WEBVTT - The AI Share Market Backlash 0:00:14.200 --> 0:00:17.560 Hello, and welcome to The Australian's Money Puzzle podcast. I'm 0:00:17.640 --> 0:00:21.400 James Kirby, the Wealth editor at the Australian. Welcome Aboard Everybody. 0:00:21.720 --> 0:00:24.160 One of my favorite shows of the year. Regular guest 0:00:24.239 --> 0:00:28.960 Will Hamilton of Hamilton Wealth Partners goes off on a 0:00:29.440 --> 0:00:32.800 odyssey around the world every year and he goes to 0:00:32.840 --> 0:00:36.720 all these various investment conferences and wealth conferences extra and 0:00:36.760 --> 0:00:39.640 he comes back on the show around this time of 0:00:39.720 --> 0:00:42.960 the year every year and he tells us basically what 0:00:43.080 --> 0:00:45.640 the mood is out there and what people are saying 0:00:45.680 --> 0:00:49.120 and what really is on the table, if you like, 0:00:49.960 --> 0:00:54.760 with wealth advisors around the world. It's always interesting. He's here, 0:00:55.040 --> 0:00:57.280 he's back. He has no jet lag this time. For 0:00:57.360 --> 0:00:58.720 the last time. We caught it really tight and he 0:00:58.800 --> 0:01:01.480 did it virtually. It's the plane. We're going to talk 0:01:01.520 --> 0:01:04.640 about rates and where on Earth they may or may 0:01:04.680 --> 0:01:07.680 not be going. We're going to talk about the craze 0:01:07.720 --> 0:01:09.840 for private credit and to the extent that it's going 0:01:09.880 --> 0:01:12.319 to be any good for you should you ever deem 0:01:12.520 --> 0:01:17.840 to go near it. Backlash on AI. Interesting had to happen. 0:01:18.120 --> 0:01:21.960 Question is whether it's just a moment of whether it's 0:01:22.000 --> 0:01:24.680 going to stay with us, and lots of other issues 0:01:24.800 --> 0:01:27.800 that we've already talked about before the show. How are 0:01:27.800 --> 0:01:29.119 you will Hamilton, welcome home? 0:01:29.840 --> 0:01:31.679 Thank you very much, Sjames, thanks for having me. I'm 0:01:31.800 --> 0:01:32.520 very well. Thank you. 0:01:33.319 --> 0:01:37.520 Always good to have you. I imagine we have to 0:01:37.520 --> 0:01:40.080 talk about rates. First of all. I just walked into 0:01:40.080 --> 0:01:41.800 the building this morning. Two people came up to me 0:01:41.840 --> 0:01:43.480 and said, what's going on with rates? What's going on? 0:01:43.520 --> 0:01:46.280 Are they going down or are they going up? Off 0:01:46.319 --> 0:01:50.120 the CPI yesterday, I said, look, I don't know, if 0:01:50.160 --> 0:01:52.080 you want my opinion, I don't think I think's going 0:01:52.120 --> 0:01:53.640 to happen. I don't think they're going to go up 0:01:53.800 --> 0:01:57.640 or down in Australia this year. But informed by your 0:01:58.080 --> 0:02:00.680 global rolling around, what do you think. 0:02:01.520 --> 0:02:04.600 Look, let's deal with offshore and then domestically, and I 0:02:04.600 --> 0:02:08.360 think rates are going down. Offshore Powers last night held 0:02:08.400 --> 0:02:11.480 raids steady in the US, but has very much indicated 0:02:11.520 --> 0:02:14.480 that potentially next month we're going to see the first 0:02:14.480 --> 0:02:16.840 cut in the United States. We've already seen cuts in 0:02:16.919 --> 0:02:20.560 the UK and in Europe. Rates are going down. Inflation 0:02:21.360 --> 0:02:24.280 has appeared to be stickier. It's definitely stickier than what 0:02:24.360 --> 0:02:29.079 people thought but inflation is going down offshore, and that's 0:02:29.120 --> 0:02:31.400 why interest rates are going down. Not to the extent 0:02:31.400 --> 0:02:33.800 that people thought at the beginning of the year, but 0:02:33.880 --> 0:02:36.880 we are going to see rates trending offshore. We're trending 0:02:36.919 --> 0:02:40.160 down now. Australia is a different matter straight because we've 0:02:40.200 --> 0:02:45.840 got variable interest rates for mortgages. We saw interest rates 0:02:45.840 --> 0:02:49.640 go up less than offshore. So one hundred bass points 0:02:49.639 --> 0:02:53.600 are one full percent less in Australia than the US. 0:02:54.919 --> 0:02:58.400 We have not tackled wage price inflation in Australia as 0:02:58.440 --> 0:03:04.520 they have offshore, and therefore our inflation is stickier and 0:03:04.560 --> 0:03:12.000 therefore I cannot see interest rates falling. Probably the second 0:03:12.080 --> 0:03:15.520 quarter of next year would be the earliest you could consider, 0:03:15.600 --> 0:03:20.400 so that April to June period is when you potentially 0:03:20.400 --> 0:03:24.200 see rates come down, So you won't see it before 0:03:24.200 --> 0:03:28.920 that we haven't tackled inflation. But likewise they shouldn't come 0:03:28.960 --> 0:03:31.799 down as much because we didn't increase as much. 0:03:31.880 --> 0:03:33.640 But you still have the opinion that they will come 0:03:33.680 --> 0:03:38.280 down eventually. Eventually, yeah, but you still have the opinion 0:03:38.280 --> 0:03:39.840 the next move is that it drops. 0:03:40.560 --> 0:03:42.480 Yeah. I don't think we're going to see it. I 0:03:42.480 --> 0:03:44.600 don't think after yesterday's figure. I don't think we're going 0:03:44.600 --> 0:03:45.680 to see an increase, but. 0:03:46.360 --> 0:03:50.720 Okay, very interesting. Yeah, because basically the figures aren't great, 0:03:51.120 --> 0:03:53.920 they're really enough great for the domestic economy. That doesn't 0:03:53.960 --> 0:03:56.040 mean the markets aren't great. Of course, the markets have 0:03:56.080 --> 0:03:59.720 been very good so far. A little bit of a 0:03:59.760 --> 0:04:03.160 w in the last few days, a bit of extra 0:04:03.240 --> 0:04:08.440 volatility in the US, and of course we are in 0:04:08.560 --> 0:04:10.840 August and we are heading towards that time of the 0:04:10.880 --> 0:04:13.480 year where the US traders tend to lose their nerve 0:04:14.120 --> 0:04:19.640 and if we have corrections or crashes, they come famously 0:04:19.640 --> 0:04:22.240 come in the September October period. If there is one 0:04:22.279 --> 0:04:24.679 this year, And I don't know what's going to happen, 0:04:24.880 --> 0:04:27.360 but of course we should be on standby for a correction. 0:04:27.480 --> 0:04:31.599 That's for sure. It will be triggered for it would 0:04:31.640 --> 0:04:35.080 seem it would be triggered not by politics or by rates, 0:04:35.640 --> 0:04:43.239 but by perhaps a backlash against the initial excitement over AI. 0:04:43.440 --> 0:04:47.719 Excitement drove the big cap stocks. The big cap stocks 0:04:47.839 --> 0:04:51.279 drove all markets around the world. That's why your ASX 0:04:52.080 --> 0:04:54.440 index one did so well last year, and your US 0:04:54.520 --> 0:04:58.839 one did twice as well. But you detected at various 0:04:59.040 --> 0:05:02.160 meetings and conferences. What is it? Is it a skepticism, 0:05:02.240 --> 0:05:04.960 Is it a skepticism about AI? Or is it a 0:05:05.000 --> 0:05:10.000 skepticism about the perceived economic potential of AI that's already 0:05:10.040 --> 0:05:11.440 built into staff prices. 0:05:12.240 --> 0:05:16.160 So Goldman Sachs produce a report early June which everyone 0:05:16.160 --> 0:05:19.920 seems to be talking about, and if your listeners google 0:05:20.480 --> 0:05:23.000 this they'll be able to find it. But basically, a 0:05:23.120 --> 0:05:28.520 trillion dollars hasn't been invested in AI, and when somebody 0:05:28.560 --> 0:05:31.799 does something, others are playing catch up. They're doing the same, 0:05:32.520 --> 0:05:35.160 they're trying to keep up. So will there be So 0:05:35.200 --> 0:05:40.160 everyone's skeptical about the revenue enhancements or the productivity improvements 0:05:40.160 --> 0:05:43.520 that come through. Where are these going to come from? 0:05:44.080 --> 0:05:46.840 And with the extent of a trillion dollars being invested, 0:05:46.920 --> 0:05:49.200 the argument is, this is a hell of a lot 0:05:49.200 --> 0:05:51.799 of money, and it is it's an extraordinary amount of money, 0:05:51.839 --> 0:05:56.039 like it's half the market cap of the Australian equity market. 0:05:56.360 --> 0:06:03.159 This is US dollars and therefore the return required is substantial. 0:06:03.880 --> 0:06:06.640 The argument coming out that when everyone does the same thing, 0:06:06.800 --> 0:06:11.000 no one comes out with an advantage. And therefore, and 0:06:11.040 --> 0:06:13.920 where are we going to see this advantage. And one 0:06:13.920 --> 0:06:17.240 thing is it is disinflationary. That's one thing you can 0:06:17.360 --> 0:06:20.080 be sure. And the real way to play this is 0:06:20.480 --> 0:06:24.800 hence won of videos run is through the input players, 0:06:24.880 --> 0:06:27.960 so your consultants, because everyone needs to get advice on 0:06:28.760 --> 0:06:32.720 what everyone else is doing, as well as the chip manufactures, TSMC, 0:06:32.839 --> 0:06:35.920 et cetera. But the big where we've got into the 0:06:36.000 --> 0:06:39.800 doubt phase. So yes, there's all this investment. This is great, 0:06:40.279 --> 0:06:45.200 but what is the quantification of the productivity improvements? Where 0:06:45.240 --> 0:06:48.400 are they going to be or the revenue enhancements and 0:06:48.800 --> 0:06:50.800 everyone seems to be playing the same game. 0:06:50.880 --> 0:06:53.359 So where is the return on investment? Is that what 0:06:53.440 --> 0:06:58.120 we're talking about? Yeah? Okay, And so the question is 0:07:00.080 --> 0:07:06.960 do the big AI fuel stocks from the megacaps, the 0:07:07.000 --> 0:07:11.240 facebooks and Microsofts and in videos or for that matter 0:07:11.280 --> 0:07:15.320 and next d see Macquarie technology, do they come off 0:07:15.320 --> 0:07:16.800 the boil after. 0:07:16.720 --> 0:07:20.200 An incredible run for something like in the video. It's 0:07:20.240 --> 0:07:23.960 to keep going to the extent that they have is unhealthy. 0:07:24.000 --> 0:07:27.040 And that's when that B word bubble starts coming out. 0:07:27.160 --> 0:07:30.880 And it's normal that things consolidate, and consolidation often means 0:07:30.920 --> 0:07:33.640 retrace a little bit. But I do think, as everyone conceded, 0:07:33.680 --> 0:07:36.280 there is a difference. So for those that are trying 0:07:36.320 --> 0:07:39.240 to compare the tech cycle now with the tech cycle 0:07:39.320 --> 0:07:43.680 back in the beginning of the century, there were companies. 0:07:43.680 --> 0:07:47.160 Even Amazon back then wasn't making money. These companies are 0:07:47.280 --> 0:07:50.320 making some decent money, but it's just it's healthy. I 0:07:50.360 --> 0:07:54.520 always think that when things get on a rule like that, 0:07:54.680 --> 0:07:58.080 it's that's where you do get bubbles, and it's unhealthy, 0:07:58.200 --> 0:08:01.480 and it's great to see it things consolidate. 0:08:01.440 --> 0:08:04.200 Yes, because it stops it from going crazy. And I 0:08:04.280 --> 0:08:06.640 have seen some sort of leading figures make that point 0:08:06.800 --> 0:08:10.200 that for anyone who's old enough to remember, it is 0:08:10.680 --> 0:08:16.200 elevated pricing and particularly elevated pees on these companies AI 0:08:17.200 --> 0:08:21.400 driven or linked or manufacturing companies, but they do have 0:08:21.520 --> 0:08:25.800 revenues and some of them have profits, and that was 0:08:25.880 --> 0:08:29.320 not the case in the dot com era. And consequently, 0:08:29.360 --> 0:08:31.680 the theory is that then it is not a bubble. 0:08:32.160 --> 0:08:34.840 It certainly isn't a bubble. Yet I've seen some pretty 0:08:34.840 --> 0:08:38.000 powerful gurus, if you like, of the market making that 0:08:38.040 --> 0:08:41.240 point in recent times. Okay, another thing you were trying 0:08:41.240 --> 0:08:45.720 to explain to me was about the excitement and fashion 0:08:45.880 --> 0:08:48.880 for private credit and private equity generally are on listed 0:08:48.960 --> 0:08:53.360 investments where retail investors are late to the party has 0:08:53.440 --> 0:08:56.080 always been going into them now and the market is 0:08:56.120 --> 0:08:59.520 only waiting for them to come along and launching lots 0:08:59.559 --> 0:09:04.720 of offers and products. But you came upon in terms 0:09:04.720 --> 0:09:07.880 of a theme that you came across at different conferences, 0:09:08.320 --> 0:09:11.560 there was a sense that not that it wouldn't work, 0:09:12.280 --> 0:09:16.719 but there was a worry about liquidity and what that means, folks, 0:09:16.840 --> 0:09:18.680 to make it really simple, is if you put ten 0:09:18.720 --> 0:09:23.240 grand into an unlisted fund and a day comes for 0:09:23.320 --> 0:09:24.920 you say I want to get that ten ground out, 0:09:25.400 --> 0:09:27.440 they may say to you, sorry, you can't have that 0:09:27.520 --> 0:09:29.760 money today. We can't give it to you right now. 0:09:30.080 --> 0:09:32.680 And if you haven't had that experience, it's worth having 0:09:32.760 --> 0:09:35.880 because it's disturbing. So what they're saying will. 0:09:35.880 --> 0:09:38.200 Private credit seems to be the number one thing that 0:09:38.240 --> 0:09:41.480 people are concerned about, but overall when it comes to 0:09:41.760 --> 0:09:45.359 this alternative space. Last year the theme was the democratization 0:09:45.440 --> 0:09:48.240 of private assets, which I really don't like that term, 0:09:48.320 --> 0:09:52.240 but I think in full twelve months it's been a 0:09:52.360 --> 0:09:55.240 rush and now people have realized you need to manage 0:09:55.280 --> 0:09:58.520 liquidity and portfolios, and there's no doubt I know as 0:09:58.520 --> 0:10:01.640 a wealth manager, we could when it comes to private 0:10:01.679 --> 0:10:04.120 credit and private equity, we could waste every minute of 0:10:04.160 --> 0:10:06.319 every day seeing a manager. And it's still the case. 0:10:07.000 --> 0:10:09.400 And whilst the ducks are quacking, the fund managers are 0:10:09.400 --> 0:10:14.120 coming out here and feeding them. But you need liquidity. 0:10:14.160 --> 0:10:17.600 Management is very important and therefore it's not surprising these 0:10:17.640 --> 0:10:20.839 so called evergreen structures which the clients etc. You're going 0:10:20.880 --> 0:10:23.960 to continue to see KKR and lots of them are 0:10:24.000 --> 0:10:25.280 going to come out here and you're going to see 0:10:25.320 --> 0:10:27.160 a lot more of these where they're semi liquid or 0:10:27.760 --> 0:10:33.880 they've got liquidity provisions. Bus everyone should remember that when 0:10:33.920 --> 0:10:37.680 things go wrong, they all have the right to lock up. Now, 0:10:37.720 --> 0:10:39.920 when it comes to private credit, it is the big 0:10:39.960 --> 0:10:42.200 trend and there is a big disparate and quality between 0:10:42.200 --> 0:10:47.120 private credit managers. Our banks being replaced by private credits? 0:10:47.920 --> 0:10:50.240 Are they because this is their presentation, isn't it. They're 0:10:50.240 --> 0:10:52.600 stand in front of every conference and they say, listen, folks, 0:10:52.640 --> 0:10:55.120 you may not know what The banks aren't banks anymore. 0:10:55.120 --> 0:10:57.880 They don't boop do banking. We are the banks. We 0:10:57.960 --> 0:11:00.160 are the new banks. We're doing all the banking. Do 0:11:00.200 --> 0:11:01.280 you think of that pitch? 0:11:01.920 --> 0:11:03.800 There's no doubt that the banks are doing less and 0:11:03.840 --> 0:11:07.640 therefore it has become open to private credits. And I said, 0:11:07.640 --> 0:11:11.800 there's a big disparity in the quality between those that 0:11:11.840 --> 0:11:13.960 I think are more established and the better managers than 0:11:13.960 --> 0:11:15.719 those they've just come by. I think we haven't gone 0:11:15.720 --> 0:11:19.280 through a default cycle, and people need to remember that. 0:11:19.320 --> 0:11:23.959 First of all, I would I would caution any of 0:11:24.000 --> 0:11:27.000 the listeners to look at single asset lines because they 0:11:27.000 --> 0:11:29.199 have one hundred percent downside, So you need to look 0:11:29.240 --> 0:11:32.079 at something that is pulled. But you've got to make 0:11:32.120 --> 0:11:35.480 sure that you are confident that a manager can manage 0:11:35.520 --> 0:11:39.600 a default cycle. And we haven't seen that. And yes, 0:11:39.640 --> 0:11:42.040 there's been the odd default here or there in some 0:11:42.120 --> 0:11:44.199 of the funds, and some of them have managed it 0:11:44.240 --> 0:11:47.160 really well. But some of the new guys, and especially 0:11:47.200 --> 0:11:49.360 the term I can't stand. We have never had had 0:11:49.360 --> 0:11:51.319 a default that makes me run in the opposite direction 0:11:51.360 --> 0:11:53.760 at a million miles an hour because that manager, what 0:11:53.800 --> 0:11:56.600 expertise they brought to the table in managing that default? 0:11:57.480 --> 0:12:00.760 Oh, very interesting. It's like the journalists to say, I've 0:12:00.800 --> 0:12:02.640 never had a libel action. 0:12:04.360 --> 0:12:06.720 I've never had a correction. I've never had a correction, 0:12:06.800 --> 0:12:08.600 No one ever has. No one has ever said I 0:12:08.640 --> 0:12:11.800 got anything wrong. Just one last thing on that. For 0:12:11.880 --> 0:12:18.080 the retail investor, often the avenue because often these funds 0:12:18.080 --> 0:12:21.440 are they've got pretty high entry points twenty grand, fifty grand, 0:12:21.480 --> 0:12:24.480 one hundred grand just to go in. For most people 0:12:24.520 --> 0:12:28.040 most of the time, the end the pathway to these 0:12:28.080 --> 0:12:34.160 alternatives or alternative funds or whatever private credit, private equity is. Ironically, 0:12:34.200 --> 0:12:37.240 I think through the stock market, do you think there's 0:12:37.240 --> 0:12:40.280 any particular weakness or is it a plus or minus. 0:12:40.679 --> 0:12:42.960 I don't want to mention names. I think that's unfair 0:12:43.040 --> 0:12:46.199 that there is one that comes to mind, and I 0:12:46.280 --> 0:12:49.200 think it still is trading at a discount to its NTA. 0:12:49.440 --> 0:12:52.400 And that's the issue. These things are always easy to 0:12:52.400 --> 0:12:54.360 get in, and when you want to get out, they 0:12:54.360 --> 0:12:59.120 can be very difficult. So just beware, and like with leaks, 0:12:59.160 --> 0:13:01.400 with the investment coming means they don't necessarily try it 0:13:01.440 --> 0:13:02.080 where they should. 0:13:02.679 --> 0:13:05.160 But you don't have a problem with the sort of 0:13:05.280 --> 0:13:08.760 inherent contradiction of buying private assets on a public market. 0:13:09.280 --> 0:13:10.960 For some people, I think that's the only way they're 0:13:10.960 --> 0:13:12.040 going to be able to do it. If that's what 0:13:12.040 --> 0:13:14.160 they want to do, make sure you do. Just make 0:13:14.200 --> 0:13:15.679 sure you do your research in your homework. 0:13:16.440 --> 0:13:18.800 Okay, Hey, we'll take a short break. A couple of 0:13:18.800 --> 0:13:21.440 other big issues I want to talk to you about. 0:13:21.760 --> 0:13:28.840 Will be back in a moment. Hello, Welcome back to 0:13:28.880 --> 0:13:32.439 The Australian's Money Puzzle podcast. I'm James Kirby, wealth editor 0:13:32.520 --> 0:13:36.320 at The Australian, talking to Will Hamilton, regular friend of 0:13:36.360 --> 0:13:40.679 the show, and he is telling us about basically an 0:13:40.679 --> 0:13:44.400 international trip piece just done and the views out there 0:13:44.440 --> 0:13:47.160 in the wider world from wealth managers, fund managers, but 0:13:47.200 --> 0:13:50.600 particularly advisors in the wealth space at the moment. One 0:13:50.600 --> 0:13:54.319 of the other big themes will I come upon every 0:13:54.440 --> 0:13:56.719 day at the moment from a global perspective, and it's 0:13:56.800 --> 0:14:02.439 kicking in here locally too, is this ocean that having 0:14:02.480 --> 0:14:05.040 had some very good years on the market driven by 0:14:05.120 --> 0:14:09.080 large caps, that we're going to have a swing to 0:14:09.320 --> 0:14:12.000 small caps and small caps are now going to have 0:14:12.080 --> 0:14:14.120 a run and they're going to have their day. A 0:14:14.240 --> 0:14:16.839 couple of things I want to say before I put 0:14:16.880 --> 0:14:18.840 it to you. First thing is I looked at the 0:14:19.480 --> 0:14:22.360 small cap indices and basically it's a flat line for 0:14:22.400 --> 0:14:25.560 about five years and even the very good small cap 0:14:25.600 --> 0:14:28.240 managers that I'm aware of, the numbers are okay. So 0:14:28.400 --> 0:14:30.640 maybe they did two or three or four percent more 0:14:30.680 --> 0:14:33.200 than the index, but g you wouldn't exactly be minting 0:14:33.240 --> 0:14:35.800 it with them. What do you think of this notion 0:14:35.960 --> 0:14:37.680 which is the flavor of the month. 0:14:37.840 --> 0:14:42.400 Just now, look the disparity in valuation between small and 0:14:42.440 --> 0:14:46.600 meds and the large caps is close to record highs. 0:14:46.640 --> 0:14:49.800 And that's one of the one of the key reasons 0:14:49.880 --> 0:14:54.200 is the small and meds tend to have higher gearing 0:14:54.480 --> 0:14:57.280 than the large cap companies and so when you are 0:14:57.320 --> 0:15:01.320 in an upward cycle on interest rates, they get punished 0:15:01.960 --> 0:15:06.520 when you are looking at a downward cycle on interest right, 0:15:06.680 --> 0:15:10.080 that is to their advantage. So I think it's been 0:15:10.120 --> 0:15:12.240 a very crowded trade. Everyone's been talking about this for 0:15:12.240 --> 0:15:15.760 a year and I will admit we've got we put 0:15:15.760 --> 0:15:20.280 global mids in probably the winning of this year and 0:15:21.240 --> 0:15:21.480 been a. 0:15:21.520 --> 0:15:23.880 Drag because it hasn't started yet. 0:15:24.720 --> 0:15:28.720 What did last month in July? But apart from that, 0:15:28.760 --> 0:15:33.480 it's been six months a drag and interesting. We use 0:15:33.760 --> 0:15:36.880 generally broad cap managers in domestically in Australia and the 0:15:36.880 --> 0:15:38.760 manager we use again I think it's unfair to mention 0:15:38.840 --> 0:15:41.680 unless you what I know is has outperformed the index 0:15:41.720 --> 0:15:44.280 by about five six percent. But they've got that, they've 0:15:44.280 --> 0:15:47.440 got that ability to play the whole market from right 0:15:47.480 --> 0:15:49.960 down to tiny and they can put a couple of 0:15:49.960 --> 0:15:53.000 the large caps in. That's the way we prefer to 0:15:53.040 --> 0:15:55.200 play it in Australia because Australia is a small market. 0:15:55.240 --> 0:15:59.080 It's only its capitalization as one point nine trillion US dollars. 0:15:59.160 --> 0:16:01.440 It's two percent of the world. It's a tiny market, 0:16:01.440 --> 0:16:03.520 and we think that's the best way to play it. 0:16:03.640 --> 0:16:06.480 Okay. I noticed for the retail investor, even some of 0:16:06.520 --> 0:16:08.680 the better known small cap funds and even the ones 0:16:08.720 --> 0:16:12.720 that are listed as the best, they're tiny, like twenty 0:16:12.800 --> 0:16:15.280 mil market cap, fifteen mil market cap. Is that a 0:16:15.440 --> 0:16:17.520 problem in and of itself? 0:16:18.480 --> 0:16:21.720 Yeah, it is because these things will outperform on the 0:16:21.800 --> 0:16:25.200 upside and the downside is high. And that's because of 0:16:25.280 --> 0:16:28.440 the way a business is run and the way we 0:16:28.480 --> 0:16:30.840 look at think we look at volatility, and the volatility 0:16:30.880 --> 0:16:35.320 and companies that are that small is just extreme and 0:16:35.360 --> 0:16:37.480 so we would never touch that. There's a lot And 0:16:37.520 --> 0:16:40.560 the other thing is there's a lot of companies that 0:16:40.800 --> 0:16:43.000 are listed in the small cap space that should never 0:16:43.000 --> 0:16:45.760 have been listed, and that's what managers will remind you, 0:16:46.560 --> 0:16:48.760 and of course they're avoiding them, but they just should 0:16:48.800 --> 0:16:50.120 never have been listed in the first place. 0:16:50.120 --> 0:16:52.640 There's a lot of junk, a lot of junk, and that, 0:16:52.760 --> 0:16:56.880 I suppose is the argument against buying an index fund 0:16:56.880 --> 0:17:01.440 of small caps, because if there's one thousand stocks and 0:17:01.520 --> 0:17:05.320 roughly even small caps in Australia, it's probably about fourteen 0:17:05.400 --> 0:17:08.199 hundred small caps and I don't know how many of 0:17:08.240 --> 0:17:11.120 them are junk. Hundreds and hundreds of them are jug 0:17:11.520 --> 0:17:13.920 and you're buying them. You're buying them if you buy 0:17:13.920 --> 0:17:16.520 the index file, if you buy a manager who specializes 0:17:16.560 --> 0:17:18.040 in small caps, and you would hope that they're not 0:17:18.080 --> 0:17:20.720 buying the junk, but of course they will always get 0:17:20.760 --> 0:17:25.119 caught by somebody. Okay, totally different business, other end of 0:17:25.160 --> 0:17:28.560 the spectrum. In our market, it's something I've asked lots 0:17:28.600 --> 0:17:30.399 of people. I han't had a chance to ask you 0:17:30.440 --> 0:17:34.359 on air. Our market was very much driven by the 0:17:34.400 --> 0:17:39.680 bigger cap stocks. The banks are completely running the show 0:17:39.680 --> 0:17:43.880 at the moment on the AX five banks, Big four, 0:17:43.960 --> 0:17:47.040 an Macquarie in the top ten common Well Bank on 0:17:47.080 --> 0:17:49.439 a league of its own. Common Well Bank at one 0:17:49.520 --> 0:17:52.040 hundred and thirty dollars, the biggest stock of the market, biggest, 0:17:52.040 --> 0:17:57.200 bigger than BHP, and everyone says all year long, all 0:17:57.320 --> 0:18:01.320 the top brains, all that big house, all the brokers, 0:18:01.359 --> 0:18:05.000 local and internationals say sell get away from that bank, 0:18:05.320 --> 0:18:08.320 and they're all wrong so far. But when do you 0:18:08.320 --> 0:18:09.120 come on that one. 0:18:09.000 --> 0:18:14.160 Under owned institutionally and over owned in retail land. Self 0:18:14.200 --> 0:18:18.280 directed investor that wanting his dividend goes and buys the banks, 0:18:18.480 --> 0:18:22.320 but every institutional fund manager will be underweight, hence the 0:18:22.400 --> 0:18:25.240 volatility in these things. I think that it's run too 0:18:25.280 --> 0:18:29.720 hard and it was may I be taking some profits. 0:18:29.760 --> 0:18:32.280 I think that the fact that the largest company at 0:18:32.320 --> 0:18:34.919 its valuation is where it is. We've got to be 0:18:34.960 --> 0:18:38.680 sensible about these things. And it's run incredibly well, and 0:18:38.720 --> 0:18:41.040 good luck to those that have it or bought it. 0:18:41.320 --> 0:18:45.240 But nothing ever continues going up in a straight line. 0:18:45.440 --> 0:18:49.280 Yeah, okay. I saw someone say a gorgeous quote the 0:18:49.320 --> 0:18:51.840 other day, and this old lined about something and being 0:18:52.000 --> 0:18:56.680 priced for perfection. Then someone said CBA is priced beyond perfection, 0:18:56.880 --> 0:19:01.679 which probably captures, probably does capture the issue of it Okay, 0:19:01.880 --> 0:19:04.160 we'll be back in a moment with some great questions, 0:19:04.480 --> 0:19:07.520 very good questions, I have to say, our particular selection 0:19:07.640 --> 0:19:09.119 this week, and there's quite a few of them. So 0:19:09.160 --> 0:19:11.840 stick around because we're going to go through quite a 0:19:11.960 --> 0:19:14.520 range of issues which will be useful to everybody. I'm 0:19:14.520 --> 0:19:24.600 sure back in a moment. Hello, and welcome back to 0:19:24.640 --> 0:19:27.960 The Australian's Money Puzzle podcast. I'm James Kirby, the Wealth 0:19:28.080 --> 0:19:31.440 editor at The Australian, talking to Will Hamilton of Hamilton 0:19:31.480 --> 0:19:34.680 Wealth Management. Will, if you don't know, is a top 0:19:34.720 --> 0:19:37.919 wealth manager. He is on our Top hundred, which is 0:19:37.920 --> 0:19:40.960 about to become Top one hundred and fifty advisors list 0:19:41.320 --> 0:19:43.760 of which we publish in The Australian every year, and 0:19:43.880 --> 0:19:47.680 he's at Hamilton Wealth Partners. What about six questions here? 0:19:47.680 --> 0:19:51.040 Why don't we read them alternately? And also why don't 0:19:51.080 --> 0:19:54.720 we aim to try and get through them as well? 0:19:55.320 --> 0:19:58.120 Okay, so Paide asks, what is the biggest bubble Navidia 0:19:58.200 --> 0:20:01.320 with the market KAPE two two point eight trillion or 0:20:01.359 --> 0:20:05.439 cryptocurrency market cap US two point five trillion. Look, I 0:20:05.440 --> 0:20:09.119 think we've talked about in the video and why just 0:20:09.240 --> 0:20:13.159 consolidating and is a positive thing, because that stops that 0:20:13.280 --> 0:20:17.000 word bubble cryptocurrency. I don't follow I have no intention 0:20:17.119 --> 0:20:19.920 to follow it, and we don't have investments. 0:20:20.119 --> 0:20:24.120 So you're you're not even one of these people who say, 0:20:24.440 --> 0:20:27.160 if my clients want to invest in it, then they can, 0:20:27.320 --> 0:20:28.439 but I don't recommend it. 0:20:28.560 --> 0:20:30.879 Yeah, we have done that, but that's their decision and 0:20:30.920 --> 0:20:32.560 they signed forms. That's their decision. 0:20:32.640 --> 0:20:36.160 Yeah. Okay, I hope you like that, answered Pete O. Kate. Kate, 0:20:36.800 --> 0:20:39.639 he says, when you next have an advisor on the 0:20:39.680 --> 0:20:43.480 show to discuss tax deductions, can you please ask the following. 0:20:43.960 --> 0:20:47.280 I have a Spotify subscription which now includes audio books. 0:20:47.560 --> 0:20:50.440 I'm regularly using it to listen to finance books to 0:20:50.480 --> 0:20:53.919 help me understand and manage my personal portfolio. Do you 0:20:54.000 --> 0:20:56.880 think I could claim a percentage of the subscription? I'll 0:20:56.880 --> 0:20:59.720 tell you what, Kate, I think you should be able to. Okay, 0:21:00.080 --> 0:21:04.080 but this is not advice and it's information only. However, 0:21:04.240 --> 0:21:08.240 in the real world, where the ATO has thought of 0:21:08.560 --> 0:21:11.760 everything you could possibly think of and are so tight 0:21:11.800 --> 0:21:14.560 and mean on all these things, they would say to you, 0:21:14.720 --> 0:21:16.920 if you could get them to agree, they would say 0:21:16.960 --> 0:21:20.400 to you that you could claim the Spotify subscription if 0:21:20.440 --> 0:21:24.199 you listened to absolutely nothing else but finance podcasts, and 0:21:24.240 --> 0:21:26.520 you could prove to them that you did so, and 0:21:26.600 --> 0:21:28.840 at that I would say they would try to kick back, 0:21:28.880 --> 0:21:31.480 but I think they would have to take it on 0:21:31.560 --> 0:21:36.200 that basis about acclaiming a percentage, you'd have to prove 0:21:36.240 --> 0:21:40.000 what percentage it is. So if you really think it's 0:21:40.000 --> 0:21:43.480 worth that much trouble, I wouldn't stop you having a try, 0:21:43.560 --> 0:21:46.760 but I would refer to a conventional tax adviser on that. 0:21:46.880 --> 0:21:49.160 But I know I'm doing this a long time. I've 0:21:49.200 --> 0:21:51.920 tried to claim all sorts of things over the years, 0:21:52.760 --> 0:21:56.359 from clothing to whatever, and every single time I got 0:21:56.480 --> 0:21:59.800 knocked back I tried. That doesn't mean you won't be 0:21:59.840 --> 0:22:03.000 so successful, but that would be I think what that 0:22:03.000 --> 0:22:05.320 would be the conventional wisdom. Does that sound? How does 0:22:05.320 --> 0:22:06.160 that sound to you? Will? 0:22:06.400 --> 0:22:11.359 Yes? Absolutely, like you. I can't give I'm registered with 0:22:11.359 --> 0:22:14.480 the TPP, but that's for financial advice tax only, so 0:22:14.640 --> 0:22:16.800 this is a bit different. So yeah, I would talk 0:22:16.840 --> 0:22:18.320 to your text advice. 0:22:18.240 --> 0:22:20.560 Yes, and your tax advisors will say, oh god, that 0:22:20.680 --> 0:22:24.879 sounds like a lot of trouble. Ironically, this principle probably 0:22:24.920 --> 0:22:28.480 isn't tested because this is a new area, right, podcasts 0:22:28.520 --> 0:22:32.480