WEBVTT - Two things you must do as the $US drops 0:00:10.240 --> 0:00:13.560 Hello and welcome to The Australian's Money Puzzle podcast. I'm 0:00:13.640 --> 0:00:19.200 James Kirky. Welcome aboard, everybody. The single biggest investment call 0:00:20.079 --> 0:00:25.840 of the last decade at least has been around the US. 0:00:26.760 --> 0:00:29.159 Were you in US stocks or were you not in 0:00:29.360 --> 0:00:34.040 US stocks? And that really was dictating the outcome for 0:00:34.159 --> 0:00:37.839 many people in terms of how their portfolio went and 0:00:37.880 --> 0:00:41.360 same it you're super okay. Now, for the first time 0:00:41.440 --> 0:00:45.600 in a long time, the situation of the US is 0:00:45.640 --> 0:00:49.879 being questioned economically and financially. It is. It doesn't just 0:00:50.000 --> 0:00:52.960 you know, dominate world stock markets. It is the world 0:00:53.040 --> 0:00:57.000 stock market. It literally dominates the market cap of all 0:00:57.080 --> 0:01:00.960 the global markets. It is the world bond market. And 0:01:01.040 --> 0:01:05.280 for the first time in a long time this has 0:01:05.360 --> 0:01:08.920 really been questioned now the pre eminence of the US. 0:01:09.000 --> 0:01:11.840 I'm talking strictly financially here, the pre eminence of the 0:01:11.959 --> 0:01:15.640 US market, the pre eminence of the US dollar in particular, 0:01:16.040 --> 0:01:20.600 which has had its weakest opening period going all the 0:01:20.640 --> 0:01:25.160 way back to Nixon basically this year. So serious investors, 0:01:25.920 --> 0:01:29.080 professional investors, big investors around the world, they are casting 0:01:29.120 --> 0:01:33.800 about to cover themselves in relation to what's going on 0:01:33.840 --> 0:01:36.800 in the US. And they're buying everything else. They're buying gold, 0:01:37.720 --> 0:01:40.959 some are buying crypto, they're buying European shares, they're buying 0:01:41.000 --> 0:01:44.520 emergent marketing, emerging market shares, because there is an enormous 0:01:44.560 --> 0:01:47.280 question about where it goes from here and will it 0:01:47.319 --> 0:01:49.240 be as good as it used to be? Simple as that. 0:01:49.680 --> 0:01:52.680 One of our favorite guests on the show is Win Hamilton, 0:01:52.800 --> 0:01:56.640 Will Hamilton of Hamilton Wealth Partners, and once the year, 0:01:56.800 --> 0:01:59.680 if you recall, Will goes on a world tour where 0:01:59.680 --> 0:02:02.840 he goes to a number of key investment and wealth 0:02:02.920 --> 0:02:06.320 management conferences around the world, and when he comes back, 0:02:06.680 --> 0:02:09.919 I grill him on what we need to know if 0:02:09.960 --> 0:02:13.720 we had the time or I suppose the money to 0:02:13.800 --> 0:02:15.560 go to those conferences. How are you well? 0:02:16.600 --> 0:02:18.280 Very well, James, Thank you for having me. 0:02:19.040 --> 0:02:21.400 Great to have you on, and you know there is 0:02:21.440 --> 0:02:24.919 so much we could cover, but I think we should 0:02:24.919 --> 0:02:29.000 cut to the chase for the Australian investor and look 0:02:29.040 --> 0:02:31.840 at this issue. I mean, first of all, do you 0:02:31.880 --> 0:02:33.919 accept what I said in the preambum. 0:02:35.080 --> 0:02:37.640 Look, yes, what you're saying is very right and it 0:02:37.720 --> 0:02:40.600 was a major topic of discussion. But I'm just sort 0:02:40.600 --> 0:02:45.920 of you cast some doubt on this is euphoria towards 0:02:45.919 --> 0:02:48.920 European equities that I heard, and we can talk about 0:02:48.919 --> 0:02:50.720 that in a little bit more detail. And I think 0:02:50.720 --> 0:02:53.040 because the US is the US, and you know, you 0:02:53.520 --> 0:02:57.040 canvas looking to IPO and that's going to list in 0:02:57.120 --> 0:02:58.960 the US, it's not listing in Australia. 0:02:59.680 --> 0:03:03.680 So you're not deep you're not deeply questioning the pre 0:03:03.720 --> 0:03:06.280 eminence of the US, are you. 0:03:06.320 --> 0:03:10.200 No. Look, there was the big debate from the perspective 0:03:10.240 --> 0:03:14.320 of European investors has been the US risk premium. So 0:03:15.160 --> 0:03:18.560 it is the US suddenly considered high risk? 0:03:18.760 --> 0:03:20.600 Is it worth the prices on those markets? 0:03:20.680 --> 0:03:23.840 Yeah? Okay, Yeah, And the consensus seemed to be there 0:03:23.880 --> 0:03:27.720 is a high risk attributed to the US now. And 0:03:27.800 --> 0:03:30.440 you're very right. With respect to the weaker US dollar, 0:03:30.720 --> 0:03:33.240 that seemed to be a major focus and people were 0:03:33.240 --> 0:03:36.400 still talking it down on the simple fact that the 0:03:36.480 --> 0:03:38.040 US president wants it weaker. 0:03:39.800 --> 0:03:44.000 Yeah, So we take it that they wanted to drop, 0:03:44.240 --> 0:03:46.600 and the mechanics are there for them to use for 0:03:46.720 --> 0:03:49.480 it to drop. So we can, to the extent that 0:03:49.520 --> 0:03:52.640 you can safely assume anything in financial markets, We'll make 0:03:52.640 --> 0:03:55.200 the assumption that the US donar will weaken through the 0:03:55.280 --> 0:03:56.839 year yeap. 0:03:57.160 --> 0:03:59.120 So what does that mean is the fact that the 0:03:59.200 --> 0:04:02.760 US president. So for Australian investors, if you're having US 0:04:02.840 --> 0:04:05.600 dollar holdings and you know you can either look to 0:04:05.840 --> 0:04:08.240 take some hedging strategy and so like if you're invested 0:04:08.280 --> 0:04:11.440 in managed funds, you can take a hedge class if 0:04:11.480 --> 0:04:15.720 that exists, or you just realize that when coming back 0:04:15.760 --> 0:04:19.520 to Australian dollars, you are if you're invested in US equities, 0:04:19.560 --> 0:04:21.920 you're going to see you're going to see a currency 0:04:21.920 --> 0:04:25.479 adjusted return which will be negatively impacted through a weaker 0:04:25.600 --> 0:04:26.119 US dollar. 0:04:26.480 --> 0:04:29.680 So you're existing if you had existing holdings in US 0:04:29.839 --> 0:04:32.560 dollar as well, if you had most people and on 0:04:32.760 --> 0:04:34.920 listening to the show, they're explosure to US is through 0:04:34.960 --> 0:04:38.760 funds mostly tfs or perhaps managed funds. Wouldn't the existing 0:04:38.760 --> 0:04:40.320 holdings call open value? 0:04:41.440 --> 0:04:43.960 Well, what you what you can see in if you've 0:04:43.960 --> 0:04:46.840 got a weaker US dollar? No, you're you're seeing a 0:04:46.880 --> 0:04:50.840 weaker US dollar impact. Now you can't hedge that. You 0:04:50.839 --> 0:04:53.880 can't hedge that. If you're in some of the funds, 0:04:53.880 --> 0:04:59.560 they do have a hedge class and that can give 0:04:59.600 --> 0:05:01.279 you and impact their. 0:05:01.279 --> 0:05:04.039 So are you recommending that people if they're going in 0:05:04.120 --> 0:05:06.400 fresh and they hadn't been in before, so they don't 0:05:06.440 --> 0:05:09.760 get the advantage perhaps of what's happened so far. If 0:05:09.760 --> 0:05:14.240 you're buying today US stocks, US funds, managed funds, ETFs, 0:05:14.839 --> 0:05:18.240 then are you saying, whereas in the past we didn't 0:05:18.320 --> 0:05:21.839 really have to consider it, that we should consider hedged options, 0:05:21.880 --> 0:05:24.400 and all those ones tend to have hedged around hedged options. 0:05:25.200 --> 0:05:27.119 Yeah, I'd be looking at a hedged option at the moment. 0:05:27.160 --> 0:05:30.200 Correct, Okay, right, that's very interesting. That's a fresh sort 0:05:30.200 --> 0:05:31.000 of perspective. 0:05:31.279 --> 0:05:31.520 Now. 0:05:32.400 --> 0:05:35.880 The big question I suppose is that investors are also 0:05:36.720 --> 0:05:39.520 looking beyond the US, aren't they. They're looking elsewhere, and 0:05:40.080 --> 0:05:47.560 gold seems to be the alternative of choice. And though 0:05:47.560 --> 0:05:51.440 golds had a good run, all the conditions would seem 0:05:51.480 --> 0:05:52.960 to be in place for it to keep running. What 0:05:53.000 --> 0:05:53.520 do you think. 0:05:54.640 --> 0:05:56.800 I was just saying yesterday when I was talking to 0:05:56.920 --> 0:05:59.599 staff here internally, that when you talk to other managers, 0:05:59.600 --> 0:06:01.480 they always to you the good stories and never tell 0:06:01.520 --> 0:06:06.080 you the bad stories. And I didn't meet anybody that 0:06:06.279 --> 0:06:11.080 wasn't long gold and one of the big Swiss banks, 0:06:11.120 --> 0:06:14.120 for instance, I was shocked by the extent of the 0:06:14.120 --> 0:06:15.880 holding that the god and gold, and they were talking 0:06:15.880 --> 0:06:17.479 about the fact that in the first quarter of this 0:06:17.560 --> 0:06:22.280 year more slow went when you're looking at what they 0:06:22.360 --> 0:06:25.640 considered exits out of US dollars, more went into gold 0:06:25.839 --> 0:06:28.320 than the euro. So they're seeing gold as the proxy 0:06:28.680 --> 0:06:32.520 to the US dollar as opposed to the euro, and 0:06:32.720 --> 0:06:37.880 they saw still considerable downside in the US dollar and 0:06:37.880 --> 0:06:41.279 therefore they were still very bullish on gold. To the 0:06:41.320 --> 0:06:43.560 extent some of the figures they were throwing around, I'm 0:06:43.560 --> 0:06:46.320 sort of going, wow, this is It was one firm 0:06:47.160 --> 0:06:49.400 and I spoke then one to one of the portfolio 0:06:49.400 --> 0:06:52.800 managers in this Swiss private bank and he said, yeah, 0:06:52.839 --> 0:06:55.799 but we've always held gold, and he said for years 0:06:56.279 --> 0:06:58.360 we had at least a two percent holding, and it 0:06:58.360 --> 0:07:00.800 was one of those things that you was that was 0:07:00.839 --> 0:07:03.000 where the bad discussion came about. And he said, yes, 0:07:03.160 --> 0:07:05.520 it's about five percent now our holdings in gold. But 0:07:05.560 --> 0:07:06.880 he said, you know, for the first time in a 0:07:06.880 --> 0:07:08.800 long time, we're having positive discussions on it. 0:07:09.680 --> 0:07:12.880 So you've got Swiss private Swiss banks being a sort 0:07:12.880 --> 0:07:16.720 of proxy for what very wealthy investors are thinking. Doubling 0:07:16.760 --> 0:07:21.800 there holding in gold and more than that actively discussing 0:07:22.360 --> 0:07:23.400 what buying more. 0:07:25.040 --> 0:07:29.480 Yeah, and further upside in the goal price. Their whole 0:07:29.560 --> 0:07:32.520 logic seems to be, you know a lot of people 0:07:32.560 --> 0:07:35.440 saying central banks, et cetera. They're saying, no, it's seen 0:07:35.480 --> 0:07:39.720 as the proxy to the US dollar, which was a 0:07:39.720 --> 0:07:41.240 different perspective from Bloodhead. 0:07:42.200 --> 0:07:47.560 Yeah, so global money uncomfortable with the trajectory and what's 0:07:47.600 --> 0:07:51.840 going on around the US donor they're only alternative, perhaps 0:07:51.880 --> 0:07:55.360 as a global currency proxy is gold. 0:07:55.800 --> 0:07:58.920 Yep. Yeah, that's what they're saying, and they claim more 0:07:58.960 --> 0:08:01.600 money's gone into gold the neuros. 0:08:01.680 --> 0:08:04.960 Yes, explain why that's important to to the general listener. 0:08:06.320 --> 0:08:10.640 Well, I think that the I think there's this enormous 0:08:11.640 --> 0:08:14.400 excitement about Europe at the moment. I think it might 0:08:14.440 --> 0:08:17.280 be a bit overdone, but you know, there's this tail 0:08:17.360 --> 0:08:21.440 wind from the amount of spense, defense spending and infrastructure spending, 0:08:22.120 --> 0:08:28.480 and therefore everyone's getting very excited. But is this in reality, 0:08:28.560 --> 0:08:30.400 I don't, I don't know. I think this. You can 0:08:30.440 --> 0:08:34.920 see it's not necessarily going into the euro people buying 0:08:35.080 --> 0:08:40.360 therefore European stocks, and I think the Euros stock index 0:08:40.600 --> 0:08:43.320 is a very old index like Australia but it doesn't 0:08:43.320 --> 0:08:45.920 have the cyclicality that Australia has. So we've got some 0:08:45.960 --> 0:08:54.640 cyclical stocks which at times is therefore very worthwhile'ts. 0:08:53.240 --> 0:08:56.200 And it's it's a dopey old market, I would say, 0:08:56.400 --> 0:08:59.040 And it's been dopy for years. Do you do you 0:08:59.040 --> 0:09:02.920 see anything to me people think they should reconsider European 0:09:02.960 --> 0:09:05.920 stocks apart from the fact that Trump has made them 0:09:05.960 --> 0:09:08.160 spend more on defense. Do you see any other sort 0:09:08.160 --> 0:09:11.040 of structural reason to be attracted to it that wasn't 0:09:11.040 --> 0:09:11.679 there before? 0:09:13.480 --> 0:09:17.199 No, Well, that everyone was talking up Europe, and they're 0:09:17.240 --> 0:09:22.599 Europeans and UK citizens talking up Europe. But let you know, 0:09:22.679 --> 0:09:25.240 when you sort of take a deep breath and look back, 0:09:25.280 --> 0:09:28.240 you go, well, what do you invest in? Okay, So 0:09:28.320 --> 0:09:33.160 they're talking about infrastructure, defense spending and the government is 0:09:33.200 --> 0:09:35.680 not going to this is self fulfilling for the US 0:09:35.720 --> 0:09:39.320 because most of the armaments are US companies, that's the 0:09:39.360 --> 0:09:42.800 other thing. And you just you look at it and 0:09:42.840 --> 0:09:44.760 you go, well, I just don't understand what they're going 0:09:44.800 --> 0:09:46.640 to invest in. I think that things are just getting 0:09:46.679 --> 0:09:49.120 a little bit ahead of themselves over there. It's done well. 0:09:49.200 --> 0:09:52.960 And one manager, as you pointed out to me, Europe 0:09:52.960 --> 0:09:58.880 has not outperformed the US this century, this century, right 0:09:59.320 --> 0:10:01.599 this century, so in the last twenty five years, and 0:10:01.640 --> 0:10:02.120 I thought. 0:10:02.120 --> 0:10:04.200 And it's had so many four starts. 0:10:04.280 --> 0:10:07.000 Yes, and also and the other one thing is which 0:10:07.040 --> 0:10:09.880 I think is really important is GDP growth. As Capital 0:10:09.920 --> 0:10:12.360 Economics said to me, GDP growth in Europe and the 0:10:12.440 --> 0:10:15.120 US twenty twenty five is going to be about even. 0:10:15.280 --> 0:10:18.319 But next year you're looking at one full percentage point. 0:10:18.520 --> 0:10:21.960 So you're looking approximately two point five percent in GDP 0:10:22.080 --> 0:10:24.240 growth in the US and one point five percent in Europe. 0:10:24.360 --> 0:10:26.440 And that's that I think is a very that's something 0:10:26.440 --> 0:10:27.679 you have to take into consideration. 0:10:28.280 --> 0:10:32.200 Okay, just turning it all back in terms of portfolio 0:10:33.000 --> 0:10:37.960 construction and portfolio allocation for private investors in Australia, what 0:10:38.040 --> 0:10:40.440 did you take when you came back? What did you 0:10:40.520 --> 0:10:42.959 think that you should do that you haven't been doing 0:10:43.000 --> 0:10:49.439 before In terms of gold or US donor exposure, we. 0:10:49.520 --> 0:10:52.960 Or are already hedged. So yeah, but at some point 0:10:53.040 --> 0:10:56.160 we will if we've got some strength in the Australian dollar, 0:10:56.200 --> 0:10:58.520 we would look to reverse that some of that, not 0:10:58.600 --> 0:10:59.960 all of it, but some of it. At this point 0:11:00.080 --> 0:11:03.160 time on gold, would I be going in again at 0:11:03.200 --> 0:11:05.400 those levels. It's run so hard. But yeah, for those 0:11:05.440 --> 0:11:07.319 that have got gold in their portfolios, you know, I 0:11:07.360 --> 0:11:11.000 would be sticking with it, and on US, I would 0:11:11.000 --> 0:11:14.040 be sticking with the US market. I think that, yes, 0:11:14.120 --> 0:11:18.600 Europe's had a run. Let's just be sensible about things. 0:11:18.800 --> 0:11:20.960 I still struggle on what to buy in Europe. 0:11:21.480 --> 0:11:26.240 Okay, Okay, all right, very interesting and obviously if possible 0:11:26.240 --> 0:11:29.960 that's hedged obviously the US exposure, okay, which is not 0:11:30.040 --> 0:11:33.360 normally the case right from many investors. All Right, I 0:11:33.400 --> 0:11:35.200 think we'll take a short break. We'll be back in 0:11:35.240 --> 0:11:37.400 a moment. There's a couple of really key aspects of 0:11:37.440 --> 0:11:48.400 this I want to talk to Will about. Hello and 0:11:48.480 --> 0:11:52.040 welcome back to the Australians Money Puzzle Podcast. James Kirby 0:11:52.080 --> 0:11:56.160 talking to win Will Hamilton of Hamilton Wealth Managers, regular 0:11:56.240 --> 0:11:59.960 on the show Hamilton Wealth Partners. Tell me Will, Okay, 0:11:59.800 --> 0:12:02.320 so let's take it that from the first segment we've 0:12:02.320 --> 0:12:07.040 got a sort of updated picture of the risks and 0:12:07.080 --> 0:12:11.520 opportunities and the changing risks and opportunities around the weaker 0:12:11.640 --> 0:12:16.320 US donor potentially de dollarization of markets. As you see 0:12:16.760 --> 0:12:19.599 that strength of gold which is happening there. So in 0:12:19.720 --> 0:12:21.800 terms of what people are looking at in terms of 0:12:21.880 --> 0:12:24.160 where they put their money, is it stick with the 0:12:24.280 --> 0:12:28.559 US which is very interesting? How about emerging markets? Because 0:12:29.920 --> 0:12:33.840 if the US donor is weakening and continue to is 0:12:33.960 --> 0:12:37.520 that a tailwind for emerging markets? 0:12:37.559 --> 0:12:39.840 Not just that seventy percent of global growth in the 0:12:39.840 --> 0:12:42.080 next twenty years is going to come from emerging markets. 0:12:42.120 --> 0:12:44.640 So yeah, I think it's a combination of what you 0:12:44.679 --> 0:12:48.040 just said, which is positive, combined with the fact that 0:12:48.600 --> 0:12:51.520 emerging markets do have real growth and superior growth to 0:12:51.559 --> 0:12:54.520 the rest of the world, so they performed well year 0:12:54.600 --> 0:12:57.360 to date and also rolling on a twelve month basis, 0:12:57.400 --> 0:13:00.920 and I can I see that continuing. The only area 0:13:01.000 --> 0:13:03.640 in emerging markets where people seem to be hesitant, and 0:13:04.200 --> 0:13:06.080 it's probably one of the cheapest stock markets in the 0:13:06.080 --> 0:13:09.000 world is China, which is a big. 0:13:09.000 --> 0:13:11.240 Chunk of emerging markets, isn't it if you're going into 0:13:11.280 --> 0:13:13.680 a fund or an ETF yep. 0:13:13.800 --> 0:13:16.000 And but interestingly I hear that a lot of the 0:13:16.040 --> 0:13:20.960 industry funds now are looking at em x China, and 0:13:21.000 --> 0:13:23.800 so a lot of and a lot of professional managers 0:13:23.840 --> 0:13:26.480 are looking x China. In the way they approach this 0:13:26.600 --> 0:13:31.559 part of this asset class, and likewise in internationally that 0:13:31.880 --> 0:13:34.640 seems to be the case as well. So because of 0:13:34.679 --> 0:13:35.400 political risk? 0:13:35.679 --> 0:13:37.920 Is that because emerging markets x China has been the 0:13:37.920 --> 0:13:40.240 best component of the index? 0:13:41.320 --> 0:13:43.720 Yeah that is yeah, yeah, right. 0:13:44.280 --> 0:13:46.440 One thing, what about tariffs? You would have thought actually 0:13:46.440 --> 0:13:49.360 that the tariffs would be negative for that area. 0:13:51.840 --> 0:13:54.559 You would, But the simple fact is it seemed to 0:13:55.080 --> 0:13:58.319 have growth. And I think that the world is looking 0:13:58.360 --> 0:14:00.839 outside of the US in many respects as well. Look 0:14:00.840 --> 0:14:04.800 at Australia's looking at FTA with free Trade Agreement with Europe, 0:14:04.920 --> 0:14:08.600 and so it seems to be an x US sort 0:14:08.600 --> 0:14:13.120 of equation that people are looking at tariffs. I think 0:14:13.200 --> 0:14:15.840 the whole debate on tariffs has raised its ugly head 0:14:15.840 --> 0:14:18.200 again in the last week or two. But when I 0:14:18.280 --> 0:14:21.720 was away, I think people were looking at a more 0:14:21.760 --> 0:14:23.920 at that ten percent level. But a few other figures 0:14:23.920 --> 0:14:26.840 have been thrown out since. But it's a geopolitical risk. 0:14:27.720 --> 0:14:33.600 Whereas we've been always told geopolitical risks provide buying opportunities. 0:14:33.640 --> 0:14:36.720 Now it seemed to be on geopolitical risks that you 0:14:36.760 --> 0:14:40.800 look at scenario analysis around it. So what is you know, 0:14:40.920 --> 0:14:42.760 we're looking at a base case of ten percent, What 0:14:42.840 --> 0:14:45.280 if it was higher, what if it was lower? 0:14:46.720 --> 0:14:49.080 What do you mean by base case of ten percent there. 0:14:49.600 --> 0:14:52.360 On tariffs that the US is going to inflict on 0:14:52.480 --> 0:14:54.840 them the rest of the world. So correct, So people 0:14:54.840 --> 0:14:57.400 are looking at geopolitical risks now as something that you 0:14:57.440 --> 0:15:01.400 do have to adjust for, but on taking into cat 0:15:01.480 --> 0:15:04.800 scenario scenario analysis. 0:15:04.640 --> 0:15:09.480 So put simply, gold and emerging markets would seem to 0:15:09.520 --> 0:15:17.200 be the hot ticket five for investors. Yeah, okay, very interesting. Okay, 0:15:17.360 --> 0:15:20.080 that's very I've wanted to get across that for some time. 0:15:20.880 --> 0:15:23.680 One thing for our listeners who may not be that 0:15:24.000 --> 0:15:26.640 may be all new to them, emerging markets. Gold is 0:15:26.640 --> 0:15:28.480 pretty obvious what you can do. I mean, gold is 0:15:28.480 --> 0:15:31.720 not complicated. It's a commodity that goes up or it 0:15:31.720 --> 0:15:35.160 doesn't go up. Emerging markets are terribly complicated. A bit 0:15:35.200 --> 0:15:37.960 of a bit of nonsense, really. I mean it's because 0:15:38.160 --> 0:15:40.080 someone in London or New York said, let's put them 0:15:40.080 --> 0:15:43.560 all into a basket. That Russia, China, Indonesia, and Mexico. 0:15:43.920 --> 0:15:49.400 These countries have nothing in common except this classification. So 0:15:49.440 --> 0:15:50.280 what I'm driving out. 0:15:50.240 --> 0:15:53.360 Is many of the amount emerging markets, like seth career 0:15:53.360 --> 0:15:53.880 in Taiwan. 0:15:54.400 --> 0:15:57.680 Yeah sure, yeah, sure, so so what and you go 0:15:57.720 --> 0:16:00.080 in and you see time in the semiconductor is like 0:16:00.160 --> 0:16:02.840 a major holding, but that's not an emerging market stuff. 0:16:04.040 --> 0:16:06.120 What I want to ask you, Will is how does 0:16:06.160 --> 0:16:09.400 the everyday investor get at this area? 0:16:11.200 --> 0:16:13.880 Well through you know, there's some very good managers out there, 0:16:13.960 --> 0:16:17.600 and all I would suggest in approaching it is have 0:16:17.680 --> 0:16:20.880 a look at the downside participation when things go tough 0:16:20.880 --> 0:16:24.040 in emerging markets in selecting a manager, and make sure 0:16:24.600 --> 0:16:28.120 you're comfortable with a downside participation. There are managers that 0:16:28.160 --> 0:16:30.600 have less and that's what we always look at. So 0:16:30.640 --> 0:16:33.720 I'm not going to mention names. There's some very good 0:16:33.720 --> 0:16:34.720 managers out there. 0:16:35.280 --> 0:16:38.000 And it sounds like you don't like ETFs on this one. 0:16:40.400 --> 0:16:42.560 I know, I think that you've this is something you 0:16:42.680 --> 0:16:46.360 do definitely need an active manager out like we actually 0:16:46.480 --> 0:16:49.760 use managers that don't like China. 0:16:50.400 --> 0:16:52.800 Okay, or maybe you will at at very least perhaps 0:16:52.840 --> 0:16:55.480 an ETF X China are such a thing which are 0:16:55.560 --> 0:16:57.960 not aware of. But if you see, we're not there 0:16:57.960 --> 0:17:00.240 to let us know. Okay. I have some really good 0:17:00.280 --> 0:17:01.680 questions I want to talk to Will about. But I 0:17:01.760 --> 0:17:03.440 want to there's something else I want to ask in 0:17:03.520 --> 0:17:08.159 which is not on the broad theme today about the 0:17:08.280 --> 0:17:12.159 US and what it means for you. It's about the 0:17:12.200 --> 0:17:14.880 sixty to forty rule. And I've been reading some very 0:17:14.880 --> 0:17:19.119 interesting things. A really terrific piece last weekend. It was 0:17:19.119 --> 0:17:21.560 about the sixty forty rule, which I'm sure most of 0:17:21.600 --> 0:17:23.879 our listeners are familiar with. This idea that you have 0:17:23.920 --> 0:17:26.119 sixty percent of your money at risk and you have 0:17:26.160 --> 0:17:30.640 forty percent of your money in safer investments. And traditionally 0:17:30.880 --> 0:17:33.840 globally that was sixty percent in shares or risk assets 0:17:33.880 --> 0:17:36.800 that are listed, forty percent in what they call fixed 0:17:36.840 --> 0:17:41.280 income traditionally bonds. This has really changed in recent times. 0:17:41.480 --> 0:17:45.720 Bonds have been disappointing for years and years, and there 0:17:45.720 --> 0:17:48.600 has been new areas that have mushroomed before our eyes, 0:17:48.880 --> 0:17:52.280 private equity, private credit. I just want to ask you Will, 0:17:52.320 --> 0:17:56.199 for this whole sixty to forty rule, what do you 0:17:56.520 --> 0:17:59.920 what in your eyes the forty percent that people should 0:17:59.920 --> 0:18:03.760 have that isn't that is a fixed rather than ash risk. 0:18:05.119 --> 0:18:07.600 What does it comprise of these days? 0:18:08.280 --> 0:18:12.240 Well, for growth portfolio, where approximately seventy thirty we do have. 0:18:12.520 --> 0:18:14.880 It all depends on the client how much money they've got, 0:18:15.840 --> 0:18:19.840 how comfortable they are holding a degree of ill liquidity 0:18:19.880 --> 0:18:23.000 and their portfolios. So for a decade now we've invested 0:18:23.040 --> 0:18:27.960 in private equity, infrastructure, diverse FOI credit and direct real estate. 0:18:28.200 --> 0:18:32.639 But this is something that clients have to be comfortable 0:18:32.680 --> 0:18:36.320 with illiquidity and their portfolio. Now there are what's called 0:18:36.400 --> 0:18:39.840 these evergreen funds which have come about and you know 0:18:39.880 --> 0:18:43.240 they're in at you in particular and infrastructure and private equity. 0:18:43.960 --> 0:18:46.479 They some people call them semi liquid which I think 0:18:46.560 --> 0:18:50.000 is a terrible term. I'd like to ren think of 0:18:50.040 --> 0:18:54.960 it as variable liquidity. In other words, you can get 0:18:55.000 --> 0:18:59.720 your money out in normal environment with you that there's 0:18:59.760 --> 0:19:05.760 out slow caps et cetera. However, if things were to 0:19:05.840 --> 0:19:09.560 go bad, these things have the right to lock up 0:19:10.280 --> 0:19:10.960 two seconds. 0:19:11.160 --> 0:19:13.080 Yes, sorry, what I was driving out. 0:19:12.960 --> 0:19:15.520 Was that's why it's use the term variable. 0:19:16.040 --> 0:19:17.880 You didn't see the word bonds when you listed out 0:19:17.880 --> 0:19:21.920 the four key elements of the of the your fortunate bond. 0:19:21.960 --> 0:19:24.320 But that's what we put all of these in the 0:19:24.400 --> 0:19:29.200 risk base. But we have reduced a defensive allocation. Now, 0:19:29.200 --> 0:19:31.919 this was a big debate and to what extent you 0:19:32.040 --> 0:19:37.680 go into what is your waiting in these private market assets. Yeah, 0:19:37.760 --> 0:19:39.600 and as I said, it's very dependent on a client 0:19:39.600 --> 0:19:44.480 by client basis and the comfort with illiquidity. And I 0:19:44.520 --> 0:19:47.640 think that's that is the number one question you've got 0:19:47.640 --> 0:19:49.960 to take. You take into account and how do you 0:19:50.000 --> 0:19:52.480 how do you categorize an asset as being a liquid 0:19:52.560 --> 0:19:55.159 So we're quite conservative on that. We say it's monthly liquidity. 0:19:56.160 --> 0:20:00.440 So it's very conservative on an approach. And there's some 0:20:00.520 --> 0:20:03.920 firms out there that recommend very high ratings. Yeah, thirty 0:20:03.920 --> 0:20:08.000 percent plus. We're not anywhere near that, but we think, yes, 0:20:08.040 --> 0:20:13.000 somewhere between fifteen and twenty if if it's a big 0:20:13.080 --> 0:20:17.119 if the client is comfortable, and if they're not, well, 0:20:17.640 --> 0:20:18.439 it goes lower. 0:20:18.640 --> 0:20:20.640 And so if you want to go into these areas 0:20:20.800 --> 0:20:25.640 private equity, you mentioned infrastructure, what were the other there's 0:20:25.680 --> 0:20:26.360 two more you. 0:20:26.320 --> 0:20:28.879 Mentioned diversified credit and direct real estate. 0:20:29.080 --> 0:20:31.720 Divers boy credit and direct real estate. What you're saying is, 0:20:32.160 --> 0:20:34.480 as a guide, you should be able to get your 0:20:34.520 --> 0:20:35.400 money up once a month. 0:20:37.600 --> 0:20:41.159 We define something as a liquid as monthly or greater. 0:20:43.480 --> 0:20:46.680 So in some cases these windows are quarterly, sometimes they're annually. 0:20:47.280 --> 0:20:50.359 But you're weere conservative in the way we classify that 0:20:50.480 --> 0:20:52.680 some other firms classified as quarterly or greater. 0:20:53.000 --> 0:20:54.840 But be aware of folks. If you are going into 0:20:54.840 --> 0:20:56.240 one of these funds for the first time and it 0:20:56.320 --> 0:21:00.919 says you can take your money out monthly, watch the 0:21:01.000 --> 0:21:04.560 fine print that they will invariably say unless we change 0:21:04.600 --> 0:21:09.520 our minds, and that can happen, So you must bear 0:21:09.600 --> 0:21:11.840 that in mind. It's not the stock market. There's always 0:21:11.840 --> 0:21:14.320 a liquidity in the stock market. You can always get 0:21:14.560 --> 0:21:17.159 your money out of shares nine times out of ten, 0:21:17.240 --> 0:21:19.560 especially large caps or mid caps. I mean occasionally you 0:21:19.600 --> 0:21:21.200 might get a squeeze on a small cap, but that's 0:21:21.320 --> 0:21:25.159 very rare. And ETFs even more so that they're exceptionally liquid. 0:21:25.160 --> 0:21:27.520 That is there, that is their advantage. Only so much 0:21:27.600 --> 0:21:31.000 we can cover. Very interesting. Okay, well, just while before 0:21:31.040 --> 0:21:33.160 we go to the break, in terms of anything else, 0:21:33.200 --> 0:21:36.040 you discovered that perhaps we are not right up to 0:21:36.080 --> 0:21:39.160 speed on global markets. In terms of trends, we didn't 0:21:39.160 --> 0:21:45.560 talk about crypto. I detect a serious change in attitude 0:21:45.800 --> 0:21:49.320 from our listeners on the money pustle towards crypto in 0:21:49.400 --> 0:21:52.880 the space of a year. I think in terms of 0:21:53.880 --> 0:21:55.280 the Grand Tour, you had. 0:21:57.119 --> 0:22:01.280 Well, the same Swiss private bank that was talking about 0:22:01.280 --> 0:22:03.440 gold Is said to us, said to me that they're 0:22:03.480 --> 0:22:07.800 about to bring crypto into their portfolios and a very 0:22:07.840 --> 0:22:12.560 small waiting, tiny waiting, but there that's it. I was 0:22:12.600 --> 0:22:14.960 shocked when I heard that. I sort of why were 0:22:15.000 --> 0:22:15.359 you shocked? 0:22:15.400 --> 0:22:18.080 I mean AMP has done a GP, Morgan has done. 0:22:19.760 --> 0:22:23.840 Well. I think that when you look at, in particular, 0:22:24.240 --> 0:22:27.119 some of the UK investors, Yeah, they're waiting in private 0:22:27.160 --> 0:22:30.240