This is an audio transcript of the Unhedged podcast episode: ‘How will Europe pay for its new weapons?’
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Katie Martin
¡Hola! Buenos días, y bienvenido al podcast Unhedged del FT y Pushkin en Madrid! The Unhedged podcast has been let loose on the world, and we’re making the most of it. So welcome to the second instalment of our humble podcast, recorded at the IE Business school in the Spanish capital, with an audience and everything. (Applause)
I’m Katie Martin, a markets columnist and an extremely bad Spanish speaker. I can just about order a café con leche or una cerveza and that’s about it. I’m joined by a double whammy. We have Rob Armstrong from the Unhedged newsletter in New York, and he’s doing pretty well for a man who got the redeye over yesterday from the States.
Robert Armstrong
¡Hola!
Katie Martin
¡Hola! ¿Qué tal? But also we’re joined by Barney Jopson. He was my colleague in London for a while.
Robert Armstrong
And mine in New York.
Katie Martin
Yeah. But now he’s the FT’s man in Madrid, which I’m gonna say is quite a sweet gig. (Laughter)
Barney Jopson
Yeah, it really is. It’s great to be here with you.
Katie Martin
So listeners, if you get confused, Rob is the massive, brash American, Barney is the infinitely wiser-sounding guy with an English accent, so that should keep you straight.
What we’re actually gonna talk about today is this extraordinary display of European unity that’s come not out of nowhere, but as a direct response to what’s been happening on the geopolitical stage with Donald Trump, with the situation in Ukraine. European markets are having an absolutely scorching run in stark contrast to what’s been going on in the US. This is like, not how the world works at all. This is not what we’ve witnessed, you know, pretty much ever in the past sort of 20 years that I’ve been looking at markets.
So, Barney, tell us, you’ve been over in Spain for was it two and a half years now over here. How is Trump 2.0 viewed from over here?
Barney Jopson
Well, let’s talk about the defence side of things first. One reason for the changes that you mentioned there is that Europe is petrified that Trump is about to pull away the US defence shield that has protected this continent for so many decades. And that’s led to the erasing of all kind of red lines. It’s led to the sacrificing of sacred cows because Europe has realised that holy cow, we need to do something different to defend ourselves.
That’s got a whole bunch of implications. One is that Germany said it’s gonna throw off the fiscal shackles and start spending whatever it takes to boost its own defence industry. You’ve got the European Commission talking about raising €150bn to lend to member states so they can invest in their own defence. It’s led to defence stocks soaring in Europe this year, precisely because they’re the ones, they’re the companies that are gonna get the bonanza of an increase in defence spending. So that’s just one side of it. But that’s just changed everything in the space of a couple of months.
Katie Martin
Yeah. No, absolutely. And I was looking at a really cool chart the other day from S&P, the rating agency. And it charts how close a country is in Europe to Moscow against its defence spending. And so if you . . . So the Baltic states and Poland spend a huge amount of money on defence. So you’re talking like somewhere between 3.5 and 4 per cent of GDP they spend on defence. Now the further away you get from Moscow, the less and less and less you spend on defence. Spain and Portugal are not fulfilling their part of the bargain here.
Barney Jopson
They aren’t.
Katie Martin
So what . . . Is there an acceptance in the Spanish corridors of power that something’s got to change here, and that you need a new defence strategy, or is there a sort of idea that look, we’re miles away? Why do we need to worry about this?
Barney Jopson
You’re right there. For a long time, Spain and Portugal have been sort of trying to hide in the corner, hoping they don’t get noticed. But they now have been noticed by you and everyone else. I mean, just to put some figures on it, the Nato target is that members should be spending 2 per cent of GDP on defence. Spain last year spent only 1.3 per cent, so it’s a long way away. It’s got a long way to go. And now Nato’s talking about lifting that target from 2 to 3 per cent. So it’s even further away.
The realisation that something needs to be done in Spain has dawned. But for a host of political and historical reasons, you can’t just click your fingers and change. So the prime minister here, Pedro Sánchez, is talking very gingerly about the fact that yes, we need to act. Yes, we’re good Europeans. Yes, we’re gonna support Ukraine. But that has not yet resulted in a meaningful pledge to increase defence spending. It has not yet changed his policy on how to support the defence industry because if he moves too fast, it will trigger a backlash from members of his own governing coalition and from some people on the streets in this country, which is still largely anti-war and pretty pacifist.
Robert Armstrong
I mean, your comment there, Barney, kind of raises my main question about what we’ve seen in markets here. There’s been almost this euphoric response to the idea that Europe is gonna change its attitude towards defence, and it’s gonna spend more money. But this sounds much more ambiguous to me than the markets seem to be reading it as, both on the spending side and the military side. Is your feeling that the markets have kind of gotten ahead of themselves, the euro, European stocks, you know — is it ignoring a political reality we should be kind of alert to?
Barney Jopson
It’s still very early days and maybe markets are not appreciating that. I do think the sort of the end of the German debt break, Germany’s willingness to do whatever it takes on defence, is a huge deal that merited a sort of a change in the calculus. However, let’s think through the stages that need to happen first. If Europe’s gonna increase its defence spending, all the countries need to agree to do that. And as I’ve just said about Spain, they haven’t agreed to do that.
Second, once they’ve got the money, they need to co-ordinate on how it’s gonna be spent. So you make sure that a munitions factory in southern Spain is building munitions that can fit into a missile launcher built in Germany, right? And once you’ve co-ordinated, then the third stage is helping to ensure those companies can actually increase their capacity, which doesn’t happen overnight. You can’t just open a bunch of factories from one day to the next. So we’re very early days. Maybe the market is getting ahead of itself because there’s a lot more hurdles to cross over.
Katie Martin
Yep. One thing that we keep hearing at the moment is that one trick that Germany can play is that it can turn all of its car factories that are not succeeding terribly well at selling their cars into tank factories. Does Spain have a large part of its manufacturing industry that it could turn to defence if it really wanted to, and is there a kind of groundswell of support for doing that?
Barney Jopson
So Spain is in a similar position to Germany. It’s the second biggest car producer in Europe. But some of those factories are lying empty. I was in Barcelona last week, which is one of the big car producers, and precisely this idea came up. Let’s convert these factories into defence. For now, I think it’s an idea circulating among the sort of the intelligentsia, the think-tanks. It’s not a discussion or an idea that’s reached the streets, partly because, again, the prime minister does not want people to be thinking this far ahead because he fears that if you move too quickly in turning Spain into a defence superpower . . .
Robert Armstrong
Can he come run America, do you think? Come and run America?
Barney Jopson
(Laughter) Yeah. Well, he might be a little too leftwing for the average American (inaudible), I think.
Robert Armstrong
I’m gonna ask another dumb American question here. I focus very much on the American market and the American economy, as you both know, in my work. But it seems to me that Europe has shortages, but a debt shortage is not something that it had. How do I untangle that knot? We have this very positive response in markets to the news that there will be more debt on countries that are already struggling with their debt levels. How does that work?
Katie Martin
I mean, there’s no sensible argument that Germany is struggling with its debt levels, right?
Robert Armstrong
OK, that’s fair enough.
Katie Martin
So it’s prepared to borrow a lot more. We had a piece in the FT the other day suggesting that Germany can spend €2tn extra over the next decade without harming the economy. So Germany’s starting from such a low base in terms of its borrowing. That’s why yes, you saw German bond yields pick up, right? So you saw the bonds fall in price, which meant that the yields went up, which is normally the market’s way of saying, we don’t like this, this is too much borrowing.
But, at the same time, you had the euro gaining in value and you had German stocks absolutely racing higher. So the market is not saying hell’s teeth, this is too much spending. You’ve got to stop it right now. The market is saying carry on, as you were.
Robert Armstrong
A little growth. Real growth expectations drive bond yields up, or they should.
Katie Martin
Yeah. So you’re gonna have more inflation. You’re gonna have more growth. This is . . . You know, spending on defence is fiscal stimulus. And people often lose sight of this. So that’s one way of viewing this.
But Spain is in a somewhat different position, right? It does have higher debt-to-GDP levels. So can Spain borrow its way out of this situation that’s imposed on it on its own, or the really big question, the really big prize is does the EU pool resources and borrow as one bigger entity? Again, is there political will for that?
Barney Jopson
So Spain would very much like a pan-European borrowing or pan-European funding, partly because if everything’s pooled it gets a better interest rate on its debt. So Spain is pushing for a pan-European financing solution. Italy’s pushing for a pan-European financing solution. As is often the case in these debates, Germany, despite the change in fiscal policy, Germany and France are reluctant.
Robert Armstrong
This touches on the point you made in the last show, Katie, which is that is there an alternative to the dollar as a world currency? A euro with a common financing mechanism has taken a big step in being. I mean that whenever you say to people there is a world beyond the dollar for the global financial system. And what they respond to you is, what are you gonna buy, the euro? (Laughter) You know? But if you have a common financing system, and even beyond that you have more financial integration, you have a more integrated banking system, suddenly you have a currency on your hands, a proper global currency. That could be a huge change.
Katie Martin
Yeah, because the big problem with using the euro as a reserve currency to rival the US dollar is the German government bond market or the Spanish government bond market or Italian or French or whatever it is, no one of them is simultaneously large and safe enough to accommodate all of those flows. So if you’re a really big reserve manager at a central bank or a sovereign wealth fund or whatever it is, you wanna dart in and out of a bond market. The only one that is big enough to absorb that flow without you leaving a huge mark on the market is Uncle Sam, is the US government bond market. But — and all I’m saying is I can see a situation five, 10 years from now where Europe is forced into a situation where it pulls all of its bonds and it could take that role. And I know that’s a bit kind of pie in the sky, kind of Eurocrat stuff to say, but I think it could actually happen this time. I mean, Barney, do you get the sense that Madrid is taking this role of a combined European force for good seriously?
Barney Jopson
It is. And Spain’s acting with a bit more confidence. The economy in Spain was the fastest-growing big economy in the world last year; still growing pretty well now. That’s given Spain a bit of swagger. So it’s at the table in Europe presenting ideas about sort of common financing in a way it didn’t before. It has Portugal behind it. Italy, with some nuances, is behind it. So the strength of Europe, southern European economies, is giving them a bit more heft in these negotiations.
Robert Armstrong
OK, I’m gonna try to ruin this nice, happy story that we’re telling here. The old joke sort of 10 years ago or a little more in the Eurozone crisis. The joke was, you know, what is Europe? It’s Greece’s economy with Germany’s currency, which was a disaster. You needed currency weakening, but you couldn’t do it because you had Germany in the mix.
And now, yes, it’s wonderful for Germany to have higher bond yields. They signal an increase in real growth prospects, I agree with you, not excessive spending. But the rest of Europe has to eat those bond yields too. It forces everything up, every bond. So if you’re a peripheral country in Europe, one that’s not in such a fiscal situation, suddenly you have Greece’s economy and you have Germany’s bond yields, right? And so it’s harder for you to borrow and it may get worse. Again, I’m just playing the devil’s advocate here. It gets worse if there’s a common European debt. That’s gonna crowd out maybe French bonds, maybe Spanish bonds, maybe whatever. So this could go badly the wrong direction, right? Don’t you think?
Katie Martin
It could, but it’s not obvious to me that Europe has another choice at this point. You know, it’s got to step up defence spending. None of the national government bond markets is big enough to do this on its own. So, you know, necessity is the mother of invention. I mean, Barney, what are you hearing in Madrid?
Barney Jopson
Well, look, I think it’s gonna happen one way or another. The mechanism through which it happens is still to be decided. Just one little side note. I think France’s . . . Sorry, France’s borrowing cost is actually higher than Spain’s right now. That tells you partly how things have flipped in Europe. So some of those contradictions are not quite as they as they used to be.
But yeah, look, this money’s gonna come from somewhere because it has, to because the alternative — and Rob, this is part of the answer to your question about why markets have risen so much. The alternative is that Europe can’t defend itself. It’s abandoned by Trump and Putin, to use a phrase Trump once said, can do whatever the hell he likes with the continent, right?
Barney Jopson
If Europe gets its act together, if it can defend itself, well, then thank God. We can feel a bit safer. And I think that’s part of the reason, emotional as it is, for the fact the markets have gone up here.
Katie Martin
Another opportunity for us to be mean to Americans is for decades, the European defence sector has relied on bits from the US. So it’s relied heavily on US defence equipment. It, you know, the FT has been reporting about this recently. Now European capitals, European defence ministers are saying we can’t do this any more. We can’t buy American kit because we don’t know . . .
Robert Armstrong
They’ll turn it off.
Katie Martin
You’ll turn it off.
Barney Jopson
Kill switches.
Katie Martin
It’s unbelievable that we’re even having this conversation. So there’s a big gap in performance between US and European markets. European markets are doing much better than the US so far this year. But European defence stocks are absolutely racing higher.
Robert Armstrong
Murdering. Yeah, great.
Katie Martin
The US is going to discover quite quickly that its defence sector is one of its export jewels in the crown. And, you know, congratulations. You played yourself. You know.
Robert Armstrong
I just . . . I asked a professor here over lunch about how quickly that conversion can happen, and it’s extremely hard to say, he said. And he said it for the exact reason that you pointed out. It’s a co-ordination game. Actually turning one factory into another kind of factory, not that hard. Deciding for a heterogeneous group of nations where the factory is gonna be, who’s gonna make what, what are the standards gonna be, whose money is gonna be used, that is something that takes time to work out. You can’t just start. You just can’t have money and just magic up missiles or carriers or for that matter, kit for soldiers or soldiers themselves. That’s a question I want to ask you before you even make your comment is, do people wanna be soldiers in Spain or anywhere else in Europe?
Barney Jopson
I don’t think anyone’s gonna vote for conscription here or anywhere else, right? I mean, this is . . . We’ve seen what Ukraine’s had to do to get soldiers on to the front lines. It’s conscripting people who are 50, 60 even. Russia as well. Nobody in Spain or Europe wants to get involved in that. So, yeah, the manpower issue.
Robert Armstrong
You would look great in uniform, Barney.
Barney Jopson
(Laughter) Yeah, exactly. What I wanted to say is that ramping up production of tanks and munitions is one thing. That’s kind of like dumb material. Where Europe is especially dependent on the US is with something called strategic enablers. Remember that phrase? It sounds very obscure. Strategic enablers are the things that the technology the Americans have that enable you to run a military campaign. It’s like air-to-air refuelling. The Americans can do it. The Europeans can’t.
This is the communications and the radar systems that you need to get your jets talking to each other, that you need to kind of direct people on the ground. The Americans have that. The Europeans don’t have that. So yeah, turning out more tanks is one thing, but they also need to develop the knowhow in Europe to develop this kit which you need to run a campaign.
Katie Martin
Yeah. Look, we’re in a room full of young people. I mean, would you be willing to put boots on the ground in Ukraine? Put your hands up if you are.
Robert Armstrong
One. Good lad.
Katie Martin
Good man. That is not a huge groundswell of support for this. But again, like, Madrid is just so far from this eastern border.
Robert Armstrong
We’re not talking about necessarily a war. The point of increasing the size of your forces is precisely so you don’t have to send soldiers to the Ukraine.
Barney Jopson
But if there’s a peace deal, there will be a peacekeeping force and . . .
Robert Armstrong
Yeah. Fair enough.
Barney Jopson
Spain and others need to send troops to the peacekeeping force.
Robert Armstrong
Can I change the tenor of this conversation slightly?
Katie Martin
You can.
Robert Armstrong
And you can . . . We can turn it back later. We’ve heard a lot of talk from the likes of Mario Draghi about European competitiveness. And it feels to me if this immense rally in markets is gonna be backed up, if that surge in market sentiment is gonna be backed up by economic activity, Europe has to become more competitive as an economy. And people have been talking this way for a long time. It’s a hard thing to do. We Americans look at Europe and see a place that’s just miserably over-regulated, can’t get out of its own way.
Katie Martin
Oh, yeah. Well, you have really expensive healthcare.
Robert Armstrong
All of this is true. Yeah, exactly. And we’re bad at football and everything else. But similar to the question is there a feeling that a different world militarily is possible, is a different world economically possible — a less regulated, more competitive, more free market, less internal barriers even inside of the single market?
Barney Jopson
I think that’s really hard. I mean, in a lot of European countries, Spain is one of them, the bureaucracy is so crushing. Both in government and actually in business, many big Spanish businesses are incredibly bureaucratic, and that stifles innovation. This is not a great country for creating a start-up. It happens. There are some successful start-ups here, but it’s not for…
Robert Armstrong
It’s hard ground.
Barney Jopson
And changing the bureaucracy is just a terribly difficult task.
Robert Armstrong
I wonder how many students at this school plan to go work in America when they’re done. Anyone planning to go off to America when you get out?
Katie Martin
Show of hands: who wants to get out of here and go to the States?
Robert Armstrong
More Americans than soldiers, I notice here. Any freedom that you wanna have economically is bought by productivity. You know, this is the old line. Productivity isn’t everything, but it’s almost everything. And if you’re a more competitive, more productive economy, you have more choices — what to spend on, you know, how to live your life. Debt, not debt. Everything is easier when productivity is higher. And as it goes down, every decision gets more difficult because when there’s no productivity growth, everything is a zero-sum game. Everybody’s fight, it’s just a fight over the ungrowing pie. And so . . .
Katie Martin
But Rob, let’s ask Barney like one last question here. The call for European cohesion is strong. It’s stronger than I’ve ever known it to be before. Do you think that the EU and Spain within it, have they got the guts for this fight? Are they gonna do this or is this effort gonna dissolve in arguments, like it normally does?
Barney Jopson
I think they’re sufficiently scared of Putin that they will get it together. It won’t happen quickly, but they’ll get it together because the alternative is worse.
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Katie Martin
Yeah. All right. Listen, we are going to go to a very short break, and then we’re gonna be back with questions from the audience.
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Listeners, welcome back to Unhedged here at IE Business School in Madrid. We’re taking questions from our lovely audience.
Nicolás
My name is Nicolás. I’m from the Bachelor in Economics at (inaudible). And I was wondering, you were previously discussing on the current financial situation in the US and how the markets are currently struggling. In the scenario that this continues to go on, how can Europe capitalise on this, let’s say, struggle that the American economy is going through in order to step up in the global economy?
Katie Martin
Be a traitor, Rob. Tell Europe how to take the US down.
Robert Armstrong
Well, as we talked a little bit in the last show about how it is very unpredictable how the Trump administration will respond to a sustained weak market. Not this little baby-cute weak market we’re having right now. I mean, a real bad one. But I would predict that will weaken his hold on the electorate. A Trump with a bond market and a stock market that is in trouble is a less politically powerful Trump. Remember, in the House of Representatives and in the Senate, he has a very slim majority. There is gonna be more room to negotiate to the degree US markets are in real distress. I’m not predicting that’s gonna happen. I hope that it will not happen. But this is Trump. We’re talking about a negotiation. We’re talking about deals. It’s gonna be easier to strike a deal. How’s that for a guess?
Katie Martin
Yeah. Right. That will do nicely. (Robert laughs) Yeah. So let’s have the next question that we’re not gonna know the answer to.
Eduardo
Hello. My name is Eduardo. I’m a first year student in the dual degree of business administration/international relations. My question is sort of related to inflation. So last week the ECB cut rates to 2.5 per cent, sort of in the lowest that it’s been in over three years, more or less. This would have been five to six almost successive rate cuts in the past year. And Isabel Schnabel from the ECB came out last week as well and said that she believed the ECB might still overshoot the target, considering all of this growth that the EU is seeing. What do you think this impact will have on the Eurozone economy, on growth? And sort of simultaneously, how long do you think this boom in European stocks is gonna last? And can it sort of close the gap that it’s had with the US on growth?
Katie Martin
God, these young people ask good questions, don’t they? What the hell? You raise a very important issue here. And one thing that the European Central Bank was at pains to say at its last conference was we are meeting-to-meeting, data-point-to-data-point here. They are not making any effort to predict the future because that’s a total mug’s game at the moment.
So I think they’re gonna be flexible. I think you will get the usual pushback to higher inflation from countries like Germany and less resistance to it in Spain, Greece and other places. But, you know, the European Central Bank is not going to do anything to fight against what you’re seeing happening in European stock markets, certainly. I think it’s pretty comfortable even with where bond yields are. But they’re not gonna want to see inflation get out of control. But they will be very happy to see inflation that is sort of the cousin of higher growth. They don’t want to see inflation kind of run away on its own.
I think they’re actually in quite a good spot now. They’ve still got room to cut rates further. They’re being quite nimble in terms of how they’re reacting to the data. I don’t know. Barney, what are you picking up from here?
Barney Jopson
Spain is in a relatively happy place. Spain’s inflation has been lower than the rest of Europe for a while, partly because energy costs here are lower, which has a lot to do with renewables. So it’s not an issue on people’s minds here as much as in other countries.
Robert Armstrong
I am a guy who thinks that we didn’t just have an inflationary incident. I believe that the neutral rate of interest globally has gone up, and that we live in a more inflationary world for a whole list of reasons I won’t go into. So I will tell you I don’t think we had pandemic inflation. I think the inflation is with us now, and we’re gonna have to be more vigilant forever for your lifetime, for my lifetime. The uninflationary period of the last 10 or 15 years was the historical anomaly. It is over.
Katie Martin
Yeah. Totally. Thank you so much for your question. My God, we’ve got so many questions coming in.
Robert Armstrong
This is great.
Katie Martin
Make it easier than the last one. This makes me feel extremely important.
Sharad
I make no promises. I’m sorry. My name is Sharad. I’m currently doing my MBA. Just started, actually. So my question, in line with a lot of your previous topics discussed over here, is also going to be concerning the current devaluing of relations with China. Regarding how the US is currently imposing tariffs on China, do you see the EU play a bigger role with regards to relations with China? What kind of new dynamic do you see at play over here, especially with regards to China’s willingness to increase their expenditure spending on the One Belt, One Road initiative and increase their foothold in Europe?
Katie Martin
I specifically requested an easier question than last time. (Laughter)
Barney Jopson
I can say something about EU-China policy.
Robert Armstrong
Yes.
Barney Jopson
There isn’t one.
Katie Martin
Hooray!
Barney Jopson
That’s my top line. There isn’t an EU-China policy because there’s so much division amongst member states on how close or how cautious we should be with China. Spain is one of the more pro-Chinese countries in the sense that it’s eager to get investment. It wants investment for cars in particular. It knows that China’s got the car technology. So Spain and its prime minister has been currying favour with China in a way that’s caused some unease in other capital cities. So there’s not a unified China policy and different countries are pulling in different directions. But everyone needs some Chinese investment, that’s for sure.
Robert Armstrong
In a way, you’ve put your finger on the second most important policy question in Europe. The first policy question is, of course, military. The second policy question is what is Europe’s relationship with China? I think that’s a hard decision. This is why I’m glad I’m a journalist and not a real person who has to make these decisions. (Laughter)
Katie Martin
Yeah, we just get to . . .
Robert Armstrong
Talk it over. Thank you so much for your question.
Katie Martin
. . . shoot from the peanut gallery. Thank you so much. OK, last question. Here we go.
David Bickford
Yeah, I guess I’m the last one. My name is David Bickford. I wanna get your gut feeling on the sustainability pursuits in Europe. Do you think companies in Europe are gonna ditch that pursuit or we’ve seen that with BP sort of changing its core? It’s also a bit of pressure in America ditching that pursuit. Do you think they’ll stop or decrease the speed that they’re going with?
Katie Martin
It’s a really interesting question, and I get that a lot. It’s around, you know, so the US is like, just setting fire to diversity programs and setting fire to sustainability initiatives, at least in public. There’s a lot of that stuff that’s still going on in corporate America that’s just been rebadged or kind of hushed up that’s actually still happening.
I don’t detect anywhere near the same degree of allergy in Europe and the UK to diversity and sustainability initiatives. If anything, you know, we had a story about this just the other week. There was a big UK pension scheme and it ditched its investment manager specifically because they had ditched ESG. And so, you know, pension money, insurance money in the UK and Europe wants ESG and DEI and they couldn’t care less what the policy is in the States.
So I think we’re going to see quite a marked divergence between the two. I don’t think Europe wants to give up that agenda at all and they’re not spooked by the fact that the US is. I mean, Barney, what’s your experience here?
Barney Jopson
I agree. As long as the far right in Europe is not in power or not in coalition governments, I think the mainstream view will be to push ahead with sustainability with one caveat, which is that ESG funds used to stay clear of defence. Now defence is the place to go so you might see some redefinition of what ESG means to include some guns.
Robert Armstrong
This was absolutely a core issue with ESG, is nobody knew what it meant. Maybe we’re rethinking that in an interesting and dynamic way.
Katie Martin
There’s a lot of money that has not gone into defence stocks over the past 20 years because of ESG programmes that is now having a big rethink and heading in. I think that’s very healthy and a really big shift.
Right. We had an amazing run of questions there. Thank you so much. Give yourselves a round of applause. (Applause).
Robert Armstrong
Great students.
Katie Martin
OK. One more last quick thing. As I said last time, it is not the Unhedged podcast without Long/Short. Rob, stop coughing and tell us. You’ve got to stay alive for this one last period.
Robert Armstrong
Sorry. All right.
Katie Martin
Long a thing we love, short a thing we hate. What do you got?
Robert Armstrong
I think the European defence trade has room to run.
Katie Martin
Uh-huh. So you’re long European defence?
Robert Armstrong
I like the European defence stocks. I think they’re . . . It’s just getting started. That’s a long-term trade.
Katie Martin
Yeah. Good one. Very sensible. Yeah.
Robert Armstrong
Right on.
Katie Martin
Barney, have you prepared for this or is this a big surprise to you?
Barney Jopson
But I just thought it.
Robert Armstrong
It doesn’t have to be a businessy thing. Can be any old thing. We were long eels in the last one, so. (Laughter)
Barney Jopson
I’m gonna go long renewables. This is a success story in Spain. Gets 50 per cent of its energy from renewables, wants to get to 80 per cent . . .
Robert Armstrong
That’s a contrarian trade right now. Yeah.
Barney Jopson
. . . by 2030. So there we go. I’m gonna go long renewables and I will go short the aforementioned government bureaucracy, which is not great for innovation.
Katie Martin
Yeah. I am still short crypto. There was a note out the other day from Cliff Asness, who is a fund manager of some repute. He’s been in this business for a very long time, and he called it a “dangerous boondoggle”. And I agree with him. He’s specifically writing about the . . .
Robert Armstrong
It is such a testament to the quality of this school that we didn’t get bitcoin questions.
Katie Martin
No bitcoin questions. Yay! (Laughter) Yeah. So read Cliff Asness. I agree with him. And it’s never worth disagreeing with Cliff Asness because he can get really grumpy with people on the phone.
Robert Armstrong
Yeah. He’s so grumpy on the phone. (Laughter)
Katie Martin
Yeah, so grumpy. But he’s right about this. OK, that wraps up our . . .
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Robert Armstrong
Spanish adventure.
Katie Martin
. . . duo of Spanish podcast recordings. We’ve been made incredibly welcome by IE Business School. We’ve been having a lovely time, so muchas gracias. I hope we can do this again.
Robert Armstrong
Thank you all so much. (Applause)
Katie Martin
Unhedged is produced by Jake Harper and edited by Bryant Urstadt. Our executive producer is Jacob Goldstein. We had additional help from Topher Forhecz. Cheryl Brumley is the FT’s global head of audio. Special thanks to Laura Clarke, Alastair Mackie, Gretta Cohn and Natalie Sadler.
FT premium subscribers can get the Unhedged newsletter for free. A 30-day free trial is available to everyone else. Just go to FT.com/unhedgedoffer.
I’m Katie Martin. Thanks for listening.
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