Welcome to Maren Talks Money, the podcast in which people who know the markets explain the markets. I'm Maren Suset where this week, Jim Read, global head of economics and thematic research at Deutsche Bank, joins me to discuss his latest research which closely examines how US tech stocks have soared so called Magnificent seven American tech chants combined market cap alone would make it the second largest country stock exchange in the world. We talk about whether this level of concentration should be concerning for global stock markets, and of course for you I love for my conversation with Jim. Do say tuned because Bloomberg columnist John Authors is joining me for our weekly debrief. Jim, Welcome, Thank you so much for joining us today.

Welcome to Maren Talks Money, the podcast in which people who know the markets explain the markets. I'm Maren Suset where this week, Jim Read, global head of economics and thematic research at Deutsche Bank, joins me to discuss his latest research which closely examines how US tech stocks have soared so called Magnificent seven American tech chants combined market cap alone would make it the second largest country stock exchange in the world. We talk about whether this level of concentration should be concerning for global stock markets, and of course for you I love for my conversation with Jim. Do say tuned because Bloomberg columnist John Authors is joining me for our weekly debrief. Jim, Welcome, Thank you so much for joining us today.

Thank you pleasure to be here, Right.

Thank you pleasure to be here, Right.

Jim, I want to start with a note you wrote recently called everything Poised to a soft landing except for history. And what I particularly like about this piece is the very first slide percent of Bloomberg articles mentioning soft landing in total articles, It says, and then there's a wonderful chart that says that we tend to mention soft landings a lot. Just before there isn't one. And then there's another chart underneath that that shows that we love to talk about recessions after they've already started, so they're not charts that really show us journalists in the best of light. So I wonder if we could start by talking about why it is that we're usually wrong about soft landings, and why it is that we may well be this time as well, not me, by the way.

Jim, I want to start with a note you wrote recently called everything Poised to a soft landing except for history. And what I particularly like about this piece is the very first slide percent of Bloomberg articles mentioning soft landing in total articles, It says, and then there's a wonderful chart that says that we tend to mention soft landings a lot. Just before there isn't one. And then there's another chart underneath that that shows that we love to talk about recessions after they've already started, so they're not charts that really show us journalists in the best of light. So I wonder if we could start by talking about why it is that we're usually wrong about soft landings, and why it is that we may well be this time as well, not me, by the way.

Then it's a fun kind of icebreaker for the pack. I suppose if you think about it, if you've got an economy that's operating in a relatively normal manner and then it overheats, and then central banks types and policy to remove some of that heat, data will soften, and therefore as it softens, you probably get more and more people talk about soft landing, and the news are mentioned it spike, and then I suppose you've got a question is that the final destination or is it just the pathway to a harder landing? And I suppose the only problem with that graft that I put in my piece is that there's only thirty forty years of data, so you've only really got three or four cycles, and therefore you can't base a whole investment thesis on it. But it's interesting that before the last you know, three or four recessions, you have had a soft landing talk spike quite aggressively, you know, six to eighteen months beforehand. So it has happened in those cases. I don't think we can say for certain it's going to happen again. But soft landing has been all the raised in the last two or three months and doesn't necessarily mean we have one.

Then it's a fun kind of icebreaker for the pack. I suppose if you think about it, if you've got an economy that's operating in a relatively normal manner and then it overheats, and then central banks types and policy to remove some of that heat, data will soften, and therefore as it softens, you probably get more and more people talk about soft landing, and the news are mentioned it spike, and then I suppose you've got a question is that the final destination or is it just the pathway to a harder landing? And I suppose the only problem with that graft that I put in my piece is that there's only thirty forty years of data, so you've only really got three or four cycles, and therefore you can't base a whole investment thesis on it. But it's interesting that before the last you know, three or four recessions, you have had a soft landing talk spike quite aggressively, you know, six to eighteen months beforehand. So it has happened in those cases. I don't think we can say for certain it's going to happen again. But soft landing has been all the raised in the last two or three months and doesn't necessarily mean we have one.

Well, let's talk about the case for a soft landing. I mean that it is definitely the case still that most people believe that not just the US, but across the board there will be a soft landing. And even you know, in the UK recently we have these numbers dropping US into a technical recession and everyone's said, gosh, don't worry. In fact, even a doutsche Bank put out of you saying don't bank, it's a short and small technical recession. I there's nothing to see here, nothing to see here. So what is the case for a global soft landing?

Well, let's talk about the case for a soft landing. I mean that it is definitely the case still that most people believe that not just the US, but across the board there will be a soft landing. And even you know, in the UK recently we have these numbers dropping US into a technical recession and everyone's said, gosh, don't worry. In fact, even a doutsche Bank put out of you saying don't bank, it's a short and small technical recession. I there's nothing to see here, nothing to see here. So what is the case for a global soft landing?

Yep. I think the main case probably rests on inflation falling rapidly enough and making enough progress towards two percent that the central banks can cut rate just in time to stop the lag of policy being too threatening to the economy. And I think that is the key thing inflation. Inflation has fallen quicker than virtually everyone expected over the last twelve twelve to fifteen months. Let's say even the most pullish on inflation probably didn't see inflation coming down as quickly as it has done so. And I suppose that the next point is does it go the last mile towards two percent?

Yep. I think the main case probably rests on inflation falling rapidly enough and making enough progress towards two percent that the central banks can cut rate just in time to stop the lag of policy being too threatening to the economy. And I think that is the key thing inflation. Inflation has fallen quicker than virtually everyone expected over the last twelve twelve to fifteen months. Let's say even the most pullish on inflation probably didn't see inflation coming down as quickly as it has done so. And I suppose that the next point is does it go the last mile towards two percent?

Is always the hardest bit, right, the last mile is always the hardest bet. We guessed on this show. Over the last year or so, we've looked at the history of inflation once it's gone to double digits or close to double digits, and there are so many experiences historically in developed economies of that number coming down maybe you know, four percent, five percent, but then not being able to get through that last bed, and then quite often you see you see it rearing its ugly head again. So getting down to five percent or four percent even feels like the easy bit.

Is always the hardest bit, right, the last mile is always the hardest bet. We guessed on this show. Over the last year or so, we've looked at the history of inflation once it's gone to double digits or close to double digits, and there are so many experiences historically in developed economies of that number coming down maybe you know, four percent, five percent, but then not being able to get through that last bed, and then quite often you see you see it rearing its ugly head again. So getting down to five percent or four percent even feels like the easy bit.

I think that's right. And look, a lot of the models do say inflation it's going to return to two percent within a reasonable time frame, So that would be what the soft landing basis is based upon, and that's where I suppose we can have the biggest debate is that going to happen this time or not? But that is definitely what the soft landing basis is based around.

I think that's right. And look, a lot of the models do say inflation it's going to return to two percent within a reasonable time frame, So that would be what the soft landing basis is based upon, and that's where I suppose we can have the biggest debate is that going to happen this time or not? But that is definitely what the soft landing basis is based around.

But we have slightly lots of confidence in models, haven't we, particularly central bank models. And I know there's lots of talk about her central bank is in the Bank of England in this particular, is going to have a good look at their models and improve them and changes, etc. But there's not been time for that yet, so they're still using the structures that have been phenomenally wrong for four or five years.

But we have slightly lots of confidence in models, haven't we, particularly central bank models. And I know there's lots of talk about her central bank is in the Bank of England in this particular, is going to have a good look at their models and improve them and changes, etc. But there's not been time for that yet, so they're still using the structures that have been phenomenally wrong for four or five years.

No, I think that's right, and I think the I was shocked at how complacent markets were, you know, two three years ago about inflation, given you've just seen the biggest money supply spike since World War Two, And actually, if you look at longer term data, you'd have to go back about one hundred and fifty years to the late nineteenth century to see a spike in money supply bigger than the one that we saw in COVID. So you know, anybody who's got any kind of monetarist leanings that had to have brought proper inflation. So yeah, the market and the markets central banks hadn't really covered themselves in glory on inflation in the last handful of years, So you know, one has to take that into account when you think about predictions of inflation.

No, I think that's right, and I think the I was shocked at how complacent markets were, you know, two three years ago about inflation, given you've just seen the biggest money supply spike since World War Two, And actually, if you look at longer term data, you'd have to go back about one hundred and fifty years to the late nineteenth century to see a spike in money supply bigger than the one that we saw in COVID. So you know, anybody who's got any kind of monetarist leanings that had to have brought proper inflation. So yeah, the market and the markets central banks hadn't really covered themselves in glory on inflation in the last handful of years, So you know, one has to take that into account when you think about predictions of inflation.

Yeah, do you have monagorist leanings, because if you do, you have to believe that inflation is going to continue on its way down, right, because we've seen one of the sharpest sharpest contractions in money supply in a long time.

Yeah, do you have monagorist leanings, because if you do, you have to believe that inflation is going to continue on its way down, right, because we've seen one of the sharpest sharpest contractions in money supply in a long time.

Yeah, And I would say that my biases are that inflation is a monetary phenomena. It's probably a slightly more complicated than that. And I suppose one of the interesting things at the moment is whether you the stock versus the flow. So if you were making a case that inflation might linger a little bit longer, you would probably say that the stock of money in the system is still big enough. You know, from that massive helicopter drop till or three years ago, that even though the flow of money is now contracting, so money supply numbers are negative most of the across most of the important parts of the world, maybe that stock of money, that reservoir of money from the huge stimulus is still there. Kind of around around the system. So that's where it's confusing, and that's stock versus flowing.

Yeah, And I would say that my biases are that inflation is a monetary phenomena. It's probably a slightly more complicated than that. And I suppose one of the interesting things at the moment is whether you the stock versus the flow. So if you were making a case that inflation might linger a little bit longer, you would probably say that the stock of money in the system is still big enough. You know, from that massive helicopter drop till or three years ago, that even though the flow of money is now contracting, so money supply numbers are negative most of the across most of the important parts of the world, maybe that stock of money, that reservoir of money from the huge stimulus is still there. Kind of around around the system. So that's where it's confusing, and that's stock versus flowing.

Yeah, and we keep thinking that people's savings are going to run out, that that stock is going to disappear, but it doesn't, does it.

Yeah, and we keep thinking that people's savings are going to run out, that that stock is going to disappear, but it doesn't, does it.

No. Actually, in the US, where we probably spent a bit more time analyzing this before the revisions to GDP in September, they do annual benchmark revisions. We thought that the stock of excess savings would run out by the end of last year, so you know, six weeks ago. But with the revisions that were seeing our cautpulations meant that xcess savings had another year, So that that again might be one of the reasons why we haven't had a recession yet because there is that stock of excess savings that lingers from from the pandemic stimulus.

No. Actually, in the US, where we probably spent a bit more time analyzing this before the revisions to GDP in September, they do annual benchmark revisions. We thought that the stock of excess savings would run out by the end of last year, so you know, six weeks ago. But with the revisions that were seeing our cautpulations meant that xcess savings had another year, So that that again might be one of the reasons why we haven't had a recession yet because there is that stock of excess savings that lingers from from the pandemic stimulus.

Yeah, and the labor market's still strong pretty much everywhere.

Yeah, and the labor market's still strong pretty much everywhere.

Yeah, I mean, the labor market is a lagging indicator, so one has to be careful. But at the moment that another big I suppose what most people who believe in the soft land in the police degree think is that, you know, the miracle has been the central banks have put the biggest hiking cycle in forty years into the system and it's dealt with inflation and has had no consequence on unemployment, and that you'd have to say that's true. But is whether unemployment is a lag and indicator or not on history says it is, so you shouldn't take too much from that.

Yeah, I mean, the labor market is a lagging indicator, so one has to be careful. But at the moment that another big I suppose what most people who believe in the soft land in the police degree think is that, you know, the miracle has been the central banks have put the biggest hiking cycle in forty years into the system and it's dealt with inflation and has had no consequence on unemployment, and that you'd have to say that's true. But is whether unemployment is a lag and indicator or not on history says it is, so you shouldn't take too much from that.

And are they forgetting the believers in self landings just how long the lag of monetary policy can be. You know, everyone for the last couple of years has behaved. Is that central banks put up interest rates, and that's that it happens immediately, But in fact the lag is always very long and conceivably could be longer in this cycle because of the way people fix their debt during the very low interest rate period.

And are they forgetting the believers in self landings just how long the lag of monetary policy can be. You know, everyone for the last couple of years has behaved. Is that central banks put up interest rates, and that's that it happens immediately, But in fact the lag is always very long and conceivably could be longer in this cycle because of the way people fix their debt during the very low interest rate period.

Right, yeah, And I mean we did a look at the last thirteen US hiking cycles over the last seventy years, and apart from the Vulka FED INDIUCED recession in the early eighties, the earliest a recession that started after the start of a FED hiking cycle is nineteen months. I should probably rephrase that and say, now the thirteen cycles, the Volka recession happened eleven months after the start of the hiking cycle, but the next earliest was nineteen.

Right, yeah, And I mean we did a look at the last thirteen US hiking cycles over the last seventy years, and apart from the Vulka FED INDIUCED recession in the early eighties, the earliest a recession that started after the start of a FED hiking cycle is nineteen months. I should probably rephrase that and say, now the thirteen cycles, the Volka recession happened eleven months after the start of the hiking cycle, but the next earliest was nineteen.

Months, okay, and that would take us to when that.

Months, okay, and that would take us to when that.

Would have taken us to October last year, So a very early recession would have happened in Q four of last year basically. And I suppose, well, if you look at history, a lot happened kind of between of nineteen and thirty months, if that makes sense, from the initial hiking cycle dark date. And that means that we're kind of in that window. Okay, we're in that window now effectively. Yeah, this is where history would say, you know, kind of sniper's alley of recessions from a historical point of view, is it's more probabilistic. And actually, the interesting thing is, twelve months ago, most of the most analysts were thinking you'd get a recession within you know, we were in a recession, all close to it at that point, and that would have been very early historically. Yet nobody now is that worried, even though now probabilistically you're at more risk, okay.

Would have taken us to October last year, So a very early recession would have happened in Q four of last year basically. And I suppose, well, if you look at history, a lot happened kind of between of nineteen and thirty months, if that makes sense, from the initial hiking cycle dark date. And that means that we're kind of in that window. Okay, we're in that window now effectively. Yeah, this is where history would say, you know, kind of sniper's alley of recessions from a historical point of view, is it's more probabilistic. And actually, the interesting thing is, twelve months ago, most of the most analysts were thinking you'd get a recession within you know, we were in a recession, all close to it at that point, and that would have been very early historically. Yet nobody now is that worried, even though now probabilistically you're at more risk, okay.

And how worried are you when you when you when you say, well, this is happening. Look at history, we always talk about soft landings. These this kind of soft landing data is no different to how it's been in the past, just before something nasty happens. How worried are you about the nasty.

And how worried are you when you when you when you say, well, this is happening. Look at history, we always talk about soft landings. These this kind of soft landing data is no different to how it's been in the past, just before something nasty happens. How worried are you about the nasty.

If I'm being completely honest, that's.

If I'm being completely honest, that's.

What I'm after, completely honesty, John, the whole way through.

What I'm after, completely honesty, John, the whole way through.

Only only between you and us. Tell anybody else.

Only only between you and us. Tell anybody else.

Won't tell anybody else.

Won't tell anybody else.

Absolutely, if I'm being really honest. We got the inflation call spot on. We were very early on it. We got the bed call spot on. We thought they would move it very aggressively before anybody else. We've got the recession called wrong so far. I thought you'd been a recession by the end of twenty twenty three, so you know, a couple of months ago. So I you know, I have to be I have to look at you know, the things I've looked at and think whether they're still valid. I would say the thing that has probably prevented a recession most has been the excess savings in the system and the fact that companies and entities probably have less borrowing these than maybe they would normally have at this stage of the of the cycle. Now both can't last forever, so excess savings, even if we revised our forecast based on the revisions, they probably will run out by the end of this year, and you know, for most consumers sooner than that, and there is a refi wall coming in leavered credit in commercial real estate, and therefore that I think again the soft landing narrative probably does need the FED to be cut in rate this year to just about get us over the line before we have more difficult times ahead. So we thought you'd be in a recession and you're not. A history would say that the risk is still going to be there for probably the next year. And I suppose the question is can the FED cut rates quick enough and aggressive aggressively enough that you get back to a more normal kind of monetary position before an accident happens.

Absolutely, if I'm being really honest. We got the inflation call spot on. We were very early on it. We got the bed call spot on. We thought they would move it very aggressively before anybody else. We've got the recession called wrong so far. I thought you'd been a recession by the end of twenty twenty three, so you know, a couple of months ago. So I you know, I have to be I have to look at you know, the things I've looked at and think whether they're still valid. I would say the thing that has probably prevented a recession most has been the excess savings in the system and the fact that companies and entities probably have less borrowing these than maybe they would normally have at this stage of the of the cycle. Now both can't last forever, so excess savings, even if we revised our forecast based on the revisions, they probably will run out by the end of this year, and you know, for most consumers sooner than that, and there is a refi wall coming in leavered credit in commercial real estate, and therefore that I think again the soft landing narrative probably does need the FED to be cut in rate this year to just about get us over the line before we have more difficult times ahead. So we thought you'd be in a recession and you're not. A history would say that the risk is still going to be there for probably the next year. And I suppose the question is can the FED cut rates quick enough and aggressive aggressively enough that you get back to a more normal kind of monetary position before an accident happens.

That sounds like a really nasty situation, because if we agree that inflation is still looking a bit dicey, and we agree that it may be, as you say, the stock rather than the flow that is keeping inflation a little higher and more volatile than people expected, then it gets very hard for central bank. Is maybe not so hard for the FED with its dual manddate, but certainly hard with the legs of the Bank of England to start cutting rates in time for this to happen. The way you describe it, it sounds incredibly precise. And one thing we do know is that monet people, I see, it's very hard to make it precise for it, particularly in this environment.

That sounds like a really nasty situation, because if we agree that inflation is still looking a bit dicey, and we agree that it may be, as you say, the stock rather than the flow that is keeping inflation a little higher and more volatile than people expected, then it gets very hard for central bank. Is maybe not so hard for the FED with its dual manddate, but certainly hard with the legs of the Bank of England to start cutting rates in time for this to happen. The way you describe it, it sounds incredibly precise. And one thing we do know is that monet people, I see, it's very hard to make it precise for it, particularly in this environment.

The way I think about it is that in this last you know, three four years or so, you've had two forces in the opposite directions of just once in a lifetime size. So you have the kind of the once in the lifetime increase in the money supply on one side, which was ginormous around the world, and then followed by, you know, the biggest hike in interest rates in forty years and the biggest contraction in money supply for the best part of eighty eighty years. And to think that they can be perfectly calibrated to kind of slowly drift you back to two percent inflation and two percent growth, it's not impossible, but given the lag of policy, that would also require a lot of good fortune, I think, and the deutsch Bank house viewers moved to a soft landing has been our central case scenario, and that clearly looks like like the most likely scenario at the moment. But I would say that probably the tails of that distribution are bigger than the market expects. So you know, the no landing scenario is probably a higher risk than the market inspects. And I still think the hard land in scenario probability is probably higher than the market inspects.

The way I think about it is that in this last you know, three four years or so, you've had two forces in the opposite directions of just once in a lifetime size. So you have the kind of the once in the lifetime increase in the money supply on one side, which was ginormous around the world, and then followed by, you know, the biggest hike in interest rates in forty years and the biggest contraction in money supply for the best part of eighty eighty years. And to think that they can be perfectly calibrated to kind of slowly drift you back to two percent inflation and two percent growth, it's not impossible, but given the lag of policy, that would also require a lot of good fortune, I think, and the deutsch Bank house viewers moved to a soft landing has been our central case scenario, and that clearly looks like like the most likely scenario at the moment. But I would say that probably the tails of that distribution are bigger than the market expects. So you know, the no landing scenario is probably a higher risk than the market inspects. And I still think the hard land in scenario probability is probably higher than the market inspects.

Oh, let's talk about the no landing scenario. How does that work?

Oh, let's talk about the no landing scenario. How does that work?

Well? I think the no landing scenario is one where the inflation data just stalls enough that the FED either can't cut rates, or you know, maybe does a cut and then has to stop, or even contemplates Rizon again. And I suppose where that would be an issue is if that rates are quite restricted now, so if you look at real rates in across the world, they're pretty restrictive, and therefore, you know, the probablity of an accident does what accumulative probability of an accident probably increases steadily the longer you have rates at these sort of levels. That's probably the risk of a no landing.

Well? I think the no landing scenario is one where the inflation data just stalls enough that the FED either can't cut rates, or you know, maybe does a cut and then has to stop, or even contemplates Rizon again. And I suppose where that would be an issue is if that rates are quite restricted now, so if you look at real rates in across the world, they're pretty restrictive, and therefore, you know, the probablity of an accident does what accumulative probability of an accident probably increases steadily the longer you have rates at these sort of levels. That's probably the risk of a no landing.

Is there an argument that the central banks are loathed to cut interest rates because they're actually quite keen to get rates back to long term historical levels. When I say long term historical, I mean sort of five thousand year levels rather than twenty year levels. And so in an ideal world, they'd like to be able to stay up at four percent or so.

Is there an argument that the central banks are loathed to cut interest rates because they're actually quite keen to get rates back to long term historical levels. When I say long term historical, I mean sort of five thousand year levels rather than twenty year levels. And so in an ideal world, they'd like to be able to stay up at four percent or so.

I suppose the way I like to think about it is more from the angle that you know, if you listen to central bank speak, you're never more than a few days away from a central banker mentioned in the nineteen seventies trying to ensure that we don't repeat the mistakes of the nineteen seventies. I mean the Unfortunately, the Arthur Burns bed is not particularly not held particularly well in academic and central bank circles, and therefore most central bankers really don't want their legacy to be that they also made similar errors. So I think on balance, the central bank's probably main priority is not to ease too early. Doesn't mean to say that their priority is not to ease if the data is there. I think, ingrained, it's almost like every central banker has been to the virtual nineteen seventies open university course. They don't want to be seen to be making the same mistake. And I think the central banks have been saying this, but the markets kind of between October and January weren't listening to them and didn't believe them. And I think in the last you know, last two or three weeks, the markets have kind of stood up and kind of taken a little bit of that warning. So there's a bit more balance in market pricing now. But yeah, central banks, I mean, if the US inflation data of the last week isn't a one off, then that seriously raises the question of whether the BED can start an easy in cipher law. If they do start, how you know, they probably wouldn't get very far in.

I suppose the way I like to think about it is more from the angle that you know, if you listen to central bank speak, you're never more than a few days away from a central banker mentioned in the nineteen seventies trying to ensure that we don't repeat the mistakes of the nineteen seventies. I mean the Unfortunately, the Arthur Burns bed is not particularly not held particularly well in academic and central bank circles, and therefore most central bankers really don't want their legacy to be that they also made similar errors. So I think on balance, the central bank's probably main priority is not to ease too early. Doesn't mean to say that their priority is not to ease if the data is there. I think, ingrained, it's almost like every central banker has been to the virtual nineteen seventies open university course. They don't want to be seen to be making the same mistake. And I think the central banks have been saying this, but the markets kind of between October and January weren't listening to them and didn't believe them. And I think in the last you know, last two or three weeks, the markets have kind of stood up and kind of taken a little bit of that warning. So there's a bit more balance in market pricing now. But yeah, central banks, I mean, if the US inflation data of the last week isn't a one off, then that seriously raises the question of whether the BED can start an easy in cipher law. If they do start, how you know, they probably wouldn't get very far in.

Saying And everyone I'm talking to at the moment about various things is where everyone's listening to the same The Rest is History podcast about the nineteen seventies, right literally, it's at the forefront of everyone's minds, and I reckon central bankers are probably listening to that as well and thinking to themselves, God, and the last thing I want to be is one of the central bankers. You've got it wrong, particularly haven't got it so wrong for the last four or five years. Everyone wants to be remembered as a vulgank lot of burns, and that may have impacts for all of us.

Saying And everyone I'm talking to at the moment about various things is where everyone's listening to the same The Rest is History podcast about the nineteen seventies, right literally, it's at the forefront of everyone's minds, and I reckon central bankers are probably listening to that as well and thinking to themselves, God, and the last thing I want to be is one of the central bankers. You've got it wrong, particularly haven't got it so wrong for the last four or five years. Everyone wants to be remembered as a vulgank lot of burns, and that may have impacts for all of us.

Yeah, listening to the central bankers, they're remaining on the courtious side in terms of rate cuts. I suppose what market will still choose to ignore them if they believe that they have a better insight into the data. But we've probably moved a bit more in balance in the last few weeks.

Yeah, listening to the central bankers, they're remaining on the courtious side in terms of rate cuts. I suppose what market will still choose to ignore them if they believe that they have a better insight into the data. But we've probably moved a bit more in balance in the last few weeks.

Yeah, okay, let's look at what this idea that we're moving from a into a soft landing scenario has meant for markets. Now, you wrote recently about the Magnificent Seven, the Seven, the seven companies in the US there are effectively driving US markets, and in driving US markets, driving global markets because the US is such a big component of the global market. So we have these seven companies that are basically the drivers behind our pensions, our ices, our assets. What is going on with them? The US market is now what nearly as concentrated as has ever been in history, with these big companies taking up most of the market, and time after time after time we look at them, we say, this can't go on. This is ridiculous. This never ends well. But maybe it is going to end well.

Yeah, okay, let's look at what this idea that we're moving from a into a soft landing scenario has meant for markets. Now, you wrote recently about the Magnificent Seven, the Seven, the seven companies in the US there are effectively driving US markets, and in driving US markets, driving global markets because the US is such a big component of the global market. So we have these seven companies that are basically the drivers behind our pensions, our ices, our assets. What is going on with them? The US market is now what nearly as concentrated as has ever been in history, with these big companies taking up most of the market, and time after time after time we look at them, we say, this can't go on. This is ridiculous. This never ends well. But maybe it is going to end well.

What the first thing to say is I wish I did have them in my eye, says I, with all due respect, I wouldn't be speaking to you. I'd be on the beat if I'd.

What the first thing to say is I wish I did have them in my eye, says I, with all due respect, I wouldn't be speaking to you. I'd be on the beat if I'd.

Have had you must have some of them in your I say you must have a nice global tracker or something, and Deutsch you must have given you a nice pension which ought to enroll you into some lovely US trackers.

Have had you must have some of them in your I say you must have a nice global tracker or something, and Deutsch you must have given you a nice pension which ought to enroll you into some lovely US trackers.

Surely, maybe in those decisions that I haven't had anything to do with, maybe there's a little bit in the back burner.

Surely, maybe in those decisions that I haven't had anything to do with, maybe there's a little bit in the back burner.

That's how it works for me as well, Jo, if I've got any It's not a decision I made.

That's how it works for me as well, Jo, if I've got any It's not a decision I made.

Yep, sadly, sadly for both of us. Look, I think they are astonishing in terms of their size and their breadth. So the US market is pretty much the most concentrated it's been in history, really, very similar to the where it was in nineteen twenty nine in terms of the weight of let's say the top five constituents. So top five make up about twenty five percent of the market now, so that's as big as it has been in history. And look, as an economic historian, I have a bias to believe that this is nonsense and doesn't make sense and is warning of us of a more difficult time to come. Yeah, I suppose this is where you've got to be slightly careful of history, because we've probably never had a situation in history where the companies that make up that top five per or a Magnificent seven, et cetera, make as much money already. You know, this isn't like two thousand, where there was a lot more speculation in companies that weren't profitable. And just you know, a stat to throw out out at you. If the Magnificent seven were a stock market on their own, if you exclude the US, there'd be the third biggest stock market in the world by profitability, so only China and Japan would be ahead of them.

Yep, sadly, sadly for both of us. Look, I think they are astonishing in terms of their size and their breadth. So the US market is pretty much the most concentrated it's been in history, really, very similar to the where it was in nineteen twenty nine in terms of the weight of let's say the top five constituents. So top five make up about twenty five percent of the market now, so that's as big as it has been in history. And look, as an economic historian, I have a bias to believe that this is nonsense and doesn't make sense and is warning of us of a more difficult time to come. Yeah, I suppose this is where you've got to be slightly careful of history, because we've probably never had a situation in history where the companies that make up that top five per or a Magnificent seven, et cetera, make as much money already. You know, this isn't like two thousand, where there was a lot more speculation in companies that weren't profitable. And just you know, a stat to throw out out at you. If the Magnificent seven were a stock market on their own, if you exclude the US, there'd be the third biggest stock market in the world by profitability, so only China and Japan would be ahead of them.

Yeah, and they'd be the biggest by market cap. I saw as well in your work. So they would be that those seven alone would be in taking out the rest of the US, would be the biggest stock market in the world, China coming just buying them, Japan to soft there than India, France, etc. And then you have individual US companies Microsoft, Apple, which are bigger as single companies in terms of market captain than all of the UK markets, all of the Canadian market, all of the German market. I mean, it's just nuts.

Yeah, and they'd be the biggest by market cap. I saw as well in your work. So they would be that those seven alone would be in taking out the rest of the US, would be the biggest stock market in the world, China coming just buying them, Japan to soft there than India, France, etc. And then you have individual US companies Microsoft, Apple, which are bigger as single companies in terms of market captain than all of the UK markets, all of the Canadian market, all of the German market. I mean, it's just nuts.

It is, as I said, my natural inclination to say this is crazy, and then you look at how much money they make and it's still expensive and elevated, but it starts to become you can start to build a narrative of some discript So, for example, the amount of annual profit that Apple makes is around sixty percent of the entire listed stock market in France.

It is, as I said, my natural inclination to say this is crazy, and then you look at how much money they make and it's still expensive and elevated, but it starts to become you can start to build a narrative of some discript So, for example, the amount of annual profit that Apple makes is around sixty percent of the entire listed stock market in France.

Yeah, no, I mean that absolutely extraordinary. I've got I've got your chart in front of me, which so if you look at it in terms of billions for the profits Apple one hundred and one, all of the UK, all of it, two hundred and seventeen, all of Canada one thirty six, all of Germany one eighty eight, and then you go to alphabet Alphabet, Alan seventy four, Amazon alone thirty, etc. Matter alone, though, it was absolutely extraordinary how successful these companies are. And as you say, once you start to look at it like that, maybe these valuations are.

Yeah, no, I mean that absolutely extraordinary. I've got I've got your chart in front of me, which so if you look at it in terms of billions for the profits Apple one hundred and one, all of the UK, all of it, two hundred and seventeen, all of Canada one thirty six, all of Germany one eighty eight, and then you go to alphabet Alphabet, Alan seventy four, Amazon alone thirty, etc. Matter alone, though, it was absolutely extraordinary how successful these companies are. And as you say, once you start to look at it like that, maybe these valuations are.

Okay individually within the seven there may be some that are look a little bit more stretched than others. But I mean, if you're talking about, you know, the lights of Apple and Microsoft, you know these are very profitable companies that probably will stay profitable for a period of time. I'm not a micro analyst, and I don't understand the wizards, et cetera. But I would say as a minimum that these aren't uber crazy valuations. It's just whether you think that they are rich or not.

Okay individually within the seven there may be some that are look a little bit more stretched than others. But I mean, if you're talking about, you know, the lights of Apple and Microsoft, you know these are very profitable companies that probably will stay profitable for a period of time. I'm not a micro analyst, and I don't understand the wizards, et cetera. But I would say as a minimum that these aren't uber crazy valuations. It's just whether you think that they are rich or not.

Well, they are still high. I mean, if you look at the average of this even again I'm looking at your chart, the average trailing pee for those seven stocks is thirty seven times. I mean, it is high. It's not one hundred. You know, this is not Japan in the middle of its great bubble, but it's still high. And then you know, the most expensive Nvidia on ninety. And then you come back to the UK as a whole and it's got an average pe of seventeen. So they're expensive, but not as expensive as we've seen in previous bubbles.

Well, they are still high. I mean, if you look at the average of this even again I'm looking at your chart, the average trailing pee for those seven stocks is thirty seven times. I mean, it is high. It's not one hundred. You know, this is not Japan in the middle of its great bubble, but it's still high. And then you know, the most expensive Nvidia on ninety. And then you come back to the UK as a whole and it's got an average pe of seventeen. So they're expensive, but not as expensive as we've seen in previous bubbles.

Yeah, I think that's probably the way to put it. And I suppose if you were trying to put it into a historical context as well, in this era we live in today, we probably have more globalization that allows companies to cross borders, maybe even more than it was let's say the nifty fifty or obviously people are talking a lot about the nifty fifty in the late sixties early seventies, although the company's sold products around the world, the world was much more localized back then, so you know, Kodak, for example, although it was a global company, wouldn't have the same kind of global presence as some of the Magnificent Seven. Today, the Internet has also kind of been a global phenomena, and therefore, you know, the Lights and Magnificent seven can access global consumers in a you know, a press of a button in the way that maybe we couldn't have done fifty years ago, one hundred years ago, et cetera. So the world has changed a little bit to allow dominance of individual companies more than they would have in the past. But it's just what price or you want to pay for that.

Yeah, I think that's probably the way to put it. And I suppose if you were trying to put it into a historical context as well, in this era we live in today, we probably have more globalization that allows companies to cross borders, maybe even more than it was let's say the nifty fifty or obviously people are talking a lot about the nifty fifty in the late sixties early seventies, although the company's sold products around the world, the world was much more localized back then, so you know, Kodak, for example, although it was a global company, wouldn't have the same kind of global presence as some of the Magnificent Seven. Today, the Internet has also kind of been a global phenomena, and therefore, you know, the Lights and Magnificent seven can access global consumers in a you know, a press of a button in the way that maybe we couldn't have done fifty years ago, one hundred years ago, et cetera. So the world has changed a little bit to allow dominance of individual companies more than they would have in the past. But it's just what price or you want to pay for that.

Yeah, and there is risk. And we talk about globalization being one of the big drivers behind these companies, and of course it has been, but one of the things we're looking at now is a degree of deglobalization. And it's never going to happen as fast as some people believed it would. But this is not the world of five years ago. It's a very different world. And there are a lot of governments out there that are increasingly controlling the Internet and increasing they want to control the way these big companies operation, in particular control their profits and how those profits are taxed and to control the information that they can carry or not carry. So there's still a lot of risk there when you think about geopolitics, right.

Yeah, and there is risk. And we talk about globalization being one of the big drivers behind these companies, and of course it has been, but one of the things we're looking at now is a degree of deglobalization. And it's never going to happen as fast as some people believed it would. But this is not the world of five years ago. It's a very different world. And there are a lot of governments out there that are increasingly controlling the Internet and increasing they want to control the way these big companies operation, in particular control their profits and how those profits are taxed and to control the information that they can carry or not carry. So there's still a lot of risk there when you think about geopolitics, right.

Yeah, I know, and it's a good point. And look, if you think about markets, I mean, we make the point in the report that the top five biggest companies over in the US, for example, do change over time and in fairly unpredictable ways that you wouldn't have known maybe five ten years in advance. They tend to be quite stable in the short term, but quite they move quite a bit in the medium term, if that makes sense. So you know, the top five biggest companies in ten years may be a completely different cohort and because of things that we don't know yet. So we don't know if globalization is going to really cause a kind of a schism in the world order at some point in this decade. You know, we don't know if there's a new silver bullet that's going to come around that makes some of the technologies redundant. We just don't know, and that's part, you know, part of investing is obviously trying to lean against things that you don't know if the price is probably the wrong price, and that's a feel that probably helps you in the long term, but doesn't necessarily help you in the short term.

Yeah, I know, and it's a good point. And look, if you think about markets, I mean, we make the point in the report that the top five biggest companies over in the US, for example, do change over time and in fairly unpredictable ways that you wouldn't have known maybe five ten years in advance. They tend to be quite stable in the short term, but quite they move quite a bit in the medium term, if that makes sense. So you know, the top five biggest companies in ten years may be a completely different cohort and because of things that we don't know yet. So we don't know if globalization is going to really cause a kind of a schism in the world order at some point in this decade. You know, we don't know if there's a new silver bullet that's going to come around that makes some of the technologies redundant. We just don't know, and that's part, you know, part of investing is obviously trying to lean against things that you don't know if the price is probably the wrong price, and that's a feel that probably helps you in the long term, but doesn't necessarily help you in the short term.

Yeah, shorter term though, I suppose we could say that these are all growth companies. So it is the expectation that rates will fall reasonably soon that it's been one of the drivers. I mean, obviously as AI and this kind of thing, But it's also so the idea that rates will fall, and there's obviously give for growth companies. So if we do see rates not falling as expected, may we see a sudden turn in the Magnificent seven or is that too simplistic?

Yeah, shorter term though, I suppose we could say that these are all growth companies. So it is the expectation that rates will fall reasonably soon that it's been one of the drivers. I mean, obviously as AI and this kind of thing, But it's also so the idea that rates will fall, and there's obviously give for growth companies. So if we do see rates not falling as expected, may we see a sudden turn in the Magnificent seven or is that too simplistic?

Well, I think if you'd have said that to me six, nine, twelve months ago, I would have agreed. But we've had some concern about rates in the last month or so, and actually it's the smaller stocks that have suffered, So the Russell two thousand, it's been much more sensitive to the rate volatility that we've seen in the last few weeks, whereas the Magnificent seven have just powered on. So it seems like, you know, the Magnificent seven investors are saidler, under any macro scenario, now we think these are going to win. But if the FED is going to raise rates, that's not very good for the small caps in the US, etc. So I think your proposition is a fairly sensible one. But in recent weeks, in recent months, it seems to be the they are decoupling from that rate expectation. Now, whether that can last is a moot point. But for now they are Yeah.

Well, I think if you'd have said that to me six, nine, twelve months ago, I would have agreed. But we've had some concern about rates in the last month or so, and actually it's the smaller stocks that have suffered, So the Russell two thousand, it's been much more sensitive to the rate volatility that we've seen in the last few weeks, whereas the Magnificent seven have just powered on. So it seems like, you know, the Magnificent seven investors are saidler, under any macro scenario, now we think these are going to win. But if the FED is going to raise rates, that's not very good for the small caps in the US, etc. So I think your proposition is a fairly sensible one. But in recent weeks, in recent months, it seems to be the they are decoupling from that rate expectation. Now, whether that can last is a moot point. But for now they are Yeah.

So basically recovered from everything. They've moved into their own little world, beyond our world.

So basically recovered from everything. They've moved into their own little world, beyond our world.

Beyond our comprehension, a bit like AI that they are. Yeah, they have superior intelligence to us.

Beyond our comprehension, a bit like AI that they are. Yeah, they have superior intelligence to us.

I think, Okay, so you're not going to rush out after US chat and buy more abusing things for your ISA. Sorry, some of these things for your ISO?

I think, Okay, so you're not going to rush out after US chat and buy more abusing things for your ISA. Sorry, some of these things for your ISO?

I am confused about it. In doing this report, I've really learned how great these most of these companies are. I genuinely, you know, I've been doing this job a long time and I look at these stops as a macro man all the time. But I genuinely learned a lot about how great these companies are from a profitability basis, and it was really instructive to compare that to whole countries stock markets. Mate, whether I want to pay up for that, I'm always somebody likes to see a bargain rather than pay up for something on the expensive side, if that is the wrong trade, I tend to try to be a bit of a bargain hunter.

I am confused about it. In doing this report, I've really learned how great these most of these companies are. I genuinely, you know, I've been doing this job a long time and I look at these stops as a macro man all the time. But I genuinely learned a lot about how great these companies are from a profitability basis, and it was really instructive to compare that to whole countries stock markets. Mate, whether I want to pay up for that, I'm always somebody likes to see a bargain rather than pay up for something on the expensive side, if that is the wrong trade, I tend to try to be a bit of a bargain hunter.

Yeah, I'm with you there, Jim, and look and look what that's got. I say, absolutely, Let's talk about other markets then. I mean, one of the things that we can see so clearly in your chance about the Magnificent Seven is just how lonely some of these European markets, in the UK market in particular, are valued at the moment relative to the US market. I mean, obviously, if you take the Magnificent Seven out of the US market, it's not nearly as expensive as it is with them included, but nonetheless there's still a US premium in there. And when we look at the UK, which we do relentlessly on this podcast, because John and I are both both have a value by us that we can't shake. When we look at the UK, we keep thinking, well, surely that that's the place to be, that's the place to be. Is that a market that looks attractive to you.

Yeah, I'm with you there, Jim, and look and look what that's got. I say, absolutely, Let's talk about other markets then. I mean, one of the things that we can see so clearly in your chance about the Magnificent Seven is just how lonely some of these European markets, in the UK market in particular, are valued at the moment relative to the US market. I mean, obviously, if you take the Magnificent Seven out of the US market, it's not nearly as expensive as it is with them included, but nonetheless there's still a US premium in there. And when we look at the UK, which we do relentlessly on this podcast, because John and I are both both have a value by us that we can't shake. When we look at the UK, we keep thinking, well, surely that that's the place to be, that's the place to be. Is that a market that looks attractive to you.

Are someone likes of value, then it's hard to say the UK is bad it's bad value. I do think there's a legacy problem. I think there's a fair proportion of international investors that have kind of sides that the UK post brexit, and that has left the market relatively cheap. I spoke the one thing you say about the UK. I've talked at length about how concentrated the US market is, but I just looked actually earlier, the top five names in the foot see make up about thirty two percent of it. So I approcate that's the PUTSI one hundred rather than the S and P five hundred, So not quite the same, but it is. The UK market has always been concentrated to kind of banks and commodities, and therefore that there is a little bit of healthcare and there they're obviously a little bit of what goes on in those sectors probably overrides things.

Are someone likes of value, then it's hard to say the UK is bad it's bad value. I do think there's a legacy problem. I think there's a fair proportion of international investors that have kind of sides that the UK post brexit, and that has left the market relatively cheap. I spoke the one thing you say about the UK. I've talked at length about how concentrated the US market is, but I just looked actually earlier, the top five names in the foot see make up about thirty two percent of it. So I approcate that's the PUTSI one hundred rather than the S and P five hundred, So not quite the same, but it is. The UK market has always been concentrated to kind of banks and commodities, and therefore that there is a little bit of healthcare and there they're obviously a little bit of what goes on in those sectors probably overrides things.

But do you think that the numbers coming out of both Europe and the UK are beginning to suggest a foreign investors that, well, the UK isn't exactly in the best of health. There's no obvious indication in the numbers that we're doing significantly worse than the rest of Europe. So at some point you have to look at it and say, well, I need to I need to get over myself about this Brexit business and just look at things as they are.

But do you think that the numbers coming out of both Europe and the UK are beginning to suggest a foreign investors that, well, the UK isn't exactly in the best of health. There's no obvious indication in the numbers that we're doing significantly worse than the rest of Europe. So at some point you have to look at it and say, well, I need to I need to get over myself about this Brexit business and just look at things as they are.

I definitely think you're seeing that a little bit from my conversations I have with people around the world. It probably needs a bit of momentum to get it going. It's a bit like M and A. You know, once once you get maybe a couple of big deals for overseas companies buying cheap UK companies, maybe there'll be a bit more activity. And maybe for that you need the interest rate environment to be a bit more stable across the world. But yeah, I think, look, I think the UK market does look pretty good, good value. I've always liked dividends, and you get quite a bit of dividends in the UK market.

I definitely think you're seeing that a little bit from my conversations I have with people around the world. It probably needs a bit of momentum to get it going. It's a bit like M and A. You know, once once you get maybe a couple of big deals for overseas companies buying cheap UK companies, maybe there'll be a bit more activity. And maybe for that you need the interest rate environment to be a bit more stable across the world. But yeah, I think, look, I think the UK market does look pretty good, good value. I've always liked dividends, and you get quite a bit of dividends in the UK market.

We keep saying to people John and I, you know, there's a lot of cheap equities listed in the UK and if you don't buy them, eventually somebody else will. And you know, here we are with Curries Curries earlier this week. Obviously the deal hasn't been done yet, but you know it will be beginning to see these companies that have done nothing but see their share prices fall for years and trading on very low valuations with potential they are starting to get snapped up. And we keep wondering just how many of them have to get snapped up before other investors look at the market and go, yeah, that'll do me.

We keep saying to people John and I, you know, there's a lot of cheap equities listed in the UK and if you don't buy them, eventually somebody else will. And you know, here we are with Curries Curries earlier this week. Obviously the deal hasn't been done yet, but you know it will be beginning to see these companies that have done nothing but see their share prices fall for years and trading on very low valuations with potential they are starting to get snapped up. And we keep wondering just how many of them have to get snapped up before other investors look at the market and go, yeah, that'll do me.

From reading your work, you look at this a lot more closely than me, So I would bow to your kind of expertise here.

From reading your work, you look at this a lot more closely than me, So I would bow to your kind of expertise here.

But excellent, that's the kind that's the kind of.

But excellent, that's the kind that's the kind of.

Guest we like. Yeah, absolutely, Yeah, from from that corec point of view, I wouldn't. I wouldn't disagree with the kind of conclusions you come with.

Guest we like. Yeah, absolutely, Yeah, from from that corec point of view, I wouldn't. I wouldn't disagree with the kind of conclusions you come with.

Yeah, yeah, well, I think I think we do keep looking at it, But John and I don't entirely agree on that. We'll have to have another conversation on that one. I did want to ask you about if you were, if you were coming into government now as a new chancellor in the UK, what would you do, given your knowledge of economic history and your knowledge of how the UK works, what would you do to make things better?

Yeah, yeah, well, I think I think we do keep looking at it, But John and I don't entirely agree on that. We'll have to have another conversation on that one. I did want to ask you about if you were, if you were coming into government now as a new chancellor in the UK, what would you do, given your knowledge of economic history and your knowledge of how the UK works, what would you do to make things better?

I think if I was chancellor and I came in with a clean slate, Look, we're in a difficult situation in the decades ahead because we do have a lot of entitlements that we've promised people that that means the pressures on the government coppers are going to go up and up. So I think you have to try to find ways of extending people's working lifetime in a way that is politically tenable. And IM not sure I know how to do that, but I think to be a success as a chancellor you need to try to find ways of doing that. And I think you probably also need to find ways of borrowing money that you can invest to make the economy better. And although I'd like to pay lower taxes, maybe maybe that's not always the answer. Maybe in some cases it's the answer, but you've got to find ways of making what are still quite low long term real rates work for you as an economy. I mean, look, government debt borrowing. There shouldn't be one hard and fast rules. It probably should be how attractive it is to borrow. So in eras where rates and real rates are very very low, government should be incentivized to borrow in ways that they can productively increase the economy. If rates are high, real rates are high, then governments shouldn't you know, should be quite proval. So I think you have to have an element of flexibility. I still think real rates are relatively low enough that you can borrow more than what might look to be prudent if you're investing it in the right things.

I think if I was chancellor and I came in with a clean slate, Look, we're in a difficult situation in the decades ahead because we do have a lot of entitlements that we've promised people that that means the pressures on the government coppers are going to go up and up. So I think you have to try to find ways of extending people's working lifetime in a way that is politically tenable. And IM not sure I know how to do that, but I think to be a success as a chancellor you need to try to find ways of doing that. And I think you probably also need to find ways of borrowing money that you can invest to make the economy better. And although I'd like to pay lower taxes, maybe maybe that's not always the answer. Maybe in some cases it's the answer, but you've got to find ways of making what are still quite low long term real rates work for you as an economy. I mean, look, government debt borrowing. There shouldn't be one hard and fast rules. It probably should be how attractive it is to borrow. So in eras where rates and real rates are very very low, government should be incentivized to borrow in ways that they can productively increase the economy. If rates are high, real rates are high, then governments shouldn't you know, should be quite proval. So I think you have to have an element of flexibility. I still think real rates are relatively low enough that you can borrow more than what might look to be prudent if you're investing it in the right things.

Now, listen, there is one thing that I do have to ask you about. I do have to ask you about before we can finish up here. And I know that neither of these things will be your area of expertise, but we don't care. We just want an answer. We ask everybody if we were going to lock them away somewhere for ten years, someone nice, By the.

Now, listen, there is one thing that I do have to ask you about. I do have to ask you about before we can finish up here. And I know that neither of these things will be your area of expertise, but we don't care. We just want an answer. We ask everybody if we were going to lock them away somewhere for ten years, someone nice, By the.

Way, Can I leave my kids at home? Can I leave the kids somewhere else? Yes?

Way, Can I leave my kids at home? Can I leave the kids somewhere else? Yes?

You can. You can, although we're the entire audience is already judging you for that, but you can.

You can. You can, although we're the entire audience is already judging you for that, but you can.

You can.

You can.

And then once you're in this lovely place, before you go sorry, you have to invest all your money in every penny in one of two things, either gold or bitcoin. And you don't have to tell us why you make the choice. You're about to make all that as nicer if you do. But what would it be?

And then once you're in this lovely place, before you go sorry, you have to invest all your money in every penny in one of two things, either gold or bitcoin. And you don't have to tell us why you make the choice. You're about to make all that as nicer if you do. But what would it be?

Do you think I would say gold? And I think the reason I would say that. Look, I'm someone that's broadly an inflationist. As an economic historian, I know that inflation is always there because in democracies and the election cycles, there is always going to be incentive to create money, you know, at some point relatively soon. Even if the macro models don't suggest there will be inflation, there will always be a political reason to create inflation, especially in a world post Breton Wood system where it be it money rules. So I'm always an inflationist. So therefore I do like things that protect you against inflation. Now, to be fair, gold isn't a brilliant hedge for a lot of history, apart from if you've got inflation, So to make gold work, you actually do need inflation. Bitcoin. I do think that in a world where we're moving into a digital world, there will be kind of some digital demand for store value. I just don't know if bitcoin is that long term winner or whether the regulators will deal with it in a different way than they have today. So I wouldn't say bitcoin is a total disasters investor investment. I just don't know whether it's the winner, and I don't whether know whether the regulators will clamp down on it in years to come. I would prefer gold, Okay, that puts you.

Do you think I would say gold? And I think the reason I would say that. Look, I'm someone that's broadly an inflationist. As an economic historian, I know that inflation is always there because in democracies and the election cycles, there is always going to be incentive to create money, you know, at some point relatively soon. Even if the macro models don't suggest there will be inflation, there will always be a political reason to create inflation, especially in a world post Breton Wood system where it be it money rules. So I'm always an inflationist. So therefore I do like things that protect you against inflation. Now, to be fair, gold isn't a brilliant hedge for a lot of history, apart from if you've got inflation, So to make gold work, you actually do need inflation. Bitcoin. I do think that in a world where we're moving into a digital world, there will be kind of some digital demand for store value. I just don't know if bitcoin is that long term winner or whether the regulators will deal with it in a different way than they have today. So I wouldn't say bitcoin is a total disasters investor investment. I just don't know whether it's the winner, and I don't whether know whether the regulators will clamp down on it in years to come. I would prefer gold, Okay, that puts you.

In firmly in the merin Talks Money podcast, majority.

In firmly in the merin Talks Money podcast, majority.

Is that a good thing?

Is that a good thing?

I don't know. We'll find out when we're in a decade. Jim, thank you so much joining us today.

I don't know. We'll find out when we're in a decade. Jim, thank you so much joining us today.

Very kind, pleasure, lovely to be invited. Thank you.

Very kind, pleasure, lovely to be invited. Thank you.

With me now reflect on what we just heard from Dutchbanks. Jim read is fellow Bloomberg columnist John Author's John, you are kind to join us today.

With me now reflect on what we just heard from Dutchbanks. Jim read is fellow Bloomberg columnist John Author's John, you are kind to join us today.

It's a pleasure. Now.

It's a pleasure. Now.

I know that you've known Jim for a long time and you've been reading his work for a long time. Yes, when you listen to him speaking today, did you think to yourself that man is absolutely right? I agree with everything you said. Is that how you felt?

I know that you've known Jim for a long time and you've been reading his work for a long time. Yes, when you listen to him speaking today, did you think to yourself that man is absolutely right? I agree with everything you said. Is that how you felt?

I'm not sure I agree with everything he says, but in general he's one of the people who thinks in a very similar way to me, and that means that he's occasionally been too bearish, just as I have been over over the last couple of decades. But in general, I think you're in pretty safe ground following him. He's got an incredibly acute sense of history, which I think is always very important, and he has the rare ability to combine big picture thinking. What you heard that in this the conversation with extremely granular nerdy focus on on data, and it's unusual to have somebody who can who can actually do both equally.

I'm not sure I agree with everything he says, but in general he's one of the people who thinks in a very similar way to me, and that means that he's occasionally been too bearish, just as I have been over over the last couple of decades. But in general, I think you're in pretty safe ground following him. He's got an incredibly acute sense of history, which I think is always very important, and he has the rare ability to combine big picture thinking. What you heard that in this the conversation with extremely granular nerdy focus on on data, and it's unusual to have somebody who can who can actually do both equally.

Well, okay, that's a that's that's pretty positive.

Well, okay, that's a that's that's pretty positive.

Hm.

Hm.

Now we talked a lot about something that I've written about a lot, and I know you've written about a lot, which is the concentration in the US market, the Magnificent Seven. And you know his statistics on this is just absolutely extraordinary. That report on on the Magnificent Seven, about them they're in terms of market cap and profits being more like countries than companies was wonderful. But of course it rings every warning bell in the book for bears like him and me and you. Right, we look at that and we don't go, isn't this wonderful? It's going to last forever. We love this. We look at and we go, oh my god, this guy's going to fall in.

Now we talked a lot about something that I've written about a lot, and I know you've written about a lot, which is the concentration in the US market, the Magnificent Seven. And you know his statistics on this is just absolutely extraordinary. That report on on the Magnificent Seven, about them they're in terms of market cap and profits being more like countries than companies was wonderful. But of course it rings every warning bell in the book for bears like him and me and you. Right, we look at that and we don't go, isn't this wonderful? It's going to last forever. We love this. We look at and we go, oh my god, this guy's going to fall in.

Yes, And but we also have this painful thought that it's going to it's going to look really embarrassing until it turns because I just cannot cannot justify jumping in at this level, and that's going to look bad for a while.

Yes, And but we also have this painful thought that it's going to it's going to look really embarrassing until it turns because I just cannot cannot justify jumping in at this level, and that's going to look bad for a while.

Well, Jim said that as well, not in his ISA.

Well, Jim said that as well, not in his ISA.

Acid happens as it happens at the precise moment we are, we're recording this about an hour after trading started in New York on them on Thursday. So my factoid for you is, after an hour of trading following its results coming out, in Vidia's market cap is up something like two hundred and forty billion dollars. The total market cap of Intel is one hundred and eighty billion dollars. So our response to the news the results that in Nvidia have announced is to decide that they are more than a whole Intel's worth more valuable than we thought they were, which.

Acid happens as it happens at the precise moment we are, we're recording this about an hour after trading started in New York on them on Thursday. So my factoid for you is, after an hour of trading following its results coming out, in Vidia's market cap is up something like two hundred and forty billion dollars. The total market cap of Intel is one hundred and eighty billion dollars. So our response to the news the results that in Nvidia have announced is to decide that they are more than a whole Intel's worth more valuable than we thought they were, which.

And also one of our other colleagues said that it was also equivalent to the entire market capitalization of Greece.

And also one of our other colleagues said that it was also equivalent to the entire market capitalization of Greece.

That makes sense, which, interestingly, according to a chart from Jim Reid, Thank you, Jim, our hero, Our hero, Greece is now now that Japan has managed to take out it's all time high. Poor old Grease is now in the lead for the stock market that's gone the longest since its last all time high. Interesting, and Greece is cypress.

That makes sense, which, interestingly, according to a chart from Jim Reid, Thank you, Jim, our hero, Our hero, Greece is now now that Japan has managed to take out it's all time high. Poor old Grease is now in the lead for the stock market that's gone the longest since its last all time high. Interesting, and Greece is cypress.

Yeah, Greece is going to turn into the measurement of stock market units, isn't it? Like Wales is the measurement of the scale of everything in the UK. It's five wells as two Wales, as one Wales, etcetera. We're now going to say it's worth five greases, ten greases, forty five greases.

Yeah, Greece is going to turn into the measurement of stock market units, isn't it? Like Wales is the measurement of the scale of everything in the UK. It's five wells as two Wales, as one Wales, etcetera. We're now going to say it's worth five greases, ten greases, forty five greases.

It's all a little because Greece has hit bottom and is now turning into one of the one of the safer places to invest in Europe, which is just as well after all the pain it had to go through to get where it is now. But in terms of how far away it is from it it's high, and how long ago it is, it's got a lot of sledting to go. It's yeah, it's in many ways comparable to Japan. Anyway, Sorry, Jim, Well.

It's all a little because Greece has hit bottom and is now turning into one of the one of the safer places to invest in Europe, which is just as well after all the pain it had to go through to get where it is now. But in terms of how far away it is from it it's high, and how long ago it is, it's got a lot of sledting to go. It's yeah, it's in many ways comparable to Japan. Anyway, Sorry, Jim, Well.

Let's stick with Japan, because okay, there's not much point in us talking much longer about how wonderful we think Jim is and how he's absolutely right on everything. Goodness me, what a man. So why don't we talk about the other thing that you and I are both fascinated by, which is Japan and the new high in Japan, which we've been waiting for a long long time. I started my career in Japan back when the nicket was roughly where it is now, you know, and I've been writing for a decade telling our readers that you know it's going to turn. It's going to turn. It's really it's going to turn. It's definitely going to turn. There's a new high out there, and now it's finally happened, and you wrote a column about.

Let's stick with Japan, because okay, there's not much point in us talking much longer about how wonderful we think Jim is and how he's absolutely right on everything. Goodness me, what a man. So why don't we talk about the other thing that you and I are both fascinated by, which is Japan and the new high in Japan, which we've been waiting for a long long time. I started my career in Japan back when the nicket was roughly where it is now, you know, and I've been writing for a decade telling our readers that you know it's going to turn. It's going to turn. It's really it's going to turn. It's definitely going to turn. There's a new high out there, and now it's finally happened, and you wrote a column about.

Yes, God's right, you wrote a column.

Yes, God's right, you wrote a column.

About this this morning, and you think you think this can continue?