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Speaker 1: Hello and welcome to The Australian's Money Puzzle podcast. I'm

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Speaker 1: James Kirby. Welcome aboard everybody. We've a special edition for

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Speaker 1: you today. It's on the Iran crisis and what it

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Speaker 1: may mean for you the investor. You know, it's early

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Speaker 1: days in this and so far the response from share

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Speaker 1: markets has been mixed, you might even say muted, as

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Speaker 1: someone put it. But if you look a little deeper,

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Speaker 1: of course, so the response from the bond markets, which

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Speaker 1: by the way, are often considerably more important than share

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Speaker 1: markets in terms of how everything ultimately goes well. Eiels

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Speaker 1: are rising around the world, that treasury yields have been

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Speaker 1: rising in the US, and our own bond markets, our

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Speaker 1: own yiels have been rising. So one thing is clear.

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Speaker 1: There's a very distinct risk of higher inflation and higher

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Speaker 1: interest rates. And then inside the markets there's quite extraordinary

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Speaker 1: sort of individual stories going on, obviously oil being the

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Speaker 1: big one which is really lifting right now, really lifting

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Speaker 1: and scaring people. You've probably seen reports of queues at

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Speaker 1: petro stations, which tells you that this crisis can turn

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Speaker 1: on a dial and can mean a lot very quickly.

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Speaker 1: So I thought we'd have a discussion on this. I

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Speaker 1: needed someone who was very well briefed. Who better than

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Speaker 1: Will Hamilton of Hamilton Wealth Partners.

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Speaker 2: How are you will? Very well, James, thank you for

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Speaker 2: having me on for the listeners.

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Speaker 1: Let's just give him a part of a recap I

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Speaker 1: suppose of what's happened. So we've had this war for

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Speaker 1: roughly yet six days now. In where America has attacked Iran,

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Speaker 1: there is a distinct escalation. Iran obviously has attacked in

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Speaker 1: its fashion nine different countries, which means it is a

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Speaker 1: Middle East wide escalation. The immediate impact has been, as

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Speaker 1: I said, which has been moving up pretty fast in

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Speaker 1: terms of price share. Market's kind of all over the place.

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Speaker 1: Gold is all over the place. The only thing I

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Speaker 1: can see a clear line on is bond. So far, well,

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Speaker 1: how do you read it?

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Speaker 3: Yeah, it's look, it's been a benign response. But I

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Speaker 3: think what's happened is, you know, I think we've talked

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Speaker 3: about this in the past. Geopolitics and these type of

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Speaker 3: events often have provided a buying opportunity. But I think

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Speaker 3: that markets have become unfortunately used to these things. Is

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Speaker 3: you know, we've got Crane's been going on for four

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Speaker 3: years we've had this year alone. This is the second

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Speaker 3: conflict we've had because we had Venezuela, which was very

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Speaker 3: short and sharp, but back in January. And I think

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Speaker 3: geopolitics has become somewhat market risk as well. So markets

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Speaker 3: are getting used to it, but you know, there's no

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Speaker 3: doubt there's been a sell off in some areas. And

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Speaker 3: one of the things that I've repeatedly said for about

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Speaker 3: six month, we think the biggest risk in markets is inflation.

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Speaker 3: And I think a lot of people are saying that

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Speaker 3: as well as a result of what we're going through

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Speaker 3: and our oil prices and how that will flow through.

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Speaker 1: How does this arrival of a war out of the

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Speaker 1: blue to some extent in that Iran has been an

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Speaker 1: issue for many years, So how does this escalation and

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Speaker 1: war in the mid least, what's its impact potential impact

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Speaker 1: on inflation? How does it color your existing views on inflation.

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Speaker 3: I think the big thing is, you know a lot

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Speaker 3: of forecasters that are a lot smarter than they are

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Speaker 3: saying at around eighty dollars for the oil price, and

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Speaker 3: Brent's eighty one seventy six last night, West Texas is

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Speaker 3: just about seventy five, and that's worth about point two

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Speaker 3: to points three on global inflation across the board.

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Speaker 2: And therefore, you know, we.

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Speaker 3: Were talking only a week ago of two rate cuts

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Speaker 3: in Europe and now talking price in a fifty percent

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Speaker 3: chance of a rate rise the ECB, and you'd have

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Speaker 3: to say that something. You'd have to think that a

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Speaker 3: rate cut in the US is potentially on hold. And

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Speaker 3: as we've seen, without even factoring an oil governor Bullet

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Speaker 3: is talking about the potential flagging the potential.

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Speaker 2: Of another rate rise in Australia even this month.

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Speaker 1: And she mentioned, didn't she first thing in the morning she

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Speaker 1: mentioned or and that was clearly well she put it

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Speaker 1: on the table as an extra risk but also an

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Speaker 1: extra wasting if you like, towards the likelihood of a

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Speaker 1: rate rise.

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Speaker 2: Correct.

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Speaker 3: And so I think that inflation expectations have shifted in

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Speaker 3: as you said, six days, and therefore interest rate expectations

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Speaker 3: when you look at the ECB. I will admit that

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Speaker 3: one shocked me when I heard yesterday I think it

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Speaker 3: was on a podcast, that's a fifty percent possibility of

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Speaker 3: a rate rise is factored in fifty percent.

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Speaker 1: Now I presume I'm expecting one of the things is

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Speaker 1: that they are stilled to some extent dependent on imported oil,

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Speaker 1: unlike the US for instance, and of course we are too.

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Speaker 1: But before we go into that and that area, standing

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Speaker 1: back from it, for investors, we've had three great years, right,

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Speaker 1: so the US has had remarkable three year bull run. Statistically,

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Speaker 1: the possibility of a fourth year bull run on the US,

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Speaker 1: where they're putting in double digit growth historically is very unlikely.

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Speaker 1: And now we have this event, whatever happens to the

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Speaker 1: market today, tomorrow, yesterday, what do you think the broader

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Speaker 1: implication for markets are with what's going on?

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Speaker 3: Or Rotation has definitely been the same as twenty twenty

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Speaker 3: six ed Yeah, Daney.

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Speaker 1: Explain that to everybody what that means.

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Speaker 3: Yeah, So rotation basically, we've had seven big stocks and

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Speaker 3: then sets and a few other things dominate performance in

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Speaker 3: the S and PLA five hundred in particular, and we've sayen, yeah,

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Speaker 3: the SAS sell off, so the software as a service

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Speaker 3: sell off in particular last month, and if you actually

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Speaker 3: look at the rustle two thousand and in the last

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Speaker 3: six so, people have been diversefying into midcaps, have been

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Speaker 3: diverse fying geographically out of the United States and they've

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Speaker 3: been diversifying across the S and P five hundred, so

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Speaker 3: the other four ninety three, as a lot of commentators

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Speaker 3: call it.

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Speaker 1: So they're swinging back to the traditionals, the non software,

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Speaker 1: the non magnificence.

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Speaker 3: If you look at quality, qualities have that second worst

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Speaker 3: performance in about the last twenty five years. The last

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Speaker 3: time were actually longer than is about last thirty years.

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Speaker 3: And the last time you saw the underperformance in quality

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Speaker 3: and quality of companies that have earnings. The last time

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Speaker 3: you saw this was in nineteen ninety nine when quality

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Speaker 3: underperformed such an extent. If you look at the Rustle

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Speaker 3: two thousand, since the middle of last year twenty twenty five,

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Speaker 3: those that don't have earnings have massively outperformed those that

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Speaker 3: do have earnings.

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Speaker 2: So crap has run as well last for a.

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Speaker 1: Long right, so kid industry could tell that cannot last

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Speaker 1: for long. So you think that might become at an end?

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Speaker 2: I think so, I really do.

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Speaker 3: And I think one reason why geographic rotation has occurred.

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Speaker 3: You heard me say ed Jardini. But the market commentator

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Speaker 3: Ed Jardini recently said on another.

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Speaker 2: Podcast, you can't go overweight.

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Speaker 3: Something that's overweight and being the US, and because the

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Speaker 3: US is sixty three ish percent of the Morgan Stanley

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Speaker 3: Capital Index, Yeah or country World Index, And as he said,

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Speaker 3: you can't go overweight. So hence money has been shifting

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Speaker 3: into Japan, which was one of the worst performing markets

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Speaker 3: two days ago, into emerging markets and yeah, which have

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Speaker 3: also been very disappointing performers. In the last five days,

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Speaker 3: you've also seen a shift back, which you would expect

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Speaker 3: in this sort of conflict, back towards safe having currencies

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Speaker 3: like the US dollar. The Australian dollar is now high

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Speaker 3: sevent it's in the seventies, seventy cents, but just above

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Speaker 3: it's just below seventy one, but it was you know,

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Speaker 3: it's full and effectively one scent against US dollar.

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Speaker 2: But the last fact that.

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Speaker 1: When we look at this war has broken out, and

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Speaker 1: the certain things we could assume, we could assume all

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Speaker 1: goes up. We could assume travels stocks are in trouble,

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Speaker 1: we could assume airlines are in trouble. We could assume

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Speaker 1: a whole bunch of things. But there's certain things we

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Speaker 1: might not have assumed. And one was when there's a

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Speaker 1: global crisis. International crisis traditionally often started by the US.

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Speaker 1: Classic being the GFC, they triggered a crisis. They've triggered

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Speaker 1: this one by invading Iraq, at least striking Iraq. The

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Speaker 1: big irony is that the whole world rushes into the US,

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Speaker 1: puts their money into the US. And there was fears

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Speaker 1: or concerns that this might not happen this time because

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Speaker 1: the Trump administration is so erratic and so unpredictable and

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Speaker 1: has eroded a lot of the key institutions in the US,

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Speaker 1: has eroded the status of the US. So what happened.

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Speaker 1: Did the US hold up this time so far?

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Speaker 2: Yes, relative to other markets, it has. I don't think that.

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Speaker 3: I don't think it's seen that the rush in as

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Speaker 3: I just said, even with respect to the US dollar, yeah,

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Speaker 3: God's comfortable about fifty one hundred at the moment, but

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Speaker 3: it's been incredibly volatile. So I think there's other alternatives.

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Speaker 3: And I think that you know when you get this

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Speaker 3: type of crisis in a previous life. When we were

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Speaker 3: just talking before we went on air about being in

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Speaker 3: Hong Kong. When I was in Hong Kong, one of

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Speaker 3: the things is I had a very large trading book

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Speaker 3: report to me close to billion euros and we ran

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Speaker 3: that on what's called of our basis or value at risk.

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Speaker 3: And then these type of times the risk managers come

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Speaker 3: to you to tap you on the shoulder and say

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Speaker 3: pull your risk in. It's impossible really to trade with

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Speaker 3: a degree of certainty given the amount of volatility that

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Speaker 3: you're seeing at this point in time. And I do

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Speaker 3: think that's what's happened. Hence why you've seen a sell

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Speaker 3: off in certain areas which have been quite aggressive, because

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Speaker 3: that's where the gains have been as well, like career.

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Speaker 1: Just to take it on a big helicopter level for

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Speaker 1: everyone listening. So so far, folks, of the has been

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Speaker 1: predictable to considerable degree, but there are some question marks.

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Speaker 1: I mean, I thought you'd be I thought the money

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Speaker 1: had really rushed back to the US will and as

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Speaker 1: you say, it has, but maybe not in a convincing fashion. Similarly, gold,

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Speaker 1: I don't think gold is selling gold so far is

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Speaker 1: telling us nothing because except that it's had a six

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Speaker 1: percent fold and one day, which was extraordinary. But maybe

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Speaker 1: to some extent that happens every time there's a crisis,

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Speaker 1: that people sell gold to liquidate their position or their

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Speaker 1: losses in other areas, So we don't really know the

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Speaker 1: pattern on gold just yet. But looking across from as

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Speaker 1: I say, from a helicopter view, the big trend this

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Speaker 1: year has been getting out of the US and certainly

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Speaker 1: getting out of the Magnificent seven into traditional whatever you've

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Speaker 1: got Pepsi, Disney, et cetera, to traditional stocks that carry

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Speaker 1: the world. Now, if we have this, if this escalates

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Speaker 1: and oil continues to rise, inflation continues to rise, and

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Speaker 1: rates go up in the US, which would be the

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Speaker 1: big one obviously, or in Europe or here there, does

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Speaker 1: it mean for investors? And what are the chances of

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Speaker 1: those double digit returns on the share market coming back

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Speaker 1: again for a fourth year in the row? This is

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Speaker 1: Wall Street.

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Speaker 3: I want to remind people of twenty twenty two, and

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Speaker 3: I actually reminded the time here at HWPL yesterday that

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Speaker 3: when interest rates go up, equity markets underperform. And I

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Speaker 3: just said, look, what worries me more than anything else

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Speaker 3: at the moment is rising interest rates.

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Speaker 1: So what if an investors listening and they say, okay, well,

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Speaker 1: you know my portfolio is not all shares. Just before

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Speaker 1: we leave shares, actually, I we'll talk about everything else

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Speaker 1: in the moment. But one last thing, last time we're

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Speaker 1: on the show, you were very hot on, very keen

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Speaker 1: on emerging markets. Yep, they would be terribly exposed to

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Speaker 1: or wouldn't they in the US and South Korean market.

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Speaker 1: I had to close down yesterday. I have just have

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Speaker 1: to actually suspend trading. What's the emerging market's picture just now?

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Speaker 3: So seth, Look, South Koreas are the best performing market

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Speaker 3: and what was the best mark in the world is

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Speaker 3: up fifty percent. It's sold off seventeen percent in the

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Speaker 3: last two days. It's still up over twenty percent year

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Speaker 3: to date, so that's over to just two months. But

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Speaker 3: there's two stocks there that you know. Samsung fell ten percent.

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Speaker 3: I think it's twelve percent for Skhinex, and these two

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Speaker 3: companies alone a sixty seven percent of global d RAM

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Speaker 3: eighty percent of high bandwidth memory or HBM. Now, these

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Speaker 3: two components are absolutely critical in AI. Every data center

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Speaker 3: depends on them, and they're made in South Korea, and

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Speaker 3: that's why they've run well. But South Korea gets ninety

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Speaker 3: seven percent of its energy comes through the states of

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Speaker 3: straits of humans. So everyone's been saying chips are the

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Speaker 3: big day. Well, what's the big danger factor to AI

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Speaker 3: that at the checkpoint so to speak, that could collapse,

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Speaker 3: and that they're thinking it's chips. Well, I would actually

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Speaker 3: throw one out there. It's energy security.

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Speaker 1: Because energy because there are such energy users notoriously so

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Speaker 1: isn't that interesting? And that give out the straits of

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Speaker 1: harmless folks, which I'm sure you know. It's an extremely

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Speaker 1: narrow strip of water between Iran and the Gulf States

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Speaker 1: and one in five barrels of oil in the world

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Speaker 1: that are basically produced and transported each day come through there.

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Speaker 1: That is why there is fear about old price. But

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Speaker 1: specifically interestingly in terms of knock on effects, there's one

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Speaker 1: energy into tech and AI splendidly revealed there by the

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Speaker 1: South Korean issue yesterday. Isn't that interesting? Okay? That is

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Speaker 1: the big picture. I hope we've covered some basis there.

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Speaker 1: What we're going to do in the next part of

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Speaker 1: the show is have a look at some of the

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Speaker 1: flashpoints and what you need to know what you should

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Speaker 1: be doing just now back in the moment. Welcome back

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Speaker 1: to The Australian's Money Puzzle podcast. I'm James Kirby talking

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Speaker 1: to Will Hamilton of Hamilton, well partner's regular contributor to

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Speaker 1: the show and to the Australian Wealth Section. And a

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Speaker 1: great day to have him on board, a great week

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Speaker 1: to have him on board, because we have this international

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Speaker 1: crisis now out of Iran and we're trying to fathom

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Speaker 1: I suppose in this early stage, extremely early stage, by

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Speaker 1: the way, I mean, anyone who's old enough to know

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Speaker 1: how these events play out, they don't tend to play

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Speaker 1: out very quickly. Someone was asking me just yesterday they

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Speaker 1: were flying to Europe through the Middle East on one

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Speaker 1: of those terrific Middle East airlines which so many Australians

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Speaker 1: go through. Now one hundred thousand Australian is supposed to

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Speaker 1: be in that area right now, one hundred thousand. I mean,

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Speaker 1: how many of them are in transit on planes? I

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Speaker 1: want to because the used to always go through Singapore

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Speaker 1: now or Hong Kong, and everyone else goes through the midleast.

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Speaker 1: Just to give you an example of unexpected consequences. One

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Speaker 1: of the point I'm leading to is we can't judge

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Speaker 1: what's happening today's market, tomorrow's market. This is going to

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Speaker 1: play out, This is going to take minimum I would

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Speaker 1: think months for the for investors to decode. But what

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Speaker 1: were the if we take the flash points in the

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Speaker 1: market so far, the clear overpricing of AI stocks for instance,

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Speaker 1: the boom in private credit, and the cracks scares, et

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Speaker 1: cetera that are shaping up all around the world just

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Speaker 1: now in the US, and here how did how are

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Speaker 1: they exposed to this or how might this change things

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Speaker 1: will be? If we got to change in risk appetite,

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Speaker 1: for instance, how would it affect them?

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Speaker 3: Look the effect on the Magnificent seven. The video came

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Speaker 3: out with a result was that last week or the

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Speaker 3: week before. And I never ordinarily would have done this,

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Speaker 3: but I actually listened to a podcast which covered the

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Speaker 3: video result with all these different analysts.

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Speaker 1: Knocked it out of the park right once again?

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Speaker 3: Yeah yeah, yeah, fifty three minutes. At the end of

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Speaker 3: that fifty three minutes, I thought, this thing's going to

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Speaker 3: go up. This was a great result. Well wow, I

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Speaker 3: got that wrong.

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Speaker 1: Yeah yeah. But the context is that in and of itself,

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Speaker 1: it was a great result, and companies that have great

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Speaker 1: results that be downing should go up. But that's not

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Speaker 1: the start. Within video, it's a rocket and it has

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Speaker 1: had this extraordin I mean extraordin in every sense of

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Speaker 1: the world. It's the biggest became the biggest stock in

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Speaker 1: the world out in a couple of years, so it's

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Speaker 1: just the standard company. But what were the point what's

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Speaker 1: the point you were making really about that?

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Speaker 3: I think that they are so finally priced now and

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Speaker 3: then that there is this doubt there's six hundred and

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Speaker 3: forty six billion. I think it is of Capex between

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Speaker 3: the big guys yea Alphabet, Microsoft, Video, et cetera. That

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Speaker 3: you know on Capex that they're all spending they've got

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Speaker 3: to get a return on this, And put that into

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Speaker 3: perspective from memory, the Australian stock market today is worth

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Speaker 3: about one point nine to two trillion dollars, so a

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Speaker 3: third of the Australian stock market capitalization is being spent

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Speaker 3: by these massive companies and they've got to get a

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Speaker 3: return on that. And that's what I think the market's

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Speaker 3: just saying, Wow, it's just so great that the extent

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Speaker 3: of this cap X it's coming out of cash flow,

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Speaker 3: which is extraordinary.

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Speaker 2: That's how they're trying to fund it.

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Speaker 3: And the market there's for saying basically in some respects

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Speaker 3: enough as enough its these.

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Speaker 2: Things have done so well, but they're so finely priced.

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Speaker 1: Yeah, under some gigantic reason is going onder, some gigantic

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Speaker 1: IPOs planned across the market. So cut to the chase.

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Speaker 1: Is the US market more vulnerable now than it was

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Speaker 1: due to this?

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Speaker 3: Or I think look, as you started the show by

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Speaker 3: saying that we're now in the fourth year of a

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Speaker 3: bull market, and therefore investors become a little bit more

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Speaker 3: cynical as well, and that they look for reasons the

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Speaker 3: market's also it is expensive.

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Speaker 1: They look for reasons to what just.

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Speaker 3: To sell sorry, and hence why we've had this We've

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Speaker 3: discussed both within the US and also geographically. It is

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Speaker 3: interesting that the market's been very on geographic, has been

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Speaker 3: very specific where it's gone. There's no doubt money is

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Speaker 3: also a little bit of money. We're into Europe as well,

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Speaker 3: but that doesn't have the earnings growth and the economic growth.

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Speaker 3: But the US has had exceptional earnings growth. And I

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Speaker 3: think the other thing people are starting to be cynical

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Speaker 3: about is we've got to run in We know that

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Speaker 3: the president is going to try and stimulate the economy

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Speaker 3: and benefit the people of America running into the midterms,

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Speaker 3: but the evidence on how these midterms are going to

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Speaker 3: play out as becoming more and more convincing that at

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Speaker 3: this stage, and I know they're not until the first week,

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Speaker 3: first Tuesday November, that the Democrats will gain control the

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Speaker 3: House at this stage.

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Speaker 1: So looking at the wider market, the other I mean,

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Speaker 1: obviously the over pricing of stocks typified by Wall Street

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Speaker 1: and its narrow dependence on a handful of stocks is

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Speaker 1: one issue in the market. The other I mean, a

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Speaker 1: major issue has been the boom in private credit and

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Speaker 1: that a lot of investors around the world have gone

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Speaker 1: into private credit. It's come from a standing start. Really,

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Speaker 1: I'm talking among retail investors now into private credit. They

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Speaker 1: don't have the liquidity that public markets have, which is

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Speaker 1: what everybody wants at times of stress. And it's a

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Speaker 1: flashpoint right right now. It would seem to be a

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Speaker 1: market that needs to prove itself. What has this affair?

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Speaker 1: What do you think it will have an impact on

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Speaker 1: this area private credit.

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Speaker 3: I was in the United States in September and came

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Speaker 3: back and said, we have to review private credits. Everyone

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Speaker 3: I spoke to over there have a wealth management firms,

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Speaker 3: and I saw one or two really big guys and

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Speaker 3: the others also of firms like ours, which are more specialized,

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Speaker 3: specialist ferms. They're all ringing the bell on private credit.

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Speaker 3: I find it quite interesting that we've all rushed in

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Speaker 3: here to the these global US funds, just as they

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Speaker 3: were ringing the bell back then. We definitely reviewed everything,

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Speaker 3: and liquidity has become very important. We just said we're

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Speaker 3: prepared to put at leave a little bit of return

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Speaker 3: on the table and make sure we've got liquidity, and

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Speaker 3: we make sure that we're taking far more conservative starts.

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Speaker 3: So we exited some sectors, some parts of private credit,

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Speaker 3: like property we only had a little bit left, but

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Speaker 3: we exited that completely. Anything that was just cash flow

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Speaker 3: dependent as well, you know, not our set backed we

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Speaker 3: exited completely.

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Speaker 1: So that's very interesting. Tell me what you would say

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Speaker 1: to the listener who hasn't diverse FOD portfolio. Do you

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Speaker 1: think that's a useful strategy now? Do you think people

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Speaker 1: should be building cash? Do you think they should be

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Speaker 1: more conservative? Do you think they should have another.

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Speaker 2: Didn't build cash.

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Speaker 3: We're actually overweight diverse FI credit, but it's where we're invested.

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Speaker 3: I think that's really important. Liquidity and we're in highly

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Speaker 3: liquid areas of the market and we've gone very conservative,

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Speaker 3: have you.

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Speaker 2: We haven't crossed the border.

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Speaker 1: Is it just in this credit.

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Speaker 3: In this space where were we became increasingly concerned about it?

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Speaker 3: And and whilst we have we talked to fifteen different

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Speaker 3: private credit funds, including all these US funds, and in

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Speaker 3: the right time, these US funds are very good, but

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Speaker 3: we haven't put any money into any of them. And

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Speaker 3: be careful when they talk about or you're someone tells

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Speaker 3: you these evergreen structures are semi liquid. We've always referred

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Speaker 3: to evergreen or semi liquid as variable liquidity because the

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Speaker 3: liquidity is there to ex to the extent that it is.

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Speaker 3: They usually have a liquidity window of five percent per quarter.

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Speaker 3: Blackstone came out two days ago, I think it was,

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Speaker 3: and said that the redemptions for the last for the

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Speaker 3: December quarter were seven point nine percent, so they funded

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Speaker 3: that differential through inflows. And I actually heard Blackstone talk

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Speaker 3: here in Australia last week. They said that they believe

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Speaker 3: that there's some funds out there with fifteen percent redemptions

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Speaker 3: last quarter, meeting that through inflows. So whilst some parts

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Speaker 3: of the market have been really concerned, like the US,

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Speaker 3: there's some other parts that you are supporting these funds.

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Speaker 2: Therefore, sorry, yes, we'll My only.

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Speaker 3: Advice and I'm not giving I'm giving general advice only

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Speaker 3: is make sure you are with big names. There's some

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Speaker 3: big names out there that know how to manage this.

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Speaker 3: There's some smaller ones that I hope they don't lock up.

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Speaker 3: But you just be careful.

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Speaker 1: The deep pocket that can fund the outflows within flows

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Speaker 1: that for a longce they're supposed to be investing it.

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Speaker 1: But I hear what you're saying. I suppose Adultarek, who

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Speaker 1: you knew, was on the show. I think it was

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Speaker 1: just a week ago and he just said, same sort

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Speaker 1: of thing for the everyday investor. When you're going too

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Speaker 1: the private fund and they say you can have your

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Speaker 1: money out quarterly, there's fine print there always and they

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Speaker 1: can lock it up. They can stop or freeze it.

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Speaker 1: The biggest names in town can freeze it. And you know,

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Speaker 1: just keep that in mind. Share market never freezes, right

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Speaker 1: unless things are extraordinarily dramatic. You'll get your money out

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Speaker 1: in particularly in funds in the share market if they

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Speaker 1: are listed right, because the low always find a matching

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Speaker 1: trade nine times out of ten. That is not the

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Speaker 1: case in private credit where they have basically run their

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Speaker 1: own machines. All right, I have some questions and want

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Speaker 1: to put to you will from listeners, just more broadly

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Speaker 1: on the markets. From here then it's like it sounds

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Speaker 1: to me like you're saying it's getting tougher. You need

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Speaker 1: to be more conservative. The distinct risk in the market

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Speaker 1: perhaps is oil. Not so much oil, but energy. That

437
00:23:46,760 --> 00:23:49,760
Speaker 1: energy can kick in all sorts of fashion, not just

438
00:23:49,960 --> 00:23:54,119
Speaker 1: in obvious ways, but in particular pockets, for instance AI

439
00:23:54,160 --> 00:23:57,760
Speaker 1: stocks who are enormous energy users. That's a very interesting point.

440
00:23:58,200 --> 00:24:01,359
Speaker 1: Also more broadly in terms of rates, the pressure is

441
00:24:01,359 --> 00:24:03,879
Speaker 1: now upwards, really, isn't it? In every market off the

442
00:24:03,920 --> 00:24:07,879
Speaker 1: back of and possibly an inflation. I don't know what

443
00:24:08,080 --> 00:24:11,080
Speaker 1: Fast says to say spike, but I mean what prices

444
00:24:11,119 --> 00:24:13,760
Speaker 1: could be an inflation re spike, couldn't they?

445
00:24:14,840 --> 00:24:15,480
Speaker 2: Yes I can.

446
00:24:15,560 --> 00:24:18,520
Speaker 3: And whilst I'm not expecting interest rates to rise to

447
00:24:18,560 --> 00:24:21,359
Speaker 3: the extent that they did in twenty twenty two, just

448
00:24:21,960 --> 00:24:25,320
Speaker 3: look back to what increasing interest rates can do do

449
00:24:25,480 --> 00:24:26,280
Speaker 3: equity market.

450
00:24:26,480 --> 00:24:29,680
Speaker 1: Yes, yeah, absolutely, all right, okay, folks, I think we'll

451
00:24:29,720 --> 00:24:32,320
Speaker 1: take a break. I want to do some questions as well,

452
00:24:32,800 --> 00:24:36,320
Speaker 1: and we have some very good questions from Eric and

453
00:24:36,400 --> 00:24:43,800
Speaker 1: Peter and others back in a moment. Hello, Welcome back

454
00:24:43,800 --> 00:24:46,879
Speaker 1: to the Australian's Money Positive podcast. James Kirby here with

455
00:24:47,000 --> 00:24:50,480
Speaker 1: Will Hamilton of Hamilton Well Partners. So, folks, just looking

456
00:24:50,520 --> 00:24:54,359
Speaker 1: back on those first two segments, I think if you

457
00:24:54,400 --> 00:24:56,399
Speaker 1: are a seasoned investor, and even if you're not a

458
00:24:56,400 --> 00:24:59,440
Speaker 1: seasoned investor, be aware of history, be very careful watching

459
00:24:59,520 --> 00:25:01,879
Speaker 1: daily moviements on the share market.

460
00:25:01,920 --> 00:25:02,160
Speaker 2: Here.

461
00:25:02,480 --> 00:25:06,960
Speaker 1: This is an extraordinary crisis. This is a full scale war.

462
00:25:08,119 --> 00:25:10,880
Speaker 1: No one knows where this goes, and certainly no one,

463
00:25:11,080 --> 00:25:13,080
Speaker 1: absolutely no one knows how it ends.

464
00:25:13,119 --> 00:25:13,600
Speaker 2: You can go.

465
00:25:14,119 --> 00:25:16,280
Speaker 1: It's one thing to strike and start the war, it's

466
00:25:16,320 --> 00:25:20,119
Speaker 1: a very difficult business to finish it. And similarly on

467
00:25:20,359 --> 00:25:25,000
Speaker 1: share markets, there's such a bullish mood in the US

468
00:25:25,440 --> 00:25:27,560
Speaker 1: that you know, when they got worried about the AI

469
00:25:27,680 --> 00:25:30,520
Speaker 1: stocks being overpriced, they didn't leave the market, they just

470
00:25:30,520 --> 00:25:33,840
Speaker 1: swung to traditional stocks. But that bullish mood can turn

471
00:25:33,880 --> 00:25:38,840
Speaker 1: on a dial, and oil is certainly the It's like

472
00:25:38,920 --> 00:25:41,440
Speaker 1: the vis. Oil is what you got to watch here

473
00:25:42,040 --> 00:25:44,280
Speaker 1: in that as a symbol of how much trouble we

474
00:25:44,359 --> 00:25:47,680
Speaker 1: could have from this point on. But I will certainly

475
00:25:47,680 --> 00:25:51,280
Speaker 1: not underestimate in any fashion, regardless of what market's do

476
00:25:51,400 --> 00:25:55,359
Speaker 1: today or tomorrow. These the depth and potential risks for

477
00:25:55,480 --> 00:25:58,960
Speaker 1: investors in a crisis like this. Okay, first question from Peter.

478
00:25:59,600 --> 00:26:04,639
Speaker 1: I've in turns on the interpretation of private credit. Not

479
00:26:04,760 --> 00:26:09,159
Speaker 1: all private credit is bad. You give your money on

480
00:26:09,240 --> 00:26:13,160
Speaker 1: trust with no guarantee of return. However, we all buy

481
00:26:13,160 --> 00:26:17,000
Speaker 1: shares that can do the same thing. The recent program,

482
00:26:17,160 --> 00:26:20,280
Speaker 1: and this actually was our program with Doug turette Turek,

483
00:26:20,600 --> 00:26:23,119
Speaker 1: it was based on fear. I've been a customer and

484
00:26:23,119 --> 00:26:25,840
Speaker 1: he mentions Balmain Private for years. I hold him in

485
00:26:25,880 --> 00:26:32,080
Speaker 1: high regard. I believe interviewing one of their principles would

486
00:26:32,119 --> 00:26:36,280
Speaker 1: be illuminating. Okay, thank you, Peter. Balmain Private, yes, folks,

487
00:26:36,280 --> 00:26:41,439
Speaker 1: you probably know. They are a secured mortgage operation and

488
00:26:41,520 --> 00:26:44,320
Speaker 1: they have an excellent track record and I'm quite impressed

489
00:26:44,320 --> 00:26:44,560
Speaker 1: with them.

490
00:26:44,600 --> 00:26:45,840
Speaker 2: Disclosure disclosure.

491
00:26:46,240 --> 00:26:48,199
Speaker 1: Yes, I use them in my own SMSF and half

492
00:26:48,240 --> 00:26:50,919
Speaker 1: for years and they are very reliable and they've had

493
00:26:51,000 --> 00:26:53,040
Speaker 1: very good returns. I think like nine or ten percent

494
00:26:53,080 --> 00:26:55,159
Speaker 1: a year. It's a bit I won't say messy, but

495
00:26:55,160 --> 00:26:57,040
Speaker 1: it's a bit of a laborious where all this stuff

496
00:26:57,080 --> 00:27:00,800
Speaker 1: comes in little dribs and praps from each particular investment

497
00:27:00,840 --> 00:27:03,760
Speaker 1: they make. But sure, but would you classify that, first

498
00:27:03,760 --> 00:27:06,040
Speaker 1: of all as private credit? Is that what we're talking about?

499
00:27:06,040 --> 00:27:11,639
Speaker 3: Well, it's one part of the pool there's.

500
00:27:10,520 --> 00:27:12,720
Speaker 1: That would be that it would be the safest part.

501
00:27:12,880 --> 00:27:14,040
Speaker 1: Would that be fair to see?

502
00:27:14,680 --> 00:27:17,520
Speaker 3: It's an area where I've sort of been more concerned

503
00:27:17,560 --> 00:27:23,119
Speaker 3: about liquidity is I think is the absolute tea at

504
00:27:23,119 --> 00:27:25,520
Speaker 3: the moment. But you know, look, they've done very well.

505
00:27:25,920 --> 00:27:28,200
Speaker 3: We don't use them, so we know them a little bit.

506
00:27:28,400 --> 00:27:32,399
Speaker 3: But I think that you've got to look at be

507
00:27:32,440 --> 00:27:34,800
Speaker 3: able to be comfortable that And this is the one

508
00:27:34,840 --> 00:27:38,560
Speaker 3: thing that we we stress to people remembering if it's

509
00:27:38,560 --> 00:27:40,480
Speaker 3: a single asset loan and you know, things like this

510
00:27:40,520 --> 00:27:42,800
Speaker 3: aren't there. That's a pool of loans, but single asset

511
00:27:42,800 --> 00:27:45,520
Speaker 3: lines have one hundred percent downside first of all. Secondly,

512
00:27:45,560 --> 00:27:46,680
Speaker 3: have you looked under the bonnet?

513
00:27:46,720 --> 00:27:47,399
Speaker 2: Are you? Do?

514
00:27:47,520 --> 00:27:51,280
Speaker 3: You actually know what you're investing your money in? And

515
00:27:51,320 --> 00:27:53,520
Speaker 3: that's really important to us that we can look under

516
00:27:53,520 --> 00:27:56,400
Speaker 3: the bonnets. And I think that's really important and make

517
00:27:56,440 --> 00:27:58,080
Speaker 3: sure that manager allows you to do that.

518
00:27:58,680 --> 00:28:01,080
Speaker 1: I'm privately is it to see the private credit in

519
00:28:01,119 --> 00:28:03,639
Speaker 1: Australia is very much based on property. By finding the

520
00:28:03,640 --> 00:28:05,760
Speaker 1: global sense and the US sense, it's much wider and

521
00:28:05,800 --> 00:28:06,800
Speaker 1: more diversified.

522
00:28:07,880 --> 00:28:11,080
Speaker 3: Correct, I'd say the most the largest area offshore is

523
00:28:11,080 --> 00:28:16,040
Speaker 3: probably lending private equity. Actually, yeah, providing that leverage you

524
00:28:16,080 --> 00:28:16,880
Speaker 3: have a very different game.

525
00:28:16,960 --> 00:28:19,560
Speaker 1: But would not be would you not be reassured by

526
00:28:19,600 --> 00:28:25,159
Speaker 1: the presence of hard assets in areas version of private credit?

527
00:28:27,520 --> 00:28:33,760
Speaker 3: We is it residual stock or on with respective property

528
00:28:34,040 --> 00:28:38,400
Speaker 3: or is it development? We've avoided development completely in property

529
00:28:38,400 --> 00:28:41,480
Speaker 3: at the moment, so we've exited that. Absolutely, we aren't

530
00:28:41,480 --> 00:28:44,440
Speaker 3: putting any more money into property at the moment whatsoever.

531
00:28:44,520 --> 00:28:47,680
Speaker 3: If there is residual stock, we haven't redeemed on that.

532
00:28:47,920 --> 00:28:51,680
Speaker 3: But yeah, we've been very selective on property at the moment.

533
00:28:51,720 --> 00:28:54,360
Speaker 3: We and the whole private credit area as I.

534
00:28:54,320 --> 00:28:57,720
Speaker 1: Mentioned, okay, and folks, there is bonfires all the time

535
00:28:59,360 --> 00:29:02,640
Speaker 1: and we're seeing the yes, okay, Well, I suppose that

536
00:29:02,720 --> 00:29:07,480
Speaker 1: the issue is for local investors the nature of who's

537
00:29:07,480 --> 00:29:09,320
Speaker 1: who in this game, and it is a new game,

538
00:29:09,360 --> 00:29:11,480
Speaker 1: and as well says stay with the big names or

539
00:29:11,520 --> 00:29:15,400
Speaker 1: certainly people with whom you are utterly convinced by. I

540
00:29:15,480 --> 00:29:18,160
Speaker 1: say this because there's been spotfires across the market, and

541
00:29:18,200 --> 00:29:21,120
Speaker 1: if you watch every couple of days, it seems there

542
00:29:21,240 --> 00:29:25,680
Speaker 1: is a private credit outfit in trouble of one sort

543
00:29:25,960 --> 00:29:29,120
Speaker 1: or another. The issue so far, hopefully is that none

544
00:29:29,200 --> 00:29:35,600
Speaker 1: of the major players have had to have dramatic redemption freezes.

545
00:29:36,680 --> 00:29:39,080
Speaker 1: But if that comes, that will be the big test

546
00:29:39,160 --> 00:29:41,760
Speaker 1: of this market. Okay, thank you very much Peter for

547
00:29:41,840 --> 00:29:45,120
Speaker 1: your question. This is always information not advice, all right, Eric,

548
00:29:46,400 --> 00:29:48,680
Speaker 1: longtime listener, Thanks for all the work you do for

549
00:29:48,760 --> 00:29:52,520
Speaker 1: financial education. Thanks Eric. General advice of course here. But

550
00:29:52,680 --> 00:29:55,480
Speaker 1: I was wondering if you could talk a bit about insurance.

551
00:29:55,840 --> 00:29:58,480
Speaker 1: Most of the information online is written by brokers, yes,

552
00:29:58,520 --> 00:30:02,040
Speaker 1: indeed it is. What are you thoughts on disability insurance,

553
00:30:02,120 --> 00:30:06,400
Speaker 1: life insurance, income protection insurance? Does everyone need them? Brokers

554
00:30:06,400 --> 00:30:09,600
Speaker 1: seem to imply they do, But what roles should they

555
00:30:09,640 --> 00:30:11,480
Speaker 1: play in an overall financial plan?

556
00:30:11,800 --> 00:30:12,000
Speaker 3: Now?

557
00:30:12,280 --> 00:30:14,400
Speaker 1: Will This is asking you to come right down, to

558
00:30:14,400 --> 00:30:16,680
Speaker 1: come right down onto the runway from being pretty high

559
00:30:16,760 --> 00:30:18,160
Speaker 1: up on the sky in terms of what we're talking

560
00:30:18,160 --> 00:30:22,120
Speaker 1: about global global investments. But hey, everyone has faces the

561
00:30:22,160 --> 00:30:27,120
Speaker 1: same issue. Personally, I'm extremely skeptical of income protection insurance.

562
00:30:27,160 --> 00:30:30,760
Speaker 1: I think people should review it every year and test

563
00:30:30,800 --> 00:30:33,320
Speaker 1: it hard whether they need it. And even life insurance.

564
00:30:33,400 --> 00:30:36,720
Speaker 1: I also believe as you get older, especially if you

565
00:30:36,800 --> 00:30:39,400
Speaker 1: have your own super, there's a point at which you

566
00:30:39,480 --> 00:30:42,280
Speaker 1: may not need to pay it anymore. That's sometimes seen

567
00:30:42,280 --> 00:30:46,400
Speaker 1: as debatable. There's my twopence worth for you, Eric, what

568
00:30:46,440 --> 00:30:47,080
Speaker 1: do you say will?

569
00:30:48,680 --> 00:30:50,880
Speaker 2: So we don't do insurance, but we refer on to

570
00:30:51,200 --> 00:30:52,400
Speaker 2: you kind of must do it early.

571
00:30:52,360 --> 00:30:56,280
Speaker 3: Or advice on this bass. We have discussions with plants

572
00:30:56,320 --> 00:30:59,000
Speaker 3: on that. So it depends on one year age. And

573
00:30:59,000 --> 00:31:01,080
Speaker 3: I sudized that a list that are over fifty and

574
00:31:01,120 --> 00:31:04,280
Speaker 3: they do have these insurance, we have insurance premiums in

575
00:31:04,320 --> 00:31:06,760
Speaker 3: these areas. They'll notice that the minute you go over fifty,

576
00:31:07,560 --> 00:31:11,920
Speaker 3: the step up, the step up and these premiums is enormous. Secondly,

577
00:31:11,960 --> 00:31:14,400
Speaker 3: what is your the set? So what is your age,

578
00:31:14,440 --> 00:31:17,200
Speaker 3: what are the premiums paying? What is your asset base

579
00:31:17,800 --> 00:31:20,080
Speaker 3: and what is that? Is that sufficient to provide the

580
00:31:20,120 --> 00:31:22,880
Speaker 3: income you need? So they can become a point in

581
00:31:22,920 --> 00:31:26,560
Speaker 3: time that you can self insure. And so the people

582
00:31:26,560 --> 00:31:28,400
Speaker 3: that we deal with, what's one thing we would like

583
00:31:28,640 --> 00:31:31,040
Speaker 3: that we want them to have a conversation with our

584
00:31:31,040 --> 00:31:34,000
Speaker 3: clients about have they at a level where they can

585
00:31:34,000 --> 00:31:36,120
Speaker 3: self insurre or is there a point where they unfortgether

586
00:31:36,160 --> 00:31:38,360
Speaker 3: they need to continue to pay these premiums. So it's

587
00:31:38,400 --> 00:31:42,360
Speaker 3: not one size fits all, but self insurance is something

588
00:31:42,400 --> 00:31:45,680
Speaker 3: that you know, people need to consider at some point

589
00:31:45,720 --> 00:31:47,200
Speaker 3: in time if they've got the asset base.

590
00:31:48,200 --> 00:31:54,560
Speaker 1: And folks, no insurance broker ever will say that to you, Okay,

591
00:31:54,720 --> 00:31:56,920
Speaker 1: I mean really, unless they're planning, unless they're planning to

592
00:31:56,960 --> 00:32:00,240
Speaker 1: retire themselves, they're not going to say, you know what,

593
00:32:00,400 --> 00:32:03,400
Speaker 1: actually you don't need annie. Don't want to be flippant here,

594
00:32:03,480 --> 00:32:06,440
Speaker 1: be really careful. We're not talking about everyone every time,

595
00:32:06,480 --> 00:32:08,720
Speaker 1: but we are saying, if you are an investor and

596
00:32:08,760 --> 00:32:11,240
Speaker 1: you have accumulated investments, and you own your own home,

597
00:32:11,560 --> 00:32:13,720
Speaker 1: and you have a substantial amount in super, or you

598
00:32:13,800 --> 00:32:15,520
Speaker 1: have enough in super that you know that if you'd

599
00:32:15,520 --> 00:32:19,040
Speaker 1: stopped today you could pay you the income you were

600
00:32:19,120 --> 00:32:21,520
Speaker 1: hoping to have. What are you insured? What are you

601
00:32:21,520 --> 00:32:25,680
Speaker 1: paying life insurance for? Especially because it is absolutely goes

602
00:32:25,720 --> 00:32:28,920
Speaker 1: through the roof once you're over fifty. All right, terrific,

603
00:32:29,360 --> 00:32:31,320
Speaker 1: Thanks very much. Will great to have you on board

604
00:32:31,360 --> 00:32:31,840
Speaker 1: this morning.

605
00:32:33,000 --> 00:32:34,680
Speaker 2: Thank you, James. Great discussion, great show.

606
00:32:34,800 --> 00:32:37,800
Speaker 1: Was always all right, thank you and thanks everyone for listening.

607
00:32:37,800 --> 00:32:40,560
Speaker 1: Today's show was produced by Leah Sam mcglue. And keep

608
00:32:40,720 --> 00:32:45,320
Speaker 1: those terrific questions, observations, comments and criticisms if you like

609
00:32:45,480 --> 00:32:48,520
Speaker 1: Rolling the Money Puzzle at the Australian dot com dot

610
00:32:48,560 --> 00:32:52,160
Speaker 1: au and do leave us a review on the Apple

611
00:32:52,520 --> 00:32:55,640
Speaker 1: podcast app. We would love to see some fresh ones

612
00:32:55,680 --> 00:32:57,920
Speaker 1: on there. Okay, talk you soon.

613
00:33:00,080 --> 00:33:01,920
Speaker 2: The Wood, The

614
00:33:03,680 --> 00:33:03,720
Speaker 3: S