February 3, 2023 • 41 mins
Inflation isn’t going away. Why? Because governments can’t let it. So says market historian Russell Napier, who on this episode of Merryn Talks Money tells host Merryn Somerset Webb that, with the global debt-to-GDP ratio at an historic high, using inflation to eat away at the real value of debt is the only escape route. What that means, Napier says, is that for the first time in a long time politics will matter most to markets.
Napier also shares his ideas on how investors can navigate this new environment. He says market indices may fall, but mentions some equities that he says will still make investors real money. Which ones? Tune in to find out.
And Money Distilled's finest John Stepek joins to talk about why dividends are due a comeback. Check out his daily newsletter here:
https://www.bloomberg.com/account/newsletters/uk-wealth
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Hi, John, Now listen, we are talking just after the
Bank of England has raised interest rates brainnother half a
percent to take them to four percent, which seems kind
of okay, right, four percent feels like a normal kind
of range for interest rates, all other things being equal, that,
of course, all other things that are not equal. But nonetheless,
if safe, for example, inflation was somewhere around the Bank
(00:21):
of England target of two percent, then you would expect
interest rates to be about four percent. The fact that
inflation is around tempercent, we'll put that one side at
the moment. This first my progress, right, Yeah, it's nice
to get away from zero's. It feels somewhere approaching something,
getting towards normality. And if inflation actually does come down,
(00:42):
obviously it's going to come down next year and next year,
but if it does kind of stay around maybe four
or five percent in the long run, then the Bank
England doesn't have that much although it should. I mean,
obviously it's not planning to reads them much further at
all effort all actually, but we'll see, and certainly not
(01:03):
planning to raise them above inflation, because you know that
would be crazy and old fashioned. But it does mean
it does mean that if we have an even vaguely
consumer phacing bank, we should be able over the next
few months, just like getting proper interest on our deposits,
not more than inflation. Obviously isn't a real return on cash,
(01:24):
but a return on cash the less. Yeah, and I
mean there's quite a few fix Street boinds know that
you don't alsus have to lock up for that long.
You get over four per cent, may even be high
on the um. And then there's a few accounts you
can get stuff. I mean, obviously with the Continent account
you can't see really white money in it, but I'm
sure I saw one that was picking up above sex
(01:45):
or seven percent actually recently, I don't believe you. Now listen,
you can get above four percent on UK equities as well, right,
And one of the great things about UK equities is
that they are usually dividend paying and not particularly expensive.
And I put up a chance the other day on
twitship that everyone got right across about pointing out that
in capital terms, real the UK market hasn't actually moved
(02:09):
since the nineteen sixty seven, which meant everyone go, oh,
you can't like this, You've forgotten about dividends, and I
haven't got about dividends. I was just putting up an
interesting chart and people didn't find it interesting. I found
it quite interesting. But nonetheless, you've had a perfectly reasonable
return from the UK market thanks to dividends, right, Yeah.
And I think this is actually really important because and
that's it's really important in the context of a very
specific thing today, which is a Shell obviously just reported
(02:31):
its results as well, and it's made draka profits blah
blah blah, and of course everyone is kind of disgusted, appalled,
blah blah, et cetera. But this and one of the
things they always highlight is it pays out there's something
of dividends to share holders. But if I called up
a chart the Royal Dutch Shall over the past ten years,
if you include dividends re invested, it has made exactly
(02:55):
as much as if you put your money and a
foot who shared tracker. If you don't rest the dividends,
the capital gain is less than six percent, So I
think that's a good measure of Look, the dividends are
part of the reward to shareholders for owning the stock.
They are not actually egregious and they are not, you know,
flying ahead of every other company in the country. Um.
(03:18):
So that that's kind of like I think one could
measure that helps to separate the can effect from the
fiction side. This argument about whether kind of energy companies, etcetera.
Are making profits that are kind of over the top. Um,
and you know, the discussion about wind fall taxes, etcetera.
Greedy shareholders. I mean that's the story, isn't it. You
(03:39):
greedy shareholders. You shouldn't want those dividends. Everyone forgets that
those dividends are paying their pensions. Yeah. And also those
greedy shareholders would have been like far, far, far better
off by being invested in the SMP five hundred for
those ten years. So we should be we should be grateful,
grateful to those greedy shareholders exactly, these sacrificed returns and
(04:00):
wait for this. I'm gonna wait for the thank you
letters now. In terms of anything but the US, which
is kind of where most investors are beginning to get
to these days. One of the things that I'm talking
about in the podcast that you're about to hear fantastic
conversation with with Russell Napier or other. He's fantastic. I
just sit there as usual, but you know, he does
say some really interesting things. One of the things he
(04:22):
points out is that in pretty much every environment similar
to the one we have today i inflationary or one
jammed with the financial oppression measures, the best way to
invest is to invest in stuff that is cheap. And
outside of the US almost everything is reasonably prized. You know,
look at the the MSCI World Index if you take
(04:43):
out the US, and again it's barely budged for a decade. Yeah,
I mean, I think this is really good. It's it's
actually I mean, this is the nice thing that interest
is going up. We've get something closer to normal environment.
We are you can also put your money, are we
we haven't a or in sort of like really weird
conditions lasting forever, which is what you had to do,
(05:05):
you know, maybe five years ago. Um. And I think,
I mean, one of the things I've been writing about
this morning the zou Ki equity income investment trusts, and
one of the brokers was out talking about basically how
cheap they look, and it wasn't exactly I kind of
is it. The UK might quite possibly be quite a
(05:26):
good place to be this year. So it's not like
a ringing endorsement. God, it's hard for people to It's
hard for people to say this isn't it after all
these years are saying the UK is rubbish, rubbish, rubbish.
The fact that it looks like a perfectly really bras
market with good dimit impayment, it's really hard for some
of these professionals to force themselves to say, but you
know what, the more it goes up, the easier they're
going to find it. Well, yeah, I mean, interesting thing
(05:50):
is the Investment Association came out it's annual figures on
where we've been putting our money basically, and last year
was the first year ever, including two thousand and eight,
the UK retail investors have actually had a net outflow.
In other words, we took money out of funds and
of course the hardest sector again was UK equity funds
generally something like twelve billion outfloor is the only thing
(06:13):
going up? Yeah, and then well this is you know,
it's good news for anyone who's got a kind of
contrarian bent because it's still really widely detested. It's not
quite as heated as it was in September, but that's
really not seeing very much relative hatred. Wonderful thing, right, John,
Thank you very much. Thanks. Welcome to Mary Talks Money,
(06:41):
the podcast in which people who know the markets explain
the markets. I'm there in sum Stweb this week. Our
guest is Russell Napier. He's author of The Solid Ground Investment.
Well it's a newsletter, really report anyway, it's brilliant. If
you can't get your hands on it, do He's also
the author of two excellent books, Anatomy of the Bear,
which I think we might be eating over the next
few years, and The Asian Financial Crisis, both absolute must
(07:05):
reads now rather than I started by discussing one of
the things that is absolutely crucial to Russell's analysis, which
is understanding where the global economy is heading. And to
look at that, we need to look at government debt
and private debt relative to g d P. Has it, pete,
Is it at a point where something has to change? Now?
If we can understand where we are with that, then
(07:26):
we can start to understand how governments will react. And
if we know what governments are going to do, then
we can get a sense of how markets are going
to react. So my first question to Russell was where
are we right now? Globally in terms of public and
private debt levels. I mean, one of the biggest questions
and finances when it's too much debt, too much debt.
(07:47):
Throughout my entire career, debt to GDP ratios have been
going on. Either's more debt, but yet it always seems
to be sustainable. So we have to focus on why
suddenly that isn't the case. Let's talk about three metrics.
So one is debt to GDP ratio, and that would
be the debt of the government, the dead of the
household sector, and the debt of the non financial corporate
sector as a percentage GDP. Well, it's at the highest
(08:08):
level ever recorded. Often when people look at this data,
they look just at government data, and you could show
for the Hunted Kingdom, for instance, that it's below where
it was at the end of World War two. But
if one looks at the whole lot, which includes the
households and the corporates, were at a higher level. America,
for instance, would have got to the end of World
War two with its debt burden on those three sectors
(08:28):
at about a hundred and GDP. It's now two hundred
and sixty to GDP. So it's not marginally higher, it
is significantly higher. So you'd come to the conclusion it's
the highest level of debt to GDP and human history.
That still doesn't mean it's too much, but it doesn't
raise the vibraes as to why it might be too much. Now,
let's look at the other metrics, because the problem with
(08:49):
that the GDP is it's measuring a stock, which is
the debt to a flow which is GDP that's the
annual amount of the production of the economy. A second
one people can look at is the Bank of International
Settlements Early Warning Indicators, and they have back tested this
and look at the growth rate off debt to GDP
relative to trend, and a deviation from trend on the
(09:10):
upside as produced as a very high prospect of a
private sector debt crisis. In other words, there's too much
debt because the private sector can't possibly service it. So
that's another indicator. And the one that I like to
look at is private sector debt service ratios. So that's
just the private sector and not the government, and it's
the total amount of income private sector income needed to
(09:30):
service the debts. And there are many many countries where
that's above. That's always been a warning signal, particularly if
interest rates are going up and you're already at And
the problem we have today is they're going up from
five thousand year loans. And when interest expense goes up,
interest rates go up from five thousand year loans, interest
expense goes up particularly quickly. Anybody with the UK mortgage
(09:52):
it's maturing this year will be all too familiar with
that dynamic. So you put all that together, I think
it's too high. It's dangerously high. It risks a prior
that sector debt crisis if interest rates properly reflect the
inflation outlook. So that's the final little bit of the
ingredient that is now in the in the pudding. If
you like, inflation is high, interest rates are supposed to
go high to correct that bring it down. But can
(10:15):
the system, this geared system, live with the level of
indust rates that will do that. My answer is no one.
So finally, too much debt is too much debt. Okay, Well,
that sounds like there's a really simple solution here. We
just keep interest rates low forever everything I'll be fine.
I think that is the solution. There's a problem with
that because short term rates are controlled by the central bank,
(10:36):
and long term rich are supposed to be controlled by
you and me the saver. They're not supposed to be
within the control of the government. Remember one of the
reasons that we took it out of the control of
the government as they did such a bad job of it.
And that is why we made the Bank of independent
in the nineties. That is why we give our central
banks targets. That is why we left this up to them. Uh.
(10:57):
And if the market you and I demand the correct
level of interest strates to compensate us for future inflation
one if that's just simply too high and forces everybody
to default or forces mass default in the private sector.
And if you look at the British government profit and
loss account of the minute, and look at how much
money we're paying on interest expense and the inflation compensation
we pay on indexlling guilts, and the transfers were making
(11:18):
to the Bank of England to compensate them for their losses,
and the transfers will soon be making to the commercial
banking system to compensate them for the losses on the
COVID loans that the government guaranteed. You know this number
is rapidly getting to about a hundred and thirty hundred
forty billion sterling, quite close to the budget for the
National Health Service. So I focused on the private sector
(11:40):
and say, you know, the private sector couldn't cope with
higher rates. But if we stick with the status quo
where a central bank independent sets short term rates and
bond investors right even the set long term rates, we
may not have a feasible economic system. What should interest
rates be at the moment to compensate us for inflation?
You know, CPI is branning knocking around ten the center,
(12:00):
so that we should be getting twelve on our deposit
accounts in a way. Well, in short term rates, yeah,
and in long term rates it's a bit more problematical.
There are lots of distortions already in the long term
bond market, Lots of force buyers already, and those buyers
will be life funds and pension funds when they're doing
their liability management and matching. Those were their aspects, So
they're already distorting the rates. The central bank ownership is
(12:21):
distorting the rates. And there's a unique function post Great
Financial Crisis, of which many organizations used government debt as
a form of collateral for borrowing, and that also distorts rates.
So yeah, we're showing much much higher, but they are
not going higher. And part of that is a government
action through forcing savings some savings institutions to buy this
(12:43):
part of it is a central bank distortion. But I
think it's very difficult to argue that these rates are
properly set by a market and fully compensates for future inflation.
So there's some distortion already there. But let's go back
a little bit to the last time that that debt
was extremely high, although as you set year is different
because we're talking about the post war period when it
was public debt alone that was the major problem, and
(13:07):
then didn't see massive distortion of the relationship between interest
rates and inflation or how how did that work? Well,
it worked by forcing the savings institutions to buy government bonds.
So I want to quote from Isaac Newton here, and Newton,
as you probably know, quite a lot to do with finance,
and his time was Master of the Mint, and that
was particularly go to executing people for forgery. But we'll
leave that as a as a separate issue. So UT's
(13:29):
third laws dates that for every action there is an
opposite and equal reaction. And what I will now arrogantly
called Napier's laws is that for the modern investor, for
every market action, there is an opposite, never equal, and
always distortionary government reaction. So let's talk about the reaction,
but more importantly, let's talk about some of the distortions
that it causes to the entire systems. So during warfare,
(13:51):
it's quite easy to get people to buy government bonds.
I mean, the sacrifices people make during war are much
bigger than finances, so they there are war born drives. Also,
your institution Usians are forced by government bonds through ferties
Freeconian measures. In World War Two, the savings institutions of
the United Kingdom had the hand over all of their
offshore assets, particular dollar assets, to the government and they
(14:12):
got government bonds in return. So there's a pretty blunt
sledgehammer approach to this. Obviously, there was a dollar assets
where liquidated and used to purchase war materials, but the
investors suddenly find themselves for herself or in government bonds.
After World War Two, it's more tricky to make the
case that we should continue financial repression. But the case
is made, and then that we have to switch and
(14:33):
say this was not about preserving the state and preserving
the welfare and the liberty of the people. This is
about their safety. And this is because we have to
get them into really safe assets, because we all know
how dangerous assets. Other assets are not that difficult after
World War Two, given the prolonged her performance from equities
which began famously in October nine and had lasted really
(14:56):
throughout that entire period. But we now have to say
that it's government bonds that are saying if the yield
has capped, in particular, if you don't let the price
of bonds fall, there won't be a capital loss. The
yield is reasonable, it can be argued there is no
risk of principle not being paid, There is no risk
of interest not being paid. Why wouldn't you want this
coercy of our set right in the middle of your portfolio.
(15:17):
And then we go to the institutions under the guise
of macropotential regulation and say you need to have x
percentage in government bonds. And a nice little example of
the legacy of this, which has only just disappeared, is
the need to force retiring pensioners to put all the
money into ennuities, and the nuities are backed by government bonds.
So there's lots of little works of the system you
can put in place to force the compulsory ownership of
(15:41):
government bonds. Okay, so I can see how it works
that time around. How might this work this time around?
I mean, obviously, what we're trying to do here is
to get investors to hold onto government bonds at lower
yield than our appropriate given the inflation environment, that gradually
eats away at government debt in real terms. And the
problem is that stop, friend, So it works, I mean,
(16:01):
it works, so there is an upside here, right, Yeah.
I think a nice little example of that is I
think it's nineteen fifty seven where Harold McMillan said to
the people of the United Kingdom, you've never had it
so good. By that stage, I think you've already lost
thirty percent of your money in real terms investing in
British government bottoms. So you've never had it so good.
It was clearly in that one section of the population,
(16:23):
but not necessarily in another section of the population. So
if you're a portfolio investor and you can see how
wealth maybe realigned during this period. You can do something
about that as long as you're free to do so,
and you can look at it to invest in equities
and shares of companies that might benefit from such realignments
of wealth. So it's being alive to the opportunities to
do something rather than believing that this is temporary. And
(16:46):
I think that's the other thing worth stressing. Could last
a long time. It doesn't last a year or two years.
This to get our to GDP and say, oh, I
mean the advanced economy, it's not just the United Kingdom.
To get it back into line, I think it's a
decade's work. Don't own government bonds unless they force you
own them. Well, let's come back to how financial repression,
because that's what this is. How finance repression might work
(17:07):
this time around. We talked about how it worked last
time around and has some of the remnants of it.
For example, annuities being as something we're forced about exceptionaly,
they're relatively recently fallen away, right, But nonetheless, if we're
going to start again, how how might it happen or
is it happening already? I think the other that might
be Yes, yeah, I think it's happening already, depending on
My main job is to advise financial institutions, and the
(17:28):
more I'm talking to longer term pension funds and life funds,
the more they'll tell me this is already happening to them.
If I'm talking to mutual funds, they'll say, what's financial repression?
So in the obviously easy answer that is just hang
around and you'll find find out. So it has to
spread down through the system. It's like low hanging fruit.
The low hanging fruit to be repressed. It has to
be regulated, but it has to be natural owners of
(17:50):
government bonds. If you like multi asset funds, so multi
asset I shouldn't call them funds. Multi asset pools have
been the easy place to repress because it's not revolutionary
to tell them that forced them to buy more government bonds.
As if we ever get beyond that two funds that
are dedicated to equities, or if we get to your
SIP or your ISA, that's when it becomes more revolutionary.
So the minute they've just been plucking off the low
(18:12):
hanging fruit, and I think it's about to become much more,
much more dramatic than somewhere sometime we're going to see
an institution or a form of savings compelled to buy,
say to buy bonds that we just didn't think was
ever going to be owning bonds, and that may be
coming to Japan before it comes here. Well, it's interesting,
I mean, we've heard a little bits involves that suggest
(18:33):
to us that various things might be coming that we
will find uncomfortable. I mean, but until up until now,
we've seen, for example, defined benefit pension funds providing people
with their defined benefit pensiants having to hold larger amounts
of bonds than possibly some people might think is sensible
under the circumstances for regular reasons. But we've heard mutterings
recently about the suggestions, for example, that perhaps all penci
(18:54):
of funds may be the ones that people hold under
order enrollment, might be persuaded to invest in various government
initiatives via green bomb system, that kind of thing. So
what you're talking about having to having to assist the
government bio iss that already kind of feels like it's
out there to a degree, doesn't it. Well, the Bike
of England, and this is before COVID formed a committee
(19:15):
I think it's called the Bank of England Working Group
on Productive Investment. Now I'm I'm not sure that the
Bank of England knows a lot about productive investment, but anyway,
it has a working Group on Productive Investment which includes
h m r C, includes the regulator and includes Last
time I looked about seventeen financial institutions people are listening to.
This will be interesting to know that they're not banks,
that the people who look after your money. So they're
(19:37):
sitting in a room and what are they discussing. Well,
that's all over the newspapers you can read about it.
But it's effectively about getting those institutions to buy more
long term securities, and those long term securities are ultimately
aimed at achieving some sort of political goals. Now those
political goals can be in renewables, but can they be
all the political goals? And the high biling is what
coupon really should people get for this returned? And there's
(20:00):
a lot of argument from those institutions and other institutions,
but the fact is that the working group is there.
It's trying to find a way to get the people
who look after your money to buy more long term
fixed coupon securities and in my opinion, that is not
good for the own customer. So there's lots of ways
you can dress it up to say it is good
for the own customer, but I think it isn't, and
I think it is tinged more than tinged with a
(20:22):
needed by the politicians to have your savings where they
need the savings to be. So basically the point is
that the concepts are out there now we're just bickering
about the price. That's a very good way of putting it. Okay,
So if that is the case here we are in
a situation where as you say, if saving institutions and
fund managers, in particular the fund managers so we think
of as being mainly equity only investors, long the only investors,
(20:46):
if they are now forced to put even five teen
percent of their portfolios into what we might call it
the bank giving they would call long term productive investments,
and we might call long term not particularly productive political investments.
If they're forced to that, then as you say, they
are then forced to sell equities, and so what we
have Obviously we know that inflation has a long term
nemic negative effect on equity valuations, but there's selling of
(21:09):
equities would have a secondary negative effect on equity valuations.
One of the consequences of that for us. Well, so
we all go back to the seventies now and we
think about what happened in the seventies, and it wasn't
a good time to be in order of equities. I
think there's an interesting dynamic though, because one of the
key reasons why it wasn't a good time to be
an honor of equities is because indust rates went so high.
(21:31):
Nominal rates went so high. Now we've already discussed why
that's unlikely, just because the levels of debt are so
much higher, So it's not to be rising rates. What
is it that would bring down valuations? And as you said,
it's going to be this shift that forced the savings
institutions to sell equities. And then we reach an interesting
dichotomy here because some equities are already cheap and some aren't.
(21:54):
So if I do that in broad terms, I would
say to categorically the SMP five hundred is grossly overvalued,
and data that we have stretching back as far as
eighteen seventy one, it looks like it's very expensive. If
I look at UK equities, looks like they're really at
best fair value and potentially really quite cheap. So I
think there are still opportunities and equities. It may be
(22:16):
that UK st in institutions have to sell the UK equities,
but frankly they don't own a lot of them anyway.
And secondly, there's always this other buying power below that,
and that is in the form of solid wealth funds,
private equity management biots. So I would not be so
negative in a word of financial repression in the markets
where we start with low valuations. So last time we
(22:38):
didn't and it didn't do well. But if you want
to look at the period in the in the fifties
and sixties when UK was clearly running a financial repression,
equities didn't do too badly because they started at a
very cheap price. Now they're not as cheap as they were.
In we're looking at the world x US equity markets
in dollar terms, there really haven't gone very far in
(22:58):
twenty two years. The MSc I, this is an index
of world equities, doesn't include the US in dollar terms,
it's not much above it's March two thousand level. But
if you have an asset class in the capital returns
of being close to zero for twenty two years? High
risky is it to invest in? They asked a class.
So I don't rule out some forms of equities as
(23:20):
a way to defend yourself from this financial repression, but
I think one should be very very cautious about US equities,
which are sixty four of global market capitalization. Yeah, and
any fund you might hold, literally, any fund that is
not country specific is going to have very high exposure
(23:41):
to the U s sense. So it's pretty much any
passive fund that you might buy in any sector or
any kind that anything global or world and the title
is effectively can be tracking the US. Right. Yeah, Passive
I think is particularly dangerous. And I suppose you have
people involved with active management on here every week saying
how dangerous passive is, and they've been saying that probably
twenty five years. But it is dangerous in this world.
(24:03):
This is a sea change in how the system works
and the market. This is the nature of equity markets.
They fill up with winners, and they fill up with
winners of a certain type of system. And the system,
particularly US market, is filled up with is those that
benefit from falling infest rates, more debt, lower inflation, off shoring,
productive capacity just running with brands financial engineering, if you like,
(24:25):
in its broadest terms, and those are not the winners
of a financial repression. In fact, they may be forced
to re equitize. So when you're buying passive, you're buying
the winners of the old regime. I would say, even
in America, there are lots of stocks to buy that
are winners in the new regimes. So if you've got
a good map fund manager who's not compelled to be
orientated towards the benchmark, I would be pretty convinced that
(24:47):
they could buy a good portfolio of reasonably priced equities.
As you know, the thing that biases us towards that
would be the word value in the title. So value
managers would be looking for lower valuation stocks, and if
the risk from equities in an inflation is really the
valuation and not the earnings, which is what history tells
us that I think even in America, with the right
sort of mandy, a good fund manager could potentially produce
(25:08):
with terms have been inflation. But it's difficult to see
that happening in the SSP, which is full of the
winners of the old regime. They are actually saying that
this could be a stockpickers market. People have been saying
that to me for ages, and I've written several columns
about it, saying, you know, now it's a stock pickers market.
And it turns out that the momentum of the index
JAZZ keeps going. But the last year or so, we
(25:32):
have begun to see a change, haven't we. So you know,
value stocks about performed, and you're beginning to see I think,
as you say, the shift towards people who can really
step away from the index and really look for value,
really by stuff that is cheap to begin with out performing,
which is is reassuring for the likes of us. Yeah, well,
you know, I can't say you heard it here first
(25:52):
obviously because you've been hearing it for twenty odd years.
But it is coming, and I think there's an interesting
quirk in it, which is the gorhythms fascinating. The algorithms
obviously use lots of historical data to work out relationships
that they see in the market, or relationships they see
related between the market and macro variables. And if I'm
right that there's a whole new system coming, and one
(26:13):
of a lot less market and a lot more government.
One wonders what the algorithms do because at some stage
the data dropping into the equation against the sense that
actually some of these old relationships don't exist anymore. And
then there has to come a tipping point where they
begin to pick up new relationships. And at that stage
do they all go at the same time, that they
(26:35):
all move at the same time. So strangely, one of
the reasons that we've been so wrong about stop picking
for so long is the automized automization of the whole
system through algorithms and index funs. And it may be
the algorithms lead us or don't lead us. Hopefully human
beings are ahead of them, but sort of exacerbate these strands.
But as when they get that important piece of data
(26:55):
that tells them that we're not in Kansas anymore, I
don't know. But when they do, it might all happen
quite quickly, okay. And when they do, what do you
what what do you want to be in? I mean,
when when we look back to history, what are the
kind of stocks that should perform well in this environment
outside value? I've heard you speak before about it being
(27:16):
a matter of size and the midcaps and small caps.
Ever history of that performing in this environment. But again,
is that because historically when these things have happened, they've
been cheap at the beginning, or is it because there's
smaller mid caps. Yeah, I think it's because they've been
cheaper againing. Primarily, what we're talking about is the politicization
of the flow of credit and capital. So when would
want to look to see which companies benefit from it? Okay,
(27:38):
that's just the whole point. We said, this is a
transfer of wealth, but there are people and companies and
sectors that benefit from it. I don't think it's that
difficult to work out what the political goals are. And
the political goals are clearly energy and renewables, shorter supply chains,
and the big one which we don't really talk enough
about but it's really important, is that we're becoming less
reliant upon China. From a geopolitical perspective, We've got to
(28:00):
become less reliant up on China. Now, those companies are
going to be getting cheap credit. It's worth pointing out
that if you can access credit at all and a
financial repression, it is pretty cheap. I mean, the government
fleeting away Zone debts isn't fleeting away everybody's debts. If
you're on the political nice step and not the political
naughty step to get some of that cheap debt capital,
and you and I invest in the equity, then those
(28:22):
companies that get that cheap capital to solve the political
problems that we've just discussed, well, their equity should do
quite well, even better if it was cheap. Now that's
the sort of place I think you should be investing in.
But you can see the problem here which the managers
acclimatized to that which for manager has been thinking in
that sort of world. I have an answer to that, actually,
(28:42):
and that is if you if you've been operating in
emerging markets for the last thirty years, you've got a
reasonable idea how that system works. Emerging markets are not
percent like that, there's a huge variety in them. But
I think emerging market managers in a better sense of
working out the political economy, because that's what we're talking
about here. It's profiting from a political economy, uh, and
being very careful of the old financial engineering economy, which
(29:05):
is the legacy which will now be allowed to wither
on the vine. One of the things that you're expecting
as we attempt to make our supply chains more secure
and shift away from China. Is a capex boom in
the West, the capox boom in in developed markets. So
we need to be looking to invest in the kind
of companies that will benefit from that. So the industrial sector,
(29:26):
for example, which had been much ignored over the last
couple of decades. Absolutely. I mean, if I look, I
have a nice chart somewhere. It's in the Andrew Smith's
book Productivity of the bonus culture of the US corporates
investment in tangible assets as a percentage of US GDP,
and from two thousand onwards it just goes down and
down and down. And I don't think it's at an
old time Lobo. I think it's close to a post
(29:47):
war blow. They didn't have to invest in these tangible
assets because that productive capacity was being added in China.
And they may have invested in the intangible assets and
the brands and the goodwill acquisition, but not in the
tangible assets. There has been a massive under investment. Lots
of reasons for that. Andrews for this in his book,
argues it's the bonus culture. But anyway, whatever the cause
(30:09):
and reason was, it now has to end an interesting
prohibit from Christians suing who's the man who runs Deutsche Bank?
He was asked why his loom books, expanding why are
German corporations boring from him? And what looks like it
could be a recession law for Germany, and he replied, well,
the rebuilding their supply lets. That is a huge form
of reinvestment, and it relates not to Russia, but it
(30:30):
relates primarily to China. So yes, absolutely, this, this reinvestment
in our productive assets is going to do well. And
there are people who make the picks and shovels once again,
of any such form of physical capital investment, and there
are bits of the country that do much better from it,
and bits of the world that do much better from it.
And worthwhile then saying that the other bit that whether's
on the vine, which is financial engineering, we are going
(30:53):
to focus on directing capital to something that builds new
cash floats and not financing old cash flow, because, as
everybody listening to this knows, the quickest way to get
rich in the last thirty years was to borrow as
much money as you could and buy an existing income
strain and were or a house. Many houses that's that's
exactly that. You know, whether it was commercial properly a house,
(31:15):
private equity, gear up, buy an income strained. Watch your
industry has come down, watch your asset price go up.
That is a form of financial engineering, or any different
derivations of it. It's over and therefore that's the opportunity,
because the opportunity is to be in the other bit,
which benefits not from the flow of cheap, cheap credit.
So there are two parts for this. As I said,
(31:36):
there's the naughty step and there's a nice step, and
then a politicization of credit. But a lot of things
will be on the naughty step. Does this mean do
you think that the northeast and northwest of the UK
might level themselves up? Yes, I hit to to talk
about British vaults, but I do suspect it's coming back.
I do suspect there will be a battery pack factory,
(31:58):
and I do think it will be at Blithe, northumber
and whoms. It will be a very different question. These
will be some of the highest quality jobs to being Blinth,
Northumberland ever and certainly for many decades, but perhaps perhaps
even ever. And that sort of thing does begin to
regenerate not just the United Kingdom, but lots of parts
of Europe and lots of parts of America that haven't
seen it before. So the leveling up agenda, maybe you know,
(32:21):
not coming from the government, may just be coming from
geo politics and the need now that we are self
sufficient or partially sufficient in key strategic goods such as chips,
such as electric batteries, and there'll be plenty more. And
I think it's interesting that those two things hit all
the headlines. But when you ask got to bank what's
happening with their long book, companies are boring to invest
(32:43):
in everything to make them less reliant on China and Russia.
And that's a that's an investment boom which goes on
for many many years to come. So yeah, it should
really focus on bits of the country that need the
investment and have been starved off it. And it should
happen without the intervention of government. It should be fairly
natural to go where the labor is over some short suppliers,
you know, so goodworth on the ammer rigs, but with
the land is cheap, and it could happen with its
(33:05):
old court. Yeah, you know what's going to happen now.
All our listeners, because they're obsessed with houses, are rushing
out to buy house prices on the Northumberland coast. I
have looked at the price of houses in Blair, Northumberland.
I'm sure everybody will night be googling, but they are.
Let's put it this way, there are a lot cheaper
than a garage in Kensington, isn't everything? Russell? Listen to
(33:26):
you talking about emerging markets and about China and about
how emerging markets are the place to be at the moment,
I would say it's any obvious from what you said
that you are not talking about China, You're talking about
the other emerging markets. Do you have a favorite? So
my long term sort of macrobublitioners has been on India,
but I would find it very difficult now to commit
capital to India just because of the valuations. How may
(33:48):
I may be a macro guy if you like, but
value matters. It's too expensive and I think it's time
to be a bit more cautious on India. There are, however,
lots and I'm more familiar with Asia because I used
to of there. So Indonesia, Malaysia, Thailand, even Singaport, which
is not an emerging market, but sits at the middle
of those emerging markets and benefits from their growth and
(34:09):
benefits from financing that growth. So I think Southeast Asia
looks particularly attractive. Vietnam has been, uh something that people
have been promoting that fit into your structure. Yeah, no
reason not to include Vietnam. The other markets are more
familiar with and I can e's much easier check the valuations,
and there's more liquidity in the markets as well, and
(34:30):
they just look cheap. Last thing I want to talk about,
because they you've been brilliant. Thank you. Gold got la
force everyone about gold. Would you hold gold in this environment? Yeah?
Gold is they go to asset of a financial repression.
Two reasons. One, we're kind of locking in negative real reads.
But that's what we're doing, so that's important. It's not
(34:51):
that there are negative real rates, is that we're locking
them in, that we're institutionalizing, and that institutionalization means that
you can forecast them but hire degree of certainty. So
if I'm right, we will now be forecast a negative
real rates. That takes a certain amount of risk out
of running gold. There is risk, and gold at the minute.
If rates should suddenly spike above inflation, infltation should collapse
(35:12):
the low interest rates. But if you think we're institutionalizing
the gap between the two, then that's positive for gold.
There are bigger things for gold. A financial repression is
interfering in people's property rights and forcing their savings to
be where the government wants them to be. In gold
is much more difficult to do. That not impossible, as
we know from the Roosevelt legislation of Thanking thirty three,
(35:32):
but it is very difficult and not really necessary. So
much wealth is held in regulative financial institution. So I
think as we realize that more people will come to
whole gold, central bankers already doing it. I'm sure everyone
seem the data central bankers were particularly big buyers of
gold last year, And which two central bankers were They
were the People's Bank of China and the Central Bank
of Turkey, two governments that may find themselves in dispute
(35:55):
with other governments who are being pretty clear that they
think it's safer to own gold than those other government's
government bond markets. And something else. For gold, we're talking
about the naughty step and who's not going to get
credit and capital going forward. I wonder if gold miners
are high up the list to get capital to create
more gold, because you know it's not that good for
the environment. You create this thing, you smelled it, put
(36:18):
it at the bar, and then you could have back
in the ground to get so I think there could
be an interference with their ability to have a cheap
cost of capital, which if it makes it more difficult
to produce it, then it's going to be The existing
gold is worth even more. It is one third of
the height of the Washington Monument. All the gold in
the world, I've just flown past the Washington Monument. It's
a lot, but it's not the hell of a lot.
(36:39):
So I think it's the It is the asset for
a financial repression. Yeah, there was say there's only enough
gold at the ground globally to fill one basketball court.
These things are under amazing if true. Now we have
a joke to jump step back and alas you think
is absolutely hysterical, and I'm not sure everyone else last
in the same way where we call god physical bitcoin.
(37:03):
I think you enjoynce you get into the marketing business.
I think you've got a whole thing going there. But
of course we call it physical bitcoin because they used
to call bitcoin digital gold, and I just want to
double check that there's none of that digital gold in
your portfolio. It's not something you're looking at for the future,
because it is, i'd be interesting. So in a financial repression,
(37:24):
what we're saying is the government is taking the part
of control money away from the central point. So the
idea that it would do that slowly at first, and
then quickly, but yet somehow I allow this private sector
money to exist out there, which will become a means
of transaction. It's highly unlikely, but that loophole is allowed
to work. So I think there will be crypto. I
think it will be stable cooin. I think the government's
(37:45):
gonna love stable coin. Stable cooin properly regularly. It was
entirely backed by short term government debt. Who's not going
to like that. So you get all that functionality that
you know people who are in the crypto talk about.
You know, there is great functionality in it, but that
was a particular form of crypto which government's like. That
then leaves to what we might call private sector crypto,
which is bitcoin. I just see that as being a
(38:06):
kind of curiosity in which one can make money, and
it one understands that one can trade it and make money.
There are lots of assets I don't understand, don't trade
and would never make any money, and it's about crypto
will be one of them. Baseball cards is one I've
never really managed to get the grips with. Fine, why
I knew there's lots of things that one can play
around in and occasionally make money in, but it's never
gonna be a currency, and it's never going to be
(38:28):
a store of value. It's going to be a spectative
asset of beast. So that's my view on crypto, which is,
you know, if you really really understand crypto, well, you know,
people really really understand baseball cards. Nothing wrong with that,
but it doesn't become this thing that it's been marketed as.
I was walking in Edinburgh just before Christmas doin George
Street and was a bitcoin conference on and the headline
and they had the assembly rooms, which you know, well
(38:51):
a great big poster for a bitcoin and said fix
the money, fix the world. No it isn't money, but
it's one of the greatest mark getting efforts of all
time to call something money and to say not only
that that it fixes the world. What about I mean who,
I don't know who thought of it, but it's an
active genius create a new form of money that fixes
the world. Well, No, in its purest form, it would
(39:14):
destroy the world because it would strip the power of
away from government. Many people think that would be a
good thing, but it would strip all the power away
from government, So governments will not consionate. I think that's
always been as biggest flaw by the understand it or not,
it is not going to be allowed. And that's the
kind of that. Um Russell, thank you so much for
joining us. I found that unexpectedly optimistic because we're away
(39:36):
now where that we know that we should be buying
physical bitcoin, we know that we should be buying emerging markets,
and we know that if we carefully inside all stock markets,
we can find stuff that is reasonable value and that
may benefit from cheap credit or from the Catholics zoom
having to zoom Catholics boom industrials, et cetera. So Russell,
thank you so much for joining us today. She hugely appreciated.
(39:56):
And that, Russell, what would you like to promote while
you were here? The library mistakes of course, well, there
are two charitable ventures, so I don't feel about promoting
charitable ventures. So one of them is the Library Mistakes,
which is in Edinburgh. We hope to bring one to
London this year. Watch the space free public Library for
anybody who walks to register of God the Library Mistakes
(40:16):
dot com and the same charity runs a course in
finance which will find out the DASCO education dot or work.
So if you think you need education in how the
markets have worked as a guide to how they will work,
which is, you know, a lot order than the last
thirty years, so hopefully covering some of the things that
we've already discussed. If you'd like to get into that,
we have that as an online version. You can do
(40:38):
it online, So go to dadasco education dot org have
look see if you are ready for several hours of
high quality education on the history of financial markets and
hopefully that will prepare you somewhat are somewhat better for
what is to come. I have been on that course,
by the way, everybody, and it's absolutely brilliant. Um, so
(40:59):
do go on if you have the time. Russell, thank
you very much, so true thanks for listening to this
week's Marion Talks Money. We will be back next week
in the meantime. If you like our show, rate review
and subscribe wherever you listen to your podcast, and do
remember that we prefer good reviews to bad reviews. This
(41:22):
episode was hosted by me Marin's Somerset Web. It was
produced by Summer Sadi. Additional editing by Blake Maple's and
special thanks to Russell Napier and of course as ever
to John's Steppeck. Thank you John, and of course don't
forget to sign up to John's Weekly Notes. Sorry daily
news letter. Money distilled the linkers of the show Notes
and you won't regret it.
Hi, John, Now listen, we are talking just after the
Bank of England has raised interest rates brainnother half a
percent to take them to four percent, which seems kind
of okay, right, four percent feels like a normal kind
of range for interest rates, all other things being equal, that,
of course, all other things that are not equal. But nonetheless,
if safe, for example, inflation was somewhere around the Bank
(00:21):
of England target of two percent, then you would expect
interest rates to be about four percent. The fact that
inflation is around tempercent, we'll put that one side at
the moment. This first my progress, right, Yeah, it's nice
to get away from zero's. It feels somewhere approaching something,
getting towards normality. And if inflation actually does come down,
(00:42):
obviously it's going to come down next year and next year,
but if it does kind of stay around maybe four
or five percent in the long run, then the Bank
England doesn't have that much although it should. I mean,
obviously it's not planning to reads them much further at
all effort all actually, but we'll see, and certainly not
(01:03):
planning to raise them above inflation, because you know that
would be crazy and old fashioned. But it does mean
it does mean that if we have an even vaguely
consumer phacing bank, we should be able over the next
few months, just like getting proper interest on our deposits,
not more than inflation. Obviously isn't a real return on cash,
(01:24):
but a return on cash the less. Yeah, and I
mean there's quite a few fix Street boinds know that
you don't alsus have to lock up for that long.
You get over four per cent, may even be high
on the um. And then there's a few accounts you
can get stuff. I mean, obviously with the Continent account
you can't see really white money in it, but I'm
sure I saw one that was picking up above sex
(01:45):
or seven percent actually recently, I don't believe you. Now listen,
you can get above four percent on UK equities as well, right,
And one of the great things about UK equities is
that they are usually dividend paying and not particularly expensive.
And I put up a chance the other day on
twitship that everyone got right across about pointing out that
in capital terms, real the UK market hasn't actually moved
(02:09):
since the nineteen sixty seven, which meant everyone go, oh,
you can't like this, You've forgotten about dividends, and I
haven't got about dividends. I was just putting up an
interesting chart and people didn't find it interesting. I found
it quite interesting. But nonetheless, you've had a perfectly reasonable
return from the UK market thanks to dividends, right, Yeah.
And I think this is actually really important because and
that's it's really important in the context of a very
specific thing today, which is a Shell obviously just reported
(02:31):
its results as well, and it's made draka profits blah
blah blah, and of course everyone is kind of disgusted, appalled,
blah blah, et cetera. But this and one of the
things they always highlight is it pays out there's something
of dividends to share holders. But if I called up
a chart the Royal Dutch Shall over the past ten years,
if you include dividends re invested, it has made exactly
(02:55):
as much as if you put your money and a
foot who shared tracker. If you don't rest the dividends,
the capital gain is less than six percent, So I
think that's a good measure of Look, the dividends are
part of the reward to shareholders for owning the stock.
They are not actually egregious and they are not, you know,
flying ahead of every other company in the country. Um.
(03:18):
So that that's kind of like I think one could
measure that helps to separate the can effect from the
fiction side. This argument about whether kind of energy companies, etcetera.
Are making profits that are kind of over the top. Um,
and you know, the discussion about wind fall taxes, etcetera.
Greedy shareholders. I mean that's the story, isn't it. You
(03:39):
greedy shareholders. You shouldn't want those dividends. Everyone forgets that
those dividends are paying their pensions. Yeah. And also those
greedy shareholders would have been like far, far, far better
off by being invested in the SMP five hundred for
those ten years. So we should be we should be grateful,
grateful to those greedy shareholders exactly, these sacrificed returns and
(04:00):
wait for this. I'm gonna wait for the thank you
letters now. In terms of anything but the US, which
is kind of where most investors are beginning to get
to these days. One of the things that I'm talking
about in the podcast that you're about to hear fantastic
conversation with with Russell Napier or other. He's fantastic. I
just sit there as usual, but you know, he does
say some really interesting things. One of the things he
(04:22):
points out is that in pretty much every environment similar
to the one we have today i inflationary or one
jammed with the financial oppression measures, the best way to
invest is to invest in stuff that is cheap. And
outside of the US almost everything is reasonably prized. You know,
look at the the MSCI World Index if you take
(04:43):
out the US, and again it's barely budged for a decade. Yeah,
I mean, I think this is really good. It's it's
actually I mean, this is the nice thing that interest
is going up. We've get something closer to normal environment.
We are you can also put your money, are we
we haven't a or in sort of like really weird
conditions lasting forever, which is what you had to do,
(05:05):
you know, maybe five years ago. Um. And I think,
I mean, one of the things I've been writing about
this morning the zou Ki equity income investment trusts, and
one of the brokers was out talking about basically how
cheap they look, and it wasn't exactly I kind of
is it. The UK might quite possibly be quite a
(05:26):
good place to be this year. So it's not like
a ringing endorsement. God, it's hard for people to It's
hard for people to say this isn't it after all
these years are saying the UK is rubbish, rubbish, rubbish.
The fact that it looks like a perfectly really bras
market with good dimit impayment, it's really hard for some
of these professionals to force themselves to say, but you
know what, the more it goes up, the easier they're
going to find it. Well, yeah, I mean, interesting thing
(05:50):
is the Investment Association came out it's annual figures on
where we've been putting our money basically, and last year
was the first year ever, including two thousand and eight,
the UK retail investors have actually had a net outflow.
In other words, we took money out of funds and
of course the hardest sector again was UK equity funds
generally something like twelve billion outfloor is the only thing
(06:13):
going up? Yeah, and then well this is you know,
it's good news for anyone who's got a kind of
contrarian bent because it's still really widely detested. It's not
quite as heated as it was in September, but that's
really not seeing very much relative hatred. Wonderful thing, right, John,
Thank you very much. Thanks. Welcome to Mary Talks Money,
(06:41):
the podcast in which people who know the markets explain
the markets. I'm there in sum Stweb this week. Our
guest is Russell Napier. He's author of The Solid Ground Investment.
Well it's a newsletter, really report anyway, it's brilliant. If
you can't get your hands on it, do He's also
the author of two excellent books, Anatomy of the Bear,
which I think we might be eating over the next
few years, and The Asian Financial Crisis, both absolute must
(07:05):
reads now rather than I started by discussing one of
the things that is absolutely crucial to Russell's analysis, which
is understanding where the global economy is heading. And to
look at that, we need to look at government debt
and private debt relative to g d P. Has it, pete,
Is it at a point where something has to change? Now?
If we can understand where we are with that, then
(07:26):
we can start to understand how governments will react. And
if we know what governments are going to do, then
we can get a sense of how markets are going
to react. So my first question to Russell was where
are we right now? Globally in terms of public and
private debt levels. I mean, one of the biggest questions
and finances when it's too much debt, too much debt.
(07:47):
Throughout my entire career, debt to GDP ratios have been
going on. Either's more debt, but yet it always seems
to be sustainable. So we have to focus on why
suddenly that isn't the case. Let's talk about three metrics.
So one is debt to GDP ratio, and that would
be the debt of the government, the dead of the
household sector, and the debt of the non financial corporate
sector as a percentage GDP. Well, it's at the highest
(08:08):
level ever recorded. Often when people look at this data,
they look just at government data, and you could show
for the Hunted Kingdom, for instance, that it's below where
it was at the end of World War two. But
if one looks at the whole lot, which includes the
households and the corporates, were at a higher level. America,
for instance, would have got to the end of World
War two with its debt burden on those three sectors
(08:28):
at about a hundred and GDP. It's now two hundred
and sixty to GDP. So it's not marginally higher, it
is significantly higher. So you'd come to the conclusion it's
the highest level of debt to GDP and human history.
That still doesn't mean it's too much, but it doesn't
raise the vibraes as to why it might be too much. Now,
let's look at the other metrics, because the problem with
(08:49):
that the GDP is it's measuring a stock, which is
the debt to a flow which is GDP that's the
annual amount of the production of the economy. A second
one people can look at is the Bank of International
Settlements Early Warning Indicators, and they have back tested this
and look at the growth rate off debt to GDP
relative to trend, and a deviation from trend on the
(09:10):
upside as produced as a very high prospect of a
private sector debt crisis. In other words, there's too much
debt because the private sector can't possibly service it. So
that's another indicator. And the one that I like to
look at is private sector debt service ratios. So that's
just the private sector and not the government, and it's
the total amount of income private sector income needed to
(09:30):
service the debts. And there are many many countries where
that's above. That's always been a warning signal, particularly if
interest rates are going up and you're already at And
the problem we have today is they're going up from
five thousand year loans. And when interest expense goes up,
interest rates go up from five thousand year loans, interest
expense goes up particularly quickly. Anybody with the UK mortgage
(09:52):
it's maturing this year will be all too familiar with
that dynamic. So you put all that together, I think
it's too high. It's dangerously high. It risks a prior
that sector debt crisis if interest rates properly reflect the
inflation outlook. So that's the final little bit of the
ingredient that is now in the in the pudding. If
you like, inflation is high, interest rates are supposed to
go high to correct that bring it down. But can
(10:15):
the system, this geared system, live with the level of
indust rates that will do that. My answer is no one.
So finally, too much debt is too much debt. Okay, Well,
that sounds like there's a really simple solution here. We
just keep interest rates low forever everything I'll be fine.
I think that is the solution. There's a problem with
that because short term rates are controlled by the central bank,
(10:36):
and long term rich are supposed to be controlled by
you and me the saver. They're not supposed to be
within the control of the government. Remember one of the
reasons that we took it out of the control of
the government as they did such a bad job of it.
And that is why we made the Bank of independent
in the nineties. That is why we give our central
banks targets. That is why we left this up to them. Uh.
(10:57):
And if the market you and I demand the correct
level of interest strates to compensate us for future inflation
one if that's just simply too high and forces everybody
to default or forces mass default in the private sector.
And if you look at the British government profit and
loss account of the minute, and look at how much
money we're paying on interest expense and the inflation compensation
we pay on indexlling guilts, and the transfers were making
(11:18):
to the Bank of England to compensate them for their losses,
and the transfers will soon be making to the commercial
banking system to compensate them for the losses on the
COVID loans that the government guaranteed. You know this number
is rapidly getting to about a hundred and thirty hundred
forty billion sterling, quite close to the budget for the
National Health Service. So I focused on the private sector
(11:40):
and say, you know, the private sector couldn't cope with
higher rates. But if we stick with the status quo
where a central bank independent sets short term rates and
bond investors right even the set long term rates, we
may not have a feasible economic system. What should interest
rates be at the moment to compensate us for inflation?
You know, CPI is branning knocking around ten the center,
(12:00):
so that we should be getting twelve on our deposit
accounts in a way. Well, in short term rates, yeah,
and in long term rates it's a bit more problematical.
There are lots of distortions already in the long term
bond market, Lots of force buyers already, and those buyers
will be life funds and pension funds when they're doing
their liability management and matching. Those were their aspects, So
they're already distorting the rates. The central bank ownership is
(12:21):
distorting the rates. And there's a unique function post Great
Financial Crisis, of which many organizations used government debt as
a form of collateral for borrowing, and that also distorts rates.
So yeah, we're showing much much higher, but they are
not going higher. And part of that is a government
action through forcing savings some savings institutions to buy this
(12:43):
part of it is a central bank distortion. But I
think it's very difficult to argue that these rates are
properly set by a market and fully compensates for future inflation.
So there's some distortion already there. But let's go back
a little bit to the last time that that debt
was extremely high, although as you set year is different
because we're talking about the post war period when it
was public debt alone that was the major problem, and
(13:07):
then didn't see massive distortion of the relationship between interest
rates and inflation or how how did that work? Well,
it worked by forcing the savings institutions to buy government bonds.
So I want to quote from Isaac Newton here, and Newton,
as you probably know, quite a lot to do with finance,
and his time was Master of the Mint, and that
was particularly go to executing people for forgery. But we'll
leave that as a as a separate issue. So UT's
(13:29):
third laws dates that for every action there is an
opposite and equal reaction. And what I will now arrogantly
called Napier's laws is that for the modern investor, for
every market action, there is an opposite, never equal, and
always distortionary government reaction. So let's talk about the reaction,
but more importantly, let's talk about some of the distortions
that it causes to the entire systems. So during warfare,
(13:51):
it's quite easy to get people to buy government bonds.
I mean, the sacrifices people make during war are much
bigger than finances, so they there are war born drives. Also,
your institution Usians are forced by government bonds through ferties
Freeconian measures. In World War Two, the savings institutions of
the United Kingdom had the hand over all of their
offshore assets, particular dollar assets, to the government and they
(14:12):
got government bonds in return. So there's a pretty blunt
sledgehammer approach to this. Obviously, there was a dollar assets
where liquidated and used to purchase war materials, but the
investors suddenly find themselves for herself or in government bonds.
After World War Two, it's more tricky to make the
case that we should continue financial repression. But the case
is made, and then that we have to switch and
(14:33):
say this was not about preserving the state and preserving
the welfare and the liberty of the people. This is
about their safety. And this is because we have to
get them into really safe assets, because we all know
how dangerous assets. Other assets are not that difficult after
World War Two, given the prolonged her performance from equities
which began famously in October nine and had lasted really
(14:56):
throughout that entire period. But we now have to say
that it's government bonds that are saying if the yield
has capped, in particular, if you don't let the price
of bonds fall, there won't be a capital loss. The
yield is reasonable, it can be argued there is no
risk of principle not being paid, There is no risk
of interest not being paid. Why wouldn't you want this
coercy of our set right in the middle of your portfolio.
(15:17):
And then we go to the institutions under the guise
of macropotential regulation and say you need to have x
percentage in government bonds. And a nice little example of
the legacy of this, which has only just disappeared, is
the need to force retiring pensioners to put all the
money into ennuities, and the nuities are backed by government bonds.
So there's lots of little works of the system you
can put in place to force the compulsory ownership of
(15:41):
government bonds. Okay, so I can see how it works
that time around. How might this work this time around?
I mean, obviously, what we're trying to do here is
to get investors to hold onto government bonds at lower
yield than our appropriate given the inflation environment, that gradually
eats away at government debt in real terms. And the
problem is that stop, friend, So it works, I mean,
(16:01):
it works, so there is an upside here, right, Yeah.
I think a nice little example of that is I
think it's nineteen fifty seven where Harold McMillan said to
the people of the United Kingdom, you've never had it
so good. By that stage, I think you've already lost
thirty percent of your money in real terms investing in
British government bottoms. So you've never had it so good.
It was clearly in that one section of the population,
(16:23):
but not necessarily in another section of the population. So
if you're a portfolio investor and you can see how
wealth maybe realigned during this period. You can do something
about that as long as you're free to do so,
and you can look at it to invest in equities
and shares of companies that might benefit from such realignments
of wealth. So it's being alive to the opportunities to
do something rather than believing that this is temporary. And
(16:46):
I think that's the other thing worth stressing. Could last
a long time. It doesn't last a year or two years.
This to get our to GDP and say, oh, I
mean the advanced economy, it's not just the United Kingdom.
To get it back into line, I think it's a
decade's work. Don't own government bonds unless they force you
own them. Well, let's come back to how financial repression,
because that's what this is. How finance repression might work
(17:07):
this time around. We talked about how it worked last
time around and has some of the remnants of it.
For example, annuities being as something we're forced about exceptionaly,
they're relatively recently fallen away, right, But nonetheless, if we're
going to start again, how how might it happen or
is it happening already? I think the other that might
be Yes, yeah, I think it's happening already, depending on
My main job is to advise financial institutions, and the
(17:28):
more I'm talking to longer term pension funds and life funds,
the more they'll tell me this is already happening to them.
If I'm talking to mutual funds, they'll say, what's financial repression?
So in the obviously easy answer that is just hang
around and you'll find find out. So it has to
spread down through the system. It's like low hanging fruit.
The low hanging fruit to be repressed. It has to
be regulated, but it has to be natural owners of
(17:50):
government bonds. If you like multi asset funds, so multi
asset I shouldn't call them funds. Multi asset pools have
been the easy place to repress because it's not revolutionary
to tell them that forced them to buy more government bonds.
As if we ever get beyond that two funds that
are dedicated to equities, or if we get to your
SIP or your ISA, that's when it becomes more revolutionary.
So the minute they've just been plucking off the low
(18:12):
hanging fruit, and I think it's about to become much more,
much more dramatic than somewhere sometime we're going to see
an institution or a form of savings compelled to buy,
say to buy bonds that we just didn't think was
ever going to be owning bonds, and that may be
coming to Japan before it comes here. Well, it's interesting,
I mean, we've heard a little bits involves that suggest
(18:33):
to us that various things might be coming that we
will find uncomfortable. I mean, but until up until now,
we've seen, for example, defined benefit pension funds providing people
with their defined benefit pensiants having to hold larger amounts
of bonds than possibly some people might think is sensible
under the circumstances for regular reasons. But we've heard mutterings
recently about the suggestions, for example, that perhaps all penci
(18:54):
of funds may be the ones that people hold under
order enrollment, might be persuaded to invest in various government
initiatives via green bomb system, that kind of thing. So
what you're talking about having to having to assist the
government bio iss that already kind of feels like it's
out there to a degree, doesn't it. Well, the Bike
of England, and this is before COVID formed a committee
(19:15):
I think it's called the Bank of England Working Group
on Productive Investment. Now I'm I'm not sure that the
Bank of England knows a lot about productive investment, but anyway,
it has a working Group on Productive Investment which includes
h m r C, includes the regulator and includes Last
time I looked about seventeen financial institutions people are listening to.
This will be interesting to know that they're not banks,
that the people who look after your money. So they're
(19:37):
sitting in a room and what are they discussing. Well,
that's all over the newspapers you can read about it.
But it's effectively about getting those institutions to buy more
long term securities, and those long term securities are ultimately
aimed at achieving some sort of political goals. Now those
political goals can be in renewables, but can they be
all the political goals? And the high biling is what
coupon really should people get for this returned? And there's
(20:00):
a lot of argument from those institutions and other institutions,
but the fact is that the working group is there.
It's trying to find a way to get the people
who look after your money to buy more long term
fixed coupon securities and in my opinion, that is not
good for the own customer. So there's lots of ways
you can dress it up to say it is good
for the own customer, but I think it isn't, and
I think it is tinged more than tinged with a
(20:22):
needed by the politicians to have your savings where they
need the savings to be. So basically the point is
that the concepts are out there now we're just bickering
about the price. That's a very good way of putting it. Okay,
So if that is the case here we are in
a situation where as you say, if saving institutions and
fund managers, in particular the fund managers so we think
of as being mainly equity only investors, long the only investors,
(20:46):
if they are now forced to put even five teen
percent of their portfolios into what we might call it
the bank giving they would call long term productive investments,
and we might call long term not particularly productive political investments.
If they're forced to that, then as you say, they
are then forced to sell equities, and so what we
have Obviously we know that inflation has a long term
nemic negative effect on equity valuations, but there's selling of
(21:09):
equities would have a secondary negative effect on equity valuations.
One of the consequences of that for us. Well, so
we all go back to the seventies now and we
think about what happened in the seventies, and it wasn't
a good time to be in order of equities. I
think there's an interesting dynamic though, because one of the
key reasons why it wasn't a good time to be
an honor of equities is because indust rates went so high.
(21:31):
Nominal rates went so high. Now we've already discussed why
that's unlikely, just because the levels of debt are so
much higher, So it's not to be rising rates. What
is it that would bring down valuations? And as you said,
it's going to be this shift that forced the savings
institutions to sell equities. And then we reach an interesting
dichotomy here because some equities are already cheap and some aren't.
(21:54):
So if I do that in broad terms, I would
say to categorically the SMP five hundred is grossly overvalued,
and data that we have stretching back as far as
eighteen seventy one, it looks like it's very expensive. If
I look at UK equities, looks like they're really at
best fair value and potentially really quite cheap. So I
think there are still opportunities and equities. It may be
(22:16):
that UK st in institutions have to sell the UK equities,
but frankly they don't own a lot of them anyway.
And secondly, there's always this other buying power below that,
and that is in the form of solid wealth funds,
private equity management biots. So I would not be so
negative in a word of financial repression in the markets
where we start with low valuations. So last time we
(22:38):
didn't and it didn't do well. But if you want
to look at the period in the in the fifties
and sixties when UK was clearly running a financial repression,
equities didn't do too badly because they started at a
very cheap price. Now they're not as cheap as they were.
In we're looking at the world x US equity markets
in dollar terms, there really haven't gone very far in
(22:58):
twenty two years. The MSc I, this is an index
of world equities, doesn't include the US in dollar terms,
it's not much above it's March two thousand level. But
if you have an asset class in the capital returns
of being close to zero for twenty two years? High
risky is it to invest in? They asked a class.
So I don't rule out some forms of equities as
(23:20):
a way to defend yourself from this financial repression, but
I think one should be very very cautious about US equities,
which are sixty four of global market capitalization. Yeah, and
any fund you might hold, literally, any fund that is
not country specific is going to have very high exposure
(23:41):
to the U s sense. So it's pretty much any
passive fund that you might buy in any sector or
any kind that anything global or world and the title
is effectively can be tracking the US. Right. Yeah, Passive
I think is particularly dangerous. And I suppose you have
people involved with active management on here every week saying
how dangerous passive is, and they've been saying that probably
twenty five years. But it is dangerous in this world.
(24:03):
This is a sea change in how the system works
and the market. This is the nature of equity markets.
They fill up with winners, and they fill up with
winners of a certain type of system. And the system,
particularly US market, is filled up with is those that
benefit from falling infest rates, more debt, lower inflation, off shoring,
productive capacity just running with brands financial engineering, if you like,
(24:25):
in its broadest terms, and those are not the winners
of a financial repression. In fact, they may be forced
to re equitize. So when you're buying passive, you're buying
the winners of the old regime. I would say, even
in America, there are lots of stocks to buy that
are winners in the new regimes. So if you've got
a good map fund manager who's not compelled to be
orientated towards the benchmark, I would be pretty convinced that
(24:47):
they could buy a good portfolio of reasonably priced equities.
As you know, the thing that biases us towards that
would be the word value in the title. So value
managers would be looking for lower valuation stocks, and if
the risk from equities in an inflation is really the
valuation and not the earnings, which is what history tells
us that I think even in America, with the right
sort of mandy, a good fund manager could potentially produce
(25:08):
with terms have been inflation. But it's difficult to see
that happening in the SSP, which is full of the
winners of the old regime. They are actually saying that
this could be a stockpickers market. People have been saying
that to me for ages, and I've written several columns
about it, saying, you know, now it's a stock pickers market.
And it turns out that the momentum of the index
JAZZ keeps going. But the last year or so, we
(25:32):
have begun to see a change, haven't we. So you know,
value stocks about performed, and you're beginning to see I think,
as you say, the shift towards people who can really
step away from the index and really look for value,
really by stuff that is cheap to begin with out performing,
which is is reassuring for the likes of us. Yeah, well,
you know, I can't say you heard it here first
(25:52):
obviously because you've been hearing it for twenty odd years.
But it is coming, and I think there's an interesting
quirk in it, which is the gorhythms fascinating. The algorithms
obviously use lots of historical data to work out relationships
that they see in the market, or relationships they see
related between the market and macro variables. And if I'm
right that there's a whole new system coming, and one
(26:13):
of a lot less market and a lot more government.
One wonders what the algorithms do because at some stage
the data dropping into the equation against the sense that
actually some of these old relationships don't exist anymore. And
then there has to come a tipping point where they
begin to pick up new relationships. And at that stage
do they all go at the same time, that they
(26:35):
all move at the same time. So strangely, one of
the reasons that we've been so wrong about stop picking
for so long is the automized automization of the whole
system through algorithms and index funs. And it may be
the algorithms lead us or don't lead us. Hopefully human
beings are ahead of them, but sort of exacerbate these strands.
But as when they get that important piece of data
(26:55):
that tells them that we're not in Kansas anymore, I
don't know. But when they do, it might all happen
quite quickly, okay. And when they do, what do you
what what do you want to be in? I mean,
when when we look back to history, what are the
kind of stocks that should perform well in this environment
outside value? I've heard you speak before about it being
(27:16):
a matter of size and the midcaps and small caps.
Ever history of that performing in this environment. But again,
is that because historically when these things have happened, they've
been cheap at the beginning, or is it because there's
smaller mid caps. Yeah, I think it's because they've been
cheaper againing. Primarily, what we're talking about is the politicization
of the flow of credit and capital. So when would
want to look to see which companies benefit from it? Okay,
(27:38):
that's just the whole point. We said, this is a
transfer of wealth, but there are people and companies and
sectors that benefit from it. I don't think it's that
difficult to work out what the political goals are. And
the political goals are clearly energy and renewables, shorter supply chains,
and the big one which we don't really talk enough
about but it's really important, is that we're becoming less
reliant upon China. From a geopolitical perspective, We've got to
(28:00):
become less reliant up on China. Now, those companies are
going to be getting cheap credit. It's worth pointing out
that if you can access credit at all and a
financial repression, it is pretty cheap. I mean, the government
fleeting away Zone debts isn't fleeting away everybody's debts. If
you're on the political nice step and not the political
naughty step to get some of that cheap debt capital,
and you and I invest in the equity, then those
(28:22):
companies that get that cheap capital to solve the political
problems that we've just discussed, well, their equity should do
quite well, even better if it was cheap. Now that's
the sort of place I think you should be investing in.
But you can see the problem here which the managers
acclimatized to that which for manager has been thinking in
that sort of world. I have an answer to that, actually,
(28:42):
and that is if you if you've been operating in
emerging markets for the last thirty years, you've got a
reasonable idea how that system works. Emerging markets are not
percent like that, there's a huge variety in them. But
I think emerging market managers in a better sense of
working out the political economy, because that's what we're talking
about here. It's profiting from a political economy, uh, and
being very careful of the old financial engineering economy, which
(29:05):
is the legacy which will now be allowed to wither
on the vine. One of the things that you're expecting
as we attempt to make our supply chains more secure
and shift away from China. Is a capex boom in
the West, the capox boom in in developed markets. So
we need to be looking to invest in the kind
of companies that will benefit from that. So the industrial sector,
(29:26):
for example, which had been much ignored over the last
couple of decades. Absolutely. I mean, if I look, I
have a nice chart somewhere. It's in the Andrew Smith's
book Productivity of the bonus culture of the US corporates
investment in tangible assets as a percentage of US GDP,
and from two thousand onwards it just goes down and
down and down. And I don't think it's at an
old time Lobo. I think it's close to a post
(29:47):
war blow. They didn't have to invest in these tangible
assets because that productive capacity was being added in China.
And they may have invested in the intangible assets and
the brands and the goodwill acquisition, but not in the
tangible assets. There has been a massive under investment. Lots
of reasons for that. Andrews for this in his book,
argues it's the bonus culture. But anyway, whatever the cause
(30:09):
and reason was, it now has to end an interesting
prohibit from Christians suing who's the man who runs Deutsche Bank?
He was asked why his loom books, expanding why are
German corporations boring from him? And what looks like it
could be a recession law for Germany, and he replied, well,
the rebuilding their supply lets. That is a huge form
of reinvestment, and it relates not to Russia, but it
(30:30):
relates primarily to China. So yes, absolutely, this, this reinvestment
in our productive assets is going to do well. And
there are people who make the picks and shovels once again,
of any such form of physical capital investment, and there
are bits of the country that do much better from it,
and bits of the world that do much better from it.
And worthwhile then saying that the other bit that whether's
on the vine, which is financial engineering, we are going
(30:53):
to focus on directing capital to something that builds new
cash floats and not financing old cash flow, because, as
everybody listening to this knows, the quickest way to get
rich in the last thirty years was to borrow as
much money as you could and buy an existing income
strain and were or a house. Many houses that's that's
exactly that. You know, whether it was commercial properly a house,
(31:15):
private equity, gear up, buy an income strained. Watch your
industry has come down, watch your asset price go up.
That is a form of financial engineering, or any different
derivations of it. It's over and therefore that's the opportunity,
because the opportunity is to be in the other bit,
which benefits not from the flow of cheap, cheap credit.
So there are two parts for this. As I said,
(31:36):
there's the naughty step and there's a nice step, and
then a politicization of credit. But a lot of things
will be on the naughty step. Does this mean do
you think that the northeast and northwest of the UK
might level themselves up? Yes, I hit to to talk
about British vaults, but I do suspect it's coming back.
I do suspect there will be a battery pack factory,
(31:58):
and I do think it will be at Blithe, northumber
and whoms. It will be a very different question. These
will be some of the highest quality jobs to being Blinth,
Northumberland ever and certainly for many decades, but perhaps perhaps
even ever. And that sort of thing does begin to
regenerate not just the United Kingdom, but lots of parts
of Europe and lots of parts of America that haven't
seen it before. So the leveling up agenda, maybe you know,
(32:21):
not coming from the government, may just be coming from
geo politics and the need now that we are self
sufficient or partially sufficient in key strategic goods such as chips,
such as electric batteries, and there'll be plenty more. And
I think it's interesting that those two things hit all
the headlines. But when you ask got to bank what's
happening with their long book, companies are boring to invest
(32:43):
in everything to make them less reliant on China and Russia.
And that's a that's an investment boom which goes on
for many many years to come. So yeah, it should
really focus on bits of the country that need the
investment and have been starved off it. And it should
happen without the intervention of government. It should be fairly
natural to go where the labor is over some short suppliers,
you know, so goodworth on the ammer rigs, but with
the land is cheap, and it could happen with its
(33:05):
old court. Yeah, you know what's going to happen now.
All our listeners, because they're obsessed with houses, are rushing
out to buy house prices on the Northumberland coast. I
have looked at the price of houses in Blair, Northumberland.
I'm sure everybody will night be googling, but they are.
Let's put it this way, there are a lot cheaper
than a garage in Kensington, isn't everything? Russell? Listen to
(33:26):
you talking about emerging markets and about China and about
how emerging markets are the place to be at the moment,
I would say it's any obvious from what you said
that you are not talking about China, You're talking about
the other emerging markets. Do you have a favorite? So
my long term sort of macrobublitioners has been on India,
but I would find it very difficult now to commit
capital to India just because of the valuations. How may
(33:48):
I may be a macro guy if you like, but
value matters. It's too expensive and I think it's time
to be a bit more cautious on India. There are, however,
lots and I'm more familiar with Asia because I used
to of there. So Indonesia, Malaysia, Thailand, even Singaport, which
is not an emerging market, but sits at the middle
of those emerging markets and benefits from their growth and
(34:09):
benefits from financing that growth. So I think Southeast Asia
looks particularly attractive. Vietnam has been, uh something that people
have been promoting that fit into your structure. Yeah, no
reason not to include Vietnam. The other markets are more
familiar with and I can e's much easier check the valuations,
and there's more liquidity in the markets as well, and
(34:30):
they just look cheap. Last thing I want to talk about,
because they you've been brilliant. Thank you. Gold got la
force everyone about gold. Would you hold gold in this environment? Yeah?
Gold is they go to asset of a financial repression.
Two reasons. One, we're kind of locking in negative real reads.
But that's what we're doing, so that's important. It's not
(34:51):
that there are negative real rates, is that we're locking
them in, that we're institutionalizing, and that institutionalization means that
you can forecast them but hire degree of certainty. So
if I'm right, we will now be forecast a negative
real rates. That takes a certain amount of risk out
of running gold. There is risk, and gold at the minute.
If rates should suddenly spike above inflation, infltation should collapse
(35:12):
the low interest rates. But if you think we're institutionalizing
the gap between the two, then that's positive for gold.
There are bigger things for gold. A financial repression is
interfering in people's property rights and forcing their savings to
be where the government wants them to be. In gold
is much more difficult to do. That not impossible, as
we know from the Roosevelt legislation of Thanking thirty three,
(35:32):
but it is very difficult and not really necessary. So
much wealth is held in regulative financial institution. So I
think as we realize that more people will come to
whole gold, central bankers already doing it. I'm sure everyone
seem the data central bankers were particularly big buyers of
gold last year, And which two central bankers were They
were the People's Bank of China and the Central Bank
of Turkey, two governments that may find themselves in dispute
(35:55):
with other governments who are being pretty clear that they
think it's safer to own gold than those other government's
government bond markets. And something else. For gold, we're talking
about the naughty step and who's not going to get
credit and capital going forward. I wonder if gold miners
are high up the list to get capital to create
more gold, because you know it's not that good for
the environment. You create this thing, you smelled it, put
(36:18):
it at the bar, and then you could have back
in the ground to get so I think there could
be an interference with their ability to have a cheap
cost of capital, which if it makes it more difficult
to produce it, then it's going to be The existing
gold is worth even more. It is one third of
the height of the Washington Monument. All the gold in
the world, I've just flown past the Washington Monument. It's
a lot, but it's not the hell of a lot.
(36:39):
So I think it's the It is the asset for
a financial repression. Yeah, there was say there's only enough
gold at the ground globally to fill one basketball court.
These things are under amazing if true. Now we have
a joke to jump step back and alas you think
is absolutely hysterical, and I'm not sure everyone else last
in the same way where we call god physical bitcoin.
(37:03):
I think you enjoynce you get into the marketing business.
I think you've got a whole thing going there. But
of course we call it physical bitcoin because they used
to call bitcoin digital gold, and I just want to
double check that there's none of that digital gold in
your portfolio. It's not something you're looking at for the future,
because it is, i'd be interesting. So in a financial repression,
(37:24):
what we're saying is the government is taking the part
of control money away from the central point. So the
idea that it would do that slowly at first, and
then quickly, but yet somehow I allow this private sector
money to exist out there, which will become a means
of transaction. It's highly unlikely, but that loophole is allowed
to work. So I think there will be crypto. I
think it will be stable cooin. I think the government's
(37:45):
gonna love stable coin. Stable cooin properly regularly. It was
entirely backed by short term government debt. Who's not going
to like that. So you get all that functionality that
you know people who are in the crypto talk about.
You know, there is great functionality in it, but that
was a particular form of crypto which government's like. That
then leaves to what we might call private sector crypto,
which is bitcoin. I just see that as being a
(38:06):
kind of curiosity in which one can make money, and
it one understands that one can trade it and make money.
There are lots of assets I don't understand, don't trade
and would never make any money, and it's about crypto
will be one of them. Baseball cards is one I've
never really managed to get the grips with. Fine, why
I knew there's lots of things that one can play
around in and occasionally make money in, but it's never
gonna be a currency, and it's never going to be
(38:28):
a store of value. It's going to be a spectative
asset of beast. So that's my view on crypto, which is,
you know, if you really really understand crypto, well, you know,
people really really understand baseball cards. Nothing wrong with that,
but it doesn't become this thing that it's been marketed as.
I was walking in Edinburgh just before Christmas doin George
Street and was a bitcoin conference on and the headline
and they had the assembly rooms, which you know, well
(38:51):
a great big poster for a bitcoin and said fix
the money, fix the world. No it isn't money, but
it's one of the greatest mark getting efforts of all
time to call something money and to say not only
that that it fixes the world. What about I mean who,
I don't know who thought of it, but it's an
active genius create a new form of money that fixes
the world. Well, No, in its purest form, it would
(39:14):
destroy the world because it would strip the power of
away from government. Many people think that would be a
good thing, but it would strip all the power away
from government, So governments will not consionate. I think that's
always been as biggest flaw by the understand it or not,
it is not going to be allowed. And that's the
kind of that. Um Russell, thank you so much for
joining us. I found that unexpectedly optimistic because we're away
(39:36):
now where that we know that we should be buying
physical bitcoin, we know that we should be buying emerging markets,
and we know that if we carefully inside all stock markets,
we can find stuff that is reasonable value and that
may benefit from cheap credit or from the Catholics zoom
having to zoom Catholics boom industrials, et cetera. So Russell,
thank you so much for joining us today. She hugely appreciated.
(39:56):
And that, Russell, what would you like to promote while
you were here? The library mistakes of course, well, there
are two charitable ventures, so I don't feel about promoting
charitable ventures. So one of them is the Library Mistakes,
which is in Edinburgh. We hope to bring one to
London this year. Watch the space free public Library for
anybody who walks to register of God the Library Mistakes
(40:16):
dot com and the same charity runs a course in
finance which will find out the DASCO education dot or work.
So if you think you need education in how the
markets have worked as a guide to how they will work,
which is, you know, a lot order than the last
thirty years, so hopefully covering some of the things that
we've already discussed. If you'd like to get into that,
we have that as an online version. You can do
(40:38):
it online, So go to dadasco education dot org have
look see if you are ready for several hours of
high quality education on the history of financial markets and
hopefully that will prepare you somewhat are somewhat better for
what is to come. I have been on that course,
by the way, everybody, and it's absolutely brilliant. Um, so
(40:59):
do go on if you have the time. Russell, thank
you very much, so true thanks for listening to this
week's Marion Talks Money. We will be back next week
in the meantime. If you like our show, rate review
and subscribe wherever you listen to your podcast, and do
remember that we prefer good reviews to bad reviews. This
(41:22):
episode was hosted by me Marin's Somerset Web. It was
produced by Summer Sadi. Additional editing by Blake Maple's and
special thanks to Russell Napier and of course as ever
to John's Steppeck. Thank you John, and of course don't
forget to sign up to John's Weekly Notes. Sorry daily
news letter. Money distilled the linkers of the show Notes
and you won't regret it.
Host
Merryn Somerset Webb
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