1 00:00:09,800 --> 00:00:12,800 Speaker 1: Hello, and welcome to the Australians Money Puzzle podcast. I'm 2 00:00:12,880 --> 00:00:16,560 Speaker 1: James Kirkby Well, the editor at The Australian. Welcome aboard everybody. 3 00:00:16,960 --> 00:00:18,960 Speaker 1: You know, when I asked this week's guest to come 4 00:00:19,000 --> 00:00:21,360 Speaker 1: on the show, I didn't know at the time that 5 00:00:21,400 --> 00:00:23,360 Speaker 1: we were going to have the worst day on the 6 00:00:23,360 --> 00:00:26,840 Speaker 1: stock market for four years in the same week, or 7 00:00:26,920 --> 00:00:30,240 Speaker 1: indeed that share markets would have moved, you know, from 8 00:00:30,320 --> 00:00:35,839 Speaker 1: pretty good to a pretty rocky in a matter of days. 9 00:00:36,040 --> 00:00:39,360 Speaker 1: So it's good timing. Danielle Ekoye has been on the 10 00:00:39,360 --> 00:00:42,120 Speaker 1: show before. She's an author of the book Shared Plicity. 11 00:00:42,240 --> 00:00:45,600 Speaker 1: She's a writer, she's a television presenter. She's a seasoned 12 00:00:45,680 --> 00:00:50,040 Speaker 1: investor and a professional investor for many years around the world, 13 00:00:50,520 --> 00:00:53,880 Speaker 1: in London and here. It's always good to talk to her. 14 00:00:53,960 --> 00:00:56,440 Speaker 1: I'm delighted to have her on the show. How are you, Danielle? 15 00:00:56,920 --> 00:00:59,279 Speaker 2: Good James, Thank you so much for having me back 16 00:00:59,320 --> 00:00:59,960 Speaker 2: on the program. 17 00:01:00,440 --> 00:01:05,160 Speaker 1: Exquisite sense of timing straight into it. If you and 18 00:01:05,240 --> 00:01:10,400 Speaker 1: I right, let's say you and I Danielle had a 19 00:01:10,560 --> 00:01:16,319 Speaker 1: self managed super fund full of shares and I said 20 00:01:16,319 --> 00:01:19,560 Speaker 1: to you, oh my god, I got a scare on Monday, 21 00:01:20,600 --> 00:01:26,319 Speaker 1: Japan felt ten percent. The US fell over days. The ax, 22 00:01:26,400 --> 00:01:31,840 Speaker 1: of course, delighted in classic fashion, fell with vigor for 23 00:01:32,040 --> 00:01:36,319 Speaker 1: no apparentarieson apart from the US. So what if I 24 00:01:36,400 --> 00:01:37,800 Speaker 1: was saying to you, hey, what should we do with 25 00:01:37,880 --> 00:01:41,720 Speaker 1: our shares? Now? What would you got instinct be? 26 00:01:42,080 --> 00:01:44,800 Speaker 2: Well? I can only revisit a conversation I had with 27 00:01:45,000 --> 00:01:47,800 Speaker 2: a former very large client of mine. He used to 28 00:01:47,800 --> 00:01:52,960 Speaker 2: invest in emerging markets, and basically the approach was a 29 00:01:53,120 --> 00:01:55,920 Speaker 2: you do nothing until you establish really what was going on, 30 00:01:55,960 --> 00:02:00,400 Speaker 2: which became quite clear James that there was what is 31 00:02:00,480 --> 00:02:04,960 Speaker 2: called the unwind of the Japanese yen carry trade. So 32 00:02:05,520 --> 00:02:09,720 Speaker 2: for the most simplifictic purposes out there, it represented a 33 00:02:09,760 --> 00:02:13,079 Speaker 2: whole lot of leverage borrowing by hedge funds in our 34 00:02:13,120 --> 00:02:17,000 Speaker 2: financial system, where they borrow in Japanese yen and then 35 00:02:17,080 --> 00:02:21,240 Speaker 2: invest in overseas assets, particularly into the US. That's where 36 00:02:21,280 --> 00:02:23,799 Speaker 2: a lot of the money had gone. And because of 37 00:02:23,840 --> 00:02:27,560 Speaker 2: a number of events, including a high and expected hike 38 00:02:27,919 --> 00:02:32,640 Speaker 2: in the Japanese interest rates of about twenty five basis points, 39 00:02:33,000 --> 00:02:35,720 Speaker 2: you started to see a big move between the US 40 00:02:35,800 --> 00:02:39,480 Speaker 2: dollar and the en, and that meant this lovely carry trade, 41 00:02:39,480 --> 00:02:42,800 Speaker 2: which has basically been a funding source for hedge funds 42 00:02:43,280 --> 00:02:47,160 Speaker 2: to invest in overseas markets came under pressure. And the 43 00:02:47,200 --> 00:02:49,760 Speaker 2: long and the short of the story, because some people 44 00:02:49,840 --> 00:02:53,120 Speaker 2: might find it a little bit confusing, is just imagine 45 00:02:53,160 --> 00:02:55,400 Speaker 2: you have one of these and James, you and I 46 00:02:55,400 --> 00:02:59,400 Speaker 2: have spoken about these before, these liquidity draw down events, 47 00:02:59,480 --> 00:03:02,960 Speaker 2: and it's back when hedge funds get themselves into trouble 48 00:03:03,520 --> 00:03:07,360 Speaker 2: because they've taken on too much debt and something in 49 00:03:07,400 --> 00:03:10,840 Speaker 2: their position starts to work against them. So instead of 50 00:03:10,840 --> 00:03:13,919 Speaker 2: making lots of money, they start to generate lots of losses. 51 00:03:14,720 --> 00:03:17,200 Speaker 2: And the more that the assets that they've invested in 52 00:03:17,840 --> 00:03:21,160 Speaker 2: for the prices, the more that they have to sell 53 00:03:21,360 --> 00:03:25,800 Speaker 2: to cover at the other end. And basically that huge 54 00:03:25,800 --> 00:03:28,359 Speaker 2: four that we saw in the nicke and the cosby 55 00:03:28,480 --> 00:03:32,040 Speaker 2: the Korean market on Monday, that's not normal. That is 56 00:03:32,120 --> 00:03:35,120 Speaker 2: just not normal. That isn't just the US going, Oh, 57 00:03:35,200 --> 00:03:38,280 Speaker 2: we might be going growing more slowly, or a recession 58 00:03:38,360 --> 00:03:42,760 Speaker 2: might be coming, James. That means something has not broken 59 00:03:42,840 --> 00:03:46,840 Speaker 2: in the financial system, but in some of these big 60 00:03:46,840 --> 00:03:49,960 Speaker 2: hedge funds with all that debt, are coming unstuck. 61 00:03:50,120 --> 00:03:54,040 Speaker 1: I won't say that I was cynical about this currage trade. 62 00:03:54,040 --> 00:03:58,560 Speaker 1: But you know, to me, correct me if I'm wrong, 63 00:03:59,160 --> 00:04:02,160 Speaker 1: you know it's ancality. I wake up and I find 64 00:04:02,200 --> 00:04:04,360 Speaker 1: that the Australian markets has the worst day in four 65 00:04:04,440 --> 00:04:07,680 Speaker 1: years because the hedge funds in the japan carry trade. 66 00:04:07,720 --> 00:04:09,800 Speaker 1: And I know a lot of people have mentioned it 67 00:04:09,880 --> 00:04:14,440 Speaker 1: as part of their invariably you know, lengthy menu length 68 00:04:14,600 --> 00:04:18,480 Speaker 1: explanation as to why the markets felt, But that doesn't 69 00:04:18,640 --> 00:04:23,720 Speaker 1: explain why the markets lost their nerve. The quantity of 70 00:04:23,720 --> 00:04:28,240 Speaker 1: that action doesn't explain why traders lost their nerve around 71 00:04:28,279 --> 00:04:32,359 Speaker 1: the world, including here. I know what happened, and I 72 00:04:32,440 --> 00:04:35,760 Speaker 1: know it's in there among the explanations. 73 00:04:36,400 --> 00:04:41,360 Speaker 2: Why doesn't it Why Why? Because I think what people 74 00:04:41,360 --> 00:04:45,560 Speaker 2: have completely underestimated, and I think it's really clear when 75 00:04:45,600 --> 00:04:48,719 Speaker 2: you compare the Australian market to the US market, and 76 00:04:48,760 --> 00:04:53,800 Speaker 2: what's being impacted in the US is that these hedge 77 00:04:53,800 --> 00:04:57,680 Speaker 2: funds had been riding let's say, the gen Ai way, 78 00:04:58,000 --> 00:05:00,720 Speaker 2: the golp one wave, which we do disgusted at our 79 00:05:00,800 --> 00:05:04,080 Speaker 2: last one, and those share prices are being hit more 80 00:05:04,120 --> 00:05:06,719 Speaker 2: and we're actually seeing that being reflected back into the 81 00:05:06,760 --> 00:05:10,599 Speaker 2: Australian share market with the stocks like Goodman Group, by way, 82 00:05:10,640 --> 00:05:14,640 Speaker 2: of example, which has exposure to data centers getting hit. 83 00:05:14,800 --> 00:05:16,680 Speaker 2: Now you might be sort of saying, like, what does 84 00:05:16,720 --> 00:05:19,920 Speaker 2: little All Australia have to do with the carry trade? Well, 85 00:05:20,360 --> 00:05:25,440 Speaker 2: nothing directly probably, But to the extent that the financial 86 00:05:25,480 --> 00:05:30,559 Speaker 2: system is so intertwined, James, it can no longer be 87 00:05:30,720 --> 00:05:33,920 Speaker 2: a case of when something goes wrong in one part 88 00:05:33,960 --> 00:05:36,760 Speaker 2: of the world, it has no impact. El Sweat. I'll 89 00:05:36,800 --> 00:05:40,160 Speaker 2: give you an example, long term capital management, and it's 90 00:05:40,200 --> 00:05:42,599 Speaker 2: what I always use it, and it came unstuck in 91 00:05:42,640 --> 00:05:45,160 Speaker 2: the Asian currency crisis. And that was the time when 92 00:05:45,200 --> 00:05:49,359 Speaker 2: I was broking emerging markets and they were meant to 93 00:05:49,440 --> 00:05:53,800 Speaker 2: be the best mathematicians around with the best algorithms and 94 00:05:53,839 --> 00:05:56,119 Speaker 2: black box these to call it black box at the time, 95 00:05:56,760 --> 00:06:00,680 Speaker 2: and they hadn't anticipated that Russia would to fault on 96 00:06:00,760 --> 00:06:04,640 Speaker 2: its sovereign debt. Okay, when they did that, the whole 97 00:06:04,680 --> 00:06:07,600 Speaker 2: hedge fund basically blew up. So what started as an 98 00:06:07,600 --> 00:06:10,560 Speaker 2: Asian currency crisis where they were making money and the 99 00:06:10,600 --> 00:06:14,680 Speaker 2: Asian markets were falling, suddenly became oh my gosh, this 100 00:06:14,720 --> 00:06:18,120 Speaker 2: is a Wall Street problem. And you saw the US 101 00:06:18,160 --> 00:06:21,159 Speaker 2: market then responding in kind, and they had to bail 102 00:06:21,200 --> 00:06:25,279 Speaker 2: out LTCM because it became too big to fail. Now, 103 00:06:25,520 --> 00:06:27,680 Speaker 2: the events that you've seen with the carry trade a 104 00:06:28,400 --> 00:06:31,120 Speaker 2: I think through the passage of time, we'll find out 105 00:06:31,160 --> 00:06:36,800 Speaker 2: that carry trade has in fact injected so much money 106 00:06:37,600 --> 00:06:41,320 Speaker 2: into assets overseas that we're probably only seen the tip 107 00:06:41,360 --> 00:06:44,320 Speaker 2: of the iceberg in terms of the young wide potentially 108 00:06:44,600 --> 00:06:47,320 Speaker 2: in the trade. We don't know how much leverage these 109 00:06:47,360 --> 00:06:50,440 Speaker 2: heads funds have and how long it's going to take 110 00:06:50,440 --> 00:06:54,440 Speaker 2: them to rebalance. All we do know is that the 111 00:06:54,480 --> 00:06:57,480 Speaker 2: Bank of Japan came out in response and said, oh, well, 112 00:06:57,480 --> 00:06:59,960 Speaker 2: we won't be raising interest rates anytime soon. 113 00:07:00,640 --> 00:07:03,640 Speaker 1: That's right, so hang on. So this curriage trade is 114 00:07:03,680 --> 00:07:05,120 Speaker 1: not as disturbed as we thought. 115 00:07:05,720 --> 00:07:08,800 Speaker 2: No, on the contrary, it is that disturbed because the 116 00:07:08,800 --> 00:07:12,360 Speaker 2: Bank of Japan came out and said, it's like a 117 00:07:12,360 --> 00:07:15,920 Speaker 2: FED put when markets fall. They've come out and said, 118 00:07:16,120 --> 00:07:18,200 Speaker 2: and I suspect the US. The FED was on the 119 00:07:18,240 --> 00:07:22,040 Speaker 2: phone to them saying, whoa guys, hello. We can't afford 120 00:07:22,160 --> 00:07:24,960 Speaker 2: to have at this point in the cycle one of 121 00:07:25,000 --> 00:07:29,200 Speaker 2: these drawdown events where we go back to what happened 122 00:07:29,560 --> 00:07:31,520 Speaker 2: in the lockdowns. 123 00:07:32,160 --> 00:07:35,640 Speaker 1: What I meant was that if I'm a retail investor 124 00:07:35,640 --> 00:07:39,320 Speaker 1: listening to the show and I hear this, I say, okay, right, okay, 125 00:07:39,680 --> 00:07:43,040 Speaker 1: you know, okay, So all these sort of desk jockeys 126 00:07:43,080 --> 00:07:45,880 Speaker 1: around the world, what my share is and what I'm 127 00:07:45,880 --> 00:07:49,720 Speaker 1: really driving at is I don't want to simplify the 128 00:07:49,960 --> 00:07:53,760 Speaker 1: long term capital management event. But in a way, right 129 00:07:53,840 --> 00:07:55,480 Speaker 1: there were technical. 130 00:07:55,000 --> 00:08:00,400 Speaker 2: Events correct, totally, totally, they don't. 131 00:08:00,480 --> 00:08:06,000 Speaker 1: Fully explain why the market has dropped. And what I'm 132 00:08:06,040 --> 00:08:09,280 Speaker 1: asking you, I suppose what I'm driving at is it 133 00:08:09,400 --> 00:08:12,080 Speaker 1: wasn't much of a drop in the end. It has 134 00:08:12,160 --> 00:08:14,640 Speaker 1: recovered a fair bit so far. It's not a crash. 135 00:08:14,800 --> 00:08:17,400 Speaker 1: It's not even a correction. The fall was seven point 136 00:08:17,440 --> 00:08:19,800 Speaker 1: five percent at its peak on the US, on the 137 00:08:19,920 --> 00:08:23,920 Speaker 1: SMP and ten percent is a correction. But I wonder, Danielle, 138 00:08:23,960 --> 00:08:26,560 Speaker 1: if we were running our shares in the SMSF and 139 00:08:26,600 --> 00:08:28,440 Speaker 1: you were telling me all about this stuff, I would 140 00:08:28,480 --> 00:08:35,080 Speaker 1: simply say, I think I worry sentimental approach. Knowing history, 141 00:08:35,360 --> 00:08:37,679 Speaker 1: watching markets all the way back to nineteen eighty seven, 142 00:08:39,240 --> 00:08:41,920 Speaker 1: I feel it's a dress rehearsal for the for for 143 00:08:42,040 --> 00:08:43,640 Speaker 1: what's what this market is due. 144 00:08:44,880 --> 00:08:47,320 Speaker 2: So you're saying you think markets need to crash. Is 145 00:08:47,360 --> 00:08:48,120 Speaker 2: that what you're saying? 146 00:08:48,600 --> 00:08:50,640 Speaker 1: I'm saying that look. One of the things I sort 147 00:08:50,640 --> 00:08:53,199 Speaker 1: of obsessed with all week, of all the mountains of 148 00:08:53,280 --> 00:08:55,520 Speaker 1: material that I've read and listened to, is Mike Wilson, 149 00:08:55,559 --> 00:09:00,360 Speaker 1: the strategy king right at Morgan Stanley, the king of 150 00:09:00,400 --> 00:09:02,560 Speaker 1: the global market. And by the way, in terms of 151 00:09:02,559 --> 00:09:05,760 Speaker 1: what do people do in Australia, they absolutely dominate the 152 00:09:05,760 --> 00:09:09,600 Speaker 1: top end of financial advice market here. I mean they 153 00:09:09,600 --> 00:09:11,600 Speaker 1: think they have something like a quarter of all entries 154 00:09:11,679 --> 00:09:15,520 Speaker 1: on our top advisor's list. And the Air chief just said, 155 00:09:15,640 --> 00:09:18,960 Speaker 1: very simple thing. He said, longtime average under US sixteen 156 00:09:19,000 --> 00:09:22,520 Speaker 1: times PE, current PE twenty one. He thinks it should 157 00:09:22,559 --> 00:09:25,360 Speaker 1: drop to about nineteen to be right, either the earnings 158 00:09:25,400 --> 00:09:27,520 Speaker 1: have to fly up for all those stocks in the 159 00:09:27,600 --> 00:09:29,880 Speaker 1: US or they have to come down. And this market 160 00:09:29,960 --> 00:09:33,880 Speaker 1: has this market is due to a reversal because of 161 00:09:33,920 --> 00:09:38,040 Speaker 1: the AI excitement which percolates right through the market even 162 00:09:38,080 --> 00:09:39,800 Speaker 1: to our Maybe you know, what do you think of that? 163 00:09:40,160 --> 00:09:42,280 Speaker 1: Of what I'm saying, Well. 164 00:09:42,000 --> 00:09:45,200 Speaker 2: It's funny because you've gone from like it's a storm 165 00:09:45,200 --> 00:09:48,640 Speaker 2: in a tea cup about the unworked. It's the end trade. 166 00:09:49,320 --> 00:09:52,440 Speaker 2: But the markets really need to fall over in a heap. 167 00:09:52,480 --> 00:09:54,760 Speaker 2: And of course there is that narrative out there. It's 168 00:09:54,800 --> 00:09:59,400 Speaker 2: probably been the most distrusted rally in share markets post 169 00:09:59,520 --> 00:09:59,880 Speaker 2: the low. 170 00:10:00,720 --> 00:10:02,079 Speaker 1: I really like that freeze. 171 00:10:02,120 --> 00:10:05,400 Speaker 2: Well it is people just go, this shouldn't be happening, 172 00:10:06,080 --> 00:10:10,360 Speaker 2: and yet you go, us earnings are actually better than 173 00:10:10,440 --> 00:10:14,840 Speaker 2: expected this quarter. They're coming out better than expected. I 174 00:10:14,960 --> 00:10:20,679 Speaker 2: think that whole gloom we're going to mean revert back 175 00:10:20,720 --> 00:10:26,160 Speaker 2: on valuations. I personally don't subscribe to it. I go 176 00:10:26,320 --> 00:10:31,520 Speaker 2: back to the financial system globally has fundamentally shifted over 177 00:10:31,559 --> 00:10:35,439 Speaker 2: the last thirty years. Of course, there are investors, and 178 00:10:35,960 --> 00:10:39,160 Speaker 2: you have to be very careful to differentiate between somebody 179 00:10:39,200 --> 00:10:43,280 Speaker 2: that has ten billion, one hundred billion, or even one 180 00:10:43,360 --> 00:10:48,560 Speaker 2: hundred million versus probably most of your listeners, because those 181 00:10:48,640 --> 00:10:53,000 Speaker 2: people have a completely different take on our set allocation, okay, 182 00:10:53,480 --> 00:10:56,760 Speaker 2: versus most of us who have money in the markets 183 00:10:56,760 --> 00:11:01,400 Speaker 2: and our superannuation in the markets and hedge super funds. 184 00:11:01,400 --> 00:11:04,760 Speaker 2: Have been the biggest buyers of banks over this year, 185 00:11:04,880 --> 00:11:08,400 Speaker 2: which I bet would surprise you because every broker has 186 00:11:08,400 --> 00:11:09,680 Speaker 2: a cell rating on them. 187 00:11:10,240 --> 00:11:14,679 Speaker 1: So I think, Sorry, Danielle, I talked about the Australian banks. 188 00:11:15,000 --> 00:11:16,200 Speaker 2: Yeah, the Australian banks. 189 00:11:16,520 --> 00:11:18,360 Speaker 1: Yeah, yeah, So this is why CommBank is at a 190 00:11:18,400 --> 00:11:20,360 Speaker 1: one hundred and thirty bucks et cetera. 191 00:11:21,120 --> 00:11:25,320 Speaker 2: Correct and nobody expected That's I think this whole big, 192 00:11:25,679 --> 00:11:28,520 Speaker 2: you know, doom gloom. Interest rates are still going to 193 00:11:28,559 --> 00:11:31,720 Speaker 2: go up in Australia. I'm not so sure about that 194 00:11:32,280 --> 00:11:36,120 Speaker 2: when you look at the reset in the markets. Possibly, yes, 195 00:11:36,160 --> 00:11:41,120 Speaker 2: Australian shares had moved too far. Yes, US shares had 196 00:11:41,200 --> 00:11:46,920 Speaker 2: moved too far. Is jen Ai a flash in the pan? Absolutely? 197 00:11:47,000 --> 00:11:53,679 Speaker 2: Not so differentiate between what was possibly exuberants coming into 198 00:11:53,679 --> 00:11:58,000 Speaker 2: certain shares. But I just think be very careful about 199 00:11:58,040 --> 00:12:00,960 Speaker 2: saying markets are going to crash. Loople say markets are 200 00:12:00,960 --> 00:12:05,720 Speaker 2: going to crash, but I will put it out there 201 00:12:06,160 --> 00:12:09,120 Speaker 2: that there is no government and no central bank that's 202 00:12:09,160 --> 00:12:10,280 Speaker 2: going to let that happen. 203 00:12:11,160 --> 00:12:14,360 Speaker 1: Okay, By the way, I would never say markets are 204 00:12:14,360 --> 00:12:16,240 Speaker 1: going to crash, and I would never say the word panic. 205 00:12:16,480 --> 00:12:19,080 Speaker 1: What I would say is that pullback wasn't as big 206 00:12:19,120 --> 00:12:22,079 Speaker 1: as I thought it was going to be, simple as that, because. 207 00:12:21,840 --> 00:12:28,640 Speaker 3: It hasn't finished, necessarily has backstopped everything. That's what I 208 00:12:28,679 --> 00:12:31,880 Speaker 3: was trying to explain, the Bank of Japan has kind 209 00:12:31,880 --> 00:12:34,360 Speaker 3: of backstopped it. Now Again, I. 210 00:12:34,280 --> 00:12:36,680 Speaker 2: Don't want people to be scared because ultimately, at the 211 00:12:36,760 --> 00:12:40,560 Speaker 2: end of the day, it's like it's going to once 212 00:12:40,640 --> 00:12:45,320 Speaker 2: this liquidity draw down, once the liquidity readjusts right, it 213 00:12:45,400 --> 00:12:48,959 Speaker 2: will be about going back to earnings. And if earnings 214 00:12:48,960 --> 00:12:51,840 Speaker 2: are growing, it's a very simple story. Share prices go 215 00:12:52,000 --> 00:12:54,079 Speaker 2: up over time, end of story. 216 00:12:54,840 --> 00:12:58,480 Speaker 1: So let's take that line of inquiry. If that's the case, 217 00:12:58,800 --> 00:13:03,120 Speaker 1: and let's assume that's the key, then we have a 218 00:13:03,160 --> 00:13:05,640 Speaker 1: market that is a bit cheaper this week than last week, 219 00:13:06,640 --> 00:13:11,760 Speaker 1: and is it too early to go bargain hunting. 220 00:13:12,800 --> 00:13:17,160 Speaker 2: Well, it's reporting season, James. So I think in the 221 00:13:17,200 --> 00:13:22,199 Speaker 2: context that that it is probably more prudent to, rather 222 00:13:22,240 --> 00:13:26,680 Speaker 2: than play the casino game of you know, red or black, 223 00:13:27,200 --> 00:13:30,120 Speaker 2: that investors should wait till the results come out. I'll 224 00:13:30,160 --> 00:13:33,360 Speaker 2: give you a couple of examples. Murvak was off about 225 00:13:33,400 --> 00:13:37,400 Speaker 2: twelve percent today because the twenty twenty five guidance is 226 00:13:37,480 --> 00:13:42,079 Speaker 2: lower than expected. Then there is another company, ordinate a favorite, 227 00:13:42,080 --> 00:13:45,360 Speaker 2: They had to reset their earnings guidance down and it 228 00:13:45,440 --> 00:13:47,920 Speaker 2: fell thirty five percent. But now a whole lot of 229 00:13:47,960 --> 00:13:51,280 Speaker 2: brokers have come up and upgraded today. Or Macquarie, which 230 00:13:51,320 --> 00:13:54,719 Speaker 2: are downgraded before, have upgraded and said look now it's 231 00:13:54,840 --> 00:13:59,520 Speaker 2: offering value. So I guess, whilst not giving advice, I 232 00:13:59,559 --> 00:14:05,040 Speaker 2: would say two listeners, wait till look at the company reports. 233 00:14:05,160 --> 00:14:10,559 Speaker 2: There's going to be ongoing volatility and big share price moves. 234 00:14:10,840 --> 00:14:14,440 Speaker 2: So rather than going to the casino and second guessing saying, 235 00:14:15,000 --> 00:14:17,280 Speaker 2: is combat share price going to go up and down 236 00:14:17,360 --> 00:14:20,320 Speaker 2: till well, Telster just go up and down whatever, just 237 00:14:20,640 --> 00:14:24,600 Speaker 2: I think wait and absorb because everybody's going to have 238 00:14:24,640 --> 00:14:27,360 Speaker 2: a different position in terms of the shares they own, 239 00:14:27,440 --> 00:14:30,680 Speaker 2: what time period, et cetera. But I think you can 240 00:14:30,760 --> 00:14:34,240 Speaker 2: expect volatility in this earning season. 241 00:14:35,560 --> 00:14:37,720 Speaker 1: I want to ask you one thing, which was just 242 00:14:37,800 --> 00:14:40,400 Speaker 1: about how our market is just a little bit different 243 00:14:40,400 --> 00:14:42,960 Speaker 1: than the US and earnings. I will just take Combank 244 00:14:43,000 --> 00:14:46,040 Speaker 1: you mentioned there, biggest stock in the market, biggest bank 245 00:14:46,080 --> 00:14:49,560 Speaker 1: in the market than as you to report on the fourteenth, 246 00:14:49,560 --> 00:14:54,800 Speaker 1: which is next Wednesday, and they are expected market consensus 247 00:14:54,880 --> 00:14:56,800 Speaker 1: is that their profit actually will drop a little bit, 248 00:14:57,480 --> 00:15:01,000 Speaker 1: very roughly from ten point something to nine point something billion, 249 00:15:01,560 --> 00:15:03,640 Speaker 1: But at the same time, their dividend is going to 250 00:15:04,480 --> 00:15:07,280 Speaker 1: crawl higher by five cents. What I'm driving out here 251 00:15:07,360 --> 00:15:12,400 Speaker 1: is in our market, the value proposal to the investor 252 00:15:12,480 --> 00:15:17,440 Speaker 1: includes dividends at like four percent dividend yeal. In the 253 00:15:17,520 --> 00:15:20,840 Speaker 1: US the dividend is nothing remotely near that, so the 254 00:15:20,880 --> 00:15:22,840 Speaker 1: promise is price increased. So what I'm going to ask 255 00:15:22,880 --> 00:15:25,160 Speaker 1: you is, when you look at the when you look 256 00:15:25,200 --> 00:15:31,280 Speaker 1: at the results, should the dividends hay out or payment 257 00:15:31,880 --> 00:15:36,240 Speaker 1: be a more important criteria on the ASEX than it 258 00:15:36,280 --> 00:15:38,760 Speaker 1: would be on global shares. 259 00:15:40,880 --> 00:15:43,760 Speaker 2: Well, it really depends on the share James, because obviously 260 00:15:43,800 --> 00:15:47,880 Speaker 2: it's important for being become important portant for the big miners, 261 00:15:48,200 --> 00:15:51,200 Speaker 2: and it is important for the banks. But there's a 262 00:15:51,200 --> 00:15:53,440 Speaker 2: whole lot of shares that don't pay much dividend here 263 00:15:53,440 --> 00:15:54,239 Speaker 2: in Australia. 264 00:15:54,400 --> 00:15:56,920 Speaker 1: For the ones that are the big like literally dividend 265 00:15:56,960 --> 00:15:58,640 Speaker 1: influencers like Common. 266 00:15:58,480 --> 00:16:02,200 Speaker 2: Well, yeah, yeah, of course. Of course in the US 267 00:16:02,280 --> 00:16:07,200 Speaker 2: it's buybacks hmm okay, because they changed the legislation years ago. 268 00:16:07,320 --> 00:16:09,680 Speaker 2: I think it was Bill Clinton that made buybacks more 269 00:16:09,720 --> 00:16:15,239 Speaker 2: attractive than dividends. So yeah, of course, dividend is hugely important. 270 00:16:15,400 --> 00:16:19,040 Speaker 2: Although I wouldn't be surprised unless they really come out 271 00:16:19,160 --> 00:16:21,440 Speaker 2: on a big miss on the dividends or a big 272 00:16:21,520 --> 00:16:24,200 Speaker 2: better than expected on the dividend. I wouldn't expect that 273 00:16:24,240 --> 00:16:26,400 Speaker 2: you're going to get much movement for some of those 274 00:16:26,640 --> 00:16:29,360 Speaker 2: more well known companies. Actually, I haven't had a look 275 00:16:29,360 --> 00:16:32,640 Speaker 2: at Transurban today because I think their dividend might be 276 00:16:32,720 --> 00:16:37,840 Speaker 2: slightly better than expected. But generally speaking, Rio came out 277 00:16:37,880 --> 00:16:40,520 Speaker 2: with a lower than expected dividend the other day and 278 00:16:40,520 --> 00:16:44,640 Speaker 2: the share price didn't really respond, so it has to 279 00:16:44,720 --> 00:16:47,960 Speaker 2: be quite a big change for them. 280 00:16:48,520 --> 00:16:51,360 Speaker 1: Dramatic. Okay, Actually, if I were talking on dividend, then 281 00:16:51,360 --> 00:16:52,680 Speaker 1: before we go to the brick, I wanted to throw 282 00:16:52,720 --> 00:16:55,640 Speaker 1: one other thing out to you, which is I was surprised, 283 00:16:55,960 --> 00:16:57,560 Speaker 1: you know even I think at the start of the 284 00:16:57,560 --> 00:17:00,760 Speaker 1: show there I mentioned, oh, you know, we the distinct 285 00:17:00,840 --> 00:17:04,800 Speaker 1: value proposal of Australian shares as opposed to offshore shares 286 00:17:05,359 --> 00:17:10,919 Speaker 1: is the dividend rate, the dividend yield. But it's been 287 00:17:11,000 --> 00:17:14,679 Speaker 1: dropping and the forecast dividend use for the market is 288 00:17:15,200 --> 00:17:17,400 Speaker 1: under four. It's three point eight. We were always told 289 00:17:17,440 --> 00:17:20,280 Speaker 1: it was four and a half. So to that extent, 290 00:17:20,359 --> 00:17:23,120 Speaker 1: the dividend side of the dealer seems to be feeding 291 00:17:23,240 --> 00:17:27,480 Speaker 1: while the price action is all right, but it's never 292 00:17:27,520 --> 00:17:30,880 Speaker 1: as good as the US. What do you think of that? 293 00:17:32,560 --> 00:17:35,640 Speaker 2: I'm not surprised all of these institutions that are paid 294 00:17:35,680 --> 00:17:39,240 Speaker 2: out to higher payout ratios, too much in dividends and 295 00:17:39,280 --> 00:17:42,960 Speaker 2: haven't invested in the future have to invest now. It's 296 00:17:43,000 --> 00:17:44,320 Speaker 2: a huge problem. 297 00:17:44,760 --> 00:17:46,879 Speaker 1: They catching up with them. 298 00:17:47,080 --> 00:17:51,879 Speaker 2: Yeah, totally, totally. Banks are a classic case in point. Again, 299 00:17:52,040 --> 00:17:55,159 Speaker 2: it goes back to even if you're looking at things 300 00:17:55,240 --> 00:17:58,680 Speaker 2: like cybersecurity and all the attacks that are going on there, 301 00:17:58,760 --> 00:18:01,160 Speaker 2: I mean they have to invest for the future. Oh 302 00:18:01,240 --> 00:18:05,879 Speaker 2: that's the bottom line. I think investors have feasted gorged 303 00:18:05,920 --> 00:18:10,320 Speaker 2: themselves on amazing dividends in Australia and it's typical of 304 00:18:10,400 --> 00:18:13,960 Speaker 2: a cyclical, mature market. The UK is the same. I 305 00:18:14,000 --> 00:18:17,240 Speaker 2: think you'll find James that has quite a high yield 306 00:18:17,280 --> 00:18:22,000 Speaker 2: as well. From memory, for example, tobacco companies. I was 307 00:18:22,080 --> 00:18:24,280 Speaker 2: just recently in London met with a friend of mine 308 00:18:24,280 --> 00:18:27,400 Speaker 2: whose I know tobacco companies on everybody's cup of tea. 309 00:18:27,480 --> 00:18:29,560 Speaker 2: So I'm not suggesting you run out and buy them. 310 00:18:30,080 --> 00:18:33,119 Speaker 1: I know there'd been great investments for a long time. 311 00:18:33,200 --> 00:18:39,639 Speaker 2: I know this, but the dividend built on BAT is 312 00:18:39,760 --> 00:18:43,159 Speaker 2: over nine percent British and American tobacco. Because my friend 313 00:18:43,400 --> 00:18:47,479 Speaker 2: is top rated tobacco analyst in the world, and I 314 00:18:47,520 --> 00:18:50,880 Speaker 2: said how much capital erosion have you had me? He said, oh, yes, 315 00:18:51,000 --> 00:18:54,520 Speaker 2: quite a bit of capital erosion, and I go then 316 00:18:54,520 --> 00:18:57,280 Speaker 2: he explains why. But I guess what I'm saying is 317 00:18:57,320 --> 00:19:02,640 Speaker 2: that some of those more mature industries etc. Have much 318 00:19:02,720 --> 00:19:06,000 Speaker 2: higher yields. But in the case of Australia, if we 319 00:19:06,040 --> 00:19:09,000 Speaker 2: look at our companies that respond or behave in a 320 00:19:09,080 --> 00:19:12,000 Speaker 2: fashion that is more attuned to possibly what investors look 321 00:19:12,040 --> 00:19:15,480 Speaker 2: for in the US, so the car sales area which 322 00:19:15,520 --> 00:19:21,040 Speaker 2: is reporting on Friday, the likes of Wistech Global zero. Now, 323 00:19:21,080 --> 00:19:25,520 Speaker 2: these companies are investing for the future, always upgrading, and 324 00:19:25,560 --> 00:19:28,600 Speaker 2: they don't pay high dividends, and yet their performance capital 325 00:19:28,640 --> 00:19:30,560 Speaker 2: appreciation has been spectacular. 326 00:19:30,760 --> 00:19:35,879 Speaker 1: We won't go down the side allly of the reality 327 00:19:35,960 --> 00:19:41,119 Speaker 1: that the frank dividend regime has a lot too answer 328 00:19:41,160 --> 00:19:44,680 Speaker 1: for here. You know, it really does, because it's steam 329 00:19:44,760 --> 00:19:48,840 Speaker 1: ruled and basically shunted the whole market towards the dividends 330 00:19:48,920 --> 00:19:53,600 Speaker 1: becoming perhaps overly important A story for another day. We'd 331 00:19:53,640 --> 00:20:02,960 Speaker 1: be back in a moment, folks would take shortbreak. Hello 332 00:20:03,040 --> 00:20:05,720 Speaker 1: and welcome back to the Australian's Money Puzzle podcast. I'm 333 00:20:05,720 --> 00:20:09,199 Speaker 1: talking to Danielle O Cooye, author of the Shaplicity book, 334 00:20:09,440 --> 00:20:12,040 Speaker 1: which was a bestseller on shares and terrific book if 335 00:20:12,080 --> 00:20:14,200 Speaker 1: you are getting to know the share market and want 336 00:20:14,200 --> 00:20:18,120 Speaker 1: an introduction to it. She is also an analyst, investor, 337 00:20:18,160 --> 00:20:23,680 Speaker 1: professional investor and writer. I wanted to ask you, Danielle. 338 00:20:23,720 --> 00:20:25,640 Speaker 1: This segment, folks, is going to be choppy, right because 339 00:20:25,640 --> 00:20:27,480 Speaker 1: I'm going to throw different things at Danielle and she's 340 00:20:28,000 --> 00:20:29,520 Speaker 1: sort of a person that you can do this and 341 00:20:29,560 --> 00:20:31,880 Speaker 1: she's going to be able to answer most of the questions. 342 00:20:32,320 --> 00:20:37,240 Speaker 1: You know, this hunt for alternative assets and this which 343 00:20:37,240 --> 00:20:40,000 Speaker 1: I'm terribly skeptical about. Not that I'm skeptical about it, 344 00:20:40,280 --> 00:20:47,679 Speaker 1: I'm terribly skeptical about the business of listed securities on 345 00:20:47,720 --> 00:20:51,560 Speaker 1: the Australian market, where mom and Dad are told, here's 346 00:20:51,560 --> 00:20:54,800 Speaker 1: your way into private credit, here's your way into private 347 00:20:54,800 --> 00:21:00,199 Speaker 1: equity in the very to me, extremely unlikely vehicle of 348 00:21:00,240 --> 00:21:03,640 Speaker 1: a listed share. Have you did you have a look 349 00:21:03,680 --> 00:21:09,840 Speaker 1: at see how those performed in the shock drop earlier 350 00:21:09,840 --> 00:21:13,359 Speaker 1: in the week, and what do you think of that 351 00:21:13,720 --> 00:21:18,560 Speaker 1: fashion of pulling retail investors into I mean, the funds 352 00:21:18,600 --> 00:21:20,800 Speaker 1: are just popping out by the day. Everyone's rushing in 353 00:21:21,560 --> 00:21:25,480 Speaker 1: and launching these listed funds where they say to people, hey, folks, 354 00:21:25,520 --> 00:21:28,200 Speaker 1: you know you can't get at private credit and private 355 00:21:28,240 --> 00:21:31,080 Speaker 1: equity because you're just Joe average. But if you want 356 00:21:31,080 --> 00:21:33,119 Speaker 1: to catch up with the future phone in Australian super 357 00:21:33,200 --> 00:21:35,040 Speaker 1: by this listed shair. What do you think of that 358 00:21:35,080 --> 00:21:35,520 Speaker 1: whole thing. 359 00:21:37,040 --> 00:21:40,000 Speaker 2: Well, I'm going to refer to another guest of yours, 360 00:21:40,040 --> 00:21:42,760 Speaker 2: Will Hamilton, because Will and I used to work together 361 00:21:43,520 --> 00:21:46,160 Speaker 2: and we have a little bit of a joke about this, 362 00:21:46,480 --> 00:21:49,240 Speaker 2: and it's not to dismiss anyone that has put money 363 00:21:49,359 --> 00:21:52,400 Speaker 2: in these forms of asset classes, but we are very 364 00:21:52,400 --> 00:21:55,399 Speaker 2: cynical because we've come from that side of the industry. 365 00:21:56,000 --> 00:22:00,880 Speaker 2: We know that the institutions will give the tell public 366 00:22:01,520 --> 00:22:04,960 Speaker 2: the funds that they think they will like and they 367 00:22:05,000 --> 00:22:09,480 Speaker 2: can sell so in straight off the bat, I'm very 368 00:22:10,000 --> 00:22:15,640 Speaker 2: concerned cynical that whilst there will be good vehicles, there 369 00:22:15,680 --> 00:22:19,639 Speaker 2: will also be vehicles that could tell a very sorry 370 00:22:19,720 --> 00:22:22,479 Speaker 2: story down the track. Now, private credit has been a 371 00:22:22,680 --> 00:22:27,200 Speaker 2: huge growth market, largely to do with banking regulations, so 372 00:22:27,320 --> 00:22:30,719 Speaker 2: the banks have shift out of funding in this area 373 00:22:30,800 --> 00:22:34,879 Speaker 2: and private institutions have moved into it. In my former 374 00:22:35,320 --> 00:22:37,879 Speaker 2: job at Osby's, I was interviewing a lot of private 375 00:22:37,920 --> 00:22:42,760 Speaker 2: credit people. It is growing rapidly, but when you think 376 00:22:42,840 --> 00:22:49,480 Speaker 2: about it, not all debt see mine, credit is created equally, James. 377 00:22:50,680 --> 00:22:54,080 Speaker 2: And if we are going into an economic slowdown, albeit 378 00:22:54,160 --> 00:22:57,800 Speaker 2: everyone's debating the extent of the slowdown, one has to 379 00:22:57,920 --> 00:23:03,600 Speaker 2: question the quality of the credit that people are investing in. Intuitively, 380 00:23:03,720 --> 00:23:07,520 Speaker 2: if you're getting a ten percent plus yield on debt 381 00:23:08,840 --> 00:23:12,800 Speaker 2: versus let's say I bought some A and ZID corporate 382 00:23:12,840 --> 00:23:15,680 Speaker 2: bonds today which are almost yielding about five point nine 383 00:23:15,720 --> 00:23:19,400 Speaker 2: percent versus getting ten percent, you have to ask how 384 00:23:19,440 --> 00:23:22,600 Speaker 2: much risk am I taking for that almost additional five 385 00:23:22,720 --> 00:23:31,520 Speaker 2: percent per annum? And personally for smaller investors it sounds attractive. 386 00:23:31,600 --> 00:23:34,119 Speaker 2: I know a lot of older investors I think, have 387 00:23:34,200 --> 00:23:37,439 Speaker 2: been saying we'll sell our shares, we'll go into private 388 00:23:37,480 --> 00:23:41,320 Speaker 2: credit because we just want the income. But like all 389 00:23:41,359 --> 00:23:43,920 Speaker 2: new fads, I think there's going to be winners and 390 00:23:43,960 --> 00:23:45,639 Speaker 2: there's going to be losers, So you have to be 391 00:23:45,760 --> 00:23:50,639 Speaker 2: very careful. You just can't assume what the underlying asset 392 00:23:50,760 --> 00:23:53,359 Speaker 2: is and if it's going to be okay, and what 393 00:23:53,520 --> 00:23:58,720 Speaker 2: happens if that company goes busted. Now, obviously there's a 394 00:23:58,720 --> 00:24:01,879 Speaker 2: lot of property credit it out there, and property is 395 00:24:01,920 --> 00:24:04,719 Speaker 2: in an immense world of pain at the moment. So 396 00:24:04,760 --> 00:24:08,960 Speaker 2: I think investors have to be incredibly diligent and careful 397 00:24:09,200 --> 00:24:13,000 Speaker 2: about what they're buying. When it comes to private equity, 398 00:24:13,600 --> 00:24:17,240 Speaker 2: investors have to understand that the big boys. They again, 399 00:24:17,320 --> 00:24:19,040 Speaker 2: if you go back to the big investor with one 400 00:24:19,080 --> 00:24:22,840 Speaker 2: hundred million or whatever they have, they don't mind blowing 401 00:24:22,920 --> 00:24:25,639 Speaker 2: up ten million dollars. That's why they'll put it into bitcoin, 402 00:24:25,760 --> 00:24:29,399 Speaker 2: or they'll put it into something else, do you know 403 00:24:29,400 --> 00:24:32,120 Speaker 2: what I mean? And they can buy private Yeah, it's 404 00:24:32,119 --> 00:24:35,560 Speaker 2: petty cash. So it comes down to adisset allocation. If 405 00:24:35,600 --> 00:24:39,360 Speaker 2: you have a good fund manager that is allocating across 406 00:24:39,520 --> 00:24:45,280 Speaker 2: a huge spectrum of new companies in private equity, one 407 00:24:45,480 --> 00:24:49,000 Speaker 2: maybe out of one hundred will be will do really well. 408 00:24:49,440 --> 00:24:52,760 Speaker 2: We hear about the canvas. We don't hear about all 409 00:24:52,800 --> 00:24:56,880 Speaker 2: the ones that end up in the toilets. That's the problem. 410 00:24:57,520 --> 00:24:59,720 Speaker 1: They all talk about the ones. The winner is this 411 00:25:00,160 --> 00:25:03,040 Speaker 1: horse racing, I had a winner in the two thirty 412 00:25:03,320 --> 00:25:06,560 Speaker 1: at whatever Randwick. Yeah, well what about the dozens of 413 00:25:06,600 --> 00:25:07,440 Speaker 1: times you didn't? 414 00:25:07,720 --> 00:25:09,160 Speaker 2: Hey, just one quick thing. 415 00:25:09,600 --> 00:25:12,399 Speaker 1: It just struck me. There it didn't enter your It 416 00:25:12,440 --> 00:25:17,640 Speaker 1: didn't enter your highly sophisticated and experienced investor mind when 417 00:25:17,640 --> 00:25:21,119 Speaker 1: you bought and I don't want to plug any particular bank, 418 00:25:21,560 --> 00:25:24,920 Speaker 1: but when you bought a bank security that you just mentioned, 419 00:25:25,480 --> 00:25:27,639 Speaker 1: don't you mind that these were the guys that are 420 00:25:27,720 --> 00:25:32,119 Speaker 1: financing the private credit people anyway, the funds. 421 00:25:32,680 --> 00:25:35,600 Speaker 2: Yeah, that's true actually, and obviously yes, it was more. 422 00:25:35,640 --> 00:25:37,960 Speaker 2: I obviously have missed something in that. It was more 423 00:25:37,960 --> 00:25:40,439 Speaker 2: a switch out of a floating rate note into a 424 00:25:40,480 --> 00:25:40,959 Speaker 2: fixed rate. 425 00:25:41,080 --> 00:25:43,840 Speaker 1: So I'm taking but the big banks, that big investment 426 00:25:43,840 --> 00:25:45,720 Speaker 1: banks there behind all that anyway, aren't. 427 00:25:45,520 --> 00:25:47,920 Speaker 2: They Well I'm not up to date on that one, 428 00:25:47,920 --> 00:25:51,520 Speaker 2: but it's a financing the credit market, which I guess 429 00:25:51,520 --> 00:25:54,440 Speaker 2: somebody has to, Yeah, because they've taken it off their 430 00:25:54,480 --> 00:25:55,520 Speaker 2: balance sheets. 431 00:25:56,119 --> 00:25:59,560 Speaker 1: Same in the US, they've taken it off their balance sheets. 432 00:26:00,240 --> 00:26:04,040 Speaker 1: Is the lending and then these funds come along, but 433 00:26:04,119 --> 00:26:06,760 Speaker 1: the funds find uced by banks. And we'll put that 434 00:26:06,800 --> 00:26:09,479 Speaker 1: out there just for the moment. All right, Okay, we'll 435 00:26:09,520 --> 00:26:11,840 Speaker 1: take short break. We've got some really good questions from 436 00:26:11,920 --> 00:26:15,440 Speaker 1: Matthew and Joe and Matt and someone who likes to 437 00:26:15,480 --> 00:26:24,359 Speaker 1: call themselves the average punter back in a moment, Hello, 438 00:26:24,400 --> 00:26:27,280 Speaker 1: and welcome back to The Australian's money puzzle. Maybe you 439 00:26:27,359 --> 00:26:30,560 Speaker 1: and I could read them alternatively if you'd like to 440 00:26:30,600 --> 00:26:30,919 Speaker 1: do that. 441 00:26:31,760 --> 00:26:34,480 Speaker 2: Yep, okay. So Matthew has asked, if the market always 442 00:26:34,520 --> 00:26:36,840 Speaker 2: goes up in the long term, why wouldn't a young 443 00:26:36,880 --> 00:26:41,080 Speaker 2: investor always buy a geared ETF. I don't understand the 444 00:26:41,119 --> 00:26:44,600 Speaker 2: long term downside. Ultimately one is just magnifying the long 445 00:26:44,680 --> 00:26:50,160 Speaker 2: term expected market return. The expected return wasn't positive long term, 446 00:26:50,359 --> 00:26:52,720 Speaker 2: it wouldn't buy it in the first place. Great question 447 00:26:52,880 --> 00:26:56,159 Speaker 2: and conversation with my son who at one point watched 448 00:26:56,320 --> 00:27:02,520 Speaker 2: by a triple gid nazdak triple geared. I think so, yeah, 449 00:27:03,119 --> 00:27:05,919 Speaker 2: I stand to be corrected. It might be only double gid. 450 00:27:06,080 --> 00:27:08,119 Speaker 2: Look at the end of the day, in theory it 451 00:27:08,240 --> 00:27:11,560 Speaker 2: sounds great. But when market's four by twenty percent and 452 00:27:11,600 --> 00:27:15,080 Speaker 2: your geared ETF it's gone down by double or triple 453 00:27:15,119 --> 00:27:20,840 Speaker 2: the amount, you might feel as ballsy. So it depends 454 00:27:20,920 --> 00:27:26,400 Speaker 2: on your restolerance, Matthew. Like everything it. People forget James 455 00:27:26,440 --> 00:27:29,879 Speaker 2: that you can have long periods of underperformance in share 456 00:27:29,960 --> 00:27:33,240 Speaker 2: markets from nineteen sixty eight to the early eighties, and 457 00:27:33,280 --> 00:27:36,560 Speaker 2: I'm sure you've discussed reasons why in previous podcast. 458 00:27:37,240 --> 00:27:37,960 Speaker 1: It's come up with that. 459 00:27:38,119 --> 00:27:43,640 Speaker 2: Yeah, yeah, but I think it depends how your risk 460 00:27:43,720 --> 00:27:47,640 Speaker 2: tolerance works. Me personally, women tend to be more conservative. 461 00:27:47,760 --> 00:27:51,479 Speaker 2: I would never consider a gard ETF or a gard 462 00:27:51,560 --> 00:27:55,080 Speaker 2: ETF into a stock like nvideo. Yes, you can make 463 00:27:55,119 --> 00:27:57,720 Speaker 2: lots of money in the short term, but equally you 464 00:27:57,760 --> 00:28:01,720 Speaker 2: could watch your capital eroad rather quickly long term Welsh 465 00:28:01,760 --> 00:28:05,119 Speaker 2: creation is done I think more patiently. 466 00:28:05,240 --> 00:28:08,280 Speaker 1: Okay, Matthew. This is never advised, by the way, of course, 467 00:28:08,280 --> 00:28:11,280 Speaker 1: it's always information. But one thing I want to ask you. Theoretically, 468 00:28:11,359 --> 00:28:13,879 Speaker 1: I suppose would you gear it all? Would you borrow 469 00:28:13,960 --> 00:28:15,520 Speaker 1: to invest on the markets? 470 00:28:15,760 --> 00:28:16,000 Speaker 2: Never? 471 00:28:16,280 --> 00:28:19,359 Speaker 1: No, I see, okay, all right, okay, then your answer 472 00:28:19,480 --> 00:28:23,680 Speaker 1: was very much in keeping with your broader worldview. All right, 473 00:28:23,800 --> 00:28:27,080 Speaker 1: the average punter says, I always listen to your podcast 474 00:28:27,119 --> 00:28:29,960 Speaker 1: from picking up my daughter from school. Actually, you know 475 00:28:30,000 --> 00:28:31,359 Speaker 1: what we should do. We should have it. We should 476 00:28:31,359 --> 00:28:33,879 Speaker 1: we should encourage people to tell us what they do 477 00:28:33,960 --> 00:28:36,159 Speaker 1: when they're listening to the podcast. It's just struck me, 478 00:28:36,200 --> 00:28:38,320 Speaker 1: you know, I hear all sorts of things. That was. 479 00:28:38,400 --> 00:28:40,720 Speaker 1: We had a we had we had a we had 480 00:28:40,760 --> 00:28:43,240 Speaker 1: a listener who used to tell us this. Listen to 481 00:28:43,400 --> 00:28:47,280 Speaker 1: us blowing the leaves during the garden cycling. All sorts 482 00:28:47,320 --> 00:28:49,560 Speaker 1: of things. I wonder, what's the oddest one have to 483 00:28:49,600 --> 00:28:53,920 Speaker 1: be genuine? Of course that let us know. Okay, recently 484 00:28:53,960 --> 00:28:56,640 Speaker 1: says the average punter. I heard Marcus Badley, who's someone 485 00:28:56,640 --> 00:28:59,320 Speaker 1: I must have on the show someday of Marcus today 486 00:28:59,400 --> 00:29:03,000 Speaker 1: saying if the overnight iron ore prices are up, then 487 00:29:03,040 --> 00:29:06,000 Speaker 1: the share prices of iron ore prices like for to 488 00:29:06,120 --> 00:29:09,479 Speaker 1: skull go up when the ASEX opens for trading if 489 00:29:09,480 --> 00:29:12,240 Speaker 1: they're down, vice versa. Is it true? And how would 490 00:29:12,280 --> 00:29:17,040 Speaker 1: I check iron ore prices before the AX opens for trading? Okay, well, 491 00:29:17,080 --> 00:29:21,400 Speaker 1: the AESX opens at ten o'clock for trading these days, 492 00:29:21,440 --> 00:29:23,959 Speaker 1: you can correct. I hang and get this stuff pretty easy. 493 00:29:24,880 --> 00:29:27,400 Speaker 1: The London Metals Exchange would have life prices. There are 494 00:29:27,480 --> 00:29:29,000 Speaker 1: nine hours behind, et cetera. 495 00:29:30,440 --> 00:29:34,120 Speaker 2: We have it on the fn Arena website. James, the 496 00:29:34,160 --> 00:29:36,520 Speaker 2: iron ore price can be a little bit tricky to 497 00:29:36,520 --> 00:29:39,960 Speaker 2: get hold of. It's not traded directly out of London. 498 00:29:40,200 --> 00:29:43,440 Speaker 1: Why is it tricky to get Singapore? So what's the key, 499 00:29:43,440 --> 00:29:45,640 Speaker 1: mar what's the key price market for our and ore? 500 00:29:46,480 --> 00:29:49,960 Speaker 2: I think it's it's traded and Singapore that's the main 501 00:29:50,040 --> 00:29:53,080 Speaker 2: one and they have different features. Yeah, and there's also 502 00:29:53,320 --> 00:29:57,880 Speaker 2: the Chinese Exchange and they usually traded in futures prices. 503 00:29:57,920 --> 00:30:01,480 Speaker 2: Butfn arena dot Com has an updated which you can 504 00:30:01,480 --> 00:30:04,680 Speaker 2: see on the front of the website, updated all the 505 00:30:05,240 --> 00:30:09,200 Speaker 2: muldity prices every morning by about eight point fifteen. 506 00:30:09,760 --> 00:30:12,240 Speaker 1: There you are average punter. All right? Do you want 507 00:30:12,240 --> 00:30:16,040 Speaker 1: to read the question from due and just before we 508 00:30:16,120 --> 00:30:19,440 Speaker 1: do aphic folks, which is the subject of this question 509 00:30:19,560 --> 00:30:22,840 Speaker 1: is the Australian Foundation Investment Company so listed investment fund. 510 00:30:23,120 --> 00:30:25,080 Speaker 1: It's the most famous of them all. I think it's 511 00:30:25,080 --> 00:30:27,040 Speaker 1: the biggest of them all too. Okay, would you like 512 00:30:27,080 --> 00:30:28,280 Speaker 1: to read that one, Danielle? 513 00:30:29,360 --> 00:30:32,640 Speaker 2: Yes, So Joe is asking that he's invested in AFIC 514 00:30:32,760 --> 00:30:34,959 Speaker 2: over the last few years and you can't understand at 515 00:30:34,960 --> 00:30:38,240 Speaker 2: the moment why the net asset's higher than the share price. 516 00:30:38,760 --> 00:30:42,000 Speaker 2: I can understand where this happens for a listed investment 517 00:30:42,160 --> 00:30:46,080 Speaker 2: company based on properties where the underlying valuations may not 518 00:30:46,120 --> 00:30:50,160 Speaker 2: align it to the lick valuations. Interesting one, James. 519 00:30:50,280 --> 00:30:56,040 Speaker 4: I've had a we peak at the asset valuation and 520 00:30:56,280 --> 00:31:00,400 Speaker 4: the latest one that provided it was really interesting, James, 521 00:31:00,400 --> 00:31:04,760 Speaker 4: because the pre tax valuation versus the post tax valuation 522 00:31:05,040 --> 00:31:08,680 Speaker 4: compared to the share price presents a totally different picture. 523 00:31:09,320 --> 00:31:13,040 Speaker 2: So I didn't come away with a very clear response 524 00:31:13,120 --> 00:31:15,080 Speaker 2: to this one, and I'd be interested in your view 525 00:31:15,120 --> 00:31:20,040 Speaker 2: because pre tax the share price is actually trading lower 526 00:31:20,080 --> 00:31:26,080 Speaker 2: than the asset valuation post tax. It's yeah, yeah, which 527 00:31:26,120 --> 00:31:27,240 Speaker 2: is interesting, isn't it? 528 00:31:27,280 --> 00:31:30,280 Speaker 1: Because you got stored Frank dividends. 529 00:31:31,560 --> 00:31:35,400 Speaker 2: Yeah, they do, they hold They've got a lot of them. Yeah, yeah, 530 00:31:35,440 --> 00:31:38,360 Speaker 2: I think so. And all I would say is that 531 00:31:38,480 --> 00:31:41,440 Speaker 2: typically your best to buy when the share price is 532 00:31:41,480 --> 00:31:44,360 Speaker 2: trading at a discount. It should have done quite well 533 00:31:44,400 --> 00:31:48,640 Speaker 2: because it's Lavish's holding is actually Commonwealth Bank, but they 534 00:31:48,680 --> 00:31:51,640 Speaker 2: do tend to move depending on what the shareholdings are. 535 00:31:51,760 --> 00:31:55,000 Speaker 2: Although I don't know what your you've heard gens or 536 00:31:55,000 --> 00:31:58,840 Speaker 2: your view, but I think some of these listed investment 537 00:31:58,880 --> 00:32:03,360 Speaker 2: companies are not necessarily the preferred vehicle for the young 538 00:32:03,960 --> 00:32:07,640 Speaker 2: they can to buy ats And I'm wondering whether the 539 00:32:07,680 --> 00:32:12,800 Speaker 2: flow of funds has impacted on some of these discounts 540 00:32:13,640 --> 00:32:15,000 Speaker 2: to the share prices. 541 00:32:14,880 --> 00:32:17,640 Speaker 1: List investment companies. I would say invariably, but I think 542 00:32:17,680 --> 00:32:21,800 Speaker 1: you'd probably find actually the majority numerically trade below their 543 00:32:22,440 --> 00:32:26,680 Speaker 1: asset value or tangible asset value, and the textbooks will 544 00:32:26,720 --> 00:32:29,120 Speaker 1: tell you buy them when they're trading to out a 545 00:32:29,160 --> 00:32:31,000 Speaker 1: discount to them. The thing is that they never know 546 00:32:31,200 --> 00:32:34,200 Speaker 1: the discount. Most of them never never catch up. Some 547 00:32:34,280 --> 00:32:37,600 Speaker 1: of the good ones do the better ones, and if 548 00:32:37,640 --> 00:32:40,240 Speaker 1: it would be one of them. So that's point one, 549 00:32:40,480 --> 00:32:44,400 Speaker 1: and point two is as Danielle is saying. The thing 550 00:32:44,440 --> 00:32:48,080 Speaker 1: about ETFs is that, especially now with active ETFs, where 551 00:32:48,080 --> 00:32:50,840 Speaker 1: they can really sort of get very close to an 552 00:32:50,840 --> 00:32:56,720 Speaker 1: approximate of a conventional ASX top two hundred listed investment company, 553 00:32:56,920 --> 00:33:01,880 Speaker 1: their fees can be lower and they can go lower 554 00:33:01,920 --> 00:33:04,880 Speaker 1: even still, So that's going on there, but for what 555 00:33:04,960 --> 00:33:08,440 Speaker 1: it's worth. In many ways, it's always the case with 556 00:33:08,640 --> 00:33:13,080 Speaker 1: even really good licks that they trade below the neck 557 00:33:13,240 --> 00:33:15,200 Speaker 1: tangible value of all the shares in them, which is 558 00:33:15,280 --> 00:33:17,760 Speaker 1: kind of ironic. It shouldn't be the case. But in 559 00:33:17,960 --> 00:33:21,320 Speaker 1: verb is I might be corrected. I'll be corrected by that. 560 00:33:21,440 --> 00:33:23,600 Speaker 1: The ones that are trading at a premium will tell 561 00:33:23,600 --> 00:33:25,840 Speaker 1: me very quickly. But if you have a look across 562 00:33:25,880 --> 00:33:31,440 Speaker 1: the board, that's often the case, all right, Mats. Finally, Matt, 563 00:33:31,560 --> 00:33:35,120 Speaker 1: last question, Like many others. I have shares in big 564 00:33:35,280 --> 00:33:38,640 Speaker 1: tech in the US. I don't want to sell, but 565 00:33:38,720 --> 00:33:42,400 Speaker 1: I want to protect against the falling US dollar. What 566 00:33:42,440 --> 00:33:48,160 Speaker 1: can I do as a mom slash dad investor. You're 567 00:33:48,200 --> 00:33:51,600 Speaker 1: probably a dad investor, Matt, look for a couple of things. 568 00:33:51,720 --> 00:33:54,280 Speaker 1: First of all, it's funny we had this conversation the 569 00:33:54,360 --> 00:33:56,120 Speaker 1: other day. Over a very long period of time. The 570 00:33:56,120 --> 00:33:58,720 Speaker 1: hedging doesn't really make an awful lot of difference, right, 571 00:33:58,800 --> 00:34:02,480 Speaker 1: That's the first thing. Okay, second thing is any sort 572 00:34:02,480 --> 00:34:07,040 Speaker 1: of hedging whatsoever. Nothing's free. If you get hedging, you 573 00:34:07,120 --> 00:34:07,720 Speaker 1: pay for it. 574 00:34:08,560 --> 00:34:12,480 Speaker 2: I wouldn't. I wouldn't personally. It's not advice, but Mats 575 00:34:12,640 --> 00:34:16,560 Speaker 2: talk about Greek enough Greek investing overseas with you know, 576 00:34:16,800 --> 00:34:20,560 Speaker 2: even in big tech it's everybody calls the demise of 577 00:34:20,600 --> 00:34:23,239 Speaker 2: the US dollar. But I don't think we're going to 578 00:34:23,280 --> 00:34:26,280 Speaker 2: see the demise of the US dollar in our lifetime. James. 579 00:34:26,600 --> 00:34:29,600 Speaker 2: Everybody calls the Aussie dollar at eighty cents for years, 580 00:34:29,840 --> 00:34:32,120 Speaker 2: and we haven't seen eighty cents in ages. 581 00:34:33,000 --> 00:34:34,839 Speaker 1: You don't think even Trump cannot do it. 582 00:34:37,160 --> 00:34:39,120 Speaker 2: Oh, I think if Trump has a go at trying 583 00:34:39,120 --> 00:34:41,200 Speaker 2: to do some of the stuff that's in Project twenty 584 00:34:41,280 --> 00:34:44,480 Speaker 2: twenty five, you'll see the bond market have conniptions and 585 00:34:44,520 --> 00:34:47,320 Speaker 2: you'll back off faster than the road runner. 586 00:34:47,760 --> 00:34:53,560 Speaker 1: Is your sense of its ability to remain the words 587 00:34:53,560 --> 00:34:56,440 Speaker 1: reserve currency in a strong currency? Is it based on 588 00:34:56,480 --> 00:35:00,960 Speaker 1: the fact that treading as such, but fact that it 589 00:35:01,040 --> 00:35:03,600 Speaker 1: is the reserve currency? And so when things go wrong, ironically, 590 00:35:03,680 --> 00:35:05,279 Speaker 1: even if they're sparked by the US the whole world 591 00:35:05,320 --> 00:35:07,360 Speaker 1: for some money in US treasuries. 592 00:35:07,280 --> 00:35:09,359 Speaker 2: Yes, that's part of it. And it's also because it's 593 00:35:09,400 --> 00:35:12,440 Speaker 2: the collateral that's used around the world those US treasuries. 594 00:35:12,760 --> 00:35:13,200 Speaker 1: Yeah. 595 00:35:13,640 --> 00:35:17,399 Speaker 2: So that's the biggest thing that's my understanding, and it's 596 00:35:17,440 --> 00:35:20,040 Speaker 2: not going to be dislodged anytime soon. Nor is the 597 00:35:20,160 --> 00:35:22,919 Speaker 2: US government in the Federal Reserve going to roll over 598 00:35:23,040 --> 00:35:26,680 Speaker 2: and say take our hedgeomny like that easily. They can 599 00:35:26,719 --> 00:35:28,040 Speaker 2: make life very difficult. 600 00:35:28,800 --> 00:35:30,799 Speaker 1: There's a bottom line where they won't jeopardize their own 601 00:35:31,040 --> 00:35:35,000 Speaker 1: pre eminence in currency markets. Wow. 602 00:35:35,040 --> 00:35:37,120 Speaker 2: They don't want to give up that power anytime soon, 603 00:35:37,160 --> 00:35:40,200 Speaker 2: do they? Because they've I mean, they have weaponized the 604 00:35:40,280 --> 00:35:44,760 Speaker 2: US dollar geopolitically with Russia, and that's what's caused China 605 00:35:44,840 --> 00:35:48,520 Speaker 2: and these other countries to be looking to increase their 606 00:35:48,560 --> 00:35:52,719 Speaker 2: gold holdings and looking to create an alternative to the 607 00:35:52,840 --> 00:35:58,360 Speaker 2: US dollar. But ultimately, James, it's very hard because everybody 608 00:35:58,400 --> 00:36:01,400 Speaker 2: when they go out to borrow whatever they need the 609 00:36:01,480 --> 00:36:06,239 Speaker 2: collateral and you're not going to buy Chinese treasury the 610 00:36:06,360 --> 00:36:09,680 Speaker 2: equivalent and all. Probably is there the liquidity to actually 611 00:36:09,719 --> 00:36:12,719 Speaker 2: do it. So I think the demise of the US 612 00:36:12,880 --> 00:36:16,160 Speaker 2: dollar is overstated. I think if you invest in the 613 00:36:16,320 --> 00:36:18,600 Speaker 2: US you just have to take a long term view 614 00:36:19,480 --> 00:36:22,960 Speaker 2: that over the balance of time, the share price capital 615 00:36:23,000 --> 00:36:27,160 Speaker 2: appreciation of the shares will do you well enough. Trying 616 00:36:27,160 --> 00:36:30,720 Speaker 2: to hedge currencies is even impossible for the big boys, 617 00:36:30,800 --> 00:36:34,799 Speaker 2: isn't it, James, little owner immortals and. 618 00:36:34,880 --> 00:36:38,280 Speaker 1: Matt let me tell you, they get it so wrong 619 00:36:39,360 --> 00:36:42,800 Speaker 1: so often that the chances you'll get right very slim. 620 00:36:42,880 --> 00:36:45,759 Speaker 1: So just yes. So look, it would seem we're not 621 00:36:45,800 --> 00:36:47,399 Speaker 1: talking to you, Matt, We're talking to all the mats 622 00:36:47,400 --> 00:36:50,000 Speaker 1: in the world hedging. You know, really, I don't worry 623 00:36:50,000 --> 00:36:52,880 Speaker 1: about it on particularly if you are a long term investor. 624 00:36:52,960 --> 00:36:56,480 Speaker 1: And as for whether the US will drop just because whatever. 625 00:36:57,000 --> 00:36:58,920 Speaker 1: And you didn't mention Trump, but the narrative at the 626 00:36:58,920 --> 00:37:01,240 Speaker 1: moment is that you know what he plans will weaken 627 00:37:01,320 --> 00:37:05,000 Speaker 1: the US donor don't know about that either, Okay, terrific. Hey, 628 00:37:05,200 --> 00:37:07,239 Speaker 1: thank you very much, Danielle. It was great to talk 629 00:37:07,280 --> 00:37:09,880 Speaker 1: to you today. As always regular guests on the show. 630 00:37:10,239 --> 00:37:13,000 Speaker 2: Pleasure James. Lovely to chat with you and thank you 631 00:37:13,080 --> 00:37:14,239 Speaker 2: so much for having me on. 632 00:37:14,719 --> 00:37:16,719 Speaker 1: Oh you're very welcome and lovely to have you back 633 00:37:16,760 --> 00:37:20,200 Speaker 1: on this show. Okay, folks, as I have asked for 634 00:37:20,200 --> 00:37:22,880 Speaker 1: a week or two, if you are enjoying the podcast, 635 00:37:22,960 --> 00:37:24,960 Speaker 1: thank you, thanks for all the ratings and everything. But 636 00:37:25,000 --> 00:37:27,120 Speaker 1: what would be really good would be if you would 637 00:37:27,120 --> 00:37:30,480 Speaker 1: just mention it to one other person in your circle 638 00:37:30,560 --> 00:37:33,400 Speaker 1: that you like it. That would be our little reward 639 00:37:33,480 --> 00:37:37,640 Speaker 1: and we'd love that. All right, communications, Let's have some more, 640 00:37:37,680 --> 00:37:41,560 Speaker 1: Let's have some questions, observations, even tell us what you 641 00:37:41,640 --> 00:37:44,880 Speaker 1: do when you're listening to the podcast for our own entertainment, 642 00:37:44,920 --> 00:37:48,240 Speaker 1: for the audience's entertainment. All right, the email the Money 643 00:37:48,239 --> 00:37:51,080 Speaker 1: Puzzle at the Australian dot com dot au. Talk to 644 00:37:51,080 --> 00:37:51,439 Speaker 1: you soon.