Speaker 1: Hello and welcome to The Australian's Money Puzzle podcast. I'm
Speaker 1: James Kirky. Welcome aboard, everybody. The single biggest investment call
Speaker 1: of the last decade at least has been around the US.
Speaker 1: Were you in US stocks or were you not in
Speaker 1: US stocks? And that really was dictating the outcome for
Speaker 1: many people in terms of how their portfolio went and
Speaker 1: same it you're super okay. Now, for the first time
Speaker 1: in a long time, the situation of the US is
Speaker 1: being questioned economically and financially. It is. It doesn't just
Speaker 1: you know, dominate world stock markets. It is the world
Speaker 1: stock market. It literally dominates the market cap of all
Speaker 1: the global markets. It is the world bond market. And
Speaker 1: for the first time in a long time this has
Speaker 1: really been questioned now the pre eminence of the US.
Speaker 1: I'm talking strictly financially here, the pre eminence of the
Speaker 1: US market, the pre eminence of the US dollar in particular,
Speaker 1: which has had its weakest opening period going all the
Speaker 1: way back to Nixon basically this year. So serious investors,
Speaker 1: professional investors, big investors around the world, they are casting
Speaker 1: about to cover themselves in relation to what's going on
Speaker 1: in the US. And they're buying everything else. They're buying gold,
Speaker 1: some are buying crypto, they're buying European shares, they're buying
Speaker 1: emergent marketing, emerging market shares, because there is an enormous
Speaker 1: question about where it goes from here and will it
Speaker 1: be as good as it used to be? Simple as that.
Speaker 1: One of our favorite guests on the show is Win Hamilton,
Speaker 1: Will Hamilton of Hamilton Wealth Partners, and once the year,
Speaker 1: if you recall, Will goes on a world tour where
Speaker 1: he goes to a number of key investment and wealth
Speaker 1: management conferences around the world, and when he comes back,
Speaker 1: I grill him on what we need to know if
Speaker 1: we had the time or I suppose the money to
Speaker 1: go to those conferences. How are you well?
Speaker 2: Very well, James, Thank you for having me.
Speaker 1: Great to have you on, and you know there is
Speaker 1: so much we could cover, but I think we should
Speaker 1: cut to the chase for the Australian investor and look
Speaker 1: at this issue. I mean, first of all, do you
Speaker 1: accept what I said in the preambum.
Speaker 2: Look, yes, what you're saying is very right and it
Speaker 2: was a major topic of discussion. But I'm just sort
Speaker 2: of you cast some doubt on this is euphoria towards
Speaker 2: European equities that I heard, and we can talk about
Speaker 2: that in a little bit more detail. And I think
Speaker 2: because the US is the US, and you know, you
Speaker 2: canvas looking to IPO and that's going to list in
Speaker 2: the US, it's not listing in Australia.
Speaker 1: So you're not deep you're not deeply questioning the pre
Speaker 1: eminence of the US, are you.
Speaker 2: No. Look, there was the big debate from the perspective
Speaker 2: of European investors has been the US risk premium. So
Speaker 2: it is the US suddenly considered high risk?
Speaker 1: Is it worth the prices on those markets?
Speaker 2: Yeah? Okay, Yeah, And the consensus seemed to be there
Speaker 2: is a high risk attributed to the US now. And
Speaker 2: you're very right. With respect to the weaker US dollar,
Speaker 2: that seemed to be a major focus and people were
Speaker 2: still talking it down on the simple fact that the
Speaker 2: US president wants it weaker.
Speaker 1: Yeah, So we take it that they wanted to drop,
Speaker 1: and the mechanics are there for them to use for
Speaker 1: it to drop. So we can, to the extent that
Speaker 1: you can safely assume anything in financial markets, We'll make
Speaker 1: the assumption that the US donar will weaken through the
Speaker 1: year yeap.
Speaker 2: So what does that mean is the fact that the
Speaker 2: US president. So for Australian investors, if you're having US
Speaker 2: dollar holdings and you know you can either look to
Speaker 2: take some hedging strategy and so like if you're invested
Speaker 2: in managed funds, you can take a hedge class if
Speaker 2: that exists, or you just realize that when coming back
Speaker 2: to Australian dollars, you are if you're invested in US equities,
Speaker 2: you're going to see you're going to see a currency
Speaker 2: adjusted return which will be negatively impacted through a weaker
Speaker 2: US dollar.
Speaker 1: So you're existing if you had existing holdings in US
Speaker 1: dollar as well, if you had most people and on
Speaker 1: listening to the show, they're explosure to US is through
Speaker 1: funds mostly tfs or perhaps managed funds. Wouldn't the existing
Speaker 1: holdings call open value?
Speaker 2: Well, what you what you can see in if you've
Speaker 2: got a weaker US dollar? No, you're you're seeing a
Speaker 2: weaker US dollar impact. Now you can't hedge that. You
Speaker 2: can't hedge that. If you're in some of the funds,
Speaker 2: they do have a hedge class and that can give
Speaker 2: you and impact their.
Speaker 1: So are you recommending that people if they're going in
Speaker 1: fresh and they hadn't been in before, so they don't
Speaker 1: get the advantage perhaps of what's happened so far. If
Speaker 1: you're buying today US stocks, US funds, managed funds, ETFs,
Speaker 1: then are you saying, whereas in the past we didn't
Speaker 1: really have to consider it, that we should consider hedged options,
Speaker 1: and all those ones tend to have hedged around hedged options.
Speaker 2: Yeah, I'd be looking at a hedged option at the moment.
Speaker 1: Correct, Okay, right, that's very interesting. That's a fresh sort
Speaker 1: of perspective.
Speaker 2: Now.
Speaker 1: The big question I suppose is that investors are also
Speaker 1: looking beyond the US, aren't they. They're looking elsewhere, and
Speaker 1: gold seems to be the alternative of choice. And though
Speaker 1: golds had a good run, all the conditions would seem
Speaker 1: to be in place for it to keep running. What
Speaker 1: do you think.
Speaker 2: I was just saying yesterday when I was talking to
Speaker 2: staff here internally, that when you talk to other managers,
Speaker 2: they always to you the good stories and never tell
Speaker 2: you the bad stories. And I didn't meet anybody that
Speaker 2: wasn't long gold and one of the big Swiss banks,
Speaker 2: for instance, I was shocked by the extent of the
Speaker 2: holding that the god and gold, and they were talking
Speaker 2: about the fact that in the first quarter of this
Speaker 2: year more slow went when you're looking at what they
Speaker 2: considered exits out of US dollars, more went into gold
Speaker 2: than the euro. So they're seeing gold as the proxy
Speaker 2: to the US dollar as opposed to the euro, and
Speaker 2: they saw still considerable downside in the US dollar and
Speaker 2: therefore they were still very bullish on gold. To the
Speaker 2: extent some of the figures they were throwing around, I'm
Speaker 2: sort of going, wow, this is It was one firm
Speaker 2: and I spoke then one to one of the portfolio
Speaker 2: managers in this Swiss private bank and he said, yeah,
Speaker 2: but we've always held gold, and he said for years
Speaker 2: we had at least a two percent holding, and it
Speaker 2: was one of those things that you was that was
Speaker 2: where the bad discussion came about. And he said, yes,
Speaker 2: it's about five percent now our holdings in gold. But
Speaker 2: he said, you know, for the first time in a
Speaker 2: long time, we're having positive discussions on it.
Speaker 1: So you've got Swiss private Swiss banks being a sort
Speaker 1: of proxy for what very wealthy investors are thinking. Doubling
Speaker 1: there holding in gold and more than that actively discussing
Speaker 1: what buying more.
Speaker 2: Yeah, and further upside in the goal price. Their whole
Speaker 2: logic seems to be, you know a lot of people
Speaker 2: saying central banks, et cetera. They're saying, no, it's seen
Speaker 2: as the proxy to the US dollar, which was a
Speaker 2: different perspective from Bloodhead.
Speaker 1: Yeah, so global money uncomfortable with the trajectory and what's
Speaker 1: going on around the US donor they're only alternative, perhaps
Speaker 1: as a global currency proxy is gold.
Speaker 2: Yep. Yeah, that's what they're saying, and they claim more
Speaker 2: money's gone into gold the neuros.
Speaker 1: Yes, explain why that's important to to the general listener.
Speaker 2: Well, I think that the I think there's this enormous
Speaker 2: excitement about Europe at the moment. I think it might
Speaker 2: be a bit overdone, but you know, there's this tail
Speaker 2: wind from the amount of spense, defense spending and infrastructure spending,
Speaker 2: and therefore everyone's getting very excited. But is this in reality,
Speaker 2: I don't, I don't know. I think this. You can
Speaker 2: see it's not necessarily going into the euro people buying
Speaker 2: therefore European stocks, and I think the Euros stock index
Speaker 2: is a very old index like Australia but it doesn't
Speaker 2: have the cyclicality that Australia has. So we've got some
Speaker 2: cyclical stocks which at times is therefore very worthwhile'ts.
Speaker 1: And it's it's a dopey old market, I would say,
Speaker 1: And it's been dopy for years. Do you do you
Speaker 1: see anything to me people think they should reconsider European
Speaker 1: stocks apart from the fact that Trump has made them
Speaker 1: spend more on defense. Do you see any other sort
Speaker 1: of structural reason to be attracted to it that wasn't
Speaker 1: there before?
Speaker 2: No, Well, that everyone was talking up Europe, and they're
Speaker 2: Europeans and UK citizens talking up Europe. But let you know,
Speaker 2: when you sort of take a deep breath and look back,
Speaker 2: you go, well, what do you invest in? Okay, So
Speaker 2: they're talking about infrastructure, defense spending and the government is
Speaker 2: not going to this is self fulfilling for the US
Speaker 2: because most of the armaments are US companies, that's the
Speaker 2: other thing. And you just you look at it and
Speaker 2: you go, well, I just don't understand what they're going
Speaker 2: to invest in. I think that things are just getting
Speaker 2: a little bit ahead of themselves over there. It's done well.
Speaker 2: And one manager, as you pointed out to me, Europe
Speaker 2: has not outperformed the US this century, this century, right
Speaker 2: this century, so in the last twenty five years, and
Speaker 2: I thought.
Speaker 1: And it's had so many four starts.
Speaker 2: Yes, and also and the other one thing is which
Speaker 2: I think is really important is GDP growth. As Capital
Speaker 2: Economics said to me, GDP growth in Europe and the
Speaker 2: US twenty twenty five is going to be about even.
Speaker 2: But next year you're looking at one full percentage point.
Speaker 2: So you're looking approximately two point five percent in GDP
Speaker 2: growth in the US and one point five percent in Europe.
Speaker 2: And that's that I think is a very that's something
Speaker 2: you have to take into consideration.
Speaker 1: Okay, just turning it all back in terms of portfolio
Speaker 1: construction and portfolio allocation for private investors in Australia, what
Speaker 1: did you take when you came back? What did you
Speaker 1: think that you should do that you haven't been doing
Speaker 1: before In terms of gold or US donor exposure, we.
Speaker 2: Or are already hedged. So yeah, but at some point
Speaker 2: we will if we've got some strength in the Australian dollar,
Speaker 2: we would look to reverse that some of that, not
Speaker 2: all of it, but some of it. At this point
Speaker 2: time on gold, would I be going in again at
Speaker 2: those levels. It's run so hard. But yeah, for those
Speaker 2: that have got gold in their portfolios, you know, I
Speaker 2: would be sticking with it, and on US, I would
Speaker 2: be sticking with the US market. I think that, yes,
Speaker 2: Europe's had a run. Let's just be sensible about things.
Speaker 2: I still struggle on what to buy in Europe.
Speaker 1: Okay, Okay, all right, very interesting and obviously if possible
Speaker 1: that's hedged obviously the US exposure, okay, which is not
Speaker 1: normally the case right from many investors. All Right, I
Speaker 1: think we'll take a short break. We'll be back in
Speaker 1: a moment. There's a couple of really key aspects of
Speaker 1: this I want to talk to Will about. Hello and
Speaker 1: welcome back to the Australians Money Puzzle Podcast. James Kirby
Speaker 1: talking to win Will Hamilton of Hamilton Wealth Managers, regular
Speaker 1: on the show Hamilton Wealth Partners. Tell me Will, Okay,
Speaker 1: so let's take it that from the first segment we've
Speaker 1: got a sort of updated picture of the risks and
Speaker 1: opportunities and the changing risks and opportunities around the weaker
Speaker 1: US donor potentially de dollarization of markets. As you see
Speaker 1: that strength of gold which is happening there. So in
Speaker 1: terms of what people are looking at in terms of
Speaker 1: where they put their money, is it stick with the
Speaker 1: US which is very interesting? How about emerging markets? Because
Speaker 1: if the US donor is weakening and continue to is
Speaker 1: that a tailwind for emerging markets?
Speaker 2: Not just that seventy percent of global growth in the
Speaker 2: next twenty years is going to come from emerging markets.
Speaker 2: So yeah, I think it's a combination of what you
Speaker 2: just said, which is positive, combined with the fact that
Speaker 2: emerging markets do have real growth and superior growth to
Speaker 2: the rest of the world, so they performed well year
Speaker 2: to date and also rolling on a twelve month basis,
Speaker 2: and I can I see that continuing. The only area
Speaker 2: in emerging markets where people seem to be hesitant, and
Speaker 2: it's probably one of the cheapest stock markets in the
Speaker 2: world is China, which is a big.
Speaker 1: Chunk of emerging markets, isn't it if you're going into
Speaker 1: a fund or an ETF yep.
Speaker 2: And but interestingly I hear that a lot of the
Speaker 2: industry funds now are looking at em x China, and
Speaker 2: so a lot of and a lot of professional managers
Speaker 2: are looking x China. In the way they approach this
Speaker 2: part of this asset class, and likewise in internationally that
Speaker 2: seems to be the case as well. So because of
Speaker 2: political risk?
Speaker 1: Is that because emerging markets x China has been the
Speaker 1: best component of the index?
Speaker 2: Yeah that is yeah, yeah, right.
Speaker 1: One thing, what about tariffs? You would have thought actually
Speaker 1: that the tariffs would be negative for that area.
Speaker 2: You would, But the simple fact is it seemed to
Speaker 2: have growth. And I think that the world is looking
Speaker 2: outside of the US in many respects as well. Look
Speaker 2: at Australia's looking at FTA with free Trade Agreement with Europe,
Speaker 2: and so it seems to be an x US sort
Speaker 2: of equation that people are looking at tariffs. I think
Speaker 2: the whole debate on tariffs has raised its ugly head
Speaker 2: again in the last week or two. But when I
Speaker 2: was away, I think people were looking at a more
Speaker 2: at that ten percent level. But a few other figures
Speaker 2: have been thrown out since. But it's a geopolitical risk.
Speaker 2: Whereas we've been always told geopolitical risks provide buying opportunities.
Speaker 2: Now it seemed to be on geopolitical risks that you
Speaker 2: look at scenario analysis around it. So what is you know,
Speaker 2: we're looking at a base case of ten percent, What
Speaker 2: if it was higher, what if it was lower?
Speaker 1: What do you mean by base case of ten percent there.
Speaker 2: On tariffs that the US is going to inflict on
Speaker 2: them the rest of the world. So correct, So people
Speaker 2: are looking at geopolitical risks now as something that you
Speaker 2: do have to adjust for, but on taking into cat
Speaker 2: scenario scenario analysis.
Speaker 1: So put simply, gold and emerging markets would seem to
Speaker 1: be the hot ticket five for investors. Yeah, okay, very interesting. Okay,
Speaker 1: that's very I've wanted to get across that for some time.
Speaker 1: One thing for our listeners who may not be that
Speaker 1: may be all new to them, emerging markets. Gold is
Speaker 1: pretty obvious what you can do. I mean, gold is
Speaker 1: not complicated. It's a commodity that goes up or it
Speaker 1: doesn't go up. Emerging markets are terribly complicated. A bit
Speaker 1: of a bit of nonsense, really. I mean it's because
Speaker 1: someone in London or New York said, let's put them
Speaker 1: all into a basket. That Russia, China, Indonesia, and Mexico.
Speaker 1: These countries have nothing in common except this classification. So
Speaker 1: what I'm driving out.
Speaker 2: Is many of the amount emerging markets, like seth career
Speaker 2: in Taiwan.
Speaker 1: Yeah sure, yeah, sure, so so what and you go
Speaker 1: in and you see time in the semiconductor is like
Speaker 1: a major holding, but that's not an emerging market stuff.
Speaker 1: What I want to ask you, Will is how does
Speaker 1: the everyday investor get at this area?
Speaker 2: Well through you know, there's some very good managers out there,
Speaker 2: and all I would suggest in approaching it is have
Speaker 2: a look at the downside participation when things go tough
Speaker 2: in emerging markets in selecting a manager, and make sure
Speaker 2: you're comfortable with a downside participation. There are managers that
Speaker 2: have less and that's what we always look at. So
Speaker 2: I'm not going to mention names. There's some very good
Speaker 2: managers out there.
Speaker 1: And it sounds like you don't like ETFs on this one.
Speaker 2: I know, I think that you've this is something you
Speaker 2: do definitely need an active manager out like we actually
Speaker 2: use managers that don't like China.
Speaker 1: Okay, or maybe you will at at very least perhaps
Speaker 1: an ETF X China are such a thing which are
Speaker 1: not aware of. But if you see, we're not there
Speaker 1: to let us know. Okay. I have some really good
Speaker 1: questions I want to talk to Will about. But I
Speaker 1: want to there's something else I want to ask in
Speaker 1: which is not on the broad theme today about the
Speaker 1: US and what it means for you. It's about the
Speaker 1: sixty to forty rule. And I've been reading some very
Speaker 1: interesting things. A really terrific piece last weekend. It was
Speaker 1: about the sixty forty rule, which I'm sure most of
Speaker 1: our listeners are familiar with. This idea that you have
Speaker 1: sixty percent of your money at risk and you have
Speaker 1: forty percent of your money in safer investments. And traditionally
Speaker 1: globally that was sixty percent in shares or risk assets
Speaker 1: that are listed, forty percent in what they call fixed
Speaker 1: income traditionally bonds. This has really changed in recent times.
Speaker 1: Bonds have been disappointing for years and years, and there
Speaker 1: has been new areas that have mushroomed before our eyes,
Speaker 1: private equity, private credit. I just want to ask you Will,
Speaker 1: for this whole sixty to forty rule, what do you
Speaker 1: what in your eyes the forty percent that people should
Speaker 1: have that isn't that is a fixed rather than ash risk.
Speaker 1: What does it comprise of these days?
Speaker 2: Well, for growth portfolio, where approximately seventy thirty we do have.
Speaker 2: It all depends on the client how much money they've got,
Speaker 2: how comfortable they are holding a degree of ill liquidity
Speaker 2: and their portfolios. So for a decade now we've invested
Speaker 2: in private equity, infrastructure, diverse FOI credit and direct real estate.
Speaker 2: But this is something that clients have to be comfortable
Speaker 2: with illiquidity and their portfolio. Now there are what's called
Speaker 2: these evergreen funds which have come about and you know
Speaker 2: they're in at you in particular and infrastructure and private equity.
Speaker 2: They some people call them semi liquid which I think
Speaker 2: is a terrible term. I'd like to ren think of
Speaker 2: it as variable liquidity. In other words, you can get
Speaker 2: your money out in normal environment with you that there's
Speaker 2: out slow caps et cetera. However, if things were to
Speaker 2: go bad, these things have the right to lock up
Speaker 2: two seconds.
Speaker 1: Yes, sorry, what I was driving out.
Speaker 2: Was that's why it's use the term variable.
Speaker 1: You didn't see the word bonds when you listed out
Speaker 1: the four key elements of the of the your fortunate bond.
Speaker 2: But that's what we put all of these in the
Speaker 2: risk base. But we have reduced a defensive allocation. Now,
Speaker 2: this was a big debate and to what extent you
Speaker 2: go into what is your waiting in these private market assets. Yeah,
Speaker 2: and as I said, it's very dependent on a client
Speaker 2: by client basis and the comfort with illiquidity. And I
Speaker 2: think that's that is the number one question you've got
Speaker 2: to take. You take into account and how do you
Speaker 2: how do you categorize an asset as being a liquid
Speaker 2: So we're quite conservative on that. We say it's monthly liquidity.
Speaker 2: So it's very conservative on an approach. And there's some
Speaker 2: firms out there that recommend very high ratings. Yeah, thirty
Speaker 2: percent plus. We're not anywhere near that, but we think, yes,
Speaker 2: somewhere between fifteen and twenty if if it's a big
Speaker 2: if the client is comfortable, and if they're not, well,
Speaker 2: it goes lower.
Speaker 1: And so if you want to go into these areas
Speaker 1: private equity, you mentioned infrastructure, what were the other there's
Speaker 1: two more you.
Speaker 2: Mentioned diversified credit and direct real estate.
Speaker 1: Divers boy credit and direct real estate. What you're saying is,
Speaker 1: as a guide, you should be able to get your
Speaker 1: money up once a month.
Speaker 2: We define something as a liquid as monthly or greater.
Speaker 2: So in some cases these windows are quarterly, sometimes they're annually.
Speaker 2: But you're weere conservative in the way we classify that
Speaker 2: some other firms classified as quarterly or greater.
Speaker 1: But be aware of folks. If you are going into
Speaker 1: one of these funds for the first time and it
Speaker 1: says you can take your money out monthly, watch the
Speaker 1: fine print that they will invariably say unless we change
Speaker 1: our minds, and that can happen, So you must bear
Speaker 1: that in mind. It's not the stock market. There's always
Speaker 1: a liquidity in the stock market. You can always get
Speaker 1: your money out of shares nine times out of ten,
Speaker 1: especially large caps or mid caps. I mean occasionally you
Speaker 1: might get a squeeze on a small cap, but that's
Speaker 1: very rare. And ETFs even more so that they're exceptionally liquid.
Speaker 1: That is there, that is their advantage. Only so much
Speaker 1: we can cover. Very interesting. Okay, well, just while before
Speaker 1: we go to the break, in terms of anything else,
Speaker 1: you discovered that perhaps we are not right up to
Speaker 1: speed on global markets. In terms of trends, we didn't
Speaker 1: talk about crypto. I detect a serious change in attitude
Speaker 1: from our listeners on the money pustle towards crypto in
Speaker 1: the space of a year. I think in terms of
Speaker 1: the Grand Tour, you had.
Speaker 2: Well, the same Swiss private bank that was talking about
Speaker 2: gold Is said to us, said to me that they're
Speaker 2: about to bring crypto into their portfolios and a very
Speaker 2: small waiting, tiny waiting, but there that's it. I was
Speaker 2: shocked when I heard that. I sort of why were
Speaker 2: you shocked?
Speaker 1: I mean AMP has done a GP, Morgan has done.
Speaker 2: Well. I think that when you look at, in particular,
Speaker 2: some of the UK investors, Yeah, they're waiting in private
Speaker 2: markets is so low and they won't even debate putting
Speaker 2: something like crypto in They really are conservative, whereas you
Speaker 2: know these some of these more European institutions such as
Speaker 2: this West Private Bank. Yeah, they are saying, well, start
Speaker 2: to put a small holding. So it's a very different
Speaker 2: approach from the UK.
Speaker 1: Yeah, and it's growing right, the acceptance.
Speaker 2: Absolutely yeah, yeah.
Speaker 1: Throughout institution and investment investors around the world. Okay, or
Speaker 1: I wanted to cover that because we've had some lively
Speaker 1: discussion on bitcoin and crypto in recent times on the show,
Speaker 1: and we had Jackie Clark who was completely against it
Speaker 1: and had a lot of criticism from our listeners. And
Speaker 1: then I said, okay, well let's get Shane Oliver on
Speaker 1: from AMP. Since the AMP is you know, the definitive
Speaker 1: institutional investment in Australia. And they've put twenty seven million
Speaker 1: into crypto, which is, you know, not a lot, but
Speaker 1: it's also twenty seven million into crypto for AMP. And
Speaker 1: he explained their side, and it was a bit like
Speaker 1: you were saying, it was, by no means an enthusiastic.
Speaker 1: I didn't think it was an enthusiastic I think it
Speaker 1: was more a sort of acceptance that this acid class
Speaker 1: is here to stay. All right, we'll be back on
Speaker 1: that one. Of course, Let's have some questions. We'll be
Speaker 1: back in a moment. Hello, Welcome back to the Australians
Speaker 1: Money Puzzle podcast. James Kirby here, I've been keeping some
Speaker 1: questions for Will Hamilton of Hamilton Wealth Partners and they
Speaker 1: are rather the difficult, but always interesting as you can
Speaker 1: imagine the difficult ones. Can you see them?
Speaker 2: Will? I can? Would you like me to read the
Speaker 2: first one? Yeah? Okay, so Bernie. I'm an experienced investor
Speaker 2: in shares, residential and commercial property, but almost always pick
Speaker 2: up something new or inspiring. So some comments from your
Speaker 2: guests this week were a little disheartening. I don't hold
Speaker 2: Lockheed Mark Martin directly, but the inference seemed to be
Speaker 2: that investors in it may not be moral people, as
Speaker 2: they drop bombs on families. A bit extreme, But this
Speaker 2: does raise a great point. How do how do the
Speaker 2: top investors now establish guardrails on ethical considerations? So Lockheed US,
Speaker 2: both Amazon and Microsoft extensively across their businesses, yet both
Speaker 2: companies were picks for your guest. So look, values is
Speaker 2: the way I like to look at it. I won't
Speaker 2: use the word ethics because what's ethical to one person
Speaker 2: is not to another. But values, Yeah, that's something that
Speaker 2: a lot of investors like to take into account. And
Speaker 2: when it comes to armaments, it's a very big consideration
Speaker 2: which you don't generally exist on the ASX, but you
Speaker 2: can get exposure to in global equity markets, and it's
Speaker 2: something that's most investors we find actually it's something they
Speaker 2: do want to exclude. However, where do you draw the line?
Speaker 2: It's like alcohol. You know, when some people take alcohol
Speaker 2: into consideration, did you then go and ban coals because
Speaker 2: they sell it? And where to what extent do you
Speaker 2: draw that line? So do you and the alcohol companies,
Speaker 2: But do you then know when it's a smaller percentage
Speaker 2: of their total revenue do you ban those companies? So
Speaker 2: Bernie is right Locke to use both Amazon and Microsoft.
Speaker 2: You know, it's where do you draw that line?
Speaker 1: It's very difficult, Bernie, and it's one of the reasons
Speaker 1: that the wholes swing away from ESG has been that
Speaker 1: the lack of definition, and perhaps in some way it's
Speaker 1: the difficulty of definition. A serious ethical investor would pull
Speaker 1: this sort of toll very quickly and say listen cot
Speaker 1: to the chase, you can do it. I think the
Speaker 1: only way, in Bernie, this is not advice, never is information,
Speaker 1: only is to look at the more pure play ethical
Speaker 1: investment groups, the oldest, probably best known as Australian Ethical Investments,
Speaker 1: and you would like to think that their benchmarks are
Speaker 1: as good as you will find if you're very interested
Speaker 1: in that area. But there is always, as Will says,
Speaker 1: there is always. It's just really hard to cut it.
Speaker 1: To cut it. So you say, okay, I'm not going
Speaker 1: to buy Lockheed Martin. I don't want to buy Lockheed Martin.
Speaker 1: They make bombs, okay, fine, or they make fighter bombers
Speaker 1: or whatever. Then do you say you don't buy Amazon
Speaker 1: because they use Amazon? Do you say you won't buy
Speaker 1: a standard four x nine ETF on the US market
Speaker 1: because Lockheed Martin will be in there, so you can see.
Speaker 1: It's up to you. You've got to design your own
Speaker 1: portfolio to a large extent, I believe, all right, but
Speaker 1: thank you, Bernie, really good question, Charles. A common misconception
Speaker 1: that came up on your shoe on exchange traded funds
Speaker 1: was the idea that these funds need to buy more
Speaker 1: of a company when it performs well and sell it
Speaker 1: when it performed poorly. In reality, ETFs or index funds
Speaker 1: passively reflect the composition of the index. They don't need
Speaker 1: to make those active trades. The only time index funds
Speaker 1: actively buy our sell is when money flows in or
Speaker 1: out of the fund, or when a stock enters or
Speaker 1: exits the index. So Charles is saying that my contention,
Speaker 1: if you like here in the show when in print,
Speaker 1: has been that the ETFs are now at a point
Speaker 1: where they are driving markets to a degree, and certain
Speaker 1: stocks to a degree. And the outstanding example was common
Speaker 1: Wealth Bank, where the part I was making was the
Speaker 1: higher it goes, the more they must buy it, and
Speaker 1: so to some extent they self perpetuated. Charles is saying, no,
Speaker 1: that's not right. That's not how it works. He's just
Speaker 1: explained how it works technically. What do you think, well,
Speaker 1: is our ETF's then neutral in the market in terms.
Speaker 2: Of that they are and momentum. It's all about momentum.
Speaker 2: And as money comes in, and there's money that goes
Speaker 2: into your twelve percent of people salaries going to in
Speaker 2: a superannuation every month, and people are buying the index,
Speaker 2: and as such they're buying a large percentage of when
Speaker 2: they're buyingn ETF, they're buying a large percentage of CBA. Likewise,
Speaker 2: as waitings change, those ETFs have to chase those waiting
Speaker 2: changes as well, up or down.
Speaker 1: So they they pushed the momentum down.
Speaker 2: Correct, And I don't think it's just as simplistic as
Speaker 2: saying everything static and therefore it just moves up or
Speaker 2: down because there is the cash that chases these markets.
Speaker 1: Okay, okay, I hope that's a I hope that's a
Speaker 1: useful explanation to everybody. Childs might like it, but but
Speaker 1: there you are, Childs, I would agree with well on that.
Speaker 1: All right, Why don't you read the last question there
Speaker 1: are from Bruce, which is probably the sort of thing
Speaker 1: you get in your office sometimes.
Speaker 2: Yeah, so can you provide some clarification on the tax
Speaker 2: on inherited super? So I used to be under the
Speaker 2: impression that if super was left to your estate then
Speaker 2: it would be passed on untaxed. However, recent podcasts have
Speaker 2: led me to doubt this. He asked his his accountant
Speaker 2: and ended up more confused than ever. So can you
Speaker 2: get someone to explain the situation and the various components
Speaker 2: tax free, untaxed, taxable. Look, let's just have if we
Speaker 2: don't have time, we don't have another ran.
Speaker 1: Bruce, We'll just tell you one thing which with stands unchallenged.
Speaker 1: There is tax uninherited super, isn't there? And you might explain,
Speaker 1: let's say I inherit Let's say if my dad had
Speaker 1: lived in Australia. Un let's say he had super. Unless
Speaker 1: say he left me two hundred thousand dollars and it
Speaker 1: was his whole super, how would that be taxed?
Speaker 2: So you're we're making an assumption here that it's that
Speaker 2: there is some There are quite a number of things
Speaker 2: you've got to take into account and I'm not going
Speaker 2: to go into this in any detail. And this is
Speaker 2: why you do need to get You know, this is
Speaker 2: not advice, and you need to get specific advice. So
Speaker 2: were you a dependent? Is it paid as a lump
Speaker 2: sum or an income stream? The income stream is it
Speaker 2: account based or capped? Yeah? The super tax is it
Speaker 2: taxable or tax free? And so if you look basically,
Speaker 2: the bottom line is it's sevente and a percent, but
Speaker 2: or your age and the age of the deceased person
Speaker 2: when they die. So there's a lot of things that
Speaker 2: have to be taken in account. There is no clear, simple,
Speaker 2: one answer across the board, and that's why you ended
Speaker 2: up confused and wanted to know, well, what are the
Speaker 2: various answers? There are many answers.
Speaker 1: There are many, and you need to talk to as
Speaker 1: well as unfortunately you need If it's individual and it's substantial,
Speaker 1: it's probably worth paying an advisor. But there's a couple
Speaker 1: of core things that are true. Bruce, adults, dependents being
Speaker 1: adults who inherit super, the super they inherent the person
Speaker 1: who had the super. To make it simple, we'll assume
Speaker 1: that they never voluntarily contributed to super. It was all mandated.
Speaker 1: There was all their SGC. That means that was tax.
Speaker 1: That that means that there was tax pre component in
Speaker 1: all that. That means there's tax to be paid, and
Speaker 1: that tax works out at seventeen percent. This is what
Speaker 1: the seventeen percent figure that we'll mention it. There's also
Speaker 1: some complications with the new division two nine six, but
Speaker 1: we won't go there because we don't have two hours.
Speaker 1: But basically, don't think that you're super coming through has
Speaker 1: no tax on it. Unfortunately, but most people don't realize this.
Speaker 1: When Paul Keaton created the supersystem and when he created
Speaker 1: the concession for super whereby the bit that goes in
Speaker 1: from your employer which is now twelve percent, believe it
Speaker 1: or not, when that comes out the other side as
Speaker 1: an inheritance to you, they want to recover the tax
Speaker 1: concession and that works out at seventeen percent of that figure. Simple,
Speaker 1: simplified answer. But that's it.
Speaker 2: We have a site Texas in Australia and that's three souper.
Speaker 1: That's right. So it's funny people said, is there an
Speaker 1: inheritance tax and people say, no, there's no inheritance tax
Speaker 1: in Australia. Well, if you inherit super there is. But
Speaker 1: technically that's a super tax, not an inheritance tax. You
Speaker 1: cant have a whole show about debating that one. Okay, terrific, terrific,
Speaker 1: Thanks very much, Will Hamilton, well partner's great to have
Speaker 1: you on the show again.
Speaker 2: Thank you for having me, appreciate it.
Speaker 1: Nice to have you back on land and we'll talk
Speaker 1: to you again. Okay, terrific. Great questions Today a number
Speaker 1: of people have done the clever thing of batching questions
Speaker 1: together and sending two or three questions in at the
Speaker 1: same time. That's great. Keep it up. Why not if
Speaker 1: you're going to make the effort to send in a question,
Speaker 1: send in two or three. I will try and cover
Speaker 1: them all and we do get to cover them on
Speaker 1: the show. The addresses the money Puzzle at the Australian
Speaker 1: dot com dot au talk to you soon.
Speaker 2: At the pad, the h