Merryn Talks Money – "Why Contrarians Can't Get Enough of Real Assets"

Host: Merryn Somerset Webb (Bloomberg)
Guest: Alec Cutler (Orbis Investments – Orbis Global Balanced and Cautious Fund)
Date: March 16, 2026

Episode Overview

This episode dives deep into why contrarian investors like Alec Cutler are focusing on "real assets"—think energy, infrastructure, and commodities—as global events shift priorities away from flashy tech and more towards the basics of national, industrial, and energy security. Merryn Somerset Webb and Cutler discuss the re-emergence of value investing, how global conflict and resource nationalism are reshaping markets, the importance of “pyramid of needs” thinking for countries and portfolios, and the long-term case for real assets, natural resources, and select sovereign bonds.

Key Discussion Points & Insights

1. Pyramid of Needs Applied to Investing

Timestamps: 02:32–06:14

• Concept Origin: Alec references Maslow’s Pyramid of Need, applying it to national priorities: foundational layers include security (energy, food, industrial) before getting to “wants” like entertainment and self-actualization.
• Quote (Alec, 03:11):
  “If you think about that base layer, the foundational layer of a nation's pyramid of needs, it's things like national security, food security, energy security... And if we've learned anything in the last five, six years, it's that from the pandemic on, that this stuff isn't guaranteed and needs to be focused on.”
• Takeaway: Markets are only now waking up to the neglect of these foundational needs, leading to a shift in capital flows.

2. The Shift from “Hope” to “Avoidance of Despair”

Timestamps: 06:10–07:53

• On Valuation Reset: Investors are increasingly willing to pay more for companies that safeguard against downside (energy, food, industrial) than for the “hopes” of high-growth tech.
• Quote (Merryn, 07:33):
  “People are now going to pay an awful lot less for hope and an awful lot more for the avoidance of despair.”
• Alec's View: The capital is shifting to “sure things” like resource producers and companies crucial to critical infrastructure.

3. Global Conflict, Energy Security, and Geographic Opportunity

Timestamps: 07:53–12:49

• Middle East volatility & Energy Sourcing: Asian countries (e.g., Korea, Japan) depend on Middle Eastern energy, making energy security policies (like nuclear) central.
• Quote (Alec, 08:53):
  “Every country needs to focus on its own controllable energy resource... Korea and Japan are not well endowed with energy resources, so something like nuclear is obvious for them.”
• UK as an Investment Opportunity: Despite self-destructive policies, Alec invests in UK companies offering solutions (e.g., Balfour Beatty, Rolls Royce), not just in resources but in engineering and infrastructure.
• Contrarianism in Practice (Alec, 13:55):
  “The UK is just a wonderful hunting ground for contrarian, super-cheap names that no one wants and we get laughed at when we buy. And then five, six, seven years later, people begin to understand why we were happy to own them.”

4. Real Assets, Contrarian Holdings, and Political Change

Timestamps: 13:43–15:11

• North Sea Energy Producers: Building positions in Serica, Ithaca, Harbour Energy—companies providing secure domestic energy.
• Political Will: Politicians’ willingness to “turn on a dime” (example: German nuclear U-turns) is ultimately a strength for investors betting on eventual rationality.
• Quote (Alec, 15:52):
  “Politicians being unabashedly willing to flip on a dime without any memory of what they said the day before is a big strength, right? Because if they really want to dig their heels in, it just takes longer to get to the right answer... Economics will eventually win out.”

5. AI, Semiconductors, and Natural Gas: Hidden Infrastructure Plays

Timestamps: 17:04–20:46

• Taiwan Semi & Samsung: Alec has held TSMC since launch, calls it “the most important company in the world”—yet undervalued by public markets due to location and lack of simple access.
• Quote (Alec, 17:37):
  “Taiwan Semiconductor is the most important company in the world... And yet it sells at 17–18 times forward because it's in Taiwan.”
• AI Relies on Real Inputs: Shift in focus from hardware/infrastructure (e.g., Siemens Energy, Prysmian) to consumable essentials like US natural gas—“you can't have AI without natural gas.”
• Semiconductors as Consumables: Chips for AI/data centers now last just 3–5 years, making them a near-commodity, like oil or gas.
• Quote (Alec, 19:07):
  “These chips are consumables for the first time in technology. Super excited about the consumable aspect. The prime mover of AI, if you will, being something as simple as natural gas or semiconductors.”

6. Gold: Still a Hedge, But Less Contrarian Than Before

Timestamps: 20:53–24:42

• Gold Allocation: Position trimmed from 10–12% to 8–9% as it’s less contrarian, more crowded (not “cheap insurance” anymore).
• Quote (Alec, 21:14):
  “We like to buy insurance when it's cheap. And gold as an insurance policy isn't as cheap as it used to be.”
• Portfolio Trends: If industry allocations to gold return to 5–7%, that could force prices up—selling out now might be premature.

7. Sovereign Bonds: Developed Markets vs. New “Safe Havens”

Timestamps: 24:48–28:38

• Emerging Markets as New Safe Havens: Iceland, Brazil, and Norway cited as fiscally responsible, resource-rich, and offering yields far superior to the US or UK.
• Quote (Alec, 25:45):
  “Brazil... We're getting 13, 14% yields, 8% real, 8% higher than inflation yields... They're running a much lower deficit than the United States... All three of these countries I've mentioned are resource rich... Norway... The Norwegian kroner is the ultimate in security. It’s not the Swiss franc. It’s Norway.”

8. Geopolitics: Iran, Market Reactions, and Staying the Course

Timestamps: 28:38–30:38

• Conflict as Wake-Up Call: Ongoing wars increase focus on self-sufficiency and the lower pyramid needs, further validating the fund’s positioning.
• Market Responses Unpredictable: Despite expectations, gold sold off during conflict due to margin calls and over-ownership.
• Quote (Alec, 29:01):
  “But increased global conflict... accelerates and highlights all those things... But you really can't make changes in the portfolio based on that because the uncertainty is just so high and the market reaction is so unpredictable.”

9. The Return of Value Investing

Timestamps: 30:38–31:56

• Valuation Matters Again: After a long period where price seemingly didn’t matter, rotation is back, with formerly neglected sectors (energy infrastructure) coming into favor.
• Quote (Alec, 31:06):
  “It does. It feels like valuation is starting to matter again... we're starting to see rotation... critical in element of a value cycle and we're starting to see that them. So we're increasingly optimistic that... valuation [is] becoming important again.”

Notable Quotes & Moments

• On Political U-turns (15:52):
  “Politicians being unabashedly willing to flip on a dime without any memory of what they said the day before is a big strength, right?” – Alec Cutler

• On Contrarian Investing Payoff (13:55):
  “We get laughed at when we buy. And then five, six, seven years later, people begin to understand why we were happy to own them.” – Alec Cutler

• On the Unique Nature of Recent Globalization (12:49):
  “Global cooperation is an incredibly recent phenomenon... we've lived in just a fraction of the history of the world... that will wind up being a very unusual time in the world's history.” – Alec Cutler

• On Gold as Insurance (21:14):
  “We like to buy insurance when it's cheap. And gold as an insurance policy isn't as cheap as it used to be.” – Alec Cutler

Key Timestamps

• 02:32: Introduction to the “Pyramid of needs” in markets
• 06:10: Shift from “hope investing” to “avoidance of despair”
• 08:24: Discussion on Asian energy security and nuclear energy
• 10:11: Why invest in the UK despite unfavorable policies?
• 13:43: Contrarian UK stocks and North Sea energy exploration
• 17:04: Japan, semis, and AI infrastructure plays
• 19:07: Natural gas: The overlooked backbone of digital growth
• 21:14: Gold’s evolving role in the portfolio
• 25:01: Developed vs. emerging market sovereign bonds
• 28:38: Impact of Middle Eastern conflicts on investing
• 30:38: The dawn of a genuine value investing cycle

Overall Tone & Style

The podcast balances a relaxed, conversational tone with in-depth finance and macroeconomic analysis. Alec Cutler comes across as patient, pragmatic, and deeply rooted in valuation discipline, while Merryn provides context, humor, and pointed questions.

Summary Takeaway

Contrarian investors may now be vindicated as real assets—energy, infrastructure, commodities—return to center stage. Focusing on the “bottom of the pyramid” means prioritizing the undervalued essentials over speculative tech, embracing the cyclical nature of markets, and seeking security via real resources. Alec Cutler’s strategy is evidence that patient, value-driven investing in unloved sectors and regions is, as history repeats itself, back in vogue.

Memorable Closing (Alec, 31:56):
“So we’re increasingly optimistic that we’re seeing the pendulum swing back... and that would be a very welcome thing for us and our clients.”