 Welcome back to the podcast. It's the end of the week. So time to talk a little global markets. And in this episode, we're going to talk about the fall in the US and UK inflation. What does it mean for interest rate expectations and thus the markets in terms of quite a severe reaction in the markets in a positive way when that data hit earlier in the week. We're also going to have a look at the latest filing from the infamous hedge fund manager of the big shorts, Michael Burry, a lot of headlines flying around about how he could have lost a lot of money caught the wrong side of this rampant market. However, perhaps you're just misreading the headlines when it comes to that one and peers will break that one down. Hopefully look to explain. We'll also talk a little bit about the Oracle of Omaha Warren Buffett, because in these filings which come out quarterly, and we've also seen that his holding of Apple is now just shy of 50%, which is incredible in terms of a single allocation to one company. We'll explain a little bit of why that numbers crept up, but also a little bit about what else is going on with Buffett's portfolio. Everyone's always interested in that following what he's doing, of course, from an investment point of view. And then finally a quick word on the political front. As you can see and know, neither peers are our politicians, so we won't look to breach in any shape or form about our political views. However, there's been two meaningful things this week. President Xi and US President Biden have met in San Francisco. And also UK Prime Minister Rishi Sunak is going one more throughout the dice to try and keep his election hopes alive with a significant cabinet reshuffle with a former PM coming back to the forefront. So we'll have a quick word on that as well, but peers, perhaps we can start with the inflation data that came out this week and the US numbers in particular. Yeah, inflation numbers were were amazing in that they went down. So inflation going down in this point in time is a very positive thing having had an inflation crisis, of course, over the last couple of years. And there was one, there's one, there's one individual item in the inflation basket, whose number was particularly important that I think was really the single item. In what is a complex calculation, inflation, there's one single item that sent markets like boom through the route, like the S&P was up 2%. And maybe more interestingly, something called the Russell 2000, which is a US another US stock index, but this is a, it's a small cap stock index. So it's like, it's 2000 small US companies that went up that ripped 5% of the back of this data. And then if you go into that Russell 2000, you can pick out some companies, they were up 10%, 15% one day off the back of this information flow. So it's all about, you know, the good old story of the Fed at the end of their hiking cycle and, you know, what's going to happen in 2024? Are they going to start cutting interest rates? And before we delve into it, the reason why smaller companies perhaps ripped higher at a faster rate than the big old S&P 500 is because typically smaller companies are more sensitive to interest rates. Smaller companies are typically more levered, they're borrowing more, you know, the big boys in the S&P 500 typically are very mature companies that are very cash generative. And so I don't have much debt on their books. So they're less sensitive to interest rates going up, right, or down. So yeah, it's the small guys that have been suffering from these interest rate costs rising higher. So any information that can tell us, and well, I should say, those small companies, their share prices have been hammered this year, like big time, certainly the tech small cap, you know, down 75%. So it makes sense then when the rationale for the big sell-off is now turning, it obviously makes sense that it's these stocks that have the big fall are now trading at very cheap valuations. And if the reason for the fall is no longer there, well fine, you're getting the buyers coming back in and they popped higher. The individual element in the inflation report, because remember inflation is measuring the cost of goods changing over time and there's goods across all the items you could possibly think of that you're spending money on. So there's energy costs, there's food costs, there's house costs, there's costs of whatever, Spotify, whatever you spend your money on, right? One thing in the report is then it's rental inflation. And this has been one of the key things that has taken the longest to start to dampen, okay? So remember inflation, the headline measures peaked in the US at the start of this year. And they've been coming down ever since, right? And this has been part of that story. And I mean peaked above 10% and now the trajectory is down. The Fed wants it back at 2%, okay? But we're not there yet. So it's been trending down and trending down and we're like, well, is it going to trend all the way down to 2% and find the Fed won't have to hike anymore? Will it trend below 2% in which case the Fed might have to start cutting? So is it going to get down to 2? And we thought it was on the way. And then in the summer when you hit July, well, June, we hit 3%, right? So it's come from 10% down to 3% and we're like, right, perfect. This is great. In July, it went back up. It went back up to 3.2%. In August, it went back up to 3.7%. And it's through that summer period, that quarter three period is where you've seen stock markets come back down, okay? Because we suddenly thought, we're not going to make it to 2%. Inflation is on the way back up. The Fed are going to have to continue to hike, right? And it was the rental inflation in particular that was part of this story where inflation started to tick back higher. And the rental inflation component last month, like measuring for the month of September, spiked. It didn't just tick back up, it spiked back up. It went from about 4% in August and it spiked up to nearly 8% in September. And everyone was like, oh my God, the Fed are going to have to hike. This hiking cycle is not over, you know, but the key reading in the report for October, which was the reading we had this week, that rental one went from nearly 8% back down to 4%, showing that the September print was some weird noise anomaly. And look, you do sometimes get that. These readings month to month can be very noisy. And so it's like big sigh of relief that spike up in rental inflation in September was not sustained, we're back to 4%, so we're back on this idea that the headline inflation is on its way down to 2%. And so now the story's turned even to, well now we're reassured, is it going to continue to trend below 2%? And right, our rate cuts back on the table for 2024. Right, and on that point then, let me just introduce some of the views on Wall Street, because they're talking about that last point that you mentioned, which was when are they going to start cutting rates? And there's a little bit of diversion between, or division between the likes of Morgan Stanley and Goldman Sachs. So two of the banking giants. So I'll give you MS's view first. And I'm going to ask you, what do you reckon they're going to be bullish or bearish? Well, the biggest grizzly bear on the street, I'm assuming they're playing to type and will be massively bearish. Right, so they think the Fed will start cutting rates in June of 2024, then again in September, and every meeting from the fourth quarter onwards, each in 25 basis point clips. And Morgan Stanley think rates will hit 2.375% by the end of 2025. So start cutting in June next year, with an end target of 2.375% by the end of 2025. So for Goldman Sachs, they see the first cuts coming in Q4 of 2024. So six months later than what MS foresee. And they say followed by one cut per quarter through going further through mid 2026. And a total of 175 basis points with rates settling in basically a three and a half to three and three quarter percent range. So a whole 1% higher than Morgan Stanley. So I think that's the key difference here in those two outlooks. You could say on the one hand, well, they're the same in so much as both think rates are at their peak now. Both think rates are going to start to come down beginning in 2024. That's where the similarities end. So the differences are the timing of the first cut and how many cuts are they're going to be in the cycle. And that's where they're diverging. So Goldman's think they'll cut later. The cycle of cuts will be slower and overall smaller. So Morgan Stanley's view is more positive for stocks in the short term. And I know it seems a bit it can seem a bit disconnected when we're thinking on the one hand when you're hearing us talk about right what. By how much my interest rates go down in 12 months time in the in the period of time between 12 and 36 months in the future. It seems a bit. Well, all right, how's that important now? Well, what you've got to understand is the bond markets are reacting to this stuff like now today. So I said that the S&P was up 2% Russell 2005%. Well, we have massive moves in the bond markets off the back of this data as well. The two year yield dropped 21 basis points, which is a lot. And then the 10 year yield dropped 19 basis points. So so those yields, well, they're actually having basically an immediate impact on interest rates right now today. So on that two year yield side, I mean, people, there's a lot of people that have bought and we'll talk about the the your man from Omaha in a minute or in Buffett. He's been buying up T bills like it's going out of fashion in the last nine months because they're yielding 5%. Right. But when I said the two year yield dropped, that means the amount of interest they're getting on their two year T bills is now getting less. So the point is, well, hang on, less attractive interest from your bond position. Well, shouldn't I now sell out of that then and buy stocks. So it does have an impact right now today in financial markets, even though these are concepts that may not play out until 12 to 36 months time. So, you know, to go to go then that one step further or why are these banks thinking differently about how the Fed might behave. And then it comes down to, I think Goldman's look like they're more positive that their outlook on the future is more positive from an economic point of view. And they're probably in the note what's what's now being coined the no landing camp. The idea we were talking about is it going to be a hard landing or a soft landing, meaning are we going to have a big bad recession, hard landing, or are we going to have a mild recession, soft landing. Now it's no landing, like no recession. Right. And so Goldman's are in that camp where they think rates will come down a little bit, just to kind of keep inflation at the 2% point but there won't be a recession. Whereas Morgan Stanley might be suggesting they think that there will be a recession so that rate cuts won't just be about managing inflation, it'll actually be coming in as more of a stimulative, more aggressive stimulative measure to boost growth out of recession. How do you think internally it's perceived when you have a macro house view and you have divisions in your bank, like an investment banking team, which are very much cyclical with the economic environment as to activity. Do you think that they feel when they have these like Uber bearish scenarios, which would be problematic for different parts of the bank, do you think there's like grumbles between divisions or is it, is it beyond that. I mean, I think, well, firstly there's Chinese walls right so that whatever the research team think whatever the Morgan Stanley macro research team think doesn't necessarily mean right that's what the rest of the bank also think and that's how the rest of the bank are now going to behave. There's separate divisions and indeed, yeah, a lot of their research they put out is saying conditions are going to be such that they'll be bad for our bank overall, but you know as a research analyst you've got to be impartial right it's not. Oh, I'm not going to suggest a bad thing because that's bad for our company, you go entirely separate it. So here's why it's good to be known to be the bearish on the most bearish on the street all the time to be known to be labeled. It's a good thing because what you're in the business of selling research right your team generates revenue from clients buying your research so who are the clients, well the clients are the buy side. So that's the financial institutions like asset managers and hedge funds and so on okay they're buying your research also the other the other sell side banks will be buying your research as well. So let's just take an example of an asset manager you're running a portfolio. Now your job is to manage your clients money and deliver the best return you possibly can. So your job as part of the decisions you're making. What should I do with the portfolio what should I be buying. What should I be selling should I be changing strategy keeping strategy. You want to do a lot of research yourself and a lot of reading. So if I'm a portfolio manager I would buy really bullish research and I would then buy really bearish research because I want to see the angle and the point of view of people that are sat on both sides of this argument. So I as the portfolio manager what a 360 degree overview of what people are thinking out there and their analysis and their rationale and then right I'm going to digest all of that. And then right myself. I'm going to take my view on where I sit on that spectrum. So Morgan Stanley being labeled the bears is great for them because they're going to get a consistent revenue of people buying their research. Because people always want to read about the bearish view along with the bullish view as well. Now, if it was based on rational research though. Surely if I'm a junior research analyst and my superior and the voice of the bank is bearish but I analysis shows that we are too bearish. What happens then. I need to move move company. Yeah, I think you'll just get kind of batted off and probably largely ignored I think you'd be brought up with that ethos of we are the bearish view. And that's how we make money and that's very much the label we want to retain. I would suggest. So I wonder if that gets get is sticky for you in your career in terms of how you are known from your more nuanced part of your CV. Think about it though like from a man like if you're if you join a business and you're the youngest will of course right you don't know much and who you're going to learn from what your superiors. So you're learning from the bear. So naturally you're learning your kind of yeah yeah you're picking up that sort of persuasion through who your teacher is and who your mentor is right and yeah I think then that probably does. You do carry that around with you for the rest of your career, maybe. Yeah, I'll be like Pierce why are you just so miserable. I couldn't work in the Morgan Stanley research fund. I'm too much of an optimist. All right, well let's move the conversation on to the UK, where headline CPI consumer price index rose 4.6%. So it's still rising at this point to show 5% from a year earlier. This is for October, but it's down so it fell from 6.7 to 4.6. It's the lowest pace since 2021 enough that Rishi Sunak was right on it. I think 60 seconds after that data came out he was tweeting mission accomplished. I've halved inflation, as I said I would. But perhaps you can explain a little bit about why such a dramatic fall and any differences here between the US and in the UK. Well you can maybe tell me about the detail here. I'm less in tune with the under the bonnet stuff with the UK. Maybe I'll just talk a bit more about. I'll give you some flavor then. So I mentioned the headline CPI. So lower energy prices basically gas costs were down by 31% in October compared to a year earlier. The city was down 15.6%. Core and services inflation, which is now the new super core or core core reading that people tend to gravitate towards because it's particularly watched by the Bank of England for signs of underlying inflation that was weaker as well than what economists were expecting. So just down across the board basically. And I think it's the, it's the size of the drop. I mean, I'm just looking at the headline inflation chart over the last 12 months and 12 months ago, a bit like the US you know we kind of at the peak for the UK our peak was slightly higher at 10.7%. It's been trundling lower since then and prior to the reading we've just received so the for September it got down to 6.7. So UK inflation was dropping but it was dropping from a higher peak and dropping at a slower rate than the US. Okay, that's why we were more hawkish about the Bank of England and had the Bank of England have raised rates. You know, later, I mean the Fed stopped hiking. Okay, I remember now you might have to remind me but the Bank of England stopped hiking later if you see what I'm saying, because our inflation was staying stubbornly higher. Well maybe not anymore because it dropped from 6.7 in September to 4.6 that is the biggest month on month decline in this whole downtrend from the peak. So it's like suddenly we're getting an acceleration in the decline, which is obviously very positive when inflation is too high. The big danger here is if we're suddenly accelerating and that acceleration doesn't slow down, well we could nosedive into deflation. You know, if it's dropping by more than 2% from one month to the next. I mean, by the start of next year we could be in deflation on that kind of rate. So it does set some alarm bells. So just break that down for someone who doesn't study economics. Why is deflation you're suggesting a bad thing? Yeah, well, inflation is way easier to understand. That's the prices of goods going up too fast. You can't afford to buy as much anymore. So naturally consumption drops and then that's a recession. Deflation is a bit more counter-intuitive because you might think the opposite. Well if deflation is prices are dropping and there you the immediate thing is to go great. Right. Awesome. I'll buy more and I can afford to buy more stuff. Great. I do buy more stuff and consumption goes up except you've got a factor in the human behavioural thing. Because when prices are dropping, do we just gun in and buy more stuff? No. We start thinking, well, hang on. Maybe they'll continue to drop. So if I think the price is going to continue to go down, you know what? I'm going to wait. I'm not going to buy now. Maybe if I wait, it'll be even cheaper. So that damages consumption as well. That's the annoying thing about inflation. If it's too high damages consumption, recession risk. If it's too low or negative damages consumption, recession risk. That's why you've got to get it in the sweet spot, which is around that 2% point. So, yeah. The Bank of England will be sat quite nervously, I think, about that sudden drop. Just because you don't want inflation moving too fast because then it's out of control. And then their jobs even harder. I wonder how those, I think it was three dissenters who said, we need to hike now again because inflation is not done yet. They're looking a bit silly at this point. One thing I guess timing wise is that the kind of backdrop politically, obviously there's a lot going on. We'll discuss Rishi Sunak in a cabinet reshuffle. But also the government delivers its autumn statement next week as well. So it couldn't be better timing, I guess, from that perspective. Rishi certainly will not be saying what you just said though. No, no. Well, it's perfect for Rishi because he had that. He kind of nailed it on the post the start of the year. I will have inflation before year end. And he's just done it by October, right? So he's like, so he's actually suddenly Rishi's weirdly said quite a good week, even though he was backed into a corner with this whole... It's Tuguella. Tuguella. I had a mind blank there. So the Home Secretary and the chaos around the marches and her thoughts on the police. And it was just a just dumped a massive bomb into Rishi's lap. But the last couple of days, he's done a pretty big U-turn. I mean, obviously you would suggest way too little, way too late in the grand scheme of things. But nevertheless, he's had a good few days and this inflation print has allowed him to come out and say, there you go, I've delivered the autumn statement. There's supposed to be maybe some tax breaks for businesses that might be coming down the pipe. There won't be tax breaks for consumers is what the noises are saying. But well, maybe they'll be more confident and more aggressive given this inflation print. Who knows, maybe they'll give, well, that's some more giveaways. But we'll see. Yeah. Good for Rishi. Yeah. I was thinking when I was watching the news last night when he made that commitment, I was thinking, God, you know, like something like the invasion of Russia and Ukraine, like, was it going to happen? Most people would have thought, yes, but you could never have predicted the timing. So for him to just come out and go, yes, because it makes sense. It's not going to stay that high. It will decline. There are some significant risks to that call. I bet when other Middle Eastern potential contagion fears were kicking off a few weeks ago, that call could have gone completely the other direction. But thankfully, it hasn't happened. So final thing, little quiz, mid-show. Just with this talk of English inflation. And I was watching this BBC documentary, actually, to cue this up about the Union. I encourage everyone to watch that. Absolutely fascinating four-part mini series where it talks about the history of the Union. Right. And I always think, OK, so when you think of Scottish people, you think, OK, specific music, the bagpipes, when you think about Haggis the Food, you think about Willem Wallace, and then you think about the Welsh, you think about the Irish. They're very clearly defined cultures. When you think about the English, you're kind of like, what is it to be English? So aside from chicken korma and things like that, the English breakfast is obviously a staple. Here's your quiz about the good old English breakfast prices now compared to this time in 2022. So I'm going to ask you two questions. OK. Anyone listening can take part. Which item do you think on the plate on your English breakfast? Americans are probably very confused at this point in time. Do you think has gone up the most in year-in-year percentage change? I mean, let's not go down the conversation of, well, hang on, what's on your plate? Because an English breakfast. No, no, no, no. I'm not talking. There's no avocados. I've got one. There's no, like, rye bread. Yeah, you smashed that, though. I've got, I'm going to say eggs. OK, correct. Eggs. How much do you think they've gone up? In the last 12 months. Yep. 21%. 16, 16.1. OK. So what's, there's two items, only two out of a list of 10. Where price has actually gone down. What are those two items, do you think? Two items. Pork. No. No, that's actually the third highest. I was going to say I was very uncomfortable when I said that. I'm going to give you a hint. Baked beans. I didn't want my hint. You're just shooting from the hip now. So, no. The one that can extend beyond the plate. Bread. Part of the breakfast. Bread. No. I'm going to give you one of the two. OK, go on. Block butter has seen the biggest decrease. OK, all right. It's down over 4%. What's the other thing, though? What do you have with your breakfast? Tea. OK, if it's not tea, it's coffee. Right. So coffee is down 2.5%. I mean, it really is a tea, though, isn't it? It should be a tea. It should be a tea, really. I don't know why. Bloomberg needs to up their game there. No one has coffee with them for English, does it? That's the problem. Yeah, apologies. It's only Americans listening. Coffee. How coffee's gone down? How much did you say? 2.4%. Right. Interesting. Yeah. So everything, milk is flat. Mushrooms up 3.5%. The average plate of your full English has gone up 7.3%. There you go. So yeah, you're going to have to just stick in there. The prices will normalize, I promise you. But look, let's move the show on. Let's talk a little bit about Michael Burry. Those who are, I guess, more interested in finance will recognize that name and that person. But perhaps you could just give us a brief summary of his history. Like why is he someone who always grabs a headline or two? Well, it's because of one trade. This guy's been at it. He runs a hedge fund. Here's a quiz for you. Back at you. What's the name of his hedge fund? I don't actually know how you pronounce it. It's like Skyon or Skion or something like that. I would say Scion. Scion Capital is his hedge fund. But look, he's obviously, he's been, I don't know how old his hedge fund is, but it's definitely, I don't know, 25 years plus, right? But really he did one trade that got serialized in one of the best movies of the last 20 years. So he did one trade and it was all part of the great financial crisis. And he shorted the US housing market. Let's just simplify it like that. That's how the press talk about it. It's a bit more nuanced about, well, how did he short it and what kind of products, but I won't go into that. He shorted the US housing market at its peak and then it collapsed. That's what led to Lehman Brothers going bankrupt. That's what led to the global financial crisis. And if you like your movies, you should watch The Big Short, which I'm sure most people listening might have already watched that. But yeah, he was, what's his face? What's the actor? Christian Bale. Christian Bale, thank you. Christian Bale in The Big Short was playing Michael Burry. And it was about how he profited billions in the end. The great thing about the movie and the trade, it almost bankrupted him. Before then it spectacularly came good and he made an absolute fortune. So what makes this such a story that resonates with people? It's like David versus Goliath, him against the system. The government is doing this, all these banks from the street are doing this. I'm betting against it. Almost comes back from the brink off the canvas. It's got all the hallmarks of a legendary story. Absolutely. So ever since every single trade he's ever done becomes sensationalized and grabs the headlines and it's good clickbait, let's say. For financial media, Michael Burry in your headline is good clickbait because everyone knows about him from the crisis. So anyway, he's back in the news and the clickbait. Well, I think actually wasn't the headline, Michael Burry's lost $1.6 billion shorting semiconductors. Well, yeah, that's what I was sent by none other than our dear co-founder this morning. There's many, many things wrong with that sentence. Not less than the fact that it's entirely untrue. So basically he put on a trade. The thing about this is we don't know what his P&L was for this trade because all we know is he put it on at some point in quarter two and he took it off at some point in quarter three. And the timing of entry and exit entirely obviously determines whether you make a profit or a loss from any trade. And so that's for one thing. This whole $1.6 billion thing is also false. So he placed a bearish bet on semiconductors, meaning he thinks that the share prices of semiconductor producers like NVIDIA, for example, are going to go down. There's various different ways you can place that trade. The way he did it was using put options, which I won't go into the details of here and now, but this is a derivative product that enables you to profit from the price of something dropping. Now with options, you have either the nominal value, which is where this $1.6 billion comes from, or you have the market value, which is the actual amount of money that Michael Burry paid to put the position on. The nominal value is just like, well, theoretically, what is the worth of this trade? Should all these options be carried to expiry and then the exercise of these options take place? And yes, so one options contract typically translates to 100 shares. So depending on how many options contracts multiplied by 100, that's the number of shares he's going to have to buy or sell. And then what's the share price of the shares at the moment? Right, that all adds up in this big calculation to $1.6 billion, okay? Except for Michael Burry, that's a reasonably irrelevant number. The market value, the amount of money he paid to put the position on, is just the price of the option at the time he bought it. His exit, he won't exercise these options necessarily. People come out of these options positions before expiry and they don't get exercised and actually, therefore, the amount of money you make or lose is just the difference in the market price when you bought it and when you sold it. And it's a tiny fraction of a $1.6 billion thing. So that's one thing to say. It is feasible if he did short the towards the end of June and if he took the position off at the end of September, well, actually the semiconductor stock prices went down. So he would have made a profit. So we don't know the timing as to whether he made a profit or took a loss or how big it was. But yeah, it makes for a great headline even though it's false. Yeah, I think actually over the period, they were down about 3.5% to 4%. Yeah. But if he put the trade on at the start of quarter two in April, he would have lost a load of money. And the other thing here was that, I think these were two different bets. So initial bet was against the S&P 500 and that 100. His latest wager is against the semiconductor stock. So maybe we can talk about that a little bit. Right. Because one thing here is that, I think yesterday a site, it's before that, NVIDIA was kind of on course for 11th consecutive update. In those 11 sessions, NVIDIA shares are up 22%. That's equivalent of $220 billion of market cap in 11 sessions essentially. Yeah. I mean, that's pretty phenomenal. And that's a record streak in fact for NVIDIA. So even though that AI bubble feels like it's perhaps just come off the boil a little bit. I think you had that announcement more recently with open AI and more investment, Microsoft. Right. They're pumping the co-pilot enterprise stuff. And it's just gone gangbusters again. But for many people and perhaps you as a former trader, now investor could say a little bit about why when a company does that, it can make other people think it's now in territory for a quite a significant pullback, which is I'm assuming why Barry is sniffing around semiconductors. Here's the argument, buyers or sellers, if you're a buyer, you've just given the argument. Microsoft, way more investment getting pumped in to kind of build out your AI offering to your customers. You need compute. You need semiconductor chips in order to provide these platforms for your clients. So you're going to need to buy way more of these chips. Great for NVIDIA. That's your bullish case. And short-term, I think that's true, but the argument is, well, has the short-term benefits to NVIDIA now been fully priced into its stock? The longer term is a different. That's where your risks come in, because it's like, well, A, this is so new, right? And NVIDIA are flogging these chips for, I mean, was it $40,000? Yeah, $40,000 for the main chip. $40,000 a pop. Now, you know, take the tech industry back through time. What happens? You get a new product. A good example. I bought a widescreen television in 2005, maybe. Oh, God, that was expensive. And I paid 5,000 pounds, right? And it was this amazing thing. No one had that. It was like, wow, I felt like I was the king. You can now pick up a way better television, way better for like 500 quid, right? So the point is that as other competitors come into the market, then you get this battle for market share, which typically sees the price of the product falling, right? So there's that one argument. And then the other argument I've already said, it competition, you know, there's other big players that are starting to create their own chip rather than having to buy NVIDIAs, right? So in the longer term, maybe NVIDIAs market share is going to be eroded by competition. The price of the product is going to come down anyway. So yeah, maybe this price right now is looking pretty toppy. That's Michael Burry's view, right? But he'll be sat there over the last two weeks, very uncomfortable, as this thing pings another 20% to the upside. Well, he's had a lot of training and being uncomfortable over the years. He's absolutely cool as a cucumber at the moment. But maybe we could pivot to a very different character of investor. You've gone from Michael Burry to Warren Buffett. So tell me a little bit about what we learned from Buffett's portfolio disclosure. Well, so I guess, again, looking at the headlines, that clickbait headline was that his Apple holding now makes up 50% of his portfolio. I feel like you're taking a pop at my newsletter here. I did lead with, do you like Apples with the people hunting? Yeah. So yeah, look, I was on that bandwagon, I'm afraid. Well, it is quite amazing, right? Because anybody who's studied portfolio management or has been a portfolio manager or runs their own portfolio, one of the key words, lessons that gets drummed into you is diversification. You've got to spread your money. Don't put all your eggs in one basket. Spread it around to spread your risk. And yet here's the king of all long-term value investors, the absolute undisputed king on the hill. And he's got half of his money in one stock. So it is quite unbelievably remarkable. I guess that, whilst that sounds interesting as it is, the thing is the proportion of his portfolio that is Apple is going up, not because he's been buying more Apple shares. It's been going up because the value of his Apple shares that have been fixed, he owns 9 million, 9 million, that's completely wrong. 915,560,382 Apple shares. Wow, I'd love that. That makes my holding sound very insignificant. That number of shares has not changed for the whole year. So he has not bought or sold one share. But the proportion of his portfolio has changed because obviously the value of Apple shares changes. And it's changed. The value of Apple shares have gone up a lot this year, not much in the last three months. In fact, Apple's slightly down. But the first six months of the year, they've boomed. And so other parts of his portfolio have maybe gone down. So really naturally through market shifts, the proportion of his portfolio that's made up of those Apple shares in dollar terms has gone up. So that's one reason why it's risen. But I mean, that still doesn't get away from the fact that it is 50%. But he's a long-term value investor. So what is the general flavour of the other companies within that other 50%? Well, his next biggest holding and the stats I've got, well, actually, let me just switch up to different graphics. So 50% for Apple. The next biggest is 8.1%. I'm going to go to a more granular view. Hang on, these stats are a month old. So his next biggest is Bank of America, which is 8.6%. Then it's American Express at 6.8. Then it's Coca-Cola at 6.5. Chevron at 4.5. He's cut his Chevron holding. I mean, even though he's a long-term value investor, he has nailed his short-term Chevron trade because he didn't own any Chevron until last year, start of 2022. He started buying aggressively. He's played this perfect spike, rally up in the oil price. And now he's been booking profit as the price of oils peaked and come back down. So he's nailed a short-term oil trade for what is the world's most long-term investor. He's caught the oil pop and now he's going to get the upside of the shale play. Well, so he's pivoted some of that money out of Chevron into Occidental Petroleum, who I think are more geared towards that shale play. And then, yeah, Kraft, Heinz, and then Moody's, and then, yeah, I won't go any further. So they're the kind of biggest. But yeah, Apple's at 50%. And the next biggest is only 8.6. So it's just Apple, then, in terms of tech. There's not any other Magnificent 7 in there. Well, not US tech. I'm just looking down the list here. He's got BYD, which is like the Chinese Tesla. Wow, that's a spicy one for the Oracle of Omaha. I'm looking down to beyond Amazon. He's got Amazon, but that makes up just 0.4% of his holding. Which is, by the way, I was just thinking, well, that's hardly any at all. It's basically negligible, right? But 0.4% holding, that is still $1.4 billion worth of Amazon shares that he owns. Just to distill it down as to why Apple and not these other tech firms or other companies, in terms of just broader exposure that he has. The simplest two points I could see, and this isn't looking at any financial metrics. This is more like strategic. One was durable competitive advantage as the most important quality a business can possess. That was number one. Number two was strong market presence in several consumer electronic verticals, just kind of where they're heading. That kind of underpins the Buffett rationale with Apple. Right. So I guess, even though it's one company, you could argue there's some diversification within Apple, the business. Obviously, you've got geographical diversification, but then you've also got product line diversification where you've got the hardware, which is the iPhone, but then you've got the App Store, which is your software side. Cool. Let's have a quick word then on politics. There's a promise at the top of the show. We'll keep this as brief as possible, just a couple of points to say. So one was, we touched on it, Home Secretary Suella Braverman has gone because of, as you said, the policing of a pro-Palestinian march from the streets of London. She made some unauthorized comments. I think it was in a Times article that saw her somewhat bumpy past come to an end in terms of the cabinet and she's already challenging the PM, what, two, three days later? Probably the biggest headline then, one perhaps you could just have a quick word on, is about bringing back the former Prime Minister David Cameron. Now my understanding is this has happened before in the past. They come back, but it's an infrequent thing. It's not very common. I did see some interesting photos of a very prime ministerial physicality that Cameron has shaking what I thought was the intern's hand, but no, it was our dear partner, Rishi. But that aside, which perhaps is going to be potentially one of the problems that Rishi might have to deal with. I guess there's a division there. Some people might see it as a sign of confidence that Rishi can bring someone like that in. Others might see it as in Cameron might steal the limelight. But what do you think? Well, I think that this is, we're in the end game because we've got an election next year, probably towards the end of the year, right? And the Conservative Party are big losers right now. And so you've got this end, the end game has begun and it's begun in two ways. Braverman, I think she fully intentionally basically got herself sacked intentionally so she could send a few bombs in terms of her much more right-wing opinions because I think ultimately she's gearing to be party leader when the Conservative Party are in opposition after losing the election to a more centrist Labour government. So the Conservatives have to pivot right and she wants to be the top of that. I think that's her play. Rishi, to counter it, has a, I think quite genius, brought in Cameron which grabbed all the headlines, right? And Braverman, well actually her story got taken down off the front pages. So actually from a media play point of view I think it was genius. It kind of trumped her. Then from a political thing. I mean, yeah, look, foreign secretary, obviously Cameron's got, he was Prime Minister for six years. So longer than that, wasn't it? I think it was six, wasn't it? 2010 through to then Brexit. Oops, I need to resign in 2016. Pretty sure. You might have to fact check that. But anyway, he's got relationships with world leaders. He's been out and about around the planet. And so I think he carries weight as a foreign secretary. So I think that's a good thing. Plus, finally, he's more centrist, right? So this is Rishi saying, look, if we're going to win this election, we need to go back to the centre where Labour are trying to steal our old ground and we need to not pander to the right-wing side of our party. So that's his play. So translating this into markets is there any short-term impact or is this more long-term potential implication? Yeah, for markets, I don't know what the impact is to be honest. I mean, I think some would argue that this is the last desperate move in what will ultimately be a failed attempt. So they all lose the election anyway. So we're left with a Labour government. Now, Labour governments, depends how centre they go to win this election, but normally Labour governments are bad for business because Labour like to historically like to tax more. So it's kind of business negative. But as I said, Starmer is definitely going more centre here to win the election. So it might be that, who knows, it's not negative, I don't know. But I think for markets at the moment, probably doesn't matter too much. I mean, I think the inflation situation is way more significant for markets right now. All election stuff, fine. It will brew up and become more interesting next year. Yeah. And then finally, we had Biden and Chinese counterpart Xi Jinping, they met this week, I think it was San Francisco, and they agreed to resume military communications. That's quite a significant thing, given what had been a fairly severe deterioration in that relationship. I think two things in the last 12 months, I think Xi Jinping was a bit of a lousy, your dear friend. She just kind of went totally against the grain and visited Taiwan, which China would not happy about in one bit. And then also, US accused China of sending those spy balloons. If you remember those getting shot down, that wasn't long ago, that was earlier this year. So Xi had been giving Biden the cold shoulder. I think Biden in June, and they were having a nice lunch yesterday in San Francisco. So the fact that they're having lunch, is that the takeaway here and just the fact that the, certainly military communication being reestablished, because I guess the tail risk of any major power confrontation is a miscommunication on that level, which would have dire consequence. And hopefully now they've not agreed really anything, but at least there's dialogue. This is a short-term positive. For sure, the fact that they're talking is definitely a step in the right direction and is a positive. And if you want to put it at a super, super top-top level, World War III risk has come down a touch because they've met up and they've had lunch. The reason I say it's short-term is back to the political cycle thing. Like in the UK, we're going to have an election next year, so are the US, right? And if DJT, Donald J. Trump, wins and rocks up back in the White House, well, then you could probably bet that maybe some of the positive ground that Biden makes up might be reversed. It depends on Trump's angle, to be honest, because I think from a trade point of view, Trump's very divisive and of course implemented the sanctions on China when he came into office last time round. Sanctions that Biden retained, I might add. So on a trade point of view, he can be divisive, but I do think from a war point of view, Trump's definitely on that camp of he doesn't want these forever wars going on where the US get involved in wars on the other side of the planet and he wants to pull back from all of that. He wouldn't be funding the Ukraine, like Biden's Democrats have. And so I think you could say from a military point of view, Trump might be a positive in terms of Chinese relations, but from a trade point of view, he'd probably be a negative. Indeed, do you think China are quite aware of their economic situation at the moment and also the scarring of COVID and a supply chain disruption which has led to big companies like Apple, for example, almost pivoting a large portion of strategy out and into areas like India, for example? Do you think China also need to be quite forthcoming here to ensure that, look, this is a long-term transition. This isn't going to happen immediately. We need this business because at this conference or the dinner in the evening, I understand Musk was there, Tim Cook was there, the head of Pfizer was there. You had BlackRock, Larry Fink, Blackstones, the private equity firm, CO was there. So every mover in shape. Power table. Right. On the Apple point, it's almost the opposite is happening. You would be right to say from China's point of view, hang on, our economy is weak. We should be doing everything we can to keep Apple happy because they obviously employ upwards of a million people or something crazy via Foxconn who's their main producer. But then there's regulatory issues afoot with Foxconn which people, the conspiracy theorists believe is to hamper Apple's ability to produce the iPhone so that therefore the Chinese domestic equivalent can come in and win back more market share. So that's going on. And Tim Cook kind of alluded to that in the earnings report whatever a month ago. So that's something. But yeah, I mean, look, I think that these big powers need to be talking. I don't think it's the case that China or the aggressor like the West think and look, they're sensible. They want a long-term strategy that's going to work for them and so yeah, let's get back to the table. I think it's more of that than anything else. Yeah, I think that's the point I wanted to make. I think I feel like being positioned in London and being of Western media, we tend to think it's the Chinese being quite problematic. But I think that this is a marriage that needs to work basically for both parties' sake. But okay, cool. Well, look, let's wrap it up there. What I have been doing on all of the recent episodes is dropping a poll on the Spotify podcast app which is a new feature. So if you've just listened to this, check that out. Leave what you think is the correct answer. Won't tell you what the question is yet because I haven't actually come up with it yet. We're not recording this, but there will be one and I just want to have a play with that feature. So yeah, give it a go. Let's see what happens. What did Elon Musk order for his main course at the Biden G lunch? I do know what he had. So apparently there's this new injection that you can have. There's a weight loss and it's meant for people who have type 2 diabetes. Yeah, yeah. That's what he has for dinner. I'm told. Sources. Cool. Thanks, Piers. Have a great weekend and thanks everyone. Catch you later.