Latest / Merryn Talks Money / Why Now Is the Moment for Bitcoin and Gold

Transcript

Why Now Is the Moment for Bitcoin and Gold · Merryn Talks Money

0:03
Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
0:10
Speaker 2: Hello, it's Maren sum set Web here. We've got a
0:13
Speaker 2: very special episode of Marrin Talks Money for you this week.
0:16
Speaker 2: As regular listens to the show, you will know gold
0:19
Speaker 2: versus Bitcoin is a debate we love to have on
0:21
Speaker 2: the show every week. In fact, how I end every episode.
0:25
Speaker 2: So we thought, rather than just saving that question for
0:27
Speaker 2: the end of every show, we'd make an entire show
0:31
Speaker 2: around it. So this week we bring you the conversation
0:33
Speaker 2: I had with Charlie Morris, chief investment officer and founder
0:36
Speaker 2: of Fike Tree, and Alexander Charter's fund manager at Ruffer
0:39
Speaker 2: in front of an actual, real live audience at Bloomberg
0:43
Speaker 2: headquarters in London about which of these assets they would
0:46
Speaker 2: hold and why. But first, as always, senior reporter and
0:50
Speaker 2: author of the Money Distilled Newslater, which by the way,
0:52
Speaker 2: is excellent sign up if you have not already written
0:56
Speaker 2: by John Steppeck And here he is with me to
0:58
Speaker 2: chat John Man, John who knows that we are a
1:02
Speaker 2: bit frustrated with him.
1:04
Speaker 3: The list is endless for sure. Who you're a filmed to?
1:07
Speaker 2: Oh, come on, you must have listened to poor old
1:10
Speaker 2: well you know how we used to say Portries and me.
1:12
Speaker 2: We're going to start saying poor Richie Sunac, poor Richie
1:16
Speaker 2: sac As he unveiled what they call a seventeen billion
1:20
Speaker 2: pound package of tax cuts, he says, I am not
1:25
Speaker 2: blind to the fact people are frustrated with me, and
1:28
Speaker 2: he admitted that he's not got everything right now. I
1:33
Speaker 2: know you've looked at the manifesto. Is he ever going
1:36
Speaker 2: to get anything right?
1:39
Speaker 4: Actually? Know what?
1:40
Speaker 3: The thing that the aspire to do, which is getting
1:43
Speaker 3: rid in national insurance is a good aspiration.
1:47
Speaker 2: Why didn't they do it a decade ago?
1:49
Speaker 5: Though?
1:50
Speaker 3: I mean yeah, I mean basically everything that's on the manifesto.
1:52
Speaker 3: You can either say, well, walkie, if you think this
1:54
Speaker 3: is a good idea, why didn't you try it X
1:56
Speaker 3: number of years ago? And a lot of the things
1:58
Speaker 3: in the manifesto actually thought, look that this idea bringing
2:01
Speaker 3: back help to buy?
2:03
Speaker 2: Oh god, but it is interesting, isn't torupt have to
2:06
Speaker 2: interrupt because you mentioned helped to buy?
2:08
Speaker 5: It?
2:08
Speaker 2: Is like presses every button, every button? You know how
2:13
Speaker 2: sometimes people might make a policy and they think it
2:16
Speaker 2: might work and it sounds good and they haven't got
2:19
Speaker 2: actual evidence to show that it's a rubbish policy. Yeah,
2:23
Speaker 2: helped to buy isn't like that because we've had it
2:26
Speaker 2: before for yolks, and we know it's a terrible policy.
2:31
Speaker 2: We know that in areas of high demand, all it
2:34
Speaker 2: does is push out prices for first time buyers.
2:36
Speaker 5: We know that.
2:36
Speaker 2: Why would you reintroduce it when you already know that
2:42
Speaker 2: it's a subsidy program for house builders.
2:44
Speaker 3: I think that it's mostly because the Vares. It seemed
2:48
Speaker 3: that the first time buyers don't fully appreciate that. And
2:53
Speaker 3: you are absolutely righty by me because actually another side
2:56
Speaker 3: effect that helped to buy Hide Boys rightly led to
3:01
Speaker 3: the person in chief executive getting that massive pay package,
3:05
Speaker 3: and that in turn led to the I think I
3:07
Speaker 3: think that was the tipping point for chief executive pay
3:10
Speaker 3: in this country. It became the point at which all
3:12
Speaker 3: the you know, the kind of advisory committees said no,
3:17
Speaker 3: we're not We're not having this anymore. And now we've
3:20
Speaker 3: got you know, the new regulators kind of pushing back
3:22
Speaker 3: against that and saying we like, there's no law saying
3:24
Speaker 3: that ukchief executs can't have packages done more like us once.
3:28
Speaker 3: So that's interesting in itself. You know, you can argue
3:31
Speaker 3: that you know, Helped to Buy directly affected the health
3:35
Speaker 3: of UK capital markets by drawing attention to one particularly
3:39
Speaker 3: egregious people.
3:40
Speaker 2: It did, and getting us into a situation where we
3:43
Speaker 2: have chief executives across the UK talking about shifting their left,
3:46
Speaker 2: listening to the US they get pay properly, or just
3:49
Speaker 2: leaving and going to the US so they can get pay,
3:51
Speaker 2: probably Ashted being the most recent example of that.
3:53
Speaker 5: Right.
3:53
Speaker 2: Anyway, let's not get hang up on help to Buy.
3:55
Speaker 2: John and I have written about this a lot over
3:57
Speaker 2: the years. Go back read our columns on it, but
3:59
Speaker 2: basically rubbish policy not required.
4:03
Speaker 3: Well, they're talking about building more houses again, kind of like, well, okay,
4:08
Speaker 3: that's fine, but again, you have been in power for
4:11
Speaker 3: fourteen years for whatever reason. Now whether you think building
4:14
Speaker 3: more hous is a good idea or not. And I
4:16
Speaker 3: actually think it's more about reform and planning than necessarily
4:19
Speaker 3: saying we have to have this number of houses. And
4:22
Speaker 3: I think actually that will probably quite often lead to
4:24
Speaker 3: disaster because you build houses where people don't actually want
4:27
Speaker 3: to be.
4:28
Speaker 2: Whereas if you reform planning, the market will give you
4:30
Speaker 2: houses where people need houses.
4:32
Speaker 3: Yeah exactly, but it's kind of like, well, why do
4:35
Speaker 3: you think that's saying that you're going to build one
4:37
Speaker 3: point six million is somehow going to magic one point
4:39
Speaker 3: six million houses out of nowhere when you've been saying
4:42
Speaker 3: we want to build houses. It's not as if this
4:46
Speaker 3: is a new commitment. It's not as if they've turne
4:48
Speaker 3: around and said, oh, we don't like building houses. Now
4:51
Speaker 3: they're going to find the magic key to do it.
4:54
Speaker 3: I just think it's that sense that you're going to
4:56
Speaker 3: get more of the same. There's all the kind of
5:00
Speaker 3: kidding on about fiscal responsibility as well, which is the
5:04
Speaker 3: irritating thing because obviously all of this is going to
5:06
Speaker 3: cost a bit more money, and so they're saying, okay,
5:11
Speaker 3: well why are you going to raise the money? And
5:12
Speaker 3: we're going to raise the money. I think it's six
5:14
Speaker 3: billion in tax avoidance, which is you know, kind of
5:19
Speaker 3: you're kind of like, well, look at again, if that
5:21
Speaker 3: six billion is just sitting around, how come you're not
5:23
Speaker 3: already collecting it.
5:25
Speaker 2: To get that last year or the year before or
5:27
Speaker 2: the year before. It's just been sitting there down the
5:30
Speaker 2: back of the South were waiting for you exactly.
5:33
Speaker 3: And then it's twelve billion in welfare reform. And you know,
5:36
Speaker 3: while I'm sure i'd be among the first to say yes,
5:40
Speaker 3: I'm sure there are areas where we can do welfare
5:43
Speaker 3: reform and where it's inefficient and all the rest of it,
5:46
Speaker 3: the question again is, well, why we're at the situation
5:49
Speaker 3: where there's apparently just twelve billion line around to be
5:52
Speaker 3: picked up from the kind of benefits system, and it's
5:57
Speaker 3: and what have we been doing without it? Out of
5:59
Speaker 3: the sake of for the sake of what you know,
6:02
Speaker 3: It's like, why are you suddenly going to get more
6:04
Speaker 3: efficient if we vote for you?
6:06
Speaker 5: Now?
6:07
Speaker 3: You know, it's one thing if labor says stuff like this,
6:09
Speaker 3: because although you know they're almost certainly talking rubbish as well,
6:13
Speaker 3: at least they haven't actually been in charge for any
6:15
Speaker 3: period of time, so.
6:17
Speaker 4: Them, why didn't you do it? Now?
6:19
Speaker 2: Listen, One of the things that you and I've talked
6:21
Speaker 2: about a lot of the narrowing of the tax base
6:23
Speaker 2: and the percent of tax station paid that comes from
6:27
Speaker 2: the people at the very top. And you pointed out
6:29
Speaker 2: to me earlier really eye catching statistic from the IFS
6:33
Speaker 2: which tells us that a higher proportion of over sixty
6:36
Speaker 2: five is now pay income tax than working people pay
6:39
Speaker 2: income tax.
6:40
Speaker 3: In twenty ten twenty eleven, it was forty eight percent
6:44
Speaker 3: over sixty fives paid income tax, and it's now sixty
6:48
Speaker 3: five percent, whereas the number of workers paying income tax
6:54
Speaker 3: has fallen from sixty one percent in two eleven to
6:58
Speaker 3: fifty eight percent.
7:00
Speaker 4: Now.
7:01
Speaker 3: It is expected to go back up to sixty six
7:03
Speaker 3: percent by the twenty twenty nine tax year. But it just,
7:08
Speaker 3: I mean, it just shows you. I mean, it's partly
7:10
Speaker 3: because pensioners actually did used to have a slightly higher
7:13
Speaker 3: personal allowance, but it's mostly because they've had pretty decent
7:16
Speaker 3: income growth. Whereas also obviously a lot of the Conservative
7:21
Speaker 3: Party policies have been named at taking the lowest paid
7:24
Speaker 3: people out of the income tax net altogether, whether or
7:29
Speaker 3: not that's actually a good idea, And I think our
7:32
Speaker 3: view is the problemise of if you rely too much
7:35
Speaker 3: on the people at the top, because what is that
7:39
Speaker 3: they share the income tax payer by the top ten
7:41
Speaker 3: percent income taxpayers has gone up from fifty four percent
7:45
Speaker 3: to sixty percent now, so you're becoming ever more reliant
7:49
Speaker 3: on our very small group of taxpayers to prop everyone
7:52
Speaker 3: else up.
7:53
Speaker 2: Yeah, and you could always say that you have an
7:55
Speaker 2: a lot of people who who by not paying any
7:58
Speaker 2: income tax at all, maybe and have quite the same
8:01
Speaker 2: stake in how taxation revenues are spent than other people.
8:06
Speaker 2: Old fashioned argument, but I think it's still got some
8:08
Speaker 2: validity to it.
8:10
Speaker 3: Yeah, yea, I broadly agree with that, because I think
8:12
Speaker 3: when people go from not paying tax they suddenly pay
8:15
Speaker 3: in tax. They get a kind of wake up call.
8:19
Speaker 3: And the problem is if if nor win't the kind
8:22
Speaker 3: of minimum made jobs there's actually pay an income tax,
8:24
Speaker 3: then I think there's a there's a lacky participation in
8:28
Speaker 3: that funny kind of way.
8:30
Speaker 1: Well, I say that just because I'm fascinated by when,
8:34
Speaker 1: you know.
8:34
Speaker 2: The young people around me when they get their first job,
8:37
Speaker 2: waitressing or whatever it is, and they come home with
8:39
Speaker 2: their first paypacket, an emergency tax has been taken out
8:43
Speaker 2: and they lived in there like, oh my god, they
8:45
Speaker 2: took all my money away, like yes they did, Yes
8:49
Speaker 2: they did, and they're going to keep doing that for
8:51
Speaker 2: your whole life. And it's a horrible shock when they
8:55
Speaker 2: see that number and they realize that's how it actually works.
8:57
Speaker 2: They think they are under certain amount. They added up
9:00
Speaker 2: their hours in their head, and they've added up their
9:02
Speaker 2: percentage of the tips, etc. Get the paypack it in half.
9:05
Speaker 3: It's gone faithfully. What you're seeing is the instantly becomes
9:09
Speaker 3: somewhat more conservative, and yet it's been a conservative government
9:12
Speaker 3: that's pushed them all out of the tax.
9:16
Speaker 4: Envelope.
9:17
Speaker 2: I think it was Nick Clegg who had this a
9:19
Speaker 2: little idea that you should get as many people as
9:21
Speaker 2: possible out of the tax neck and they should make
9:23
Speaker 2: the allowance bigger and bigger and bigger, so that fewer
9:26
Speaker 2: people at the bottom paid any tax at all. I
9:28
Speaker 2: remember discussing it with him once and I get that,
9:30
Speaker 2: and you know, you're quite right. The more of anyone's
9:32
Speaker 2: money they get to keep, the better. But maybe if
9:36
Speaker 2: we all have to be part of this system, everyone
9:39
Speaker 2: should be paying even a tiny bit into it, and
9:42
Speaker 2: understanding that they pay a tiny bit into it, and
9:44
Speaker 2: so they have some stake in how it's spent as well.
9:48
Speaker 2: I don't know philosophical arguments that they're probably too much
9:50
Speaker 2: for this podcast, too much for this podcast, But I
9:53
Speaker 2: tell you what, John, you know what you need. And
9:54
Speaker 2: an era of debt and deficits and political instability and
10:00
Speaker 2: changing governments here in Europe and the US everything's a
10:04
Speaker 2: bit uncertain. Bit confuser that there's a lot more instability
10:07
Speaker 2: inflation ahead. Do you know what you need?
10:09
Speaker 3: I can't possibly imagine.
10:17
Speaker 2: Welcome to Meren Drugs Money, the podcast in which people
10:20
Speaker 2: who know the markets explain the markets. I'm Meren Sumset Web.
10:23
Speaker 2: Let's get my conversation with Charlie Morris, chief investment officer,
10:26
Speaker 2: I'm founder with bike Tree and Alexander Charter's fund manager
10:29
Speaker 2: Rougher at our special event in the Bloomberg offices in London.
10:32
Speaker 2: Cannopis and drinks by the way, Sorry you'll wren't there.
10:34
Speaker 2: Focusing on the question bitcoin or gold. Now, as I mentioned,
10:37
Speaker 2: it's a question I ask all my guests, so here's
10:40
Speaker 2: a quick reminder of some of the answers we've received
10:43
Speaker 2: in the past.
10:45
Speaker 5: I'd probably go for gold, bitcoin gold, bitcoin gold, gold,
10:49
Speaker 5: bick gold gold. For me, old gold would not be bitcoin,
10:53
Speaker 5: but I think I could do better than either.
10:55
Speaker 2: Really, so overwhelming support for gold among the Marion Dogs
11:04
Speaker 2: Money guests, but not so black and white for Charlie
11:08
Speaker 2: and Alexander. I start the conversation by asking alex why
11:12
Speaker 2: is it that we're talking about holding assets like bitcoining gold. Right, now,
11:16
Speaker 2: what is it about geopolitics? What is it about everything
11:20
Speaker 2: going on around the world that means that you need
11:22
Speaker 2: this kind of anti fragile insurance asset.
11:38
Speaker 6: I think the headline is we're in a period of
11:40
Speaker 6: extraordinary regime change for markets. We've had forty years of
11:44
Speaker 6: falling inflation, interest rates, economic volatility, and very atypical geopolitical peace.
11:51
Speaker 4: And that was driven by things like China.
11:52
Speaker 6: And the former Soviet Union rejoining the global trading system,
11:57
Speaker 6: massive positive supply shock, cheap energy, most favorable demography of
12:01
Speaker 6: all time, literally, small state revolution, you name it, plus tech.
12:06
Speaker 6: It was all disinflationary and so it's been manner from
12:10
Speaker 6: heaven for investors for four decades. You've basically just have
12:12
Speaker 6: to hold something equities, bonds, real estate. It's all gone
12:16
Speaker 6: up and asset love low and stable rates and inflation.
12:20
Speaker 6: So if anything comes along to change that dynamic, the
12:24
Speaker 6: portfolio logic that's dominated the last generation also needs to change.
12:30
Speaker 6: So what's happening now. You've got fragmentation of world order,
12:34
Speaker 6: so retooling of supply chains because relations with China and
12:37
Speaker 6: the West are much more fraud You've got more expensive
12:39
Speaker 6: and potentially volatile energy. You've got the big state coming
12:44
Speaker 6: back in large size in the economy with fiscal policy
12:48
Speaker 6: driving much more vol Demography is reversing. You've got the
12:52
Speaker 6: biggest population bust of all human history. So if you
12:55
Speaker 6: put it together, you've got a more inflation prone and
12:58
Speaker 6: volatile environment. That means that you can't rely on things
13:02
Speaker 6: like the negative stock bond correlation that's dominated for a generation.
13:05
Speaker 6: So you need alternsive assets, real assets that are anti
13:08
Speaker 6: fragile to get you through what we think comes next.
13:11
Speaker 2: Okay, so basically everything that starts with the D has turned. Yes, Demographics,
13:16
Speaker 2: end of the peace evidend, decarbonization, deglobalization.
13:22
Speaker 1: That's the big change.
13:23
Speaker 2: But we look around US now and we see inflation falling,
13:26
Speaker 2: and you know, thank which you're seeing it's very kindly
13:28
Speaker 2: auto inflation back to nearly two percent for us.
13:30
Speaker 4: Yeah, well done him, amazing, amazing. Yeah.
13:35
Speaker 6: Look, the key thing is inflation volatility. So no one's
13:38
Speaker 6: saying it's not going to come down. It's just that
13:40
Speaker 6: probably in the era ahead, the floor will typically be
13:44
Speaker 6: two percent inflation rather than a two percent ceiling as
13:46
Speaker 6: we have for the last generation. And you only need
13:49
Speaker 6: very small changes in the amount of inflation around to
13:52
Speaker 6: fundamentally change cross asset correlation. So in plain English, when
13:56
Speaker 6: there's not much inflation around, bonds and equities tend to
13:59
Speaker 6: be negatively correlated.
14:00
Speaker 4: To your bonds go up when your actities go down.
14:02
Speaker 6: But for most of history, if I drew a chance
14:04
Speaker 6: that back to the Napoleonic Wars, you'd find that bonds
14:06
Speaker 6: and ecpties tend to be positively correlated. So if there's
14:10
Speaker 6: a bit more inflation, it will be positively correlated more often.
14:13
Speaker 4: You need other assets. Enter the conversation tonight.
14:16
Speaker 2: Okay, I want to ask you one more thing before
14:18
Speaker 2: we move on, which is you and I've talked quite
14:20
Speaker 2: a lot over the last four or five years about
14:21
Speaker 2: this regime change, about regime change in markets, regime change geopolitically, etc.
14:26
Speaker 1: And it's a story that I think what we.
14:28
Speaker 2: Both feel is is right. But what could happen to
14:32
Speaker 2: make you feel that this story is wrong, That perhaps
14:36
Speaker 2: it isn't so bad, that perhaps we're just going to
14:38
Speaker 2: slip back into the previous path and carry on as was.
14:43
Speaker 6: There are a few things, But first of all, I
14:44
Speaker 6: wouldn't necessarily characterize it as bad.
14:47
Speaker 4: It's just different. Actually, it's very tirely.
14:49
Speaker 1: Give you that different than there are lots of good
14:51
Speaker 1: things about it exactly.
14:52
Speaker 6: So it's just a different opportunity set and a different
14:54
Speaker 6: set of assumptions. What could change if you had a
14:57
Speaker 6: dramatic change in relations between the US and China, if
15:01
Speaker 6: you had a monster productivity miracle around say Ai, if
15:07
Speaker 6: there was some sort of other technological dis sex machiner
15:09
Speaker 6: that solves the problem.
15:11
Speaker 4: Unfortunately, given the.
15:12
Speaker 6: Massive debt situation, because as those rates fell for forty years,
15:16
Speaker 6: debt ran up and people didn't think it was a
15:18
Speaker 6: problem because the cost of servicing that debt was also
15:22
Speaker 6: very low because rates were coming down. Because now rates
15:24
Speaker 6: have gone back up, people realize it is a problem,
15:26
Speaker 6: and paying for the reversal of those d's that you
15:28
Speaker 6: described earlier is very very expensive when you've already got
15:32
Speaker 6: debt to GDP ratios at all time highs and the
15:35
Speaker 6: debt service ratio shooting up quickly.
15:37
Speaker 2: Okay, Charlie, when you look at this situation that he's outlined,
15:41
Speaker 2: is that how you see it?
15:43
Speaker 5: Absolutely? I think that when you have a large high
15:46
Speaker 5: debt GDP ratios and you've got structural deficits and it's
15:49
Speaker 5: a year of elections, and no one is talking about
15:53
Speaker 5: bringing down the deficit. Not a single actor in any
15:56
Speaker 5: parliament here or in America or in Europe cares about
15:59
Speaker 5: that deficits anymore. So it's only going one way. And
16:03
Speaker 5: I'd also say that the money supply has been a
16:05
Speaker 5: growth has been very very low in the last few years.
16:08
Speaker 5: Come around the world, and what we've seen is, you know,
16:12
Speaker 5: quite impressive behavior from asset prices, despite the fact there
16:16
Speaker 5: hasn't been vast amounts of money creation since twenty twenty one.
16:20
Speaker 5: And that really tells you that the pent up demand
16:23
Speaker 5: for inflation. Once they start printing money again, what would
16:26
Speaker 5: happen in that environment.
16:27
Speaker 2: Okay, so we can't trust fit anymore. Well, not that
16:30
Speaker 2: we ever could trust Fit, but we're in a situation
16:32
Speaker 2: where we can trust Fit even less than we've been
16:34
Speaker 2: able to over the last couple of decades.
16:35
Speaker 5: Fear money is brilliant if you you know, if you
16:38
Speaker 5: treat it carefully, and you know, there are some countries
16:40
Speaker 5: that really don't, and we've seen that, We've seen what
16:42
Speaker 5: happens there in place like Turkey and Argentina.
16:44
Speaker 1: Do we treat it carefully?
16:45
Speaker 5: No, we don't. We once did, but don't we don't anymore.
16:48
Speaker 6: If you go back to seventy one, when Nixon pulled
16:51
Speaker 6: America off the gold standards, you had a price of
16:55
Speaker 6: thirty five dollars a try ounce. The price on the
16:57
Speaker 6: screen when we do this podcast is twenty three thirty.
17:01
Speaker 6: So you've lost in the principal reserve, the currency of
17:04
Speaker 6: the world. You've lost ninety eight percent plus of your value. Okay,
17:11
Speaker 6: don't trust fit.
17:12
Speaker 2: Don't trust fear. Anyone trust fit? No, No one trusts fit. Right,
17:17
Speaker 2: So in this environment, we can't invest in the way
17:20
Speaker 2: that we have all the way previous generators have. We
17:23
Speaker 2: can't look back at the last forty years instead of
17:24
Speaker 2: we replicate that will be absolutely fine. So what does
17:28
Speaker 2: let's go back to you, Alex, what does a portfolio
17:30
Speaker 2: look like? Now?
17:32
Speaker 1: What should it look like?
17:33
Speaker 6: Well, it's going to have a wider range of assets,
17:35
Speaker 6: and it probably than the traditional equity and bond setup
17:39
Speaker 6: that's done so well over the last twenty five years
17:41
Speaker 6: or so. That means using commodities more often, it means
17:45
Speaker 6: using FX, It means using anti fragile assets like derivatives,
17:50
Speaker 6: which in a world where you've got higher correlations between
17:52
Speaker 6: cash assets if they all fall together, you want to
17:55
Speaker 6: protect your self, you need derivatives as well, and of course,
17:58
Speaker 6: mon that will include anti feat assets, investments in a
18:02
Speaker 6: bear market, in institutional trust as Bank of American Memory described,
18:06
Speaker 6: it not includes gold.
18:07
Speaker 1: Okay, explain to us briefly what you mean by anti.
18:10
Speaker 6: Fragile things that profit from volatility and instability in the situation.
18:15
Speaker 6: So you don't just want to survive the sort of
18:18
Speaker 6: stress that the system will throw you.
18:20
Speaker 4: You want to be able to thrive.
18:22
Speaker 2: Okay, Portfolios, how do they look to you in this environment?
18:27
Speaker 2: And I know that you focus at the moment mostly
18:28
Speaker 2: on bitcoin and gold, but obviously you have a long
18:30
Speaker 2: history of investing in all sorts of things.
18:33
Speaker 5: I still do that, by.
18:34
Speaker 1: The way, Sorry, only readly golden bitcoin.
18:38
Speaker 5: Yeah, we're talking about gold and bitcoin today. But of course,
18:41
Speaker 5: you know, I think that if you can take a
18:43
Speaker 5: more resilient approach to portfolio management than normal. Obviously we're
18:46
Speaker 5: in extraordinary times because we've seen you know, we've got
18:48
Speaker 5: these indices. It's very very popular these days to track
18:52
Speaker 5: indicies and have a passive portfolio, and you know, low
18:55
Speaker 5: fees a theme with this podcasts have always sort of
18:59
Speaker 5: you know, count to fition through that. But then you
19:01
Speaker 5: have a huge concentration risk. And it's not just the
19:03
Speaker 5: S and P five hundred or the naset that's concentrated.
19:06
Speaker 5: The footsier is half, the footsie is twelve stocks. And
19:09
Speaker 5: you see this all over the place. And I think
19:11
Speaker 5: if you embrace good old fashioned value fundamental investing, you're
19:14
Speaker 5: in a better position because you're prepared for the unknown.
19:17
Speaker 5: You don't know what's going to go wrong, and when
19:19
Speaker 5: you just know that it will at some point, and
19:21
Speaker 5: you know, greater diversification. Miss Alex has said, if bonds
19:25
Speaker 5: and equities are basically correlated, then that means when one
19:28
Speaker 5: goes up, the other one, you know, goes up as well,
19:30
Speaker 5: and they go down together. That's what it means. And
19:32
Speaker 5: therefore we need to find other additional sources of diversification.
19:36
Speaker 5: The traditional one is gold, and now it's got a
19:39
Speaker 5: thread called bitcoin, digital gold, digital gold.
19:45
Speaker 1: Right, Okay, well why don't we talk about gold? Your
19:46
Speaker 1: bother al was the itching to talk about gold. I
19:48
Speaker 1: can't keep your furt right, So Alex, why gold?
19:55
Speaker 6: It's got a five now five thousand year pedigree of
19:58
Speaker 6: being the hard money choice. It's the preferred neutral FX
20:03
Speaker 6: asset and there's no counterparty for it. It's inert, has
20:08
Speaker 6: a low amount of additional supply of a year versus
20:11
Speaker 6: the stock which keeps it hard money. And crucially at
20:15
Speaker 6: the moment, you can see people voting with their feet.
20:18
Speaker 6: So one of the most interesting things in markets is
20:21
Speaker 6: always stealth bullmarkets, bull markets that are not liked and
20:25
Speaker 6: are not widely observed. And of course Western investors have
20:28
Speaker 6: been selling gold if you look at holdings of bully
20:31
Speaker 6: and ETFs for example, because rates have gone up, but
20:34
Speaker 6: gold has decoupled from its traditional relationship with real interest
20:38
Speaker 6: rates on the dollar.
20:39
Speaker 4: That's basically because there's a new big.
20:41
Speaker 6: Cast of buyers that aren't so interested in that China
20:44
Speaker 6: in particular India to a lesser degree. In China's cases,
20:48
Speaker 6: especially central bank and retail. Why are they doing it?
20:51
Speaker 6: They don't trust the dollar anymore. So that's a canarian
20:55
Speaker 6: the coal mine for monetary change, and they are still
20:58
Speaker 6: going to this asset of choice, and that is likely
21:00
Speaker 6: a structural trend and a more inflation prone and volatile environment.
21:04
Speaker 3: Okay, let's talk a.
21:05
Speaker 1: Little bit more about that.
21:06
Speaker 2: Why does it make sense for central banks to hold gold. Well,
21:09
Speaker 2: you say you don't trust a dollar, but how does
21:11
Speaker 2: this work?
21:12
Speaker 6: If you hold most of your reserves in US dollar assets,
21:16
Speaker 6: you're ultimately in the hands of the US authorities. And
21:21
Speaker 6: as you saw after the invasion of Ukraine, what the
21:24
Speaker 6: Russians discovered very quickly, which they didn't expect, is that
21:27
Speaker 6: those reserves got confiscated. So part of the system over
21:30
Speaker 6: the last forty years has really relied on the recycling
21:33
Speaker 6: more than that, actually fifty years has relied on the
21:35
Speaker 6: recycling of excess surfaces from the rest of the world
21:40
Speaker 6: into US dollar denominated assets. People don't want to do that,
21:43
Speaker 6: so so much of themore they don't have confidence they're safe,
21:46
Speaker 6: so they want to own a neutral FX assets that
21:49
Speaker 6: Uncle Sam can't control. And gold is therefore taking up
21:52
Speaker 6: a larger share of reserves.
21:54
Speaker 1: Neutral and what does that mean?
21:55
Speaker 5: Well, can I come back on that question as well,
21:57
Speaker 5: because gold had many different roles over the years as
22:00
Speaker 5: official money, and it's sad time as being official and
22:02
Speaker 5: time have been unofficial. And we can start the conversation
22:06
Speaker 5: shortly before nineteen seventy one, as Alex mentioned, and really
22:11
Speaker 5: gold was the original financial technology, the original fintech, because
22:14
Speaker 5: if you went on a sailing ship to the other
22:16
Speaker 5: side of the world and you were trading something, this
22:18
Speaker 5: piece of gold was pretty hard to forge. I know
22:22
Speaker 5: there's tungsten and things like that, but actually you could
22:24
Speaker 5: tell gold was gold. And therefore it was a technology
22:27
Speaker 5: that transferred value equally and fairly around the world. It
22:30
Speaker 5: was a pretty powerful idea when you think of it
22:32
Speaker 5: in those terms, and the nineteen seventy one system. There
22:36
Speaker 5: are lots of reasons why it happened in the Vietnam
22:38
Speaker 5: the money came to be, but one of them was technology. Finally,
22:40
Speaker 5: we had telephones and computers that enabled to have a
22:44
Speaker 5: sort of real time Bloomberg Ye type by sell system
22:48
Speaker 5: of lots of information and data. You couldn't really have
22:50
Speaker 5: done it in quite the same way in the same
22:52
Speaker 5: scale much before that, computers weren't good enough. And so
22:56
Speaker 5: I think that's something worth remembering. And so as it
22:58
Speaker 5: started to work, and that's the inflation of the seventies
23:02
Speaker 5: cooled down the By nineteen eighty two, you had two
23:05
Speaker 5: decades where gold was completely irrelevant. Having been a twenty
23:08
Speaker 5: seven bag in the seventies, it was relevant for two
23:11
Speaker 5: decades and I think it found its metal fundamental value.
23:14
Speaker 5: By nineteen ninety nine, it was irrelevant in central bank circles.
23:18
Speaker 5: Gordon Brown had sold many European central banks had reduced
23:21
Speaker 5: their holdings as well. But you know, at that point
23:25
Speaker 5: that was the low. And then slowly but surely people
23:28
Speaker 5: started to pick up on their interest in God without
23:30
Speaker 5: any formal declaration, and by two thousand and nine, after
23:35
Speaker 5: the credit crisis the emerging market central banks went, do
23:38
Speaker 5: you know what, It's not such a bad idea. After all,
23:40
Speaker 5: it had already gone from you know, two hundred and
23:41
Speaker 5: fifty dollars up to about one thousand at the time
23:43
Speaker 5: of the crisis, and then they started accumulating, and they've
23:46
Speaker 5: been accumulating every year since two thousand and nine, and
23:50
Speaker 5: it's recently started to accelerate. So I think, you know,
23:52
Speaker 5: you've got to sort of wonder why this asset and
23:55
Speaker 5: it's not written down anywhere that you know, central banks
23:58
Speaker 5: must own gold, but they just chose to, particularly in
24:01
Speaker 5: the fast growing emerging world. It's only in the West
24:03
Speaker 5: where we've sort of lost interest in this asset. And
24:06
Speaker 5: find my final point is that in twenty ten eleven,
24:10
Speaker 5: and I remember it clearly, you know, being a portfolio
24:12
Speaker 5: manager in London. Back then everyone was all over the
24:15
Speaker 5: gold ETFs. It was big news of how how big
24:18
Speaker 5: they've become, and people were showing off their allocation. And
24:21
Speaker 5: today they can't set it fast enough. The wealth management industry,
24:25
Speaker 5: the pension funds and so forth have given up on gold.
24:28
Speaker 1: So that's more money flowing out of gold ETFs in
24:30
Speaker 1: the West.
24:31
Speaker 5: Correct.
24:32
Speaker 2: Yeah, I do think it's interesting you say about central
24:34
Speaker 2: banks holding gold, because it is one of things we
24:36
Speaker 2: don't really talk about much. Everyone sort of accepts that
24:38
Speaker 2: central banks hold gold. But if you stop think about it,
24:41
Speaker 2: what it's strange.
24:42
Speaker 5: Well, it's stop strange as not if you look back, but.
24:45
Speaker 2: If you if you were to sit down and say,
24:47
Speaker 2: you know, they don't dollars anymore, they're cutting down doors
24:50
Speaker 2: and they've got big.
24:50
Speaker 6: Parts of gold to know something we don't about commitments
24:54
Speaker 6: to the value of currency, which of course what Cynop
24:57
Speaker 6: would say.
24:58
Speaker 5: So there's there's one other point about gold we haven't mentioned.
25:00
Speaker 5: You know, it's a massively liquid asset. Liquidity itself is
25:03
Speaker 5: hugely valuable and according to World Gold Council, the quiality
25:06
Speaker 5: of the gold market is one hundred and forty five
25:09
Speaker 5: billion dollars a day, which is not far off the
25:11
Speaker 5: S and P five hundred bitcoin, which I'm sure will
25:14
Speaker 5: come to. It's also a highly liquid asset. So you know,
25:17
Speaker 5: what Alex has been talking about is, you know, allocating
25:20
Speaker 5: to different things in the portfolio anti fragile assets and
25:23
Speaker 5: so forth. Commodities. You know, made lot of commodities are
25:27
Speaker 5: not particularly liquid. And the frozen concentrated orange juice in
25:30
Speaker 5: in Eddie Murphy's Best Film of All Time, for example,
25:34
Speaker 5: there's not a particularly liquid asset, even though it is
25:36
Speaker 5: a liquid art is not liquid. But you know, the
25:39
Speaker 5: two most liquid alternative assets in the world are bitcoin
25:42
Speaker 5: and gold.
25:43
Speaker 2: We'll come back to to bitcoin, Charlie promise, whiching to
25:47
Speaker 2: go what we've just been talking about the fact that
25:50
Speaker 2: the main buyer of gold at the moment in central banks,
25:52
Speaker 2: and that's what pushing up the price. That rather explains
25:55
Speaker 2: why we're not seeing much action in for example, the
25:57
Speaker 2: gold miners. Normally, when the gold price goes up, retail
26:00
Speaker 2: investors lakes US we will rush out and by gold
26:02
Speaker 2: miners right because they're going to follow, and this time
26:04
Speaker 2: they have happened.
26:06
Speaker 5: Yes, well, it's actually Alex he said in the greed groups.
26:08
Speaker 5: I'm not going to take his idea. He said that
26:10
Speaker 5: the Chinese are are buying gold. It's a retail investor
26:14
Speaker 5: in China don't have a lot of choice and what
26:16
Speaker 5: they can invest in. We in the West have much more.
26:18
Speaker 2: Tube retail investors in China are buying I keep reading
26:21
Speaker 2: little gold beads.
26:23
Speaker 4: Yeah, that's right.
26:24
Speaker 6: I mean, look, fundamentally, everyone is going to want to
26:27
Speaker 6: own lots of stuff that governments can't print, because we're
26:30
Speaker 6: going into a world where to pay for those these
26:33
Speaker 6: government prints paper to buy real assets. Ultimately that finds
26:37
Speaker 6: it swing to copper and things like that for grid
26:39
Speaker 6: buildouts and.
26:41
Speaker 4: Rearmaments and so on. So I think people are sniffing
26:44
Speaker 4: this out in their various ways. And in the.
26:46
Speaker 6: West, if you get lower rates and Western investors coming
26:50
Speaker 6: back to gold for any reason, that's an additional kicking out.
26:54
Speaker 6: We should say short term, all this stuff is obviously
26:57
Speaker 6: run pretty hard, so don't be surprised by the significant
27:00
Speaker 6: pullback or we are talking about long term trends. So
27:03
Speaker 6: with the right time rise and it's interesting.
27:05
Speaker 1: Okay, So should we as retail investors, should we be.
27:08
Speaker 2: Buying bullion, Should we buying coins keeping them a home,
27:11
Speaker 2: should we buying ETFs? Should we buying miners? Should we
27:14
Speaker 2: buy mining ETFs? What should we be actually buying to
27:17
Speaker 2: reflect our interest in gold?
27:19
Speaker 5: So on the on the relative value trade, you know,
27:22
Speaker 5: which is the cheapest historically compared to where gold is.
27:25
Speaker 5: You know, silver and miners are obviously obviously offering a
27:28
Speaker 5: lot of good value there, but they're only going to
27:30
Speaker 5: They're only going to do well if gold goes up.
27:32
Speaker 5: So you know, if gold's not going to go up,
27:34
Speaker 5: then then then to stay it clear, because they're not
27:36
Speaker 5: going to they're not going to catch up with gold
27:38
Speaker 5: standing still. But I do think that it's also worth
27:40
Speaker 5: looking at the volatility of these things. The gold miners
27:44
Speaker 5: are basically more volatile than bitcoin now. And as Alex
27:47
Speaker 5: was saying in the green room, the Chinese private investor
27:50
Speaker 5: is not buying gold mining shares, they're buying gold bullion.
27:53
Speaker 5: They're not buying silver either, and so so you know,
27:56
Speaker 5: you've got to think who's buying it, and it's well,
27:58
Speaker 5: it's the West, and of course the West aren't gold,
28:00
Speaker 5: so they're not buying gold miners either. And so I
28:02
Speaker 5: think we've had no inflows into the gold mine ets
28:04
Speaker 5: for ten years or something like that, and we've had
28:06
Speaker 5: outflows from from from from gold. But to me, that's
28:09
Speaker 5: all bullets. They're just too cheap. We know why they're
28:11
Speaker 5: cheap because no one believes the gold story, or not
28:13
Speaker 5: enough people believe the gold story. But there are plenty
28:16
Speaker 5: of sound reasons why it's underpinned massively. So so I
28:20
Speaker 5: would think silver and the miners are a very good
28:22
Speaker 5: thing to do for gold itself. Absolutely, for the conservative investor,
28:26
Speaker 5: that's what they should be doing. And the ets are fine.
28:29
Speaker 5: There are conspiracy theories about ets all the time. You
28:32
Speaker 5: don't need to listen to them. They're not true. ETFs
28:34
Speaker 5: are fine. But if you want to own bullion or metal,
28:37
Speaker 5: the metal itself. As a British citizen owned the sovereigns
28:40
Speaker 5: because they're tax free, capital gainst Taxbrey Goney favorite miners, Yeah,
28:45
Speaker 5: to Rex would be one in Canada and sent them
28:49
Speaker 5: in you know in Egypt that London listed in Egypt.
28:51
Speaker 5: I think that you know, they would be quite quite
28:53
Speaker 5: good choices.
28:54
Speaker 1: Okay, and Alex in the fund you hold.
28:57
Speaker 6: Gold, how we've got about ten percent, maybe a bit
29:02
Speaker 6: more across precious metals exposure around so about five percent
29:05
Speaker 6: of that's gold miners. Most of that is through our
29:08
Speaker 6: in house gold mining fund, which has a range of
29:10
Speaker 6: smaller midcaps. We've also got a decent position of Numont,
29:13
Speaker 6: which is the biggest gold miner in the world.
29:16
Speaker 4: We also own some silver billion.
29:18
Speaker 6: Silver billion traditionally has a beta of about one point
29:23
Speaker 6: six y gold, which means that it tends to move
29:25
Speaker 6: in a magnified way one and a half times up
29:28
Speaker 6: or down whatever gold's doing. And there's a very interesting
29:31
Speaker 6: long term fundamental story there. Eighty percent of silver is
29:36
Speaker 6: created as a byproduct of other metals, and demand is
29:40
Speaker 6: going up.
29:41
Speaker 4: On the industrial side.
29:42
Speaker 6: We've also got a bit of platinum in that space
29:44
Speaker 6: as well, which is twenty times rareer than gold. So
29:46
Speaker 6: we've got a bit of a spread. But gold miners
29:48
Speaker 6: and silver offer effectively leveraged exposures to the gold price.
29:52
Speaker 1: Okay, brilliant, right, we've covered gold.
29:55
Speaker 3: Good news, Charlie.
29:57
Speaker 2: We can turn a bitcoin tell us.
29:59
Speaker 4: A bit coin story.
30:01
Speaker 5: So Bitcoin was designed around the idea of gold limited supply,
30:06
Speaker 5: and so the supply side characteristic of bitcoin is is
30:09
Speaker 5: very very similar. Indeed, in fact, the new supply growth
30:12
Speaker 5: of bitcoin now is slightly lower than goal. But but
30:15
Speaker 5: so what the important point about bitcoin is that it's
30:19
Speaker 5: a neutral asset like gold. It's respected down the world.
30:22
Speaker 5: It's it's very very liquid, very very very liquid, unlike
30:26
Speaker 5: many other so called cryptocurrencies, and you know, it's the
30:30
Speaker 5: real deal. I think that some people would be very
30:33
Speaker 5: skeptical because it's got no physicality about it. Well, there
30:36
Speaker 5: is a physicality in two forms. One is the you know,
30:40
Speaker 5: the energy intensity. There is a sort of real world
30:43
Speaker 5: part to the bitcoin story. If it was easy to
30:46
Speaker 5: mind bitcoin, it wouldn't be valuable. If someone was in
30:49
Speaker 5: control of you could make bitcoin really really easy to mine,
30:54
Speaker 5: or rather you could maintain the limited supply, but there'd
30:58
Speaker 5: be there'd be a controller of some kind, there'd be
31:00
Speaker 5: a sort of board or CEO or whatever. Then then
31:03
Speaker 5: it's not an independent asset. So I think that you know,
31:06
Speaker 5: if you want it to be taken seriously, the design
31:08
Speaker 5: is as it is. The physicality the lack of physicality
31:12
Speaker 5: doesn't matter because you don't really own a bitcoin a thing.
31:15
Speaker 5: You own a share of a valuable network. And that
31:18
Speaker 5: hugely valuable liquid network is what it's all about and
31:22
Speaker 5: if you're wise enough to own a little bit, then
31:25
Speaker 5: then you know that that that's your price. You have
31:29
Speaker 5: a little bit of that. I mean Warren Buffett once said,
31:32
Speaker 5: you know, I wouldn't pay twenty dollars to buy all
31:34
Speaker 5: the bitcoins. Sorry about the accident, but I wouldn't pay
31:37
Speaker 5: twenty dollars to buy all the bitcoins. And if you whatever,
31:41
Speaker 5: you paid for all the let's say you wanted to
31:42
Speaker 5: buy all the bitcoins and you had the money to
31:45
Speaker 5: do that, then you would soon have zero money because
31:50
Speaker 5: you destroyed the network. It's a bit like owning all
31:53
Speaker 5: the telephones, so who you're going to call? So it's
31:59
Speaker 5: a very simple. This idea of a network is valuable.
32:02
Speaker 2: So the value is in the energy intensity of its production.
32:07
Speaker 2: Its production is security, okay, because that's what tells you
32:11
Speaker 2: that it will always remain scutts.
32:14
Speaker 5: Yes, well, the scarcity can be baked in that. You
32:16
Speaker 5: can copy the code, and bitcoin code is freely available
32:20
Speaker 5: on the internet. You help yourself. You can go and
32:23
Speaker 5: launch your own give it a name and good luck.
32:25
Speaker 5: It'll be worth a trillion dollars. But it won't be
32:27
Speaker 5: worth a trillion dollars because twenty thousand copycats have failed.
32:30
Speaker 5: There can only be one network.
32:32
Speaker 2: Okay, so let's ask about the use case because we
32:36
Speaker 2: have to do this for the likes of us. What
32:39
Speaker 2: does bitcoin do for us that we can't do already
32:43
Speaker 2: with products and networks already just for us?
32:46
Speaker 5: Which countries you live in?
32:48
Speaker 4: Good answer?
32:50
Speaker 5: So you know, there are many use cases for bitcoin,
32:53
Speaker 5: and I think if you look at its price correlation,
32:56
Speaker 5: so we just you know, it is liquid, that's a fact.
32:59
Speaker 5: It's price election is very very high. With tech in general,
33:03
Speaker 5: it used to be social media stocks that stood out,
33:06
Speaker 5: and what are social media stocks? They're basically people using
33:10
Speaker 5: the internet. The price of a social media stock is
33:13
Speaker 5: the sort of measure of how many people are using
33:15
Speaker 5: the Internet. And they sort of moved on to more
33:19
Speaker 5: tech in general, and now they're sort of hanging around
33:21
Speaker 5: Navidia quite closely and the big companies in particular. So
33:25
Speaker 5: you know, it's quite obvious that what is bitcoin will
33:28
Speaker 5: it's something to do with the internet when it comes
33:29
Speaker 5: from the Internet, and it correlates highly with these things.
33:33
Speaker 5: It's part of the tech revolution. You can't cherry pick
33:36
Speaker 5: which bits of it you like in which you don't like.
33:38
Speaker 5: You can't say, oh, I think AI is really good,
33:40
Speaker 5: and you know, having my NHS online it's really useful,
33:43
Speaker 5: and I like the taxman online. But then all I
33:46
Speaker 5: don't like bitcoin, or I don't like this or that.
33:49
Speaker 5: I mean, there are many many things on the on
33:51
Speaker 5: the on the evil on the internet. Some of them
33:57
Speaker 5: are very very evil, indeed, and others are fascinating.
34:01
Speaker 1: It's not about liking or not liking. It's about I mean,
34:04
Speaker 1: I understand.
34:04
Speaker 5: What you mean.
34:05
Speaker 2: You say which country you live, and what you mean
34:06
Speaker 2: is that in unstable countries it's a great way to
34:09
Speaker 2: be able to hold and transfer wealth, right, that's what
34:11
Speaker 2: you mean. And we don't understand that because we don't have.
34:14
Speaker 5: That problem, absolutely right, and you can cross the border
34:17
Speaker 5: and remember a few words and that's it.
34:19
Speaker 2: Yeah, okay, what about Okay, let's look at it another
34:23
Speaker 2: way then, When we talk to people about bitcoin podcasts
34:27
Speaker 2: or anywhere, and people are very evangelical about it and
34:29
Speaker 2: treated as as you says, as an ascid that is
34:33
Speaker 2: respected everywhere now used as an acid, what would have
34:36
Speaker 2: to happen to make you no longer feel like that
34:39
Speaker 2: about bitcoin? What would have to change for you no
34:44
Speaker 2: longer feel that bitcoin was an appropriate asset for people
34:48
Speaker 2: to hold, that it.
34:49
Speaker 1: Existed as a thing, you know, because we look at
34:51
Speaker 1: it and we said, well, what is it? There's not
34:53
Speaker 1: a thing we call it, you know, we call it
34:55
Speaker 1: a digital gold, we called gold physical bitcoin makes us.
34:57
Speaker 2: Laugh, et cetera. But what would have to change for
35:02
Speaker 2: your bullishness on it to change?
35:04
Speaker 1: And I don't mean your bullish is not price, I
35:06
Speaker 1: mean your bullishness on its existence. So yeah, for example,
35:09
Speaker 1: you know, is it a change in regulation?
35:11
Speaker 2: You know, we worried for ages or bitcoiners are worried
35:13
Speaker 2: for ages that western central central banks won't allow bitcoin
35:17
Speaker 2: to exist, and that ship seems to have.
35:19
Speaker 1: Selled a little bitter.
35:20
Speaker 2: We wouldn't have ETFs ex But what is it that
35:22
Speaker 2: would make you not think that bitcoin would continue, but
35:25
Speaker 2: that it would fail?
35:26
Speaker 5: So I think network exhaustion. I think everyone has got
35:29
Speaker 5: bored of it. And so far we've had lots of
35:31
Speaker 5: bull and bear cycles in bitcoin, but their bear cycles
35:35
Speaker 5: have been absolutely devastating. But it comes back bigger and
35:38
Speaker 5: stronger every time. And I think that if the liquidity
35:42
Speaker 5: started to fade, which hasn't done in past bear markets,
35:45
Speaker 5: it really hasn't And that's been so amazing. The price
35:48
Speaker 5: has gone down, but the liquidity has always been there,
35:50
Speaker 5: and so genuinely, if people just got bored of the
35:52
Speaker 5: whole idea, which by the way, would also mean they
35:55
Speaker 5: got bored of the Internet, AI and all of that
35:57
Speaker 5: stuff too, it's quite possible then I think that that
36:00
Speaker 5: would turn me off, certainly tactically, cyclically, not sure whether
36:04
Speaker 5: it be structurally, but if you know, if the if
36:06
Speaker 5: the liquidity of bitcoin evaporated, it's worthless.
36:09
Speaker 2: Okay, Alex Ruffer had a little little dip into the
36:13
Speaker 2: bitcoin market a while ago and sold that really quickly.
36:15
Speaker 1: Hasn't gone back in. How do you feel about it now?
36:19
Speaker 6: Well, look for all the structural reasons, it's interesting for
36:24
Speaker 6: a lot of people. I think generationally there's a bit
36:27
Speaker 6: of a Thermer climb between gold and crypto assets as
36:30
Speaker 6: a way to protect against sphit the basements, So never
36:34
Speaker 6: say never. The thing about bitcoin is that it's the
36:38
Speaker 6: beneficiary of the marginal liquidity in the system. In other words,
36:41
Speaker 6: how much money there is sloshing around the system makes
36:43
Speaker 6: a big difference. And if anything causes that liquidity to retreat,
36:47
Speaker 6: bitcoin is like you go down. It's really a kind
36:49
Speaker 6: of risk on asset. Charlie talked about its correlation to
36:52
Speaker 6: tech earlier. If you put up a JAR three times
36:55
Speaker 6: bless you leveraged NASDAK, you'd find that it's basically the
37:00
Speaker 6: coin share price.
37:01
Speaker 4: So portfolio balance is important.
37:03
Speaker 6: We've got lots of things that give us a lot
37:05
Speaker 6: of bang for buck against the sorts of things that
37:07
Speaker 6: people say bitcoin is long term defense against.
37:11
Speaker 4: So never say never. But we're nowhere nerves at the moment.
37:14
Speaker 1: You got any personally, No, I don't know should we
37:17
Speaker 1: hold it.
37:17
Speaker 2: Personally, Charlie.
37:19
Speaker 1: I mean people who listen to the podcast.
37:20
Speaker 2: Will know that technically I'm the owner of perfectly reagonal amount.
37:23
Speaker 2: Bitcoin is absolutely no way to access it. I think
37:27
Speaker 2: this is my code twice.
37:29
Speaker 5: I forget the numbers. But there are a lot of
37:30
Speaker 5: people in this country do own crypto themselves, and it's
37:35
Speaker 5: been very, very popular, particularly about amongst people who are
37:38
Speaker 5: under forty years old, and they, you know, they just
37:41
Speaker 5: they're much more comfortable with the idea of a virtual
37:43
Speaker 5: digital asset than older people. And this starts with computer
37:49
Speaker 5: games where you can buy I don't know only about
37:51
Speaker 5: computer games, but I gather you can buy a sword
37:54
Speaker 5: and this has been true for years.
37:55
Speaker 1: So I think you know nothing about computer games, how reckon,
37:58
Speaker 1: you know quite a.
37:58
Speaker 5: Lot about I know nothing. I really do know very little.
38:02
Speaker 5: But you can buy buy swords and hats and weapons
38:05
Speaker 5: and things. And so if you've been brought up thinking
38:07
Speaker 5: that's property, then it is property. And the whole NFT
38:11
Speaker 5: revolution was pretty interesting. And I don't own an NFT,
38:14
Speaker 5: but I can understand why people would value an NFT
38:16
Speaker 5: as the original. You know, so you own the first
38:20
Speaker 5: one with the with the hash and all the rest
38:22
Speaker 5: of it that says, this is the original picture of
38:25
Speaker 5: a of a laughing monkey or something, and and and
38:29
Speaker 5: that's fine. It is the original. And the same way
38:31
Speaker 5: that you know, you want to earn a nice piece
38:33
Speaker 5: of art, you would you wouldn't want to print or
38:36
Speaker 5: a copy. You would want the original. And so I
38:38
Speaker 5: do understand that, even though it's not something I personally
38:42
Speaker 5: get involved in. And I just think there's so many
38:44
Speaker 5: things happening in this space. When you want to have
38:47
Speaker 5: property transferred across the Internet, Tokenization, the stable coin, think
38:52
Speaker 5: of think of AI. Imagine two big mega computers talking
38:56
Speaker 5: to each other in the early hours of Sunday morning,
38:59
Speaker 5: and they're doing some complex transactions. Are they going to
39:02
Speaker 5: use a traditional bank account? I very much doubt it.
39:05
Speaker 5: They'll be using stable coins and bitcoin.
39:07
Speaker 2: And you've brought up thing I want to move on
39:09
Speaker 2: to by very briefly, by mentioning AI and mentioning all
39:12
Speaker 2: these kinds of things energy usage. There's a lot of
39:15
Speaker 2: talk about the amount of energy that bitcoin uses up.
39:18
Speaker 2: You know, as you say it's grids, its value is
39:20
Speaker 2: partly in the energy that it uses to be created,
39:22
Speaker 2: and then of course it consistently uses energy. And one
39:25
Speaker 2: of the things about gold is that sure a lot
39:27
Speaker 2: of energy is used to drag it out of the ground,
39:29
Speaker 2: but then it exists effectively as a store of that
39:31
Speaker 2: energy to a degrid doesn't continue to use energy. So
39:35
Speaker 2: bigcoin is there is a user of energy in a
39:38
Speaker 2: time when we're desperately, fairly desperately trying to use less energy.
39:43
Speaker 5: Well, we don't want to use less energy, because the
39:45
Speaker 5: advancement of mankind economically has always conciety with considering more energy.
39:49
Speaker 1: So absolutely I entirely agree with you.
39:51
Speaker 2: I'm simply saying that the political imperative we're being given
39:54
Speaker 2: is to use less energy.
39:56
Speaker 5: For those political people and the next sentence, I'll say,
39:59
Speaker 5: I don't understand the productivity problem, and so you can't
40:02
Speaker 5: have a productivity revolution without more energy consumption. So you know,
40:07
Speaker 5: and it's very strange that politics doesn't seem to of
40:09
Speaker 5: course they understand it, they just don't admit it. They
40:11
Speaker 5: say something different. But back to your point. You know,
40:14
Speaker 5: the gold does consume approximately about the same amount of
40:17
Speaker 5: energy as bitcoin today in terms of mining. You can
40:19
Speaker 5: switch off the mining and you still have lots of gold.
40:22
Speaker 5: But again we're coming back to this idea that gold's
40:24
Speaker 5: a thing, not a vibrant liquid network. If everyone has
40:28
Speaker 5: a whole bar of gold in their garden hidden underground
40:30
Speaker 5: the rose bush, you know, is that a vibrant liquid network. No,
40:35
Speaker 5: it's just a piece of metal under your rosebush. And
40:38
Speaker 5: that is quite important point I think to understand. If
40:42
Speaker 5: you go back to nineteen ninety nine, I was saying
40:44
Speaker 5: that that was the sort of end of the gold market.
40:45
Speaker 5: It was sort of dead at that point, two hundred
40:48
Speaker 5: and fifty five dollars an ounce, and then it all
40:50
Speaker 5: turned And I think that's the fundamental gold metal value
40:54
Speaker 5: discovered in nineteen ninety nine. Now slap CPI on top
40:57
Speaker 5: of that, you get to about five hundred dollars. That's
41:00
Speaker 5: what gold, the metal is worth. Gold the monetary network
41:03
Speaker 5: is a different thing, and it is trains at the
41:06
Speaker 5: same price.
41:07
Speaker 2: You know, it's four talks yourself into gold.
41:11
Speaker 5: I have an index called Bold that combines.
41:13
Speaker 2: Both I know, and it's absolutely brilliant, and I'm going
41:15
Speaker 2: to let you talk about that very briefly in a minute.
41:16
Speaker 2: But before we get to that, I am actually going
41:18
Speaker 2: to make you choose if you had to choose one.
41:22
Speaker 5: If you had to, what do you think I'm going
41:24
Speaker 5: to choose gold? Of course I'm gonna choose gold because
41:28
Speaker 5: the Bold index is three quarters of gold and one
41:30
Speaker 5: quarter of bitcoin, so I are going to go with the majority.
41:33
Speaker 4: Alex, I'm afraid I will say gold as well. Preay consensus.
41:38
Speaker 1: Okay, one minute on Bold how it works?
41:42
Speaker 5: Yeah, more like thirty seconds.
41:45
Speaker 2: Question.
41:46
Speaker 5: I followed the gold market for twenty five years, and
41:48
Speaker 5: when bitcoin came along in twenty twelve, I thought, how
41:51
Speaker 5: ridiculous is that you can cut and paste it. I
41:53
Speaker 5: realized I was wrong in twenty thirty and got very excited,
41:56
Speaker 5: and over time I've been writing a lot about these
41:58
Speaker 5: things on Bytree dot com. And you know, I realized
42:01
Speaker 5: that if one was risk on, one was risk off.
42:03
Speaker 5: Over Through my fund management career, I've come across things
42:06
Speaker 5: like vlacility, waiting and this sort of thing, and you
42:09
Speaker 5: realize that if you allocate less money to the more
42:12
Speaker 5: stable asset, the ballast in the ship and you have
42:15
Speaker 5: been a bigcoin as the spinnakers of the sales or
42:18
Speaker 5: what have, you end up with something that's pretty special.
42:20
Speaker 5: So the Bold index is a very nice way for
42:24
Speaker 5: people to own both assets, and it maintains risk and
42:27
Speaker 5: it adds a little value. So something that's more. It's
42:31
Speaker 5: cool it has unless bigcoin becomes you know, the central
42:35
Speaker 5: the money choice of central banks and fifty years time,
42:37
Speaker 5: then the index will adjust for that.
42:39
Speaker 1: Now that would be interesting, wouldn't it. Thank you very
42:40
Speaker 1: much for joining us, and please help me and think.
42:42
Speaker 3: Thank you to our guest.
42:47
Speaker 2: Thanks for listening to this week's Mary and Dogs Money.
42:49
Speaker 2: We'll be back next week in the meantime. If you
42:51
Speaker 2: like us, show rate review and subscribe wherever you listen
42:54
Speaker 2: to your podcast, and keep sending questions or comments to
42:56
Speaker 2: Marry Money at Bloomberg dot net. As ever, we are
42:59
Speaker 2: interested on your views on bitcoin and on gold. If
43:02
Speaker 2: you disagree with Charlie, if you disagree with Alec, let
43:05
Speaker 2: us know. This episode was hosted by me Maren Sunset Web.
43:08
Speaker 2: It was produced by some Asadi, additional editing by Moses
43:11
Speaker 2: and special thanks to Charlie and to Alex