J.P. Morgan vs Goldman Sachs, Bitcoin & Gold Hit New Record Highs

I was just about to say welcome to the end of the week, and if you're listening to this, it is the end of the week, but not for me and Piers because we're actually recording this on Wednesday. So if something spectacular does happen between recording now and when this episode goes out, kind of 2 days later, you must forgive us, please. Um, but what are we going to cover here? We're going to talk about a quite stark divergence between some of the giants on Wall Street and what they think about this recent record high we've had in U.S. stocks. We've got JP Morgan very bearish and Goldman Sachs and Bank of America very bullish. So we'll look to dive into some of the rationale and what the arguments are for each case, and we'll let you decide with the poll we'll put with this episode whether you fit within the bull camp or the bear camp. Then we're also going to talk about record highs for both Bitcoin and gold. So what's underpinning that? Why? What might happen next? We'll look to unpack that. And then if we have time, we're also— there's lots of other things going on in the market. I think China's come out with its annual targets. Uh, they've come out and talked about 5% growth. A lot of question marks whether they'll be able to hit that. We've also got Super Tuesday's just happened at the point we're recording this, but I guess if you're in America, you probably already know what happened. But if you're in Britain and you're English, you're probably thinking, what is Super Tuesday? So I'll do a quick explainer of that as well at the end of the episode. And Jerome Powell's got an important speech to deliver as well this week. But Piers, to start then, uh, this kind of battle on Wall Street for who, who's right, who's wrong. So JP Morgan, what do you think? They're pretty bearish.

Yeah, I mean, well, it's kind of, it's kind of Goldman's versus JP Morgan, isn't it? They've, um, you know, in recent days of that, they're kind of chief economists have kind of come out with pieces that are very starkly, uh, opposite. And you've got JP Morgan thinking that this recent, you know, very pretty phenomenal gravity-defying bull run that we've seen, you know, particularly in US stocks, but globally more broadly. We were talking about this on the podcast the other week, weren't we, where off the back of the Nvidia results you had new all-time highs being set in stock indices in the US, in Europe, in APAC. Um, but the US, let's just kind of focus on the US here. So the S&P 500 has had a phenomenal run of it. So coming off the October low, which was around about 4,100, we're now, you know, above 5,100, and it's just been stellar. And JP Morgan are saying enough, this has gone too far, this is getting stupid. Um, and they're kind of defining this with a year-end target, and this is where the kind of stark contrast is the most obvious to see. So JP Morgan's year-end target, so in like 10 months' time, they think it's— we're going to drop from above 5,100 now back to 4,200. So almost right the way back to that low point we saw in Q3 of 2023. Goldman's exact opposite. They think, don't be silly, don't fight this trend. Bet against these Mag Seven at your peril. The stock market's going to march higher and they've got a 5,400 year-end target. Um, so it's quite— I'd say it's pretty unusual to get, you know, the big, big, big boys so contrastly, uh, sort of delivering expectations about what's coming next. So I thought, yeah, we could kind of drill into the bull case and the bear case a little bit. Um, which do you want to go first?

Yeah, let's go— yeah, let's get the doom and gloom out of the way. So why is your man at JP so So pessimistic.

Yeah. So there's like, for fundamental reasons, the kind of bear case and like this guy at JP Morgan. So their chief market strategist is a guy called Marko Kolanovic. Okay. So he's their chief guy in the US. Now he's come out and said, look, volatility's low, froth is building. And basically equities, I'm quoting him here. He said equities have moved up this year, even as bond yields rose and rate cut expectations unwound. Investors may be assuming that the increase in yields is reflective of economic acceleration, but earnings projections for 2024 are coming down and the market appears too complacent on the cycle. Um, I'd say you've got to think about, like, is the market going to come down? Well, question one, well, why did it go up? And those forces, are they done? You know, have we gone too high now? And basically saying we've gone too high. The key thing is the interest rate expectations. So a key catalyst for this big rally end of last year into the start of this year was where the Fed made a big pivot and they actually started to say, we're going to cut rates quite consistently throughout the whole of 2024. And you'll remember, seems a bit crazy to think about it now, but literally a month ago, markets were pricing 6 rate cuts in '24, the first one being in March, like in a couple of weeks. Okay. So that was literally a couple of months back we were thinking that. And now markets, the expectations have gone from 6 cuts to maybe 4, or not even 4, maybe 3. And then you got some out there like the Larry Summers of this world who are saying forget cuts, the next move is going to be a hike because the economy is so strong. Okay, so that's the big kind of absolutely the most, uh, I guess compelling argument in the bear camp. Is to say the interest rate situation has completely changed. And ultimately, that all shakes out to mean, because inflation has been dropping, it all shakes out to mean that the real interest rate, so that's the Fed's interest rate minus the inflation rate, is actually now the highest since 2007. So real rates are at their tightest. And ultimately, JP Morgan are saying, look, When real rates are that high, you know, I don't care how strong the economy looks at this point, it just can't survive that for any period of time. So that's their kind of central argument.

Do you think that the bear case gets an added benefit of human behavior in a sense of the narrative gets so much more promotion, if you like? Because I got an email alert from the Daily Telegraph, because I get the newsletters from every major publication, literally. And I always kind of—

I can't— you normally just deleted the Daily Telegraph.

Well, I canvassed the headlines just to see like what the general mood is.

You've changed.

I find it— well, yeah, the Guardian is still in there and the Observer. But the point being is, is that, that headline that they led with was Bitcoin bubble, frothy market inbound. And I clicked on the newsletter, so it caught my attention. I was like, okay, well, did its job. And then it just cited only one side of this discussion, what we're having.

Right. Well, yeah, that's bad journalism, straight up.

Yeah, but is that bad journalism when they all do that? I mean, that's just default. So who's to blame here? I mean, the journalists are just doing what they do, isn't it? The— well, I mean, isn't there a bit of emphasis on us as consumers, as people, to have a little bit more better understanding of like, we need to not just believe all the information that just falls on our doorstep? We've got to be a little bit more—

we're straying into a different conversation here, but I, I mean, the mainstream media now The way it's gone digital, of course, has meant that it's just about clicks. That's the single measure that they have.

Yeah.

And don't forget that clicks means money because of course they're generating advertising revenues, right? So they need more clicks, more eyeballs, more money, right? So it's about clicks. So you have to go sensational. And human nature is that you look at a kind of catastrophe disaster type headline. And the stats don't lie. There's always more clicks than there are for headlines with positive stories. That's human behavior. So they always go negative and then you click on it and fine, it's feeding you that narrative. They've kind of dug their own grave a little bit. If you've got a negative headline, you've obviously then got to justify why you've put that headline with then some arguments, right? And this is the failing of, I think, today's mainstream media. You're getting fed, um, one side of the narrative where proper journalism should be presenting a full 360 view, and you're not getting that anymore. And so this is why you need to— I think it's the onus is on the individual to do even more digging and your own research. You kind of got, got to do the job yourself now rather than relying on mainstream media.

So my question then is, did that— does that play a part in this? Do you think when it comes to this idea of market direction, when we start to get to these more extreme levels?

Well, I think it definitely does. I mean, history tells us that the media does play a role, or certainly has played a role, in shaping sentiment. Um, and so now you're starting to get more noise because you've got to have, like, to justify that article, you, you know, there's nothing better than the JP Morgan chief market strategist to quote in your article, right? Because now you're getting proper heavyweights kind of fall on that side of the fence. So yeah, I mean, I think there is a possibly that, that's, this is a compelling argument for the bear case, um, for sure. Um, there is a couple of other kind of items on that bear case list. Number one is something we've been banging on about forever and it's getting really boring, but it's the It's the market concentration thing. It's the fact that this rally is so narrow where it's mainly being driven by the Magnificent Seven. Although I saw— have you coined a new term here or did you get this from someone else? Because I was looking through a couple of your slides and do you want to talk about your new—

I can't remember what I've donned it now, the Eight.

Enormous Eight. It's not the Mag Seven anymore. It's Anthony Cheung's Enormous Eight. And you basically just throw Netflix in the mix as well, right?

Well, yeah, it was there to start. I felt a bit bad for Netflix after it had a bit of a boom period, so let's just pop it back in and let's just roll out enormous—

Anthony Cheung's enormous 8. So basically, because the market rally is so narrow, it's more vulnerable, um, and so I guess it's super vulnerable to anything negative about Nvidia. Basically, if you get bad news on Nvidia, fine. That's like the pin that will just prick this little bubble. Is it a bubble? I don't know, but certainly it'd be a deflation factor if, if something bad happens to Nvidia.

Okay, so is there any other on your checklist for bear?

Yes, one more. China, you know, just economically vulnerable and Yeah, just a little bit nervous about how that all shakes out in 2024. And of course, it's such a monster economy that, you know, if it does go pear-shaped a little bit, then, you know, that's going to have a spillover effect on everyone else. So yeah, that's certainly something to be monitoring, and the bears are all over that.

Yeah, I mean, one of the things actually, talking about the enormous 8, that slide that I put together, the, the, the quote that I saw was quite a good one, was that the rising tide is not lifting all boats. So even amongst the Mag 7, let's say, you are actually starting to see a bit of discrepancy where Tesla is getting whacked year to date. I think they're probably down 20% plus now because I think they fell again yesterday. Apple are down and Apple have had a bit of a rough time of it actually in the recent week. They've been slapped with a €2 billion or thereabouts fine from the EU over music streaming. They came out— I saw a report this week as well that their iPhone plunged in China in the first weeks of 2024. Just to give that some context, iPhone sales dropped 24% in the period, right? Apparently. So they're under pressure from all of the local—

and that's their second biggest market, right?

Right. And that's the one where there's a lot of focus to grow, uh, as well. So Yeah, they're down, and I think Alphabet might be down as well, just a fraction, or pretty, pretty flat at this point.

So they're down on the year. They've got issues like around their kind of rollout of Gemini, and they're trying to, they're trying to compete on the AI race, you know, off the, you know, on the heels of OpenAI. And they've just had a bit of a, a bit of a crisis internally, I'd say, on the sort of DEI front where the DEI team in Google seemed to be, basically seemed to have had grown into this position where they've got outsized influence over everything. And this is now fed through to the product that's now sat in front of the user. And, you know, there was huge gaffes around, um, their Gemini tool. So if you search things like, you know, give me an image of, I think, what was it the media were talking about? Give me an image of George Washington. I mean, I haven't done this myself, but, you know, give me an image of George Washington and it was coming back with a black guy. So that's factually incorrect. But it's the way that the DEI layer of their tool has kind of, it's gone too far where you now get those, you know, quite ridiculous outcomes that are factually wrong. And I think in the end, that's what users want. They want to trust the product to give them correct information. And so if you're getting something that's factually 100% wrong, well then you question everything else that it spits out as well. So I think, yeah, another stumble, another one, because there's been multiple now in this kind of AI race from Google's side. So yeah, they're not doing so well.

So the concentration has gone from almost 7, even more, and really we're talking 2 stocks, is Nvidia and Meta.

You might put Microsoft in there as well. I call it 2 and a half. I call it— let's call it 3. I mean, you can't not have Microsoft there, but okay, that's an Nvidia more so. But you're right, the concentration's narrowed, which makes it all the more vulnerable. So yeah, so a good argument in the bear case.

Okay, well look, I'm a half glass full kind of guy, so I'm not gonna add any more bearish points. So look, I've jumped in the cab I've gone around the block and I've jumped out at GS's HQ in New York.

Yeah.

What's Dave Koston, the, the kind of peer of, or the equivalent of JP Morgan's person, saying?

So he's definitely got an opposite case here. And again, and this is what makes it difficult, some really compelling arguments on this side of the, the, the defense. So I don't know where to start here. Let's talk about sentiment. At the moment. So fine, you're talking about negative media articles. Well, it hasn't damaged sentiment yet, at least. So a couple of things like US consumer confidence data, um, last week came out with a, a quite a notable increase. And it's notable because it's been below this kind of 75 kind of level, which is kind of the cutoff with this consumer confidence data. If it's below 75, it's considered to be like overall bearish. On average, people are more negative than positive, and above 75, the opposite. And we've been below 75 for 29 straight months, okay, from August 2021. And so, um, 29 straight months in the bear camp, and in February it's gone back above 75 for the first time. And actually, there was a big jump on the month— largest monthly gain in that sentiment indicator since December 2005. So you're getting these kind of crazy positive sentiment scenarios going on that could be fed by just the fact that wage, real wage growth is continuing to stay strong because inflation's dropped. Yes, interest rates are still high, so fine, that is a drag, but it does mean wage growth is now much higher than inflation. So in real terms, the consumer's getting more wealthy again relative to the speed at which the cost of living is increasing. So it's 8 months in a row now of real wage growth in the US. So maybe people are feeling a bit flush. You know, what recession? People were worried about a recession. It just hasn't happened. Maybe they own a bit of Nvidia stock and they're thinking, wehey. More likely they own a bit of Bitcoin. And they're thinking, sweet, I'm loaded. And so from a sentiment point of view, the consumer seems strong. If you think about investors, there's this thing called the American Association of Individual Investors survey. That's, I mean, it's actually in the top decile, the top, it's like the 99% sort of decile in terms of bullishness. Now you could spin that and say, well, that's a bad thing then. Because, well, if everyone's bullish, they've bought already. And I guess another point for the bear camp possibly is because valuations are this high, you're probably seeing people not sell if you've already bought in the past, not sell because there's positive cases to hold, right? But new buyers coming in now, I mean, it's expensive, right? And there are some more bear case noise coming through. So yeah, maybe that stat on the top decile of that survey is not necessarily a positive thing. So anyway, sentiment's positive, right? Backed up by the economy. You're getting strong kind of labor market numbers. And we got another nonfarm payrolls report this Friday, but that's straight really strong. I've talked about wages. GDP trackers are still looking at 2 to you know, high 2s or even low 3% GDP growth in the US. And it's like, wow, the resilience is just ongoing, right? So the final, and I think more interesting case is this AI revolution. And what does it actually mean? Fine, outside of Nvidia and Meta. Now let's leave those for a sec. Is AI leading to productivity gains. And I think the idea had been that not yet was the answer, except something came out last week that maybe has, you know, flipped that argument. I don't know if you saw the news from Klarna last week. So Klarna, Scandinavian, you know, massive pay, buy now, pay later firm, right? They've started to use So through, they, they've got an AI assistant that's powered by OpenAI. Okay. And they use this for customer service calls, right? That's been live globally on their platform for 1 month. Okay. In the month of February, and they released a load of stats about how it's gone. And their AI assistant dealt with 2.3 million conversations. In one month. That was two-thirds of Klarna's entire customer service chats is now automated. Basically, the AI's done the work of 700 full-time human agents in February. Now, okay, you might think, fine, okay, but is this AI any good? It might be handling a lot of volume, but is it doing it in a way that's, that's good for consumers? And basically, they're saying that actually, customer satisfaction scores have stayed exactly the same, indicating that they are doing it as good. But actually, when you drill into the stats, so they're saying that it's more accurate in errand resolution. So the AI involvement has led to a 25% drop in repeat inquiries. It's resolved errands in less than 2 minutes on average compared to a human, which is 11 minutes. And I mean, so it's taking over 700 human beings. They've got this in 23 markets. It's available 24/7. Of course, you know, the AI doesn't need to sleep and it's available in 35 different languages. So this news from Klarna, and they've said, Klarna have said, as a result of this successful rollout, our profits will go up by $40 million in 2024. So I think that's quite an interesting— I, I think the first major case where we've seen AI actually translate into real proper productivity gains within a firm, which is leading to much more margins going up and profits improving, and Ultimately, the best thing of all, the customer being more satisfied. So look, it's obviously still early days and Klarna, fine, an early adopter. You know, if one of your, if you're a consumer-facing business that's handling a lot of inbound from your customer, fine, this AI tool's spot on for you. I'm not saying all businesses have that business case. They don't. So, but still, it was interesting to see those numbers coming out of Klarna.

And then just going back to— I got one point on the bull case on valuations, and then another on something Bank of America said, who are also equally as bullish as GS. Okay, so one thing that the strategist at Goldman said was that this time is different. And whenever a sentence starts like that, it always makes me slightly nervous. It's like that famous saying in trading, right? this time's different. It's the time you get slapped around the chops by the market more often than not. But he said this time is different than other periods in history when stock prices have moved abruptly, typically beyond their value. So much in the context of now. He said that unlike prior such instances, the breadth of extreme valuations is far more contained this time. With the number of stocks trading at those types of multiples down sharply from that kind of COVID peak that we had in 2021. So do you think that plays into it as well?

I think that is true. So it's kind of, you're making the concentration argument, but in a positive way now, where you're basically saying it's just the Mag Seven that got crazy valuations. But the key point here is another, you've got to go one step further, and that is to say that Okay, yes, those 7 have, or not even the 7 now, we've said, like, let's talk about the 3. And so the argument is, well, are those 3 companies, are their valuations justified at these levels? And the big difference is, yes, the fundamentals straight up back it up. You know, we talked about, well, that example, Meta buying 350,000 H100 chips. For $14 billion, right? There's, there's real hard cash changing hands here. This isn't expectations, wild expectations of something happening in the future. It's, it's absolutely tangibly happening. So that's why it's a little bit different to the bubbles of the past and why the Goldman's camp is saying, look, don't bet against this yet. I mean, there's no evidence to suggest that this Nvidia-driven rally is going to stop yet.

Yeah, and then as I said, Bank of America, they also upped their target from 5,100 to 5,400, uh, this week. The main reason for that was that they said surprising margin resilience amid the dramatic step function change in rates and inflation. But the point I wanted to make was they said that while the target is being raised They warned the likelihood of a near-term pullback is high. And I think that's something that people miss when we throw around or you read about these year-end targets. They are year-end targets.

Yeah.

I think people get so confused, not maybe the professionals doing this day to day, but just your casual reader of finance thinking, right, is now a good time to invest or not? And, and then all of a sudden they invest and the market drops 5% and you're like, oh my goodness. But then actually staying invested, the market ends up at 6,000 at the end of the year. And so, um, just to be clear, I mean, I think the summary of what we're saying is the market probably is ripe for a pullback. Yeah, I think that would make some sense. Moreover, typical pre-election volatility heading into November I got a stat here. So the figure is that in the run-up to the election, the VIX typically increases 25 percentage points.

Right.

A big risk event. Basically, people position themselves for extraordinary bout of volatility forthcoming. But then post-election day, history would show us that it's generally positive. They remove the uncertainty and markets rally. So look, we are in March and there's still the best yet to come for the year. Um, so I think it's about not getting too blinded by, you know, because people always say to me, oh, this bank's terrible, we've already hit the year-end target, right? And you're— and I kind of think like, son, you better buckle up because we might end at 5,400 and we might be close to 5,400. But I can tell you what, we're, we're certainly not going to be a smooth level line till the end of the year, year end. So yeah, I just wanted to make that point crystal clear.

Exactly.

Um, all right, well look, let's move on. The other kind of talking points of the week, I mean, you can't really get away from it at the moment because, um, people are starting to— yeah, I caught someone, peered over their shoulder this morning on the commute in and, uh, he was checking on his Coinbase. How's that Bitcoin overnight while I was asleep? And, uh, Bitcoin hitting record highs. And perhaps we can kind of intertwine gold as well within this conversation.

Yeah, I mean, yeah, Bitcoin, crypto's back, baby. I mean, the Sam Bankman-Fried crisis, um, I mean, it's— everyone's forgotten about it, haven't they? That was only— what was that, only 6 months ago?

Yeah, probably less than that.

Maybe not even that, right? Um, but whatever. Yeah, Bitcoin. So it's made a new all-time high. I mean, that's the kind of, uh, like headline news, and it hit the all-time high yesterday. Okay, but I mean, this thing's lethal. Uh, crypto just generally, I mean, the volatility, that is not for the faint-hearted. It hit a new all-time high, $69,000. And $63, okay, just pipping the 2021 high, right? Do you want to know what happened next? It got slammed $10,000, um, it sold off down to $59,000. So just nicked the new high and then came off. I mean, that's like 8-9%, like bang. Um, however, uh, overnight, and while your, your mate on the tube was probably kind of relieved when looking at the chart this morning. It snapped back most of that. We're back up to like $67,000 now. So, so, um, I mean, this is a— it's a hell of a ride.

Another stat for you, just if that guy is listening, uh, I've got another bullish stat. Bitcoin's price has doubled in 18 days or less in 3 of the 4 times that it's hit a new all-time high. Okay, so 100K in two weeks.

Here we go, here we go, baby. Um, well, look, let's, let's just kind of break this down. There are some fundamentals driving this, dare I say it. Um, because that's been the big, the big skepticism within the financial industry around crypto generally is the fact that there's— it's very hard to kind of— because crypto hasn't been adopted as a currency, um, you know, full stop. I mean, certainly not in the mainstream, right? So it's like, well, it's hard to fundamentally assess it as an asset and as a kind of, you know, a holder of value and a, you know, a medium of payment. It's very hard to fundamentally assess it. However, there are two, two key fundamentals that are driving this. So there was a big event earlier this year where in the US the US regulator approved spot ETFs with two of the big guns. So Fidelity and BlackRock, who are two of the very, very biggest. I mean, they're both, I think they're, I think they're number one BlackRock and number three, I think Fidelity in terms of the world's biggest asset managers. They've both had Bitcoin ETFs approved. Okay. This was a major game changer. What's led What following that, and that was at the start of the year, we've had 5 weeks of strong inflows into these ETFs since the first day of trading began, and we've had about $7.5 billion worth of capital flowing in, mostly from institutional investors. This is basically given institutions a kind of safer way of accessing this asset. You don't have to go through the FTXs anymore, right? You got these crypto exchanges where there's a certain amount of risk around on their own. And so here now you can trade Bitcoin essentially through BlackRock. Okay, so it removes one of the big risks.

So like an ETF, is it, is it just institutional, or can a retail participant access an ETF? So, so is it— are we saying this is institutional inflow, or is it not?

I think that it's both, but the majority would be institutional of that $7.5 billion. But there's definitely consumer money there as well. Yeah, you can absolutely buy into this ETF through BlackRock if you want as an individual. Um, but I think for the first time, institutions, let's put it this way, have basically remained on the sidelines of this whole story, and this has given them a vehicle to say, well, okay, Fine. At least one of the big risks is eliminated. Maybe they're now thinking, well, okay, the Bitcoin story and crypto more broadly over the long term, maybe we can see it becoming something meaningful and being adopted. And so, right, this is a kind of vehicle where they can start to kind of get involved. Okay, that's number one, fundamental. Number two, um, is an event that's going to take place in April. It's the halving event. Okay. Now, the way this system works is basically every 210,000 blocks that get mined, we have a halving event, which basically means the reward to the miners for mining a block halves. All right. So the last time it halved was on the 11th of May, 2020, where it went from 12.5 bitcoins as the reward for a block being successfully mined. It, it dropped to 6.25, right? That was in May, 2020. In April, we're coming up to, again, another 210,000 blocks being mined. So the reward's gonna drop by half to 3.125 bitcoins. So the idea and the thought is that, well, if the reward halves, you're gonna get less mining. Less mining means less bitcoins. And so the supply factor here is helping to drive the price up. Okay. Just as an aside, every 210,000 blocks, right? The way it's set up at the moment and the way we're tracking, it's expected that the last halving event— there's going to be many, many more, but the last halving event will be in 2140, as in the year 2140.

Look forward to that.

When the maximum number of bitcoins Well, so the maximum number is capped at 21 million. I don't know if you knew that. So as soon as the number of bitcoins in circulation hits 21 million, stop. No more mining. That's it. So that's— we're on track to hit that in 2140. Anyway, this halving event in April, again, is another reason why for supply-side arguments, there's a bull case, and that's helping to drive Bitcoin up.

Yeah. Another interesting angle within this that I read was talking about the— this is a money opportunity for a revenue source for some of these financial institutions. And one thing was Bank of America, Wells Fargo's brokerage units, they've started offering these US-listed spot Bitcoin ETFs. These two, what they call wirehouses, I'd never really heard of that term, but a wirehouse is a full-service broker. Of any size, essentially. So these two would fit within that. But the way of which this actually works from a legally compliant way, which I didn't know this, was that they have to— they've approved the ETFs on an unsolicited basis. So I don't know what the case is for BlackRock or Fidelity, it could be different. But for these two, what that means is that financial advisors cannot suggest this product to their client. It must be that the client requests information about it for them to then present it. Now, this opens up then this idea that, uh, ETF firms are gonna have to spend a lot more money on marketing so that then the consumer sees it to then contact their financial advisor to request information, or in fact participate within the ETF. And What this then means is this isn't just marketing, because we're talking about crypto, which naturally a lot of these more, let's say, sophisticated investors are more skeptical. And so therefore you're going to have to spend more money on marketing because of the brand side of things that you need to pump, to kind of promote the product, given its association with risk. And I was looking at some of the numbers. That's a pretty painful reality from a business case point of view. Because actually, one of the things is that the majority of spot Bitcoin ETFs charge 0.3% or less in terms of the fees. So when you take out the marketing side of things, this could be a loss leader, which could be okay for BlackRock or Fidelity because it's so large, but some of these others may— maybe not. So yeah, I just thought that was, was quite interesting. And the interesting point what this means, so perhaps it does impact some of the big boys, is the, the fact that the spot Bitcoin ETF, having received through full kind of throttled approval, and that's made a net $8 billion or so taken the ETF since its launch. If you think about it, that is even more impressive because what you're saying is, is that a lot of people haven't even— a lot of these companies haven't just gone out there with a, with a army of advisors to push this product. A lot of this has actually been fairly passive and inflows have come from perhaps retail investors or self-directed financial advisors, which makes it even more bullish in that sense because they haven't been able to take the full— hasn't been completely a free-for-all as yet.

But in the short term, and it might not last, But the media's basically doing their marketing for them in a way, right? Certainly when that ETF got approved, I mean, that was big global headline news, front page FT kind of stuff. Now obviously when Bitcoin's hitting a new high, fine, there's a huge wave of media attention on that. But I guess your point is, and it's correct, you know, you can't rely on the media story and narrative being focused on Bitcoin for very long. And so yeah, they might have to then return back and rely on their own marketing initiatives. Yeah, that's interesting. I didn't realize.

But from a kind of traditional asset manager like Fidelity, I mean, I don't know, I can't speak for all, but I mean, if you're a young person, particularly in Britain, Gen Z, you're probably like, Fidelity's for my, like, my grandpa, right? And so perhaps you can run a loss leader program where you, you market, um, some of these products and you attract them in, but then you actually end up taking their pension and other long-term investments. And so you use it as a marketing vehicle rather than looking for a real source of revenue via the ETF, perhaps.

I like it. Now you're talking.

Yeah, yeah. Um, all right, all right. Well, look, gold. What's going on with gold? Because that also has, has squeezed higher as well.

Gold, new all-time highs. I mean, everything's new all-time highs, it seems, doesn't it? But it broke 2,000 It actually broke $2,000. It was actually end of last year, but it's been continuing to march, march north. Um, we're up above, we're actually trading at $2,126 now. So that's $2,126 per troy ounce is the, uh, unit that, uh, we use for gold. But, um, it's a bit funny because, well, hang on, stocks are all-time highs. Interest rates are really high. Both of those things are quite negative for the price of gold in theory, right? I.e., gold is a— one of its attributes is a safe haven. Well, hang on, people are bullish. Look at stocks. Why is gold so high with interest rates? Well, you— that just means you can earn a big yield on your cash now. Put it in your bank account, buy some short-term money market products, right? And you can earn 5%. The famous thing about gold, it doesn't pay you any, it yields zero. You buy a block of metal and that's it. It doesn't yield anything, right? It's a big negative for owning gold. So normally in a high interest rate environment, that's bad news for gold. And yet it's all-time highs. So why? So that I think there's a couple of really strong underlying drivers. That are probably a bit unusual, um, I would say, and have maybe gone a bit under the radar. So firstly, record buying by central banks, okay? So, and particularly in the emerging market space. Now this is a function and a bit of a side effect of, we believe, US sanctions against Russia way back, it feels like, when that, um, conflict began when Russia invaded Ukraine, the US started to implement sanctions, and one of their kind of— they weaponized the dollar, as it's being described, where they basically used— they blocked— well, firstly, they, they were blocking dollar-held reserves that were held in US financial institutions. They kind of sanctioned and ring-fenced They also used the international payment system SWIFT to try and make it difficult for Russian institutions and indeed the government to process transactions. All right. And they kind of called it weaponizing the dollar. So what a lot of emerging markets have said is, well, look, that's— I don't want to be vulnerable to that. So they've kind of taken their dollar reserves because a lot of them hold US dollar reserves and instead they've bought gold. It seems so. That's been quite a big driver that's been ongoing, right, for the last— obviously, as I said, since when the Russia— when Russia invaded Ukraine, you had a big pop, um, to the upside, and that seems to still be fueling it. The other thing is more recent, and that's Chinese consumers. There's been a really big demand coming through from them for two reasons, really. Number one, well, just broadly, their economy's in a bit of trouble, but the property market specifically is in huge trouble. So you've got some Chinese looking to switch out some of their property investments and, and put it in gold where it's safe. And also more broadly, the stock markets had a shocker in China. Um, you know, talk about all-time highs in most places, not in China. And so there's been a shift in an asset allocation switch to gold at a consumer level, it would seem. Um, so I'd say those are the, those seem to be the two fundamental drivers that have seen demand increase, which have really, um, outweighed the negative forces on gold, which is stocks all-time highs and positive sentiment and interest rates still really high.

And what I've got— if, um, if stocks were to see a 10% downturn, yeah, I mean, it's just a case of gold— gold's kind of pretty robust in all circumstances at the moment.

Uh, yeah, if gold can be at all-time highs now, I mean, yeah, just think what will happen if some of these, these kind of— yeah, if the sentiment shifts, if, I don't know, Nvidia comes out and suggests, hang on, demand is softening, or, you know, you get Powell saying that we're going to hike rates, although maybe that'll be negative for gold actually. Um, anyway, yeah, I mean, gold's outside of a, uh a hawkish pivot from the Fed. And Powell's talking this afternoon, so who knows? I mean, it's incredibly unlikely. Powell's message is going to be, guys, higher for— we're not, you know, we're going to stay at these levels. It's going to be more about be patient for rate cuts. Not— that'll be the message. Not, boy, we might start hiking, you know.

Yeah. Well, let's finish on, on those final points then. So Powell and this, this Super Tuesday in US politics. So let's continue with what you just said with Powell. So Do you think that Powell and the rest of his Board of Governors are aware of some of these— the mood at present? And so therefore what's required here is just a stable hand, really not too much movement from an official language perspective. This is just about a reassuring speech that he needs to deliver on this major platform today.

It's a tricky one because when you got this positive market sentiment. If stocks are going up, then a lot of the US— a big portion of the US public owns stocks, right? So if their asset values are increasing, then this can lead to positive consumer sentiment. We saw that on the consumer sentiment data. It can lead to more consumption because people feel wealthier. Which leads to more inflation, which then leads to, well, hang on, we might need to raise rates again. Right? So he's got to tread this fine line. He's got to basically say, we're not going to cut rates as quickly as you want and hope that that's enough to cool off this sentiment scenario. If sentiment isn't dampened by that message, and it hasn't been yet, It can't go on much longer. And if sentiment continues to stay super positive, in the end, Powell is going to have to go one more step down the hawkish side and say, well, look, we might entertain another hike. And I think if that were to happen at any point in the coming months, then that would be a moment where you're going to get a pullback in markets where they think, okay, actually, the Fed may well hike further, but I can't see that happening yet. And so I'd say today it's more about more of the same from Powell. Rate cuts are coming, but not until the second half of the year.

Okay. And then the summary of Super Tuesday, Joe Biden, Donald Trump election. Okay. Good night. See you later.

Yeah.

Um, so yeah, just for, as I said at the top of the show, for any of the, the Brits who are listening and not so familiar with this, very quick kind of skinny of what, what this is. So millions of U.S. voters went to the polls for the primaries in 15— 1-5— 15 states, uh, indicated that Americans will likely face a basically a rematch between, uh, the unsurprisingly Donald Trump and President Biden. So the background is these primaries do not ultimately decide on who will become president or even directly pick candidates for the election in November. Instead, they simply award delegates who will vote for the winning candidate at each party's nominating convention this summer. So yeah, the November election is almost certain to be a rematch at this point between Biden and Trump. Uh, and as per usual, and we will talk about this, I'm sure, in the months leading up, uh, it's not about all of these states Again, it's very much a focus on swing states and 6 in particular, which we will talk about in future episodes, I'm sure. So yeah, nothing's really changed a great deal, I would say, from what we all thought and think the battle will be in the coming months.

Yeah, I mean, last night he smashed Nikki Haley, who's the rival for the Republican candidacy, the only rival left. Absolutely smashed her across all 50. Well, she got close in Vermont where the vote was 49.9%. Oh no, sorry, she won Vermont. Apologies.

Yeah.

She won 49.9% versus Trump's 45.9%. But basically most of the states, Trump was like 70, if not 80% of the vote, absolutely destroying her. So yeah, Trump will be up against Biden. And I'm sorry, I said it, I said it, I don't know, 2 months ago. I said it a month ago. I'm going to carry on saying it. This will be the most, the least interesting election of my lifetime in the US. Donald Trump will not only smash Nikki Haley, Biden can't compete with Trump. It's too old. There's too many problems. Trump will smash Biden. It'll be the most one-sided election in decades.

Wow. I've got to strap— I, I, I need to take that 10 seconds. That's going to be like the, uh, the TikTok of this podcast. All right, with that bombshell, yep, that is the end of the episode. Thank you very much. As I said, we started with the bull-bear case for stocks. Talking about JP the Bear and GS the Bull. Let us know what you think. I'll drop a poll on the podcast episode. This is specifically if you're listening on Spotify, or just leave a comment or a review and let us know what you think. We'd love to hear from you. All right, Piers, thanks very much, and thanks everyone. See you next week.

Cheers, Ant. See you later.