Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
Speaker 1: James Kirby, the Weather editor at The Australian. Welcome aboard, everybody.
Speaker 1: I expect you're more than aware just how good share
Speaker 1: market investing is right now. Our share market, folks. Even
Speaker 1: the ASX is up eleven percent in over the last
Speaker 1: twelve months. Dividends to that there's fifteen percent in the bag.
Speaker 1: The US market is steaming along. It's up twenty four
Speaker 1: percent in the last twelve months. And more than that,
Speaker 1: there are so many signs that this market has got
Speaker 1: the ideal conditions to keep going. On a broad basis,
Speaker 1: there's always things you can worry about, and you can
Speaker 1: always worry. I can tell you about a slump or
Speaker 1: a surprise setback or a correction in the September or
Speaker 1: October period when the Americans get wobbly every year as
Speaker 1: they face Christmas. Winter is coming. You've seen Game of Thrones,
Speaker 1: you know what it means, same thing in the share market. Now,
Speaker 1: on top of all that, we've got Donald Trump, who
Speaker 1: you know. I think we might as well take it
Speaker 1: as read this morning that the markets at least think
Speaker 1: he's going to be re elected, and there's like a
Speaker 1: sixty to sixty seven percent probability in the money markets
Speaker 1: right now, but that he will be re elected. That
Speaker 1: means a Republican administration, that means pro business administration, and
Speaker 1: that means a big lift in stocks. Traditionally, you know
Speaker 1: Trump first time round, from the day he was elected
Speaker 1: to when COVID arrived the US market went up sixty
Speaker 1: percent or so, people will be thinking that there's a
Speaker 1: good chance that will happen again. So I want to
Speaker 1: talk about chairs today, and just before I start, by
Speaker 1: the way, one or two pieces of correspondence about when
Speaker 1: I talk about chairs, and do I have a conflict
Speaker 1: of interest, et cetera. I mean I have an SMSF
Speaker 1: and of course I want to invest. I have all
Speaker 1: the things that you have in terms of shares, just
Speaker 1: to clear the air in terms of ordinary shares. This
Speaker 1: isn't ETF re funds in my portfolio I have. I
Speaker 1: try to keep it to ten always. Just now, these
Speaker 1: are the ten shares I have. I am not going
Speaker 1: to give you wastings aroundthing, but here they are. Are
Speaker 1: you ready? Come on with bank CSL Hansen technology a
Speaker 1: quarry bank. Quarry technology NAB, Next, DC, Cube, Ramsey and Reo.
Speaker 1: Some of them I've had for twenty years. Some of
Speaker 1: them I've had four a year. My guest today is
Speaker 1: a regular on the show Friend of the Show. It's
Speaker 1: Jemma Dale, head of Investor Behavior and SMSF at NAB Trade.
Speaker 1: Oh are you, Gemma?
Speaker 2: I'm well, thank you? How are you?
Speaker 1: What do you think of my portfolio?
Speaker 2: That's the million dollar question, isn't it?
Speaker 1: Instinctive response?
Speaker 2: Probably my first question would be what else do you have?
Speaker 1: I'm not telling you what else I have? Oh, I
Speaker 1: have ECF, since I have some active fun and I
Speaker 1: have gold, and I feel I like to think my
Speaker 1: SMSF is very well diversified. I mean, I'm obsessed with
Speaker 1: deir feresssification, and I do think it's very well diversified,
Speaker 1: though I find the share component constantly gets bigger than
Speaker 1: I meant it to for the simple reason shares have
Speaker 1: been so good for so long.
Speaker 2: Yeah, that's quite interesting. I mean the most interesting thing
Speaker 2: about that is we focus on the individual stocks because
Speaker 2: you can see their performance. It's very hard to get
Speaker 2: excited about the performance of your ETFs, to be honest,
Speaker 2: and some of the very well diversified components of your portfolio,
Speaker 2: even though they're going to be thousands of securities by
Speaker 2: the time you add them all, lot would be my guess,
Speaker 2: and so you've probably got exposure to thousands of things,
Speaker 2: and yet you look at the ten that you can
Speaker 2: definitely put a number on and worry about those. And
Speaker 2: we're all the same. We all do it very You've
Speaker 2: got a lot of banks in there, but you're doing
Speaker 2: very well out of them, so certainly can't complain at
Speaker 2: the moment.
Speaker 1: There's no dogs in there. There's one dog. Let me
Speaker 1: call it out loud and clear. I wish I didn't
Speaker 1: have it. I'm stuck with it, and I should have
Speaker 1: the guts to sell it. But then every time I
Speaker 1: look at it, I say, maybe it's coming round, which
Speaker 1: is Ramsey Healthcare. And there's one absolute ripper in there,
Speaker 1: which is next TOC, followed closely, I might add, by
Speaker 1: mcquari Technology, and both those docks are AI plays in
Speaker 1: my mind, though I have next TC for years, but
Speaker 1: to Mcquarie Technology relatively recently. Anyway, I'm just putting that
Speaker 1: out there, folks, just to clear the air, and because
Speaker 1: we're going to talk about shares today. Exclusively because I
Speaker 1: think it's a terrific market. Jem At tell me, first
Speaker 1: of all, because you see all the data and a
Speaker 1: trade and you see what's coming in and what people
Speaker 1: are doing. Do you detect any change in the flavor
Speaker 1: of shared trading, the volume of shared trading, the demographics
Speaker 1: of shared trading in this last few months as people
Speaker 1: are starting to realize, gee, the market's damn good for
Speaker 1: quite some time.
Speaker 2: Yeah, it's so interesting. The last few years have been fascinating.
Speaker 2: I mean, we've talked about this before, but the well
Speaker 2: over half of our investor base has joined us since COVID,
Speaker 2: so the huge influx of new investors and new accounts
Speaker 2: for us. But new investors came through in that COVID
Speaker 2: period when the market fell off a cliff, so that
Speaker 2: thirty percent in three weeks dip on the ax and
Speaker 2: saw very similar responses from share markets around the world.
Speaker 2: Was when the vast majority of our new accounts were opened,
Speaker 2: and in the subsequent sort of twelve months, so people
Speaker 2: came to investing during that period and had this incredible
Speaker 2: opportunity to buy shares at a very discounted price, and
Speaker 2: then they rocketed back very quickly. So many of our
Speaker 2: investors have had a really interesting first experience. If you
Speaker 2: started training for the first time in nineteen ninety nine,
Speaker 2: you had a very different experience that somebody started in
Speaker 2: two thousand and A lot of people you know who
Speaker 2: have been around for a long time felt that was
Speaker 2: a normalist that period, but it was your first experience,
Speaker 2: it wasn't right. That's what share investing is for you now,
Speaker 2: and so those people are familiar with a pretty strong market.
Speaker 2: That's half of our investors. Those who've been around a
Speaker 2: long time tend to have much bigger portfolios. I've had
Speaker 2: a lot more time to build up their wealth. You
Speaker 2: mentioned you've got CBA and McCrory and CSL. They're the
Speaker 2: kind of shares that have made people a lot of
Speaker 2: money over the long term. You know, if you're buying
Speaker 2: those in the nineties, and a lot of our investors were,
Speaker 2: then you have done extremely well. Those people are moving
Speaker 2: money around but feeling reluctant to throw a lot of
Speaker 2: money at this market, which I find really interesting. So
Speaker 2: our cash book is very high at the moment. Newer
Speaker 2: and younger investors are mostly buying ETFs and just buying
Speaker 2: them consistently as a wealth creation strategy. That's a very
Speaker 2: common strategy now more and more people are doing it,
Speaker 2: and they're pretty agnostic as to mine market movements. They
Speaker 2: will buy more on a down day, which I find fascinating.
Speaker 2: So you think they're agnostic, but they're very aware of
Speaker 2: what is going on in the market, and they will
Speaker 2: absolutely buy more if the market gets hammered in the
Speaker 2: US overnight and futures are down, they will throw more
Speaker 2: into an ETF that day than they would if futures
Speaker 2: were really positive. But it's a long term strategy for them,
Speaker 2: and they tend to do it consistently. And then our
Speaker 2: more mature investors are a little bit anxious, right They're
Speaker 2: seeing CBA above one hundred and thirty dollars, They're seeing
Speaker 2: prices that feel quite stretched in some areas of their portfolios.
Speaker 2: And because those portfolios have been around a long time
Speaker 2: and tend to hold things they're very familiar with and
Speaker 2: know very well. Yeah, they're a little bit of nov
Speaker 2: I would guess, you know, they're not super keen to
Speaker 2: chase these prices.
Speaker 1: Right. Okay, let's take it on board. One of the
Speaker 1: things we were saying about, and I imagine our listeners
Speaker 1: are something broadly similar. Right, So they have the ETF
Speaker 1: so core and satellite, they have the maybe they only
Speaker 1: have ETFs, Maybe they have some ETFs, like I have
Speaker 1: to achieve certain things right to access the most of
Speaker 1: the offshore. As you notice, all those stocks are Australian
Speaker 1: an offshore. I'm using atfs and funds mostly. But when
Speaker 1: you look at the composition of the market, so people
Speaker 1: will say the thing, we're obsessed. Why do we talk
Speaker 1: about individual shares when ETFs are so important or they
Speaker 1: may be for our listeners because they're the swing factor. Right,
Speaker 1: that's the difference between having an ordinary year the same
Speaker 1: as everyone else, winning big or losing. And that's I
Speaker 1: think that that will never I don't know, but I
Speaker 1: don't think that will ever change. That will never go.
Speaker 1: The attraction of shares and the particular attraction of shares
Speaker 1: that they can do so well. And ETFs are fine,
Speaker 1: they're great, but you will never ever do any better
Speaker 1: than the norm.
Speaker 2: With an ETF. Yeah. Absolutely, really think to me, as
Speaker 2: I said, there is this very strong preference for ETFs,
Speaker 2: particularly in younger investors. And funnily enough, you talk about
Speaker 2: using ETFs for offshore. But our investors tend to start
Speaker 2: with the AX. And when I say tend to, I
Speaker 2: mean there is a dramatic difference between the number of
Speaker 2: investors and the amounts of money they put to the
Speaker 2: ASX two hundred. It is the first investment versus what
Speaker 2: is a long way down the list, which is the
Speaker 2: S and P five hundred. As this second option, it
Speaker 2: is a long way behind. So people start buying the
Speaker 2: ASEX first and then they diversified beyond that, which I
Speaker 2: find fascinating. And yeah, the appeal is really obvious, which
Speaker 2: for so many young people and so many people new
Speaker 2: to market, I don't know what to buy. That's always
Speaker 2: the biggest question. I don't know what to buy. ETF
Speaker 2: just takes that problem away for you. Right, just buy
Speaker 2: the whole market. You'll be fine. And as you say,
Speaker 2: then you don't have any opportunity to outperform. You're going
Speaker 2: to get the market minus the tiny feet. But you're
Speaker 2: gonna get market. That's great. It's better than enough, right,
Speaker 2: it's very good based on how performance has been over
Speaker 2: the last twelve months. There are many others who are
Speaker 2: looking for something much better than that, and they feel
Speaker 2: very strongly about making their own choices. Funnily enough, they
Speaker 2: tend to be more experienced investors. They're not young people,
Speaker 2: you know, willing to bet their shirts, right, it's quite
Speaker 2: the opposite. It's people who are very experienced. They know
Speaker 2: what they're doing, and they're absolutely going to try to
Speaker 2: get a better return than the market or and it
Speaker 2: was something I didn't ask you about your portfolio. They've
Speaker 2: got a very specific need. So a lot of our
Speaker 2: older investors invest for yields, and they are not looking
Speaker 2: for high growth. That's not what they're after. They're not
Speaker 2: going to take a punt on ZIP. They just want
Speaker 2: yield and that's what they're going to invest for.
Speaker 1: Yeah, very true. The irony is that there would have
Speaker 1: been twice literally haven't met twice as much money if
Speaker 1: they had bought a US ETF rather the S and
Speaker 1: P if I found it, rather than the ear six
Speaker 1: year after year.
Speaker 2: Certainly, the last twenty years have been pretty astonishing for
Speaker 2: US equities.
Speaker 1: Twenty years was due Jemma.
Speaker 2: That will do it for the vast majority of people.
Speaker 2: For most of us, that is long enough as a timeframe.
Speaker 2: So yeah, absolutely, the US has been astonishingly strong in
Speaker 2: terms of its performance, and that has been the rise
Speaker 2: of tech. Right. It's very clear what drove that performance,
Speaker 2: and it's very clear when you look at the composition
Speaker 2: of the S and P five hundred, now what has
Speaker 2: driven that performance. There's a lot of people making comparisons
Speaker 2: to sort of the ninety nine two thousand era right
Speaker 2: now based on the hype around AI, but we haven't
Speaker 2: seen the pullback. We thought we saw it in twenty two,
Speaker 2: and it just came around again, right.
Speaker 1: Comes around again. The other thing is, yes, I know,
Speaker 1: nineteen ninety nine, sure you know, but maybe it's not
Speaker 1: nineteen ninety nine. Maybe it's nineteen ninety five. Yeah, and
Speaker 1: there's four fabulous years to go. I mean, I don't know,
Speaker 1: and I'm not going to Both of us have experienced
Speaker 1: enough that I'm not silly enough to ask you, do
Speaker 1: you know where the market's going? And I'm not going
Speaker 1: to puntificate as to where it's going. But a couple
Speaker 1: of things I do want to ask you when we
Speaker 1: sit there now as investors on the share market, so
Speaker 1: we look at that, we look at the return on
Speaker 1: the share market, and it's well above average, okay above
Speaker 1: average on historical figures. It's above average on recent figures.
Speaker 1: There is four percent inflation of course, okay, so really
Speaker 1: you know, you got to put that in If you say,
Speaker 1: oh my my shares did ten percent last year, it's great,
Speaker 1: Yeah they did, but it's four percent inflation, so you
Speaker 1: got to put that in mind. When there was no inflation,
Speaker 1: six percent would have been the same. That's one thing.
Speaker 1: And we have the dividends. The big dilemma I think
Speaker 1: for Australian investors is you mentioned about so many people
Speaker 1: who want yield and the older very broadly, the older
Speaker 1: you are, the more you want yield. It's as simple
Speaker 1: as that. And by the time you retire, it's all
Speaker 1: you want, right. I talked to someone the other day,
Speaker 1: very very well known financial journalist, and they are for
Speaker 1: the first time in their life, they're looking for advice
Speaker 1: because they're so confident in their own ability that they
Speaker 1: never thought of asking anybody as for advice before. But
Speaker 1: I said, well, what do you want? You know, what
Speaker 1: do you want? And this person simply said, I just
Speaker 1: want income. We hit his wife and just want income.
Speaker 1: And that's what happens when you get to a certain point,
Speaker 1: and that's fair enough, and you maybe do you think
Speaker 1: you lose your nerve as you get older as well
Speaker 1: in terms of investing.
Speaker 2: I don't think it's not necessarily you just don't need
Speaker 2: to take the risk anymore. You know, a young person
Speaker 2: is trying to build from nothing. You know, it's unless
Speaker 2: you've inherited some money or you happen to cross a
Speaker 2: windfall or something. You are taking any excess cashflow you've
Speaker 2: got from your job and trying to build something aggressively.
Speaker 2: You've got to build it fast, you know. When you're young,
Speaker 2: you've got to build it fast because you're coming off
Speaker 2: with such a low base, Whereas when you're older, it's
Speaker 2: about the preservation of what you have and you're far
Speaker 2: more to lose. And we know about sequencing risks, so
Speaker 2: for anyone who's not familiar with the concept, you understand
Speaker 2: it intuitively, but it's really there's a lot of academic
Speaker 2: work around it now. Sequencing risk is effectively when you
Speaker 2: are drawing down on your money. So say you have
Speaker 2: a million dollars to provide for your retirement and you're
Speaker 2: taking out fifty thousand dollars a year. If you suffer
Speaker 2: a massive downturn in the market in year one, and
Speaker 2: that million dollars turns into six hundred thousand dollars, which
Speaker 2: sounds dramatic, But this happened to a colleague of mine
Speaker 2: in two thousand and eight, two thousand and nine, he
Speaker 2: was back at work.
Speaker 1: It happened to everyone in two thousand and eight too.
Speaker 1: Then the market felt fifty percent of us never forget that.
Speaker 2: Yeah, And he had a diversified portfolio, he'd taken a
Speaker 2: lot of care, he worked in finance and markets, he
Speaker 2: knew what he was doing, and he was back at
Speaker 2: work twelve months after retirement to rebuild. Because when you're
Speaker 2: pulling down fifty thousand dollars a year out of six
Speaker 2: hundred thousand, it runs out very quickly compared to pulling
Speaker 2: it out of a million that might be growing. So
Speaker 2: that sequencing risk, if you suffer an adverse event right
Speaker 2: at the beginning of your retirement, is very damaging to
Speaker 2: the long term outcome of your portfolio and your wealth frankly,
Speaker 2: and your lifestyle. So people, it makes sense to be
Speaker 2: anxious about losing a lot early in retirement in particular,
Speaker 2: And as you get older, does it matter so much?
Speaker 2: You're okay? The vast majority of older people I speak
Speaker 2: to and retired people they don't want to draw down
Speaker 2: on the capital at all, and retirement they want to
Speaker 2: preserve the whole lot and just live off the income.
Speaker 2: And that's where that desire for yield comes from. It's
Speaker 2: not a really chunky yield. And I don't want to
Speaker 2: think about drawing down on the capital. That's too much
Speaker 2: risk for me.
Speaker 1: Yeah, yeah, And that is I suppose in a way,
Speaker 1: it's the optimal it's the optimal situation. I think we
Speaker 1: should be careful. And we had actually awn on the
Speaker 1: show Very Interesting a few weeks ago about that whole
Speaker 1: issue about how you know, I mean, yes, you'd rather
Speaker 1: not draw down on capital, but similarly, you're not going
Speaker 1: to live for a thousand years, okay, there is a
Speaker 1: point of which you could safely actuarially make an esspence
Speaker 1: say okay, and as soon I live to one hundred
Speaker 1: and ten, you know, and then you can walk backwards
Speaker 1: from there. That would be I would imagine safe enough
Speaker 1: for most people even today with the longevity risk that
Speaker 1: we have. But on the market and where it's going.
Speaker 1: So we crossed the eight thousand mark on the ASX
Speaker 1: two hundred the other day, big number very important milestone,
Speaker 1: important to show that we are in blue sky, that
Speaker 1: the ASEX is really starting to move, and let's just
Speaker 1: put the US to one side just for the moment
Speaker 1: at this part of the show and talk about the ASEX.
Speaker 1: One other very big change occurred just around the same
Speaker 1: time that was happening, and that was that that our
Speaker 1: market is, as everyone knows very much based on two things,
Speaker 1: banks and minors and BHP had been the biggest stock
Speaker 1: in the market for years, and CBA on Monday morning
Speaker 1: this week, because I was going to do a story
Speaker 1: gem about how it was going to overtake BHP, and
Speaker 1: as I was doing it on Monday morning, I had
Speaker 1: it actually written, and I had it written in this
Speaker 1: way that said it's going to overtake. I had a
Speaker 1: about lunchtime, I looked again and the numbers had changed
Speaker 1: around and it had overtaken. So a bit of luck
Speaker 1: that I was able to say on the day, hey,
Speaker 1: CBA is after becoming the biggest stock. It happened before
Speaker 1: my eyes. But and I think this time around it
Speaker 1: is going to stay there. And I think it's stayed
Speaker 1: there before about four years ago, it was there for
Speaker 1: a year. And here we are again. What does that mean?
Speaker 1: Do you think that our biggest stock is a bank
Speaker 1: now and the banks are under the pinning our ASX now,
Speaker 1: not the miners.
Speaker 2: Yeah, it's an interesting one, not least because I work
Speaker 2: for a bank.
Speaker 1: Yeah, but we talk about bank stocks as a generic.
Speaker 2: I'll talk about them generally, but it's worth calling out CBA.
Speaker 2: CBA is broadly understood to be the most expensive bank
Speaker 2: in the world based on share pricense valuation. That's an
Speaker 2: extraordinary thing. And it is a very high quality bank.
Speaker 2: You know, it doesn't carry the risk of US banks
Speaker 2: and a lot of the other alternatives out there in
Speaker 2: the world. It is very exposed to the Australian consumer
Speaker 2: through home loans. It's a very strong franchise and it
Speaker 2: continues to maintain this massive premium over the other Australian
Speaker 2: banks and over other global banks because over literally decades,
Speaker 2: it's continued to maintain its margins to an extent, you know,
Speaker 2: better than others, let's put it that way. It continues
Speaker 2: to have this very strong footprint and have the largest
Speaker 2: home loan share in the Australian market. The Australian homelan
Speaker 2: market continues to hold up despite constant predictions of fallen
Speaker 2: house prices. All of the things that are supposed to
Speaker 2: undermine the share price of CBA and the Australian banks
Speaker 2: just don't come to fruition. It doesn't mean they never will.
Speaker 2: It just means that it's called the win. Don't make
Speaker 2: a trade for a reason shorting the Australian banks. It
Speaker 2: has cost a lot of people a lot of money.
Speaker 2: We keep thinking that can't continue to grow at this
Speaker 2: right in terms of the share prices.
Speaker 1: And yet and it's really worth thinking about the folks.
Speaker 1: And it's not just because Jemma works for a bank.
Speaker 1: And by the way, I mean, I would think a
Speaker 1: lot more of her. There's no way that she would
Speaker 1: simply talk her book or anything like that. Because I've
Speaker 1: had her on the show lots of time.
Speaker 2: She didn't work for bank.
Speaker 1: I was like, oh no, no, but she doesn't talk
Speaker 1: her book. And anyway, here's the facts. It's very hard
Speaker 1: to find a buy notes. It's almost impossible to find
Speaker 1: a single stoff broker in the Australian stock market that
Speaker 1: would tell you to buy banks right now. There's there,
Speaker 1: there's holds and underweights and everything across the board. On
Speaker 1: all the banks and on CBA. And here's the thing.
Speaker 1: All those brokers are wrong, and they're wrong all year,
Speaker 1: and they're wrong month after a month. This is August.
Speaker 1: They're saying it since late last year. That doesn't mean,
Speaker 1: as Jemma says, they will be wrong in the future,
Speaker 1: But I tell you what, right now, they're wrong. So
Speaker 1: the point I'm making is that we have the banks
Speaker 1: now dominant on our market, and then we have the miners,
Speaker 1: and we have the usual suspects CSL and some of
Speaker 1: the biggest stocks. Macquarie Bank two also never forget in
Speaker 1: there very much, so now in the top ten, even
Speaker 1: though it's an investment bank and not typical and would
Speaker 1: have a lot more risk and a different nature of
Speaker 1: risk than what we might call high street banks, the
Speaker 1: big four that we all know. So, Jemy, what are
Speaker 1: your troops on n AB trade? What else are people buying?
Speaker 1: Because you know, one of the things that I always
Speaker 1: think about one of the great quotes about stock market
Speaker 1: investing is that it's you can look at a stock
Speaker 1: and you can have your opinion on us, and you
Speaker 1: could be very good mathematically. You could have it all
Speaker 1: worked out, and you might think that it's going to
Speaker 1: go up, and that's all fine, But actually what matters
Speaker 1: is whether other people think it's going to go up.
Speaker 1: That's what matters. Right. So I'm digging here and I'm
Speaker 1: trying to find out from you, what are your database
Speaker 1: are millions of investors? What are they looking at now?
Speaker 1: What are they like?
Speaker 2: It's always the best question. The one thing I found
Speaker 2: about working in this part of the industry so working
Speaker 2: with non advice. The people who trade via and a'm
Speaker 2: trade generally don't have a financial advisor. They're making their
Speaker 2: own decisions, non advised individuals managing their own money. Is
Speaker 2: it is amazing how astute people are when it's their
Speaker 2: own money on the line. They are not outsourcing this decision,
Speaker 2: and they tend to be very thoughtful about it. There's
Speaker 2: a lot of talk about how ignorant retail investors can be,
Speaker 2: and they refer to the dumb money. We just don't
Speaker 2: see that at all. You see quite the opposite, very thoughtful,
Speaker 2: very well considered investing. And the COVID period was the
Speaker 2: classic example where people went out and the top ten
Speaker 2: stocks were stuff your mum would tell you to buy.
Speaker 2: All big four banks were in there, all four of them.
Speaker 2: BHPM re overre in the AASX two hundred ETF was
Speaker 2: in there, right, that's what people bought during COVID. Every
Speaker 2: single one of those things has performed extremely strongly since,
Speaker 2: and it was an incredible opportunity. So to your question
Speaker 2: about what peop doing, they are all loaded to the
Speaker 2: eyeballs with banks. Right. Everyone has bought banks at various
Speaker 2: points over the last couple of decades, in some cases
Speaker 2: back in the nineties, and then they bought a ton
Speaker 2: more during COVID, which was a brilliant decision across the board.
Speaker 2: If you're buying three of the big four sort of
Speaker 2: sub sixteen dollars, you had a good time, and you
Speaker 2: know seventy dollars range for CBA. People have so many banks, right,
Speaker 2: and so they're not buying banks at the moment. This
Speaker 2: is not what they need. There's been a very dramatic
Speaker 2: rotation into materials, and that's been going on for about
Speaker 2: twelve months now.
Speaker 1: Explain broadly what materials are, because it's more than just miners, isn't.
Speaker 2: It it is? But to be honest with you, for
Speaker 2: our guys, it's mostly BHVAN round right. So I'm using
Speaker 2: a general term, but I'll be more specific. A lot
Speaker 2: of interest in BHP, a lot of interest in rio
Speaker 2: ford eskew has been our biggest trade for literally years,
Speaker 2: but that's a small handful of very wealthy traders who
Speaker 2: mostly trade it very actively, so it doesn't.
Speaker 1: And they're literally they're treating it off the in oor
Speaker 1: placed because it's a pure it's a pure connection.
Speaker 2: To pure plate, right. So it's a very straight line
Speaker 2: between what happened with the iron ore price what happens
Speaker 2: with the fortescue price. And if you're very onto that,
Speaker 2: you can make a lot of money, but you need
Speaker 2: to be very onto it. So we have people who
Speaker 2: do that that is very much that's their thing, and
Speaker 2: there's another group of investors who are very interested in
Speaker 2: Fortescue comes and goes from their portfolios as well. There
Speaker 2: was a brief liftier moment and there are people who
Speaker 2: kind of flirt with it again at the moment. But
Speaker 2: we just have seen this real shift back to materials
Speaker 2: from an investing perspective because people feel that perhaps everything's
Speaker 2: not fully priced yet, whereas they feel with financials they are,
Speaker 2: and then when they're looking to the broader market, there's
Speaker 2: sort of less that people are excited about, and we
Speaker 2: start to see more ETF investing in someone.
Speaker 1: Okay, all right, I hope they're right about to miss you.
Speaker 1: I mean, the iron ore is the thing. I mean,
Speaker 1: you can have all all the interest in Nikola and
Speaker 1: Lithian that you like, but really, if the iron ore
Speaker 1: price things, folks, I'm sorry, the ship goes with it. Okay,
Speaker 1: we have to stop right there. We're going to take
Speaker 1: a break. When we come back, we're going to talk
Speaker 1: about the Trump trade, What would the election Trump mean,
Speaker 1: how important is the US to our market and what
Speaker 1: may be ahead in the rest of the year. Back
Speaker 1: in a moment, Hello, Welcome back to the Australians Money
Speaker 1: Puzzle podcast. James Kirby here with Jemma Dale from NAB Trade. So, Jemma,
Speaker 1: I thought the market was pretty looking pretty good. I
Speaker 1: thought the US markets were steaming along. Because I'm looking
Speaker 1: at it for forty years, I'm very aware that the
Speaker 1: September October period is our damn rocky period in global
Speaker 1: markets because of the US, and the US now represents
Speaker 1: Just to reiterate, folks, the US represent sense seventy percent
Speaker 1: of the global market just now. The Morgan Stanley Capital
Speaker 1: International Index. That's extraordinary. What happens in the US is
Speaker 1: of extreme importance to what happens to all markets, including ours.
Speaker 1: And if it rises, we will rise with it, and
Speaker 1: if it falls, we will fall with it. And so
Speaker 1: it really matters. And so we leads us to the question,
Speaker 1: if Trump wins with his pro business agenda, with his
Speaker 1: track record of lifting markets the last time, with his
Speaker 1: track record of pushing old industry, fossil fuels, oil coal,
Speaker 1: he's anti certainly anti environmental advocacy. He's not pro electric
Speaker 1: cars despite all the money Elon Musk wants to give him.
Speaker 1: He's going to dictate to a serious extent the nature
Speaker 1: of the market as it comes along. Used to be
Speaker 1: mixed on tech. But he now has JD Vance as
Speaker 1: he's running mate, as he's the VP who is big
Speaker 1: with Silicon Valley, backed by Peter Thiel, who I'm sure
Speaker 1: you will know who's behind Planter with that extraordinary preamble.
Speaker 1: It's tough, isn't it, Gym. I ask you what difference
Speaker 1: will trumpon make? Just tell us what do you think?
Speaker 2: It's fascinating, is it? There's so many questions that all
Speaker 2: market participants are trying to answer because the biggest question
Speaker 2: in markets for the last twelve months then when's the
Speaker 2: Fed going to cut?
Speaker 1: Right?
Speaker 2: So question one was when do we cut? And that
Speaker 2: answer at the moment is September. Previously been six cuts
Speaker 2: in the year, that's what we were expecting. That's the
Speaker 2: market was pricing, and six cuts now the back to
Speaker 2: two they're expecting September. So it was always about rate cuts.
Speaker 2: And despite the market's extraordinary enthusiasm for cuts, historically, the
Speaker 2: Fed is cutting because the economy is falling off a cliff,
Speaker 2: and so those first cuts are quite positive for the market,
Speaker 2: and then after that it all looks very bleak, and
Speaker 2: so you actually you want to you can get out
Speaker 2: in front of the first couple, and then after that
Speaker 2: it really looks ugly. In terms of what Trump is
Speaker 2: going to do, it's fascinating. So the first question I
Speaker 2: think for a lot of investors what is going to
Speaker 2: happen with tax cuts at a corporate level. If we
Speaker 2: look at his first election win, there was a dramatic
Speaker 2: uplift in corporate profitability post Trump, and it was all
Speaker 2: tax cuts. Every dollar of it was tax cuts. That
Speaker 2: has some implications for an economy that is as heavily
Speaker 2: indebted or a government that's as heavily indebted as the US.
Speaker 2: So there's a lot of questions about the US dollar.
Speaker 2: There's a lot of questions about what happens with the
Speaker 2: treasury and the debt that is being carried currently and
Speaker 2: being raised regularly. It is it's quite extraordinary to try
Speaker 2: and unpick the range of things that are on the
Speaker 2: table currently. There's tariffs as well, and trade wars that
Speaker 2: may start again do we know about this? And obviously
Speaker 2: feeding into the Nasdaq at the moment, there is talk
Speaker 2: that Jamie Diamond may become the next set the Secretary
Speaker 2: of the Treasury. That is very appealing to a lot
Speaker 2: on Wall Street for a lot of reasons. I love that,
Speaker 2: but I think that would also come the market a
Speaker 2: bit because he's obviously not known to be a highly
Speaker 2: political character. He's known to be money guy. He knows
Speaker 2: what he's doing.
Speaker 1: But can I ask you between the lines? To me,
Speaker 1: it seems to me that you're saying, Okay, the definsits,
Speaker 1: et cetera. That's going to push up interest rate, it's
Speaker 1: going to push up inflation to the US. And we
Speaker 1: just put that to one side, but that would seem
Speaker 1: to be a natural consequence of his disposition and the
Speaker 1: American administration's disposition that we could expect under Trump advance.
Speaker 1: Here's the thing. Tell us, then, what the most interesting
Speaker 1: thing is about the US dollar? And I noticed more
Speaker 1: and more of this talk about d dollarization. Can you
Speaker 1: explain what the theory is about the US dollar, what
Speaker 1: could happen to it and what would it mean for
Speaker 1: us as Australian investors.
Speaker 2: This it's a really interesting one and it is getting
Speaker 2: more and more attention. Trump appears to be of the
Speaker 2: view that the US dollar is too strong and is
Speaker 2: the world's reserve currency and has been for a long time,
Speaker 2: and at current and historical levels it is too strong.
Speaker 2: And more to the point that everyone has been happily
Speaker 2: devaluing their currencies against the US, which allows them to
Speaker 2: export to the US and has, in his view and
Speaker 2: advances an interesting choice, hollowed out American industry, particularly manufacturing,
Speaker 2: that you can't produce goods in the US because they're
Speaker 2: too expensive to export. He mentioned tractors, which is quite interesting.
Speaker 2: So his view is when you've got a very strong dollar,
Speaker 2: you're hollowing out US manufacturing the sort of Middle America
Speaker 2: that votes for them, and to that extent, he does
Speaker 2: not want a strong US dollar. He would like the
Speaker 2: dollar to fall relative to other currencies, which would allow
Speaker 2: them to be far more competitive in export markets in manufacturing,
Speaker 2: but has hum implications for everybody else. And so it's interesting.
Speaker 2: I mean Australia, the US is not our number one
Speaker 2: you export market, and the things that we export are
Speaker 2: not easily substitutable. So your point about iron ore is
Speaker 2: a really good one. Right. You're not going to go
Speaker 2: and get your iron or from a waterbup places. There
Speaker 2: are alternatives, and most of it goes to China. Then
Speaker 2: the question becomes, if China can't export to the US,
Speaker 2: do that have implications for Australia When you look at
Speaker 2: a company like CSL where their earnings are pricing US dollars,
Speaker 2: is that a problem. So you can see ripple effects
Speaker 2: across so many different areas, and this is I think
Speaker 2: why so many people would be very keen for someone
Speaker 2: like Diamond to go in and be working with the
Speaker 2: administration to ensure that maybe some of those implications are
Speaker 2: thought through before we aggressively try to devalue the currency.
Speaker 1: Right, and if they did devalue the currency, which cause okay,
Speaker 1: so quick win for US Heartland America feels better about itself.
Speaker 1: But then the US wouldn't be the US. The decline
Speaker 1: of the US as a reserve currency, which by the way,
Speaker 1: has barely occurred, but if it started to occur, what
Speaker 1: would that mean?
Speaker 2: Then for Australia, there's a few different things to consider.
Speaker 2: One is how much in Australia is priced in US dollars.
Speaker 2: We're not a country that is as heavily dependent on
Speaker 2: the US dollar as many others, you know, so you
Speaker 2: can see the implications for China, for example. For US,
Speaker 2: they're probably secondary effects rather than direct, and so we
Speaker 2: don't see quite as much anxiety here. It's more going
Speaker 2: if we have to work through this, what are the implications?
Speaker 2: But for some companies and some sected the implications and
Speaker 2: quite significant.
Speaker 1: Okay, one last thing, what would it mean for gold?
Speaker 1: Rhetorical question.
Speaker 2: Rallying for a while, right, people have been watching this
Speaker 2: and it's quite interesting to observe. And the major hypothesis
Speaker 2: for why it's been rallying is that central banks have
Speaker 2: been buying. Have they been buying in anticipation of a
Speaker 2: d dollarization. Maybe they have, so there is a hypothesis
Speaker 2: that there will be more upward pressure on the gold price,
Speaker 2: and then it's quite attractive, even though it has rallied
Speaker 2: very strongly.
Speaker 1: By the way, talking about the top ten stocks, we
Speaker 1: talked about banks and miners, but you know the miner
Speaker 1: that's appeared in the top ten is Neumont. Newcrest just
Speaker 1: sold the wrong time, folks, Sorry but you are, oh lord, Newcrest.
Speaker 1: It's tough. Honestly, they've floundered around for years and years
Speaker 1: and then they sold to Numant and guess what gold
Speaker 1: is going beautifully. Remember folks, that just because gold is
Speaker 1: going up doesn't mean the gold miners go up because
Speaker 1: they have to mine and often they get it wrong
Speaker 1: big time. But in the main they should do better.
Speaker 2: It's never a perfect correlation.
Speaker 1: That it's disappointed, no, oh man, it's the most it's
Speaker 1: a particularly unreliable relationship the direction of the gold price
Speaker 1: and the direction of gold miners. Okay, that's for another show.
Speaker 1: We'll be back in a moment. If that's a great question.
Speaker 1: Hello and welcome back to The Australian's Money Puzzle podcast.
Speaker 1: I'm James Kirby, the Wealth editor at The Australian, talking
Speaker 1: to a friend of the show, Gemma Dale, head of
Speaker 1: Investor Behavior and SMSF at NAB Trade. As I have
Speaker 1: often said, one of my favorite job titles. It's funny
Speaker 1: when I go on other people shows they say, oh,
Speaker 1: I love your title wealth editor, but I like kind
Speaker 1: of investor behavior. I must say I love that one.
Speaker 2: All right. Now I'm not telling them what to do.
Speaker 2: I'm just looking at it. Yeah.
Speaker 1: No, but it's such an interesting area, all right. Bruce says,
Speaker 1: what is the difference between infrastructure investments made by private
Speaker 1: equity and those led by infrastructure ETFs and does this
Speaker 1: explain the relatively poor performance of infrastructure ETFs? Bruce, that's
Speaker 1: a terrific question. I wonder, are we perhaps thinking that
Speaker 1: the private equity performance of infrastructure is better and they
Speaker 1: say it is, or we're late to believe it's so good,
Speaker 1: because how do we know? But what do you think, Gema?
Speaker 2: I think there's multiple parts of this question. I thought
Speaker 2: about a lot. Actually, private equity firms will have an
Speaker 2: infrastructure arm in many cases, but that doesn't mean they
Speaker 2: approach it the same way they do private equity. The
Speaker 2: way they would to text sort of startup for example.
Speaker 2: So the goal of private equity is to get in
Speaker 2: very early, take a very active role in the company,
Speaker 2: and sometimes it will turn around the big company that's
Speaker 2: existed for a long time it's really broken. Private equity
Speaker 2: buy it up, get in there, restructure it, turn it around.
Speaker 2: That's quite different to infrastructure, where your goal is effectively
Speaker 2: to own something that generates a pretty consistent return over time.
Speaker 1: It's just tipping over. It's tipping along.
Speaker 2: Yeah, something that's ticking overs are quite different. So even
Speaker 2: though it maybe a private equity firm that is owning
Speaker 2: the assets, it's not approaching it like a private equity business.
Speaker 2: There is a lot of unlisted infrastructure. It's not stuff
Speaker 2: that isvailable on the ESSEX or a listed exchange. And
Speaker 2: then you've got your listed plays and then you've got ETFs,
Speaker 2: and then you've got passive versus active. So it's all
Speaker 2: very It depends on what you're comparing. Infrastructure is a
Speaker 2: really good example of where it's a very broad term
Speaker 2: that covers a lot of different things, and you need
Speaker 2: to look at the underlying assets to got is this
Speaker 2: something I want to invest in? Because the performance will
Speaker 2: be dramatically different. We saw during COVID that all of
Speaker 2: these things that were supposed to be great long term
Speaker 2: investments that just spit out a long term return and
Speaker 2: you don't have to worry too much about volatility, ended
Speaker 2: up being very volatile. Toll roads, airports, all of that
Speaker 2: stuff complete disaster during COVID did the exact opposite of
Speaker 2: what they were supposed to do long term because of
Speaker 2: very dramatic change in the world. So the other thing
Speaker 2: that is very important to some people, less so others,
Speaker 2: but absolutely matters if you're an institutional investors. There's a
Speaker 2: lot of energy exposure in some font So you'll see
Speaker 2: some with thirty percent more exposed to non renewable energy
Speaker 2: sources fossil fuels, let's be frank. And then they will
Speaker 2: have pipelines which are also, let's be frank, non renewable
Speaker 2: energy sources. In most cases that can be forty or
Speaker 2: fifty percent of the assets, and if that's not for you,
Speaker 2: you need to think about that. But also there are
Speaker 2: a lot of institutional investors who will not touch something
Speaker 2: that's fifty percent fossil fuels. It's just a much bigger
Speaker 2: universe than perhaps people anticipate and you want to look
Speaker 2: at what is actually being held in it and think
Speaker 2: long and hard about whether or not it's for you
Speaker 2: and whether you think it's going to perform the way
Speaker 2: it wanted to. Right.
Speaker 1: Yeah, it's a really good answer. As you say, it's
Speaker 1: a world within a world, Bruce. And you know, with
Speaker 1: an infrastructurrey Ta, if you know, you know what the
Speaker 1: deed is. With the private equity infrastructure player, you have
Speaker 1: no idea what's going on there. They might be firing
Speaker 1: the entire management, they might be changing the entire plan.
Speaker 1: You know, don't build that bridge, build another one completely different.
Speaker 1: It's almost not comparing apples with apples, though it sounds
Speaker 1: like it. Okay, really good, thank you for that, Gemma.
Speaker 1: Now Bruce cleverly puts in the second question, and that's
Speaker 1: always fine. Folks. You can put in two questions. If
Speaker 1: they both make sense to me, and they're both relatively succinct,
Speaker 1: they have a very good chance of being read out. Okay.
Speaker 1: The second one is the debate over the minimum amount
Speaker 1: required for a self managed super fund rages on. One
Speaker 1: factor often mentioned is the running cost. Scary figures are
Speaker 1: sometimes used last year our SMSF costs a total of
Speaker 1: two thousand, six hundred. That's the tax turn preparation Order's
Speaker 1: an asseic. No, no financial advice, as we didn't use any,
Speaker 1: and we keep getting lesters from people offering to do
Speaker 1: it for less. Can you explain the discrepancy between the
Speaker 1: quoted figures. This is a great question, Bruce, again, two
Speaker 1: in a row. Well done, Bruce. I'm the same, okay.
Speaker 1: I have ANMSF for about twenty years and I get
Speaker 1: letters all the time from these people. I don't know
Speaker 1: how they get my name and address. I love to
Speaker 1: know how they get it, because I didn't give it
Speaker 1: to them, and they're offering. They just said the SMSF owners.
Speaker 1: They don't actually know who I am, but they've got
Speaker 1: enough information to get a letter to my home and
Speaker 1: they offer to do my SMSF for tiny amounts. The discrepancy,
Speaker 1: I imagine, is the same as anything else. You know,
Speaker 1: You'll have two people drop it a leafless in your door,
Speaker 1: saying they'll clean your gotters, and one says they'll do
Speaker 1: it for fifty bucks, and one says five hundred. And
Speaker 1: you can kind of guess why one's fifty and wants
Speaker 1: five hundred. Maybe that's rather simplicitic. Gemma, who is Russ
Speaker 1: You must remember at a SMSF at one of the
Speaker 1: nation's biggest banks may have a more sophisticated answer. Ah.
Speaker 2: So this is funny because a friend of mine uses
Speaker 2: one of the very low cost administrators for his SMSF.
Speaker 2: And when I say he uses it, what I mean
Speaker 2: is his wife is an accountant and she does all
Speaker 2: the paperwork and then submits it to them, and then
Speaker 2: they do the last tiny bit. So it's quite fascinating. Effectively,
Speaker 2: what happens is you do most of the work and
Speaker 2: then you provide the administrator. They do the bare minimum
Speaker 2: at the end, just require I imagine cost it out
Speaker 2: at her hourly rate. It's probably a very poor decision
Speaker 2: on their part, but you know it's got to be done.
Speaker 2: So this is I find this fascinating and I've looked
Speaker 2: at this so many times, and it's always worth noting
Speaker 2: who has done this research and emphatter commas about what
Speaker 2: the cost is and what their motivation might be for
Speaker 2: putting it out there. The assumption is often that you
Speaker 2: have a financial advisor, which in your case was Bruce.
Speaker 2: Is not the case right, you don't have an advisor,
Speaker 2: so you can chuck out several thousand dollars worth of
Speaker 2: fees that have been assumed in this situation. And there
Speaker 2: are always a lot of assumptions. The other thing they
Speaker 2: will assume is asset management fees, So they assume that
Speaker 2: you have managed funds generally, well they used to. Maybe
Speaker 2: they will say now they're actively managed dtfs and they
Speaker 2: will put in one hundred basis points for that, or
Speaker 2: one hundred and fifty basis points for that, or they
Speaker 2: might assume you have a retail managed fund and it
Speaker 2: might be two hundred basis points for that, so they
Speaker 2: layer them right, So they go, your accountant's going to
Speaker 2: charge you five thousand dollars a year, and then the
Speaker 2: order is going to charge you one thousand dollars a year,
Speaker 2: and then you are going to pay two percent of
Speaker 2: your assets if you're in managed funds. Now they may
Speaker 2: have brought these down because obviously fees, all of these
Speaker 2: things have fallen dramatically over the last ten years. So
Speaker 2: I'm not quite sure exactly what their assumptions are. Now
Speaker 2: they have hopefully reflected the market a bit better, and
Speaker 2: then an advisor fee, so many people will pay an
Speaker 2: advisor a fee of anywhere between sixty and one hundred
Speaker 2: basis points if you pay an asset based fee. So
Speaker 2: once you add all of those things up, you can
Speaker 2: be talking ten thousand dollars plus to run a fund.
Speaker 2: But the vast majority of people don't do that, right, Like,
Speaker 2: when I look at what we have on NAB trade,
Speaker 2: which is a very meaningful number of estimatests, they're people
Speaker 2: running their own share portfolio. There's no holding cost because
Speaker 2: they're hint based assets, and they just sit on the platform.
Speaker 2: Then you get your statement at the end of the
Speaker 2: year and just give it to your accountant, so you
Speaker 2: give it to your administrative.
Speaker 1: What percentage of them use advisors?
Speaker 2: I'm n AB traide virtually none, Right, Yeah, I.
Speaker 1: Would have thought so. I would have thought so, because
Speaker 1: the whole thing is it's self.
Speaker 2: Managed, That's right. And it's not to say that investors
Speaker 2: who have smsfs don't use advisors. Many of them do.
Speaker 2: They tend to be, ironically, the wealthy ones who want
Speaker 2: quite sophisticated advice, and so we do see a lot
Speaker 2: of that. To NAB owns JBWIR for example, and most
Speaker 2: of our Jbear clients will have a self managed super fund,
Speaker 2: but they don't have it necessarily for the share advice.
Speaker 2: They have it because they have a business, real property
Speaker 2: in there, because they have other assets in there that
Speaker 2: are quite complex and would not otherwise be able to
Speaker 2: be held inside super So for the vast majority of people,
Speaker 2: you have a self managed super fund for a specific
Speaker 2: set of reasons. A lot of people do it just
Speaker 2: for control because they want to run it themselves. If
Speaker 2: you're doing that and you're only holding shares and ETFs,
Speaker 2: your running costs are super low. If you have a
Speaker 2: far more complex and you're trying to hold those assets
Speaker 2: for specific reasons, and you wanted to own business for
Speaker 2: your property, so you can own a property that your
Speaker 2: business leases from your SMSF inside super that's an amazing strategy.
Speaker 2: For some people, you might want to borrow to by
Speaker 2: property inside souper, which is much harder to do than
Speaker 2: it used to be, but it does work for some people,
Speaker 2: usually very wealthy people. That's got a completely different set
Speaker 2: of costs, right, So you can't compare these things again,
Speaker 2: not apples with apples. If you're happy to cost your
Speaker 2: paying and a couple of grande a year is not bad.
Speaker 2: You're just not Those assumptions that you use are just
Speaker 2: not relevant to you. Don't worry about it.
Speaker 1: Yeah, yeah, I think that's broadly right too. As you see.
Speaker 1: You know, if it's two grand on an SMSF and
Speaker 1: we're assuming your sms if isn't tiny, then it's going
Speaker 1: to make sense really, And you don't use financial advice,
Speaker 1: and if you did, the number is supposed to be
Speaker 1: four thy three hundred a year, which is so different
Speaker 1: and would change everything. Unfortunately, I think that just must
Speaker 1: be paid. And the discrepancy between the quoted figures because
Speaker 1: all sorts of games, as Gema alluded to, some of
Speaker 1: which I didn't even know. But I also, I mean,
Speaker 1: you get what you pay for you would think as well.
Speaker 2: I should note though, financial advice is not just what
Speaker 2: to hold in your smasef right, So the advice might
Speaker 2: be what contributions you should be making every year, how
Speaker 2: much you should be withdrawing. There can be some tax
Speaker 2: advice in that, not the accounting sense of tax advice,
Speaker 2: but just how you structure those things. There could be
Speaker 2: all sorts of value added advice in there that's not
Speaker 2: specifically just about how the SMSF is run. So again
Speaker 2: a bit disingenuous to include the whole cost of financial
Speaker 2: advice in that cost of running an SMSF. It's a
Speaker 2: lot of assumptions.
Speaker 1: Very interesting. Now, Bruce, you monopolize the question segment of
Speaker 1: our show this week with are two very smart questions,
Speaker 1: so congratulations. No one's ever done that before, but you
Speaker 1: have because we've run out of time, but that was terrific.
Speaker 1: Thank you very much. Jemmerdale, head of Investor Behavior and
Speaker 1: SMSF at NAPTA. Great to have you on as always.
Speaker 1: Thank you so much, Thank you and we'll talk again. Okay, folks,
Speaker 1: do recall that we have an email which I would
Speaker 1: love you to send some questions, observations, complaints to the
Speaker 1: Money Puzzle at the Australian dot com dot au. Talk
Speaker 1: to you soon.