Is The Fed Credibility Cracking? And What Earnings Season Tells Us

0:06Welcome to the Art of Investing brought to you by IG, the global investment platform. Now, we thought it might be worth introducing ourselves for those of you that are new listeners. My name's Rich MacDonald. I'm your host, as well as that ex-Hedge Fund Manager at Brevin Howard, and then Head of Emerging Markets at Credit Suisse back in the day, while they were still around. To my left, we've got Mark Spice Holden. Hi, Rich. One of the UK's leading unit trust managers in equities during his illustrious career. How are we doing, Spice? Good. Gosh, I'm trying to think how long ago that was. And then if you read the mail on Sunday this weekend, you'll find out Chris CJ Fellingham is king of the gilt market.

0:49Finally, I've got recognition for all those years of hard work. So we are got a huge amount to get through today, including why Spice is looking like Woody from Toy Story. But let's kick off with this week's portfolio. 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. So as you can see on screen here, we're down 1.7%. It's been a really tough week. We got so much to explain the moves this week, including the Federal Reserve last night.

1:27But these AI names have really been winging around and set the cat amongst the pigeons. We've got a year-to-date number of up 8.8 % and their performance since inception up 21.4%. Now, you might ask, what has cost us this week on the performance? Why are we down 1.7? Well, the main contributor is the Nikkei and emerging markets for much, much the same reason, with the Nikkei down 6.7 % in one week and emerging markets down 5.4%. Spice, that's a dramatic move, isn't it? It has. And hands up, I've got this completely wrong because I thought about a week or so ago, we'd probably seen enough of a fall, but it's carried on, mainly because the AI sort of exposed stocks around the world, not just in Japan and emerging markets have been hit very hard.

2:15If you remember that the emerging markets, some of the biggest stocks are in Taiwan and in Korea, and they've been hit very, very hard. And we'll talk about that more in the market report, but that's the principal reason. But while Spice is saying that, I just would like to say that Japan has still had a very good year to date, as has EM. The throth has come off the top. And maybe we should have spotted a bit more of that and been a bit more aggressive in some of that. But we'll be talking later as to whether the investment case is still there. And if so, what opportunities these falls have given us.

2:48And a similar story in mining and copper, because copper is down 2.5 % on the week, the World Mining Trust down 4.7 % on the week. So these reverberations around the market from this AI unwind have been really brutal. Now, we're going to go more into that during the episodes, including why the UK yet again outperforms. In fact, we might be cheering a new all-time high today. We might be. We might be. I'm just waiting for the spicy market update to see what happens. Well, we've also got Bank of England coming at 12 noon, which is about in 50 minutes time. So we might get a comment on that as we finish today's podcast as well.

3:30So yeah, that was the FTSE 250 up 0.3 % on the week and the FTSE 100 up 1.6%. But that wasn't our best performer. Best performer, MSCI India up a nice 2.2%, which gave us a little bit of that diversification benefits. And you'll see that that ties into the story around the Nikkei and emerging markets as well. So a big show coming up, we're going to talk about the Federal Reserve last night. This is a huge change because of course, Kevin Warsh, this was his second meeting, and we're starting to learn that the Federal Reserve over the next four years is going to be a very different beast. So we're going to discuss that at length, really worth listening to because this is going to change the way the bond market operates and of course its repercussions onto other asset classes as time goes on.

4:21But without further ado, Spice Market Update. Well, thanks, Rich. As you say, it's been a huge week packed full of central banks. This time last week, we had the ECB made no changes. But as you say, importantly, last night, the Fed, Bank of England today at 12, and then tonight, overnight, when we're all fast asleep, Japan, the Bank of Japan have a very important meeting as well. But it Apart from those central banks, we've just had an absolutely huge week for corporate reporting. It's the busiest week of the year, pretty much. The second quarter reporting, if you remember. And in the main, they've been really, really good.

4:57Hasn't always met with share prices going up, as we'll see. But in the main, the results are coming in as expected or better. So in the background, we've had almost a peace breakout in the war again. We had 10 days of lull where they weren't firing bombs at each other. The oil price fell 15%, 17%, I think it was, in a straight line. And then immediately started bouncing back up when the bombs started flying again later in the week or early this week. So net-net, the oil price is down at about 10%. Ordinarily, that would be good for equities and probably good for bonds because it reduces inflation expectations and the support of companies' costs.

5:33Obviously, lower oil price goes into their costs. But we've actually managed to eke out some all-time highs. As you guys alluded to, FTSE 100 made it to a new all-time high. They said it would never happen. We're sitting with our fingers crossed, hoping it gets across that 11 ,000 barrier, which has been a big psychological barrier for a while. The S &P Equal Weighted Index, despite some very big sort of falls in certain parts of the markets in the US, eked out a new all-time high. Wow, that's really interesting. I haven't seen that. That's really interesting. Apple made an all-time high, probably one of the reasons it helped sort of some of the markets, back above$5 trillion, bigger than NVIDIA.

6:12The FTSE 250, guys, a five-year high. I'm going to do a jig. I'm going to do a jig around the table. Everything is going so well for me today. Oh, dear. As I mentioned when we sort of talked about the portfolio, I've got to put my hands up. I've missed out on huge falls. A few weeks ago, we talked about taking some money off the table in Japan and emerging markets, and they've both fallen about 17%, 16%, 17 % in the last few weeks from the recent highs, which has been very painful for people who are very exposed there. What about Korea? Korea, yeah. Well, obviously within the emerging markets, Korea has been down about a third.

6:50It's about over 33%, but it's still up about 90 % year to date. So yes, it's a pullback. It's a crash off of a very big high after a huge bull run. And we can obviously discuss those when we come to talk about portfolio construction maybe later. But away from that, you've had some very big moves down again in the tech stocks and the AI and the chip stocks. Basically, it started, I think, pretty much with NVIDIA, who's down about 10 % this week, because they announced one more of those circular funding deals with OpenAI. If you remember, they're basically going to put in around$250 billion, they say.

7:26They're going to actually lend OpenAI$250 billion. And in return, OpenAI say they'll buy around$350 billion worth of NVIDIA chips. So, one for you, one for me, one for you, one for me. Richard, have you ever heard of the expression Ponzi scheme? You know, I'll buy it from you, you buy it from him, and I'll give him the money to do that in the first place. So it looks brilliant, doesn't it? Circular funding is definitely the polite thing to call this. So there are serious questions. We'll stick with that then. Well, I mean, look, Europe's biggest company, ASML, which make the machines that make the chips, that go into AI, the revolution.

8:05Their shares are down about 15 % this week. Intel down 20%, Micron are down 20%, Samsung about 20 % all down, TSMC, Taiwan Semiconductors, just down 10%. So that's quite a result. So these huge moves. And another reason for why this all kicked off, and we did warn that this could come, is the Chinese are getting involved in the production. So the Chinese have come up with a technology to build the machines that then build the chips. And ASML, one of the reasons they're down 15%. However, there's always a however. They're only talking about building five machines this year and 20 machines next year, whereas ASML sales just to China alone are 150 machines.

8:49So you're talking about 10 % of revenues and it's in the lower end, lower margin lithography machines as well. So, you know, things are getting overdone, but that's what happens when leverage is as high and when positioning is as crazy as it has been. It is. I mean, the whole semiconductor index, which you can track, basically is down about 16 % this week. It's crashed about 30 % in the last sort of six weeks. The whole of NASDAQ actually has entered what we call a correction phase. If you remember, a correction is a fall of more than 10%. So NASDAQ is in correction territory down about 12 % from its all-time high about two months ago.

9:28Korea has been a volatile market this week. We talked last week about they use circuit breakers or sidecars, they're called in Korea, where basically if the market moves by more than 5%, one plus or minus, they put a stop in stop all program trading for the next five minutes or so. Let everyone take a breather and you start again. And we had loads of those this week. Literally just on Wednesday alone, the market fell 12%. Then it went up 3 % and it ended the day down 6%. So, I mean, that's in one day. The term sideguard just makes me think of you two, like Wallace and Gromit, with you sitting in the sidecar alongside Spice with his helmet, hair blown in the wind on his motorbike.

10:13Well, it's a good job these things don't happen in the UK because the Korean stock market lost$2.2 trillion worth of value in the last two days, which is 60. If you put it in the FTSE 100, it would be equivalent to 65 % or two thirds of the whole of the FTSE 100 in value. So there's some very big moves going on out there. And it's interesting that their government is now looking to try and introduce some steps to reduce that volatility, stop people trading on margin as in taking leveraged bets against it. And they're maybe going to try and also pull back on single stock leveraged ETS, where you can buy three times the move in SK Hinex or whatever it happens to be.

10:54So they're going to try and pull back on that. Actually, the results from SK Hinex are very good. The operating profit is up 557%. And the shares are down 6%, as you do. So down 50 % in the last month, but still up 120 % year to date. That's just SK Hynix. Elon Musk hasn't been able to avoid it. SpaceX shares down another 10 % since we last spoke. Remember, their IPO price was$135 down to$115, as we speak, around that sort of level. It was maybe found a base because they traded 107 one morning, didn't they? And it felt like there was a lot of support came in there, cleared the sellers out and up they went 7 % in an hour.

11:32Exactly, yeah. And I think, you know, I said, there's been, as you, I think, alluded to, there's been a lot of short selling of SpaceX. So, as you say, people covering their positions there. But it's not all been about tech. Back in the normal old world that we live in, particularly CJ, there's been a raft of corporate news. As I say, this is the busiest week of the calendar, the reporting calendar. Just on the bank side, we had poor results from Barclays. The shares actually fell 10 % on the back of that. Visa, shares down 2%. But good results from other banks, UBS in Switzerland, Deutsche Bank in Germany, and our own Standard & Chartered all had very good results and their shares were up 2 % or 3 % or so.

12:08In the car world, Ford shares are up 5 % after good results. BMW in Germany shares up 5%, even though they're cutting jobs by about 8%, they're cutting 8 % of their workforce. Sorry, Ford up 5 % despite writing down 19 billion off their balance sheet because of the investments in EV haven't really gone that well. So, you know, this is where we're sitting in this value territory that we're going to discuss a lot later, is that stocks can write off 19 billion of a failed move into EVs and the stock goes up. I think one of the reasons Ford has been able to bounce back is that they've got very good battery technology, which were meant to go into the electric vehicles.

12:50And so people are now saying, well, actually, that battery technology could be used in data centers, in AI. And that's one of the reasons Ford's bounce back. Ford's an AI company now. Well, here we go. Here we go. More traditional, though. One of CJ's old friends, Porsche, had their results out this week, and they've done well. Their shares are up 5%. In the luxury goods world, talking of luxury, Hermes, obviously one of France's leading companies, had disappointed results. Their shares were down 10%. And LVMH, Louis Vuitton, Moet, Hennessy, both been hit by disappointing sales into China because, as we know, the Chinese economy has been struggling.

13:27Sales for those guys have been struggling out there. Closer to home, the consumer side, you'll be pleased to hear this, Greggs. Oh, yes. You can't beat a veggie sausage roll to a performer of the week. You know, sausages are doing well, particularly in the Canary Islands where they've been expanding. So when you go on your holiday, you want to get your Greg's sausage rolls. You all love it. Shares up 14%. Come on. Is that because the flights are reaching further and further? Because obviously they set them up where they think they're going to see a lot of people who know Greg's well. And maybe some of these flights are coming out of airports in the UK and they say, oh, well, we'll put a Greg's there and that'll be great.

14:05Yeah, but you thought that would have been all baked into results or anything. Oh, no. Good drum roll. No sausage rolls, sorry. Oh, God. Anyway, so moving on quickly, Starbucks have had great results. Their shares are up 6%. Anheuser-Busch, unfortunately, their beer sales are a bit lower than expectations, probably because the Scots came home early from the World Cup, I'd imagine. But anyway, their shares are down a bit. Unilever, good results. Shares up 8%. managing to pass on some of the costs that they've been absorbing from things like higher oil price. But Procter & Gamble, which is another company exactly like Unilever, make detergents, et cetera, in America, their shares were struggling because they can't put the prices up in America, interestingly, despite their higher costs.

14:50But back in the UK, some of the big FTSE companies, apart from Stan Chartered, Rolls-Royce this morning, this is Thursday, shares are up 4 % because they're actually doing quite well because AI data centers, they're selling machinery into those data centers. And defence spending is also going up. Guess what? And that's a problem that our new prime minister is going to have to deal with in the not too distant future. Or the chancellor. Or the chancellor, perhaps, yeah. Well, maybe their whole hands didn't do it together. Shell also had good results. Rio Tinto, a very good capital discipline. So they're benefiting from these higher commodity prices generally.

15:26So although we've had a bad week in commodities, for our funds, actually overall this year, things like the copper price has been done very well. and they're not putting lots of money into expanding, which is good, means there's going to be limited supply. The prices should go even higher. That's a good thing. And shareholders like that sort of response. So Spice, I mean, this is just incredible, right? Just in the last 24 hours alone, we've had 60 big companies reporting. Everybody from Shell to Starbucks, from BA Systems to BMW. How do you prepare as a fund manager when you're coming into earnings season?

16:02Well, I mean, it's incredibly difficult to keep on top of it. I mean, you know, there are things that I tend to look at. So when we're looking at tech stocks at the moment, one of the things the market's laser focused on is the amount of capital expenditure they're spending. So if that is higher than expectations, you would ordinarily expect the shares to come back or fall because people are going, oh, God, where are they going to get the extra money from? Are they going to have to borrow it from us as shareholders? They're going to have to borrow it from bond markets. Where are they going to get this extra money?

16:31So right at the moment, if you're looking at the tech sector, AI, chips, etc., that's where you've got to look at. And interesting, last night, for example, we had two of the biggest companies in the world, Microsoft and Meta, who owned Facebook, both had results out. Now, they had slightly different moves. Microsoft's share price went up 3.5%, 4%, because basically they upped their revenue guidance, which was great. But they also said that their capital expenditure would be no higher than they'd previously said. Right. So they kept a lid on it. Discipline. Discipline. Meta, on the other hand, said, yes, we're going to keep, again, another positive sign that said we're going to have a lid on our capital expenditure, but the bottom end, the spread between what their lowest end and what their top end would be, sort of closed up.

17:15So the bottom end moved up. So the middle bit, if you like, of the range has moved up a little bit. And the market punished them. Shares down 5%. Yeah, I think, and part of that as well is because next year, the capex spend is going to be so big that Zuckerberg chickened out. And he said, I'm not going to tell the market what next year's guidance is. So that's why they're getting punished. But what about when the actual numbers come out? As a fund manager, especially, you know, in a long fund, do you make quick decisions or are you waiting for the conference call? Perhaps before we go there, just to help people, what's the sequence?

17:52So take a UK company. What's the sequence? Now, of my understanding, and you now guys fill in once I've done the first one, is at 7 o 'clock in the morning, the results are released on the Reuters news service before trading starts at 8. So the first thing you see is that. What happens next? So what happens next is the investment bankers have an analyst who is close to it. And the company who is the main stockbroker for the company that's released the results, they have an analyst who will have seen the results last night, probably. He will have been an insider. So he will know exactly where the good bits of the results are, where the bad bits of the results are.

18:31And they will also then make a judgment about what they want to do about the outlook for their earnings forecasts. So they will tell their clients. So they will tell their most important and biggest clients first. And that's why it's important as a fund manager to have a good relationship with an investment banking analyst who is broker to these companies. But they have to get that information to the market pretty quickly so that everyone has the benefit of that. So the art when I was a fund manager looking after individual equities would be to try and ring the stockbroker responsible for that company and say, Hi, mate, I see the results.

19:03They look okay to me. Is there anything I'm missing? And he might say, well, actually, you're missing the fact that this division is actually accelerating really fast. Well, this division is actually getting much worse and I'm going to have to push my numbers up or push my numbers down. I remember we were a house broker for Reckitt Benckiser. and Charlie Mills, you'd refresh the page, refresh the page, 6.59 in 59 seconds, and then you'd have the numbers out. But instead of reading them, you go straight through to Charlie on the hoot and say, right, tell us everything. Oh, this is great. This is an upgrading guidance.

19:34Under constant currency, then the growth number is big. They're also talking about Sillit Bang. They've done a deal with Durex. This is a great set of results. So what we would do as market makers is then go to the sales traders, and the sales traders that speak to the clients like Mark's fund. And we would give them a snapshot of what Charlie said. And the sales traders would then make all their calls. So if you're the first call and you're the house broker, then you're most likely to get the big trade that day. Then 20 minutes later, the hedge funds are on and they're asking you for pre-market prices.

20:09And you're shooting in the dark. The request, right, GLG looking for a pre-market in Mark's and Spencer. and you get to make it a little bit wide, but you can be very, very wrong. So it's not the biggest trade of the day, but it gets you into the flow, they say. The rest of the market will probably get that information in more detail when they have what's called a conference call. Right, so that comes later then. That comes later. A lot later, normally? Normally about nine o 'clock. They try and do it pretty early on. So the market starts trading at eight. So it was out of seven. Out comes at eight.

20:45conference call at nine. You can trade between seven and eight o 'clock, which is why sort of fast money, as it's called, we'll be trying to get involved and find out what's happening before everyone else gets in. So what happens in the conference call? So the conference call, the chief executive, the finance director will stand up and tell you why the results are good or bad, what their expectations are. They won't give you a forecast, but they'll say, we are on track still to, you know, to have a good year or a bad year. Our debt's done this. You know, our creditors have done that. These are our new order outlook.

21:13Everything's looking good. by then most of the analysts have got know what the numbers are going to be if i'm sitting in there with my you know portable device can i you know send a message to the guys back at the back at the office saying gosh you just said this i'd sell everything if i were you or buy everything and not just what they're saying but by reading their body language and what they're avoiding saying that's also just as important i remember sitting at the the anglo-american investor meeting and it was Cynthia Carroll at the time and she was just avoiding the elephant in the room and you knew that the market wasn't going to take it well because she didn't have an answer for that.

21:52I mean you know you get a chance those people sitting in those meetings have a chance to ask the management questions and my favorite question would always be what is the worst bit of performing bit of your business at the moment and what are you doing about it because if they don't have an answer for that, you might as well go, well, that's going to get bigger and bigger and bigger. Normally, they will have an answer and they know that people like me would have asked that sort of question. Otherwise, they'll just focus on all the good stuff and try and avoid the bad stuff. So, you've got to try and bring out what's happening in the bad stuff and what they're doing about it.

22:23Very important. But yeah, by the time 10 o 'clock comes around, most of the information is dissipated into the market and the share price is probably adjusted to where it probably should be. Although between seven and eight o 'clock when there's not an official market, but people can trade, you know, the share price will be winging around much more than it would do ordinarily. And coming into that seven o 'clock announcement, is there a sort of cheat sheet that you're looking at for, as you said, capital allocation, earnings per share or whatever that you're running down? So you can search through that statement first thing and try to form a judgment.

22:59Is that what you would do as a fund manager? Is that how you would play it? Absolutely. And like last night, I was looking for what the revenues were going to be out of the cloud services business at Microsoft and what the CapEx is going to be and what leases were going to be. So I had all that sort of prepared. And actually, companies have become a lot better over the years in the sense that when they put out the announcement now, they tend to give you 10 or so main key sort of metrics that people will be looking at, like the CapEx, like the revenue growth. Because they know that's what people will be focusing on.

23:26Exactly. And those are the things that analysts will immediately go to. But I say, you don't really find out the nitty gritty behind it or some of the underlying trends that may beginning to be emerged until you've spoken to the analyst and the analyst has spoken to the company or you've spoken to the company. Because for the next two weeks, the management will then come in and go in and see those individual fund managers, sit down in a room like this, where you have the chief executive, the finance director, the main analyst, a couple of fund managers in there. And the fund managers and the analysts will all will do is ask questions of the management.

23:57What are you doing about that? what's the trend you're seeing in China? Why do you think that Chinese AI is going to be better than the US? Is it really a tenth of the price that the US is? Will you be able to buy it? Was Trump going to stop you doing it? And those are the sort of things you'd ask. And that's why the first 24 to 48 hours are incredible opportunity if you've had a change of strategy or there's a part of the business that suddenly started performing. Because the price can react for the next two weeks. So if you're on board early and then you get broker upgrades and price target increases, then there's momentum, but there's also real buyers coming in.

24:39Because the long funds don't just buy for a day, do they? They can be buying for six, seven days. And that's why, and what hedge funds and traders are trying to do is getting early to then enjoy the majority of that move. Absolutely. So Spice, things have changed a lot since those days. haven't they? It's not so much now you've got to go to AGMs and go to conference call during earnings season. The democratization of shareholding has brought everybody into that game and you get conference calls online now. So if people do actually want to go and listen to what's happening in Starbucks as a company, then they can go and listen to it.

25:21And there's a great app now called Quarter. So Q-U-A-R-T-R. And you can go and you can read the transcript or you can listen to what the management have actually said. But that's different from actually trying to trade these earnings, isn't it? Because that can be a very dangerous game. Yeah, I mean, you can also listen to Bloomberg, CNBC, all these financial channels that are out there on TV or YouTube or wherever it happens to be. But even they get it wrong. So, you know, we talked about Arm earlier on, the first reaction of the Bloomberg analysts when they were talking about, these are great sets of results.

25:54The shares went up 4%. They ended the day down 15. So, there was a 20 % swing. Now, if you just listened to that and jumped in without being an expert, because it then took the experts to realize that they were oversimplifying the results and had missed something key, and the shares then start falling, you would have got your fingers very burnt. So, one of the reasons we don't invest in individual stocks is there is huge risk in one or two stocks. Why we like indices is that risk is spread across, for example, in S &P 500, 500 companies. In the FTSE, 100 companies. In the FTSE, 250. 250 companies.

26:31So, if one goes wrong, you're not going to get completely burned. It may nudge the index up or down a bit, depending on whether the results are good or bad. And that's what we're trying to look for when we're buying the indices. Are the overall earnings moving in one direction or another? is that better than expectations or worse than expectations? If it's better, you would expect share prices to move up. If it's worse, you expect them to move down. And CJ, from a retail investor point of view nowadays that you do and your SIP and your pension, what does earning season mean to you then? Earning season to me is a checkpoint on how companies overall are doing.

27:10I do not sit there in the morning and say, oh, BP's coming out today or Shell or Microsoft last night or whatever. I don't do that because as you've talked about already, really explained it very well, for professional fund managers, that's something that's important. But for the retail client, it's too tricky to work this stuff through. There are many, many holes. There are very many traps out there. You don't need to. What you're trying with earnings season, see, has it been a good earnings season? Has it been a bad earnings season? And generally, how's that then affecting the index? And that's why we in the podcast, when we think about our target audience, when we think about what we're trying to show people is we stick very much to those ETFs, to those broad indexes, because the individual name stuff is just an opportunity to lose money as far as I'm concerned.

28:05Is there anything like earnings season in bond funds? What would be the equivalent? I mean, it's the same sort of thing in the sense there are the economic statistics that come out each month. The brokers will forecast what they are. You will get a consensus. That consensus is therefore priced into the market. Out will come inflation was 4.3%, and it was meant to be 4%, and the market will then react to that. The problem is, or the interesting thing is, sometimes the market will react to the number. Sometimes the market will think, well, it's a number, but actually it's a one-off. And actually, all the other numbers are fine.

28:43So actually, you're reading the wrong thing into this. And which is why on this podcast before, I've often said the first reaction is normally the wrong reaction. And we'll see when we come to talk about the Federal Reserve last night, how excited the market got in the first 15 minutes and how it ended up on its lows an hour and a half later. So the first reaction was, oh, isn't this great, blah, blah, blah. But then the more considerate voices came in and said, well, hold on a minute. Are you sure that's good news? And it changes things. So yes, it helps in the short term if you can see something beat the market by a bit or failed for a bit.

29:28But you've got to get more into the depth. And that's what you guys are talk about when you get to that analyst meeting, where you've got the chance to ask more questions rather than just look at a number. So the reaction to the number may be different, and we've seen this in equities, than when they then have the presentation, and it's gone down really well because numbers have been beaten, and then suddenly in the presentation, someone says, well, that's great, but my guidance isn't very good, and suddenly the market collapses. So it's great for that first reaction, but actually, there's a longer-term reaction that we all need to be aware of.

30:01And that was true last night. So we had Arm, interestingly, an old British company, which is now quoted on NASDAQ. He's went to Japan for a while with SoftBank, and their share's down 15%. Because another company that makes chips that goes into phones, Qualcomm, the biggest provider of chips, their shares were down 10%. Both of them beat expectations. This is fantastic. In fact, the first stuff, if you listen to Bloomer, they go, Arm's beaten shares. Their shares went up 3 % or 4%, ended up down 15%. Because they're all struggling to get parts to go into their chips to service the mobile phones.

30:34And so tonight, people are a bit nervous about Apple. As I say, Apple's now become the biggest company in the world again. And obviously, Apple still make a huge amount of money. I think it's probably still about 40 % of their sales come from mobile phones. So, you know, guidance is now, you know, the expectations have been beaten down a bit because of what Arm and Quotone said last night. So if they beat that and they say, and by the way, we've got all the components we need for our mobile phones for the next 12 months, 18 months, the shares will probably go up quite a lot, I would have thought.

31:02Okay, so we have given you a snapshot of the portfolio. But let's just set the scene for you for last night's Federal Reserve meeting. This is Kevin Walsh's second meeting. The first one, he managed to buy a lot of credibility and the market believed what he was saying, that he was determined to get inflation down. And last night, as the meeting went on, then the statement was good and the market rules were rewarding him yet again. And then suddenly one journalist turned round in the questions and said, I don't really understand what you're saying here because you're promising that you're going to battle inflation.

31:40You're promising that the inflation target is 2%. However, you're not raising rates. Why not? Chris, why did they not raise rates last night when he's talking such a big game? Haven't got a clue. I mean, I think it was an atrocious car wreck last night. You know me, I like to talk in hyperbole. So, you know, to me, you've got a guy who basically stood up last night and said, I'm going to keep inflation low. I'm not going to tolerate any extra inflation. I'm not going to soft inflation targets. It's a hard inflation target. It's 2%. It's not 2.5. It's not 2.6. It's 2%. And I'm not going to be moved from that.

32:18Okay, so why didn't you raise rates then? because inflation's well above two and all the lead indicators are well above two. And he said, I'm really tough on inflation. I'm going to stay really tough on inflation. Inflation, what it's all about. Yeah, but why didn't you put rates up? Yeah, but I'm really tough on inflation. Now that's what I do. So he's basically not listening to the question. Now, what he would argue is I'm not giving any forward guidance. I'm not telling people what we're going to do so we can let the market react and essentially do the tightening for us. So when the bond market sells off and when bond yields go up, remember bond yields up, price is down.

32:58But what the bonds are saying is interest rates, we need to tie to monetary policy. Economic growth is too strong. Inflation is a problem. I don't want to hold bonds on these yield levels. I need to compensate for potential higher inflation. You expect the Federal Reserve then to take that message and do something. I'm really tough on inflation. I'm determined to keep it down, but I don't do anything. And what you saw was a really interesting reaction in the market last night. Violent. So when he comes out and he says, I'm really tough on inflation, blah, blah, blah, blah, blah, the market starts to say, hold on a minute, he's not raised rates.

33:38This is really dovish. He's not going to raise rates. He could talk he's going to, but he's not going to. Equities go well in that background. Isn't that fantastic? So all my friends in the equity side, two of them around the table here, Mr. Bull all the time, all they can focus on is, oh, prices going up, which is my next car I'm going to buy, which is the next this I'm going to buy. Suddenly, they look over their shoulder at the Bond boys. And the Bond boys are going, I don't like this. Because if he was serious about it, he would be putting interest rates up. And he's not. So we're going to sell bonds because we're not confident that inflation is going to be low.

34:16And even more on one question, he was asked, do you consider this a pause today then? He said, oh, no, no, no. My committee and I, we had a family fight, a good old family fight in that room for two whole days. And we did so well. We debated and we debated and we have made a decision on interest rates today. It's not a pause. It was a conscious decision. But you've made a conscious decision to keep rates as they are, despite everything you're saying. So it's not even that they just thought, well, let's just give it another few months. But don't you think he's playing into exactly what Trump wants him to do by saying, I'm going to keep a lid on it, be dovish.

35:01But, you know, for an equity investor, he said all the right things. He said, we see strong growth and productivity gains. We see a surge in high-tech capex that's going to help prepare for future growth. Inflation is elevated, but it's due to supply shocks, the one-offs, the gulf. So basically, it's telling me it's transitory, so it's only there for a short period of time. And basically, he didn't really say anything else than that. And Tilly then said, well, actually, as you say, normal and real interest rates, so that above inflation, is effectively tightening for me, so I don't have to do anything.

35:31So you see, we had a chap here called Mark Carney. Those people who know me well know I thought he was useless as well. And I'm very happy to say that to his face if he ever came on the podcast. At the end of the day, he did nothing. In all the time he was there, nothing. Because he basically said, well, the market's doing the tightening for me. Well, the market's doing the easing for me. So I don't need to do anything. Explain what that means. How can the market do tightening for you? Your job's to control interest. Right. So all they can control is the interest rate. And the interest rate, as we know, is where you buy and sell risk-free rates for one month or two months or three months.

36:06But very, very short dated. So in the UK, the base rates are in three quarters. We put it up today, it goes to four. We put it up, it goes to four and a quarter. We put it down to three and a half, whatever. That's what the central bank can do. But the 10-year end of the market is difficult for them to control because it's the market's appetite for buying a 10-year bond. What return do I want? for 10 years to compensate me for the risk that's in markets. And if I want to buy a 30-year bond, what is the yield I want on a 30-year bond, given the risk of where inflation is going to be and paying back the bond over time and all those other things going in there?

36:46Now, remember, we have talked about this before on many occasions. We've broken down the bond into three pieces. We've broken the bond down into an inflation estimate, a risk premium, and a real yield. And the real yield is you could effectively think as the growth rate of the economy, the steady state of the economy at the moment, the rate at which would make you say, well, rather than put the money in the economy, I might put it in the bond market instead. That sort of thought. It's not an exact thought, but that's the sort of thought that's there. So if you look at the bond market move and you take what question you asked me, which was they're doing their job for them, what does that mean?

37:27The market is lifting the yields on bonds of 10-year maturities, let's say. So although interest rates themselves aren't moving, the bond is moving. And when people start to say, well, I'm going to invest in this property over here or this project over here, they will look at it against what the risk-free rate is. And if that risk-free rate for 10 years is moving up, they might say, you know what, I'm not going to do that. I'm going to wait before I do it, which means that activity at the edges slows down. And therefore, they've done the job of the Fed in slowing down economic growth. So you're saying that loans from banks, etc., they go off the bond market, not the overnight Fed funds rate?

38:15Yeah. All loans will go off against the maturity of the project. So if it's a 10-year project, people will look at 10-year bonds, risk-free rate. A 30-year project, what are long risk-free rates? Because what will tend to happen is companies will go into the market and borrow and try and match where they borrow the maturity with the maturity of the project they're trying to fund. So if those yields go up because the bond market has sold off, then it gets more expensive to do those projects. And so effectively, monetary conditions have tightened, although the Fed has done nothing. So an example is mortgage rates.

38:57So in America, most people have 30-year mortgages. In the UK, we might fix it for two or five years. In America, people like to fix it for 30 years. So going back to Chris's examples of 10-year, 10-year, but if you go out 30 years, there's the increase, in the last week alone, there's been an increase in the 30-year yield by a quarter of a percent compared to a week ago. So if you wanted to have a 30-year mortgage in America, it's priced off of a 5.2 % yield. Instead, last week, it was at five. And so people who have those mortgages applying for them today are having to pay more. and that can be in a dampener for the housing market, for employment.

39:33People spend less because they feel they've got less money in their pockets after they've paid their mortgage payments. But the good thing is that actually there's what's called a steepening. So the front bit of the curve, so the earlier maturities, two years, five years, the actual yields actually fell a bit. So the prices went up because he is not putting the rates up as quick as the market wanted to. So they're saying you're going to build a problem, but the problem's coming later on. So you're going to have these higher yields later on. And in the short term, actually, that's one of the reasons some equities, and we'll talk about that in a minute, do pretty well when they're in this environment.

40:06If we look at those things at the moment and where those bond market yields are at the moment, bond markets going up, young Mr. Walsh is saying, I'm steady on inflation at two. And therefore, all the other parts, the real yield and the risk premium are going up. So let me give you an example because we like examples here to help reinforce the messages. 30-year tips. Now, tips are treasury inflation-protected securities. So if you buy a tip, you will get a return over and above inflation guaranteed until the maturity date of that bond. So 30-year tips at the moment yield over 3%. So you can invest in a 30-year US government bond and guarantee yourself a return of 3 % over the next 30 years over and above inflation.

41:07If inflation's 10, you'll get 13%. If inflation's zero, you'll get 3%. But you don't have to worry about inflation. Now, we go back 4, 10, 15 years. Those tips were yielding 1%. When we were keeping interest rates really low, remember, all the QE, the buying of government bonds, those things were down less than 1%. I mean, they got down to negative in the UK, but that's another story. We might visit that another day. That was a very difficult time for you like me, right, who run these things. But never mind, never mind. Oh, God, I'm having a nightmare again. Sorry. Right, let's go back. So you can get down to 0.5 % or 1%, and these things are over 3 % now.

41:47Now, do you remember we talked before about the 10-year, 10-year? So you can buy a 10-year government bond in the US. It yields 4.7%. But you can also buy a 20-year government bond in the US, and that yields 5.25%. So what I could do is I could either buy a 20-year bond today, and I get a return of 5.25 % over the whole period that I own it per year, or I could buy a 10-year bond on my time machine 10 years forward, what would the 10-year bond be in 10 years' time to have given me the same return as buying a 20-year bond today? So I'm getting 4.7 % for the next 10 years. Yes. And then I have to invest in something which means the average...

42:32Over the whole period would have been 5.25. 5.25, right. And that rate is 5.8%. So the 10-year government bond in the States in 10 years' time is forecast to get to 5.8%. Now, when I look at the equity market and I start looking at yields like this, I start to think as a bond man, I can invest in these things for a little risk. I mean, it's the government risk, but in your own country, there is no better risk than your own credit. So why would I take a risk on some of these equities when I can buy these sorts of returns? And that's the issue. That's what blew the market up yesterday evening. They started off going down spices for you.

43:15Oh, inflation higher. Dovish means it's great for earnings. Isn't this brilliant? And then somebody said, look what's happening to bonds. They're selling off. They're discounting a higher yield. They're going to give me a better return. Maybe I should buy bonds rather than equities. And suddenly equities fell sharply. So the real question for me after last night, which, as I said, was a car crash, is has Walsh lost control of the bond market? And lost credibility. Because if he loses control of the bond market, that's a very dangerous place to be. I'm going to paint a scenario now for you. Well, Spice is going to have a crack, I know.

43:53But there's a monetary policy event at the end of August called the Jackson Hole Conference in Wyoming. It's the sort of place that Rich likes to go skiing and that sort of thing because only he can afford those sorts of things. It's like Scotland. But it's just like, well, it's not actually just like Scotland. It's not even there. Actually, Jackson Hole is really nice. And it's beautiful. And in August, all central bankers go there and have a conference. And it's, you know, some sort of one of those times where central banks like to explain what they're up to. So I can see a situation where we go from here now to Jackson Hole, where the bond market says, you're telling me you want to keep inflation down?

44:33I'm seeing no evidence of it. Let's try you out. Let's sell off these bonds a bit more. Let's push you and see what happens. There's nothing to stop them. And the equity market is still up this year. So no one's going to come to the rescue of the equity market for the moment. So I can see a pretty tricky time in the next three, four weeks until we get to Jackson Hole, when then Walsh can give some more guidance as to what he's thinking. But the incentive's there for the bond market. The bond vigilantes can now sell the market and say, what are you going to do about it? What are you going to do about it?

45:08And so I'm a bit concerned. He lost control yesterday. I think it was a very bad statement. And what's more, it will encourage people to think about their tech holdings and other things. But that's not necessarily bad for markets overall because what Spice is going to talk about now, Now, apart from telling me I'm talking a load of rubbish, that's the polite word for it, he's also going to talk about some of the rotational things that are going on in the market because it's bad for some things, this scenario I'm talking about, but not bad for everything. We've been talking for quite a long time now about the internal rotation of markets and people have been moving between sectors or between different countries.

45:51And the areas that have been suffering for the last six weeks, two months have been all the tech areas. Now, America is full of tech. So NASDAQ, as we said, has hit correction today down 11%, 12 % in the last few weeks because it's 60 % of its tech. And with tech performing so badly, that's hurting the overall index. But we pointed out that the FTSE 100 is up, you know, to all-time highs. And the Russell 2000 has been doing pretty well and all that sort of thing. And the UK FTSE 100 is known as a value index. And we've talked before about the value factor. So these are lowly rated companies that don't produce huge growth, but they give you good dividends.

46:29They just steady eddies. The tech give you the sex and violence, if you like, on the other side. And most people, most investors obviously like to have a bit of sex and violence and some boring stuff, hey? I'm happy with steady eddy. That says a lot about me. Go home and play with your train set. So I wanted to point out that actually we've seen this huge rotation and even when there's certain markets. So if you look at the S &P 500, for example, So value, value companies have been performing much better than growth companies in the recent past. So over the last month, the value companies have outperformed the growth companies by about 1.7%.

47:05So a very good return. Over the year to date, it's actually about 1.2%. So actually, year to date, there's been that positive performance. And yet we all think of all the tech and some of the big stock moves we saw earlier in the year. Where it's most prevalent, you can see it in the Russell 2000, because there's a lot more companies that are value and a lot more companies that are growth. Within the S &P 500, there's actually relatively few value companies. And the truth be told, they're mainly growth companies. So in the Russell 2000, value has again outperformed growth over the past month by about 1.4%.

47:37But over the year to date, it's up 10%. The value companies have outperformed the growth companies by 10%. And that's a big move. Historically, you don't see that. This is a sort of one year in five type event? Or is it the start of the next five years being different? Well, this is the question, isn't it? The question to me is coming out of what was said by Walsh yesterday. If bond yields are going to push higher and push him into what are you going to do next? You know, come and have a go if you think you're old enough type comment. Are we going to see a continuation then of the value trade doing better than the growth trade, which then may change of course when we get to that jackson whole statement but is that trend going to continue and i think that's what's important for us with our portfolio and where we are because we've seen some big setbacks in some areas which maybe we should be looking to take advantage of well also and and what's useful for everybody at home is when we talk about value we talk about cheap and unloved and we talk about growth as Spice called it, sex and violence, that's all the ones that the retail public tend to get involved in because it's all these, you know, US platforms and everything push them into it.

48:58And the TV shows talk about it all the time. So all the AI names and the tech and the fancy nuclear sector and the quantum sector and, you know, all that stuff is where retail tends to get pushed. And it's where all their friends make money. Well, what's happening now is those are just coming back down to earth because they don't make profits or because the profits are so far out that interest rates does affect that. And these cheap and unloved names are really starting to catch a bid, as we would say, and the money's flowing. Does it continue to flow their spice? I mean, that's the trillion dollar question, isn't it?

49:35I mean, I suspect when I first joined the city, we used to get a good value year about every three years. One in three would be a good value year. Then it became one in four, then it became one in five. And until recently, actually, you haven't had a whole year. You've basically had a six-month spell, maybe a three-month spell. Yeah, you've had a three-month spell or a six-month spell. But because of this sudden move up at the steepening of the yield curve, as it's called, and longer-term interest rates have been ticking up, that's playing against the growth companies because you value growth companies on a long-term discounted cash flow basis.

50:10All their dividends, you assume they're going to go on forever. The lower in the interest rate, the higher the value today. But if that interest rate goes up, then actually that reduces your value today. And that's what's impacting these growth companies. So future profits are worth not very much today because it's just promises way in the future. Exactly. And, you know, I think one of the reasons we're seeing this move in bonds, as well as, you know, from what Walsh has said, is there is this huge competition for Kaplan. If our friend Stewie Thompson was here, the economist, he's always talked about competition for capital.

50:41And we've, you know, as an equity guy, you go, what interest rates have to get to, to attract equity people to sell, to buy bonds? And Chris talked about it earlier on, you know, are we getting to that point? And that's what's worrying the market at the moment. And this competition for capital is not just from government bonds, it's now from corporate bonds, because, you know, SpaceX, when they came to the market, raised another 70 billion or whatever it was in new government, In new bonds, for their bonds, by the way, their bonds have gone up by 1 % that they issued in terms of the price has fallen and the yield on those.

51:11You can now buy SpaceX bonds at about 7%. And they were issued at about 6%. So there's been some huge moves. So this competition for capital, or do you buy equities? This is the huge rotation, the pot that is boiling at the moment. Right. Well, I'll remind you both that we're not just here to talk about it. We are here to run this portfolio and take action if we need to. But Chairman, it sounds like there's been so many things going on this week, and the world's changing quickly. Are there going to be changes to the portfolio made? That's for us to decide here. Can I just put a little proviso over it first?

51:46One of the things that I know has frustrated various people around this table is that we've not had the exposure to AI that other indices have by running the market as we've run it with a low wasting in the US because we've been concerned, all of us, that things were getting a little bit perky. So in fact, being down 1.7 % this week and all the changes that happened is actually not a bad result at all. And a lot of people would be very happy to be only down 1.7 % this week. So I'm not overly concerned that we've got too much exposure to AI. The question to me then is, should we use this sell-off in markets to add our exposure to AI?

52:29or do we think there's better value elsewhere? Going back to this value debate that Mark's talked about, given the fact that I am worried we've lost a north star in what's happening in the bond market, that people don't really know what's going to happen in there, what Walsh is actually talking about, and therefore they might push those bond yields a bit higher. That's the stability under everything, isn't it? It is, but what you need to remember is that everything else is priced bloody expensively in the US, it's not priced so expensively in some of the other markets in the world. So you can buy things which are cheaper and therefore have more protection if something goes badly wrong.

53:11But if there's this continued switch from tech into the old style, you'll see, as you saw this week, where some of the old style equities markets have gone up, but the new style ones have gone down quite a lot. So that to me is the question. The question is, do we use some of our cash to buy NASDAQ, given the way the markets come back and say, great opportunity to buy some great companies, 12%, 13 % below where they were? Or are we a little bit concerned and suggest, well, maybe if we want to buy something, we buy something like the FTSE 250 or Japan, where there's more protection from some of these bad outcomes.

53:58I'd be honest. I actually came in this morning thinking, do you know what? Why not buy some Nasdaq? It's come back a bit. It's not done, you know, it's done okay this year. It's up 8 % this year, but it was up a lot more than 8%. But I'm worried that something else is going on in this US bond market and that actually we're going to get more rotation. I still think the world is full of people who are long of tech. And therefore, I'm a little bit weighing against that and I'm weighing more towards, let's buy a bit of Japan. Japan's come back a long way, but I think the fundamentals of Japan are pretty positive.

54:30FTSE 250, you know me, I love FTSE 250. I love the FTSE. When I die and go to heaven, FTSE will be there and it will be fantastic. And it might have gone up by then. But at the end of the day, for a portfolio like we've got here, we've got Andy Burnham, is he going to say something that's going to upset everybody? Is he going to, what's he going to do? So I can be persuaded that actually FTSE could be a bit too dangerous. but Japan I quite like. But what do you guys think? Let's have a chat on that. As Mr. Cautious, then I would have to say that I really enjoy the sell-offs like this because it wipes out the people that have got over their skis.

55:13It wipes out these momentum junkies and the algorithms that are so over-leveraged. I think we're now back to a base and we could even be getting to somewhere where they're getting themselves into trouble on the other side, there was a report out this week that there's banks that are putting up margins on hedge funds because these hedge funds have got so many of these AI trade positions, including positions in Korea, that the banks are saying, right, hedge funds, this is dangerous. You need to give us more cash to protect your positions. And when we get to that kind of point, there's forced selling goes on.

55:52And that's when you get that leg down. So Mr. Cautious is actually getting more constructive on the Nasdaq and taking a little bit more risk because I think we've had the froth taken off the top and we're somewhere in a potential buying opportunity. But I'd be talking about two and a half percent of the portfolio because that gives us a little toehold, dip the toe in the water, but it doesn't expose us to those risks that we've talked about the Federal Reserve. Because what could happen is Wors realizes his mistake and he comes out and makes a comment this week to the press. Japan, I completely agree with.

56:26I'd be happy to take even up to 5 % additional there. And then an additional 2.5 % into the FTSE 250. So I'd be happy to take the entire cash position of 10 % this week and put it to work in the market. What do you think, Spice? Welcome to the coverage. Wow, wow. So! Well, I mentioned that NASDAQ, I mentioned NASDAQ was on my blotter last week along with the mid-250. And we've had a huge blow off in some of those big NASDAQ names and the magnificent. And to me, last night, I was looking for these CapEx numbers. And we just had a bit of self-control at last from people like Meta and Microsoft. And if Amazon do the same tonight and Apple do the same tonight, then actually, I think people will start to return to some of those companies.

57:09And we've had this huge sell-off, a correction. Remember, more than 10 % fall in NASDAQ. So to me, I think we've got, really, we could afford to have a barbell. So have some of these sex and violence, more of the sex and violence, and some of the value over here. And that balances one out the other. So actually, as long as we haven't bet the whole house on this side, then if we're wrong and we put, say, 5 % in NASDAQ and we're wrong, it's not going to kill us because we still have some of these value stocks over the other side. Unless the whole lot come off. And that's what hasn't happened yet.

57:41If the whole lot come off. But you've had huge corrections in things like some of these major markets. But not the S &P 500. Because you've had a rotation. All you're doing is selling Paul to buy Peter. What if Peter and Paul both come off because of the rain? The only reason Peter and Paul come off is if bonds absolutely collapse and people go, now they're so attractive, I have to sell some equities to go and buy those. That's the time the whole market will have a leg down. But that won't insulate the UK or anyone. All the markets will price off of America and they'll all go down at the same time.

58:15Japan to me is like a halfway house. as we mentioned before, it's got quite a lot of tech in it, but it's got a lot of industrials. It's got sort of, you know, changes of government, a new leader who's pushing for it. Everyone's expecting interest rates to go up. And that, you know, the Bank of Japan at two o 'clock this morning will, you know, tomorrow morning will maybe do an interest rate rise. They've hinted at it. If they don't, well, the market will be relieved and the shares will go up. But I think at the end of the day, say Japan's fallen 15, 16 percent in a few weeks and a great buying opportunity.

58:44So to me, a halfway house is Japan because you get a bit of each and you've had a big sell-off as well. I like the mid-250. I think, like I said, we've passed the Burnham effect. And I think we're starting to see some quite good results coming out of the UK companies. But some of the smaller ones, Greggs, for example, are doing a bit better. So, you know, it doesn't take much to push a market that's been very weak over a number of years. So yes, it's hit a five-year high, but it's still not at its all-time high. And that requires still quite a big move up from here. And it's very under-owned. International investors hate it.

59:20So there's not many natural sellers there to keep it pushing down. If it were me, I'd put 5 % in the mid-250, another 5%. We've got 5 % now, if you remember. And I'd start a position in NASDAQ, 5 % position in NASDAQ. So we use our 10 % cash that we have at the moment. And the halfway house, if you didn't want NASDAQ, well, Japan's not a bad proxy with a slightly different bias. So Japan instead of FTSE, instead of NASDAQ. But it sounded as though you were keener, just listening on Japan as being something than the NASDAQ, yet you're saying one or the other. Well, I think if I'm being truthful, NASDAQ.

1:00:00I want both. Yeah, I would. If I'm being truthful, is that a question? I'm always truthful. Now, I think when things are going down like this, and I put my hands up that I've got it wrong over the last, you know, personally, I think, you know, we talked about selling Japan and selling some of these things and we didn't. And, you know, I was fighting against that, my bad. But I think that when you, when things are falling like this, it feels, there's a saying, it's like trying to catch a falling knife and you might lose a finger. But if you can catch it quite near the bottom and have the patience to realise that it may not quite be the bottom, but it will be closer to the bottom.

1:00:35It's certainly closer to the bottom now than it was a month ago, then I would probably be prepared to lose a finger or two by buying NASDAQ. You've already lost one. Exactly. So, I mean, look, we're a team here. As I say, I haven't been seeing it clearly from that side of it. I'd say I'd be happy with either of those, but I'm just happy that we'd be prepared to put more money into markets that have come back a bit, have had a bit of a correction. Mr. Chairman, dilemma, dilemma. As I said, I'm quite happy to put some money in. Markets have come back. I don't mind buying things on falling prices.

1:01:13I don't mind buying them on rising prices, which is where you and I differ, as we both know. I quite like Japan because I think Japan's done well. I would have obviously, I mean, I think 10 is a good holding. And if I was buying to go back up to 10, I'd be a lot more keener on buying it. But I think you should buy it. So I think we should buy 2.5 % in there to give us 12.5 % in total. I'm more nervous of the FTSE 250. I'm only nervous of it because I've held it for such a long time personally. And I've been wrong for many, many, many, many moons. Eternal disappointment. And it's now starting to work.

1:01:46But the chart looks very good. So I think, yeah, why not? Let's do another 2.5 % there. And then that leaves NASDAQ. And that, to me, is the real worry. Because you could see the US equity market shake out a bit more. Now, you guys are far more in touch with this stuff than me. And, you know, we were talking about this this morning. And Rich was saying he's identifying in his book actually some value appearing now. So, it's not often one can say that. So, I think we should reflect that as well. So, I'm going to say 2.5 % in each of those. I'm going to take that out of gilts. I'm going to take that out of the gilts because I don't see us cutting rates in the UK in any time soon, especially if the US is raising them.

1:02:29I'd like to have the cash sitting there so it's safe. So I'm going to take that out of the UK gilts. So 7.5 % out of UK gilts 0-5 year, 2.5 % into Japan, 2.5 % into the NASDAQ, and 2.5 % into the FTSE 250. Well, that takes us nicely on to the Bank of England result because we've just had the rate decision, which Spice is going to update us on. rates on hold at three and three quarter percent as expected but there was a six to three split in the vote three people wanted to put interest rates up that's not a big surprise because i think there was a similar split last time but uh yeah it's um interesting how they justify it but we'll see that probably and talk about it maybe next week good stuff well a lot to digest there we've been through a lot of detail in the fed we've been through a lot of detail in earnings season.

1:03:23And next week's podcast, you will see us at home, wherever we are on holiday. So it'll be exactly the same for you guys, but it will be an online, so we will not be in the studio. We are still available for your questions, of course, so please send those in to theartofinvestingatig.com. Thanks for joining us and give us a like, a subscribe, and we'll see you in the comments this weekend.