Bloomberg Audio Studios, podcasts, radio news. Hey you and gentlemen and feaz Welcome Marin's Somerset Web. Hello, Maren Talks Money Listeners, It's Maren Sunset Web. Before we get back to our regular programming in early September, we are bringing you something very special, recordings of the conversations I had at Pania
House for the Edinburgh Fringe Festival. Now, for those of you who don't know, the Fringe is a three week arts and culture festival that began in nineteen forty seven and it takes place in Edinburgh in Scotland every August. For the past few years I have been hosting conversations about markets, economics and investing from one of the most
special locations in Edinburgh as part of this festival. I do it from Panmia House, which is the last home of Adam Smith, philosopher and father of modern economics, is where he completed the last editions of his best sellers, The Theory of Moral Sentiments and The Wealth of Nations. This year we did a three day run was the end of August, and we are bringing you the slightly
edited conversations from those three days. The panel I hosted on the first day, featured Bloomberg senior reporter John Steppek, Alex Cutler, who's portfolio manager of the August Global Balanced and Cautious Funds, and Tom Slater, who's the manager of the Scottish Mortgage Investment Trust.
Right, thank you all very very much for coming.
I think in some cases again who's been before, new jokes, new jokes.
Everything differently.
Thank you, and I'm particularly grateful to you because you know, we sold out again this year. We sold out incredibly quickly. The tickets were gone in a matter of weeks. And that allows me and John and me in particular today to everybody, I have a sold out show at the Fringe over and over every year, and we say that, and we never ever tell anybody how small this venue is.
And so one thing I would have appreciate from all of you, you do not tell people that there are only six y of you, because spread the general view that you're in something akin to the McEwan Hall would be greatful, right, Okay, brilliant, Thank you right onwards. You probably all know how this works. What we do is we choose an Adam Smith quote each not me obviously, because I'm not doing the actual work here today, these
three each choose their favorite Adam Smith quote. I asked them to tell us the quote, which they will all read from their phones because they no longer have the attentions pan to memorize them, and.
Then we will discuss the quote, right my guess.
Farst side, I have Tom Stater, who is the manager of Scottish Morge's Investment Trust, who holds that an airport failure. Sean, yeah, yes, I don't.
We'll get onto that my loft.
Alec Cutlow is the manager of the Aubist Global Balance Fund and the multi asset funds there. You've been on the podcast several times before, so those of you who listen to the podcast will already know Alec well and Tom quite well actually. And on my right of course, John Steppek, who is what are you now?
John?
I am a senior reporter at Bloomberg, and I'm the author of the Money Distilled newsletter, which I think may have mentioned already at some point based excellent and you.
Should say not for it, but it is behind the paywall, but the subscription is very very very good, valuable.
I wanted to see who who owns the orbiscool balanced fund. I saw all kinds of hair.
Who owns the almost global balanced fund?
Trust me by the end of today, rushing out, rushing out wealth, managing the audience. Be ready, right, We're going to start with as I can't remember who's going to start. You're going to start, Tom, Let's have your quote.
Consumption is the sole end and purpose of all production, and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. And I thought, maybe pick four or five points as to why that's relevant to today. Smith obviously insists that producers exist to serve consumers and not the other way around. And yet in much of global trade policy today, the focus is squarely on the
on the producers. So I guess the headlines have been dominated by Trump's tariff policy and generally global trade barriers. You see it in subsidization of certain industries. I guess EU farming subsidies would be another great example of that. Yet Smith was was single mindedly focused on the idea that production only exists insofar as it makes consumers lives better. So I think just a very very clear difference of view from the one that policy makers have taken today.
I think you see it in big tech. I think the reason that these these companies have been so successful this because and they've they've made consumers lives easier. If it's if it's Amazon, it's it's price selection, convenience. They've they've given consumers better prices, they've given consumers greater selection, They've they've given consumers greater convenience, and and and being
extraordinarily successful on the back of it. But obviously the debate today is whether these technology companies have become too big, whether their ability to generate profits from all different parts of their business is no longer aligned with that you know what Smith would focus on in terms of just
producing that sort of consumer surplus. Even see it in the pharmaceutical industry and healthcare and drug pricing, and how do you get the balance between and maximizing the value for consumers there, who are of course patients, versus giving for giving the company's sufficient profits to invest in R and D and in developing new drugs, And how is
that burden shared. I think climate change and climate policy is is almost an extreme example of this that you know, if if we were you know, us focus on consumers. Then we would of course take these the extremely low price solar panels from China, extremely low priced electric vehicles from China, and consumers will be deploying this technology and incredibly rapid rate. Again, Smith would to say, you focus, the only reason we're doing all of this is to make consumers lives better.
But I suppose that what policymakers would say to today is that it's inconceivable that Adam Smith could have imagined the type of world that we have today, interconnected in the way that it is. And policymakers would say that by protecting producers and by putting up security walls around various industries, they are protecting consumers much longer term. And by having productive industries inside their borders, they're creating the
incomes that then create consumers. And without those walls and barriers, you may end up with countries that have consumers with no actual to consume it. So you can look at it from the other side as well, that that Smith this quote was both designed for a different world.
Yeah you could, I guess one. So, So I was here three months ago, four months ago, and Sir John ka was was talking and He made the point that we sort of have come to fetishize manufacturing or heavy industrial manufacturing, and actually, do we do we really do we really need it? Do we really want it? You know, if you take the COVID vaccine as an extreme of that, you know, this, this this tiny, almost microscopic product which had extreme value. You should we not be focusing on
on those, you know, the intellectual property, intellectual production. And yet you know we government policy is so focused on you know, heavy industrial making, machines, manufacturing.
You know why it seems like be able to answer that question, Well, it seems like where the where it comes out is when when one country is effectively attacking you using subsidies to kill off your industrial base and then have an amazing gain in the future after they put you out of business and you can't get it back.
And I suppose you could take it back to Tom Wadge, you said about you know, why would we not use all the cheap solar panels coming out of China. But that's the most mrcintilis country that we've seen in many, many decades, and they now have their own very difficult problem which they have a very low level of consumption which they're not desperately trying to fix. So does it make sense for us to absorb all the products from such a hugely mrcantilis country.
Long time.
Well, on the specific one, it depends how worried you are about climate change, I guess, and how quickly you think we should be going through that transition. But there's there also has to be a degree of realism about this, that that they have an industry producing, producing all the equipment that you need to generate energy from renewable sources that's on a completely different scale and a completely different
cost base from everybody else. Now we can we can debate where we've got to, but if that there is no part of the supply chain and in most form of renewable energies that the Chinese don't dominate some part of, so you know, we have to accept that trade off.
It is interesting though, because I do weirdly enough, I was looking at the chapter on tariffs a couple of days ago because I was acused to see if you'd said and he didn't say any quite pathy enough for an actual quote with the Chapter's quite interesting because the issues that he raises, although he is the kind of free trade guy, and he's kind of anti cantialism, where he says it might be okay, he talks about defense, So there's a bit we're just talking about how basically
I didn't kind of fully understand it, but Britain's kind of navy was protected, and what they were doing was basically trying to avoid the Dutch from having a monopoly on the kind of various sea trades. And he said that this isn't very helpful for effective for consumers, but it's a really good policy because it stops the Dutch from, who are enemies, basically from you know, getting a strangle
hold on this important trade route. And the other issue he did bring up interestingly was employment, which this kind of surprising me actually, but he did talk about almost exactly the thing that people in Middle America and in you know, bits of Britain, post industrial bits of Britain like Glasgow and Liverpool, talk about where you demolish an industry so rapidly by opening it up to competition that you create social uphaval. Now, I mean, Smith didn't really
kind of make a big deal of that. He didn't think it was going to be a big problem because he assumed that there'll be a lot of other employment for most people to go into. And I think probably either there was at the time, or or or probably people just didn't really care as long as the lower orders were, you know, involved in employment in some way,
even if it was FAMI labor. And but just think it's really interesting that the same qualms even then are basically the exact same ones that we've got today, and we kind of still haven't found a solution or a satisfactory solution. But I think if you look at China as an enemy, I don't mean an enemy enemy, but I think you know that threat, you know that's threat.
It's sort of like Coldish War type thing, then maybe some you know, retreat from globalization is I guess justified from from that point of view.
It's a wonderful scart stories recently about renewable energy product coming from China. I'll be able to turn off the turbines, shut down the panels.
Is that possible? I don't know.
If you put have you put Chinese kit in the system, sure, transformers and switches, you can do it. That's why you need to buy German from Zemens. Energy needed by Germans. They would never know. Germans have always been our friend.
I'm going to take that as a perfect time to move on to your quote I say I was.
Going to change my mind.
Okay, sure, science is the greatest antidote to the poison of enthusiasm and superstition. And I love that quote because it says to me that Adam Smith was the first contrarian where you're looking for from the investing context, what we do every day is try and find where society is just run off in a direction, using their imagination, not weighed down by facts or physics, to come up with something that we should all be doing.
Give us an example.
It's really hard to think of one, but I think the war on carbon might be a good one. And if you invest into that, or you search that and say, well, this is impossible. You can't have a grid that's entirely dependent on wind and solar, it's not going to work physically. You can invest against that, and then when the physics finally determine that your superstition and enthusiasm aren't really working out,
you can make money doing that. What was interesting about this quote is superstition made sense, particularly in his time. They were still burning witches for the first half of his life, so that kind of he was probably followed enough logic to think that probably wasn't a good idea. But enthusiasm seemed like a really weird word. And Laura,
my wife, was sitting in the front row. We were at lunch yesterday with Sir David Edward, who's a lawyer in town, and he said, in the during the Scottish Enlightenment, enthusiasm was code for zelotry tree. That's that's unbounded by logic. So I don't know why they just didn't call it, tell it try, but enthusia, enthusiasm was the word they used.
Okay, so you are now saying, I sit with the renewable energy as your example. You now feel that the enthusiasm for it has hito a rule of physical physical reality when it comes to the grid.
Well, who has a power bill here in the room? Who pays a power bills? Have you seen it hit the limit yet? And you're by the way, you're you're being subsidized more and more and more because the politicians don't really want you to see that the physical constraints on the grid impacting you in your pocketbook. But I think we're certainly seeing it, and we're seeing the governments
react as you would expect them to. The one thing that we as contrionce can can count on is politicians changing their mind and that's when we kind of get the big payoff. But there is a governor in Maryland who passed edicts saying we need to shut down all the coal fired power plants in Maryland and then about and that was three four years ago. Last month the power bills all went up thirty forty percent over the ensuing couple of years in Maryland, and he started getting heckled because of.
The coast of subsidizing tabines and because.
The grid had too much has now too much renewables and not enough spinning reserve in it to keep the nurse in the system. And he said, well, it's not my fault, because that's what politicians say. And they say, well, whose fault is it? And he said, it's the utilities for shutting down the power plants, so they can change. It will never be their fault. But they can go to bed one night saying that it's all about renewables.
We need to shut down biomass and coal fired plants, and then they can wake up the next morning and you could have your Prime minister come up the next morning and say I am the champion of north sea natural gas. There are no limits to what politicians can do.
Okay, so what's the solution?
I mean, Tom, Tom says, what really matters here is how much you care about climate change, how much you how much you think we should effectively suffer in order to attempt to mitigate it.
What would you say the solution is?
I'd say the solution is what we're seeing now, and that's a that's the physicists and grid engineers and chemists and quite frankly, the oil companies and the utilities finally getting their seat at the table. No one's no engineers are invited to the seat at the platitude table. They didn't get They get invited afterwards when the platitudes blow
up in our face. And they're now being invited to the table, and they're they're starting to craft an appropriate grid that has diverse energy sources feeding into it so you can actually have reliable, attractively priced energy.
Okay, I have got another example of yours.
This is what we do for a living. So ten years ago in Europe, we don't need defense to the point where and we won't remember this because our memories aren't long enough. Europe wanted to pass a thing called
social taxonomy. Doesn't ever remember what social taxonomy was. It was following on the heels of green taxonomy, which still exists in Europe, where they said we're going to charge anybody who produces carbon and extra tax so that they're incentive not to produce something that makes carbon, which of course makes all your industry leave and go to China, who then take over and they'll charge you whatever they want when they're the only one who can make ass
turbans or something. So they were going to follow that huge success with social taxonomy, which would be applying a tax to companies that produce social ill the top of the list. Sob Ry Mattal Leonardo Talas, Bae system defense companies. This is not I'm not making this up. We're going to apply a massive tax on those companies so that they decide to produce less. How is that based in any kind of rational thought with regard to how the
world works. And we've seen when Russia invaded Ukraine for the second time, people at that time were thinking they never invaded them because they didn't have a patch on their green suits that had a Russian flag on it, so they really didn't invade crimea uh, And now there's a we've gone it completely one hundred and eighty degrees the other way. We're selling our defense stocks. Oh, by the way, just rolling back.
Because defos because you've had a great rum with them, and now they're expensive.
They're because everyone wants to own them. Yeah, and the social responsible funds. Everyone remembers those that slap sustainable on the end of your fun name. When they did that, they were no longer allowed to hold defense contractors back then because they were evil. They've all now decided to change their mandates such as that they can on it.
So we now know that we now know that defense is the social good, right, Yes, it comes right down to it. There is no more social good than the ability to defend yourself. So defense is now elevated from the worst thing in the world to the greatest thing in the world.
And ESG has become ESG D. You can't have ESG without D. So now we can all own defense contractors and we're now selling have been selling those off for a couple of years now.
And replacing them with.
Right now, we're replacing with biotech. Still have quite a bit of.
Nuclear eating with tom If we're getting into biotech.
It's fascinating. Biotech is really cool and quite frankly, a lot of ourdea our ideas come from the incredible research that the the Bailey Diifferts of the world do. It's super high quality, and that means that we don't have to do it because we're not really small. We're just contrurions. We're the ones that we'll run into a burning building and check out the art, see what we can get out.
With gorgeously symbiotic relationship between baches, bus the contreating a go on.
The biotech stuff just is that just because it's.
Cheap, it's just pure deep value at this point, so not thematic you could if it, if it comes big enough, then we'll craft a theme around it so we can tell a story and people can understand it. But we're able to buy biotechs that we're selling at one hundred times earnings two years ago for mid teens or in some cases single digit multiples.
What are your big ideas in biotech at the moment.
Tom, Yeah, it's very kind of say we're very smart, But the implication of what you're saying is we've owned these stocks that have gone down a very long way in the plast couple of years, which is true. But I'm one of the things that I think is really interesting in biotech is the idea that some of the tools that we talk about moreen really things like ai I just offer a real hope of addressing some of
the big challenges in biotech. We're really just scratching our scratching the surface of our understanding of, you know, the molecular basis of disease, and if we can actually use these tools to ingest the huge volumes of information, if we can use these tools to automate some of the processes which you know today involve a PhD at a
lab bench with perpettes. If you if you can actually start to bring robotics and they into these processes, then that you offer out the prospect of massively lowering the cost and massively increasing the speed at which you can do this research. And I think that's that's the piece of it that's most exciting to.
Me, and that that that's exactly the kind of thing. There is this ongoing conversation going on around the AI bubble and the extent of cap expending inside AI, and the extent to which this is all going to be hardby disappointing. But that's kind of that's the kind of theme that would suggest there may be not so much disappointment in there.
I think you could be excited about AI without having a particularly strong view on that. But if you to give you some idea of the scale of what's happening here, I think gross fixed capital formation, so all capital investment by all companies in the UK is of the order of six or seven hundred billion dollars. Microsoft, Apple, Meta and Google between the four of them, will spend four
hundred billion next year. So those four companies will spend two thirds of the total capital expenditure of the UK. And they're doing that because they get really strong demand signals. You know, it's a game we're not playing in and you know, is it too much, Well, to them, it doesn't really matter. You know that those numbers are big in re context accept the profitability of these online giants, so you know they can use that kit in other ways.
So I think they will, there will there be you will three of those four names find.
That they've wasted their money?
I don't.
I don't think any of them will find that they've wasted the money. Whether they've gone too fast or too slow, we don't know. But what you can see at the moment is more and more applications of this technology because
it has such huge potential. And now it's maybe not you know, sitting you know, chatting to your to your phone, to your new AI friend, but actually, you know, like in areas like drug discovery or managing energy grids or there's just there's so many applications where just about everything we do as a society is short of intelligence. It's it's, you know, if you can provide machine intelligence at low cost, it will make everything better.
You're nodding.
I think there there is an existential risk element to their spending. I don't think it's all about, look what we can do and we can make a ton more money. It's geez, this might be a winner take most type of deal, which is the type of deal that they all were born on and succeeded in. What happens if this new thing, this next thing that comes is going to be dislike the thing that we won, but it's going to be a tsunami over what we want. So
Google's the easiest one to see. In search. They dominate search, they have ninety percent market share and search are they going to have ninety percent market share? And answer? Which is replacing search? So I think that there's that, and you know, from our perspective, we and looking over your portfolio, it seems like you've come up with the same answer. You rather feed them Ammo. You rather own the AMMO providers like an Nvidia, or the suppliers to Nvidia like
Taiwan Semi, or the suppliers to them like ASM. Then you would try to pick between is it Google or Amazon or Microsoft or Meta or now new ones. So you're supposed to these are supposed to be the best industries in the world because there's no new competitors. Seven Ai brand new and x Ai funded by the richest man in the world, brand new competitors, and the Chinese
all coming in at attacking the same problem. So you've gone from having a monopoly like Google has in search to being one of seven or eight players trying to attack this next winner, make winner get most market we feel much more comfortable providing the ammoing.
Away from the very very high valuations.
Predictives in a win and I'm not sure if you look at the way they're spending, they're not sure who's going to win either. They're freaking out.
In part John, what does it mean for the ordinary investors in the run with.
This place or what they I think? I mean, I think the things do interesting, But long story shot, I'll say the thing that I've been saying for probably far too long, which is that arguably US stocks are overvalued relative to the rest of the world. And also, you know, if you if you're based in the UK, but you've been shunning UK stocks for obvious reasons, then actually they're
they're pretty cheap. And certainly there was recently a piece of research that Schroeders put out that everyone's talking about, which is that Americans are actually because Americans are now thinking, actually, I'm not sure that I should be quite as exposed to the US exactly, particularly the Magnificent seven, which is the big A I stocks. They're moving out of US assets and one of the things that they are buying in quite significant amounts is the UK stocks.
Believe finally we've been waiting, so yes to stop buying us. Yeah.
All we're waiting for now is maybe some consecutive inflows from actual UK investors in the UK equity funds, because certainly, according to the data, they've been selling consistently every month for I think it's three and a half years now. You've got to think at some point the selling's got to speak exhausted.
Original rage comes to a rescue with you who still have some pension as.
We get the British eya going.
That's what that, right, John, This is a This is a long win.
Otherwise I promise I would have memorized it.
Right.
The man's system is often so enamored with the supposed beauty of his own ideal plan of government that he cannot suffer the smallest deviation from any part of it. He goes on to establishment establish it completely and in all its parts, without any regard either to the great interests or the strong prejudices which may oppose it.
He seems to.
Imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess board. He does not consider that the pieces upon the chess board have any other principle emotion beside that which the hand impresses upon them, but that in the great chess board the human society, every single piece is a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it.
One of Seth's relation and happy ones is nearly there.
Nearly there, hang in, hang in, there's not as long as we go. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and it's very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.
We're going to have a new role form.
I'll make it a.
Short one tomorrow.
This is a quote from the Theory of Moral Sentiments, which was Adam Smith's first book, and I sort of think it as been the first self help book of a published really, because it's all about human psychology and why we are the way we are and how we think and what that means about how we should say, shape society. And the thing I think is important about this quote particularly is that it sums up his approach to economics and why personally speaking, I think it's superior
to the other kind of big names. So I would say that both Marx and Kanes, who are probably two other major economy economic schools are thinking. They take a very top down view. So Marx is very much the kind of grand scale of history, class war. It's not really about people, it's about what group you are in. And Cain's is kind of thinking about society and the economy as a machine with inputs and outputs, and you can tweak this and you can tweak that. But Smith
isn't doing any of that. He's actually starting from individuals and what they want and understanding that everyone who's got their own desires, everyone's got their own motivation, and so the best thing you can do is to kind of just provide an environment that just basically lets people get
on with it. So that's an argument for a kind of it's not an argument for no government at all, absolutely not, He's not a radical libertarian at all, but as an argument for a smallish and simple state, one that we can all understand, and I think more than anything else. That's second bit. And obviously we've got a massive state. But I think the real problem is that we now have governments that are full of people. We are surrounded by men and women of system. Now everybody
wants to dictate what everyone else can do. I mean one reason that I mean, one of the biggest kind of employment areas of growth in the UK over the past twenty years has been in HR. The proportion of workers in the UK who work in HR has quadrupled in the last twenty years, and the UK now has more HR people per head of staff than anywhere except for the Netherlands. So you've got all these people. And then this is before we get to the legal profession. And this is before we get to i f as
and tax advisors. Yeah no, I'm just thinking, I mean, how many HR people are in the room. But yeah, and this this is all part partly because we've made the system so complicated because of a desire to dictate and push people into doing various ways of behavior, rather than stepping back and saying, actually, you know, things could be much better if we just within a narrow framework of defending property rights and you know, preventing kind of
you know, violence in the streets. We just let everyone get on with what they wanted to do and make the best of their own lives without trying to dictate everything. And so I think that's where we kind of need to get back to. I mean, I saw sort of that nice Rachel Raves.
I think.
I think Adam Smith would see it as a kind of final boss of a kind of gradual deterioration over a long period of time that probably started with Gordon Brown is the one who I blame most for the way the governance and the kind of budget side of things has deteriorated into a steady stream of stealth taxes with the kind of aim of socially engineered and different chunks of society and you know little boxes.
I mean, we were talking earlier in saying that Adam Smith would simply not have been able to conceive of a world filled with this much debt, of a state that took up forty percent plus of GDP, with debt to gypay one hundred percent, with a yet another black hole of fifty our billion coming up in ten minutes.
Et cetera.
This is he couldn't have understood it so far removed from the world in which he left that we have no quotes for levels have stated it.
Well, that's to be fair, we do because he does.
That was the test.
There's a point, isn't that what he talks about how France and England both at one hundred percent to GDP thing.
About it in seventeen, Yeah, it was.
It was war related. But and his point about that was, Look, when a state gets that indebted, it never ever pays it back. They either default on it overtly or the default on it by debasing the currency. And the funny thing.
Is that's basically what we still do.
It's much easier now because we don't have gold and silver underpinning the you know, the monetary system. And it used to be that if you wanted to debase the currency, you had to tell everyone to bring their coins back to the Mints. The Mints would then stamp them and say they're only worth this now and then give you back you know, maybe like one in one in kind
of one in thirteen or one in twelve. We kept back the king and that's how he would make the money from everyone kind of you know, from deep in the currency but just now you can just you know, do it by printing more money and interest rates and you can keep it going as well. You can extend and pretend for longer.
John, I know we're having a chat at breakfast this morning that you two would have loved this.
I'm sorry weren't there.
We're having a chat about how Rachel Reeves could raise more money and we're trying to think of things in the UK that are not yet taxed. I can't tell you how hard it is. Don't have any ideas. Anyone can think of.
Anything anything you want to do public We figured she's she's going to get there anyway. She's going to get there anyway. From the podcast, you know, thinking guilt, but she can't go for that.
Anyone got any ideas there's something you can think of that isn't yet taxed at all. I'm not saying I advocated.
But they are.
Every single financial transaction is tax we have every now we have we have that the highest stamp duty in the world apart from Ireland, had fifty basis points and everything.
But a transaction that's megatax. I mean that's a wealth tax.
That's an actual wealth tax in action.
Every single time you buy us all shares. So yeah, nope, not that anything else.
If you think, if you think about the government particularly, I don't know, can I say this government will always endeavor to shoot themselves in the foot. They can tax childbirth.
We haven't got very much of that. We need more of that.
No, well we'll get less, of course, we don't want less.
We are.
I just you told me to find something.
That we could catch, although we've further do contact child because everything round.
That's a great idea. Everyone's got one of those. But isn't that council tax? Well yeah it is, it is.
I mean one of the things that that we that you and I have discussed and we discussed for is that you know, every mistake in the UK is effectively policy driven.
We can fix it all.
We get very doom story about it, but absolutely everything is fixable, and we get this vague when we took that. We're getting close to the bit where there is no longer a choice but to change policy so as to fix it.
There we have a massive crisis, or we have massive crisis and then we fix it. We're getting quite close to that.
Then, yeah, well I suppose it's because that the whole thing about the Laugher cuve, and I know that people obviously there's a kind of backlash against.
The ideas doing what the leve a cove is.
So laugher cuve is basically, see, if you put a tax it's zero percent, obviously you'll collect no money. But if you put it at one hundred percent, you'll also collect no money because nobody will do the thing that you're taxing one hundred percent. So basically, logically there must be a peak point somewhere between those rates that collects more revenue. And it might be at forty, it may be at sixty. If you go above that, the amount you get will start going down, even though the tax
rate is higher. And it sort of feels as if Britain as a whole is that the peak of its laugher cuve, because the tax take is a percentage of GDP is what with thout eight percent?
Now, why has this ever been?
Every time we've nudged up to thirty eight percent historically we immediately.
Sort of collapsed back down again.
There's a sort of weird dynamic globally where every country seems to have its own level of tax relative to GDP that it's prepared to pay. So Scandinavian countries are prepared to pay more than we are. Generally, it doesn't matter what you do to tax rates. In the UK, you can't get it above thirty eight percent, So we're.
Hitting it as much lower in the US, isn't it. Well, yeah, you've got your own level lower.
It's lower than us, and you know, Germany are happy with forty four percent.
You know.
I think that's part of the way that you pay for public services as well, because obviously one reason the Americans tax takers are percentage of GDP is so low is because the medical course is so high in the coverupment privately. And I think one of the people always say that, oh yeah, but Britain doesn't have a high tax take compared to other European countries. But state pension is very different to most countries. A lot of people keep saying it's very it's very low.
It's not.
And it's also it's consistent as a whole. It's everyone gets the same state pension basically, assuming you know you've paid in the sort of paid in is the wrong word, assuming you have ticked the n I box enough. But you know, in Frans you don't automatically get a specific amount of state pension, and I think in most Eurozone countries it's graded based on you know, what you got paid when you were working in various other measures. So
all of these things are really hard to compare. But I actually don't think the British taxpayers or even American taxpayers are that different to European ones. It's just to pay for more stuff out of fair enough.
Tom, what's you then investing at the moment. What's your favorite stock on your portfolio?
Well, they're all my favorites.
No, no, no, that's not true. I know that's not true. Okay, let me help you.
Let me have you what did you most recently buy for the portfolio?
So my most recent spreending expree was in private companies, which is not particularly helpful. But I guess on the public side, one of the things that I think is really quite exciting, and it's a trend that has been going for twenty years now, which is that we've been spending more and more and more of our money online.
And I think that trend is far from exhausted, and there are companies in lots of different parts of the world where they're not replacing established formal retail, but they're giving the consumers their first opportunities to get access to goods and services at reasonable prices. So see Limited in Southeast Asia, Coupang in South Korea, Mercado Libre in Latin America. But they are also moving from just providing goods and
services online to providing financial services online. And these consumers have never had access the high quality financial services. The banking sectors in their respective countries were not set up to serve individuals, and so the opportunity is not just in retail, but it's all the financial services. So there's there's three fee that I think have these opportunities that will run for at least the next three decades.
Excellent, Thank you. See that's the kind of question. Look what you got.
I can't think in decades as a contrarian inventor, but UK industrials in midcaps back yourselves and you get paid absolutely all right.
I really hope you caught that old video the still of that letter.
So we drove from the ilsky down to here and we stopped at tracks Crew Chin Crooking Pumped hydro Station, a marvel of British Engineering built in commission in nineteen sixty five, a great year it. Laura and I were born in nineteen sixty five and then arrived and walked up to go to see the tattoo and went by Balfour. Bad signs everywhere because stuff's going wrong here in the city and it needs to get fixed. Any kind of foundation work that's done in the world usually a thirty
percent chance. So you're going to use Keller, which are the companies that build the foundations for any project. And the cool thing about Keller is they get paid first, so we all know that every major development goes busted. You want to invest in the foundation company because the PowerPoint financing scheme works really well and at least until the foundation guy gets paid. But Keller sells for seven times earnings and a four percent of a an yield.
This is an amazing company that's lasted forever. And if you believe in AI, if you believe in onshoring reshoring, if you believe in that we're in a cold war and that AI is the new arms race, you're going to build a lot of infrastructure. So why is there a company in the UK selling it seven times earnings that's involved in every one of those sink things. You can't build a single thing without a foundation, and here's
a company that leads in the world in that. And part of it is that it just happens to be on the London Stock Exchange and no one wants to own it because it's there and the money keeps flowing out. But we'll just keep buying it and buying or buying it today. We were buying it a year ago, we were buying it two years ago, we were buying it three years ago.
One day it'll come good.
One day it'll come good for a buds up in three years and we'll just keep plugging away at these British midcaps that are really cheap and oh really well.
Man, we appreciate it.
Thank you, Alec John, you've got anything to add quickly? Two seconds, gold gold, gold, gold, gold mine has been the real.
Have been stunning this after that very very long periods of.
Intail, and we did tell you so, didn't.
We much doubled this ship?
Did?
Okay?
I think we have to stop and this is anything absolutely urgent from you, and beyond that, just say thank you so much to my wonderful panel. Listen to all of you for helping us sell out this huge room over and over. Thank you, thanks for listening to this week's Marin Dogs Money. If you like our show, rate review, and subscribe wherever you listen to podcasts, I keep sending questions or comments to Marrior Money at Bloomberg dot net.
You can also follow me in John on Twitter or x I'm at Mariness w and John is John Underscore STEPEC. This episode was hosted by me Marin Zumset Web was produced by some Sidi sound designed by Blake Maple's Special thanks to my guests, to Blairbarrows and to all the rest of the team at Paniel House.