Gold, Copper or Oil: Which One is Best for Our Portfolio?

0:00This week on The Art of Investing, Spice goes digging for dirt in the sector that has been our worst performer of the year so far. and the chairman finally gets off the fence. Yes, there are some moves coming in the portfolio. Stick around, see what they are.

0:22Welcome to The Art of Investing, brought to you by IG, the global investments platform. And I can introduce us as the awards winning podcast. That's right. For the eagle eyed amongst you will see in front of us. Well, a nice see-through trophy, which Chris Fellingham is best economist creator of the year. Yeah, it's amazing that I've been recognized finally after 40 years in the city for something I have no idea what it means or what it does. So good stuff that is. Thank you very much. All down to you guys at home that got those votes in. So a huge thank you. And yeah, we'll put up a picture of when the gents were presented.

1:02because you were missing somebody at the presentation, weren't you? Yeah, it was only two of us. The most important two of us, clearly. It was me and Spice. But someone else was actually being the compere. I'm not sure whether there was a question afterwards where there was a conflict of interest that the compere was announcing us as the winners. I wasn't allowed to show any favoritism or even pretend that I was included. And I think a lot of the audience still don't know that I was involved. So before we dive in, let's talk about the best investment that you'll make today. And that is, of course, subscribing to this podcast.

1:36It's free with a high return on investment in the form of new episodes. So please hit that like button for us. And if you disagree with CJ or Spice, drop a comment down below telling them why and we get plenty of them. If you ring the bell at the top of the page, you'll also get notified the moment we release new content, including those portfolio updates. So without Without further ado, it is that time. Your favorite time of the week is the Spice Market Update. Well, thank you, Rich. Well, let's start with the events of the last 24 hours. There's been some very interesting moves, particularly in the oil market.

2:11Let's start with that. The oil price since last week is up about 6%. That's at about$109 at the moment. But interestingly, if you look out to the futures, it's expected to rise now to about$112 on the December future and then start falling again to 108 in January and then down to 104 in February. And you ask yourself, why is that? Why is that when there's meant to be increased oil coming through the Middle East? I think, and my gut is telling me, I saw a statement last night that the US State Department is about to order, apparently, the departure of certain staff and families from embassies across the Middle East, not just in Saudi Arabia or anywhere else.

2:51And my gut feeling, and it's been building in me for a while, is that I think the Americans are about to maybe invade Karg Island. If you remember, Karg Island is the main hub for Iranian oil. It controls about 85 % of all their oil exports and is very, very strategically important for them. But it's the size of Jersey and therefore could easily be taken over by lots of Marines. And there's been an extra aircraft carrier move to the Middle East, lots of extra troops. You've now had six to eight weeks of potential rearming after the heavy bombing we saw earlier on the conflict. And I think that's what the oil price is starting to tell us.

3:30And as soon as that US State Department comment came out yesterday, markets having been pretty strong, actually, on the back of some very good results, which I'll go into in a minute, started coming off very heavily. The oil price rose and equities started to come back. And that's continued overnight. There is what you call a spread between the price of Brent oil, which mainly comes out of the Middle East and the North Sea, hence Brent. There's a Brent field in the North Sea. That's where the price originally came from. And West Texas oil, which is basically from America. And about a month ago, there was only a$3 difference between Brent, which is$3 more expensive than the West Texas oil price.

4:08That's widened now to$12, which is pretty wide compared to history. So more than, it's about 12 % premium. Again, that's because remember, America don't really have to import oil. They've got enough oil that they generate themselves to look after themselves. But if something happens again in the Middle East that curtels supplies, that Brent price is obviously being pushed up. So all these things are coming together and just my gut is telling me something's going to happen. You know, does it happen before the midterm elections, which is just over a week and a half's time? Or does it come just after that, you know?

4:43So if Voldemort thinks he's going to lose the midterms badly, he may just get on with it and do it because he don't think it will make any difference. If he thinks he's got some chance of sort of holding either the Senate or the representatives, then he may well wait until after. And for those of us who've been around Spice's gut for many years, we know that's something not to ignore. And it's interesting that this morning in one of the New York papers, they're talking about exactly this. They're talking about after the midterms, there'll be renewal of strikes into Iran and the US are now ready for the next stage.

5:20So, you know, keep watching this space, but it's looking a little scary. But let's see what happens. Okay, Cassandra, carry on. Actually, it's okay. We normally now at this point talk about all-time highs and there's only one I really want to point out and that's Apple has made a new all-time high this week. And now Apple is considered a very defensive company, really, nowadays compared to some of those that, because they haven't really heavily invested in AI. In fact, if you use Siri, you'll realize that they haven't invested in it at all, actually. But defensives generally have been very strong.

5:52So if you look in the big US sectors, you've had the consumer staples, as they're called, is up about 4 % this week. But the best performer has been the healthcare sector, which includes pharmaceuticals. Considered very defensive. Healthcare's up about 6%. And that's new highs as well, actually. Exactly, yeah. And tech's down about 4 % this week. So it shows you the spread of returns. So there's rotation within the overall market. But the other things to point out, Not all-time highs, but Japan's Nikkei, the 225, which we unfortunately own 10 % of, basically is in a correction phase. Remember, correction is down 10 % or more.

6:27And some Chinese equity markets this morning went into a bear market, so down more than 20%. And as you'll see, that's weighed on the emerging markets this week. But some of their biggest indices, which is their top 50 companies, the A50 index and the CSI 300, are both those down 20%. So it's pretty painful in places out there. However, you know, within the emerging markets, Korea and Taiwan are actually pretty flat this week. They haven't gone down. Obviously, Korea had had a very difficult few weeks beforehand, having gone into a bear market itself and fallen over 20%. Part of the reason China's difficult is because they had GDP, which was actually better than they expected on the face.

7:06It was up 4.6 % and people looking 4.5%. Not many people trust the Chinese numbers, to be fair. But nevertheless, it was a beat. But at the same time, people said, well, that means that they're not going to do as much easing to stimulate their economy. And if you look at the way that GDP growth came, it's all about exports. And as we've pointed out a number of times, if you're driving down any motorway at the moment, you see a number of Chinese cars that pass you. You know, there's huge exports of things like Chinese cars, but their domestic economy, the property market, consumers are very, very weak.

7:36And that's led to the Chinese market selling off pretty heavily. I don't think the way you drive, don't think any cars pass you, do they? Not much passes me, but when Spice is on his scooter, quite a lot goes past. If I was young enough to use a scooter, mate, I would, I tell you. So elsewhere, it was basically commodities, again, probably suffering because of China, which was a bit weaker this week. Cops down about 3%, gold down two, silver down one. But interestingly, Goldman's this week have tried to step in and help Corweave with a buy note. And now, is that a corporate buy, what do we say in the industry?

8:11A corporate buy means you've got interest in trying to keep the shares up. Oh, they definitely do. They did. The shares went up 1 % and then ended down 6%, I think. Another successful ramping operation. And also, they took their target price down from$139 to$109. So, it was an upgrade. But within a downgrade scenario. Yeah. I mean, to be fair, the credit default swaps, which you've talked about, insurance on the debt of CoreWeave, actually has improved a bit. The cost of sort of doing that has dropped by about sort of 100 basis points. So it's not too bad. We'll see. The jury's out. Now, we've had a really, really busy week for corporate results.

8:53Let's start with the UK. Some of our biggest mining companies, BHP Bulletin, which is the biggest mining company in the world, and Anglo-American, both reported results, which were sort of fine on the face of it. But when you look into it, their production was very weak. So if it hadn't had a rise in some of the commodity prices, the numbers would have been lower. And they're blaming things like strikes in Chile and the weather in South America, where they get a lot of their copper particularly. And that hurt, that held the FTSE back from probably doing a bit better. Both their shares were down 4%, as I say.

9:26And that hurt the BlackRock World mining, because remember, they don't just own direct commodities, but also own the mining companies. And BHP, being the biggest mining company in the world, would definitely be quite a decent-sized part of BlackRock World Mining. So Netflix were down 7 % of their shares. They've had very difficult results for the last few years. But the hint was, actually, if you looked earlier in the week, before they put the results out, they just sacked the head of film, the head of content. So actually, call me old-fashioned, but you would have said, those results aren't going to be great.

9:54And they weren't. Their content's been awful. It's awful. They're just losing out market share to Rich on TikTok and CJ on YouTube. And the other thing they don't have is live sports. So actually, live sports is something that draws people in. Amazon Prime have realized that and they're doing that, as we know. The other streaming company and open to mobiles is AT &T. Again, difficult results. There's a very competitive price war going on in mobile phones at the moment. Obviously, lots of new issues from new phones from people like Apple and Samsung. And that's before Elon arrives in because he came out this week and he said, I'm coming for you.

10:32Oh, yeah. Well, he's got a busy man, isn't he? Because he's had not just Tesla results this week, which actually, by the way, were pretty good. They've been cutting their capex, believe it or not, which was not expected. And they managed to generate a billion dollars of free cash flow. And they were expected to sort of have a loss of about$5 billion on the cash flow. So that was positive. The shares started up 3%, now down 3 % overnight. And so part of that may be this oil situation that's bubbling in the background. But a much better set of results was SpaceX. This is the first proper big set of results we've seen from SpaceX.

11:07And they were absolutely fantastic. The shares were up 8%. They've managed to hold most of that gain despite the market. Their revenues were three times greater at this period than last. AI is now half all their revenues, which is nine times greater than it was a year ago. That's just smashing income forecasts, a great set of results. And they're talking about getting recurring revenues by the end of next year of possibly between$500 billion and$1 trillion. I do need both of you to put your fingers in your ears just for 30 seconds, because I have to tell all our listeners... As you as well, Spaz.

11:41Oh, yeah. Got to tell all our listeners about another podcast. That's right. If you want to hear more on single stocks and the tech sector as a whole, then there is a new podcast coming out every Wednesday. It's called The Long and Short with myself and Piers Buckworth. So if you can't wait until a Friday to get your fix and you need something for your dog walk or your gym session midweek, then it's a quick 45 minutes, but we talk about NVIDIA, Meta, Microsoft, Micron, SpaceX. We go through them all. And the latest on the way, the professionals think. Piers and I have known each other for over 15 years.

12:18I was actually a client of his back in the day. So, yeah, there's a little bit of banter there, but not nearly as much as you do, of course. Well, I look forward to tuning in, Rich. Now, moving on quickly. There was a whole load of other results last night. Meta, remember her own Facebook. Their shares are up 5 % on good results. They raised their capex again, but not as much as perhaps some people thought they might do. But the shares now is just 1 % up. Again, we've had this quite big move overnight, I think centered on the oil price. IBM shares were up 10 % after good results, now down 1 % despite great results.

12:54Spice, can I ask a question on this? Because it may actually help us for our later conversation as well. Is this a fight between the sort of professional investors and the retail investors? You know, out come these numbers, beat the forecast and retail investors go in there and say, yeah, let's buy the dip, but no dip, but we'll buy it anyway, and up it goes. And what might be in the past called smarter money, maybe isn't smarter money anymore, but call it smarter money for the sake of it, for this conversation, is actually letting them have these stocks. And so actually you're using up all this ammunition from the retail investor, and actually, net-net, things are going nowhere.

13:36Would you see that? Or is that just, it's an interpretation, but you don't think the right interpretation. What do you think? Yeah, no, I don't think it's that. I think that actually outside of the US, people are far more skeptical about AI and its prospects. So what you tend to see is the US shares do well during the US hours, trading hours, including an hour or so after the US closes. Remember, the US closes at nine o 'clock UK time, and then it trades for about the sort of hour or so. and then that's when you get some of these movies post-results. But by the time Asia comes in at sort of midnight, one o 'clock in the morning and all the way through, and then Europe starts at seven, eight o 'clock in the morning, some of those gains have been eroded because I think the foreign ownership of that, you know, the Asian owners or the European owners, are going, oh, there's a great opportunity to sell because I'm sceptical about the ability for this to be maintained.

14:26So I think there's massive scepticism outside the US. You know, and I've been to the US only a couple of weeks ago. So people are definitely bulled up on AI and, you know, a lot of them are benefiting personally from it because they have shares in their companies that are doing better as well. So I think it's not so much the retail side. The US retail is very big, but they won't be trading it in the middle of the night. They'll be trading, you know, when the market starts open today. So if those shares start bouncing, we'll know the retail buyers are coming back in. Yeah, definitely. Away from earnings, that's definitely what happened.

14:58Last week, we had data that hedge funds sold at the highest rate that they have done in years. So you're getting massive deleveraging from hedge funds. And you're seeing retail come in and buy these leveraged products, the three times bull on the NASDAQ and the AI names. Just explain what that means for people listening. It's an ETF or an ETP, an exchange-traded product, that's become really popular in the last three years. And if I buy$10 ,000 of that, then it's structured. So it's actually, you've got$30 ,000 of exposure. Now, this of course is a problem because we've seen the chip names go down 11 % in the past week.

15:44So this product was actually down 33%. So if you'd bought the three times levered chip products, Semiconductors, yeah. You'd have lost 33 % this week, but you can now do this in any sort of sector you want and any part of the market. You can buy these levered products, which, I mean, what could go wrong? What could go wrong? And it's retail that's buying them. So you've got hedge funds selling into really aggressive retail buying. And that's where we are at the moment. I mean, in Korea, the government stepped in actually about six weeks ago, I think, when the Korean market started becoming very volatile.

16:24are moving 6%, 7 % in a day, the whole market. And the authorities came out and said, look, we're going to start reining in the ability for retail to own these leveraged products. And so they've acted. Clearly, the Americans won't act because they believe in free markets and capitalism. And you go and do these things at your own risk. And they are very, very risky. So beware of people out there. Don't get sucked into doing these things, trying to get a short-term game because quite often it's a mugs game. Yes, sometimes it might work, But you might lose a lot, as you say. You could lose a 33 % in a week.

16:57What about yourself, CJ? Have you seen much this week? No, I mean, I think it's been a really interesting week, as Mark has outlined, that you've got, essentially, you've got two states for the market. One state is everything's fine, and then AI runs, and everything, and all risk assets rally nicely. And then you suddenly get the panic mode when the oil price moves. And then everything does the opposite. The net effect over the week is not a lot changes, perhaps. But actually, the emotional highs and lows of the week are quite high. And that's showing you that the market is really fighting to work out which is the right way of going.

17:38We've also, next week, I wanted to point out we've got the Federal Reserve meeting, the big interest rate setting meeting from the Fed. And that is literally a week ahead of the US midterms. As we said, it would be unusual for a central bank to move rates either up or down in the midst of a political election, as it were. And the market, just a week ago, were looking for a potential interest rate rise at 67 % probability of a quarter percent rise. That's completely swung this week and down to just the 85 % probability of a hold. So just 15 % chance of a rise. And that's because there's been a number of Federal Reserve officials who sit on that committee have been out talking it and saying, basically, after our rate rise last month, we're now at a point where we can maybe go on pause for a bit, which is surprise markets because everyone thought when you've done one rate rise, you're probably going to follow that with another one or two or three straight after a cycle, if you like, of rate rises.

18:42And it looks like if the officials are guiding correctly, we're not going to get that. We'll see. Your capital is at risk. The value of your shares, ETFs and ETCs can fall as well as rise, which could mean getting back less than you originally put in. This content is for information purposes only and is not investment advice. Past performance is not an indication of future results. Well, I think there would be some of us would like to press pause on our portfolio performance at the moment because we're down 1.2 % on the week. But let's look at the constituents of that because, as CJ alluded to, the FTSE and the FTSE 250 have actually been all right.

19:19Okay, it's only up 0.2 of a percent, 0.1 of a percent, but they're keeping their head above water. That's the important thing. Best performer of the week was the Russell 2000. Yay! As the yields start to come down, up 1.5 % in the week. But, ooh, the negatives, they are not nice to look at. CJ, come on, run us through the bottom three there. It's been a very tricky time for a lot of the risk assets within our portfolio. As that oil price has moved up, the price for the worst goes to the Nikkei down 5%, which is a big move. They've moved up quite sharply over the last couple of weeks. And to be honest, I hadn't got a clue why they moved up.

20:01And really, I don't really know why they've gone down this 5%. So it was striking me as though it was probably, it shouldn't have happened in the first place. And it's just gone back to where it came from. You've then also got the copper ETF down 3.4, which is a little concerning. But copper has done pretty well since we bought it. So it's given a bit back there. You've got the EM and Spice mentioned China as a big component there. You know, it's down 3.2 % now on the week. And then the NASDAQ down 3 % as well. So, you know, not much good news for anybody who's got a risk in the market. Unless, of course, you've got most of your stuff in the FTSE or the FTSE 250.

20:42But most people haven't. And so, therefore, it's a little bit painful. Over the same period, bonds small up in performance. So, you know, those people who moved into bonds, those people ignored my advice and bought them. Well done. But, you know, to me, you know, it's just more stability within that portfolio. But it's a pretty ugly period. And I think really makes us think quite hard about where we want to be in the market at the moment. Because as I mentioned in the podcast earlier, if we look at our performance from the 21st of August, 2026, so if we started this portfolio about 21st of August, 25, so we had our first year, first year was very good, up over 20%.

21:30Since the start of the second year, the 21st of August, 2026, we're down about 2%, 2.5%. Now, what's performed over that period? So, NASDAQ is up two and a half. Round of applause for NASDAQ. Well done, NASDAQ. S &P 500 hedged, unchanged. Nikkei, unchanged. Copper, down 0.7. FTSE, down one. FTSE 250, down 2.2. and EM down 2.6. So let's sort of take those all together and say more much of a muchness, rounding error to zero. One day's move. Then you've got the Euro 600 down 4.7 and clearly not helped by what's going on in the French bond market, which by the way, just in passing, has had a terrible day so far today.

22:21It's up to 5.1 % of yield. Remember we talked about it about three weeks ago. We talked about that spread between French bonds and German bonds And how that had been down at 20 basis points when times are good, it had got to 1.4 % or 140 basis points. Today, it's 170 basis points. So, there'll be a bit of worry going on in the ECB as to what's going on there. But that's a side issue. That's why the European equity market's been struggling. We've then got Russell down 10 % over that period. Wow. We've got gold down 11%. Now, we haven't held gold all that period. I'm only putting that in there to give it its perspective.

23:02We've only just bought gold. We bought gold quite well. So we lost a couple of percent, but that's fine. Once again, it goes into the doesn't matter, a rounding error. But over the whole period, it's down 11%. And then BlackRock World Mining is down 13%. And, you know, I look at the portfolio and I think, you know, what the hell am I playing at? You know, is it time for, as I said, sack the chairman type conversations? and if we don't improve it soon, I would expect the noise to start to grow within the YouTube comments section. I mean, it's there now. For those who look at these things, it's there now, but I'm ignoring it so far.

23:40It might start to get too loud for me to ignore it. And I'm ignoring, by the way, cash in our bonds because we know cash in bonds would be slightly positive. So I think we've really got to look again at some of these holdings and say, and our overall portfolio positioning and say, are we sure we are in the right place? Or should we be taking a little bit more defensive action? Because clearly the risks are high at the moment. What I want to focus mainly on today is the BlackRock World Mining and the outlook for commodities. And as luck would have it, our roving reporter, our reporting hound, the greyhound, we might call him, of the team.

24:25At least he's got hair. The greyhound of the team has been actually reviewing the commodity sector. I think he went to a conference this week. Normally, by the way, when he used to go to a conference on commodities, it would be down in South Africa or it would be in Russia or whatever. He'd be drinking vodka with many of his compatriots out there. I'm afraid now it's just a Bloomberg conference in London. So how times have changed. But Spice, tell us what you learned at that conference. And let's think about it as you're talking as to how it might affect our portfolio, in particular, BlackRock World Mining, copper and gold.

25:07Yeah, look, we didn't really talk about gold. It was more about industrial metals. So I'd include that copper, nickel, aluminium, the main sort of investable sort of metals in that area. And iron ore, of course, but we didn't really talk much about iron ore. That's interesting in itself. Indeed. I think the trouble is iron ore, there's a lot of it around the world, and a lot of it is consumed by China. But because the Chinese domestic economy is doing so poorly and the property market is so poor, there's been a sort of big dampener down on demand for sort of iron ore. And just to give everybody the picture, the last six months, copper is up 10, iron ore is down 15.

25:48Wow. So this is the wonderful thing about the sector, isn't it, Spice? That, you know, you can have even two metals can perform completely differently. And it depends on which companies have exposure to which metals. Exactly. So I remember China imports about 55 % of all commodities, but about 80 % of iron ore, of all the iron ore. So it's very important. Like I say, with this domestic economy, which we touched on earlier in the market report being so poor, particularly the property side, that's working against it. However, for copper and nickel, which go into some of these AI sort of businesses and AI data centers, that demand growth is still accelerating, actually.

26:27So we're getting to the point where the data centers are being built and they're now beginning to be filled with the kit that needs it. So there's still a long way to go. And most people think now that the peak in that demand for copper associated with data centers might be sort of late 27, sort of mid-2028. So we've still got some way to go for that. And underlying, historically, copper has been growing at 2 % to 2.5 % each year because it's sort of just less than global GDP, which normally is about 3%. But that's accelerated now and lifted because of the electrification, move away from fossil fuels, et cetera.

27:08And that's now running at about 3 % to 4 % demand. And that's without the extra kicker we're going to get from data centers in the next few years. So a data center, you know, 100 megawatt data center, consumes about 3 ,000 tons of copper, believe it or not. And as I was talking to my daughter, who is an architect, and building a lot of these data centers, she was telling me it's very, very interesting. And some companies are trying to get ahead of it and buying copper ahead because they know they're going to use this demand. To build a data center that was a gigawatt, which is some of the people like SpaceX are trying to do, then you would use about 1 % of global copper supply just to go into that one data center.

27:47So there's huge demand coming there. As I say, the peak might come in late 2027, early 2028, mid-2028. But people are still expecting to be on a really high plateau for the next five years. That might sound like a low number, 1 % of total production. So, you know, who cares? But the corporate market has an incredible talent of finding an equilibrium, doesn't it? And so a 1 % at the margin, pushing it into deficit or surplus is a huge impact on the price. Absolutely. It's a very fine balance, as you say. Now, copper production in the world is only running at about 1.1 % growth per annum. And there are very few signs of new big mines coming on.

28:33It takes 16 to 17 years from when you discover a deposit of copper to actually being able to sell it into the market. it takes 16, 70 years. You have to go through planning consents. Those planning consents are getting harder and harder. The environmental issues, they're getting harder and harder to get through. There's a huge amount of nimbyism, you know, even, you know, it is for data centers, but also if someone's going to build a big mine in your backyard, people are going, no, we don't want that, don't want that. The government of the country wants it because they're going to get revenue from royalties from selling this copper, but the countries, you know, the people in the country don't want it.

29:05So there's this backlash going on everywhere. So the way that there's a shortage between this demand picking up and the supply from production, normal production from mines is lagging behind it. I was really staggered. I found out that the balance is being made up by recycled copper. And this year, recycled copper production was up nearly 14%. Now, in previous years, it's run at about two to two and a half percent. So there's been a huge uplift. So this gap, that's one of the reasons the copper price perhaps hasn't sort of completely gone skyrocket because people are just recycling old copper.

29:41But that just shows you the efficiency of markets, doesn't it? In the sense that the price has got to a level where it makes sense to recycle old copper. And now that's turning there. I'm going to challenge you very slightly on copper because we could go down rabbit hole if I just talk about copper the whole time and we want to wind it out. But everything you've told me is well known by everybody. There is nothing you have told me that's new apart from actually the amount of copper that's been recycled. That's the only thing that I think is possibly new there. Everybody's been projecting data centers use this much copper.

30:14Everyone's saying everybody's short of copper. Why isn't the price absolutely roaring then? Now, what's happening? Was that new all-time highs three weeks ago? So, and I think if you look at that, you're actually choosing your level well, because the last three months, it's actually done nothing. It's been up, it's been down, it's been up, it's been down. So, it might have just been an all-time high, but actually two months ago, it was pretty much the same all-time high. I'm not taking away from the fact that copper has done very well. When you look at just the numbers I was just talking about and what you've just said about iron ore being down 15 and you look at what copper's done, you look at what gold's done and how it's done.

30:52Copper has outperformed all the rest of these things well. But when we look at what we're doing in our portfolio, do we not want to take profit on things that have done really well to invest into other things? because it's already reflected that fact. So to me with copper, I think it's a wonderful long-term bull story. Completely agree with that. I don't have an issue with that at all. But I'm not hearing anything new in it. So JP Morgan came out with their sector review this week and they've upgraded the price target on Glencore from£5.20 to£7. So they see a huge opportunity there in one of the stocks that's one of the main holdings in the World Mining Trust.

31:34And they see 30 % growth out to 2031. And they see very similar numbers in Antofagasta. So Antofagasta, you're talking about an 8 % free cash flow. And that's their top pick of the sector. So there's a difference between the underlying metal, which is at all-time highs. So you're creating huge cash flow for these mining companies. the difference between the underlying metal and the actual mining stocks that are having the time of their lives just now because the margin is so different from the cost of production to what they're selling at. So you don't need copper to go up for them to make a lot of money.

32:15Yeah, but hold on. We're talking about copper. Now you're going out to the companies underlying it. But Mark already said in his review today that we've seen numbers come out this week and they've done pretty poorly, right? And we all know that if the market starts pricing peak earnings, we've mentioned this on the last couple of podcasts. I think you have very well explained that if you think it's peak earnings time, actually your multiple goes down a lot. And so could it be that all this information is in the public domain and people know about it already? And therefore, that they've done their performance, their outperformance.

32:57It doesn't mean they all go up together at the same speed, but they've actually done their outforms for it. That's the only question that I'm asking about copper, really. I think there's been distorted, this whole supply-demand dynamic, by, obviously, geopolitics. The US tariffs that were imposed, remember, in April? Yes. And he imposed a tariff on copper. The Americans bought in huge supplies of copper. They've got 1.7 million tons of copper at the moment. and they use about 2 million tons a year. So they've got huge amounts of stock, if you like, in the background. The rest of the world is finding themselves short now and can't get it.

33:34So the US are, by the way, meant to build the most number of data centers. They're expected to build nearly 900 data centers in the next three years. The UK, by the way, is doing eight, right? So let's get in perspective. We're lucky we get to eight, mate. Let's get in perspective. Well, that's over so because my daughter's involved with a few of them. But anyway, at the end of the day, you know, so you've had this interesting dynamic where America has sucked in huge amounts of supply. The rest of the world is now beginning to struggle. That's why things like the London Metal Exchange, the premium people are paying for copper, for physical copper delivery, is going up and up and up.

34:09And therefore, all this recycling is having to come from places like China and places like that who are recycling to try and take advantage of these prices. But there's only so long that can go on. And I think at some point it will snap and there just won't be enough supply and the price will go to another level again. That's what I sort of think is good because the Americans are not going to sell that stock back to other places because they want to use it and it will be very soon before they start running out of it if they get all the permissions to build the data as they want to. So for the benefit of our portfolio, what I think I'm hearing is that your opinion is that of all the commodities, your NAP, your chosen one, the one you've got a real explosive view upon at some stage, not today, not tomorrow, but at some stage is copper.

34:58Is that right? Absolutely. And Rich, same? Yeah, absolutely. That's great. Just to come back to you on the peak earnings question as well, stocks like Glencore, Rio Tinto, we're talking about 11 times forward earnings. So, you know, when we talk about taking the multiple lower peak earnings, we're talking about, you know, NASDAQ on 23 times, S &P on 20 times. When you get down to these mining stocks, they're already on a low rating anyway. So there's not much more you'd want to compress the PE ratio. I understand what you're saying there, but I've been around for a long time. I haven't been around as close to this stuff as you have.

35:39But I seem to remember at peak earnings times before in mining companies, the PE could be six or seven times. So you could half the PEs from where they are now. They're very different companies now, right? Back in the old days, they were… It's different this time! It's out! I got it out! I got it out! They've been different companies for the last 15 years. But I was last an analyst in this sector. The big problem the mining companies had is that every time they saw the price go up, they would go and build a new mine, right? They haven't done that for the last decade. They said, we are not going to build any more.

36:16We're going to maybe, at the edges of our existing mines, sort of make them more efficient, hopefully get more sort of iron ore out or coal out or copper out, but we're not going to build a completely new mine, which, by the way, costs$5 to$7 billion to do each time. If you found enough deposit to do that, they're not doing it. And for 10 years, they've gone, we are not going to spend any more money. We're just going to take prices. But I am right in my memory, is what I'm... Oh, yeah. Because the price would go up, they'd build a load of mines, the demand would go down, the price would plummet, and they'd just finish building the mine.

36:51The normal cycle. That's what they used to do. But they've learned, and that's the thing. Nowadays, they are all sticking to capital discipline, as we call it. As, by the way, the oil companies are as well. So, you know, people will say, well, you know, if the UK Chancellor says, right, I'm going to incentivize you to go and drill a load of, you know, new fields in North Sea, how many oil companies do you think are going to go out there and do it? They're not because, one, they're taxed 80 % for every extra barrel of oil they get out. They're not incentivized to do it at all. And they know that, yes, the oil price is high now, but if they go and do that, it's going to take them three or four years to get a sort of a new rig up and getting production out of it.

37:29By which time, the oil price will have probably fallen 50%. There's no point. So, yeah. So, the JP Morgan long-term price assumption for copper is$13 ,000 a tonne. Now, it's at$14 ,000 a tonne at the moment. But in the mining valuations, then it's nowhere near that because it's rallied 40 % this year. So, I think I'm clear in understanding you think the better value is in the companies. that you have the upside lottery ticket in the underlying metal. But even if the metal is flat, the mining company still benefits. Okay, all right. Make your money move with IG. With zero commission and no annual fees.

38:11Back your next move with IG. Download the app and get started. IG, trade, invest, progress. What else did you learn about other commodities within this conference? Yeah. So 10 years ago, there was a massive surplus in aluminium. And as the copper price has been going up, the aluminium price has actually been following it. And part of that is that copper is the best conductor of electricity. So when China are building railways or electrifying new cities, they've typically, in the old days, you'd say, I've got to use copper, 100 % copper for my electric wires. Now, in China particularly, they don't do that.

38:51They mix, they make an alloy, so a mix between different metals. They make this, in this case, they use copper and they use aluminium. So they've only, they're sort of reducing the amount of copper, which is expensive. And there was a massive oversupply of aluminium that basically was making up the difference. So that aluminium's now all being used up as well, pretty much. But the aluminium smelters, it's not hard to produce aluminium. The Chinese are producing lots and lots of it to help build the alloys that they have. But other countries in the world or America don't use this alloy. They tend to stick to copper because they believe they're the best conductors, they've got longevity, and they won't need replacing as quickly.

39:32And so aluminium demand is high because of this alloy demand in places like emerging markets. But actually, the production is starting to pick up in aluminium as well. So there was a general consensus, which I agreed with in this conference that I was at, that actually aluminium, you're potentially going into a bit of a bear market because production is picking up more than demand. The real demand for pure copper and high-grade copper is coming in the Western world as they build out the data centers and computers. And in a computer, in supercomputers, you're not going to be using alloys in that.

40:04You have to use copper and things like gold, actually, which is a very good conductor as well. So I think my conclusion was that basically copper's really good. Nickel was also pretty good, you know, and that's also part of this electrification process as well. But aluminium is probably had its best and may actually be going to a bit of a bear market. And net net, I think, you know, most companies that investors invest in, like Rio Tinto and BHP Bulletin, have very little to no exposure to aluminium anymore. Their big exposures are in copper and iron ore, and those are the ones that were driving it.

40:41Just this first part of review, when we look at the World Mining Trust, given what you have said about the companies, and you know far more better than I do, and what you said about copper, I know it's not performed particularly well recently, but it would not be a great trade to have set out any of that at the moment. because if your longer-term views are correct, if your valuation views are correct, there should be more upside there. And I've read that correctly. Especially with the potential kicker of China, which has been hugely disappointing. Okay, all right. So let's broaden out the conversation then a little bit for the last few minutes of the podcast and talk about where we think we are in terms of our overall feeling about the market.

41:27And I hold my hand up. You know, I'm still pretty confused. I was confused, if you remember, in February, March. It came clearer then, and we had a bit better run. But I've got a bit confused again as to I can make you a bull case and I can make you a bear case for things at the moment. I'm going to make a bull case, and then I want you guys to shoot me down with what you think, and then we'll go to what we might do in the portfolio. Because as normal, you can have a view. I'm the chairman. Okay. So I'm going to give you the bull case here. And the bull case to me is the following. It's not going to sound pretty bullish to start with, but it is ball code.

42:04It's so nice to have someone else talking bullishly, isn't it? While yields are rising, well, that's pretty bearish. Coreweave, funding problems, well, that's pretty bearish. Professional sellers, we talked about earlier, you know, the hedge funds and people are taking money out now that the retail is buying it, but professionals are selling. Yeah, that's pretty bearish. Worries about an AI bubble in terms of exposures, well, that's pretty bearish. China bear market, that's not good. And the oil price, I mean, these are all terrible things. So why is the stock market still trading virtually at the all-time highs?

42:43And Spice and I have said on many occasions, Spice has been alone in it in the last few weeks, but together we have said it many times, all markets climb a wall of worry. Now, there's a lot of worry around at the moment. You could not possibly think there's not a lot of worry around at the moment. So the bull case would be the market's taken a lot of this news on board. It's revalued downwards a number of these AI companies. We talked to the other day about 60 % of the S &P being in a bear market. And therefore, now would be a time to say, look, these things might get worse. But if the market can withstand all this stuff now, a bit of good news.

43:26Now, what good news? And remember, I'm absolutely useless in terms of my oil forecast because I thought the Iran war would be over in three weeks. Well, that shows how good I am at this stuff. But at the end of the day, if the Americans do attack Cog Island, which I think Mark was talking about earlier, and it's better to travel than arrive. You know, the old story that, you know, the rumor of it happening is always far worse than the actual event that's happening. And the oil price was to fall$10 or$15, having gone up quite a lot recently. Why isn't everything going to go, woo, off we go. And we're out of the bad seasonal timing part as well into a period that's traditionally very good for risk assets.

44:12So I've tried to make a bull case there. When does that period start? The period of the better time for markets at the end of October. If you think about the times of the presidential elections, things like that at the start of November, often we'd be coming down into them and then Donald Trump's won and they've started going up again. So this sort of timing is exactly the timing of when you'd expect there to be a bottom in the market just for seasonal reasons. Clearly, there are other things going on here. I think timing is difficult because although I may have my gut being ripped by the fact that I think there's going to be an invasion of Carg Island.

44:49I don't think that's a majority view at all. I think it's maybe just beginning to get talked about a little bit. And one of the reasons I wanted to bring it up today was to sort of get it out there, because the more people who talk about these things, the more it's in the price. The markets have come back this morning, and it's in the papers this morning, that they're going to do something. Maybe not Carg Island, but they're going to do something. Yeah, they need to do something to get control, get Iran back to the table properly on the Straits of Hormuz. So my instinct is, you know, that the midterms are on the 3rd of November, I think 3rd of November, so in just under two weeks' time.

45:22So this time in two weeks, we will know the result of that. I'm sort of hoping that Voldemort loses control of both houses, which means, by the way, he's blunted in being able to do something really stupid domestically. And therefore, that's normally quite good for stock markets, for the American stock markets. If they don't think he has this sort of carte blanche power, then they will take heed from that. It's like when we have a hung parliament in the UK. Actually, stock markets do quite well because politicians can't blow it up, which they tend to normally do. But between that, if I was tactically, you know, I know I've been getting it wrong.

45:57So I'd probably take a little bit of cash. I'd de-risk a little bit, but it would be at the margin. So for me, I'd probably be taking a little bit off of emerging markets still, maybe two and a half percent, only because they are, along with the UK and Europe, the biggest importers and dependent on oil that they have to import. And that hurts their underlying economy. And I am worried about China. I did mention that China are getting this data. Their domestic economy is in real trouble. And there's no sign that the government want to try and stimulate their domestic economy. They're relying totally on exporting all of their problems, electric cars, etc., etc.

46:36Now, by the way, that's good for the rest of the world in that it should drive down prices in other products. Like Chinese cars competing in the UK, no one wants to compete with them because they've got lower prices than it. We're now selling a higher quality product in many cases. So they're exporting this deflation, disinflation. That's good ultimately for bonds, which are always being good for equities. So in a roundabout way, I think emerging markets, just because I've got it wrong, we've got 10 % in it, I'd probably take it down to 7.5%, 8.5 % of that. Blackrock World Mining. Well, again, I think that there is this money being sucked into paying for oil, which is hurting the underlying commodity.

47:11And we've seen disappointing results from BHP and Anglo this week, which I can't sort of get away from. They should be making more hay out of the sun that's shining in things like copper, and they're failing to do that. So BlackRock World Mining, I think, could come down a little bit more. Although I think we're near the bottom. It's just for the edge. I would take that 2.5 % out of BlackRock and put it into gold. I've said for a long time now, gold at$4 ,000 is my target. We're a couple of percent from that now. This morning, we're a couple of percent from that. So it's neither here nor there.

47:41We started a position. I would probably add to that, move to 1.5%. And the other 2.5 % I took out of emerging markets, I'd probably put into cash. And I don't mind, by the way, putting cash back into the market when the market's even 5 % or 10 % higher than here to know that we're through some of the issues. But to have that little bit of powder, I suppose, gives you a little bit of cash in the back pocket that on a rainy day you might put to work. But I don't feel strongly about it. I can't get away from my store core view that AI will lead to greater efficiency, greater profitability, and therefore much higher profits will lead to higher share prices.

48:15And that's my core view. And it'll be led by the Americas. So America is the place I think will continue to lead the world higher. Thank you. Rich, where is your mind at the moment? Because you've had, I think, probably a better call in the sense that you've been a little bit more active around the edges making your portfolio a bit more defensive. What are your thoughts on that? I think I'm going to base it on a phrase which is very well known within markets, but I'm not sure if it's one out in the public domain. Are we looking at the stock market or are we looking at a market of stocks because the S &P 500 is no longer a market of stocks.

48:56It's AI. It's 60 % of the S &P 500 moves on AI, of which the 10 big companies are the biggest mover, right? So I don't want that. I want the stock market because I do actually believe Spice, and he's right when he says The AI, the benefits are going to come to all. The profits might not come to the chip makers and the hyperscalers. But I think the benefits do come to everybody. Therefore, I want to be in the rest of the 490 companies and the S &P 500. So I would sell 5 % of our S &P holding. I'd sell the 5 % NASDAQ. And I would put that whole 10 % into something called the equal weight S &P 500, which means that the stocks that are down there in the hundreds, 200, 300 position in the S &P get almost the same weighting as the Metas, the Microsofts, the NVIDIAs, which I believe have got all the money invested in them.

50:07and I feel that that's de-risking the portfolio. So whatever the next move is, who knows if it's oil 120 or if it's a rally, I still think you'll get a really good rally in the equal weight S &P, possibly even better than you do in the NASDAQ and S &P 500. And then secondly, just a bit of trimming, like Spice, 2.5 % out of EM. I would actually take 2.5 % out of Russell 2000 and maybe take our cash holding, for example, and I would move that into treasuries. And I'd actually start a treasury position because they've been a lot better in the last 10 days. And if we do start to see a fall off in growth, then I'd want to have some exposure to treasuries.

51:00So what you're really saying is, I'm moving a little bit more defensive because I want to be alive if there's a bad day rather than lose a lot of money. And then have to cut. And then cut at a worse time at some stage in the future. Okay, so what do I think about that? Oh, just I was going to ask you about the World Mining Trust and gold that Spice is saying. So you presumably wouldn't want to do that transaction that Spice was talking about because of your thoughts about the valuations of these companies within the World Mining Trust? Or have I got that wrong? If you were actually going to push back and say, right, you are the expert in bonds, and you still are very hardcore, we do not want bonds in this portfolio because yields are going higher, which they well might, especially if oil is going to 120.

51:51Then I'd say, all right, let's take out the Russell 2000, which we don't really have an idea of many of the companies in there. And let's put that 2.5 % into the World Mining Trust here, where we've got a far better feel. I mean, Spice, you know, even goes to conferences on this stuff. So I'd take 2.5 % Russell 2000 into world mining. I'd take the 2.5 % out of EM and put it into gold. I just got a better feel. I know what I'm invested in there. So I just looked at the BlackRock world mining sort of split of assets at the end of last month. So gold is 33%, so a third of it. Diversified miners, which is all the things we're talking about, The Rio Tintos, the BHP Billitons is 31%.

52:31Copper is 16%. And steel, interestingly, is 8%. And the rest of it then disappears into virtually nothing. So platinum group metals are 2.8, played in platinum, rhodium, et cetera. And industrial metals, which is like iron ore, is 2.4. So it is skewed to sort of, you know, copper and gold still up there. Every Hanborough who runs that fund is an excellent investor. and he's got lots of plaudits and I would be one of them. Okay, so it comes to decision time as to what we're going to do. So as I mentioned earlier, I am not of the view that we should be desperately worried about the markets because I think there's a lot of bad news in the markets and I think anything could trigger the upside.

53:18But I do think that there's a danger from doing nothing and just sort of sitting there and being a bit of a rabbit, I suppose. It's a different definition of a rabbit, but it's that sort of thing. What am I doing here? So to me, for example, we've got the World Mining Trust having had a poor period, but I'm actually quite convinced by your argument, Rich, that the companies in there are attractive and that as long as we have a following wind in the metals themselves, you should see better coming through from there. Now, I am worried about EM, and I'm worried about EM because it's been really good for us, but it seems to be very heavily driven by the AI trade, and it's got a lot of concerns with China as well.

54:10So it's got sort of double whammies going on here, and I'm a bit worried there. So I actually quite like the idea of selling 2.5 EM and buying 2.5 World Mining Trust. Okay? So that's the first stage of where I'm at. Now, I remember the whole point of this is I'm completely inconsistent, but I'm the chairman. So that's all right. So Rich talks about the equal weight of SP500. I am less happy with that. And the reason I'm less happy with that is if I'm going to hold my hat on anything, it's that AI is changing the world. and I think therefore the AI companies have got slightly better earnings. You know, the big Magnificent Seven are going to keep their earnings driving nicely, in my book.

54:52No, they're the ones spending. Well, they're spending, but their earnings are coming through. And they're being derated the whole time. And I can see that, I can see that as managing to keep holding the market up, even though the rest of the market's in trouble. Where I'm with you is I am not bullish about the Russell 2000. Because I believe that the cyclicality going on at the moment, you talked earlier about, you know, if you still don't like, you know, bonds, you know, nice little, nice little dig in the side there. You don't think I'd notice that. But hey, that's life. That's life. I can go there.

55:27I can go there. But to me, I think bond yields are going to go higher. I think bonding will continue to go higher until something goes wrong in the world. That's what we said at the Lord's live event. And I consider, I continue to believe that. So if I really do believe that, I got to worry about the cyclicality within my portfolio. And so I'm going to sell 2.5 % Russell. Where is it going? And keep that. Where is it going, Spice? And I'm also going to sell 2.5 % Japan because Japan is still sitting on a nice profit. It's done very well. But if I think these bond yields are going to keep rising, then I've got concerns there.

56:02So I've basically, I've sold 2.5 % EM to buy 2.5 % world mining. So that's a sell to buy. I'm selling 2.5 % Russell and 2.5 % Japan. And I'm putting that into cash because I still do not believe the bond story. And I want that to be flexible enough to be able to use when I want to. So I'm adding some cash to the portfolio. Now we've added cash over the last few podcasts. So we've got a slightly more defensive position than we had, but there are still worries around and I would like to raise a little bit more cash to make sure I've got some ammunition to buy. But I do like the story about the World Mining Trust and the copper.

56:45I was giving you a jip on the copper, but I think it's a good story. I don't have a problem with it. I suppose I'm just a bit disappointed that it hasn't done better in the most recent time. But I think it can. And then I go to gold. And my view, as you know, is that gold is going to take out the 4 ,000 level. But I think you should be looking to acquire it when it does. So I'm happy to add a little bit more in that score by buying the World Mining Trust, which has got a diluted effect. So I accept, though, that I'm not embracing that conservative view completely. I'm still trying to represent a bullish view.

57:22And if we carry on with the last couple of weeks' price action and how things are going, then the ferrari to change the chairman is going to get quite long. I'm going to be the Michael Carrick of the team. As a Spurs man, Michael Carrick used to play. But as you know, with Man United, he's under a lot of pressure at the moment. So my head's in the sand. I'm saying the boys are doing a great job. The boys are doing a great job. And they're going to say, we've got ultimate fate in the chairman, which you know is the kiss of death. But at the moment, what we're going to do is we're going to do our EM into world mining in two and a half.

57:54We're going to sell two and a half Russell, sell two and a half Japan into cash and see what happens. So it takes our equities down to 57 and three quarters. So it's 57.5%. Historically, we said we wouldn't want to go below 60 % because we think that long-term, our portfolio to make 10 % a year should have about 75 % in equity. So we're right at the very bottom and a little bit below where we thought we'd do. Given that actually we've got a reasonable amount of commodities, those actors risk assets as well at the same time. So net-net, we are still sort of above that. And that's where I would look at it.

58:35I would look at my commodities as risk assets with my equities. They are still above that lower level, but we are getting down. I wouldn't want to have less equities than I have now unless I was really thinking we were going into a nightmare time because I actually think, as I said, there's a load of bears things here and the markets haven't done too badly. So we're going to have to move quickly when it turns because when it turns, it's going to move fast. because a lot of people in my view are taking negative views at the moment. So you're going to have to be ready to move quick. But I think it's a sensible thing to do and it might freshen up our minds and our thoughts.

59:12So next week, you can all come in and we can buy loads of things. So 22.5 % of cash. 2.5 % of short-term gilts, which is pseudo cash. So the portfolio, very defensive there with 25 % in cash and liquid instruments on the sidelines. and 2.5 % of gold. The hatches have been battened down, I would say, Spice. The rabbits have moved out of the headlights. Hopefully not into the middle of the road. Or back onto the train track with the train coming. What is that light going down the tunnel? Oh my God. So let us know in the comments below, is this the capitulation that we'll see the bottom of the market?

59:55Let's hope so. Or have we just managed to get that little bit more cash before the market eventually comes off because let's face it we're only two and a half percent off all-time highs let us know in the comments and also if you've got an email question for us then write in to us at theartofinvesting at ig.com from the best economist creators in the country we bid you farewell