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We spoke to Sebastian Lion of Troy Asset Management and that conversation is in the feed already. But we also did a Maren Talks Your Money segment live and we welcomed back veteran financial advisor Paula Steele. So here is that conversation. Now we're going on to the Marin Talks Your Money section of the show, and those of you who.
Listen to us will know what push you'll listen to us.
But this is the weekly series where we talk more personal finance stuff. We talk about how to make the most of your money. So with me today you all know as John Steppeck Senior, a border and author of the Do You Want to Stay Yourself?
John? What I need to sell Newslayer up?
Thank you John. Also, we have Paula Steel. He will have heard on the podcast as well as well.
I'm an introducer directorate at John Lamhill Oldridge and very very experienced. Now what we want to talk about today, Thank you Paul for coming on again. What we want to talk about today is the Great Wealth Transfer, which I'm hoping to be a beneficiary of at some point and I'm sure many of the rest of you are hoping to be a beneficiary of as well. And I spent some time looking today to see exactly how much money we can all expect, and it really does depend
where you look at. Could be four and a half trillion over the next twenty years, could be five, could be seven pounds in the UK, so proper money. And in the US we're up into the hundreds of trillions, and we who knows. I found numbers ranging from eighty trillion to one hundred and twenty four trillion, So however you cut it, we're talking about a lot of money trickling down from the baby boomers to the next generation.
So what we want to talk.
About is how that money should get transferred. How do you do it efficiently, how do you do it with the least possible tax implications, and how do you do it without destroying the lives of your children by giving them too much too soon not something that happened to me. So, Pauler, let's say that you are a baby boomer with quite a lot of money and a house and a couple of kids. Where do you even start with thinking about how you transfer it?
You think about how much money you need to keep, yes, before you start to give it away. And I think that although the baby boomers we're going to live longer and we're going to be very expensive, the last ten years of our lives are going to be very, very expensive in terms of care, and you can't afford to give it away. You need to keep it in terms of that. And I say, you know a lot of people do it lot of cash for modeling to show
that you can afford to give it away. My experience is that most of the clients are not prepared to give away that much because and I think that one of the big issues is going to be the change in the pensions legislation. Yes, because when the pensions were inheritance tax free, they were your third line of defense. You always knew that the pension fund was there. It was inheritance tax free, so it could go to the kids. But if you needed it for care, it was there.
It was that third line of defense because that that care issue for the baby boomer is the big elephant in the room.
Do you think that maybe the numbers are just wrong because when we talk about four trillion, five billion, and six seven trillion, whoever coalates those numbers is not taking into account the fact that a lot of people are going to spend four or five years any care home it's going to cost one hundred and twenty grand a year.
And the rest, oh okay, in a care home. Maybe if you have care at home, probably more right. If you need twenty four our care, that's three that's three shifts of staff. You're looking at probably twice that, okay.
So a lot of people who are thinking that they have money to hand down and people who are thinking they have money to inherit may well not.
I think you may well find. You know, it comes into the assisted dying, which is in Canada where people are being pushed and whatever ones you want a sister dying, And I personally think I would rather go if I was sort of half dead anyway, But nevertheless, but.
You wouldn't want your kids to make sure you.
Went okay, you know, but I think that I think that the first thing for anybody to think about is you're going to have enough money for care. I was talking somdly fun Enough the other day, and they were saying, it's a great place that we don't have a product that enables us to spend our pension, but gives us an income if we are if we survive to a sage ninety, because that's really what the pension was there for. It was giving you that longevity support so effectively.
A delayed annuity of sometimes yeah, it.
Used to call a contingent annuity doesn't exist in the market anymore. Sadly, it would be an interesting thing.
Interesting that feels like the kind of product that might be coming back in the same way as the innuity market might be coming back.
I think the innuity market is back, is it? But it's back in terms of an investment proposition, it's a different way of buying a fixed interest investment, getting a much better return. You're getting a fixed return and you're playing the longevity. For the client or for the advisors, they're playing the longevity the longevity game. I remember a client doing a next to release on his parents who were very elderly, and him saying, I'm doing an extry release.
I'm going to buy an annuity because that handles my longevity risk on my parents' wealth, So which I thought was quite tough, actually.
Has that is the annunity.
If I've partly been helped by Patons and Helen's tax coming, then is that something that's in people's mains.
I think people are given that the pension fund is now going to be you know, I've had people saying before it was tax free and now it's going to pay tax at sixty seven percent. It was never tax free. It was tax free from an inheritance tax perspective. But this to get to sixty seven percent, you've got a forty percent and then a forty five percent tax rate to get it out. The forty five percent tax rate to get it out if you died post seventy five was always there, but it.
Provided options but to your heirs right and they can take it. They could withdraw from it when they had a lower encarment or lots of ways to make it a low tax event a lower.
Well, no, because once you died, the pension fund had to go to somebody at that point. So you couldn't say your dad dies and you couldn't say, well, I'll have it. Actually no, I think I wanted to go down to the grandchildren. You had to make a decision at that point. It wasn't it was, but it stayed.
In the wrapper.
It's good with that for it at will. So you could choose to withdraw from it. You can show income period in your life.
You could.
Yeah, you could choose to withdraw it a lower and you can still choose to withdraw it as a lower thing, so you won't be paying sixty seven percent. I have seen more angry people about this, you know adell story. I've got a client and she's I don't know how they are. She's coming up to eighty and she's incandescent. She has one hundred and twenty five thousand pounds in her pension fund, and that is her money for her grandchildren.
The fact there worth twenty five million isn't neither here all that.
Should spend it on herself. Definitely, but nonetheless.
So if you know that you're going to be paying that amount of tax, your family's going to be paying that amount of tax, you may as well buy annuity and have the security of that income flow upfront.
Yeah, I think, and I think people will start to spend their pension funds down. Which if they are going to do that, there are two things in terms of efficiency. First of all, if you're joining income out of a pension fund, it is income if it is surplus income. And I've got clients who are joining and out paying the tax forty five percent tax, better than sixty seven percent tax, but it then gives them income which they
can then give away. And because it is now a surplace income, it's clearly surplus income because they didn't have it before and they were living perfectly comfortably, they can give it away and it's immediately inheritance tax free.
So you'll split it. You're stripping it over say.
Three or five years, and I think it certainly we're seeing clients that are doing that kind of thing. But you need to do that. You need to have enough other assets. You're having to rethink your assets so that you are then thinking about, Okay, what I'm going to do is I'm going to spend this pot of money, but that will then mean that I've got this pot here.
Yeah, So it's a general reshaping of the way you do it. It's reshaping. So let's go back to.
Our our couple worried about their care bills and they've decided how much they need to keep, and that they've got a pot that they want to give away. Obviously, the best way to do that is just to give it away and not die for seven years.
You'll buy an insurance policy to cover it.
Can you buy insure?
You buy an insurance quality to cover that, an expensive one, presumably depending on your edge depends how old.
You asked about six percent of your eighty, about one percent of your seventy, and you pay that over seven years. So it's one percent over seven years. If you're seventy, I think that's cheap. Yeah, that does sound quite cheap. It's quite expensive if you're eighty. Yes, more more problematical is that you've got to pass a medical.
Oh and okay, so there's only one percent if you're very healthy.
You have healthy The insurance companies didn't put the price of life insurance up post COVID. What they did was they increased the bar. So where before we would have got standard rates for somebody, now they'll load the premium by fifty percent, so they've changed the pricing without looking as though they've changed the pricing.
Good marketing.
Okay, definitely, Okay, So give it away by an insurance policy.
Give it away and give buy an insurance policy.
What about bringing it in a trust.
If you're going to put it in a trust, if it is agricultural land or business assets. Business assets are trading businesses which are unquoted, So there's a which is not property assets. If you constitute yourself as a builder, that is a trade. If you are holding assets for rent, then it is not a trading asset. I always say that's the easiest way to remember, because everybody knows what the builder is, and they know what holding an asset
is for rent. So if it's a building, if it's a trading asset, and you give it away into a trust before the fifth of April, I haven't got long hair, have I got wrong, then you will not pay You will be able to transfer it without any tax.
Okay.
The neurals after the after what's only allows to that million pounds?
They know that's only on death. You will be paying a ten percent entry charge on those assets. You've got three hundred and twenty five thousands of allowance which you can reuse every seven years. But apart from that, you will pay the ten percent as a lifetime entry charge, and you don't. The allowance is only on death. It's not a lifetime. It's all that's worth the bother de friends, how much you care about what the tax? I think you have some clients.
Men didn't say.
I largely spend my life doing life insurance and we look after a very large number of very large estates. And for them, inheritance tax and the transitioning of the wealth to the next generation is a key driver for them. And they know who's going to inherit it from the time that probably something is born, and they spend a great deal of time and they buy insurance to cover it, and they are making huge gifts of transfer of assets
now and they care very much. I have other clients who maybe have made the wealth and they care very much about income tax and capital against tax, and they don't care about inheritance tax because from their perspective, what the children. They started with nothing, and they don't tend to then care of their children. They get sixty percent feet they'll be well off. That changes when they get grandchildren when staggeringly well, they're not prepared to earn their
own children by giving them loads of money. They're delighted to the grandchildren and children. I've had lots of clients who you know, you've talked to for years and said, well, you ought to be thinking about giving it away.
No.
No, And particularly if it's business assets, there's much more of a problem because the giving away of the business assets is about succession in the business and transfer, and that's all about do you trust the children to do the transfer? Is that going to be appropriate? Are they appropriate for running the business? Are they interested in running the business, all those other things. So you may or may not want to give the asset away if it's a business asset and you don't want to earn them,
and they must get on with their lives. And then these grandchildren arrive and boo if.
They go, hof they go, it's all different.
And if that's skipping a generation a good way to go. I mean that surely caused some friction between parents and their next generation if the money skips a generation.
I haven't really seen that because I think if it's going down a generation, that the generations are being skipped tend to be involved. I think I think, as with all of these things, it's all about communication, because.
I suspect, as we were talking about this earlier, that there's there's a there's a this missing generation when it comes to pensions, which is people born born sort of late sixties to late eighties or middle eighties, people who missed out on having a defined benefit pension and then had no pension provision at all until the introduction of water enrollment and so have pretty much no pench and provision at all and will generally be relying on inheritance
to get through their last twenty years and pay for that care. So it would makes sense if the boomers left their money to that generation.
They might all want might not realize that the boomers need the money. Well, no, no, because money has a you have a reference point. My father who's dead would be one hundred almost now. But when he started working, he earned fifty pounds a year working in Lloyds in London, and then you know, his first pay rise went to two hundred and fifty pounds a year.
But it's very difficult, is.
You spend two pounds fifty buying a cuff of coffee on the way to work for him to understand that he moved his reference point up. But I think that's that's in terms of the transfer of wealth. I think that that reference point that the children, you know, the children have got fifty thousand a year or so, they're fine because in their reference point, there's a point at which people stick yeahering.
There's probably an educational need on both sides, right, And one of the things that you mentioned the inheritance is systems of bigger states and families that have been rich for generations have a system for passing wealth down and an education system as well for the recipients.
But most people don't.
You know, it's relatively new, this idea that a lot of people will have money to pass down and a lot of people will inherit and there's an education gap possibly on both sides.
Yes, I think so, And I think that it was never talked about it So within the biggest states, it's talked about as a commercial thing. It's part of the
commercial planning for the estate. They're very long term investment, and it's very long term planning and people are involved in it, and they also are quite good if they have a generation who aren't, who aren't maybe very commercial, they're quite good at finding a way around that, so that then they just get an income and they're not going to impact on the estate, not impact on the business.
But it's a commercial, it's a commercial thing. They have a whole ramp of advisors who talk about it, and you just join that conversation which has gone on for years. I think what's much more difficult is if you've suddenly got what's really quite a lot of wealth and you don't have that sort of range of advisors and you don't have that forum, which is we discuss, you know, how we're investing for the long term. We discuss it, and we do it at the annual at the annual
meeting at least. And there's almost always a trust so there are always external people. They're called the trustee, and they're probably outside the family.
So how do you educate a new generation of inherited the fabulous opportunity for the wealth management community, right.
I think they're trying. I think the wealth management community is trying, but I think they're trying more to get to the much younger ones. Certainly, the wealth management industry is going to lose. As things stand, they keep about twenty five percent of the wealth when people die and.
Their population, so they get the cash. They go around with the wealth manager and they say, will you be looking after that gorgeously for forty years, but now I'll have it.
Yep.
Because they pay off the mortgage, they hand the money on to the next generation. They get the children on too, they pay off their student loans. They get the grandchildren onto because they don't need it, and if they do need it, they've got their own managers.
Or swoop it up. That seemed to me, I was going to ask you. That seems to me to.
Be one of the best possible ways to pass down some inheritance is to pay for all your grandchildren to go to university and pay all their living expenses so they don't leave with one of these awful that John conducting is about all the time.
It's not tax deductible for an inheritance tax. If you pay your children's education, that is not considered a gift for the inheritance tax. If you pay your grandchildren's education, that is a gift, So it goes on the clock.
Even if they're a surplus income. That's the way to do it.
Well, if it's if you can create the surplus income yet.
Then you can do it.
You used to give people who used to give grandchildren quite a bit of money under deed of government and then which was a way to make it very tax efficient, but that was then shut down.
Nothing left is that everything's been shut down.
You buy insurance just to pay the tax, so paid the premium every year rather than paying forty percent of the bullet. You do think about putting some of it into trust. You can fund an insurance policy by drawing money as the pension fund. That's very efficient, and then you give it away.
Okay. Ask a final question, do you think it's a good tax, inheritance tax?
I think that's from where you are on the political spectrum. If you believe in the redistribution of wealth, then I think it probably redistributes wealth. If you think that people have worked terribly hard and paid an awful of tax to have accumulate his money.
That's what makes Peel very.
Cross Chavan who'd like to see inheritance tax abolished for those who aren't here, I say that's about forty percent. Yeah, yeah, I'm surprised that the young are putting up their hands.
You did inherit more. You know, if it was it was abolished, not less, it'll be good. I have to leave it there.
Although I didn't ask John, John, should it be abolished?
Bad?
I think in the moment, yes, yes, it's too it's too long. And don't think what is too many people at the low end, you know the thresholders. Yeah, there are too many people panic in the wrong about it.
You shouldn't exactly.
There are an awful lot of people and they will spend quite a lot of it. That that's when people really get into a panic is when you look at the care costs.
Yeah, let's not talk about care anymore. And I'm going to add one of these sessions on and up. Let's just end it with you can all go out and buy insurance.
You don't have inheritance tax.
But well, brilliant and Paula, thank you so much, Thank.
You so much. The last bit.
So this is the question answered session. John's going to stay here because I know you always have questions for him. And we've got Moreena coming up to join us. She is on our Markets Live team. And I think you've probably all had been when I was speaking before, because she's been on You've been quite a few of the Friday round ups, haven't you. Yes, yeah, excellent, so all things markets, and you've given us some really brilliant contributions.
So let's just start with a question just view about I mean markets, we've talked about a bit of Sebastian, but what I think we're really interested in is interest rates where we might expect them to go next. We've got quite a lot of questions about mortgages and that kind of thing, So let's start. Their expectations have changed quite a lot over the last few weeks, haven't they.
Yes, they have, particularly from the end of last month into March. Of course, with the conflict escalating in the Middle East, we had seen markets expecting more too full quarter point cuts from Bank of England this year, with quite a strong chance of that happening this week. Since
the invasion, that has quite dramatically reversed. At one point we really had a full cut priced in, sorry Paul, hike priced in for the year and that's pared back a little bit, but market startles still looking quite hawkish at the moment. We've got about fifty percent chance of a hike priced in so it's really quite a dramatic change, although I think some people maybe feel that that's a
little extreme. You know, Whether the Bank of England actually feel that what's happening justifies a hike at this point is certainly something that will be looking very closely to them and what they say on Thursday. They may be looking to temper some of those those fears. They had for a very long time been expressing their desire to cut rates and the question was really just about the pace. So whether their approach is completely changed, I think what
we'll have to see. But it's quite early days to be pricing, you know, that far ahead. But I think we're looking for things to stay on hold for quite some time.
And as Sebastian answers, there's quite a lot of room here for policy mistake in both directions.
Yeah, John, I mean yeah.
I think the fact that the problem is oil and the oil price rise is it's both inflationary in terms of it drives up the consumer price index, but it's also very disinflationary because it's staple's money from people's pockets, so or rather not disinflationary so much as recessionary. So the longer it goes on for the more likely we
get some kind of stag inflation. But equally the problem is the Bank of England's only get one target, and it's CPI at two percent, and they haven't had it for six years now, and so.
They changed that target, isn't it well?
I mean, I think they would look quite late to I mean, some people think that it's a daft idea, and to a great extent I kind of agree with that, except that you need some kind of target, and the problem is if you change it, then they'll just make life easier for themselves. So I can see almost that, I can see a policy mistake, and I do think
it would be a mistakes put up interest rates. I can see it almost happening as a result embarrassment and a sort of commitment to this idea that doesn't inflation expectations channel the you know, because inflation is too high, we keep thinking it's going to keep being high, even though I don't actually I kin I struggle with I don't think that's how people actually generally think about inflation.
It's a long story short, Yeah, it's not ideal. I think the bank will probably hold this week because they'll want to you know, keep their options open.
Yeah, a difficult people. We have one question ken in earlier about buying houses. Is this a good time to buy a house?
I think that's an incredibly difficult, a very difficult question to answer or anything. What we would always say on the blog and John I would just talking about this earlier and ultimately you know it's the right time, when it's actually the right time for you to do it, because it's not it's not a speculative asset for most people, it's actually somewhere you live, and there's a lot of
other considerations that come into account. But in terms of the actual mortgage rates, I mean the way in which mortgage is the price. We have been seeing that rising and we have also seen lenders actually increasing their rates, but not a huge amount. Some have actually reported to us that they've been encouraging people who are coming up to refinance to perhaps do it now and not in six months time. So it is seen as actually a
good time in the context of the uncertainty ahead. But at the same time, I think, as we were discussing earlier, we're seeing some of those expectations for the Bank of England, you know, calming down a little bit, and you know you wouldn't want to jump the gone on a major decision I think purely based on a couple of weeks of very fraud uncertainty.
Because John, here's one fear. I think you probably agree with all that on houses. But here's here's something you write about all the time, which is UK equities. Right with the UK stuck between weak growth and physical constraints, do you think markets are still giving too much benefit of the doubt to UK assets.
It's interesting when looking at.
It, the fifty one hundred is one of the very few developed markets that's still up on the year, considerably on the air.
I mean the first one hundred to think makes sense to be less vulnerable, I mean still down since the war kicked off, despite the factskoot oil and.
Resources not that is.
But the firstly one hundred I think, you know is if you're going to be in equities, that's not the worst place to be. The two fifty and the kind of UK mid caps and smaller caps. I know that we've can have been broadly bullish in the UK assets and think that they've been possibly hip with the ugly stick too much. At the same time, there is you know, they have come some way. We do have this problem
that you know, we are quite vulnerable. I absolutely don't want to catastrophize, but you know, the kind of Geltz market is quite sensitive to changes. We still in force that are kind of stricken by political uncertainty. People had hoped and I must have been it was kind of one of those. Certainly, well they give the new government the benefit of the doubt, kind of hope that that was going to go away.
Clearly it hasn't.
In May obviously, obviously Kirs Stammer's position has flipped off the front pages because we've got other things taken over. But come to May local elections, I think it's pretty clear that you know, there's going to be a pretty nasty outcome for the incumbents and that will again raise questions or whether have we got the right guy leading the party just now? Is it worth the risky of
changing it? So I guess I can see there's a lot of pain points coming up for the UK that I hope where I'm going to be an issue.
There are there are so.
Many questions on on UK credibility coming in.
Absolutely, I mean the same thing, you know, companies have companies, and companies just have to put up this stuff. You know, we've been through plenty of kind of traumatic times before, and the companies themselves are not hugely expensive relative to their own history. One issue with the two fifty, I guess is a lot of things like hostpeild doesn't know at that are quite cyclical. I don't I'm not ready to give up point UK equities yet, but maybe agent closerly.
Aging closer to not being so bullish.
Yeah, And we did have probably all listened to the Edward Chancellor podcast earlier this week and one of the things that he said was if you're looking for a place to invest, maybe didn't choose the place was incredibly high electricity costs and there's no chance that they might be coming down because it's just a bad signal. And that did that did make us go, yeah, maybe we should be slightly slightly less positive. Are there any questions
in the because we've got mics. I've got loads of questions here, but I'd much prefer to take them from from the room if you have them. Really, okay, one of the bag here, thank you, There is a mic coming to you.
I how do you view the strategy of treating a guaranteed pension from like a workplace pension as a proxy for a fixed income allocation, thereby justifying one hundred equity strategy.
In a portfolio very young to have a dB pension, so.
Like a workplace pension. So using that as like if you had a ninety ten portfolio, your workplace pension or your is your bond.
So it's not a dB pension. It's not a guaranteed no, not guarante topic sex pension. Yet I guess that that's really just a question about your your asset allocation. I mean, if you're told me yourself and that thing been to you not given personal financial ad face, we can't do that. But through all I thumb is the younger you are,
the more risk you can take. So you know, I mean even my age is like thefty ish fifty ish, so coy I would, you know, And I'm kind of mostly inequities because I'm thinking it's going to at least twenty or years before retire, so I may as well take the maximum ament risk that kind of you know, it's so I can get the maximum growth.
But nonetheless, a workplace pension if there's not a guaranteed income is also equity. There's not a replacement for it's the same thing.
It's just the same thing.
It's sole equity exposure in the main, unless it's lifestyled into bonds as you age. Yeah.
I was treating it as a form of like lifetime capital. So it's kind of guaranteed as long as you're still in a career. So that would act as your safety net. So then that allows someone young like me to be fully risk onde.
I suppose what you mean is that you would have a higher risk equity portfolio out with your webs.
Yeah, yeah, that makes some sense.
That sounds theological, I think.
But but just to be clear, it's still an equity portfolio.
Yeah, likely lower risk equity portfolio.
Still don't have a bond style balancer, and you'll be needing some gold.
Thank you for that question.
Listen, there's quite a few questions on does the does the UK need a crisis? Will the government change they do we need Do you think that that maybe you can have a go at this point? Do you think the UK needs a crisis something similar to the UK's IMF bailad in the late seventies for policymakers to confront the underlying issues with the economy, energy policy, taxes, et cetera. In other words, do things need to get worse before
they get better? And there are a couple of others along the same zone, the same thing about the bond market and the extent which we might destroy it by cutting yels, et cetera. And we have had this conversation that things eventually they'll get so that they have.
To get better.
I mean, things haven't been good for quite a long time. I think if you look at the longer dated guilt yields, you know, we saw them hitting sort of nineteen ninety eight levels earlier in the year, and that suggests that we haven't really recovered actually from what we saw in twenty twenty two with the mini budget. Actually, things have been getting a bit better this year until this recent
sort of turmoil, which is a global one. But actually their longer data to guilds haven't been too badly affected in contact, so I wouldn't say that we've sort of reached a point where things have got much better. Whether they could get worse, I mean, I think they always could, and I don't know what the answer is to that, except that I think to Joins point, there is a
lot of uncertainty. We've seen quite a lot of political risk priced in, and so I suppose is something that would add to that and stabilize it further.
Do we need it, John? Do we need a crisis if we muddle alone?
It seels to me like the bit where we can just keep muddling is nearly over.
No, I think so.
And I actually think where we make it a crisis is in energy provision or infrastructure, because we've already seen things like I'm from live near Tunby's Wells and thankfully didn't get caught up, but like you know, the water system was out in like a major town. It's just probably something you kind of live there or thereabouts for you know, the best part of like six weeks. And that was nothing to do with it was nothing to be cyber attacks, it was nothing to do we you know,
warfare or anything like that. It was it was just degraded kind of facilities, back management, whatever it was. And you know, we've got the highest industrial electricity prices kind of pretty much in the world, and you got it turn around and think, well, what happens if we keep on going down the pathway that leads away from me security and towards kind of like energy speculation, you know, kind of maybe overloading their grid with kind.
Of renewable assets before it's ready.
Not saying that's a bad thing, but you know, we got to kind of take you know, baby steps towards this stuff, and then maybe we start seeing things like you know, extensive blackouts or the sort of thing that gets people properly worried and makes us make some hard.
Decisions about where we need to focus.
I think something like that actually probably more than a guilts market crisis is actually more likely where there it really is a sense that things have fallen apart.
Okay, christ is then yeah, proper pace question right here in the front.
I'm trying to answer some quickly.
Do you think we will see a massive exodus from the UK of the high ending individuals in light of the punitive labor government tax policies.
I think we already have, but we might see that.
Decline because there's nowhere to go now, is there coming.
Back on going?
Yeah, it's Ryan Swin.
I'm a mortgage advisor, so I wanted to bring it back to the housing market if possible it seems to me that there's a huge scope on Thursday for surprises from the Bank coming not because of necessarily a policy move, but because of what they say. If it appears there's consensus that because of the energy crisis now they're inclined to raise rates that could push bond yelds up much higher than we've gone so far. But they might also say they're still inclined to raise races, which you could
push yields down. So I just want to know what your take is, what do you expect them to say, and you know, what are the risks for the housing market the rest of the year as you see it.
I mean from my perspective, you know, I can look at what the market are saying, and they have seemed quite actually uncertain. So whilst I said that they'd moved towards pricing in a hike, you know, they've moved back again, and we've also seen that fluctuate in both directions just in the last few trading sessions. So I would say
there's a huge amount of uncertainty. The only real indications we've heard from the bank last week we had Alan Taylor speaking and he said that if the oil price spike sort of stayed where it was for just a few weeks. Then by the time we get to the end of the year, it wouldn't necessarily make any difference to overall CPI, But of course we're already moving on and things maybe look like they're going to be a
bit more protracted. So I think there's going to be a huge amount of uncertainty, and the bank do tend to be quite cautious in that. I don't think they're going to be looking to say anything that's going to trigger extreme market reactions. I think how they vote will be very important. You know, we're expecting it to be a hold, but whether anybody feels like it's worth sort of stepping out of that consensus view will be interesting.
And now we get the commentary published as well, and of course their guidance, you know, changing and wording to the guidance and just really anything and their inflation you know, predictions as well. For the rest of the year, I think really going to be incredibly closely watched. But I probably had to say that we'll see now big surprises because I think they'll probably want to try and give a massive stability housing market.
John, Yeah, I mean, I think I agree with you more when I don't think they're going to want to rattle the horses that this meeting. I think the April one will be the scarier one because if you're still going on by that point, they're going to actually have to commit in some sort of direction. As far as the housing market goes, I mean it really boys down again. If you're buying a house for yourself, then there are so many other factors that mark more it is a buyer's market.
Well, I think that's one thing I would say.
You know, and this, if anything, makes it more of a buyer's market, because you know, you can turn around people and say.
Well, you know there's a barrow and you know he's not going to get many other buyers.
So I sort of feel that from that point of view, if you are a buyer, you're probably in a decent position as long as you've got all the usual stuff, you know, get your mortgage lined up, make sure you get enough money, that kind of thing. And also if you're buying in London, which I think is where the question came from. The I mean, the London housing market is basically flat for about a decade now, and probably a nice of the town in real terms. So I mean,
what can it go the world? You know, of course I can go through it. But at the same time, you know, you're not buying when it's at the peak, if you're worried about that kind of thing.
But the market across the board, I mean, it is just interesting, isn't it. And we're talking disapascination about the turn in yields and interest rates starting to go up and interest rate normalizing, and now we're moving into an environment we can easily expect rates to stick around the three thousand year historical normal four.
To five percent.
And only just now is it really beginning to turn up in all the asset classes that you would have expected it to turn up in a few years back, So.
Housing being one of them.
You know, house prices were ridiculously high on the basis of a very, very free and easy capital.
We don't have those things anymore. You begin to see the housing.
Market crack, You start to see the private actuity market crack, you start to see private credit crack. All these things are a function of this regime change in in yields, and I find it so interesting that it's taken so long. You know, we started talking about all these things, well this will crack, and that'll crag, and this will crag three four years ago. But it's just it's much slower
than you think. But of course it's slower than you think in the asset classes that are not particularly liquid and not particularly transparent and housing, well, obviously it's not the same kind of asset price class as private credit and private equity. It has the same dynamics when it comes to liquidity and transparency. That was an attempt to answer another five questions in a while.
Because there are quite a few abouts. Did you have private credits, did you have private equity?
How should you hold infrastructure inside your portfolio? And the answer I would say from all of us is with extreme care, Sebastian nodding, with extreme care. You know, we feel very strongly, John and I will I do anyway that if you're going to hold pretty much any asset, you should hold it in the most transparent way way possible, Which is why we are those great fans of the
listed markets over the private mind. Because you want to be able to trade something, you want to be able to understand it, you want to be able to talk to the directors all these things, and you can do that and listed markets in a very different way. And of course listed markets react much more quickly, so that that covers pretty much all of those anything else. From the floor, there were a couple at the back there.
I think, thank you, Hi Field job, thank you for this, and just wanted to ask, if you assume a new investor no equity exposure to begin with, very young, and they were looking at having a split of UK and American ETF, how would you think about framing the question of do you hedge the US ETF back into pound sterling or do you just leave it in American dollars to roll up in that US side of the investments.
I think you're going to make your life far too complicated by even thinking about that. When you invest in a country, you take the car do risk at the same time there they come as a package. So I would never begin to start trying to, particularly in a small young portfolio, to start trying to hedge that away. But maybe the others have a different view.
I don't at all.
No.
I think the four X exposures is one of those things that goes into the buffet too hard bucket and if you are, by and part and also part of the benefit of investment overseas is you do get that diversity. So you know, you get the dollar as well as the pound exposure, and you know often the dollar or so often in recent years, you know, having dollar exposures
been a good thing for stelling investor. At some point it probably wouldn't be the best thing, but it's not something they worry about on top of all the other things that go into choosing that in the first place.
We have run out of time, but I'm still going to take another question to see because I don't think we've.
Done quite enough on the back here. Thank you.
There is a question, by the way, and here about do you have any thoughts on the upcoming SpaceX ipo and we'll this lead to Tesla merging with SpaceX down the road. Now, I'm not going to answer that one because Cassy Word has answered it for us, and you can listen to my podcast with her on Monday and you can hear the answer to that.
I'm not going to tell you, so you will listen to the podcast.
Question So, prior to the events in the Middle East, obviously one of the dominant conversations in the in the markets was around cracks and private credit and elevated valuations in sort of AI boom equities, And in one of your recent podcasts there was sort of a conversation about a potential catastrophic event pulling the rug under those valuations in AI equities and you know, potential inflationary impact and downstream.
Do you see a prolonged situation of conflict in the Middle East as one of those potential scenarios causing a crash in those you know, and an adjustment in those equities.
Yeah, I mean, it easily could be.
And that's the thing with any any kind of any kind of bubble level of valuation. You don't know, you never know what it's going to be, but it's going to be something, So yes, that could be it. But again, I got to listen to Kathy because we talk about that quite a lot in the podcast with her about what.
It might be. But of course she doesn't believe it will be anything.
She believes that all those stocks will grow into their evaluations over the next few years and this this won't happen, but that that very rarely happens.
That's very rarely. The answer to over priced stocks. The answer is is usually that they fall.
Anything to add to that, John or Mollana No.
I think, yeah, yeah, the one thing I see the private schedit thing, and this is something I'm curious about him when the audience is an expert on this and do police come up with the chatters after? But I still don't quite see because some people have mentioned that would have been kind of like two thousand and eight, two and seven, and that always kind of, you know, raises a lot on bells because obviously two thousand and
eight was pretty charastrophic. But I don't quite see yet how we get from sure a lot of these things could go bad, or how do we get from that to infect in the entire financial system. I believe there is a sort of like insurance and go there. Even then, I'm still struggling to see exactly how that goes to, you know, not being able to get cash out your ATM, you know, one Friday kind of morning. Yeah, I was just if anyone thinks they wanted that one, then please come.
Up to me.
Okay, I'm going to allow one more question, but please, can it be something to which we can answer in an upbeat manner, because I want to finish this on an up. We finished every session on a low. You look like a happy person.
Go for it.
Change What one policy change could a UK government do that would turbo charge our economy?
You can't sol on that zero that's on net zero.
If you're talking about the housing market, i'mus like, get her of stamp duty?
Great one.
I can't believe you both took my man options next zero stamp duty?
Yeah?
No, God, that is a really good one, don't. That's a kill off for these marginal tax rates. That's the other irritating one. So like when somebody turns over a hundred ground, they immediately jump up to a.
Six percent tax rate.
And also and that the other said as well, because whenever your own benefits, if you get a job, or you get a job going over a certain nobody else, you get a similarly in seeing marginal tax right and whether you know and know that, people say, oh you're still getting for what ep, you're still getting there, You're still get a bit more money.
It's not.
It definitely holds people back and spoken to people that can have both ends the spectrum who are put off extras by those marginal tax so get rid of them. I think it would be really helpful.
Okay, so counselor a lot of taxes, sort out the tax system.
Get rid of that zero, make life cheaper.
Okay, that's thank you for that question that I think those answers were quite positive. None of these things are going to happen, of course, but you know there you go, right, So do you listen to the podcast. Do read John's newsletter Money to Build award winning. Do read my newsletter out on Saturdays. Do read the Markets Today Blog Mona and enjoy them all. I hope, and thank you so
much for coming this evening. You've been a really good audience and we will be hanging around to answer more questions, and so will our other panel.
So thank you all.
Thanks for listening to this week's Marin Talk to Your Money. If you like our show, rate review and subscribe wherever you listen to podcasts. Also be sure to follow me in John on ex or Twitter at marinas w and John Underscore Steppek. This episode was produced by Someasadi and Moses, and questions and comments on this show and all those shows are always welcome. Our show email is Merrin Money at bluebog dot net sound designed by Aaron Kasper, and special thanks of course to Paula Steele.