← Merryn Talks Money
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- [00:00]
Bison Wealth Advisor
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- [00:29]
IBM Representative
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- [00:59]
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- [01:57]
Marin Talks Money Host (Merryn Sumset Webb)
Welcome to Marian Talks Money, the podcast in which people who know the markets explain the markets. I am Merryn Sumset Webb and this week we welcome back Evie Hambro, global head of thematic and sector investing. Evie, I think you were last one about eight months ago, right?
- [02:10]
Evie Hambro
Yeah, it was definitely middle of last year.
- [02:12]
Marin Talks Money Host (Merryn Sumset Webb)
Yeah, yeah. Quite a few things have changed since then. Right. So we've got a lot to talk about when it comes to the commodity markets. But listen, I want to start and not everyone will agree that this is the correct place to start, but I know what our listeners hold in portfolios, and it's an awful lot of gold. And you know, I was speaking at the weekend at this thing called the Weekend of Stakes in in Hay on wy, and I did an investment breakfast chat for the audience and I asked them to put up their hands if they held more than 5% of their portfolio in gold, which is a pretty unusual Right. The average sort of wealth manager will hold maybe 2% of a portfolio in gold. At 5%, pretty much everyone put up their hands. So I'm like, okay, all right, 10%, a lot of people still hands up. 15%, a lot of people hands up. 20, still a lot of hands. 25, a lot of hands. 30, lot around 30, it starts to go down and I'm actually beginning to feel like an auctioneer as well. But when I got to 50% of the portfolio, there was still two people with their hands up.
- [03:10]
Evie Hambro
Wow.
- [03:11]
Marin Talks Money Host (Merryn Sumset Webb)
Yeah. And that's effectively what they call over at gavecal, they call the Turkish portfolio half equities, half gold. So someone who has that amount of gold in their portfolio, even the people who have 10% or 15%, they would have expected over the last three weeks for that gold to have protected them from the volatility in particular of the markets. Over the last three weeks since the war with Iran began and absolutely hasn't happened. In fact, gold and silver have both behaved like volatile financial instruments and they haven't done the job that I think a lot of people would have expected them to do. So we're going to start by me asking you to explain what on earth is going on.
- [03:52]
Evie Hambro
That is the question that we're asking ourselves. And let's think about it in steps. I think the first step to think about is if we go back to points in history where we've had similar heightened volatility and, I don't know, shocks or surprises and so on, the first reaction for most investors is to raise liquidity. And so there is a rush for cash. And in that scenario, there's a very high correlation across asset classes as things are sold. And that would be a pretty standard reaction in those environments. I think what's peculiar about this one, which would be the second point is, is that going into this crisis, there was, I think, as we spoke about maybe last time, an increased allocation to commodities within people's portfolios for many of the reasons that we discussed, the ongoing devaluation of paper currencies, a positive view towards general commodities and materials related to CAPEX spend and so on. So that if you had a commodity allocation in your portfolio, it didn't have energy in it. And so what we've now seen is the commodity desired commodity mix has a much higher energy component in it because of the disruption that we've seen in the Middle East. So there would have been a liquidation of areas that you would have had historical profit on from the allocation you would have had relative to everything but energy and then a switch out of that into energy related exposures. So you might be keeping the commodity sleeve the same size, but the components within it would have adjusted away from areas like gold and copper and other things and towards oil and gas and so on. So that's the second point that we would mention. I think the third thing is that there is, without a doubt, and you are a better expert on this than me, that there is going to be ongoing disruption to energy markets. Even if there was a ceasefire or victory or whatever, a stand down today, there would be ongoing disruption to energy markets for a period of time into the future. And I think Iran probably doesn't want people to forget that they have the ability to disrupt energy supplies. So there might be, even if there was a ceasefire, there might be some form of provocation or some kind of reminder that they're still around and they have the ability to disrupt things. So the premium that remains in the energy market in oil premium or gas premium is likely to remain elevated. And on that scenario then we have to price in a higher degree of inflation prospects and therefore a higher degree of rates. Circularly risk premiums will have gone up. And so in those things then you've got the prospect of higher rates. If you've got higher rates, that's normally negative for gold. So to us, without saying it's one of those three things, it's probably a combination of all of those three things. And then the last one is just probably some profit taking. People have made a lot of money in gold over a relatively short period of time. It probably got to an outsized level. You mentioned 50% in two people's hands going up at your event, if you used to have five and it doubled, you would be at 10. If your model was five, maybe you'd probably kick yourself for not taking some profits and bringing it back down to five. So there's probably a fifth or fourth element as well to that mix. So those would be the things that I would explain When I think about the gold market though, looking forward into the future in just about all timeframes going forward from now, apart from the very short term, the ongoing issues of government haven't disappeared. If anything, they're going to be spending more money on defense, they're going to have higher interest bills on their debt, they're going to require greater amount of overall funding for everything that's going on, which means more indebtedness, it means more devaluation of paper currencies and better returns for real assets.
- [07:24]
Marin Talks Money Host (Merryn Sumset Webb)
Let's look at some of those reasons for gold volatility. One of the things I think, as you suggest, is that you'd have a lot of effectively gold tourists have been in the market over the last little while. You've had your long term gold holders who I imagine they're going to be staying in this market and they're, you know, hold for all the long term reasons that you and I have discussed. But then you have people who've come in quickly, they've made a lot of money and they've gone out again. And there's also maybe this time around there's more people using various instruments to buy gold. And in previous gold bull markets people have been buying gold, actual gold, and now we're buying gold ETFs and other instruments that represent gold. So maybe the market is a lot more financialized than it used to be. So it's, it's less likely to work as a steady hedge for you maybe.
- [08:04]
Evie Hambro
I think you've definitely had financial additional sources of financial capital added to the market so you've got greater leverage behind the scenes. So people would have been having a 5% weighting and then borrowing 2.5% against it, taking it to 7 and a half and whatever the maths might have been. And so that financial leverage would upped the exposure, which is good in a rising market, but obviously very bad in a falling market. So the pressure, a margin call or whatever to be able to reduce your position would have prompted some action. I think algorithmic training as well would definitely have been a factor when things fall or companies miss earnings or whatever, the computers get involved and the volatility is normally far greater than you would have expect without that kind of part of the market being present. So I think that would have extended the returns.
- [08:45]
Marin Talks Money Host (Merryn Sumset Webb)
Yeah. And there's always also a suggestion that the last few years we've always had central banks as their last buyer. There's always this backup from the central banks who've been buying and buying and buying and that we might now be at a point where they might think actually do you know what, maybe that's enough gold. And particularly under these circumstances, this maybe will hold some different commodities as well. And also that perhaps that the central banks in the Middle east might no longer want to keep buying gold when they've got an awful lot of other things to worry about.
- [09:12]
Evie Hambro
So I think central, I don't see central banks changing course in terms of adding to gold holdings. The ones that have been buying have got aspirations in terms of percentage weights far higher than their current holdings. So if anything, price weakness normally triggers that as an opportunity for them to be able to step up some activity. We won't know whether they've done so for a few months until the official data comes out, but I'd be surprised if you'd had that. I think the point about, about selling some gold or assets or liquidating Treasuries or equity positions to be able to fund spending on defense in the Middle east might be the case. And at the end of the day, these economies are not thriving right now. Tourism's gone, the airports are shut, the hotels will be empty, and you're not exporting a lot of the things that were the foundation of your economy, which is the petroleum revenues. So these countries are going to be really suffering. And so for them to raise some capital to be able to cover their needs is probably a likely outcome. But I would have thought that won't just be gold specific. It would be across a range of different financial assets that they might have, and they will be obviously reaching for the liquid ones. They're not going to be able to sell a port very quickly or to sell a property in London or whatever it might be.
- [10:17]
Marin Talks Money Host (Merryn Sumset Webb)
You can't be selling a property in London these days. That's very illiquid stuff. That ship definitely sailed. But gold you can sell.
- [10:25]
Evie Hambro
Yeah, well, you definitely can. And there clearly has been more sellers and buyers over the last few weeks, but it wouldn't surprise me if we saw more buyers and sellers. At the end of the day, this is a very big retracement. We've dropped over $1,000 an ounce in a number of days and it wouldn't surprise me to see quite a lot of that put back.
- [10:40]
Marin Talks Money Host (Merryn Sumset Webb)
Yeah, and interest rates are a big deal, aren't they? I mean, a month ago in the UK everyone was busily pricing in rate cuts through to the end of the year, and now everyone's begun to price in rate rises, which may or may not be the correct strategy. But as is always the case in a crisis, our central banks will be busily fighting the last war. They didn't raise rates nearly soon enough last time, and they're never going to utter the word transitory ever again. And probably never, ever utter the words, look through this inflation. These things simply can't be said again. So they're more likely to make a mistake on the upside than the downside.
- [11:11]
Evie Hambro
Yeah, it is going to be interesting, the rhetoric this time. You remember all of the inflationary chat last time and the government's out of control with the previous government being criticized by the current government. Inflation's crazy. Look at what you've done. And I think was it Rishi Sunak was getting all of the jabs in the side and that was Ukraine related and now we've got Middle east related. Does the current government get the same kind of pain verbally from the opposition parties on the back of what we look at to see as high gas prices and so on today?
- [11:38]
Marin Talks Money Host (Merryn Sumset Webb)
Should think so. Now we're going to come on to energy in a minute, although I know it's not your core area. But we must sideswipe silver before we move on from precious metals, which has been even more dramatically throwing itself around the place than gold. Right?
- [11:50]
Evie Hambro
Yeah. No, silver's absolutely been a hell of a roller coaster. Prices of well above 100 and coming back down again. It's definitely been one that was long overdue. The industrial imbalances in the market. So we needed to see higher prices. The demand, the supply situation was completely out of kilter. Did it get a bit too far? Probably. Has it now come back to levels which look very attractive again? Absolutely. And that's how we're certainly positioning the portfolio for some kind of recovery there.
- [12:15]
Marin Talks Money Host (Merryn Sumset Webb)
The top 10 shareholdings are very heavily weighted toward precious metals. And you appear to be completely happy with that.
- [12:21]
Evie Hambro
Yes. I mean, across the range of funds we have different exposures. But in the World Mining Trust, at the core of some of the absolute return that we generated in 2025, which was one of our record years, a lot of that came from precious metals, but it also came from copper as well. That was another key contributor. And those two factors, plus the gearing and some of the other things around royalties and other areas in our uncoated sleeve delivered a lot of value in 2025.
- [12:43]
Marin Talks Money Host (Merryn Sumset Webb)
Okay, so energy is such a tiny part of everyone's portfolios and about 3% of global markets, absolutely nothing. And as a proportion of the US market, of any of the big markets, again, smaller than it's been for such a long time. So we can expect that to change. Right. Where does that go?
- [13:04]
Evie Hambro
Yeah. So I think this topic that you touch on with energy is one example, has a multitude of examples that could sit with inside. So it's been fascinating for me to read the reports that have been written. I'm sure you've seen similar ones underneath the kind of title of this halo trade, Hard Assets and Low Obsolescence. So that was in motion prior to the events in the Middle East. And just to Remind everybody, there's obviously a threat around AI and disruption of existing business models. And many of the existing business models that are under threat are areas where people have large amounts of exposure in their portfolios and have had for many decades because they've been consistent, high growth, high margin, successful tech companies and so on. There are some now question marks about the future value of those business models. And so there is a rotation of capital. And as you completely rightly point out, if you looked at a pie chart of the global economy and broke it down into segments, there are areas that stand out within there as being really important. Now, when you compare that to the market cap of the world economy, the shape of the slices is completely different. So as you say, the market cap of energy is tiny, but its relevance in GDP for the global economy is enormous. Now, is it right that you've got a market cap that's so low relative to such an important part of today's economy? There's clearly an imbalance there. And so there is likely to be this rotation of capital back towards areas that are geopolitically important, industrially important, and the backbones of the global economy, away from areas that maybe have some threats to their business model. And people have made a lot of money in those. And so that rotation, that halo strategy rotation was in motion before the Middle East. I think the Middle east is an accelerator with a focus on energy. But I think the overall trend where you have a lot of the companies that sit in, I would describe them as second and third order beneficiaries of the hyperscaler Capex spend, that rotation again is going to be part of that. So you've got a kind of high growth in those businesses that have been quite sleepy for a long time because of the Capex spend and less probability of disruption to their business models, which means they might look relatively safe compared to some of the uncertainties that exist elsewhere.
- [15:15]
Marin Talks Money Host (Merryn Sumset Webb)
Yeah, there's been a long period where there's been an assumption, both in stock markets and at a political level, that energy is available whenever you want it and in whatever volume you want it, that you can trade cash for energy at any point. And it's quite a wake up call for those who didn't quite hear the siren blaring during the beginning of the Ukraine war, who are now hearing it blaring very loudly now. So I think we're finally getting to the bit where everyone across the markets understands this business of Ed Conway's wonderful phrase, the difference between the ethereal world and the material world. Anyone who didn't get it now surely gets it now. So that that rotation must be underway at some speed.
- [15:51]
Evie Hambro
Yeah, he's fantastic and I love reading his book. One of the words that's missing in the conclusion, part of that is complacency. There is a widespread complacency on supply of things that we take for granted and whether that's agricultural products, whether it's commodities, whether it's energy and so on. The amount of work and effort that goes into delivering these things for society, how dependent we are upon them, but how little we're prepared to pay for them. Extraordinary. Whereas we pay a lot more for something that's probably less essential to our daily lives. And I think that. And as a result, you've seen the profitability of those industries decline through time, and therefore they've been disincentivized to invest in future supply opportunities. Which means when events come along to disrupt supply, either because there's too much demand or supply itself, it gets physically disrupted. There's a significant price outcome because the world is set up to be very finely balanced between supply and demand. And so that kind of complacent complacency, both in how people invest but also what people take for granted, does play out with extreme outcomes.
- [16:56]
Marin Talks Money Host (Merryn Sumset Webb)
Yeah, I mean, fertilizer has been the other real bit of that, hasn't it? Everyone suddenly realizing how you need sulfuric acid and those other inputs, which I don't think anyone ever thought about before, and suddenly realizing that without the fertilizer inputs that come through the Middle east, maybe you won't have quite as much food as you thought you would have. And so the impact of these last three weeks will be seen in food prices at the end of this growing season.
- [17:17]
Evie Hambro
That's what I mean. When we said about inflation earlier on, there are going to be profound from this. And whether it's through direct energy costs, whether it's through fertilizers, whether it's through the manufacturing of chips and the availability of helium for a lot of these countries.
- [17:30]
Marin Talks Money Host (Merryn Sumset Webb)
Been fascinating watching people learn that helium is the coolant in MRI machines. Me too. I didn't know that helium was the coolant in MRI machines.
- [17:36]
Evie Hambro
Yeah. So there's a huge disruption across the kind of spread. And it's not just barrels of oil, it's a whole bunch of things that come from that. And then you've got the disruption to the supply chain of all of the different fuels that we use and so on. So I think the inflationary impact on this is going to be around for a while.
- [18:02]
Bison Wealth Advisor
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- [18:31]
IBM Representative
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- [19:01]
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- [19:43]
Marin Talks Money Host (Merryn Sumset Webb)
I suppose shorter term, all this is quite deflationary. It suggests if it goes on much longer, and I know we hum and ha between are we negotiating or are we escalating? Who can possibly know? But if it goes on, it becomes a bit of a recessionary influence as well. And that presumably hits demand for commodities across the board and maybe at the very least delays the super cycle that you're expecting.
- [20:06]
Evie Hambro
Yeah, I don't think we're necessarily thinking about a super cycle. I just think we're going to be in a period of time. You probably get the clue. I don't really like supercycle. We had a China cycle in the early 2000.
- [20:14]
Marin Talks Money Host (Merryn Sumset Webb)
I know, but we like everyone likes to talk about commodity super cycles. Remember last time around, when was the last time we all got very excited about a commodity?
- [20:22]
Evie Hambro
It was 2001 to 2011.
- [20:23]
Marin Talks Money Host (Merryn Sumset Webb)
2001. 2000 exactly. And that was great.
- [20:25]
Evie Hambro
It was good. It was good. And I think we do. We're definitely at the foothills of a cycle now. And it's a cycle linked to capex Spend and you know, and the same foundations are there about the underinvestment into supply and the price elasticity that doesn't exist to be able to turn on taps and produce more of these commodities. And we've got a decade plus of high spend. I think say one caveat to would be if equity prices fall too far, I'm sure that some of the hyperscalers are going to say look, it must make more sense to buy shares back again now and maybe there's a little bit of reallocation of capital towards that. That would be one of the kind of only risks that I see to that hyperscaler spend in general. Yeah, absolutely. We're at the foothills of a cycle. It's very exciting. As I mentioned, the sector trades on low multiples and is completely out of balance relative to its kind of geopolitical significance and its significance to standard living and in the overall economy. Economy.
- [21:13]
Marin Talks Money Host (Merryn Sumset Webb)
I'm just sticking with the negatives briefly because we have to do that. We have to do that. The other possible thing that could hit the demand that we talk about so much and when we talk about rare earth metals and we talk about copper and we talk about silver, we're very often talking about the energy transition. And there are two views here on where the war in Iran should make people head on the energy transition. One is further faster and the other is for heaven's sake, slow this down and, and keep using the oil and gas that you've got or focus on that, et cetera. So there are two views, either slow it down or speed it up. And I suspect that the slow it down view is gaining traction here. So if the energy transition drive slows, that also affects demand for a lot of the things that you're quite bullish on.
- [21:57]
Evie Hambro
Yeah, potentially. But I actually think the answer is the third scenario, which is all of the above. Because we do have a changing energy demand graph. We've been flatlining for years and we've now it's now, now I guess it's pretty consensual that demand for energy molecules is going to rise. We've got higher use cases across, whether it's robotics, electric vehicles, data centers, et cetera. So we have got a change ahead of us where we're going to see rising consumption and fossil fuels can't meet that demand all on their own. Renewables can't meet that demand on their own. You can't build the nuclear reactors fast enough. There's a seven year waiting list for the gas turbines, for the gas plants in the near term, it's going to be an all of the above answer to be able to meet that rising energy need for the growth that we think is built into the global economy over the medium to long term. There's definitely going to be some kind of transition and I'm sure as we get more competent, more efficient, more reliable when it comes to alternatives, they will have a bigger and bigger role to play. I'm sure that nuclear is going to come out and maybe replace coal as that kind of baseload power. And so you will see some stuff phased out. But I don't think we're, I think we spoke about it last time. I don't think we're in a kind of transition as such. I just think we're just in the a phase where things are changing to be able to meet the need of rising consumption.
- [23:12]
Marin Talks Money Host (Merryn Sumset Webb)
Yeah. So we're talking about just a general admission that this is an addition, not a transition, correct?
- [23:16]
Evie Hambro
Absolutely.
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Marin Talks Money Host (Merryn Sumset Webb)
On that matter of the not transition, but addition, coal. Suddenly people are talking about coal again and there are some mines reopening. Is there any coal in any of your portfolios and how would you express that?
- [23:29]
Evie Hambro
Yeah, so we have indirect exposure to coal in the portfolio. So we have some large cap diversified mining companies that still have thermal coal assets and metallurgical coal assets in the portfolio. Definitely we have exposure, but we don't have any pure play coal exposure in the fund. And I think that's a legacy of what is the future is one point. And the second is where is the value? And when we looked at the value, you could see huge amounts of value in the gold equities and precious metals equities in the copper equities in aluminium and so on. So there was a lot of obvious value there. The coal, it was less obvious. And then when you think about future pricing outside of this event, coal prices were on their knees and so the outlook was pretty bleak. And I think this tragic event in the Middle east has said we do need this stuff probably longer than we thought. And when you see higher gas prices coming through, that translates directly into thermal coal because you have that parity pricing.
- [24:18]
Marin Talks Money Host (Merryn Sumset Webb)
Yeah. Okay. So commodities as a whole, the ordinary, ordinary investor's portfolio at this point, at this stage in the cycle that I won't call a super cycle, just to humor you, this stage in the cycle, how much of a portfolio should make it up? Should it make up and how? Let's say that you've got a default position of 5 positions, pure gold in your portfolio just for the Sake of argument, because I think that's probably where most wealth managers will be heading these days, and that's in an ETF or something like that. Exposure to gold. What about the rest?
- [24:47]
Evie Hambro
I can answer from my personal point of view.
- [24:49]
Marin Talks Money Host (Merryn Sumset Webb)
It'll be fine too. What we really like, we'd like to hear your personal view and then your professional view so we can compare them. That we.
- [24:56]
Evie Hambro
Okay, so there's. Yeah, there's two. So one is my view and one is the view that I hear from clients. And so the first one, personal point of view, I look after my own own pension plan that for my wife and my three kids. And we have an allocation of a typical allocation of about 20% invested in gold equities, not physical gold. In gold equities, that number's now 30 because it's outperformed the rest of the portfolio. Like all professional fund managers, they're really bad at running their own money. So I haven't actually.
- [25:22]
Marin Talks Money Host (Merryn Sumset Webb)
Yeah, you never rebalance. Absolutely.
- [25:23]
Evie Hambro
You can't do the admin and obviously the bureaucracy of the firm you work for gets in the way as well and stuff. So I haven't rebalanced. And it's done a little bit of natural rebalancing. But I think if it came back a bit further from where we are today, even though I'm above my threshold, I'd be looking to add to that and that would be my kind of thing. And now why do I have so much? Is because I think it's a lovely natural foil to the rest of the portfolio. But I also have exceptionally high conviction on the ongoing loss of purchasing power. Paper currencies and therefore real assets will outperform government bonds and things through time. What do I see from clients? Clients have a range of outcomes. Now, going back, I don't know, 10 years from where we are today. Allocations would have been close to zero. Yeah, they're way above that number. I would say most people that I encounter aren't as high as five. I'd say they're in the kind of two to five bucket, that kind of range. I do occasionally encounter some people who have a more kind of turbocharged view of 10 plus. But those allocations will typically been split between physical gold via gold ETF and gold equities. So they will have some kind of higher beta within there. And in fact, most people who have that kind of 2 to 5 range typically have a larger weighting to gold equities because then they get that. That higher bang for their buck for the gold Move than they do in just having the physical gold and they get the dividends and the growth and the M and A and all the things we like.
- [26:46]
Marin Talks Money Host (Merryn Sumset Webb)
Yeah. And what about commodities as a whole? I think commodities related equities.
- [26:49]
Evie Hambro
Yeah, it tends to be separate to that and I think that again that number would have been very low. So that would have been 1% or so. I think because people are now starting to better understand the need to look to the second and third order beneficiaries of this kind of capex spend and this energy change in the global economy, the increased digitization and so on. There is a reason to have more old economy, more industrials, more suppliers of kit, more producers of commodities. To be able to build the kit from, to be able to satisfy the spend at the end of the day, to build the kind of final outcome, whether it's the robots or the data centers or whatever you might think in that regard. So that's a growing number, but it's still very small. Single digit, low single digits.
- [27:29]
Marin Talks Money Host (Merryn Sumset Webb)
Yeah, yeah. But should be more like 20, 25% of a portfolio.
- [27:34]
Evie Hambro
If it matches the shape of the global economy it's going to be high single digits. So it's some number between there and where it is today. Today. But I would have thought 5% somewhere in there, 4 or 5% would be a decent number. And then you've got, you've got a good balance. You've got that kind of 5% towards gold, you've got that kind of 4 or 5% towards broader materials. As long as you're not overlapping and double counting by having gold within the material slice, I think that's a decent thing. Then you'd have some energy on top and then you can have your high growth and consumers and everything else to make up your mix.
- [28:01]
Marin Talks Money Host (Merryn Sumset Webb)
Yeah, yeah. And valuations, as you say, last year was one of your best years ever. So there's been a lot of movement in the sector. The valuations of the big miners, the diversified miners, they still look okay.
- [28:10]
Evie Hambro
Yeah. When you look at the historical, historical multiples that they used to trade on, they're all at substantial discounts. Those historical multiples, they continue to be at discounts to the broader market. The one thing that's lagging is the dividends. The companies made a lot of money last year, but they didn't have a full year of high prices this year. Today's commodity prices, it's going to be a full year of good prices which should result in good cash flow and good earnings. And so we should see that dividend bump start to come through. So the only metric that looks a little bit expensive today is yield, but that's because it's less lagging the payments.
- [28:41]
Marin Talks Money Host (Merryn Sumset Webb)
People don't really. Do people really expect high yields from that part of their portfolio?
- [28:46]
Evie Hambro
I do.
- [28:46]
Marin Talks Money Host (Merryn Sumset Webb)
I mean, I know they do if they hold them. You do?
- [28:48]
Evie Hambro
Yeah. I think dividends are a fantastic discipline, and I hate it when companies just don't reward the equity investor because everybody needs to be paid. I think the equity shouldn't come for free. And without a dividend, it's basically free. And then the second thing is it's. It's like a handbrake on a management's desire to spend. So if they know they've got to pay the dividend and they've got to be able to have that as a kind of core thing that they do for their shareholders, they can't just charge off and spend loads of money on building stuff and buying stuff because they've got that anchor that they need to do, which is pay the dividend. And so I think it's really healthy.
- [29:22]
Marin Talks Money Host (Merryn Sumset Webb)
What are you buying in the portfolios at the moment?
- [29:24]
Evie Hambro
What's going on? Well, we're taking advantage of some of the weakness we've seen, so leaning into a few of the names that have fallen the most relative to their own fundamentals. And at the moment, for the last few days, or a bit of last week, that's been painful because they've fallen further.
- [29:37]
Marin Talks Money Host (Merryn Sumset Webb)
Listen, I know this is in your area, but the other thing that hasn't really performed as a lot of people would have hoped this year is Bitcoin. And we've talked about Bitcoin before, and I know you're not a believer, but after all this time, any changes to your mind?
- [29:51]
Evie Hambro
So rather than narrowing it down just to one coin, if we just talk about the kind of digitization, tokenization, stable coins and so on. So I'm a big believer in what has been achieved by some of the stablecoin companies. I think the efficiency they bring to the market, to areas of the world which didn't have access to hard currency currency, and were beholden to their domestic currencies, which often had trouble, I think is actually a really great tool for society. As long as it's managed, there's no fraud, there's no corruption, et cetera, et cetera. And so far, so good on that front. So I think the digitization of these assets, whether it's the tethers or the state or the circles or these other things I think it's a really great tool. But I do think we're going in the direction of people being able to spend digital currency much more efficiently than paper currency. And I think that we will get to a time when we're already seeing it. I don't know how many coins you have in your pocket or cash, but probably a lot less than you would have had 20 or 30 years ago. And so everyone's touching their telephone to go and pay things, and you happen to be spending a pound or a euro or a dollar. What's wrong with spending a digital item instead of that? And so I think that's going to happen with far greater frequency. And so whether that digital item is a Bitcoin or whether it is a tether, a UST bill token, or whether it's a circle item, I think that is absolutely coming. And then the next logical leap beyond that is to spend equities. So if you're saving in equities and you have a fractional ETF that's tokenized to be able to spend that. So spend a little bit of S&P 500 or a little bit of FTSE 100 or whatever it might be. It's not a small jump. Sorry. It's a very small jump to be able to get to that. There's probably a lot of administration that I don't know about to be able to do that and then have a CGT statement at the end of the year. But it means that your cash isn't sitting in cash in a digital form. It's actually sitting in an investment. And if you wake up in the morning and you, sir, FTSE 100 is up 3%, your coffee costs 3% less in terms of your money because you're able to bring that forward and spend it that way. And I think that's a logical next step in terms of the kind of increased digitization of the global economy.
- [31:56]
Marin Talks Money Host (Merryn Sumset Webb)
That'd be fascinating. But all that, when you talk about that kind of thing, and whenever I hear anyone talking about stablecoins and how much more pervasive they're becoming, and the rise of AI, of course, will mean that stablecoins will be used much more in that area, that always sounds to me like an argument against Bitcoin as an asset. Because most of the arguments that we've heard over the years, all the stories that we hear about the constantly moving story about why bitcoin will be the asset, they're all done by the stablecoins.
- [32:24]
Evie Hambro
Yes, but the stablecoins is a format. So it's an ability for you to be able to spend the item and the item can be.
- [32:30]
Marin Talks Money Host (Merryn Sumset Webb)
No, I understand that. But nonetheless, when you've been told about bitcoin, it's very often about exactly that. It's important because of people who can't hold dollars in their home countries, for example. It's important to give people in emerging markets access to an easy way to transact across borders. All these stories. Yeah, they're very much taken care of by a stablecoin.
- [32:47]
Evie Hambro
Yes, it is probably without the extreme
- [32:49]
Marin Talks Money Host (Merryn Sumset Webb)
volatility that you get with.
- [32:51]
Evie Hambro
Well, I think with the stablecoin you wouldn't want any volatility because you just want it as flat, as close to one as possible. But I think the underlying.
- [32:56]
Marin Talks Money Host (Merryn Sumset Webb)
Yeah, but you have the volatility of the dollar. You have the volatility of the dollar,
- [32:59]
Evie Hambro
which is a different thing. So I think whatever you, whatever sits behind the stablecoin is going to have the volatility and that could easily be bitcoin. If you don't believe in dollars, when you believe in bitcoin, then how you're going to choose to have the item that sits behind. Some people might decide to have treasury bills or gold or silver or pounds, probably not pounds, but lots of other things that might sit behind it. I'm fully of the view that we're going to go into this much more digital economy.
- [33:24]
Marin Talks Money Host (Merryn Sumset Webb)
Interesting. Let's go back to the hyperscalers briefly while we're talking about modern exciting technology stuff. One of the things that I have heard several times recently and I will do, I've asked someone on to do a separate podcast about this in a of weeks, couple, couple of weeks is that the current LLM model isn't working and has hit a ceiling. And that it may be that a lot of the work and energy being put into giant data centers and the energy that they require and all these things is entirely unnecessary. And five years out we will all realize that we've gone down the wrong road. And the alternative road about, about which I so far know almost nothing, is much less energy intensive, much less metal intensive and has no need for giant buildings full of service. If that is the case, that does have a knock on effect across commodities
- [34:15]
Evie Hambro
abroad, if that was to be the case, it would have an impact, but it's a question of time. All I can reference is what I've read and consumed and started to understand. And so when I listen to some of the podcasts by some of the hyperscalers, Elon Musk's and so on and so forth. They see no let up in space based on improvement, which is effectively just one word to describe what you've said for many years to come. Even Elon Musk when he talks about this, references with the building of solar panels in space and data centers on the moon and all this kind of thing that's years away into the future. The AI arms race is today and if you listen to the quotes that they will say, it's not about chips, it's about power and property and power, that's effectively everything we've spoken about in relation to rising energy demand and all of the associated materials consumption growth that comes with that property is about the construction of these things, which again is materials intensive. So you look at that journey for the next five plus years into the future, it's a very exciting time. Now that's mispriced by the market after the volatility that we've seen. Five plus years from there, it's probably still going to be the case. You're not going to rely on everything in space. There's also a limit in terms of how much you can get up there. Improvements, there's definitely going to be improvements. The world is constantly improving in terms of technology and we will get more energy efficient, et cetera, et cetera, into the future. But again, that's far away and people don't want, want to lose the race in the short term. So I think the spend is going to be resilient many, many years into the future and then there might be some kind of step change and so on and so forth. And if that's the case, that's great because then we've got an enormous amount of capacity that's built that's going to be able to do things even more efficiently. So therefore there's going to be more tokens consumption and there are going to be more tokens going to be generated, which means you're going to still need more capacity. And when you look at the amount of tokens that people need for certain tasks, it goes up pretty exponentially. So you and I sitting there playing on our AI at home and building, building an app, that's one thing, but a robot trying to replicate what a human does, the amount of tokens that you need there is just simply extraordinary. And so that change in token consumption is very far from being built. So I think the amount of capacity that we need to add globally, even with efficiency and improvement is massively underestimated is what I'd say.
- [36:27]
Marin Talks Money Host (Merryn Sumset Webb)
Okay, so exciting times for investors in
- [36:30]
Evie Hambro
mining, I think it's exciting times for. For some parts of the economy, I think it's very scary. For other parts of the economy, I think it's very scary for employment, I think it's very scary for society, I think it's very scary for government tax receipts, I think it's very scary for lots of different things. When we look back into the past, when technology's come along, there have been periods of interruption and then things tend to bounce back from that period of interruption. But this does feel like it. Big one.
- [36:59]
Marin Talks Money Host (Merryn Sumset Webb)
Luckily, you can hedge all those downsides by holding a nice portfolio of copper, tin and zinc.
- [37:04]
Evie Hambro
Yeah, we'd like to think so. Certainly the foundations are there for that.
- [37:08]
Marin Talks Money Host (Merryn Sumset Webb)
Evie, before you go, there was one thing I wanted to ask you. What are you reading at the moment?
- [37:14]
Evie Hambro
I have got an answer to your question, but it's not one you probably expect. My daughter is likely to be performing in Cold Comfort Farm, and I've never read Cold Comfort Farm. So one of my books that I'm reading this holidays is Cold Comfort Farm so I can talk about what role she's going to play in in the autumn. So that is definitely on my list.
- [37:31]
Marin Talks Money Host (Merryn Sumset Webb)
Yeah, that is exciting.
- [37:34]
Evie Hambro
Yeah, it's a very different one for me and normally it's business and biographies, but this is going to be a real departure.
- [37:41]
Marin Talks Money Host (Merryn Sumset Webb)
Excellent. We'll talk about that next time we meet. Thanks very much.
- [37:44]
Evie Hambro
Okay, thanks. Bye. Bye.
- [37:48]
Marin Talks Money Host (Merryn Sumset Webb)
Thank you for listening to this week's MarineTalks Money. If you like our show, rate, review and subscribe wherever you listen to podcasts and keep sending your questions or comments to marinmoneyoomberg.net, we'd love to know how much of your portfolio is in gold. You can also follow me and John on Twitter or x. I'm at MarinesW and John is Johnstapek. This episode was hosted by me Marin's Upset Web. It was produced by Summer Sadi Roses Andam and Eleanor Harrison. Dengate Sound designed by Blake Maples and Aaron Casper. And special thanks, of course, to Evie Hambro.
- [38:28]
Bob Pittman
Hi, I'm Bob Pittman, chairman and CEO of iHeartMedia, and I'm kicking off a brand new season of my podcast, Math and Stories from the Frontiers of Marketing. Math and Magic takes you behind the scenes of the biggest businesses and industries while sharing insights from the smartest minds in marketing. Coming up this season on Math and Magic, CEO of Liquid Death, Mike Cesario.
- [38:48]
Evie Hambro
People think that creative ideas are like
- [38:50]
Podcast Narrator (Math and Magic / Grainger)
these light bulb moments that happen when,
- [38:52]
Dr. Guy Winch
when you're in the shower where it's
- [38:53]
Evie Hambro
really like a stone sculpture.
- [38:55]
Podcast Narrator (Math and Magic / Grainger)
You're constantly just chipping away and refining.
- [38:58]
Bob Pittman
Take two Interactive CEO Strauss Selnick and our own Chief Business Officer, Lisa Coffey. Listen to math and magic on the iHeartRadio app, Apple Podcasts, or wherever you get your podcast.
- [39:08]
Joel Dommet
Joel Dommet, shall we tell these wonderful people about the new business that we're starting?
- [39:12]
Evie Hambro
Good idea, Ben Shepherd.
- [39:14]
Joel Dommet
Especially if you want them to come along for the ride. He's exactly what we want. Quite simple, simply, we are starting a business. We're starting a brand. This is not going to be a television show. There's no bright lights, no makeup. This is very, very real, man. We've got no idea how to do it. But we are going to share the whole journey with you right here on our brand new podcast, the Businessmen Podcast, out now.
- [39:38]
Podcast Narrator (Math and Magic / Grainger)
If you work in university maintenance, Grainger considers you an MVP because your playbook ensures your arena is always ready to for tip off. And Grainger is your trusted partner, offering the products you need all in one place, from H Vac and plumbing supplies to lighting and more. And all delivered with plenty of time left on the clock. So your team always gets the win. Call 1-800-GRAINGER visit grainger.com or just stop by Grainger for the ones who get it done.