Unhedged Live: How Katie was “right all along”

Katie Martin (0:00)

Hello, and welcome to the Unhedged podcast live from the FT Weekend Festival in London with me, Katie Martin, and him, Rob Armstrong.

Yeah! We've been let out for good behavior again. Normally, we record this podcast in something that looks a little bit like a gray padded cell. Or mine in London, yours in New York. But now, if you're listening to this podcast, just imagine we're in a white marquee in the grounds of Kenwood House. It's a beautiful day in London, and there's loads of people here, and dogs. So, a few weeks ago, the organizers were on my case, saying, what's the title of the event? What are you going to talk about? And you were on holiday, or couldn't be bothered replying or something.

Rob Armstrong (0:49)

Something like that, yeah.

Katie Martin (0:51)

And I was like, well, I don't know. It's like three or four weeks ago. Like, how am I supposed to know what's going to be happening in three or four weeks? But then, a glorious thing came out of the sky, which was a column written by Rob Armstrong that effectively said, Katie was right and I was wrong all along.

Rob Armstrong (1:13)

That's one interpretation of what the column said.

Katie Martin (1:16)

So, I've been banging on, like ever since Trump came back into power, I've been banging on about this idea that investors are thinking differently about US markets. It's not the kind of safe place to be, that it's always been treated by investors. And you've always said, pipe down young lady, nothing is going to happen. And now you're warming to the idea that I'm on to something.

Rob Armstrong (1:37)

I am, but I would like to clarify, there's two parts to that thesis, that it's all going to be fine from an investment point of view in America. Point number one is that America has the strongest corporate economy in the world by a mile and matched to the deepest capital market in the world. And politics doesn't change that. The companies are bigger, they have a large domestic market, you can list their virtues, there's a deep stock market, there's plenty of financing, there's loads of entrepreneurs, there's good universities, it's everything you want. So that's the positive part of the thesis, is money will always come to that corporate slash financial monster that is the United States. Part number two is the thesis, is no matter how bad it gets in the United States, it'll be worse in the rest of the world. And those two points are kind of causally connected. You know, it is a US sneezes, rest of the world gets a cold kind of problem because the dependencies flow that way.

I think all of that remains broadly true. Where, and saying this makes me feel like I'm putting hot coals in my eyes, you turn out to be right, Katie.

Is that you can put this at risk if you borrow like a total crazy person, both on the corporate and the government side. And I think that can destabilize the American system enough that all this good stuff that isn't changing can be kind of knocked away. And so we have a runaway government deficit and debt that for reasons no one quite understands, the market is just noticing now. It's like, hello, we've been watching this show for 30 years, but they're paying attention. Plus, we have the explosion in debt from our most important companies, AI companies. And between the two of those, they're kind of connected. It's this huge blob that could ruin everything. That's the short version of me conceding that you are right about something, just this one time as the exception that proves the rule.

Katie Martin (3:37)

So you're sort of awakening to this idea that there may be some sense in putting money to work in places other than the United States of America.

Rob Armstrong (3:44)

By the way, I do have money at work in other places myself. I'm not totally against diversification.

But still.

Katie Martin (3:50)

So you're thinking about it from a kind of sort of numbersy point of view. You're thinking about debt levels. I'm thinking about institutional credibility, which I think is a much more important part of that equation. So let's talk about a thing that happened last week, which is that the Dutch Central Bank, so you have like the European Central Bank, but you still have national central banks across all of the euro system countries. The Dutch Central Bank said that it had brought back its gold from New York.

And it said, you know, it didn't just say, this is just a thing we've done on a whim. They said it was all about the kind of trade ability of the gold. But they said, we're doing this due to geopolitical concerns. And effectively, they think their gold is safer in London than it is in New York. So they brought over 78 tons of the stuff they've switched from New York to London. Now that, I think, in a very kind of, like, dry Dutch, finance-y kind of way, is saying, we don't trust you guys. Like, the whole point of having all this gold is that in some sort of nightmare situation, the shit hits the fan, we need the gold. And now we're starting to wonder whether, in that situation with the brown stuff hitting the fan, you would give it back to us. It is ours.