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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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Welcome to the Merrin Talks Money Market Wrap, where we talk about the biggest moves in the market this week and what is driving them. I'm Merrin Thumbs at Web, UK money editor at large. And whilst John is still out of the office on a beach somewhere, I am joined by Sam Unstead. Sam is editor of Bloomberg's Markets Today blog and wrote about UK stocks, economics, central banks and global markets.
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Chapter 2: What recent political changes are impacting UK gilts?
But there are other things feeding in which we need to talk about. And there is this thing that has happened just a few hours ago of Apple saying they're putting up their prices fairly substantially because of chip prices going up. And we've been talking for a while on on the podcast about how when people talk about AI, they talk about costs coming down and they talk about productivity.
But in fact, of course, the hardware is very, very expensive and that is a new inflationary impulse.
Yeah, I mean, there are a couple of inflationary impulses to think about with AI. So as you mentioned with memory chip prices, so you had a really neat thing happen today where we had Micron Technology, which is the biggest memory chip maker in the world, with incredibly good results. I mean, way, way ahead of expectations, huge demand, revenue, profit, everything that could be.
I can't get, there's one number in there I can't get out of my head with 86% margin.
Yeah, it's astonishingly high, right? So that's one side of the AI story. And so all the chip makers and the memory companies are all going up with them today and by a lot. And Micron, remember, is a big company. I mean, they're already worth nearly $2 trillion. So it's a huge move.
But on the complete other side of that, you get this other question about the reason that they're making this huge margin, which is that memory chip prices have gone through the roof because everything is being directed to AI.
So the consumer stuff, so everything that's... We're talking memory chips that go into basically anything electronic that exists in the world, from phones with Apple, with iPads and MacBooks. You're talking from there to... Fridges, cars, like basically anything anyone buys that has any electronics in it will have a memory chip in it.
So you're getting an inflationary impulse coming from that because as Apple and Apple being kind of the biggest electronics company in the world, they're pushing through prices. So if they're not able to sustain those margins and they're having to do it. That's not a good sign for everywhere else. And then the other side of it is this huge- There are three sides to this? There's another side.
It's a triangle. Is data centers. So spending huge amounts of money on data centers, this huge AI capex boom that's going on. But that requires lots of electricity and people are going to have to pay for that somewhere down the line.
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Chapter 3: How are oil prices influencing the gilt market?
You're an expert in everything, so I'm going to ask you. One of the reasons why the oil price never went up to $150, $200, like some of the more excitable people were suggesting at the beginning of the war was because of the drawdown from everyone's reserves, right? From US reserves and in particular from Chinese reserves. Massive drawdowns there because we never saw any
any demand destruction in China. So we know that huge amounts of oil were being used up. They have to be refilled. Yes. So that's a huge source of demand over the next couple of years, a year. So surely that would suggest that oil prices aren't going to fall below these levels and may actually rise from here?
Yeah, there's certainly a risk. I mean, I would suggest it's... more likely that they will stay kind of where they are now. So not marginally elevated from where they were before the war, but with a lot of volatility and a lot of wobbliness over the course of the rest of the year for exactly the reason you're mentioning.
So part of it will require, and this is why there's such a huge focus on this all the time, that the oil starts flowing through the Strait of Hormuz really sustainably for an extended period of time now. With no breaks in it, with no issues, that's a big ask. So that has to happen. And during that happening, then the reserves can start to be filled.
So you need these two things to kind of happen in concert with each other. But while they're happening in concert with each other, the likelihood is oil prices don't go much further down from where they are now. And those inflationary kind of impulses that have happened with oil going up for a few months will still be flowing through during that time.
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Chapter 4: What are the implications of Keir Starmer's resignation?
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Stories that move markets.
Chair Powell opened the door to this first interest rate cut.
Impact politics. Change businesses. This is a really stunning development for the AI world. And how you think about your bottom line. Listen to The Big Take from Bloomberg News every weekday afternoon on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.
The last thing I want to ask you about is, again, all connected to geopolitics, connected to inflation, connected to everything. And it's the gold price. Boy, this is disappointing, isn't it? For gold bugs, this is disappointing.
Yeah, yeah, yeah. I mean, I would say, you know, to just calm everyone, you know, it's still only just a little bit below $4,000 an ounce. But that was a really key level.
But below $4,000. I mean, remember the excitement when over $5,000, John and I could barely contain ourselves. Yeah.
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Chapter 5: What narratives are driving market sentiment today?
That was something we actually really did see evidence of. was retail traders getting rid of their Bitcoin holdings in order to buy SpaceX. And that was happening actually across all sorts of spaces. It was happening with some of the high flying kind of chip stocks as well.
I thought you were supposed to hold your Bitcoin forever. I thought that was, it's not a, it wasn't, we've learned it's not a currency. And the new gig is that it's a long-term asset and you hold it forever. And that is neither of those things.
That's a great point, actually. So yeah, so last year we had this debasement trade, right? This was like, for a few months, this was the idea that the dollar is no longer king and that people are putting their money into gold or Bitcoin. And that seems to have fritted away over the course of this past year.
I think a lot of the enthusiasm, you know, Bitcoin does rely to an extent on enthusiasm, on investors just being enthused about getting into gold, pumping their money into the ETFs that have now been launched, you know, these kind of institutional funds.
All of those companies, when you have this much equity supply, like SpaceX, when you have this much excitement about a different corner of the market- Sorry, I'm talking about Bitcoin now, not gold. Yes, sorry. Yes, I'm talking about Bitcoin. Yes. So when you have this much excitement about- AI or about SpaceX particularly, and big IPOs coming later in the year for OpenAI or Anthropic.
When all of that is going on, it seems like the sort of traders that are in Bitcoin are the ones who are then thinking, actually, I'm going to move a little bit away from here.
Well, it's all about stories, isn't it? I mean, Bitcoin is very story-driven among things that we've seen since we first heard about Bitcoin. It's the constant renewal of the story. It's not quite that. It's this. No, no, it's this. No, it's this. No, it's this. And when there isn't a good story right now, there isn't a good new story for Bitcoin. But there are amazing stories elsewhere.
So if you're a story-led investor...
Yeah.
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