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Chapter 1: What is the main topic discussed in this episode?
We don't just invest in cutting edge companies. We look at companies with a history of steady growth. And companies whose growth cycle has come round again. Because in the real world, you have to look at growth in three dimensions. Monk's Investment Trust.
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Bloomberg Audio Studios. Podcasts. Radio. News. Welcome to the Merrin Talks Money Market Wrap, where we talk about the biggest moves in the markets this week and what is driving them. I am Merrin Somerset Webb, Editor-at-Large for Bloomberg UK Wealth.
And I'm John Stevick, Senior Reporter at Bloomberg and author of the Money Distilled Newsletter. Right, John. In an effort to ramble less and to be more specific and more precise about what we discuss, we have decided that we are going to tell you at the beginning, you listeners, what it is we are going to talk about. So today we are going to talk about gold.
We're going to talk about supply and demand in the equity market. And we are going to talk about bonds and inheritance tax. So what excellent value for money this podcast is. Three whole topics. Yeah. Right. Gold. So. Gold. I was talking to Sebastian Lyon of Personal Assets Trust last night, right?
And as you know, personal assets is a trust that we're both very fond of, but it always has a pretty big gold holding. And I was talking to him about that. How much? Why this amount? And how does this work? And he has this sort of... base level of gold inside the trust is about 10%. Yeah. And when things are worrying and difficult and inflationary and scary, he'll go up to maybe 13, 14%. Yeah.
And when everything is kind of okay, he'll come down to 8%. And I was trying to get from him why it is that 10% is his number. Because, you know, gold, it's impossible to value, right? It's impossible to know how much you should have in a portfolio. And he said, well, the key thing is you need to have enough gold in your portfolio to make a difference when something goes wrong.
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Chapter 2: What are the recent trends in gold market corrections?
We were thrilled when it went over $5,000. Are we looking at it now and going, this is a healthy correction. All this money you've lost everybody, that's a good thing. Yeah, I mean, look, to be honest, yes, I think that this is, I think this is not a good thing.
And to be fair, I remember as we both were getting quite twitchy at the start of the year, and I think we'd sort of mentioned maybe take some profits. But I do, because I have been looking at it, I have been thinking, oh, well, look, is this it? Have we tipped over? Is this kind of, you know, 2011, 2012 again? But I just can't see it.
I mean, one of our colleagues, Simon White, who does the Microscope column, wrote a good piece pointing out that Asian money is still buying. And that's... And several banks are still buying. Yeah, I... Not on quite the same scale as they were, but they are still buying. Yeah. And so I think a couple of things happened. There was momentum, obviously. Everyone got very excited about gold.
Gold was briefly like the new Bitcoin sort of thing. But also, you know, we kind of had a period of inflations going up and people stopped thinking interest rates were going to go down, started thinking they were going to go back up.
And they haven't got quite as far as remembering that, yeah, well, what if interest rates go up, don't go up fast enough to, you know, stop inflation from taking off. And again, that's when you want some gold in your portfolio. So I don't really, and certainly, obviously, the debt picture hasn't got better, particularly not in the US.
So I don't see any fundamental things changing, unlike, you know, arguably they did in 2011, 2012. Yeah. So, yeah, basically, I still think it's a bull market. All the reasons to hold stand. Yeah. Yeah, so find your number. Yeah. And stick with it. Yeah. And, you know, if you're feeling queasy, then sell something until you don't feel queasy. Yeah, never feel queasy about your investments. Yeah.
Yeah. Okay, on that subject, on to number two. Yes. Topic number two. See, I'm signalling now. Yeah. Topic number two.
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Chapter 3: How does gold allocation affect investment strategies?
Supply and demand in the equity market. Now... One of the things that we've talked about so much over the last decade, two decades, for those of you who don't know, John and I have been working together a long time. Last couple of decades, things have really been bothering us. There's been de-equitization, there's been the general shrinking of the equity market, of the
absolute numbers of shares available to you to buy and of the absolute numbers of companies that are listed. It's been a problem. And so the market has turned into, over the last couple of decades, something from which investors extract money from companies being bought out by private equity.
You take your cash and you run from dividend payments, from buybacks, huge rise in buybacks across all markets, particularly in the U.S., right? And you can argue, and lots of people do, and it's hard to quantify, but that shrinkage of supply has been one of the drivers behind the bull market for the last many years, right?
You take out supply, demand stays the same or goes up and up and up with auto-enrollment and 401ks. What do you expect? You expect a bull market. Yeah, absolutely. I mean, it's entirely logical. It's just that nobody thinks about it because it's so abstract. Yeah. But actually, you know, it's like if suddenly there were like half the number of apples at your supermarket, the price would go up.
Yeah, apples would be more expensive. Yeah, and it's not because the apples are any better, there's just fewer of them. Okay, and so... Look at what's happening now. We talked about this last week a bit, but we've got these huge IPOs. SpaceX, I'll find out very soon how many shares I have been allocated in SpaceX. SpaceX, OpenAI, Anthropic, and these are huge.
We're into hundreds of billions with these guys. But even if these ones weren't listing, there would be other companies we would be talking about with huge excitement because they're listing. There are a huge number of IPOs coming through.
And at the same time, we're seeing a lot of the companies that would once have been doing buybacks, I'm thinking of the hyperscalers, who were very, very cash heavy and are now not cash heavy and are coming to market to look for money. Google raises money the other day, for example. And not only lots of money, like 85 billion. Yeah. Real money. That's the same as SpaceX is trying to raise.
Suddenly we're in a new environment where instead of the investor, you know, listeners, you and me, John, taking money out of the market. Thanks very much for the cash, guys. Now we're being asked to put money Into the market. The dynamic has changed. And at the same time, we're looking at private equity, aren't we? And going, you know what?
We're not really sure about that performance record of yours. And it really is time that you lot started capitulating and selling that stuff off at the right price. And when you do, I wonder where they're going to sell it. And is it going to come back into the public markets? So are we now moving into a new era, you know, a back to the future era? Yeah.
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