So Bob let's start with you. Goodness knows you're responsible for a lot of investment. If we talk to an investor rather than a
trader what do you do with your analysis of where we are on the market right now.
Well the first principle is diversification. Right. So if you have a diversified portfolio you could just sort of go through
the ups and the downs and you being confident about the other side. And then if you want to tactically move around that you
can do that. See first things have to have a start with a diversified portfolio. And the problem is most people don't have
a very well diversified portfolio. You know if you have even stocks and bonds let's just say you have a balance of stocks and
bonds. If we're headed into a stagflation environment. And I wouldn't say we're there yet but we're on the cusp of that
stagflation meaning high inflation with low growth. That's actually you've go back historically and you study
stagflation is the worst asset in a stagflation is equities. It's even worse if you're in a stagflation and you get an
aggressive tightening monetary policy. We're somewhere in the vicinity of that. So equities by themself
is not a safe place. It may work out but it's not a safe place and it's not diversified. But even to hold bonds bonds do Paul
Allen stagflation because the inflation problem and the tightening of monetary policy.
Cash does very badly. Cash is not safe because you lock in and negative real yield on cash you give. You have basically assured
wealth destruction. So you need some way of benefiting from a rise in inflation to at least balance those two forces. And so
whether it's inflation indexed bonds or whether it's commodities diversified basket of commodities. You need to get that kind of
that kind of diversification in the portfolio. And I think within the equity market there's you know I think the thing you
really need to pay attention to is the cash flows of the assets. You know we've been in an environment where cash flow didn't
matter too much. It was you know where are things going to play out 10 years now. But if you're in an environment of high
nominal growth not that spending will be the income to companies and that income will be profits. And so in the short run you'll
face risks from the tightening. But over time if you're invested in equities that have a reliable cash flow stream. You know
Warren Buffett said in the long run. In the short run the stock market is a voting machine. In the long run it's a Wayne
machine. That's because cash flows accumulate over time. So even within the equity market I think it's important to be thinking
about that. So as you look at the markets the various markets right now I heard commodities. Is commodities a good investment
do you think. Are commodities about to go up more. They're already gone up a bit up a lot. So I like the diversification
idea given what we're talking about the beginning of uncertain times of
reference to the markets and the economy. I like cash. I don't I'm not really I'm not getting ahead on
cash. I get my cash back. But you're actually falling behind if you have substantial inflation right now. But I think inflation
is going to be about for about 4 percent. But I'm saying just if I was advising people I would say first let's have you know a
certain amount of cash so you can sleep at night and you're not worried if your house price goes down or your stock values go
down. But diversification and I like the idea that the hard assets are commodity like things the energy sector sort of
industrial renaissance idea. I like that some but I'm not as
negative on the tech sector as the stocks are. I mean I think I still think we're in a pretty rich technology
revolution but you know that's the stock market and real estate is you know
it's too expensive. But you know.
Not the worst thing you can do. Is everything. So that's one of the problems really is everything else is expensive. So I like
your diversification. Plus some cash in case something happens. But I really.
I don't I'm pretty. I'm not that negative on the outlook. We've been talking about various sectors here and talks of
diversification. What about geographic diversification. What do you think. What non U.S. investments by.
Was increasingly important we break the world down into three regions. There are three
major monetary regimes monetary and credit systems in the world is a dollar system. There's a euro system and now there's an
army system in China. And while. And so you can break the world down into
North America Europe and Asia it doesn't have to be China. I think it's Asia. And Asia has been a great diversifying
for a relative to North America relative to Europe. And so geographic diversification is going to be much more valuable in
the future than it was in the past because you increasingly have China is much more of a powerful independent economic zone with
an independent monetary policy whereas up to 2015 they had a linked exchange rate to the dollar and they really were not so
independent. But they're they're driving themselves to be much more of a you know the domestic economy is the mainstay. And so
the more they have an independent economy independent monetary system and that'll spill over to the rest of Asia geographic
diversification can be really important. Just quickly here at the Independent but how independent do you have to be concerned
with the globalization of the euro that keeps the inflation rate a little bit higher. But David I'd
like to say that not exactly right of this but boy we have a really funny economy where Europe and China are in trouble and
the U.S. is doing pretty well. Well that's for sure. We saw that with the Bank of England just this week basically projecting
stagflation or the equivalent stagflation that looked like a to.