July 17, 2026 • 25 mins
It's been a week of turning points in markets: from Japan's shifting stance on the weak yen, to star fund manager Terry Smith revisiting his "buy and hold" strategy, to incoming British Prime Minister Andy Burnham's apparent last-minute change of heart on chancellor, to SpaceX falling below its IPO price. One thing that didn't change - the UK market keeps shedding stocks. What does it all mean for your money? Merryn and John sum up a hectic week in the Merryn Talks Money Market Wrap.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Welcome to the Marin Trogs Money Market Wrap. But we
talk about the biggest news in the markets this weekend.
What is driving them? I am Maren sum Zai, Web
UK Money Editor at Large.
Speaker 3 (00:27):
No, I'm joint Staviic Senior Reportered at Bloomberg and author
of the Money Distilled newsletter.
Speaker 2 (00:32):
Right, John, there is a lot going on which is
outrageous really, given that it's holiday time and both of
us are, you know, back and forth from glamorous destinations.
You shouldn't shouldn't be having to talk about who's going
to be the next chancellor of the UK.
Speaker 3 (00:46):
Again, this is nine I think in Sam in French
we're seeing in something like ten years more.
Speaker 2 (00:54):
Chancellors than prime ministers.
Speaker 3 (00:58):
So do we care?
Speaker 2 (01:00):
Can you drag up any interest? Does it matter? Is
it more of the same? I'll tell you the only
thing that matters is it is not Ed Miliband.
Speaker 3 (01:10):
If that's the key.
Speaker 2 (01:11):
If it's not Ed Miliband, we just get more of
the miserable same. It is Ed Miliband, we get a
nasty shifter to the left and more net zero blah
and yep one Michaels will be a little upset. The
rest of the world would look at us with even
more eye rolling than usual.
Speaker 3 (01:28):
Yeah, I think that's basically it were The only thing
I would say is well, a couple one. It's interesting
because I actually think part of this is because there
was a Bloomberg survey read out and it came back
and I think it was not yesterday, but the day
before the results and Ed miller Band was deemed the
least market friendly chancellor, and not until then he was
(01:49):
the absolute top favorite, including among people who a chat
to who know about this stuff. They would sort of
tell me Ed miller Bands doing for chancellor, that's what I.
Speaker 2 (01:58):
Had too, absolutely nail down fixed in stone or fixed
in Edstone.
Speaker 3 (02:04):
Yes, yes, And then suddenly this story comes out in
Bloomberg and well they ought to suddenly shift dramatically and
it looks as if we're going to get Chavana Mahmoud
for chancellor instead. And again, as you say, the only
thing we know is that she's not as left wing
as Ed mellerbound. And that's been enough to actually it
(02:25):
did give Gilts and the pound a little bit of
a boost yesterday. I'm usually very very careful about attributing
these things to politics, but everything else was down and
gelts in the pound were up, and it looks as
if it probably was something to do with a bit
of relief on that front.
Speaker 2 (02:42):
Yeah, but you know what, John, Yes, I think that's
absolutely terrifying. Shall I tell you why? Yeah, because that
market pulled market pul survey from Bloomberg told us something
so obvious that it is beyond the bounds of all
reason that anyone in the government could possibly have not known.
(03:02):
It could not have understood that Ed Miliband would be
the least market friendly contender. Not new news, not something
you'd have to look at any survey to know. So
how can it possibly be that the results of a
survey showing that Ed Miliband would be the considered the
least market friendly chancellor for the UK could be new
(03:27):
news too an incoming prime minister when it is not
new news to anybody else. And that for me is
quite scary and boats really badly for the next few years.
Speaker 3 (03:40):
We thought that is Marrian, and I think you're really
this boy was donning at the other big point about
it is, how can this stuff he already not be
kneeled down and be if he was going to go
with them, then it should have been an anticipation of
a negative reaction from the markets, and then have a
think about how he was going to deal with that.
(04:01):
It shouldn't, I mean, the only rational thing that you
can say about it into once. I don't even believe this,
because I think most of them are too narcissistic to
not see these things until they're in their face. But
one thing you could say is maybe Bundum needed an
excuse not to appoint Mill the band, and then he
gets the excuse in the form of something like this,
(04:24):
Oh look, I was going to hire you, but now
the headlines are all saying that you would be a
terrible chancellor. And that's you know, it's not me, it's
it's the you know, bond market or whatever.
Speaker 2 (04:34):
But that even wash that's even already got the it's
no me, might be yea and it's not even prime
minister yet.
Speaker 3 (04:44):
Yes, that just put you right back to where Kure
Starmer was a year ago.
Speaker 2 (04:49):
It doesn't matter how you interpret this shift, assuming it
is a shift. I mean they're not done yet, right
a shift. There is no way whatsoever to interpret this
positive beyond the fact that if he's not Chancellor, well,
I mean that's a minor positive, but it doesn't you
can't interpret it positively in terms of the way Burnham
(05:11):
is thinking and the way he is likely to manage
going further. And you know, prove me wrong the future please.
Speaker 3 (05:17):
Oh yeah, yeah, I'd love to be wrong. But there's
the ultimate hedge, as if we're wrong, then things get better.
And if we're right, then the only consolation that you
get to see I told you so, along with the
rest of the population.
Speaker 2 (05:30):
So all right, moving on, John, because my head's going
to explode. Moving on. There are a couple of other
things we wanted to talk about, right. We wanted to
talk about SpaceX being back to its IPO price, which
is really depressing for the entire team because regular listeners
will know that my profits on my vast space position
were to be used to buy the team summer drinks
and now there are no profits, so no summer drinks.
(05:54):
Sorry guys, sorry summers summer Moses.
Speaker 3 (05:56):
Sorry Moses, I mean we need to buy your drink
is negative from here?
Speaker 2 (06:01):
Yes, yes, yes, it's on you and I'll have the Bollinger.
Thanks very much.
Speaker 3 (06:08):
Well, hope it's been how file it falls that may
even to that you never.
Speaker 2 (06:12):
Know, right even Okay, So back to my papers, and
one of the things that you and I've worried about
for a long time now is that these big i
pos might be a negative marker for the market, might
give us some kinds of top. There were a variety
of studies, studies reports when the when the IPOs were
first announced. But the giant sucking sounders and money goes
out of other parts of the market to go into
(06:33):
the IPOs and then of course maybe slides back out
again to go into other things. So there's there's a
lot going on in the market, and that this first
i PO is not an immediate success is a worry. Yeah.
Speaker 3 (06:47):
And it's interest because the most recent high for the
US markets that both the S and P and that
is like was the second to June and the space
X I p O or was the eleventh of June.
That doesn't mean they're not going to make new highs,
but it is kind of interesting in that if this
did prove to be the top, it wouldn't be an
astonishing thing to happen. It's also I think it's just
(07:09):
it's a useful reminder as much as anything else that
you shouldn't outsource your investment thoughts or views to the
market price itself, because you know, before SpaceX launched, slots
of people thought, actually this, this looks kind of expensive,
(07:30):
and it was kind of expensive, and then it shoots
up on the day and everyone thinks, of God, maybe
everyone else knows something I don't, and so the temptation
is then to try and pile in or try and
make a quick buck or whatever. But history shows that IPOs,
even long term successful ones, do tend to drop below
their IPO price at some point within the first year.
Speaker 2 (07:51):
Average down, average down eight percent.
Speaker 3 (07:53):
Right, and that's one of things like Facebook and Google.
Here we're not talking things that you know, hit the dark.
So this is perfectly normal ip behavior and all on
this day. But also more importantly I think is that well, yeah,
I mean SpaceX was overplaced to ploic stell is overplaced
at this level, and you should didn't feel underppreciately buy
(08:16):
something just because it's going up.
Speaker 2 (08:19):
I mean, I suppose it does make sense if you
think about it, which we do try to do, don't
We think about things good for an IPO to end
its first year down, because when do you bring something
to an IPO and you think you can get the
absolute maximum top price for it. On the whole idea
of the the olden days, there was an idea that
you should leave something on the table. You shouldn't bring
it to market that its peak price. You to leave
(08:40):
something on the table for the public market investors. But
I think there's days are gone. So when you bring
your company to market, you do it when you think
you can get the maximum for it. So it makes
complete sense that it would then end the year slightly
off a percent makes sort of intuitive sense. Yeah, it's
a sales market, it's a seller's market. Right. Just as
we look at this kind of thing, I think, oh, well,
things very little topy and these giant hypos might change
(09:02):
some things, et cetera. We then get a half yearly
letter from Terry Smith, manager of the fund Smith Equity Fund,
which is boys that had a nasty time recently. So
I don't know. Wow, now well, look I'm just looking
at the chart of the performance of this fund, Smith
Equity Fund, which I know a lot of listeners in
the UK will be in because Terry Smith, the very
(09:23):
well known manager. Here now it is let me see
here fun Smith Equity Fund from the first of January
this year at the end of June this year down
three percent, MSc Wild World Index up eleven percent, and
of course other things up a lot more. That's inception. Okay,
(09:43):
we have to say this because you know, lesbian and
let's be nicer. Since since inception the fund is still
up thirteen percent annualized and MSCI World up twelve and
a half percent annualized, so you know, okay, but probably
not quite what people expected when they brought into the
hype around this. Now here's interesting, well, I hope it's
(10:04):
interesting to people. What Terry Smith always said that he
would do is to buy good companies, don't overpay for
those companies, and then do nothing to sit and wait.
And theoretically that should really work. Going We're both down
with that, arn't we, John By great companies, don't overpay
for them and then sit around and wait, because investing
(10:24):
is our long term game, but it has not been
working in this environment of the shift to passive because
what really works in this environment is momentum investing, not
long term quality slash value investing. Right, So he is
now beginning to backtrack in this letter, is it's worth reading.
By the way, I'm going to put the link into
the show notes so you.
Speaker 3 (10:45):
Can read it.
Speaker 2 (10:46):
It's a public letter, and he talks about the way
that Pascifists conquered the world and that possibly one needs
to adjust one's investing process as a result. And what
Terry is going to do is to change his holding
periods as opposed to or anything else. So still buy
good companies, still don't overpay, but the third leg needs
(11:08):
to change. So if you look at their portfolio turnover,
it's gone up a lot, and I think quite rightly
points out in a world where share prices sometimes may
have twenty thirty percent a day, even in very big stocks,
buy and hold kind of doesn't work anymore.
Speaker 3 (11:20):
It's a shricky one, isn't it? Because I actually sympathize
overall his view and the passive highs tounned markets spent
a momentum market, and this has been the case for
a long time now, certainly longer than reversion of the
mean with investors can handle. I think it's also interesting though.
(11:46):
The one thing I would say, and I can see
why obviously he doesn't want to go there, but he
and neck Train, another big retail face and fund manager
that have a sort of similar style, which is this
focus on quality thing. And you know, from the investment
point of view that respect them both. They both explained
their ideas very well, They're very good at communicating with investors,
(12:09):
and obviously they both have excellent long term track records.
I think it is also fair to say that their
style kind of went out of fashion, and partly that
was for I would argue reasonably predictable reasons, because a
lot of this stopped in twenty twenty one after the
(12:29):
the kind of basically the kind of COVID ultra zero
interest rates backdrop ended interest rates went up, and most
of those stocks then got demolished, and a lot of
them are also the kinds of stocks that then got
further hit in the software as a service apocalypse as
(12:52):
they called it, as an AI is going to take
all that business. So I feel that there is there's
a lot of sense and sticking to one strategy it
makes a lot of sense. But I do think that
that was perhaps a tourning point at which an act
of manager, even when we are long term ultra long
(13:14):
term take on things. Might have wanted to look at
what was changing about the backdrop and then reconsider the
portfolio within those parameters. But maybe that's unfair.
Speaker 2 (13:27):
Maybe that's unfair. But it's interesting, isn't it. I Mean,
when we were talking about what we were going to
talk about today, you said, well, there's a lot of
turning points out there, and seeing someone like Terry Smith,
who's been so clear and so firm in his view
and his investing style for so long, to start to
(13:48):
make changes in it makes me feel a little contrarian.
Speaker 3 (13:53):
I mean, yeah, I mean there is an element of
capitulation here as well. Yeah, and obviously, well that goes
to all the other signs that we are very toppy
at the moment. I think the problemly all of the
top signs is that well it is working out when
(14:14):
the dominoes finally going to fall over, Like what is
the straw that breaks the camel's back, because there's been
a lot of them and a lot of them going
back years now, you know, no, just minds.
Speaker 2 (14:25):
Yeah, but we do really need there's a turning point
in the UK stock market because the other thing is
that we got to talk about is the ongoing demise
of the UK stock market closing down sale continues. I'm
afraid I'm not sure who it was. You wrote closing
down sales continuous on Twitter and somebody wrote underneath it,
at least this time we won't have to turn the
(14:45):
lights out, which, of course there's a reference to our
rather rickety electricity grid and the fact that the lights
might just turn themselves out. I thought it was quite funny. Well, George, George, excellent. Anyway, John,
(15:12):
I'm going demise of the UK don't market We've lost
another company, haven't we?
Speaker 3 (15:16):
Yeah, I mean, so there was a bid for road Talk,
which is an engineer and all means. I don't know
very much about road Talk. It's a bit familiar name
to me. Low I believe it was set up in Bath.
As soon as we know part of that tweet. I
got an awful lot of older city heads kind of
reply and say, no, I remember that that was one
(15:36):
of the first stalks I ever covered kind of thing.
She's got a long history of being here and but yeah,
it is just the latest one to get kind of
spiped up. And I think the other interesting thing is
that this week I was writing about this and money distilled. Hey,
Barrett red Row, the house builder. I know that you're
not your favorite sector for very acceptable reasons, but just.
Speaker 2 (15:58):
Go to look at the hard sand house builders. I
hate them for the hideous houses that they build, and
I hate them for not trying. But I do understand
that the right number. I'm just difficult, but I still
don't think that these houses have to be quite this hideous.
Speaker 3 (16:15):
I think this is fair. But the reason they bring
it up is because basically one of their big shareholders
said to them, look, you need to buy back your
own shares because no one else is going to, you know,
appreciate what a you know, good good quality in terms
of profitability, long term business you've got. And so they've
started doing that, and it's just adding to the whole
(16:37):
sense that nobody these things are just lying around unappreciated
on the supermarket shelf until someone where an eye for
a bargain comes along and takes them, or the management themselves.
Speaker 2 (16:52):
Compass.
Speaker 3 (16:53):
Yeah, thats exactly stick to ekes track. They kind of
the value themselves if you like. So I don't know
if there is a turning point, because regardless of how
much to be buying this drum nobody seems to be paying.
Speaker 2 (17:11):
The time interested.
Speaker 3 (17:13):
Yeah, I know, which is fine from a short term
point of view. At the end of the day, if
you can invest in these stocks, then you'll get the
takeover premium or you'll get to be the last person
owning the last share outstanding, so you make money that way.
It's just not great for the long term healthy the economy,
if our equity market specifically, because London's cattle markets as
(17:36):
a whole are fine, there's nothing wrong with them, but
this bit is just dying on his backside, and I
think we should try to stop that from happening.
Speaker 2 (17:50):
Okay, well, we should try and to be feder ritual raves.
This is one thing she did slightly get and she
was trying at least in a regular environment. Let's see
it is focused on comes up with on a similar subject.
We have for years, John, our favorite favorite markets. You
and I've been Japan and the UK, and you know,
(18:11):
Japan has kind of come good. The UK has come
a little good, but not that good. Has just discussed.
But Japan is really interesting because the only thing we've
talked about a lot on this podcast is financial repression
and return of the extent to which governments might, in
our great age of debt, demand that domestic investors bring
their capital home to help out with either national infrastructure
(18:35):
or investing in the domestic bond market to make it
look less rubbish, et cetera. And we're now seeing something
happening in Japan. Nothing set yet, but the Finance Minister
Kata Yamastan, we're speaking earlier this week about how one
might encourage local investors, including Japan's whooping great government pension fund,
(18:56):
to consider bringing money home and investing in themes stick assets.
And it's interesting that this has shifted since twenty fourteen
or so, when there was a much higher level of
Japanese assets held inside Japan than under Abasan. There was
a shift in as it started to flow abroad. And
in one way that's been great. Very cheap yen has
(19:16):
been brilliant for the Japanese exporters in the manufacturing sector
dat in an age when you know physical AI, robotics, etc.
It's all been marvelous. But now there is talk about
trying to bring some of that money home, which would
be kind of interesting. And Deutsche Bank have done a
little blog on this looking at what might happen, and
suggesting that at the maximum the amount of money that
(19:37):
might be brought back would amount of about ten percent
of GDP. It should be something of a game changer
for the end.
Speaker 3 (19:42):
Yeah, and I think this really has both paying attention
to because I mean, obviously the semmetery as the in
twenty tweyelve, as you say, that's where then playmnster sins
or RB can they say it will basically we need
to do something about this and started a policy. It's
a little bit deliberately being the end amongst other things.
(20:03):
And that was Bien was at the strongest end. And
as you say, twenty fourteen, the GPF, the big pension
fund started the increased the amount of foreign assets that
they could own. And so yeah, if they flip that around,
because it did have a big effect, they'll have a
big effect in the opposite direction. There's obviously the concerns
that the yen carry trade, which is basically borrowing money
(20:26):
and yen and investing in elsewhere, if that suddenly reverses
and a whole load of money could come out of
various assets, including you know, hot tech stocks. But I
think the other thing, and I don't know if this
was in the Deutsche study or not, but they said
that the most vulnerable asset was probably French sovereign bonds
(20:46):
and that would be interesting to watch given that vulnerable. Yeah,
I mean frances is the only reason that France is
not on the front pages all the time in the
way that Britain has been is because inflation is slightly
lower in the Eurozone as a whole. But also France
is effectively underwritten by you know, the European Central Bank,
(21:07):
which is Germany basically, and so that's you know, it's
it's kind of debt isn't isn't being subject to quite
the same pressures. But if if this happens and you've
also then got you know, again a very panicky looking
French political situation next year, I don't think it'd be
going too far to say that you start getting worries
(21:28):
about the kind of Eurozone again kind of erupting in
the you know, headlines and all the rest of it.
So yeah, I think this, this this suggestion is actually
quite consequential, and I'd imagine they will follow up on it.
Speaker 2 (21:45):
I don't think it's worth saying that, as I think
a lot of people have pointed out that the the
government pigeon Fund does not fall under the Ministry of
Finance technically nothing to do with the Finance minister Cutma
but but but, but it all falls onder the same
thing in the end, and the pension Fund falls under
the Ministry of Health, Labor and Welfare. But it's all
(22:08):
part of the same government, all part of the same system.
And we know that the government has influence over pretty
much everything. I mean, the Bank of Japan is famously
not quite independent, et cetera. So I don't think the
fact that it's not directly cut Umiston's responsibility would make
a difference to this, nor but the fact that the
pension fund again has like all punch of funds in
the main so far for dishary duty to seek the
(22:29):
best returns, that doesn't necessarily make a long term difference
to how it's invested in Japan.
Speaker 3 (22:36):
No, And that also they're able to They aren't at
the limit of that allocation either. They can that official allocation,
they can they can go higher even without changing anything overtly.
So yeah, no, I'd be surprised if this doesn't end
up being a turning.
Speaker 2 (22:53):
Point, turning point, And you know, maybe a tanning point
for global finance for oppression, because it's not exactly the
only place that is talking about patriating capitals. It's been
an ongoing conversation here trying to get punch and films
to repatriate capital and invested in things of national interest
in the UK, and we hear of it in other
countries as well, and it may just be that in
an age of great public debt, capital can no longer
(23:15):
be free.
Speaker 3 (23:16):
Yeah, we'll be interested because I've sort of de slaved
this as a capital nudge and I'll be interested and
to see, well when's it go from being a capital
nudge their capital capital control?
Speaker 2 (23:25):
Yeah? Okay, well this has been positive, Yes, as usual
as usual?
Speaker 3 (23:30):
You're ree of sunshine for the week?
Speaker 1 (23:33):
Yep.
Speaker 2 (23:33):
Absolutely, Look there is a red sunshine here and I'm
going to tell you about it, which is that nearly August,
which means that it is nearly time for our fringe
show all about Adam Smith and how moldless he was
at Pama House. We will put the link to how
to book tickets for that in the show notes as well.
I will say they do sell out very very quickly,
so you will want to book your tickets now so
(23:55):
that you are not the person calling me on the
day begging for a ticket from my personal family allocation
that right.
Speaker 3 (24:02):
John, absolutely, absolutely, rather than the last bitcoin.
Speaker 2 (24:09):
Not rare at all, bitcoinds onwards onwards.
Speaker 1 (24:13):
Oh.
Speaker 2 (24:14):
I will also say, by the way, that we have
asked a lot of people on the podcast over the
last few months about what they're reading, and not just
authors but non author guess what books they're reading. And
I've made a list of those for those of you
who don't quite listen to the end of every podcast,
and they'll be in my newsletter this week. So if
you want a roundup of the things that you should
definitely be reading on the beach, do read my newsletter
(24:36):
on Saturday. And of course you always read John's newsletter
every day. Anything to add to that.
Speaker 3 (24:42):
John, No, I'll look forward to that one. I like
seeing what other people have reading.
Speaker 2 (24:47):
Yeah, well, I tell you what. The one I really
want to read is the one that Ed Cole from
Margaret recommended, the final fatal adventure of Captain James Cook,
The Wide Wide Seiand that's absolutely brilliant. Jam. Now I've
given I've given away the ending.
Speaker 3 (25:06):
Spoiler A Lot spoiler alert.
Speaker 2 (25:17):
Thanks for listening to this week's Marren Talks Money Markets RAP.
If you like us show, rate, review, and subscribe wherever
you listen to podcasts. Also, be sure to follow me
and John on ex or Twitter at marins w on
John Underscore Stepic. This episode was produced by Samasadi and
Moses and questions and comments on this show and all
our shows are always welcome. Our show email is Marror
Money at Bloomberg dot
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Welcome to the Marin Trogs Money Market Wrap. But we
talk about the biggest news in the markets this weekend.
What is driving them? I am Maren sum Zai, Web
UK Money Editor at Large.
Speaker 3 (00:27):
No, I'm joint Staviic Senior Reportered at Bloomberg and author
of the Money Distilled newsletter.
Speaker 2 (00:32):
Right, John, there is a lot going on which is
outrageous really, given that it's holiday time and both of
us are, you know, back and forth from glamorous destinations.
You shouldn't shouldn't be having to talk about who's going
to be the next chancellor of the UK.
Speaker 3 (00:46):
Again, this is nine I think in Sam in French
we're seeing in something like ten years more.
Speaker 2 (00:54):
Chancellors than prime ministers.
Speaker 3 (00:58):
So do we care?
Speaker 2 (01:00):
Can you drag up any interest? Does it matter? Is
it more of the same? I'll tell you the only
thing that matters is it is not Ed Miliband.
Speaker 3 (01:10):
If that's the key.
Speaker 2 (01:11):
If it's not Ed Miliband, we just get more of
the miserable same. It is Ed Miliband, we get a
nasty shifter to the left and more net zero blah
and yep one Michaels will be a little upset. The
rest of the world would look at us with even
more eye rolling than usual.
Speaker 3 (01:28):
Yeah, I think that's basically it were The only thing
I would say is well, a couple one. It's interesting
because I actually think part of this is because there
was a Bloomberg survey read out and it came back
and I think it was not yesterday, but the day
before the results and Ed miller Band was deemed the
least market friendly chancellor, and not until then he was
(01:49):
the absolute top favorite, including among people who a chat
to who know about this stuff. They would sort of
tell me Ed miller Bands doing for chancellor, that's what I.
Speaker 2 (01:58):
Had too, absolutely nail down fixed in stone or fixed
in Edstone.
Speaker 3 (02:04):
Yes, yes, And then suddenly this story comes out in
Bloomberg and well they ought to suddenly shift dramatically and
it looks as if we're going to get Chavana Mahmoud
for chancellor instead. And again, as you say, the only
thing we know is that she's not as left wing
as Ed mellerbound. And that's been enough to actually it
(02:25):
did give Gilts and the pound a little bit of
a boost yesterday. I'm usually very very careful about attributing
these things to politics, but everything else was down and
gelts in the pound were up, and it looks as
if it probably was something to do with a bit
of relief on that front.
Speaker 2 (02:42):
Yeah, but you know what, John, Yes, I think that's
absolutely terrifying. Shall I tell you why? Yeah, because that
market pulled market pul survey from Bloomberg told us something
so obvious that it is beyond the bounds of all
reason that anyone in the government could possibly have not known.
(03:02):
It could not have understood that Ed Miliband would be
the least market friendly contender. Not new news, not something
you'd have to look at any survey to know. So
how can it possibly be that the results of a
survey showing that Ed Miliband would be the considered the
least market friendly chancellor for the UK could be new
(03:27):
news too an incoming prime minister when it is not
new news to anybody else. And that for me is
quite scary and boats really badly for the next few years.
Speaker 3 (03:40):
We thought that is Marrian, and I think you're really
this boy was donning at the other big point about
it is, how can this stuff he already not be
kneeled down and be if he was going to go
with them, then it should have been an anticipation of
a negative reaction from the markets, and then have a
think about how he was going to deal with that.
(04:01):
It shouldn't, I mean, the only rational thing that you
can say about it into once. I don't even believe this,
because I think most of them are too narcissistic to
not see these things until they're in their face. But
one thing you could say is maybe Bundum needed an
excuse not to appoint Mill the band, and then he
gets the excuse in the form of something like this,
(04:24):
Oh look, I was going to hire you, but now
the headlines are all saying that you would be a
terrible chancellor. And that's you know, it's not me, it's
it's the you know, bond market or whatever.
Speaker 2 (04:34):
But that even wash that's even already got the it's
no me, might be yea and it's not even prime
minister yet.
Speaker 3 (04:44):
Yes, that just put you right back to where Kure
Starmer was a year ago.
Speaker 2 (04:49):
It doesn't matter how you interpret this shift, assuming it
is a shift. I mean they're not done yet, right
a shift. There is no way whatsoever to interpret this
positive beyond the fact that if he's not Chancellor, well,
I mean that's a minor positive, but it doesn't you
can't interpret it positively in terms of the way Burnham
(05:11):
is thinking and the way he is likely to manage
going further. And you know, prove me wrong the future please.
Speaker 3 (05:17):
Oh yeah, yeah, I'd love to be wrong. But there's
the ultimate hedge, as if we're wrong, then things get better.
And if we're right, then the only consolation that you
get to see I told you so, along with the
rest of the population.
Speaker 2 (05:30):
So all right, moving on, John, because my head's going
to explode. Moving on. There are a couple of other
things we wanted to talk about, right. We wanted to
talk about SpaceX being back to its IPO price, which
is really depressing for the entire team because regular listeners
will know that my profits on my vast space position
were to be used to buy the team summer drinks
and now there are no profits, so no summer drinks.
(05:54):
Sorry guys, sorry summers summer Moses.
Speaker 3 (05:56):
Sorry Moses, I mean we need to buy your drink
is negative from here?
Speaker 2 (06:01):
Yes, yes, yes, it's on you and I'll have the Bollinger.
Thanks very much.
Speaker 3 (06:08):
Well, hope it's been how file it falls that may
even to that you never.
Speaker 2 (06:12):
Know, right even Okay, So back to my papers, and
one of the things that you and I've worried about
for a long time now is that these big i
pos might be a negative marker for the market, might
give us some kinds of top. There were a variety
of studies, studies reports when the when the IPOs were
first announced. But the giant sucking sounders and money goes
out of other parts of the market to go into
(06:33):
the IPOs and then of course maybe slides back out
again to go into other things. So there's there's a
lot going on in the market, and that this first
i PO is not an immediate success is a worry. Yeah.
Speaker 3 (06:47):
And it's interest because the most recent high for the
US markets that both the S and P and that
is like was the second to June and the space
X I p O or was the eleventh of June.
That doesn't mean they're not going to make new highs,
but it is kind of interesting in that if this
did prove to be the top, it wouldn't be an
astonishing thing to happen. It's also I think it's just
(07:09):
it's a useful reminder as much as anything else that
you shouldn't outsource your investment thoughts or views to the
market price itself, because you know, before SpaceX launched, slots
of people thought, actually this, this looks kind of expensive,
(07:30):
and it was kind of expensive, and then it shoots
up on the day and everyone thinks, of God, maybe
everyone else knows something I don't, and so the temptation
is then to try and pile in or try and
make a quick buck or whatever. But history shows that IPOs,
even long term successful ones, do tend to drop below
their IPO price at some point within the first year.
Speaker 2 (07:51):
Average down, average down eight percent.
Speaker 3 (07:53):
Right, and that's one of things like Facebook and Google.
Here we're not talking things that you know, hit the dark.
So this is perfectly normal ip behavior and all on
this day. But also more importantly I think is that well, yeah,
I mean SpaceX was overplaced to ploic stell is overplaced
at this level, and you should didn't feel underppreciately buy
(08:16):
something just because it's going up.
Speaker 2 (08:19):
I mean, I suppose it does make sense if you
think about it, which we do try to do, don't
We think about things good for an IPO to end
its first year down, because when do you bring something
to an IPO and you think you can get the
absolute maximum top price for it. On the whole idea
of the the olden days, there was an idea that
you should leave something on the table. You shouldn't bring
it to market that its peak price. You to leave
(08:40):
something on the table for the public market investors. But
I think there's days are gone. So when you bring
your company to market, you do it when you think
you can get the maximum for it. So it makes
complete sense that it would then end the year slightly
off a percent makes sort of intuitive sense. Yeah, it's
a sales market, it's a seller's market. Right. Just as
we look at this kind of thing, I think, oh, well,
things very little topy and these giant hypos might change
(09:02):
some things, et cetera. We then get a half yearly
letter from Terry Smith, manager of the fund Smith Equity Fund,
which is boys that had a nasty time recently. So
I don't know. Wow, now well, look I'm just looking
at the chart of the performance of this fund, Smith
Equity Fund, which I know a lot of listeners in
the UK will be in because Terry Smith, the very
(09:23):
well known manager. Here now it is let me see
here fun Smith Equity Fund from the first of January
this year at the end of June this year down
three percent, MSc Wild World Index up eleven percent, and
of course other things up a lot more. That's inception. Okay,
(09:43):
we have to say this because you know, lesbian and
let's be nicer. Since since inception the fund is still
up thirteen percent annualized and MSCI World up twelve and
a half percent annualized, so you know, okay, but probably
not quite what people expected when they brought into the
hype around this. Now here's interesting, well, I hope it's
(10:04):
interesting to people. What Terry Smith always said that he
would do is to buy good companies, don't overpay for
those companies, and then do nothing to sit and wait.
And theoretically that should really work. Going We're both down
with that, arn't we, John By great companies, don't overpay
for them and then sit around and wait, because investing
(10:24):
is our long term game, but it has not been
working in this environment of the shift to passive because
what really works in this environment is momentum investing, not
long term quality slash value investing. Right, So he is
now beginning to backtrack in this letter, is it's worth reading.
By the way, I'm going to put the link into
the show notes so you.
Speaker 3 (10:45):
Can read it.
Speaker 2 (10:46):
It's a public letter, and he talks about the way
that Pascifists conquered the world and that possibly one needs
to adjust one's investing process as a result. And what
Terry is going to do is to change his holding
periods as opposed to or anything else. So still buy
good companies, still don't overpay, but the third leg needs
(11:08):
to change. So if you look at their portfolio turnover,
it's gone up a lot, and I think quite rightly
points out in a world where share prices sometimes may
have twenty thirty percent a day, even in very big stocks,
buy and hold kind of doesn't work anymore.
Speaker 3 (11:20):
It's a shricky one, isn't it? Because I actually sympathize
overall his view and the passive highs tounned markets spent
a momentum market, and this has been the case for
a long time now, certainly longer than reversion of the
mean with investors can handle. I think it's also interesting though.
(11:46):
The one thing I would say, and I can see
why obviously he doesn't want to go there, but he
and neck Train, another big retail face and fund manager
that have a sort of similar style, which is this
focus on quality thing. And you know, from the investment
point of view that respect them both. They both explained
their ideas very well, They're very good at communicating with investors,
(12:09):
and obviously they both have excellent long term track records.
I think it is also fair to say that their
style kind of went out of fashion, and partly that
was for I would argue reasonably predictable reasons, because a
lot of this stopped in twenty twenty one after the
(12:29):
the kind of basically the kind of COVID ultra zero
interest rates backdrop ended interest rates went up, and most
of those stocks then got demolished, and a lot of
them are also the kinds of stocks that then got
further hit in the software as a service apocalypse as
(12:52):
they called it, as an AI is going to take
all that business. So I feel that there is there's
a lot of sense and sticking to one strategy it
makes a lot of sense. But I do think that
that was perhaps a tourning point at which an act
of manager, even when we are long term ultra long
(13:14):
term take on things. Might have wanted to look at
what was changing about the backdrop and then reconsider the
portfolio within those parameters. But maybe that's unfair.
Speaker 2 (13:27):
Maybe that's unfair. But it's interesting, isn't it. I Mean,
when we were talking about what we were going to
talk about today, you said, well, there's a lot of
turning points out there, and seeing someone like Terry Smith,
who's been so clear and so firm in his view
and his investing style for so long, to start to
(13:48):
make changes in it makes me feel a little contrarian.
Speaker 3 (13:53):
I mean, yeah, I mean there is an element of
capitulation here as well. Yeah, and obviously, well that goes
to all the other signs that we are very toppy
at the moment. I think the problemly all of the
top signs is that well it is working out when
(14:14):
the dominoes finally going to fall over, Like what is
the straw that breaks the camel's back, because there's been
a lot of them and a lot of them going
back years now, you know, no, just minds.
Speaker 2 (14:25):
Yeah, but we do really need there's a turning point
in the UK stock market because the other thing is
that we got to talk about is the ongoing demise
of the UK stock market closing down sale continues. I'm
afraid I'm not sure who it was. You wrote closing
down sales continuous on Twitter and somebody wrote underneath it,
at least this time we won't have to turn the
(14:45):
lights out, which, of course there's a reference to our
rather rickety electricity grid and the fact that the lights
might just turn themselves out. I thought it was quite funny. Well, George, George, excellent. Anyway, John,
(15:12):
I'm going demise of the UK don't market We've lost
another company, haven't we?
Speaker 3 (15:16):
Yeah, I mean, so there was a bid for road Talk,
which is an engineer and all means. I don't know
very much about road Talk. It's a bit familiar name
to me. Low I believe it was set up in Bath.
As soon as we know part of that tweet. I
got an awful lot of older city heads kind of
reply and say, no, I remember that that was one
(15:36):
of the first stalks I ever covered kind of thing.
She's got a long history of being here and but yeah,
it is just the latest one to get kind of
spiped up. And I think the other interesting thing is
that this week I was writing about this and money distilled. Hey,
Barrett red Row, the house builder. I know that you're
not your favorite sector for very acceptable reasons, but just.
Speaker 2 (15:58):
Go to look at the hard sand house builders. I
hate them for the hideous houses that they build, and
I hate them for not trying. But I do understand
that the right number. I'm just difficult, but I still
don't think that these houses have to be quite this hideous.
Speaker 3 (16:15):
I think this is fair. But the reason they bring
it up is because basically one of their big shareholders
said to them, look, you need to buy back your
own shares because no one else is going to, you know,
appreciate what a you know, good good quality in terms
of profitability, long term business you've got. And so they've
started doing that, and it's just adding to the whole
(16:37):
sense that nobody these things are just lying around unappreciated
on the supermarket shelf until someone where an eye for
a bargain comes along and takes them, or the management themselves.
Speaker 2 (16:52):
Compass.
Speaker 3 (16:53):
Yeah, thats exactly stick to ekes track. They kind of
the value themselves if you like. So I don't know
if there is a turning point, because regardless of how
much to be buying this drum nobody seems to be paying.
Speaker 2 (17:11):
The time interested.
Speaker 3 (17:13):
Yeah, I know, which is fine from a short term
point of view. At the end of the day, if
you can invest in these stocks, then you'll get the
takeover premium or you'll get to be the last person
owning the last share outstanding, so you make money that way.
It's just not great for the long term healthy the economy,
if our equity market specifically, because London's cattle markets as
(17:36):
a whole are fine, there's nothing wrong with them, but
this bit is just dying on his backside, and I
think we should try to stop that from happening.
Speaker 2 (17:50):
Okay, well, we should try and to be feder ritual raves.
This is one thing she did slightly get and she
was trying at least in a regular environment. Let's see
it is focused on comes up with on a similar subject.
We have for years, John, our favorite favorite markets. You
and I've been Japan and the UK, and you know,
(18:11):
Japan has kind of come good. The UK has come
a little good, but not that good. Has just discussed.
But Japan is really interesting because the only thing we've
talked about a lot on this podcast is financial repression
and return of the extent to which governments might, in
our great age of debt, demand that domestic investors bring
their capital home to help out with either national infrastructure
(18:35):
or investing in the domestic bond market to make it
look less rubbish, et cetera. And we're now seeing something
happening in Japan. Nothing set yet, but the Finance Minister
Kata Yamastan, we're speaking earlier this week about how one
might encourage local investors, including Japan's whooping great government pension fund,
(18:56):
to consider bringing money home and investing in themes stick assets.
And it's interesting that this has shifted since twenty fourteen
or so, when there was a much higher level of
Japanese assets held inside Japan than under Abasan. There was
a shift in as it started to flow abroad. And
in one way that's been great. Very cheap yen has
(19:16):
been brilliant for the Japanese exporters in the manufacturing sector
dat in an age when you know physical AI, robotics, etc.
It's all been marvelous. But now there is talk about
trying to bring some of that money home, which would
be kind of interesting. And Deutsche Bank have done a
little blog on this looking at what might happen, and
suggesting that at the maximum the amount of money that
(19:37):
might be brought back would amount of about ten percent
of GDP. It should be something of a game changer
for the end.
Speaker 3 (19:42):
Yeah, and I think this really has both paying attention
to because I mean, obviously the semmetery as the in
twenty tweyelve, as you say, that's where then playmnster sins
or RB can they say it will basically we need
to do something about this and started a policy. It's
a little bit deliberately being the end amongst other things.
(20:03):
And that was Bien was at the strongest end. And
as you say, twenty fourteen, the GPF, the big pension
fund started the increased the amount of foreign assets that
they could own. And so yeah, if they flip that around,
because it did have a big effect, they'll have a
big effect in the opposite direction. There's obviously the concerns
that the yen carry trade, which is basically borrowing money
(20:26):
and yen and investing in elsewhere, if that suddenly reverses
and a whole load of money could come out of
various assets, including you know, hot tech stocks. But I
think the other thing, and I don't know if this
was in the Deutsche study or not, but they said
that the most vulnerable asset was probably French sovereign bonds
(20:46):
and that would be interesting to watch given that vulnerable. Yeah,
I mean frances is the only reason that France is
not on the front pages all the time in the
way that Britain has been is because inflation is slightly
lower in the Eurozone as a whole. But also France
is effectively underwritten by you know, the European Central Bank,
(21:07):
which is Germany basically, and so that's you know, it's
it's kind of debt isn't isn't being subject to quite
the same pressures. But if if this happens and you've
also then got you know, again a very panicky looking
French political situation next year, I don't think it'd be
going too far to say that you start getting worries
(21:28):
about the kind of Eurozone again kind of erupting in
the you know, headlines and all the rest of it.
So yeah, I think this, this this suggestion is actually
quite consequential, and I'd imagine they will follow up on it.
Speaker 2 (21:45):
I don't think it's worth saying that, as I think
a lot of people have pointed out that the the
government pigeon Fund does not fall under the Ministry of
Finance technically nothing to do with the Finance minister Cutma
but but but, but it all falls onder the same
thing in the end, and the pension Fund falls under
the Ministry of Health, Labor and Welfare. But it's all
(22:08):
part of the same government, all part of the same system.
And we know that the government has influence over pretty
much everything. I mean, the Bank of Japan is famously
not quite independent, et cetera. So I don't think the
fact that it's not directly cut Umiston's responsibility would make
a difference to this, nor but the fact that the
pension fund again has like all punch of funds in
the main so far for dishary duty to seek the
(22:29):
best returns, that doesn't necessarily make a long term difference
to how it's invested in Japan.
Speaker 3 (22:36):
No, And that also they're able to They aren't at
the limit of that allocation either. They can that official allocation,
they can they can go higher even without changing anything overtly.
So yeah, no, I'd be surprised if this doesn't end
up being a turning.
Speaker 2 (22:53):
Point, turning point, And you know, maybe a tanning point
for global finance for oppression, because it's not exactly the
only place that is talking about patriating capitals. It's been
an ongoing conversation here trying to get punch and films
to repatriate capital and invested in things of national interest
in the UK, and we hear of it in other
countries as well, and it may just be that in
an age of great public debt, capital can no longer
(23:15):
be free.
Speaker 3 (23:16):
Yeah, we'll be interested because I've sort of de slaved
this as a capital nudge and I'll be interested and
to see, well when's it go from being a capital
nudge their capital capital control?
Speaker 2 (23:25):
Yeah? Okay, well this has been positive, Yes, as usual
as usual?
Speaker 3 (23:30):
You're ree of sunshine for the week?
Speaker 1 (23:33):
Yep.
Speaker 2 (23:33):
Absolutely, Look there is a red sunshine here and I'm
going to tell you about it, which is that nearly August,
which means that it is nearly time for our fringe
show all about Adam Smith and how moldless he was
at Pama House. We will put the link to how
to book tickets for that in the show notes as well.
I will say they do sell out very very quickly,
so you will want to book your tickets now so
(23:55):
that you are not the person calling me on the
day begging for a ticket from my personal family allocation
that right.
Speaker 3 (24:02):
John, absolutely, absolutely, rather than the last bitcoin.
Speaker 2 (24:09):
Not rare at all, bitcoinds onwards onwards.
Speaker 1 (24:13):
Oh.
Speaker 2 (24:14):
I will also say, by the way, that we have
asked a lot of people on the podcast over the
last few months about what they're reading, and not just
authors but non author guess what books they're reading. And
I've made a list of those for those of you
who don't quite listen to the end of every podcast,
and they'll be in my newsletter this week. So if
you want a roundup of the things that you should
definitely be reading on the beach, do read my newsletter
(24:36):
on Saturday. And of course you always read John's newsletter
every day. Anything to add to that.
Speaker 3 (24:42):
John, No, I'll look forward to that one. I like
seeing what other people have reading.
Speaker 2 (24:47):
Yeah, well, I tell you what. The one I really
want to read is the one that Ed Cole from
Margaret recommended, the final fatal adventure of Captain James Cook,
The Wide Wide Seiand that's absolutely brilliant. Jam. Now I've
given I've given away the ending.
Speaker 3 (25:06):
Spoiler A Lot spoiler alert.
Speaker 2 (25:17):
Thanks for listening to this week's Marren Talks Money Markets RAP.
If you like us show, rate, review, and subscribe wherever
you listen to podcasts. Also, be sure to follow me
and John on ex or Twitter at marins w on
John Underscore Stepic. This episode was produced by Samasadi and
Moses and questions and comments on this show and all
our shows are always welcome. Our show email is Marror
Money at Bloomberg dot
Host
Merryn Somerset Webb
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