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Dambisa Moyo on Why the AI Bubble Still Has Room to Grow · Merryn Talks Money

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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Hi listeners that you're
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Speaker 1: about to hear a conversation that I had with Baroness
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Speaker 1: Dambisa Moyo. It was recorded on November the eighteenth. We
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Speaker 1: discussed a few ways in which the UK's fiscal situation
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Speaker 1: could improve. But do bear in mind that this conversation
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Speaker 1: came before Chancellor Rachel Reeves's great budget reveal. Welcome to
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Speaker 1: Maren Talks Money, the podcast in which people who know
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Speaker 1: the markets explain the markets. I'm Maren Sums at Web.
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Speaker 1: This week we are speaking with Baroness Dambisa Moyo. Danbieza
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Speaker 1: is one of those people who seems to do absolutely everything.
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Speaker 1: She's a global economist, a member of the UK's House
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Speaker 1: of Lords. She's a principal at Versica Investment as a
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Speaker 1: family office that focuses on growth investing around the world.
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Speaker 1: She's also a best selling author and so it's on
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Speaker 1: the ball of major companies, most recently Starbucks. So all in,
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Speaker 1: she is the ideal guest to talk about what is
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Speaker 1: happening both in geopolitics and in financial markets right now.
1:10
Speaker 1: Are we in a bubble? For example? She's gonna help
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Speaker 1: us step back and look at the bubble issue and
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Speaker 1: also the bigger picture of where the global economy is headed.
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Speaker 1: Dn't be said, Welcome back to Marin Talks Money.
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Speaker 2: Thank you Delica to be here.
1:26
Speaker 1: Right now. We should start, I think, with ai bubble
1:31
Speaker 1: or not bubble on the basis that it really is
1:33
Speaker 1: the question on everyone's lips at the moment and the
1:35
Speaker 1: one that we start talking about on almost all our
1:37
Speaker 1: podcasts at the moment.
1:39
Speaker 2: Now.
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Speaker 1: I know that you wrote recently about what makes a bubble,
1:42
Speaker 1: and it came up with the general feeling that while
1:46
Speaker 1: this has most of the characteristics of a bubble, it's
1:49
Speaker 1: probably in its early rather than its later days, so
1:52
Speaker 1: nineteen ninety seven rather than two thousand. Now. Right now,
1:56
Speaker 1: the markets, as we speak, markets are very well, believe,
1:59
Speaker 1: very volatile. Well so most markets are down two three
2:02
Speaker 1: percent in the lost three four days, although of course
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Speaker 1: most are also still up somewhere between fifteen and twenty
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Speaker 1: percent on the year. So volatile, but not exactly a
2:11
Speaker 1: disaster of any kind whatsoever. So let's just pick that
2:16
Speaker 1: up and talk about why you think that it is
2:18
Speaker 1: a bubble but not a bubble to really get stressed
2:21
Speaker 1: about yet.
2:22
Speaker 2: Yeah, So I think that it's worth just pulling out
2:24
Speaker 2: some metrics. So the one that everybody reaches for is
2:28
Speaker 2: the price earnings ratio, so multiples, and historically the market
2:33
Speaker 2: has traded around sixteen times of earnings. That's the price
2:36
Speaker 2: earnings ratio. And one of the things that people have said,
2:39
Speaker 2: as you know, the average over the last couple of years,
2:42
Speaker 2: few years, has been much higher. It's about somewhere between
2:45
Speaker 2: twenty three and twenty five times earnings. Some extremes in there.
2:49
Speaker 2: You have things like the Nvidia trading at like forty
2:51
Speaker 2: times earnings. I believe Tesla at some point was two
2:54
Speaker 2: hundred times earnings. So that is just a lot of
2:59
Speaker 2: dislocation for historical norms. Then the theory was that we
3:03
Speaker 2: all go back to the reversion of the mean, and
3:05
Speaker 2: therefore that's a bubble. Another thing we're thinking about is
3:09
Speaker 2: that people think, well, actually, you know, the world is
3:13
Speaker 2: fundamentally structuring differently. We have a new supercycle. In the
3:17
Speaker 2: way that we had women coming into the global workforce
3:21
Speaker 2: in the nineteen fifties and sixties, in the way that
3:24
Speaker 2: we had de globalization after the fall of the Wall
3:26
Speaker 2: in nineteen eighty nine, in the way that we had
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Speaker 2: China joining the WT on two thousand and one. We
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Speaker 2: have a massive structure of supercycle in its early innings,
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Speaker 2: which is AI, and this is going to increase productivity
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Speaker 2: and therefore past historical norms such as a price earning
3:43
Speaker 2: ratios trading at around sixteen times, are just not the
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Speaker 2: what to look for. There's a lot of euphoria around this,
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Speaker 2: and you as you know, you know lots of forecasts
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Speaker 2: like PwC saying we're going to add about sixteen trillion
3:55
Speaker 2: dollars worth of new GDP by twenty thirty, Microsoft Cope
4:00
Speaker 2: Pilots and others talking about adding twenty to thirty percent
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Speaker 2: increases in productivity. All that is being reflected in the market.
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Speaker 2: So that's the kind of what i'd say tension. On
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Speaker 2: the one hand, people are saying this has gone too far,
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Speaker 2: this doesn't make sense. On the other hand, people are saying, no,
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Speaker 2: it's justifiable because we are seeing a fundamental structural change.
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Speaker 2: The other piece that I would just throw out there
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Speaker 2: as making the situation slightly worse is that a lot
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Speaker 2: of the bets that are being taken in the AI space,
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Speaker 2: which we know sort of estimates between now twenty thirty,
4:32
Speaker 2: averaging about five hundred billion dollars of capex new capex.
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Speaker 2: I mean, that's huge. It's pushing the US to three
4:39
Speaker 2: point eight percent GDP in Q three, and really a
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Speaker 2: lot of ufour you around that. But people are saying
4:45
Speaker 2: these are big levered bets and in other pockets of
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Speaker 2: the market, and even though the AI bet itself doesn't
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Speaker 2: seem to be levered, there's a lot of circular dealing.
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Speaker 2: And I know this sounds like schizophrenia, but it is
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Speaker 2: a bit of a sort of tug of for w
5:00
Speaker 2: of the issues. Even though it does feel very bubble
5:02
Speaker 2: esque because of price earnings ratios lots of capital going
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Speaker 2: into the sector, on the other hand, people feel it's justified.
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Speaker 2: It's going to be higher productivity. And actually, even though
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Speaker 2: it could be a bubble, it's equity financed and it's
5:17
Speaker 2: in productive assets. They're building out data centers, it's not
5:21
Speaker 2: like it's dead finance. And people are buying bitcoin, which
5:23
Speaker 2: has no discernible cash flows. So that's really framing the
5:28
Speaker 2: debate for you. The reason I said I think it's
5:30
Speaker 2: in early innings and it's not two thousand is that
5:33
Speaker 2: you don't have the institutional investors in this trade. It's
5:37
Speaker 2: still largely retail investors who are very euphoric on the back.
5:42
Speaker 2: For example, the change in the US where four to
5:45
Speaker 2: one k so retail investors can now invest in riskier assets.
5:50
Speaker 2: That's been a big drive for bitcoin, a big drive
5:53
Speaker 2: for the fifty percent up to fifty percent run up
5:55
Speaker 2: we've seen in gold and other risky assets, private equity,
5:58
Speaker 2: et cetera. I think we are in early innings because
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Speaker 2: really the bubble fears, bubble trouble so to speak, really
6:07
Speaker 2: emerges when you start to see institutional investors saying, you
6:10
Speaker 2: know what, we can't just sit here and see these
6:12
Speaker 2: massive returns happening. We need to jump in. And then
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Speaker 2: you have a worry about not just the financial implications
6:19
Speaker 2: of the worth of bubble to burst, but also the
6:21
Speaker 2: real economy types of concerns.
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Speaker 1: Okay, interesting, there's quite a lot in there. Thank you
6:26
Speaker 1: for all that. I mean, I suppose one thing to
6:29
Speaker 1: say when you talk about how amazing it is that
6:31
Speaker 1: this could be one of these great turning points in
6:33
Speaker 1: economic history, in the same way as women coming into
6:36
Speaker 1: the world of work that kind of work, and the
6:38
Speaker 1: same way as China coming in etc. Nonetheless, the thing
6:42
Speaker 1: that is being bid up is individual stocks, whereas that
6:45
Speaker 1: something that has a much wider economic benefit. So you
6:48
Speaker 1: could still see something that will have a huge economic
6:51
Speaker 1: benefit over the next ten years, but there's still being
6:54
Speaker 1: a bubble and a small group of individual stocks. Right,
6:56
Speaker 1: So it's entirely possible for valuations to mean revel but
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Speaker 1: the benefits of AI to carry on as discussed.
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Speaker 2: Yes, no, absolutely, And you know another reason I didn't
7:07
Speaker 2: throw this up. But to your question, another reason people
7:10
Speaker 2: are feeling pretty lais fair shoulder shrug about where we
7:14
Speaker 2: are is that this AI sort of buzz hasn't yet
7:17
Speaker 2: gone into the applications. I think I haven't looked today,
7:21
Speaker 2: but I think Salesforce, Adobe, these are real consumer facing
7:25
Speaker 2: applications are down this year, so they're not part of
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Speaker 2: the mag seven run up, which is largely driven by
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Speaker 2: Capex and the five hundred billion as I was saying
7:34
Speaker 2: earlier year, that they're going to fund as the buildout happens.
7:39
Speaker 2: Yet seeing this percolate into applications and so again there's
7:45
Speaker 2: some progress that needs to happen at that basis. I think, yeah,
7:48
Speaker 2: we will. I think we will see a lot of
7:50
Speaker 2: upside still here.
7:51
Speaker 1: Yeah, I do worry slightly more than you do. I
7:54
Speaker 1: felt it was slightly further along than I think maybe
7:57
Speaker 1: you do, and that I look at it and I see, well,
7:59
Speaker 1: you know, we talk a lot of about how this
8:00
Speaker 1: isn't debt finance, but it's actually kind of a ginneaing
8:02
Speaker 1: to be debt financed, isn't it just getting to the
8:05
Speaker 1: point where cash flow can't quite cover all these things?
8:09
Speaker 1: And then when we talk about lack of institutional involvement, well,
8:14
Speaker 1: when you look at the survey's institutional fund manage, they
8:16
Speaker 1: tend to say that they're very worried about an AI bubble,
8:19
Speaker 1: But on the other hand, they're still all in on
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Speaker 1: the US, which effectively is an AI bubble market.
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Speaker 2: To your point, there's a lot in there. I mean, obviously,
8:27
Speaker 2: people repeating the open AI numbers. They have thirty billion
8:31
Speaker 2: dollars of revenues and they pledge that one point four
8:33
Speaker 2: trillion dollars of spend. Obviously, that has people raising eyebrows.
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Speaker 2: And of course the circular dealing between Vinia, Open AI
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Speaker 2: and Oracle, et cetera, et cetera, that is another hallmark
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Speaker 2: of people generate a lot of stress. But It's interesting
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Speaker 2: that you pick up on the US because you are
8:52
Speaker 2: right that there's been a lot of focus, a lot
8:54
Speaker 2: of the upside even in the markets have been really
8:56
Speaker 2: around the mag seven, but the four hundred and seventy
8:59
Speaker 2: three other stocks that haven't really shown a lot of
9:03
Speaker 2: that upside. And I actually published in my LinkedIn newsletter
9:06
Speaker 2: some of the breakdown. There's a lot of lag yards
9:08
Speaker 2: in there. The healthcare sector is not done as well
9:10
Speaker 2: as if cyclicals have been okay. But you know, there's
9:13
Speaker 2: a big difference between large and small stocks. So you're
9:16
Speaker 2: right that this is quite a differentiated story. But let
9:18
Speaker 2: me pick up on your theme about the US. The
9:20
Speaker 2: US is growing at three point eight percent, as you know,
9:23
Speaker 2: you need to grow by three percent per year in
9:26
Speaker 2: order to double per capita incomes in a generation in
9:29
Speaker 2: twenty five years. But I mean, look at that story.
9:31
Speaker 2: It's phenomenal, and yes it's a case shape economy. There
9:35
Speaker 2: are a lot of issues. You're right that if you
9:37
Speaker 2: look at some of the desegregated banking data, you're starting
9:40
Speaker 2: to see concern around leverage, especially and low consumer spend
9:45
Speaker 2: at the lower levels of income. But I mean, compared
9:48
Speaker 2: to Europe, which is expected to grow one point four
9:52
Speaker 2: the UK at point one in the last print. I mean,
9:55
Speaker 2: these are pretty paltry, and I think the other thing
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Speaker 2: I would say is people are understanding that there's an
10:01
Speaker 2: opportunity to bet on the United States on innovation, on pharmaceuticals,
10:06
Speaker 2: on technology, on deep capital markets, et cetera, e c.
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Speaker 2: On a massive consumer without having to take the exposure
10:14
Speaker 2: of the US per se. Meaning they're stripping out and
10:17
Speaker 2: this is why the dollar has been kind of weak
10:19
Speaker 2: this year. They're stripping out their concerns around the US
10:23
Speaker 2: fiscus and obviously the debts and deficits there that remain
10:26
Speaker 2: quite worrying. You could argue it's a good house in
10:30
Speaker 2: a bad neighborhood. You know, there's nowhere else you're going
10:32
Speaker 2: to really throw capital to put it to work. I
10:35
Speaker 2: like something that Nikolai Tangan said to me, who runs
10:38
Speaker 2: the largest sovereign wealth fund in the world, and Norwegian
10:41
Speaker 2: Sovereign Wealth Fund got two trillion dolls on the assets.
10:44
Speaker 2: He said, somebody asked him what's going on, you know,
10:46
Speaker 2: outside of the US and China, and he said, nothing.
10:51
Speaker 1: Nothing except for a bit of defense spending.
10:54
Speaker 2: Yes, but even that, I think we have. There's a
10:56
Speaker 2: lot to be said about that.
10:58
Speaker 1: So yeah, interesting can take you back to something you
11:01
Speaker 1: said earlier about retail participation, and this is an interesting
11:05
Speaker 1: time in the US, and that retail participation in the
11:07
Speaker 1: markets in the US is historic. You always been higher than
11:10
Speaker 1: in other countries. I meant particularly the UK, where we're
11:12
Speaker 1: absolutely useless at this stuff. But in the US you've
11:15
Speaker 1: always had relatively high retail participation, but now maybe even
11:18
Speaker 1: higher than ever. And one of the things I know
11:20
Speaker 1: that you've talked about in the past is that there
11:22
Speaker 1: is an awful lot of speculation embedded in the way
11:25
Speaker 1: retail investors are operating in the US at the moment,
11:28
Speaker 1: everything from prediction markets to betting on all sorts of
11:31
Speaker 1: things and very highly leveraged accounts, a lot of margin, etc.
11:35
Speaker 1: Is that a worry. It's wonderful that the US investorates
11:38
Speaker 1: has been made rich by the market, but there's also
11:41
Speaker 1: a risk that maybe they're getting a little bit too
11:43
Speaker 1: involved here.
11:45
Speaker 2: When I say I'm worried, which I am on some level.
11:48
Speaker 2: You know, my American friends say to me, Oh, you're
11:50
Speaker 2: so European, You're so risk mitigation, so glass half empty.
11:54
Speaker 2: You don't want to democratize access to the markets, et cetera,
11:58
Speaker 2: et cetera, et cetera. One hundred and twenty four trillion
12:01
Speaker 2: dollars of capital that's moving through the system by twenty
12:04
Speaker 2: forty eight, which is coming from older generations going to
12:07
Speaker 2: transfer to younger generations. Those guys are betting on everything.
12:12
Speaker 2: They're in private equity, they're in venture and all the
12:15
Speaker 2: lists of things that you just said. And my concern
12:17
Speaker 2: is a lot of that is outside the regulatory purview
12:20
Speaker 2: of you know, people who can say, hey, god, it's
12:24
Speaker 2: getting too hot now, and being part of the shadow banking,
12:28
Speaker 2: I do think there is a bezel. This is that
12:31
Speaker 2: risks and leverage are building up in the system that
12:34
Speaker 2: we just don't have real clarity on. And I guess
12:38
Speaker 2: the question, knowing that is what's the so what? Because
12:42
Speaker 2: on the one hand, we all know that private gains
12:45
Speaker 2: end up being socialized losses, and so you could see
12:49
Speaker 2: a scenario where down the road rates go up, bubble bursts,
12:53
Speaker 2: you know, et cetera. So we've seen this movie before.
12:56
Speaker 2: We've seen in the global financial crisis, savings and loans,
12:59
Speaker 2: et cetera. And in which case, you know, somebody cheekly said,
13:05
Speaker 2: well that's the case. If you know that that's what's coming,
13:07
Speaker 2: should you not want to be part of the of
13:10
Speaker 2: the run up in that sense? Because we know we're
13:13
Speaker 2: all going to pay for it, So maybe you should part.
13:15
Speaker 1: Maybe it's okay, maybe you should just buy buy all
13:18
Speaker 1: those single stock leverage gtfs and don't worry about it.
13:22
Speaker 2: Yeah, because when that day comes, when I would say
13:24
Speaker 2: it's definitely coming at some point, when that day, when
13:27
Speaker 2: that faithful day comes, we're all going to pay for it,
13:29
Speaker 2: you might as well have been part of the run up.
13:31
Speaker 2: I don't take that view, but I do worry a
13:33
Speaker 2: lot that there are going to be knock on effects
13:35
Speaker 2: from the government fiscus being strained from capital being in
13:39
Speaker 2: these shadow banking shadow areas when they're highly everts. Those
13:42
Speaker 2: are three things that worry me.
13:44
Speaker 1: I want to come back to exactly that, and I
13:46
Speaker 1: want to talk about the implications of what might happen
13:49
Speaker 1: with the socialization of losses, et cetera. But before we
13:51
Speaker 1: get to that, can I just ask you what you
13:53
Speaker 1: think about bitcoin at the moment, so I know you
13:55
Speaker 1: have views here and there'll be a lot of unhappy
13:57
Speaker 1: people that bitcoin is now dipped below ninety thousand, the
14:00
Speaker 1: first time, I'm going to take it the first time
14:02
Speaker 1: in seven months. Shot horror. Let's find this rather amusing.
14:04
Speaker 1: These days we talk about the first time in three days,
14:07
Speaker 1: the first time in the month, first time in seven months.
14:09
Speaker 1: This is nothing in the world of investment as a timescale,
14:11
Speaker 1: But nonetheless a lot of shock horror about bitcoin falling
14:15
Speaker 1: below ninety thousand dollars. What's your view there at the moment?
14:19
Speaker 2: So I'm not great to ask. When I speak to
14:21
Speaker 2: my nephews and nieces, they look at me and say, oh,
14:24
Speaker 2: you don't understand. You're an old generation, old fuddy duddy.
14:27
Speaker 2: And that's true. I'm a particular generation. Where as far
14:30
Speaker 2: as I'm concerned, you know, a simple African girl, My
14:33
Speaker 2: view is, hey, does this thing have discounted cash flows
14:36
Speaker 2: that's making a treat at these numbers? And it doesn't,
14:39
Speaker 2: And so you know, it feels very speculative to me.
14:42
Speaker 2: Now that may be intellectually true on paper, but it's
14:47
Speaker 2: also true that it's had an enormous run up. And
14:50
Speaker 2: I can sit here and say, oh, when my hairdresser
14:53
Speaker 2: says that they're in bitcoin in the bottle at four thousand.
14:56
Speaker 2: Who am I to tell them that they're being silly
14:58
Speaker 2: because it doesn't have discounted cash flows. As many people
15:01
Speaker 2: as I might say, ha, I told you, so it's
15:04
Speaker 2: going down. There are plenty of people who are saying, actually, great,
15:07
Speaker 2: now's my time to jump in, because I think this
15:09
Speaker 2: thing could be worth two hundred three I've heard credible people,
15:12
Speaker 2: so it could be two hundred three hundred thousand dollars
15:15
Speaker 2: in a year. But I mean, I'm not making any predictions.
15:17
Speaker 2: I don't own any bitcoin for the simple reason that
15:20
Speaker 2: I was born in a particular era where we don't
15:23
Speaker 2: generally get excited or we understand it to be speculation
15:26
Speaker 2: when this thing doesn't have discounted cash flows. Now, maybe
15:28
Speaker 2: I'm just lacking an imagination. I don't understand that this
15:31
Speaker 2: is a fundamental structural shift in the financial architecture of
15:35
Speaker 2: the world, etc. So I've heard all the arguments, but
15:38
Speaker 2: you know, on balance, stable coins are more interesting to me,
15:42
Speaker 2: not such a far reach or requiring a herculean amount
15:47
Speaker 2: of imagination, as bitcoin.
15:50
Speaker 1: And stable coins do seem to solve all the problems
15:54
Speaker 1: that bitcoin was supposed to solve, but in a slightly
15:56
Speaker 1: more simple way.
15:58
Speaker 2: Well, look, I think the root of thumb and I'm
16:01
Speaker 2: sure we can get corrected is that almost.
16:04
Speaker 1: Definitely, we have a lot of crypto people who listen
16:06
Speaker 1: to this podcast. We will definitely be corrected if we
16:08
Speaker 1: say anything wrong.
16:09
Speaker 2: But absolutely fine. It's not going to sway me to
16:13
Speaker 2: buy any I'll just put it out there. But again,
16:15
Speaker 2: my head is that I'm a woman of a certain age.
16:18
Speaker 2: But look, I would say that it's stable coin. I
16:21
Speaker 2: you know, they're very credible people who.
16:23
Speaker 3: Work in the sort of more established old school financial architecture,
16:29
Speaker 3: and they would say, you know what, stable coin makes
16:32
Speaker 3: sense because there are still huge transaction costs from a
16:36
Speaker 3: business to business or B two c, especially internationally.
16:40
Speaker 2: So that I can get my head around. Yeah, we
16:42
Speaker 2: can sit here and talk about whether they're investing in
16:44
Speaker 2: exposing people to treasuries and all that. I understand that.
16:48
Speaker 2: But I can get my head around that sort of thing.
16:50
Speaker 2: It's harder for me to get myself my head around
16:52
Speaker 2: something which is supposed to be replacing FIAT currencies based
16:56
Speaker 2: on trust and you know, has already shown some vulnerabilities
17:01
Speaker 2: in terms of this sort of trust establishment around a
17:04
Speaker 2: trust network. But today listen, so far I admit it.
17:08
Speaker 2: I started this conversation when it was three hundred dollars
17:11
Speaker 2: up for a bitcoin, But here we are ladies and
17:13
Speaker 2: gentlemen talking about it at being over ninety thousand so.
17:16
Speaker 1: Y and as I say, being horrified that it's fallen
17:18
Speaker 1: fall under ninety thousand dollars. I do hold just to
17:21
Speaker 1: remind everyone listening when you start writing your hate mail,
17:24
Speaker 1: I do own some bitcoin, not very much, and Sheddownbis's views.
17:29
Speaker 1: But I'm hedging myself by owning a little bitcoin. And
17:32
Speaker 1: let me said, you look at gold in the same
17:34
Speaker 1: way and say, well, that doesn't have a discounted cash flow,
17:36
Speaker 1: so that doesn't work with me either.
17:38
Speaker 2: Well, listen, gold has had a completely different relationship with
17:41
Speaker 2: financial markets. It goes back to nineteen seventy one and
17:45
Speaker 2: coming off of the gold standard, so public policymakers owned
17:48
Speaker 2: it then, and we know even this year, I think
17:50
Speaker 2: they are some of the numbers I looked at in
17:52
Speaker 2: the middle of the year. I think the many central
17:54
Speaker 2: banks were increasing their exposure. Still a yeah, it's a bit,
17:58
Speaker 2: there's a natural bid there. It doesn't feel as speculative,
18:01
Speaker 2: but you know, I was on the board of Barret
18:03
Speaker 2: Gold the largest gold producer in the world, and I
18:07
Speaker 2: remember sitting in there thinking, oh my god, gold and
18:10
Speaker 2: with a two handle on the ounce just seemed so unfathomable.
18:15
Speaker 2: And once again here we are with it at over
18:18
Speaker 2: four thousand, around four thousand. So I just look, I
18:22
Speaker 2: think there's some fundamental changes that are going on in
18:25
Speaker 2: the financial market, absolutely in terms of risk, in terms
18:29
Speaker 2: of leverage, in terms of asset classes, which we haven't
18:34
Speaker 2: really talked about yet, but I mean, I think all
18:35
Speaker 2: of these things are transforming the way the markets have operated.
18:39
Speaker 2: And I think it's fair to have the debate, and
18:41
Speaker 2: there's no need for anybody to be hostile about it.
18:44
Speaker 2: We can The beauty of the market is that their
18:46
Speaker 2: buyers and sellers, and that's what makes the market absolutely right.
18:49
Speaker 1: Let's talk then about because we mentioned briefly earlier things
18:53
Speaker 1: that might derail, might turn this bubble from the beginnings
18:57
Speaker 1: of a bubble into a bubble that's collapsing. And one
18:59
Speaker 1: of the things that you suggested with rising rates, and
19:01
Speaker 1: I know that you've you've written a bit recently about
19:04
Speaker 1: inflation and what might what might bring it back, will
19:06
Speaker 1: remarkably relaxed at the moment about inflation, and there's a
19:10
Speaker 1: built in assumption of cross markets that rates are on
19:12
Speaker 1: their way down, But there are risks there aren't there.
19:16
Speaker 2: Well, first of all, I think it's absolutely the case
19:19
Speaker 2: that if you we had this conversation three weeks ago,
19:23
Speaker 2: it was an eighty five and one hundred percent even
19:25
Speaker 2: a chance that there was going to be a rate
19:27
Speaker 2: cut at the next FED meeting. I think now, certainly
19:32
Speaker 2: into the end of the year, I think now that's
19:34
Speaker 2: come a bit off the boil. People aren't as confident
19:36
Speaker 2: as they are, especially after the comments from a FED
19:39
Speaker 2: chair Powell. But you know, I think there's a there
19:41
Speaker 2: is a more fundamental question to ask, is are there
19:45
Speaker 2: some some inflationary pressures bubbling in the economy? And I
19:49
Speaker 2: did put out a piece again on my LinkedIn newsletter
19:53
Speaker 2: for this month in November arguing that there are you
19:55
Speaker 2: know a handful of things that are happening that could
19:58
Speaker 2: prove inflationary. Next deer and you know, trade, just to
20:02
Speaker 2: remind everyone the fact that the tariffs have not yet
20:05
Speaker 2: led to inflationary pressures. That is a complete roundabout from
20:10
Speaker 2: what canonical models for two hundred and fifty years have
20:13
Speaker 2: told us about adding a tax. Who pays the tax
20:16
Speaker 2: is immaterial, meaning it could be the companies. It could
20:19
Speaker 2: be wholesale they could absorb ten percent, It could be consumers.
20:22
Speaker 2: But the fact of the matter is adding an additional
20:25
Speaker 2: tax to a consumer goods and services, it has always
20:29
Speaker 2: led to an increase in inflation, so it hasn't shown up.
20:34
Speaker 2: Are we wrong or are we late? I think that's
20:36
Speaker 2: a question we can ask here. Labor markets is the
20:39
Speaker 2: second thing we know inflation from the fact that the
20:43
Speaker 2: labor markets as largely but not entirely, because of the
20:47
Speaker 2: border closures changes in H one B to vEDS H
20:50
Speaker 2: one visas that have been touted, et cetera, et cetera.
20:55
Speaker 2: That is a net increase in the price of workers
20:59
Speaker 2: that could also be inflationary AI demand. We talked about AI.
21:04
Speaker 2: The amount of capex going in here five hundred billion
21:06
Speaker 2: is estimated certainly starting next year to the twenty thirty
21:10
Speaker 2: every year from just the MAGS seven huge huge inflationary
21:13
Speaker 2: pressures that could come from that. I think all of
21:15
Speaker 2: these things plus loose monetary policy rates going down. I mean,
21:19
Speaker 2: there's a theory out there that come may have a
21:22
Speaker 2: new FED chair that very likely to be more dubvish.
21:26
Speaker 2: All of these things could end up being incredibly inflationary
21:29
Speaker 2: into the economy. And you know, obviously in an inflationary environment,
21:33
Speaker 2: rates could go up, and that could be a trigger
21:35
Speaker 2: for some of the things we're talking about in terms
21:37
Speaker 2: of the bubble.
21:38
Speaker 1: Yeah, and I suppose, alongside talking about AI capex at
21:41
Speaker 1: that level being inflationary, that kind of data center demand
21:45
Speaker 1: may well redto lead to mo rises and energy costs,
21:48
Speaker 1: which of course has another inflationary dimension to style thing.
21:51
Speaker 2: Exactly exactly right. So and I think there's too early
21:55
Speaker 2: to say you're right. If people look at them, people
21:57
Speaker 2: might be rolling their eyes as they're listening to us,
22:00
Speaker 2: Marin and saying, well, wait a minute. You know, Brent
22:02
Speaker 2: is at sixty dollars, what is all this? Why are
22:05
Speaker 2: we seeing the sky is falling down? I mean, there's
22:07
Speaker 2: absolutely it's been over the market has been oversupplied, But
22:10
Speaker 2: that doesn't mean that OPEC and some of the other
22:13
Speaker 2: OPQ plus countries won't respond to that, and also that
22:17
Speaker 2: those could have some real implications coming down the pike.
22:21
Speaker 1: And of course there is a know that oil prices
22:23
Speaker 1: aren't necessarily connected to electricity prices, and there's the huge
22:26
Speaker 1: cost of building out the grid to provide electricity. There's
22:29
Speaker 1: huge national infrastructures across the West being rebuilt to try
22:33
Speaker 1: and provide the electricity to deal with I mean, obviously
22:36
Speaker 1: not just data centers, but with the energy transition as
22:38
Speaker 1: a whole.
22:38
Speaker 2: Yeah, absolutely right. The oil price was just one marker.
22:41
Speaker 2: Of course, now natural gas is a big input into power,
22:46
Speaker 2: into the data center story. But I was just giving
22:48
Speaker 2: a broader point that we have some commodity pressures that
22:52
Speaker 2: could be supundamentally problematic.
23:10
Speaker 1: There is an idea that we're on the cosp of
23:12
Speaker 1: a new commodity supercycle.
23:14
Speaker 2: Ha, well forever. Thus, right, I mean, copper, take your pick.
23:19
Speaker 2: It's always the way. And obviously because I grew up
23:22
Speaker 2: in a copper country and I think we're all sort
23:25
Speaker 2: of expectant of that. But I mean, you know, do look,
23:28
Speaker 2: I think something like natural gas and thinking about the
23:31
Speaker 2: energy marketing, electricity, et cetera. I think those are much
23:34
Speaker 2: more perhaps less wish for thinking, and much more granularity
23:38
Speaker 2: in the numbers in terms of what could be coming.
23:41
Speaker 2: I think even the chief executive for National Grid has
23:44
Speaker 2: been talking about the grids being you know, struggling to
23:47
Speaker 2: deliver in energy electricity. As you know, in the UK
23:51
Speaker 2: the price of energy about forty cents a kilowatt hour
23:56
Speaker 2: compared to twelve cents in the United States, twelve to
23:59
Speaker 2: sixteen cents depend under the state and only eight cents
24:01
Speaker 2: in China. So it prices are higher already, which is
24:05
Speaker 2: a constraint for sure, but hopefully also an opportunity to
24:09
Speaker 2: really drive non inflationary growth in the UK and elsewhere
24:13
Speaker 2: in the European area.
24:15
Speaker 1: Yeah, it is one of our great problems in the
24:17
Speaker 1: UK is now the price of energy. Let's go higher
24:20
Speaker 1: and talk about the wider global problems or maybe not problems,
24:24
Speaker 1: maybe opportunities. And there's big challenges around the world at
24:27
Speaker 1: the moment. And again you've listed them previously and we've
24:29
Speaker 1: talked about some of them. We've talked about AI, we've
24:32
Speaker 1: started talking about the energy transition, but we can pick
24:34
Speaker 1: up a bit more on that. We haven't really talked
24:36
Speaker 1: about deglobalization, or maybe it's not deglobalization, maybe it's localization,
24:41
Speaker 1: maybe it's a variety of things like that. And we
24:44
Speaker 1: also haven't talked about the role of government going forward.
24:47
Speaker 1: I know that you feel possibly we are getting to
24:49
Speaker 1: the point my governments are too big and too overbearing.
24:52
Speaker 1: So these are some of the problems that I've heard
24:55
Speaker 1: you talking about of the last couple of years around
24:57
Speaker 1: the world. Which of those the most solvable and which
25:01
Speaker 1: is the least solvable?
25:03
Speaker 2: Do you think I'm going to add one more to
25:05
Speaker 2: that list, which is demographic four?
25:07
Speaker 1: Is really four is a lot already.
25:10
Speaker 2: It is, but I'm going to throw demographics in there.
25:12
Speaker 1: That's quite right. Absolutely, I think that.
25:14
Speaker 2: We overlook and I think more and more in boardrooms
25:16
Speaker 2: you started to say, oh wait a second, this actually
25:18
Speaker 2: does matter about capital allocations, about where we're going to
25:21
Speaker 2: put our plants, where we're going to hire people, where
25:23
Speaker 2: we're going to deploy people. So, you know, just to
25:26
Speaker 2: put some numbers around it, we're going to be about
25:28
Speaker 2: eleven billion people by twenty one hundred. India is already
25:32
Speaker 2: a larger economy than China, and India it's you know,
25:35
Speaker 2: three times poorer on a per capita basis than China.
25:38
Speaker 2: It matters because it matters what kind of energy they buy,
25:40
Speaker 2: what kind of food stops, what kind of consumer goods.
25:43
Speaker 2: So demographics are going to be huge. Landset has some
25:47
Speaker 2: pretty aggressive forecasts. It has estimates that in terms of Japan,
25:52
Speaker 2: it will go from about one hundred and twenty million
25:54
Speaker 2: people down to fifty three million. Africa is going to
25:58
Speaker 2: go from about one point two twenty percent of the
26:00
Speaker 2: world's population one point two billion to about three billion.
26:03
Speaker 2: These are massive, massive changes. Italy, similar to Japan, will
26:06
Speaker 2: probably be around fifty million people. So these are real
26:08
Speaker 2: fundamental changes that are affecting the world. But come to
26:11
Speaker 2: your list deglobalization. It's funny because I think there's more
26:15
Speaker 2: and more a an acceptance, so sort of reticence that
26:18
Speaker 2: we are now living in this world which is much
26:20
Speaker 2: more siloed. It does have implications for how we allocate capital,
26:24
Speaker 2: how we think about procurement in the globalized world. We'd say, oh,
26:28
Speaker 2: let's just set up a plant in Argentina or in
26:31
Speaker 2: the Philippines and it can distribute stuff from there. We're
26:34
Speaker 2: now becoming much more certainly in the boardroom is becoming
26:37
Speaker 2: a little bit more reflective about is that going to be.
26:40
Speaker 2: You know, it's going to have resilience in time changes.
26:42
Speaker 2: And we already had this conversation after the pandemic with
26:45
Speaker 2: a supply chain and bringing supply chain home. But it's
26:48
Speaker 2: much more poignant now with China having meetings with Russia
26:52
Speaker 2: and in India in such a brazen form, but also financing.
26:57
Speaker 2: We used to borrow money in London and New York
26:59
Speaker 2: cheaply in invest in Brazil or wherever around the world,
27:02
Speaker 2: generate returns and then repatriate them back to head office.
27:05
Speaker 2: That world is fundamentally changed. It's again very siloed world.
27:09
Speaker 2: We have to think about can we fund and raise
27:12
Speaker 2: and fund projects and investments at a centralized level, but
27:16
Speaker 2: at a local level, so that again hiring obviously falls
27:19
Speaker 2: into that. On the role of government, I think that's
27:21
Speaker 2: probably where we have the most degrees of freedom. The
27:24
Speaker 2: good news is that we all get to vote. The
27:26
Speaker 2: bad news is that we all get to vote, which
27:29
Speaker 2: means policymakers, even though they sometimes know what they should do,
27:33
Speaker 2: they're very driven by the hear and now by polls
27:37
Speaker 2: and things that really require them to do things that
27:41
Speaker 2: might not be long term in the best interests of
27:44
Speaker 2: the country. I'm very interested in that question because I
27:48
Speaker 2: do think it can be a source of chaos, which
27:51
Speaker 2: can discourage investment, and it can be very damaging over
27:54
Speaker 2: the long term. So I'm quite interested in that if we.
27:57
Speaker 1: Go back to demographics, I'm one of the things that
27:59
Speaker 1: with fascinates me is how fast fertility rates are falling everywhere.
28:05
Speaker 1: And you mentioned India and the vast growth in the
28:08
Speaker 1: population there, but already they're down below two right in
28:11
Speaker 1: terms of their fertility. So you're going to see that
28:15
Speaker 1: obviously peak and then fall off again much faster than
28:18
Speaker 1: I think people would have expected ten years ago. And
28:20
Speaker 1: even when you look at the African countries that has
28:23
Speaker 1: had incredibly high fertility rates, there's really only a couple
28:26
Speaker 1: of countries left that have fertility rates above four right.
28:29
Speaker 1: I always wonder whether, in terms of demographics, were going
28:32
Speaker 1: to actually end up seeing the global population fall really
28:35
Speaker 1: way faster than any of the forecasts.
28:39
Speaker 2: Well, it's it's a great point because the two things.
28:43
Speaker 2: So first of all, the replacement rate is two point one,
28:45
Speaker 2: So the reason you're saying to two point one is
28:48
Speaker 2: precisely because it's a number that we do track. But
28:51
Speaker 2: the other point is that even in the last five years,
28:53
Speaker 2: we have gone from forecasts from the United Nations and
28:58
Speaker 2: from other demographers that were to hit twenty one one
29:01
Speaker 2: hundred with eleven billion people already those numbers are coming down.
29:04
Speaker 2: Saying ten point four. I didn't even mention China, which
29:07
Speaker 2: obviously is now forecast to end at the century at
29:10
Speaker 2: about eight hundred million people. So you're right, the whole
29:14
Speaker 2: demographics assumptions are changing very dramatically. It took about one
29:18
Speaker 2: hundred years to go from a billion people to two
29:21
Speaker 2: billion people. It took forty years to go from three
29:23
Speaker 2: billion to six billion. There's a lot of volatility, and
29:26
Speaker 2: there's also a lot of disaggregated what I call disorderly
29:29
Speaker 2: migration that's happening as a consequence of this. So as
29:32
Speaker 2: we think about demographics, it's not that people are just
29:35
Speaker 2: static and staying home. They're moving. We now have about
29:38
Speaker 2: one hundred and twenty million people who are displaced out
29:40
Speaker 2: of their homes. So I do think it's a big issue.
29:43
Speaker 2: I do think government, certainly in Europe, which is also
29:47
Speaker 2: forecast to face a decline from its a sort of
29:49
Speaker 2: natural citizenry, they're going to need to encourage more orderly
29:54
Speaker 2: demographic and migration. But in Europe, we know places like Italy, France,
29:59
Speaker 2: other places are actually trying to increase the population through
30:03
Speaker 2: some types of incentives. You know, in terms of tax breaks,
30:06
Speaker 2: et cetera. Even in the UK itself we've been having
30:08
Speaker 2: a discussion about the two child cap et cetera. So
30:12
Speaker 2: I think it's going to be a top of mind
30:14
Speaker 2: agenda issue going forward.
30:16
Speaker 1: In that sense, AI maybe comes along on exactly the
30:18
Speaker 1: right time to take quite a lot of the labor
30:20
Speaker 1: off our hands.
30:22
Speaker 2: Well, as you know, John Maynard Keynes forecast in the
30:26
Speaker 2: nineteen thirties that by twenty thirty we would have a
30:29
Speaker 2: fifteen hour work week and we would be spending all
30:32
Speaker 2: those extra hours contemplating God. So let's see what happens.
30:35
Speaker 2: We're not far away from.
30:36
Speaker 1: That, not far away from fifteen hour weeks. That'll be
30:39
Speaker 1: quite Actually, well.
30:42
Speaker 2: I I'm not misquoted by.
30:46
Speaker 1: I'm glad ye're not, but I mean, so far, it's
30:48
Speaker 1: always seemed that the work has expanded to fill the time,
30:51
Speaker 1: hasn't it. But maybe with declining population, suddenly we know
30:55
Speaker 1: the dynamic changes. Anyway, Let's go back to the road
30:58
Speaker 1: of government perhaps, and we might even given there in
31:02
Speaker 1: the House of Lords. Here look at the UK. You
31:04
Speaker 1: mentioned earlier that the good news is we can vote
31:07
Speaker 1: and the bad news. The bad news is that we
31:08
Speaker 1: can vote. But I think a lot of UK voters
31:11
Speaker 1: might say, well, we keep voting and may never get
31:13
Speaker 1: what we vote for.
31:14
Speaker 2: Well, you know what, here's what I would say. I mean,
31:17
Speaker 2: ultimately goes back to where I started. We're trying to
31:19
Speaker 2: get growth here. With our growth, can't fund public services,
31:21
Speaker 2: we can't do climate change, we can't defend ourselves. I mean,
31:24
Speaker 2: the list is big. We need to be growing the UK. Now,
31:29
Speaker 2: if you ranked all the US states individually, Mississippi would
31:34
Speaker 2: be the poorest state. And the UK and a per
31:36
Speaker 2: capita income is poorer than Mississippi. That is a problem
31:39
Speaker 2: as far as I'm concerned.
31:40
Speaker 1: Yeah, and the weather in Mississippi is nicer, much nicer.
31:44
Speaker 2: It was certainly today. But you know, I think it's
31:48
Speaker 2: very easy to say more taxes, less taxes, more regulation,
31:51
Speaker 2: less regulation. I think we miss what should be we
31:54
Speaker 2: should be trying to do. To me and to my mind,
31:57
Speaker 2: they are two massive constraints in the UK, but in
32:00
Speaker 2: Europe and many other governments. Number one, energy costs too much,
32:04
Speaker 2: and number two, our capital markets are just not working.
32:07
Speaker 2: On the energy point, I already mentioned, we are an
32:09
Speaker 2: outlier in the UK at forty cents a killer water hour.
32:12
Speaker 2: The policies. I understand in terms of trying to pursue
32:16
Speaker 2: a more clean agenda, but many other countries are doing that.
32:21
Speaker 2: But we cannot have a such an extreme cost of
32:25
Speaker 2: energy that it actually starts to bite for households, for businesses,
32:29
Speaker 2: for public goods like the National Health Service. I just
32:32
Speaker 2: don't think that that is something we should want, living standards,
32:34
Speaker 2: deterior rating, et cetera. And then with the capital markets,
32:38
Speaker 2: we need investment, we need investments, and whether it's IPOs,
32:41
Speaker 2: we're now outside the top twenty globally in terms of
32:45
Speaker 2: venture and private equity. The fact that those numbers have
32:47
Speaker 2: gone down in fact, also the pensions and insurance funds,
32:51
Speaker 2: which should be the sort of backbone of investing the
32:55
Speaker 2: UK Pensions and Insurance company are not even investing in
32:58
Speaker 2: the UK. And it's day Minimus gone from thirty percent
33:01
Speaker 2: in the nineteen nineties down to less than two percent
33:04
Speaker 2: or around two percent in yea.
33:05
Speaker 1: And we were horrified when we looked at the as
33:07
Speaker 1: Commons pension investments under two percent in the UK. And
33:11
Speaker 1: what kind of confidence is that? Thanks very much, guys.
33:14
Speaker 2: Yeah, peratuche and so you know, let's just solve those
33:17
Speaker 2: two because you know, yes, there are a multitude about
33:21
Speaker 2: issues defense, national health service, education, you know, I mean,
33:24
Speaker 2: take your pick, infrastructure. But I just feel like, if
33:27
Speaker 2: you want to catalyze the growth, let's solve these two.
33:30
Speaker 2: These things will bring in capital, they'll bring in aspiration, energy,
33:34
Speaker 2: the very things that we seem to be lacking at
33:37
Speaker 2: the moment, which is just completely insane. Given that this
33:40
Speaker 2: is the home of the industrial revolution, we should be
33:44
Speaker 2: at the forefront of driving productivity gains. We should be
33:47
Speaker 2: the ones who should be showing the world how to
33:51
Speaker 2: do rule of law, how to do these things in
33:53
Speaker 2: a way that's competitive. And we're lagging. We're lagging just
33:56
Speaker 2: simply by the growth numbers. You don't have to believe me.
33:59
Speaker 2: Go look at it growth, Go look at our inflation
34:01
Speaker 2: at three point eight percent. Go look at unemployment, but
34:05
Speaker 2: really youth unemployment. These are not metrics that we should
34:09
Speaker 2: look at and say, oh, things are going swimmingly. And
34:11
Speaker 2: I think we have a pathway to captalyze the growth
34:16
Speaker 2: that can lead to solving the structural problems that I
34:19
Speaker 2: laid out. Education and infrastructure, healthcare. Of course, those are
34:23
Speaker 2: real problems, but we should not be putting band aids
34:26
Speaker 2: on these on these things and not solving these underlying
34:30
Speaker 2: problems around energy and the capital markets.
34:33
Speaker 1: Interesting. I think people would would mostly be able to
34:36
Speaker 1: think of some fairly simple ways to sort out our
34:38
Speaker 1: energy problem. But the capital market problem is a slightly
34:41
Speaker 1: different one, isn't it. And we've talked about that a
34:43
Speaker 1: lot on this podcast and it's quite hard to come up.
34:46
Speaker 1: You can come up with a long list of things
34:48
Speaker 1: that we should do to try and improve matters. And
34:50
Speaker 1: some of the things have already happened, right We've had
34:52
Speaker 1: you know, simplified simplified regulations for listed companies and some
34:57
Speaker 1: changes to I peer regulation, etctera, etcetera. There's a lot
34:59
Speaker 1: of conversation under way, but what would you do to
35:02
Speaker 1: loosen up UK capital markets to bring them back? Because
35:05
Speaker 1: I mean people often say, well, why does it matter
35:07
Speaker 1: how many listed companies you have? For example, why does
35:09
Speaker 1: it matter how many IPOs you have when there's a
35:11
Speaker 1: huge private market underneath the public markets. The answer twitch
35:15
Speaker 1: is what you need that network that comes with public markets, right,
35:19
Speaker 1: You need the institutional network of lawyers and accountants and
35:22
Speaker 1: finance and being the center of something that comes with
35:26
Speaker 1: having a very healthy listed equity markets. What do you
35:30
Speaker 1: do to bring it back?
35:32
Speaker 2: It's interesting that, you know, I don't really hear the argument.
35:35
Speaker 2: I hear a lot about the regulation and people just
35:37
Speaker 2: being the whole systems gummed up into exhausting to try
35:39
Speaker 2: and do something. You know, even entrepreneurs are just like,
35:42
Speaker 2: it's just it's just a hassle. That's a regulatory problem.
35:46
Speaker 2: But it's interesting I hear this also from private companies.
35:50
Speaker 2: There are a number of private equity venture firms, buy
35:54
Speaker 2: out growth firms that moved to the UK on the
35:57
Speaker 2: basis of it's got they speaking English, they're the center
36:01
Speaker 2: of a great time zone, they've got great root of law,
36:04
Speaker 2: let's get at it. And they've not They've been around five, seven,
36:07
Speaker 2: ten years in some cases and they've not invested in anything.
36:11
Speaker 2: So I don't think the private markets are really there.
36:14
Speaker 2: Every now and then we do hail, oh, look at
36:17
Speaker 2: what happened with deep mind, or look at what happened
36:20
Speaker 2: with you know this or that. But you know, I
36:22
Speaker 2: actually put a question I have to say to the
36:25
Speaker 2: government in my role in the Lord, in my written questions, saying,
36:29
Speaker 2: you know, what's going on, how we think what's the
36:31
Speaker 2: government response? To some of the exact same things the
36:33
Speaker 2: IPO market, you know, venture et cetera. And I was
36:36
Speaker 2: a bit astonished with the response. I think there had
36:38
Speaker 2: been an IPO of a tuna fish company and that
36:41
Speaker 2: the beauty markets they just started to grow, and I think, fine,
36:45
Speaker 2: that's great, but that's surely not enough. And if you
36:48
Speaker 2: look at the Footy one hundred, we're still trading like
36:51
Speaker 2: in companies and sectors that were important in the yester year,
36:56
Speaker 2: you know, banks and energy companies and you know that
36:59
Speaker 2: kind of thing, pharmacuys. But where are the next gen
37:02
Speaker 2: companies where the AI companies that are supposed to power
37:04
Speaker 2: healthcare solutions that are going to drive new education, going
37:09
Speaker 2: to drive the AI and productivity gains. They're not listing
37:12
Speaker 2: in the UK. And I think that that does have
37:14
Speaker 2: a if nothing else, it just makes the country seem
37:18
Speaker 2: quite moribund. It feels, you know, and no surprises that
37:23
Speaker 2: young people seem to be leaving. I think I think
37:26
Speaker 2: that's very tragic in many ways because this is a
37:30
Speaker 2: natural place. It is the home of Adam Smith, it
37:33
Speaker 2: is the home of industrial revolution, it's the home of
37:36
Speaker 2: all the greats, and in terms of invention, we should
37:40
Speaker 2: be leading the world in these spaces, and I think
37:43
Speaker 2: a lot of that has to do with the narrative.
37:45
Speaker 2: We're just not excited about as excites as we ought
37:48
Speaker 2: to be and our pension fund, our endowments. I sit
37:51
Speaker 2: on the Oxford University Endowment. We should be excited about
37:54
Speaker 2: investing in the House of Commons, should be excited about
37:57
Speaker 2: investing in the UK, putting their money where it's worth,
37:59
Speaker 2: which they are in a strange way by when they
38:02
Speaker 2: decide not to invest. And by the way, just to
38:05
Speaker 2: put a finer point to it, I'm not in favor
38:08
Speaker 2: of a mandatory forced investment because I think, you know,
38:13
Speaker 2: and I used to be open minded about it, but
38:15
Speaker 2: now I think to myself, well, the reason people aren't
38:17
Speaker 2: investing is because they don't think it's investible. If they
38:20
Speaker 2: thought it was investible, they'd invest, and you don't need
38:23
Speaker 2: you know, people would be tripping over themselves to put
38:25
Speaker 2: money into the stock markets. And so we've had a
38:28
Speaker 2: good year this year, obviously, and much of Europe paths.
38:32
Speaker 2: But I think there's some structural changes, if nothing else,
38:34
Speaker 2: just marketing. Can we just market the country in a
38:36
Speaker 2: better way? People on your podcast today might say well,
38:40
Speaker 2: I'm guilty of doing the negative thing. But I think
38:44
Speaker 2: the upside is that it's so obvious. We have two
38:47
Speaker 2: hundred and fifty years of evidence of what works. We
38:49
Speaker 2: don't need to invent the wheel. Let's just get at
38:51
Speaker 2: it and let's do it in a more effective way.
38:53
Speaker 1: Yeah. Well, we always think that people come back to
38:55
Speaker 1: the market when the market goes up, and it's going
38:57
Speaker 1: up now, and you know that perhaps in the budget
39:00
Speaker 1: we might get a signal, a signal from the Chancellor
39:02
Speaker 1: the the UK is open for business, perhaps with for example,
39:06
Speaker 1: a shift in the ICI rule done. They always think
39:08
Speaker 1: is that it's interesting, interesting at the least that you
39:11
Speaker 1: can use a tax wrapper in the UK to invest abroad. Yeah,
39:14
Speaker 1: so it does make sense. I mean I agree with
39:16
Speaker 1: you to a degree about MANDATORI, although I do sometimes
39:18
Speaker 1: think that maybe public sector pension funds should have to
39:22
Speaker 1: put some money into the UK to take away a
39:25
Speaker 1: large part of the cash ice for allowance in the UK,
39:27
Speaker 1: and say, do you know what, if you're going to
39:29
Speaker 1: if you're going to use this tax repper in the UK,
39:31
Speaker 1: you don't have to use the tax repper, but if
39:33
Speaker 1: you are going to use the tax repper, then it
39:35
Speaker 1: does kind of make sense that maybe twenty thirty, possibly
39:38
Speaker 1: even fifty percent of what you invest in via this
39:42
Speaker 1: UK based tax repper, which is effectively financed by other
39:45
Speaker 1: UK taxpayers, that you should put that money into the
39:48
Speaker 1: UK market.
39:49
Speaker 2: I don't dispute that argument, have heard that argument. I
39:52
Speaker 2: just feel like I long for the day that it's
39:55
Speaker 2: such a no brainer to invest in the UK. We
39:57
Speaker 2: don't have to do fund fent to trickery or we
40:00
Speaker 2: don't have the strong arm people to do that. It
40:02
Speaker 2: should be obvious, and I think it was obvious. There
40:06
Speaker 2: have been times in the history of this country that
40:07
Speaker 2: there was a no brainer obvious, and I look forward
40:11
Speaker 2: to it being more like that. And you're right, we
40:13
Speaker 2: can do stuff. We can nibble at the edges and say, well,
40:15
Speaker 2: let's do the ISA. But in I is another example
40:18
Speaker 2: that I spoke with enough insurance that affects businesses. We
40:21
Speaker 2: have a lot of people who are now out of
40:23
Speaker 2: work on the back of some of those things. So
40:24
Speaker 2: I do understand. I'm not saying it's an easy job
40:27
Speaker 2: and you have to but I do think we needing
40:28
Speaker 2: a holistic approach and say, what are we trying to achieve? Here.
40:31
Speaker 2: You can't say are trying to achieve growth if we
40:33
Speaker 2: have more taxes and more regulation. I think that doesn't
40:37
Speaker 2: feel growth like. And I think, oh, well, look what
40:40
Speaker 2: I did on the ISA wrapper. I think it may
40:42
Speaker 2: not be enough.
40:43
Speaker 1: Can I ask you one last question, which is are
40:46
Speaker 1: you reading anything interesting at the moment? I have you
40:48
Speaker 1: in my head as a voracious reader. I bet there's
40:51
Speaker 1: a book right next to you right now. I know
40:52
Speaker 1: you're getting on a plane in an hour. What are
40:54
Speaker 1: you going to be reading?
40:55
Speaker 2: Oh my gosh, so I'm reading a bunch of stuff.
40:59
Speaker 2: I'm actually not reading a book at the moment. I'm
41:01
Speaker 2: reading a big survey that just came out of the
41:04
Speaker 2: US interestingly enough about how the Democrats can try and
41:08
Speaker 2: win again, and it's worth a read. I mean, I
41:11
Speaker 2: am reading other books, but the books are not going
41:13
Speaker 2: to trump what I'm saying right now, no pun intended.
41:15
Speaker 2: But it's really about a reset. They've been pushing this
41:19
Speaker 2: agenda of affordability. Affordability meaning jobs meaning housing, meaning education,
41:24
Speaker 2: meaning healthcare meaning retirement, those five angles and I'm just rereading.
41:29
Speaker 2: It's very data heavy, but it has real applications for
41:32
Speaker 2: the UK, and you should definitely. It's called deciding to
41:36
Speaker 2: win or decision to win, I think it is. But
41:38
Speaker 2: it's brilliant. I can put it down because I think
41:41
Speaker 2: there's a lot of learnings, especially for people who weren't ideological.
41:45
Speaker 2: You know, you're not extreme left or extreme right. You're
41:47
Speaker 2: just trying to move the country forward, leave a great
41:50
Speaker 2: future for future generation. So how do you do that?
41:52
Speaker 2: How do you think about what matters, and how do
41:55
Speaker 2: you deliver that message? So that's what I'm really excited
41:58
Speaker 2: about at the moment.
42:00
Speaker 1: Okay, brilliant. Thank you so much. It was absolutely fascinating.
42:02
Speaker 1: I think we've pretty much covered the entire world and
42:05
Speaker 1: that I've had that. The only thing we didn't get
42:07
Speaker 1: onto was Chinese inflation, but I think we might have
42:09
Speaker 1: to leave that for our next chat. Dummies. I thank
42:11
Speaker 1: you so much for joining us today.
42:13
Speaker 2: So lovely to see you. Thank you so much, really
42:15
Speaker 2: appreciate it.
42:20
Speaker 1: Thanks for listening to this week's Marin Talks Money. If
42:23
Speaker 1: you'd like our show, rate review and subscribe wherever you
42:25
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Speaker 1: to Mirror Money at Bloomberg dot net. You can also
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Speaker 1: Mariness w and John is John Underscore Stepic. This episode
42:36
Speaker 1: was hosted by me Marry zumzet Web is produced by
42:39
Speaker 1: Someersidi and Moses and sound designed by Blake Maple's and
42:42
Speaker 1: Aaron Kasper Especial thanks of course to Baroness Dan Disa
42:46
Speaker 1: Moyo