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Why Sunak May Quit Ahead of a July 4th Election · Merryn Talks Money

0:03
Speaker 1: Bloomberg Audio Studios, podcasts, radio news, John Mel do you
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Speaker 1: remember how excited you were last week when inflation went
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Speaker 1: down and it's you we need bit.
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Speaker 2: I was thrilled you were.
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Speaker 1: Well, this week the footsy one hundred has gone up
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Speaker 1: and it'sy, we need bit and we have a new high.
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Speaker 1: So how excited are you today?
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Speaker 2: Actually significantly more excited than I was last week.
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Speaker 1: You wait and you wait, and you wait, and finally
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Speaker 1: the thing you've been wanting for happens. It kind of
0:32
Speaker 1: happens all the time, and stop markets should regularly hit
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Speaker 1: new highs. Right, that was a normal stop market would
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Speaker 1: hit the new high all the time. But I do
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Speaker 1: want to say one thing before we go on to
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Speaker 1: talk about how wonderful it is that the footy one
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Speaker 1: hundred it's finally going up. I do want to say
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Speaker 1: that this is not a and you high and inflation
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Speaker 1: adjusted terms, but that would have to get through about
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Speaker 1: well well over nine thousand, nine one hundred and sixty eight.
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Speaker 1: I calculated it just now. But you know, don't don't
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Speaker 1: take my accuracy as say nine thy two hundred to
1:02
Speaker 1: make it to a reason a random But so we're
1:04
Speaker 1: not there yet. In real term, so of course we
1:05
Speaker 1: had have dividends along the way, so we mustn't be
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Speaker 1: two respondent. But nonetheless a new higher nominal terms is nice.
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Speaker 1: Right do you feel, John, do you feel that there's
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Speaker 1: a turning point of any kind here?
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Speaker 2: Actually I do a better, do you? I do a better? Yeah?
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Speaker 2: I mean so like one of the things that I mean,
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Speaker 2: from a purely technical point of view, when stuff makes
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Speaker 2: new highs, it just tends to go in to make
1:30
Speaker 2: more new highs. You also get the sentiment issue of
1:35
Speaker 2: people noticing the oh wait, man, the UK is doing
1:39
Speaker 2: much better this year so far than the S and P,
1:41
Speaker 2: for example, And I mean that really is a bit
1:43
Speaker 2: more significant, you know. You get the Magnificent seven have
1:47
Speaker 2: come off the boil a bit, and some people were panicking.
1:50
Speaker 2: Last week's the na's deck was down like one and
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Speaker 2: a half percent. I was like, oh, the nurse DC
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Speaker 2: never goes down. But you know, but going on nothing, Yes, no,
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Speaker 2: I don't try being British for a while.
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Speaker 1: British. I'm telling you that is a job. This is
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Speaker 1: not the first time that the footsie's done or right, right,
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Speaker 1: I mean, there is a general view in the market
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Speaker 1: that the US has always had this wonderful acceptionism about it,
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Speaker 1: and that US markets automatically do better and American stocks
2:20
Speaker 1: automatically deserve a premium. But this isn't true. Is it
2:25
Speaker 1: actually quite a recent phenomenon.
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Speaker 2: It is recent, And I do think the other thing
2:30
Speaker 2: you often hear with the Footy one hundred is almost
2:32
Speaker 2: the sense that it hasn't gone anywhere since basically the
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Speaker 2: dot com bust, because it was about seven thousand, nineteen
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Speaker 2: ninety nine. And the thing is, if you can actually
2:42
Speaker 2: look at the stats, because I looked at them this morning,
2:44
Speaker 2: if you if you did the choice to buy either
2:46
Speaker 2: UK stocks or US stocks after the dot com bubble
2:50
Speaker 2: bottomed out, so don about November two thousand and two
2:52
Speaker 2: or March two thousand and three, and then if you'd
2:55
Speaker 2: held until the top of the banking kind of mortgage
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Speaker 2: bubble in mid two thousand and seven, the foot one
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Speaker 2: hundred absolutely thrashed the S and P. It's actually spending
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Speaker 2: the dates. It's kind of like you get anything up
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Speaker 2: to double the return, you know, so the foot say
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Speaker 2: basically trebled in value, whereas the S and P just
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Speaker 2: went up one hundred percent over that period. I mean
3:18
Speaker 2: that's including evidence. So you know it's and it's in
3:22
Speaker 2: you know, it's in whatever currency you want to choose.
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Speaker 2: No pounds or US do all us. There's there's no
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Speaker 2: jiggery pokery here. The foot say UK stocks roundly beat
3:30
Speaker 2: US stocks during that period, and yes, it's because you know,
3:34
Speaker 2: we had lots of banks and minors whereas they had
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Speaker 2: banks and kind of you know, shooting my staples and
3:39
Speaker 2: things like that. But you know, you would have been
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Speaker 2: better off in the UK stock. So this is a
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Speaker 2: relatively recent phenomenon and is mostly a post financial crash phenomenon.
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Speaker 2: And to be fair, it's not just the UK. The
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Speaker 2: US is basically beaten everyone. I mean, that's not to
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Speaker 2: say the UK hasn't been one of the the wast laggards,
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Speaker 2: particularly in developing markets, but you really there is normal
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Speaker 2: market that has come close to the US, even when
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Speaker 2: the kind of obscure, kind of amusing market say yeah.
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Speaker 1: It's interesting. So the key thing that we'd like to
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Speaker 1: think here is that this kind this kind of thing,
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Speaker 1: the new high, even modern inflation and justice new high,
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Speaker 1: does draw attention to us and does mean that people
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Speaker 1: might look over and go look at that. And we
4:25
Speaker 1: had Nick Train, a very well known UK fund manager,
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Speaker 1: out earlier this week talking again about how incredibly cheap
4:33
Speaker 1: UK stocks are and saying we just need something to
4:36
Speaker 1: draw attention to it, something to make people realize that
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Speaker 1: this is this is true, that there are fabulous opportunities here,
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Speaker 1: that you have a once in a generational opportunity to
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Speaker 1: buy very high quality stocks at low prices. And his
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Speaker 1: thought was that as soon as there's a very big
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Speaker 1: takeover of a name on the on the UK market
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Speaker 1: that is internationally known that has taken over because it
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Speaker 1: is so cheap, that will turn all international investorized towards
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Speaker 1: the UK. They will notice what's going on here and
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Speaker 1: that once in a generational opportunity will be doubled up
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Speaker 1: fairly quickly.
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Speaker 2: I think that's a really good point. I mean, you know,
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Speaker 2: like this week, another foot two fifty stock was bought
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Speaker 2: by a US rival. It's like our doors and window
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Speaker 2: frames maker, and we actually saw a bid battle erupt
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Speaker 2: for hypnosis trust of all, you know. I mean, that's
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Speaker 2: a troubled, troubled asset for a while there, and I
5:34
Speaker 2: think a lot of shared holders were probably relieved when
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Speaker 2: they got you know, the below I p o prize
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Speaker 2: bid from Concord I think it was, but then kind
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Speaker 2: of Blackstone came in and offered more, and suddenly, you know,
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Speaker 2: everyone's off to the races.
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Speaker 1: So I'm pretty thrilled to get out of that.
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Speaker 2: Yeah, I mean, cheapness well out eventually.
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Speaker 1: Interesting. Now listen on the on the zebrage cheapness I
5:59
Speaker 1: want to talk about. I'll not talk about my column
6:02
Speaker 1: this week.
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Speaker 2: Yes, I think you should, because this one.
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Speaker 1: Caused a lot, a lot of trouble. I mean, it's
6:07
Speaker 1: not like I go out of my way course problem.
6:09
Speaker 1: I go out of my way to course controversy on Twitter,
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Speaker 1: sorry X or anything like that. But this column. You know,
6:16
Speaker 1: I wrote a few weeks ago about how the problem
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Speaker 1: with the UK house building market is that we build
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Speaker 1: lots and lots of tiny, really rubbish houses, and our
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Speaker 1: house builders are culpable there and I just like them
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Speaker 1: intensely for building these horrible, horrible houses, although I accept
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Speaker 1: the part of that is driven by regulation and planning
6:32
Speaker 1: stuff all give than that. So I wrote about how
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Speaker 1: awful tiny houses are, and then this week I thought
6:37
Speaker 1: I'd write another column about how absolutely brilliant tiny house
6:42
Speaker 1: but in a slightly different context. So looking around the
6:47
Speaker 1: coast of the UK and a particularly you know, some
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Speaker 1: of the incredibly beautiful Scottish islands off the West coast,
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Speaker 1: and some of the Welsh coast and the Cornish coast,
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Speaker 1: and one of the extraordinary things about the coast of
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Speaker 1: the UK is how probably unpopulated it, how few houses
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Speaker 1: there are, how few of us have holiday houses. And
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Speaker 1: when you look at the stats for the UK relative
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Speaker 1: to Europe, a very small number of people in the
7:11
Speaker 1: UK either own or have access to Are you not
7:14
Speaker 1: renting better access to a holiday home? We don't have
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Speaker 1: the same cabin or the hucked culture that lots of
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Speaker 1: Scandinavia has, for example, or the second home culture that
7:27
Speaker 1: France has, for example. And our politicians just hate anyone
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Speaker 1: having holiday homes or second homes, although obviously they all
7:35
Speaker 1: have them themselves, that they hate anybody else having them.
7:38
Speaker 1: So you constantly get a sort of barrage of insult
7:41
Speaker 1: and new tax I think, are colleague Marcus Ashworths worried
7:44
Speaker 1: about that a few weeks ago? And so I'd just
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Speaker 1: like to make the case, and please everyone, go and
7:49
Speaker 1: read the column and tell me if you think I
7:50
Speaker 1: made the case. Well, for us changing planning completely so
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Speaker 1: that anyone, anyone build a nice little cabin and I
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Speaker 1: repeat the word nice, you know, scandy wooden kind of
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Speaker 1: thing anywhere across the UK where there's space for it
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Speaker 1: self built. Let's get self built cabins going. So not
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Speaker 1: fewer tiny houses, but more tiny houses. Are you in, John,
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Speaker 1: Are you in?
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Speaker 2: I think it's a great idea. I think it would
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Speaker 2: really walk and also it be a good stepping stone
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Speaker 2: towards perhaps getting more self build fast houses as well
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Speaker 2: if it were too. It strikes me as a good experiment.
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Speaker 2: And you also, I mean, people pay like insane amounts
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Speaker 2: of money for these little beach huts on the shore
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Speaker 2: like a Dorset and all that, and they've got a
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Speaker 2: space to boil. Okay, well you can't even sleep in
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Speaker 2: them overnight. So I think you would.
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Speaker 1: Think there is demage that's demanded. And you know when
8:45
Speaker 1: people say, oh they couldn't, people don't want that. People
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Speaker 1: couldn't possibly, you know, not enough people want to travel
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Speaker 1: to the to the Hebrides, to go to these islands
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Speaker 1: and to a little house, et cetera. I'm like, yeah, okay,
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Speaker 1: well look at the price of a tiny little plot
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Speaker 1: on one of these islands has planning. You'll pay one
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Speaker 1: hundred grand plots plus for a tiny blood that doesn't
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Speaker 1: even run right down to the beach. That tells me
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Speaker 1: those demand right.
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Speaker 2: No, absolutely, and I think I think.
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Speaker 1: There's information in those prices. Yeah.
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Speaker 2: The one thing would say is just clarify so you
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Speaker 2: because I know that some readers will be sitting and
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Speaker 2: they're going, oh my gosh, she wants to build those
9:16
Speaker 2: you know, the entire course, the pamblic shut or whatever.
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Speaker 2: It's not. It's not that is this idea of sort
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Speaker 2: of market driven sympathetic development because you can only use
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Speaker 2: it for three months a year.
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Speaker 1: Four months exactly. Allowed to reside in it permanently, that
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Speaker 1: would be wrong. So you're not allowed to use the
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Speaker 1: infrastructure of the holiday area or the coach, you know,
9:40
Speaker 1: you don't get to use the schools or the hospital. Yeah,
9:43
Speaker 1: that kind of thing. So you just you know, so
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Speaker 1: maybe you'd pay fifty percent council tax, probably allow the
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Speaker 1: local councils to build the schools and hospitals that everyone
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Speaker 1: else needs to use the people who live there permanently.
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Speaker 1: And then you take the proper houses and you say,
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Speaker 1: do you know what this is going to come with
9:57
Speaker 1: the covenants they can only be sold onto locals, and
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Speaker 1: that'd be very had for the people who paid five
10:01
Speaker 1: million pounds for a big house and say you know
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Speaker 1: rock or something like that, but you know, too bad,
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Speaker 1: and that would solve the problem of local people saying, well,
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Speaker 1: these holidaymakers are driving up the prices of our houses
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Speaker 1: and then they were for us to live and this
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Speaker 1: is destroying our community. So I think it's a bit
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Speaker 1: of a win win. And interestingly, the as ever on
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Speaker 1: things like this, the response has been completely down the middle,
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Speaker 1: half of the people saying brilliant idea, let us do that,
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Speaker 1: and half the people saying, why do you hate us?
10:28
Speaker 1: You know? Onwards, John Onwards. I know I didn't ask
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Speaker 1: our guest about this this weekend. We talked about all
10:35
Speaker 1: sorts of other things, but I know you suggested that
10:38
Speaker 1: we get Helen Thomas from Blonde Money on because you've
10:41
Speaker 1: led she was excellent and would be a great guest,
10:44
Speaker 1: and I think she she is. But why did you
10:47
Speaker 1: suggest we had her on?
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Speaker 2: Well, basically, ILL sent me oldly is the forodcast for
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Speaker 2: what's going to happen election ways in the UK, And
10:54
Speaker 2: when I did, I thought God, that's pretty poinchy. Need
10:58
Speaker 2: to get you to discuss that. And I can't remember
11:03
Speaker 2: how much that you discussed in the actual podcast, but
11:07
Speaker 2: that this if you want a quick summary, she's basically
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Speaker 2: saying she's going to step down before the election, call
11:14
Speaker 2: it in July, and it will probably be pay any
11:18
Speaker 2: moderant who takes over as the Prime minister during the
11:22
Speaker 2: election period. And I thought July is a lot earlier
11:26
Speaker 2: than personally I was expecting an election. I thought they
11:29
Speaker 2: would string out for as long as possible, you know,
11:32
Speaker 2: and they wouldn't even get an interest straight cut before then.
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Speaker 2: So yeah, so I thought it was pretty punchy.
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Speaker 1: Welcome to Merren Drugs Money the podcast and which people
11:43
Speaker 1: who know the markets explain the markets. I'm Merrin Sumset Web.
11:46
Speaker 1: It's my conversation with Helen Thomas of market commentary firm
11:49
Speaker 1: Belonde Money. Helen has I have a fifteen years experience
11:52
Speaker 1: working in a number of banks for funds. She's a
11:54
Speaker 1: CFA charter holder and says on the board of CFI UK.
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Speaker 1: She also has political experience as an advisor the former
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Speaker 1: Chaetom with the Exchequer George Osborne. And then thank you
12:04
Speaker 1: so much for joining us today. It's really good to
12:06
Speaker 1: have you on.
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Speaker 3: Thank you very much. I'm delighted to be here.
12:09
Speaker 1: Now let's start with what you've been writing about UK
12:12
Speaker 1: politics recently, and your most recent note is about the
12:15
Speaker 1: next election in the UK and one of the lines
12:18
Speaker 1: towards the end of the note that particularly leapt out
12:22
Speaker 1: at me was this suggestion that the whiskey and the
12:24
Speaker 1: revolver are already in Rischie Sunek's office. He knows what
12:29
Speaker 1: he has to do. What do you think it is
12:31
Speaker 1: that Rischie has to do?
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Speaker 3: Rischie seem like he's entering the world of least worst options.
12:38
Speaker 3: And this is because the Conservative Party is polling so
12:41
Speaker 3: badly that we're talking about extinction level events. But by
12:46
Speaker 3: the way, let me just stop one minute and say,
12:48
Speaker 3: the reason I started my business was to look at
12:51
Speaker 3: what actually is going to happen, to get away from
12:54
Speaker 3: the all hyperbole that people reading the newspapers about politics,
12:57
Speaker 3: which just total noise. That is a nightmare for people
13:00
Speaker 3: in markets who just want to know what's going to happen.
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Speaker 3: So when I talk about this, it's because of the
13:06
Speaker 3: very low level in the polls the Conservative Party are
13:08
Speaker 3: at back down to those post trust lows and what
13:12
Speaker 3: that will translate into in terms of seats tricky to calculate,
13:16
Speaker 3: but it's clearly now a bad situation, as we're seeing
13:20
Speaker 3: from so many of the polls. So basically we're in
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Speaker 3: a situation where the Conservative Party itself could be decimated
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Speaker 3: and will it even survive as a political party.
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Speaker 1: More than decimated? Way more than decimating.
13:32
Speaker 3: Yeah, it's yeah, just obliterated maybe is a better Wayeah.
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Speaker 3: And so what that means, of course, when you're in politics,
13:39
Speaker 3: is where is the blame going to lie? And also
13:43
Speaker 3: what do the different political actors need from this situation,
13:47
Speaker 3: because there are people who want the Conservative parties to survive.
13:50
Speaker 3: Maybe that's a surprise to some of the listeners, but
13:52
Speaker 3: there are and therefore they now need there for Rishisunak
13:57
Speaker 3: to be buried with the with this situation and in
14:02
Speaker 3: order to resurrect the party whichever direction they want to
14:05
Speaker 3: take it. And look, by the way, should also say
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Speaker 3: it doesn't matter what I think, doesn't matter what you think.
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Speaker 3: We're just going to say that these are the calculations
14:12
Speaker 3: that go on with politicians.
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Speaker 1: Yeah, can we just go back a little bit and
14:17
Speaker 1: talk about why things are so bad for Rissius Sink.
14:20
Speaker 1: He's put in place as a stability prime minister, the
14:22
Speaker 1: guy who was going to make everything look okay, and
14:25
Speaker 1: he is delivering a little bit on some of his pledgures.
14:28
Speaker 1: You can argue about whether it's down to him in
14:30
Speaker 1: any way whatsoever or his government that inflation has come down,
14:33
Speaker 1: but it has cause the price level has not come down,
14:35
Speaker 1: but the rate of price growth has come down, and
14:38
Speaker 1: that still matters. Small boat crossings it down a bit.
14:41
Speaker 1: We can talk about GDP per ahead, which is awful,
14:43
Speaker 1: but GDP growth as a whole isn't so awful, So
14:46
Speaker 1: why is it quite this.
14:48
Speaker 3: Bad for so A couple of things on this one
14:52
Speaker 3: is the economics, where if you look at a you
14:56
Speaker 3: gov question of which party is best placed to deal
14:59
Speaker 3: with the economy, and as you might expect, the Conservative
15:02
Speaker 3: Party is now below the Labor Party and has been
15:04
Speaker 3: for a while. But that actually started to get worse
15:08
Speaker 3: well before Richies, and that well before Liz Tross. It
15:10
Speaker 3: actually happened in twenty twenty one twenty two as inflation
15:14
Speaker 3: was rising. So the inflation shock has been extremely pernicious,
15:19
Speaker 3: and not just here. President Biden's also facing this the US.
15:22
Speaker 3: Many other politicians are too. You said it there merin.
15:26
Speaker 3: The rate of change of prices is coming down, but
15:28
Speaker 3: prices are still higher. People still feel it. Perhaps it's
15:31
Speaker 3: slightly part of Richestynac's academic approach to life that the
15:36
Speaker 3: spreadsheet shows the numbers coming down and that looks good.
15:39
Speaker 3: But to people who fill up their car with petrol
15:41
Speaker 3: go to the shops, it still feels really quite bad.
15:44
Speaker 3: They still remember it was nowhere near that much to
15:47
Speaker 3: fill your car up with petrol a few years back.
15:49
Speaker 1: Time goes by and things should be beginning to feel
15:51
Speaker 1: a little bit better because wages arise in quite nicely,
15:54
Speaker 1: But nonetheless Rissiu Scenac's approval ratings does keep falling. Nothing
15:58
Speaker 1: seems to make them any better.
16:00
Speaker 3: This is where you have to come into the politics
16:03
Speaker 3: of this and the man himself. By the way she
16:05
Speaker 3: declare that we were at university together at the same
16:07
Speaker 3: time as most people. I'm sorry, I'm another Oxford ppeist.
16:11
Speaker 3: I don't know what that qualifies before these days, but anyway.
16:14
Speaker 1: But this it qualifies you for this.
16:16
Speaker 3: But yeah, I suppose that's fair. But it means that
16:20
Speaker 3: the way that he became prime Minister was actually always
16:24
Speaker 3: going to be a problem for him because of course
16:27
Speaker 3: he was a loser in an election campaign against Liz Trust.
16:30
Speaker 3: Now it's just within the Tory Party membership, but he
16:33
Speaker 3: lost that campaign. This casts quite a long shadow. He
16:36
Speaker 3: never went to a vote with his MPs when he
16:39
Speaker 3: was up against Penny Mordant. People remember back to that period.
16:41
Speaker 3: They went in a bit of a rush to get
16:42
Speaker 3: the Prime Minister sorted. They never actually had a round
16:45
Speaker 3: of voting. They just said Penny Morden said no, look,
16:48
Speaker 3: I'll pull out at this stage. We'll just get on
16:50
Speaker 3: with it. But what that means is you're never really
16:52
Speaker 3: sure who your enemies are. And so the key problem
16:56
Speaker 3: for issues here because he built a lot of enemies
16:58
Speaker 3: within his own party, of various different kinds. So it's
17:01
Speaker 3: not just got the opposition to worry about, and it's
17:04
Speaker 3: not just one group in his own party, for example,
17:06
Speaker 3: the Trust sites. He has got all these other different
17:09
Speaker 3: elements who don't like the way he got there, don't
17:11
Speaker 3: like his focus on certain policies. You should just look
17:14
Speaker 3: at the vote that we've just had about banning the
17:18
Speaker 3: sale of cigarettes to people born after the year of
17:21
Speaker 3: two thousand and nine. Now that went through, but it
17:24
Speaker 3: went through on opposition votes. Half of Conservative MP's either
17:28
Speaker 3: abstained or voted against it. That's quite something. Didn't get
17:32
Speaker 3: covered a lot because it feels like that maybe wasn't
17:34
Speaker 3: that consequential a vote, but he had half of his
17:36
Speaker 3: own party against that. And do the public care that
17:39
Speaker 3: much if they can't get a doctor's appointment or they're
17:41
Speaker 3: worried about getting on a train because there's a strike,
17:43
Speaker 3: or they're worried about the votes. The key point is
17:46
Speaker 3: he's not very good at the politics and the public
17:48
Speaker 3: know it well.
17:50
Speaker 1: He's not regular the politics. And also there's really nothing
17:52
Speaker 1: he could do to improve matters in the time he's
17:55
Speaker 1: got left. When it comes to the economy, cott really
17:57
Speaker 1: doing anything about the NAT it's too late, anything about productivity,
18:01
Speaker 1: can't really do anything about the number of people who
18:03
Speaker 1: aren't in the workforce, etcetera, etcetera. There's very few things
18:06
Speaker 1: that he can really do with this time to turn
18:08
Speaker 1: things around, and that's been obvious for some time now.
18:10
Speaker 3: The point is actually was that maybe not obvious when
18:12
Speaker 3: he took over. The parliament has to end in January
18:15
Speaker 3: twenty twenty five. People might be delighted to hear and
18:17
Speaker 3: so what was that that were two years? It's some
18:20
Speaker 3: of that stuff, the productivity stuff you've been talking about
18:22
Speaker 3: that a long time merin anyone following UK economy has.
18:25
Speaker 3: It's been a problem for a decade, if not more.
18:28
Speaker 3: But the other element to all of this is of
18:29
Speaker 3: course the trust period guilt crisis, because that changed the
18:34
Speaker 3: whole narrative of what could be done. Neither the next
18:37
Speaker 3: labor government as looks likely, nor this one feels they
18:40
Speaker 3: can do anything because they're so constrained by obr by
18:46
Speaker 3: the markets. So we're in this you know, death spiral
18:50
Speaker 3: hesitates use that phrase. But it's quite difficult that taking
18:53
Speaker 3: over in the wake of all of that, As you say,
18:56
Speaker 3: a lot of these long term challenges would have been
18:58
Speaker 3: very hard to address. It was pretty much an impossible task.
19:01
Speaker 3: But the one thing you can do as a leader
19:04
Speaker 3: is lead and inspire and give a vision, and it's
19:09
Speaker 3: been extremely hard to know what that vision is from
19:12
Speaker 3: this Prime minister.
19:14
Speaker 1: I suppose one of the things that he has wanted
19:16
Speaker 1: is maybe not to be the vision guy, but there'd
19:18
Speaker 1: be the stability guy, and that's been a mistake.
19:20
Speaker 3: Yeah, absolutely, But then that's the point about being a
19:23
Speaker 3: sort of technocrat. Yeah, this is an ongoing question, isn't
19:25
Speaker 3: it's oh sick of experts? Oh no, we want the experts. Ideally,
19:28
Speaker 3: you want a bit of both. You need the person
19:31
Speaker 3: at the LEC turn outside number ten Downing Street. It
19:34
Speaker 3: should have a really simple message. I don't know Blair
19:37
Speaker 3: Tony Blair's education education, education. People knew what that was,
19:40
Speaker 3: and then you need people around you to implement it,
19:42
Speaker 3: and it just failed on both fronts.
19:45
Speaker 1: Okay, so we know he's got to go. I think
19:47
Speaker 1: pretty obvious to everybody that Rich is doing it. It's
19:49
Speaker 1: not going to be a prime minister for much longer,
19:50
Speaker 1: either either pre or post an election. Right, it is
19:53
Speaker 1: nearly over. So why is it taking so longer? He
19:56
Speaker 1: has all these enemies. It's perfectly clear that maybe he
20:00
Speaker 1: isn't the best person to lead into the next election.
20:02
Speaker 1: It's perfectly cleary certainly isn't going to be the prime
20:03
Speaker 1: minister after the election. So if we know all these things,
20:07
Speaker 1: why is it taking so long for him to go?
20:10
Speaker 3: Because the enemies need the method of dispatch to work
20:18
Speaker 3: in their favor. So this is where the politics comes
20:21
Speaker 3: into play, because there is clearly going to need to
20:24
Speaker 3: be a resurrection of the Conservative Party. There is a
20:27
Speaker 3: group that felt the trusts vision should come back. There
20:32
Speaker 3: is a group that feel it needs to be much
20:35
Speaker 3: more centrist and sort of address some of these migration
20:38
Speaker 3: issues and end the Nasty Party as may once called it.
20:43
Speaker 3: Battle for the soul of the Conservative Party. But nobody
20:45
Speaker 3: wants to be the one to finally stab in the knife.
20:50
Speaker 3: And where's what's quite interesting this has been Nigel Farage
20:53
Speaker 3: because there's no doubt that Reform UK are doing well
20:56
Speaker 3: in the polls. They've got quite an important thing in
20:58
Speaker 3: any election campaign, which is momentum. That is absolutely crucial
21:02
Speaker 3: in any election. Hermain is to have the momentum. And
21:06
Speaker 3: what's happened is because you said, it's all petered out
21:08
Speaker 3: a bit, which if you compare it to when the
21:09
Speaker 3: Brexit Party came into being, it was around four or
21:12
Speaker 3: five percent and within three months it was polling at
21:14
Speaker 3: twenty four percent on one of the poles, topping the poles.
21:17
Speaker 3: It's certainly doable. But if you read interviews with Nigel Farage,
21:20
Speaker 3: she talks about how he doesn't want to be the
21:23
Speaker 3: man that actually vanquishes the Conservative party, because I think
21:27
Speaker 3: the quote is people are quite tribal. They remember this stuff.
21:31
Speaker 3: They may think he has some good vision of what
21:33
Speaker 3: party should be, but actually being the one to stick
21:36
Speaker 3: the knife in does not tend to go well with
21:38
Speaker 3: a person who does it. So it's kind of a
21:40
Speaker 3: sequencing going on at the moment. There's like a kind
21:42
Speaker 3: of shadow boxing happening where everyone is waiting that now
21:47
Speaker 3: for Rishie Sunak to fall on his own sword, because
21:49
Speaker 3: if he falls on his own sword, then you know,
21:52
Speaker 3: they rush in to be the savior. They're not the
21:54
Speaker 3: ones who are actually brought him down, and so they're trying
21:56
Speaker 3: to make it clear to him it's in your own
21:59
Speaker 3: interest to step us. And that's why I talk about
22:02
Speaker 3: the whisky and revolvers already in Downing Street and you're
22:04
Speaker 3: starting to see this come through with reports or we're
22:07
Speaker 3: thinking about maybe we could do an earlier election. We
22:09
Speaker 3: could go in fourth of July has been floated as
22:12
Speaker 3: a date rather than this thought it could be October November.
22:16
Speaker 1: Okay, So let's say he does fall on his sword,
22:20
Speaker 1: who takes over? How does that work? I mean, obviously
22:23
Speaker 1: we're all in the world of guessing here. I'm not
22:25
Speaker 1: asking you to make clear, firm forecast, but now what
22:28
Speaker 1: looks the most likely.
22:29
Speaker 3: No, we do, Merin, Actually we do, because we will
22:32
Speaker 3: always make a forecast. And if we're wrong, then that's
22:34
Speaker 3: a good chance to say why are we wrong? Where
22:36
Speaker 3: is the analysis wrong?
22:37
Speaker 4: Now?
22:38
Speaker 3: The person taking over has to have some claim to
22:41
Speaker 3: the position. So Penny Morden is in pole position by
22:44
Speaker 3: virtue of having come second to as she's Sunac last
22:47
Speaker 3: time round, also to the fact she has quite a
22:51
Speaker 3: lot of support amongst the local associations. Because here's the thing,
22:55
Speaker 3: and I know there's been lots of Vernon bogdenor who's
22:57
Speaker 3: professor of constitutional politics saying oh, it's a constitutional outrage
23:01
Speaker 3: if we had yet another prime minister, but they'd purely
23:04
Speaker 3: be prime minister for the election campaign. And that means
23:08
Speaker 3: that actually some of the other names that have talked about,
23:10
Speaker 3: like the Kemy Badernos of this world, in some respects
23:13
Speaker 3: it's better for them to wait till after the election
23:15
Speaker 3: because paying Audent, for example, has a much lower majority
23:19
Speaker 3: than Kemy Baderock. There's a chance that actually Penny might
23:22
Speaker 3: not make it through that election commage on and keep
23:24
Speaker 3: a seat. So Kenny Badanock could not be tainted with
23:28
Speaker 3: the loss and then pick it up afterwards. This is
23:30
Speaker 3: one of these nefarious calculations that politicians have to make.
23:33
Speaker 3: I always say, by the way, because I've worked in
23:35
Speaker 3: both politics and finance, that business people get very frustrated
23:38
Speaker 3: by this because business is about what works, but politics
23:42
Speaker 3: is about what sells, and you've got to remember who
23:44
Speaker 3: you're selling to, and that changing the team into an
23:47
Speaker 3: election campaign. Of course, the electorate the public at largely
23:50
Speaker 3: like what is going on. But because it's an extinction
23:54
Speaker 3: level event, the Tories are talking to their own activists
23:58
Speaker 3: in the midst of it going so badly, the last
24:00
Speaker 3: thing you want is you're not gonna have people knocking
24:01
Speaker 3: on doors delivering leaflets, not feeling motivated to bother the
24:05
Speaker 3: god to ge those people up. So someone like Penny Morden,
24:08
Speaker 3: who herself wrote to the Telegraph and said she'd visited
24:10
Speaker 3: seventy local associations in the last year, is that kind
24:13
Speaker 3: of geeing up the base.
24:15
Speaker 1: Keep an eye on Penny basically, yeah, And keep an
24:18
Speaker 1: eye on the possibility of Rishie's standing down in the
24:22
Speaker 1: next few weeks, Penny possibly replacing him and going into
24:26
Speaker 1: a general election in the beginning of July exactly.
24:29
Speaker 3: That's our core scenario.
24:30
Speaker 1: Now, okay, all right, let's get forward then, because I
24:35
Speaker 1: think we can then guess what happens, whoever might replaate
24:37
Speaker 1: Rissy's sunk or whether he decides to go for it himself.
24:40
Speaker 1: However that happens, we are most likely to end up
24:44
Speaker 1: with a labor government after that and kiss Damer's Prime minister.
24:47
Speaker 1: And very few people are negative about that scenario. Most
24:50
Speaker 1: people are fairly positive about that scenario. See it as
24:53
Speaker 1: a Hobstly we need change. How do you see it?
24:57
Speaker 3: Just picking up on your point there about change, because
24:59
Speaker 3: I've been thinking thinking about this because change normally means
25:04
Speaker 3: massive enthusiasm and optimism of yeah, let's go for this person, right,
25:09
Speaker 3: this is the change. I think what people want is competence. Ironically,
25:12
Speaker 3: of course, as we've discussed, which you seem like we're
25:14
Speaker 3: supposed to liiver that, But they just want someone to
25:16
Speaker 3: get a grip of it, get your party in line,
25:18
Speaker 3: get things organized, and make things work. That's a minimum.
25:22
Speaker 3: Before we've talked about trying to get growth and trying to.
25:25
Speaker 1: Yeah, but that is change right now at the moment,
25:27
Speaker 1: nothing seems to work. It nothing seems to work. So
25:29
Speaker 1: anyone who can make something work that seems like very
25:31
Speaker 1: positive change, and the idea that stuff might work is
25:34
Speaker 1: about as optimistic as I'm prepared to be at the moment.
25:36
Speaker 3: It is a bit like from a purely I don't know,
25:38
Speaker 3: political academic perspective, when you think about change, you tend
25:41
Speaker 3: to think about changes as a vote for something, whereas
25:44
Speaker 3: some of this support for labor is a vote against
25:47
Speaker 3: what we currently have. So that's interesting because it means
25:51
Speaker 3: that have people really thought about what a labor government
25:54
Speaker 3: will do, and they've done an extremely good job. I
25:57
Speaker 3: must say it's a very well disciplined campaign the Labor
26:00
Speaker 3: Party of pursuing. They're keeping on the same song sheet.
26:04
Speaker 3: They're not scaring the horses with anything, particularly the markets
26:09
Speaker 3: on the economic and fine out side. But I would
26:12
Speaker 3: draw attention to Rachel Reeves's May's lecture, which might sound
26:16
Speaker 3: extremely dull, but is absolutely worth reading for giving a
26:21
Speaker 3: revelation to what Rachel Reeves really thinks about the economy.
26:26
Speaker 1: Okay, what does Rachel Reeves really think? So more radical
26:29
Speaker 1: things than most people think. She thinks that it suspects.
26:31
Speaker 3: Exactly what was quite amazing about the way that was
26:33
Speaker 3: brief to the newspapers is lots of people. Oh it's
26:35
Speaker 3: exactly the same as well. She see like, Oh, you're
26:37
Speaker 3: saying the same things. What's the difference. I'm actually going
26:40
Speaker 3: to just quote a bit of it if I might
26:42
Speaker 3: for one second. It's just a couple of lines Merin right.
26:45
Speaker 3: So this is from Rachel Reeves's May's lecture. A model
26:50
Speaker 3: based on the pursuit of narrow based, narrowly shared growth
26:54
Speaker 3: with ever diminishing returns cannot produce adequate returns in growth
26:58
Speaker 3: and living standards, nor can it command democratic consent. Now,
27:05
Speaker 3: what she's saying there is capitalism is too narrow. We
27:08
Speaker 3: need to be broader about how we share the proceeds
27:10
Speaker 3: of growth. But the key part is right at the end,
27:13
Speaker 3: nor can it command democratic consent. She's suggesting there, capitalism
27:17
Speaker 3: itself erodes democracy, it will blow up the system, and
27:23
Speaker 3: therefore socialism is the only way for the world to proceed. Now,
27:30
Speaker 3: some people may agree with that, some people may not.
27:31
Speaker 3: Doesn't matter, But that's what she's set out in this
27:34
Speaker 3: Maize lecture of what she thinks, and it has some
27:38
Speaker 3: fairly radical implications because it means that, And she goes
27:44
Speaker 3: and talks a lot in the speech about we want
27:46
Speaker 3: to pay more money to people with high skills, but
27:48
Speaker 3: then she also says, we really want to give more
27:49
Speaker 3: money to people with lower skills, and in fact, we
27:51
Speaker 3: don't really care about money. We just want people to
27:53
Speaker 3: be happy, and we want workers and secure.
27:55
Speaker 1: We want people to be secure.
27:56
Speaker 3: Secure, yeah, which nothing bad can happen because if bad
27:59
Speaker 3: things happen, people won't take risks. And that's that's pretty radical.
28:04
Speaker 3: Now you're starting to say, oh, hang on a minute,
28:06
Speaker 3: So if I just go for a start a business,
28:09
Speaker 3: does that mean I'm bailed out whatever happens, which is
28:12
Speaker 3: pretty much the opposite of a capitalist approach, And so
28:16
Speaker 3: that's fairly Yeah, it's a pretty it's a pretty radical
28:18
Speaker 3: left wing approach. She quotes a lot of economists in there,
28:20
Speaker 3: if you can bear to read all of it. I
28:22
Speaker 3: know it's difficult people to get through some of this stuff,
28:25
Speaker 3: but it's worth it because it's the first time we've
28:27
Speaker 3: really heard what she thinks, and she mentions a lot
28:29
Speaker 3: of fairly left wing economists in that piece.
28:32
Speaker 1: Basically, we've been on a path to big and bigger
28:35
Speaker 1: government for quite a long time. And everything that she
28:38
Speaker 1: said suggests that we're on a path to even bigger government,
28:41
Speaker 1: and that there's many new organizations that are going to
28:44
Speaker 1: be set up. Aparently there's the Wealth Fund, there's a
28:46
Speaker 1: British Energy Group, and Skills England excely except that there's
28:49
Speaker 1: an endless list of new groups, new institutions set up.
28:54
Speaker 3: Yeah, new government group.
28:55
Speaker 1: Going to extend the reach of government into into pretty
28:58
Speaker 1: much everything. It's it's hard to see any way in
29:02
Speaker 1: which government as a whole can't get bigger and bigger
29:05
Speaker 1: under this resume.
29:06
Speaker 3: Absolutely, and as I say, it's been a good job
29:09
Speaker 3: of trying to brief it out that it's not too frightening.
29:11
Speaker 3: And she makes throw away points about the fiscal rules.
29:14
Speaker 3: I will sie to the government's fiscal rules, except we
29:16
Speaker 3: will allow borrowing for investment purposes. Actually, that's quite Gordon Brown,
29:21
Speaker 3: and it's good bread. Initially doesn't sound maybe that scary,
29:25
Speaker 3: but as we know with governments. Okay, so it suddenly
29:31
Speaker 3: becomes the case that you can classify something is oh no,
29:34
Speaker 3: that is borrowing from investment because it's going to do this,
29:37
Speaker 3: or we've teamed up with this organization to do that
29:39
Speaker 3: it's a bit like in Germany where they have all
29:41
Speaker 3: the debt rules and they try to keep a balanced budget.
29:43
Speaker 3: But then oh, hang on a minute, We've got this
29:45
Speaker 3: fund over here and it's not on the balance sheet exactly,
29:48
Speaker 3: and it does borrow and it does do things, and
29:51
Speaker 3: it's one of those things where once the door is
29:54
Speaker 3: slightly open, you can just push it and ram in.
29:58
Speaker 3: More So, I think tax and spend is quite easy
30:03
Speaker 3: to see happen underneath that framework that we see in
30:05
Speaker 3: that Maize lecture.
30:07
Speaker 1: But where do taxes go? How high can taxes in
30:10
Speaker 1: the UK go without getting to the point where it
30:14
Speaker 1: becomes a little self destructive. It feels to me like
30:16
Speaker 1: we're already knocking on that door with then I live
30:18
Speaker 1: in Scotland.
30:19
Speaker 3: Yes exactly, this is a very good question. And till
30:22
Speaker 3: the pips squeak. As has been said in the past,
30:25
Speaker 3: one of the things we do know about this new
30:27
Speaker 3: labor government will be the vat on private school fees,
30:31
Speaker 3: which they I think are claiming will raise two billion pounds,
30:34
Speaker 3: which by the way, is a massive just drop in
30:36
Speaker 3: the ocean compared to the hundreds of billions that will
30:39
Speaker 3: borrowed or in COVID and the size of the deficit.
30:42
Speaker 1: And possibly compared to how much it's going to cost
30:44
Speaker 1: to take all the children who leave private schools into
30:46
Speaker 1: the state sector.
30:46
Speaker 3: This is it. You started to see already surveys of
30:49
Speaker 3: parents and analysis that suggests that far from raising anything best,
30:54
Speaker 3: it could be neutral or might even cost money. And
30:56
Speaker 3: that is that's obviously the point about these tax risers.
30:59
Speaker 3: So therefore, when I look at that policy as that
31:02
Speaker 3: being one of the few that we know about, it
31:04
Speaker 3: suggests to me when you say, where else could these
31:06
Speaker 3: taxes come from? It could be some sort of a
31:09
Speaker 3: wealth tax, or of course it may not be branded
31:12
Speaker 3: as that, could be branded as a second home tax
31:14
Speaker 3: above a certain level. Or it's quite possible that you
31:17
Speaker 3: could start to see extra taxes coming in called something else.
31:22
Speaker 3: Let's not shy away from this. Of course, the Conservative
31:24
Speaker 3: government introduced to health and social care levy, so you
31:27
Speaker 3: know what they're realizing, what they've spotted is the Overton
31:30
Speaker 3: window has shifted, and as you said, there is a
31:34
Speaker 3: bigger state.
31:34
Speaker 1: It is bigger, and there are lots of spaces for
31:36
Speaker 1: wealth taxes. I mean everything from you know, whether you
31:39
Speaker 1: approve them or not, as by the pie. There's lots
31:41
Speaker 1: of places you can put in place in new wealth taxes.
31:43
Speaker 1: There's a CGT on private homes above a certain level,
31:46
Speaker 1: for example. Yeah, and we're already thinking things like double
31:48
Speaker 1: council tax on second terms, I mean that you can
31:50
Speaker 1: call it what you like, but it's a wealth tax,
31:51
Speaker 1: that's right exactly. We're seeing those throughout the structure of
31:54
Speaker 1: the tax system. And then of course the capital gains tax,
31:56
Speaker 1: which is an unindexed to inflations and so is therefore
32:00
Speaker 1: automatic wealth tax. And what really have to do is
32:01
Speaker 1: put that up and you've got really a relatively high
32:04
Speaker 1: wealth tax.
32:04
Speaker 3: They're all over the place exactly. So I just think,
32:07
Speaker 3: you know, we could expect to see more of the same,
32:10
Speaker 3: so that for markets it's going to be quite interesting
32:14
Speaker 3: actually in terms of global capital because of course these
32:17
Speaker 3: challenges facing the UK are not just restricted to the
32:20
Speaker 3: UK of Western Europe, somewhat in the US. But of
32:22
Speaker 3: course the US has been interesting in terms of actually
32:25
Speaker 3: having some growth, and where that seems to be coming from.
32:30
Speaker 3: The difference that I see is they've had a huge
32:32
Speaker 3: amount of visa issuances in the US over the last
32:35
Speaker 3: two years. They've had a lot of immigration. Whatever you
32:37
Speaker 3: might think about, it does seem to be contributing to
32:41
Speaker 3: more growth and also slightly bearing down on inflation as
32:44
Speaker 3: that growth has come, which is why we've had a
32:46
Speaker 3: bit of a goldilocks period for the US economy in
32:48
Speaker 3: last year. Whether it will last, we'll now see. But
32:51
Speaker 3: I can understand people getting very energized about the question
32:53
Speaker 3: of immigration because there is the concept, okay with pie
32:57
Speaker 3: might grow as immigrants become assimilated and w but then
33:01
Speaker 3: it might shrink if they are taking from the state
33:04
Speaker 3: more than they are giving. And I think this is
33:08
Speaker 3: a huge topic in the UK. We've seen, of course,
33:10
Speaker 3: this Rwanda policy going on, and of it's quite clear
33:13
Speaker 3: that Rishie now thinks that another argument, by the way,
33:15
Speaker 3: for a summer election could be that election happens as
33:18
Speaker 3: the first flight leaves for a Wanda. But it's a
33:22
Speaker 3: hot button topic everywhere.
33:24
Speaker 1: Yeah, I have the question, as we mentioned briefly earlier,
33:26
Speaker 1: it's all about GDP per head as opposed to just
33:29
Speaker 1: with GDP. It's all very well seeing GDP go up
33:31
Speaker 1: by a half percent here, a half percent there, one
33:33
Speaker 1: percent here, whatever. But if GDP per head is constant
33:37
Speaker 1: or falling and if while everything works on an income basis,
33:41
Speaker 1: but nonetheless we have a massive short of infrastructure as
33:45
Speaker 1: our population grows. This is where the problems come in. Yeah,
33:47
Speaker 1: this is the essential population and you may have a
33:50
Speaker 1: short term boosted GDP, but that doesn't help you out,
33:53
Speaker 1: yeah in any way, with the hospitals, the roads, the schools.
33:57
Speaker 3: This is where when talk about the Labor Party coming in,
33:59
Speaker 3: they are going to face an awful lot of challenges.
34:01
Speaker 3: And remember they've been out of government for a long time.
34:03
Speaker 3: Although they're getting advice from the Blair Brown period and
34:08
Speaker 3: there are plenty of advisors who are involved, actually getting
34:11
Speaker 3: into government is very different as the Conservatives are seen.
34:15
Speaker 3: And remember the Conservatives have just had they did have
34:18
Speaker 3: a majority of eighty and they still struggled. So I
34:22
Speaker 3: know there will of course be the excitement that all
34:24
Speaker 3: Labor are in and they win a big majority. But
34:27
Speaker 3: just as the Conservative Party have struggled with the right wing,
34:30
Speaker 3: there will also be a left wing element to the
34:32
Speaker 3: Labor Party that says, wow, we've got this, we've got
34:35
Speaker 3: the mandate, let's do this stuff. And that could well
34:38
Speaker 3: cause tension for Keir Starmer as well. So it's going
34:40
Speaker 3: to be extremely difficult period for whoever I.
34:44
Speaker 1: Always think it must be. Actually becoming prime minister must
34:47
Speaker 1: be one of the most disappointing things in the world.
34:50
Speaker 1: You spend so long working towards it. You have all
34:53
Speaker 1: these ideas, you spend the years criticizing other people and
34:56
Speaker 1: criticizing the economies are run, societies are run, politics a run,
35:00
Speaker 1: and etc. I could do it better. I could do
35:01
Speaker 1: it better. You get into number ten and you find,
35:04
Speaker 1: my god, it's so hard and you can't just say,
35:07
Speaker 1: let this happen, and it happened, because it's not like that.
35:10
Speaker 1: You have much more limited power than you believe you
35:13
Speaker 1: have on the way in. It's only when you get
35:15
Speaker 1: there that you find out just how little power you
35:18
Speaker 1: really have over an economy, over a society, of rejustice system,
35:22
Speaker 1: et cetera.
35:22
Speaker 3: Yeah, the leavers are really hard to find, and there
35:26
Speaker 3: isn't one that's marked click here, you'll get everything done.
35:30
Speaker 3: Absolutely No, it's a constant, that constant selling that I'm
35:32
Speaker 3: talking that I was talking about. They due to the electorate,
35:34
Speaker 3: they're doing it internally, they're doing it to the civil service.
35:37
Speaker 3: They're trying to get the project going. I should say
35:39
Speaker 3: by the way. That also applies in the US, and
35:41
Speaker 3: there's always and in fact even more so in the
35:44
Speaker 3: US because of the separation of powers. In the UK,
35:46
Speaker 3: you've got the executive sits in the legislature. In the US,
35:48
Speaker 3: it's separate in terms of what the US president can
35:52
Speaker 3: actually do. They are severely constrained, even with the majority
35:56
Speaker 3: for their party in the other elements of Congress. One
35:59
Speaker 3: of the things I was found when you critical of
36:00
Speaker 3: Donald Trump was that he often seemed to be casting
36:03
Speaker 3: around for the leavers and failing abysmally to find them,
36:06
Speaker 3: and then missing the ones he did have. He didn't
36:09
Speaker 3: seem to grab the power is even as best as
36:12
Speaker 3: he could. I want to make a really broad and
36:14
Speaker 3: important point about all of the world and the politics
36:20
Speaker 3: and what's going on right now, because sometimes people can
36:22
Speaker 3: feel terribly upset, and I get it. But if we
36:26
Speaker 3: look at what we've gone through for these last four years,
36:28
Speaker 3: locked up at home, war on Europe, well, war in
36:32
Speaker 3: the Middle East, inflation for the first time in many
36:36
Speaker 3: people's lifetimes, if we weren't angry, what on earth is
36:41
Speaker 3: going on? Of course people are going to be furious,
36:44
Speaker 3: and then that means we should see radically different political parties,
36:49
Speaker 3: emerging different kinds of leaders and huge political volatility. So actually,
36:54
Speaker 3: this current phase that we're going to go through now
36:56
Speaker 3: another spasm for the Tory Party. Then the Laby prjer
36:59
Speaker 3: come in and then it'll be difficult because they also
37:01
Speaker 3: need to grasp these big challenges. We're talking about at
37:04
Speaker 3: least a decade more of really dramatic political change across
37:10
Speaker 3: the world, but particularly across anywhere with the democracy. And
37:13
Speaker 3: I'm mean kind of part of me is wildly excited
37:15
Speaker 3: and frightened at the same time, but it's what people
37:19
Speaker 3: in markets need to pay attention to. I'm afraid you're
37:21
Speaker 3: not going to be able to stop thinking about politics
37:24
Speaker 3: for a while.
37:24
Speaker 1: Well that brings us to the next thing I was
37:25
Speaker 1: going to ask you, which is what does this mean
37:27
Speaker 1: for markets, and particularly for markets in the UK. I
37:30
Speaker 1: have conversation after conversation on this podcast about the awfulness
37:34
Speaker 1: of UK capital markets and what can possibly happen to
37:36
Speaker 1: get some flows starting to come back into the UK.
37:40
Speaker 1: And I suppose one hope might be all the change
37:44
Speaker 1: of government might make global investors say the UK looks
37:47
Speaker 1: like a place that might begin to reintegrate a little
37:49
Speaker 1: with Europe and this kind of thing. So maybe the
37:51
Speaker 1: Brexit discount might begin to disappear and that just may
37:54
Speaker 1: start to come back to the UK. This could be
37:56
Speaker 1: one of the catalysts that we've been waiting for. Or
37:58
Speaker 1: is that too optimistic? Have a guest done last week
38:01
Speaker 1: who insisted that the Labor Party absolutely get it and
38:04
Speaker 1: will be very careful of like capital markets.
38:06
Speaker 3: I think it's going to be a game of two halves.
38:08
Speaker 3: I think when they Labor Party get in by virtue
38:11
Speaker 3: of having one and having a majority and everyone being
38:15
Speaker 3: on board with that within the party at least to
38:17
Speaker 3: start with, it's going to look good. It's going to
38:21
Speaker 3: look coherent and we are it looks quite clear that
38:24
Speaker 3: they will try and seek a more conciliatory link with
38:28
Speaker 3: Europe at least, so I would imagine, yes, some of
38:31
Speaker 3: that kind of optimism is quite well founded in the
38:33
Speaker 3: first sort of year or two of the Labor government
38:36
Speaker 3: and just some of the sort of uncertainty premium of
38:38
Speaker 3: the last few years of it just all looking like
38:40
Speaker 3: a total shambles and a mess. Because the Labor Party
38:42
Speaker 3: will end up probably they'll do a fair few things
38:45
Speaker 3: to start with, but it'll be It's not the sort
38:47
Speaker 3: of thing that would frighten investors. I don't think the
38:50
Speaker 3: trouble will come when we talk about how they're not
38:53
Speaker 3: going to have any money to do anything. They face
38:54
Speaker 3: all the same challenges. Where's the growth going to come from?
38:57
Speaker 3: Where the productivity? And the temptation then to start on
39:00
Speaker 3: some of those wealth taxes. I would imagine that might
39:04
Speaker 3: be quite perturbing for international investors.
39:08
Speaker 1: But it's a couple of years at okay and interest rationing,
39:13
Speaker 1: inflation in the UK, where do you see them GOLEA,
39:14
Speaker 1: And now we're getting out of the tricky questions. We've
39:16
Speaker 1: done all the stuff.
39:17
Speaker 3: Yeah, it's funny, isn't it? Because I always feel like
39:19
Speaker 3: we's seen Act a bit of a hedge fund punter
39:21
Speaker 3: on interest rates. I think that he's as much a
39:23
Speaker 3: guilt trader as anybody else, because I think he thought,
39:27
Speaker 3: oh great, we're going to get inflation down. We're going
39:29
Speaker 3: to get three rate cuts before I am an election brilliant,
39:32
Speaker 3: and that's not going to happen. I mean, the big
39:35
Speaker 3: theme that we all have to come to terms with
39:37
Speaker 3: is inflation is going to be higher than it was
39:39
Speaker 3: in the fifteen to twenty years prior to the pandemic.
39:42
Speaker 3: It just is because the world is being redrawn. There's
39:46
Speaker 3: more inefficiencies as we go to a new equilibrium, and
39:50
Speaker 3: that just means that we hire inflation. So therefore all
39:52
Speaker 3: else e Court interest rates should be higher. But I
39:55
Speaker 3: think it's clear that we're going to get a cut
39:57
Speaker 3: or two from the UK this year, a bit more
40:00
Speaker 3: the EU because they've got a bit more a bit
40:02
Speaker 3: lower growth, and a bit more consistency consensus, I should say,
40:06
Speaker 3: on the ECB. But of course the US. I looked
40:09
Speaker 3: at this alleged pivot that the FED made in December
40:13
Speaker 3: and I thought, what are they doing it now? This
40:15
Speaker 3: is odd. The data doesn't really seem to suggest that
40:18
Speaker 3: they need to do this. The market's been expecting cuts
40:20
Speaker 3: all year, they never delivered them. Growth good, inflation is good.
40:23
Speaker 3: What's it what they are about? And I thought, the
40:25
Speaker 3: only thing can be this US election. In a way,
40:28
Speaker 3: I know they are politically independent, but they are appointed
40:33
Speaker 3: by a politicians and it would help Biden to have
40:36
Speaker 3: a couple of rate cuts before November. And now that
40:40
Speaker 3: Fed's in quite a sticky wicket because it's not going
40:43
Speaker 3: to be anything this month. It's got June, where yeah, okay,
40:46
Speaker 3: maybe they'll have to do one or signal it. Then
40:49
Speaker 3: they've not got They've got two more meetings before the
40:51
Speaker 3: US election. And then once you get two plays, you
40:53
Speaker 3: start to look a bit too political. It's tricky for them.
40:57
Speaker 1: Sorry, central Bank, the federal banking it's tricky.
41:02
Speaker 3: Yeah, well, okay, a better answer, sorry, better and more
41:04
Speaker 3: coherent answer. The rate cuts that will come will make
41:09
Speaker 3: very little difference to actual economic conditions. There you go.
41:12
Speaker 1: Yeah, this is the interesting. This is the interesting that
41:15
Speaker 1: John and I talk about a lot that you may
41:17
Speaker 1: get from these levels. You may get a cut here
41:19
Speaker 1: and a cut there, but absolutely the incorrect response to
41:22
Speaker 1: that would be to expect rate to keep falling back
41:26
Speaker 1: down to the low levels we've seen in the past.
41:28
Speaker 1: Any cut from here could be reversed, could stay there
41:31
Speaker 1: for ages. We have to assume that something around four
41:34
Speaker 1: five percent is the norm, and you just see cuts around
41:37
Speaker 1: that cuts or rises around that level.
41:39
Speaker 3: And I think in the sort of mid nineties period,
41:42
Speaker 3: and yeah, we have to all come to terms with
41:44
Speaker 3: the fact that was the aberration zero interest rates. Why
41:48
Speaker 3: is there this obsession that once you get up to
41:50
Speaker 3: the long term normal average would you go back down
41:52
Speaker 3: to zero.
41:53
Speaker 1: Just yeah, all these efforts spent getting up, you want
41:56
Speaker 1: to stay up? Now. It's a last question, absolute last question.
41:59
Speaker 1: I promise this is the one we have to ask
42:01
Speaker 1: everybody at the end. If you're only allowed to invest
42:04
Speaker 1: in one asset class over the next ten years, and
42:08
Speaker 1: that asset class could only be bitcoin or gold, I
42:13
Speaker 1: might be digging bitcoin up a little by calling it
42:15
Speaker 1: an asset class. Hate mailed the usuler address. Wait do
42:18
Speaker 1: you one of those? Would you choose? Wow?
42:20
Speaker 3: Just bitcoin or gold? Goodness means that's all all of
42:23
Speaker 3: the safe havens. Perhaps they might call it bitcoin.
42:28
Speaker 1: Oh, tell us more.
42:29
Speaker 3: And I say that as someone who does not understand
42:32
Speaker 3: it enough it wants to owns a little bit, has
42:35
Speaker 3: been learning a lot about it, has been learning about
42:38
Speaker 3: cold storage and all this stuff. I think that there
42:42
Speaker 3: is a safe haven argument for bitcoin over gold in
42:45
Speaker 3: the technological era by saying that it exists virtually and
42:50
Speaker 3: not physically, because I think our future is virtual, not physical,
42:55
Speaker 3: So therefore something that's in the cloud is going to
43:00
Speaker 3: do better that can be moved around in the palm
43:03
Speaker 3: of your literally in a device the part of your
43:05
Speaker 3: hand will have more long term value than gold. But
43:09
Speaker 3: I don't think I want either of them. Marrion, Sorry,
43:11
Speaker 3: oh okay, what do you want you to say?
43:13
Speaker 1: Then? I'm opening the world to you. Oh okay, oh
43:16
Speaker 1: just you Normally I don't do this as you definitely
43:18
Speaker 1: don't want to either of them. What would you take?
43:19
Speaker 1: And said, I'm just I'm still only giving you one
43:21
Speaker 1: asset class for teny it.
43:23
Speaker 3: Can I do US tech Stocks? You can? Too broad?
43:27
Speaker 1: Now? Yeah, that's not too broad.
43:29
Speaker 3: I was going to picture just one of them, and
43:30
Speaker 3: then I feel a bit like that's tricky because you know,
43:33
Speaker 3: you know, in video is doing very well at the moment,
43:35
Speaker 3: But is it's technology always going to be ahead of
43:37
Speaker 3: the curve?
43:37
Speaker 1: Now?
43:37
Speaker 3: I think we are. I think we're again taking a
43:39
Speaker 3: massive long term historical view of everything that's going on.
43:42
Speaker 3: We're in a technological revolution, just like the industrial revolution,
43:46
Speaker 3: and we've got to embrace it. It is. It is
43:49
Speaker 3: the future, and therefore you want to be on it.
43:52
Speaker 3: And where is all the where is all the advance happening?
43:54
Speaker 3: And it is the US?
43:56
Speaker 1: So there you go, Okay, US tech Stocks is it?
44:00
Speaker 1: Thank you so much this week to do for my
44:08
Speaker 1: conversation with Helen I've got John Stuffic and also Bloomberg
44:11
Speaker 1: opinion columnist Adrian Wildbridge. And just before we get into
44:14
Speaker 1: our discussion about this week's interview, I want to let
44:17
Speaker 1: our listeners know that you are co hosting your own podcast,
44:20
Speaker 1: a new one, a series that just today called voter Nomics. You,
44:23
Speaker 1: Stephanie Flanders know we're Stratton. You'll be coming together weekly
44:26
Speaker 1: having conversations about the elections taking place this year that
44:29
Speaker 1: is shaping the geoeconomic landscape. And this week's episode is
44:32
Speaker 1: a conversation with Neil Ferguson, absolutely something to look forward to.
44:36
Speaker 1: We'll all be listening to that right onwards. John, I'm
44:40
Speaker 1: going to ask you first, because I always do, what
44:42
Speaker 1: did you think about this conversation with Helen which you
44:43
Speaker 1: suggested by the way, we had Helen on because you
44:46
Speaker 1: suggested we did, and I thought that was an all
44:48
Speaker 1: right suggestion.
44:49
Speaker 2: Well, I'm glad to hear that. I know though, it
44:52
Speaker 2: was very interesting, and I thought, actually the idea that
44:57
Speaker 2: Vshi is going to step down of his own accord
45:00
Speaker 2: and then call someone election, it's quite a punchy call.
45:04
Speaker 2: And she did seem pretty comfortable to you know, put
45:08
Speaker 2: that out there. So I thought it was gonna work
45:11
Speaker 2: kind of talking about it, because if that happens, I mean,
45:13
Speaker 2: that's I I would. I mean that that that surprised
45:18
Speaker 2: me as an idea.
45:21
Speaker 1: John. After we recorded that conversation, I had a couple
45:24
Speaker 1: of conversations with other people who think they're in the
45:27
Speaker 1: there well maybe are in the know, and they pretty
45:29
Speaker 1: much all said the same thing. Okay, so independent backup
45:34
Speaker 1: of that opinion, it's definitely floating around as a distinct possibility.
45:38
Speaker 2: I mean, so, I mean, at the end of the day,
45:42
Speaker 2: I'm not plugged into Westminster, and there's, you know, a
45:45
Speaker 2: part of me that things the whole gossip side it
45:49
Speaker 2: kind of borden, but it is important, and I do
45:52
Speaker 2: think that. I mean, if anything, I actually think your
45:54
Speaker 2: discussion about what will happen afterwards was it more interesting,
45:59
Speaker 2: because that's the idea that you know, labor getting and
46:02
Speaker 2: at the moment everyone seems to be kain comfortable with
46:05
Speaker 2: that and happy enough about it and assuming there's going
46:08
Speaker 2: to be something along the lanes of business as usual,
46:10
Speaker 2: but clearly when you look at the state of the
46:12
Speaker 2: public finances, that's just not possible. There's got to be
46:16
Speaker 2: a change and the big Devin Steen label on the
46:19
Speaker 2: Tories is that the Tories at least have to pretend
46:21
Speaker 2: to be a law tax party, but as there's no
46:23
Speaker 2: such you know, kind of restriction when labor once they
46:28
Speaker 2: get in, I don't know why.
46:30
Speaker 1: They bother with the pretense Adrian, let me bring in
46:32
Speaker 1: you and de fancy the idea of Penny more than
46:34
Speaker 1: just prime minister has that working fear.
46:36
Speaker 4: I think it's a very interesting sort of question. I
46:40
Speaker 4: think a lot depends on what happens to the mayors
46:43
Speaker 4: in the in the local elections. I think if a
46:46
Speaker 4: bunch of counselors losing the local elections, people, you know,
46:48
Speaker 4: even if the number is very large, people think out, well,
46:51
Speaker 4: who cares about these local cancers. If you lose a
46:53
Speaker 4: big city, let's say Birmingham, then the party really does
46:57
Speaker 4: begin to panic. And I think that Rechi steps down
47:02
Speaker 4: rather than having another act of regicide quite interesting. And
47:06
Speaker 4: I think if anybody were to replace him, I think
47:08
Speaker 4: Penny Morden would be a very very good choice in
47:10
Speaker 4: all sorts of ways. One is that she's you know,
47:14
Speaker 4: an attractive and articulate figure. She carried the sword extremely
47:18
Speaker 4: well during the during the coronation, which is no mean feat,
47:22
Speaker 4: you know, So it's a pretty important qualification for running
47:25
Speaker 4: the country these days.
47:26
Speaker 1: Also, she.
47:29
Speaker 4: Has a good feeling for the upper working class vote,
47:33
Speaker 4: the white working class vote. Her constituency, which is Portsmouth North,
47:37
Speaker 4: was a labor constituency before she took it over. She's
47:41
Speaker 4: converted it into a pretty solid majority at the moment,
47:44
Speaker 4: and nothing will be solid whenever the election comes, but
47:47
Speaker 4: up to now it's been pretty solid. She knows how
47:49
Speaker 4: to deal with that sort of version of the red
47:52
Speaker 4: Wall down in the South. And she's a better retail
47:55
Speaker 4: politician and more attractive retail politician than Richie who is
47:58
Speaker 4: a very clumsy retail policy and a technocrat. So if
48:01
Speaker 4: I were a Tory wanting to save my seat, I'd
48:04
Speaker 4: rather have her than him. And also thinking from the
48:09
Speaker 4: national interest, the interests of the country, I think we
48:11
Speaker 4: are perhaps if things continue to go as they are
48:15
Speaker 4: with Rishi, looking at an absolute catastrophe for the Tory parties,
48:19
Speaker 4: for the Tory Party and a very big labor majority.
48:22
Speaker 4: And I think a very big labor majority might be
48:24
Speaker 4: a very worrying thing. It would be a very worrying
48:26
Speaker 4: thing for the city. It might be a very worrying
48:28
Speaker 4: thing for Kirs Starmer, who might not want to have
48:31
Speaker 4: this huge pressure not only of expectations, but of MPs
48:34
Speaker 4: who will find it more and more difficult control than
48:36
Speaker 4: more of them there are.
48:38
Speaker 1: But do you think that changing Prime Minister at this point,
48:41
Speaker 1: swapping Richie for Penny, it would make any difference to
48:44
Speaker 1: the result of the election. It kind of feels like
48:46
Speaker 1: it wouldn't.
48:47
Speaker 4: I think that you can change the narrative a bit.
48:51
Speaker 4: I think at the moment, as long as it's Ritchi,
48:53
Speaker 4: its failure, it's the sort of sex frindses of these
48:56
Speaker 4: various MP's, it's whatever the latest story is. If you
49:00
Speaker 4: put a new person in the front, it's like it's
49:02
Speaker 4: like reviving a soap opera and you at least have
49:05
Speaker 4: a chance to change the story. And I think she's
49:11
Speaker 4: a better face for the party. Now you really forced
49:14
Speaker 4: bit of you know, to put money on the line,
49:17
Speaker 4: I'd say no, the Tory Party's finished, you know, it's
49:19
Speaker 4: for the moment it is. People have made up their minds.
49:22
Speaker 4: But I think as a sort of hospital pass, i'd
49:25
Speaker 4: go for it.
49:27
Speaker 1: With reform out there, with the Workers Party out there,
49:30
Speaker 1: is there any chance for hung Parliament. We naturally assume
49:33
Speaker 1: that there's going to be a massive labor majority simply
49:35
Speaker 1: because the toy is horrible, horrible state. But there are
49:38
Speaker 1: other parties.
49:39
Speaker 4: Yeah, but it cannibalizes the Reform Party, cannibalizes the Tory votes,
49:43
Speaker 4: and the Tory vote is still going down and the
49:46
Speaker 4: Reform Party is still going up at the moment. So
49:50
Speaker 4: I think it is splitting the right. And again that's
49:52
Speaker 4: another reason why I think there is a there is
49:54
Speaker 4: a danger, if you want to look at it from
49:55
Speaker 4: that point of view, at least a possibility of a
49:57
Speaker 4: very substantial labor major. And what you might have is
50:00
Speaker 4: a very weird world in which you have a substantial
50:03
Speaker 4: labor majority, just like in ninety seven. But in ninety
50:06
Speaker 4: seven you had a lot of enthusiasm, new labor, new beginning.
50:10
Speaker 4: You know, Tony Blair very good at his job. You'll
50:12
Speaker 4: have a substantial labor majority with no really having many
50:15
Speaker 4: expectations for them, boring Prime minister, expectations of things actually
50:19
Speaker 4: going pretty dismally, no money to spend, and so more
50:22
Speaker 4: of the same mood of despair, but with a different
50:24
Speaker 4: bunch of people to kick and complain about.
50:27
Speaker 1: You say that it would all feel pretty dismal. But
50:29
Speaker 1: John and I were talking about this the other day.
50:31
Speaker 1: I'm thinking that possibly a large labor majority would make
50:35
Speaker 1: everyone feel mildly optimistic, largely because they don't quite understand
50:39
Speaker 1: what a very large laborjority would mean over the medium term,
50:42
Speaker 1: but just because there'd be the sense of something vaguely
50:45
Speaker 1: new and of stability. Yeah.
50:47
Speaker 4: But if the person who's the front line of the
50:49
Speaker 4: act is Kars Starmer, it's hard just to get excited.
50:52
Speaker 4: Or can you get excited about Rachel Reeves or men
50:55
Speaker 4: of the rest of it. I don't think you can.
50:57
Speaker 4: And I think the Labor Party is going to go
50:59
Speaker 4: interpower with no money to spend a lot of expectations
51:03
Speaker 4: for fixing potholes and picked fixing hospital which they can't fulfill.
51:08
Speaker 4: And if I were a sort of hyperactive left wing columnist,
51:15
Speaker 4: I'd be looking forward to a great future denouncing the
51:17
Speaker 4: Lay Party and saying they betrayed everything and that we
51:20
Speaker 4: should go back to a more Corbynite policy.
51:22
Speaker 2: I'm afraid I mean that that is part of the problem.
51:26
Speaker 2: Connect very irresponsible. It's like, how do you keep the
51:31
Speaker 2: kind of file left on the under wraps once the
51:34
Speaker 2: then pos of course to keeping them shot up.
51:36
Speaker 4: And you've got a restricted majority, you can give a
51:39
Speaker 4: lot of people jobs, which means money, which means you
51:43
Speaker 4: can basically afford to live in London. If you haven't
51:45
Speaker 4: got that, if you've got all these hungry people outside, well,
51:48
Speaker 4: the temptation to to to you know, go down the
51:52
Speaker 4: Owen Jones line is greater.
51:55
Speaker 1: Okay, So what what do you think when you say
51:57
Speaker 1: this is dangerous and this is frightening. What is it
51:59
Speaker 1: that you are expecting policy wise in the early days
52:03
Speaker 1: that might scare horses.
52:06
Speaker 4: Well, I think what's going to happen is that they
52:08
Speaker 4: will have pretty conservative macroeconomic policy that they will continue
52:17
Speaker 4: with a lot of the Tory policies that will create
52:19
Speaker 4: a lot of frustration. They'll have a bit of promises
52:22
Speaker 4: on fixing the National Health Service, fixing potholes and all
52:25
Speaker 4: the rest of that, which they won't have any money
52:27
Speaker 4: to do. They'll increasingly be tempted to engage in gesture
52:31
Speaker 4: or performative politics, which will I think solve no problems
52:37
Speaker 4: and actually increase the potential for polarization and discontent. And
52:42
Speaker 4: I can see after not very long of a sort
52:45
Speaker 4: of basically inert Starmerish labor government, a surge in support
52:49
Speaker 4: for Corbynism and a surge in support for you know,
52:56
Speaker 4: anti work policies or whatever you want to call them.
52:59
Speaker 4: For our style is on the right, so you know,
53:03
Speaker 4: a dismal but more polarized Britain and I we're all going.
53:06
Speaker 1: To be desperate to have Rishi back in six months.
53:09
Speaker 4: Oh, we will say technocrat, a sensible guy. Can't we
53:11
Speaker 4: have something to learn that.
53:13
Speaker 1: We were talking earlier in our introduction about the at
53:17
Speaker 1: the market you hires for the fifty one hundred, etcetera.
53:19
Speaker 1: Is any optimism from either review that the assumed stability
53:25
Speaker 1: of a labor majority and perhaps a little more friendliness
53:28
Speaker 1: with the EU as I discussed with Helen might actually
53:31
Speaker 1: be good for the market, possibly bring some international investors
53:34
Speaker 1: back in or at least of the outflow from the UK,
53:36
Speaker 1: or perhaps another way, perhaps there'll be regulations that will
53:39
Speaker 1: prevent the outflows from the UK.
53:42
Speaker 4: I just think that if you're looking around the world
53:45
Speaker 4: at the moment, the US is so dynamic and so
53:48
Speaker 4: tempting that I didn't see whether the UK would be
53:51
Speaker 4: attracting you when you could when you could go to
53:53
Speaker 4: the US instead.
53:54
Speaker 2: I suppose that depends on whether the Trump baken in the.
53:58
Speaker 4: V But I think Trump will be could be a
54:01
Speaker 4: huge boost in film States. I mean cutting capital, court
54:05
Speaker 4: corporation tax, cutting taxes, I think, deregulating quite a bit,
54:09
Speaker 4: rolling back a lot of green stuff. I think it
54:11
Speaker 4: will suck huge amounts of money and indeed talent from Europe,
54:16
Speaker 4: from Britain into the United States and make the boom
54:19
Speaker 4: even bigger than it's already been. And you must remember
54:21
Speaker 4: the first two or three years of the last Trump administration,
54:25
Speaker 4: before COVID came and he started telling people to inject
54:27
Speaker 4: themselves with bleach. I mean, the economy was booming, you know,
54:31
Speaker 4: and business was saying, you know, he may be a nutter,
54:33
Speaker 4: but he's our nutter. And I can see that coming back.
54:39
Speaker 2: More US exceptionalism then, basically.
54:41
Speaker 1: Yeah, a slightly different kind and more acceptable acceptionalism from
54:45
Speaker 1: US to a bad kind. Agre John, thank you so
54:48
Speaker 1: much for joining us today. Thank you thanks for listening
54:53
Speaker 1: this week's Marin Talks Money. We will be back next
54:55
Speaker 1: week in the meantime. If you like us, sh rate,
54:57
Speaker 1: review and subscribe whereever you listen to your podcasts. And
55:00
Speaker 1: finally we have our show email, so I send along ideas,
55:03
Speaker 1: questions or comments to Merrin Money at Bloomberg dot net.
55:06
Speaker 1: And if you have ideas on when Roshu's going to
55:08
Speaker 1: go and who the next Prime Minister will be, please
55:10
Speaker 1: do let us know. This episode was hosted by me
55:13
Speaker 1: Maren sumset Web. It was produced by some Asidi, additional
55:16
Speaker 1: editing by Blake Maple's Special thanks to Helen Thomas and
55:19
Speaker 1: of course to John Steppek and Abrian Wildridge