Autumn update: An interview with Jim Mellon

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Autumn update: An interview with Jim Mellon

This is the transcript to our interview with Jim Mellon. Its also available to watch here or to listen to as a podcast here or on your favourite podcast apps.

Sarah Lowther: Ladies and gentlemen, welcome to Master Investor’s autumn update with the original master investor Jim Mellon. Now he has a flair for identifying emerging global trends and for creating them such as why the future of meat is going to be lab grown. He’s the author of several books, his most recent Moo’s Law: An Investor’s Guide to the new agrarian revolution. We are delighted that we are going to be benefiting today from both his hindsight and his foresight.

Now, Jim, thank you for joining us for another virtual event, which is the new norm, yet this week it’s been COVID concerns and a fresh outbreak of the infection in China that has been blamed for depressing stocks. Is it right to put the blame on the pandemics door? And are you feeling healthy?

Jim Mellon: Oh, thank you Sarah. It’s lovely to talk to you today. And thank you, everyone for for joining this webinar. I’m in Dubai and I can tell you that I’ve now had five vaccinations. I had my fifth a couple of days ago and apart from a sore arm, I feel absolutely fine. So I don’t think I’m going to be coming down with COVID. So yes, I’m, I’m healthy. It’s very hot here, as you might imagine. And but it’s you know, full of business energy and great opportunity. I recommend anyone who’s young, and setting out that they should check out Dubai in the same way that people like myself used to check out Hong Kong or Singapore, I think this is the new place to be to be starting if you can.

SL: Well, It’s all lemonades and lollipops where you are Jim, but what I was hoping that you’d give us is a reason not to blame COVID for the current pathetic state of the markets that we’re experiencing in the UK?

JM: Well, I don’t think markets have been very weak. I mean, okay, the UK market is the cheapest major market in the world. As we know, it’s about 14 or 15 times forward earnings. But that’s not particularly cheap. There are reasons why the UK market has underperformed other markets. And that’s mainly due to the over concentration in old industries in the UK, like banks or mining companies, utilities, whereas in elsewhere in the world, you’ve had a much heavier concentration of technology companies as you know, Sarah. There are also reasons to be optimistic about the UK and I’m very happy to go into those. But generally speaking, I think markets are far too high. And the reason why we’ve had some fullback in the last few weeks is partly due to the power of gravity on things that have gone flown to high like Daedalus and Icarus towards the sun.

But it’s also partly due to the shock that the Chinese Communist Party has engineered in the Chinese markets by progressively going through hot sectors and effectively destroying them. And I don’t know if you know this in detail, but the first one was the tutorial sector and there were several companies listed in the multi billion dollars in the United States that represented the cream of Chinese tutorial ventures where they taught children and adults outside of school and work to increase the educational opportunities. And that was deemed to be a common good, so in other words, they were not to make any more more money and the stocks in that area down 95% since the beginning of the year, and then they moved on to the familiar tech stocks, so Tencent and Alibaba and NetEase and so forth and said that they had to basically hand over a large part of their profits for the good of the country, and then they today went off to the casino companies, which are largely US companies, partly listed in Hong Kong and so forth, and they fell by 30% today.

So one by one, the Chinese have been actively, you know, almost cancelling the, the opportunities for making money in the tech sectors. And at the moment, most people are Western investors are quite sanguine about the tech sector in our countries, but, you know, it could happen. My view is that, you know, these tech companies like Google, Facebook, Amazon and Apple have been going up, I mean, admittedly not as fast as they used to go up, and they’ve still been gently rising over the last year or two. And they are making so much money that it must be a tempting target for governments to impose fines and taxes and if we remember, back in 2008, and 2009, the banks were the ones that were making lots of money, and they were, you know, punished in the form of extra levies and taxes and so forth and for the last 10 years, they’ve been hampered by government, brigandry in terms of taking that surplus profits and it could well be that they will turn their attention to the tech companies.

SL: So let’s go back to China because over the last six months, I’ve seen losses of between 18 to 30% at Baidu, Tencent, and Alibaba, nothing quite like the horror shock of the 95% drop in other companies that you were referencing there. But some of the people watching today, we’ve put an awful lot of money into Chinese related funds. Is it time to be jettisoning and withdrawing from those funds? So do we hold tight?

JM: Well, I’m, you know, to be quite honest, I’ve not had exposure to China. And you’re at the mercy really there of the of the government’s whims, the government has expressed and I don’t think it’s a bad thing to express a concern at the rising inequality, which we’ve seen, really around the world, in terms of, you know, the gap between the ultra wealthy, and the, the regular citizens who are much less wealthy obviously, and they want to do something about it. So they’re basically forcing these companies which are huge cash generators to put back some of that a large part of their profits actually into the, into society. Now that to my mind caps, the upside on these companies, because every time they grow, they’re going to pay off more and more of their profits. So I don’t know if today is the right time to diversify but I think you have to be concerned about China as a viable place for foreign investment. There was another one I forgot to mention, which was DiDi. Didi is a cab type service like Uber and listed in New York, and then within a couple of weeks, it was slapped with a lot of regulatory penalties and the stock fell very sharply. So it could be, you know, do a double edge thing. One is, we want to reduce inequality in China. And second, is we’re not very happy about these Chinese companies listing in overseas markets, because that represents a potential capital flight from China for the wealthy, who are the principal shareholders of these companies, and they don’t like that.

SL: So let’s go away from government interference to government advice, because as recently as 24 hours ago, our government are advising us to work from home this autumn this winter to protect the NHS, so more of the office sofa, which brings us to a question from the audience. Previously, the questioner asks you have assumed there will be a widespread recovery in trade and travel based on vaccination success. But do you now think this is actually an optimistic gamble, as oil and airline companies still languish?

JM: The oil companies probably languish for a different reason. And this gets back to you know, decarbonisation. And you know, the need for big companies like Shell and BP to go into alternative energy. Of course, when they divest their oil and gas interest, someone else buys them so it’s not necessarily a reduction in carbon emissions. It’s just by different entities. So the oil and gas companies are different to the airlines. Look, my own view is that this pandemic is very close to being over And I, you know, over for the majority of us and I say that 93% of the British population now has antibodies. There is a thing called files law, which is as the virus spreads more widely, it attenuates or basically gets less violent. I mean, we’re going to have COVID forever, but it will be like flu. I wouldn’t regard COVID as a barrier to international travel, and I know that many people want to travel. In fact, this summer, you know, I could see it in Spain, where we were just huge numbers of people coming down as soon as they could, despite all the inconveniences of covered testing and all that sort of stuff, and the extra pricing. So I’m not pessimistic about that at all. However, it has taken a bit longer so companies like EasyJet and IAG, which owns British Airways have been burning through cash for longer than expected, and EasyJet is doing a rights issue at the moment. I think EasyJet is a good buy now because they’re tapping their shareholders, and they’ll probably have some cash and someone will go after them. I mean, Michael O’Leary of Ryanair is saying that EasyJet it’s a very big consolidation plan. I don’t disagree with them, right. I bought some EasyJet this week. And IAG is a good company got some good brands underneath it. And it’s very close to making profits again on the North Atlantic route, which has its principal source of of profit, and because I’m sure that the US is going to open up to the European travellers quite soon. So let’s not be pessimistic about those ones. I mean, you know, not all travel related stocks are going to do very well, but some of them will do well. So actually, it’s been a good ride from the bottom up to the current position, and I think it’s farther to go in this sector.

SL: I’m just wondering if the takeover premiums already been factored into EasyJet particularly as there were talks of it merging with ease with a whiz. But that’s an ongoing story. We should have a conclusion I reckon within the next five weeks, but let’s go from jet fuel to alternative energy. There’s a question do you see a future for hydrogen in the energy mix now many investors were enchanted by the helium? One story which is found a large scale high grade helium project in Tanzania. However, the share price is still skirting along IPO levels. And but companies aside what about investment opportunities in the infrastructure energy storage? Fuel cells or some other usage?

JM: Yeah, well, I actually I was a seed and the seed investor in Helium One and my friend Ian Stalker, who’s now the chairman of Bradda Head, which is another one of our companies was kind of founded that along with Neil Herbert. But I’m glad to say that was a very profitable one for us. Right and I think it’s done quite well for early stage investors. But, you know, all these early stage exploration companies as many of slip between cup and lip and it will take some time for them to pan out in terms of the hydrogen economy. I really believe in it. I think this is hydrogen, particularly for large scale transportation, like shipping, for instance, makes a huge amount of sense. The problem is the containment of the hydrogen is it’s heavy itself. So you know, where the agent is much more efficient than fossil fuels. You have to contain it in very secure vessels. That will be correct, I’m sure that that problem will be cracked. But there is a huge amount of hype around hydrogen and I just saw that the founder or the boss of JC Bamford’s, some has just started a hydrogen fund and when I see funds being started and then there’s all the hype, I’m always concerned that people are going to lose money so I won’t be personally subscribing to that phone. I think that we just it’s a great idea we’re probably working in practice, but I think we need to you know, consider the pricing. Its too high.

SL: Okay, well bit more. On the chemistry side, we’ve got some lithium or atomic number three. It’s an element of many uses manufacturer of aircraft and in certain batteries. It’s used in mental health. Bradda Head you’ve just two months ago listed on aim, described as a new breed of lithium explorer with unique exposure across all three main recognised lithium deposit types. Brian pegmatite, and sedimentary. Now next week, it’s changing its name to Bradda Head Lithium, which they could have done two months ago admittedly, but you are 21% shareholder. Jim, what’s the attraction?

JM: Well, I started the company. That’s why I’ve got 21% of it. But then I brought in Ian Stalker, and he brought in Charlie FitzRoy who is a great manager. And we started it really based on the explosion in electric vehicles, which is going to carry on. And for the moment, the electric vehicle remains unchallenged by hydrogen fuel cells, because although hydrogen fuel cells, as I mentioned, are going to be important, I think they’ll be important in large scale transportation first, rather than in cars. And there is a there’s a shortage of lithium, as we know that the price of lithium is at an all time high and there’s a particular desire by the US government, that lithium should be domestically produced. So we concentrate in Bradda Head on, by the way, Bradda Head is the name of the promontory right next to my house on the Isle of Man, which was a mining area, and they used to mine underneath the Bradda Head. So there is some legitimacy to the name. But they know that, all in all, their assets are in the US, they’ve done some clever deals in terms of buying back rights and so forth. And I think the, you know, the drilling programme is going to get underway, there’s a serious amount of money that’s been raised. And I’m very optimistic about Bradda Head, particularly because it’s in the US and you know, so companies like Tesla will be encouraged and will want to have a secure supply of lithium of all types from domestic sources. And that’s what we’re playing on.

SL: Well, hopefully, there aren’t any mine shafts that have been dug underneath your home, which reveal themselves at the most unfortunate times.

JM: I was very optimistic. Thank you for that. Now, I won’t be able to sleep at night, wondering if I’m going to be plunged down some sort of ancient hole.

SL: Oh, but it would be fun and it would probably..

JM: No it wouldn’t be fun. Thank you. It might be fun for you, but not for me. But thank you anyway.

SL: The next chapter in a new book, but another question from the audience. Do you have a view about nuclear fusion?

JM: Yeah, I think it’s about that. But look at the UK is the world leader and in several places, a nuclear fusion. And I think that, you know, there’s got to be, it’s got to be a phenomenal thing. I don’t know any way of playing it from a commercial point of view and so from a Master Investor point of view, it’s something to watch and watch the companies that emerged from that. But I’ll tell you a little story about another area where the UK is a world leader in and that is quantum computing, which is going to be absolutely, incredibly important. A friend of mine called Ilyas Khan who I’ve known for 25 years, started a company called Cambridge Quantum Computing, which I’m very pleased to say I was the first investor in. It wasn’t very long ago, I think it was about eight years ago. They’ve just done a deal with Honeywell and the valuation on that company is $10 billion. Right? It’s not a company that’s well known in the UK, but it’s a British company. And Ilyas was saying when I last saw him, that the whole of the cryptocurrency space, all of it, which relies on you know, ledgers that are, you can’t hack will be upended by quantum computing within 18 months and that all internet protocols will be upended, and all secure. Internet passwords or WhatsApp will be upended. And it’s going to be a dramatic change. I mean, I’m not an expert on technology. But it’s going to be a dramatic change in technology. And this is why a company like Cambridge, Quantum Computing is worth $10 billion, because it’s right at the cutting edge of something that’s going to be actually dramatically important. I think we we should watch this. And I know that you’ve had some questions on cryptocurrencies, but I think people are in cryptocurrency should consider the implications of what might happen with quantum computing because they’re important.

SL: So you have uttered the word crypto, which still sends fear through my spine. But you’re right, the questions have come in. Jim, what’s your opinion of utility enterprise grade cryptos.

JM: I don’t even know what that means. But I assume it means the larger cryptocurrencies like Bitcoin, Etherium, and so forth. I have to absolutely confess that I’m not an expert in this And I’ve missed the boat, except that I have a friend called Jean-Yves Sireau who’s an enormous believer that fiat money is dead. The banking system is an efficient, and the crypto will replace that. I have a niece who works in the crypto space and again, they’re a fervent believer in it. And they could well be right, that could be a significant role for crypto. However, we are seeing far too many coins being created and far too much speculation and that normally ends in tears. And if you’re in crypto at the moment, my general view is that you should probably reduce your exposure, my friend Jean-Yves Sireau has a huge amount, I mean, massive amounts of money in crypto, and I keep telling him to take some off the table and buy a building or buy a fleet of planes, whatever, but monetize some of it. But there is something about crypto believers that they are. It’s almost like religion. And you know, they’re very, very fervent believers, and they may well be proved right. But for the moment, I would say it’s a phase of consolidation, probably time to take profits. Bitcoin went up to about 60,000 went down to 30,000. It’s about 45,000. That doesn’t indicate to me a very positive trajectory. So I think I can and I would expect that Bitcoin will go back to 30,000. So it’s not the time to be in it at the moment.

SL: So you’ve got the audience salivating about the quantum computing already. Colin asks, Do you have quantum computing investment ideas away from Cambridge Quantum Computing?

JM: No. I mean, Ilyas has done a deal with Honeywell, which is an American listed company. But I think Honeywell is a very big company, I’m not sure how big, I imagine it’s like 30 or 50 billion dollars. So the percentage of quantum computing in that at the moment isn’t very big, but you might want to look at maybe a way of playing the Cambridge aspect. But I’m just very proud of Ilyas, it’s, it’s amazing what he’s done. It’s incredible to have had that idea and to bring it to this level in such a short space of time, I don’t believe there is a single UK company that’s had the same trajectory. And yet, we’re not talking about it. We talk about Darktrace and talk about Oxford Nanopore. None of them are as big as Cambridge quantum computing in terms of their capitalization and it’s all happened in a very short space of time.

SL: Well, we’re talking about it now. But what we have been speaking about for time immemorial is the price of gold. It’s currently at $1800. That’s about £1300. It’s a good hedge against inflation and other issues that we are battening the hatches against. Is it still a good investment, whether held in an ETF or a related investment vehicle? And can it touch 2000 US dollars?

JM: Well, it touched $2,000 a few months ago and I’m not holding for it going to 2000, I’m holding it to go to 5000. And, you know, I’ve been saying this for a while, but I think we are in an inflationary environment. The central banks are saying “Oh, it’s transient, you know, it’s gonna be temporary” and there is some evidence of monetary slowing down in the United States. There’s obviously a slowing down in China that’s going on at the moment. But we are in fundamentally a new era of inflation, you know that the period of long term deflation that’s lasted for the last 30 years, is now broken. So governments have got used to pump priming, but printing a lot of money to keep economies afloat, distorting the economy’s you know, it’s not normal type of base rate of 0.1%. That distorts everything in the economy. And the best hedge against that longer term is absolutely gold and silver, maybe with platinum attached to it. So I’m absolutely believer, not in the way that people are believing in cryptocurrencies because there will come with time to sell gold and silver. But I would suggest that if you buy gold today, and you close your eyes in five years time, at some point, it will reach close to $5,000. So it’s, you know, it’s a no brainer. Now, go back to the 1930s. The US left the gold standard at that time and also left again in the 1970s. And in the 1930s. The US government confiscated all privately held gold, but this time, they’re not going to confiscate the gold. I think they might try and regulate and impose taxes on cryptocurrencies which is a very big market as well. So I don’t know which way things are going, but you know, gold is an essential part of everyone’s portfolio at the moment. And you can play it in a whole variety of ways. As you know, Sarah, that you can go from the big miners like Barrick or Kinross to small ones like Condor which I’m a significant shareholder in, and even smaller ones than that. Or you can buy ETFs but make sure that they’ve actually got physical gold behind them, not just paper ETFs. And oh, you just buy futures in gold or you hold gold coins. And in the UK, if you buy sovereigns, because they’re legal tender they don’t attract the VAT. So it’s that’s a good one for British people to buy.

SL: So you mentioned Condor Gold there. I last spoke to the chairman Mark Child about six weeks ago, and he tantalisingly spoke about the first gold pour being on the horizon. Do you know, if that’s still the case?

JM: I think that, you know, Condor’s released all its plans and so forth. There are two phases, there’s a kind of, you know, early stage gold mining, smaller production, as I understand it. And that may be relatively soon by relatively soon over thought in the next year or so, you’d have to ask mark for the exact detail. And then large scale production of you know, 100,000 ounces a year or something like that, and 18 months or two years time, the main risk in Condor is not the gold, or the mining execution or anything like that, that’s really being very professionally handled. There’s a perception of political risk in Nicaragua, which may be overdone. But you know, price per ounce in the ground for Condor, which is increasingly proving up more and more reserves is low. And that’s why I think I’ve got, if I said, I’ve got 18% of that. I think that’s about right. And I’m very happy holder of that. and I will continue to support Condor. And one day, hopefully, I’ll get my just reward

SL: You need to have, you need to have an Excel spreadsheet in front of you in terms of all the investments you’re making and the companies that you’ve created as well. But we talked briefly about the vehicles that give people access to the precious metals. question here. What are your thoughts on Golden Prospects Precious Metals? Now, this is a fund and of course, one way to get exposure to multiple companies operating in the precious metals space. Are you familiar with the company and its fund?

JM: Never heard of it, but I look it up after this. So thanks for the tip, whichever viewer that was, and I’ll look it up. I always like to hear about new ideas. So thank you for that, but at the moment I’m unfamiliar with it.

SL: It’s something that was a question from our cohort of master investors. And another master investor has asked if Jim is as bullish on silver as he is on gold?

JM: Yes. It’s more volatile than gold as we know. There’s a significant gap, at one point that gap was absolutely enormous and in ratio terms much more than it had been since the 1960s. It’s narrowed a bit but I would say silver, currently it’s like $25 an ounce, is going to be $50 an ounce by the end of next year. So yeah, definitely buy silver.

SL: Okay, and to round this section up, Neeraj. Taylor asks about precious metals. Do you recommend buying US stocks or ETFs, or even as gold bars, for example?

JM: Well, I just said any one of those and depends on your appetite for risk, you know. The gold stocks will go up probably more than the price of gold because they are operationally leveraged to gold. I think if you’re looking for dividend stream and you know, big companies like Kinross and Barrick, which are two very large US-listed companies, are probably a way to play it. And if you just want security, then get some called gold coins and/or gold bars, if you’re rich enough to afford those, and put them in a place that no one knows about, including your husband or your wife just you know, have them under some sort of rock in the middle of nowhere and wait for the day that you need it basically.

SL: Or under that shaft, which is under your house on the Isle of Man. So you’re in Dubai at the moment. I’m anticipating that you’re going to be in Glasgow at the end of October because from the 31st of October to November the 12th Glasgow is going to be a very busy place when it hosts COP26, that’s the UN Climate Change Conference, zero carbon, zero waste, net zero. You’re going, I’m assuming, and if you are, what are you wanting to learn? Or what are you wanting to contribute?

JM: Yeah, we’re the longevity forum, which is a charitable organisation founded by Andrew Scott, Dafina Grapci and myself, is putting on its fourth year events, one of which is in Glasgow, in November. And we’re going to combine the idea of longevity being linked to climate change, because we won’t live very long if we carry on allowing climate change to get out of control. And so my own panel, my own contribution to that is, one way of reducing climate change is to change the food system. 20% of global emissions come from intensively farmed animals, and we are able now to put our minds to reducing that level of intensive farming. Intensive farming didn’t really exist until after the Second World War. So that’s what we’re going to be talking about. The contribution that we can make is trying to influence policymakers to see that this is the largest form of man made emissions, it’s a form that can be dealt with relatively quickly. Methane is a much more noxious mission than carbon and most of the methane emissions come from either natural gas or from cows. And the we can do something about, you know, the emissions from animals are relatively quickly. And that’s actually the reason why I’m in Dubai at the moment, because in the UAE, they import 95% of their food, so they’re very receptive to the idea of making food and labs and getting rid of animals in that food supply system. So that’s why I’m going but we can’t find a hotel room in Glasgow so we’re going to go from Edinburgh, because it’s 30 minutes on the train. And we can stay inEdinburgh. So Glasgow is completely packed out. It’s really really difficult to get any accommodation that…

SL: Edinburgh is just as nice.

JM: I was born in Edinburgh, so yeah, it is just as nice. My dad was born in Glasgow, so we won’t have an argument about it.

SL: Okay, but do not have any family in Edinburgh who could look after you or have you’ve fallen out with them.

JM: I’m not following up with any members of my family. But I do have an apartment in Edinburgh.

SL: Very good. I’ll stop worrying about you. Now, about a month ago I attended vegan fest at Newark Showground. Now, I’m a meat eater, but the 12,000 people that were with me, aren’t. And I remember looking around seeing business cards being exchanged and I was thinking and to forgive the pun, it’s begun at grass roots level amongst the young. Now, you’ve anticipated a lot of the trends that I was witnessing at the vegan camp out a month ago, which brings us on to your company Agronomics, which you’ve just referenced, it has a focus on cellular lab grown meat alternatives, plant based sources of nutrition. This week, there’s been plenty of news out from your portfolio constituents. So how is the portfolio developing? And what are the common themes emerging apart from the ones I’ve just mentioned?

JM: Yeah. Well, I’m really, really keen on this revolution. And it’s really the first one I’ve been in the very early stages. It’s like the dial up phase of the internet. It’s also, unless you’re a dairy farmer or cattle farmer, one which you really can’t object to. And so we are still quite early, but you know, there are about 80 companies in the world involved in cellular agriculture or growing products in laboratories, materials, like cotton, or collagen, or leather. And of those we think about 30 or investable and none of them are public. So for the the master investors, really as far as we can see at the moment, I’m sure there will be competition that comes along and some of these companies will go public, Agronomics is the vehicle that represents the only way that I know that the retail investor can participate in this and I’ve got my money where my mouth is. I’m the biggest shareholder of Agronomics and I haven’t sold a single share. I don’t intend to. I think it’s good. You know, I just love this industry. And let’s put it this way, none of the products are science fiction, all the companies have products that you can taste or feel, some are being sold. But at the moment, they’re small scale. However, in the case of meat, which is probably the biggest market that these companies are addressing, it can be any species of meat, there are three key components to the cost of production. One is the cost of bioreactors, which are huge, great big stainless steel, sort of, like containers, cylinders. That price is coming down as they get bigger. The second cost is what’s called media. And that’s the nutrition that goes to feed the cells that are being amplified in these and their muscle or fat cells in different containers combined for meat. And that media cost is coming down. But what’s most dramatic is that the biggest cost a couple of years ago of producing this is growth factors. Growth factors are the ones that encourage the stem cells, and then ultimately, the cells to amplify and create meat very quickly and safely. The growth factors in the last year have come down in price by 95%, which emphasises that my book, which is called Moo’s Law, it’s a riff off Moore’s law. You know, the semiconductor guy’s famous law, for the price comes down by 50%, every 18 months, and the efficiency doubles every 18 months, applies, but it’s even faster in cellular agriculture. So in a few years time, we’ll see these foods which are by the way, perfect. They don’t have any antibiotics, no hormones, no faecal contamination, no bacteria. They’re the best in species. They are meat at all levels. They are fish. They are dairy products. They are not synthetic in any way, they are just a more efficient way of producing these products than the animals which we previous previously have used. So if you think of a cow as being a very inefficient factory, what these companies are doing is producing efficient factories. And before I get on this rant too long, I’ll just briefly say that a cow takes in 25 times more protein than it puts out. At scale, the cellular agriculture takes in two and a half times the amount that it puts out. So one day in the relatively near future, India, China, and so forth, will be able to get their meat at lower prices. And the conventionally found me with no emissions, no antibiotics, no animal cruelty, no water use waste with, I don’t know if you know that there’s a huge amount of water use waste in agriculture. And they’ll get it more cheaply. I mean, how good is that? And so this is a fantastic convergence of science, at exactly the right time, when humanity needs it.

SL: So you answered the question that came through about some updates on the medium costs for producing cultured meat? What about AI insights into your predicted timelines for the mainstream adoption of alternative lab grown products? Or does it all depend on how you lobby and how effective you are at COP 26?

JM: I don’t think it’s anything to do with me to be quite honest, my voice is a tiny little one in comparison to some much more serious voices. But the total addressable market that these companies at the moment are going after it’s a $5 trillion market, which is twice the size of the UK economy. Of that 1.4 trillion is meat, which is about the size of the Spanish economy. About $750 billion is the dairy industry. The fish is somewhere between 200 and 300 billion dollars. And then you’ve got materials like leather, cotton, and so forth. But I mentioned the first very big opportunity to see the trajectory of this stuff will be that dairy will be the first one to be completely displaced. Dairy cows emit more noxious emissions than any other animals on the planet. Forty percent of all, cow all methane emissions from animals come from dairy cows. The dairy industry is a precarious industry financially. And there are a lot of animal welfare issues with dairy as I’m sure you know and I’m not going to go into the detail on Master Investor. So at the moment plant based milks, which we’re all familiar with oat or almond based milks or soy milk or whatever, have about coming up to a fifth of the US market and that’s pretty similar in the UK. But they’re plant based. When precision fermentation products come on the market, which is where they grow whey and casein using precision fermentation, it’s almost like a brewing process. But it’s an exact, not replica, but it is exactly milk, and then yoghurt, cheeses and so forth. And that’ll be on the market next year. The game’s over for dairy farming. And the price of this stock will be lower than the price of conventional milks, yoghurts, cheeses, etc, but the bearer exactly the same. And so of course, you can also engineer them to be without lactose issues so lactose intolerant people can eat them. So dairy is the first one to go. The second one is fish. There isn’t a strong lobby for fish and the US is likely to approve fish as early as the end of this year so within three months. And then Bluenalu, one of our companies, will be selling it next year in the US market. Small scale to begin with, and ultimately, big scale. No methyl mercury in that fish, which is something that everyone should be worried about. No overfishing of the oceans and destruction of the ocean beds and coastal regions. And, you know, no microplastics, which are absorbed by most aquatic species at the moment. So just ticking every box and not destroying the fishing industry, but just acting as a third arm of the fishing industry. So farmed fish, wild caught fish, and cultivated fish, all working together to satisfy the growing need for fish in the world. It’s growing about 9% a year and particularly in Asia, it’s very important part of the diet. So we’re super excited about that. And the materials are here, so leather is already being sold by vitro labs, one of our companies, to the biggest fashion houses in the world. There’s already that it’s lab grown leather, which is much better for everyone, especially if you’re a calf that’s being slaughtered for your your hide. And it’s best, it’s identical to the best quality leather that you can get.

SL: Okay, well, there will be blood if I don’t move on. But one of the audience is talks about Beyond Meat and Oatley, the brands being grotesquely overvalued. And finally, is the Agronomics trading in the US on the OTC the same underlying investment as the one that trades in London.

JM: I’ve never heard of Agronomics trading OTC in the US, I have to look it up because we hold the copyright on that or the trademark or whatever it is so it must be a pale imitator. But no. Okay, a very good question Oatley and Beyond Meat. I don’t know if they’re wildly overvalued because obviously they have huge traction and upside in earnings and they’re certainly not as overvalued as Tesla as an example. But plant based foods typically don’t have strong intellectual property protection. And the reason that we’re so keen on cellular agriculture is that because of our biotech background, because we started companies in biotech with partners. We know that intellectual property is the key to long term or is a key to long term economic value and I think most of the companies that we’ve invested in will be bought out by the conventional beef to producers, a bit like biotech companies are bought out by big pharma companies. And so we’re very keen on the IP aspect of cellular agriculture. Also, it’s not entirely clear that some of these plant based foods are any better for you than eating conventional foods and also the potential for them to get their prices down to way below the level of conventional foods is not as great as for cellular agriculture. So we love the cellular agricultural space and that’s why we’re focused on it.

SL: Okay, this is the last time I’m going to plug your book, Moo’s Law but…

JM: It is profits to charity by the way, so please, go ahead and buy it and I will not be benefiting. I won’t be going out on the town in Dubai celebrating more royalties because it all goes to the Good Food Institute.

SL: Okay, that is good to know. However, that book and royalties are going to charities hones in on the holy trinity of longevity, climate and farming. Let’s have a look at longevity and Juvenescence. Juvenescence is investing in a wide range of anti-ageing therapies that it thinks have the potential to extend the human life. Time is against us, as we know and we’re waiting for the news of a potential listing any updates on the Juvenescence essence IPO? Jim?

JM: Yeah, well, let me put this in context. All right. So I’m the chairman of Juvenescence and along with Greg Bailey, one of the largest shareholders. And we together, Greg and I have put in nearly $50 million of our in cash into this business, so we believe in it. We’ve raised about a quarter of a billion dollars, in the last four years since the company was established. We have some very interesting, indeed, fairly advanced projects. And I would expect that we will go pubIic, I mean, I can’t go into too much detail because of obvious public market reasons. But I would expect that within the next few months, Juvenescence will be a public company. That’s my current expectation. The industry itself has obviously got huge potential, but it’s an iterative process. So there is no polypill, one pill that people will be able to take that will take years off them and it’s a bit like the food industry, it will take some time for it to happen. But I do believe that we all Sarah, you and me, will probably live to, my dad’s 92, we’ll probably live to well over 100 unless we get run over by a bus. But I think most people on this Master Investor, chat will be living to over 100. Children today have a good chance of living to 110 or 120 and that will be as a result of biological intervention. It won’t be because of the improved environment, it will be because of biological invention. I don’t believe that people are going to be immortal. I don’t think there’s anyone who’s going to live to 1000. But I do think now we know what the pathways of ageing are and almost all of them are malleable, they can be changed in mammals, that will happen. So Juvenescence, as an example, is in a phase two trial for liver regeneration, which is a platform technology that might encompass things like the thalamus and the pancreas. And in the liver, this is super exciting because you can regrow our liver in the body at a fraction of the cost of doing a liver transplant. And so that’s just one of the many Juvenescence products, so when Juvenescence comes public, I hope that investors will admire it. Now my partners and particularly… No, they’re both fantastic in different ways. But one of them, a guy called Dec. Doogan, five years ago, invited Greg, my other partner, and myself. And this company has been promoted through Master Investor through the last few years. That was five years ago it started and we put in $3 million and bought 54% of the Biohaven. Today Biohaven’s got a drug on the market, which is remarkable. Five years, as you know Sarah, to put together a drug on the market. And it’s the best selling drug for migraine in the United States, and it’s got a nice platform behind it. That company is worth 10 billion US dollars. Alright, so Dec knows how to get the best out of the people and to shepherd the drugs. Greg is really good at the financing of drug companies. I’m very happy to be along for the ride, but we own 54% of that company. We don’t anymore because it’s been diluted by issues, but it’s been a phenomenal investment for us. And I think Juvenescence has got an even greater potential. But we know something’s gonna work, we just don’t know what’s going to work so it’s an early stage investment. But the team is really really good. Our COO was formerly the Chairman of the Crick Institute, which you’ll be familiar with, which is the leading scientific Institute in London based in Kings Cross. Two thousand scientists there. We just have a fantastic team of drug developers and now we’ve got a consumer division with a drug with a product on the market. So I’m very excited about it and yeah, Juvenescence will be a big success.

SL: All right, good. I’m just visualising a new liver being grown on a petri dish but…

JM: No, it’s grown inside you. It’s it’s basically hepatocytes which liver cells are implanted into lymph nodes, of which we have about 500 or 600 adjacent to the failing liver, and they act as an ectopic bioreactor to create new liver tissue which over time takes over from the failing liver. And the FDA has approved it to go into sick patients, which is remarkable. And there are millions and millions of people with terminal liver failure, and they don’t have enough livers to go around. And the liver operations cost about $800,000 and take 15 hours and you’re on very heavy immunosuppression the rest of your life. How great it is that we could provide an operation that costs $100,000 as an outpatient procedure. And you don’t need to go on the level of immunosuppressant drugs for the rest of your life. It’s fantastic.

SL: It is a thing of beauty. And I’m sorry, I was being flippant about the petri dish, but that’s how I envisioned it initially. And speaking of time, this is a question from the audience. A large number of older people have downsized and are sitting on a lot of cash. Any suggestions as to how best make use of this money given time is not on our side? And we’re not talking about the people who’ve been collecting the Kew Gardens, 50 pence pieces. so what should they be doing with their cash?

JM: Well, it’s not just all the people are sitting on cash, it’s corporations got huge amounts of cash. And this is in part due to the manipulation by central banks and governments of the fundamentals of the monetary system. And I’m not talking about conspiracies. They said they had to, they felt that they had to do this and once you start doing it, it’s very difficult to stop. So it’s very difficult, because if you are earning nothing on your deposits, and if you buy bonds, which are vastly overpriced, and in some cases, giving you a negative yield, you’re basically eroding your capital, especially in a period of inflation. So my recommendation, if you’ve got a lot of cash, is to if you’re older, if you don’t want to take huge amounts of risk. I would buy some gold because I think it will provide a good inflation hedge. I would look at some very blue chip British shares. We talked at the beginning, Sarah, about how British shares are cheap by international comparison. And if I may, if that’s alright, I’ll give you a few examples of shares that I like, I wrote in the last Master Investor piece I wrote that my current favourite is Tesco. You’ve seen that there’s been a bidding war for Morrison’s which is a much weaker version of Tesco. I see no reason why a private equity raider wouldn’t go for Tesco. It’s not a national importance company. You get 400% dividend yield, it’s at 10 times cash flow, it owns about half of its property. It’s the outright leader in online in the UK, way ahead of Ocado, and it’s a well run company. Its divested its Thailand operations and paid a special dividend earlier this year, which is why we look at the chart, you’ll see if there’s a drop next when the special dividend was paid. I think it’s a better investment than cash and I think it’s got 30% upside. So that’s a recommendation. I, as you know, recommended Lloyds when it was in the 20s. They went up to nearly fifty, maybe it got to 50, it’s about 43 now. Lloyds is not a particularly brilliant institution, but it is dominant in the UK mortgage market. Basically what you’re doing there is, if you’re if you’re a customer of Lloyds, you’re earning nothing on your deposit. If you buy Lloyd shares, you’re probably going to go six or 7% dividend yield. It’s a no brainer, I think you should buy that. Its a discount to its book value. I think that AXA Insurance, the French insurance company, is very cheap. And I’ve been buying that one. And Babcock, which is a company that’s beset with woes, but is our national warship builder and builds all sorts of warships around the world. Given that defence is going to become an increasingly important thing and it’s kind of cleaning up its act on the new management, I think Babcock is probably a buyer at that stage, about 350 pence a share. And then in Japan, which I still think is a very cheap market and is on a bull run. Hitachi is my favourite stock at the moment. So I would buy Hitachi, one of the biggest Japanese companies well diversified, relatively cheap. And those will be my recommendations. And if you want to go into pharma companies, in the UK I think Astra is better than GSK so I would go for Astra. And in the US, Merck and Pfizer both offer good dividend yields and Pfizer is enjoying a bonanza because of the jointly developed Pfizer BioNTech vaccine which they didn’t expect I think, to go into booster shots and to children and all that sort of stuff. They’re minting it basically at the moment, so that’s probably a good one.

SL: So I know that in the past, you did buy Aviva. Is that still in your books?

JM: Definitely. Yeah, sorry, I don’t want to, like sound like a broken record, but you know, any of the UK blue chip, financial stocks that, you know. Like Phoenix is another one, they basically pay out a decent dividend. Its a much better alternative to cash. People remember in March or April of last year, there was a sudden destruction of value in the stock market. That was panic and most of those companies have gone back to the levels they were at pre-pandemic or even above those. And so, you know, even if there is high volatility in stock markets, you know if you buy this sort of blue chip stuff, and you want to be cautious about your investments, I think these are good ones to go for. And, actually, if you buy these sort of stocks, you don’t need to go through a fund and pay management fees. You can just buy them directly through a low cost broker and, and hold them and then if they go down, then you can come and shoot me. But I’ll be in Dubai, so it’d be quite hard to find me. I’m only joking, by the way, but I think these are good investments.

SL: Yeah, might be hard to find you that shaft underneath your house in the Isle of Wight crumbles as well.

JM: Isle of Man, by the way. Big difference.

SL: So, there’s a question about Credit Suisse. We know that Credit Suisse has made huge losses due to exposure to two high profile bankruptcies. Archegos and Greensill. Any view on that, because you were in favour of Credit Suisse at the beginning of the year I believe?

JM: No, I was in favour of Credit Suisse after the fall. And so there’s a small profit on our Credit Suisse position, which I think is okay. Um, I think Credit Suisse, you know, I like the firm, I’m actually a client of theirs. I think they’ve got really good people, they’ve got an excellent money management, wealth business, I think wealth businesses will do very well in the future. They’ve got a great franchise. They may be a merger or a takeover prospect, maybe even one of the big British banks might buy them like HSBC or possibly at a stretch Lloyds. But if they’re not bought, I think they they’re under much better management and the guy who ran Lloyds, as you know, I can never pronounce his name, but Portuguese guy, Antonio, whatever, is now the chairman there and is really cleaning up the top level. I think they just got carried away in some aspects of their business, but the fundamental business is core good and it’s about nine Swiss francs, nine and a half Swiss francs per share. And I think, you know, you can see 12 on it. And in the current environment, if you make 20 or 30%, in a stock, it’s jolly good because you’re going to make nothing in cash.

SL: So this conversation we’ve been having, it’s been very life affirming. I did try to start talking about COVID and depressed markets, and you corrected me and debated with me on that. But in terms of life affirming, affirming, you’ve got a large holding Portage Biotech as one of the founder investors. It’s got many projects in the clinic. Given cancer as one of the world’s biggest enemies of us all. What can you tell us about Portage in a life affirming sense?

JM: Okay, so Portage is run by a guy called Ian Waters. He is an exceptional scientist. He basically, a bit like Juvenescence, is an investor on a number of projects. One is called iOX in the UK where I think there’s they have the majority ownership. And then they have a smaller investment, I mean, smaller percentage in a company called Intensity, which is doing great stuff in trials. They are a bit like mining exploration company with multiple exploration prospects. And I’m pretty sure that one or two of them willcome right. Greg Bailey and myself, my long standing business partner, I think we own 70% of the shares. And, you know, we did very well with SalvaRx and UK investors will be appreciative of that. And it’s the same team that did that. And I think over time, Portage will do very well. Its market cap is about 300 million US dollars. It’s done extremely well, in the last year or so and I’m very confident in it. But you know, ask me about the details of cancer therapies and in various blockades and all that sort of stuff, and I’m afraid you’ve got me but I just trust the management and the quality of the team there.

SL: Jim, we’ve run out of time, but thank you very, very much for your very precious time because I know it’s it’s getting lateish where you are in Dubai at the moment.

JM: Sarah, you’ve been an absolutely brilliant interlocutor. We want you back on again, you’re absolutely fantastic. I’m sure everyone who’s been listening to this will agree with that you’re absolutely fabulous and thank you so much for you doing it. It is always a pleasure. I just love doing Master Investor pieces. and I can’t wait that we all meet up again, I think it’s early next year, in person. And as I said, I’ll make this prediction, now we are coming out of COVID. Don’t worry about the fourth or the fifth or sixth wave. I honestly believe that we’re towards the end of this and we want to see everyone in person at Master Investor, so please come.

SL: I certainly will. So that is next March. They have proved to be great fodder for some of the upcoming topics that you will see on the website.

JM: Thank you very much everyone.


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