1 00:00:04,440 --> 00:00:06,869 Sean Aylmer: Welcome to the Fear and Greed daily interview. I'm Sean 2 00:00:06,900 --> 00:00:09,420 Sean Aylmer: Aylmer. I spent a couple of weeks this month in 3 00:00:09,420 --> 00:00:12,570 Sean Aylmer: the US, and when I got back I returned to 4 00:00:12,570 --> 00:00:15,690 Sean Aylmer: a much stronger share market than when I left. Quite 5 00:00:15,690 --> 00:00:17,880 Sean Aylmer: extraordinary, really. The ASX had a very good run in 6 00:00:17,880 --> 00:00:19,950 Sean Aylmer: the first half of the month while the boss has 7 00:00:19,950 --> 00:00:21,510 Sean Aylmer: taken a bit of a breather in the last week 8 00:00:21,510 --> 00:00:24,510 Sean Aylmer: or so. It's still trending the right way. Well, the 9 00:00:24,510 --> 00:00:26,940 Sean Aylmer: right way if you want it to rise. So, where 10 00:00:26,940 --> 00:00:30,210 Sean Aylmer: are the opportunities for investors? Remember, this is general information 11 00:00:30,210 --> 00:00:33,150 Sean Aylmer: only. You should get professional advice before making any investment 12 00:00:33,150 --> 00:00:37,620 Sean Aylmer: decisions. Matthew Kidman, principal at Centennial Asset Management is a 13 00:00:37,620 --> 00:00:40,770 Sean Aylmer: bit of a Fear and Greed regular. Matthew, thanks for 14 00:00:40,770 --> 00:00:41,820 Sean Aylmer: coming back on the show. 15 00:00:42,120 --> 00:00:43,589 Matthew Kidman: Morning, Sean. Thank you. 16 00:00:44,310 --> 00:00:46,440 Sean Aylmer: So, what has been... I mean, it's been quite an 17 00:00:46,440 --> 00:00:52,740 Sean Aylmer: extraordinary year, from the invasion of Ukraine, the energy crisis, 18 00:00:53,580 --> 00:00:57,870 Sean Aylmer: inflation rates, it just keeps going on, but where do 19 00:00:57,870 --> 00:01:00,810 Sean Aylmer: we end the year at and why the rally in 20 00:01:00,810 --> 00:01:01,980 Sean Aylmer: the last few weeks? 21 00:01:02,580 --> 00:01:07,410 Matthew Kidman: It's really interesting, Sean, because where we are now at the end of November, 22 00:01:07,950 --> 00:01:11,340 Matthew Kidman: we look back and it's a bit of a mixed 23 00:01:11,340 --> 00:01:17,640 Matthew Kidman: market. But the actual Australian market, take the 200 index, the XJO, has 24 00:01:17,850 --> 00:01:20,970 Matthew Kidman: never reached a bear market this year, and it sits single 25 00:01:20,970 --> 00:01:23,760 Matthew Kidman: digits below its high that it hit right at the 26 00:01:23,760 --> 00:01:25,800 Matthew Kidman: start of the year. So, all the losses that we 27 00:01:25,800 --> 00:01:27,810 Matthew Kidman: had have been in this calendar. It's a bit of 28 00:01:27,810 --> 00:01:29,819 Matthew Kidman: an unusual top, right at the start of January, I 29 00:01:29,819 --> 00:01:31,770 Matthew Kidman: think the first trading day of January. We're going to 30 00:01:31,770 --> 00:01:34,890 Matthew Kidman: finish 6- 7% at the end of this month. There's 31 00:01:34,890 --> 00:01:36,780 Matthew Kidman: an outside chance that we have a Christmas rally, and 32 00:01:36,780 --> 00:01:38,580 Matthew Kidman: we might be flat on the year. Now, it's been 33 00:01:38,580 --> 00:01:41,789 Matthew Kidman: different small cap land, which is still down in the double digits, 34 00:01:42,060 --> 00:01:46,410 Matthew Kidman: and was down 26-27% at the bottom. And it's a bit the same in the US, where 35 00:01:46,410 --> 00:01:48,480 Matthew Kidman: the brunt of the selling has been in those high 36 00:01:48,480 --> 00:01:50,760 Matthew Kidman: growth areas we know, and especially the first half of 37 00:01:50,760 --> 00:01:54,300 Matthew Kidman: the year where the Nasdaq was down at its bottom 35%. Now it's 38 00:01:54,300 --> 00:01:56,160 Matthew Kidman: only down in the 20s. But if you look at 39 00:01:56,160 --> 00:01:59,190 Matthew Kidman: the old Dow, the much forgotten Dow, that's underperformed for 40 00:01:59,190 --> 00:02:01,740 Matthew Kidman: the best part of a decade, it's a bit the 41 00:02:01,740 --> 00:02:05,310 Matthew Kidman: same as the 200 here. It's not down very much 42 00:02:05,310 --> 00:02:08,250 Matthew Kidman: at all. So it's all very interesting. What's driven it? 43 00:02:08,310 --> 00:02:11,190 Matthew Kidman: Well, the bottom of the latest bottom was in early 44 00:02:11,190 --> 00:02:13,560 Matthew Kidman: October, and so now we are the best part of 45 00:02:13,560 --> 00:02:16,050 Matthew Kidman: seven or eight weeks into a rally, which is what 46 00:02:16,050 --> 00:02:19,500 Matthew Kidman: we did out of June into middle of August before 47 00:02:19,500 --> 00:02:21,389 Matthew Kidman: it fell over again and everyone got the shakes about 48 00:02:21,389 --> 00:02:24,570 Matthew Kidman: inflation and interest rates. But I think what's happened this 49 00:02:24,570 --> 00:02:27,630 Matthew Kidman: time is that, one, we got good inflation data out 50 00:02:27,630 --> 00:02:29,610 Matthew Kidman: of the US. When I say good, it's still really high, 51 00:02:29,610 --> 00:02:32,190 Matthew Kidman: but it's trending in the right direction, and was a 52 00:02:32,190 --> 00:02:35,760 Matthew Kidman: little bit better than markets thought. And everyone's concentrated on 53 00:02:35,760 --> 00:02:38,130 Matthew Kidman: the short end of the interest rate cycle, because in 54 00:02:38,130 --> 00:02:41,760 Matthew Kidman: the US it's pretty well assumed there's a recession next 55 00:02:41,760 --> 00:02:44,280 Matthew Kidman: year because of the conversion of the yield curve. What does that mean? The 56 00:02:44,280 --> 00:02:47,760 Matthew Kidman: short end of the yield curve, the overnight rate through 57 00:02:47,820 --> 00:02:50,940 Matthew Kidman: the one-, two-, even out to the five- year yields are 58 00:02:51,210 --> 00:02:55,830 Matthew Kidman: higher than the long term yields, the 10 and the 30 years, which normally should 59 00:02:55,830 --> 00:02:58,050 Matthew Kidman: be the other way around, but when the bond market 60 00:02:58,050 --> 00:03:00,270 Matthew Kidman: predicts a recession, they think rate are going to go higher in 61 00:03:00,270 --> 00:03:02,130 Matthew Kidman: the short term, and then we'll have to cut that. 62 00:03:02,130 --> 00:03:06,000 Matthew Kidman: That is why the long term is lower. So, that's what they're forecasting. 63 00:03:06,120 --> 00:03:08,790 Matthew Kidman: But ever since that 10- year bond yield hit 4. 64 00:03:09,060 --> 00:03:12,570 Matthew Kidman: 2 back in the end of September, start of October, it's been 65 00:03:12,570 --> 00:03:15,300 Matthew Kidman: going down, and guess what happened? The market's rallied, and 66 00:03:15,300 --> 00:03:19,169 Matthew Kidman: it's rallied pretty hard. So, my suspicion is that's what's 67 00:03:19,169 --> 00:03:22,859 Matthew Kidman: happened. Better inflation data, 10- year bond yield coming down. 68 00:03:23,070 --> 00:03:24,930 Matthew Kidman: The bears will say, " Well, that's just saying that there's 69 00:03:24,930 --> 00:03:28,140 Matthew Kidman: a recession coming," but follow the interest rate cycle, not 70 00:03:28,200 --> 00:03:31,200 Matthew Kidman: the economic cycle when you talk about equity markets, and 71 00:03:31,200 --> 00:03:32,100 Matthew Kidman: I think that's what's happening, 72 00:03:33,210 --> 00:03:36,210 Sean Aylmer: A point there that you're making implicitly is that markets 73 00:03:36,300 --> 00:03:41,760 Sean Aylmer: are often priced of 10- year bond yields, or bond yields more generally. 74 00:03:42,300 --> 00:03:45,600 Matthew Kidman: Yeah. So what happens with inflation, you have rising interest 75 00:03:45,600 --> 00:03:49,740 Matthew Kidman: rates across the board. The central banks do the short 76 00:03:49,740 --> 00:03:51,540 Matthew Kidman: end and the markets did the long end, as we 77 00:03:51,540 --> 00:03:56,370 Matthew Kidman: know. And so they go up to counter inflation, because 78 00:03:56,370 --> 00:03:58,500 Matthew Kidman: rates go up. You've got to get inflation down to 79 00:03:58,500 --> 00:04:02,670 Matthew Kidman: the level that the central banks want. And so once 80 00:04:02,700 --> 00:04:05,640 Matthew Kidman: interest rates go up, and especially the 10 year, the 81 00:04:05,640 --> 00:04:07,740 Matthew Kidman: way you value stocks changes because you use a different 82 00:04:07,740 --> 00:04:10,290 Matthew Kidman: discount rate on future earnings. So, you discount them at 83 00:04:10,290 --> 00:04:12,030 Matthew Kidman: a higher rate so you get a lower price today. 84 00:04:12,030 --> 00:04:16,500 Matthew Kidman: Now that's fine, but also the investors start say, " Well, 85 00:04:16,500 --> 00:04:18,060 Matthew Kidman: you're going to get a recession at some stage in 86 00:04:18,060 --> 00:04:20,640 Matthew Kidman: the future; therefore, earnings are going to be down." So you get the double whammy. 87 00:04:21,660 --> 00:04:24,839 Matthew Kidman: At the moment, it feels like what the bond market is saying is, " 88 00:04:24,839 --> 00:04:28,710 Matthew Kidman: Yeah, we'll adjust prices, equity prices, but we are not 89 00:04:28,710 --> 00:04:32,549 Matthew Kidman: necessarily that negative on the outlook on earnings." So, the 90 00:04:32,550 --> 00:04:35,010 Matthew Kidman: bears will tell you, " Well, next year's a recession. Don't 91 00:04:35,010 --> 00:04:38,700 Matthew Kidman: go near equities." I think that maybe because our financial 92 00:04:38,700 --> 00:04:42,600 Matthew Kidman: systems aren't in a bad spot, maybe the slowdown recession 93 00:04:42,600 --> 00:04:45,360 Matthew Kidman: will be mild next year, and that's what the equity 94 00:04:45,360 --> 00:04:49,020 Matthew Kidman: market's pricing in. And if interest rates start to fault 95 00:04:49,020 --> 00:04:52,290 Matthew Kidman: the long end, then the valuations can go up. So, 96 00:04:52,650 --> 00:04:55,140 Matthew Kidman: the bears want a bad recession next year. The bulls 97 00:04:55,140 --> 00:04:56,460 Matthew Kidman: are saying, " Well, we think it's going to be mild, 98 00:04:56,460 --> 00:04:58,170 Matthew Kidman: and we think we'll look through it, because interest rates have 99 00:04:58,560 --> 00:05:00,029 Matthew Kidman: start to come down at the long end." 100 00:05:00,900 --> 00:05:03,930 Sean Aylmer: Okay. So, at home here in Australia, we've had AGM 101 00:05:03,930 --> 00:05:05,400 Sean Aylmer: season, and so we've actually got a bit of an 102 00:05:05,400 --> 00:05:08,040 Sean Aylmer: insight into what earnings might look like over the next 103 00:05:08,040 --> 00:05:08,940 Sean Aylmer: six to 12 months. 104 00:05:09,750 --> 00:05:12,240 Matthew Kidman: That's right. And no one's overly committed, because we're all 105 00:05:12,240 --> 00:05:14,130 Matthew Kidman: seeing off the same (inaudible) sheet. Next year's going 106 00:05:14,130 --> 00:05:15,570 Matthew Kidman: to be a bad year, and I've got no doubts 107 00:05:15,570 --> 00:05:18,330 Matthew Kidman: there's going to be a slowdown. You know, I know, 108 00:05:18,330 --> 00:05:21,240 Matthew Kidman: that when reserve bank and market rates go up over 109 00:05:21,240 --> 00:05:25,200 Matthew Kidman: time there's a lag and economic activity slows down. And 110 00:05:25,200 --> 00:05:28,320 Matthew Kidman: the other bellwether, obviously, is the housing market, and the 111 00:05:28,320 --> 00:05:31,560 Matthew Kidman: housing market has slowed down after a ripping couple of 112 00:05:31,560 --> 00:05:34,349 Matthew Kidman: years during Covid. So, the housing market's a big part 113 00:05:34,350 --> 00:05:37,080 Matthew Kidman: of Australia, and so it's slowing down and that's become 114 00:05:37,080 --> 00:05:40,799 Matthew Kidman: obvious in what we're seeing. However, there is still quite a 115 00:05:40,800 --> 00:05:43,620 Matthew Kidman: bit of activity going in the building sector, which is 116 00:05:43,620 --> 00:05:46,350 Matthew Kidman: important to Australia, and probably goes through to April/ May, 117 00:05:46,350 --> 00:05:49,049 Matthew Kidman: because jobs start and they have to finish. So, we 118 00:05:49,050 --> 00:05:51,180 Matthew Kidman: would expect a slowdown in the middle of next year. 119 00:05:51,630 --> 00:05:54,089 Matthew Kidman: Do we think an all out recession? I think that's 120 00:05:54,089 --> 00:05:57,000 Matthew Kidman: in doubt in Australia, and I think that's why companies 121 00:05:57,000 --> 00:05:59,130 Matthew Kidman: are not committing to the future. But what they're saying 122 00:05:59,130 --> 00:06:03,779 Matthew Kidman: today is things are pretty good. Things are still okay. People 123 00:06:03,839 --> 00:06:08,070 Matthew Kidman: are buying goods. Companies are investing in their own businesses. 124 00:06:08,339 --> 00:06:11,640 Matthew Kidman: And so, overall, I would give a pass. What you 125 00:06:11,640 --> 00:06:14,790 Matthew Kidman: found with this AGM season is the good and the 126 00:06:14,790 --> 00:06:19,140 Matthew Kidman: bad. We're back to that scenario. The good operators are 127 00:06:19,140 --> 00:06:22,200 Matthew Kidman: doing quite well because the underlying environment's okay and they're 128 00:06:22,200 --> 00:06:24,600 Matthew Kidman: pretty optimistic about Christmas and the future and so on, 129 00:06:25,020 --> 00:06:29,070 Matthew Kidman: while the people who have struggled are struggling again, that 130 00:06:29,130 --> 00:06:32,580 Matthew Kidman: the tide is not supportive of them, it's more of 131 00:06:32,580 --> 00:06:36,060 Matthew Kidman: a neutral environment. So, that's come through loud and clear, 132 00:06:36,060 --> 00:06:37,830 Matthew Kidman: and I think one of the big things is, besides 133 00:06:37,830 --> 00:06:40,529 Matthew Kidman: the housing market, we know it's rolled over and is 134 00:06:40,529 --> 00:06:43,169 Matthew Kidman: naturally correcting. I don't think that's as much to do 135 00:06:43,170 --> 00:06:46,440 Matthew Kidman: with interest rates we've had, the ebbs and flows after two incredible years. 136 00:06:46,800 --> 00:06:49,050 Matthew Kidman: But I also think some of the trends out of Covid 137 00:06:49,140 --> 00:06:51,270 Matthew Kidman: are probably a bit more stark than what we thought. 138 00:06:51,660 --> 00:06:53,970 Matthew Kidman: So, in the retail sector, which is obviously important to 139 00:06:53,970 --> 00:06:57,450 Matthew Kidman: the small cap end, we have seen the online- only 140 00:06:57,450 --> 00:07:02,700 Matthew Kidman: players perform disastrously. The idea that we've all switched to online 141 00:07:02,730 --> 00:07:05,160 Matthew Kidman: shopping because we all know how it works now that 142 00:07:05,160 --> 00:07:08,820 Matthew Kidman: we're dragged across the line during Covid has not really 143 00:07:09,120 --> 00:07:11,370 Matthew Kidman: played out that way. People have gone back and shopped. I 144 00:07:11,370 --> 00:07:13,410 Matthew Kidman: don't know where it settles over a couple of years, but 145 00:07:13,410 --> 00:07:18,390 Matthew Kidman: your Kogans and your Temple & Websters and so on, those pure plays 146 00:07:18,390 --> 00:07:21,150 Matthew Kidman: have really struggled. They're going backwards at a million miles 147 00:07:21,150 --> 00:07:24,420 Matthew Kidman: an hour, while some of the very good retailers are 148 00:07:24,450 --> 00:07:28,170 Matthew Kidman: doing incredibly well. We saw Nick Scali yesterday. Earlier in 149 00:07:28,170 --> 00:07:30,180 Matthew Kidman: the season we saw JB Hi- Fi. We saw Harvey 150 00:07:30,180 --> 00:07:32,520 Matthew Kidman: Norman doing well in Australia, and that's a very mature 151 00:07:32,520 --> 00:07:34,020 Matthew Kidman: business, so that's not going to grow at the same 152 00:07:34,020 --> 00:07:37,350 Matthew Kidman: rate. We saw Lovisa, which is a global play, doing 153 00:07:37,350 --> 00:07:41,370 Matthew Kidman: very well. So, it's interesting. The tech companies at the lower end, 154 00:07:41,550 --> 00:07:45,000 Matthew Kidman: we saw Technology One, which is in that midcap range, 155 00:07:45,000 --> 00:07:49,440 Matthew Kidman: do incredibly well. So, I think things are okay. Inflation's 156 00:07:49,440 --> 00:07:52,860 Matthew Kidman: not great, but most price increases are being passed through 157 00:07:53,010 --> 00:07:55,740 Matthew Kidman: and the consumer is pretty healthy. So, at the moment 158 00:07:55,950 --> 00:07:59,130 Matthew Kidman: there's no real signs outside the housing sector of a 159 00:07:59,130 --> 00:07:59,790 Matthew Kidman: major slowdown. 160 00:08:00,240 --> 00:08:02,190 Sean Aylmer: Stay with me, Matthew. We'll be back in a minute. 161 00:08:08,460 --> 00:08:11,520 Sean Aylmer: My guest this morning is Matthew Kidman, Principal at Centennial 162 00:08:11,550 --> 00:08:15,630 Sean Aylmer: Asset Management. Okay, as we head into 2023, what are 163 00:08:15,630 --> 00:08:19,410 Sean Aylmer: the areas that you like Matthew? And let's leave commodities 164 00:08:19,410 --> 00:08:21,690 Sean Aylmer: aside for the moment. Do you like the financials? Do 165 00:08:21,690 --> 00:08:24,240 Sean Aylmer: you like the retailers? Do you think the small caps 166 00:08:24,480 --> 00:08:28,260 Sean Aylmer: can bounce more than the top 200 simply because they've 167 00:08:28,260 --> 00:08:30,720 Sean Aylmer: gone down further? How are you viewing 2023? 168 00:08:30,930 --> 00:08:32,970 Matthew Kidman: Yeah, that's a really good question, Sean. I think the 169 00:08:32,970 --> 00:08:35,340 Matthew Kidman: backdrop we've got to put into that, just looking at 170 00:08:35,340 --> 00:08:38,189 Matthew Kidman: the market, as I said, everyone's still pretty negative. We've 171 00:08:38,190 --> 00:08:40,110 Matthew Kidman: had a rally, and so that's changed sentiment a little 172 00:08:40,110 --> 00:08:42,870 Matthew Kidman: bit, but generally people think that maybe the beer market's 173 00:08:42,870 --> 00:08:44,429 Matthew Kidman: not over, the worst is yet to come, we're going to have 174 00:08:44,429 --> 00:08:47,400 Matthew Kidman: a bad earnings season. But I don't mind looking at 175 00:08:47,429 --> 00:08:50,040 Matthew Kidman: how the market's actually reacting into this once we look 176 00:08:50,040 --> 00:08:53,040 Matthew Kidman: at companies from bottom up. But looking at the technical 177 00:08:53,040 --> 00:08:54,600 Matthew Kidman: is not a bad thing. It looks like to me 178 00:08:54,600 --> 00:08:57,270 Matthew Kidman: the Aussie markets made a double bottom. They made it 179 00:08:57,270 --> 00:09:01,410 Matthew Kidman: in June, it retested in late September/ early October, and 180 00:09:01,440 --> 00:09:04,140 Matthew Kidman: now the all odds has gone past that high that 181 00:09:04,140 --> 00:09:05,939 Matthew Kidman: it reached in August. To me, that looks like a 182 00:09:05,940 --> 00:09:08,100 Matthew Kidman: bottom that's formed. Now I could be wrong. We need 183 00:09:08,100 --> 00:09:10,140 Matthew Kidman: some evidence on the inflation front, which we're going to 184 00:09:10,140 --> 00:09:12,690 Matthew Kidman: get out of the US in the next couple of weeks. If it's 185 00:09:12,690 --> 00:09:16,110 Matthew Kidman: benign, I think you're right. There's opportunities ahead of us. 186 00:09:16,410 --> 00:09:19,859 Matthew Kidman: Let's just be cautious about that, but be optimistic at 187 00:09:19,860 --> 00:09:22,200 Matthew Kidman: the same time if we get some confirmation inflation's coming 188 00:09:22,200 --> 00:09:24,449 Matthew Kidman: down. And I think you're on the money. I think 189 00:09:24,450 --> 00:09:27,809 Matthew Kidman: in the first instance where you will get returns are 190 00:09:27,809 --> 00:09:30,900 Matthew Kidman: those long- dated assets that have got good growth pros, 191 00:09:30,900 --> 00:09:33,870 Matthew Kidman: not the non- profitable companies that have been washed out 192 00:09:34,290 --> 00:09:36,510 Matthew Kidman: of this. And that's what's been great about this downward 193 00:09:36,540 --> 00:09:39,390 Matthew Kidman: trend in the year, that there have been, but these long- dated 194 00:09:39,390 --> 00:09:42,270 Matthew Kidman: assets. What do I mean by that? So it might be infrastructure, it 195 00:09:42,270 --> 00:09:45,150 Matthew Kidman: might be property assets that rely on yields. That 10- 196 00:09:45,150 --> 00:09:47,910 Matthew Kidman: year yield might just keep creeping down over time if 197 00:09:47,910 --> 00:09:50,819 Matthew Kidman: we get that inflation data right. That will be supportive 198 00:09:50,820 --> 00:09:55,620 Matthew Kidman: there. So, good technology companies, good growth companies. We mainly 199 00:09:55,620 --> 00:09:57,990 Matthew Kidman: do in the small caps, but more recently we've gone 200 00:09:58,260 --> 00:10:00,780 Matthew Kidman: into bigger caps, and you get the Transurban, which is 201 00:10:01,110 --> 00:10:04,650 Matthew Kidman: obviously tollways, roads. You might get a Goodman group, which 202 00:10:04,650 --> 00:10:07,740 Matthew Kidman: is doing quite well globally as a growth story. Those 203 00:10:07,740 --> 00:10:09,930 Matthew Kidman: kind of things will do well. But I think as 204 00:10:10,080 --> 00:10:12,420 Matthew Kidman: time goes on and maybe we get to the end 205 00:10:12,450 --> 00:10:14,850 Matthew Kidman: of the interest rate cycle, you're right, the small caps 206 00:10:14,850 --> 00:10:16,980 Matthew Kidman: will come into their own, but that's probably a few 207 00:10:16,980 --> 00:10:20,429 Matthew Kidman: months away. Because they have been belted, there are opportunities 208 00:10:20,429 --> 00:10:25,439 Matthew Kidman: there. And so the bellwethers and the really safe places, 209 00:10:25,500 --> 00:10:28,740 Matthew Kidman: that liquidity end, might hand over the bat at some 210 00:10:28,740 --> 00:10:31,230 Matthew Kidman: stage, maybe in the first half of next year, but it 211 00:10:31,230 --> 00:10:32,729 Matthew Kidman: could be a little bit longer. But I do see 212 00:10:32,730 --> 00:10:34,710 Matthew Kidman: the back end of next year as maybe a really 213 00:10:34,710 --> 00:10:37,230 Matthew Kidman: good place to be in small caps. In relation to 214 00:10:37,230 --> 00:10:39,420 Matthew Kidman: the financials, I keep getting that wrong. You ask me 215 00:10:39,420 --> 00:10:41,850 Matthew Kidman: every time, because I know you're a banking writer and 216 00:10:41,850 --> 00:10:46,709 Matthew Kidman: you're obsessed with big banks. I still think that they're had a 217 00:10:46,710 --> 00:10:49,410 Matthew Kidman: good run, but I still think that they're expensive. Everyone's 218 00:10:49,410 --> 00:10:54,209 Matthew Kidman: got very, very focused on the net interest margin. I 219 00:10:54,210 --> 00:10:57,630 Matthew Kidman: think that is probably peaking around now for the moment. 220 00:10:57,870 --> 00:11:02,189 Matthew Kidman: They'll have to be competitive around deposit rates, which means 221 00:11:02,220 --> 00:11:05,730 Matthew Kidman: over the next year or so maybe those interest rate margins peak. And we 222 00:11:05,730 --> 00:11:08,490 Matthew Kidman: know the housing market's slowing down. So, at some stage 223 00:11:08,520 --> 00:11:10,050 Matthew Kidman: it will be a great place to go into the 224 00:11:10,050 --> 00:11:13,170 Matthew Kidman: housing market. That boom will unwind. I don't think it'll 225 00:11:13,170 --> 00:11:16,469 Matthew Kidman: be nasty by any means. It will unwind and there 226 00:11:16,470 --> 00:11:19,620 Matthew Kidman: will be a great opportunity in the housing- related sector. 227 00:11:19,800 --> 00:11:21,870 Matthew Kidman: But I think the banks probably have done the heavy 228 00:11:21,870 --> 00:11:24,059 Matthew Kidman: lifting over the last couple of months, and you might 229 00:11:24,059 --> 00:11:26,070 Matthew Kidman: get some other leaders of the market. It's the great 230 00:11:26,070 --> 00:11:28,979 Matthew Kidman: question we're asking. If you believe that a bottoms into 231 00:11:28,980 --> 00:11:31,229 Matthew Kidman: the market, what's going to be your leaders of the 232 00:11:31,230 --> 00:11:34,830 Matthew Kidman: market? It tends not to be what led before, but 233 00:11:34,830 --> 00:11:37,829 Matthew Kidman: not always after a bear market or a downward trend. 234 00:11:37,830 --> 00:11:40,319 Matthew Kidman: So, that's what we're spending all our time, and it's 235 00:11:40,320 --> 00:11:42,300 Matthew Kidman: a real conundrum at the moment. In June you knew 236 00:11:42,300 --> 00:11:44,850 Matthew Kidman: it was the technology sector, because it had been smashed. 237 00:11:45,270 --> 00:11:48,359 Matthew Kidman: This time around, a few months later, that's adjusted a 238 00:11:48,360 --> 00:11:50,910 Matthew Kidman: bit, and it could look a bit different, the leadership. 239 00:11:51,570 --> 00:11:53,910 Sean Aylmer: I'll let you go, but what about the energy companies? 240 00:11:53,910 --> 00:11:56,429 Sean Aylmer: Can the coal companies keep doing what they've been doing? 241 00:11:56,429 --> 00:11:58,680 Sean Aylmer: I'm just amazed that they're still running. 242 00:11:59,670 --> 00:12:04,200 Matthew Kidman: Yeah, well, it's interesting. We don't invest directly in coal. 243 00:12:04,200 --> 00:12:08,370 Matthew Kidman: That's part of our mandate, but it doesn't mean we 244 00:12:08,370 --> 00:12:12,540 Matthew Kidman: don't look at them, because there's mining services companies and 245 00:12:12,540 --> 00:12:15,390 Matthew Kidman: there's other companies that depend on them. I don't know. 246 00:12:15,720 --> 00:12:18,630 Matthew Kidman: There's no investment in coal. Coal is going to continue 247 00:12:18,630 --> 00:12:21,990 Matthew Kidman: into those markets. It did spike and the prices come 248 00:12:21,990 --> 00:12:25,410 Matthew Kidman: down a bit. I suspect it's through a consolidation stage, 249 00:12:25,770 --> 00:12:29,160 Matthew Kidman: but I don't expect a collapse. I could be totally 250 00:12:29,160 --> 00:12:32,640 Matthew Kidman: wrong there, but I suspect that the world will reach 251 00:12:32,640 --> 00:12:34,770 Matthew Kidman: a bit of a bottom and probably start to grow 252 00:12:34,770 --> 00:12:39,120 Matthew Kidman: again midyear next year, including China, and that could be 253 00:12:39,120 --> 00:12:43,349 Matthew Kidman: good for coal again, just general demand. So, yeah, I 254 00:12:43,350 --> 00:12:45,870 Matthew Kidman: think those and the lithium stocks maybe have a rest 255 00:12:45,870 --> 00:12:48,840 Matthew Kidman: now, but they could be back next year, because the supply/ 256 00:12:48,840 --> 00:12:51,090 Matthew Kidman: demand characteristics are way in their favor. 257 00:12:51,780 --> 00:12:53,490 Sean Aylmer: Matthew, thank you for talking to Fear and Greed. 258 00:12:53,910 --> 00:12:54,540 Matthew Kidman: Thanks Sean. 259 00:12:55,080 --> 00:12:58,410 Sean Aylmer: That was Matthew Kidman, Principal at Centennial Asset Management. This 260 00:12:58,410 --> 00:13:00,929 Sean Aylmer: is the Fear and Greed daily interview. Remember, this information 261 00:13:00,929 --> 00:13:03,660 Sean Aylmer: is general in nature, and you should seek professional advice 262 00:13:03,660 --> 00:13:06,990 Sean Aylmer: before making any investment decisions. Join us every morning for 263 00:13:06,990 --> 00:13:09,300 Sean Aylmer: the full episode of Fear and Greed, Australia's most popular 264 00:13:09,300 --> 00:13:11,849 Sean Aylmer: business podcast. I'm Sean Aylmer. Enjoy your day.