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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.
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Unknown
Welcome, everybody, to the Art of investing. Brought to you by EJI with myself, Rich MacDonald,
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Unknown
Chris Felling and
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Unknown
Mark spice. Holden,
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Unknown
I'll let you into a secret. Our producer, the wonderful Sophie, is away on holiday this week.
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Unknown
So against the lunatics have taken over the asylum. That's right Chris, there's nobody here to force you to laugh at my terrible jokes.
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Unknown
Rich. It never has been a problem laughing at your jokes. There are plenty. Funny enough. Even if I don't get to look at
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Unknown
No spice. Come on. You are up there in my beautiful homeland. What are you up to?
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Unknown
Well, I'm here for obviously to do the podcast, but I'm going to spend the next couple of days at the fringe and this will make you laugh or cringe. But I'm going to see a show tonight that my son is recommended to me. He's in a play called nesting. So if you're in the in around Summerfield, go and have a look at that.
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Unknown
It's a great play, great reviews. But I'm seeing a comedian tonight, an Australian comedian
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Unknown
called Gary Star. And he does the whole show apparently naked apart from a pair of flippers.
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Unknown
So
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Unknown
Are you in the front row?
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Unknown
I'm definitely going nowhere near the front row,
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Unknown
Right. We're talking about flippers, CJ, last week you told us. Dropped the bombshell even that you thought it was time to start looking for timing your exit from owning risk.
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Unknown
And that was all because of the the issues going on in the bond market. So why not give us an update? It's not often bonds get the the priority here, but let's dive right into
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Unknown
So for once, for once in a while, I actually go, right? And so let's update where we are with the bond market after the events of last week. And remember the events last week, the Treasury Secretary, Scott Besant, tried to manipulate bond prices because he didn't like those naughty boys in the bond market, doubting his fiscal credibility.
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Unknown
So a new player has entered the field this week, and that's a chap called Stanley Druckenmiller.
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Unknown
Now, Stanley is one of the most famous hedge fund managers in the world. And he ran a firm called Duquesne Capital. Very, very successful hedge fund used to charge three and 30 locks in for five years. And he never had a problem raising money.
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Unknown
What does that 3 in 30 mean Chris.
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Unknown
Okay, so so three and 30 means you get 3% per year as a fee and 30% of any money you make.
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Unknown
So, as you can imagine, he's not a poor chap. But he made his he he made his followers a lot of money
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Unknown
Whereas the industry standard nowadays is 1 in
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Unknown
The industry standard now is 1% of fee with 10% share of the profits. And, and that's worked its way down from these large amounts which were, which were their sort of ten, 15, 20 years ago.
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Unknown
before he ran Duquesne, he also ran the Quantum Fund with George Soros. Now, if this sounds circular to last week, stay with me because it is circular.
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Unknown
It's like invidious funding.
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Unknown
As you know, I used to work at Soros, and rumors had it that Stanley Stanley Druckenmiller was the real brain behind the investment themes. He was the guy who did all the research and came up with the ideas.
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Unknown
George as endure Soros. He had the sixth sense to know which were good ideas and which weren't.
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Unknown
He would move in and out of them very quickly, but his real skill was to push the accelerator, really increase the risk when he felt he had the right positions and he would take enormous positions. So Stan and George were the key guys, and Besson was the administrator. He made sure the office ran smoothly.
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Unknown
So Druckenmiller is not just another market commentator.
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Unknown
He was best since former mentor and colleague at Soros for management, best himself told the Ft. Last year that in macro, there's Stan and there's everybody else. So he's got a wonderful opinion of Stanley Druckenmiller and it would seem now they're not on each other's Christmas godless. Because Stanley has sharply criticized Scott Besson's Treasury bond buying plan this week,
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Unknown
As you did yourself this time last week.
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Unknown
all Soros guys lining up together, you can see
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Unknown
he says the Treasurer's decision to dump to double their lined bond buybacks was not liquidity management, as Bissonnette was saying, but price management, i.e. trying to manipulate prices.
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Unknown
He called it a mistake. And he said if the bond market wants to move higher in yield, telling you that fiscal policy is out of control, then that's something it should be allowed to do.
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Unknown
But what's happened to bonds? Has that had any effect? And the answer to that is very little. This week we've had a falling price, which I'm sure spice will talk about in a moment, that falling all price is really good for bonds because inflation is lower.
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Unknown
So bond yields come down a little bit.
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Unknown
Against that though, we have this uncertainty about what the Federal Reserve chairman, Kevin Warsh, is going to say at the Jackson Hole speech on Friday. So the market is very nervous. Bonds haven't decided which way they want to break yet. But I don't think this is over. Not in the slightest.
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Unknown
So watch this space.
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Unknown
Now that lines us up very well for the episode. We've got three questions and answers coming to you. One on gold. We're going to focus on gold this week. We're going to focus on whether it's still appropriate to buy single stocks. Or you should just focus on ETFs. And then finally we're going to look at D equities. Or are we going into a period of re equities.
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Unknown
So that's all to come back A quick look at our portfolio performance for the week. Better week. It has been quiet all the same. Everybody waiting for in video last night. And of course as C.J. alluded to their Jackson Hole coming up this weekend.
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Unknown
so the portfolio up just half a percent week on week. That takes us to 25.4% since inception and 12.9% year to date.
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Unknown
So more of that to come later including the winners and the losers for the week. But first
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Unknown
with that famous Nvidia update, it is by market update.
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Unknown
Well, I'm going to keep you waiting for the detail. But basically
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Unknown
the big picture stuff that is very important for the background sort of moving markets we've had, as Chris alluded to, they're talking about bonds. The oral price is down about 7% this week. And that's partly because Amazon and Iran have basically come to an agreement about revenue share.
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Unknown
So it sounds like ships will be charged to go through the Straits of Hormuz. We don't know what that will be yet, but the oil price has fallen in anticipation of some sort of deal there and at least shipping to better carry on.
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Unknown
It's been a pretty
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Unknown
poor week for chips again and chipmakers, semiconductors, etc. until last night's results from the video, which I'll touch on in a moment.
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Unknown
But another very good week for our friend Bitcoin.
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Unknown
we talked to a couple of weeks ago saying the crypto winter may be over, it's up another 12% this week and back above
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Unknown
$80,000
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Unknown
Gold and silver also up 2 or 3%, which is handy.
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Unknown
And we're seeing the biggest inflows into exchange traded funds that specialize in cryptocurrency, Bitcoin, Ethereum and gold and silver
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Unknown
the biggest inflows for ten months.
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Unknown
So that's that's pretty impressive. There is a bit of momentum beginning to gather behind
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Unknown
inequities. There's only been one all time high this week that I've noted of the major sort of areas we look at. And guess what that is the Footsie 250.
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Unknown
Oh is it really
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Unknown
on.
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Unknown
yeah
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Unknown
good call CJ.
00:08:03:09 - 00:08:05:03
Unknown
Well, the interesting thing
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Unknown
you saw yesterday the Burnham was saying that, you know, he's not going to he's not going to upset the applecart when it comes to growth or, or companies. He recognizes it's a tough time and therefore he doesn't want to create instability, uncertainty. Now, of course,
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Unknown
what he says.
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Unknown
And what he does might be two entirely different things. But if you wanted a bullish story, you're getting the right sort of mood
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Unknown
language, which is suggesting that things might be a little bit better for the UK
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Unknown
I think I wanted to mention are the very big picture stuff is obviously we've seen a Russian of a trade tariff war between Canada and the United States. So there's a 50% tariff being slapped on Canadian goods by Trump and Canada, led by Mark Carney, or ex chairman of the Bank of England, has basically done exactly the same thing tit for tat, 50% back the other way.
00:09:01:20 - 00:09:16:22
Unknown
So we've got all out war in North America, and that's as you'll see when we come and look at the portfolio, I think has been one of the main reasons why we've seen a drag in US equity markets this week compared to other equity markets around the world.
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Unknown
We'll talk more about that later, undoubtedly.
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Unknown
But let's go on to the results. As rich and as alluded to
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Unknown
in video, was the big one last night at about 9:20 UK time, we had an absolutely amazing sort of set of numbers, hit the screens,
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Unknown
beat all expectations, but then very quickly market makers who the people who make the prices in these shares put the shares down in price initially, and that was until they not knocked down about 2 or 3%.
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Unknown
And that was until the finance director stood up at the conference call and basically said,
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Unknown
it's great, everything's going well. And by the way, we want to give you some guidance about next year or for they have a fiscal year ending, which is the end of January 2028. So
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Unknown
the 12 months up until the end of January 2028.
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Unknown
So most of the 2027. They upped the forecast revenue forecast to 70% growth, seven 0% growth.
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Unknown
So Nvidia has gone sideways for a whole year around $220 a share. Are we just missing the best stock in the market? And people are refusing to invest in it because they think it's got too big? Or does everybody remember that the chip makers, the semiconductors are cyclical and this will come back to bite them at some point.
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Unknown
But spice with 70% earnings growth next year on 24 times earnings, is that just too cheap?
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Unknown
I mean I hate to correct you, but it was 70% revenue growth next year. And that is a very important distinction because equity investors like revenue growth
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Unknown
more than they do earnings growth because earnings growth can be manipulated at the side by them buying back shares or doing other sort of tricks. But
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Unknown
it was 70% growth they're guiding to in their fiscal year that ends in January 2028.
00:11:17:22 - 00:11:32:08
Unknown
So for 2027 and a bit if you like, the old consensus was they were expected to grow up 44%. Revenue growth is now expected to be 70%. And that means that from this year, from last year,
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Unknown
the revenue that will be generated by this company will have trebled to nearly $670 billion in one year.
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Unknown
that is just I mind boggling.
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Unknown
And they they said very openly growth is being constrained by supply not by demand. Now we're going to have a debate later on. But one of that's one of the reasons they're trying to improve, spend money and sort of lend money to infrastructure suppliers because the infrastructure isn't there yet to meet all of this demand. And it's a wonderful problem to have, but it's just growth that I can't ever remember seeing.
00:12:14:05 - 00:12:21:09
Unknown
And it's certainly this is very high quality growth, what I call high quality growth. So I do believe it's repeatable.
00:12:21:11 - 00:12:35:01
Unknown
you know, when you're dealing with what we used to call the law of large numbers, even a small percentage increase on a very large number is very large. But a big percentage increase on a large number is just absolutely enormous.
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Unknown
So I think the markets,
00:12:37:04 - 00:12:47:23
Unknown
you know, are interpreting it well. The shares went from being down about 3% to being up 3 to 4%. In fact, I think they're about up 6% as I talk at the moment,
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Unknown
as indicated before the US open today.
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Unknown
And that's helping lift most of those markets that are exposed to AI, which is principally, obviously Nasdaq in America and the S&P 500.
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Unknown
I think there is a very good point here being made by both of you. It's not often I say that, but
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Unknown
that is that the numbers keep coming through and the stock price isn't actually going up. And so what's actually happening is for those people who are listening and wondering how the whole process works is the multiple is getting cheaper, as you say, rich, and therefore the market is showing that it is suspicious as to whether that growth is going to come through.
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Unknown
So for those people who have been worried about a bubble blowing, and this is, you know, everything is getting massively too expensive. The market's actually being quite cautious in what it's taking on board. So that gives a little bit of protection to, to to people.
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Unknown
The first concern that I have with Nvidia and the market has with in Vidya is that you would expect it to say what it said last night. You know, the finance director came out and basically said,
00:14:02:18 - 00:14:17:23
Unknown
all these people who are worried about, you know, us with this balance sheet, business model, balance sheet as a service, as it's been described, because they're helping to fund everything that's going on, shouldn't be worried because the demand is there.
00:14:18:03 - 00:14:33:15
Unknown
I'm not an expert, but I saw that Morgan Stanley bought out a document yesterday on the debt ratings of the hyperscalers and whether you should buy or not buy the debt that has been issued to funds this data center development.
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Unknown
Now, the interesting thing is they came out with a neutral stance. Now,
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Unknown
a
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Unknown
Yeah. From an investment bank that wants all their business.
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Unknown
correct?
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Unknown
No investment bank is going to say sell when they want the business. So the worst they can say is neutral.
00:14:55:15 - 00:15:22:18
Unknown
the reason they are neutral on it is because they basically say these tail risks are too great. And I love this expression. The opaque financing pulse through creative structures in the ecosystem. So they've actually looked at this circular funding and put it out in a couple of flowcharts and says, well, you know, in theory this all makes sense, but it's really quite technical.
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Unknown
It's really quite complex,
00:15:25:03 - 00:15:46:06
Unknown
and it's very similar to situations in the past where complexity hasn't always been the friend of market performance. And the one that obviously comes to mind to me, I'm not suggesting we're here in any way, shape or form, but is the CDO market, which was developed in 2006 2007, now
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Unknown
CDO stands for
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Unknown
collateralized debt obligations and was invented by investment bankers in 2006 2007. It's really clever.
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Unknown
You take all this debt, you pile it into a vehicle, and then you try and shop that debt by the better quality and lesser quality and crappy quality.
00:16:09:18 - 00:16:11:20
Unknown
It's like a night out with you to.
00:16:11:22 - 00:16:16:19
Unknown
Exactly. And you can basically by whichever bit you like.
00:16:16:24 - 00:16:17:07
Unknown
Of course.
00:16:17:08 - 00:16:42:05
Unknown
Now these, these investment bankers developed this product and it went really, really well. It went really, really well. And they made a lot of money. And they they skated off into the sunset as they left the financial system to destroy itself. In 2008, as people realized the mortgage backed securities that were behind these CDOs, the the underlying credit was a lot worse than anybody thought.
00:16:42:08 - 00:16:52:03
Unknown
in a way you could draw some sort of parallels in the complexities there and in vedere funding their own chip purchases to other private debt holders.
00:16:52:03 - 00:17:19:22
Unknown
Now, the other thing, the second point is that the real yield argument we talked about last week, which is if real yields are going higher, the importance that has always had in markets in the past has been the rating, the price earnings multiple that Rich's talked about just now gets pushed down, i.e. as bond yields go up, as interest rates go up, those pieces go down.
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Unknown
So although they may be growing rapidly,
00:17:22:10 - 00:17:25:18
Unknown
maybe we're just rating things at 24 times.
00:17:25:20 - 00:17:33:11
Unknown
It's too expensive in the real yield environment that we're looking at. So so those are my two my two concerns. But I have to say the numbers were great.
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Unknown
and the market's right to react to them positively in that in the short term.
00:17:37:20 - 00:17:56:17
Unknown
I guess a lot of people running money now haven't seen that situation before where real yields have been going up and you're meant to contract P s the the whole idea of contracting valuations and multiples just just doesn't happen anymore since the financial crisis. And it seems to have been forgotten about spice.
00:17:56:21 - 00:17:59:18
Unknown
I mean, I want to give you a little bit of mass on this, because
00:17:59:23 - 00:18:26:20
Unknown
current PE ratio price earnings ratio for invidious until January 2027, so you know, about 6 or 7 months forward, nine, nine, six months from here is 24 times, as Rich says, one year after that it drops to 14 times. Now the market will be skeptical at the moment and that 14 but if as you go through the year and into next year and get closer to January 2028,
00:18:26:20 - 00:18:33:00
Unknown
if they've delivered, if everything else isn't right, the AI boom is still continuing.
00:18:33:02 - 00:18:46:09
Unknown
It won't be trading on 14.1 times. It's probably going to be trading on probably 20 times, which is lower than the 24 times we're talking about today. But that's still a 50% five 0% increase in the share price from today.
00:18:46:11 - 00:18:51:22
Unknown
So if you're an optimist like me, you say this is a great opportunity. The market is being hugely skeptical.
00:18:51:23 - 00:18:59:09
Unknown
Why don't I go and buy those shares now with a 18 month view? And if I'm right and if the finance director,
00:18:59:09 - 00:19:06:03
Unknown
their guidance is correct. And by the way, they cannot knowingly or recklessly, to use the words of the SEC,
00:19:06:09 - 00:19:12:19
Unknown
They cannot knowingly make these numbers up. They have to have numbers in the background and orders.
00:19:12:21 - 00:19:17:05
Unknown
They can't make these public statements because that would be misleading markets.
00:19:17:08 - 00:19:24:11
Unknown
They're not allowed to do it. So they don't say these things publicly, lightly. And therefore I'm willing to trust them
00:19:24:13 - 00:19:39:02
Unknown
because the finance director doesn't want to lose their job. And, you know, if you're patient and you believe they're going to be delivered, you've got a bigger amount of upside to come because the US market, even if it gets rated, it's still going to trade on 18, 19 times
00:19:39:02 - 00:19:48:21
Unknown
But all you're really saying they're at spices. They say it. So I believe it I mean you wouldn't be the first time. That's not works. And it won't be the last time that's not worked.
00:19:48:23 - 00:19:54:08
Unknown
You expect them to say it. And they can always say, oh, that's what we thought was going to happen. It didn't.
00:19:54:10 - 00:20:01:22
Unknown
if I have just one more attempt and Rich, you'll need to be the judge here as to whether how complicated we get here
00:20:01:24 - 00:20:14:21
Unknown
when in video was being when when they were speculating as to how much money, if it was going to make two years ago, it would trade on a multiple of 70, 80, 90 times.
00:20:14:23 - 00:20:27:02
Unknown
And the market was right to say it can trade that high because the numbers are coming through. The market is now saying it should trade at 14 times two years out, multiple.
00:20:27:02 - 00:20:28:23
Unknown
Maybe it's right again.
00:20:29:00 - 00:20:32:05
Unknown
let's remember, you know, we're talking about one stock in the index here. And okay
00:20:32:10 - 00:20:37:06
Unknown
8% of the S&P 500. But just because in Vedere goes up
00:20:37:11 - 00:20:40:16
Unknown
doesn't mean that the index will go up because
00:20:40:18 - 00:20:55:15
Unknown
their revenues are the costs of Amazon and Meta and Alphabet and the real other big juggernauts in this index. So it might be boost for in video but not necessarily bullish for the index.
00:20:55:15 - 00:21:00:00
Unknown
And that will take us on later on to to talk about whether you should be
00:21:00:05 - 00:21:05:18
Unknown
investing in single stocks going forward or you should be investing in an index.
00:21:05:21 - 00:21:15:24
Unknown
Yeah all very good points there guys. I've got that as a natural optimist. You know where I'm going with this. I'm happy to to sort of sit with the in video and see it's the biggest company
00:21:15:24 - 00:21:19:12
Unknown
in the world. And I suspect they will continue to be that for a while yet.
00:21:19:14 - 00:21:32:13
00:21:32:13 - 00:21:49:02
Unknown
Right now. Let's take a quick look at the model portfolio reminder that we run a model portfolio for you to see where the three of us, with our 100 years of investing experience in these markets, what we would do with our money and how we would
00:21:49:05 - 00:21:51:02
Unknown
allocate assets into
00:21:51:02 - 00:21:52:18
Unknown
diverse portfolio.
00:21:52:18 - 00:21:56:04
Unknown
So the performance year today up 12.9%. And since
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Unknown
inception up 25.4%.
00:21:59:05 - 00:21:59:08
00:21:59:09 - 00:22:00:18
Unknown
the best performer.
00:22:00:18 - 00:22:04:12
Unknown
It's not just being gold, the only commodity going higher.
00:22:04:12 - 00:22:06:23
Unknown
All the mining stocks have performed well,
00:22:06:23 - 00:22:11:07
Unknown
with the Blackrock World Mining Trust up 4.7%,
00:22:11:07 - 00:22:11:11
00:22:11:11 - 00:22:29:12
Unknown
copper also strong on the week, up 1.9%. And we've got emerging markets up 1.8%. So spice it hasn't just been gold rallying. This is the idea of the inflation trades is back with that yield curve control from the Treasury.
00:22:29:16 - 00:22:35:05
Unknown
Absolutely. And as you say the biggest beneficiary is actually our commodities. And that's shown through
00:22:35:05 - 00:22:41:05
Unknown
you know very well for our portfolio and for other people who own metals out there. That's great news.
00:22:41:07 - 00:22:52:16
Unknown
I think one of the interesting things that actually struck me this week is when we talk about the losers, let's do that now. But our biggest losing positions, we're basically all the top three were all American indices.
00:22:52:16 - 00:22:53:05
Unknown
So the
00:22:53:09 - 00:22:54:16
Unknown
US industrials
00:22:54:20 - 00:22:57:10
Unknown
sector position, we've got XLE
00:22:57:12 - 00:23:06:05
Unknown
that fell 1.2%. The Russell 2000 fell 1.2% my old favorite and Nasdaq 100 although it's going to make that up today
00:23:06:05 - 00:23:08:01
Unknown
was down 1.1%.
00:23:08:01 - 00:23:08:06
00:23:08:06 - 00:23:13:08
Unknown
part of that is due to the fact that Donald Trump has reignited this trade war with Canada,
00:23:13:08 - 00:23:19:05
Unknown
and I think certain international investors would have pulled money out of the US and taken it home.
00:23:19:05 - 00:23:24:05
Unknown
And that's certainly would have helped the emerging markets. It also helped the
00:23:24:10 - 00:23:27:19
Unknown
Footsie 100, which is actually our fourth best performer
00:23:28:00 - 00:23:28:03
00:23:28:05 - 00:23:36:15
Unknown
So well done CJ. We've had what's called a value bounce, but we'll see if that continues after Nvidia's results today.
00:23:36:19 - 00:23:45:14
Unknown
As we said on many occasions, every dog has its day. It's been a pretty lagging market for the past few weeks.
00:23:45:14 - 00:23:57:07
Unknown
But as you say, the tech stuff has just had a bit of profit taking ahead of maybe Jackson Hole. And that is, you know, with the bond yields doing what they're doing. And some of the more established stuff has done a bit better.
00:23:57:07 - 00:24:18:15
Unknown
So you know, that's that's good news. But all bets are off until we see what the fed chairman says on Friday. Hopefully as we've said he will row behind the the Treasury Secretary. Keep keep clear and many comments. Remember he doesn't believe in forward guidance. So he's not he's only us. Whether he thinks rates are going up down or anything like that.
00:24:18:16 - 00:24:29:16
Unknown
Hopefully he'll stick with his balance of payments stuff that you were talking about and it'll all be a bit of a yawn. And then markets will be set steady for a not too bad September.
00:24:29:18 - 00:24:39:17
Unknown
Remembering also that September is not a great time for for risk markets. So, you know, we're running into that tricky period. But you know, it looks to me like things are okay at the moment.
00:24:39:17 - 00:24:52:09
Unknown
Now moving on to your viewer questions. We've had some great questions in. And it's time for me to grill the guys and find out the answers to those questions. So
00:24:52:11 - 00:24:53:20
Unknown
the first one that we had
00:24:54:01 - 00:24:59:05
Unknown
basically the theme of it was why bother investing in single stocks?
00:24:59:06 - 00:25:04:15
Unknown
Now we can see that we chose to only invest in ETFs in the portfolio.
00:25:04:20 - 00:25:14:15
Unknown
CJ if most investors, including the professionals, underperform, then why bother investing in single stocks at all? Why not just go down the route of ETFs for your investments?
00:25:14:15 - 00:25:27:20
Unknown
Well that's a great question. And the and there's a very simple answer to it. And that is don't bother investing in the single stocks. But I don't want people to think that when I say
00:25:27:22 - 00:25:29:02
Unknown
that's not because
00:25:29:02 - 00:25:48:15
Unknown
I don't want it to be true that people can pick good stocks. It's just a 40 years of experience. In the markets where I've looked at many managers, I've interviewed many, whether it's part of my hedge fund brief or whether it was part of my job as a chief investment officer.
00:25:48:15 - 00:25:55:02
Unknown
I'm trying to find people who can create alpha, and when I say alpha, I mean people who could outperform an index.
00:25:55:02 - 00:25:59:15
Unknown
people who can actually outperform that ETF passive structure.
00:25:59:17 - 00:26:04:06
Unknown
And I'm afraid that, you know, over all those 40 years, I
00:26:04:08 - 00:26:08:02
Unknown
found it very, very, very difficult to find
00:26:08:02 - 00:26:18:18
Unknown
people who can do that. There was an article last week in the Wall Street Journal entitled, Stock picking funds are Performing as Poorly as ever.
00:26:18:18 - 00:26:35:23
Unknown
What this document showed was that over ten years through to June 2026, only 13% of actively managed US large cap equity funds outperformed the benchmarks. So let's say, for example, that
00:26:35:23 - 00:26:38:05
Unknown
were trying out from the S&P 500.
00:26:38:07 - 00:26:49:21
Unknown
There's these people sitting there getting paid 80 basis points, 1% picking it stock A over stock B, maybe buying Nvidia and selling, you know IBM.
00:26:49:23 - 00:26:57:17
Unknown
And you know when you look at their performance over ten years only 13% of them
00:26:57:17 - 00:27:16:05
Unknown
have outperformed that index. And if we just take the year. So just a year from June 25th to June 26th, this paper showed it was 27%. So 1 in 4 were able to outperform on a one year view, and about 1 in 10 on a ten year view.
00:27:16:08 - 00:27:18:04
Unknown
had a stock picker in front of us now, I mean,
00:27:18:04 - 00:27:23:06
Unknown
we got Mark here, but he's you know, he's he gave up that job some time ago.
00:27:23:06 - 00:27:37:15
Unknown
They would say this was a great time for people to produce alpha to outperform the index, because the dispersion between various individual stocks has risen to its highest level in a decade.
00:27:37:16 - 00:27:56:20
Unknown
Now. Now, what do I mean by dispersion? I mean the difference between the best performing stocks and the worst performing stocks is enormous. Some might be down 60%, some might be up 200%. So this should be a great time to be a stock picker. But actually less and less people are outperforming.
00:27:56:22 - 00:28:03:18
Unknown
Right now we've asked the bond guy I mean, what does he know about picking stocks? Right. You are my equity expert
00:28:03:20 - 00:28:17:20
Unknown
Now if markets are becoming less efficient right. With all this passive investing everybody's going down the index route. Now, isn't this the exact time you should be generating Alpha from picking single stocks?
00:28:17:20 - 00:28:19:12
Unknown
Yeah I mean I think it's
00:28:19:18 - 00:28:38:23
Unknown
very complex argument as to whether markets are efficient. And you know by efficient we mean that if any news that's out in the public domain will be absorbed by the share price, and the share price will go up or down to reflect whatever that latest news flow is, in conjunction with everything else that's happened in the past.
00:28:38:24 - 00:29:02:08
Unknown
I think what has definitely happened, which is why it becomes more difficult to be a stock picker, is that the speed of the moves is just unbelievable. It's fractions of seconds and a share of news comes out. Like Nvidia's news last night that a statement was digested. There was nothing about that forward guidance. In their first statement, the shares went down 3%.
00:29:02:09 - 00:29:10:11
Unknown
Then the finance director stood up and spoke, and the shares went suddenly from being down 3% to up 6%. So 10% swing.
00:29:10:11 - 00:29:14:08
Unknown
But you had had no chance to actually react to that
00:29:14:10 - 00:29:19:09
Unknown
I'll show you my history. You'll actually find that I bought shares at 205 last night.
00:29:19:11 - 00:29:21:15
Unknown
Well done Rich, well done.
00:29:21:17 - 00:29:36:09
Unknown
But you know it is. It's a rare thing. You have to be watching these things full on. It is a full time job. And the thing is, most people who will listen to this podcast, including myself, even I don't have that time to look at these individual stocks in such detail anymore.
00:29:36:10 - 00:29:53:21
Unknown
And so, yes, it might be a bit lazy. Way to do it is to investor ETFs, but it's also a naturally a safer place to do it as well, because you don't get the hit by those big down days, okay. You won't get as many big up days, but you certainly don't get the pain when things go bad.
00:29:53:21 - 00:30:12:06
Unknown
I also just want to add on I want to believe that stock selection works. I have seen over time numbers that would suggest it works, but the problem is that when you look at those periods
00:30:12:08 - 00:30:20:21
Unknown
you look at what factors worked over that period, remember we talked about factors before. There's the momentum factor. There's the value factor.
00:30:20:22 - 00:30:44:06
Unknown
There's the quality factor, all these different factors. When you look at them, you find that actually most fund managers align with the factor. So you might find someone who's done really well over the last five years. But actually there are momentum investor. And the men have been the best factor. In which case why don't I buy just the momentum ETF which I can buy.
00:30:44:12 - 00:31:03:07
Unknown
And that cost me ten basis points in fees than buying a manager who gives me exactly the same performance as that momentum ETF, but charges me AC basis points in fees. So what what you find nowadays to me is that most managers have factor favoritism.
00:31:03:07 - 00:31:06:05
Unknown
There's some managers out there who always loved quality,
00:31:06:05 - 00:31:12:20
Unknown
and for a number of years, I think Terry Smith is a perfect example of someone who's liked quality for a long time.
00:31:13:00 - 00:31:33:21
Unknown
And now his numbers for the last three years haven't been very good because quality hasn't done particularly well. So to me, I'd like to believe people can do it. I'm I'm sure there are some who can, but I don't have the time to find those people. And therefore to me, I would rather by an ETF.
00:31:33:23 - 00:31:43:20
Unknown
I guess that there's so many ETFs available now. And like CJ says you can get the factor ETF. So a momentum one or you can get
00:31:43:20 - 00:31:55:18
Unknown
an industry specific ETF. So is ETF investing a lot more like single stock investing than it used to be. So you may as well good old ETF rather than single stock.
00:31:55:20 - 00:32:13:01
Unknown
certainly the thing. That's a very good point. I think I looked the other day, there is something like 4400 ETFs in the United States alone that quoted in the US against about 4200 companies that are quoted on the stock market. So there are now more ETFs
00:32:13:03 - 00:32:21:13
Unknown
than there are stocks and shares. The difference with an ETF to a manager or a stock is an ETF does exactly what you want it to do.
00:32:21:13 - 00:32:32:09
Unknown
In a sense, it you want it to perform in line with the S&P 500. It will do it. If you wanted to perform in line with the US industrials. We remember the US industrials XLI.
00:32:32:09 - 00:32:39:14
Unknown
We pay relatively small fee sort of 2030 basis points or 0.2 0.3%. Remember that is
00:32:39:16 - 00:32:44:01
Unknown
that gives us exact replication of what thing we're trying to achieve.
00:32:44:06 - 00:32:48:22
Unknown
As if you have a money manager or a guy who's making that decision
00:32:48:24 - 00:33:04:11
Unknown
one year, he may do it, the next year he may miss the target by a mile, and you're paying him probably over 1% for the privilege. So I'm I'm a convert because I started my career as a stock picker and doing exactly what Chris said.
00:33:04:11 - 00:33:12:06
Unknown
and I've definitely evolved in summer. Now, who says the best way forward for me personally, unless you are doing this full time,
00:33:12:08 - 00:33:18:01
Unknown
is undoubtedly to use ETFs. In my humble opinion, the cheap and they do what they say they're going to do.
00:33:18:03 - 00:33:24:22
Unknown
Right on to our second question. And that is a deep dive on gold. We haven't had it in the portfolio for a long time
00:33:24:24 - 00:33:32:21
Unknown
Spice actually bought some for himself when gold dropped under 4000. But we ignored that idea.
00:33:33:00 - 00:33:34:23
Unknown
Chairman. And
00:33:34:23 - 00:33:44:16
Unknown
we haven't really loved it. In fact, you haven't really looked at gold in the same way ever since it had that ridiculous parabolic run at the start of the year.
00:33:44:16 - 00:33:45:12
Unknown
So
00:33:45:14 - 00:33:48:02
Unknown
has the shine come off it for you completely?
00:33:48:02 - 00:33:50:17
Unknown
I sort of love gold and I hate gold
00:33:50:21 - 00:33:55:19
Unknown
occupies that sort of territory for me. There's never a time when I'm sort of lukewarm to it or call to
00:33:55:24 - 00:34:01:05
Unknown
at the end of the day, I look at the macro conditions. That's what I try to look at for gold now.
00:34:01:05 - 00:34:05:21
Unknown
We bought it in our original portfolio, and we made a lot of money in it in our original portfolio,
00:34:06:00 - 00:34:16:24
Unknown
then we sold it out of our original portfolio at around the $4,000 range, a little bit higher than for a bit of it. But we kept our exposure with our
00:34:17:00 - 00:34:22:12
Unknown
our World Mining Trust. So we knew we had exposure to it, but we felt it had done pretty well.
00:34:22:12 - 00:34:24:23
Unknown
And now maybe time to take some profit.
00:34:25:00 - 00:34:31:08
Unknown
of course we were wrong and it went up. Or rather, I was wrong and it went up to over 5000.
00:34:31:10 - 00:34:36:14
Unknown
then I stayed out of it and it's come back down to 4000 again. So really to me it's done nothing
00:34:36:14 - 00:34:40:03
Unknown
in the last. Well I don't know, nine months, let's say.
00:34:40:05 - 00:34:52:15
Unknown
Spice the Treasury intervention into the long end of the yield curve last week. That together with your belief that they're already running the economy hot. That's that's the perfect scenario for gold isn't
00:34:52:17 - 00:34:59:12
Unknown
It certainly is. Because, you know, for hundreds of years people have considered gold and inflation hedge
00:34:59:18 - 00:35:04:01
Unknown
because it's a real hard asset and there's very limited supply.
00:35:04:01 - 00:35:12:03
Unknown
And it has tended to, in general do very well when there's times of inflation around the place.
00:35:12:05 - 00:35:26:11
Unknown
And we are, you know, in a period that that, you know, Chris has brought to that the bond market is desperate for the central bankers to put up interest rates to sort of slow this or sort of counter this inflation that we've seen rising over the last few years.
00:35:26:13 - 00:35:32:17
Unknown
And yet the central bankers, particularly in America, are reluctant to do that. So for me, that's actually quite a good backdrop
00:35:32:17 - 00:35:34:04
Unknown
for investing in gold.
00:35:34:06 - 00:35:44:09
Unknown
then you've got the real yield move as well. So so are these two things that are fighting against each other. The the inflation backdrop and the increasing real yields.
00:35:44:13 - 00:35:50:00
Unknown
think there's three elements. One is, is inflation here and it's inflation going to get worse.
00:35:50:00 - 00:36:05:18
Unknown
The second one is the real yield argument. And that is an important argument as well. And the third one of course is the dollar index and the dollar itself. So those are normally the sort of three reasons why people might give for why gold should do.
00:36:05:18 - 00:36:14:00
Unknown
Well. Now I've looked back at this thing over a long, long, long, long time. And, you know, we can challenge each other's views on various things. I mean, spice just now
00:36:14:02 - 00:36:22:09
Unknown
said, well, it's the worry about inflation, but spice doesn't believe there is any inflation. So why is he buying gold? It doesn't make sense to me. That isn't right.
00:36:22:11 - 00:36:41:08
Unknown
What to me is, if you look at it, I think there are two things that dominate its performance. One is the dollar and I think spice than I would agree with, you know, when people got strong views about the dollar that can dominate. But the other thing and this is, you know, you've got to be as old as me to remember this sort of thing.
00:36:41:08 - 00:36:43:00
Unknown
But the other one is real yields.
00:36:43:00 - 00:36:55:20
Unknown
If you draw a chart of the real yields that you get on index link bonds. And we've talked about this last week, but in the UK we've had index linked bonds a long dating that's in bonds since 1985.
00:36:55:22 - 00:37:03:04
Unknown
So you can look back at what those yields have done. Back in the old days real yields were about 4%.
00:37:03:09 - 00:37:15:05
Unknown
So that means you've got to return above inflation of 4% by holding index linked bombs. They moved down to 2%. So real yields moved down to two. And then they yield
00:37:15:08 - 00:37:17:20
Unknown
moved down to minus
00:37:17:22 - 00:37:18:19
Unknown
now they're back up
00:37:18:23 - 00:37:27:03
Unknown
plus two again. Now if you look at when gold has done poorly in the past, it's when those real yields were high.
00:37:27:05 - 00:37:30:16
Unknown
Now I think we're going back into that same
00:37:30:18 - 00:37:59:07
Unknown
area now. And therefore I see why people want to buy gold. Gold has done poorly from the highs. And so therefore people think it must be cheap compared to where it was. But actually the underlying fundamental macro view to me that of real yields moving higher doesn't help it. And so I wouldn't still be as keen on it as,
00:37:59:10 - 00:38:00:22
Unknown
both of you.
00:38:00:24 - 00:38:08:21
Unknown
But I'm always I'm always willing to be persuaded if someone's got a particularly strong view as to why that might change this time
00:38:08:23 - 00:38:19:16
Unknown
Okay. And of course, the argument there is that I can have a boolean of gold in my safe at home. I don't, by the way, just in case anybody thinks about coming to grab
00:38:19:18 - 00:38:21:19
Unknown
But I get I get no return on
00:38:21:24 - 00:38:28:20
Unknown
Nobody pays me any interest, no coupon, no borrow, nothing. I've just got a lump of gold sitting in my house.
00:38:28:22 - 00:38:48:07
Unknown
Whereas I can have my money in the bank or in bonds. And as CJ says, as the real yield goes higher, then I'm receiving a much better reward for holding that asset relative to holding a lump of shiny metal. So spice what
00:38:48:10 - 00:38:49:23
Unknown
changes that scenario? Okay,
00:38:49:23 - 00:38:53:23
Unknown
Gold's already had a 15% run off the laws.
00:38:54:00 - 00:39:00:16
Unknown
What makes it go materially higher from here? And do you think that we should have some in the portfolio.
00:39:00:20 - 00:39:14:04
Unknown
Well, I think there are two things that you guys are missing. That one is that if you think that governments or central bankers are not to be trusted anymore or are not going to do their job properly,
00:39:14:08 - 00:39:23:04
Unknown
people tend to try and hide in some of these other assets that are, you know, sort of outside of the normal realms of that.
00:39:23:04 - 00:39:48:03
Unknown
And gold is one of those. I think that's one of the reasons Bitcoin has started to perform well again, because people have seen, you know, the growing trade spat between Canada and the US. So maybe they're going we don't really like Trump again. Is he going to do it elsewhere, etc., etc.. And you know, if Besson is trying to do what he's doing and Kevin Walsh is not going to put interest rates up, that means, you know, the dollar should weaken in time compared to other currencies.
00:39:48:03 - 00:39:49:15
Unknown
Again, goes back to the dollar. But
00:39:49:15 - 00:40:01:07
Unknown
one of the big differences and what hurts gold earlier in the year. And remember the Gulf War started six months ago almost to the day. Now we've been going for six months. And
00:40:01:07 - 00:40:03:01
Unknown
at that point,
00:40:03:03 - 00:40:18:08
Unknown
governments who were very heavily investing in things like gold and silver and copper and other commodities with their spare cash that generated from their economies, particularly emerging markets and China,
00:40:18:13 - 00:40:23:02
Unknown
that cash has had to be diverted into paying a much higher all price.
00:40:23:04 - 00:40:50:12
Unknown
And I therefore think it's quite interesting that as the old price seems to have peaked and come back a bit and, you know, arguably could come back some way further if they do this still between Oman and Iran, then there will be a return to some cash surplus for some of these, these central banks and governments around the world, which before the conflict, they were happily diverting into gold because central banks were building gold positions.
00:40:50:12 - 00:40:59:24
Unknown
That was a well known fact. I think they were the biggest buyer of gold for a long period of time, and that added to it. And they've been out of the market because of this high all price.
00:41:00:01 - 00:41:09:20
Unknown
encouraged. You know, we're at about 4600 today. The all time high was 5600, give or take 5595. I think it
00:41:09:22 - 00:41:23:23
Unknown
said, my short term view is I think we will go back to the 5000 level because that's a big psychological level for markets. And if we get through that, then we'll we'll go back up to that all time high. So I'm positive, you know. But there are plenty of
00:41:24:00 - 00:41:27:12
Unknown
plenty of sweeties in the shop. I like at the
00:41:27:14 - 00:41:30:02
Unknown
and I could pick many, many things I like.
00:41:30:02 - 00:41:32:20
Unknown
CJ wants to buy everything. What do you think.
00:41:32:20 - 00:41:47:04
Unknown
I wouldn't find myself disagreeing. But, you know, he's he's abandoned that inflation view that he started off with. So that's great. So I'm taking that as a win. But what he is saying and I agree with is some of the things that Trump has done
00:41:47:06 - 00:41:52:02
Unknown
may undermine the dollar. Undermining the dollar will build interest in gold.
00:41:52:02 - 00:41:54:03
Unknown
So I'm with spice on that.
00:41:54:08 - 00:42:07:24
Unknown
just how does this real yield argument offset the dollar argument. And so I think it's absolutely right that if let's say it Jackson Hole the fed chairman
00:42:08:01 - 00:42:18:09
Unknown
calms everything down on the bond market. Keeps everybody relaxed. I think given what's going on in the geopolitical side of things, gold may well push higher still.
00:42:18:10 - 00:42:43:15
Unknown
And maybe we'll find ourselves next week saying let's buy some gold because we feel we've got that sort of green light. The issue to me is if they lose control of the bond market, I think that will hurt the gold price as well. So you may have a situation where one offsets the other, but I'm not sitting here bearish of gold I and if we were we wouldn't have the World Mining Trust.
00:42:43:16 - 00:43:04:02
Unknown
We've got a nice decent position there which is goals in itself. It's got gold, silver, copper and other things there. So I'm not negative. I just can't get myself excited. And I share spices for you that there are other things to buy. If you get bullish, for example, you're in video or something like that where you've got some fundamental earnings behind there.
00:43:04:04 - 00:43:05:24
Unknown
You know, if you buy into that story.
00:43:05:24 - 00:43:30:03
Unknown
it comes down to the to the US government. And the idea is are we back in the this debasement trades that you guys have spoken about, or is the US government actually going to start putting policies there to get their spending down and get their budget deficit under control? If you believe that, then you'll believe anything because there is not a chance
00:43:30:06 - 00:43:38:22
Unknown
spice keeps on referring to as big beautiful Bill, and there is no way that they're going to stop spending, and I don't know how they manage to do
00:43:39:03 - 00:43:51:15
Unknown
But if the Chinese are buying gold, and as spice says, as the oil price comes down, the other countries around the world also start investing in gold because they know that dollar is not as safe as it used to be.
00:43:51:21 - 00:43:53:07
Unknown
I think there is a hunt
00:43:53:10 - 00:43:58:12
Unknown
for somewhere to store your wealth. And I think that that gold ticks that box
00:43:58:17 - 00:44:06:22
Unknown
spice. You mentioned a cash surplus there. That seems to be something that could be disappearing fast. And it takes us on to our third question
00:44:06:22 - 00:44:16:09
Unknown
around the Or requisition. And CJ want to just give a quick introduction as to what those terms actually mean.
00:44:16:11 - 00:44:24:24
Unknown
it's a well known story within the investment markets that over the past, you know, 15, 20 years
00:44:24:24 - 00:44:32:00
Unknown
equity has has been taken out of the public equity markets either by.
00:44:32:04 - 00:44:35:01
Unknown
Buybacks from companies because they made so much money
00:44:35:01 - 00:44:41:12
Unknown
or by companies going private and private equity, taking out those
00:44:41:14 - 00:44:42:13
Unknown
00:44:42:16 - 00:44:49:14
Unknown
listed equities. And therefore the supply of equities has been low. There haven't been that many IPOs or
00:44:49:17 - 00:44:51:03
Unknown
Initial public offering.
00:44:51:05 - 00:45:02:09
Unknown
And therefore you know it's there's been a sort of scarcity value in equities. And that's helped them do so very well. Now of course the leader in that has been the US, where the US has been the leader
00:45:02:09 - 00:45:02:17
Unknown
00:45:02:17 - 00:45:08:03
Unknown
doing buybacks and their stock. The stock market is performed absolutely fantastically.
00:45:08:04 - 00:45:30:24
Unknown
And there's a paper from a asset manager which basically reckon that between 2015 and 2025, the shrinking supply of shares added roughly 0.7% a year to US returns. So it's been helpful. It's been positive and that's great.
00:45:31:01 - 00:45:37:12
Unknown
Is essentially that process turning around more IPOs
00:45:37:16 - 00:46:06:04
Unknown
more issuance of equity less buybacks less takeovers of equity. And therefore so the supply is increasing. And this same document reckoned that if you went back to the IPO crazy of two. And when you know you had the the the internet bubble the the amount of stop that came there dragged down returns by as much as 10%.
00:46:06:04 - 00:46:08:23
Unknown
And their view is that we are going to see a similar
00:46:09:01 - 00:46:35:21
Unknown
situation now because the issuance in the US is picking up so sharply with not just space X and anthropic and some of these other things, but also that when these companies first come to the market, they only float a very small amount of their shares. But a lot of insiders who own those shares can't sell them for nine months a year, a year and a half, whatever it is.
00:46:35:21 - 00:46:54:06
Unknown
But when they can, they all start selling as well. And what happens then is you get a lot more stock coming on than expected. And these guys who wrote this article reckon that the new share supply they see coming will drag down the index performance by a wait for it
00:46:54:10 - 00:46:56:22
Unknown
4.5% a
00:46:56:24 - 00:46:58:05
Unknown
Wow.
00:46:58:07 - 00:47:06:00
Unknown
next decade, because there's so much supply coming in relation to historic supply
00:47:06:04 - 00:47:07:22
Unknown
and historic demand.
00:47:07:24 - 00:47:10:13
Unknown
So that's what people mean by this.
00:47:10:17 - 00:47:28:08
Unknown
Spice. This goes back to what you were talking about earlier. And what's the right multiple going forwards in the index and in single stocks. If we are really entering a period of equities and it feels like we are, doesn't that mean that we should go ahead with lower valuations?
00:47:28:10 - 00:47:42:08
Unknown
I think you have to look at it two ways. I think I've always said, and you know, this plays to your argument rather than a more bullish one that I would normally hold. You know, companies look at their various means of raising money,
00:47:42:08 - 00:47:48:09
Unknown
historically, they might go to a bank manager and say, oh, can I borrow some money through alone?
00:47:48:11 - 00:48:07:23
Unknown
Or they go to the the corporate bond market or the private bond market and say, oh, look, we'll issue some bonds. We'll pay you back in ten years, we'll pay you, you know, 2% above what the the US government pays. That's a nice return for us. And if you think we're a good company and we're strong enough and we've got a good business, we'll still be here in ten years.
00:48:07:23 - 00:48:38:09
Unknown
You'll get all your money back and you'll get a nice interest rate in between. And the third way and the way that is normally used least by companies, unless they think their shares are quite expensive, is they issue equity. Now I'm shooting myself in the foot here, as I say, because ordinarily I say if you start to see a lot of companies issuing equity, they are sort of telling you that their shares are quite expensive and highly valued, and therefore that's quite a rich form of currency for them to go and raise extra money.
00:48:38:11 - 00:48:55:18
Unknown
they're also, you know, if they're starting to take over other companies, that's that they see other companies shares are too cheap. That's one of the reasons you wouldn't go and buy a company you think shares of expensive, but you might use your shares to do that. If you think your shares are expensive as well and you sort of offset one with the other.
00:48:55:23 - 00:49:04:09
Unknown
And that's why. So I've sort of shot myself a little bit in the foot here, but going back and trying to bring a bull back bull point back
00:49:04:11 - 00:49:05:00
Unknown
that
00:49:05:00 - 00:49:17:03
Unknown
I think what everyone's underestimating is this is happening at a time of truly exceptional earnings growth. You know, this quarter has just about come to an end. You know the peak was last night.
00:49:17:03 - 00:49:39:20
Unknown
We're probably in video. We're going to get 30% earnings growth in the second quarter of the US. This is almost unprecedented at a time where you're not coming out of a recession, where you would expect earnings to recover quickly. And to me, I think that if you were looking at 6% as growth or 10% on his growth, then that 4.5% sort of dilution that you're talking about by all this
00:49:39:23 - 00:49:43:15
Unknown
extra equity would be pretty painful for equity markets.
00:49:43:16 - 00:49:49:07
Unknown
I don't think we're there. I think that the earnings growth is so powerful. It's an offset and a positive one.
00:49:49:11 - 00:49:54:10
Unknown
The the other thing I think to say is we can both be right.
00:49:54:10 - 00:49:56:10
Unknown
You know, we can say that the
00:49:56:10 - 00:49:58:01
Unknown
Doesn't happen often.
00:49:58:03 - 00:50:00:13
Unknown
it doesn't often have. That's absolutely right. Well,
00:50:00:15 - 00:50:02:09
Unknown
Neither of you might be right.
00:50:02:09 - 00:50:05:03
Unknown
right, but you know, that's life. But
00:50:05:08 - 00:50:12:05
Unknown
could find relative performance. We could find the performances 4.5% less than it would have otherwise been.
00:50:12:10 - 00:50:24:14
Unknown
But the returns still might be quite good because the fundamentals are improving. And therefore, you know, it could have been a really good year and it's just not quite such a really good year. It's it's a good year.
00:50:24:14 - 00:50:36:01
Unknown
But the uncertainty is there. We're changing those ground rules. And I think the jury is going to be out till we see how some of this supply gets placed.
00:50:36:06 - 00:50:59:22
Unknown
The only thing I'd say there is, I think, to say that you're going to get this dilution for ten years, I think is, is probably wrong because the amount of investment that's going in now, as we've heard from a couple of companies recently, they're looking for a 3 to 4 year payback of that capital expenditure. Now, if we don't get that, stock market is going to be a lot lower anyway, right?
00:50:59:22 - 00:51:20:02
Unknown
Because everyone had gone, you've wasted all that money, you haven't got return, you're a waste of time or selling shares. And the markets will be a lot lower. However, if they do start to generate returns on this, this huge capital expenditure, then they'll be making shed loads of cash and you know they will start buying back shares again I'm sure.
00:51:20:04 - 00:51:24:13
Unknown
So I don't agree with the ten year thesis. I can see it maybe for another couple of years.
00:51:24:14 - 00:51:28:04
Unknown
as the returns come through for Niklas CapEx, it'll be a great
00:51:28:06 - 00:51:42:05
Unknown
Spicy cat you can't have both. You can't be bullish on Nvidia, which is receiving all the revenue for the CapEx and be bullish on those that are spending all the money on the CapEx, because if they continue
00:51:42:05 - 00:51:51:08
Unknown
paying all the CapEx that's in videos revenues going forward, if they stop paying the CapEx, then Nvidia half's in value.
00:51:51:10 - 00:52:01:14
Unknown
You know, and this is you know, this is the big dilemma that's out there at the moment. You have to sort of trust that the people who are investing or in video are backing to invest.
00:52:01:17 - 00:52:17:13
Unknown
They can see a way to making a handsome return and everyone should make money. That's why I think that's why you've got this massive race for, you know, for AI and all the things that go with it, the infrastructure, you know, the copper that goes into the data centers, etc..
00:52:17:14 - 00:52:29:21
Unknown
I mean, look, we've been using the cloud services for how many years now? A decade probably, I can't remember. I've been subscribing to my iCloud on Apple and Microsoft for probably a decade, and the price of that keeps going up.
00:52:29:22 - 00:52:35:21
Unknown
Remember, the cloud is just a bloody big data center. That's what it is, right? Is exactly the same.
00:52:36:00 - 00:52:40:00
Unknown
And, you know, I think all we're doing is that they realized there's this huge
00:52:40:02 - 00:52:43:06
Unknown
demand for extra storage, extra space,
00:52:43:08 - 00:52:54:07
Unknown
that's why they've got to build these data centers and run like hell to try and keep up with the demand. As Nvidia said last night, it's a demand issue. The demand is there, its supply is tight and they can't get there quick enough.
00:52:54:10 - 00:53:12:06
Unknown
CJ, the last ten years, a lot of people that watch this podcast won't have been investing for more than ten years. So they they haven't really known about this invisible hand that's been increasing and buying back stock every single year.
00:53:12:08 - 00:53:22:14
Unknown
Now, with all this AI spend across the board, they're filling the debt markets, right? All the cash that's there in the debt markets, euros, euros, years.
00:53:22:18 - 00:53:41:18
Unknown
Then they come with these $2 trillion IPOs and 1.4 trillion in space because we're going to build data centers in the moon, euros, euros, euros. They fill up all the cash going into IPOs. Now they're going to start issuing stock again. And they're going to take away that cash support.
00:53:41:18 - 00:53:47:07
Unknown
doesn't it take away all the pillars that have been supporting stock market growth for the last ten years?
00:53:47:07 - 00:54:10:13
Unknown
It takes away a number of supports. I mean, it doesn't take them all away because you've got the retailer of markets over the past few years, there's more and more people have got involved. And clearly there are a number of areas of the world where people haven't discovered the attraction of stocks. You could argue the UK is one of those because we hold a lot of cash here, which, if they put it into stocks, would help and provide more capital.
00:54:10:13 - 00:54:33:23
Unknown
But it does undermine the case little bit by little bit. And what we don't know is where that tipping point actually is. And you know, I add to your list, you've got this real yield argument. Most people in the markets are used to very low interest rates and very easy to borrow money. Right. That's not how it is, guys.
00:54:33:23 - 00:54:54:16
Unknown
That's not how it has always been. And if we get Walsh, the Kevin Walsh, the the the chairman of the fed who said I don't want those way, the way it always done in the old days. I want to have a proper a proper functioning bank balance sheet. Again, I don't want to do all this, you know, acting as you know, a buyer of the equity market is keep equities doing well.
00:54:54:16 - 00:55:01:01
Unknown
If he stops and he says we're going to have a proper functioning bond market again,
00:55:01:01 - 00:55:18:14
Unknown
much to the the Treasury Secretary Scott did dismissal. He doesn't want it. But if the chairman of the fed does want it and he succeeds, people are going to have to factor in a higher cost of capital. When you factor in all these things, like the high cost of capital and all these other things,
00:55:18:14 - 00:55:20:14
Unknown
then the picture comes unstuck.
00:55:20:14 - 00:55:25:24
Unknown
But let's not let's not be silly here. I've said on many occasions sitting here
00:55:25:24 - 00:55:33:17
Unknown
I'm a bond man and I am for my for my sins. I've been that for the whole of my life. And I only learned over the last 20 years the
00:55:33:19 - 00:55:38:13
Unknown
joy of being an equity investor, which is you can believe in two different things at the same time.
00:55:38:14 - 00:55:44:03
Unknown
It doesn't
00:55:44:05 - 00:55:52:13
Unknown
in the end, things will become unstuck. There was an excellent article. I don't know if you saw it in the in Lex talking about
00:55:52:13 - 00:55:54:18
Unknown
the price war in footwear
00:55:54:20 - 00:56:20:10
Unknown
saying how that's driving things lower and lower. And it's last paragraph. You never believe it is about AI. And it pulls out the fact that anthropic investors told the EFT that the company's IPO could be worth 2 trillion, even though they slashed the cost of its lightweight GPT 5.6 lunar model by 80% last month,
00:56:20:15 - 00:56:24:00
Unknown
then anthropic cut theirs as well by the same amount.
00:56:24:00 - 00:56:35:02
Unknown
So this which charging a lot of money is going to justify all the expenditure. Everything's fine. Oh no it's not. We're having to cut our prices by instant, but still we give it a market value of 2 trillion.
00:56:35:02 - 00:56:45:03
Unknown
When people want to believe, they believe. But at the end of the day, we just need to be sensible. We're seeing a number of these things that are working against us.
00:56:45:04 - 00:57:00:22
Unknown
The time to hit the exit is coming, but I don't still believe we're there yet. As I said last week, you're in the back of the car. Your kids are saying, are we there yet? Are we there yet? The answer is, I don't think so yet, but we need to be careful.
00:57:00:22 - 00:57:03:06
Unknown
So I'm just the kid in the back of the car. Am
00:57:03:09 - 00:57:09:22
Unknown
I so.
00:57:09:24 - 00:57:15:02
Unknown
Spice. Are we there yet? Are we there yet? Come on spice, tell us. Finish off. Because
00:57:15:04 - 00:57:26:20
Unknown
I don't know. Producer Sophie might not be here with us today, but she's probably watching this. And I beat her and she's thinking, guys, you're way over time. Come on, spice, who's the marginal buyer in those circumstances?
00:57:26:20 - 00:57:33:02
Unknown
Well, I think as Chris says, there's been a retailer of equity ownership.
00:57:33:06 - 00:57:50:08
Unknown
I think that's a very healthy thing. Now it's it's most prevalent in the US. But I think in other countries and particularly in Asia, there is this growing culture of perhaps investing in your equity markets. More so the places where lagging long way behind, apart from the UK is Europe.
00:57:50:08 - 00:57:53:04
Unknown
And I was looking at the saving rates, the percentages,
00:57:53:06 - 00:58:04:23
Unknown
the UK save about 4% outside of pensions and that's that's been rising. That was up from three years ago, about 3%. So we're saving more money in the UK, but we're not putting it into stocks and shares
00:58:05:00 - 00:58:09:01
Unknown
in America only about three. They have the same rate of about 3%.
00:58:09:02 - 00:58:15:02
Unknown
Everything else goes into the stock market and they've got very big pension funds through there for what called for one case.
00:58:15:05 - 00:58:23:21
Unknown
In Europe, the savings rate is still 14%. The Europeans do not want to invest in equities. They are traditionally bond investors.
00:58:23:22 - 00:58:33:06
Unknown
good luck to them because I'm not sure of that body inequities. And one day when that when they're saying is rate falls to 4%, then maybe that's the time to sell.
00:58:33:08 - 00:58:36:13
Unknown
And I see CJ smirking there. What are you thinking of that CJ?
00:58:36:13 - 00:58:43:00
Unknown
I've been in many meetings where spice where Spicer said when the retail investor takes over and starts buying, that's the time to
00:58:43:02 - 00:58:45:10
Unknown
worry.
00:58:45:12 - 00:58:55:00
Unknown
How how balls change their their strike spots or whatever.
00:58:55:02 - 00:58:59:05
Unknown
They are too busy putting all their money into the new defense spending though aren't
00:58:59:07 - 00:59:01:03
Unknown
Exactly. Defense bonds.
00:59:01:05 - 00:59:10:18
Unknown
Okay. Well I think that is time up gentlemen. So no changes to the portfolio I'm feeling. Chairman that might change next week when we're back in the studio.
00:59:10:20 - 00:59:14:09
Unknown
I'd like to see what happens. Jackson Hole,
00:59:14:13 - 00:59:29:22
Unknown
how the markets take to that. And I think then we can decide whether we want to go down that route of maybe buying a little bit more of the precious metal complex, or whether we feel it's safer to perhaps even increase our equity risk. Or maybe it's time to run for the hills.
00:59:29:22 - 00:59:30:11
Unknown
But I think,
00:59:30:11 - 00:59:33:05
Unknown
we'll get some more clarity by the end of this week.
00:59:33:07 - 00:59:42:01
Unknown
Thank you everybody. It's been a wonderful summer break. Spice. Safe trip to the to Edinburgh tonight. Enjoy that fringe. Enjoy that show.
00:59:42:05 - 00:59:43:22
Unknown
Certainly will do. Looking forward to
00:59:44:00 - 00:59:44:02
00:59:44:02 - 00:59:57:09
Unknown
Get off guys. We'll see you back in the studio next week and we'll see you in the comments section. Drop us a comment if you've got any further questions after today's pod, or if you've got some comments, or if you just want to find out
00:59:57:09 - 01:00:00:20
Unknown
on a show review from spice on how it goes tonight.
01:00:00:24 - 01:00:02:05
Unknown
Thank you very much for joining us.
01:00:02:06 - 01:00:04:08
Unknown
Have a great weekend.
01:00:04:10 - 01:00:08:16
01:11:16:14 - 01:11:17:08
Unknown
Down.