WEBVTT - Trumped or stumped…your sharemarket dilemma 0:00:10.320 --> 0:00:13.399 Hello, and welcome to the Australians Money Puzzle podcast. I'm 0:00:13.480 --> 0:00:17.479 James Kirby. Welcome aboard everybody. Now, for investors in shares, 0:00:18.440 --> 0:00:22.680 the single biggest question I believe this year is how 0:00:22.800 --> 0:00:27.000 you as an investor deal with the market, the share market, 0:00:27.000 --> 0:00:30.880 the global market under the influence if you like, of 0:00:30.920 --> 0:00:33.920 the US and Donald Trump. And if you get this right, 0:00:34.880 --> 0:00:37.720 I think you will win in the market, as has 0:00:37.760 --> 0:00:39.840 been the case for some time now since the election 0:00:39.960 --> 0:00:42.880 of Trump. And if you get it wrong, your share 0:00:42.960 --> 0:00:46.360 portfolio I think would be something of a sorry sight 0:00:47.200 --> 0:00:49.760 in a few months time. And the same goes for 0:00:49.840 --> 0:00:52.560 people who are professionals in the market, who are specialists 0:00:52.600 --> 0:00:56.040 in the market. And my guest today is a specialist 0:00:56.080 --> 0:00:59.600 in the market. It's Nick Griffin. He is the co 0:00:59.680 --> 0:01:03.960 founder and chief investment officer at the Monro Group. The 0:01:04.040 --> 0:01:06.399 Monro Group is a fund manager has about six billion 0:01:06.440 --> 0:01:10.440 dollars under management at the moment. It's an active manager. 0:01:10.720 --> 0:01:13.720 They are stock pickers. They select a relatively small amount 0:01:13.720 --> 0:01:15.520 of stocks and go with it. How are you, Nick? 0:01:16.040 --> 0:01:17.240 Good? Thanks James yourself? 0:01:17.560 --> 0:01:19.399 Good? Thank you. Nice to have you on the show. 0:01:19.680 --> 0:01:22.600 It's a funny thing as we sit here midyear, mid 0:01:22.680 --> 0:01:26.720 calendar year on the show for all the dramas, and 0:01:26.760 --> 0:01:29.679 I imagine a lot of traders or lost a lot 0:01:29.720 --> 0:01:32.360 of money. But for all the dramas, things have almost 0:01:32.360 --> 0:01:35.319 back to where they started. On Trump. By that I 0:01:35.440 --> 0:01:40.720 mean shares. They're not greatly up or greatly down on 0:01:40.760 --> 0:01:44.039 the market so far, but that's by no means indicates 0:01:44.080 --> 0:01:47.319 that Trump has settled down. Is Trump and his administration 0:01:48.160 --> 0:01:52.320 and their activities do they really, to a large extent 0:01:54.160 --> 0:01:57.680 director affect how your outcomes will be this year and 0:01:57.840 --> 0:01:58.480 going forward? 0:02:00.360 --> 0:02:03.280 So great question, and yes, they obviously have some influence. 0:02:03.440 --> 0:02:05.600 We have a tagline at Monroe Partner's which is called 0:02:05.720 --> 0:02:08.960 invest in the Journey. We run global equity products that 0:02:09.000 --> 0:02:11.919 invest in global growth companies, so any company outside of 0:02:11.919 --> 0:02:14.560 Australia that we think can grow over time. And it 0:02:14.639 --> 0:02:16.280 has been a journey in the first half of the year, 0:02:16.320 --> 0:02:19.440 that's for sure. What we're seeing here is the share 0:02:19.480 --> 0:02:22.480 markets sort of get used to the way Trump does business, 0:02:23.000 --> 0:02:25.400 which is to, you know, do something really big and 0:02:25.480 --> 0:02:28.200 see what breaks and then roll it back. We sort 0:02:28.200 --> 0:02:30.280 of should know this because that's what he did last 0:02:30.320 --> 0:02:33.600 time as well. But ultimately it's important for all the 0:02:33.639 --> 0:02:37.560 listeners to remember that ultimately that the global equities and 0:02:37.639 --> 0:02:41.280 stocks generally follow their earnings. And so what you've really 0:02:41.320 --> 0:02:43.280 got to analyze out of Trump is he doing anything 0:02:43.280 --> 0:02:45.920 that's going to change the earnings outlook for these companies. 0:02:46.400 --> 0:02:49.600 And I would argue in some cases that's correct. Yes, 0:02:49.720 --> 0:02:51.840 you know, if you're affected by tariffs, your earnings will 0:02:51.840 --> 0:02:55.119 be affected. If you're expecting an economic recovery this year, 0:02:55.240 --> 0:02:58.840 that may not happen. But in other cases, like for instance, Microsoft, 0:02:58.880 --> 0:03:00.760 you know is a good example, it's not really going 0:03:00.800 --> 0:03:02.880 to change how much money Microsoft's going to make this year, 0:03:02.880 --> 0:03:04.680 and it's probably not going to change what they're going 0:03:04.720 --> 0:03:07.120 to make next year. And so many people have used 0:03:07.160 --> 0:03:10.080 this volatility as an opportunity to invest in things that 0:03:10.080 --> 0:03:12.920 they feel confident to get to grow earnings regardless of 0:03:12.919 --> 0:03:15.360 the environment. That's sort of how i'd frame the discussion. 0:03:15.639 --> 0:03:17.400 Well, I see you as a fund manager, and I 0:03:17.400 --> 0:03:20.800 see and you are an active fund manager. I won't 0:03:20.800 --> 0:03:23.920 say old style, that's not because that's probably not what 0:03:23.960 --> 0:03:26.280 you want to hear, but you're an active fund manager, right, 0:03:26.320 --> 0:03:29.560 So your proposition to the investor is, look, I'm going 0:03:29.600 --> 0:03:33.640 to charge you a fee and if I outperform beyond 0:03:33.040 --> 0:03:35.960 what my benchmark is, I'm going to charge an extra 0:03:36.000 --> 0:03:39.320 fee performance fee, and I am going to select from 0:03:39.520 --> 0:03:42.440 you know, thousands and thousands of stocks a relatively small 0:03:42.480 --> 0:03:45.640 amount twenty to forty in your two big funds, and 0:03:46.880 --> 0:03:49.120 you have to come with me, as you say, on 0:03:49.160 --> 0:03:54.760 this journey. This area has been a minefield of recent times, 0:03:54.760 --> 0:03:58.200 and the big names that we all knew, Midgellen and Platinum, 0:03:58.200 --> 0:04:03.360 they've all come undone to the uninitiated, you're doing something 0:04:03.360 --> 0:04:07.600 awfully similar, but you are growing and have had good results, 0:04:07.640 --> 0:04:12.200 particularly since your inception. So what is your approach? What 0:04:12.280 --> 0:04:14.400 is your could you try and to steal your distinct 0:04:14.440 --> 0:04:19.600 approach why you've managed to grow when others around you 0:04:19.680 --> 0:04:20.760 are struggling. 0:04:21.360 --> 0:04:24.359 Yeah, thank you for the opportunity. So I think a 0:04:24.360 --> 0:04:26.640 lot of people look at the share market the wrong way. 0:04:26.960 --> 0:04:28.640 A lot of people sort of and a lot of 0:04:28.640 --> 0:04:30.839 those companies you mentioned, they would look at the share 0:04:30.880 --> 0:04:33.159 market and basically say, this is what we think the 0:04:33.160 --> 0:04:36.000 global economy is going to do, and we want to 0:04:36.000 --> 0:04:38.719 be overweight certain countries because that country's economy is going 0:04:38.760 --> 0:04:40.919 to do better and this other country economy is can 0:04:41.040 --> 0:04:43.359 do worse, and this sector will be better, and this 0:04:43.400 --> 0:04:45.599 sector will do worse. And we would say that's just 0:04:45.680 --> 0:04:48.320 all noise and probably, quite frankly, a bit of a 0:04:48.360 --> 0:04:51.599 waste of time. The reality is, in our opinion, the 0:04:51.640 --> 0:04:54.359 equity market is made up of very few great companies 0:04:54.760 --> 0:04:58.039 and thousand thousands of mediocre ones. The reality is the 0:04:58.120 --> 0:05:00.480 S and P five hundred is not actually the it's 0:05:00.520 --> 0:05:03.240 the best five hundred companies in the United States, and 0:05:03.320 --> 0:05:06.279 it's made up of these exceptional businesses that are doing 0:05:06.440 --> 0:05:11.120 exceptional things, and that exceptional things that they do create 0:05:11.160 --> 0:05:14.000 strong earnings growth, and their earnings growth creates share price growth. 0:05:14.400 --> 0:05:16.920 So when we look at the world, what we're trying 0:05:16.960 --> 0:05:18.560 to do for our clients to say, we have the 0:05:18.720 --> 0:05:20.960 entire world to choose from. There's more than thirty thousand 0:05:21.000 --> 0:05:23.760 listed companies. We're going to do our best effort to 0:05:23.760 --> 0:05:27.120 pick the most exceptional twenty to forty that we think 0:05:27.160 --> 0:05:29.440 we can buy at good valuations, that they think can 0:05:29.480 --> 0:05:32.159 grow structurally sustainably over a long period of time. 0:05:32.320 --> 0:05:35.560 So you're you're a bottom up, well, it's very much 0:05:35.640 --> 0:05:37.720 bottom up and very much what you described that you 0:05:37.760 --> 0:05:41.120 don't make is top down. Okay, so you're associated you've 0:05:41.120 --> 0:05:46.080 had a good run beyond doubt by being involved in 0:05:46.120 --> 0:05:50.040 the Magnificent seven stocks and they did very well for you. 0:05:50.520 --> 0:05:52.640 If we take a long period of time in the 0:05:52.760 --> 0:05:54.960 last few years as IF fund manager, that's what allowed 0:05:55.000 --> 0:05:59.080 you to grow. And they are the outstanding sort of 0:05:59.240 --> 0:06:01.920 champions of you. Like all of the arguments you're making, 0:06:02.560 --> 0:06:04.120 will they continue to be. 0:06:06.200 --> 0:06:09.799 Yeah? And so to do this well, what you should 0:06:09.800 --> 0:06:11.719 do is not look at the economy or the sectors, 0:06:11.720 --> 0:06:13.880 look at the big structural changes and who's going to win. 0:06:14.240 --> 0:06:15.760 So that's what we do. We try and identify the 0:06:15.760 --> 0:06:18.360 big structural changes and you identify who win. You talked 0:06:18.400 --> 0:06:21.920 about the Magnificent seven. They are the big digital winners. Okay, 0:06:22.080 --> 0:06:25.479 So everybody on this phone call remembers, you know, when 0:06:25.520 --> 0:06:28.000 we used to read newspapers on the train. We don't anymore. 0:06:28.040 --> 0:06:30.799 We read our phone and generally we're looking at Facebook 0:06:30.880 --> 0:06:33.080 or Instagram, or we're looking at Google, etc. And so 0:06:33.120 --> 0:06:36.840 they have structurally won from digital advertising. There's no reason 0:06:36.880 --> 0:06:39.919 why that one continue. They've structurally won by the shift 0:06:39.920 --> 0:06:42.320 to the cloud. So anybody who hosts anything in the 0:06:42.360 --> 0:06:45.680 cloud has to host it at three companies. Amazon Google 0:06:45.880 --> 0:06:48.200 or Microsoft. They're the only cloud providers on the planet. 0:06:48.560 --> 0:06:52.640 And so what's generally happening here is digitalization is creating 0:06:52.680 --> 0:06:56.320 network effects around these companies, and they become the advertising 0:06:56.360 --> 0:06:58.480 company for the world, they become the software company for 0:06:58.520 --> 0:07:01.599 the world. And so all they're doing is taking share 0:07:02.040 --> 0:07:05.360 from Channel seven, Channel nine, Fairfax, et cetera, and bring 0:07:05.360 --> 0:07:07.280 that back to the US. So coming back to my point, 0:07:07.279 --> 0:07:10.080 they're not really linked to the US economy. They're linked 0:07:10.080 --> 0:07:12.000 to the point that digital takes share. 0:07:11.800 --> 0:07:15.400 From their their global they're global and they're base in 0:07:15.640 --> 0:07:17.000 But I actually when I was asking you at the 0:07:17.000 --> 0:07:20.080 start that Magnificent seven, they're all in your top what 0:07:20.360 --> 0:07:21.400 top ten? Would that be fair? 0:07:21.520 --> 0:07:23.640 Not all of them? No, So we would own four 0:07:23.680 --> 0:07:26.440 of the seven today. And so we like in Video 0:07:26.480 --> 0:07:29.560 a lot, we like Meta a lot, we like Amazon 0:07:29.600 --> 0:07:31.720 a lot, and we like Microsoft a lot. 0:07:31.920 --> 0:07:34.960 Okay, Okay, So tell us that's who you like. And 0:07:34.960 --> 0:07:37.120 maybe we could have guessed that to some degree. When 0:07:37.160 --> 0:07:39.760 I looked at the top holdings in the fund, there 0:07:39.800 --> 0:07:43.120 were some names that weren't at all tech or digital 0:07:43.600 --> 0:07:45.800 that you like. Give us an example of some of those. 0:07:46.280 --> 0:07:48.880 Yeah, So if you're investing in structural changes. There's lots 0:07:48.920 --> 0:07:51.120 of structural changes in the world. They don't necessarily have 0:07:51.200 --> 0:07:53.720 to be tech. The really simple one for the last 0:07:53.800 --> 0:07:55.920 decade is being cashed to card. You know, you can 0:07:55.960 --> 0:07:59.320 invest in MasterCard or Visa slightly taking but the reality 0:07:59.360 --> 0:08:02.000 is everybody on this this podcast doesn't use cash anymore. 0:08:02.040 --> 0:08:04.880 They benefited from that. But another great example for US 0:08:04.880 --> 0:08:08.000 has been security. We've been investing in, for instance, European 0:08:08.040 --> 0:08:10.440 defense companies for more than three years because we felt 0:08:10.480 --> 0:08:13.320 that the war would cause a structural shift in defense spending, 0:08:13.360 --> 0:08:17.280 and that's what's happened the Ukraine War. Yes, and we've 0:08:17.280 --> 0:08:21.080 invested in things like homeland security, so we own companies 0:08:21.640 --> 0:08:26.360 like Axel and Motorolo solutions that you help police with policing, 0:08:26.400 --> 0:08:29.640 help with body cameras, et cetera, et cetera. So all 0:08:29.640 --> 0:08:32.560 of these areas are basically you're basically trying to identify 0:08:32.559 --> 0:08:35.319 the area structural change and identify the winner. Healthcare is 0:08:35.360 --> 0:08:38.440 another obvious area where we've goun things like Lily and 0:08:38.920 --> 0:08:42.079 Orice that producers and Munjara. So these are big structural 0:08:42.120 --> 0:08:44.720 changes that occur in the world, and as a global investor, 0:08:44.760 --> 0:08:47.960 we can identify the change and investor benefit for our clients. 0:08:48.120 --> 0:08:50.240 How do you get an edge on that you're sitting 0:08:50.320 --> 0:08:53.560 in Australia, how do you say that drug in that 0:08:53.640 --> 0:08:56.320 big farmer company is going to be the one that 0:08:56.440 --> 0:08:59.760 moves the dial. And what competitive advantage could you possibly have. 0:09:00.080 --> 0:09:03.920 That's a great question. So what we think and Monroe, 0:09:03.960 --> 0:09:07.760 in case you don't know, is a word for Scottish mountains. 0:09:09.480 --> 0:09:12.200 Mountains over three thousand feet of Monroe's and I spent 0:09:12.280 --> 0:09:15.199 a lot of my career living and working in Edinburgh, 0:09:15.280 --> 0:09:17.079 and if you go to other places in the world 0:09:17.120 --> 0:09:19.720 like Edinburgh, there are fund managers who sit in a 0:09:19.800 --> 0:09:21.320 very far away place in the world and take long 0:09:21.360 --> 0:09:23.439 term views of the world. When I looked at those 0:09:23.480 --> 0:09:25.920 fund managers, that's what we wanted Monroe to be in Australia. 0:09:25.960 --> 0:09:28.160 So we have roughly thirty one people here in Melbourne, Australia, 0:09:28.600 --> 0:09:30.760 and we are just trying to solve one problem. Who 0:09:30.760 --> 0:09:33.440 are these exceptional companies We look in these areas of 0:09:33.440 --> 0:09:35.480 structural growth and obviously we do heaps of research and 0:09:35.520 --> 0:09:36.560 we travel extensively. 0:09:36.720 --> 0:09:39.880 Okay, so your cultural training was in that well that 0:09:40.040 --> 0:09:47.720 Scottish Aberdeen, Scottish widows, Bill Gifford, whoever. They're all in Edinburgh, Canny. 0:09:47.880 --> 0:09:51.640 We know that, but that's your cultural context, correct. 0:09:51.320 --> 0:09:53.000 Yeah, And so the word Monroe is you know, a 0:09:53.000 --> 0:09:54.839 bit of homage, because that's how we want it to 0:09:54.880 --> 0:09:57.319 be like them. And so to answer your question specifically, 0:09:57.360 --> 0:09:59.880 we travel a lot, we talk to everybody in an area, 0:10:00.120 --> 0:10:03.280 so we might know the whole world well, but these 0:10:03.320 --> 0:10:05.720 areas of structural growth, we know them really well. And 0:10:05.760 --> 0:10:08.160 so next week I'm off to see these states. I'm 0:10:08.160 --> 0:10:10.160 off to see in Video Gain. I've been going to 0:10:10.160 --> 0:10:12.439 see in Video for six years now. We've owned the 0:10:12.480 --> 0:10:15.520 company since twenty eighteen. Every time we speak to them, 0:10:15.559 --> 0:10:17.400 they tell us what they're doing. Every time we go back, 0:10:17.400 --> 0:10:20.480 they're roughly achieving what they say. And so this just 0:10:20.520 --> 0:10:24.240 comes from experience and research quite frankly, just extensive research 0:10:24.400 --> 0:10:26.000 to help you find those few winners. 0:10:26.160 --> 0:10:30.240 And you find getting in front of the companies still 0:10:30.679 --> 0:10:32.760 very important. Do are you sitting face to face? 0:10:34.080 --> 0:10:36.760 Sitting face to face for the companies and also with 0:10:36.840 --> 0:10:40.079 their customers. So in in videos case, for instance, their 0:10:40.080 --> 0:10:43.080 biggest customers are other companies we own, like Meta and 0:10:43.240 --> 0:10:45.840 Google and Amazon. And they will tell us that in 0:10:45.880 --> 0:10:47.560 Video's the best chips. They've been telling us in Video 0:10:47.600 --> 0:10:49.920 is the best chips for ten years. So that just 0:10:50.040 --> 0:10:52.560 checks out what the other companies told you. And this 0:10:52.720 --> 0:10:55.160 is just again but I come back to the first point. 0:10:55.960 --> 0:10:58.559 Different to our peers. This is all we're trying to solve. 0:10:58.640 --> 0:11:00.720 We're not trying to solve the economy. I'm not trying 0:11:00.720 --> 0:11:03.600 to solve what French retail sales are doing. I'm just 0:11:03.640 --> 0:11:05.920 trying to solve who are the big structural winners and 0:11:05.960 --> 0:11:07.800 as over time we just the more we do it, 0:11:07.800 --> 0:11:08.679 the better we get at it. 0:11:09.000 --> 0:11:10.960 Okay, all right now. One of the things I'm really 0:11:11.000 --> 0:11:14.559 interested and hear your view, which seems to be the 0:11:14.559 --> 0:11:16.880 big question for the Australian investor this year and the 0:11:16.880 --> 0:11:18.719 big question for the big super funds this year, and 0:11:18.720 --> 0:11:21.120 they're talking about it on stage and they're giving different answers, 0:11:21.840 --> 0:11:24.600 is whether you should stick with the US, whether after 0:11:24.679 --> 0:11:28.160 all these years, it can keep doing what it's doing 0:11:28.160 --> 0:11:30.160 because it's been so good. And there's been some big 0:11:30.160 --> 0:11:32.720 fund address saying we're coming back to Australia, some saying no, 0:11:32.760 --> 0:11:35.640 we're sticking with the US. They've been tested, that's for sure. 0:11:35.760 --> 0:11:47.120 I want to come back to that after a break. Hello, 0:11:47.240 --> 0:11:50.319 Welcome back to the Australian's Money Puzzle podcast. James Kirby 0:11:50.360 --> 0:11:55.720 here talking to Nick Griffin of the Monroe Partners Investment Group, 0:11:56.040 --> 0:12:00.360 specialist really in global investing, offshore investing with a well. 0:12:00.360 --> 0:12:03.000 As he's explaining the first part of the show, he's 0:12:03.040 --> 0:12:07.120 really interested as picking companies bottom up based on their 0:12:07.200 --> 0:12:10.640 numbers and their promise, if you like, of a structural 0:12:10.720 --> 0:12:14.160 change which gives them a leap in profitability. I mean, 0:12:14.200 --> 0:12:17.600 obviously you mentioned the video. Why wouldn't you. That's the 0:12:17.640 --> 0:12:20.560 one that's everyone's favorite right now and it's staying up, 0:12:20.600 --> 0:12:23.320 which is fascinating. But Nick, what about that issue then 0:12:23.679 --> 0:12:28.160 that how could the US possibly continue to return the 0:12:28.280 --> 0:12:30.960 level of returns. It's not that it's been better than 0:12:30.960 --> 0:12:33.760 the ASEX, like it's been multiples better than the ASEX 0:12:33.800 --> 0:12:38.679 for years and years. Do you think that's forever now? 0:12:39.600 --> 0:12:42.440 So from our point of view over the medium term 0:12:42.520 --> 0:12:45.920 the answers yes, over the medium term. Over the short term, 0:12:46.000 --> 0:12:48.760 I can see why multiples in the US might be 0:12:48.800 --> 0:12:51.200 too high and multiples in the UK and France are 0:12:51.240 --> 0:12:54.040 too low and they should converge with each other for 0:12:54.120 --> 0:12:57.000 a period of time, but in the end it's earning scritter. 0:12:57.040 --> 0:12:59.560 As I said before, the Drivestock prices, And if you 0:12:59.600 --> 0:13:02.640 want to invest in cloud computing, you have to invest 0:13:02.640 --> 0:13:05.920 in the US. If you want to invest in semiconductive development, 0:13:06.240 --> 0:13:08.240 you pretty much have to invest in the US. Outside 0:13:08.280 --> 0:13:09.240 oft SA Tearsom see in. 0:13:09.240 --> 0:13:12.760 Taiwan, there's the emergence of structural tariffs. 0:13:13.960 --> 0:13:16.960 Tariffs, and I agree that tariffs are an issue, but 0:13:17.040 --> 0:13:19.000 they are sort of a one time issue. So it's 0:13:19.040 --> 0:13:21.720 a one time cost to these companies that will that 0:13:21.760 --> 0:13:23.760 they'll deal with, but then they'll go back to doing 0:13:23.800 --> 0:13:26.680 what they do before, which is, you know, be positioned 0:13:26.679 --> 0:13:28.920 in these great areas. And it's not I want to 0:13:28.960 --> 0:13:31.040 be clear on the call, it's not the Australian's fault 0:13:31.040 --> 0:13:32.880 that this is happening in the US. It happens in 0:13:32.920 --> 0:13:36.040 the US not because they're smarter than US. It happens 0:13:36.080 --> 0:13:38.680 because they've just got more people and they've got more money. 0:13:39.200 --> 0:13:41.240 And so if you think about it, and I've said 0:13:41.240 --> 0:13:43.640 this example a lot, if Google was invented in Australia, 0:13:43.640 --> 0:13:46.520 it still wouldn't have won. But when Google's invented in 0:13:46.559 --> 0:13:49.520 the US, everyone looks at Google, so everyone has to 0:13:49.559 --> 0:13:51.400 be on Google. So everyone looks at Google, so everyone 0:13:51.440 --> 0:13:53.160 has to be on Google, and then Google becomes the 0:13:53.160 --> 0:13:54.480 dominant search engine in the world. 0:13:54.800 --> 0:13:56.880 Someone just reminded me the other day that the Australian 0:13:56.920 --> 0:13:57.880 company looks smart. 0:13:58.600 --> 0:13:59.880 Yeah poor. 0:14:00.200 --> 0:14:02.760 Once upon a time met a bit for Google one time, 0:14:03.160 --> 0:14:04.680 which would have been really good if Big got it. 0:14:05.120 --> 0:14:07.040 Yes, well, you can have a lot of funny at 0:14:07.040 --> 0:14:10.400 Alta Vista, ask Jeeves. Yeahoo, there was exortent. But now 0:14:10.440 --> 0:14:12.800 Google has a ninety seven percent market share. That's network 0:14:12.800 --> 0:14:15.800 effects at work. Microsoft does this as well. You're the 0:14:15.800 --> 0:14:18.480 biggest software company, so everyone uses Microsoft server and has 0:14:18.480 --> 0:14:21.200 to be on Microsoft server, news microphones Exactly. The same 0:14:21.200 --> 0:14:24.720 thing's happening at Netflix. And so these network effects around 0:14:24.720 --> 0:14:28.320 digitalization is concentrating wealth in companies that happened to be 0:14:28.360 --> 0:14:30.400 listed in the US. Why because they were. They have 0:14:30.480 --> 0:14:33.080 the biggest population based on money base to start with, 0:14:33.520 --> 0:14:34.320 not because they're smarter. 0:14:34.760 --> 0:14:38.080 Do you worry at all that the Trump and this 0:14:38.240 --> 0:14:40.840 is the second term of Trump, and it's stronger obviously 0:14:41.120 --> 0:14:44.360 than ever, more confident if you could imagine such a thing, 0:14:44.560 --> 0:14:48.360 but more confident in his position in power, do you 0:14:48.440 --> 0:14:53.680 worry that this core worry that the US itself, that 0:14:53.800 --> 0:14:59.280 it's bond market, that it's currency may be at a 0:14:59.400 --> 0:15:03.080 period where it's about to decline, Like all empires decline, 0:15:03.120 --> 0:15:05.880 nothing lasts forever, and it's an empire and it's the 0:15:05.880 --> 0:15:08.360 beginning of its decline, and Trump, in some ways is 0:15:08.360 --> 0:15:11.360 the personification of that. What do you say to that view. 0:15:11.280 --> 0:15:13.440 Of the world. That is a very good question. So 0:15:13.560 --> 0:15:16.160 I think we can all agree that these companies are 0:15:16.160 --> 0:15:19.120 clearly stronger and potentially more powerful and more likely to 0:15:19.120 --> 0:15:23.600 grow than say a French supermarket or a Japanese trading company. 0:15:23.440 --> 0:15:26.600 So I think most people can see that and they 0:15:26.640 --> 0:15:29.160 want to invest in the US. But the point you 0:15:29.200 --> 0:15:31.600 make is a good one. So, but the problem is 0:15:31.640 --> 0:15:34.320 what happens if the currency goes down? What happens if 0:15:34.320 --> 0:15:37.240 the bond market riots, etc. These are what we would 0:15:37.240 --> 0:15:40.760 call exogenous shocks. The currency is less of an issue 0:15:40.760 --> 0:15:43.800 because we can hedge that out for instance, and vice versa. 0:15:43.800 --> 0:15:45.480 A lot of these companies are foreign earners, so they 0:15:45.520 --> 0:15:47.520 actually end up their ownings going up as the currency 0:15:47.560 --> 0:15:50.000 going down. But the bond market things a big issue 0:15:50.080 --> 0:15:52.160 because if the bond market at it for in some 0:15:52.480 --> 0:15:55.640 point then that would cause you know, a significantly bigger 0:15:55.680 --> 0:15:59.360 economic slowdown, and I can see some reasons to diversify there. 0:15:59.560 --> 0:16:01.560 The only last thing I'd say is, look, obviously, people 0:16:01.560 --> 0:16:05.280 have been predicting this for twenty years, and that's twenty 0:16:05.360 --> 0:16:08.040 years of great returns they missed out on. It could 0:16:08.200 --> 0:16:11.480 and may happen one day, maybe today's day. Maybe it's not. 0:16:11.680 --> 0:16:15.400 But obviously that's something we're watching very closely. But fundamentally, 0:16:15.480 --> 0:16:19.040 the corporates in the US are growing faster, they're more dynamic, 0:16:19.080 --> 0:16:21.760 they're more advantaged, and so ultimately we prefer at least 0:16:21.800 --> 0:16:23.560 having at least a good chunk of our money there 0:16:23.560 --> 0:16:25.400 because the companies we like the most there. 0:16:25.840 --> 0:16:28.760 Okay, all right, well, fairly for some support for the 0:16:28.840 --> 0:16:31.960 US market there, Okay, while we have you. For anyone 0:16:32.160 --> 0:16:35.680 that's listening to you, what they love to hear from 0:16:35.720 --> 0:16:39.120 someone like you is what you see as hotspots and 0:16:39.200 --> 0:16:44.160 black spots basically in the coming year, well, this particular climate, 0:16:44.720 --> 0:16:48.080 this market, what are the sort of companies and you 0:16:48.120 --> 0:16:50.440 have to some extents illustrated what you do like, what 0:16:50.480 --> 0:16:54.320 you've always liked. Is there anything new that are a 0:16:54.400 --> 0:16:57.320 new theme that you are keen on and are there 0:16:57.440 --> 0:16:59.000 themes that you keep away from? 0:17:00.120 --> 0:17:02.320 Great And so just to clarify the last question, it 0:17:02.320 --> 0:17:04.600 doesn't mean we don't just invest outside the US. We do. 0:17:04.840 --> 0:17:08.360 We do. We do like companies like TSMC, for instance, 0:17:08.359 --> 0:17:11.560 in Taiwan. And I already talked about European defense stocks earlier. 0:17:11.680 --> 0:17:13.760 So if we can find structural growth in other parts 0:17:13.760 --> 0:17:16.240 of the world, by all means, we'll invest in Okay, 0:17:16.640 --> 0:17:19.159 going forward, this is an exciting time and I know 0:17:19.200 --> 0:17:22.359 Trump is causing volatility, and I know it's hard to 0:17:22.440 --> 0:17:25.239 keep track of. But in the background we have the 0:17:25.280 --> 0:17:28.320 emergence of AI, and so artificial intelligence, we think is 0:17:28.320 --> 0:17:29.879 probably going to be the biggest structural change in the 0:17:29.960 --> 0:17:33.120 next decade. This is the fourth tectonic shift in computing, 0:17:33.160 --> 0:17:34.679 if you think about it. So we went through a 0:17:34.680 --> 0:17:37.440 mainframe era, we went through a PC era, we went 0:17:37.440 --> 0:17:39.840 through a mobile era. We're now in an AI era. 0:17:40.160 --> 0:17:41.359 And so what's going to happen is you're going to 0:17:41.359 --> 0:17:43.760 connect every device on the planet to the Internet, and 0:17:43.880 --> 0:17:45.840 AI is going to process that data to give us 0:17:45.840 --> 0:17:48.879 better outcomes. The beauty of AI, which is really interesting, 0:17:48.960 --> 0:17:52.040 is it doesn't just affect software and consumer application and 0:17:52.040 --> 0:17:56.040 infects things like autonomous driving, robotics, like drug discovery, and 0:17:56.119 --> 0:18:00.679 like security. And so we are finding today companies that 0:18:00.720 --> 0:18:04.440 can harness this technology are seeing a massive structural shift 0:18:04.440 --> 0:18:06.879 in their ownings growth at a big structural shift in 0:18:06.880 --> 0:18:08.159 the attractiveness of their product. 0:18:08.320 --> 0:18:10.400 Can you give me an example of somebody. 0:18:10.040 --> 0:18:11.919 Yeah, So I'll give you a couple of examples. So 0:18:12.440 --> 0:18:15.159 one example i'd mentioned is again those security companies I 0:18:15.160 --> 0:18:17.800 talked about before. So if you're a company selling security cameras, 0:18:17.800 --> 0:18:20.520 for instance, you sell security cameras, you can now put 0:18:20.560 --> 0:18:23.520 software on those security cameras, and you can identify who's 0:18:23.520 --> 0:18:26.760 at your front door. You can identify threat detection faster 0:18:26.880 --> 0:18:29.680 and better, and so you sell hardware and now software 0:18:29.960 --> 0:18:33.000 and software. That's quite frankly, everyone is cool. Everyone's podcast 0:18:33.080 --> 0:18:35.720 can see is quite useful. That would be one example. 0:18:36.119 --> 0:18:39.679 If you think about medical technology or MRI technology, you 0:18:39.720 --> 0:18:43.480 can now get an MRI and potentially identify cancer. 0:18:43.160 --> 0:18:45.800 Two years earlier diagnostics acceleration. 0:18:46.440 --> 0:18:49.760 Yeah, and so you basically and everybody would know that 0:18:50.080 --> 0:18:52.359 finding cancer earlier is obviously what we'd all like to 0:18:52.400 --> 0:18:55.040 do to stay live longer. So there's a general benefit 0:18:55.440 --> 0:18:58.160 for using the technology and a reason why people would 0:18:58.200 --> 0:19:00.440 pay for it. In both those examples, those would be 0:19:00.480 --> 0:19:02.600 two i'd give you off the bat. But the last 0:19:02.640 --> 0:19:06.440 one is obviously software. You know, we can summarize this podcast. 0:19:06.520 --> 0:19:08.639 You can drop it into a GPT and it'll just 0:19:08.680 --> 0:19:10.400 tell you what the summary was without having to listen 0:19:10.400 --> 0:19:13.120 to the whole thing. You can summarize the good parts. 0:19:13.119 --> 0:19:15.720 If you do that, yeah, you're going to miss jokes. 0:19:16.040 --> 0:19:18.400 Tell me about what you don't like. 0:19:19.680 --> 0:19:25.440 So what we don't like. So honestly, just mediocre companies. 0:19:25.520 --> 0:19:28.400 I'm not saying they're bad. I'm just saying that they're 0:19:28.440 --> 0:19:33.320 stuck in competitive industries that that ultimately I don't have 0:19:33.400 --> 0:19:35.919 an edge versus say someone else who's looking at it. 0:19:35.960 --> 0:19:37.920 So i'd give you an example here is like banks. 0:19:38.080 --> 0:19:40.080 I mean banks are great and obviously in Australia they 0:19:40.080 --> 0:19:42.960 have done well, but they're not growing that much and 0:19:43.080 --> 0:19:45.200 you rely on interest rates in the economy and a 0:19:45.200 --> 0:19:46.840 whole bunch of things that I have a view on, 0:19:46.920 --> 0:19:48.880 but I don't have an edge. I've got an edge 0:19:48.880 --> 0:19:50.800 on AI I think we do, and that's how we're 0:19:50.800 --> 0:19:54.320 making money. Other areas would be you know, a consumer 0:19:54.400 --> 0:19:57.720 fashion is hard like, it's hard. I'm not very fashionable, 0:19:58.240 --> 0:19:59.960