Russell Clark: Investing Ideas for a New Macro World

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1:24And now to the top analysis of today's markets.

1:33Hey, everybody. Welcome to this special festival of learning, Three Ideas. I'm the host of the show, Samuel Burke, Managing Editor here at Real Vision. And I'm super excited to have Russell Clark on with us. A lot of people in the Real Vision community are very excited to see you here, Russell. You're a former hedge fund manager and now content creator and investment manager. Before we jump into your three ideas, I just want to get your global macro outlook. we've had some updates uh from the fed and testimony at the house in the u.s so just curious to see how you see it all thanks for joining us yeah no my pleasure uh yeah look you know um you know one of the reasons i sort of stepped away from managing money at least for a while is that the world started acting in a sort of different way to how i'd become expecting it to happen especially the way currencies and bonds uh used to move um and i think a lot of that's been driven by changes out of China.

2:30So, you know, we've got this largest in some ways, the largest company in the world now has a closed capital account. It has controlled lending. It does a lot of different things. And I think this influence, this influence of China on global macro is leaking into different changes elsewhere. Um, and it just took me a little while to get my head around that. And now I have it's sort of, and for people that sort of still follow me, you know what i describe is that we have been living since let's say 1980 maybe even 1970 depending on how you want to classify it but we've been living in an era that's sort of pro-capital so we've been giving more and more power to people who own capital investors businesses and we've been sort of taking power away from labor particularly organized labor but labor in general and it's a very capitalistic system where it looks to maximize profits and the idea that that corporates sort of know best.

3:27And if we give corporates freedom, we get the best possible results from that. Now, what I'm trying to say is I think that's a political, that was a political agreement, and I think it's sort of falling apart in recent, in like last five to six years, we've been voting. And even in countries that don't vote like China, the policies have been moving to, I'd say a pro labor environment. And what that means to me is that, you know, we are going back to sort of what we saw in the 50s 60s and 70s and we that will continue as long as people vote that way so that sort of leads me to this sort of more a much more inflationary environment so when it costs you more to hire people to do stuff prices go up and it also leads to an environment where how about describe it so if you look at like what we had from the 80s onwards is that we would crush real wages to get inflation down.

4:20And then to get growth going again, we'd expand credit because that was pro-capital. Now I think we're the other way around. Governments are pushing up wages and then they crush capital to try and keep inflation down. It's a complete change to how the world has operated. And everywhere you look, you see signs of that. So you have a banking crisis in the States and yet unemployment is very low. For example, you have this sort of, you know, problems in the crypto space as well with FTX, other things as liquidity is being pulled, unemployment remains low and inflation remains high. And I think that is really a template that's going to continue for the foreseeable future until voters decide they tire of it.

5:04And we start voting for politicians like Thatcher or Reagan again, who I'd say at the moment would be unelectable in the current type environment. I think like austerity is intellectually unacceptable everywhere. And so I think that's why we're in a sort of new macro world. And I'm just curious, you've chosen the phrase pro-labor and obviously you haven't said populist. So can you just parse that for me? So, I mean, yeah, pro-labor is called populist because it tends to be more wage workers. But if you look at the way, you know, if you take a sort of step back from that, you know if you look at like some i'm going to talk about thatcher a bit more i'm not more familiar with her policies but what you saw with thatcher was like for example uh selling council properties to their tenants you took people that were you know uh mainly wage owners or depending on the state and you turn them into property owners right so you you have this sort of political environment where you're trying to convert as many people away from being depending on the government and depend on labor unions to being self-sufficient.

6:11That's a really good policy. That sort of has run its electoral, come to its electoral end because particularly when you look at people under the age of 40, particularly in London, it's almost impossible to buy property that. And so you've sort of seen the political support for that type of policy has collapsed purely because it's gone too far, just as the political support for full employment and wage growth that existed after World War II collapsed in the 70s because people started seeing prices go up all the time. And so that is sort of where I'm going with that in that, yes, it's populist, but the old policies, pro-capital policies were very popular for a long time as well, because they benefited the most people.

6:55But those policies now benefit relatively few, while pro-labor policies or populist policies benefit far more people. And that's where the votes are and you can see that in the transformation of like a republican party in the u.s uh the stop go transformation of the conservative party here and just policies in general we're going to get into your three ideas in a second but before we do i just want to get your um how it plays into your global macro thesis uh what we heard jerome powell uh what we heard that he said talking uh in private to members of the US House yesterday, asked how much further central banks would be willing to raise interest rates this year.

7:36And he pointed to the latest forecast showing that they'll do at least one more increase. We're gonna get deep into this in your third trade, in your third idea having to do with bonds, but just curious how the latest from the Fed is shaping your outlook. So, unlike a lot of people, I just think central banks are reactive to the environment that they're in. So when we were running, so, you know, one of the things I think, you know, that I did very well back in the day was, you know, after the financial crisis, people got very bearish on bonds. They thought loose central bank policy was going to create inflation.

8:13Do you remember that like 100 economists wrote to the Fed saying what you're doing is bad, bad, bad, you're going to have inflation. And, you know, what I was trying to say is, look, you know, Japan is a good example here. If wages aren't rising and the government is running austerity policies, right? You are not going to get inflation. If people don't have money, prices are not going to rise. And that is just a very simple observation. And that was actually what came through. So owning bonds in that era, in the era of austerity, made a lot of sense. Now, when you look at the US over the last few years, the government has spent a lot of money whenever there's been a problem and they've spent it quite aggressively.

8:53now if if that policy changes and we're heading back to austerity yeah i think you know the central banks will be cutting rates uh you're going to see interest rates go back way down again right if that is what's going to happen i very very much doubt that personally austerity is intellectually dead no one wants it and we want changes so i don't I personally, I don't particularly listen that much to what the century bankers say. I think they end up being, they end up following the macro trends. Um, and in a way, it's sort of, you know, what I think, you know, Powell is responding to is what the interest bond markets want.

9:34I'm not interested in this case. I I'm not sure they'll get what they think. Um, and I'll be honest with you, people were very, very bearish on bonds back in 2014. Uh, you know, they were sure the long end was going to get crushed and then there, it rallied massively. And what I see now is people think that's going to happen again, whereas I think the political environment has changed dramatically. It sounds like you're echoing a bit what an interview that Ash Bennington did yesterday on the Real Vision daily briefing is people kind of think that the Fed's going to go by the old playbook, like classic that Gus talked about, you know, generals fighting the last war.

10:09And it sounds like you think that isn't what's going to happen so you know one of the things about inflation right is so i started out in emerging markets and you always used to get inflation like particularly in markets like india right and you know people would say you know people would say various reasons why they thought but for me it was always pretty obvious what you always used to see particularly in india and some other markets as well about about a year six months before an election the government would raise public servant salaries by 20 okay that was and then you get massive inflation coming for a system obviously right now when was the last time we saw a 20 % pay increase for the public servants in the UK or the US I don't know I can't remember my mom was a public servant I don't you know I you you'd have to really scratch your head to think when that last happened but I'm looking at you know the environment we're in now you know and uh I'm thinking you know at least somewhere in like the UK I'd be surprised if you didn't get like five to six maybe even 10 % pay increases for NHS, which is the biggest employer in the UK, I wouldn't be surprised if you didn't see like 10 to 15%, maybe even larger increases for the next 10 years there.

11:23Because, you know, as you're probably aware, you know, like, you know, these were the front line fires against COVID. We all clapped at 8pm every day. But when it comes to kind of have some money so I can actually afford to live in London and or to pay for rising food prices, you have very, very stingy increases. And that is, you can see in the polls, is destroying the conservatives, particularly in the big cities, but elsewhere as well. So I think the world has changed. And I see that the purse springs are going to be loosened and money is going to go out to workers. We're going to take a quick break and be right back with more of the day's top analysis on the Real Vision daily briefing.

12:09Well, let's jump into the core of this show. It's called Three Ideas. So we get great minds like you to come in and talk about their three ideas. Full disclosure, most of the time people on this show literally have a vested interest. They're invested personally or their companies have shares in a lot of what they're talking about. And of course, time frame is everything. I'm going to be asking you about that over and over again. We just had our top performer, Larry Lippard come back on. He's had 44 % returns, and he just talked about the luck of timing over and over again in his victory lap, his very humble victory lap.

12:42So let's jump into your first trade, and that's Oxy, Occidental Petroleum Corporation. I just want to bring up the charts. We can look at how it's performed over the past five years. So as we look at this, we see that it cratered in 2020 around march got all the way down to about 10 dollars and 23 cents currently it's off its recent highs in trading at about 62 dollars this is an american company hydrocarbon exploration and petrochemical manufacturing so russell tell us why this company and why now yeah okay uh so i mean i think for a lot of listeners they should be familiar with occidental uh it became you know I started looking at when Warren Buffett disclosed a 20 % stake in it.

13:30And that was before it collapsed. That was during COVID when pricing for oil and gas went negative. And just to jump in there, you're talking about a while ago, not the news this week, that TD Cowan had given it a major upgrade. And Warren Buffett revealed that he's purchased about$200 million more worth of this in the past week, putting their control at 23.6%. So I don't want to confuse those things. Go ahead. Yeah, so I looked at it. And the thing is, one of the things I've learned through looking at Buffett's stuff is sometimes they're playing a very, very long game that is not particularly apparent when you first start off.

14:08And so for me, so like I said, I started in emerging markets. So Buffett and Munger bought BYD. And at the time when they bought it, it was just a mobile phone battery maker. but they had a car division in there but it was very small and loss making and then of course in the last couple of years that car division has become the main part of that business stock went up 15 times when they purchased it but they were taking a very long view on where electric car industry was going so I went and looked at Oxy with the same sort of okay what are they seeing here that gives them the comfort that this business could be much bigger because there are lots of oil and gas businesses out there lots of them right Oxy has some nice features it's consolidating an industry in the shale area but i wondered if there was anything else a bit like with the byd trade that was interesting so i went for the presentations and looked at it the the business that really caught me caught my eye has been very both unique and unusual and not really uh correctly priced was its direct air capture business now what that is at the moment is they take carbon dioxide and inject it into wells to get more oil and gas out.

15:17Okay. And the way the US is running that is they give them a credit for that. So actually, you know, they get like a carbon credit for doing that because they're sequestering carbon in that. The Greens don't really like that because you gain oil out at the same time with putting carbon back in. So it's not particularly, not something I particularly like. But when you read about this business a little bit more, where they're going with it is that they are going to scale up massively and what they what they're able to do is take carbon out of the air and put it back in the ground and the way i think about um sort of carbon uh problem or carbon in the air problem is that you know we're in a closed system in the earth and over millions and millions of years all this sort of carbon got stored underground because it's all dinosaurs or whatever, green stuff.

16:09And then we've been using it and it's being released back, right? So what I was thinking is that, in like a 10 to 15 year time horizon, in 10 or 15 years, people like Greta Thunberg will be running Sweden rather than just like a teenage activist. I'll be an MP, prime minister or something like that. And I can see policy moving from one of gain to net zero, which is gain carbon down to zero emissions to actually removing carbon from the air. And when you look at how much carbon has been released and how much would need to be put on the ground, you know, it's a huge amount, massive amount. And only Oxy is the one that could possibly do at the moment.

16:48The real bottleneck there is underground storage of which the US dominates and Oxy has 75 % market share of what has been done. And so when you do some numbers on that you know if that was where the world went their business could be absolutely massive uh and far bigger than the oil and gas businesses now so i really like that uh i like that trade i like the long-term nature of it which i guess is slightly against your sort of uh where does it go from here that being said if you look at what oil and gas prices have done you know they've come down dramatically uh particularly in europe um and so you've seen like this you know sideways movement in the oil and gas stocks.

17:28But when I look at sort of more long-term features, such as is oil production in the US rising, are we seeing a lot more CapEx going in? I'm not really seeing that. So for me, it feels like we had a spike from the Russian invasion of Ukraine and now it's sort of come back. So for me, it fits in, it ticks a lot of boxes. So I quite like it for that reason. So it sounds like your time horizon would be quite long. Just how long? Yeah, you know, as you get older, you get longer and longer time horizons which should really be the reverse you should have long time horizons when you're young and short when you're old but anyway uh yeah i think like i said if when i did the numbers uh on how big this direct air capture business what i really love about it right is let's say in 15 years time us is net zero but india and africa are emitting carbon into the air right the us could then say you know what we're going to do your favor we are going to take some carbon out of the air for you so you guys keep growing that business will go to oxy and it will be based in texas because you when you take the carbon out of the air you're benefiting the whole globe uh and so there's this really nice feature to it and that you can build a global business that helps the world it's all based in texas around oxy's business so i really like it yes a very long time horizon but that being said um when i look at the way i understand the world now to me it looks like we're we've had this sort of huge inflationary boom uh last year we've had this sort of counter trend you know bond yields have fallen commodity prices come down people are getting relaxed again uh and now it looks like a good time for another inflationary burst i think and what would make you upend your view on this idea what would make you stop and say all right i got this wrong time to retreat or rethink at the very least so if china really changes policy so if china suddenly devalued for example so opened up this capital account uh that's uh currency trade freely and particularly if it allowed the currency to devalue against the dollar that would really destroy uh all of the trade ideas that we've got here um so one of the big shifts is you know a free market capitalism requires free movement of capital and the free pricing of currencies and moving to a still more pro-labor environment is more capital controls and more fixed exchange rates so if china changed policy then i would change my view but at the moment there's no sign of that all right well if anybody has questions for russell a few have already come in i'll ask them at the end of this uh of this part of the Festival of Learning, though if you have any questions relevant to any of his ideas here, individual ones, I'll take them while we're talking live.

20:17Let's jump into your second idea, and that's Wilmar International that trades in Singapore. I just want to take a step back and look at the chart for the past five years. This is the world's largest crude palm oil producer with extensive upstream assets in China and India, peaked in February of 2020 at around$5.57 cents Singapore dollars of course uh October 2022 bottoms at around uh 3.51 and now around 4.2 so talk to us about this company and why you'd be interested to get in now yeah so I've been following this stock ever since it first listed it listed via sort of backdoor uh listing in Singapore back I think in 2005-2006.

21:05It was phenomenal stock at the time. It sort of peaked out around 2010-11 and has done nothing since. Now what it does have, it has dominant, it's like the dominant plantation coupon oil producer in Indonesia and Malaysia. Now those markets are starting to get constrained. There's not enough land to build on and environmental concerns are sort of reducing supply there. So they've been starting to expand into West Africa, which i quite like i like the i the story of west africa i like the demographics i like the politics there um but you with wilma so you get like an asset a really nice sort of inflation asset driven by for me food inflation and wage inflation are almost synonymous so when you have wages going up you'll see food prices go up if wages don't go up food prices stay flat they sort of move together for me so i quite like having a sort of food related asset um now the other thing that makes wilmar interesting two other things that make it very interesting is it has a the dominant sort of cooking oil bat brand in china which is listed uh which is called yehi awana and that they own 90 of that business and uh the value of that 90 steak is greater than their market cap in singapore so you've really got like a sort of stub play there or negative ev value on a marked market They also have a Indian JV with Adani, which has sort of been not great this year, but market wise.

22:34But again, you know, it's a great business. And they do other things like sugar, a whole bunch of different businesses, but they constantly expand in investing. So you buy in a book, 4 % yield. Archer Daniel Midlands owns 25 % of it. The Kwok family owns another big chunk of it. So it's sort of, you know, it has a really, it's not a super huge float, but it's big enough to get in and out of most people. And so I like a lot of the sort of optionality on this. Again, there is, unfortunately, as I get older, I sort of take a longer time horizon on things. You know, the Africa side of it, which I quite like, West African side of it anyway, probably will take a while to play out.

23:16But as a sort of inflation, food inflation trade, I quite like it and looks attractive for me. We're going to take another quick break and be right back with more of the day's top analysis on the Real Vision daily briefing.

23:35Yeah, you say trades as a commodity stock, but it's got that consumer business exposure that you're talking about in China. I'm curious, what's your time horizon then? You're saying long. Can you actually give me some numbers, some decades, it sounds like? uh well you know it this could be one you just own forever uh but you know i've you know like i said one of the things i i think about is that and which fits in and it's a slightly more difficult analysis but um now we sort of have this conflict between china and the usa what that's done is it's given power to smaller countries because before everyone was sort of alive in the u.s so there wasn't, you know, and the U S ran the system.

24:19And so it was like, you had to play below those rules. Now you've gained more conflict between China and the U S there's more power sort of flowing down to smaller nations and the countries are taking more, more notice of them. And so I like that angle in Africa and particularly West Africa is the one region where, for example, China could really grow a big export business without having the sort of political constraints that the Western world has placed on it. And so I could see money being poured into that part of the world, not just by the Chinese, but by the Japanese, by the Americans, and by the Europeans all looking for influence.

25:00So I feel like growth is going to be much stronger in these sort of unaligned or potentially unaligned areas. And so I like having that sort of angle into it. So it sounds like it's a forever stock, but what would make you upend your forever view of it? Well, like I said, at the moment, it's very heavily reliant on China again. So, yeah, for me, everything revolves around Chinese policy. So the Chinese were the first ones to go pro-labor. And that is what that is for me really driving a pro-labor change globally. and I think is ongoing. So if Chinese change policy, then that stock could be problematic.

25:41But at the moment, there's no signs of that. All right. Just want to remind everyone, if you have any questions, if you're watching this live, feel free to jump in on these trades. But let's jump into your third trade, which is actually a trade that David Rosenberg had also here on Three Ideas in January. That's iShares 20 plus year treasury bond ETF. uh people are probably quite familiar with this and we talked a little bit at the top of the show about those remarks from j pal uh does that influence i i can't imagine it doesn't influence your thinking uh on this etf yeah look you know uh i've been i made you know i made a lot of bonds in the sort of deflate what i would call uh the deflationary era from sort of 2010 to 2020 21 you know made 20 i made a lot of money on those uh and but for me i look at the bond environment and i think i understand the logic of people buying tlt so what you're seeing is you're seeing this rapid rise in interest rates you're seeing the yield curve invert and if you look historically at least back to 1980 whenever the yield curves inverted the feds stopped raising rates and then the long bond has rallied because it's been a bond bull market right the problem is is if you extend your analysis back to the 60s and 70s and look at what happened with yield curves, yield curves got very much more heavily inverted, up to 6 % to 7%, super inverted.

27:13And so what I'm trying to say is you have a very, just because it inverts in that era didn't mean that the Fed stopped raising rates. What they did do is they kept raising rates and the whole curve was pulled up in this inverted sort of way. And you lost absolute fortunes on the long end. now that so that is the first thing of why i think we're in that bad environment the second one is i think uh i'll be honest with you i think a lot of commentators uh have gotten very lazy with their analysis so the thing about tlt is it's not a bond okay it's not like if you came out to me and said russell i'm gonna buy a 50-year austrian bond that's trading at 40 cents you know at 40 percent of par okay so 40 cents whatever i get that's absolutely fine there is no way you can lose money on that if you hold that to maturity you'll get your hundred and you'll get your coupons tlt does not have that feature so if you buy tlt today today what it does is it buys 30 year bonds and it sells them when they become a 20 year bond okay in that 10 year horizon there is no pull to par okay there is no so if it's let's say it's 80 cents now you're buying your 30 year 80 cents by in 10 years time when it's a 20 it could be 50 cents right if interest rates have gone up a lot more right and then the bond the etf will automatically sell it so it locks in that capital loss and then goes back and buys another 30 year with it do you get what i'm saying there so it's naturally even though it's replicating owning a long dead bond it's only doing on the capital side then it has no pull to par so it's a product that has a naturally is inferior to actually owning a government bond directly now the other thing about it is that if you look at it it quotes a yield of three three and a half percent you know 3.8 percent which is in line with what the 30 year is offering at the moment they should understand that there's no pull to par the actual number that only really matters is what the coupon is okay so the coupon will tell you where the capital value is going.

29:22So if the coupon is less than current market yield, which it is, the coupon's two and a half, market yield's like three seven, it trades at 80 cents on the dollar. Okay. A two and a half coupon, well, you know, if let's say market rates on the long end goes to five or six, you're looking at losing another 30 to 40 percent of capital. And there's a potential that you don't get that back, like I said, because there's no pull to par. And so what I think is, for me what i like about tlt i see two things happening possibly happening one is that the fed realizes that fiscal policy and other policy is going to keep pushing up wages so they need to raise interest rates even more so the whole curve moves up but stays inverted i could see that happening uh that would all depend on the fed the other thing i could see happening is as you probably highlighting is the fed thinks about cutting rates because the market's telling them to cut rates i think what happens then if they cut rates is that inflation pressures start to come back into the system very aggressively and so you get a massive sell-off at the back end right because people start to realize inflation is coming back you know it to me it's ridiculous to start talking about rate cuts when you still have uh employment dollar as strong as it is in the states you really you really sort of i think looking too far down or looking too much at history and so for me it just looks like you make money on that trade either way and of all the three just to be clear i'm i'm pretty sure i heard you correctly but whether the fed raises or cuts rates you see you see tlt performing well uh going well performing badly as i see yes yes yes in fact that's how i see at the moment yeah so so what is your time horizon then for this i think it looks great at the moment of all the trades it's probably the most timely um well i also love about it uh uh if you go people with bloomberg uh i'm sure there's another way to get it that's how i get it if you do type in tlt so that gives you the shares outstanding on tlt and they have tripled in the last year right now i can tell you back in 2014 when you should have been buying them and no one wanted them people were not buying them retail investors the share count was actually short interest and it was very high i think the net positioning in tlt back then was negative so we were very very bearish on bonds now everyone and their dog has gone and bought tlt like literally have gone super long and normally in that type of Verizon like I said when I for me when I look at it it looks like a short no matter what the Fed does which I love to see and and then I look at positioning people are super bullish on it it's sort of gone sideways for a while that's fine by me you I think just from a technical perspective this will be more for your institutional clients if they watch this is that because the yield curve is so heavily inverted to the Fed fund rate if you sell TLT you can take the proceeds and stick them in the money market.

32:33And you actually make a carry on that. It's very rare. So that's what makes it as a track to trade. So when you calculate this, can you please add the carry into that trade as well, please? Oh, we do have a tracker on the show. So maybe we'll have to figure out some way of tracking that. We track everybody's trades. You can go to bit.ly slash RV3ideas and see them. So that might be one way we'll have to track it. And what would cause you to say, all right, maybe I got this one all wrong. I can think of a number of factors, but what do you think is the most likely one where you would say time to rethink this?

33:12Well, you know, it's like for me, like, again, if we saw a change in China and the way they were dealing with policy away from, you know, this sort of what I call pro-labor policy, that would be incredibly deflationary. so if China blew up right and demand in China consumer demand fell we'd be in a world of pain depression you know very very bad economic environment and we have yet to see that if it was going to happen I would have said it would have happened in 2015 2016 so to me it moved it feels like we've really moved into a different environment and that continues to go that way um outside of that it's you know it's tricky because if you look at like i think the reason why people are so bullish on bonds they look at like a bank bank failures in the states and go oh that's deflationary so i gotta buy bonds uh and looking at gfc but the bank failing failures have happened this time have all been because the banks have been too lazy to pay pay up for deposits uh i certainly know i've taken deposits out of the bank because they don't pay enough i can put in the money market or in the fed and get nearly five percent so why would i leave in the bank that's paying me zero uh and so the banks have gone bust i think have deserved to go bust in the way because they've been unable to fulfill their basic uh job of paying you interest on the deposit all right so short shorting tlt is your third idea and now i just want to jump into some of the questions that we've had coming in uh first one we have from alex fuoma what was it like when you first started on this journey talked a lot about emerging markets so so give us give us some color oh first uh well which journey in which journey you're talking about there but um i first started as an emerging market analyst back in 2002 which at the time was the biggest dead-end job in the financial markets uh 2002 you had come through the asian financial crisis the russian crisis and the argentinian deval dot-com bubble which her career was big in emerging markets and then 2002 you had a big Brazilian devaluation.

35:37So it just was a world of pain and very, very poorly paid. But fortunately enough, I've been working in China in 98 and knew it was the next big thing. So I was just desperately trying to get as long China as I could and emerging markets was the way the way to do it. And that's been, you know, it's been a very fun ups and downs, but a very fun journey for me i hope that's the question he was asking about that one or not the uh becoming a content creator which is much more recent i've both of them being interesting well let's contrast that as well oh well the content in case folks don't know you you have a you're pretty prolific on twitter but your sub stack is quite colorful and it's always a nice one to follow especially when i'm doing research for for this interview but good to follow even if you're not talking with Russell directly yeah well you know the the sub stack just came from uh I used to write a you know monthly newsletter and publish some free research and always end up on zero hedge of all places I try not to go on the zero hedge I particularly try not to read the comments on zero hedge that always gives me like a headache uh might make you feel like a zero but I did notice it was sometimes getting like 50 60 000 views and I was thinking well you know that's great for zero hedge it's sort of great for me it's like free marketing um but it always made me think you know actually maybe i should be getting some of that money uh if people are that interested in what i have to say uh and then you know after you know in the way i thought about the world covid should have destroyed financial markets and should have been super deflationary and it wasn't and so i needed to rethink about how i thought the world worked and so i wanted to take a step back and then Substack seemed like a good way for me to organize my thoughts and keep in touch with people and if I ever find a big opportunity to launch another fund again then I'll be set to do that so it's been good it's been very interesting and has it been profitable for you uh yeah it's not as profitable as running a hedge fund I'll be I'll be honest with you yes less stress and I'm very lucky in that uh my two sons are great athletes my oldest one uh my oldest one is a go-karter so this gives me the time to take him to europe where he's competing now and spends a lot of time when my youngest is doing football so i take him all around london so uh the sub stack fits in really well with that what i'm doing in my life at the moment uh yeah so it works really well uh and i enjoy it all right so sub stack for uh spending time with your kids in mainland europe and playing uh football soccer i want to jump into the next one that's uh from schwifty swole should we really be worried about this digital dollar interesting the digital dollar i mean uh

38:42it's a bit of a tricky question what do you mean by worried exactly what in like someone's gonna like take all your money away or is it going to destroy bitcoin or is it going to change the nature of what uh so that question is a bit tricky to answer i'm not quite sure what they're asking about no knowing this audience i wouldn't be surprised that plenty of folks are wondering about how it would affect bitcoin so we could go that venture but i know because there's been talk about the digital pound here in the uk as well where you and i are sitting as well as the a digital euro and you know i think there is a lot of concern maybe not with the typical real vision viewer but i think with a lot of folks about what that means for their money i think it probably sounds a lot more well a lot scarier to folks than than folks in the rv audience yeah i must say i have a very different view on it in that um i think the political priorities of uh of politicians has moved to raising real wages which is why we have inflation but the the thing that the sort of subtle part of that is that by focusing on getting wages up central banks are almost forced to destroy speculation in the system so they try and they don't let the currencies devalue, their interest rates rise.

40:03And so you have this environment, and you've definitely seen it this year and last year as well, this environment of strong growth, people have more money to spend, and the flip side of asset prices being not great. And for most people, that's very difficult to accept because we use this idea of good economy, good asset prices, and asset prices trying to drive growth. because the political priorities have changed what i think you're seeing is um you know anything that's speculative anything that has any sort of speculative flows is struggling and you're starting to see that with banks you see in the crypto space definitely in sort of ftx exchanges some of the more altcoins uh and you know and so it's this weird thing in that the the it actually almost pays to own cash now i certainly have more money parked in money market funds i have had for for decades if that makes sense and so i think you know in the digital space a digital coin if it if it's earning a five six percent yield and it's government backed is going to be an asset that most people are going to be attracted to and we're going to see more money money shift that way as a government sucks uh speculative flows back into uh high yielding products so yeah digital coins can be a problem but i think it's government policy that's the real issue here's a question from nanomo trader what concept idea do you feel most retail investors are missing right now

41:46always a tricky one I think like I said I mean it's almost going to be a rehash of the last answer a little bit but like you know I think people forget that it's been because interest rates have been so low for so long and there's an expectation for them to go back again people are sort of saying oh look speculative assets come down now we can get in or I'm saying I think we've got this environment where governments will keep trying to pull uh speculative capital back out and so we're going to have you know i think safety even though it looks really tricky safe assets uh like you know money market funds and that sort of things will be an attractive place to be i think for for long term 10 to 15 years probably yeah okay when the fed stops raising rates asked danielle 710 would entering tlt call options make sense if you had to trade it how would you so my view uh is that if the fed stops raising rates and so the market goes okay the fed stop raising rates you know what you're probably going to see particularly unless we see a huge spike unemployment suddenly which i'm not seeing which is why I'm surprised people are so sure that the Fed's going to stop raising rates without a big spike in unemployment caused by something I think the Fed just keeps raising rates and what you're going to see is you want to be buying puts on TLT not calls because TLT will be going down so this is the way I look at it right if you take Fed fund rate and you look at the 30-year bond yield you know on average the steepness of that curve is like two percent okay so you got a two percent premium for lending to the u.s government for the year that's typical right now at the moment it's sort of it's like uh negative one percent or something like that roughly about one percent so let's say the fed cuts five percent from where we are today and the market goes wow that's inflationary we want to put sort of peak where there's like four percent so you actually get like a huge sell-off at the end if the fed cuts rates and growth starts to accelerate.