Loading summary
Transcript72 lines
- [00:01]
Goldman Sachs Podcast Host
Exchanges on navigating macro uncertainty exchanges on the forces shaping global markets for the sharpest analysis on finance, business and the economy, count on exchanges the Goldman Sachs Podcast Listen Now.
- [00:15]
Public Investing Platform Advertiser
Support for the show comes from Public, the investing platform for those who take it seriously. On Public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index with AI. It all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are like EFTs with infinite possibilities, completely customizable and based on your thesis, not someone else's. Go to public.com podcast and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com podcast paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA SIPC Advisory Services by Public Advisors LLC SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not investment recommendation or advice. Complete disclosures available@public.com disclosures.
- [01:28]
IBM AI Advertisement Speaker
So you're telling me that the AI that's meant to make everyone's job easier to manage just adds more to manage? On top of the thousands of apps the IT department already manages? Funny how that works. Any business can add AI. IBM helps you scale and manage AI to change how you do business. Let's create Smile to Business. IBM.
- [01:55]
Goldman Sachs Podcast Host
Saks off 5th is revealing the season's most wanted holiday steals. Whether you're gifting someone on your list or treating yourself to a designer score, find deals on McQueen, Valentino, Versace, Stuart Weitzman and more at up to 70% off every day, outshine at every event and outsmart your budget. From shimmer ready party looks to luxe layers and cozy giftable Accessories, Saks off 5th is your secret source for celebrating in style. Your holiday shopping mission starts now at saksoff5th.com or a Saks off 5th store near you.
- [02:30]
Merrin Sumset Webb
Bloomberg Audio Studios Podcasts Radio News. Welcome to the Marantalks Money Market Wrap, where we talk about the biggest moves in the markets this week and what is driving them. I'm Merrin Sumset Webb, Editor at Large for Bloomberg UK wealth.
- [02:55]
John Stevik
And I'm John Stevik, senior reporter at Bloomberg and author of the Money Distilled Newsletter.
- [03:00]
Merrin Sumset Webb
Hello, John. Now, John, this is our last chat of the year. Well, it's our last public chat of the year, should we say? Yes, well, it says, hello, we're going to talk about the biggest moves in the market this week. Actually, you know, we need to look at the biggest moves in the market this year. Yes, yes, because it's been kind of an interesting year. So much going on, mostly negative, yet global markets are up nearly 20% across the board. I mean, it's absolutely fascinating. I mean, obviously it's about AI, it's about falling interest rates, it's about maybe a bit more growth than expected. But nonetheless, when you look at everything and you look at how we started the year, this is kind of extraordinary. And then you look at the footsie in that 100 up around 20%. You look at the all share is still up 17% or so. And then you look at our favorite gold. Well done gold, 63% the back and I know, nice pat in the bag. We'll get to silver in a minute. And then you've got the gold miners index up over 150%. And then of course there is poor bitcoin.
- [04:02]
John Stevik
Yeah, actually, yes, I had forgotten Bitcoin. Of all the risky stuff that went up.
- [04:11]
Merrin Sumset Webb
Everything went up except for bitcoin, which actually went down about 8%. And then there is the Bitcoin Treasuries index, you know, so if you think of gold and then leveraged gold being gold miners, and then you've got bitcoin and you think of the equivalent of gold miners being the treasury index, these companies that we've talked about before, listed companies, companies that just hold bitcoin. And inexplicably until relatively recently, quite a few of them traded at a premium to the bitcoin, which they hold completely insane, will never understand this stuff. But there it is, the Bitcoin Treasury Index again, down 6,7% so far this year. So it's been really interesting. You look at bitcoin now and you think, well, what is it correlated to?
- [04:50]
John Stevik
No, you are right because there is nothing else that you can look at. I mean, the one thing that whenever people were saying, well, it's not digital gold, but it is correlated to the Nasdaq. But you know, even, I mean, the NASDAQ's done fine this year. It hasn't done as well as it normally does.
- [05:06]
Merrin Sumset Webb
18.72% so far. We're on there. We're talking on the 18th of December, by the way, it is still underperforming the FTSE 100, but not quite as badly as I initially suggested.
- [05:17]
John Stevik
And are these local currency figures? Because I think if you translate it into gbp, so what a British person would actually have got then. I'm Pretty sure the FTSE's beaten the NASDAQ by even more than that. But I mean, we shouldn't crow too much because it hasn't happened for a while. But I think it's interesting that there's been that move away from the us. So the US exceptionalism story, I think it is fair to say when you look at the markets, did end this year. I mean, whether that will continue next year is another matter.
- [05:47]
Merrin Sumset Webb
But no, I mean, there's no getting away from the fact that absolutely the best place to invest anywhere until relatively recently, until two years ago, was definitely anything to do with the US stock market. So, you know, we can, we can be frightfully jolly about what's going on in the UK and Europe at the moment, but this is quite recent. So the question now is whether moving into next year, this rotation continues this idea that, you know, the returns from the US are not going to be exceptional over the next few years and you may, on the other hand, get exceptional returns from the things that have performed horribly over the last couple of decades. Maybe, just maybe, we really are getting to the point where value might have its day in the sun. We've seen gold have a stay in the sun, of course, well done, gold. Maybe small caps will finally have their time in the sun. Maybe we will see the 100 break through 10,000. I mean, sort of outside chance it'll break through 10,000 before the end of the year at this rate. So the, the question for next year is, does this rotation continue? And my guess is that it does, given the price differences, given the worries around AI capex, etc.
- [06:51]
John Stevik
But you know, forecasting, I mean, I do wonder if the small caps will come back just because people will have run out of other stuff to buy, because that does sometimes happen. It can just be a late cycle thing. I mean, the only problem is the small caps always strike me as being more exposed to your domestic economy. And that's where the kind of gloom generally is just now that, I mean, not just in the uk, I guess actually, but particularly in the uk, there's that feeling that businesses are constantly being assaulted by the government. And if that doesn't change next year, then eventually something's kind of going to give. At the same time, though, they are cheap.
- [07:33]
Merrin Sumset Webb
They are cheap. Yeah. And of course you know, they're cheap and ignored. You know, there are fewer, there's less money in small caps than there used to be across the board in the US and the uk and in Europe there are fewer fund managers dedicated to it, et cetera. And as soon as you get to the point where an area is completely ignored, it begins to look quite interesting. And of course value as well. There are very few fund managers left focused focusing on value. There's practically nobody in the UK who would stand up and say, look at me, I'm a value investor. Quite a few of them on the podcast, but I think we've had all of them on the podcast.
- [08:03]
John Stevik
Are they what actually support network for the UK's value managers practically are.
- [08:09]
Merrin Sumset Webb
Anyway, speaking of the UK, we should mention this week's rate cut. Bank of England has now cut rates by 25 basis points, 0.25%. We are now down at 3.75%. So under 4%. You know, it would be nice to look at that and say, well, this is, this is all for good reasons. But of course, precisely, it's really more to do with bad stuff, isn't it?
- [08:30]
John Stevik
Again, the depressing thing about where we're ending the year for the UK is that it's basically a question of is growth going to tip over to the point where we get a recession next year, which is an outside chance. It's not thing that most people expect. But the poor quality of the recent data does make you think, oh, I wonder if that could be a surprise for next year. On the other hand, inflation is still much more persistent than, I mean, so the rate now is at 3.75%, but inflation's only down to about 3.2%. So we're still above target. This is by no means what people in the pre 2008 era would have considered to be tight monetary policy. And obviously things change, macro environments change and this probably is tight given how everyone's feeling. But yeah, it's not an attractive economy and most of that I think it would be fair to say the policy decisions that have been made have resulted in this. And unless we change some of them, which doesn't seem likely under the current government, then I would expect inflation to still be an issue, but also slow growth to still be an issue next year.
- [09:46]
Merrin Sumset Webb
Like a mini bout of stagflation.
- [09:48]
John Stevik
Yeah, yeah, just kind of grinding, slightly depressing, this sort of soldiering through environment.
- [09:59]
Merrin Sumset Webb
Okay.
- [10:00]
John Stevik
I mean, can you think of a different outcome?
- [10:03]
Merrin Sumset Webb
No, I can't. No, I can't. Not as we've discussed endlessly. Not until there is a change of government or a change of stance. Yeah, I mean, I think one of the really interesting things to watch for next year has got to be the rollback of the focus on net zero in the uk. You know, pretty much everybody everywhere else is rolling back, rolling back, rolling back. Hasn't really happened in the UK yet. Bits and bobs of muttering about, you know, maybe all this, maybe that, some changes to the North Sea, etc. But generally speaking, we're still on as an extreme a net zero path as, as we were at the beginning of the year and the year before that and the year before that. And that's clearly. Well, people would argue. But looking at electricity prices, clearly unsustainable, you can't be an outlier in this area. So I mean, I think that will be one of the things to watch in the UK next year and I think an awful lot of people are watching that. They are waiting to see a shift in energy prices and of course electricity supply in the UK before they move in here to invest.
- [11:05]
John Stevik
I mean that does play in a slightly wider one as well. And the energy this year, particularly fossil fuels, has been the kind of laggard. So if you were looking for a contrarian bet for next year, as we mentioned kind of like a couple of times in the podcast, the energy sector is probably the place to look at this point. And if you've got that sense that the attitude is changing towards it, then that is kind of pointing that way quite aggressively as being classic sort of contrarian play.
- [11:43]
Goldman Sachs Podcast Host
Exchanges the Goldman Sachs podcast featuring exchanges on navigating macro uncertainty, exchanges on the forces shaping global markets. For the sharpest analysis on finance, business and the economy, count on exchanges between leading minds at Goldman Sachs. New episodes every week. Listen now.
- [12:10]
Public Investing Platform Advertiser
Support for the show comes from Public, the investing platform for those who take it seriously. On public, you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index with AI. It all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year. You can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are like EFTs with infinite possibilities, completely customizable and based on your thesis, not someone else's. Go to public.com podcast and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com podcast paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA SIPC Advisory Services by Public Advisors, LLC SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not investment recommendation or advice. Complete disclosures available at public.com disclosures hey.
- [13:19]
IBM AI Advertisement Speaker
Ryan Reynolds here for Mint Mobile. One of the perks about having four kids that you know about is actually getting a direct line to the big man up north. And this year he wants you to know the best gift that you can give someone is the gift of Mint Mobile's Unlimited Wireless for $15 a month. Now you don't even need to wrap it up. Give it a try@mintmobile.com Switch upfront payment.
- [13:40]
Goldman Sachs Podcast Host
Of $45 for three month plan equivalent to $15 per month required new customer offer for first three months only. Speed slow after 35 gigabytes if network's busy, taxes and fees extra.
- [13:48]
Various Celebrity Advertisers
See mintmobile.com this is Jacob Goldstein from what's yous Problem? Business software is expensive and when you buy software from lots of different companies, it's not only expensive, it gets confusing. Slow to use, hard to integrate, hard to Odoo solves that because all Odoo software is connected on a single affordable platform. Save money without missing out on the features you need. Odoo has no hidden costs and no limit on features or data. Odoo has over 60 apps available for any needs your business might have, all at no additional charge. Everything from websites to sales to inventory to accounting. All linked and talking to each other. Check out Odoo at o d o o.com that's o d o o dot com.
- [14:39]
Merrin Sumset Webb
Listen, I wanted to come back to small caps on the contrarian front because it really is, it is the big contrarian play. And Pamela Liberum had a little report out earlier in the week that I looked at in a really depressing reading. Looking at US Small caps, I am we're going to end on a positive note by the way everybody. We will be finishing this podcast this week on a positive note. So looking back at the last hundred years. So since 1926 US small cap stocks outperformed large cap stocks by 2.85% a year. So that's marvelous. So you can look at that and you can say in the long run this stuff massively outperformed. You know, if you look at nearly 3% compounded over even a decade we're talking real money. But inside those long term averages you've got some really, really nasty and very lengthy periods of underperformance. When I say lots, I mean actually two. 1982 to 1999. So a long time. Nearly two decades. Nearly two decades of underperforming by 1.6% a year. And then the second bout of underperformance is the one that we are deep in right now. Underperformance of 1.7% a year since 2018. So added not touching the sides of the length of the underperforming period in the 80s and 90s.
- [15:59]
John Stevik
Oh man. So wait a minute, what's the good news? Because that sounds like we've got another 10 years.
- [16:06]
Merrin Sumset Webb
No, no, no, it doesn't have to be so long. The good news is that when it outperforms, boy, it really outperforms. So 1964 to 1981, outperformance by small caps of 8% a year.
- [16:16]
John Stevik
Actually. That's very good.
- [16:18]
Merrin Sumset Webb
Yeah, yeah. 1926 to 1941, 4.4%.
- [16:24]
John Stevik
Yeah.
- [16:25]
Merrin Sumset Webb
I mean obviously you can pick your time periods, can't you, but.
- [16:28]
John Stevik
Oh yeah, but it's indicative whenever it's that length of time. And we all, you know, we're all told constantly the small caps. And it's logical that small caps over the very long run should outperform big.
- [16:41]
Merrin Sumset Webb
Cats and particularly when they're as cheap as they are now, relatively speaking. So, you know, you look at it now and you say this stuff is cheap, this stuff about out of favor. It's been absolutely slammed by the shift to passive and absolutely slammed by various regulatory things, particularly in the uk. So it's got to come back. On the other hand, if you'd invested in US small caps over the last 40 years, just the last 40. So not going back to 1926 and averaged out the outperformance and the underperformance, you can't barely have managed to keep pace with large cap stocks, let alone beat them. So, you know.
- [17:13]
John Stevik
Yeah, that's interesting.
- [17:16]
Merrin Sumset Webb
Yeah. The optimistic take is that's where the growth is, that's where the value is, that's where the long term outperformance is. So maybe next year I would think.
- [17:24]
John Stevik
The Magnificent seven or sort of varieties of the Magnificent seven must make a big difference in the US law because the whole point about them is they are large caps that grow like small caps.
- [17:35]
Merrin Sumset Webb
Yes, until they don't.
- [17:37]
John Stevik
Until they don't. Yeah, well, we'll see about that.
- [17:42]
Merrin Sumset Webb
So I mean, we're saying we'll talk about this a lot in the new year, I think, but you're seeing quite a lot of cracks appearing across the AI story. I mean, just have a look at Oracle. Someone have a look at Oracle.
- [17:55]
John Stevik
And also just before, what about gold and silver? Why have they had such a wild year, do you think?
- [18:05]
Merrin Sumset Webb
Well, I don't know. They say gold is insurance and silver is a warning. Right?
- [18:11]
John Stevik
Yeah.
- [18:13]
Merrin Sumset Webb
So gold, looking at what's been going on across the last year, everyone has been absolutely fine with staying in equities and seeing bull markets across the board. But also everyone's a bit. Well, maybe I'll just insure that. And that's gold and it is the basement trade and in particular it's this new regular price insensitive buyer in the form of the world central banks. So all that's in there for gold, silver, to be honest, silver is more your area. I mean obviously it tends to catch up with gold and then it tends to have little manias. So maybe this is a little silver mania.
- [18:46]
John Stevik
Yeah, yeah, I think that makes sense. It feels a bit like the way the gold miners suddenly woke up and realized that gold was at twice the price the last time they had a decent run.
- [18:57]
Merrin Sumset Webb
And so it makes sense, you know, if you've made some money out of gold, it makes sense to turn to silver. And there we go. I mean, I'm definitely keeping my gold. I don't think looking at the geopolitical environment that now is the right time to not have your gold. But I'm not sure I'd be rushing out to buy a pile of silver right now. That's more of a speculation than an insurance for me.
- [19:18]
John Stevik
Yeah, and actually this is a long time reader actually emailed me after I wrote about silver recently and said that he'd just taken a pile of the family kind of silver tea sets and heirlooms that they didn't want anymore down to a silver smeltery and got them turned into hard cash. So I thought that kind of is, that is a problem with silver because there's a lot of scrap silver out there. And if someone who's as relatively well informed as this particular reader was doing that, it does make me think, okay, maybe we're certainly in the later stages of this silver mania. Eloise, that reminds me of one other really interesting statistic that I still haven't properly shared anywhere.
- [20:06]
Merrin Sumset Webb
Go on then.
- [20:06]
John Stevik
The fact that announced the silver is now worth more than a barrel of oil that's not home since 1980. Like 1980. Yeah.
- [20:17]
Merrin Sumset Webb
And how long after it passed through that milestone did the silver price collapse?
- [20:21]
John Stevik
I mean like a day. I mean 1980 was very, you know, a spike for silver, which to be fair, this, this kind of hasn't been. But yeah, no. So silver being at parity with oil is quite something. I mean, obviously it was parity with oil when oil went negative in 2020, but that doesn't really count. So that is, I thought that was a very thought provoking start. I don't know what thought very much provoked, but quite a number.
- [20:49]
Merrin Sumset Webb
Okay, so for next year, watch the gold prize. Watch the silver prize. Maybe don't bother with the bitcoin prize. Watch. Sorry. Watch your energy.
- [20:59]
John Stevik
Watch what happens already coming in.
- [21:02]
Merrin Sumset Webb
Nobody writes hate mail at Christmas, do they?
- [21:06]
John Stevik
Some of the round robins I get are pretty fruity.
- [21:08]
Merrin Sumset Webb
You still get round robins?
- [21:10]
John Stevik
Thankfully. I always hated them.
- [21:14]
Merrin Sumset Webb
I don't think people do those anymore. No round robbers, no hate mail. Everyone just, you know, focus on your own Christmas. Watch, gold watch, silver watch, energy. Really interesting. Watch what happens with net zero in the uk. Watch small caps and keep an eye on the growth value intersection. Anything else, John?
- [21:35]
John Stevik
No, I think that is a wonderful roundup. And all the remains.
- [21:41]
Merrin Sumset Webb
Well, in that case, yeah, all that remains. Go on, you say it. You say it.
- [21:45]
John Stevik
All that remains Very Merry Christmas listeners.
- [21:50]
Merrin Sumset Webb
Happy Christmas. Happy Christmas to all our listeners. And to you, John, by the way, and to you.
- [21:55]
John Stevik
And to you.
- [21:56]
Merrin Sumset Webb
Thank you. Thanks for listening to this week's Marian Talks Money debrief. If you like our show, rate, review and subscribe wherever you listen to podcasts. Also, be sure to follow me at John on X or Twitter ariansw and John underscore stepek. This episode was produced by Sama Saadi, production support and sound designed by Moses Andam. Happy Christmas to you too as well. Thank you for all your work this year. Questions and comments on this show and all our shows. Always welcome our show. Email is merriamoneyloomburg.net There you go. Christmas Christmas wishes On the podcast.
- [22:34]
Public Investing Platform Advertiser
Support for the show comes from Public, the investing platform for those who take it seriously. On public, you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index. With AI. It all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are like EFTs with infinite possibilities, completely customizable and based on your thesis, not someone else's. Go to public.com podcast and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com podcast paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA SIPC Advisory Services by Public Advisors, llc SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not investment recommendation or advice. Complete Disclosures available at public.comDisclosures Amazon Five.
- [23:44]
Amazon Advertiser
Star Theater presents Real Customer Reviews performed by Eva Longoria. Tonight's review Sports Briefs. Oh boy, where do I even start with these performance mesh boxers? These boxer briefs are like a magician's trick. You know the one where you go, where did that rabbit come from? So if you're looking for underwear that not only performs well, but also gives your package the attention it deserves, then look no further. 5 stars Nickalicious shop the perfect gift this holiday season on Amazon.
- [24:23]
Various Celebrity Advertisers
This is Julian Edelman from Dudes on Dudes with Gronk and Jules. Sunday mornings I've got my game day ritual, Coffee, Lucky socks and now New Morning Uncrustable Sandwiches. It's all about that 12 gram protein boost with the new Uncrustables Bright Eyed Berry or Up and Apple flavors. Bright Eye Berries got a feisty receiver energy up an apple. Your classic do it all tight end, soft pillowy, packed with protein and easy enough for Gronk to grab from the freezer. Whether you're on the couch, driving to the tailgate or heading to the locker room, New Morning Uncrustable Sandwiches are the MVP of snacks. Your new Sunday kickoff ritual starts here with new Morning Uncrustable sandwiches packed with 12 grams of protein.
- [25:24]
Goldman Sachs Podcast Host
I use Shipt Same Day delivery to stay connected with my sister during the holidays. She lives across the country. Shipt has tons of stores to order from. Groceries from Albertsons, crafts from Michaels, even pet supplies from Petsmart. The list goes on. So when we have long distance movie nights, I turn to Shipt to get face masks, snacks and everything else we need delivered to her and to me same day. Download the app or visit shipt.com that's s h ipt.com.