Introducing: Merryn Talks Money

the markets explain the markets. Now, we're not really going to get into this until December, when we're going to start having a podcast every week talking to some of the most interesting people in the markets in fun, management and well and anything you can think of anything to do with money, we are going to talk about it.

But today I have with me the person who I've probably talked to the most over the last twenty years, my good friend John Steppack, who writes the newsletter, the Bloomberg newsletter Money Distilled, which I'm sure you all already subscribe to, and if you don't, you need to go away and sign up to it right now because it is absolutely brilliant. John is a very clever man. Hello, John Hill, and I'd like to just subtly agson you

just said thank you very much. Now, over the last fifteen, sixteen, seventeen years, John and I have been having conversations all over the place, and there are a couple of subjects that we always come back to and that I think we'll be covering on this podcast, which, by the way, don't get over excited. John is not going to appear every time, but it will be popping in and out of this podcast, so you'll get to know his voice

pretty well. But the subjects that we have been talking about relentlessly and we will keep talking about over the coming years. We talk about house prices. We talk about UK equity markets, US secretary markets. We talk about bubbles. We love to talk about bubbles and booms and bust and we will talk about those a lot. Talk about how construct p folios. We talk about precious metals, We talk about the energy transition, We talk about fossil fuels.

Were a little keener on fossil fuels and most people aren't. We um, So John, let's talk about what you've been writing about in Money Distilled recently. What's on your mind? I suppose the main thing is that there's been kind of two big things. So why is inflation? Obviously because the moment we're kind of going into that period where him thinking, okay, are we are we near the peak?

Is that it? And then can we go back to the way that things were like three years ago, before all the acceptable currency blew up, and when house prices were still going up and acid places were still going up, and interest rates with at zero percent. And basically the answer is no, and I'm not sure that anyone's quite figured out that's no. This is for keeps. Ten percent inflation isn't gonna be permanent, but we're not going back to zero percent inflation either. So basically, inflation is both

transient and structural. Right, That's the thing that we've been talking about for ages. We've been saying, you've got the transient element in there, but don't be fooled when it peaks, because there's a lot of dynamics in here that means that inflation at four or five percent is a long term dynamic. You're not coming to You're not come back to one. Not come back to Zra No actually really interested.

So um A Chapel and Twitter who have followed Dario Perkins, who is it Tyes Lombard and he's very good, he's a smart guy. But he was reposted something from it. I don't know the guest as you should, but reposted this A couple of things that an e CV equanimis

have done talking about UM. Basically, what they've done is they've done a counter factor looking at what would have happened if you joined nineteen seventies style monetary policy during the Great Moderation, which is the period when you know, basically inflation felt nothing and you know, we had this kind of boom period and it wouldn't made any difference,

is what they found. And so their argument was, well, actually what's driven the Great Moderation were structural influences, which were fairly obvious, things like, you know, kind of the global labor market expanding to include China and China manufact on what's the cheap goods, and that's what can have suppressed prices for that length of time and the course

we're going, and that reduced the power of labor. So we just stayed low for ages, you know, so that you can lay it pretty much at the door of China technology increasing that, demographics, et cetera, and that's it, and then we had this dynamic West central bankers believed that they did this, They did this, I mean the arrogance, right, arrogance that they did this, and then come the inflation.

They believe that they can get rid of it, but of course they can't because all these structural things have turned around. Globalization has peaked, power is returning to labor. We just will start to rise globally. Yeah, which is which is good for for what girls, It's going to be a much harder time for I said winners and investors.

Law um so, I mean, I guess that's one reason why we can spend a lot of time talking about it because then and I kind of decades of inflation volatility is giving a much tougher sort of environment in the last twenty years of actually inflation with altility, not just inflation sitting around at four inflation moving all over the place. Yeah, that's that's so much worse. Yeah, Like I like that as a as a coincept because it's last thing. I don't know if you've seen a bit

again Deutsche Bank. That needs to be historical study. But as soon as inflation sent basically and I've seen other people talk about us as well. Was that idea that it's it's almost like you get a state change, so you know, like when you boil water, it's all it's just water, water, water, and then it's suddenly steam and suddenly all you know, the way acts changes totally. It's the same way the economy and inflation. So you know, up to about you know, mid single digits, it's kina predictable.

But then once it goes above eight percent or another figure, then it starts to king of bounce around a lot over a prolonged period of time. And when once it's going to above that, it's never going back to as quickly to the sort of areas that markets have price and then just now, so it doesn't go back to two percent next year, you know, you're lucky if it goes back to kind of six percent. So I am

so yeah. I mean, I think it's going to be a very very different kind of world from the one that actually the vast majority of us growing up in and invested through. But one of the things that we've talked about a lot of the years, and we'll try and get the wonderful Russell Napier, who's a brilliant strategist. We're trying to get him on the podcast, so every everyone,

I love him. And one of the things that he talks about is how this is the dream for full governments anyway, to have inflation at four or five percent to everyone to feel okay with that, because once inflation is being temper cent, everyone's okay with four percent um.

And if you can keep it at four or five percent and you can have negative real interest rates during that time, my nominal rates below four or five percent, then you can really work on getting rid of public debt and everything's going to be okay in a decade. Well yeah, and I mean that is in a weird and we that's the oup side, you know, because all this stuff a way, but it just you know, like the you know, the there's massive kind of like debt

that's hanging off. That's the way that you get read all of it and a relatively painless kind of way. And of course the problem is it's not painless because somebody has to pay for it, and the people pe usually evils anyone with wealth at the moment, Yeah, exactly downside to financial opresson where we will cover that at length over the next couple of years. I think that's

going to be a significant paign. Oh yeah. And also I've I've read something the other day about someone looking to target pension points and saying that everyone had a fine contribution schemes should be invested in these alternative energy schemes or infrastructure schames, and suddenly you're thinking about you know, that's classic financial depression where you're getting told we have this this pool of capital which is just stuck there.

That's you know, has to go into these assets, whether or not what they deliver good re ton they won't write. Whenever you're forced to put your money into things by the government, you know what's going to happen next, because if it was attract of you wouldn't have to anytime you're coerced. It's not attractive in the first place. You know, a lot of that stuff is coming, Okay, so writing this newsletter that we're going to talk about a lot of over however many years to come, I hope what

do people do? Ah, Now there's the question that's why masking you're not the other way around. The thing I've been writing about a lot recently, and I've been has been for a while, it is there is kind of UK equities um and obviously it's not the only thing that's interesting out there. But one thing I do like about the fact that, I mean the UK is cheap b it's been detested for so long that is hard

to remember the last time it was popular. Um and also saying without this the other day, it reminds me of whenever we used to going about Japan before that you know, became appealing again. Don't tell people that go on about stuff I don't even know. That's so early on in the game. You know, whenever we we discussed a long term opportunities, which is what you should be looking for as investors. You shouldn't be looking for the short term stuff because you know where that leads. That

leads you to f t X and panicing. How you can't get your money at your bank account anyway. That's just we will be talking about cryptocurrencies as well, but possibly not in a town that everyone will like, but UK. So it's nice to see the actually on our door step. That is stuff that is incredibly cheap and in any valuation measure you want to look at. And I mean a roll pale Duncan Lamoent from show does is always kind of like yeah we should dunk smart yeah, and

and kind of underrated, I would say. So it's like, you know, he always kind of like puts out this study where he talks about the fact that it doesn't, you know, whatever sector you look at, even if you're comparing directly comparable companies, the UK ones are trading discount to the US ones, and often to European ones as well, even once you've taken out the tech sector stuff. Yes, so you're kind of like, well, why is that? And I mean no one n actually really seems to know.

But the obvious answer seems to be the well, global capital has kind of shunned the UK, and it's probably showned it more since bregsit because you know, the it's easy to park it and the this is too hard to understand basket because the UK is ultimately quite a small chunk of the global equity market by market value. And also it's just been much easier to stick all your money in fine stocks for a long time, because then you've performed the global banks market. Anyway, that's all changing.

Change needs have a little think, doesn't it, because of one thing we've learned over the last year that actually we knew already, didn't we It's that evaluations actually matter. They actually matter. You know, we were told during the Great Growth Bubble that didn't matter what you paid for a growth dock because the growth will out run the valuation. Everything would be fine. And we knew that wasn't true at the time, and it definitely isn't in global capital

needs to have a good thing. But how it's time to start looking at valuations and paying the correct price because it's the price you pay that determines the return you make. Yeah, with themselves, go back and read the Warden Buffett absolutely or my favorite book, by the way, The Money Game, published in the sixties, uh pseudonym Adam Smith. Everyone should go get it. Absolutely brilliant. And the the chapter on growth stocks, which doesn't call growth stocks, you

calls performance stocks, is I mean totally brilliant. Gives you a total roadmap for what happened during the last growth bubble that is just ending and reminds you of what may happen next because it's not over yet. This past performance stocks performance and Fidelity was the Baily Gifford of the day. Well, I mean the good news for Billy Gift for this Fidelity is still going stocks. That is true.

See there's a silver lining for everybody. Right. Podcast listeners, thank you very much for listening to us talk about what we are going to talk about, and these are all things we will start talking about from December. John will be here relatively frequently and there will also be a very interesting, very very interesting guests on an almost weekly dasis um and we very much look forward to talking to you then, Jeff help the guest less potential

guest less that it sounds really exciting. I'm looking forward to good Thanks John, Thanks Smith, Thank you so much for listening to this first introduction to Marin Talks Money. Please do be sure to subscribe to the podcast at your podcast provider of choice. H