You Can't Control Westminster, But You Can Control This

So important date coming up, 25th of October. Um, that is going to be the budget. And I think, you know, it's super relevant to be discussing these things in the current context because of where I guess the UK economy is right now. You know, yields are ticking higher for various reasons. I'll touch on those in a little bit. And we've got a massive tax burden. Again, going to touch on that. Um, and there are a lot of, I guess, disincentives that are geared towards unproductive activity. Um, and so this is why I'm, I'm talking about it being a mess, because that is the true mess. And we— or I don't live in the UK anymore, so you guys probably just want to be able to hedge that political and economic instability, if you consider it to be so. And so that's really what this is going to be about today. Um, we're going to be discussing the backdrop and then how we can actually, you know, see some positivity from this situation because we're actually controlling things that we can control, um, and not just letting political and economic winds dictate everything. So Start off with this. Britain has 3 ways out of this mess. Your money has a 4th. But also why the US keeps winning. And there's a little hint there— who gets paid in shares and equity, which is what we'll come on to, um, towards the end of this. But firstly, we used to get richer, not anymore. So this is a super interesting chart. Because before 2007, 2008, we had a growth over the previous— let's call it 20-odd years, 22 years— of 2.5% per year, roughly, a real GDP growth. Okay. Since 2019, we have seen 0.3% per year in real GDP growth. What has changed? Well, naturally, if we're looking at a GDP per capita measure, immigration is going to be a huge, huge topic there. Um, but also we've seen a rapid decline in productivity, and that is major. And it's interesting because just yesterday, um, I saw a, a post from someone that referred to teenagers swapping benefits. For therapy. And if you look at that from an economic context, it truly shows how little a lot of commentators understand this problem, because the problem isn't these Band-Aids or plasters over, you know, a wound. The problem is the inherent incentives or disincentives pervasive throughout the economy. And this is really what the government has to truly get a grip of if they really want this number here, that 0.3% per head GDP growth, to start increasing. And there are various backdrops to this, but I really want to show you this video that is super recent actually. Um, it's of Jensen Huang in London, um, and he's speaking— I think it might have been last night, but have a watch of this.

There's a strange General behavior in the UK. First of all, from the outside looking in, you're— you have superpowers and intellect. You have superpowers and some of the best universities in the world. You have superpowers and just a great culture. Nobody in the world could drink on the streets than you can. And so the fact of the matter is you have smart people, you have a great culture, you have young people. And the energy is vibrant. But for some reason, if there was a million ways to win, you find the one reason not to do it. And that's— and I think you overthink things. You know, there's a phrase at NVIDIA, I make my company dumb. Don't overthink things. Take a step forward. And that step will lead to another step. Believe in yourself. I even believe in you guys. That's the reason why I invested $10 billion here.

So I think that's pretty powerful. What do you think? Does anyone have a comment on that? It'd be interesting to get your take.

Really interesting. Probably quite true as well, isn't it? It's just that evasive. I think I see you talk about it a lot on X about how just the— it's in the nature and the culture of the UK to not invest and really find these safe haven investments and not pick individual stocks. And I think it's all related in a way.

Yeah, that's exactly the link that I was going to make as well. You know, when he said about the, uh, million ways to do something, you'll, you'll try and find a reason not to. It's exactly the same kind of thought process that we see with a lot of the guys that, uh, and girls that we speak with before they join Think, for instance. You know, they will have had various different preconceptions as to what, say, the stock market is and always find a reason not to invest or not to uh, you know, run a strong portfolio or something. But on a broader perspective, what that means for the UK economy is lack of risk-taking generally. Um, and one of the biggest problems— and, and I ran a load of data on this the other day, I made a chart— one of the biggest problems with the UK isn't necessarily that things cost more when they're built. It is that— excuse me— it's that all of the decision-making leading up to it creates bigger costs. So all of those consultants, all of those deliberations, all of those delays itself to a longer term, longer and bigger cost over time for things like, you know, making Hinkley Point, for instance, um, HS2. It's all the same kind of cultural problem, just on different magnitudes. So you've kind of got like the macro level big broad, then the micro level, and then the individual level. And I think this is truly something that we have to get over. So he's saying, look, just make a decision. That's basically what he is saying at the end of the day. Um, decide to do something and follow it through as soon as you can. Um, and, and I believe the politicians are obviously the, the ones creating these problems, um, mainly because they are playing a different game to business a different game to the individual. They're trying to win over voters when businesses are trying to make more money, and, um, individuals are again trying to make more money but also have a sense of security. And so when you don't have that longer-term perspective on an economy, you're gonna run into trouble when it's purely down to how you can win the swing voters. So I think that's a true problem, and someone just needs to have excuse my crudeness, the, the balls to actually just say, no, we're doing it this way and you guys don't get a say. So here's some of the political insanity in 3 numbers. 10-year gilt is higher. There is a premium, uh, applied to UK, uh, debt costs basically, uh, for a few different reasons. There's something called the term premium. Uh, don't necessarily need to get into that. today. Um, a lot of people like to consider this premium as being the moron premium, which stems from Truss. Um, but in actuality, it's the structure of how the Bank of England have bought bonds over the last, especially 5 years, COVID, um, and how they sell them. That, I believe, is the true differentiator. And you can understand that difference because the Bank of England and Treasury the only ones to have this relationship. So let me explain the relationship. The Treasury has an insurance policy whereby if the Bank of England makes a loss on its bond portfolio, the Treasury, i.e., taxpayer, will pay for that. The Bank of England has to pay commercial banks in terms of being primary dealers who hold these gilts. And so effectively, there is a transfer from the taxpayer to the commercial bank. Now, the Reform Party mentioned this QE on— sorry, this interest on reserves, but they didn't go far enough to explain the relationship. If you were indeed to get rid of paying the interest on those reserves, you would have no liquidity. So their idea of it is completely wrong. The real problem is that indemnity. Again, we come back to the word incentives. Because what it does is it incentivizes the Bank of England to sell bonds to lower their balance sheet at whatever price. You know, I'm long— if you, you may have seen some of the stuff that we've been putting out— I'm long a bond called the TG61. It's down a good 70-75%. I wasn't looking to make money off of it. I was buying it purely to be able to give myself skin in the game, to be able to talk about all of this stuff. Um, so that's a really big issue. Now, the other problem with that is 41.9% of GDP is taken in tax. That's insane, especially when you consider the fact that the interest on debt is having to be paid off by a lot of that tax take. So that doesn't leave much room to do nearly anything. And especially when you have such a pervasive— and we're going to get onto this, uh, in a little bit— a pervasive welfare segment. And what I'm not saying is that people shouldn't, uh, have, you know, welfare if they're validly disabled or, you know, if they're pensioners or whatever. What I am saying, it has to be far more decisive and far more selective. if we want that GDP per head number to go up. Um, what we noted with the teenagers who are out of work is that if you are from a young age permitting them to just rely on the state, you're effectively providing them with universal basic income from a very, very young age, which makes them dependent, which makes them not have any ambition, which makes them have really low self-esteem, actually. And then there's questions as to why teenagers and young people have anxiety, depression, and then other people say, oh, they're making it up. Well, no, it's actually the way in which the economy incentivizes them to have a sense of purpose. And I think that is one of the biggest things that many people miss is actually without a sense of purpose, whether it is work or whether it is something else or whether it is just a sense of having security, which this current economy doesn't provide to a lot of British people, um, it's— there's no social cohesion. The social cohesion will eventually evaporate, and that idea of true kind of community togetherness will not exist because so many people will feel so isolated. So it's a much broader issue than just talking about the economy with these things. If we focus on the incentive side of things, we focus on actual human behavior. rather than just stupid numbers. Okay. I think something else that Huang alluded to as well was the energy situation. So this was in his broader keynote speech, not standing there, you know, and he had said that UK industrial energy prices are the highest in the world, which is absolutely true. Obviously it gyrates and, you know, has different, different numbers at certain times. Sometimes it'd be lower, sometimes it'd be highest. But generally over the last 3 to 5 years, the UK has had the highest industrial energy prices in the world, which is why, you know, people like Jim Ratcliffe, they're looking to move away from the UK. It's probably why Dyson did a fairly long time ago. He moved out to, I believe, was it Malaysia or maybe Indonesia to make all the vacuum cleaners? But he moved over to that, that part of the world. And if we look at this last segment here, there's £94. Okay, so the energy price cap is what this is related to, and the energy price cap allows basically the industry to recoup, uh, losses. That's pretty much what it does. It's not there to protect the consumer, um, and it's not there to protect industry because there is no price cap for industry or businesses. And so Just from the failures of, you know, the firms over COVID, the energy firms over COVID. And by the way, they failed because they couldn't trade energy as well as the other larger energy companies. Many people think that utilities providers make a load of money from actually providing energy. They don't. The cap actually is capped at 3.5% of their profits on the consumer. So British Gas, for instance, makes about 100 quid per year from providing energy to the consumer. It's crazy. Most of their profits are derived from trading, literally from, you know, making money from buying and selling and hedging and all of those kind of things. But the price cap increases the cost on the consumer. Why? Because they build in a lot of the debt from COVID Into there. They build in a lot of the failures from COVID They build in grid upgrades. They build in, you know, renewable energy, which is, I think, fantastic. But different forms and different structures need to be created for renewable energy in the UK to actually proliferate, such as battery systems, which is going to be a huge build-out that I don't think the government recognizes how big it needs to be, especially when the grid isn't upgraded properly. And so this price cap actually creates a real negative on the consumer year on year, especially when energy prices are naturally rising, because it doesn't cap them. It doesn't act as a cap. It acts as a protector for the industry. And that is one massive problem. But the big issue there is none of this is in your control. There are various different things at play there of which you have zero voting power over. For instance, you don't have voting power of the Bank of England. Seemingly you don't have voting power over the current politicians because they all keep doing the same things. And you almost certainly don't have voting power over the price cap because I guess it is a— now a kind of legislative body that imposes it. And so there has to be a way to provide some ideation of how you can I guess go with the flow on these things where you can be upset about it, but still, because you're hedged maybe in a portfolio, you don't feel too shitty. Okay, let's go on. Now I want to go back to talking about the budget because I think there's 4 ways it can go, um, 4 ways it can go with one having like a 0.1% chance, which is this one.

Absolutely.

But I think we need to discuss the budget in terms of, okay, how might you be thinking about it going into it? What are some of the key points? So let's start with the best case. Okay, the best case would be around 5% or below by the end of 2027. That would be fantastic. Per head growth increases to 1 to 1.5% per year, which I think is tricky, but we've had good growth numbers just, uh, just, just today or yesterday, was it? I can't remember now, mine's mashed. Um, and the, the triggers for that would be the fiscal rules being kept, headroom at £20 billion plus, and defense funded credibly, as we know that they've wanted to increase defense spending, um, probably to keep the US kind of happy as well. Um, but naturally there are genuine potential threats. If you've got Russia, Iran, you know, all of these kind of threats, it is very, very good for the UK to increase defense spending. And just going back a tiny bit, an anecdote here. Very interestingly, the UK has created one of the greatest nuclear submarines ever. It costs about £1.5 billion to build, and it was released a good 4 weeks ago. Have you heard about it? Probably not, unless you're, you know, looking at defense and companies and things like that. Defense is one of the UK's strongest sectors. Naturally, it's gonna be a difficult one to, to talk about, um, as kind of a good thing. You know, at the end of the day, it's how do you kill people, right? Or at least deter other nations. But there needs to be more shouted about the UK's defense sector because, as, uh, Huang said, He mentioned the strength of UK workers. Our human capital is fantastic, and that needs to be applauded. And so that human capital needs to be incentivized, and I guess unlocked is probably a really good word, to go and innovate and do all of these things. And the only hampering things is what are they actually incentivized to do? Are they incentivized to grow a company? Not necessarily. Are they incentivized to Move over to the US, perhaps. Our base case though is 5.3 to 5.4% by the end of 2027. Now, why do we say this? Well, I still think yields soften from here generally globally, but I still think there's going to be that premium applied to UK debt. So we might see, you know, the US at 5.1 or 5 as an average of maybe the last 2 quarters. of 2027. Um, and the reason, by the way, why I'm mentioning 2027 is the feed-through effects of fiscal policy and monetary policy are very, very long. So sometimes a rate hike— I know that's monetary policy— but a rate hike might actually only be felt in 2, 3 years. There's a study on it, um, and they, they found that the duration is really, really long. Um, fiscal policy might be sooner depending on the tax that is imposed. You know, VAT increases, for instance, if you're paying it quarterly, that can have an effect. But what we'd find and what the issue for yourself would be is that mortgages stay quite painful at this level, whereas with the best case, they ease and you can see that trajectory coming down. Here they're staying kind of flat, so your costs are higher for a little bit longer. The triggers for this base case would be tax or cuts funding everything. I think they might achieve it. I think they've recognized the extent to which the, uh, welfare segment is really, really all over the place. Triple lock easing a little bit. Obviously it might become a double lock. Um, believe that does need to happen. At least they're moving in the right direction. Whether it actually happens or not is a different story, but we're just thinking 2 weeks ahead here. We're not thinking too far ahead because so many things can change. Um, and the headroom as well is to be below £24 billion. That would be perfect. And the reason I'm saying this is because the bond market does want to see some credibility, and the bond market has been allowed by George Osborne when he created the OBR in 2012 or 2011, um, to rely on them for a good reading as to what the price of debt should be. Personally, I think the OBR should be gotten rid of. Their estimates are so, so shocking, so, so poor, um, and again, it's a hampering on the government. It allows the government to renege, uh, renege responsibility over to somebody that was created 14 years ago. Doesn't make sense in my head. Um, but then if we go to the worst-case scenario, 6% roughly on the 10-year mortgages and debt interest rise again upward trajectory there, we see stagnation in growth and a mild 2027 recession. Triggers could be gimmicks and more tax— gimmicks, you know, uh, in terms of just kind of flitting around the edges, not doing anything too decisive. If that defense segment is unfunded, big, big issue, um, and the Bank of England will be forced to, you know, do 3 to 4 rate hikes Purely because the UK is not in the same situation as the US where we're seeing, um, the long end of the yield curve be crowded out by hyperscaler debt. So Google, Amazon, um, you know, Meta, all of these guys are issuing debt at the same credit rating basically as the US government. So people are preferring that debt because it's slightly higher yielding, meaning fewer people are buying the long end of the yield curve on US Treasury debt. But naturally, the US, um, long end is more sensitive to interest rates anyway. Now, the perfect scenario in our Think policy manual, manifesto, whatever you want to call it, is a pro-growth scenario— 4.8% to 5% on the 10-year gilt end in 2027, which means, uh, lower tax, more jobs, and cheaper loans. Growth per head is 1.5% to 2% a year. Triggers: employer national insurance cut for new hires and probably everyone, uh, no stamp duty on shares— again, increase that incentive on buying UK shares. It is insane that you get taxed 0.5% when you buy a UK share but zero when you buy a US share. Um, and fixing the £100K tax trap. And hand in hand with that, by the way, is fixing the Universal Credit. uh, tax trap where if you increase your hours to roughly 20 hours per week, you then enter the, um, personal allowance threshold whereby you're taxed more and your marginal rate goes up. It just disincentivizes work straight away. I have zero issue with people not wanting to work more hours on zero— on, uh, Universal Credit purely because the incentive for them to not work has been set up by the government. It's not them, it's the government. If you would look at the incentives changing, we would stop having these bogeymen all the time, um, whether it's the rich, Universal Credit claimants, you know, uh, disability claimants who are valid, of course, big point there. Um, we need to change the incentives so we stop fighting each other over who's the big bad wolf. Um, I would also stress this one as being the most important. We borrow only to invest. We do not borrow to cover day-to-day spending. That is insane because day-to-day spending tends to be difficult to measure in terms of productivity. It does tend to mean that you're going to have to be on an unsustainable path of that debt expansion. And you're not— you're forgoing the opportunity to build infrastructure, which does create jobs, which creates innovation. Um, you know, if we, if we look at the recent data that came out, the UK spent £1 trillion more on benefits than it has on infrastructure. Absolutely bonkers. So how would we pay for this? Via disability and pension reform. And I think what people might be believing I'm saying here is that it's just about the numbers. No, with disability especially, it is about empowering people to not be reliant on the state. It is about unlocking a lot of capital that can then be put into actually creating an economy which allows more jobs for those people. It's not to raise more money or just simply cut spending. It is to change those incentives. That is what needs to be the focus going through the UK for the next 10 to 20 years, is how do we alter people's perception of what to do in the economy. Um, there was one more thing that I was going to say there, but does anyone have any more questions? I think I've ranted for a long time there. I know there's some chatter in the chat. Let me have a look. Treating properties like a credit card is partially why we're here again. Absolutely, Chris. And also, I'd say a lot of people are in negative equity now, or maybe not negative equity, but, you know, they've seen their property prices decline on a, on a path that they didn't expect. If you look at London property prices in terms of apartments and flats They are hammered. There are some people though. There was the who was it? There was a guy that sold his property that over overlooked Regent's Park just recently, literally in the last week or so. He bought it ten years ago. He sold it for half the price, half the price—a mansion overlooking Regent's Park. So a lot of people have invested their time and you know. Money. And although that a lot of them say, you know, we're, we're not looking at this as an investment, in the back of their head they are, because they had the perception that the, you know, the path of the price increase would be consistent. Just hasn't been. And so I think a lot of wealth is getting lost there. I mean, Taylor Wimpey as well has left the London market to build. Taylor Wimpey has said we're not building in London anymore because it isn't economically viable. And then people wonder why they build crappy houses. Well, if they built really good houses, they wouldn't make any money and there wouldn't be a property building company. So again, that word incentives— if there's one thing you can take away from this call today, it's just the word incentives. So why does it feel so personal? Why does it feel like it's just so aggravating listening to all of this stuff? Um, it is quite literally because of what's been mentioned. They are decimating growth. You know, we don't need to run through all of these again, um, but this is the key fact, is that we are looking at a real decline in growth. Okay. Be excited. Um, I don't know if anyone's been following me since I started the Asylum Seeker, um, basket. Sorry, let me just, uh, read Martin's message. Um, seen videos of London estate agents, property was actually marked to market, would cascade the supply. being held off market for asking. Martin, you are a man of my own heart. Um, I've said exactly this. If, if people had indeed seen their housing mark to market, they wouldn't be so keen to invest in it. It's because they get one valuation, then they get a valuation whenever they go to sell, and they don't have to look at the daily gyrations. Just like with the stock market, you know, sometimes you might open your platform and you might see, oh God, I'm down 1% today. You would absolutely see that in the housing market if it were able to be marked to market. And people would not want to invest in it because they'd be like, oh God, my property's down today 5%. So it's, yeah, it's an interesting kind of psychological dynamic. It's also getting into markets again. It's also why I always say that Leo Aschenbrenner, who runs the Situational Awareness Fund, is a private markets investor and not a public markets investor, because he can run these super cool theses in private markets because the valuation doesn't change unless you get a new round or something like this. Whereas in public markets, it is punitive if the market spots something, and there's various different variables that go into, you know, the value of a listed company. It might even just be a market mechanics thing. You will get punished, and he wasn't used to getting punished. He was used to having his thesis and seeing a new round come in, and that's not how listed markets work. But that was a great point. So yeah, I don't know if anyone remembers or has seen my sort of tongue-in-cheek asylum seeker basket, but it's a super good performer. It's basically made up of Serco, Mears Group, and Mighty. These are three of the largest listed contractors. who have different roles in the asylum seeker chain, if you like. So for instance, Mears does a lot of the housing for councils, a lot of the HMOs that house asylum seekers. Again, it's a tongue-in-cheek thing, but it's one to pay attention to in terms of how you can ideate alongside all this. And then you've got Mighty, who does the immigration removal centres. Um, and then you've also got Serco, which does a bit of everything, to be honest. They even do food and stuff for, uh, for hotels and that kind of thing. But it's super important to understand that there is a way to view all of these themes, these negative themes, and then apply an investing process to it. Um, that is underpinned by a strong system as well in terms of your entire portfolio, right? I ran this one the other day because I wanted to get a new slant. I wanted to get a new slant on how to make people happier from a bit of a policy decline in the UK. And I found that Vertu Motors, which is listed on the London Stock Exchange, is the largest motability provider in the UK. And so your process from this kind of thematic view is to ask yourself, do I think that the government is going to be capable enough to stop this influx? Is it actually possible to— for them to do that at this stage? If the answer leans on no, I don't think it's possible, you can buy the listed company that is most likely to benefit from that thing, from that influx. And yes, there's different considerations. How much do you put into it? you know, how do you risk manage it? How do you actually get out at the end? Um, which we will come on to in a little bit. But this is the way to think of things, is to be positive in a way that when you spot something negative and everyone is moaning about it, try and hedge that moaning. That's what I do. I try and hedge the moaning, um, because it then allows me to be a little bit, I guess, firstly less upset about it. But secondly, whenever you see something super emotive, it tends to mean that there's a good investment idea there because it will be contrarian. At the end of the day, if there is such a big furor over something, it probably hints at there being demand. And so you've got to piece together, okay, where is that demand most sensitive to a company's revenue? Then you can build that connection between, okay, this is a shit policy, How can I benefit? Does that make sense? Anyone have any questions about that? I wish I had long Serco in 2020. I was privy to how much their COVID infrastructure contracts were inflated. It depends how you, I guess, obtained that privy or private information. You do have to be very careful. They're very, very hot on anyone who has any kind of connection to the data like that, and they will— you can go to jail for 7 years for insider trading because that's what it would be counted as. But if you were smart about it, you'd probably get away with it. Just don't buy at the very bottom. Or when something's announced, maybe a couple of days later. But yeah, look, I mean, it's interesting. So I do a lot in the sovereign infrastructure space now as well, and we're talking to the UK government about nuclear. And you'd have thought that the civil servants are the problem. They're actually not the problem. They're the ones writing the policy and wanting to, um, actually get things done. The problems arise that, that we found is actually with the private sector that comes in, the white-collar private sector, the consultants, the lawyers, um, the surveyors. They're the ones that create these issues. So it's actually not the civil servants, funnily enough, which actually opened my eyes to a lot in terms of who to blame. And it's why I've softened probably more recently actually, um, on that kind of shadow government type thing which the civil service could be considered to be. Um, there's obviously a lot of, you know, unproductivity and a lot of things that go on, but when it comes to wanting to build, there is the desire. It's just I, I feel like they just get overwhelmed, to be honest with you. They need to get investing to get that edge. get that decisive edge. Personally, I think that's the best. And get them off of their super lovely pension schemes as well, because that just gives them complete security and they feel like, oh, I don't really need to. Whereas if it were market-linked, even better. Are we all clear on this, uh, this ideation perspective though? You don't have to succumb to crappy UK policy. You can just, you know, find out the actual, um, link between bad policy and good investment. Perfect. So at the start, I mentioned about why the incentive to invest in the US is so much greater. And one of the things that we teach in Finco S, which was— it used to be the Academy. In the first segment is this understanding of why capital is preferred in certain places versus other places. And the biggest thing that no one ever talks about is the extent to which US boards are paid in the equity of the companies that they, um, work at. Okay, so their salary might be Let's call it a million, but their actual pay might be something like this: 17.2. Now we can use the example of Dario, Dario Amodei of Anthropic, because his only came out just a couple of days ago. So he only takes 1.5 million. I say only, okay? That's really ridiculous. But you know, you know what I mean. He only takes 1.5, but his total comp is 22 million per year. And it's because there is a massive preference for equity. Now, what does creating that incentive do, especially for shareholders? Well, it creates an upward drift in the equity market straight away, because these execs who have inside information— effectively, they're running the company on their companies— they have all of the info to decide, okay, what is the perfect next step? And so it's something that I put out the other day as well on X. Um, it was with regards to Caterpillar because Caterpillar had traded down. It's my favorite stock, but it traded down a little bit more recently. Um, and I said to someone, do you actually think the executives are sitting there right now thinking, oh my God, you know, our stock's down a little bit, what do we do? It's down in the last week, this is terrible? No, they're continuing with the job that they know because they know that they have a completely different job to do. which is simply to increase the profitability, maintain margins, and create new products and innovate. That is all they do all day. They're not there sitting, oh my God, what is the share price doing today? And I think for a lot of investors, they need to transfer their baseline thinking into this way of thinking is, how do I think as a businessman that is sitting on these boards? Because of this, because of the fact that you want to be more like an exec, who understands the business, and then follow it through with your framework because you're not inside the business. Does that make sense? But the US is the preferred destination for capital, in my opinion, purely due to this incentive structure. If we take percentage differences between the UK and the US, the average UK CEO receive 0.05% of their compensation in equity that's listed, you know, in the, in the entire FTSE. Guess what it is in the US? Anyone want to put a guess in? Well, I'll just tell you. 25 is very, very punchy. It's about 1% of the entire float of outstanding shares. So it's what, 20 times more? They are 20 times more incentivized, if you want to put it into those terms, to increase the share price in the UK. of FTSE-listed CEOs. And then we wonder why exactly, you know, the US market does so well. Well, there's various reasons, but at a base level, that is a very good structural reason to understand that step up almost year after year in US equity prices versus the rest of the world. We're not just talking about just the UK here. Europe's the same. They don't get much equity in comparison to the US. And so it all, everything is just an incentive-based system. What I want you guys to do now is, um, there's a link here that I've got and I'm just gonna switch over here. I've mentioned systemization quite a lot there and how, you know, you're not an exec at these firms and so you don't necessarily have that complete understanding of each individual business, but you might want to be able to run a portfolio. You might want to be able to run those UK ideas, um, in a certain way. But it's fine having the idea or understanding of a theme, but being able to action it over a year, 2, 3 years as a position is a different story because sometimes it might drop 20%, for instance. So it— for those of you that invest, I want you to go to this link here and do it now because we can talk about it live on this call. And it's literally 11 questions. It's just you click, okay? And what it will ask you, for instance, in the first one is think about your last 3 buyers. Where did they come from? And then you just answer according to what you do. We'll probably give it like a minute or 2 just to get through that. It'd be really good if you could do it. Then you'll be asked to enter your email at the end as well to get your report. But I want to see 1 or 2 just so we can go live on this call. Anthony's done first. Perfect. Here we go. Okay. Anthony, you've got 6 to 15 holdings. You run your own research after a company's caught your eye in the news or on X. You put the best of them on your watch list and read up. You finish your research and are happy with the valuation in terms of what gets you to press buy. Okay, how do you decide what much goes in? Rule of thumb based on size of the account. Interesting. Take some profit off the table and let the rest run. I'd sell the story change. I'll know it when I see it. Okay, interesting. Anthony, thank you for being the first to fill that out. So, um, I want to focus just on, on, on this one first. Pick your biggest holding. Do you know, uh, do you know what would make you sell it? Anthony answered, I'd sell if the story behind it changed. I'd know it when I see it. Could you give me a perfect example recently of when you've done this? Um,

Let me just check my account. Hang on.

No worries.

Oh, um, I know it's not a perfect strategy, so I'm not, I'm not saying that. I won't argue that. I think the one that I've probably changed a little bit on recently is the whole trend around space and SpaceX, Rocket Labs, ASTS. I just, it was maybe more of a long-term player that I've been looking into and thinking about, but after kind of going back and forth with AI, it just seems like a lot of the stocks in that space are speculative and they're not actually in a profitable space yet. And there's really no guarantee on when they become profitable. And I think it was maybe more of a trendy sentiment. Um, so for me, I just wanted to step back from that and maybe invest in things that are a bit more tangible, and there's actually a future that can be seen, I guess.

Sure. So I guess if we were looking at trying to, uh, systemize this idea, um, we would be saying, look, we're looking at stocks that they can still be relatively speculative, but the revenues are probably going to be made, or at least, you know, start being, uh, start being made in terms of commercialization sense in the next year or 2 years with a clear path to that revenue. You can actually, you know, build the right structures to identify that. And what we don't want Uh, companies necessarily that have, you know, revenues 5, 7, 10 years off. Is that about right?

Yeah, definitely.

Okay, cool. That's a really good way of thinking about it. Um, interesting though, because you can still have space as part of your portfolio. A lot of it, as you can see by these 5 different layers, a lot of it then depends on size, because if you know that it's speculative, you can size it accordingly. Okay, so it doesn't necessarily mean you need to discard it. It just means that you need to identify and have intent first about what you're looking for. If we were to take like the Virtu Motors example, for instance, I would argue you would need a separate system to identify when to sell that, which isn't based on motability numbers decreasing. The reason why is the market looks forward, the market prices forward. And so you're going to need a systemized way of actually getting out of the market that isn't necessarily reliant on just a story. I think that's something just to have a, have a think about. Um, I also wanted to touch on this question, Anthony. Um, you've, uh, sorry, where was it? That's it. How do you decide how much goes into a new position? Because this is related to that sizing element as well on the space side of things. A rule of thumb based on the size of the account, I mostly stick to it. What does that rule of thumb look like?

I guess I don't have like a solid system for this. So I usually deposit monthly after I get paid and I'll look at a few things. I'll look at where each of the stocks in my portfolio are in the market. So, you know, if it's had like a really good week, I'm going to probably not look to put too much in, just in case of a pullback. And I guess if there's new news that's come out during the month and it's made me feel a bit more bullish about something, then I would maybe look at putting money into that position. But in terms of sizing, I just don't want to have too much weight in any one stock. So I try and spread it out. between the stocks. And if it's not the right time to invest, then maybe I'd wait a few days and see if things evolve. But, uh, yeah, definitely don't have like a solid system for that.

Okay, cool. So it sounds to me like understanding perhaps when the right time to invest could be quite important to you, maybe. Okay, that's interesting. Um, no, thank you for sharing that. I think, um, it's worth jumping on a one-to-one call with me. I'm going to drop the link at the end of this anyway for everyone to book in, um, so we can go through, through things a little bit more and obviously not, not as in public. Um, Martin, I just wanted to run through a couple of yours because I've got yours, um, up here now. I would be interested to, um, understand more on this one. Um, you've just had a big win and there's a new idea you feel really strongly about. How much goes in? I like it. Don't get me wrong. A proper position. Ideas this good don't come along often, so I'd rather back it. What does that look like? What's the process that goes through your head? And also, are you patient before you jump into that proper position? I guess all I'm looking to understand here is the extent to which you're more like the US investors than the British investors.

Well, if if I had a position and it came to the story changed or I hit my take profit or trailing stop and something came along, if I feel the same thing about it, I don't think oh I've just made some money. I just consider it a compounding mechanism, and that's why I'll tend to look for the next opportunity. It might be there's none, and I just wait, and there's nothing there, or there's something that comes along, and that's the next trade because I've obviously got opportunity cost of your capital. You've sold from one, so you're moving over to something else, and you want to. compound it. And sometimes there's nothing there and you just be patient. And other times something comes along and I'll just go for it. And I think it's a good idea.

Yeah, I got you. Um, I've just seen that you've got over 30 holdings. How come?

It's just things I've probably accumulated, things over the years. Um, I have a boring portfolio, which is stuff that I have for kind of— I just call it base currency investments. And they're things I help my family out with. And then I have kind of equities and other, like, a trading portfolio as well. So that's what I kind of do. I have 3 buckets.

Yeah, no, that's, that's fair enough. Sounds like you've got that process sorted out. Um, it's interesting, I was chatting with a doctor the other day, um, who's a client of ours, and he had 40 holdings in one portfolio. And he was saying to me how he would, um, literally when he's not with a patient, he would just be looking at market news. And I was like, the reason you're looking at market news all the time is because you have 40 bloody holdings. That's the only reason. You're looking at R&Ns, you're looking at, you know, every single little tick up because your brain is just completely discombobulated across so many different companies. Um, we tend to look at only 8 to 12. Like, that's the— 12 is probably the max amount of positions we'd hold. Um, and it's interesting you spoke about boring portfolio because I have a super boring portfolio. which is— I love anyway. And it's this one. Let me see if I can pull it up quickly. It's on my Twitter. Sorry, bear with me. Here it is. So that idea of boring portfolio is definitely important. And the whole point of this is that you want a low beta portfolio that compounds over 30 or 40 years. that is focused on natural monopolies because you cannot get rid of natural monopolies. These are all grid companies, for instance, which I would consider a natural monopoly outside of the US where they are all very different. In Europe, they tend to be more centered. Apart from obviously the regulated water companies and stuff, but all of these are grids and gas. Really trying to understand that, look, I'm probably going to be able to outperform at a lower volatility, um, and also have obviously less drawdown as well if I'm just looking just to hold that over a very long term. And, you know, sort of basically, um, okay, no, that was really, really good insight. What's your favorite company right now, Martin, just out of interest?

Um, in terms of A company that I like. Well, the position that I, I've just re-entered it. I sold it last year. It's um, there's a nickel company in Canada called Canada Nickel, and I've traded it over the years. But they've got like basically a government monopoly. So the first, I don't know if you followed Mark Carney. Um, they're they're basically a sovereign resource fund. And last year they were the first companies to ever get named, and they've got funding. And they've got all the First Nations on board, and they've got— they tick all the ESG boxes. Their deposit has types of basically nickel that absorbs carbon as well from the air, so they've got carbon offset agreements. And they're not looking to get into batteries, they're looking to get into steelmaking, which is where the nickel— the bulk of nickel is. So their price is very low. What I just think, they just raised some bridging funding, so they're just in the kind of final economic decision there with Deutsche Bank and Scotiabank, and they're just going to get their funding and they're going to get a government package probably end of this year. So, and they've had all the environmental permits, all the things that hold a deposit back. So I'm very kind of long-term, I think it's a no-brainer. So, but when it obviously last year they had some good news and it went from 70 cents to $2-something, so I sold most of it along the way there and I've just started getting back in

Yeah, we're, we're, uh, we're seeding the Canadian Sovereign Wealth Fund as well, um, with the other stuff that I do. So Canada is going to get a big influx of money into that infrastructure space. Um, and it's interesting you talk about the First Nations as well because they're almost like a separate government in their own right, and they need a big port built as well.

They've got their own royalty, haven't they, company now? Yeah, as well. So yeah, those type of things. I mean, that's more of a risky investment, I suppose, because obviously— but they've got 7, they've got portfolio of 7 projects. So the whole point is they've got this whole Timmins District and it's the jobs and everything comes with it once they can demonstrate. And the guy before used to run, uh, it's called Mark Selby, he ran, uh, one of the biggest nickel mines of last week, sold the project. So he's on board. And once they prove out this one and get the funding for this one They've got Mitsubishi is one of their partners, time partners, battery, Japanese battery firm. They've got Agnico, Eagle, even things like that have invested in them. So they've got lots of kind of like JV type things. And once they, once they, I think this project is only like about $200 million market cap, but the one deposit is easily worth a billion. And it's just, it's not in production or they've not got the full funding and they've got 7 other and that's not the best project. they've got other projects which are better grade, better recoveries, better metallurgy. So I kind of— yeah, so the whole point is if they prove this one out, they'll probably sell this one, and then they'll have a load of money in the bank, and then they can then go and do the model, and then without having to raise money, get onto the next project. And that's kind of— that's a long-term thing though for me. So yeah, that's kind of— that's what I like best.

No, that's super interesting. I like those plays as well, especially when they're around actually making stuff, do you know what I mean? And mining and getting stuff out of the ground. Yeah, um, cheers to that, Martin. Um, Chris, let's move on to one or two of yours. I'm just gonna scan through it quickly because I haven't had a look just yet. Um, your portfolio hasn't done much for a month. How often are you looking at it? most days, just keeping an eye on things, though I rarely change anything. Um, do you ever find that your portfolio is correlated a lot to, you know, whichever predominant market the equities are in? So for instance, if it's US-focused, are the price moves heavily correlated to the S&P? I'd say it's sensitive to— quite, quite sensitive to the S&P. Yeah. Okay. Is it, uh, sensitive or correlated though?

That's a good question. Probably both.

Okay. So you're basically long beta, which is absolutely fine. That's what I look for. I don't think as individual investors with accounts sub-$20 mil, you need to do anything different because there's no capacity constraints. It's not like you're a fund trading $5 billion. and you're going to get eaten up if you're, uh, long the same thing that everyone else is. You can get out really super easy without even leaving a footprint on most large stocks. Um, from, from that, from being long beta though, I'd say the actual alpha comes from the risk and, and risk rebalancing and I guess trade management side, side of things. How does that look? Is that like a proper process or, or What are you doing there? Is it story-based, narrative-based?

Yeah, as you can probably see from my report, I'm a bit of a sucker for an X timeline play, but that doesn't necessarily mean it determines my entire process and thought behind the decision. Your survey there does ring true, I must admit. It's very accurate, it's very impressive. Yeah, so it's I have a fairly busy job during the day, so I particularly during the summer, which means I tend to sort of switch off a bit, which is quite good sometimes. But in the winter, I'm very quiet, so I'm filling my time with consuming nonsense really, which then leads me down various paths. And here we are.

Oh, cheers.

I wasn't suggesting for a second that your course was nonsense, David. It was This is more of an exploratory mission for me, nowhere near as, uh, as, as competent, it seems, as Martin's thought processes and research behind what he does.

But I feel, I feel like Martin, are you involved in markets anyway as a job or anything?

Yeah, I, I've, as of 2021, I do 2 and a half days as a dentist and I spend, that's my main job now is looking after kind of family money and my money. Yeah.

Okay. Yeah. So you've moved more into, I guess, mini institutional stuff, I guess. So I would say then, Chris, it's kind of 2 different perspectives. If half of Martin's week is spent looking at portfolios, research, probably talking with, I don't know, CEOs, brokers, this kind of thing, it's going to be a completely different perspective, I think. And so I wouldn't feel too put out because it sounds like you're doing the right things anyway.

Yeah, absolutely. Yeah, I think I became acutely aware very early on in Martin's section where he was— he obviously knew what he was doing. But yeah, no, it's been really informative, really helpful so far.

Yeah, no, perfect. No, that's good. I think again, I'll ping you over a link and we can have a 1-to-1 chat and really see if we can help in any kind of way. Um, but yeah, I mean, this is the base level of how we think of things. It's very, you know, I guess simplistic from this perspective. It is literally filter. How do you understand what is actually good, uh, to buy at a certain time? How do you enter? What happens if, you know, the stock rallies 30% after you've entered? Are you going to shit yourself and exit the whole position, or what happens? Like, there needs to be structure over every single little thing. Um, size? Are you basing it off of, you know, volatility? You're basing it off of news momentum, uh, earnings momentum? These are all fine, just has to have the intent behind it. Um, management— what happens when it moves? Are you rebalancing quarterly so your position doesn't get too big in the portfolio? How do you do that? Um, what happens with sort of narrative-based moves? Should you, you know, um, if, if a news story comes out and it drops Should you care? How do you, you know, translate that into a quantitative measure? All of these kind of things. And the exit is most important. Like, most people have a problem with exiting the market. The problem is never buying stocks, it's how to monetize it, you know, as a business almost. Um, so I think, yeah, these— this is how we operate. Um, and then naturally, if you don't have a system, tends to leave you unstuck at certain times. So look, Any of you that I think feel like it's worth talking about this and how we can help more, please, I'll drop you a link. Book in, spend an hour, half an hour, however long fits into your schedule. We can talk more about stuff, um, and really try and see if there's any way in which we can help whatsoever. Um, but yeah, guys, let's, you know, get, get booked in anyway. I'd love to speak to you more and understand you, you guys. And see where we go.

That's great. Thank you. Amazing.

Thanks, David. Appreciate it. Thanks for your time, David. Thank you very much.

Cheers, guys. Have a good one.