Should you worry about Nvidia - and will it burst the AI bubble?

0:02Welcome to This Is Money Podcast, sponsored by Trading212. Download the Trading212.

0:30or a black swan event that could bring down the global financial system. Also today, the economist who predicted the last two housing crashes warns the market is already in free fall. But what can you do to protect yourself if he's right again? Plus, do you know how much you need to retire on and what's the cheapest way to stay warm this winter? Don't forget, you can stay up to date with all the latest breaking money news. Just go to thisismoney.co.uk or download the app. But first, it's been a rather bad week for NVIDIA boss Jensen Huang, The CEO was forced to resign from the company that he co-founded 30 years ago following revelations of not one but two affairs, including one with a suspected Chinese spy.

1:09But rarely has one man's lax marital moral judgment affected so many people. Nvidia shares have taken a hammering, billions have been wiped up its value, and your city editor Alex Brummer fears this could be a black swan event for the global financial system. But also our pension and ISIS will likely have been hit. Simon, welcome. And Simon, we don't have to go into the sordid details of this one, but skirting around those, get us up to speed, if you would, about what's been happening in the world of Jensen Huang this week. Well, I must say that when it came to discussions around what could finally burst the AI bubble, potentially, you know, bring the house of cards tumbling down based on the huge amounts of money that the hyperscalers have been raising from investors, you know, in terms of the bond market, borrowing money in terms of rights issues, raising money with stock market investors, their sky high share prices.

2:11concerns about what they're spending that money on or whether it's ever going to be worth it. The one thing I don't remember ever hearing was on someone's bingo card was the NVIDIA CEO having an affair with someone who may or may not be a Chinese spy. It's a bit of bad luck, huh? It was a wish, yes. You make your own luck, as they say. This seems like quite bad luck. now this isn't just any ceo jensen huang is the co-founder of nvidia he is a superstar ceo and a superstar ceo you know of the highest order in a world of superstar ceos he is seen as really really critical to nvidia nvidia is literally at the center of the whole ai trade you know it's selling its chips like nobody's business to all and sundry it has struck a huge amount of these circular investment deals over the course of the last year that has triggered a lot of concern it's a huge beneficiary of the hyperscalers spending vast sums of money it has risen to become currently the second largest well actually i'm not sure after today's fall but i think as of like the end of you know last month so not that long ago it was the world's second largest stock market listed company the company that was ahead of it is apple but until relatively recently that was the other way around it was nvidia that was the world's largest and to put this in context right?

3:46NVIDIA makes up roughly 5 % of the global stock market. The entire UK stock market makes up about 3%. So there's a strong chance you've got more NVIDIA in your pension than you do UK stock market. But not to put too fine a point on it, Simon. As I said, one man's indiscretions, shall we say. So what, in a way? I mean, obviously, the alleged Chinese spy element does sort of shake things up a little bit. But is this just down to the fact that people rated him so highly? Is this down to the fact that actually everyone was a bit nervous anyway? And this is kind of, I don't know, straw that broke the camel's back?

4:31Well, it's interesting, this, isn't it? Because, I mean, I think also, like, it's really important to state now, obviously, I just stated the size of NVIDIA in terms of the global stock market, about how much it makes up of portfolios. So if you just follow the global stock market, then there's a very strong chance that NVIDIA makes up a sizable chunk of your portfolio. But your portfolio will be diversified, but it will also be heavily invested into US tech shares. But NVIDIA shares have fallen 30 % from their peak at the start of October. This has wiped a lot off the NVIDIA share price. Now, let's create an alternative scenario where this was Elon Musk.

5:08Would you see Elon Musk standing down from Tesla and SpaceX for the same thing? I don't know whether you would. I think the alleged Chinese spy thing is a definite issue. The fact that NVIDIA is at the center of this kind of like technological wave and there's going to be a lot of concern about, without going into too much detail, where are NVIDIA's chips? What's been going on here? Has there been spying? Has there been a problem? That kind of thing. There's a kind of national security issue for the Americans going on there, not just an extramarital affair issue. It's then emerged that he may have had a personal relationship with someone else at NVIDIA.

5:48This hasn't been confirmed, so this is obviously just rumoured. But it is interesting that Jensen decided to step down. He didn't decide to try and tough it out, ride it out. This second one emerged. He'd ridden it out thus far this week, and he's decided to step down. for the good of the company because maybe if this was going to continue rumbling on for ages like is he going to go is he not going to go the uncertainty there in terms of the investigation you've now got everybody talking about well are there more and and so he has stepped aside from it that's what now people are obviously asking right would Elon Musk do the same thing I don't know whether he would and both of them obviously have a lot of their own personal wealth tied up in this business so in a way you could see that if jensen hung looks at this and goes well hang on a minute you know what not only is this bad for nvidia but it's bad for my personal wealth because like obviously i co-founded the company i own a large stake in it and the longer this goes on the worse it's going to be for me i'm just going to step aside while this gets sorted out but it shows like really it's like the pinnacle of the sort of superstar ceo founder tech bro saga, maybe.

7:03Yeah. I'm just thinking about the Chinese link, though. Is the fear here that if someone, I suppose, steals some company secrets from NVIDIA to China, we're going to have sort of like a deep seek moment where essentially we can have this stuff flooding for a lot cheaper. You don't have that moat around NVIDIA. It's not so valuable anymore. Is that ultimately the fear from the Chinese element of this? I guess so. I guess it's part of the fear. And I think, you know, part of the fear is this sort of weird Cold War scenario, isn't it, that's going on between various different countries. And, you know, you've got ultimately economic measures and defensive measures being put in place.

7:46You've got basically the kind of anti-globalization or the unwinding of some of globalization that has driven so much of, you know, the world's wealth over the last few decades. And this is something that's been going on now for some time. And it's been stepped up by the Trump administration because they are concerned about China becoming dominant in AI and getting their hands on the same kind of AI that the Americans have and how that would be used and everything. You've then got the situation with Russia, which is being accused of a huge amount of hacking and cyber warfare and everything else like that.

8:23This is the kind of stuff that I know very, very little about in any detail, but I can definitely see why it would be considered a problem. And I think that what you also have to look at is that really before this happened, at the start of October, when we were looking at that peak in the NVIDIA share price, NVIDIA is really priced for perfection. in order for nvidia to keep growing at the rate that it has been growing nvidia would have to become unbelievably big in a relatively short space of time and nvidia already is unbelievably big so with some of these ginormous companies you do have to look at it and go well how can they keep growing i talk to fund managers about this all the time who continue to invest in nvidia and they say it's not just because it's like a major part of the global stock market but it's because they genuinely believe that, you know, the runway for growth still exists.

9:17But you do have to look at the numbers involved and go, can it really continue to exist when a company gets that big? So, I mean, some of this is probably just taking the throth off the top. But then also some of it is to do with the concerns over what's gone on here. So Alex Brummer, your city editor, wrote a piece about this, Fearing this could trigger a global financial crisis, drawing comparisons with the 2008 crash. He talks about it being a black swan event for the global financial. What does he mean by a black swan event for the global financial system? And is this a credible risk? Well, a black swan event is, you know, something that you can't foresee or you didn't foresee.

10:00And this was something that became popularized as a term around the kind of financial crisis. Rich man having an affair? We can't see that coming. Or is it the reaction? It's the thing you didn't see coming, right? The black swan moment is the thing that you can't see coming or the thing that you didn't see coming. Now, obviously, you could imagine a scenario where this happened. It's not that you don't have to be able to imagine a scenario. But, you know, the subprime mortgage crisis was described as a black swan event that sunk the financial system. obviously you could imagine the subprime mortgage crisis happening if you lend lots of money to people who can't really afford to pay it back and then you slice and dice those loans and create financial instruments from them that you declare are absolutely cast iron safe you can imagine a scenario where they may not become cast iron safe but it's like it's that little moment you know that triggers the whole thing.

11:00And I mean, Alex is concerned about some of the parallels, you know, from now and before the financial crisis, and also, you know, before the kind of dot com bust. And one of the things he makes a point about is that how the huge rise in the share prices of these companies and their values has got simply gone bananas, in his words. And And the point he makes is that these lofty share prices make it easier for companies to take on huge unsecured debts. And the Magnificent Seven, for example, have been, in Alex's words, filling their boots to the tune of$3 trillion. That's about 10 % of America's entire GDP and is not far short of Britain's total economy.

11:48They have been borrowing vast sums of money in order to fund the hyperscaling that we talked about, the build out of AI and the data centers and things like that. Google, in its results, basically has admitted that it has gone from being cash flow positive. So Google makes loads of money. The great thing about these tech companies is the money just kept rolling in and rolling in. So people would be worried about the share prices, worried about the valuations. But you know what, at the end of the day, if that money keeps rolling in, then that's great. Cash is king when it comes to businesses. They have managed to put themselves in a position where they're now in a negative cash flow situation.

12:25So they've still got money rolling in, but they're spending so much money on this hyperscaling and this AI build out that they're having to go out and borrow money in order to spend money on it. And Google in its results basically said that some of this is actually harming its own margins. So for example, it's investing money in AI and it's making less money off its core business, which is advertising due to the fact that people are reading the AI overviews and not going to the sponsored links and so on and people aren't paying for it and everything. So AI is damaging this business, but they feel that they can't stop.

12:59Meta, for example, still got lots of money coming in, but spending unbelievable amounts of money. Alex points out that this towering edifice of debt, which will have to be repaid one day, and is larger than the one that investors are warning about in 2008. Ultimately, this is the thing that could trigger the collapse. You know, it won't be the share prices falling, but the share prices falling will have a big impact on that debt because it will have a big impact on the ability of the companies, you know, to raise that debt. And this will then mean that actually all of these hyperscaling plans might start to unravel.

13:40And there's a lot of companies tied into this, you know, who stand to benefit from it and who, you know, in theory, some of this spending is locked in. But other companies doing the spending might end up revising their plans. Then people start revising their earnings down, share prices start coming down again, investors start lowering their expectations, and you end up in a bit of a downward spiral. So I've been hearing people say about NVIDIA, for example, I just saw one video on Instagram, I think of some guys saying, I've just put my life savings on NVIDIA because obviously the share price has dropped and it's inevitably going to go back up again because it's dropped because of this affair.

14:20And actually, how should you be thinking about that? The sort of questions you should be asking as to whether you think this might be an opportunity or actually not. It's an interesting one, isn't it? Because - You probably wouldn't put your life savings on one stock anyway. No, I wouldn't put my life savings on one company. Okay, there you go. I'll start my answer with, I wouldn't put my life savings on one company. Okay, right? There you go. Done. Don't put your life savings on two companies. Don't even put your life savings on five companies. You need a diversified portfolio. And that means a selection of at least 15 to 20 different companies that do different things and don't all go up or down at the same time.

14:56So just buying U.S. tech stocks does not count, just to be clear. back to the kind of should you buy it when it's down 30 there is that kind of thing where like you know if a market crashes 30 you should maybe buy in because you know the fall might be done it might be about to bounce up you look at something like nvidia then you think 30 it's still pretty highly valued it's still worth a lot of money i mean if you were willing to buy it a month ago um you should maybe now be willing to buy it with a third off the price but i would be careful about this because you know there's this kind of old investment adage of you know don't try to catch a falling knife and there is a strong chance that it could go down further from here or there is a strong chance it could go down further from here and then not bounce straight back up or it might not bounce but straight back up from here and also again going back to my point even with the share price down 30 percent if you look at it in order to rebound you know by another 30 % and then keep going up beyond that, you have to look at what NVIDIA has to actually manage to pull off and do.

16:04And then ask yourself the questions of after this, is it going to be able to do that? Or is there going to be a period of consolidation where things aren't going quite so swimmingly for NVIDIA and people are a lot more cautious about striking deals with it? Back to the more general theme that Rachel was talking about in her article, which is how it impacts our pensions and our ISAs. With so much of our money riding on just a handful of these big tech companies. Is there anything that we should be doing right now? I mean, the first thing you should be doing is not making panic moves. You shouldn't make any knee-jerk reactions.

16:37By the time you make a knee-jerk reaction, it's invariably too late anyway. The time to make a knee-jerk reaction was on October the 6th when the NVIDIA share price was peaking. That was the time to get out. The time to get out is not when it's down 30%. But it's unlikely that most people will have a sizable chunk of their pension solely invested in NVIDIA or their ISA solely invested in NVIDIA. I mean, many of our listeners might hold some NVIDIA shares directly. Hopefully, they're not too overexposed to NVIDIA. But if you've got a global index fund, for example, then that's going to hold, you know, maybe 5 % of it being NVIDIA.

17:16Now, as NVIDIA shrinks... That's still a lot though, isn't it? It is a lot. But as NVIDIA shrinks, it's going to be selling that down. So it's going to be not 5 % now, right? It's probably like 4%. And it might even be even lower. But it's still a big chunk. But if you think about it, you've diversified by holding that index fund in the sense that it's invested in companies all around the world. And yes, one of them has fallen 30%. But that's only a 30 % fall of even at its peak, like 5 % of your portfolio. The problem is, is are all the others going to fall as well. And this is the concern. The US stock market, which makes up about 70 % of the global stock market, is dominated by big tech companies.

18:02They do tend to move in similar directions. If people are worried about NVIDIA, they'll also be worried about Amazon. They'll also be worried about Google. They'll also be worried about Meta and so on. You could consider tilting some of your investments away from that, or you could just decide to ride it out. If you decide to tilt some of your investments away from that, you could look maybe to some areas that might not be so exposed. The UK, for example, you might decide to be a bit more into funds that invest in the UK. But do bear in mind what I said, the UK stock market only makes up about 3 % of the global total.

18:36So if you put 10 % of your pension or your ISA into UK stocks, you would be very exposed to the UK stock market compared to what the global stock market is. so once you start going up beyond that that's something you need to think about you might want to think about okay well do you know what is perhaps is this bit of growth investing you know just the big tech bit of growth investing has that had its day is there another place that i should be looking for example um you know and this is not i'm saying you should go there but as an example of ways of thinking about this some people are talking about biotech for example biotechnology it's quite cyclical it has been in the doldrums until it's been up a lot over the last year but it's been in the doldrums until relatively recently before then.

19:18So you might go, well, maybe something like that has got more room to run. Or you might decide to go for an actively managed fund or investment trust. You might say, well, actually, do you know what? I'm going to shift some of my money away from that global index fund. And I'm going to go for a fund that's being managed by someone. And you then need to look at what they're investing in. Are they investing in a broad range of assets around the world? Are they investing in just one? country are they investing in just one sector do you want to try to capture growth from a from an investment trust like scottish mortgage which although it is like you know very kind of thought of as very tech dominated is really quite different to the global stock market index or you know would you prefer to go after something like uk mid-cap companies i mean uk companies in the FTSE 250, you know, are very, very much undervalued by investors.

20:13And there's great companies there that are leaders in their field around the world in quite niche things, and should always be, you know, in demand. Or if you are closer to the point where you're going to need that money, perhaps approaching retirement, maybe you should be considering moving some of it to cash, or to what is generally considered a safer investment, which is bonds. But bonds, like the bond market's a bit crazy at the moment. So if you really want safety, you might want to think about holding a bit more cash. All right, then. Thank you very much, Simon. Now talking of pensions, how much do you think you need for a comfortable retirement?

20:48According to some new research, one in 10 of us think 100 grand plus the state pension will do. More worrying perhaps is that half say they've absolutely no idea. So is 100 grand plus the state pension enough? Simon, tell us more. Well, unfortunately, the answer to this is no. A£100 ,000 retirement fund would currently buy a guaranteed lifetime income worth about£8 ,000 a year or£667 a month. That's if you use an annuity, which is going to pay you a secure income for the rest of your life. And that's an annuity that pays a higher rate. But the reason why it pays a higher rate is that it won't rise in line with inflation or provide any death benefits for a spouse who outlives you.

21:40If you would like to provide, you know, benefits for somebody who outlives you or have your income go up with inflation, then you're going to start at a lower amount. So if you take your your eight thousand pounds a year from your retirement fund and then you add, let's let's say you get that top whack. Right. And then you add the state pension, which is going to be about thirteen thousand pounds from next April. then you're going to have you know 21 000 pounds a year that will get you a minimum retirement according to the pension uk benchmark figures it will get you considerably better than a minimum requirement retirement actually because you need 13 900 pounds for that for a moderate retirement though one that you're probably going to enjoy a bit more and be able to splash out a little bit enjoy your two weeks in europe and a long weekend in the uk every year you are going to need as an individual£32 ,700.

22:31So you'll be short of that. And for a comfortable retirement, you'd need£45 ,400. If you're a couple, then it's not twice as much because you benefit from the spending power of two people reducing it. So a moderate retirement for a couple is£45 ,400 and a comfortable one is£62 ,700. It illustrates that people are falling short of where they think they're going to be and where they need to get to. The thing for most people listening to this is also that they aren't retiring now. And they aren't retiring next April either. They're going to be retiring in 20 years time, 30 years time. And inflation is going to drive up the cost of all of those retirement levels.

23:17And that's going to mean that your£100 ,000 pot and your state pension won't go anywhere near as far as it does now. See, this is something that's always confused me, Simon, because whenever we talk about these figures, and you and I spoke to Micah Curry from PensionBee, she said that 800 ,000 was the figure, which I'm sure a lot of people balked at that. But it's what you would need to save if you were retiring today, right? So it's like, how much would that be worth in, let's say, I don't know, when are we looking to retire, Simon? 25 years? Well, this is the difficulty, isn't it? And I think I'm a big fan of the Pension UK figures.

23:58I think that they are, you know, really good in the sense that I think they help people understand retirement and what it means for people and, you know, how they can picture what level of retirement they might be able to secure. But I do worry a sizable number of people reading it think, okay, well, yeah, that's not totally unachievable. I could do that. Thinking that that's what they will need when they retire and not thinking about the fact that that's what they would need if they retired now. Not if they retired in 20 years time. The thing I would say to do is to go and use pension calculator and play around with the numbers.

24:40We've got one on the site. if you go to thisismoney.co.uk forward slash pension calculator and you can put in your numbers you can put in your pension details and it will use the pension UK figures to show you a picture of what your retirement might look like and where you might get to but the good bit of news is that if you start early and then you just invest for a long time you might get quite a lot more than you think. So if you invested£200 a month into your pension over 40 years, and you managed to average a 7 % annual return, so 40 years is a reasonable approximation of someone's working career length, right?

25:25From their mid-20s to their mid-60s, you would end up with £525 ,000. Now, I don't think if you told most people that they would need a£525 ,000 pension pot, they'd have any expectation that they'd ever be able to get there. I don't think that if you said to most people in their mid-twenties, you know, that's what you're going to need, they'd be like, uh, yeah, I might as well just give up. And I hear this from younger people when I'm talking to them. There's just no point. There's no point putting money in my pension. There's no point, you know saving for a house and so on but actually i would say well look you know if you just do it and you start now and do it for a long time and you benefit from investment returns compounded then it's going to make a really big difference and also you're not going to only put in 200 pounds a month for the whole of the rest of those 40 years your salary is going to go up you're going to put more in you're going to end up with more than that i mean you might get unlucky with investment returns um but it's a reasonable rate of return the seven percent you know even if you only got 5%, you'd still get£300 ,000.

26:27And that's only putting in the£200 a month. And to put£200 a month into your pension, you don't actually need to pay£200 at all. There's a wonderful thing where the money that you put into your pension gets basic rate tax relief. So it gets an uplift of 25%. So if you put£100 in, it would be turned into£125. pounds. And if you're employed, and your employer will match your contributions, which many will do, they'll add another£100 as well. So you've turned£100 into£225. And if you invest your £225 over 40 years, an average return of 7%, you end up with£590 ,000. That's not bad. Thank you very much, Simon.

27:12If you want to watch that interview that Simon and I just spoke about with Micah Curry for our new podcast, Investing Unlocked, all about how to boost your pension and the 800 ,000 figure and how to get there. Or you want to watch the latest episode all about quality investing with under fire staff fund manager Nick Train, head to Investing Unlocked UK on YouTube, or you can listen wherever you listen to this. Now, Simon, could the value of your home be set to plummet£82 ,000? According to one economist, that could be the reality for the average British homeowner over the next four years. Now, Fred Harrison, who famously predicted the last two major housing crashes, is back with another warning.

27:48We've talked about this before on the pod, about his theory that property prices follow this 18-year cycle of boom and bust. And if he's right, we are due another crash. In fact, he believes it's already begun, with house prices set to fall by more than 30%. Simon, just remind us, if you would, how this 18-year property cycle works. And why does Fred reckon we are heading for another crash? Right. Fred, long term listeners will be aware of Fred's property cycle, which is basically it looks at an 18 year cycle. Interestingly, you can actually map this onto the top of UK house prices. And what you have is you have a number of different stages.

28:35is you have a peak then you have a crash then you have a recovery phase then you have steady growth then you have a pause stroke correction then you have a final leg up and then you have a crash again and if you map this over house prices as i said in the uk over the kind of longer term it does kind of look like it fits fred has been saying that market's going to peak in 2026 for some time now and we've had a couple of stories about it so i'm looking at a story here you know from 2021 so on the basis that he said that it was going to peak in 2026 and then the market was going to crash we thought that we should probably get back in touch with him and find out what he thought now um so ed magnus got in touch with fred and he told ed that he expects house prices to fall by more than 30 over the next four years and the crash has already begun so since 2021 obviously he's been saying these.

29:34He's not making these warnings in that such a way. He's like, it's all doom and gloom. We've asked him and he's answered the question. He's an economist. He's got a good track record. He wrote in his book, The Power in the Land, published in 1983. He correctly forecast that property prices would peak in 1989 and warned of the recession that followed it. Then in 1997, he made a 10-year forecast, predicted a global financial crisis would be triggered after house prices peaked in 2007 and his warnings played out then and he now says that they could crash again we're at that next 18 year bit of the cycle and he reckons that he has identified this cycle as operating within the uk for at least 300 years right okay so is it just look oh 18 years brilliant do you for another one or are there actually some really decent signals that mean that we are in, I don't know, we in trouble?

30:31Well, I think one thing that's interesting here is that if you look at house prices adjusted for inflation, they've been falling for some time. In real terms, house prices have been getting cheaper. And in some places, London, southeast, southwest of England, this is quite pronounced. And in fact, even nominal house prices in those areas are lower than they were four years ago. So then when you adjust for inflation, they're down quite substantially. So in the South, house prices are down around 20 % adjusted for inflation. And that's because obviously, they've fallen slightly in nominal terms, and inflation has been quite high.

31:08So that's one thing that's causing a problem in the market. Fred said that what's interesting about this one is that you didn't see the kind of final leg up before the peak, and that the usual mania that you would see this time around happen during the pandemic when we had the pandemic property boom and that money has actually then flowed into other speculative assets such as technology stocks. So he says the crash has already begun in the housing market but the driving forces are camouflaged by activities across global markets in particular the AI industry which is by and large a real estate operation is disguising the trends says Harrison.

31:45With all that money pouring into the tech corporations, analysts think economies are booming. But those investments are based on almost pure speculation in the future. And he says the underlying force behind rising prices in the property market is the finite supply of land. And boom and bust cycles are systemically embedded in the architecture of the economy. And he says the housing market's fate will be revealed when the crazy sums stop pouring into Silicon Valley, which he then adds, which has started. You know I don't like house price forecast predictions, numbers. You don't know house price stories full stop, let alone house price forecasts.

32:24And ones that run for 18 years, you can map on top of house price charts and then start to pull in things like the AI and the tech boom. I bet you absolutely love those, don't you? Oh, I mean, they are my favourite. I can't wait when you tell me that we should cover these stories. But I just have to say that like all house price sort of prediction stories, it's not one uniform view. There are forecasters predicting or expecting prices to rise. So rather wildly different predictions, which, as I say, is rather par for the course when it comes to house price numbers and figures. I mean, only last week, Savills, a company that specializes in selling expensive homes, said it thought their house prices would dip slightly and then continue to go up.

33:13Maybe someone who's got, well, he's definitely got skin in the game, but someone with less, more independent skin in the game. Buy Slate investor Rob Dix, you know him? Yes, another person we've interviewed together. He says he's been aware of Fred's 18-year cycle for a long time. He thinks the cycle isn't playing out as it should this time round, and that a major crash is looking unlikely. Rob says, As I understand it, the theory of the 18-year cycle treats the timing as systemic, with external events short of major wars just being noise. It also talks about the winner's curse phase of frenzied activity and rapid price rises, which tip over into the bust.

33:50Given that prices have been falling in real terms for years, and are now falling nominally in some areas, we're a long way from mania. and as interest rates have already normalized it's hard to see a sudden shock there being the trigger for a sharp 30 crash one thing i do think is going on is certainly something i see in the property market around me is that this the effect of how much more expensive it is to borrow on mortgages is really chilling things and that means people are putting houses on the market but then they're just leaving them sitting there you know they might cut the price a couple of times but they're not cutting aggressively and they're not taking low offers because they don't need to but the reason why they're not getting the higher offers is because people just can't borrow the same amount of money anymore due to the fact that you know if i wanted well i'll tell you what basically if you wanted your mortgage now compared to what it was five years ago it's going to cost you about an extra five or six hundred pounds a month it's quite difficult for most people to find an extra five or six hundred pounds a month you've then got the situation where lots of people remortgaging are seeing that being sucked out of their income um and they they cut a lot of people most people are coping with that they're not forced sellers okay they're just but they are having to cut back elsewhere and a 500 pound a month hits your income is massive you know you've got to earn if you're a 40 taxpayer of which many people are now you know you need to be earning 800 900 before tax in order to be getting that in you know times that by 12 that's 10 grand a year.

35:20That's a lot of money. And that is that has having a real chilling effect on the market. But it hasn't all hit at once. It's been hitting progressively over a period of time. Whereas I think if like in the in the old days when everybody used to be on variable rate mortgages, and you might have seen mortgage rates suddenly shoot, base rates suddenly shoot up, mortgage rates suddenly shoot up, and everybody gets hit at once. And maybe then it would be it would be harder on people also the lending standards for those people who are being hit by this were better than they were during the you know kind of pre-financial crisis era also arguably better than they were during the during the 80s for example when you had that boom so you do think well could this really be the start of the crash because what you normally see before the start of the crash as well is a bit of a lending boom a bit of a lending mania and we haven't seen that yet and also we then got pressure on the financial regulator on the FCA to ease some of the rules that are brought in after the financial crisis, you know, to try to limit lending.

36:23And what you'd expect to happen is for that pressure to follow through, the FCA eases the rules more, you get a bit of a lending boom, that drives prices up, and then you have the crash. But who knows, Fred might be right. We shall see, Simon. We shall see. Finally, as I sit here in my sparkly M &S thermal vest. Yeah, the sparkly doesn't take away from the M &S thermal vest. But let's talk about other ways to keep warm this winter on the cheap. From central heating to electric blankets, hot water bottles and fan heaters. This is money you have a rundown of what they cost to run and what's the cheapest, Simon.

37:01I'm guessing it's probably not central heating and more likely to be something like hot water bottles and thermal vests. But what have you found out, Simon? Well, yeah, you want to stay warm. It's that time of year. And that means it's that time of year for stories about how to keep warm. So we've run through them, what they cost. Okay, so central heating. Clearly, this is not the cheapest way to keep warm. Just whack the central heating up, stick it on 25, put a t-shirt on. But it is usually the most cost effective if you want to heat an entire home. So a standard gas boiler and central heating system in an average sized home uses an average of 4.2 kilowatts per hour and costs about 67p to run for two hours according to USwitch.

37:44Obviously that you know depends on how high you turn the temperature up. Now the NHS recommends that you heat rooms that you regularly use to 18 degrees celsius in cold weather. There will be many people listening to this who are like uh-uh 18 degrees is way too cold for me so then you've got an electric blanket we've shifted haven't we an electric blanket is not the cheapest way to warm your whole house just to be clear but they are a good way of heating like you know your bed you before you get in it you yeah an electric blanket costs as little as 5p an hour so that's cheap plug in electric heater now i have a warning story about this when we first moved into our house five years ago and then had our first winter here there was a sort of what we used as a utility ring which the the the guy before who had owned the house uses a bit of a workshop off the back of the garage it was a little bit shonky it was pretty cold out there and when we hung clothes up to dry obviously they didn't dry through the winter so we got a heater and we got it from john lewis it was a good one and it had an it had an eco setting so we were thinking okay cool this is fine uh so we put the heater on and we used to plug the heater in on in and leave it on just to dry the clothes and so the heater would sometimes be running overnight now this is back in the days when you weren't quite so worried about your energy bills and you didn't check them all the time but for some reason i did check my energy bills after about the first month of doing this and i was somewhat shocked to discover quite how big my energy bills were and it was largely due to the fact that my electricity bill had gone up by 50 pounds which in those days was a lot and basically that was thanks to the heater that we'd been using to dry clothes in the shonky utility room thing and we basically burned through 50 quid by leaving that heater on and i learned an important lesson there plug-in electric heaters are not cheap to use according to u switch an average electric fan heater uses two kilowatts of power on average per hour and costs one pound five to one for two hours if you keep yours on for four to eight hours a day that's about two pound ten to four pound twenty a day so four pounds twenty a day times by a month is a lot and then we come to the trusty hot water bottle okay it takes around two and a half to four minutes to boil a kettle according to you switch if you were to do that a couple of times for a couple of hot water bottles it would cost you about 13p the problem with for me with a hot water bottle is it doesn't keep my nose warm you know and that bothers me especially when i'm sleeping.

40:38You know, the body may be warm, but the head is cold. I'm not sleeping. But what it brings to mind, and I'll never forget this, Rachel Rickard Strauss's tip. One of the early episodes, very early episodes of This Is Money podcast, where she recommended making some rice pudding and then sticking the pan in the bed to heat up the bed. And then you have a lovely rice pudding. I have yet to try that, probably 11 or 12 years after she first recommended it, but I'm sure it works wonderfully might be cheaper even than a hot water bottle in my head for quite a long time over that the course of that time I thought she'd actually told us about how to make rice pudding in a bed with an electric blanket oh and I was like yeah you can't the electric blanket just doesn't get hot enough to cook something and it was only a conversation maybe a couple of years back when we were talking about this again I was like oh yeah that's not what she said at all is she was not talking about trying to cook something in your bed using an electric blanket.

41:39I'll tell you a nice little trick. If you've been cooking, leave the oven to cool down with the door open. It lets the warm air out. That's a nice little one. You can also cuddle the oven while you're cooking. I've done that. I get very cold. So I really, this time of year, not a big fan. And I say that as someone born and raised in Norway. I'm born in one of the coldest winters, I understand, on record, according to my mother. But like you say, every story improves in the telling. So that may not be true. Simon, your start of the week. Twelve. That is the number of years that the This Is Money podcast has been going as of Saturday, I believe.

42:18Happy anniversary, Simon. Yeah. And what's marvellous is very soon, I understand, Simon, there'll be some new pictures. And what's great is if you go back on like Google Images and stuff, you can look at a very young Simon and I for the first image of This Is Money podcast artwork. All right, that is it. Thank you very much, Simon. Thank you for listening. You can keep up to date with all the latest Breaking Money news. Just go to thisismoney.co.uk or download the app. And if you have any comments or questions for the team or anything you'd like them to look into, Simon? You can email us at podcast at thisismoney.co.uk and come to thisismoney.co.uk forward slash podcast to join in the debate and read the comments.

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