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Welcome to Marin Talks Your Money, the Personal finance edition of Marin Talks Money, where we talk about the best strategies for making the most of your money. I'm Maren Zum said Webb, and this week I am welcoming back to the show Bloomberg Personal Finance and investing reporter Suzanne Willie. Welcome, Suzann.
Great to be here.
Wow, it's a difficult time to think about what to invest in, isn't it. So it's lucky that we have your go tos. I mean, we're sitting here on we and there's been a wonderful run in markets, and now this seems like a little bit of an AI wabble going on, and there's more and more talk about is it a bubble? Will there be a crash? What will happen? What do I invest in if I can't invest in AI? Because AI is the only thing in the world to invest in, et cetera.
Exactly exactly. And goal yeah, gorblingbling.
But hanging in there, hanging in there around four thousand gold. Yeah, everything's going to be fine with gold surely. Anyway, you have been out there interviewing again, asking people who really work every day in the markets what they are investing in or what they would invest in, and also crucially, what they do if we just gave him a million bugs and told them they could do whatever they wanted with it. That's the most interesting bit of all this,
I think. I mean, you know, we're instead of on't we and what they think about metals and all that kind of thing, But what we're really interested in is what they do with a million bugs.
Exactly right.
Let's talk about your first interviewe alexandri So Tavatsi, who is from pict A Wealth Management, and he is a man after my own heart because for him, the future is metaled.
Right, Yes, yeah, he is really focused on a structural ball market in raw materials. I mean, his his line. You know, the infrastructure of the future is being built today and it's metal intensive, so you know, we're seeing record demand for materials like copper and lithium materials. They sort of give you access to the physical backbone of tomorrow's economy. He likes asset heavy companies in the space, so companies that have like significant physical assets like smelters, refineries,
land in real estate. You know, in part this is because they provide an inflation hedge as commodity prices rise. So he would deploy the one million into three buckets. He'd put about half in a diversified group of global mining companies with exposure to copper, aluminum, nickel, and rare earths. And that's because he calls them the building blocks for grid upgrades, for electric vehicles and battery storage. And then he'd put about thirty percent to direct commodity ETFs, again
copper aluminum and an array of battery components. Further, he likes their inflationary status and they provide a good sort of or direct play on metal prices. For the final twenty percent, he went just target public companies that are sort of the picks and shovels needed to build energy infrastructure. Grid connections, power inverters, storage systems, all of these sort of basic building blocks of the infrastructure that we're going to you know, no doubt be needing well out into the future.
Yeah, I mean, this is so interesting. It's something that we talk about on the podcast a lot. We talk about will there be a commodity supercycle? We talk about inflation and how you had you against inflation, and in particular, over the last year or so, we've been talking about the price of AI companies. So if you buy a company that are directly involved in the AI revolution, it's going to be extremely expensive on every single valuation measure.
So true, the companies that allow the AI company to even begin to exist, the companies that produce the metals and the products that allow the grid to be upgraded and data system data centers to exist, etc. You can buy those for all there's nothing, So it makes so little sense. So this strategy, to me, it seems incredibly sensible. You want to be invested in the future, but you don't want to pay a pee of seventy times to
be invested in the future. You'd rather pay a pe of ten to fifteen times even less than some of these cases, to be exposed to the building blocks behind that technological revolution.
Absolutely, I think it's a really sort of solid argument. And with AI today getting in where the prices are, it just seems kind of insane to me.
Yeah. Now, Alexandra, he also as as I Alexandra, he has in his mind AI across the board, I'd say, because when you asked him what he'd do with a million dollars outside this more conventional investment approach. He immediately shifted to worrying about the disruption to any work or careers that his children might have in future, and the need to give them some kind of cushion.
Right.
Yeah, that's a great point he did, you know. He talked about how young men and women today entry the labor for us, are confronting these massive challenges of technological change, you know, geopolitical order being reshaped. So he would give the one million to his kids and sort of free them up to focus, he said, on the opportunities of today, rather than the uncertainties of tomorrow, to sort of free
them from worries related to potential work disruptions. So it was it was a really interesting way to spend the money, given what his main entry was about.
Yeah, it's interesting, isn't it, giving your kids a gift of freedom.
I would take that.
Yeah, although for another podcast, of course, giving your children too much money can hamper them horribly. You have to find this sweet spot, don't you, between taking away a good bit of the pain, but also leaving them in need enough to drive them to self fulfillment. We all know, the miserable trust fund kid.
Yeah, and if they have the sort of money all their lives and they don't encounter sort of any sort of difficulties, you know, how did they develop resilience?
Well, resilience and self fulfillment. That's what we all need anyway, Not for this podcast is that. That's a different one. In fact, we should do a different one. We should do a podcast on inheriting wealth.
That would be great.
Not just on how much is been going to be inherited? Can we talk about that all the time, but the emotional and productivity sound of inheriting wealth. Okay, stand by for that one, listeners. But let's move on to fat. Let's stick with luxury. Then you spoke to Chloe Duanchi, head of macro and investment strategy at the Rockefeller Global Family off as well about they know what they're doing, and she was all about luxury real estate.
Yes, she was saying that there's a lot of interesting opportunities unfolding in some of the more niche thematic corners of luxury real estate development, such as premium student housing at state universities in the US and in really high resorts. Because as we know, while the average US consumer, the low income consumers under pressure, and we're starting of seeing cracks show up and the financial pictures there the market looks very different at the top of the income spectrum.
We had that statistic out of Moodies about how much of consumer spending. I think it was about fifty percent of all consumer spending in the second quarter was done by the top ten percent of US earners, and that is huge. So that is an area where spending by affluent households, it's far more stable against across cycles, she was saying, and that resilience is what people will pay a premium on, which makes a lot of sense to me.
She thinks that part of the story to her real estate development idea is the supply vacuum that we saw created by a number of years of limited new construction, when new builds virtually froze during twenty twenty two and twenty twenty four. So she's playing this sort of collision between scarce new supply coupled with sort of steady if not improving demand and student housing. You know, she says that at first, I thought she was going to say, oh,
premium student housing. I thought she was going to say like I don't know Harvard or Yeah or some of the really elite opportunities. But she was still saying, like, very good flagship state schools with big sports teams have seen risily enrollment and a lot of growth, but the supply of student housing hasn't kept pace, even as rents have popped up quite nicely. And it's not an imbalance. It's likely to go away soon because to be a player in this space in student housing, you have to
have a lot of history with that area. You have to sort of know the local politics, you have to know what the local entitlements are. You really have to sort of it's a very specialized niche. So you can't sort of easily parachute in.
It's interesting them and it's not for everyone. I mean, how do you invest in that? In student housing in the US. You don't want to go out and buy a student student house if you haven't got a student at that universities, So you need to find some kind of fund or a collective vical for that.
You need to find a private fund or basically you need to work with somebody like you know, like Rockefeller, you know, a high end you know, private wealth office that will have access to some of these players.
And the other thing that she talked about was experience is as the new STATA symbol. We don't want stuff anymore. We want experiences that we can put all over our social media and effectively get a longer term return from right. And therefore the idea is that you should maybe have a look at some way of investing in luxury resorts and the developers that create those luxury results. Again, that's not for everyone, is the no.
But I mean it is an area where as you'd imagine, you know, the imboulnce between supply and demand is very big, and you know, it's very difficult to create one of these new luxury resorts. They want to be in amazing locations that often have sort of you know, environmental concerns, and so it's an area where there's going to be no supply lot for sure. And you know, like she said,
you have to partner with an uber specialized operator. And some asset managers will take external capital into private credit or private equity, but you know, specialized players that have for prietary capital will sometimes take outside money. But it's not really something that you and I are going to go racing into I don't think.
Your third one. You go through a lot of these people's who said, this must be an awful lot of telephone calls. That's so interesting. This is Ron Sanchez. He's with Vaduciary Trust Co. Internationally. He's the chief investment officer and he he starts out in your conversation saying exactly the right thing, which is there isn't actually know he's wrong. He says there aren't quick chief investment ideas or opportunities
today give her. In the third year of the double digit pricing increases to the S and B five hundred, Ron Ron look abroad. It's not compulsory to covers in the US. Other options are available. You could look at the UK, where you know we're pretty key. Try emerging markets. There's all kinds of opportunities out there. Other alternatives are available.
I think there was a little home bias there.
Looking inside, Ron does find something that opportunities are narrow, that's leg but they exist in healthcare.
He focuses on healthcare. He you know, like like you and like many people, is you know, concerned about the S and P and the level at which it's trading. And so he's you know, looking for more looking sort of digging deeper to find more active opportunities in the investment space. And I mean his point is that for a lot of reasons, you know, regulatory issues, drug person concerns,
healthcare has struggled. And so he thinks it's trading at an attractive it's trading at an attractive multiple, it's trading at a discount to the broad market that is much more than it has been in recent history. And he also thinks, so from a risk management standpoint, maybe being in healthcare isn't a bad idea compared to you know, being in say Nvidia and Microsoft and such a concentrated
bed on tech in the SMP. He notes, you know, Navidia and Microsoft combined to make up nearly fifty percent of the index, but the entire healthcare sector is nine percent of the index.
That is a really interesting stat isn't it.
Yes, and so, and he also notes that it's one of the most diversified sectors in the SMP, with everything from drug companies to biotech to equipment makers and so on. And I thought, you know, the really good point was, yes, they're in near term challenges for sure, but the demand for healthcare services and drugs is not going away. Well, in the long run, it's not going to go away. You know, I have aging populations here and many of the major countries around the world, so demand is only
going to become greater. So he feels like there's some growth opportunities in healthcare. But also it's a bit of a defensive play.
Fair enough, fair enough, and quite interesting. You know, if you're looking for looking for any kind of value inside the US, that's probably an interesting place to look. But interestingly, when it comes to us saying to him, what would you do with a million dollars outside conventional investment? Again, he's giving it the kid too.
I know, I know he he thinks. You know, he said home ownership is the first step towards financial security, and so he would you know, he's talked about it with his kids, and starter homes are increasingly out of reach, so he would try to help close family members.
I mean, it's so interesting, Suzanne. I'm sure that we're not allowed to talk about your nice contact like this, but pretty I'm guessing this man has already had an opportunity to give money to his children.
Yeah, I don't I don't know so, I mean, I'm always surprised when people, when people who you think it probably already made these plans, probably already have something in place for their children, exactly, give them a million bucks and they give the kids more.
What about the holidays. I know, last time we spoke, everyone was going on holiday with a million dollars.
I know, I have to say it was it was. It was more fun last time, you know, we were talking about we were fantasizing about where we would go in the Greek riviera.
Yeah, I mean, I wonder if this, if all these people saying that they give them money to their children, it suggests you know, when previously, even a few months ago, and we were talking, we say to people, you want a million bucks, what do you can't do it?
They'll be like, well, who, I'm going on holiday. And now you're saying the same thing to them, and thinking like then they're saying, oh, things are difficult, things are tight. It's a gary out there and giving it the kids. Is this giving us some kind of anecdotal sense of a shift in the way people are feeling in the US.
It's interesting. I think it probably is. I mean, there's this sentiment shift and there's just you know, so much uncertain tea, and we've got the shutdown, you know, the government shutdown grinding on. I think it's sort of a lot is very unsettled, and I think it's just as time goes on. It's been people have felt deeply unsettled
for a long period of time. And I think it's even you know, seeping into the minds of people who probably would not be particularly concerned about their own financial picture, but it just makes everyone feel sort of vulnerable to change, to some sort of like worrying about some sort of like negative change. And so I think sort of that the maybe it's the lens at which people are viewing the world is just a bit darker now, and they're feeling more you.
Know, protective and about the kids.
Yes, worried about the opportunities. I mean, you know, you see AI taking a lot of taking a fair amount of you know, entry level jobs, and I think that is sort of a very leads to a very fundamental uneasy about what your kids' opportunities are going to be like going forward.
Definitely right, But we do have we have one participant here who had a slightly different view on how to spend his million dollars. I think, you know, we'll be keener on him. We'll come to a million dollars in a minute. But this one is Nick Frillinghausen, co Chief Investment Officer of Equities at the Chiltern Trust, and he has a slightly different idea a game we're own property here, but kind of the opposite to luxury property.
Right, yes, I mean his you're right, it's another real estate idea. And he says it's a patient idea. It's not an idea expects to take off immediately, but over the next three years. He thinks home repair and the home repair and remodeling space will be interesting. He has exposure to the leading companies in this area, the sort of what we call in the US the big category category killer companies, as well as in the paintent codings industry.
And his feeling is that we've been in a housing of session for years with affordability at all time lows, and we probably have a shortage right now, like three to five to four million homes in this country. Existing home turnover is only about four million homes a year, which is a thirty year low. Typically it would be more like five million or six million, or a peak I think it was even seven million. You know, a lot of people are, as we know, locked into their
homes because they have these low mortgage rates. But he thinks that if mortgage rates go about one hundred or one hundred and fifty basis points lower, that we're likely to see a big unlock in terms of pent up demand. Because every time, he says, you see the tenure treasury flirt with around four percent, you see an uptick in
mortgage refinancings and first time home buyer applications. So he thinks these businesses are really good values and that when we've kind of cycles like this and we've seen mortgage rates fall, these companies have sort of a coiled spring kind of dynamic going on in terms of the margins they can earn. So these are you know, these are not like sexy companies, but they're companies that are embedded in our daily lives. You know, you paint your house, you know, you fix up your deck, you do all
of these things. And he feels like a lot of people aren't focused on this area. He blames it mainly on because so many money is so much money is flowing into the same ten to twelve names, you know, tech names in the S and P. Five hundred. He thinks that if interest rates go lower, these stocks will do well, and also it'll lead to, as many people think, a broadening out of what actually works in the stock market.
Did you mention any stock name produces on when he talked about this.
He doesn't mention stock names just as a matter of policy. But I can speculate about what I would imagine they are. I mean, my guess would be when he talks about dominant companies and paints and coding, it makes me think of Sherwin Williams. That's a very big name here. And then when I think of the sort of what we call sort of category killer big home remodel of repair companies, I think of the likes of Home Depot and Lows. So those would be my essens, but they are not names that he gave me.
Okay, interesting, right onwards. I don't know why you and I are going on holiday with Nick and his million dollars.
Well, I really loved his idea. Well, I love the idea of giving money to kids. His idea again, he's really into experiences and he would take his family ten to twelve members of his family, particularly his parents who are in their mid eighties, on one of those around the world high end private jet journeys where you just jet around in your own private jet, and he would go to all these bucket list destinations that you would like to go to, but the tiquol a lifetime to achieve,
you know. So he'd go to anchor Wat and Machu Pichu and Nepal and India, and he'd go to Uganda to see the mountain gorillas and to Japan, which anyway, I love this idea.
Thirty to thirty five days, Nick, come on, yes, I mean, Matt, you Pitchiba. The time you finished queuing for tickets, you're two days.
In Well, Marrion, you know, we only gave him a million bucks. So he actually priced this out and he figured it would take him about thirty to thirty five days, and he factored the number of people, so you know, he could only take thirty or thirty five days for only allowing him to splurt with a million bucks.
I tell you what, thirty five days on a private jet with your family, maybe maybe it's enough.
Oh that's a really good point, Maren.
That's enough.
I think I might pay to break up that.
We will go for five days each. I think it would be absolutely wonderful.
Oh, I love this idea.
I entered in the jet a falcon. I go the do detail, detail, details, details, wonderful. Okay, so there you go, metals, healthcare, lots of property, give the money to your kids, and I gay self a private jet. And that's what you do with a million dollars these days. Then, thank you very much. Indeed, thanks Miren, thanks for listening to this week's Maren Talk to Your Money. If you like us show, rate, review,
and subscribe wherever you listen to your podcast. This episode was produced by Someersadi and Roses, and questions and comments on this show and all our shows are always welcome. Our show email is Merrior Money at Bloomberg dot net