Bloomberg Audio Studios, Podcasts, radio news. Welcome to Merin Talks Your Money, the personal finance edition of Meren Talks Money.
In these bonus.
Podcasts, we talk about the best strategies for making the most of your money. I'm Maren sums Up Web Bloomberg UK Wealth Editor at Large and with me senior reporter and author of the Money Dishilled newsletter.
John Steppeck back from holiday for a change.
Hi John, Yes, and a bike, bike for once, bike for this week only.
This man never stops going on many breaks away next week too.
Well, I tell me, I havn't to say, did you okay?
Fair enough? Fair enough?
Right?
Listen while you've been away.
The questions from listeners, they just keep coming in. We've got a little bit of a backlog of questions and comments from our listeners that I think we really do want to get through because they're kind of interesting.
I think, Yeah. I mean, the readers are a thoughtful bunch, and I would expect nothing less from people with such excellent taste.
I know, and what I particularly like about them is that mostly they agree with us, and that's a big positive. Remember, if you email us, we're likely to answer your question. If somehow they're hints in it that you're already.
On our side with most stuff, we're good with that, right.
The first one is exactly in that vein. It's from Jonathan. He enjoys listening to our show. That's great, Jonathan, keep telling us that, and he wonders if we think it's a good idea to be overweighting commodity stocks At the moment, I am torn between the idea that tariffs will cause prices to increase globally as countries work to reshource supply chains, or that the possibility of an imminent stock market crashed you the twenty first century equivalent of smooth Horley.
Will cause all stocks to collapse.
While Jonathan, you may be overthinking which one is more likely, or is it better just to buy gold and wait for it or to blow over? Now, the first thing to say is that John and I we do not give advice. This is not an advice podcast. I'm the hard best find any advice podcast siseely, so we cannot tell you exactly what you should or shouldn't do. Obviously, we're keen on gold. We like everyone to have a
little gold on their portfolio. You know, this is the apocalypse hedge, and given that you never know when the apocalypse might come, you might as well have some Otherwise, I think I would say, please go back and listen to our podcast with Ed Conway, which while it's not necessarily about investment in commodities, it's a really good overview of what makes this market tick. And then I would say that we are going to be doing in the very near future a full podcast on commodity investing itself.
So that is there do both of those things.
The other thing to say that is that in general, it is true that commodities have a great record as a diversifier and as a protector against inflation. So if you look back at that period before say two thousand and seven, commodities had a pretty good positive annualized for return. Post that, when we moved into our low inflation era, you will see that commodities had a pretty lousy annual return negative actually from two thousand and seven that decade on.
So it used to be that everybody had commodities in their portfolio.
Was expected.
Along with longer the equities, bonds, commodities, you have them in there as your diversify your inflation protector. That idea has fallen fallen away over the last ten fifteen years or so, largely thanks to the appalling return that you have got from commodities. We are now moving into a new era. So it is exactly the right question to ask, should you now have commodities in your portfolio?
John? What do you think?
Yeah?
I think. I think The other point to make is that obviously there are deferences between commodity stocks and commodities themselves. I mean, as you can see from the gold mains and gold for example. And also I would be really, ever so slightly really threatened too much about the micro pictures when it comes to your or in portfolio space efically so so the question of you know, whats going to lease inflation or are they going to cause an actual stock market crash? I mean, they may not actually
do either of those things. And even if they do do one or other of those things, you don't necessarily know how you should be positioned for betting on it. But I think then the longer run, like think these things through. And also if you're going to look at like mining stocks or energy stocks, then considered their valuation relative to their history rather than is there going to be inflation or is there going to be a massive
disinflationary crash. I think that's that's what I'm getting, that look focused on the stocks and the business rather than you know what's going to happen in the future.
And the other thing I think it's really important today about commodity prices enhanced by extension, maybe about mine, is that just because commodity prices are rising and doesn't necessarily mean that they will keep rising or stay high.
One of the things we always saying commodities is it this solution to.
High prices is high prices, because high high prices incentivize increased supply, and you get increased supply, and then of course your prices come down to very very cyclical business to.
Be there is an argument, is an argument.
I've made it myself that high prices may not be the solution to high prices in quite the same way in the current environment because of the environmental movement and very very hard to open a new mind.
Now used to be relatively easy.
You want to dig a hole on the ground, you dig at all on the ground, But these days you want to diget on the whole the grounds you've got to ask an awful lot of people for permission first, So the amount of time it takes to get permission to open a new mind is moved from you know, maybe a few months a year or two into many, many, many years. So it's quite so easy to say high prices will incentifize supply and bring down high prices as
it used to be. And also, of course, on the other side, you have rising demand for all sorts of metals and commodity products in a way that you didn't previously because of the energy transition.
So basically my point is there is so much.
Going on in this secture that we're having a dedicated podcast to it for it, and you will get that podcast relatively soon, so hang on for that. But as I say, well, maybe our answers aren't ideal. Great question and the right question to be answering right now, right The next one is really easy, actually, and it's one that is asked quite a lot at the moment.
I'm marry just a thought at the start of the.
Industrial Revolution, I wonder if people would have questioned the wisdom of investing in steam powered machines, very expensive, dangers, unreliable at the time, assuming the world will have to change away from fossil fuels, and assuming again that the solution will be electricity from renewables coupled with hydro the storage and nuclear for base load. Is there a parallel here with the start of the Industrial Revolution? Will early
adopters be in stronger positions later on? Now we really interestedly hear John's answer to this in a minute that the answer is no, No, I don't think so. This is completely different to the Industrial Revolution. The Industrial Revolution was more of a moving forward thing. It wasn't government mandate, it was market driven, no subsidies here and no forcing of anyone into anything, simply a natural progression of technology. Now,
what we're doing here is completely the opposite. As we've said several times on this podcast, this is an example of something that we have never done before in history, moving from a very dense and efficient form of energy to a much less dense and less efficient form of energy.
So there is no certainty that anything that we're doing right now is putting us on the right course with renewables and with the mix that we're using, etc. So my own guess for what it's worth is that the late adopters are more likely to be the winners than the early adopters. Let someone else spend the money to figure all this out, which is one of the reasons, by the way, that I think zero or our short time erme on net zero might be something of a disaster.
I suspect that's not the answer you expected. John. If you've got a different one, possibly a more popular one, can.
Of going by the way technology wise, that may be fain might think that that's what we have to do in order to save the planet, et cetera, et cetera. That's not the point. And the other thing is that renewables aren't like kind of oil or whatever, and that you're not saying the big chunk of windows same as you're sitting in the big chunket oil that you can then flog to someone else. There's no kind of scarcity
value there all of that sort of stuff. We also keep talking about this the sense that we will have enough energy to replace where we are at current levels. But what we really need is energy abundance. And so even if you could get to the point where we can generate all of the electricity that we need currently from renewables without the grid breaking down, et cetera, et cetera,
et cetera. What you want to get to is a point where we actually don't need to worry at all about how we're generating electricity or the cost of it, because there's so much of it that we're going to have enough to do whatever we want to do, and we're probably not going to get there with renewables, right.
The one I would say is, say you living somewhere like the kind of village in a very deprived part of the world, like in the Middle Lake kind of Africa, somewhere, and you start creating grids from scratch as opposed to trying to adapt existing ones, and your standard eleven is
currently very low. Anyway, I can see how that could possibly be a more interesting area where the technology is being adapted, where you can leap frog in a certain thing, because perhaps if you started with decentralized grids, then solar in a very sunny country, then solar for example, would be a much more feasible solution. So that's where I would find it more interesting to look on the basis of this question. But long story short, the answers.
No, yep, okay, good, Well we agree on no, then I recommend them.
I'd recommend going back and again listening to the podcast we did recently on nuclear because I think Jake, one of our guests from a Blue Energy, was incredibly compelling on this. He was very clear when he said, look, we've got to stop this hairshirt nonsense. What we really want to hear the go must be more energy, and we should be using more energy because that's where prosperity
comes from. And we have to find a way to have more access to energy all the time, constant abundance, not to constantly be talking about how we need to restrict our.
Use of energy.
And that's what I mean when I say, you know, we can what John just said, I'm repeating you, John, but you're so clever I can I can repeat it right. So when I say that, maybe we are going down the wrong path with the mix that we're trying to find at the moment, it's a mix, and when we talk about it, we're talking about reducing our energy use, constraining our energy used. And in an ideal world, when we wanted to better living standards, be richer, be more innovative, more active, we would.
Be looking for somewhere to have more energy.
Thank you Mike for getting in touch onwards wealth taxes. You asked listeners to contact you about wealth taxes that we had overlooked, and we thought we got a pretty good list, but.
There are always more.
And this one is isn't inflation the real wealth tax? And as I will immediately say that, the answer to that is yes. And we have talked about this quite a lot, which is why we talk about capital gains tax. Of course it's being a wealth tax because in the end it's only taxing inflation, and inflation.
Itself works like a wealth tax.
So and our questioner here, Jeff, elaborates, if ordinary working people get ten percent higher wages and RPI raises ten percent, rises ten percent, then isn't your store of wealth? Even in uset's very hard to value, like private companies are worth ten percent less. And by the way, debt divided by nominal GDP folls ten percent, house prices become ten percent.
More affordable personally.
Goal has been the most obvious way to hedge inflation, and Goal coins is CGT free, so it doesn't The surge in gold from two thousand dollars to three thousand dollars indicative inflation ahead.
God, there's lots of questions in here. If inflation heres.
Ten percent of the courses of labor government, how many labor voters would complain quite a lot, I think surely poor Rachel's obvious choice is inflation. Now again, we've talked about this a lot on the podcast over the last few years, because classic financial oppression is exactly that, to make sure that inflation is higher than interest rates. So gradually the value of our public debt and private debt is eroded, but at no obvious cost to the government.
But of course the obvious cost is to individuals whose wealth and effective income faults. So the answer to that is yes. I mean, there are a few days to deal with very very high levels of debt. You can create a great GDP growth so it becomes a smaller part of your GDP. Naturally, hands up. Who sees that's happening over the next four or five years, John has not put.
A hand up. You can do that. Otherwise, you can find a way to default on it.
Somehow, and you can have a real default where you simply say, Dad, do you know what, just not going to pay anymore. You can default on your promises. And this is what Russell Napier, one of our regular guests, talks about a lot. It is a kind of default. If you default on your promises to your electorate. I no more pensions, no more winter fuel payment, less welfare than you were expecting. Oh no new roads, no new reservoirs, etc.
That that is a type of default of that.
And the easiest default is default via inflation. So you simply make the debt that you have to pay people back worthless. So is it the obvious way out for nearly all Western economies.
Absolutely yeah, I mean, but but I suppose the things that inflation does have to be higher than interest right slow, and at the moment that's actually not the case, which obviously does then beg the questionable. So what is the next step going to be? Given the I mean, right now,
this very weak. We are seeing an element of panic or you know us very slow panic creeping into government bond markets across the world, and so Moodies is downgraded the US Treasury bonds from TRIPAA to one notch beneath that, and I mean, on the one hand, it's not a big deal. On the other hand, it's actually very clear Segal that actually the government debt is no longer anywhere
regarded as a safe haven. And then you know, in this solution is potentially that they start printing money again to try and suppress long term bin yields or something along those lanes. But yeah, we all have to see what happens. But I think that inflation is the WEO and that's what they'll go for.
Brilliant question there from Jeff.
This is an interesting question, this one, isn't it.
It is the next one that's really interesting.
But I'd actually say, John, this is the most depressing question I think I have ever received in our higher history of working together, which now is heading towards two decades, and say that this question is the one that makes me feel more than ever that we have made an absolute mess of our tax system, of our society, of our feelings of ambition. Everything's absolutely miserable. And I don't
think I'm overegging this. So here we go. I am thirty five years old and earn around one hundred thousand pounds a year.
Well done.
I am married with very young daughter, as well done. My wife doesn't work, so after tax, pension and rent, that salary doesn't afford a particularly lavish lifestyle. We have a decent amount of savings term seent physical gold allocation hooray twenty percent, gosh, seventy percent equities, so we are financially secure. Again, well done. This person sounds like they're
doing really, really well. You read that first paragraph and you're like, way, hey, go you right, so here we are here we get to the bid that makes me just so sad. I'm out a bit for a cross worlds where I'm having doubts about continuing to work so as long hours. He works at a peebacked company. Yeah,
we know about those. Listen to past podcasts on some of our feelings set anyway, on my current career two directory, I would expect I could increase my earnings to maybe one hundred and fifty thousand pounds after a few years.
Not bad.
But equally, I'm sure I don't have the right talent or abilities to get to the very top and earn the big bucks self knowledge. Also well done. Alternatively, I am confident I could move to a new job, rest on my laurels, never leave past five pm, and likely earn sixty thousand pounds or seventy thousand pounds.
Do you know what?
There's a job in the public sector just waiting for this man, so onwards. My question is, with all this noise about the dreaded tax cliff at one hundred thousand pounds, and particularly with young kids, does it make more sense financial sense to just give up and host everyone? See why I'm feeling a little low here, because the answer is probably yes, isn't it, John Nice?
Yes, isn't it?
Isn't it? Are you sure if you live in a world where every time you turn around your taxed, when you're near that cliff edge, and you've written about this before, go back and find John stuff on this where you near that cliff edge where a raise might actually mean your take home pay falls falls.
When you're looking around.
To you and you're seeing what your tax money is spent on, and you'd like to spend some more time with your children, and you're fed up with working for a pe company that you know took your company over and now ripping out the costs, planning to list it with masses of debt, et cetera. And you're looking around you at lots of people who maybe it don't work that much, people who work from home every day people all this kind of stuff.
You're look around, you go, what am I doing? I'm the idiot here.
Maybe I'll just stop and coast And so the incentives, the incentives financial incentives suggest that maybe that's not the worst idea, And you and I would.
Say, well, where's your ambition? What about your future? Maybe you're wrong.
Maybe you will just get to one hundred and fifty, and maybe you'll get to two hundred, maybe you'll be CEO.
Maybe this is usually.
Satisfying, and maybe it's true that just this bit of the beginning here with young kids and hard work on long hours, et cetera, this is a tough bit of life, you know, work on through, push on through, and it'll be great on the other side. I mean, maybe we could say that, but are we right?
Well, I ta your point. The tea has. I understand how he feels. I've sort of been in a fairly similar position. But well, first things first, So the tax cliff one hundred thousand pounds, It really is important to understand a few things about that. You only lose money if you lose your free childcare. Now, this chap has pointed out his wife doesn't work, so presumably she's looking after the kids, so they're not presumably paying for childcare.
If from assumption there is wrong, then yeah, the one hundred thousand cliff really matters. But as it stands, once he earns over one hundred thousand pounds, he's going to be paying away between Yeah, I mean, he's only going to be earning between thirty and forty pounds for every pound he takes home up until he gets one hundred and
twenty five thousand pounds. But the thing to do with that then is presumably the company he works for all of her salary sacrifice, so she ram the rest of that, and he's pension to stay below the one hundred thousand pounds mark. Saying is I'm assuming he can afford that if he's planning the coast for proper sort of discussion this, I need to know what is kind of plan b boys, It's like, so why do you want to coast? You know, why do you want to you know? Is it spend
more time with your young kids? But then yeah, I can completely understand that, but also, your daughter is only going to be young for the next five to ten years. You know, how long are you going to be a home for and then you're kind of, you know, whatever you turn fifty, you're sort of sitting there going, I say, I'm fed up in my you know, whatever this job is, it's going to pay him sixty or seventy key. I mean I'm curious as to what that is. I mean,
there's a part of your things. Maybe you should be going and finding getting a sense of what is something that's going to pressure buttons if you feel Internactually we are.
We getting back into the world to find your passion.
Don't find your passion, be quy. I mean, you quite find something to do with your life for the rest of it. I mean you can. You can't semi retire thirty five.
Semi retiring is talking about doing a nine to five job like most of the population or a large percentage of.
How many jobs are actually ninety five, especially once the pee sixty or seventy those actually exist, they don't exist.
I don't know.
I mean, I tweeted the other day that I had telephoned that the LA fourteen times in one morning in a desperate attempt to get it answered, and every single time I got response, saying that they had their unprecedented level of blah blah blah blah blah. I rather suspect that an awful lot of people sit in mind their firms who work under nine to five a day.
But you know, I agree, But I don't think any of them are getting paid sixty or seventy key they're doing. That's the slate issue. I think a lot of people because also a lot of people were listening to this one hundred K. That's a lot of money, you know, and I thought, he's right, it is not a lot of money split between I mean, and also, look, he's still rent I mean that is another issue here. I mean, I'm assuming that at some point that he wants to
buy property. Maybe he doesn't, Maybe he's comfortable renting for the rest of his life. But that's another reason why.
He's confident he can get one of these jobs at sixty or seveny K. So tak him at his word. Taking him at his word, so you know, after taxes, inc. I wasn't going to fall massively in there. Maybe he'll maybe his wife will go work part time and then they'll get the childcare. Yeah, I think we might be again we're over thinking we should know enough about their circumstances.
But I just find it very depressing that the thought is even in people's heads that the system feels stacked against people the extent that their ambition is stunted.
I mean the fact he's asking. The fact he's asking is depressed. And also at the end of the day, if he thinks he's achieved escape velocity at this point, then actually that you know, the point in which your your income and your lifestyle, your incomes out stripping your lifestyle, and you know your lifestyle is not more expensive than absolutely fine. But I just think also in me, maybe he's just feeling down, you know, and get young kids and you want to see them.
They didn't come here for life coaching, John.
Sometimes that's what you really need. Low matter.
Okay, all right, but anyone else who would like life coaching from John, do send your questions now.
I was starting to start one sub second a few weeks clearly, why.
Not, right, I'm going to leave that one behind because I'm still feeling stressed about it.
Veteran, thanks so much for getting in touch. One more for today. This is about it.
If someone starts their their question is exactly the right thing. I like your podcast greatly. Thank you very much, Paul. We're very gaen on YouTube and he particularly wish just at the government would listen to our podcast and others like yours. I don't know who who has these other ones like us, so don't listen to those. Just listen to these. I hope theybor listen to your well made anti wealth tax arguments. You asked for other wealth taxes.
You missed VAT on school fees, which is a notable one. I mean, that's interesting, actually, isn't it, Because there our numbers. You're saying that far from the trickle of students having to leave the private sector for the state sector, the so far around thirteen thousand, that's an awful lot of new pupils that the taxpayer has to stump up for. VAT is effectively a wealth tax. That's wealthy people buy
a lot of expensive things. I was pleased you mentioned the first year of registration tax for expensive and polluting cars. Don't forget there's also the additional five hundred pound a year road tax. I thought we mentioned that, maybe we didn't for the first five subsequent years, which is foolish and singly makes me not buy a new car. Fair enough stand duty on expensive houses is ludicrous.
Again.
We have talked about that, and I actually I am put in my newsletter last week. I was looking at it and I was thinking about Americans buying houses in Edinburgh, which I'm not sure they are by the way, and there are a lot of expensive houses for sale in Edinburgh at the moment. I looked up some of the most expensive and then I looked up what it would cost in the Scottish equivalent to stamp duty to buy one of these houses if you already own a home elsewhere.
And on some of these expensive houses pushing the five million mark, the stamp alone alone is close to a million quid.
That's surely unsaleable.
So why would you do this?
Who is going to hand a million pounds over to the Scottish government in cash on the day of transfer, purely to be able to buy a house in Scotland.
Why would you do this?
Could get yourself at Golden Visa in America.
You could get yourself an awful lot of stuff.
John Anyway, the loss of personal allows been one hundred thousand punds and one hundred and twenty thousand pounds is another foolish tax coming in before the forty five percent top tax rate one hundred and fifty thousand pounds disincentivizes people to work more in order to avoid the tax through larger pension contributions.
Last call was.
Seeing exactly what the last guy was saying. And then there is the removal of the interesting answer those on higher and top race of tax these are all wealth taxes, and he's right, there are and as I say, you know, you can't go out of your front door without being taxed in the UK anymore, and the wealthy are tax at every time.
I'm quite interesting. I don't know.
We've been watching this whole business of people saying that the wealthy and the high income attax much less than they used to be, et cetera. And you may have seen some of the chants doing the round showing that this is absolutely not true. In fact, the wealthy and the high income are significantly more highly taxed in the UK than I think they might ever have been, and the low income are taxed significantly less than they've been for some time. And the truth is that they used
to be. Well, you know, we talk about these very high income tax rates. There were at various points in the seventies and dividend taxes, etcetera. But there were many, many more loopholes than there are now. So now when there are taxes announced, people actually pay it, whereas back in the day taxes were in now so people go, I don't think I will.
Yeah. And it was also you know, you know these these have thems digital. But I mean people, I remember someone telling me about when of other exchange controls and this is a mainor thing. This was when you couldn't take money with you on holiday and they were told them. But some kind of cousinot on color there was that had just dashed the lot with in the hob caps of the car.
I told you this story. Yes, who is me?
Did not know coin on fire or something.
They got to France, France, they were powder friend of mine's father. By the time they got to France, they had only powder in their wheel.
Yeah, if you're going to ads, you know, kind of like exchange controls and then see this is why you need backcoin.
Okay, right, I think that's it. I think that's it. That's a lot of question, more than enough for one day. Then we have more questions. We will answer them another time. Please, do keep sending us in more questions A we really enjoy them, and B we suspect that other listeners enjoy them and find the answers interesting as well. Well. At least find the questions interesting, So do keep sending them in if you have them.
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Follow me and John on x or Twitter at Mary in sw and John Underscore STEPIC. This episode was produced by Moses and Samasadi and tala Ahmadi. Sound designed by Blake Maples. Questions and comments on this show and all our shows are always welcome. Our show email is Merin Money at Bloomberg dot net