Latest / Merryn Talks Money / What's Eating Away at Inheritance Money Re-Run

Transcript

What's Eating Away at Inheritance Money Re-Run · Merryn Talks Money

0:02
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News, Hey.
0:09
Speaker 2: Maren Talks Money listeners.
0:10
Speaker 1: Last week we had our subscriber event at the Bloomberg
0:13
Speaker 1: offices in London. It was wonderful to see so many
0:15
Speaker 1: listeners and so many readers there and thank you so
0:18
Speaker 1: much to those of you who did come to those
0:20
Speaker 1: of you who couldn't.
0:21
Speaker 2: Good news.
0:22
Speaker 1: We spoke to Sebastian Lion of Troy Asset Management and
0:24
Speaker 1: that conversation is in the feed already. But we also
0:27
Speaker 1: did a Maren Talks Your Money segment live and we
0:30
Speaker 1: welcomed back veteran financial advisor Paula Steele. So here is
0:34
Speaker 1: that conversation. Now we're going on to the Marin Talks
0:48
Speaker 1: Your Money section of the show, and those of you who.
0:51
Speaker 2: Listen to us will know what push you'll listen to us.
0:54
Speaker 1: But this is the weekly series where we talk more
0:55
Speaker 1: personal finance stuff. We talk about how to make the
0:58
Speaker 1: most of your money. So with me today you all
1:06
Speaker 1: know as John Steppeck Senior, a borter and author of
1:09
Speaker 1: the Do You Want to Stay Yourself?
1:09
Speaker 3: John? What I need to sell Newslayer up.
1:15
Speaker 2: Thank you John. Also, we have Paula Steel.
1:17
Speaker 1: He will have heard on the podcast as well as
1:19
Speaker 1: well as I'm an introducer directorate at John Lamhill Oldridge
1:22
Speaker 1: and very very experienced. Now what we want to talk
1:26
Speaker 1: about today, Thank you Paul for coming on again. What
1:28
Speaker 1: we want to talk about today is the Great Wealth Transfer,
1:31
Speaker 1: which I'm hoping to be a beneficiary of at some
1:33
Speaker 1: point and I'm sure many of the rest of you
1:35
Speaker 1: are hoping to be a beneficiary of as well. And
1:38
Speaker 1: I spent some time looking today to see exactly how
1:40
Speaker 1: much money we can all expect, and it really does
1:43
Speaker 1: depend where you look at. Could be four and a
1:44
Speaker 1: half trillion over the next twenty years, could be five,
1:46
Speaker 1: could be seven pounds in the UK, so proper money.
1:49
Speaker 1: And in the US we're up into the hundreds of trillions,
1:53
Speaker 1: and we who knows. I found numbers ranging from eighty
1:55
Speaker 1: trillion to one hundred and twenty four trillion, So however
1:58
Speaker 1: you cut it, we're talking about a lot of money
2:00
Speaker 1: trickling down from the baby boomers to the next generation.
2:04
Speaker 2: So what we want to talk.
2:05
Speaker 1: About is how that money should get transferred. How do
2:09
Speaker 1: you do it efficiently, how do you do it with
2:12
Speaker 1: the least possible tax implications, and how do you do
2:15
Speaker 1: it without destroying the lives of your children by giving
2:18
Speaker 1: them too much too soon.
2:19
Speaker 2: Not something that happened to me.
2:21
Speaker 1: So, Paula, let's say that you are a baby boomer
2:27
Speaker 1: with quite a lot of money and a house and
2:29
Speaker 1: a couple of kids. Where do you even start with
2:32
Speaker 1: thinking about how you transfer it?
2:34
Speaker 4: You think about how much money you need to keep, yes,
2:38
Speaker 4: before you start to give it away. And I think
2:41
Speaker 4: that although the baby boomers we're going to live longer
2:46
Speaker 4: and we're going to be very expensive, the last ten
2:49
Speaker 4: years of our lives are going to be very, very
2:51
Speaker 4: expensive in terms of care, and you can't afford to
2:55
Speaker 4: give it away. You need to keep it in terms
2:57
Speaker 4: of that. And I say, you know a lot of
3:00
Speaker 4: people do it of cash for modeling to show that
3:04
Speaker 4: you can afford to give it away. My experience is
3:08
Speaker 4: that most of the clients are not prepared to give
3:11
Speaker 4: away that much because and I think that one of
3:14
Speaker 4: the big issues is going to be the change in
3:17
Speaker 4: the pensions legislation. Yes, because when the pensions were inheritance
3:22
Speaker 4: tax free, they were your third line of defense. You
3:26
Speaker 4: always knew that the pension fund was there. It was
3:29
Speaker 4: inheritance tax free, so it could go to the kids,
3:32
Speaker 4: but if you needed it for care, it was there.
3:35
Speaker 4: It was that third line of defense because that that
3:38
Speaker 4: care issue for the baby boomer is the big elephant
3:42
Speaker 4: in the room.
3:43
Speaker 1: Do you think that maybe the numbers are just wrong
3:45
Speaker 1: because when we talk about four trillion, five brillion and
3:47
Speaker 1: six seven trillion, whoever coalates those numbers is not taking
3:52
Speaker 1: into account the fact that a lot of people are
3:54
Speaker 1: going to spend four or five years any care home
3:56
Speaker 1: it's going to cost one hundred and twenty grand a year.
3:58
Speaker 4: And the rest oh okay, in a care home. Maybe
4:06
Speaker 4: if you have care at home, probably more right. If
4:09
Speaker 4: you need twenty four our care, that's three that's three
4:12
Speaker 4: shifts of staff, you're looking at probably twice that, okay.
4:17
Speaker 1: So a lot of people who are thinking that they
4:19
Speaker 1: have money to hand down and people who are thinking
4:21
Speaker 1: they have money to inherit may well not.
4:24
Speaker 5: I think you may well find.
4:26
Speaker 4: You know, it comes into the assisted dying, which is
4:28
Speaker 4: in Canada where people are being pushed and whatever one
4:33
Speaker 4: you want a sister dying, And I personally think I
4:35
Speaker 4: would rather go if I was sort of half dead anyway,
4:38
Speaker 4: but nevertheless, but.
4:40
Speaker 2: You wouldn't want your kids to make sure you went okay.
4:47
Speaker 4: You know, but I think that I think that the
4:50
Speaker 4: first thing for anybody to think about is you're going
4:54
Speaker 4: to have enough money for care.
4:56
Speaker 5: I was talking somdly fun Enough the.
4:57
Speaker 4: Other day and they were saying, it's a great place
5:00
Speaker 4: that we don't have a product that enables us to
5:03
Speaker 4: spend our pension, but gives us an income if we
5:07
Speaker 4: are if we survive to a sage ninety, because that's
5:10
Speaker 4: really what the pension was there for. It was giving
5:12
Speaker 4: you that longevity support so effectively. A delayed annuity of
5:17
Speaker 4: some kinds, yeah, it used to call a contingent annuity
5:20
Speaker 4: doesn't exist in the market anymore.
5:22
Speaker 5: Sadly, it would be an interesting thing.
5:24
Speaker 1: Interesting that feels like the kind of product that might
5:26
Speaker 1: be coming back in the same way as the innuity
5:29
Speaker 1: market might be coming back.
5:31
Speaker 4: I think the innuity market is back, is it?
5:33
Speaker 5: But it be? It's back.
5:34
Speaker 4: In terms of an investment proposition, it's a different way
5:38
Speaker 4: of buying a fixed interest investment getting a much better return.
5:42
Speaker 4: You're getting a fixed return and you're playing the longevity
5:48
Speaker 4: for the client or for the advisors, they're playing the longevity.
5:51
Speaker 5: The longevity game.
5:54
Speaker 4: I remember a client doing a next to release on
5:57
Speaker 4: his parents who were very elderly, and him saying, I'm
6:02
Speaker 4: doing an xtray release. I'm going to buy an annuity
6:05
Speaker 4: because that handles my longevity risk on my parents' wealth,
6:10
Speaker 4: so which I thought was quite tough, actually.
6:16
Speaker 3: Has that is the annunity.
6:17
Speaker 6: If I've partly been helped by Patons and Helen's tax coming,
6:22
Speaker 6: then is that something that's in people's mains.
6:24
Speaker 4: I think people are given that the pension fund is
6:28
Speaker 4: now going to be you know, I've had people saying
6:31
Speaker 4: before it was tax free and now it's going to
6:34
Speaker 4: pay tax at sixty seven percent. It was never tax free.
6:38
Speaker 4: It was tax free from an inheritance tax perspective. But
6:41
Speaker 4: this to get to sixty seven percent, you've got a
6:43
Speaker 4: forty percent and then a forty five percent tax rate
6:46
Speaker 4: to get it out. The forty five percent tax rate
6:48
Speaker 4: to get it out if you died post seventy five
6:51
Speaker 4: was always there, but it provided.
6:53
Speaker 2: Options but to your heirs right and they can take it.
6:56
Speaker 1: They could withdraw from it when they had a lower encarment,
6:59
Speaker 1: or lots of ways to make it a low tax
7:02
Speaker 1: event a lower.
7:03
Speaker 4: Well, no, because once you died, the pension fund had
7:06
Speaker 4: to go to somebody at that point, so you couldn't
7:12
Speaker 4: say your dad dies and you couldn't say, well, I'll
7:16
Speaker 4: have it. Actually no, I think I wanted to go
7:18
Speaker 4: down to the grandchildren. You had to make a decision
7:20
Speaker 4: at that point. It wasn't it was, but it stayed.
7:24
Speaker 2: In the wrapper.
7:24
Speaker 1: It's good with that for it at will, so you
7:27
Speaker 1: could choose to withdraw from it. You can show income
7:29
Speaker 1: period in your life.
7:30
Speaker 5: You could.
7:31
Speaker 4: Yeah, you could choose to withdraw it a lowder and
7:34
Speaker 4: you can still choose to withdraw it as a lower thing,
7:37
Speaker 4: so you won't be paying sixty seven percent. I have
7:39
Speaker 4: seen more angry people about this, you know, as ell story.
7:45
Speaker 4: I've got a client and she's I don't know how
7:48
Speaker 4: they are. She's coming up to eighty and she's incandescent.
7:52
Speaker 4: She has one hundred and twenty five thousand pounds in
7:54
Speaker 4: her pension fund, and that is her money for her grandchildren.
8:00
Speaker 4: The fact there worth twenty five million isn't neither here
8:02
Speaker 4: all that.
8:05
Speaker 2: Should spend it on herself. Definitely, but nonetheless.
8:09
Speaker 1: So if you know that you're going to be paying
8:11
Speaker 1: that amount of tax, your family's going to be paying
8:12
Speaker 1: that amount of tax, you may as well buy annuity
8:15
Speaker 1: and have the security of that income flow upfront.
8:17
Speaker 4: Yeah, I think, and I think people will start to
8:20
Speaker 4: spend their pension funds down, which if they are going
8:24
Speaker 4: to do that, there are two things in terms of efficiency.
8:29
Speaker 4: First of all, if you're joining income out of a
8:31
Speaker 4: pension fund, it is income if it is surplus income.
8:34
Speaker 4: And I've got clients who are joining and out paying
8:37
Speaker 4: the tax forty five percent tax, better than sixty seven
8:39
Speaker 4: percent tax, but it then gives them income which they
8:43
Speaker 4: can then give away. And because it is now a
8:45
Speaker 4: surplace income, it's clearly surplus income because they didn't have
8:48
Speaker 4: it before and they were living perfectly comfortably, they can
8:52
Speaker 4: give it away and it's immediately inheritance tax free. So
8:55
Speaker 4: you're split it. You're stripping it over say three or
8:57
Speaker 4: five years, and I think it certainly we're seeing clients
9:01
Speaker 4: that are doing that kind of thing. But you need
9:05
Speaker 4: to do that. You need to have enough other assets.
9:09
Speaker 4: You're having to rethink your assets so that you are
9:15
Speaker 4: then thinking about, Okay, what I'm going to do is
9:19
Speaker 4: I'm going to spend this pot of money, but that
9:21
Speaker 4: will then mean that I've got this pot here.
9:23
Speaker 2: Yeah, so it's a general reshaping of the way you
9:26
Speaker 2: do it.
9:26
Speaker 5: It's reshaping.
9:27
Speaker 1: So let's go back to our our couple worried about
9:31
Speaker 1: their care bills and they've decided how much they need
9:33
Speaker 1: to keep, and that they've got a pot that they
9:36
Speaker 1: want to give away. Obviously, the best way to do
9:38
Speaker 1: that is just to give it away and not die
9:40
Speaker 1: for seven years.
9:42
Speaker 5: You'll buy an insurance policy to cover it.
9:44
Speaker 2: Can you buy insure?
9:45
Speaker 1: You buy an insurance quality to cover that, an expensive one,
9:48
Speaker 1: presumably depending on your edge.
9:49
Speaker 5: Depends how old you are.
9:50
Speaker 4: Itked about six percent of your eighty, about one percent
9:53
Speaker 4: of your seventy, and you pay that over seven years.
9:56
Speaker 4: So it's one percent over seven years. If you're seventy,
9:59
Speaker 4: I think that's cheap. Yeah, that does sound quite cheap.
10:02
Speaker 4: It's quite expensive if you're eighty. Yes, more more problematical
10:06
Speaker 4: is that you've got to pass a medical.
10:08
Speaker 1: Oh and okay, so there's only one percent if you're
10:11
Speaker 1: very healthy.
10:12
Speaker 4: You have healthy The insurance companies didn't put the price
10:15
Speaker 4: of life insurance up post COVID. What they did was
10:19
Speaker 4: they increased the bar. So where before we would have
10:22
Speaker 4: got standard rates for somebody, now they'll load the premium
10:26
Speaker 4: by fifty percent, so they've changed the pricing without looking
10:32
Speaker 4: as though they've changed the pricing.
10:34
Speaker 1: Good marketing, Okay, definitely, Okay, So give it away by
10:38
Speaker 1: an insurance policy.
10:39
Speaker 5: Give it away and give buy an insurance policy.
10:41
Speaker 2: What about bringing it in a trust.
10:44
Speaker 4: If you're going to put it in a trust, if
10:46
Speaker 4: it is agricultural land or business assets. Business assets are
10:51
Speaker 4: trading businesses which are unquoted, So there's a which is
10:58
Speaker 4: not property assets. If you constitute yourself as a builder,
11:02
Speaker 4: that is a trade. If you are holding assets for rent,
11:07
Speaker 4: then it is not a trading asset. I always say
11:09
Speaker 4: that's the easiest way to remember, because every one knows
11:11
Speaker 4: what the builder is, and they know what holding an
11:13
Speaker 4: asset is for rent. So if it's a building, if
11:15
Speaker 4: it's a trading asset, and you give it away into
11:19
Speaker 4: a trust before the fifth of April, I haven't got
11:23
Speaker 4: long hair, have I got wrong, then you will not
11:26
Speaker 4: pay You will be able to transfer it without any tax.
11:29
Speaker 2: Okay.
11:31
Speaker 1: The neurals after the after what's only allows to that
11:35
Speaker 1: million pounds?
11:37
Speaker 4: They know that's only on death. You will be paying
11:40
Speaker 4: a ten percent entry charge on those assets. You've got
11:44
Speaker 4: three hundred and twenty five thousands of allowance which you
11:47
Speaker 4: can reuse every seven years. But apart from that, you
11:53
Speaker 4: will pay the ten percent as a lifetime entry charge.
11:57
Speaker 5: And you don't.
11:58
Speaker 4: The allowance is only on death. It's not a lifetime.
12:02
Speaker 4: It's all that's worth the bother de friends, how much
12:04
Speaker 4: you care about what the tax? I think you have
12:12
Speaker 4: some clients men didn't say. I largely spend my life
12:19
Speaker 4: doing life insurance and we look after a very large
12:23
Speaker 4: number of very large estates. And for them, inheritance tax
12:27
Speaker 4: and the transitioning of the wealth to the next generation
12:31
Speaker 4: is a key driver for them. And they know who's
12:34
Speaker 4: going to inherit it from the time that probably something
12:37
Speaker 4: is born, and they spend a great deal of time
12:42
Speaker 4: and they buy insurance to cover it, and they are
12:44
Speaker 4: making huge gifts of transfer of assets now and they
12:49
Speaker 4: care very much. I have other clients who maybe have
12:53
Speaker 4: made the wealth, and they care very much about income
12:56
Speaker 4: tax and capital against tax, and they don't care about
12:58
Speaker 4: inheritance tax because from their perspective, what the children. They
13:03
Speaker 4: started with nothing, and they don't tend to then care
13:07
Speaker 4: of their children. They get sixty percent feet they'll be
13:10
Speaker 4: well off. That changes when they get grandchildren, when staggeringly well.
13:20
Speaker 4: They're not prepared to earn their own children by giving
13:22
Speaker 4: them loads of money. They're delighted to the grandchildren and children.
13:28
Speaker 4: I've had lots of clients who you know, you've talked
13:30
Speaker 4: to for years and said, well, you ought to be
13:32
Speaker 4: thinking about giving it away.
13:34
Speaker 2: No.
13:34
Speaker 4: No, And particularly if it's business assets, there's much more
13:39
Speaker 4: of a problem because the giving away of the business
13:42
Speaker 4: assets is about succession in the business and transfer, and
13:45
Speaker 4: that's all about do you trust the children to do
13:48
Speaker 4: the transfer? Is that going to be appropriate? Are they
13:51
Speaker 4: appropriate for running the business, are they interested in running
13:54
Speaker 4: the business? All those other things. So you may or
13:57
Speaker 4: may not want to give the asset away if it's
14:00
Speaker 4: a business asset and you don't want to earn them,
14:03
Speaker 4: and they must get on with their lives. And then
14:06
Speaker 4: these grandchildren arrive and.
14:09
Speaker 2: If they go, hof they go. It's all different.
14:12
Speaker 1: And is that it's skipping a generation a good way
14:15
Speaker 1: to go. I mean that surely caused some friction between
14:21
Speaker 1: parents and their next generation if the money skips a generation.
14:26
Speaker 5: I haven't really seen that.
14:29
Speaker 4: Because I think if it's going down a generation that
14:33
Speaker 4: the generations are being skipped tend to be involved.
14:38
Speaker 5: I think.
14:39
Speaker 4: I think, as with all of these things, it's all
14:42
Speaker 4: about communication.
14:43
Speaker 1: Because I suspect, as we were talking about this earlier,
14:45
Speaker 1: and that there's there's a there's a this missing generation
14:50
Speaker 1: when it comes to pensions, which is people born born
14:53
Speaker 1: sort of late sixties to late eighties or middle eighties,
14:56
Speaker 1: people who missed out on having a defined benefit pension
14:59
Speaker 1: and then had no pension provision at all until the
15:02
Speaker 1: introduction of water enrollment and so have pretty much no
15:05
Speaker 1: pench and provision at all and will generally be relying
15:08
Speaker 1: on inheritance to get through their last twenty years and
15:10
Speaker 1: pay for that care. So it would makes sense if
15:14
Speaker 1: the boomers left their money to that generation.
15:18
Speaker 4: They might all want might not realize that the boomers
15:22
Speaker 4: need the money. Well, no, no, because money has a
15:27
Speaker 4: you have a reference point. My father who's dead would
15:32
Speaker 4: be one hundred almost now. But when he started working,
15:36
Speaker 4: he earned fifty pounds a year working in Lloyds.
15:40
Speaker 5: In London, and.
15:44
Speaker 4: Then you know, his first pay rise went to two
15:46
Speaker 4: hundred and fifty pounds a year. But it's very difficult,
15:49
Speaker 4: is you spend two pounds fifty buying a cuff of
15:51
Speaker 4: coffee on the way to work for him to understand
15:55
Speaker 4: that he moved his reference point up. But I think
15:58
Speaker 4: that's that's in terms of the transfer of wealth. I
16:01
Speaker 4: think that that reference point that the children, you know,
16:05
Speaker 4: the children have got fifty thousand a year or so,
16:08
Speaker 4: they're fine.
16:11
Speaker 5: Because in their.
16:12
Speaker 4: Reference point, there's a point at which people stick yeahering.
16:16
Speaker 1: There's probably an educational need on both sides, right, And
16:20
Speaker 1: one of the things that you mentioned the inheritance is
16:24
Speaker 1: systems of bigger states and families that have been rich
16:27
Speaker 1: for generations have a system for passing wealth down and
16:30
Speaker 1: an education system as well for the recipients. But most
16:33
Speaker 1: people don't. You know, it's relatively new, this idea that
16:36
Speaker 1: a lot of people will have money to pass down
16:38
Speaker 1: and a lot of people will inherit and there's an
16:41
Speaker 1: education gap possibly on both sides.
16:44
Speaker 4: Yes, I think so, And I think that it was
16:49
Speaker 4: never talked about it. So within the biggest states, it's
16:53
Speaker 4: talked about as a commercial thing. It's part of the
16:57
Speaker 4: commercial planning for the estate. They're very long term investment,
17:00
Speaker 4: and it's very long term planning, and people are involved
17:06
Speaker 4: in it and they also are quite good if they
17:09
Speaker 4: have a generation who aren't, who aren't maybe very commercial,
17:13
Speaker 4: they're quite good at finding a way around that so
17:16
Speaker 4: that then they just get an income and they're not
17:18
Speaker 4: going to impact on the estate, not impact on the business.
17:24
Speaker 4: But it's a commercial, it's a commercial thing. They have
17:28
Speaker 4: a whole ramp of advisors who talk about it, and
17:30
Speaker 4: you just join that conversation which has gone on for years.
17:34
Speaker 4: I think what's much more difficult is if you've suddenly
17:36
Speaker 4: got what's really quite a lot of wealth and you
17:39
Speaker 4: don't have that sort of range of advisors and you
17:42
Speaker 4: don't have that forum, which is we discuss, you know,
17:47
Speaker 4: how we're investing for the long term. We discuss it,
17:50
Speaker 4: and we do it at the annual at the annual
17:53
Speaker 4: meeting at least. And there's almost always a trust so
17:56
Speaker 4: there are always external people. They're called the trustee, and
18:02
Speaker 4: they're probably outside the family.
18:05
Speaker 1: So how do you educate a new generation of inherited
18:09
Speaker 1: the fabulous opportunity for the wealth management community, right.
18:12
Speaker 5: I think they're trying.
18:14
Speaker 4: I think the wealth management community is trying, but I
18:17
Speaker 4: think they're trying more to get to the much younger ones.
18:22
Speaker 4: Certainly the wealth management industry is going to lose As
18:28
Speaker 4: things stand. They keep about twenty five percent of the
18:33
Speaker 4: wealth when people die and.
18:37
Speaker 1: Their population, so they get the cash. They go around
18:42
Speaker 1: with the wealth manager and they say, will you be
18:43
Speaker 1: looking after that gorgeously for forty years, but now I'll
18:45
Speaker 1: have it. Yep.
18:46
Speaker 4: Because they pay off the mortgage, they hand the money
18:49
Speaker 4: on to the next generation. They get the children on too,
18:52
Speaker 4: they pay off their student loans. They get the grandchildren
18:56
Speaker 4: onto because they don't need it, and if they do
19:00
Speaker 4: need it, they've got their own managers.
19:04
Speaker 5: Or swoop it up.
19:04
Speaker 1: It seemed to me I was going to ask you
19:06
Speaker 1: that seems to me to be one of the best
19:08
Speaker 1: possible ways to pass down some inheritance is to pay
19:11
Speaker 1: for all your grandchildren to go to university and pay
19:14
Speaker 1: all their living expenses so they don't leave with one
19:16
Speaker 1: of these awful that John Conducting is about all the time.
19:19
Speaker 4: It's not tax deductible for an inheritance tax. If you
19:22
Speaker 4: pay your children's education, that is not considered a gift
19:26
Speaker 4: for the inheritance tax. If you pay your grandchildren's education,
19:31
Speaker 4: that is a gift. So it goes on the clock.
19:34
Speaker 2: Even if they're a surplus income. That's the way to
19:36
Speaker 2: do it.
19:36
Speaker 4: Well, if it's if you can create the surplus income yet.
19:39
Speaker 2: Then you can do it. Yeah.
19:40
Speaker 4: You used to give people who used to give grandchildren
19:43
Speaker 4: quite a bit of money under deed of government and
19:46
Speaker 4: then which was a way to make it very tax efficient,
19:50
Speaker 4: but that was then shut down.
19:53
Speaker 2: Nothing left is that everything's been shut down.
19:56
Speaker 4: You buy insurance just to pay the tax to pay
20:01
Speaker 4: the premium every year, rather than paying forty percent of
20:05
Speaker 4: the bullet, you do think about putting some of it
20:07
Speaker 4: into trust. You can fund an insurance policy by drawing
20:13
Speaker 4: money as the pension fun that's very efficient, and then you.
20:17
Speaker 5: Give it away.
20:18
Speaker 3: Okay.
20:19
Speaker 1: Ask a final question, do you think it's a good tax,
20:21
Speaker 1: inheritance tax?
20:23
Speaker 5: I think that's from where you are on the political spectrum.
20:28
Speaker 4: If you believe in the redistribution of wealth, then I
20:32
Speaker 4: think it probably redistributes wealth. If you think that people
20:38
Speaker 4: have worked terribly hard and paid an awful of tax
20:42
Speaker 4: to have accumulate his money.
20:44
Speaker 5: That's what makes Peel very.
20:45
Speaker 1: Cross Chavan who'd like to see inheritance tax abolished for
20:53
Speaker 1: those who aren't here, I say that's about forty percent. Yeah, yeah,
20:58
Speaker 1: I'm surprised that the young are putting up their hands.
21:00
Speaker 2: You did inherit more, you know, if it was it
21:03
Speaker 2: was abolished, not less, it'll be good. I have to
21:08
Speaker 2: leave it there. Although I didn't ask John, John, should
21:09
Speaker 2: it be abolished? Bad?
21:12
Speaker 6: I think in the moment, yes, yes, it's too it's
21:15
Speaker 6: too long. And don't thinking what is too many people
21:17
Speaker 6: at the low end, you know the thresholders. Yeah, there
21:21
Speaker 6: are too many people panic in the wrong about it.
21:27
Speaker 5: You shouldn't exactly.
21:28
Speaker 4: There are an awful lot of people and they will
21:30
Speaker 4: spend quite a lot of it. That that's when people
21:34
Speaker 4: really get into a panic is when you look at
21:36
Speaker 4: the care costs.
21:38
Speaker 1: Yeah, let's not talk about care anymore. And I'm going
21:40
Speaker 1: to add one of these sessions on and up. Let's
21:43
Speaker 1: just end it with you can all go out and
21:45
Speaker 1: buy insurance. You don't have inheritance tax.
21:47
Speaker 2: But well, brilliant and Paula, thank you so much, Thank.
21:51
Speaker 5: You so much.
22:03
Speaker 2: The last bit.
22:04
Speaker 1: So this is the question answered session. John's going to
22:06
Speaker 1: stay here because I know you always have questions for him.
22:08
Speaker 1: And we've got Moreena coming up to join us. She
22:10
Speaker 1: is on our Markets Live team. And I think you've
22:13
Speaker 1: probably all had been when I was speaking before, because
22:15
Speaker 1: she's been on.
22:15
Speaker 2: You've been quite a few of the Friday round ups,
22:17
Speaker 2: haven't you.
22:17
Speaker 1: Yes, yeah, excellent, So all things markets, and you've given
22:21
Speaker 1: us some really brilliant contributions. So let's just start with
22:24
Speaker 1: a question just view about I mean markets, We've talked
22:28
Speaker 1: about a bit in Sebastian, but what I think we're
22:29
Speaker 1: really interested in is interest rates where we might expect
22:33
Speaker 1: them to go next. We've got quite a lot of
22:34
Speaker 1: questions about mortgages and that kind of thing, So let's start.
22:38
Speaker 1: Their expectations have changed quite a lot over the last
22:40
Speaker 1: few weeks, haven't they.
22:41
Speaker 7: Yes, they have, particularly from the end of last month
22:45
Speaker 7: into March. Of course, with the conflict escalating in the
22:49
Speaker 7: Middle East, we had seen markets expecting more too full
22:55
Speaker 7: quarter point cuts from Bank of England this year, with
22:59
Speaker 7: quite a strong chance of that happening this week. Since
23:03
Speaker 7: the invasion, that has quite dramatically reversed. At one point
23:08
Speaker 7: we really had a full cut price in sorry Paul
23:12
Speaker 7: Hike priced in for the year and that's pared back
23:15
Speaker 7: a little bit, but market startle as still looking quite
23:19
Speaker 7: hawkish at the moment. We've got about fifty percent chance
23:22
Speaker 7: of a hike priced in, So it's really quite a
23:25
Speaker 7: dramatic change, although I think some people maybe feel that
23:30
Speaker 7: that's a little extreme. You know, Whether the Bank of
23:34
Speaker 7: England actually feel that what's happening justifies a hike at
23:39
Speaker 7: this point is certainly something that will be looking very
23:43
Speaker 7: closely to them and what they say on Thursday. They
23:47
Speaker 7: may be looking to temper some of those those fears.
23:52
Speaker 7: They had for a very long time been expressing their
23:56
Speaker 7: desire to cut rates and the question was really just
23:58
Speaker 7: about the pace. So whether their approach is completely changed,
24:04
Speaker 7: I think what we'll have to see. But it's quite
24:07
Speaker 7: early days to be pricing, you know, that far ahead.
24:12
Speaker 7: But I think we're looking for things to stay on
24:13
Speaker 7: hold for quite some time.
24:15
Speaker 1: And as Sebastian answers, there's quite a lot of room here
24:16
Speaker 1: for policy mistake in both directions.
24:19
Speaker 3: Yeah, John, I mean yeah.
24:21
Speaker 6: I think the fact that the problem is oil and
24:25
Speaker 6: the oil price rise is it's both inflationary in terms
24:28
Speaker 6: of it drives up the consumer price index, but it's
24:30
Speaker 6: also very disinflationary because it's stable's money from people's pockets,
24:35
Speaker 6: so or rather not disinflationary so much as recessionary. So
24:39
Speaker 6: the longer it goes on for the more likely we
24:41
Speaker 6: get some kind of stag inflation. But equally the problem
24:43
Speaker 6: is the Bank of England's only get one target, and
24:45
Speaker 6: it's CPI at two percent, and they haven't had it
24:48
Speaker 6: for six years now, and so.
24:50
Speaker 2: They change that target, isn't it well?
24:52
Speaker 6: I mean, I think they would look quite late to
24:54
Speaker 6: I mean, some people think that it's a daft idea,
24:58
Speaker 6: and to a great extent I kind of agree with that,
25:00
Speaker 6: except that you need some kind of target, and the
25:03
Speaker 6: problem is if you change it then they'll just make
25:05
Speaker 6: life easier for themselves. So I can see almost that,
25:09
Speaker 6: I can see a policy mistake, and I do think
25:12
Speaker 6: it would be a mistakes put up interest rates. I
25:14
Speaker 6: can see it almost happening as a result embarrassment and
25:18
Speaker 6: a sort of commitment to this idea that doesn't inflation
25:21
Speaker 6: expectations channel the you know, because inflation is too high,
25:25
Speaker 6: we keep thinking it's going to keep being high, even
25:27
Speaker 6: though I don't actually I kin I struggle with I
25:30
Speaker 6: don't think that's how people actually generally think about inflation.
25:34
Speaker 6: It's a long story short, Yeah, it's not ideal. I
25:38
Speaker 6: think the bank will probably hold this week because they'll
25:40
Speaker 6: want to, you know, keep their options open.
25:43
Speaker 1: Yeah, a difficult people. We have one question ken in
25:45
Speaker 1: earlier about buying houses. Is this a good time to
25:49
Speaker 1: buy a house?
25:53
Speaker 7: I think that's an incredibly difficult, a very difficult question
25:57
Speaker 7: to answer. Or I think what we would always say
25:59
Speaker 7: on the blog and John I would just talking about
26:00
Speaker 7: this earlier and ultimately you know it's the right time
26:04
Speaker 7: when it's actually the right time for you to do it,
26:06
Speaker 7: because it's not it's not a speculative asset for most people,
26:09
Speaker 7: it's actually somewhere you live. And there's a lot of
26:12
Speaker 7: other considerations that come into account. But in terms of
26:15
Speaker 7: the actual mortgage rates, I mean the way in which
26:18
Speaker 7: mortgage is the price. We have been seeing that rising,
26:22
Speaker 7: and we have also seen lenders actually increasing their rates,
26:26
Speaker 7: but not a huge amount. Some have actually reported to
26:30
Speaker 7: us that they've been encouraging people who are coming up
26:33
Speaker 7: to refinance to perhaps do it now and not in
26:36
Speaker 7: six months time. So it is seen as actually a
26:39
Speaker 7: good time in the context of the uncertainty ahead. But
26:43
Speaker 7: at the same time, I think, as we were discussing earlier,
26:48
Speaker 7: we're seeing some of those expectations for the Bank of England,
26:51
Speaker 7: you know, calming down a little bit and you know
26:53
Speaker 7: you wouldn't want to jump the gone on a major
26:56
Speaker 7: decision I think purely based on a couple of weeks
26:59
Speaker 7: of very fraud uncertainty.
27:02
Speaker 2: Because John, here's one fear. I think you probably agree
27:04
Speaker 2: with all that on houses.
27:05
Speaker 1: But here's here's something you write about all the time,
27:08
Speaker 1: which is UK equities. Right with the UK stuck between
27:11
Speaker 1: weak growth and physical constraints, do you think markets are
27:14
Speaker 1: still giving too much benefit of the doubt to UK assets.
27:18
Speaker 2: It's interesting when looking at.
27:20
Speaker 1: It, the fifty one hundred is one of the very
27:22
Speaker 1: few developed markets that's still up on the year, considerably
27:25
Speaker 1: on the air.
27:26
Speaker 6: I mean the firstly one hundred to think makes sense
27:29
Speaker 6: to be less vulnerable, I mean still down since the
27:33
Speaker 6: war kicked off, despite the facts skoot oil and.
27:35
Speaker 3: Resources not that is.
27:36
Speaker 6: But the firstly one hundred that I think you know
27:39
Speaker 6: is if you're going to be in equities, that's not
27:42
Speaker 6: the worst place to be. The two fifty and the
27:45
Speaker 6: kind of UK mid caps and smaller caps. I know
27:48
Speaker 6: that we've can have been broadly bullish in the UK
27:51
Speaker 6: assets and think that they've been possibly hip with the
27:55
Speaker 6: ugly stick too much. At the same time, there is
27:59
Speaker 6: you know, they have.
28:00
Speaker 3: Come some way.
28:03
Speaker 6: We do have this problem that you know, we are
28:06
Speaker 6: quite vulnerable. I absolutely don't want to catastrophize, but you know,
28:11
Speaker 6: the kind of Geltz market is quite sensitive to changes.
28:16
Speaker 6: We still in force that are kind of stricken by
28:18
Speaker 6: political uncertainty. People had hoped and I must have been
28:23
Speaker 6: it was kind of one of those. Certainly, well they
28:24
Speaker 6: give the new government the benefit of the doubt, kind
28:26
Speaker 6: of hope that that was going to go away.
28:28
Speaker 3: Clearly it hasn't.
28:29
Speaker 6: In May obviously, obviously Kirs Stammer's position has flipped off
28:34
Speaker 6: the front pages because we've got other things taken over.
28:37
Speaker 6: But come to May local elections, I think it's pretty
28:40
Speaker 6: clear that you know, there's going to be a pretty
28:43
Speaker 6: nasty outcome for the incumbents and that will again raise
28:48
Speaker 6: questions or whether have we got the right guy leading
28:50
Speaker 6: the party just now? Is it worth the risky of
28:53
Speaker 6: changing it? So I guess I can see there's a
28:56
Speaker 6: lot of pain points coming up for the UK that
28:59
Speaker 6: I hope where I'm going to be an issue.
29:03
Speaker 3: There are there are so.
29:04
Speaker 1: Many questions on on UK credibility coming in absolutely.
29:08
Speaker 3: I mean the same thing.
29:10
Speaker 6: You know, companies have companies and companies just have to
29:12
Speaker 6: put all this stuff. Yeah, you know, we've been through
29:15
Speaker 6: plenty of kind of traumatic times before, and the companies
29:18
Speaker 6: themselves are not hugely expensive relative to their own history.
29:23
Speaker 6: One issue with the two fifty, I guess is a
29:25
Speaker 6: lot of things like hostpeild doesn't know at that are
29:27
Speaker 6: quite cyclical.
29:29
Speaker 3: I don't I'm not ready.
29:30
Speaker 6: To give up point UK equities yet, but maybe agent closerly.
29:35
Speaker 2: Aging closer to not being so bullish.
29:37
Speaker 1: Yeah, And we did have probably all listened to the
29:39
Speaker 1: Edward Chancellor podcast earlier this week and one of the
29:43
Speaker 1: things that he said was if you're looking for a
29:46
Speaker 1: place to invest, maybe didn't choose the place was incredibly
29:49
Speaker 1: high electricity costs and there's no chance that they might
29:51
Speaker 1: be coming down because it's just a bad signal. And
29:54
Speaker 1: that did that did make us go, yeah, maybe we
29:56
Speaker 1: should be slightly slightly less positive. Are there any questions
29:59
Speaker 1: in the because we've got mics. I've got loads of
30:01
Speaker 1: questions here, but I'd much prefer to take them from
30:04
Speaker 1: from the room if you have them. Really, Okay, one
30:09
Speaker 1: of the bag here thank you. There is a mic
30:12
Speaker 1: coming to you.
30:15
Speaker 8: I how do you view the strategy of treating a
30:18
Speaker 8: guaranteed pension from like a workplace pension as a proxy
30:23
Speaker 8: for a fixed income allocation? Thereby justifying one hundred equity strategy.
30:29
Speaker 2: In a portfolio very young to have a dB pension, so.
30:33
Speaker 8: Like a workplace pension. So using that as like if
30:35
Speaker 8: you had a ninety ten portfolio, your workplace pension or
30:39
Speaker 8: your is your bond.
30:42
Speaker 6: So it's not a dB pension. It's not a guaranteed no,
30:45
Speaker 6: not guarante topic sex pension. Yet I guess that that's
30:48
Speaker 6: really just a question about your your asset allocation. I mean,
30:53
Speaker 6: if you're told me yourself and that thing I've been
30:55
Speaker 6: too not given personal financial ad face, we can't do that.
31:00
Speaker 6: But through all I thumb is the younger you are,
31:03
Speaker 6: the more risk you can take, so you know, I
31:06
Speaker 6: mean even my age is like thefty ish fifty ish
31:09
Speaker 6: and so coy. I would you know, And I'm kind
31:14
Speaker 6: of mostly inequities because I'm thinking it's going to at
31:16
Speaker 6: least twenty or years before retire, so I may as
31:18
Speaker 6: well take the maximum aminent risk. That kind of you know,
31:22
Speaker 6: it's so I can get the maximum growth.
31:25
Speaker 1: But nonetheless, a workplace pension if there's not a guaranteed income,
31:28
Speaker 1: is also equity. There's not a replacement for it's the
31:32
Speaker 1: same thing.
31:32
Speaker 3: It's just the same thing.
31:34
Speaker 1: It's the equity exposure in the main, unless it's lifestyled
31:37
Speaker 1: into bonds as you age.
31:40
Speaker 8: Yeah, I was treating it as a form of like
31:43
Speaker 8: lifetime capital, So it's kind of guaranteed as long as
31:47
Speaker 8: you're still in a career, So that would act as
31:50
Speaker 8: your safety net. So then that allows someone young like
31:54
Speaker 8: me to be fully risk onde.
31:57
Speaker 1: I suppose what you mean is that you would have
31:58
Speaker 1: a higher risk equity portfolio out with.
32:01
Speaker 2: Your Yeah, yeah, that makes some sense.
32:04
Speaker 3: That sounds theological, I think.
32:07
Speaker 1: But but just to be clear, it's still an equity portfolio.
32:10
Speaker 2: Yeah, likely lower risk equity portfolio.
32:13
Speaker 1: Still don't have a bond style balancer, and you'll be
32:16
Speaker 1: needing some gold.
32:19
Speaker 2: Thank you for that question.
32:21
Speaker 1: Listen, there's quite a few questions on does the does
32:23
Speaker 1: the UK need a crisis? Will the government change they
32:29
Speaker 1: do we need Do you think that that maybe you
32:32
Speaker 1: can have a go at this point? Do you think
32:34
Speaker 1: the UK needs a crisis something similar to the UK's
32:36
Speaker 1: IMF bailad and the late seventies for policymakers to confront
32:39
Speaker 1: the underlying issues with the economy, energy policy, taxes, et cetera.
32:43
Speaker 1: In other words, do things need to get worse before
32:46
Speaker 1: they get better? And there are a couple of others
32:48
Speaker 1: along the same zone, the same thing about the bond
32:52
Speaker 1: market and the extent which we might.
32:54
Speaker 2: Destroy it by cutting yels, et cetera.
32:55
Speaker 1: And we have had this conversation that things eventually they'll
32:59
Speaker 1: get so that they have.
33:00
Speaker 3: To get better.
33:02
Speaker 7: I mean, things haven't been good for quite a long time.
33:06
Speaker 7: I think if you look at the longer dated guilt yields,
33:09
Speaker 7: you know, we saw them hitting sort of nineteen ninety
33:13
Speaker 7: eight levels earlier in the year, and that suggests that
33:18
Speaker 7: we haven't really recovered actually from what we saw in
33:21
Speaker 7: twenty twenty two with the mini budget. Actually, things have
33:25
Speaker 7: been getting a bit better this year until this recent
33:30
Speaker 7: sort of turmoil, which is a global one. But actually
33:33
Speaker 7: their longer data to guilds haven't been too badly affected
33:36
Speaker 7: in contact, so I wouldn't say that we've sort of
33:41
Speaker 7: reached a point where things have got much better, whether
33:46
Speaker 7: they could get worse.
33:47
Speaker 2: I mean, I think they always could.
33:49
Speaker 7: And I don't know what the answer is to that,
33:51
Speaker 7: except that I think to Joins point, there is a
33:53
Speaker 7: lot of uncertainty. We've seen quite a lot of political
33:57
Speaker 7: risk priced in, and so I suppose is something that
34:00
Speaker 7: would add to that and stabilize it further.
34:04
Speaker 2: Do we need it? John? Do we need a crisis
34:07
Speaker 2: if we muddle alone?
34:10
Speaker 1: It seels to me like the bit where we can
34:12
Speaker 1: just keep muddling is nearly over.
34:14
Speaker 3: No, I think so.
34:15
Speaker 6: And I actually think where we make it a crisis is
34:18
Speaker 6: in energy provision or infrastructure, because we've already seen things
34:23
Speaker 6: like I'm from live near Tunby's Wells and thankfully didn't
34:28
Speaker 6: get caught up, but like you know, the water system
34:30
Speaker 6: was out in like a major town. It's just probably
34:32
Speaker 6: something you kind of live there or thereabouts for you know,
34:35
Speaker 6: the best part of like six weeks. And that was
34:38
Speaker 6: nothing to do with It was nothing to be cyber attacks,
34:40
Speaker 6: it was nothing to do we you know, warfare or
34:42
Speaker 6: anything like that. It was it was just degraded kind
34:45
Speaker 6: of facilities, back management, whatever it was.
34:48
Speaker 3: And you know, we've got the highest.
34:50
Speaker 6: Industrial electricity prices kind of pretty much in the world,
34:54
Speaker 6: and you got it turn around and think, well, what
34:56
Speaker 6: happens if we keep on going down the pathway that
34:59
Speaker 6: leads away from me security and towards kind of like
35:01
Speaker 6: energy speculation, you know, kind of maybe overloading their grid
35:05
Speaker 6: with kind of renewable assets before it's ready. Not saying
35:08
Speaker 6: that's a bad thing, but you know, we got to
35:10
Speaker 6: kind of take you know, baby steps towards this stuff,
35:14
Speaker 6: and then maybe we start seeing things like you know,
35:16
Speaker 6: extensive blackouts or the sort of thing that gets people
35:21
Speaker 6: properly worried and makes us make some hard.
35:25
Speaker 3: Decisions about where we need to focus.
35:28
Speaker 6: I think something like that actually probably more than a
35:30
Speaker 6: guilts market crisis is actually more likely where there it
35:33
Speaker 6: really is a sense that things have fallen apart.
35:37
Speaker 1: Okay, christ is then yeah, proper question question right here
35:41
Speaker 1: in the front. I'm trying to answer some quickly. Do
35:46
Speaker 1: you think we will see a massive exodus from the
35:47
Speaker 1: UK of the high ending individuals in light of the
35:49
Speaker 1: punitive labor government tax policies. I think we already have,
35:52
Speaker 1: but we might see that decline because there's nowhere to
35:54
Speaker 1: go now, is there coming.
35:57
Speaker 2: Back on going? Yeah?
36:00
Speaker 9: Ryan Swent, I'm a mortgage advisor, so I wanted to
36:02
Speaker 9: bring it back to the housing market if possible. It
36:05
Speaker 9: seems to me that there's a huge scope on Thursday
36:07
Speaker 9: for surprises from the Bank coming not because of necessarily
36:10
Speaker 9: a policy move, but because of what they say. If
36:14
Speaker 9: it appears there's consensus that because of the energy crisis
36:17
Speaker 9: now they're inclined to raise rates, that could push bond
36:19
Speaker 9: yelds up much higher than we've gone so far. But
36:21
Speaker 9: they might also say they're still inclined to raise races,
36:23
Speaker 9: which you could push yields down. So I just want
36:25
Speaker 9: to know what your take is, what do you expect
36:27
Speaker 9: them to say, and you know, what are the risks
36:30
Speaker 9: for the housing market the rest of the year as
36:32
Speaker 9: you see it.
36:35
Speaker 7: I mean from my perspective, you know, I can look
36:38
Speaker 7: at the what the market are saying, and they have
36:41
Speaker 7: seemed quite actually uncertain. So whilst I said that they'd
36:44
Speaker 7: moved towards pricing in a hike, you know, they've moved
36:46
Speaker 7: back again. And we've also seen that fluctuate in both
36:49
Speaker 7: directions just in the last few trading sessions. So I
36:52
Speaker 7: would say there's a huge amount of uncertainty. The only
36:56
Speaker 7: real indications we've heard from the bank last week, we
37:00
Speaker 7: had Alan Taylor speaking and he said that if the
37:05
Speaker 7: oil price spike sort of stayed where it was for
37:08
Speaker 7: just a few weeks, then by the time we get
37:10
Speaker 7: to the end of the year, it wouldn't necessarily make
37:12
Speaker 7: any difference to overall CPI. But of course we're already
37:16
Speaker 7: moving on and things maybe look like they're going to
37:18
Speaker 7: be a bit more protracted. So I think there's going
37:20
Speaker 7: to be a huge amount of uncertainty, and the bank
37:22
Speaker 7: do tend to be quite cautious in that I don't
37:26
Speaker 7: think they're going to be looking to say anything that's
37:29
Speaker 7: going to trigger extreme market reactions. I think how they
37:33
Speaker 7: vote will be very important. You know, we're expecting it
37:37
Speaker 7: to be a hold, but whether anybody feels like it's
37:41
Speaker 7: worth sort of stepping out of that consensus view will
37:45
Speaker 7: be interesting. And now we get the commentary published as well,
37:48
Speaker 7: and of course their guidance, you know, changing and wording
37:50
Speaker 7: to the guidance and just really anything and their inflation
37:54
Speaker 7: you know, predictions as well. For the rest of the year,
37:56
Speaker 7: I think really going to be incredibly closely watched. But
37:59
Speaker 7: I probably had to say that we'll see now big
38:03
Speaker 7: surprises because I think they'll probably want to try and
38:07
Speaker 7: give a massive stability housing market.
38:10
Speaker 2: John.
38:10
Speaker 6: Yeah, I mean I think I agree with you more
38:12
Speaker 6: when I don't think they're going to want to rattle
38:14
Speaker 6: the horses that this meeting. I think the April one
38:16
Speaker 6: will be the scarier one because if you're still going
38:19
Speaker 6: on by that point, they're going to actually have to
38:21
Speaker 6: commit in some sort of direction. As far as the
38:24
Speaker 6: housing market goes, I mean it really boys down again.
38:27
Speaker 6: If you're buying a house for yourself, then there are
38:30
Speaker 6: so many other factors that mark more it is a
38:32
Speaker 6: buyer's market.
38:33
Speaker 3: Well, I think that's one thing I would say.
38:34
Speaker 6: You know, and this, if anything, makes it more of
38:37
Speaker 6: a buyer's market, because you know, you can turn around
38:40
Speaker 6: people and say.
38:40
Speaker 3: Well, you know there's a barrow, and you know he's
38:42
Speaker 3: not going to get many other buyers.
38:44
Speaker 6: So I sort of feel that from that point of view,
38:47
Speaker 6: if you are a buyer, you're probably in a decent
38:49
Speaker 6: position as long as you've got all the usual stuff,
38:51
Speaker 6: you know, get your mortgage lined up, make sure you
38:53
Speaker 6: get enough money, that kind of thing. And also if
38:57
Speaker 6: you're buying in London, which I think is where the
38:59
Speaker 6: question came from. The I mean the London housing market
39:03
Speaker 6: is basically flat for about a decade now and probably
39:06
Speaker 6: a nice of the town in real terms. So I mean,
39:10
Speaker 6: what can it go the world? You know, of course
39:12
Speaker 6: I can go through it. But at the same time,
39:14
Speaker 6: you know you're not buying when it's at the peak,
39:18
Speaker 6: if you're worried about that kind of thing.
39:20
Speaker 1: But the market across the board, I mean, it is
39:21
Speaker 1: just interesting, isn't it. And we're talking disapascination about the
39:24
Speaker 1: turn in yields and interest rates starting to go up
39:26
Speaker 1: and interest rate normalizing, and now we're moving into an
39:29
Speaker 1: environment we can easily expect rates to stick around the
39:32
Speaker 1: three thousand year historical normal four.
39:34
Speaker 2: To five percent.
39:35
Speaker 1: And only just now is it really beginning to turn
39:38
Speaker 1: up in all the asset classes that you would have
39:39
Speaker 1: expected it to turn up in a few years back,
39:42
Speaker 1: So housing being one of them. You know, house prices
39:44
Speaker 1: were ridiculously high on the basis of a very, very
39:48
Speaker 1: free and easy capital.
39:50
Speaker 2: We don't have those things anymore. You begin to see
39:52
Speaker 2: the housing.
39:52
Speaker 1: Market crack, You start to see the private actuity market crack,
39:54
Speaker 1: you start to see private credit crack. All these things
39:57
Speaker 1: are a function of this regime change in in yields.
40:00
Speaker 1: And I find it so interesting that it's taken so long.
40:04
Speaker 1: You know, we started talking about all these things, well
40:06
Speaker 1: this will crack, and that'll crag, and this will crag
40:08
Speaker 1: three four years ago. But it's just it's much slower
40:11
Speaker 1: than you think. But of course it's slower than you
40:13
Speaker 1: think in the asset classes that are not particularly liquid
40:17
Speaker 1: and not particularly transparent, and housing, well, obviously it's not
40:21
Speaker 1: the same kind of asset price class as private credit
40:24
Speaker 1: and private equity. It has the same dynamics when it
40:26
Speaker 1: comes to liquidity and transparency. That was an attempt to
40:30
Speaker 1: answer another five questions in a while.
40:33
Speaker 2: Because there are quite a few abouts. Did you have
40:35
Speaker 2: private credits, did you have private equity?
40:37
Speaker 1: How should you hold infrastructure inside your portfolio? And the
40:40
Speaker 1: answer I would say from all of us is with
40:42
Speaker 1: extreme care, Sebastian nodding, with extreme care.
40:47
Speaker 2: You know, we feel very strongly.
40:48
Speaker 1: John and I will I do anyway that if you're
40:50
Speaker 1: going to hold pretty much any asset, you should hold
40:53
Speaker 1: it in the most transparent way way possible, which is
40:56
Speaker 1: why we are those great fans of the listed markets
40:59
Speaker 1: over the private mind. Because you want to be able
41:01
Speaker 1: to trade something you want to be able to understand it.
41:03
Speaker 1: You want to be able to talk to the directors
41:05
Speaker 1: all these things, and you can do that and listed
41:07
Speaker 1: markets in a very different way. And of course listed
41:09
Speaker 1: markets react much more quickly, so that that covers pretty
41:12
Speaker 1: much all of those anything else. From the floor, there
41:15
Speaker 1: were a couple at the back there.
41:16
Speaker 10: I think, thank you, Hi Field job, thank you for this,
41:21
Speaker 10: and just wanted to ask, if you assume a new
41:25
Speaker 10: investor no equity exposure to begin with, very young, and
41:30
Speaker 10: they were looking at having a split of UK and
41:34
Speaker 10: American ETF, how would you think about framing the question
41:39
Speaker 10: of do you hedge the US ETF back into pound
41:46
Speaker 10: sterling or do you just leave it in American dollars
41:50
Speaker 10: to roll up in that US side of the investments.
41:54
Speaker 1: I think you're going to make your life far too
41:56
Speaker 1: complicated by even thinking about that. When you invest in
41:59
Speaker 1: a country, you take the car do risk at the
42:00
Speaker 1: same time there they come as a package. So I
42:04
Speaker 1: would never begin to start trying to, particularly in a
42:07
Speaker 1: small young portfolio, to start.
42:09
Speaker 2: Trying to hedge that away. But maybe the others have
42:11
Speaker 2: a different view.
42:13
Speaker 3: I don't at all.
42:14
Speaker 5: No.
42:14
Speaker 6: I think the four X exposures is one of those
42:16
Speaker 6: things that goes into the buffet too hard bucket and
42:20
Speaker 6: if you are by and part and also part of
42:22
Speaker 6: the benefit of investment overseas is you do get that diversity.
42:27
Speaker 6: So you know, you get the dollar as well as
42:29
Speaker 6: the pound exposure, and you know, often the dollar or
42:33
Speaker 6: so often in recent years, you know, having dollar exposures
42:36
Speaker 6: been a good thing for stelling investor. At some point
42:39
Speaker 6: it probably wouldn't be the best thing, but it's not
42:41
Speaker 6: something they worry about on top of all the other
42:43
Speaker 6: things that go into choosing that in the first place.
42:46
Speaker 1: We have run out of time, but I'm still going
42:48
Speaker 1: to take another question to see because i don't think we've.
42:50
Speaker 2: Done quite enough on the back here. Thank you.
42:54
Speaker 1: There is a question by the way, and here about
42:57
Speaker 1: do you have any thoughts on the upcoming SpaceX ipo
42:59
Speaker 1: and we'll this lead to Tesla merging with SpaceX down
43:02
Speaker 1: the road. Now, I'm not going to answer that one
43:05
Speaker 1: because Cassy Word has answered it for us, and you
43:09
Speaker 1: can listen to my podcast with her on Monday and
43:12
Speaker 1: you can hear the answer to that. I'm not going
43:13
Speaker 1: to tell you, so you will listen to the podcast
43:16
Speaker 1: question so.
43:17
Speaker 11: Prior to the events in the Middle East. Obviously, one
43:19
Speaker 11: of the dominant conversations in the in the markets was
43:21
Speaker 11: around cracks and private credit and elevated valuations in sort
43:26
Speaker 11: of AI boom equities. And in one of your recent
43:28
Speaker 11: podcasts there was sort of a conversation about a potential
43:31
Speaker 11: catastrophic event pulling the rug under those valuations in AI
43:35
Speaker 11: equities and you know, potential inflationary impact and downstream. Do
43:38
Speaker 11: you see a prolonged situation of conflict in the Middle
43:42
Speaker 11: East as one of those potential scenarios causing a crash
43:46
Speaker 11: in those you know, and an adjustment in those equities.
43:49
Speaker 2: Yeah, I mean, it easily could be.
43:50
Speaker 1: And that's the thing with any any kind of any
43:52
Speaker 1: kind of bubble level of valuation. You don't know, you
43:55
Speaker 1: never know what it's going to be, but it's going
43:57
Speaker 1: to be something. So yes, that could be it. But
43:59
Speaker 1: again I got to listen to Kathy because we talk
44:02
Speaker 1: about that quite a lot in the podcast with her
44:04
Speaker 1: about what it might be.
44:05
Speaker 2: But of course she doesn't believe it will be anything.
44:06
Speaker 1: She believes that all those stocks will grow into their
44:09
Speaker 1: evaluations over the next few years and this this won't happen,
44:11
Speaker 1: but that that very rarely happens. That's very rarely the
44:14
Speaker 1: answer to over priced stocks. The answer is is usually
44:17
Speaker 1: that they fall. Anything to add to that, John or Mollana.
44:21
Speaker 6: No, I think, yeah, yeah, the one thing I see
44:26
Speaker 6: the private schedit thing. This is something I'm curious about
44:28
Speaker 6: him when the audience is an expert on this and
44:30
Speaker 6: do police come up with the chatters after? But I
44:33
Speaker 6: still don't quite see because some people have mentioned that
44:35
Speaker 6: it have been kind of like two thousand and eight,
44:37
Speaker 6: two and seven, and that always kind of, you know,
44:40
Speaker 6: raises a lot on bells because obviously two thousand and
44:41
Speaker 6: eight was pretty charastrophic. But I don't quite see yet
44:44
Speaker 6: how we get from sure a lot of these things
44:47
Speaker 6: could go bad, or how do we get from that
44:50
Speaker 6: to infect in the entire financial system. I believe there
44:53
Speaker 6: is a sort of like insurance and go there. Even then,
44:56
Speaker 6: I'm still struggling to see exactly how that goes to,
44:59
Speaker 6: you know, not being able to get cash out your ATM,
45:01
Speaker 6: you know, one Friday kind of morning. Yeah, I was
45:04
Speaker 6: just if anyone thinks they wanted that one, then please come.
45:08
Speaker 3: Up to me.
45:08
Speaker 1: Okay, I'm going to allow one more question, but please
45:11
Speaker 1: can it be something to which we can answer in
45:13
Speaker 1: an upbeat manner, because I want to finish this on
45:16
Speaker 1: an up We finished every session on a low.
45:17
Speaker 2: You look like a happy person. Go for it.
45:23
Speaker 9: Change What one policy change could a UK government do
45:27
Speaker 9: that would turbo charge our economy?
45:30
Speaker 2: You can't sol on that zero that's on thatt zero.
45:36
Speaker 7: If you're talking about the housing market, i'must like, get
45:38
Speaker 7: her of stamp duty?
45:40
Speaker 2: Great one.
45:40
Speaker 6: I can't believe we both took my man options next
45:43
Speaker 6: zero stamp duty? Yeah, no, God, that is a really
45:47
Speaker 6: good one.
45:48
Speaker 11: Don't.
45:48
Speaker 6: That's a kill off for these marginal tax rates. That's
45:51
Speaker 6: the other irritating one. So like when somebody earns over
45:55
Speaker 6: hundred ground, they immediately jump up to a.
45:57
Speaker 3: Six percent tax rate.
46:00
Speaker 6: And also and that the other said as well, because
46:02
Speaker 6: whenever your own benefits, if you get a job, or
46:04
Speaker 6: you get a job going over a certain nobody else,
46:06
Speaker 6: you get a similarly in seeing marginal tax r and
46:09
Speaker 6: whether you know and know that, people say, oh you're
46:11
Speaker 6: still getting for what epe, You're still getting there, You're
46:13
Speaker 6: still get a bit more money.
46:14
Speaker 3: It's not.
46:15
Speaker 6: It definitely holds people back and sporting to people that
46:17
Speaker 6: can have both ends the spectrum who are put off
46:20
Speaker 6: extras by those marginal tax so get rid of them.
46:23
Speaker 6: I think it would be really helpful.
46:25
Speaker 1: Okay, So counselor a lot of taxes, sort out the
46:27
Speaker 1: tax system.
46:28
Speaker 2: Get rid of that zero, make life cheaper.
46:30
Speaker 1: Okay, that's thank you for that question that I think
46:33
Speaker 1: those answers were quite positive. None of these things are
46:37
Speaker 1: going to happen, of course, but you know there you go, right,
46:40
Speaker 1: So do you listen to the podcast, Do read John's
46:44
Speaker 1: newsletter Money to Build award winning Do read my newsletter
46:47
Speaker 1: out on Saturdays. Do read the Markets Today blog Moena,
46:52
Speaker 1: and enjoy them all, I hope, and thank you so
46:54
Speaker 1: much for coming this evening. You've been a really good
46:56
Speaker 1: audience and we will be hanging around to answer more questions,
46:58
Speaker 1: and so will our other panel.
47:00
Speaker 2: So thank you all. Thanks for listening to this week's
47:07
Speaker 2: Marin Talk to Your Money.
47:08
Speaker 1: If you like our show, rate review and subscribe wherever
47:11
Speaker 1: you listen to podcasts. Also be sure to follow me
47:14
Speaker 1: in John on ex or Twitter at marinas w and
47:16
Speaker 1: John Underscore Steppek. This episode was produced by Someasadi and
47:20
Speaker 1: Moses and questions and comments on this show and all
47:22
Speaker 1: those shows are always welcome. Our show email is Merrin
47:25
Speaker 1: Money at bluebog dot net. Sound designed by Aaron Kasper
47:29
Speaker 1: and special thanks of course to Paula Steele