← The Master Investor Podcast with Wilfred Frost
The Master Investor Podcast with Wilfred Frost
Jim Mellon: Why I'm Loading Up On Energy Stocks
00:41:11
Loading summary
Transcript57 lines
- [00:00]
Jim Mellon
So there's all sorts of reasons why, you know, gold and silver had gone up, but I did not expect it to go up as much as it did and it was a four year call for me. So it's worked out very well. And you know, sometimes you take your, you don't save for the last dance. And that's my philosophy. So if I said that we have reduced our position in gold and silver exposure by 80%, I think that would be about accurate. Those seven stocks represent about 40% of the market capitalization of the S and P, which is just a huge and very dangerous concentration risk at a time when they're all doing essentially the same thing. I wouldn't be playing in that area because there's plenty of. My view in life is that, you know, you don't need to be in the game that everyone else is playing. There's plenty of other things to do and that's what I try and do. What's the next unloved sector, as gold and silver were four years ago, that will actually pay you to be part of it and get dividend yields in most oil and gas stocks of any note that is very lowly represented in the S and P and in other indices around the world. And of course it's oil and gas. And so we've been loading up, I mean literally loading up on oil and gas.
- [01:18]
Podcast Host
Welcome to the Master Investor Podcast with.
- [01:20]
Wilfred Frost
Me, Wilfred Frost, where we celebrate and.
- [01:23]
Podcast Host
Learn from the success of the greatest investors, business leaders and politicians in the.
- [01:27]
Wilfred Frost
World, giving you our listeners the edge and a very happy new year to you.
- [01:33]
Podcast Host
The Master Investor Podcast is sponsored by BNY Investments, LSEG and Interactive Brokers. Please do remember the views expressed in this podcast are for general information purposes only. Nothing in the podcast constitutes a financial promotion, investment advice or a personal recommendation. More on that in the show Notes. I'm delighted to welcome back to the.
- [01:59]
Wilfred Frost
Master Investor Podcast my good friend and podcast founder, Jim Mellon, the chairman of the Burn Bay Group and nobody. Jim, I would rather kick off the new year with more than you.
- [02:11]
Podcast Host
Welcome back to the Master Investor Podcast and Happy New Year.
- [02:15]
Jim Mellon
Happy New Year to you wealth. And thank you very much for having me on. And hi from the wintry isle of Man.
- [02:23]
Wilfred Frost
Well, I know that the weather and it's wintry here in London as well is what's prevented you from being here in person. But great to catch up either way, as it always is. So much for us to get to and including some of the most more specific latest developments relating to Venezuela. Cause I Know, energy is a big theme you want to touch on, but I wanted to start by talking about gold and silver, which for me were the stories of 2025. And I know they're a theme that you've been incredibly bullish on for a number of years.
- [02:56]
Podcast Host
I guess the first question is, did you expect quite such a big rise.
- [03:01]
Wilfred Frost
As we saw in gold and silver last year?
- [03:04]
Jim Mellon
Actually, no. I mean, to be quite honest, when we conversed at the Master Investor show last year, I think we kind of came to a consensus that gold over 3,000 was a likely prospect, but now it's 4,400. That is significantly higher than I would have thought. And silver was, as you remember, I was kind of rotating a bit out of gold and into silver. The move in silver has been absolutely extraordinary and I didn't expect it to go this far. So actually I've been trimming my gold and silver positions and we don't have. We still have quite a reasonable exposure, but we don't have as much as we once had. And I've got new pastures to. To plow at the moment. So. Yeah, I mean, I. I'd be very happy to go through the reasons why I think gold and silver might be overdone. Overcooked. Well, if you so wish.
- [04:01]
Wilfred Frost
No, I'd love to. I mean, I think, look, kudos for a great call either way over the last couple of years, because they've. They've really taken off. Why do you think, first of all, they rocketed quite to the extent that. That they did, because there's a sort of simple argument which is G7 economies are monetizing the debt and then there's a sort of bigger fear of is the financial markets going to implode? That the move we saw at the end of the year would almost imply the latter.
- [04:29]
Podcast Host
Unless it's just a trading squeeze and.
- [04:31]
Wilfred Frost
That'S why it was such a big surge.
- [04:33]
Jim Mellon
Yeah, I mean, they're all good points and I imagine there's an element to all of them in the recent performance. As we know, central banks, and particularly China have been buying up gold, I think, for two principal reasons. One is that they are worried about confiscatory risk, having seen what's happened to Russia and its assets stranded in Belgium. And secondly, they are, in the case of China, I think, deliberately trying to de. Emphasize the importance of the US dollar relative to the yuan. And by buying gold at the expense of US Treasuries, are doing exactly that, which actually kind of neatly leads to one of the factors I Think why Maduro was captured and the United States took such strong action against Venezuela is that actually Venezuela was selling its oil to China in yuan and the US doesn't like that. It wants dollars denominated oil sales wherever possible. So I suspect that was another factor that went into what happened in Venezuela. And then you've got massive retail demand. I mean, there's basically gold and silver are now on everyone's lips, taxi drivers to people in the coffee shop and so forth, all talking about gold and silver. Now, I'm old enough to remember when Bunker Hunt cornered, supposedly cornered the market in silver in the early 1980s and people were lining up to melt down the family silver. In those days, silver was priced at a level which is actually significantly above the current level if you adjust for inflation. So it's entirely possible that silver could go a fair bit higher, although I wouldn't want to be taking that particular bet myself. But you're going to start seeing people cashing in their physical holdings of gold and silver, I think relatively soon and that will put pressure on the market. Also, the central bank positions are fairly opaque. We don't really know who has what. We know that there was a significant amount of arbitrage at the time of the tariffs or pre tariffs when gold and silver was being repatriated to the United States because they wanted to avoid paying tariffs or potential tariffs on gold and silver, which actually ultimately didn't happen. And we also know that people are concerned about persistent inflation and loose monetary policy, particularly in the United States until relatively recently. So there's all sorts of reasons why gold and silver had gone up, but I did not expect it to go up as much as it did and it was a four year call for me. So it's worked, worked out very well. And you know, sometimes you take your, you, you don't say for the last dance. And that's my philosophy. I, I don't believe in leverage in markets. I don't want to be leveraged and unable to sleep. And I also don't believe that you should stay till the very last minute because sometimes you misjudge that and then you really get caught short, you know, caught badly wrong. Basically.
- [07:54]
Wilfred Frost
With that in mind, I'm, I'm interested that you kind of said you reduced rather than close your position. So it's just relative to 12 months ago, how much gold and silver have you got? Is it halved? Is it much lower than that?
- [08:06]
Jim Mellon
Oh, well, my main position in gold and silver was through a company called Metals Exploration, which was, is A London listed company that took over a company. I was the largest shoulder in Condor Gold and it was a very significant position and it became even more significant and so I've been producing that and I, I still have shares in that but not like a, a fraction of what I had but I've got significant deferred compensation through that company as well in the form of milestones which are, you know, sort of related to the gold price and we also have, you know, gold and silver positions through other stocks as well but not nearly as much. If I said that we're down, we're not down but we have reduced our position in gold and silver exposure by 80% I think that would be about accurate and I found a new place to play and we've been significantly increasing.
- [09:00]
Wilfred Frost
Our positions there in gold and silver. Sorry or a new theme altogether in energy. Yeah, so I want to get to energy because I know you want to talk about it but before I do, and there's lots of tangents to go off on with energy, let's pause and reflect on the market overall and AI in particular because I know that's feeds into your bull case on energy. As we sit here today do you think AI stocks are going to correct a bit this year? Are they going to be steady? Are they going to collapse even? What scale of fear do you have towards their valuations?
- [09:36]
Jim Mellon
Well, I've been wrong about their. Well is it continued upward march? I suppose that they've kind of run out of esteem recently but I've been wrong about the fact that they've held up so well because I think there's a sort of involution as the Chinese call it, competition going on there where they're all competing to do essentially the same thing and spending vast amounts of money. And we know, I know all the arguments about the fact that these companies and we're Talking about the Mag 7 essentially here are making lots of cash and therefore they can afford all the build outs but actually they are building up leverage as well and one of the companies in particular, Oracle, is actually very stretched indeed as you can tell from the cdss which is the insurance on its bonds that have gone through the roof relatively recently. The stocks are way over owned. It's difficult to know who else is left to buy them and that's particularly because of the shepherding of investments via ETFs which are now 50% of the US market into the biggest stocks as that's the way the ETF market works and also the remarkable growth and by the way there are more ETFs in the US now than there are listed stocks in case, which I think is absolutely remarkable. And also the single option options, which are, you know, one day options which have become absolutely monstrous in the US particularly through platforms like Robin Hood. And so, you know, again, these are companies that are probably in better shape than the big companies were at the height of the dot com bubble. So they may have further to go. But frankly speaking again, it gets back to my thing. Leave the party before the last of the punch is drunk and the hangover sets in. And the valuations, by whatever measure you want to look at them, are extremely stretched. So another way of looking at this is that those seven stocks represent about 40% of the market capitalization of the S and P, which is just a huge and very dangerous concentration risk at a time when they're all doing essentially the same thing and they're all selling to each other and all creating liabilities and assets which, you know, may or may not ever get paid off. We just don't know. But I wouldn't be playing in that area because there's plenty of. My view in life is that you don't need to be in the game that everyone else is playing. There's plenty of other things to do and that's what I try and do.
- [12:17]
Podcast Host
This episode of the Master Investor Podcast is brought to you by lseg, the leading global financial markets infrastructure data and analytics provider. To learn more about how LSEC connects businesses, investors and markets worldwide, visit lseg.com.
- [12:40]
Wilfred Frost
Let's touch on energy then, because I guess AI is in part driving that call on energy.
- [12:48]
Jim Mellon
Yeah, I think whatever my views on the AI stocks, there's no doubt that there's going to be huge amounts of build of data centers. And we can talk about data centers actually later on if you want, because I'm not sure that they will have the Same validity in 10 years time as they do today. But anyway, people building up these huge, massive, great big data centers, sometimes with their own power grid attached, in other words, independent power grids for the specifically huge data centers, particularly in the United States. And there just isn't, as we know, there isn't enough grid capacity in the US and there isn't enough energy. So if you believe that by $2034 trillion will be spent around the world, largely in the US and in China, on data centers and their build out, which is bigger than the UK economy in terms of size, they're going to require an additional 20% added to the current electricity supply in the United States. China is in a much better position vis a vis energy costs and also energy availability. Now there is not a single nuclear power station being built in the US there's lots of announcements and talk about it and all that sort of stuff, but there's not one station that's being built. And China is building somewhere between 28 and 30 nuclear power stations at the moment by comparison. So uranium nuclear are going to be part of the solution, but not for five to 10 years. In the meantime, it's got to be natural gas, oil and unfortunately coal that are going to take up the slack. And everyone has been down on energy for quite a while. And you know, everyone talks about the oversupply, everyone talks about, you know, the fact that, you know, well, the world is moving to electrical and all that sort of stuff, but electrical requires power as well. So I just thought, right, okay, I've done very well in gold and silver. What's the next unloved sector as gold and silver were four years ago that you know, will actually pay you to be part of it and get dividend yields in most oil and gas stocks of any note that is very lowly represented in the S and P and in other indices around the world and is a super important industry despite everything. And of course it's oil and gas. And so we've been loading up, I mean, literally loading up on oil and gas in November and December. And I'm very pleased to see the action of oil and gas stocks after Venezuela because over the weekend people were saying, well, are they going to go up, are they going to go down? No one knew because it shows that maybe Venezuela can increase its oil and gas production or that will take years. But it also shows the unstable environment that we live in geopolitically around the world now, which may cause serious issues for oil and gas sometime this year. So I thought, okay, right, we're on the right track now. The stocks moved in the right way, they are under owned and this is going to be the big area of concentration this year in a positive sense. So I suggest loading up on oil and gas. And we've got a big long list of stuff that we've been buying.
- [16:09]
Wilfred Frost
So I want to get into a little bit there. What are some of the core recommendations there of what you have been buying? I mean, I totally get your point that these are cheap on a P basis certainly compared to the Mag 7 and they haven't performed like the Mag.
- [16:23]
Podcast Host
7, but they're not as unloved as.
- [16:24]
Wilfred Frost
They were coming out of the pandemic, for example. So what are the kind of core plays that you've loaded up on?
- [16:33]
Jim Mellon
Yeah, so the most oil and gas companies don't just make the big. The majors don't make their money just by pumping oil out of the ground and selling it. They are making money off refining, they're making money off trading, they're making money off petrol stations, they're making money off all sorts of other stuff. And so they have a relatively stable. I mean, it does move with oil and gas prices, obviously, but it doesn't move as much as you would think, as, for instance, with a gold or silver miner, which are highly geared to the price of those commodities. So there's a, generally speaking, a greater degree of stability in these stocks. And, you know, in the UK majors, for instance, you're getting about a 5% dividend yield on something like BP or Shell, which is, to my mind, extremely attractive in the current environment. So we've been buying, and I've just got a little list here, so I'll look over to the list. We've been buying bp, we've been buying Adnoc Gas in the uae, we've been. We've been buying Equinor, which is a Norwegian oil and gas company, Santos in Australia. We've been buying Jersey Oil and Gas, which is a speculative North Sea oil play, because I do believe the UK is going to have to let them drill, baby, drill. It makes, you know, I can't believe that the Miliband madness is going to persist for much longer. We've been buying First Trust National Gas etf, which is a US ETF with a good balance. We've been buying some of the renewable funds which yield very heavily actually, and particularly in solar. So foresight solar fund, very high dividend yield and it looks like it's going to be a winner. Internationally diversified, We've been buying iShares Europe Energy, iShares Global Energy, Renewables Infrastructure and Vaneck Oil Services. And I would add that Schlumberger and Baker Hughes look like good buys as well, relatively inexpensive, and those companies will be actively involved in reformatting the Venezuelan oil industry going into the future. So, yeah, it's quite a lot we've been buying.
- [18:44]
Wilfred Frost
It's an impressive and focused list there, Jim. And of course, a reminder to state the office, Jim clearly has positions in those stocks which he's just mentioned, and nothing you hear on the Master Investor podcast should be considered direct financial advice. A final question then on energy, Jim, specifically Venezuela, I mean, what did you make of that action over the weekend? And I guess we're two, three days on. It's clear that, I mean, two things I would think, for the investment landscape. It's clear that you can't boost production quickly and it's also clear that removing one leader doesn't automatically drastically change the outlook of the country. So what impacts do you think this will have or is having on that investment call for oil and other areas?
- [19:30]
Jim Mellon
I mean, as I said, I think the Venezuelan, the reaction to the Venezuelan action, whatever way you look at it, and I personally think it's a good thing to be doing, frankly, as long as it doesn't go on to all the other countries, indicates that there's potential for great instability in the world. And therefore one of the great hedges is of course always oil and gas. And so the action of the stocks is very encouraging indeed as far as Venezuela is concerned. My reading of it is it will take at least five to 10 years before they can get back up to what they had, which was about 3 million barrels a day of production, which in the context of over 100 million barrels a day is not massive, but it's enough to change things at the margin. But we also know that it's very heavy oil. The US has got lots of spare capacity for heavy oil. The US is probably at peak shale and is not buying as much oil from Canada, which is heavy oil as well. So this is a nice bolster for U.S. refining capacity. About 70% of refiners in the U.S. can handle this sort of oil. And so, you know, there's a lot in it for the US and US companies here as well, I think, which is why we have quite a lot of US stocks in. This particular list that we've been loading up on.
- [21:03]
Podcast Host
This episode is sponsored by BNY Investments. BNY Investments is part of bmy, a global financial services company supporting investors and institutions around the world. This sponsorship does not constitute investment advice.
- [21:25]
Wilfred Frost
I wanted to touch on another topic. I know you're hot and you mentioned it last time you joined the podcast in September and that's robotics. Since then you've brought out a book on the topic, specifically on robotics to flag all of the kind of by cases, the bull case for this theme.
- [21:43]
Podcast Host
I learned a new phrase reading this.
- [21:45]
Wilfred Frost
Book, Jim Moravec's Paradox, which is the idea that computers excel at high level cognitive t but struggle with physical tasks, that humans find simple things that we can do with our hands, essentially. And one of the key arguments in your book is that paradox will go away. Because AI, even if you're not constructive on the stocks, AI is drastically changing what these robots can do.
- [22:14]
Jim Mellon
That's true. In fact, this is probably one of the best, if not the best use of AI that there is. But it's going to take time. I mean, I don't know if you know, but if you buy a unique tree, which is a Chinese robot and you're doing a demonstration with it to, you know, show off its so called skills, there's probably going to be someone in China who's telling it what to do because it's just not good enough yet to be self referential, to do what, you know, what is expected of it. They're just not good enough yet. And that's going to take a bit of time. But in that process there is going to be massive development and a lot of money made and probably most of that money will be made in China because China has really everything that's required for robotics and it does manufacture at such a remarkably low price compared to the United States. So by preference, you know, if you look at the US so called robotics companies, Tesla Nvidia has announced that it's going to be involved in robo taxis as of today or the CES conference in Las Vegas today you've got Amazon is already in robotics and Meta wants to be in robotics as well, having given up on the Metaverse. So I but I think that first of all the businesses of robots in those companies is going to is swamped by their other businesses and by their huge need for capital to build out the hyperscaling data centers. And in China you've got hundreds if not thousands of companies making little bits for robots and you've got some large scale companies as well. So if you want to look at the number one area for robots at the moment, that's robo taxis. They are taking off in the US but they're also taking off in China in an even bigger way. And the competition now is going to be in London between Waymo, which is the Google subsidiary, which may actually have a separate listing sometime this year. I read that would be a very interesting stock to look at actually, I have to say. And then Baidu in China, which is an old Internet Yahoo type company in China, but happens to be probably the leader in robo taxis in China, which makes it very interesting because there is no reason why we won't all get into robo taxis within five years. Why would we get in with a human driver when the robo taxis are Basically safer. They are definitely cheaper to operate, at least at scale. They will be cheaper to operate and they'll be much more profitable for the operators because they don't have to pay the drivers.
- [25:03]
Podcast Host
I'm interested that you're bearish, as you.
- [25:06]
Wilfred Frost
Said at the top in the Mag 7, because I don't think that China can dominate the world at robotics. I don't think the US for sure would let them in. And as you sort of point to Tesla's kind of the pure, pure, most pure play robotics, both for taxis and other applications, robotics play in, in the world, probably outside of China.
- [25:31]
Jim Mellon
Well, I mean, if you look at Tesla, you know, he hasn't yet got his functioning humanoid and I can explain that humanoid doesn't necessarily mean taking a human shape, but his humanoid robots working properly. And in Robo taxis, he's been promising the same for a long time. And as yet, Tesla is way behind Waymo. And Tesla may be in some ways cheaper to operate than Waymo because It doesn't use LiDAR, it uses camera sensors. But Tesla's had quite a, you know, a lot of it's been a bit accident prone. I don't know, maybe he'll pull it off. But you are paying more than a trillion dollars for the benefit of being invested in Tesla, which has got a car division that is under severe threat from the Chinese. I don't know if you saw that Tesla's deliveries were down 16% in the last quarter internationally. And having a car business which is going down in terms of deliveries is adding a huge big fixed cost that would drag. And I think any upside that they've got in it for the, for the near term in terms of earnings with Robo Taxis, if they can successfully challenge Waymo Wave in the uk, Baidu in China and so forth for some time to come. So it's all a question of price. I mean, you know, I think all of those companies are very attractive at the right price, but the right price is probably 50% below where we are today. And will it get to be 50, 50% below? I think so. I think so. I mean, I listened to the very interesting Dan I podcast he did the other day and he's obviously mega bullish and all this stuff and he may be right. But you know, to me, with the whole US market at a CAPE adjusted Schiller CAPE adjusted PE ratio of 40 times forward, and these particular stocks are, you know, varying multiples, but in the case of Tesla, vastly higher multiples. It's just not a game I want to play when there is opportunity elsewhere. Now, the other thing is that US investors typically can't invest in these Chinese companies, but if you are based in the uk, you have a better chance of investing in these Chinese companies. So we'll find investments in the us, we'll find investments in Europe, we'll find investments in the uk, but we are also going to be focused very heavily on China and ways to play the Chinese situation. I know all the stories about you can lose your money in China, etc, etc, but there are ways of investing in China through Hong Kong as an example, Shanghai Connect, which make it or Shenzhen Connect make it safer to do so. And we're going to be very, very careful in the way that we make our investments. But that is going to be a major focus for us in the coming year. And I, I do concur with the investment banks, mostly out of the us that say that the robotics market will be bigger than any other market in the world, including food, including transport, including, you know, apps and all that sort of stuff by the year 2040. I think that is absolutely true. We will all need robots in our life. We'll all have robots in our life. What form they take and how they work is yet to be determined, but they will work and we will all be avid users of them. I can't think to get my first one.
- [29:05]
Wilfred Frost
I'm not sure I ever want one, but I'm sure I will at some point.
- [29:08]
Jim Mellon
I'm getting you one for Christmas.
- [29:09]
Wilfred Frost
Oh, God, for Christmas. Christmas is a long way off, at least. So there we go.
- [29:21]
Podcast Host
The Master Investor podcast is sponsored by Interactive Brokers. Building wealth starts with the right broker. And Interactive Brokers helps you reach your goals with powerful tools, global market access, low costs and unmatched financial strength. That's why the best informed investors choose IBKR. Learn more at ibkr.com masterinvestor. So let's touch on China more broadly.
- [29:53]
Wilfred Frost
And I'm interested just on the currency because it's been appreciating. Obviously it's fixed or managed, so it's been allowed to appreciate by the Chinese authorities of late. Is that a healthy thing? Is there more to come? Put the bullish robotics argument aside. What's the snapshot on the Chinese economy overall?
- [30:13]
Jim Mellon
Well, it's got serious deflation. The property market is still in a huge mess. It won't be fixed until at least 2030. And even then there's still going to be, you know, thousands and thousands and millions of unsold, unoccupied flats and ghost towns. Everywhere the Chinese rate of economic growth is, rather than the stated 5%, is somewhere between 2 and 3. I think you probably see the same stuff that I see on that, and that's, you know, leading to a lot of unemployment or underemployment, particularly in the youth. And so. But those are the negatives for China. On the other hand, China's been exporting what you might call deflation as a result of its severely undervalued currency to the rest of the world and now has a $1 trillion trade surplus internationally. And its exports to the United States have been de emphasized. Only 10% of China's exports now go to the United States. So, you know, despite all the tariffs and everything, it doesn't seem to be having any dent in China's overall export performance because its currency is so severely undervalued. So, I mean, I was reading the other day that if you take an Uber in New York from JFK to a hotel in Manhattan, it will cost at least $100, if not more. In China, the similar ride is 100 yuan. So that's 1/7 the price. And similarly across the board, almost everything in China is 1/7 the price of the equivalent in the United States. So the currency is massively undervalued. And as you brightly point out, the Chinese government can force it upwards. And I don't think Trump is going to be against that because obviously one of the key reasons why there's such a big trade deficit is because the currency is undervalued. And of course the Chinese want to encourage the use of the yuan in all sorts of transactions around the world to de dollarize the world at the expense of the United States. And so we're in an interesting situation there. But, you know, the average person putting money on yuan in deposit is just not possible. And indeed there isn't a yuan sort of forward market that you can play very successfully. You can buy options, but they're expensive. So it's just one of those trades that is a one to watch, but it's not, it's not possible for most, most of us investors. Whereas the Japanese yen you can buy, and I think the yen is going to be a good proxy for the yuan. And the yen is by any measure severely undervalued. And I think we' go up possibly 20% this year, but I've been saying that for a couple of years. So, you know, again, you kindly pointed out that gold and silver was a great call and they were my major calls. But you know, I've been Pointing out the yen's an interesting currency to, to hold. And here we are, it's not moved in the last year and there's no interest on it. So it's not been a great trade at all.
- [33:04]
Wilfred Frost
Just give the the bull case for that quickly. Because a lot of people point to how yields are suddenly rising in a worrying way in Japan, as if a financial crisis is about to unfold. But is that in fact part of the attraction to the yen going forward, higher yields?
- [33:20]
Jim Mellon
Yes, I think so. I mean, the lady who's come in as Prime Minister is sort of quite keen on pump priming, which is basically like blowing air into a dead horse because they've been doing that for so long, it just doesn't work. But they are getting inflation in Japan and that's one of the reasons why the long end of the bond market is RIS in terms of yields. And you're getting up to over 3% actually. And the longest Japanese bonds now, which is way, way higher than they were just five years ago. And the bank of Japan is quite aware of the pump priming problem, so it's going to be doing some quantitative tightening. In fact, it is doing some quantitative tightening to offset that. So I'm not concerned about a full blown blown sort of debt crisis in Japan because actually almost all the bonds are either owned by the bank of Japan or they're owned by the domestic market. And there's not a big foreign influence there, but what there is is a massive amount, by far the biggest amount in the world of Japanese savings that are overseas, particularly in the United States. And they, the Mrs. Watanabe, the fictional, you know, hero of the Japanese savings market, is very exposed to these international investments. If there is actually a turn in the end, and who knows how it will happen or when it will happen. And I've been waiting like Godo for a long time for this. If it does turn, you'll see a very quick appreciation in the end. One of the reasons why Japanese tourism has been absolutely booming and everyone and their dog has been on a trip to Japan in the last couple of years is because things are really cheap in Japan compared to, you know, the US or in Europe. And I think you can probably remember, I certainly can remember, you know, 10, 15 years ago, Japan was considered to be an ultra expensive destination to go. And now it's the opposite, it's really cheap. So this is a proxy and if, you know, the yield curve flattens a bit in Japan and you start to get interest on short dated instruments in Japan or even on bank deposits of some significance, 1, 2, maybe even 3%, then the yen will become even more attractive and people like you and me can just put yen on deposit as opposed to having to put it into pounds or into euros or into dollars.
- [35:48]
Wilfred Frost
As we start to wrap up, Jim, I wanted to flag of course to everyone that you've got your big in person show, the Master Investor Show. It's in London on Saturday 25th April. People can sign up@masterinvestorshow.com it's the best in person investing event in the UK every year. It's also the biggest, isn't it Jim?
- [36:08]
Jim Mellon
It is and it happens to have the big attraction of one Wilfred Frost in conversation with me, which is one of the highlights of my year, if not the highlight of the year. And I'm really looking forward to it. And you know, we will certainly have over 6,000 people there and the range of speakers is going to be incredible for this year. And if I can do it, I'm going to try and get one of those, you know, more sophisticated, not, not one of those sort of, you know, pepper type robots or cinema robots that sort of goes around, does nothing get one of the more sophisticated robots along, if not two or three of them to demonstrate just what we can all look forward to and particularly you, Wolf, at, at Christmas time I was gonna.
- [36:53]
Wilfred Frost
Say I'm not taking one home with.
- [36:54]
Jim Mellon
Me.
- [37:00]
Wilfred Frost
Particularly with your point that it means someone in China is watching. I don't think I want that in my house yet and I want to buy from a different provider in due course. But again, as you said, there's always 6,000 plus people. 25th of April in London. Sign up@masterinvestorshow.com we will be conversing. I'll be doing a few of the other panels but I always just love it's a most of the day event on a Saturday and there's just so much other things to speak to and there's a great crowd of people who love like us investing and learning from each other. So highly recommend that Jim, as we do wrap up start of the year. I mean we've touched on, I know the big themes in detail but as we wrap it all up, what is your overriding tips, bits of advice for people in 2026 when it comes to the markets?
- [37:47]
Jim Mellon
Well, my main thing is always to keep it simple. All right, there's no need to. Diversification is a good strategy but you can be diversified without having 500 stocks in your portfolio. And so I think that de emphasize, probably a lot of people listening to this have made good money in gold, silver, be contrarian, just take a bit off the table and look at energy as an opportunity as well. I think this year will also be a year when the emperor's clothes will be revealed in respect of some of the AI stories. And I would watch Oracle in particular given the rapid rise in the insurance protection against bonds because it is the only one that's heavily leveraged of these big tech companies. And then I would also keep your eyes open for quantum computing and there will be some quantum IPOs. I think this year Quantum is going to be very, very big in the world and we have in the UK a champion in the form of Quantinium, which is the biggest of all the quantum computing companies. And that company, which is headed up by a very good friend of mine, will be going public I think sometime this year for an eye watering evaluation and it's definitely worth watching that. And I would carry on buying UK investment trusts which sell at discounts, particularly those exposed to the domestic economy of the United Kingdom, which I think represents very good value in terms of stock market. And I would, you know, just not get too focused on all the bad things that may or may not happen, but stick to your knitting and carry on saving. And the power of compounding is absolutely remarkable. And you know, in 10 years time we can all be massively rich as a result of all the good stuff that's coming along. But try and buy at the appropriate price, not at the price everyone else is jumping on a bandwagon for.
- [39:48]
Wilfred Frost
Well, Jim, it's always a pleasure to catch up. Thank you for sharing your wisdom. We should mention that Jim does have a position in Quantinium as well, and nothing that you've heard in the podcast should be considered direct financial advice. But Jim, as always, a pleasure to have you on. We look forward to the next time. We look forward in particular to next time in person at the Master Investor show in London on 25 April. And don't forget, next week on the Master Investor podcast will be joined by David Tate of the World Gold Council. Great timing to have him on and touch on some of the points that Jim's just mentioned as well after a phenomenal year for gold. But for now, Jim, once again, thank you so much.
- [40:27]
Jim Mellon
Thank you very much Wilf, and thanks for having me. As always.
- [40:30]
Podcast Host
The Master Investor Podcast is sponsored by BNY Investments, Elseg and Interactive Brokers. Please do remember the views expressed in this podcast are for general information purposes only. Nothing in the podcast constitutes a financial promotion, investment advice or a personal recommendation. More on that in the show Notes this podcast is produced by Paradine Productions and Master Investor, Ltd.
- [40:59]
Wilfred Frost
In association with Birdline Media.
- [41:01]
Podcast Host
If you've enjoyed the show, please do subscribe on YouTube or click follow on your podcast platform and you'll be automatically notified each time a new episode drops.