Loading summary
Transcript70 lines
- [00:00]
Mehren Sumset Webb
We don't just invest in cutting edge companies. We look at companies with a history of steady growth and companies whose growth cycle has come round again. Because in the real world you have to look at growth in three dimensions. Monk's Investment Trust so there's a lot
- [00:16]
IBM Representative
of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a Global workforce of 300,000 can use AI to fill their HR questions. Resolving 94% of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM.
- [00:45]
Public.com Representative
Okay, before we get into it, little side note for the IT leaders listening in. I was reading up on a Microsoft Commission survey the other day and learned that teams using Windows 11 Pro PCs report 62% fewer security incidents compared to Windows 10 PCs, including three times fewer firmware attacks. Pretty significant. With security built in, you'll have AI ready it. That sets you up for operational efficiency as well as long term resilience. Upgrade to Windows 11 Pro at Windows means business.com
- [01:21]
Mehren Sumset Webb
Bloomberg Audio Studios Podcasts Radio News. Welcome to the Marantalk's Money Market Wrap where we talk about the biggest moves in the market this week and what is driving them. I'm Mehren Sumset Webb, UK Money Editor at large and whilst John is still out of the office on a beach somewhere, I am joined by Sam Unstead. Sam is editor of Bloomberg's Markets Today blog and write about UK stocks, economics, central banks and global markets. Busy time Sam, thanks for joining me.
- [02:00]
Sam Unstead
Yeah, thanks for having me.
- [02:01]
Mehren Sumset Webb
No shortage of things to talk about then.
- [02:02]
Sam Unstead
Yes, indeed, yes. Yeah, I mean, take your pick.
- [02:06]
Mehren Sumset Webb
I'll tell you what, why don't we start with UK guilt? Why don't we start with what's going on there? There's a lot of political change. We are in chaos again. We talked about this at some length in our podcast earlier in the week, but it is still ongoing. It's going to be ongoing for weeks and weeks and weeks. We have, we. I'm going to say we have no idea what's going to happen. We have a pretty good idea of what's going to happen and certainly from an Invest point of view you might say, well, nothing good.
- [02:30]
Sam Unstead
That is exactly how I would frame it that we are in yet another period of political chaos.
- [02:36]
IBM Representative
Turmoil.
- [02:36]
Sam Unstead
Pick whatever word you like for it in the UK. But gilts are actually having a pretty good week. 10 year yields down. When I got up from my desk, about 16, 17 basis points over the course of the week that is almost entirely driven by oil prices have been coming down very significantly. Takes away some of the inflationary risk. Bets on what the bank of England are going to do and how much they're going to hike over the year have been pulled back as well. But I find it a little bit curious because. So if we go back a couple of months, so to around the local elections and when there were these first kind of really substantial speculation about Keir Starmer's position, we had a lot of strategists then come out and say very clearly the most negative outcome for gilt markets would be Andy Burnham becoming the Prime Minister. So that was very much baked into what to everyone's thinking. Now we've reached that reality. So Keir Starmer's resigned on Monday. We've effectively, as you kind of alluded to, moved on to the idea that Andy Burnham will be the next Prime Minister. That's what a lot of MPs keep coming out and saying. There is a chance somebody challenges him. I think it's increasingly low.
- [03:40]
Mehren Sumset Webb
It will be so much fun.
- [03:41]
Sam Unstead
Fun isn't a good way to put it. Yeah, but it would be. That could well happen. But it's. It looks increasingly unlikely, disappointing. So you would expect, or I would expect, as someone who's covered the Guild Market for a while, that there would be a bit more risk starting to come in, at least a bit of uncertainty, because at the moment you really don't have any great idea at all about what he would do. And because we have actually got a pretty clear idea of who's going to be in charge next, that question should be at the front of mind. And it is. People are asking that question, but they're not asking it very forcefully. It's kind of just. They're just kind of waiting now to just see what happens, which is not how the gilt market has acted for the last two years or so.
- [04:21]
Mehren Sumset Webb
It's actually quite significant. We're in something of a holding pattern. I mean, there has been backtracking on the whole. We shouldn't be unhocked. The bonds market. Nonsense. Someone's explained how the bond market works to him, which is great because the Prime Minister has a tiny little idea of how it all works. It's good news. And he does say that he will stick to the fiscal rules. And again, we talked about that in the podcast earlier this week and that he isn't going to stick to the fiscal rules because that's not really possible. Rachel Rees was never going to stick to the fiscal rules because they all depended on spending being really crunched towards the end of this decade, which was never going to happen and it's still never going to happen. So we can talk about the fiscal rules, but there'll be new fiscal rules at some point in time. And the fiscal rules are a statistical nonsense anyway. But nonetheless, he's talking the correct game.
- [05:03]
Sam Unstead
He's talking the correct game where the uncertainty, I think I would expect a little bit more uncertainty coming in is because they are talking already about flexibility in those fiscal rules. And I don't really know what that means. That's going to. We'll see what it actually actually looks like when we eventually get there. That uncertainty doesn't seem to be price. But then there is actually a sort of counter argument to that, which is that already the UK pays much higher premiums to borrow money anyway. So there may well be a feeling that that's already priced in there now. So as far as we're aware, this is all already in there. And as you kind of mentioning there, the fact is once he actually gets there, a lot of these kind of initial questions or these initial policies or these maybe slightly more popular policies that are coming out now, he probably won't be able to do because everyone is constrained by the same fiscal rules. And as you kind of mentioned, it's all well and good to kind of not want to be in hoc to bond markets if you're not in hoc to bond markets.
- [05:59]
Mehren Sumset Webb
But we are in hog to the bond market and the only way out of that is to dramatically slash spending and slash borrowing. And then you wouldn't be in hog to the bond market.
- [06:06]
Sam Unstead
Exactly.
- [06:07]
Mehren Sumset Webb
And it's not going to happen.
- [06:08]
Sam Unstead
Sam, I think so far he's surrounded himself, particularly on the economic side, with a lot of kind of big, you know, wonky figures, if you like, you know, these kind of like big names within economics, I think, where there's still a lot of questions. We had a nice piece on Bloomberg about this over this week. Foreign policy don't really know anything there. And as I was just mentioning, the moving guilt markets has been almost entirely down to geopolitics over the course of the last week. So that also needs to be kind of fleshed out as well.
- [06:36]
Mehren Sumset Webb
Well, let's come back to geopolitics, actually. Let's just come back to oil. I mean, price is now basically down to where it was before the war started. There's assumption none of this really happened. None of this really happened. Here we are, back square one. Yeah, so that's good in that that inflationary impulse of higher, higher oil prices is going to come through in the numbers. But we could now genuinely, we could say that was transitory and for the first time in quite a long time that would be true. It genuinely would be transitory inflation. But there are other things feeding in which we need to talk about. And there is this thing that has happened just a few hours ago of Apple saying they're putting up their prices fairly substantially because of chip prices going up. And we've been talking for a while on, on the podcast about how when people talk about a, about costs coming down and they talk about productivity, but in fact, of course the hardware is very, very expensive. And that is a new inflationary impulse.
- [07:27]
Sam Unstead
Yeah, I mean there are a couple of inflationary impulses to think about with AI. So as you mentioned with memory chip prices. So you had a really neat thing happen today where we had Micron Technology, which is the biggest memory chip maker in the world, with incredibly good results. I mean, way, way ahead of expectations. Huge demand, revenue, profit, everything that could be.
- [07:46]
Mehren Sumset Webb
I can't get, there's one number in there I can't get out of my head with.86%.
- [07:50]
IBM Representative
Yeah.
- [07:50]
Sam Unstead
It's astonishingly high. Right. So that's one side of the AI story. And so all the chip makers and the memory companies are all going up with them today. And by a lot, Micron, remember, is a big company. I mean, they're already worth nearly $2 trillion. So it's a huge move. But on the complete other side of that, you get this other question about sort of the reason that they're making this huge margin, which is that memory chip prices have gone through the roof because everything is being directed to AI. So the consumer stuff, so everything that's, you know, and it' talking memory chips that go into basically anything electronic that exists in the world, from phones with Apple, with iPads and MacBooks, you're talking from there to fridges, cars, basically anything anyone buys that has any electronics in it will have a memory chip in it. So you're getting an inflationary impulse coming from that because as Apple, and Apple being the biggest electronics company in the world, they're pushing through prices. So if they're not able to sustain those margins and they're having to do it, that's not a good sign for everywhere else. And then the other side of it is you know, there are three sides. There's another side. It's a triangle. Is that is the is data centers, you know, so spending huge amounts of money on data centers, this huge AI capex boom that's going on, but that requires lots of electricity and people are going to have to pay for that somewhere down the line. Exactly. And so eventually that is going to feed into people's electricity prices. And so that may not be immediate because it does take quite a long time to build a data center. But even so that will start to happen as well. And the cost of building up the grid. So you've got all sorts of extra inflationary impulses coming from AI.
- [09:29]
Mehren Sumset Webb
And it's difficult to tell whether the end effect of AI should be deflationary, as with all wonderful new technologies, but the creation of it is very inflationary. We can't quite see where we're going to end up.
- [09:39]
Sam Unstead
Yeah, that's exactly right. So as you were mentioning, so oil prices have come all the way down when you look in the options market for oil. So what people are betting on what's going to happen in six months time, it's gone very bearish. Everyone thinks maybe sort of flat over the course of the next six months or so.
- [09:54]
Mehren Sumset Webb
Thing I was wondering about on that, and this is a random thought, and we should probably ask an oil expert to tell us about that, your expert and everything. So I'm going to ask you one of the reasons why the oil price never went up to $150, $200, like some of the more excitable people were suggesting at the beginning of the war was because of the drawdown from everyone's reserves. Right. U.S. reserves, and in particular from Chinese reserves. Massive drawdown there because we never saw any demand destruction in China. So we know that huge amounts of oil were being used up, they have to be refilled.
- [10:21]
Sam Unstead
Yes.
- [10:21]
Mehren Sumset Webb
So that's a huge source of demand over the next couple of years. Yeah, yeah. So surely that would suggest that oil prices aren't going to fall below these levels and may actually rise from here.
- [10:34]
Sam Unstead
Yeah, there's certainly a risk. I mean, I would suggest it's more likely that they will stay kind of where they are now. So not, you know, maybe marginally elevated from where they were before the war, but with a lot of, a lot of volatility and a lot of wobbliness over the course of the rest of the year for exactly the reason you mention. So part of it will require, and this is why there's such a huge focus on this all the time that the oil starts flowing through. The straightforward moves really sustainably for an extended period of time now with no breaks in it, with no issues. That's a big ask. So that has to happen. And during that happening, then the reserves can start to be filled. So you need these two things to kind of happen in concert with each other. But while they're happening in concert with each other, the likelihood is oil prices don't go much further down from where they are now. And those inflationary impulses that have happened happened with oil going up for a few months will still be flowing through during that time.
- [11:35]
Mehren Sumset Webb
We don't just invest in cutting edge companies. We look at companies with a history of steady growth and companies whose growth cycle has come round again. Because in the real world you have to look at growth in three dimensions. Monk's Investment Trust so there's a lot
- [11:51]
IBM Representative
of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a Global workforce of 300,000 can use AI to fill their HR questions. Resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business.
- [12:19]
Public.com Representative
IBM support for this show comes from public.com if you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge on public. You can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English like if the Vix hits 25, buy a put option on the S&P 500 or if my cash balance goes above $20,000, move the excess into my direct index. You approve the workflow and your agent handles the risk, monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com market and fund your account in five minutes or less. That's public.com market paid for by Public
- [13:16]
Sam Unstead
Investing Brokerage Services by Open to the Public Investing Inc.
- [13:20]
Public.com Representative
Member FINRA and SIPC Advisory Services by Public Advisors LLC. SEC registered advisor complete disclosures available@public.com disclosures.
- [13:36]
Mehren Sumset Webb
The last thing I want to ask you about is again all connected to geopolitics, connected to inflation, connected to everything. And it's the gold price because boy this is disappointing, isn't it for gold bugs? This is disappointing.
- [13:47]
Sam Unstead
Yeah, yeah, yeah. I mean I would say, you know, it's just calm everyone, you know, it's still only just a little bit below $4,000 an ounce but that was a really key level.
- [13:56]
Mehren Sumset Webb
But below $4,000. I mean remember the excitement went over 5,000. John and I could barely contain ourselves.
- [14:01]
Sam Unstead
Yeah. And here we are back in, you know, as we go as it comes back through that level again, you know, that's the level that it went through. As gold stopped acting like gold, you know, it started to become a kind of momentum trade. So the likelihood is you had a lot of investors, probably a lot of retail traders as well coming in there as it was going above $4,000. So it may well be that people are sitting on some hefty losses from gold as well.
- [14:26]
Mehren Sumset Webb
Okay, I thought you were going to say that clever retail traders had ridden it all the way up and sold it all the way down.
- [14:31]
Sam Unstead
If they hold on then it may
- [14:33]
Mehren Sumset Webb
well and maybe taken money out to pop into the SpaceX holdings for example, down again today.
- [14:37]
Sam Unstead
Right, well that's possible as well. SpaceX, when I got up from my desk almost everything was going up for a bit and then it was going back down for a bit. And so whether what it's doing right at this moment, I can't you. But you know, so gold, you know we've had just a long period of time when gold has not been acting in the way that gold traditionally acts.
- [14:57]
Mehren Sumset Webb
Right.
- [14:58]
Sam Unstead
And even now as it doing what it's doing now, it's still not quite doing that. It's not quite the gold, you know and I think there's still a lot of air in that market. So it will have. That might well you may well see a bit more volatility come through but you know, historically it does remain, you know, you know, pretty elevated.
- [15:15]
IBM Representative
Yeah.
- [15:15]
Mehren Sumset Webb
And I suppose if we've mentioned gold, we're going to have to mention bitcoin which is now below 60,000 again. So we're back to September 24th level.
- [15:23]
Sam Unstead
Yes.
- [15:23]
Mehren Sumset Webb
So that's quite a big ship.
- [15:25]
Sam Unstead
Yes, yes. And actually that one. So you just asking about SpaceX, that was something we actually really did see evidence of was retail traders getting rid of their bitcoin holdings in order to buy SpaceX. And that was happening actually across all sorts of spaces. It was happening with some of the high flying kind of chip stocks as well.
- [15:43]
Mehren Sumset Webb
I thought you were supposed to hold your bitcoin forever. I thought that was, we've learned it's not a currency and the new gig is that it's a long term asset and you hold it forever. Turns out it's neither of those things.
- [15:55]
Sam Unstead
That's a great point actually. So last year we had this debasement trade, right, for a few months this was the idea that the dollar is no longer king and that people are putting their money into gold or Bitcoin. And that seems to have frittered away over the course of this past year. I think a lot of the enthusiasm bitcoin does rely on, to an extent, on enthusiasm, on investors just being enthused about getting into gold, pumping their money into the ETFs that have now been launched, or, you know, these kind of institutional funds, every, all of those companies, when you have this much equity supply like SpaceX, when you have this much excitement about a different corner of the market.
- [16:33]
Mehren Sumset Webb
Sorry, I'm talking about Bitcoin now, not gold.
- [16:34]
Sam Unstead
Yes, sorry, yes, we're coming up. Bitcoin, yes. So when you have this much excitement about AI or about SpaceX particularly, and big IPOs coming later in the year for OpenAI or Anthropic, when all of that is going on, it seems like the sort of traders that are in bitcoin are the ones who are then thinking, actually I'm going to move a little bit away from here and take my surface.
- [16:57]
Mehren Sumset Webb
Well, it's all about stories, isn't it? I mean, bitcoin is very story driven and one of the things that we've seen since we first heard about bitcoin is the constant renewal of the story. It's not that we wait, it's not quite that. It's this. No, now it's this. Now it's this. Now it's this. And when there isn't a good story right now, there isn't a good news story for bitcoin, but there are amazing stories elsewhere. So if you're a story led investor
- [17:17]
Sam Unstead
you're heading towards the narrative is not good enough to bring you in.
- [17:20]
Mehren Sumset Webb
No, of course I'm a SpaceX investor. As all listeners to my podcast know. I have nine SpaceX shares and I had promised the team that I would use my winnings to take them out for a drink. So, you know, sorry guys.
- [17:33]
Sam Unstead
Well, sorry.
- [17:34]
Mehren Sumset Webb
Not winnings, not winnings. That's not how we call it, is it? We. Capital gains, capital gains, capital gains.
- [17:38]
Sam Unstead
We're not gambling here, but you know, we will see what happens there. Because I mean, just very briefly on SpaceX, I mean I mean, I've been a reporter on stocks for 15 years. I've never seen an IPO like that ever. And since then, they did an acquisition just two days later of $60 billion. They are borrowing a huge amount of money in credit markets. They are sort of getting into all sorts of corners of the market. And so they're becoming already quite a kind of important company in all sorts of different sectors of the market. It'll be really interesting to see how that works.
- [18:07]
Mehren Sumset Webb
Well, it is interesting. And, you know, there is nothing average about SpaceX at all, is there? I'm so interesting in so many, many ways, but the average tech IPO ends its first year down about 18%. And my concern is that may be the one place in which SpaceX turns out to be average.
- [18:24]
Sam Unstead
It's possible. It's possible. But I think when we're talking about Bitcoin there and this kind of enthusiasm, the AI story, there is obviously huge amount of enthusiasm for the AI story, and SpaceX goes into that as well. But SpaceX is almost like a narrative in and of itself. So, yes, it has kind of this AI element to it, but it's the same kind of people who like a story, who like a narrative, and if they can get that narrative going, then, you know, you never know over the
- [18:50]
Mehren Sumset Webb
course of the year. Is the sky the limit or the moon the limit?
- [18:52]
Sam Unstead
The moon, yeah.
- [18:54]
Mehren Sumset Webb
That's fantastic. It's absolutely fantastic. Okay, brilliant. Is there anything else that we need to tell people today?
- [18:59]
Sam Unstead
No, I think there is so many things to be focused on in markets at the moment that if we do that, we may never leave.
- [19:07]
Mehren Sumset Webb
We think we've given them enough for one day. Thank you, Sam. Thank you so much. Thanks for listening to this week's Marriott Talks Money Market wrap. If you like our show, rate, review and subscribe where you listen to podcasts. Also be sure to follow me and John on X or Twitter ayrrynsw and John underscore stepxsamy on Twitter.
- [19:27]
Sam Unstead
I'm not very much on Twitter, but you can follow me on LinkedIn and you can find the Markets Today blog on Bloomberg UK every day.
- [19:32]
Mehren Sumset Webb
Excellent. Thank you. This episode was produced by Sama, Saadi and Moses and questions and comments on this show and all our shows are always welcome. Our show email is merrimoneylumberg.net.
- [19:52]
Public.com Representative
Okay, tech leaders. Word on the street is security incidents are dropping way down with Windows 11 PCs built in. Security for the win. Upgrade to Windows 11 Pro at windows means business.com this coffee shop running smooth thanks to genius from global payments, instant transactions, transactions, effortless inventory and synchronized operations. Big league reliability. For any business, that's genius. Whatever your goal, trade show giveaways, client gifts or team gear, 4imprint has the promo products to match. With thousands of options from apparel and drinkware to tech and totes, it's easy to find the right fit for your brand and budget. With standout choices at every price point and with their 360 degree guarantee, you can be four imprint certain your order will show up just right, right on time. Explore more@4imprint.com 4imprint for certain.