Stocks & Bond Yields at Record Highs...Something Must Break

0:00Cracking show coming up. We've got Stu Thompson, our resident strategist, questioning what is going to be the straw that breaks the camel's back in the bond market. And then Chris CJ, Fellingham, he's sitting on the fence. Will we, won't we see a decision on the portfolio from the chairman? And what about this man? What is it going to take to see him reduce some exposure to equities? is today the day with the bond market explosion in the last 24 hours.

0:37Yes, we're back for another episode of your favorite podcast, The Art of Investing, brought to you by IG, the global investment platform. Joining me as always, we got Mark Spiteholden. Hi, Rich. Chris CJ-Fellingham. Hey, Rich. And our resident strategist is back. Yes, It's Stewie Thompson. Hi, Rich. So let's take a quick look at the model portfolio performance then. A reminder, the three of us run this to put our money where our mouths are each week. And it's looking good, up 2.2 % on the week. That leaves us up 25.5 % since inception and up 13 % on the year. Slightly flattered because we're recording this on the Thursday.

1:15We snap it on a Wednesday evening, but the bond market erupted yesterday, which is going to be our main discussion on the show. The macro implications of what is going on right now with interest rates, three big decisions last week. We're going to cover all of that and what are the implications for your portfolio at home. So without further ado, let's get into the Spice Market Update. Right. Well, thanks, Rich. Just a reminder, it's been nine days since we last updated you, so there's a lot to pack in. I'll try and run through it very quickly. The main events, really, that we've had, as Rich mentioned, three of the major central banks have had their meetings and their press conferences and their interest rate decisions, and that's now behind us.

2:01The oil prices had a big fall, down about 8%, although overnight it's had a bit of a rally. And that's because Trump and the Iranian president have had a bit of a conversation, apparently that was very productive, in his words. But then straight after that, Iran came out and sort of said, well, we're not so sure about that. But that's why the oil price went up again overnight. But it's still nevertheless hanging around just below$100. And the last time we updated it, it was$108, Brent, that is. So with the oil price down about 8%, there's been some all-time highs, believe it or not. I haven't been able to report those for a while.

2:34NASDAQ 100 takes out its all-time high. It took a while coming. From June, that took the last time. So, yeah, that was a decent move. It was by about three points and then collapsed. Yeah, but every little catch. Every little catch. Don't let the facts get in the way of a good story. And part of that NASDAQ rally was led by the Magnificent Seven. But also, copper also took out its high. And we've talked about that now. The last month has been sort of up a lot and down a lot and up and up. But it's taking almost one step backwards and two step forwards. So, that's more positive. And you'll see that's the major contributor to our portfolio later.

3:09In the background, the chip sector has been leading the sort of markets higher, particularly NASDAQ and the Magnificent Seven. That was led by NVIDIA. Their shares are up about 7 % over the week, very near their all-time high, not quite there. And they said they were basically going to sell twice as many chips next year as they are this year. And that was a small positive that wasn't expected. So Intel shares went up 23%. Micron shares went up 17%. Micron have got results this week on the 30th of September. So we'll see what they've got to say. Let's hope they keep the positive momentum. Apple nearly hit an all-time high as well.

3:44Basically, if you try and buy the new iPhone 18 in the UK, they're pretty much sold out. But the biggest news really was probably from Meta, who obviously owned Facebook. They launched a new app called Muse, which is basically like an AI concierge, an agent in your pocket. It goes around price checking for you, things like insurance, your banking rates, savings rates, etc. And actually, that really hurt the banks and insurance companies and the travel companies as well, because obviously competing for lower costs are hotels and a bit like you would do on Booking.com or whatever it must be. But at the end of the day, so over the week, the technology sector was the best all around the world, up about 7%.

4:23The worst was the oil sector down about 7%. But the financials hit by that new app from Meta was down 4%. And also, it didn't help that Goldman Sachs also had a profit warning saying that their profits in their bond trading division were disappointing. And we'll talk about that now. Maybe they're a bit too bullish. Funny, I'll go. Now, just to warn anybody that tries to go straight onto their app store and download the Muse app, I did exactly that on Monday. One of the biggest ever launches and one and a half million Americans downloaded it on Monday. And that's had the stock up 11%. So on I go, download it, search Muse, and I get Meta AI.

5:06So yeah, that must be it. And I spent an hour trying to get this thing to do all my jobs and sort my emails. And it wouldn't do it. I thought, this is ridiculous. You've got to short this thought. It was the wrong app. So Muse is not available in the UK yet. So you've just given all your bank details to a firm in South Korea, sorry, North Korea, who now haven't seen things as we talk. But never mind. It is all great, this stuff. It's just the metaverse. Yeah, it's just the metaverse, yeah. Yeah, I think the reason, it's caught people's attention because actually the downloads, I think, in the US are the 3 million by the end of the first week or so.

5:42And that's nearly 50 % higher than ChatGBT got when it first downloaded. So, you know, the signs are good still, the AI people want to get involved, and that's very positive. Can I interrupt just for a second here? Because I asked Spice about this today. Now, I understand that I'm a dinosaur. I'm a bit old. I don't want to give people my bank details, my passwords to get into my accounts. Does everybody feel happy just to do that? Am I just unusual? No, it is incredible. So I have set up ChatGPT linked to my email and the productivity of everything, all the jobs that are sitting in your emails there that are just mundane.

6:21Give an example of what you did. Don't talk in generalities. Give us a bit of detail. So you get an email through and you have to fill in a form, right, of a checklist of everything. Your ChatGPT knows all that details. It can go on there and it can click onto a website. It can fill everything in, gives you a final check and then you just hit go. And then I had to send all my VAT receipts onto an app. So then it goes to the account and the account can check all that. I don't even have to do that. It checks your whole email inbox for business receipts. loads them onto the app, and then writes an email to the accountant telling you that it's all up to date.

7:04But you don't need to give any of your passwords or anything like that. I haven't done that yet. I suppose if you're going to use it to pay bills, like, you know, find me insurance and sort it out for me, you will have to give them those details. I'm just a bit nervous about it, to be honest. And that is an interesting, Amazon have actually banned Muse. So you cannot get your agentic AI to go onto Amazon and buy stuff for you because they've blocked it. Okay, that's interesting. Thanks, Rich. I feel educated. As this show always does to me, I feel I understand a lot. Well, one of the other things in talking of education, that Trump is desperately obviously trying to get the oil price down.

7:44Sorry, we're talking about education? Yeah, exactly. Sorry. I know. Noxymoron, I know that. Sorry, Voldemort is basically trying to obviously get the oil price down and therefore the petrol and the diesel price down in the US. But the diesel price has pushed on up again this week, despite the fact that the oil price itself fell. So it's now at a record all-time high of$6.50 a gallon in the US. But just to make us feel a bit worse, that's still nearly 50 % cheaper than it is in the UK. Nevertheless, he's failing in that sense. And that's because the refiners are not being able to get the product in time.

8:19And so they're running behind the demand. And that's pushing the price up. The only other thing I want to talk about really this week of major importance in the sort of broad asset sense is that the US dollar has had another very, very strong rate. And we'll talk about that. That's partly due to the Federal Reserve and some very strong economic data that came out of the US. But there's an index that sort of tracks the big dollar sort of foreign exchange crosses, as they're called. One's called the DXY, the dollar index. And that was up 1.3 % this week. Now, that was set up in 1973 after the Bretton Woods, the end of the sort of gold standard and the fixed exchange rate that ended in 1973.

9:01And so, as a result, the euro is about 58 % of that index. So, it's a huge sort of driver to what happens when we say the dollars move 1.3%. A lot depends on what's happened to the euro. 58 % of that index is the euro. 14 % is the Japanese yen. And guess what? The pound sterling is 12%. Totally different to if you were weighting on gross domestic products around the world. We're much smaller than that. And then in Asia, they have this thing called the Asia dollar index. And that's much more modern in the sense that it actually goes with the weightings of the economies in that area. So the Asian dollar index basically is dominated by the Chinese renminbi, the Chinese currency.

9:44That's about 48 % of that index. The Korean one is 12 % and Singaporean dollar is about 12 % as well. Indian rupee about 10%. But both of those indices have had a big move in the last week. And that's, you know, in the background, you know, people are sort of bearish of Trump and expecting the dollar to come under pressure. And actually, the opposite is true at the moment. And the US seems to be tracking, you know, sort of pulling in quite a lot of capital. No doubt something we'll talk about later on. The only other thing I want to talk about, which we've had a bit of a quiet spell, but there's been some big money raising to put into AI, this time from SoftBank in Japan.

10:21Now, a few weeks ago, we were talking about the fact that they wanted to raise about a trillion Japanese yen, which is about$6.3 billion. And they raised that money through retail investors in Japan in local Japanese currency. And they paid an interest on that of 4.75%. And that's considered quite sensible. and that's what we call investment grade so it's quite high quality. Well this week they've announced they're raising 10 billion dollars and 1 billion euros but this time issuing it in dollars and in euros and they're paying between 9 and 10 percent interest on that debt which is a big big difference.

11:04It's being rated by the rating agencies who can tell you the sort of quality of this debt and where it stands in the pecking order if the company goes bust again paid back. And it's coming in at what you call a high yield. So it's not investment grade. It's the one below that. Junk. Junk. Almost junk, what some people say. If it's not investment grade, it's junk. Okay. But anyway, basically, they're raising lots of money because they're investing in, well, part of the reason they want to invest more in OpenAI, which obviously owns ChatGPT. They've got a 13 % stake in that business and they want to keep up with the funding rounds that are going on.

11:39That's why it's junk. Yeah. I think it's a good thing to just remember for our discussion later, but they're happy to pay returns of 9 % to 10%, which means they're expecting returns on the investments a lot, lot higher than that to make it worthwhile. And you wonder if that's the case, how many other businesses out there are confident enough to borrow at 9 % and 10 % because they think that their returns are higher. And that's going to be a classic example of the cost of capital, the competition for capital, which Stuart will talk about a bit later on. That's really interesting stuff. And Stu, just remind us what this term, the competition of capital, where did that come from?

12:15What does it mean? Competition for capital is the idea that the higher yields go, they start to take capital, sucking capital away from other markets because government bonds, they're the safest instrument. So if you can get a good return on your safest instrument, why take the risk? and that tends to take money away from the riskier markets. They tend to weaken up and that tends to balance out competition for capital. Okay, so the final thing I wanted to mention in the market update before we go into talk about the other stuff is that we've had some very strong economic data out of the US again and that had a big bearing on some of the bond yields that we're about to talk about.

13:00So they have what are called the PMIs, the Purchasing Managers Index. they were expected to be at about 56, a number of 56. Anything above 50 means that things are positive and expanding. Anything below 50 means things are contracting and maybe getting tougher. So we expect, if the economy is growing, for numbers to be above 50. Well, the composite between they have services, PMIs, and they have manufacturing PMIs, both of which are very strong. So the manufacturing PMI was 57. It was expected to be 53.7. The services PMI was even stronger, 58.7, expected to be 56.5. So overall, it came out at about 58.4 against an expectation of about 56.

13:43And that's the highest since 2021. So that's the highest of five years, showing the US economy is beginning to accelerate again. Now, within that, they point out they have a new orders price input, input prices index as well. And that came in at 66.4 against last time it's 59.9. And that is what spooked the markets yesterday along with some of the central banks. Because as soon as that number came out, people drove down into it and bond yields started rising. Bond prices started falling. And equity markets came off pretty heavily on the back of that as well. So the economy is strong, but prices for new orders were especially higher.

14:30Very strong, much higher than expected. And back in the old days when I was a trader, the series that we talk about here is the National Association of Purchasing Managers. We used to call it napalm because the effects of markets could be a bit like that. And yesterday, that's exactly what happened. It burnt up those bond yields. 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.

15:02Well, let's look how it was looking because it's the prettiest picture that you might see for a while. And this was when the squeeze was happening. And you can see the effect on the week up 2.2%. But copper, as Spice mentioned, a really strong week up over 8%. The Nasdaq 100 up 6.4%. and then emerging markets up 4.3 % and the Nikkei up 3.8%. Just really risk on. So was that because of a really positive message coming from the Fed or was that everybody was hedged, maybe even short, and risk had been taken down going into last week? I think we talked before about the way that a high oil price had been sucking in capital from governments and central banks who were having to pay a higher price for oil so they couldn't invest in other commodities.

15:54But as I mentioned, the oil price is down about 8 % over the period we're talking about. And that meant that there was some sort of relief for those central banks to go and buy some other sort of commodities. And copper, as we know, is an integral part of the AI boom. And that's one of the main reasons it's went up, I'm sure. But also the fact that we had such positive news from the AI market with Meta and NVIDIA, Intel, et cetera. And so I think the combination of a lower oil price and stronger AI definitely helped copper this week. And that strong AI definitely helped NASDAQ, as we talked about.

16:33And emerging markets, remember, biggest importers of oil probably as a group than anywhere else apart from the UK and Europe. And with that oil price down, that gave them some relief as well. Just to give everybody an indication of why we're focused on this muse from Meta. Meta have got$3 billion. users worldwide. So if they suddenly come up with a robot that you can use and make your life easier, they've already got that user base to sell it to. So it's a huge potential if they get it right. And of course, the early signs were they got it right. The reason that moved ARM, AMD, and Intel so much is that when you're talking about agentic AI, that's not GPUs.

17:19Agentic AI is everything that we've got in front of us and your robot will be on your CPU in front of you. So that's why those chips just took off. I mean, that's AMD new all-time highs this week. It also means that memory will be in those CPUs as well. So there's a great need for memory. So Micron, SanDisk moved and that's why you saw the NASDAQ up so strong on the week. So if Muse continues to develop and get this global uptake and people download the right app, then that is a new lease of life that we've seen. On the negative side, CJ, there wasn't really... There's nothing really there. I think we've got Russell down at the bottom, but I think we said last week, it seems to last week, it was nine days ago, people were expecting most of these rate moves.

18:12They got what they were expecting. I don't think it's a surprise that the market said, well, that's good. But remember, a lot of what we're seeing here is before we see the effect of those strong numbers that Mark was talking about. And that is what we really want to talk about next. Yeah. Now, going back to last week, Kieran insinuated we might see an increase from the Bank of England. And I think you agreed with them, didn't you? Absolutely. I thought we had an opportunity for rates to move up. I joined Kieran in that view as old guilt lags. But as always, you can tell how successful we were as fund managers when we couldn't call the Bank of England right last week.

18:52They did, of course, make some changes to their quantitative tightening program. Remember when the interest rates were very low, the central banks bought a lot of government bonds, whether they be gilts for the UK, whether they be treasuries or mortgages for the Fed. And over time, they've been trying to get rid of these things, get rid of sell them, sorry. And the story was that they were having some effect on these bond markets. It wasn't just the fiscal authorities, the governments were issuing bonds. You're also finding central banks were selling bonds as well. So it was making it more difficult for bonds to find the right level.

19:31So they decided to stop doing QT, essentially. And that caught the market by surprise. led to a very strong rally in the long end of the guilt market, which upsets me slightly because we did ask the question as to whether we should buy them. There were some people around the table who didn't want to buy guilts, and so we didn't. We won't talk about who because as the chairman, it's my job not to point the finger at Spicy and Kieran. Oh, sorry. It's a fair cop. At the end of the day, the long end of the guilt market did well. So I think that can be summed up as in Kieran and yourself said what the Bank of England should have done.

20:09And what didn't happen was we didn't see a rate increase. And that may have subsequent effects in the coming weeks. Because we saw a rally also in treasuries this week. And that's all been given up in the last 24 hours. What is going on in the bond market, guys? And how does that affect the macro picture overall? Okay, so let's just catch up a little bit with what happened in the bond markets because it has been nine days. And if you remember, before we took our nine-day sabbatical, we had Scott Besson, the man they call the house, trying to massage prices of long treasuries downwards, which has been a complete failure, as you will see from the numbers.

20:55Essentially, after the interest rate moves last week, where the UK kept their rates unchanged, but the US put their rates up and Japan put their rates up. Bond markets reacted pretty okay with it. There was no issues. It was what was expected. And bond yields were very well behaved. And then as Mark just talked about in the spicy market update, we then got these napalm figures, which absolutely blew the doors off, to use the expression in the Italian job. essentially now u.s treasury yields are significantly higher than where they were nine days ago so the two-year treasury so that's a bond that lasts as a maturity of two years is now yielding 4.94 that's up 20 basis points so the net effect of yesterday's figures was another rate rise priced in.

21:51So having been pricing in three, the market is now pricing in four to five. So significantly worse. And of course, when you're pricing in those things, it affects other bond yields in the country. So the US 10-year yield is 5.13. That's up 11 basis points since we spoke last time. And the 30-year bond yield yields 5.42. Now, remember Scott, the house person, with his King Canute sitting there in his armchair as the tide's coming in, says, you will not pass at 5%. They're 5.42 now. So, that's really worked well. In the UK, because we have these QE, this quantitative tightening being reduced, so a good shot to the market, bond yield is pretty much unchanged.

22:42So a significant outperformance by UK bonds to US bonds, and the Japanese bond market's up about five to 10 basis points. So net net, Spicy talked earlier about the number of highs there are in the market focused mainly on the equity market as we normally do. Almost all these bond yields now worldwide are higher than they were 10 days ago. So the prices are lower. So the markets are discounting higher interest rates. And in fact, they are now saying in the UK, we're going to get five rate rises. In the US, we're going to get five rate rises over the next year. Now, people don't believe it. I'm going to talk about the OECD in a minute.

23:28And we'll talk about their estimates in a moment. But most people do not believe what the markets are saying. Most people believe you might get a rate rise, one or two more, but no more. The markets are telling you you're going to get five. That doesn't mean they're right, but it means you need to respect them. They are the collective wisdom of people who trade in these things, that that's what's going to happen. Let's go on then to the OECD, the Organization for Economic Cooperation and Development, one of Stewie's favorite organizations, as he'll point out in a moment. And the reason I mention them is they came out yesterday with forecasts.

24:05And they came out and they said that growth in the US will be 2.2 % this year and 2.1 % next year. That's too low, isn't it? Take that, Spicy. I mean, I think Spicy might be writing to his MP over that one. 2.1 % next year. In the UK, 1.1 % this year and 1 % next. And he's having a great effect. Go burn them. Right. Then in inflation in the US next year, 2.6 % and the same in the UK. So 2.6 % inflation here and there, stronger growth in the US than here. I thought the most amazing thing about what they said, though, was rate rises, rates will go up in the world, but they don't have to go up in the UK, even though inflation is forecast to be above target.

24:55and we have missed the inflation target for the last 27 months. Now, that's shocking, but in fairness, the US has missed their target for the last five and a half years. You are understanding, therefore, why these bond markets are saying, we don't believe you, we don't believe you, you need to pay us a bigger yield if you want us to buy your bonds. And all I would say on that is I still think bond yields have got to go higher. But we've got a skew here. This is fantastic because we can talk to somebody who actually understands why these things move rather than us watching these things move and pontificating about them.

25:33Stewie's got some views or had some views as to where he thought rates were going. So really, I want to say to you, Stew, given what the OECD have said, where their forecasts are, given where these bond yields are trading now, how have your thoughts evolved on where interest rates are going in the US and in the UK over the next year? Well, first, if I can answer that in two parts. First of all, the OECD. Multilateral international forecasting organization speaks with great authority, full of brilliant economists. There are brilliant economists? Full of brilliant economists, including Catherine Mann, a former chief economist, who voted the right way last week.

26:19She was one of the independent members of the Monetary Policy Committee, voted for a rate hike. Oh, sorry, just before we go in first, so you would have voted for a rate hike as well? Absolutely. It's not just me and Kieran who got it wrong. That's three. Can you go, mate? Absolutely. That's what they should do. I might have done a description and said they're too cowardly to do it. but it's funded by national governments. And so those forecasts are filtered through. So you read the analysis, which is brilliant, and then you discount the conclusions because the conclusions tell you what the governments want you to know.

26:56So the US economic forecast, that tells you that Scott Besson wants Gold Lock's growth. He doesn't want the market worrying about growth It's been too strong in the US to inflation rate. The UK forecast, particularly the no rate hike, tells you that Andy Burnham doesn't want the Bank of England to raise rates because of the high cost of interest rates in the UK fiscal policy. This is fiscal dominance of the Bank of England. Kieran, a wonderful comments last week, worried about loss of central bank independence. You don't need to remove the Bank of England's independence if you've got a useful idiot in charge.

27:41Because, you know, Andrew Bailey should be in the old Bailey for his betrayal of central bank independence. As I say, he should have raised rates. We're now far behind the curve in the UK. But Stu, what do you really think? Why the Treasury market rallied with Kevin Warsh's hawkish comments? because the Fed in their dot plot, that is where the Fed members, the members of the FOMC, put where they think rates should be in going forward. They had two rate hikes and that was close to where the market was thinking. So they thought the Fed is not behind the curve. This week, with much stronger growth, inflationary pressures coming through from higher oil prices and higher diesel prices, they're saying the Fed is now behind the curve.

28:33And the Fed has to speed up to get ahead of the curve. The bank is way behind the curve, hence the weakness in sterling. And we were benefited last week from what was hawkish comments from the governor. They talked hawkishly, but they acted dovishly. So let's just unpack that just for everybody. They talked hawkishly means they talked a good game, that they would raise rates and they needed to raise rates and they would do everything it took. To keep inflation down, that's talking hawkishly. And they did dovishly, which is they did nothing. No, worse than that, they ended QT. Correct. So that was actually, at the margin, an easing of policy.

29:18Totally the wrong thing to do. Because, of course, with QT, you're taking money out of the financial system. And therefore, if you stop it, you're allowing more money to slosh around. Absolutely. So, Stu, go back to my question. You've given a great description. That's lovely. That's an economist for you. What do you disagree? The market is going for four to five rate rises in the UK and the US over the next 12 months. Do you disagree? Do you think we'll have more? Do you think we'll have less? Because we're trying to work out where we're going to put this portfolio, given that things have changed in terms of those interest rates expectations.

29:55I think four to five rate hikes is a reasonable estimate, given growth expectations, given inflation, where inflation is going. The question is not about what they expect, it's whether the central banks will deliver and at what pace. Because at the moment, what we are seeing is inflation expectations remain low in terms of forward inflation, future inflation expectations remain low because the market believes they will get what they're expecting. Now, if there's any sense that the central banks are dragging their feet, inflation expectations will start to rise. We'll start to see investors concerned that less interest rate hikes in the short term means more in the longer term.

30:46That would be much greater concern because obviously our international competition for capital is centered around longer term rates. And if they were to rise more rapidly, that would again start to crowd out these risk markets. Where are you saying the risk is then? I think you're saying the risk is that interest rates will need to go higher because people might do things more slowly than expected. But is your forecast that's where the risk on the forecast is? Absolutely. The risk to the forecast is this fiscal dominance. We've got governments with very high debts around the world. And much of the rise that we've seen in interest rates this year has been about those high debts rather than about the growth.

31:29And we're seeing, as we can see from Trump's trash talk on interest rates, Andy Burnham's pressure on the Bank of England not to raise interest rates, on the OECD not to forecast higher base rates. They want fiscal dominance. And with fiscal dominance, central bank independence is being compromised. And the market's belief central banks will do what is necessary to contain inflation can come into question. Sturik, you've used that and introduced it to the podcast for the first time, this term fiscal dominance. Just give us a little bit more of a definition. So fiscal dominance comes when you've got monetary policy and you've got fiscal policy.

32:16And independent monetary policy is important. Central banks around the world over the last 20 to 30 years have been given their independence because historically, governments were more interested in spending and they didn't want interest rates to rise. So they put pressure on central banks. We got that independence. But as debt around the world amongst major industrialized economies approaches and often exceeds 100 % of GDP, then governments are worried about the interest costs. As we know, the interest costs in America are bigger than the defence budget. In the UK, given our defence budget, they're bigger than our defence budget, our education budget, and several more.

33:07Governments are concerned to hold down these interest rates so they can spend the things that generate votes. Because as they're refinancing, then every single week they're refinancing at much, much higher rates than we had in 21-22. So therefore, your interest burden is going up and their budget deficit is getting blown out. The other factor for government bond yields going forward is that governments have been funding their very large budget deficits in shorter dated bonds because of the upward sloping yield curve. Now that that yield curve is flattened out, there's a real possibility they might start to extend the maturity of their debt issuance.

33:56And that would, again, would put pressure on the yield curve to steepen. So, i.e. yields further out, longer-dated maturities start to rise relative to yields at the shorter end. And again, that pushes up the international competition for capital. CJ, and this is a point since COVID and we had ultra-low interest rates, people at the Treasury decided it'd be really easy. let's just issue short-term bonds because the interest rate hardly cost us anything. So we can borrow hundreds of millions. And my brother-in-law was one of them because he works for the local council up in Scotland. And he could get millions and millions at 0.7 % interest.

34:39So that led people to borrow a lot at the short end, so short term. And you kick the can down the road for the problems of that debt burden. Are we at the end of the road now? What's happening? There's lots of unpack there from what Stu was saying and from what you were saying. So let me just give a little bit of an explanation first of some of the terms that were being used there. We talked about their steepening, flattening of yield curves and all that. And if you're a bond trader, you know exactly what we're talking about. But if you're not, you might be a little bit confused. So imagine a yield curve where shorter dated bonds yield very low amounts and longer dated bonds yield very big amounts.

35:19Just think about it in those terms. When a government decides where it's going to fund, it can fund anywhere along that yield curve. But why would it fund for those longer dated years when yields are much higher? Why wouldn't it actually move down to the shorter end of the curve where yields are much lower? And that's what Stu is talking about. What you're talking about there is sort of playing games and saying, oh, it's much cheaper to borrow at the very shorter end of the maturity spectrum. So that's where I'm going to borrow. But of course, you have to borrow again. Well, so the problem there is that after two years, your bond maybe matures, you've got to borrow again.

35:56You've got to keep borrowing. You've got to keep borrowing. So you actually, that's why generally, you would have had a nice spread of maturities that you would be borrowing at, which you would do some at the long end, some at the middle end, some at the middle of the thing, and some at the short end. But now everybody's saying, oh, it's so expensive to borrow at these longer-dated maturities, Let's borrow at the shorter dated maturities. Now, the problem with that is that's absolutely fantastic until you get to a situation like today where interest rate expectations are moving up sharply. Interest rates affect the shorter end of the market.

36:32So a two-year bond is very highly affected by what's happening to interest rates. So it may have been cheaper to roll everything into the shorter dated bonds, but now it's getting more and more expensive and actually it might be better to go and issue at the longer end again. The problem is your overall cost of capital has risen quite substantially. So what you did as an advantage to start with is not working for you anymore. So effectively, if you've done it already, fine. But if you haven't done it already, your costs have gone up substantially over the last nine months, the last two years. And that's one of the problems someone like Andy Burnham is looking as to how he can afford to spend the money he wants in the budget in two or three weeks' time, given the cost of how much the borrowing is now costing.

37:26As I heard the other day, if the level of debt interest we were paying was a government department, it would be the second largest government department after the NHS. That is frightening to everybody or should be frightening. So that's me trying to explain what you and what Stu was saying about the yield curve and where you're issuing on the yield curve is really, really important. Okay, Stu, that's great. So you're saying the risk to interest rate forecasts is to the upside. Spice, we've had these OECD forecasts. We've had them criticised by Stewie to be nothing much more than government mouthpieces.

38:09What do you think on these forecasts? And how does the bond moves that we've seen affect your thought processes going forward? Well, I mean, to be fair, I've been wrong in thinking that the rate rise expectations were going to be sort of modest. I think they've definitely sort of picked up and become more aggressive. to the point where we're now seeing headlines about bond market collapse, panic, all the things you would normally say, oh, are we getting to the very worst point of expectations here? Because there is been some very scary headlines out there, particularly in the last 24 hours or so.

38:48If those continue, then these bond yields, if they move up a bit further, so be it. But I do think that we're getting maybe to the point where people are forgetting that those expectations can quite quickly reverse. And I throw in what I've talked about before. First and foremost, if the AI revolution takes hold, the productivity that companies will get will lead to ultimately potentially companies not having to push up prices as much to maintain or grow their margins in their profits. And so that should be disinflationally. It should cause inflation expectations to lower. Now, when that comes and takes hold in a broader sense, could be in 12 months, 18 months, two years, three years, I don't know.

39:30But it's when the AI sort of becomes more sort of part of the real economy. Main street. Main street, exactly. I've got that in the back of my head. I think that's what Kevin Walsh probably gets in the back of his head. But I also think that the one that is the obvious one, which is why the NASDAQ and some of these other markets took out highs last week, was because the oil price suddenly fell 8 % because Trump said, we've had a very productive meeting with the Iranians, blah, blah, blah. If there is a solution to the Straits of Homo's, the oil price will be$70 or lower from$100 we are now. That is a huge fall.

40:07That's a 30 % plus fall. And that will be baked into expectations because if you sort Straits of Homo's out, yes, there's a chance it could come unstuck at some point. But people will take the longer term, sort of project that longer term And so, longer-term inflation expectations, which are quite often driven by oil price expectations, will start to fall. And I think that some of those long-end yields could reverse quite quickly if you saw that. It's a big if, right? I mean, we know how difficult this is proving to end the war in the Gulf. But there are definitely probably things we don't know about going on in the background.

40:41And in the meantime, one of the reasons the oil price will fall very heavily at some point when this is all sorted out is because people like Saudi Arabia and some of these other countries who can produce more oil are producing as much as they can at the moment and having to use different supply routes. So, you know, one of the reasons the oil price spiked to 108 a couple of weeks ago was because the Houthis in Yemen had attacked the east-west pipeline from Saudi Arabia into the Mediterranean, effectively. And that was taking 7 million barrels of oil. It was way higher than everyone unexpected.

41:15So when that got hit and output fell by about 50%, that's why the price spiked up. Now, the Saudis then went, we can fix that in a couple of days. And the market thought that might be a couple of months. So the oil prices come back down again. That's one of the reasons it came back down again. My point is very simple. The combination of potential AI disinflation and a potentially much lower and sustained oil price in the future, I think we'll see that these yields that we're seeing now are getting close to the panic point and maybe be close to the top. There I say I'm a bond investor, but to me, they're getting to the point where I see those headlines about panic and collapse and all the scaremongering that you hear out there.

41:54Maybe we're getting close to that point where they're picking out. I think that would be great if there wasn't a constant reissuance and this demand from hyperscalers and from SoftBank. Everybody wants more debt and more debt because it's the race for space in AI terms. This is our big fight. If I'll be it for me to disagree with my colleague opposite, but there's an illogicality in what he says, right? And that is, and please tell me if you think I'm wrong, but there's no inflation expectation baked into the US. breakeven inflation rates in the states are just over 2%. Now, remind people what that means.

42:40If you look at the index linked market in the states, it tells you what the estimate for inflation is for the long term. And currently, that estimate is about 2.3%, 2.4%. So, it's not that there is anything priced in for this oil price having moved up. It's not in there. Now, my second case of the defense, my lord, is oil prices fall on 8 % over the last two weeks. and bond yields are up 20 basis points. So there's not that link. I think far more important is this link that Richard's brought out, which is demand for capital. What's causing this problem in the bond markets, I keep saying, we keep saying in this podcast, isn't the oil price.

43:24It's not inflation. It is the demand for capital. And that's where I think the problem lies. So I think if the oil price does fall, and I'm with you, I think any sane person should expect that over the next, let's call it six months, the Straits of Hormuz is not solved, but is less of a problem. Okay? I think that's very likely. And there may be a short-term benefit to the bond market because the oil price falls. But it's not that that's driving the bonds. And so, to me, I don't think you're going to get a lot of benefit from it. It may well drive the equities. You may well see equities do very well.

44:02And as you say, NASDAQ took out highs. And I think that shows you the strength of some of the arguments we've discussed of how lowly rated some of these things are on a forward basis. But I do not think oil price coming down is going to be bullish for the bond market. And the bond market is where that competition for the capital comes. So to me, I'm far more interested in the demand side there. and then this deflationary impulse coming from AI in the future and how these things go forward. But I can't see at the moment, clearly I've been wrong many times, I'll be wrong many times going forward, but I can't see at the moment why this level of bond yields, 540, whatever it is at the long end of the US, should make me go, wow, I've got to buy these things given the growth rates that we expect, not what the OECD expect, But what we expect in the US, I just don't see it.

44:59So I think the stresses and strains are going to continue. But what I think has been shown this week is the NASDAQ can fight through most of it. So the question to me is if we're talking about our portfolio, if we generalize to our portfolio now, we've got a much higher interest rate expectation than anybody thought was likely at the start of the year. I've read somewhere, and I haven't looked at it in detail, but basically we've had eight interest rate rises priced into the US from where we were at the start of the year. At the start of the year, we thought we'd have three cuts, and now we've got five rises, and I see NASDAQ trading highs.

45:33That tells me NASDAQ's fine. Okay, I'm with you. But I look at something like the Russell, and I say, to me, it's much more about proper industrial US. Are we going to get rates to a level where smaller companies struggle? And I say commit the Russell because it's here. But you can say that about 42.50. You can say that about Japan. I think you look at Japan, right? Let's jump over to another area, Japan. Scott Besson, the house, I'm going to keep saying that until everybody knows that, said, I'm back in the yen. You can't back against me. I'm back in the yen. Well, suddenly, interest rates forecast go up in the States, and everybody wants to sell the yen and buy the dollar.

46:16So what's going to happen to Japan next? If he really believes what they've said, They're going to talk about pricing in higher increases in Japan quicker. So, you know, do we want to sell some of our Japanese equities, say, and take some profits out of these and buy some NASDAQ where we think we're pretty well insulated? That's what's going on in my sort of head, that sort of thought process. Anybody with me, or am I just a complete lunatic today? I'd like to hear what Stewie thinks the actual growth rates will be. Forget the OECD. Yeah, good idea. Spice argues 5%. Yeah, in the US, yeah. On the optimistic side, I mean, that's the top end of your forecast.

46:544 % to 5%. To be fair to Spice, the Atlanta Fed, which has an estimate of annualized quarterly GDP, is currently running around 5%. Now, that should continue over the next two to three quarters. I would put US growth north of 3 % rather than 2 % or 5%. but it's definitely strong. Now, in the rest of the world, you've got very weak growth in China, you've got sluggish growth in Europe. So the US is out there on its own, but the US is that great magnet for capital, and the Federal Reserve is tightening. So other countries have to tighten alongside least their currencies weaken to the extent that it brings in inflation.

47:48So the central banks have to follow the leader. I think that's where we're looking at some sluggish. We're not going to get strong growth in the rest of the world. It's just the US out on its own. And eventually, the US will start to come down to earth. But that's maybe four to six quarters away, we'll start to see a slowing with a lagged impact of tighter Fed policy. To answer the question, unlike most economists, what growth? You had to put a number down for growth this year and next year in the US. What is your point forecast? 3.5%. For both. So 3.5 % there. Inflation, 2.5%. Yeah. 2.5%. That's 6%.

48:31You don't want to buy bonyls then, do you? Yeah. That's one thing we can all still agree on, I think. I'm sorry, I say that. But Spice, it's always good to listen to people who are talking about things that aren't in their wheelhouse. So when Spice talks about equities, I think, yeah, he knows all about equities, but he might get emotionally involved in that. Whereas with Bonds, they're not in his wheelhouse. And if he says, do you know what, I think they're looking quite good, we should listen to that. We should listen to that. But what you're saying is, and I think what I'm saying is, we don't think we're there yet.

49:04It's a bit like the kids in the back of the car. Are we there yet? We don't think we're quite there. But it's a marker down there, Spice. I see that. Rich, what do you think? Well, just for everybody, that's because you're taking 3.5 % growth and adding 2.5 % inflation. That comes to 6%. Bond yields aren't there yet. You need bond yields to be at least at the sum of those two. For me, yeah. To put a point on the bond forecast, I think we've done 80 % of the bond move. we've got that 20 % left. That 20 % tends to be volatile. You know, it's, you know, two steps up, one step down. We will see that.

49:43So spices, you know, rallies, we could see if oil prices come off on peace in the Gulf. And, you know, certainly that's going to happen. But the competition capital and the demand from governments for all of their funding is going to push yields higher. That's going to take away capital from other risk markets. The question is whether it's high enough to take it away from the NASDAQ is one for you guys. Well, that's what is the elasticity of demand with interest rates going higher? Because if SoftBank are raising at 9%, 10 % and AI is promising returns of, you know, you're going to own the world.

50:24Yeah, you name the number. Yeah. Then a quarter of a percent does nothing. Correct. That's the point. That's the absolute key point here. These hyperscalers and other people can cope with a lot higher rates, but can the rest of the economy? That goes back to my question. Should we be selling some of these other areas, which have done very well, but with these higher yields are going to struggle to play ball? And that, do I think there's a great rush to have to do something this minute? Probably not. Are we in this bad time for market, September, October? but yes, so it suits everybody to be bearish at this time.

51:04But that's the question I think we've got to answer for our portfolio. Having been accused of being paralyzed or making any changes because of a fantasy slowdown and market collapse that never happens, as you were accused in the comment section on YouTube this week, I thought you would have been forced into doing something. No, no, no. What do you think, Spice? No, because you can never be goaded by the market. One of the things we've always said here is you need to be patient. You move when you think it's right to move, not when other people tell you to move. So very nice comment. Thank you very much.

51:40Come to Lords and we can have a little argument. I want to just bring out a couple of things. You remember Kevin Walsh's first press conference after the Federal Reserve, and he didn't raise interest rates when he just first appointed. He did say, the market is doing a lot of my work for me. I am just having the back of my mind that with the moves we've seen in these bond yields in the very short term, he will return to that very comment. He may not express it so explicitly at a press conference, but he will say, well, the market is being efficient. And that will mean there may be some pressure come off of him to raise interest rates in the short term.

52:27Now, the next meeting is in the middle of October, just before the midterm elections in the US. The market currently thinks there's a 60%, 70 % chance of a rate rise in October. I would put that much lower because they do not want to be seen as being political going into the midterms because that will be playing into Trump. So I don't think they're going to do any rate rise in October. So I think the next opportunity is November, December. And a lot can change in that time. The other thing I think about is that there is no doubt that, yes, interest rate rises coming through do hurt some of the smaller companies, hurt individuals, etc.

53:05But what it doesn't hurt, and I don't think it will put off track, is this boom in AI expenditure and capex. And as we saw, SoftBank are willing to borrow money at 9.5%, 10 % in Japan when their interest rates are 3%, their 10-year yields are 3%. and this is a seven-year issue. They're basically saying, we're prepared to do a lot more of that because they want to buy 13 % stake in OpenAI or maintain their stake in OpenAI, which they expect to make absolutely shed loads more. The US, remember, has just delivered a quarter of earnings that's 30 % up, 30 % in the S &P 500. That's 3-0. You don't get that sort of growth unless you're coming out of a recession where things are recovering from losses to going to profit.

53:51This is really highly unusual. Now, it's not going to carry on at 30%. It can't because it's just the law of big numbers. That will diminish the delta of that will be slower, as we say. So it might be 25 % next quarter, then 20%, then 20%. But anything above 9%, 10 % is fantastic compared to history. And this is the point. These companies can live with much higher interest rates, in my opinion. But does that not... That's making my case for me. Yeah, yeah, exactly. That breaks the indebted consumer. it breaks the housing market. So one by one, you see all these... That's my point. And then they don't have to put rates up.

54:26That's what Walsh's point is. Then I don't have to do it because those yields are hurting the people I least want to hurt. And that's what the Bank of England are doing, right? They know they should be putting rates up, but they just can't bring themselves to do it because the UK housing market isn't through the floor as it is. And, you know, the only people that hurts in an economy that's only growing at 1 % real are the poorer people and the people who... But your mortgages are on yields, not on actual interest rates. Yeah, absolutely. I know that. So they're naively trying to keep the short-term rates because most people don't...

55:01In the US, mortgages are priced over 30 years. You get a 30-year mortgage. In the UK, we might have a 10, 20-year mortgage, but the fixed rates are only two to five years. So even independent central banks, maybe independent of governments, but they're not independent of markets. And so when markets discount rate hikes and central banks don't follow, markets begin to lose faith in the central bank's ability to control inflation. And then that's when they start to put in a moron premium for the central bank. Tell us what the moron premium is. So remember the moron premium came about with Liz Truss and her disastrous budget.

55:45We added an extra premium to UK yields. Now, that was for fiscal stupidity. We might now get one for monetary stupidity. Have we still got more on premium? Yes, UK yields are higher than comparable yields around the world relative to our debt to GDP ratio. Yeah, the challenge, I suppose, and it's for another podcast, and not for today, is that because of Liz Truss? Or is that because of actions by successive politicians? But they blame it on Liz Truss now. Absolutely. I have a final question I want to ask. And that is to say to Spice, who's our resident bull, if long 30-year treasuries were trading at 6.5 tomorrow, if you have perfect foresight, they're going to 6.5, what would you do to the portfolio?

56:31Why are they yielding 6.5? Well, is that because of it? Who knows? I presume it's because of demand for capital. I don't think it's because inflation's got to happen. That's what I was getting to. If it's because there's growth and the growth is sucking in extra demand, I would probably say equities certainly can live with that because it is growth driven rather than inflation driven. If it were inflation driven, by the way, I think that's one of the reasons the market sold off so heavy yesterday. It was because of those prices paid in the PMIs and the Purchasing Managers Index that was so strong, 66 against sort of 56 expected.

57:04That's what whacked the markets because everyone, actually, we're not being worried about inflation. Oh, crikey, we maybe have to. And that added that extra bit of sort of yield. And I think that that is something you've got to watch very carefully. And that diesel price is at an all-time high again this week, even though the oil price is down 8%. Those are the sort of dynamics underneath. But in answer to your question, if that 6.5 % yield is because growth is at least as strong as it is now, if not stronger, then I'm happy with equities. Let me give you a really eye-catching stat from Monday.

57:36Monday, oil price down 6%. S &P 500 up 1.6 % on the day. Huge day. Everybody's celebrating, right? No. There were 37 new 52-week lows by stocks, right? 37. There were only 14 new highs. That is the market that we're in. That's not been seen for 18 years. a market so strong on the day, but you're actually getting more companies by two to one are actually heading new lows. And we've got to watch that, especially for Russell, right? But also for the rest of the market is that it's now only a tech market. But we've been through this before. We did before, you know, if you go back 18 months or so, we're getting the same thing.

58:28And, you know, it's taken a long time for the Mag 7 to take out its all-time high. It's only in the last sort of week, but it hasn't hit, the MAC7 hasn't hit an all-time high for months and months. NASDAQ, last all-time high was in June. So it's been in this lull. There has been this rotation. That's one of the reasons the Russell did so well. There was rotation out of these big, and so I think we're probably, in answer to your point, I think this rotation within the markets can definitely continue, definitely continue, which may, you know, may weigh one week on the Russell and next week on NASDAQ.

59:00So you're just shifting the deck chairs. Are yields this high a slowdown on growth? X, the AI element. So real yields at 2.25 % is not a slowdown. That's back to the old normal. We need to see real yields higher than that to not start slowing growth down. And what's the right number for that, Stu? And I think we will see yields higher. You know, 3 % to 4 % will definitely have an impact on weaker sectors, on the consumer. Remember, U.S. savings are at a low. The United States is the only country where savings rates did not follow the traditional post-pandemic increase. So U.S. savers and consumers are vulnerable.

59:46But isn't it also true that the wealth effect in the U.S. has been strongest because they're most heavily invested in equity markets? So he pointed out, Rich pointed out last week, that was it 63%, Merrill Lynch had done the survey, that 63 % of private client portfolios are in equities, which is a high, a all-time high. Well, partly that is because equity markets in the US particularly have been amazingly strong. So absolutely. So the wealth effect in terms of, yes, the cash savings, the UK with loads of cash savings. And as we've talked about before, people lose money in real terms against inflation by holding cash.

1:00:22In the US, they don't because they're in the equity markets and the equity markets perform fantastically. Remember the last time we had equity withdrawal? They used to be in the housing market and they'll run up to 2008, you know, where the consumers took the wealth effect of rising asset prices, which is wonderful until it stops. It always is, isn't it? Right. How would the Stewie Thompson portfolio look? You've got a blank sheet in front of you. I would increase my cash levels, but then I'm a cautious scott. That makes two of us. I'm not convinced by any of the arguments, but I don't want to go against Spice when he's still so bullish.

1:01:01I can't believe he is still so bullish. I mean, there's not a chance if Bonneal's at six and a half, we'd be anywhere near these levels in any of his markets. Not a chance. No, they may recover back at another time, but we're not meant to be a long-only hold-it-forever portfolio as we're saying here. We've got 15 % cash. I'm still not sure that where real yields are at the moment is enough to cause the markets to come off. But I am worried that we are getting into that sort of end game where we will have to do something. I wanted to see where we were today. I don't think we need to draw a conclusion today.

1:01:42But I think we will have to draw a conclusion pretty soon because I don't think we can carry on. We've clearly got Spice very bullish. Rich, pretty bearish. Me feeling that way as well, right? And we can't carry on that way because if it does crack, we're going to feel terrible. And Spice will feel terrible as well in the same way. So that's not, you know, we're all doing this together. We're all in this together. But it's not clear to me today is that day. Big reaction yesterday after those napalm numbers. But, you know, napalm numbers are just, they're not, markets don't normally move that much on napalm numbers.

1:02:16They could easily rally for four or five days. Oil price comes off a bit. And I think the oil price will come off a bit, and that might make people feel better. But I'd be quite tempted to sell on a spike with oil prices falling if you get much drift. But I do accept that it could be regarded as being a bit ridiculous because you can tell probably from the conversation that we're all a bit worried, but we're still sitting there. We've got 17.5 % cash. So we've only got 80 % in the market as such, 82 % in the market, but we should have more cash. If we wanted, if we really were worried, we should be selling more.

1:02:51I'd be long gold. Gold's on my radar. I'm not quite there yet, but another go, I'm going to have another go. Yeah, but if we're going to have two cracks at buying it, I don't think, to sell Russell today and buy gold, and even if it's 2.5%. You say you're worried, but, you know, yields haven't, yields, real yields haven't risen that much. Well, that's where I think, where I think spice is, But I think where I think Spice is right is this thing is going to take a lot of cracking. It's not going to crack easy, right? And there'll be a lot of people all the way up saying you shouldn't be – but there's loads of people coming.

1:03:24This conversation around their investors' table saying, oh, you've got to sell everything. You've got to sell everything. It's really crap, blah, blah, blah, blah, blah. But it's not cracking at the moment, and I'm not convinced that any of the markets look on the graphs because when I look at things, I look at the graphs, right? The graphs in S &P – S &P looks to me like it's going to take out the highs, right? Right? NASDAQ looks as though it's got more on the upside. I'm a bit more worried about some of the other things. I could easily sell Japan. That's why I wouldn't return to Japan because Japan's done really well.

1:03:54But I can't see anything but higher interest rates in Japan. How that can be good for Japan, I've got no f***ing idea. And we've got 12.5 % in it. So, you know, I could easily chop a bit of that. I'd sell two and a half in Japan, two and a half in Russell, put 5 % in gold. That's exactly what I wrote down. But I buy NASDAQ. I wouldn't buy gold. You see, where I think you're completely wrong is gold has not gone up in this environment. Everybody tells me gold should go up. It's struggling under the yields. As high yields go up, it will suffer. If we don't have any, we've got 60 % of it. But we've got, we've got, we've got, we've got, we've got blackroll world mining.

1:04:22So a third of that is gold. Right. Yeah, but that's gold miners. That's very different. And I've got copper as well. I mean, copper, we talk about a great run for copper. It's only because it had a shit week the week before. It took out its all-time high. I know it did, but it got a really shit week the week before, if you remember. It was down the bottom. It was down 60%. It's up three. It's not up three. So, I mean, that's the point. So, at the end, to me, I can see trouble coming in some places. As I said, I would sell FTSE on a 3 % rise. I'd sell FTSE on a new high. But NASDAQ, I think, is different.

1:04:51NASDAQ is showing why it's different. I think NASDAQ is unaffected by the rate rise expectations. It will be in the end, but not now. It's like everything. I'm with you, man. Ultimately, when it happens, it will happen. We're in it together. It's what else we hold, is what I'm really saying. This sort of environment hurts Russell. and if we get more rate rises than planned, it'll hurt FTSE 250, it'll hurt Europe, it'll hurt all these things if they have to go up the same ways. Right? But they're starting off at lower levels in Europe, at least. And the FTSE valuation is so much lower and FTSE 250 is so much lower, you can accommodate some disappointment there.

1:05:28It's difficult to see where you can accommodate disappointment, in my view, in the States, except for NASDAQ, where I think it's, you're right. But that's the problem. And I'm trying to herd the sheep and I'm looking for help in herding the show. You know what I mean? I can make the decision, if need be, but I don't feel I need to make that decision today. That's what I was trying to, what would you do if it got to this yield level? I wasn't expecting. Because it's absolutely fine. No matter what, I'm not selling a single thing. That's what it sounded like. I want to buy more. And that's what makes it difficult.

1:06:01That's what makes it difficult. And then you've got your strategist telling you you'd be in more cash and more cautious. Correct. God, this has been a really horrible meeting today, really tough, because the job of the chairman is to bring together all these things, all this chatter, all these decisions and all these thoughts. I am worried about Japan. I think Japan, with high yield, it's done really well for us. I'm concerned there. What I want to do with any cash I raise, actually, I'm just going to hold a bit of cash and wait and see what happens. So I'm going to overall, or not overall, I'm just going to say this is what I'm going to do.

1:06:34It's starting to sound like Alan Chigarh. Are you fired? Are you fired? So I'm going to sell 2.5 % Japan just to make our cash and gilts up to 20 % just to give us a little bit more room. Remember, we sold 5 % the week before out of our ETF that we held, our industrial ETF. Well, we're going to add another 2.5 % cash by selling 2.5 % in Japan. That's me. I'm exhausted. I'm going for a drink. that's why we all agree yeah we all agree with that right if you've enjoyed this at home make sure that you give us the thumbs up underneath YouTube if you're listening on Spotify or Apple it gives us a really boost if you leave us a review the reviews have been great thank you very much for those of you that have done it but if you just take a minute of your time that would be wonderful also subscribe to the channel if you haven't already and that means that you get these bonus episodes like the Jeremy Hunt one with CJ in Westminster.

1:07:34Thank you very much for joining us. We've got a big thank you to Stu Thompson, speaking the sense of the Scots. And if you'd like to send us an email, please write in to... Theartofinvesting at ig.com. Remember, last chance for signing up for Lords, The Art of Investing, coming to you live on the 13th of October, 6.30pm onwards. there'll be free drinks there's even some England cricket goodies which might be signed to give away maybe they'd rather have it signed by you I'm sure they would rather than the English cricket team people actually know what they're talking about we'll get you some signing some things as well maybe maybe the cards good stuff thank you very much for joining us we'll see you next week