00:00Let's go back to the conversation we started about bonds and the 60-40 portfolio that really
00:06doesn't work anymore. But that doesn't mean there aren't fixed income holdings in your portfolio,
00:11right? No, but they're very, very short duration. So we're just not taking any duration risk at all,
00:16and we haven't taken any duration risk for a very long time. So with a very long bond,
00:21clearly you're taking a lot of duration risk. A lot of the value of that bond is out into the
00:272030s, 2040s, 2050s. The capital value to that bond is at risk if yields rise, as we expect yields to
00:35be sticky and continue to rise over time until governments ultimately intervene, which I expect
00:41them to do at some stage in the next four or five years, because this whole situation is ultimately
00:45unsustainable. Intervening how? Intervening in possibly two ways. One would be yield curve control,
00:50because the interest is just not affordable. Well, the tried and tested ways are either yield
00:56curve control or actually a cutting of the coupon, which has been done in the past as well. I mean,
01:01if you remember, but war loan, which I used to own in the fund. I remember. Yeah, which is a
01:07very,
01:07very long dated UK government bond, in fact, about the longest dated, that yield was cut with 7% to
01:123.5% between the wars. So yields, coupons have been cut, but yield curve control is probably the most
01:20likely that was used in the US after the war. But there are tried and tested, but they're not very
01:24pleasant,
01:25and clearly they're a default, and clearly they have implications for currencies. But the unsustainable
01:31nature of sovereign government bonds at higher yields than today are very material. That is why
01:38the UK government is so obsessed by the gilt market, because that has huge ramifications for them.
01:46To be continued...
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