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Looking to turn Market Chaos into Investing Clarity?
Welcome to The Art of Investing - a brand new podcast that transforms market noise into clear investing strategies. Brought to you by IG, global investing platform, FTSE 250 and over 50 years in the markets.
This isn't your typical finance show.
Whether you're taking your first steps into the investment world or you're a seasoned investor looking to sharpen your edge, you've found your new secret weapon.
Every Friday, join hosts Rich McDonald, Mark Holden & Chris Fellingham – three investing legends bringing you a combined century of market wisdom. They'll decode the week's biggest moves, reveal the hot topics that could make or break a portfolio, and share the insights that separate winners from wishful thinkers.
But here's where we blow every other podcast out of the water:
Introducing our live Model Portfolio. With IG's access to thousands of global markets, you'll watch our strategy unfold in real-time, unfiltered investment action, that you can follow.
Every week, we'll pull back the curtain on exactly how the portfolio is performing. The wins, the losses, the lessons learned – it's all here. This is investing education with skin in the game.
Are you ready to master the art of investing?
This podcast is provided for educational and informational purposes only. The content presented is not intended as personal investment advice, financial planning guidance, or a recommendation to buy, sell, or hold any particular securities or investments. All discussions regarding the model portfolio are for educational purposes only. Past performance is not an indication of future results. Your capital is at risk. The value of shares, ETFs and ETCs can fall as well as rise, which could mean getting back less than you originally put in.
00:00:00:06 - 00:00:23:14
Unknown
On This Week episode, spice takes on the bears as the new clouds start to form over equities. Will there be a silver lining? And C.J. benefits from his eternal optimism on the UK? Yes, it's at the top of the leaderboard at last. Welcome to the Art of investing.
00:00:23:16 - 00:00:46:03
Unknown
Welcome to the Art of investing, brought to you by IG, the global investment platform. And a huge thank you to all of you who attended the live session at Lord's on Tuesday night. A wonderful success. C.J., what do you think? I thought it was absolutely fantastic to to listen and and hear the wisdom of the two of you with such a wonderful crowd in there.
00:00:46:04 - 00:01:06:03
Unknown
I just want to thank Iji for such a wonderful evening. The location was was was excellent. Everybody enjoyed themselves and none of this would happen without without IG. So big. Thank you. And of course, we realize the vast majority of people listening today weren't there. So we're going to go over some of the details again, aren't we? You're right.
00:01:06:08 - 00:01:32:11
Unknown
It was a very, very interesting evening. And actually some some of the sort of the surveys we took of the audience were quite eye opening and surprised us. So those details coming up for you all, but first let's take a look at the portfolio performance, because the portfolio has not performed this week down 1.1%. Oh survey said failure and things starting to get a bit here in the last 24 hours as well.
00:01:32:11 - 00:01:56:12
Unknown
So that leaves us up 11.9% on the year and plenty to go through in the winners and losers this week. A lot of dispersion happening in this market and plenty to go through. So into the space market update. Thanks Rich. Well it's been a week that's concentrated round and chips. I like chips that fry in oil. But this one was a bit hairy out there.
00:01:56:12 - 00:02:16:03
Unknown
So obviously we've seen a higher oil prices up about 3% this week as the Houthis have attacked Saudi Arabia directly and going for some of their refineries. But they all price is still anticipating we get a fall of about 4 or 5% in the next couple of months, if you look at the futures curve on that one. But nevertheless it's hurt out there.
00:02:16:06 - 00:02:32:17
Unknown
The dollar has been pretty flat this week. Or, you know, it's still up a little bit, which doesn't help some of the commodities. Ironically, though, gold this week had at the first time it's been up while markets have been down, and actually while the oil price has been up. So that was a nice change. Silver though sort of suffered down 7%.
00:02:32:18 - 00:02:52:04
Unknown
I haven't been able to report any new all time highs, but what I can report, sadly, is that Korea entered a bear market this morning. It's down 22% since we last reported. So you mean like 60% of the S&P, which is in a bear market? I know you'll be mentioning all those numbers which we talked about on Tuesday night.
00:02:52:04 - 00:03:13:17
Unknown
We did. But as we know, that doesn't necessarily not the whole thing of course. But you'll see that it has impacted emerging markets generally. Taiwan's had a difficult time. Taiwan's down about 1,314%. That's despite things like some very good results actually from Taiwan Semiconductor out there, that we'll talk a little bit more about some of the problems that are causing this shakeout in the chip sector, which is down about 14%.
00:03:13:17 - 00:03:32:20
Unknown
If you look at the Philadelphia Semiconductor Index, underneath that Magnificent seven is actually pretty flat. So some of the defensive qualities like Apple and Microsoft have actually done okay. But in videos down 9%, especially Apple. In fact, Apple could probably be described as a new high. It's very, very close to I did have to look twice this morning.
00:03:32:20 - 00:03:54:06
Unknown
But yeah, it's very, very close to it. And our old friend Bitcoin's down about 4%. So getting sucked into some of this risk off one of the other big differences this week is that actually the euro has managed to stay pretty flat against the dollar. Obviously, we talked at the last podcast about the problems within France and Spain, and that was having an impact, particularly in the currencies, particularly in the euro.
00:03:54:06 - 00:04:12:00
Unknown
But also the sterling has been pretty flat as well today, which is not a bad result. We're in the midst now of the corporate reporting season. So it's kicked off with Pepsi-Cola. Don't want to do it too much advertising, but their results are actually a little bit disappointing. Not because of the revenues, but because their costs are higher than expected.
00:04:12:00 - 00:04:37:09
Unknown
And we talked about this before. Obviously the higher order price has to go somewhere. And it also feeds into higher, you know, sort of input costs in agriculture as well because there are costs associated with that. So they cost disappointed shares went off too much. Delta Airlines, who you would expect to be very badly hit by. Obviously the high old price did have good revenues, but again, hadn't quite managed their costs as well as people had expected because of this higher price.
00:04:37:09 - 00:05:00:06
Unknown
So again, they were disappointed. So we started with two disappointing sort of numbers to this reporting season margins just just starting to get hit. Exactly. So you know, for people who are saying, well this is Pete, this is as good as it gets, then there's a little bit of evidence there. But remember, in the first few days of the reporting season, this goes on for another few weeks and we haven't really had any of the big tech names yet apart from TSMC in Asia.
00:05:00:07 - 00:05:19:08
Unknown
What about those banks? Oh the banks, this is it. So yeah, we had loads and loads of banks reports Goldman Sachs, JP Morgan, Citigroup, Morgan Stanley. They're all out there and all doing very well actually. I mean, Goldman, to be fair, they were quoted as beating their forecast. But remember a month ago they had a profits warning because they were losing money in fixed income trading.
00:05:19:10 - 00:05:37:09
Unknown
And obviously the bond yields rising, prices falling. They'd taken the wrong side of that and got hurt. So the shares have been down. 9% were sort of pretty flat on the day they reported. No violence for Goldman's. Not for me. No. They're very successful firm. Most of their alumni have led various countries of the world, various central banks.
00:05:37:09 - 00:06:08:18
Unknown
So I've got no sympathy for them whatsoever. Well, talking about old Illuminati, your old company Blackrock had their results very strong. So, you know, this is the biggest asset manager in the world. They've got $15.5 trillion of assets under management. So what they do counts really. Whether they decide to get bullish or bearish definitely counts. I tend to listen to what some of their their sort of leading investors are saying on things like LinkedIn, if you wanted to listen to them, that's quite interesting because what they say can have quite a big impact.
00:06:08:18 - 00:06:26:14
Unknown
So it's interesting, he says that because he never said that when I was there. So maybe I'm not one of the leading investors when I was there. And they're all now, I think, I think we'll allow our audience to draw their conclusion. You also don't say much on LinkedIn, though. No, exactly. That's true. I don't really need to say very much more on that one.
00:06:26:16 - 00:06:42:06
Unknown
Anyway, look at the heart of the problems that we've seen, and literally in the last 48 hours, really, is that there's a company called Core Weave, who we know, who basically sort of rent chips and take chips off of people like in video. And then they, they recycled, I think is what we call sell it to other people.
00:06:42:10 - 00:07:03:01
Unknown
Their CDs or their credit default swaps have absolutely blown out. You need to explain a little bit what a credit default swap is. I think just for everybody listening to this who's suddenly gone very, very worried and think CJ is going to start to work out credit fault swap is a way you can take insurance on the debt of a company.
00:07:03:01 - 00:07:23:04
Unknown
So a corporate bond, let's say you have a million, $1 million worth of it. Then you want to insure if they go bust, you want to be able to get your million dollars back, but you have to pay like an insurance premium to do that. Now, at the moment, to do that for quarterly, if you have to pay $100,000 to insure $1 million worth of their corporate debt, that is pretty punchy.
00:07:23:05 - 00:07:41:10
Unknown
Yeah. So you're going to have to pay 10% of your total debt. Now, some would say, why don't you just sell, you know, why don't you just sell that? Well, that's because the debt is falling way ahead of that at the moment. And people are sort of now predicted there's maybe a 50% chance that they go bust in the next five years, which is when they have to do a lot of their refinancing in five years time.
00:07:41:10 - 00:08:01:07
Unknown
So people are anticipating that. So the CDs and we've talked about it before, earlier when we were talking about some of the problems in private credit and all the rest of it, so it's reared its head again, but this time in court, we've and in the heart of AI. And if we just talk about how this started, it did start on social media and the famous Chamath.
00:08:01:08 - 00:08:24:19
Unknown
So of course, Chamath that has his own podcast, and he gets a lot of the world's top corporate leaders on their. He put out a social media post saying, oh, look at core. We've 2032 bonds. The yield is up at 15%, originally the coupon in 9.6%. And Elon Musk replied and just said yikes. And so that started the ball rolling yesterday.
00:08:24:19 - 00:08:43:20
Unknown
And Corey stock down 16% on the back of that, down another 6% overnight. So goodness only knows what happens today. So what's that done to stop Rich. Well it was small up before yesterday. But now this puts it down 15% on the year, down 15% in the year. And as you say, they've gone from a 10% yield to a 15% yield.
00:08:43:21 - 00:09:02:14
Unknown
That's a sharp move. And you know they are they're one of the big borrowers in the debt markets. So it's it's no surprise that the markets got a little bit worried over the last couple of days having seen that market reaction. And if you look at the expectations over the next couple of years, you can even more understand why.
00:09:02:15 - 00:09:28:14
Unknown
Because currently the debt is $36 billion and their equity is about $36 billion, eroding fastly. But they're about the same. But they're expecting to go up to 4 to 8 billion next year, then up to $60 billion of debt. Their net interest on that debt is 25% of revenues. So the company still lost, making it's not expected to make a profit anytime soon.
00:09:28:20 - 00:09:55:24
Unknown
And their negative free cash flow next year is $22 billion. So to say they're all in is an understatement. This is a real commitment to what they're doing. And that's why it took down the likes of Oracle yesterday as well. Yeah I mean as you say the chip sector down sort of nearly 14%. But the chip sector is still up about 68% year to date and 68% year to date.
00:09:56:01 - 00:10:14:16
Unknown
Even career. Right. Who I've just said has gone into a bear market in the past week or so. It's still up 62% year to date and Taiwan is up 73% year to date. So it's been a tough, tough week. But when you have gains like that year to date, then you should expect some big volatility and nothing goes in straight lines.
00:10:14:16 - 00:10:42:06
Unknown
Our old saying and that's certainly been the truth, the truth this week. One of the other things that sort of added into into this selloff in chips was the chief executive of Broadcom came out and said basically that there was some signs of gambling in AI stocks going on, and that obviously scared the horses. But also there is a Chinese company called Shang Jin Memory Technologies, or C x empty is probably easier for me to say.
00:10:42:08 - 00:11:05:18
Unknown
And they reported that they've made significant progress in developing denser Dram memory chips, which basically means it's cheaper, can do more, and has greater capacity, which threatens then obviously the likes of TSMC's Samsung SK Hynix, which is why career got hit so hard, and micron at last. Exactly. So all those ships ops, Intel, micron they all got hit nearly 10% most of them.
00:11:05:18 - 00:11:28:08
Unknown
And it's been a pretty brutal week there. And then just to add fuel to the fire, we had some interesting economic data this week. It started actually with some quite poor data from the United States on consumer confidence. Now, why do I mention that? I think it's quite important because idea. Yeah. Well because we've talked about this k shaped economy.
00:11:28:10 - 00:11:53:05
Unknown
You remember you shaped economy. The rich are doing very well, the poorer doing badly and getting hit quite hard. And so that, you know, because the rich are so rich, it's actually offsetting the overall economy, making the overall economy okay and making the overall stock market okay. But the consumer sentiment, which is it's called Michigan Consumer Sentiment Index for the for the October reading so far was a reading of 46.3.
00:11:53:06 - 00:12:15:21
Unknown
That's down from 48.1 in September. Now remember anything below 50 means people are worried about recession. Really anything above 50 is they're confident. They thinks things are expanding. So a negative number and negative more than they expected and more than last month made people really sort of quite worried that maybe we've got this inflation level, but then the underlying economy might be might be suffering a bit.
00:12:15:22 - 00:12:39:01
Unknown
You could have this thing called stagflation where you get a stagnant economy, but inflation is stubbornly high. And that was added. The fuel to that was added that they had the consumer price index in the United States yesterday, on Wednesday, this is Thursday. We record this. Remember the CPI and the headline number was 0.6 up 0.6. So making up 3.7% year to date.
00:12:39:03 - 00:12:53:11
Unknown
It was expected it was expected to be 0.3. So you know it was a big jump. Yes we've seen higher all prices over the last month. But that's the highest that we've jumped we've had in a month since April, which is pretty much when the when the conflict started in Iran, remember. And it's coming through in the core.
00:12:53:13 - 00:13:21:12
Unknown
Absolutely. Is ex energy prices exactly. The next Federal Reserve meetings in just over just under two weeks. And the odds on the interest rate right. And interest rate rise then jumped from just 22% probability up to 67% probability. And that's that. Immediately then had a further impact on equity markets, particularly out there. So you've had this combination of really bad sort of chip news and then some, you know, some disappointing economic data.
00:13:21:12 - 00:13:35:00
Unknown
And I don't know if you want to say anything about bonds on that, Chris, how that's affected it because net net, they seem to have been not too bad to me. Bonds have got really quite interesting. I mean, they have done over the last 2 or 3 weeks as we know, but the price action is becoming a bit more interesting as well.
00:13:35:01 - 00:13:55:19
Unknown
Now, having fallen in price quite consistently, they stabilized quite nicely before that CPI number gone up a little bit before then. Then the CPI number came out and everybody said no rates going up again. You know we got it wrong guys. It's inflation. So bonds fell. Yields rose again almost back up to those higher levels that they had been a week and a half ago.
00:13:55:23 - 00:14:19:10
Unknown
But obviously all the talk about Kawi and all the way and the way that the S&P and the Nasdaq have performed has brought those buyers back in and bonds today have got back what they lost yesterday and a little bit more. So, you know, they're about at the very long end. The bond market is about one 1.5%. So bonds are quite interesting here.
00:14:19:12 - 00:14:38:01
Unknown
And I'm sure we'll talk a bit more about that in the portfolio review section. The only comment I had was when you've watched markets as much as I have over the last 40 years, I'm sure it's true of all of us. You start to spot what's the sort of lead indicator that that seems to seems to move before everything else?
00:14:38:03 - 00:15:07:01
Unknown
I would argue that crypto. So crypto started rallying, remember about three months ago, and suddenly everything started to look up again and everything else followed. Well, 4 or 5 days ago, crypto got smacked hard. Everything else was absolutely fine, but now everything's joining in with crypto. So I'm watching crypto here as a sign of a lead indicator as to whether this thing is starting to turn up or down from here.
00:15:07:01 - 00:15:27:01
Unknown
But I just think it's an interesting observation that crypto has taken on that role. And is that specifically Bitcoin? And I know you like watching a theory as well. Both both of them have moved Ethereum's the higher beta option moves more in a more volatile manner. And so it's come back quite sharply, probably about 7 to 8% from its highs.
00:15:27:03 - 00:15:48:24
Unknown
And Bitcoin's come back three 4%. But it's just they were bit only they were really well bid. And then suddenly they came off and nothing else started coming off. And now everything else has started doing both. So we're in that difficult time we've talked about before in markets where it's seasonally not a good time for risk, and people are just getting their nerves jangle a little bit.
00:15:48:24 - 00:16:07:08
Unknown
But let's, let's, let's chat a bit more about that in a moment. And of course, we're coming up to the anniversary of the 1987 crash on Monday as well. And what are we are we coming up for 40 years now? Remember, don't remind me. It's about as long as I've been in the market. It was my first real blooding, having started the market the year before.
00:16:07:11 - 00:16:24:12
Unknown
And yeah, I learned what a crash was very quickly.
00:16:24:14 - 00:16:52:12
Unknown
Right. Well, let's hope it's not what our portfolio is about to see. Then. The outperformance of the weak Footsie 100 up over 2%. The 5250 up over a percent. And then copper small up on the week as well. However can we just stop for a moment. Because I just want to say having experienced probably 51 weeks out of 52 of pain at the UK performance, it's been the beacon of stability over this week.
00:16:52:12 - 00:17:15:11
Unknown
So this week is going to is going to live long in my memory and and it could well go on because if you do have money coming out of tech, where do you want to put it. You want to put it into farmer and utils. As bond yields come law. You want some tomatoes being utilities. Thank you. So our nice water companies that do so well Scottish and southern and and such like.
00:17:15:12 - 00:17:42:03
Unknown
But if it seems full of them it's full of those farmer names obviously AstraZeneca and GlaxoSmithKline. It's got the oil names. All your price hasn't started to come off yet. And the only real thing that you would probably take out there is that is the mining companies, because we might see commodities come lower, but certainly not as low as we've seen things like emerging markets this week, emerging markets down over 5%.
00:17:42:04 - 00:18:05:05
Unknown
Russell 2000 of course, has been hit on the back of the CPI number and higher yields. That's down over 3%. And Nikkei 225 also down 3.7. Yeah big AI exposure of course in emerging markets. And I was looking at me. So at the beginning of the year things like China was 27% of the emerging markets index. Today it's just under 20%.
00:18:05:11 - 00:18:28:19
Unknown
India, which of course we cut out of a few weeks ago, was up at about 16% of the emerging markets index. And it's now down to under 11%. And the two big gainers have been Career and Taiwan. Korea is 21% of that index. And Taiwan is sort of nearly 29%. So about 50% of the index is career in Taiwan.
00:18:28:19 - 00:18:48:13
Unknown
Now that may mean that there's an opportunity because of this selloff has been very aggressive, particularly led by those two, those two countries and those two indices. But maybe that's something to debate later on. Other moves of no in the portfolio. On the negative side there, the World Mining Trust, as I mentioned, part of the Footsie there, it's dragged it down.
00:18:48:13 - 00:19:15:12
Unknown
And you've got that nice that 100 down 2%. Now let's just remind everybody when we make the flash as the as we call it, when do we take these numbers from. So we take it as close in UK time, which is just after four 3435. And that we did that on Wednesday night, Wednesday afternoon. So by the time the ETFs are priced that we, we we are holding most ETFs here.
00:19:15:14 - 00:19:41:13
Unknown
We take those closing prices. And they had absorbed quite a big fall yesterday on the back of. We'd already seen the chips heavy chip selling. But we also had it was about two hours three hours after the US, CPI, the consumer price index which was disappointing actually those those indices, most of them were trading up and Nasdaq was up nearly about half percent before that and ended the day down sort of nearly 3%.
00:19:41:13 - 00:20:01:04
Unknown
So it was pretty brutal. You know, I just think it emphasizes that we've seen some better economic data the week before in the non-farm payroll numbers, Mark had talked about where the market suddenly assumed, oh, that's great. Interest rate rises are off, at least in the short term, which was always the wrong reaction because it didn't say that at all.
00:20:01:05 - 00:20:18:04
Unknown
It was the optimists once again taking over the asylum. And what's wrong with that? But now. But now we had a strong number yesterday and all of you was right back in the rate rises. So we're back now in that, in that state. And of course that's going to affect anything to do with the the real economy, which is what got hurt yesterday.
00:20:18:05 - 00:20:41:23
Unknown
And Mark mentioned the term stagflation. Just take us through what stagflation is. And when we've seen that before, stagflation is a really horrible thing. And it's actually, you know, people think it's one of the worst economic themes that you can have. Stagflation is where your growth is pretty recessionary. So I don't know, you might be growing a half percent or 1%, but nothing special.
00:20:42:01 - 00:21:07:05
Unknown
But inflation is high. What you normally want to do in that situation is cut interest rates, because cutting interest rates will then get your growth up, but you can't get in straits because inflation is too high. And you could argue if you look at where the UK is at the moment and where some of these other places are, that we have got stubbornly high inflation and so you can't cut interest rates yet a number of people would think that maybe that was the right thing to happen.
00:21:07:05 - 00:21:28:12
Unknown
So there's a big dichotomy here of of where people are. What people think should happen is, you know, I think rates should go up to win. Better outlook for inflation to make people realize that we're serious about our fight against inflation, whereas a lot of people are like like like like spice. Or perhaps his friends in the white House would like interest rates to be as low as possible, even though inflation is a problem.
00:21:28:12 - 00:21:53:04
Unknown
So you're getting a big fight going on. And that's what I think you're seeing a start of within this marketplace. But but let's shall we, shall we turn to the portfolio to what we're thinking about the world, because we have had a big challenge this week. And I think it's important to think about whether that's just a short term challenge or whether this is a sign of more important things to come.
00:21:53:06 - 00:22:12:23
Unknown
And I've got a bit of data here, which I'm going to go through slowly. Please, guys, stop me to make sure everybody's follows this. Some people have heard a bit of this on Tuesday night, but I think it's worth repeating for the benefit of everybody. So. So first of all, let's be completely honest. Since we started this podcast, markets have done really well.
00:22:13:00 - 00:22:36:08
Unknown
US equities risen by 29%, give or take 1% yesterday. UK has risen by 27%, Japan's up 70% and EMS up 40%. Now it's not meant to be like this. If Stewie Thompson were sitting here, he would say he couldn't make it was just that there's a risk free rate. And then you, you know, put a little bit on extra return on that.
00:22:36:08 - 00:23:01:09
Unknown
And that's what you should get on your risk assets. So risk free rate at the moment of 4% where interest rates are GDP growth of two, you should get equity returns of between 6 and 8% each year, maybe maybe ten if you're lucky. You're not meant to get these sorts of returns. And so that so let's puts things in perspective of how far we've traveled so far and how much of it has been debt fueled as well.
00:23:01:10 - 00:23:27:22
Unknown
A lot of it's been debt fueled, clearly. And and that would be one of the issues with what's happening with bonds. So if I've given you the equity piece there, bonds since we started this podcast, let's have a guess. Us, the US over 20 year bond index. What's its return been since the start of the podcast? Now you can look on the screen and people watching this that they don't know.
00:23:27:22 - 00:23:52:15
Unknown
We did talk about this on Tuesday night, so it will depend on what their memories are like. And I'm going to take the pain out of it by saying to them it's down 5.5%. So equities are 30% or more bonds down five. So it's been a very difficult period. If you've had a traditional wealth management portfolio of 60% to 40% bonds okay.
00:23:52:16 - 00:24:16:15
Unknown
Why have bonds behaved poorly. We've talked about this already. Lots of borrowing interest rates have risen. Remember we were talking about interest rate cuts months ago. Now we're talking about how many interest rate rises are we going to get. And and I think this is particularly pertinent from what you were saying earlier about core. We've junk bond yields are now over 19%.
00:24:16:17 - 00:24:41:12
Unknown
So they were about 12. They're now 90%. So just for everybody's been those are companies that are rated triple C. Those are companies that their financials are not looking good. And you probably wouldn't want to lend them any money. Readers note most people buy equity in them, though. Still, that's an interesting question, but we'll come back to that another day.
00:24:41:13 - 00:25:03:12
Unknown
As a bond man, I would say that these guys are bad risks and then 19% yielding. So you've got to get a lot of return to make those worthwhile. So I've got equities done really well sitting there looking high bonds having done really actually quite badly. And so it would be right to think about are we at some sort of turning point here.
00:25:03:18 - 00:25:20:15
Unknown
Can this carry on. And I've got some, some, some indicators here which I'm going to go through. And then we'll have a debate about what we think. Okay. All right. Is that okay with me. Okay. So first of all, listeners will remember we've talked many times before about when things appear on the front page, the feet or The Economist.
00:25:20:17 - 00:25:42:00
Unknown
It's normally time to worry. And our examples were chop prints of Citigroup saying as long as the music is playing, you've got to get up and dance that much in line 27, that's not age. Well, a year later, his bank was being rescued, effectively. Lloyd Blankfein in November 2009, Sunday Times said Goldman Sachs were doing God's work.
00:25:42:02 - 00:25:56:23
Unknown
That's not good either. You know, they had to go and become a bank, remember, for having been an investment bank, they had to go to be a bank so they could access the discount window. So both those were signs things had got too much. What was the front page on? What who was on the front page of the economy since September?
00:25:56:23 - 00:26:23:00
Unknown
But Jenson Wang, CEO of Nvidia, titled The Sorcerer of Silicon. Now, you know that's number one. That's point one for the defense, my lord. Yes. Second one, I've mentioned it earlier 60% of SMP stocks are in a full blown bear market. While the market powers new highs and marks defined what that means before. That means the stock is 20% from its high or more.
00:26:23:02 - 00:26:51:16
Unknown
60% of stocks. That's before we saw about call. Yeah. And there are other measures of breadth breadth as well. And my particular favorite go back to the 21st of September. The S&P 500 rose 1.5% finished within 1% of an all time high. So the market rose one and a half. So it's right at the top. There were more constituencies that made 52 week lows than highs, so more stocks hit their lows.
00:26:51:16 - 00:27:15:23
Unknown
30 of them hit their lows, only seven hit highs by four times. And that combination has only occurred on two previous occasions. Now where might those be? 23rd of July 1929. Do I need to say any more? 21st December 1999 was the second one. So basically not right at the tops, but giving you an indication that things have gone.
00:27:15:24 - 00:27:40:22
Unknown
And what's excessive actually seeing, though, the fact that these huge number of stocks are a 52 week lows versus a small number, what's what's that proving about that breadth, what it's showing you is that only a very small number of stocks are leading the markets. And actually there's quite a lot that are actually not managing to keep up and are derailing at the same time as these are doing very well.
00:27:40:23 - 00:28:06:23
Unknown
It really highlights that tight concentration of the way that the S&P rewards its winners. It gives them higher weightings and higher weightings. So fund managers buy more of those. And you get to this this point that it's really only 15 stocks that are moving the market. And which we had a question about this on Tuesday at Lord's where we talked about survivor bias with some of these indices.
00:28:07:00 - 00:28:29:18
Unknown
The things that talk get so much bigger that if the things at the bottom do badly, it doesn't matter. And so you get a survivor bias where the where the strong gets stronger and survive more and nobody cares about the other ones. I've got one last one for you. And that is the peak concentration level in market bubbles of the stocks that are leading it.
00:28:29:18 - 00:28:58:01
Unknown
So if we group some stocks together. You know what I mean. As I go through it, what percentage were they of the of the market at the highs. So the exception to the big one is the railroads in 18 1880s. They were 63% of the market at the highs. In the 1920s utilities were 36. The nifty 50 in the 70s were 40.
00:28:58:03 - 00:29:22:18
Unknown
Japan as a fraction of the World Index was 44 in 19 9192, TMT in 2000 were 41% right, and the AI Big Ten today are 43. And that's just the Big Ten. That's the Big Ten. That's not counting all the other things that lead to AI. So there's plenty of evidence that suggests that we've had a wonderful period.
00:29:22:22 - 00:29:47:02
Unknown
Marks have done very well. But are we have we outsized stayed are welcome in the bull market that we have been witnessing. Now I've, I've, I've tried to make that case as strong as I can because I know that's now going to be the alternatives case made by young Mark and so spicy OG my friends, been a while since you called me young and I'll tell you that.
00:29:47:08 - 00:30:13:23
Unknown
Right. Okay. So that that's 60% of the S&P that are in or in bear market are suffering undoubtedly because of a combination of two things. One is the higher order price. And a lot of them might be industrial companies, you know, where the costs of petrol or diesel etc. arising and your cost of goods because of what's been happening in the, in the Middle East, have also added sort of transportation costs.
00:30:13:23 - 00:30:34:17
Unknown
So, you know, agricultural prices have gone up, metal prices have gone up. They're having to absorb all these costs and can't necessarily pass it all on to their customers at the moment. So their margins are struggling to make any headway. They're not falling, collapsing or anything, but they're struggling to go up. And the other thing, of course, is interest rate expectations.
00:30:34:20 - 00:30:54:14
Unknown
As Chris has mentioned many times, if you go back a year ago, we were probably looking for two interest rate cuts out of America. And right as of today, we're looking for 3 or 4 more from where we are today. And we've already had a business rate rises. So yeah, exactly. From where we had, you know, so we've had a swing of basically six interest rate moves.
00:30:54:14 - 00:31:15:23
Unknown
Now bigger companies, the very biggest companies can absorb interest rate rises because they are big enough to go to the bond market and say, we want to borrow money. We're nearly as good as the American government will borrow, quite close to what the American government can borrow at. And that means that they're pretty well insulated, or they can issue more equity, or they can issue their own bonds.
00:31:15:24 - 00:31:37:05
Unknown
They can find ways to get cash elsewhere, or they can lean on the banks and say, we want to borrow money. But their tractive rates, the smaller and midsize companies don't have that. Luxury companies like core, we've will be borrowing money at about 16%, and that's substantially higher than they might have done in the past. And we know it's up from sort of under nine, under 10% not that long ago.
00:31:37:06 - 00:31:53:19
Unknown
Now. Are they borrowing the money now. You know, if they are borrowing the money now then yes, they have to accept they have to pay 16% interest on that debt, but they're not necessarily doing that now. But people assuming if they want to or refinance the existing then they have to be well, they do have to to to keep the business going.
00:31:53:19 - 00:32:14:03
Unknown
But also the big moment last week was that they said, well, why don't we start changing the rules so we can go and tap the life insurance? Because that is now endless capital. Now that was a red flag as well. The fact that they want access to new capital because they're not getting it from the market as it is at the moment.
00:32:14:04 - 00:32:30:17
Unknown
The insurance companies are not stupid. You know, the biggest ones are run by people like, you know, Warren Buffett. So he's not going to turn around and just lend money unless he thinks he's going to make a good return on it, can I? But in there, though, because you said insurance companies aren't stupid. Okay. You will have noticed.
00:32:30:17 - 00:33:02:10
Unknown
And we have talked before about the way these days that the private equity industry and the private debt industry are building their own insurance companies or taking over insurance companies, and then when the insurance company has all its money to invest, it's natural to then put it in it's own issues. Because, remember, the problem at the moment is the private equity industry and the private debt industry have got lots of supply but not enough demand.
00:33:02:13 - 00:33:24:04
Unknown
And so they can then have the demand from their own insurance companies. And one of the owners of Chelsea, I've shot in the name person because I don't want to get libeled, has had to sell his stake in Chelsea because they found that there was a lot of of these sweetheart deals within his insurance company, which he had not been open about.
00:33:24:04 - 00:33:46:18
Unknown
So then they had to sell the stake in Chelsea to raise the money. So I suppose what I'm trying to say is insurance companies, the rule are not silly, but there has been a big move by the private industry to have their own insurance companies as a ready source of demand for what they are supplying, and I think that's what the core weave guy was saying.
00:33:46:19 - 00:34:08:07
Unknown
He was saying, well, no problem, is it? You know, there's there's an insurance company will buy it because they all want to buy private debt at the moment. So I just put a little question mark there that he says that. But I'm actually with you. The the insurance the policyholders insurance company will say no, we want we want to make sure our money is good and therefore the money may not be available for them.
00:34:08:08 - 00:34:28:14
Unknown
I mean, you know, I say that is what is weighing on these companies. And it started to weigh on the Russell 2000 as well, because they obviously these smaller mid-sized companies. So, you know, an optimist like me says, well, price is very high at some point that will recede, that will take with it interest rate expectations as well.
00:34:28:14 - 00:34:50:03
Unknown
And to be fair, if the fed do the right thing and raise interest rates, you know, which you've been talking about for a long time. If they raise interest rates in the next meeting in two weeks time, then actually they the longer bonds might take sort of heart from that and the yields could start to fall a bit because they're trying to get up, get ahead of the curve or get up to the curve at the moment, whereas at the moment they're considered to be behind what they need to do.
00:34:50:04 - 00:35:14:24
Unknown
So, you know, it's an optimist like me. I'm trying to think 3 to 6 months forward that you do as an equity investor. And I can see personally. And on Tuesday, I mentioned the my, my biggest idea really for the next 12 months is that you'll see a substantially lower or price. That would be my view. So if I think the oil price is going to fall 25 to 35%, then I can see that bond yields will come lower, bond prices will go up.
00:35:15:00 - 00:35:36:01
Unknown
That will take the pressure off interest rates and inflation. And the backdrop for small and mid-sized companies will improve dramatically. And it will certainly also help some of the other commodities where money is being diverted into all at the moment, the spare cash, and it can be redirected back into things like gold and silver and copper. And that was that was my core view.
00:35:36:01 - 00:35:58:07
Unknown
So of course, it's always unsettling to see markets do the sort of things they're doing at the moment. And this, this concentration effect, sort of, you know, sort of getting small. The market leadership remain down by smaller and smaller. But we've been here before, you know, in October last year, I think I'm right in saying The Magnificent Seven had hit her high and they were the seven companies were 37% of the market.
00:35:58:08 - 00:36:17:07
Unknown
The Magnificent Seven then spent the next nine months going sideways, and it's only recently taken out. Its all time high. But in that time, money didn't come necessarily massively out of The Magnificent Seven. But where it did, it rotated into the other broader parts of market, which is why things like the Russell 2000 had a very good start to the year, because they were benefiting from the money coming out.
00:36:17:08 - 00:36:36:10
Unknown
There was a different thing there though, wasn't there? I think you're right what you say. But at that time markets were expecting lower interest rates. So they could then say, well rotate out of these into the real economy because the real economy be getting better, because interest rates are going down. We have an opposite situation now. We're in straights are going up.
00:36:36:10 - 00:37:00:05
Unknown
And therefore is it realistic to expect, you know, the battens be handed over successfully from the AI companies to those other companies. And that's that's probably, in my view, the real question here. The real question here is in the short term, does it look a bit dodgy? Yes. In the short term have we raised cash? Yes. Seasonally. Is it always a bit dodgy now.
00:37:00:10 - 00:37:22:09
Unknown
Yes. So we can say yes to all those questions now. Problem at all. Is this just a little setback which is the pause that refreshes I know all comes down. You know interest rate expectations there for for the batting gets handed over the AI earnings hold up well. And this will be seen to be a great buying opportunity into Christmas which is normally a good time in markets.
00:37:22:10 - 00:37:51:14
Unknown
Let us be honest. Or is this now the sign of something much worse? And I would argue I'm more in the first camp than the second camp, but the core we've stuff is unsettling.
00:37:51:16 - 00:38:19:17
Unknown
Of course, there won't be an answer between those two scenarios, but what we can be certain of is that the timing effect of interest rate rises probably aren't affecting businesses. No, the ones that have been the 60% of the S&P, that's down 16 to 20%. So have those stocks been de-risk going into these numbers? Because in these set of numbers in the next few weeks, the revenues are probably fine.
00:38:19:18 - 00:38:39:09
Unknown
The costs might be getting impacted, but the equity has already moved ahead of that. So is there a chance that you get a bit of a wobble in tech? You get a bit of a wobble in Nasdaq, even the S&P 500 because of the concentration. But in the part of the market that's already been impacted, they have the right numbers.
00:38:39:10 - 00:38:57:11
Unknown
And I think you described it well by saying bloody hell, that's a that's the first time he's gone to me for a long time. Take that, take off, take it here. I said, no, sorry, it wasn't you. It was in the other podcast that I did. We were discussing about this, Chris. But you've you've got two clearly two sets of stocks in the market at the moment.
00:38:57:11 - 00:39:24:08
Unknown
And going into earnings season, that top set has got high expectations and high valuations. And any disappointment there they're going to get smashed. And then you've got this bottom set where expectations are quite low now because of the stocks have come down so much because they might be utilities or other bond proxies. So they just have to not have a shocker.
00:39:24:10 - 00:39:57:02
Unknown
As long as they don't profit warm and they get through innings. Seasonal key. You might have a bit of a relief rally. So something like the S&P 500 equal weight at the moment is far more attractive to me than this highly concentrated, potentially toxic S&P 500. I think you make great points there. The issue that surrounds what you've said there is that's a sort of a perfect landing scenario, but there's also the scenario where the AI stocks come back, which is where a lot of people have invested their money.
00:39:57:02 - 00:40:24:00
Unknown
So wealth actually pulls down. And then the central bank wants to respond by cutting rates, but it can't because of stagflation. It's unlikely that inflation is going to fall. It's inflation always comes with a lag. Yeah. So actually they have to keep rates higher than would otherwise be. That's when you get the difficult scenario where suddenly people start worrying about recession coming and they can't do anything about it, and the bond market will start to rally on the back of that.
00:40:24:00 - 00:40:41:24
Unknown
But no one will be able to price in lower interest rates because of the inflationary outcomes. You would then expect inflation to fall with a lag. Yeah. And then you would switch probably out of your bonds back into excuse because this would be a bit further down than they are now. So it's a really tricky, tricky set of circumstances.
00:40:42:03 - 00:41:07:11
Unknown
You want to say anything else? Are you you know, one of the reasons I've be consistent is I like the mid and smaller sized companies, because I think they are the ultimate beneficiaries of AI in the sense that I'll become more efficient. They'll be able to they'll be able to widen their margins. Yes. They're not going to employ as many people potentially, but that should lead to greater profit margins, which means to higher earnings.
00:41:07:11 - 00:41:24:07
Unknown
And the market loves that sort of thing, and therefore a higher rating for those companies. But there's an unknown of when that really starts to be seen in the earnings in the bottom line, as you say in these companies reports and accounts. And maybe we're not far away from that. And it's quite interesting. I saw yeah, I was going to mention this in the market view, but I haven't.
00:41:24:07 - 00:41:49:24
Unknown
But yesterday I noticed that there's been a survey from Deloitte, the big accounting firm, and they've done a survey of all the sort of main chief executives of the and finance directors in the UK. And they now think that 52% of those CFOs are saying that they expect to adopt AI more quickly in their next 12 months, and they are going to lead to job cuts, and that's in the UK.
00:41:50:00 - 00:42:07:15
Unknown
That's not a surprise to me. That's exactly what I was expecting to say. And we've said we've talked many, many times before that those jobs, sadly, will probably impact the younger people and where we have to do mundane tasks and programing and data collection and data interpretation, all that sort of stuff is going to be done by AI.
00:42:07:17 - 00:42:26:15
Unknown
And it's interesting that companies are now starting broadly to start to adopt it. And in UK, I would argue with quite a long way behind what's been happening in the US. I think a lot of small and mid-sized companies in the US are already doing this, which is why, like the Russell 2000, probably at the margin, more alike than I like the FTSE 250 in the UK, which is the equivalent sort of index in the UK.
00:42:26:19 - 00:42:43:02
Unknown
So long story short, I think the AI benefits come through. I said before, I don't know whether that's going to be this quarter. I actually think it's going to be more next quarter. So when companies start reporting in January and February time, that's when we really start to see those benefits come through. And in the meantime, we're maybe in a bit of an air pocket.
00:42:43:03 - 00:43:06:01
Unknown
Who knows? But I think, you know, as I say, I'm trying to look 3 to 6 months forward every time I think about equity markets. And that would be my conclusion. Is there something between the S&P 500 and the Russell 2000 that is perhaps slightly higher quality than the some of the poorer names in the Russell 2000. Yeah.
00:43:06:01 - 00:43:36:18
Unknown
And it would be the Russell 1000. So the Russell 2000 is not the 2000 companies in the top companies in the US. But after the top 1000 companies by market capitalization their next 2000. Now the US has you know obviously 4000. I think companies are totally sort of quoted in the UK. We're much less than that, sadly, because we're obviously losing losing companies that are writing upstream takeovers and people deciding to float their companies in America and elsewhere.
00:43:36:20 - 00:44:00:04
Unknown
But yeah, you would probably go for the Russell 1000, which would give you that. And I think there's an SNP 600, I think it's called, which is the next one down. I've never invested it personally, so I don't know. And I've never invested in the Russell 1000 either, because I've always felt that if I wanted to get exposure to the bigger cap, I go to the Nasdaq, which will be the bit perhaps the biggest ones in the tech tech area at the moment.
00:44:00:05 - 00:44:32:05
Unknown
The S&P 500 is a great mix of lots of those sort of things, a high quality index, and if I want to get small and mid-sized companies, well, I'd go for the Russell 2000. That's just the way I do it. It's not necessarily the right way, but there are those other alternatives, like I say, the S&P 600 or the bus or 1000 CJ in the two scenarios we've we've talked about there, you either have AI still works and it has a potentially deflationary impact because of the the cost savings it has for companies.
00:44:32:09 - 00:44:56:15
Unknown
And some of that being staff are it doesn't have an impact. You get a big lurch lowering growth. And you know, you have problems around debt as a whole. And the economy goes into some kind of recession. Both those scenarios lead to lower interest rates. Both of them would lead to lower interest rates. In the end, it's. But this game, as we all know, question of timing.
00:44:56:17 - 00:45:15:00
Unknown
The great thing about a bond I always love this when I was trading bonds is, you know, 20, 30, 40 years is, you know, if you're buying when yields are at 10% and you sell them at six, you're going to see a number of times in those 40 years when that was the right thing to do. So you can never be wrong with a bond.
00:45:15:01 - 00:45:28:24
Unknown
It isn't like an equity that keeps going up and up and up and up. So when you sell it at the wrong level, you're always going to be wrong over, say always wrong. You're going to be wrong over time with a bond. If you buy it at ten, am I going to 15%? But at some stage it would back down again.
00:45:28:24 - 00:45:48:00
Unknown
So you could say, oh, I was right to buy on a on a long term view. You could always you could always make that claim. But that's the point. The point is if you take the, the the bond market now say take the UK, you know, 6% is is where they've been trading. They got up to just above six and now down about 585.
00:45:48:02 - 00:46:09:06
Unknown
You know, is this is it going 673 or is it going six three. So are we going to get a straight rally from here. Or are we going to sell off first and then get a straight run. And that's what I mean about the timing of things. We're trying in this in the podcast here to try and be a little bit more longer term.
00:46:09:06 - 00:46:40:01
Unknown
But we are trying to be as exact as we can around these things. And so to me, I think, yes, it's right to say some states you'll get lower interest rates. Of course you will. But it's what that combination is. And do we go there via higher interest rates before we get those lower interest rates? I think it's fair to say that if you got lower interest rates because the economy was going into recession, which is quite often one of the main drivers for lower interest rates, then the equity market would have a pretty bad time.
00:46:40:03 - 00:47:00:03
Unknown
And while adjusting to that, until they were convinced that the central bankers were about to start cutting interest rates, and you were beginning a new cycle of cutting interest rates rather than raising interest rates. If, on the other hand, you're getting lower interest rates because inflation is coming down and lower bond yields as a result, then that's good for equities.
00:47:00:04 - 00:47:21:22
Unknown
That's good. That is the perfect Goldilocks scenario. That's the old goal who had many years ago rally bonds rally equities rally. And that all works well. And that's when the last time the 6040 portfolio worked really well. Correct. And so and it will work again in that scenario clearly because that is the way things are. But let's return back to the problem at hand.
00:47:21:23 - 00:47:41:01
Unknown
The problem at hand is oh is this a short term seasonal weakness in risk prices. Everyone's giving a little bit of a moment around some of these issues, which we will see moving away over the next 2 or 3 weeks could go. Love is going to go may go. Well go lower first, but is it going to move away?
00:47:41:01 - 00:47:58:04
Unknown
And we're going to say that, you know, a buying opportunity is coming now and we need to find that. Or are we at the stage of saying this is the end of the bull market, that we've seen this wonderful bull market over a number of years, and so we need to just batten the hatches up a little bit.
00:47:58:05 - 00:48:19:10
Unknown
Well, I would say what was missing from the spice market update was this red flag from Australia that the the IPO pulled of the AI name Nvidia back company. Actually I think it's firmus. It's called and I missed that to be fair and misses of the red flag. Wow I'm color blind.
00:48:19:12 - 00:48:50:16
Unknown
What colors that green. So so we have had it's been a difficult week in terms of continuing not to believe in AI, but to believe in this endless debt and equity that is available to continue the AI CapEx spend. So, you know, does does that not change the way that you guys are are seeing the risk at the moment?
00:48:50:18 - 00:49:11:07
Unknown
Because if we're not changing the portfolio, are we at least changing our risk appetite? We have over the last few weeks sold some stuff. We've always maintained that we were going to have a high waiting to equities because we think over the long term, that's what people should have. Now, if you want to be an active trader, really active for yourself, you may have very few equities at the moment.
00:49:11:07 - 00:49:32:01
Unknown
And I, I we did a survey in the on Tuesday night of what people's weightings were in equities and where people were in bonds, and there were some people there not looking at anybody who are very heavily weighted towards bonds and cash at the moment rather than equities. And I think if you're moving around fast, that's great. We are not in that luxurious situation.
00:49:32:01 - 00:49:54:10
Unknown
When we've we said on Tuesday night that we want to keep at least 60% of our of our position in equities, because longer term, we know the way to lose money is to keep trying to pick the top. And in that we know equities left because over a hundred years the real return has been fantastic. Now you're not losing money.
00:49:54:11 - 00:50:13:15
Unknown
You're losing potential upside losing potential upside. Sorry. Yes. Good catch. And I would not criticize him for doing that. But you've got to be close to the market to do it. And you turn around quickly, which is what you will do, I'm sure. So to me, we've sold equities over the last few weeks. Do I regret not selling more?
00:50:13:20 - 00:50:37:04
Unknown
Yes I do. I think we've tried to sell a few more but it's been it's been it's always a tricky discussion because we're trying to do a consensual piece of work. And I think we've agreed where we are, all of us. So the question to me now is we've got 20% cash. We're halfway to that 60%. Do we now really feel that we should sell another five, 10%?
00:50:37:06 - 00:50:57:20
Unknown
Or do we think actually the next step we should be doing? I'm not talking about today, but the next step we should be doing is actually to buy some. Now, my view at the moment still is that is the most likely scenario. I'm, as you know, very much of the view that we have a I'm going to call it a soft landing AI disappoints a little bit.
00:50:57:21 - 00:51:18:14
Unknown
Nothing tremendous, but this one's a little bit, but it rolls into the rest of the economy. I'm with spice on that. And that's why we've got the waiting in Footsie and the waiting in 2250 and these other things as well. Defensive equities. That's at 22% of the portfolio in equities is up this week. Yes. So so to me we can relax a little.
00:51:18:17 - 00:51:42:06
Unknown
But I am I more worried than I was. Yes. Am I a little bit really a little bit shaky. Yes. But I my my my view is we've, we've apparently this situation would I'd like to more. Yes. But we haven't we've done what we've done and now I want to see what happens next. And that should be reflected in people who are listening.
00:51:42:07 - 00:52:04:01
Unknown
Yes. Especially those that put their hands up for having over 80% of the portfolio inequities this week. And, you know, it's a it's worth just considering things, isn't it? Like we say spice always take a look. And yes, you might think some of its noise, but there are concerns building. Hello. It comes down to personal preferences doesn't it.
00:52:04:02 - 00:52:18:24
Unknown
And you know, one of the things we always say is you've got to do your own research. You've got to know what you can live with. And that's one of the reasons, you know, that wealth managers will ask you these long, convoluted risk questions. Can you live? How do you feel if you have a 10% fall in your value of assets?
00:52:18:24 - 00:52:39:01
Unknown
20%? How do you feel, etc.? And that's down to personal feelings. We've argued many times that actually any falls you get can be quite quickly reversed and typically have been, you know, we expect to have, you know, 6 or 7 falls of 3 to 5% a dip, as we call them every year. You know, that's that's what typically happens.
00:52:39:03 - 00:52:58:14
Unknown
You really, you know, sort of once or twice a year, get more drawdown of more than 10% and, you know, might get a fall of 20 more than 20%. Bear market. We talked careers just in that bear market. Well, in April 2025 when Trump was doing all this tariff stuff, the S&P 500 for 20% in a few weeks, then immediately went up 30% straight away.
00:52:58:14 - 00:53:18:13
Unknown
So you could have easily be fooled into selling it at the bottom. And when it was down 20% and you would have missed out on the 30% uprise. So we try and look through these things sometimes. One of the reasons we've been building some cash is that we are cognizant that there may be a, you know, a potential wobble at some point, which would give us an opportunity to buy because we're very lonely.
00:53:18:14 - 00:53:38:24
Unknown
We're at rated an AI compared to most people out there. You know, we only have 5% in Nasdaq, and that's considered to be the biggest way of doing it. Now, you know, we have a decent position in emerging markets, which 50%, as I explained in the market of view, 50% of that is now basically Taiwan and career, which are very sensitive to what happens in the AI market.
00:53:39:00 - 00:53:57:20
Unknown
But yes, we've had the Footsie, as you say, we've got some of these offsets that have have made, although a difficult sort of 48 hours before the 48 hours ago, our portfolio was up about three quarters of percent when I ran the numbers. And yes, we ended up down, you know, over 1%. But that's the sort of, you know, we had some cushioning there.
00:53:57:20 - 00:54:21:24
Unknown
And that's one of the reasons we did build cash flow. Positioning in sentiment is one thing that I know you like to to be aware of was interesting. The survey results, 170 people there in the audience on Tuesday evening that only a handful had government bonds. Well, it doesn't surprise me as a as a bull, I think, you know, equity investors are naturally optimists.
00:54:21:24 - 00:54:39:06
Unknown
And if I had seen if I had seen something different, I would have probably felt more bullish, actually, if people were it weren't quite as exposed as that. I'm probably at the more bullish end of that as I naturally am, but I think most equity people tend to be and bond people tend to be more sort of cautious.
00:54:39:07 - 00:55:19:09
Unknown
As a rule. CJ was clear in the survey taken on on Tuesday night that positioning. Nowadays nobody has a 6040 portfolio anymore today. Yeah. And I'm going to say slightly different tomorrow. I was surprised that there were so little bonds within people's holdings. And I sort of note to reader, we need to do a bit more education on some of the defensive benefits of bonds, because there are benefits, and maybe I should be a little bit more, you know, mindful of that when we've been talking about what we're doing here, because, you know, it is wise to think about where your risk is in your portfolio and what your risk reward is.
00:55:19:10 - 00:55:43:17
Unknown
Now, we have set ourselves up as a, you know, pretend. We're a 30 to 40 year old with many years to go till retirement. So I can understand why people would have more equity. There was a whole diversity of age group in the room, but there wasn't a whole diversity of how many bonds they had. And surely as you get a little bit older, you should have a little bit of bonds if, if, if for no other reason, just a bit safer.
00:55:43:17 - 00:56:07:19
Unknown
So maybe you've got to do a better education program on that and I'll take that one away. I think it's also worth reminding people, because a few people came up and said, well, why don't you talk about, you know, what an equity is, what a bond is or whatever? And I kept saying to them, if you go back to our first five episodes of this show, episodes 1 to 5, we explain what an equity was, what a bond was, what commodity was, and what we were trying to achieve through the portfolio.
00:56:07:19 - 00:56:30:23
Unknown
And I think for new people to the portfolio, new listeners, then that's probably not a bad thing. Waste of time to go back and do that. And I would say one other thing, I was amazed on Tuesday night, but how many people came up to me to talk about bonds? And a number of them said, I think I thought bonds were really boring, and I don't know because I now understand how these things work.
00:56:30:23 - 00:56:51:07
Unknown
So we're we're are educating people. But I think maybe I've got to think a bit more about how the portfolio in the portfolio, whether we should have a little bit of a waiting there just to show people how that might vary, rather than just saying, not really. I mean, to be fair, you have given a sort of target yield that you would get interested in maybe buying gilts 6.5%, but that's that.
00:56:51:08 - 00:57:13:01
Unknown
Is he talking about the law at that point? Yeah. He thinks that they go to 6.5, but then within years you're one of your top ideas. And so I think just finding that making your point there, if your child is six and a half to have a full waiting, do you buy some at six just in case. Now, because I'm a professional bond investor, because I've done it for many years, I want to get it to the exact right basis point.
00:57:13:01 - 00:57:30:02
Unknown
But for the point of this portfolio, maybe I've got to say I'm taking much longer position, a much longer term decision in behalf of the equities we own. Yeah. So we should be doing that with bonds as well. So that's what I mean about let's let's take that back and think about some of them we've had and since day one.
00:57:30:06 - 00:57:49:11
Unknown
Yeah. So there's definitely a long term view in equities. Yeah I guess it comes to the question then. Any changes. This week's do we think I personally I'm not I'm not going to you know I'm not recommending anything. We've had a little bit of blow up in the last 36 hours. And up to that point everything was reasonably well behaved.
00:57:49:12 - 00:58:09:24
Unknown
Now I you know, I am concerned because I don't like the way this course we've gone. I don't like the rotation in the market and the way, the way that Footsie has gone up and everything else is down tells you there's a lot of money coming out of AI at the moment and into that. Maybe that's an opportunity for next week, but I would just rather wait and have and just keep keep the portfolio the same.
00:58:10:00 - 00:58:28:03
Unknown
See what happens over the next few days. We've got another podcast next week and we can make some changes then. Yeah, I don't have a problem with that. My natural instinct is to be buying this dip because we haven't even had the dip yet. We've just about into dip territory on Nasdaq, say my instinct is to be buying the dip, but I'm quite happy to sit on that cash at the moment.
00:58:28:03 - 00:58:49:18
Unknown
If I was going to do anything, it would be increase the gold position. As I said, real yields have come down in the last 24 40 hours and obviously the the inflation component of total yield has gone up. And then you've got the dollar starting to weaken and you've got money coming out of tech. So I think gold could be one of the big beneficiaries.
00:58:49:18 - 00:59:08:01
Unknown
But again happy to eat. It's very early. And you could this could be all done by tomorrow evening when the changes would be made. Or it could go on to the whole of next week. That is the that is the big unknown, as you say, I mean. But by not putting the cash in, all we're doing is maybe missing an opportunity cost.
00:59:08:01 - 00:59:26:19
Unknown
But if it if it bounces. But if not, we're still got that powder nice and dry. So that's it for today. No changes to the portfolio. And a special thanks to all of you who made the trip to Lourdes on Tuesday. Once again, don't worry, it went very well so I'm sure there will be more, maybe even a tour of the country.
00:59:26:19 - 00:59:41:00
Unknown
Gents. Oh no, he's been spared. That's me. So if you want to write in, then the email address is. The art of investing is. Have a fantastic weekend. We'll see you next week.
00:59:41:02 - 00:59:45:00