Latest / Merryn Talks Money / The Great Rotation is Here, What's Next For Gold, and UK Borrowing

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The Great Rotation is Here, What's Next For Gold, and UK Borrowing · Merryn Talks Money

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Hi John, Hi, listen.
• 0:21
  Speaker 1: We're talking in the middle of the week, and there's
• 0:23
  Speaker 1: been a lot of fuss over the last few weeks,
• 0:25
  Speaker 1: a lot of volatility, lots of seteria lots we're talking
• 0:27
  Speaker 1: about bear markets, lots of people complaining about their four
• 0:29
  Speaker 1: O n ks, et cetera, et cetera. So I have
• 0:31
  Speaker 1: just had a quick look and guess that's for me. Okay,
• 0:37
  Speaker 1: over the last twelve months. What's the change in the
• 0:40
  Speaker 1: S and P five hundred?
• 0:42
  Speaker 2: Okay, so it's not going to be connection toory. We
• 0:45
  Speaker 2: call it about six seven percent actually.
• 0:48
  Speaker 1: Over seven percent up. Also over seven percent up the
• 0:55
  Speaker 1: last twelve months. Yes, yes, I'm going to double check
• 0:59
  Speaker 1: that in real time for you, okay, because I have
• 1:02
  Speaker 1: access to a Bloomberg terminal, and here we are. NASADAC
• 1:06
  Speaker 1: Composite Index year to date not so good, down twelve
• 1:10
  Speaker 1: point two seven percent over the last twelve months, plus
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  Speaker 1: seven point ninety three percent. So if you are just
• 1:18
  Speaker 1: an ordinary person who doesn't trade in and out all
• 1:21
  Speaker 1: the time, isn't just directly watching finance Telly, et cetera,
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  Speaker 1: you have eight percent more money if you're invested in
• 1:27
  Speaker 1: the US than you did twelve months ago. Can we
• 1:31
  Speaker 1: just say this is all a great, big clus fair
• 1:32
  Speaker 1: nothing or is that a little simplastic.
• 1:35
  Speaker 2: It's a little bit simplistic, but it's not, hye simplastic,
• 1:38
  Speaker 2: you know when you think about it, you know, yeah,
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  Speaker 2: I mean it's a good watch.
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  Speaker 1: Yes, But also what it tells you is that that
• 1:48
  Speaker 1: you know returns last year we're absurd and the American
• 1:51
  Speaker 1: aquity market was ludicrously expensive and ludicrously concentrated at the
• 1:54
  Speaker 1: end of our year, and it moved much too far,
• 1:57
  Speaker 1: much too fast. And so even after everything's happened so far,
• 2:00
  Speaker 1: this year just will be up. And twelve months ago
• 2:02
  Speaker 1: told you that what happened towards the end of last
• 2:04
  Speaker 1: year was slightly not.
• 2:05
  Speaker 2: Yeah, definitely, And I mean that's place the whole point.
• 2:08
  Speaker 2: But TROMP being a catalyst for shifting things over the
• 2:12
  Speaker 2: years towards everything else which we knew was going to happen.
• 2:17
  Speaker 1: Time it. We just couldn't time it.
• 2:19
  Speaker 2: Yeah, you just needed a push, and Toomp's been the push,
• 2:24
  Speaker 2: and I suspect that's still going to carry you Oin.
• 2:26
  Speaker 1: Yeah, I mean it's going to come up and down.
• 2:28
  Speaker 1: I mean as we are speaking today. We are speaking
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  Speaker 1: on Wednesday. By the way, then as I is up
• 2:32
  Speaker 1: over four percent as we speak, So you know, you
• 2:35
  Speaker 1: get this this huge volatility. But I think we still
• 2:38
  Speaker 1: suspect overall that there is a great rotation underway from
• 2:43
  Speaker 1: very expensive stock to cheapest stocks. And we have got
• 2:45
  Speaker 1: our main podcast this week out on Friday is with
• 2:47
  Speaker 1: a value Investor, which is really interesting in the context
• 2:49
  Speaker 1: of this great rotation out of expensive the cheaper markets.
• 2:53
  Speaker 2: Well, for once, yeah, if you do it often enough.
• 2:58
  Speaker 1: And the other thing, John, that you and I have
• 2:59
  Speaker 1: been that for twenty five years and twenty five twenty
• 3:03
  Speaker 1: five years.
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  Speaker 2: Yeah, yeah, it's suning like that had a field sketched
• 3:08
  Speaker 2: twenty twenty five years.
• 3:11
  Speaker 1: Hey, the gold price at the gold price, I don't know, Harry.
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  Speaker 1: We are do the gold price up in dollar terms
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  Speaker 1: forty percent over the last year alone, down little today
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  Speaker 1: because everything else is going up because it is the
• 3:24
  Speaker 1: greatest portfolio insurance of all time. Yes, you're doing up
• 3:26
  Speaker 1: the direction, et cetera. But nonetheless there's been a phenomenal
• 3:30
  Speaker 1: run and we're just going to enter it into our
• 3:33
  Speaker 1: we told you so section.
• 3:34
  Speaker 2: Well, thanks, So, what I think we can definitely put there,
• 3:37
  Speaker 2: especially seeing his late twenty five years ago. Everyone said,
• 3:40
  Speaker 2: what idiots, and you had actually been bettered buying gold
• 3:42
  Speaker 2: twenty five years ago within the S and P. I
• 3:44
  Speaker 2: mean that is striking. And I including reinvested dividends so
• 3:49
  Speaker 2: that you could have bought golden. You wouldn't even have
• 3:50
  Speaker 2: had to reinvest the dividends because there aren't any.
• 3:53
  Speaker 1: I just sit there expect that's what you did, isn't it, John, Yeah.
• 3:56
  Speaker 2: Just a law effort. Well, I wish it's what I did.
• 4:01
  Speaker 1: Any We don't always do what we recommend anyway, So
• 4:04
  Speaker 1: here we are, gold price up a lot, and gold price,
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  Speaker 1: you know, you would expect if the chales over the
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  Speaker 1: last few months continues, if we continue to have doubt
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  Speaker 1: about the America, about the global monetary system, about the dollar,
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  Speaker 1: about incoming global recession, et cetera, you would think to
• 4:19
  Speaker 1: yourself or the gold price will continue to go up.
• 4:22
  Speaker 1: But I think we both slightly feel it's moved a
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  Speaker 1: long way, very fast, and there could be a little
• 4:29
  Speaker 1: bit of a correction in here.
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  Speaker 2: Yeah, and I think, well, there's a number of things.
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  Speaker 2: I mean, it was on the front cover of the
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  Speaker 2: Ft today and yeah, I mean again, there's no sheath
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  Speaker 2: on the Ft, but gold's one of those, cause golds
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  Speaker 2: a slightly more obscure asset. You have to watch the
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  Speaker 2: more financial peoples than the normal peoples because the gold's
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  Speaker 2: never given me in the front cover of the Times.
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  Speaker 2: But as the stock market may be at some point,
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  Speaker 2: if it could actually is hard enough. But as far
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  Speaker 2: as gold goy is, if you see it on the
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  Speaker 2: front cover of the Ft, there's probably a big contrat
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  Speaker 2: and indicator and that means it's come too far, too fast.
• 5:01
  Speaker 2: Bitcoin's the same, And I said, to be fair, I
• 5:03
  Speaker 2: remember twenty seventeen high in bitcoin. It was on the
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  Speaker 2: front Covery Money Week, which I was editing at the time,
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  Speaker 2: and even when I looked to the cover, I thought
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  Speaker 2: the top of the market signal you have become your
• 5:15
  Speaker 2: own What's night? And then it was absolutely was. So
• 5:22
  Speaker 2: the more obscure the aid, the more you have to
• 5:25
  Speaker 2: sort of downgrade your your cover expectations. But I think
• 5:28
  Speaker 2: for gold, sentiment wise, that's a tell. And also you
• 5:32
  Speaker 2: have to go we have got when you've been watching
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  Speaker 2: an asset for that for as long as we have,
• 5:37
  Speaker 2: and you're starting to feel a tiny bit kind of hegy.
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  Speaker 2: I don't think it's the mega top. I think we'd
• 5:44
  Speaker 2: have to see a few other things happen. For me,
• 5:46
  Speaker 2: you think it was the absolute top, but I think
• 5:49
  Speaker 2: that it's probably due a breather.
• 5:52
  Speaker 1: But then there is a possibility there the gold mineer
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  Speaker 1: is might catch up a bit.
• 5:56
  Speaker 2: Yeah, I mean you would think so. And silver, Well,
• 6:01
  Speaker 2: the interesting is silver's going up today, which I think
• 6:04
  Speaker 2: is probably more to do with the fact that everyone
• 6:06
  Speaker 2: is feeling relieved the Trump isn't in the fire, you know. Yeah,
• 6:11
  Speaker 2: and it's tariffs. I think it's silver. There's an element
• 6:14
  Speaker 2: of silver that goes up alongside the economic growth, and
• 6:16
  Speaker 2: that bit has been crushed by recent events, which is
• 6:20
  Speaker 2: one reason why it's departed so far from gold. So
• 6:22
  Speaker 2: we might see silver catch up as well.
• 6:24
  Speaker 1: And you'd expect gold miners to lag a bit with you,
• 6:26
  Speaker 1: because it's not just gold going up, it's gold going
• 6:29
  Speaker 1: up and staying up that matter.
• 6:32
  Speaker 2: Yeah, yeah, I mean, although they are still they're really
• 6:36
  Speaker 2: lagging it. And I mean I think that's partly to
• 6:40
  Speaker 2: do with the fact that they've been such a reliable
• 6:42
  Speaker 2: capital incinerators for such a long time that people just
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  Speaker 2: really need.
• 6:46
  Speaker 1: To capital andcinerated. If you run a gold mining company,
• 6:50
  Speaker 1: please send your head now direct.
• 6:52
  Speaker 2: To John and John. You have used, don't you?
• 6:55
  Speaker 1: Independent central banks? And we've talked about this a lot
• 6:57
  Speaker 1: over over the years. Or central banks ever genuinely independent?
• 7:01
  Speaker 1: Should they be independent? And in fact there's whole central
• 7:03
  Speaker 1: bank independence. I think it's kind of you anyway.
• 7:06
  Speaker 2: Yeah, it's just a it's a convenient fag leaf. It
• 7:10
  Speaker 2: was fine in the nineties and the two thousands and
• 7:12
  Speaker 2: actually the tens because the central banks were doing exactly
• 7:16
  Speaker 2: what the government wanted them to do. Any keeping rates low. Yeah,
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  Speaker 2: nobody felt uncomfortable about it. If it was happy enough
• 7:22
  Speaker 2: about it. Well, yeah, they should really should have been
• 7:26
  Speaker 2: higher while China was exportant inflation around the world. They
• 7:31
  Speaker 2: should have leaned against that. Then we wouldn't have got
• 7:33
  Speaker 2: the acid bubble in the house place bubble, and everyone
• 7:36
  Speaker 2: would be less measurable. Now because that's I do they say,
• 7:39
  Speaker 2: the fact the house place has been too.
• 7:41
  Speaker 1: High central bankers also, Director John, Please, But we had
• 7:45
  Speaker 1: all that period where it looked like independent central banks
• 7:48
  Speaker 1: were an absolutely fabulous idea, the great moderation, low interest rates,
• 7:51
  Speaker 1: low inflation. We had the hero central bankers, Greenspan, et cetera.
• 7:55
  Speaker 2: The Plunge Protection Team, lunch Protection team.
• 7:58
  Speaker 1: And when we look back now, you and I said,
• 8:01
  Speaker 1: at the time, of course, fell andre I told you so.
• 8:03
  Speaker 1: But you when you look back now, you can say, well,
• 8:06
  Speaker 1: this was simply a function of deflation being exported from
• 8:09
  Speaker 1: out of China. And we don't really know if independent
• 8:13
  Speaker 1: central banking is any good at what it's supposed to do.
• 8:16
  Speaker 2: We don't really know.
• 8:17
  Speaker 1: If the models work. We don't really know if independent
• 8:21
  Speaker 1: technocrats do a better job of interest rate fiddle than governments.
• 8:26
  Speaker 2: Yeah, and I don't thinks even that. I think it's
• 8:28
  Speaker 2: more the doint. Basically, you've got the if you're in central,
• 8:33
  Speaker 2: if you're an independence is contingent or in someone giving
• 8:37
  Speaker 2: the tea, then you're not independent. You're just not independent.
• 8:41
  Speaker 2: So it only lasts for as long as they're happy
• 8:43
  Speaker 2: for it to do. And I mean Arthur Bond's in
• 8:44
  Speaker 2: the eighteen seventies with elected nexton is a classic example.
• 8:48
  Speaker 2: And it's the same thing. No, I mean, you know
• 8:52
  Speaker 2: I should if if Trump wants to say Lane not
• 8:55
  Speaker 2: get a depot, he will find a way. He doesn't
• 8:59
  Speaker 2: have to do it. I fire on them, and would thought.
• 9:01
  Speaker 2: I thought that there are other ways to get around
• 9:03
  Speaker 2: any resistance. But the point is that whenever the kind
• 9:07
  Speaker 2: of politics and the central bank, the politics and the
• 9:10
  Speaker 2: technical as pomp heads, the politicians are going to win
• 9:14
  Speaker 2: one we had another. So I think that the idea
• 9:19
  Speaker 2: of central bank independence is really just it's just a mirage.
• 9:24
  Speaker 2: It's like the two percent inflation target is sort of
• 9:27
  Speaker 2: it's what for a yo and then stops working and
• 9:31
  Speaker 2: you find something else.
• 9:32
  Speaker 1: Okay, we're going to stop at that, John, because I
• 9:33
  Speaker 1: can feel your hobby host is rising to.
• 9:35
  Speaker 2: This or note.
• 9:48
  Speaker 1: Thanks for listening to this week's Marin Talk's Money Debrief.
• 9:51
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