Welcome to Merrin Dorogs Money the After Show. This is the bit where we look again at everything you heard in our regular podcast. Some of it we like, some of it we're not so certain about. So we're going to talk about that a bit. I'm Maren Zumsep Web. This week, John Steppe is a senior reporter at Bloomberg and author of the Daily Money Distilled newsletter, joins me to discuss the two panels I did at the end
of August as part of the Fringe Festival in Edinburgh. Now, there were two of these and you can listen to them wherever you get your podcasts on the Merrin Brooks Money Feed. We had some brilliant guests that were some very interesting themes. But of course John, you weren't there.
I know, I feel bad, but I was attending. I was attending one of my kids gigs somewhere.
Yeah, you just said that. You think that's cooler. You think going to your kids gigs is cooler than Yeah, okay, right at it?
I think I think it may be. Also, I would just say google dement shabos because then I can win them up a boot being nipple.
They can't be never have to be in the same industry as you.
Oh okay, I thought financial journalism was pretty rock and roll.
But no, if your children become pop stars, trust me, it's got nothing to do with you being a senior reporter at Bloomberg.
Yeah, okay.
Anyway, just for the record, John was invited. He refused to come. He said children were more important than his career. That's what he said, right, yeah, yeah, right, So John, you really missed out. We had James Anderson, who used to be the co manager of Scottish Mortgage, which so many of were listener at all, and he was fascinating. We had Russell Aper, our favorite strategist. We had Ana McDonald who so good on UK small caps. We'll come back to that. We had Jim Mellon, you know, one
of the UK's greatest investing gurus. We had Simon Evans, very funny comedian, although we did have to edit some bits him out I think in the end, or maybe we didn't. Maybe we didn't let it out everything we
should have. Who knows. Anyway, So as fantastic and a couple of themes came up again and again and again in the conversations and they were a lot of talk about the UK, state of the UK, investing in the UK, etc. Jimmelon was really interesting on that, and you and I have both written about that recently, so we'll come back to that, but also a lot on big government, the role of government, the extent which government should be involved in everything, the way that risk has been socialized, in
particular since the Great Financial Crisis, and then socialized again and again and again during the pandemic, and how we're now in a situation where the role of the state really is very different or perceived to be very different to the role of the state ten to fifteen years ago, and how that in turn means taxes in the UK can only go up, which of course is interesting in that you know, and I've written about this a lot over the years that in the main it's always been
incredibly hard in the UK to get taxation. Is a percentage of GDP up over thirty six thirty seven percent and keep it there. But it looks like other guests was Paul Johnson from The IFS. He's just just brilliant, so interesting, and you know, he said, well it has to doesn't matter if it's been difficult in the past,
there's no choice. We have to get back to revenues up because otherwise we can't pay for social care, for the triple lock, for net zero, for you know, the nightmare that is the NHS, etc. There's no choice here. So we had a lot of conversations around those things, and it was kind of depressing, to be honest.
I mean, I'm sorry, I messed it. It's a degree and the guests, I mean, a stupidous lay up.
I thought.
I thought Paul Boy's very interesting, and I thought one of the things that Boy's interesting is that he sort of seemed like, on the one hand, yeah, there was this kind of thing that is no option but big government. And on the other hand he was saying that politicians, he was gradually quite an advocate for, they should stop doing stuff and just let everything settle for.
A whale, which is clear way beyond what they're do people doing.
Ex Prime ministers are the most disappointed group of people in the world, and that they awry. They walked through the door of Number ten going yes, finally I can implement my ideas and I'm going to do this, and I'm going to do this, and I'm going to do this and then they look around and realize that actually they can't really do any of those things, is not the power is not really with them as well them in the way they thought it did, had a few weeks to do it.
To be fair, yes, I mean, I don't know whether that Prime minister is the most disappointed or the rest of us the most disappointed about that. But I think this, if you read Tony Blair's memoirs, one of the things he's disappointed about. I think he wasn't there for much longer because he kind of feels he learned on the job and could do more. And I think we probably all feel about after we've left a job. The other
thing I suppose I think is yes, you can't. It is quite difficult, but I do have I do think governments can make a difference over a long term. I think one of the things that is problematic about our politics and so on is that you know, you'll get prime minis or chances or whatever saying I'm going to make the economy grow next year, or you know, I'm going to transform the education system in three years, I'm going to level up in ten years, or have you.
These things take decades, but government can make a big, big difference. I mean, part of the reason that our growth over the last fifteen years has been terrible has been down to government policy, quite clearly being down to the government policy. But they can't turn it around this year or possibly even within the term of a parliament.
But if you get competition policy right, education policy right, infrastructure investment right, the planning policy, are you times three right, then in ten years time will be a bit better off. There's this great quote which.
And I kin of thought that really the most talent thing was that even someone who was sort of saying more as we do need does tax take was setting us in But the states should try to stop doing so much and should stop missing a boat.
You know, I mean, there is.
There are some sort of things we could at least look at, you know, I mean, like the triple lock is quite a good example. It's like, I am not I'm not happy about the way that this is constantly framed as you know, kind of intergenerational warfare, and I have no I don't like the way that we kind of we kind of have the conversation now where you know, like twenty years ago everyone pitied pensioners and now everyone hates them. But what I would say is that the
triple lock now is kind of stupid. It's like, we should have it to it should be a single lock. It should be a single lock. To Cepi, we are a floor of zero percent, so that the state pension has never actually cut. But if we've decided that it's big enough in real terms now, there's no reason to you know, raise it way wages for example, which is
probably what's going to happen this year. And there's no reason that state pension should get a real terms pair eyes, and particularly at a time whenever everyone essentially seems to agree that it's now generous enough. So how about we just get rid of the other two locks and kind of like put that one then. I mean, that's that's a really manor easy move. It doesn't require spending any more money. It would save a fortune over the longer
run relative to what it's going to be. I mean, that's just that's just that's just one idea, you know, it's not I wouldn't see that this stuff is quite as the old thing is the lack of political courage, because somebody will complain about it in headline somewhere.
Yeah, no, I was just going to say that. One of the other things we talked about in terms of easy wins, in terms of spending is the extraordinary amount of money that the government gives to other semi governing bodies gives to you know, we talked before about, didn't we about term of production of elites in the UK, et cetera on a different podcast with Peter Touchon, And you know, it is absolutely extraordinary when you sit down and look at it, the amount of money that is
handed over the by the government to vast bureaucratic organizations to fight for the government. Yeah, and you know, we have the opposits for that. We have an opposition in parliament to fight the government. We don't need the stake to give large amounts of money to other organizations to
slight the government. So this is another one of those things that came up a couple of times in these conversations that you know, money just flows all over the place to all sorts of places you don't really expect and it doesn't necessarily need to.
Yeah.
And also the other thing that would was reading the transcripts, there was a lot of talk about business getting into politics and how that was bad, and I agree with that, but business is still much more accountable than the actual lobby groups that are causing the majority of the problems
in the first place. You know, it is kind of like the third sector, and they can charity groups that have become you know, essentially kind of like political wings for certain particular kind of like issues, and the businesses all kind of follow suit in a semi reluctant, sort of mostly perfect by the HR departments to justify their existence kind of way. But as soon as you know,
you hit a huddle like rising interest rates. I mean, you look at how fast everyone's rolling back on ESG from a corporation point of view now that it's no longer as politically popular in the States, for example, and.
So easy to make money off.
Yeah, exactly.
Yeah, And so you know, the good thing about businesses is if nothing else, they are always accountable to the bottom line. So if they do things that are too stupid, then most of the time that will have an impact on the bottom line and they have to roll back from that. Butas the you know, the charitable and the NGO sector is not at all accountable on that front. And it's the amount of money that's going to them
is not very visible. I mean, there was a really interesting I mean, Rory Stewart is obviously a guy who said I doubt very much that I'm one of the same political kind of like him wavelength as him, But he's just written a book in one of our Bloomberg colleagues review this morning, and he was saying that he's kind of pointing things out about the lackey you know, political courage and governments by headline, and also pointing out
that during the period when everyone was complaining about austerity, Now you can take that term austerity where a pinched saw. But the point I was making was that the budget spent on the overseas aid department like shot up in real terms at the same time as everything domestic was getting cut. And you're kind of, well, you know this, it's that kind of thing. It's like that there is money, there are savings to be had. The NHS is definitely not the most efficient way to run a healthcare system.
Now, now, don't you dare say a thing like that about our NHS. I won't have it, not on this podcast.
So again I'm just clapping stop that now, listen.
That was a really interesting part in the conversation that Pamel has on the second day about the NHS about exactly that, and I think it was Jim someone started talking about the white.
Drugs education, and you know, I just want to say something about innovation that everyone here will be familiar with the new drugs, which are the weight loss drugs wega V and OZMPK and all that sort of stuff, nov nor disc and Eli Lilly. At the moment, the biggest selling drug in history until about two years ago was Humera, which is used for autoimmune disease, particularly rheumatoid arthritis, and it sold fourteen billion dollars a year at its peak.
It's about to go off patent. These drugs next year will sell more than one hundred billion dollars between the two companies. That's unbelievable. And they're having these positive effects that are radiating so much so that probably everyone in this country over the age of forty should be taking them. They reduce heart risk, they reduce obesity, they reduce diabetes, they reduce all the things that are costing the NHS
so much money. So you want another optimistic thing, it's that we have the potential in the next ten or twenty years using some drugs that are here and now to take the strain off. The NHS do not have people waiting in corridors in the NHS because they won't be obese, they won't have cardio disease, they won't have the care.
And I am so interested in this in that you know, one of the biggest expenses for the NHS is obesity. You know already at the moment twenty five percent plus of the UK population is obese. Another thirty eight per centers say are overweight look for you as and it's even worse. And you know, we know, we know that that's not going to go away by itself. There's every diet book in the world that every body of advice
you can possibly get. It's just not going to happen that all those people who are troubled by obesit are suddenly going to be not obese anymore. We know that's not going to happen, particularly with the huge power of
big food and their horrible processed foods, et cetera. And the way our doubts have changed, people will not become We're all going back to the nineteen seventies in terms of BMIs right, And ten percent of the NHS budget is spent on diabetes and complications from diabetes, So that's going to be seventeen teen percent in a decade or so. And libsitis, you know, is linked to link to cancers, to heart disease, to dementia, to depression, I don't know
name anything else. It's linked to almost everything that is thoroughly unpleasant for the patients and thoroughly unpleasant for the NHS and of course anyone attempting to finance the NHS. Now, if you can give everyone a drug, that will mean that they dropped fifteen percent of their body weight in a year and every year for five years, or however however much weight there is to lose. That's an absolute miracle.
Transformative for people's lives, transformative for the NHS, and hence transformative for the public finances, Transformative for the way people work. Think about the number of people we have on disability. Imagine if all that went away, and rutually transformative for big food.
Yeah, I mean I think is I mean I think that we give THEE and ozam pic of like just either you will potentially be hugely transformative. Also, like the booze industry when he had colleagues, was pointing out recently that, you know, because it seems to kind of like block all cravings, not just cravens for food. Like you know, if you if you get a problem with gambling, then you stop wanting to gamble and things like that. So, you know, I think it could be absolutely amazing.
Yeah, well, there has been some I saw a bit of research on it from Morgan Sanley the other day. I was telling you about it that once people start taking these drugs, I mean I think that you know, the sample is very small with the MAM, so you mustn't get too carried away. But they snacked less. And when they cut back on food, people are not cutting back on vegetables, misteaks. They're cutting back on high sugar, high fat, really processed food, a high margin food. You know,
they're cutting back on the high margin stuff. There's a big risk in there for the food companies. I'm not sure they're taking that seriously.
Yeah, I think that's a really good point. And yeah, I suppose you could say, oh no, the tax base will be in trouble. Then there'll be no more vices to tax.
Well, that's fair. But you know, we don't tax big food any extra, do we? So doesn't it make it? What difference does it make to the taxman if we had a big pearl of vegetables or a big pile of processed food. Let me think through that one. I haven't talked through that one yet, but I will. You know.
I was just thinking that this is this might be good for the NHS, might then be good for the tax payer, might you know, even be good for But I don't know people who reduce fresh food as opposed to processed food.
Yeah, I mean it'd be great, And I mean I'm sure this was said joking. Leave that the thing was, Yeah, if people don't day of obesity, they will just level on un day or something.
Was Absolutely Paulson was absolutely not convinced by the whole weight loss drugs will transform the world thing.
When the NHS was founded, it was treating large numbers of people with infectious diseases, which covid apart is no longer a big part of the issue. People are surviving those as viving older. Actually, heart diseases down a lot, but we're teaching a lot more people with cancer and dementia and so problem with health is you save them from this stuff, the buggers go and get something else later on, and often it could be even more expensive.
If someone dies at forty, it cheap, whereas you know if they lived to ninety, then they're going to be expensive. So I'm actually less optimistic about I mean about give the long run effects on the NHS of this, because you know, people.
Malon very much was so they were saying, yeah, a little bit of friction in there, you know, our panels alway there a little friction, So that was that was interesting. But I was very taken by this idea that that, you know, a drug can transform life. And I know that feels a little bit too simplistic and it's bound to und up having you know, nasti side effects, and I was thought of yet because that's just the way. But if it didn't, this could be amazing.
And also, I mean, it's going to increase people's health spines as well, and.
How could that possibly be bad?
I mean, yeah, you know, I say you had the ten years to everyone's working life, or in a in a positive way rather than that a girl of going work for an ten years kind of thing. I don't really see. I mean, this is the whole point. Ultimately, the human endeavor isn't it to live longer and healthier?
Area? It could It could transform our productivity numbers. Think if you think about companies in the number of sick days that people take and that kind of thing, and the difficulties of working when you don't feel great. I mean, a lot of the stuff could change.
We're talking about polls, and obviously antibiotics and vaccines are the things that you know, the other health measures that can transform things. So it's you know, this this could be something similar given the skal of the obesity form and of course it's bad it is, and how and.
How obviously, how appallingly unbelievably difficult it is to stop being abyes. You know, point Britanny, it's easy, it quite clearly isn't so for drug and sorted out and help everybody. Now we should move on from this. I can't quite see where we're going to get hate mail on this, but I'm feeling hate now. The other thing that came up because I did ask everybody where would you invest? You know, what are you going to buy now? And we heard a lot about the different sectors et cetera.
But there was some agreement across the board that UK equities are really kind of okay, And Jim Allen, who is always very interesting on investment, did say towards the end he said, the UK market is the cheapest in the world and you should get out there and buy UK investment trust trading on a discount to then that as a value.
Do that, he said, I was talking to Sandy about it earlier on and I think the UK is the cheapest market in the world and i'd buy UK investment trusts that are selling at a discount to their fundamental values. And one of the things that's not appreciated about the United Kingdom apart from and you made a very good point by the way, about the vulnerability of British companies being to take over. But we are also huge investors in other countries, so it works both ways. We're a
much bigger creditor nation than we are a debtonation. So you know that we have very large investments overseas, and particularly in our listed companies, which are I think the foot see one hundred and seventy five percent overseas revenues, which is fantastic. So invest in the UK and look anyone.
So I went away to have a look at the discounts on investment trusts and see where they were, because you know, if I read about the stuff a lot, but I mean, it takes full attention into exactly where they were. And it turns out that, you know, we have got the average investment and the average discount on investment trust at the kind of levels where you usually
see a fairly mammoth rebound afterwards. So at the kind of levels we saw in March two thousand and three, June twenty sixteen and back in the financial crisis, et cetera. So you know, nasty troughs and good returns after that.
We're knocking around those levels at the moment. And at the same time UK equities are very cheap, so you've got a bit of a double whammy there in that if there is to be a turnaround and you're holding investment trust that hold UK equities, you get the rise in the in the net has at value, and you also get the closing of the gap between the net asset value and the share price.
Yeah, I mean, I think that makes a lot of sense. And I mean, the only thing I did is that, you know, haven't been writing a bit that's for about a year or no. I would say it's noticeable that most other analysts are a large number of kind of mainstream normal investment banking analysts are now kind of saying, you know, you know, regardless of what you know, you think of the UK et cetera, et cetera, it's kind
of it is cheap. And there's a sort of even the ones who aren't kind of you know, that's the remain varies on it, are kind of like, well, you know, you can't deny it's cheap. You know, it's just it's going to be cheap forever, or that's they've kind of
got some sort of excuse. But like Goldman Sachs was putting out something today that basically said that we dividends and buybacks added together and throw in essentially kind of de equitization process, and nobody's been issuing you shares that the kind of the UK market, of the large caps
at least are now yielding about six percent. But I mean that's pretty much inflation now, and that's before you throw in any well, okay, let's not take the capital gains for granted, but you know, it's it's it's clearly cheap.
It's just what what might change it? I mean, well, the Bank England might change it, because you know, if they're telling around and decide to stop raising interest rates a little bit earlier than everyone expects, which I think is quite possible depending what happens with wages and inflation in the next you know week, that that could be a trigger, you know, something that people could start saying, oh, actually, well maybe it's fine.
Then they come to us in the end, John eventually eventually, was there anything else in the conversations that really caught your eye that we shook about before we say goodbye?
Actually, there was one minor thing about university.
The way you say that is making me feel nervous.
It's just it's the thing that I think it was Paul that was talking about it and talking about like the number of students going to UNI, and yes, Paul and Simon, because Simon was basically saying if I know it was it was all because Richard brought up the lectures don't get paid enough, and then Simon said, yeah, but if he's a you know, media studies lecturer, then he doesn't serve to get paid and then pouls Tom. But a number of people who got unni.
Can I make it just a.
Very quick observation about the lecturer who gets forty five K and what a disaster is, and we should invest more in education. I think everyone would like to see people trained in the skills that Jim describes in nuclear fusion and biotech. But there has been an eruption in the last few years of worthless degrees of people accruing student debt, coming out into the real world finding that nobody cares about gender studies.
And I think I find a lot of people understand for the next.
Ten years as they try and pay off debt, and they have a burning, souring sense of entitlement and resentment towards the state that duped them into this. You get elite over production. If you don't get the typing rebellion. At the very least you get you know, identity politics and all this crap, And are you really got to try and refocus on what are the skills we actually want to teach people? And then I think you might find the lecturer's wages naturally rise.
And the thing that kind of got me slightly was the id that well, people who graduate tend to get paid more, and therefore they should be paying for the privilege to go to UNI. And I just kind of thought that was interesting because that's a complete reversal of the way that society used to think about going to UNI. As I understand it, it's like whenever one in twenty people went to university and they were like, I don't know,
like ten unis in the whole country. It's like, we not only paid for their fees, but we also paid for their drinking money on top of it, in the form of a grant. Because the whole point was that that top five percent were meant to be the ones who went off and did kind of difficult jobs and contributed a lot to society, and that's also why their kind of salaries ended up being higher than everyone else's.
I mean, I think I'm writing thinking that that was the basic idea behind why taxpayer, why you know, the massive taxpayers should have supported a small group of people who go to UNI. And then of course, like you know, we all sort of said, oh, well, why shouldn't everyone be able to go to UNI? And then it's like, okay, well, now you have to pay for it.
But now it's.
Because you get paid more, you should be paying for going to UNI, as if it's well, the excess money that you make by having gone to UNI should then be clawed back by the state. It's kind of it's just it's the really flawed way of thinking about it. You know, it's it's there is that and that whole conversation's happening a lot just now, I see it a lot. It's like, oh, this this job only pays this much. That's terrible. It should be higher. It's kind of, well, well,
who's going to who's going to make that higher? You know, are you saying that the state should mandate what everyone gets paid now according to which particular job is flavor of the month and who is seeing is the most moral workut So, I think I think it kind of goes back to what we were talking about. Is this
this big government thinking has invaded almost everyone's minds. You know, it's like, the market should be sending wages, and you should be setting wages on the basis of what kind of jobs are most valued by society in terms of you know, the need for them in the supplying demand thing. And that's why, you know, I mean, the whole thing was about Adam Smith in the first place. That's it's
the only way to allocate resources efficiently. So she's trying to roll back this thinking that you know, there's some sort of arbiter and this guy that should be deciding wages as opposed to you know, just supplying demand.
Really yeah, well, wage and price controls.
They haven't got a great history, have they.
They haven't. And yeah, well this thing was a guy writing about it and the ft the other day suggesting it as a good idea, and he used to be on the MPCE and he's the Jeremy Hunt.
That was one of the worst columns I've ever read. That's terrible, absolutely terrible, and also one of the worst ideas I've ever had. And god, there's a low bar for that.
Yeah, and it's this sort of thing you would have. I mean, Mary expected it from Jeremy Corbyn, but even then, at least Jeremy, but they just said, I think I think, you know, we should be at these levels in Ohio, you know, as opposed to having some really kind of like twisted, weird way of framing it through excess taxes and all that sort of stuff. Anyway, that wasn't really that was a kind of It.
Wasn't minor at all. It wasn't minor at all. It was absolutely huge, huge, And we did have an interesting talk in there as well on the on the panel about degrees that have value and degrees that do not have value and how that works. Really came fifty cuffs there as well. Actually think that it wasn't quite as harmonious as I have fixed in my mind those panels.
I think we better leave it there now. Listen. If you haven't listened to both of those conversations, you really should listen to them, because they were They were incredibly interesting. We haven't talked much about the one with Russell and James and in this conversation with John, but they were absolutely fastening. A little bit more intellectual, maybe a little bit more for the experienced investor than the second panel was,
which is a bit more accessible. But if you're interested investing at all, you have to listen to James and Russell talking because they really tell you what the world's going to look like over the next decade, or give you a version of what the world is going to look like over the next ghetto that is more likely than a versions you might hear from other people. Anyway, there we are, John, Will you becoming next year? Will you have more parenting to do?
I will?
I will go out with my week to come next year. Bring the kids, you'll be famous.
They can sing afterwards.
Oh that's how I'm going to hold you.
Yeah, and we can dance and have drinks or maybe they can and they can they can be our h what's it called our pre what they're called when someone plays before.
You go in the night?
Are opening acts? Tell the kids and you heard it here first? Everybody sign up for tickets next year. They sold out in about ten minutes this year. And if there's going to be singing and dancing as well, they're going to sell that real for us next year. Thanks for listening to this week's Marin Talks Money the after Show. This episode was hosted by me Marren Sunset Web alongside John Steppek. It was produced by Someasadi. Additional editing by Blake Maples