1 00:00:03,440 --> 00:00:06,410 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. 2 00:00:06,660 --> 00:00:09,760 Sean Aylmer: After a pretty remarkable year, the last few months have 3 00:00:09,760 --> 00:00:13,700 Sean Aylmer: seen a lot more nervousness about inflation creeping into financial markets, 4 00:00:14,100 --> 00:00:16,180 Sean Aylmer: and bonds have been sold off in recent weeks as fears 5 00:00:16,560 --> 00:00:20,090 Sean Aylmer: of higher interest rates emerge. This has big implications for 6 00:00:20,090 --> 00:00:23,610 Sean Aylmer: bourses like Australia's, which is very heavy financials. In fact, 7 00:00:23,880 --> 00:00:26,920 Sean Aylmer: five of the top seven stocks are banks. And if 8 00:00:26,920 --> 00:00:29,190 Sean Aylmer: you look at the top 15, two thirds are either 9 00:00:29,190 --> 00:00:32,260 Sean Aylmer: banks that are impacted by interest rates or miners relying 10 00:00:32,260 --> 00:00:34,880 Sean Aylmer: heavily on iron ore prices. There's not a lot of 11 00:00:34,990 --> 00:00:39,300 Sean Aylmer: diversity out there. Matthew Haupt is the lead portfolio manager 12 00:00:39,300 --> 00:00:42,710 Sean Aylmer: of WAM Leaders, a listed investment company that focuses on 13 00:00:42,710 --> 00:00:45,760 Sean Aylmer: large cap ASX listed stocks. Matthew, welcome to Fear and Greed. 14 00:00:46,380 --> 00:00:48,921 Matthew Haupt: No, thanks for having me. 15 00:00:48,921 --> 00:00:51,270 Sean Aylmer: So how would you describe the last year or so for Aussie equities? 16 00:00:51,670 --> 00:00:55,250 Matthew Haupt: Yeah Sean, it's a really interesting one. I guess the last year could 17 00:00:55,250 --> 00:01:00,100 Matthew Haupt: be categorised by, having the most favourable conditions ever for equities. 18 00:01:00,840 --> 00:01:04,130 Matthew Haupt: A couple of the key drivers around interest rates, risk 19 00:01:04,130 --> 00:01:08,920 Matthew Haupt: premiums and growth have been all extremely positive. So conditions 20 00:01:08,920 --> 00:01:11,070 Matthew Haupt: couldn't have been better for the last 12 months. 21 00:01:11,300 --> 00:01:15,040 Sean Aylmer: Right. So we get to today and later today we'll find out inflation for 22 00:01:15,040 --> 00:01:17,669 Sean Aylmer: the September quarter, which will have a big bearing on 23 00:01:17,670 --> 00:01:19,209 Sean Aylmer: what the Reserve Bank does in the next couple of 24 00:01:19,209 --> 00:01:22,340 Sean Aylmer: months around interest rates, it seems very determined to stick 25 00:01:22,340 --> 00:01:24,880 Sean Aylmer: to its timetable of not lifting the official cash rate 26 00:01:24,880 --> 00:01:28,130 Sean Aylmer: until 2024. Though, many market rates at the long end 27 00:01:28,130 --> 00:01:31,720 Sean Aylmer: are starting to rise. Having said all that, where are 28 00:01:31,720 --> 00:01:34,350 Sean Aylmer: we up to as we head towards the inflation figure today 29 00:01:34,350 --> 00:01:36,010 Sean Aylmer: and beyond, in terms of equities? 30 00:01:36,390 --> 00:01:39,300 Matthew Haupt: Yeah, the one thing you can bank on is interest 31 00:01:39,300 --> 00:01:41,900 Matthew Haupt: rates will be going up, but as you said, it's only prices 32 00:01:42,560 --> 00:01:44,880 Matthew Haupt: of the forward market. So what we're looking for is 33 00:01:45,060 --> 00:01:49,020 Matthew Haupt: any changes in expectations on that forward market, we expect 34 00:01:49,020 --> 00:01:53,210 Matthew Haupt: Phil Lowe will be holding the line, 2024 lift- off, 35 00:01:53,210 --> 00:01:56,480 Matthew Haupt: which is, the market is saying, " No way." We think 36 00:01:56,480 --> 00:01:59,940 Matthew Haupt: that messaging will be consistent until he is forced to 37 00:01:59,940 --> 00:02:03,990 Matthew Haupt: change direction and the RBA will move towards the market 38 00:02:03,990 --> 00:02:06,570 Matthew Haupt: rates probably in the next six to nine months. But 39 00:02:06,570 --> 00:02:10,169 Matthew Haupt: for the time being, the message will be very consistent and 40 00:02:10,260 --> 00:02:11,231 Matthew Haupt: no lift- off to 2024. 41 00:02:11,231 --> 00:02:17,210 Sean Aylmer: Okay. So the outlook's reliant heavily on inflation. You wrote recently about 42 00:02:17,210 --> 00:02:19,950 Sean Aylmer: the difference between cost- push inflation, which is what we're 43 00:02:19,950 --> 00:02:23,410 Sean Aylmer: experiencing now, and demand- pull inflation. Just give us a 44 00:02:23,410 --> 00:02:26,810 Sean Aylmer: definition or the definition of those two and why at 45 00:02:26,810 --> 00:02:29,010 Sean Aylmer: the moment we're talking about cost- push inflation? 46 00:02:29,430 --> 00:02:32,630 Matthew Haupt: Yeah, the one thing that we're seeing at the moment is the incredible stress 47 00:02:32,630 --> 00:02:36,559 Matthew Haupt: on the supply chain. So at the moment through COVID as 48 00:02:36,560 --> 00:02:42,220 Matthew Haupt: we know, ship manufacturing, a whole raft of things, mine outputs, 49 00:02:42,330 --> 00:02:44,850 Matthew Haupt: a whole lot of supply issues were happening off the 50 00:02:44,850 --> 00:02:49,070 Matthew Haupt: back of that. Generally that is very short- term lived. 51 00:02:49,070 --> 00:02:53,100 Matthew Haupt: So to make it more sustainable inflation, we need that demand- pull, 52 00:02:53,100 --> 00:02:56,490 Matthew Haupt: which is the more sticky inflation, which is driven by 53 00:02:57,070 --> 00:02:59,549 Matthew Haupt: the good old demand of the economy as the economy 54 00:03:00,220 --> 00:03:03,799 Matthew Haupt: pushes up over the potential GDP, which is just a generic 55 00:03:03,800 --> 00:03:07,840 Matthew Haupt: term for the output, assuming good conditions. If it rises 56 00:03:07,840 --> 00:03:09,900 Matthew Haupt: above that, then you get a demand- pull, which is, 57 00:03:09,970 --> 00:03:12,720 Matthew Haupt: as I said, stickier. So we are getting to that 58 00:03:12,720 --> 00:03:15,250 Matthew Haupt: point now where you've got a bit of demand- pull 59 00:03:15,250 --> 00:03:20,250 Matthew Haupt: coming through, probably in this quarter. So overall supply should 60 00:03:20,250 --> 00:03:23,150 Matthew Haupt: get fixed, but it's actually taking a lot longer than 61 00:03:23,150 --> 00:03:26,270 Matthew Haupt: we thought. So maybe inflation will be higher for longer. 62 00:03:26,270 --> 00:03:29,700 Matthew Haupt: And I think that's what we're seeing, expectations in the 63 00:03:29,700 --> 00:03:33,230 Matthew Haupt: bond markets, that expectations are continuing to push up as 64 00:03:33,230 --> 00:03:36,570 Matthew Haupt: that stickiness in the supply chains is staying around. 65 00:03:37,100 --> 00:03:38,930 Sean Aylmer: Okay. So let's bring that back to the equity market 66 00:03:38,930 --> 00:03:42,610 Sean Aylmer: and particularly the large companies on the ASX. What do you think the 67 00:03:42,610 --> 00:03:44,740 Sean Aylmer: outlook is for the next three to 12 months for 68 00:03:44,740 --> 00:03:46,790 Sean Aylmer: the ASX, given everything you've just said? 69 00:03:47,660 --> 00:03:49,920 Matthew Haupt: Yeah. So the outlook in the short term, I'm still 70 00:03:49,920 --> 00:03:55,110 Matthew Haupt: quite constructive on the Aussie equities. Predominantly, I guess there is twofold, 71 00:03:55,110 --> 00:03:58,860 Matthew Haupt: there's never clear cut, like with interest rates. Obviously it's 72 00:03:58,860 --> 00:04:02,560 Matthew Haupt: not great on the long- end for equity evaluations, but 73 00:04:02,800 --> 00:04:05,610 Matthew Haupt: on the short end, it's really good for insurers and 74 00:04:05,690 --> 00:04:08,790 Matthew Haupt: even the banking sector, which on their replicating portfolios have 75 00:04:08,790 --> 00:04:11,870 Matthew Haupt: been hit very hard by the drop in interest rate. 76 00:04:11,870 --> 00:04:15,720 Matthew Haupt: So I think the financials should perform well as the economy 77 00:04:15,720 --> 00:04:18,619 Matthew Haupt: holds together. So I think that will do well. And 78 00:04:18,690 --> 00:04:21,870 Matthew Haupt: I guess for the miners, as in the introduction, you said 79 00:04:21,870 --> 00:04:26,130 Matthew Haupt: the mining sector is a big proportion of the ASX 20. 80 00:04:26,420 --> 00:04:29,969 Matthew Haupt: Now what happens here is very interesting. If the short 81 00:04:30,120 --> 00:04:33,359 Matthew Haupt: end rises too fast, it actually pushes the US dollar 82 00:04:33,360 --> 00:04:35,450 Matthew Haupt: up as well compared to the rest of the world. 83 00:04:35,450 --> 00:04:38,040 Matthew Haupt: So that could put a bit of pressure on the 84 00:04:38,040 --> 00:04:42,289 Matthew Haupt: Aussie miners, but it's really a case of China being 85 00:04:42,290 --> 00:04:45,339 Matthew Haupt: the main driver. And we're seeing in the last few quarters, 86 00:04:45,339 --> 00:04:49,020 Matthew Haupt: China has really eased back on the stimulatory measures they've 87 00:04:49,020 --> 00:04:51,550 Matthew Haupt: put in place post COVID. So they are in a 88 00:04:51,550 --> 00:04:54,779 Matthew Haupt: deliberate slowdown at the moment, which is hurting the iron ore market, 89 00:04:54,779 --> 00:04:58,500 Matthew Haupt: which is generally our biggest miners, the most exposure. So 90 00:04:58,500 --> 00:05:03,210 Matthew Haupt: I think, middle of next year expect China to re- accelerate, 91 00:05:03,910 --> 00:05:06,930 Matthew Haupt: so that should help the Aussie miners. So there's a 92 00:05:06,930 --> 00:05:09,560 Matthew Haupt: bit going on, but I think you look at where 93 00:05:09,560 --> 00:05:13,180 Matthew Haupt: we're coming from in the interest rates and they're still incredibly supportive, so 94 00:05:13,380 --> 00:05:16,250 Matthew Haupt: the direction will be negative, but I think the overall 95 00:05:16,250 --> 00:05:18,500 Matthew Haupt: level is still quite supportive for equities. 96 00:05:18,600 --> 00:05:21,460 Sean Aylmer: Okay. So, I mentioned it in the introduction, we've got 97 00:05:21,460 --> 00:05:24,409 Sean Aylmer: the big four banks plus Macquarie, you are adding Rio 98 00:05:24,610 --> 00:05:28,789 Sean Aylmer: Tinto, BHP, and Fortescue Metals, and you do have a 99 00:05:28,790 --> 00:05:32,360 Sean Aylmer: great concentration at the very top end of the market. Is that an 100 00:05:32,360 --> 00:05:34,280 Sean Aylmer: issue for investors, do you think? 101 00:05:34,920 --> 00:05:37,990 Matthew Haupt: I guess it's an issue when we have very specific 102 00:05:37,990 --> 00:05:40,029 Matthew Haupt: things going on, like you saw that when the iron 103 00:05:40,029 --> 00:05:43,669 Matthew Haupt: ore price fell, the impact it had to add on the Australian market was 104 00:05:43,670 --> 00:05:47,500 Matthew Haupt: quite dramatic, given that the exposures we have. So I 105 00:05:47,500 --> 00:05:51,719 Matthew Haupt: guess the overall comment around that is, I don't think 106 00:05:51,720 --> 00:05:55,310 Matthew Haupt: it's too much of an issue, but I think ideally 107 00:05:55,310 --> 00:05:58,810 Matthew Haupt: you'd have a broader market for investors, but you really 108 00:05:58,810 --> 00:06:05,029 Matthew Haupt: can get diversity through, between the top 30 to a hundred, there is still quite 109 00:06:05,250 --> 00:06:07,880 Matthew Haupt: a range of industries. We're quite light on a few 110 00:06:07,880 --> 00:06:11,609 Matthew Haupt: though, healthcare and IT is obviously pretty light compared to other 111 00:06:11,610 --> 00:06:15,220 Matthew Haupt: global markets, but there is enough exposure there. You just got to dig a 112 00:06:15,220 --> 00:06:17,750 Matthew Haupt: little further down the ASX list. 113 00:06:18,410 --> 00:06:20,310 Sean Aylmer: Stay with me Matthew, we'll be back in a minute. 114 00:06:25,420 --> 00:06:29,720 Sean Aylmer: I'm speaking to Matthew Haupt, lead portfolio manager of WAM Leaders. 115 00:06:30,180 --> 00:06:32,640 Sean Aylmer: Okay so if we go through some of those sectors, 116 00:06:32,910 --> 00:06:36,510 Sean Aylmer: the healthcare stocks, everyone talks about health tech and healthcare 117 00:06:36,510 --> 00:06:39,900 Sean Aylmer: stocks being the industry of the future, and we've got 118 00:06:39,900 --> 00:06:43,050 Sean Aylmer: great companies from CSL to ResMed to Cochlear, they've all 119 00:06:43,050 --> 00:06:48,270 Sean Aylmer: performed well. What do you think the outlook for those guys post- pandemic is? 120 00:06:48,270 --> 00:06:50,729 Sean Aylmer: Because some of them have been knocked around just because 121 00:06:50,730 --> 00:06:53,140 Sean Aylmer: of disruption to how they operate, really. 122 00:06:53,670 --> 00:06:56,770 Matthew Haupt: Yeah. I mean, CSL was a real interesting one over 123 00:06:56,770 --> 00:07:00,779 Matthew Haupt: the period as collections fell, the valuation did fall off 124 00:07:00,779 --> 00:07:05,159 Matthew Haupt: a bit, but they're still arguably quite expensive. And even the 125 00:07:05,160 --> 00:07:09,210 Matthew Haupt: likes of Cochlear, we're trading on multiples in the forties, 126 00:07:09,210 --> 00:07:13,540 Matthew Haupt: fifties, which generally don't like buying things around those levels, 127 00:07:13,540 --> 00:07:17,400 Matthew Haupt: but again, on the healthcare sector, it is a beneficiary 128 00:07:17,400 --> 00:07:20,820 Matthew Haupt: of lower rates as well. So the macro factors start 129 00:07:20,820 --> 00:07:25,700 Matthew Haupt: kicking in as well. So I think overall, it used 130 00:07:25,700 --> 00:07:28,760 Matthew Haupt: to be a defensive sector, but with lower rates, they 131 00:07:28,760 --> 00:07:31,910 Matthew Haupt: all re- rated quite heavily as much to the rest 132 00:07:31,910 --> 00:07:35,470 Matthew Haupt: of the market. So, it's an interesting one, but I 133 00:07:35,470 --> 00:07:39,720 Matthew Haupt: just think the valuation is still extreme in that sector too. 134 00:07:40,270 --> 00:07:42,830 Sean Aylmer: Right. What about the REITs? Because we talk a lot about real estate 135 00:07:42,830 --> 00:07:46,250 Sean Aylmer: investment trust and interest rates. Just explain the connection between 136 00:07:46,250 --> 00:07:47,300 Sean Aylmer: the two and the outlook. 137 00:07:47,830 --> 00:07:50,280 Matthew Haupt: Yeah. The REITs are an interesting one. Some of the 138 00:07:50,540 --> 00:07:53,210 Matthew Haupt: REITs in the ASX are predominantly done to some cap rates. 139 00:07:53,460 --> 00:07:58,040 Matthew Haupt: So interest rates have a big impact. Some trade differently, 140 00:07:58,240 --> 00:08:01,790 Matthew Haupt: the more economic- sensitive stocks, like they more trade like 141 00:08:01,800 --> 00:08:06,320 Matthew Haupt: operating companies like SCG and VCX, which are the shopping 142 00:08:06,320 --> 00:08:10,240 Matthew Haupt: centre owners, are more linked to the overall health of 143 00:08:10,240 --> 00:08:12,930 Matthew Haupt: the economy, more than cap rates. Obviously cap rates are still 144 00:08:12,930 --> 00:08:14,880 Matthew Haupt: a function of the share price, but- 145 00:08:14,920 --> 00:08:16,270 Sean Aylmer: So just, explain cap rates to the listeners. 146 00:08:17,190 --> 00:08:19,530 Matthew Haupt: Yeah, this is really the interest rate we used to discount 147 00:08:20,230 --> 00:08:24,140 Matthew Haupt: cash flow. So, when we use a lower interest rate, 148 00:08:24,140 --> 00:08:27,200 Matthew Haupt: the valuations go up. So when interest rates started falling, 149 00:08:28,300 --> 00:08:33,380 Matthew Haupt: even pre- COVID, we were heading into a... Not a 150 00:08:33,380 --> 00:08:37,470 Matthew Haupt: dire environment, but rates were falling and we had inverted 151 00:08:37,470 --> 00:08:40,380 Matthew Haupt: yield curves. It was almost like we were going into a recession pre- COVID, 152 00:08:41,059 --> 00:08:44,360 Matthew Haupt: I'm talking globally. So that sector already did well. And 153 00:08:44,360 --> 00:08:49,050 Matthew Haupt: when interest rates were dropped, globally rates obviously went up 154 00:08:49,050 --> 00:08:52,030 Matthew Haupt: in value, some which were linked to more of those 155 00:08:52,030 --> 00:08:57,850 Matthew Haupt: operating conditions like SCG and VCX fell quite dramatically. And they traded 40, 50% 156 00:08:57,850 --> 00:09:00,750 Matthew Haupt: discounts to their net tangible assets. So that's what I 157 00:09:00,900 --> 00:09:02,809 Matthew Haupt: was saying, there is a bit of a disconnect there 158 00:09:02,809 --> 00:09:07,720 Matthew Haupt: between the more, pure cap rated REITs versus the operating 159 00:09:07,720 --> 00:09:11,770 Matthew Haupt: company REITs, which trade more in line with economic activities. So the 160 00:09:11,770 --> 00:09:16,160 Matthew Haupt: overall sector is still, I'd say, around fair value. It's 161 00:09:16,160 --> 00:09:20,609 Matthew Haupt: not screaming as a really big area to put cash 162 00:09:20,610 --> 00:09:23,240 Matthew Haupt: into at the moment. But what would change that view 163 00:09:23,240 --> 00:09:27,400 Matthew Haupt: is if we started to get a slowing economy and 164 00:09:27,400 --> 00:09:30,960 Matthew Haupt: then more accommodated policy coming back in, which would be 165 00:09:31,110 --> 00:09:34,400 Matthew Haupt: worst case scenario, because we really would hate to go 166 00:09:34,679 --> 00:09:37,500 Matthew Haupt: in that environment at the moment, because we haven't even got out of the 167 00:09:37,590 --> 00:09:40,530 Matthew Haupt: new emergency measures at the moment. So I would say that's a real 168 00:09:40,530 --> 00:09:41,790 Matthew Haupt: debate everyone's having in the market. 169 00:09:41,860 --> 00:09:41,960 Sean Aylmer: Yeah. 170 00:09:42,000 --> 00:09:46,270 Matthew Haupt: Can we actually get out of this environment where QE(Quantitative Easing) 171 00:09:46,650 --> 00:09:50,480 Matthew Haupt: is still very much happening, changing shapes of yield curves 172 00:09:50,770 --> 00:09:55,540 Matthew Haupt: and extraordinary low interest rates, which is very deeply negative 173 00:09:55,540 --> 00:09:58,500 Matthew Haupt: real rates. So we've got a long way to go before we 174 00:09:58,500 --> 00:10:01,300 Matthew Haupt: get there, but yeah, that's the environment we're in still. 175 00:10:03,070 --> 00:10:06,340 Sean Aylmer: Okay. We're just sort of running through sectors here. The consumer discretionary and staples? 176 00:10:06,929 --> 00:10:10,130 Matthew Haupt: Yeah. That's an interesting one too because the consumer discretion was 177 00:10:10,130 --> 00:10:13,920 Matthew Haupt: really held up by fiscal policy. So through the pandemic, 178 00:10:13,970 --> 00:10:16,510 Matthew Haupt: all those measures were put in place which saved the 179 00:10:16,510 --> 00:10:23,550 Matthew Haupt: economy, but you go through the official figures and savings 180 00:10:23,620 --> 00:10:26,400 Matthew Haupt: and you can see there is still excess savings in 181 00:10:26,400 --> 00:10:30,170 Matthew Haupt: the marketplace. So consumer discretion should perform well, but you'd 182 00:10:30,170 --> 00:10:34,300 Matthew Haupt: be looking at a shift towards services I guess, would 183 00:10:34,300 --> 00:10:37,780 Matthew Haupt: be the theme as economies open up and people are 184 00:10:37,780 --> 00:10:40,360 Matthew Haupt: looking for more services. I don't think they need another 185 00:10:40,360 --> 00:10:43,770 Matthew Haupt: big TV or another laptop or a tablet as such. 186 00:10:43,780 --> 00:10:43,800 Sean Aylmer: Yeah. 187 00:10:44,160 --> 00:10:46,790 Matthew Haupt: So I think the theme is very much intact, but 188 00:10:47,540 --> 00:10:50,059 Matthew Haupt: the discretionary dollar will find a new home I would've 189 00:10:50,059 --> 00:10:51,550 Matthew Haupt: thought, over the next 12 months. 190 00:10:51,750 --> 00:10:54,809 Sean Aylmer: Okay. And then finally, sort of the infrastructure plays at 191 00:10:54,809 --> 00:10:56,130 Sean Aylmer: Telstra's in that of the world. 192 00:10:56,730 --> 00:10:59,240 Matthew Haupt: Yeah. Telstra is another interesting one because it's got knocked 193 00:10:59,500 --> 00:11:03,510 Matthew Haupt: by COVID as well because they've missed all their roaming 194 00:11:03,809 --> 00:11:06,760 Matthew Haupt: charges, which we're all quite fond of aren't we, when 195 00:11:06,760 --> 00:11:07,270 Matthew Haupt: we travel. 196 00:11:07,320 --> 00:11:07,480 Sean Aylmer: Yeah. 197 00:11:07,510 --> 00:11:12,809 Matthew Haupt: Offshore. So that's a couple of hundred million dollars there alone. And for 198 00:11:12,809 --> 00:11:16,390 Matthew Haupt: Telstra, there used to be a dividend stock, so everyone needs 199 00:11:16,500 --> 00:11:20,410 Matthew Haupt: to buy it on a dividend yield. I think that's changing now. 200 00:11:20,740 --> 00:11:22,670 Matthew Haupt: We're going to get some earnings growth out of Telstra 201 00:11:22,670 --> 00:11:25,100 Matthew Haupt: for the first time in I'm not sure how long, 202 00:11:25,100 --> 00:11:29,120 Matthew Haupt: so Telstra is actually screening okay. We've got a decent 203 00:11:29,120 --> 00:11:32,290 Matthew Haupt: position in Telstra, but they're doing some decent deals with 204 00:11:32,290 --> 00:11:36,709 Matthew Haupt: the infrastructure and then the latest acquisition now. So Telstra looks okay. 205 00:11:36,890 --> 00:11:41,340 Matthew Haupt: And I think it's going to change the narrative around a yielding stock 206 00:11:41,340 --> 00:11:44,331 Matthew Haupt: to a small growth stock with a yield to. 207 00:11:44,331 --> 00:11:44,671 Sean Aylmer: Wow. 208 00:11:44,710 --> 00:11:47,680 Matthew Haupt: So Telstra looks good. But the rest of the sector is 209 00:11:47,730 --> 00:11:50,650 Matthew Haupt: pretty tough. We don't have a huge amount of exposure 210 00:11:50,890 --> 00:11:53,910 Matthew Haupt: in Australia. We've got TPG of course, but the rest 211 00:11:54,090 --> 00:11:58,390 Matthew Haupt: in the telco sectors quite low and I guess on utilities, 212 00:11:58,490 --> 00:12:01,240 Matthew Haupt: they are pretty expensive given rates. 213 00:12:01,400 --> 00:12:01,579 Sean Aylmer: Yep. 214 00:12:02,210 --> 00:12:05,839 Matthew Haupt: Where they are, so we can't see too much value in 215 00:12:05,840 --> 00:12:07,250 Matthew Haupt: the utility sector at the moment. 216 00:12:07,480 --> 00:12:09,689 Sean Aylmer: And final question. How do you invest in energy at 217 00:12:09,690 --> 00:12:10,250 Sean Aylmer: the moment? 218 00:12:10,490 --> 00:12:13,050 Matthew Haupt: Yeah. So we've been investing in energy for about 12 219 00:12:13,050 --> 00:12:16,020 Matthew Haupt: months and it's been incredibly painful for about 10 months 220 00:12:16,020 --> 00:12:19,900 Matthew Haupt: of that 12 months, but the fundamentals were always there. Oil 221 00:12:19,900 --> 00:12:23,190 Matthew Haupt: demand is pretty sticky. Let's call it a hundred million 222 00:12:23,190 --> 00:12:27,960 Matthew Haupt: barrels a day. COVID knocked off 15 to 18 million barrels a day, 223 00:12:27,960 --> 00:12:30,770 Matthew Haupt: that was always going to come back. And then OPEC Plus 224 00:12:31,030 --> 00:12:33,560 Matthew Haupt: if you can have faith in OPEC Plus, which we 225 00:12:33,630 --> 00:12:35,640 Matthew Haupt: did at the time, because they showed time and time 226 00:12:35,640 --> 00:12:39,530 Matthew Haupt: again and they were committed to holding onto those output cuts. 227 00:12:39,780 --> 00:12:39,809 Sean Aylmer: Yep. 228 00:12:39,880 --> 00:12:41,949 Matthew Haupt: It was always going to come to a crunch point and I think 229 00:12:41,950 --> 00:12:45,780 Matthew Haupt: we're seeing that now. The OPEC are finding it really 230 00:12:45,780 --> 00:12:49,530 Matthew Haupt: hard to ramp up their capacity. You've still got a 231 00:12:49,530 --> 00:12:54,099 Matthew Haupt: few issues like in the US, companies are finding it incredibly to 232 00:12:54,309 --> 00:12:57,640 Matthew Haupt: get the green light to spend money on capital. So all the 233 00:12:57,640 --> 00:13:01,010 Matthew Haupt: conditions say energy is going to go up and we're 234 00:13:01,010 --> 00:13:03,880 Matthew Haupt: still quite positive on energy for the next six to 235 00:13:03,890 --> 00:13:06,980 Matthew Haupt: 12 months. But it really rests on OPEC Plus and 236 00:13:06,980 --> 00:13:11,260 Matthew Haupt: Russia predominantly. What do they do? Does someone break away 237 00:13:11,260 --> 00:13:15,070 Matthew Haupt: from the quotas or with Iran coming back on with 238 00:13:15,070 --> 00:13:18,679 Matthew Haupt: a nuclear deal. There's always moving parts in a market, 239 00:13:18,679 --> 00:13:21,230 Matthew Haupt: but for the time being, it looks incredibly tight and 240 00:13:21,340 --> 00:13:25,270 Matthew Haupt: the five year inventories are incredibly low. So the position 241 00:13:25,450 --> 00:13:29,040 Matthew Haupt: is great and we're seeing some length added to contracts 242 00:13:29,040 --> 00:13:31,520 Matthew Haupt: in the oil futures as well for the first time in a 243 00:13:31,750 --> 00:13:35,059 Matthew Haupt: long time. So all the conditions look good. It can 244 00:13:35,400 --> 00:13:37,640 Matthew Haupt: change quite dramatically though on OPEC. 245 00:13:37,920 --> 00:13:39,640 Sean Aylmer: Matthew, thank you for talking to Fear and Greed. 246 00:13:40,000 --> 00:13:40,770 Matthew Haupt: No problem, thanks Sean. 247 00:13:41,059 --> 00:13:44,640 Sean Aylmer: That was Matthew Haupt, lead portfolio manager of WAM Leaders. 248 00:13:44,640 --> 00:13:47,469 Sean Aylmer: This is the Fear and Greed Daily Interview. Join me every 249 00:13:47,470 --> 00:13:50,110 Sean Aylmer: morning for the full Fear and Greed podcast, with all 250 00:13:50,110 --> 00:13:52,630 Sean Aylmer: the business news you need to know. I'm Sean Aylmer, 251 00:13:53,020 --> 00:13:53,679 Sean Aylmer: enjoy your day.