1 00:00:10,000 --> 00:00:13,080 Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm 2 00:00:13,160 --> 00:00:16,279 Speaker 1: James Kirby. Welcome aboard everybody. I don't know about you, 3 00:00:16,400 --> 00:00:20,239 Speaker 1: but this share market to me is looking very toppy. Indeed, 4 00:00:20,320 --> 00:00:25,160 Speaker 1: we've got records breaking on Wall Street and on the ASEX. 5 00:00:26,239 --> 00:00:30,120 Speaker 1: And you wonder why in Australia's major listed companies are 6 00:00:30,160 --> 00:00:35,000 Speaker 1: actually going to have lower earnings It is expected this 7 00:00:35,159 --> 00:00:38,839 Speaker 1: year than last year. And as for the sort of 8 00:00:39,520 --> 00:00:43,400 Speaker 1: headwinds against the international markets, particularly Wall Street, well we 9 00:00:43,440 --> 00:00:46,760 Speaker 1: don't really have to reiterate those except to say that 10 00:00:46,800 --> 00:00:52,360 Speaker 1: there's an extremely volatile administration in the US presiding if 11 00:00:52,400 --> 00:00:54,320 Speaker 1: you like, over Wall Street and really trying to preside 12 00:00:54,320 --> 00:00:57,880 Speaker 1: over trying to preside over everything, including the Federal Reserve. 13 00:00:58,920 --> 00:01:01,960 Speaker 1: So here we are, it's August. You know, we're going 14 00:01:01,960 --> 00:01:04,640 Speaker 1: into the most dangerous season of the year historically for 15 00:01:04,680 --> 00:01:08,520 Speaker 1: share markets, the northern winter. All the great crashes were 16 00:01:08,560 --> 00:01:12,360 Speaker 1: in September and October. Don't forget that. So the point 17 00:01:12,400 --> 00:01:15,080 Speaker 1: I'm making is what do we do as investors, as 18 00:01:15,120 --> 00:01:17,800 Speaker 1: active investors having just had a very good year, No doubt. 19 00:01:18,160 --> 00:01:19,880 Speaker 1: If you've got a self managed super fund, it's probably 20 00:01:19,920 --> 00:01:23,960 Speaker 1: done thirteen fourteen percent. If you've got it your savings 21 00:01:23,959 --> 00:01:26,880 Speaker 1: in a major fund, a big fund, it's probably done 22 00:01:27,360 --> 00:01:30,360 Speaker 1: ten and a half percent. That's the media in return. 23 00:01:31,760 --> 00:01:36,080 Speaker 1: So it's time to recalibrate, rebalance. Perhaps it's time to 24 00:01:36,240 --> 00:01:39,559 Speaker 1: sell when you might feel like buying. My guest today 25 00:01:39,600 --> 00:01:41,680 Speaker 1: is one of the oldest friends of the show. It's 26 00:01:41,720 --> 00:01:46,160 Speaker 1: doctor Doug Turek, financial advisor and family office chair of 27 00:01:46,240 --> 00:01:50,360 Speaker 1: a family office that we can't name unfortunately still under wraps. 28 00:01:50,560 --> 00:01:51,200 Speaker 1: Oh you Doug. 29 00:01:51,880 --> 00:01:53,640 Speaker 2: I'm terrific, James. 30 00:01:53,560 --> 00:01:58,560 Speaker 1: Lovely to have you on board in your world advising 31 00:01:58,840 --> 00:02:03,400 Speaker 1: wealthy investors and specifically advising a family office. Is there 32 00:02:03,400 --> 00:02:08,080 Speaker 1: that sense that we are looking at overheated markets? 33 00:02:09,560 --> 00:02:11,960 Speaker 2: I think people have been worried for a while. And 34 00:02:12,000 --> 00:02:14,359 Speaker 2: I heard a wonderful phrase, which is, you know, are 35 00:02:14,400 --> 00:02:16,679 Speaker 2: we in a bubble that's just in search of a pin? 36 00:02:19,360 --> 00:02:21,600 Speaker 1: Oh? I think we are, by the way, Yes. 37 00:02:22,160 --> 00:02:26,040 Speaker 2: For sure. Yeah. Look, there is a nuance to some 38 00:02:26,120 --> 00:02:28,720 Speaker 2: of these very high valuations in the share market, and 39 00:02:28,760 --> 00:02:32,760 Speaker 2: we should remember that the market is not uniformly overvalued. 40 00:02:32,840 --> 00:02:35,440 Speaker 2: That there is a very large spread between the cheapest 41 00:02:35,440 --> 00:02:39,240 Speaker 2: companies in the market and the most expensive and a 42 00:02:39,280 --> 00:02:42,000 Speaker 2: lot of the excess are in what we can call 43 00:02:42,120 --> 00:02:45,720 Speaker 2: large growth companies, and there is a kind of growing 44 00:02:45,800 --> 00:02:49,120 Speaker 2: suspicion that it could be the fault of the popularity 45 00:02:49,120 --> 00:02:54,480 Speaker 2: of indexing that every American employees dollar goes into a 46 00:02:54,520 --> 00:02:57,040 Speaker 2: four toh one k which then puts you know, now 47 00:02:57,080 --> 00:03:01,920 Speaker 2: eight percent in Nvidia, and these are price sensitive buyers, 48 00:03:01,960 --> 00:03:05,760 Speaker 2: not price in sensitive buyers, and that if Invidia goes 49 00:03:05,880 --> 00:03:08,760 Speaker 2: up three times in price, the index will buy three 50 00:03:08,800 --> 00:03:12,480 Speaker 2: times more of it. So just a reminder that they're 51 00:03:12,560 --> 00:03:15,560 Speaker 2: One way of kind of dealing with this concern about 52 00:03:15,680 --> 00:03:18,680 Speaker 2: excess of prices in the share market is to diversify 53 00:03:18,760 --> 00:03:22,080 Speaker 2: within the share market. There are value strategies. There are 54 00:03:22,080 --> 00:03:26,000 Speaker 2: also small companies, both of which have underperformed, but they 55 00:03:26,040 --> 00:03:29,079 Speaker 2: are at least attractive on a value for money basis. 56 00:03:29,400 --> 00:03:31,160 Speaker 1: We have a bit of that in the Australian market, 57 00:03:31,160 --> 00:03:33,320 Speaker 1: don't we, with common Work Bank exactly. 58 00:03:33,400 --> 00:03:37,040 Speaker 2: Commonwealth Bank is our Nvidia, and we could say we've 59 00:03:37,080 --> 00:03:40,720 Speaker 2: had just fantastic conditions as we've had interest rates falling 60 00:03:40,760 --> 00:03:44,520 Speaker 2: from very big highs of twenty years ago down to lows, 61 00:03:44,520 --> 00:03:46,400 Speaker 2: and it looks that they're not going to hopefully get 62 00:03:46,440 --> 00:03:49,960 Speaker 2: back to zero and we have inflation is back. People 63 00:03:50,040 --> 00:03:52,480 Speaker 2: know that when they go to the supermarket, and that's 64 00:03:52,760 --> 00:03:55,680 Speaker 2: perhaps a dampen error on seeing interest rates go too 65 00:03:55,760 --> 00:03:59,360 Speaker 2: low for too long. So it is quite possible that 66 00:03:59,440 --> 00:04:02,120 Speaker 2: we have tough conditions ahead. So the hence your question, 67 00:04:02,680 --> 00:04:04,640 Speaker 2: you know, do we do something about it? And that 68 00:04:04,800 --> 00:04:08,760 Speaker 2: brings us back to rebalancing, which is really a risk 69 00:04:08,840 --> 00:04:11,360 Speaker 2: management strategy. It's the risk of having too much equities 70 00:04:11,360 --> 00:04:16,200 Speaker 2: in your portfolio and being vulnerable to a large transition. 71 00:04:16,320 --> 00:04:19,520 Speaker 2: And I think in America the statistics that the US 72 00:04:19,560 --> 00:04:22,279 Speaker 2: investor has never been so exposed to the share market, 73 00:04:22,640 --> 00:04:25,119 Speaker 2: and it's kind of been a good strategy, a lucky 74 00:04:25,160 --> 00:04:27,760 Speaker 2: strategy not to have been a disciplined rebalancer in the 75 00:04:27,800 --> 00:04:32,000 Speaker 2: last few years, because you're rebalancing is taking profits off 76 00:04:32,040 --> 00:04:34,760 Speaker 2: the table and parking them in the underperforming assets or 77 00:04:34,800 --> 00:04:38,960 Speaker 2: the less performing assets and just riding up this return 78 00:04:39,080 --> 00:04:42,160 Speaker 2: would have done well, but when you have a downturn, 79 00:04:42,240 --> 00:04:44,800 Speaker 2: you'll be very grateful that you listened to this podcast 80 00:04:45,040 --> 00:04:48,279 Speaker 2: and you took some profits and put them elsewhere. 81 00:04:48,680 --> 00:04:52,440 Speaker 1: Is it harder to sell? Do you reckon? And this 82 00:04:52,520 --> 00:04:55,560 Speaker 1: is not a scientific question to bias question, but is 83 00:04:55,600 --> 00:04:59,599 Speaker 1: it harder to sell winners when you know when the 84 00:04:59,640 --> 00:05:02,240 Speaker 1: market's strong than to buy shares when you know the 85 00:05:02,320 --> 00:05:04,560 Speaker 1: market's deep doodoo. 86 00:05:06,279 --> 00:05:10,880 Speaker 2: It is, but look, institutions, professional investors and smart investors 87 00:05:10,880 --> 00:05:13,960 Speaker 2: should manage their portfolio to targets, and those aren't dollar 88 00:05:14,000 --> 00:05:17,560 Speaker 2: targets or percentage targets. And if you have you know, 89 00:05:17,560 --> 00:05:19,719 Speaker 2: if you say I want to have seventy percent in 90 00:05:19,800 --> 00:05:22,880 Speaker 2: equities and now you have seventy five, then the math 91 00:05:22,920 --> 00:05:27,640 Speaker 2: should override your your optimism of continued profiteering, and you 92 00:05:27,640 --> 00:05:30,760 Speaker 2: should sell five percent of your equities and put those 93 00:05:30,960 --> 00:05:33,440 Speaker 2: Let's say, if it's just a simple two part portfolio, 94 00:05:33,480 --> 00:05:36,320 Speaker 2: put five percent back into bonds, which fortunately at the 95 00:05:36,360 --> 00:05:41,160 Speaker 2: moment are giving you good returns. And the opposite happens. 96 00:05:41,240 --> 00:05:43,960 Speaker 2: If there was a twenty percent fall in the share market, 97 00:05:44,040 --> 00:05:47,080 Speaker 2: your you know, seventy five percent in shares might fall 98 00:05:47,160 --> 00:05:50,080 Speaker 2: to sixty five percent, and then the math will tell 99 00:05:50,120 --> 00:05:52,640 Speaker 2: you buy shares because you now have a risk of 100 00:05:52,680 --> 00:05:57,160 Speaker 2: not having enough shares. So rebalancing work terrifically during the 101 00:05:57,200 --> 00:06:00,280 Speaker 2: global financial crisis era of two thousand and seven, because 102 00:06:00,320 --> 00:06:04,719 Speaker 2: the downturn was prolonged and people had time, you know, 103 00:06:04,720 --> 00:06:07,520 Speaker 2: they would have sold before the crash, before the peak, 104 00:06:07,760 --> 00:06:11,440 Speaker 2: and then the down was long enough unfortunately that people 105 00:06:11,440 --> 00:06:14,200 Speaker 2: would be buying into the market at the dips. But 106 00:06:14,360 --> 00:06:19,440 Speaker 2: lately the behavior of the market has been very quick recoveries, 107 00:06:19,760 --> 00:06:22,240 Speaker 2: and there is a kind of behavior about buy the 108 00:06:22,279 --> 00:06:26,760 Speaker 2: dip being practiced, which means, you know, a typical rebalancing strategy, 109 00:06:26,800 --> 00:06:29,719 Speaker 2: which can often be calendar based. It might be six monthly. 110 00:06:30,160 --> 00:06:34,080 Speaker 2: You can miss that opportunity and you're not being able 111 00:06:34,120 --> 00:06:36,240 Speaker 2: to buy on the cheap because the cheap sales only 112 00:06:36,320 --> 00:06:39,479 Speaker 2: last a few weeks and the market bounces back so quickly. 113 00:06:39,560 --> 00:06:43,720 Speaker 2: So yeah, in short, rebalancing is a very sensible strategy. 114 00:06:44,160 --> 00:06:46,080 Speaker 2: It wouldn't have worked in the last few years, but 115 00:06:46,120 --> 00:06:48,920 Speaker 2: you can't predict the future. And if you're right, James, 116 00:06:48,960 --> 00:06:51,560 Speaker 2: that the market is a bubble in search of a pin, 117 00:06:51,640 --> 00:06:53,839 Speaker 2: and a pin is found, then you would have been 118 00:06:53,960 --> 00:06:56,960 Speaker 2: very wise to take some of those profits off the table. 119 00:06:56,960 --> 00:06:59,440 Speaker 2: They can be of the entire equity part of your portfolio, 120 00:06:59,440 --> 00:07:03,120 Speaker 2: but you can also have some internal controls. You might say, 121 00:07:03,320 --> 00:07:05,520 Speaker 2: I don't want ten percent of my retirement to be 122 00:07:05,560 --> 00:07:08,440 Speaker 2: based on any one company, so you don't want to 123 00:07:08,440 --> 00:07:10,640 Speaker 2: have ten percent in CBA so you'll have to trim 124 00:07:10,680 --> 00:07:13,200 Speaker 2: that or you don't want to have ten percent in Nvidia, 125 00:07:13,680 --> 00:07:16,560 Speaker 2: because you know, history reminds us that these companies never 126 00:07:16,640 --> 00:07:18,800 Speaker 2: stay at the top. If you look at the top 127 00:07:18,920 --> 00:07:21,960 Speaker 2: ten stocks in the world every ten years, they're very 128 00:07:21,960 --> 00:07:22,920 Speaker 2: often not the same. 129 00:07:23,360 --> 00:07:25,400 Speaker 1: It's really hard. Course, we'll take it on board that 130 00:07:25,400 --> 00:07:28,679 Speaker 1: it's very hard to sell a winner. But let's assume 131 00:07:28,680 --> 00:07:30,920 Speaker 1: that we all have the gumption to do that and 132 00:07:30,960 --> 00:07:34,920 Speaker 1: the sort of scientific rationale to do that, because we 133 00:07:35,120 --> 00:07:38,360 Speaker 1: know history proves it's the correct thing to do. You 134 00:07:38,480 --> 00:07:43,080 Speaker 1: mentioned bonds as a whatever you buy in the rebalancing, 135 00:07:43,160 --> 00:07:45,800 Speaker 1: it must not be shares. It would it be the 136 00:07:45,840 --> 00:07:48,240 Speaker 1: case that it must not be listed securities. What I'm 137 00:07:48,320 --> 00:07:51,040 Speaker 1: driving at here is, perhaps people the easy way in 138 00:07:51,120 --> 00:07:54,000 Speaker 1: for most of our listeners to bonds is bond dtfs. 139 00:07:54,120 --> 00:07:56,920 Speaker 1: You know they're going buy these bond ETFs. Are they 140 00:07:56,960 --> 00:08:00,840 Speaker 1: what you're thinking of? Do they fit the bill? Well? 141 00:08:00,880 --> 00:08:03,560 Speaker 2: I was just describing this in the general kind of 142 00:08:04,000 --> 00:08:06,480 Speaker 2: barbell of equity at one end, bond at the other. 143 00:08:06,600 --> 00:08:09,400 Speaker 2: But most portfolios are more sophisticated. They might have a 144 00:08:09,440 --> 00:08:12,040 Speaker 2: ten percent allocation to reads, they might have a ten 145 00:08:12,040 --> 00:08:15,840 Speaker 2: percent allocation to infrastructure, they might have a ten percent 146 00:08:15,840 --> 00:08:19,680 Speaker 2: allocation to floating rate cash like securities. They might have 147 00:08:19,720 --> 00:08:23,080 Speaker 2: a ten percent allocation to fix rate government bonds. They 148 00:08:23,160 --> 00:08:26,280 Speaker 2: might have a ten percent allocation to hybrids. So, you know, 149 00:08:26,480 --> 00:08:30,360 Speaker 2: periodically or perhaps at events where you have cash flow 150 00:08:30,440 --> 00:08:33,800 Speaker 2: coming in or out of the portfolio, you can reset 151 00:08:33,840 --> 00:08:36,520 Speaker 2: everything by buying a little bit of everything in a 152 00:08:36,520 --> 00:08:39,640 Speaker 2: differential bait way to get back to those ten percent 153 00:08:39,679 --> 00:08:44,000 Speaker 2: targets of your ten asset classes. And likewise, if you're 154 00:08:44,120 --> 00:08:46,560 Speaker 2: in pension phase, you can fund your pension for the 155 00:08:46,600 --> 00:08:49,559 Speaker 2: next six or twelve months by you know, maybe taking 156 00:08:49,720 --> 00:08:51,439 Speaker 2: a little bit more out of the equities and a 157 00:08:51,480 --> 00:08:55,400 Speaker 2: little bit less out of your money market fund or 158 00:08:55,440 --> 00:08:58,679 Speaker 2: property trusts and some things you might Yeah, so you 159 00:08:58,720 --> 00:09:01,560 Speaker 2: either top up differently or you take out differently. And 160 00:09:01,600 --> 00:09:04,800 Speaker 2: if you're for some reason your portfolio is completely steady state, 161 00:09:05,360 --> 00:09:07,600 Speaker 2: then yes, you would sell your winners by your losers. 162 00:09:08,120 --> 00:09:12,760 Speaker 2: And it really depends on how you Generally, the opposite 163 00:09:12,840 --> 00:09:16,000 Speaker 2: we often consider the opposite of an equity is a bond, 164 00:09:16,080 --> 00:09:19,040 Speaker 2: But you know, lately some people have found that gold 165 00:09:19,200 --> 00:09:20,600 Speaker 2: is the opposite of an equity. 166 00:09:21,120 --> 00:09:22,600 Speaker 1: Yes, I was going to say to you when you 167 00:09:22,600 --> 00:09:25,360 Speaker 1: listed out. It's interesting, isn't it this whole thing about 168 00:09:25,400 --> 00:09:28,280 Speaker 1: sixty forty or whatever? And then you know one side 169 00:09:28,280 --> 00:09:30,560 Speaker 1: of the book was shares and the other side was bonds. 170 00:09:30,559 --> 00:09:34,720 Speaker 1: But really what constitutes the other side of the book 171 00:09:34,760 --> 00:09:38,200 Speaker 1: that isn't shares? Has really changed, hasn't it? Of late? 172 00:09:38,240 --> 00:09:41,280 Speaker 1: And people are I mean, goal is included now regularly, 173 00:09:41,840 --> 00:09:45,839 Speaker 1: Private equities included, private credit is included, so all those 174 00:09:45,880 --> 00:09:48,480 Speaker 1: categories they would come into that that they do. 175 00:09:48,840 --> 00:09:53,400 Speaker 2: The rebalancing works well, but it runs into problems if 176 00:09:53,440 --> 00:09:56,800 Speaker 2: you have substantial allocations to private assets. And at the moment, 177 00:09:56,840 --> 00:09:59,880 Speaker 2: we're aware that some of the very famous endowment funds 178 00:10:00,120 --> 00:10:04,679 Speaker 2: like Harvard are suffering from this problem that private equity 179 00:10:04,800 --> 00:10:08,600 Speaker 2: is not listing, isn't giving money back to investors, and 180 00:10:08,640 --> 00:10:11,840 Speaker 2: they can't fund their spending needs. So they've actually had 181 00:10:11,840 --> 00:10:14,640 Speaker 2: to go to the bond market and borrow several billion 182 00:10:14,800 --> 00:10:16,079 Speaker 2: dollars because they. 183 00:10:16,920 --> 00:10:18,800 Speaker 1: Can't can't get they can't send this. 184 00:10:18,880 --> 00:10:21,560 Speaker 2: Yeah, and we had this problem back in the GFC 185 00:10:21,640 --> 00:10:25,840 Speaker 2: with austriand industry superfunds that also have a large allocation 186 00:10:26,000 --> 00:10:30,079 Speaker 2: to private assets. Because you know, the valuers right wrongly 187 00:10:30,160 --> 00:10:33,319 Speaker 2: or rightly say these assets haven't fallen in value, so 188 00:10:33,880 --> 00:10:36,240 Speaker 2: the rebalancing thing is, oh, well, we've got to buy 189 00:10:36,400 --> 00:10:39,520 Speaker 2: some more BHP and CBA because it's just fallen forty percent, 190 00:10:39,640 --> 00:10:42,400 Speaker 2: but our private equity has only gone down four percent. 191 00:10:43,040 --> 00:10:45,440 Speaker 2: So I want to sell some private equity and buy 192 00:10:45,480 --> 00:10:47,640 Speaker 2: some public equity, but I can't get my money out 193 00:10:47,640 --> 00:10:52,080 Speaker 2: of private equity. So you know, rebalancing doesn't work terribly 194 00:10:52,120 --> 00:10:55,200 Speaker 2: easily when private market assets are a big part of 195 00:10:55,200 --> 00:10:58,920 Speaker 2: your portfolio, and when private markets aren't working, and they 196 00:10:59,120 --> 00:11:02,400 Speaker 2: often free in difficult times. I think this week we 197 00:11:02,480 --> 00:11:06,120 Speaker 2: saw a private credit fund suspend redemption, so that one 198 00:11:06,880 --> 00:11:09,520 Speaker 2: that might contribute to your fear, James of things the 199 00:11:09,559 --> 00:11:10,960 Speaker 2: economy softening. 200 00:11:10,679 --> 00:11:13,760 Speaker 1: Absolutely well, it confirms my skepticism. I think, tell me 201 00:11:13,960 --> 00:11:16,559 Speaker 1: you mentioned gold, right, Gold is liquid, Right, it's always liquid. 202 00:11:16,679 --> 00:11:18,480 Speaker 1: Got to say that whatever is it is, it's got 203 00:11:18,559 --> 00:11:18,960 Speaker 1: lots of. 204 00:11:18,880 --> 00:11:20,560 Speaker 2: There does seem to be lots of buyers. And in 205 00:11:20,600 --> 00:11:23,400 Speaker 2: a crisis. Ironically, when you think gold is a safe have, 206 00:11:23,520 --> 00:11:26,079 Speaker 2: and sometimes gold does dip because it's the only thing, 207 00:11:26,360 --> 00:11:27,920 Speaker 2: some investors can sell. 208 00:11:29,400 --> 00:11:29,480 Speaker 1: That. 209 00:11:29,559 --> 00:11:31,719 Speaker 2: Yeah, they're well they've got to. Maybe it's a margin call. 210 00:11:31,880 --> 00:11:35,360 Speaker 2: There's incredible indebtedness behind the market at the moment, and 211 00:11:35,800 --> 00:11:38,720 Speaker 2: if you if you're in a crisis, you can't sell 212 00:11:38,760 --> 00:11:41,640 Speaker 2: your beaten up small cap that there's no buyers for, 213 00:11:41,720 --> 00:11:44,080 Speaker 2: so you only sell the good stuff. And yeah, so 214 00:11:44,600 --> 00:11:48,280 Speaker 2: generally speaking, especially paper gold or electronic gold sold as 215 00:11:48,280 --> 00:11:51,840 Speaker 2: ETFs is very popular where you're really tray selling the 216 00:11:51,880 --> 00:11:55,439 Speaker 2: gold price not gold that is very liquid. 217 00:11:56,360 --> 00:11:59,040 Speaker 1: That thing about people will sell anything in a crisis, 218 00:11:59,040 --> 00:12:01,880 Speaker 1: and they'll sell their gold because they want cash. Okay, 219 00:12:01,880 --> 00:12:05,240 Speaker 1: we take it that dimension, But that isn't it that 220 00:12:05,320 --> 00:12:09,000 Speaker 1: I imagine that doesn't undermine your notion that gold is 221 00:12:09,000 --> 00:12:11,160 Speaker 1: a good feasible diversifier. 222 00:12:11,240 --> 00:12:15,280 Speaker 2: Yeah, diversifier. Yeah, that's right. Absolutely, No, I think it's 223 00:12:15,320 --> 00:12:18,840 Speaker 2: just one of the nuanced behaviors of gold. No assets 224 00:12:18,880 --> 00:12:22,280 Speaker 2: work perfectly, and you could actually say it just proves 225 00:12:22,280 --> 00:12:26,240 Speaker 2: you the fact that gold is available is working, that 226 00:12:26,480 --> 00:12:28,040 Speaker 2: it can be sold in a crisis. 227 00:12:28,080 --> 00:12:28,720 Speaker 1: People want it. 228 00:12:29,280 --> 00:12:31,079 Speaker 2: You know, We'll be interesting to see what happens during 229 00:12:31,120 --> 00:12:34,320 Speaker 2: the next crisis because the nature of the crises are 230 00:12:34,400 --> 00:12:38,720 Speaker 2: always evolving, and the current fears are around government solvency 231 00:12:38,920 --> 00:12:43,000 Speaker 2: and debasement of currency. So I'd be surprised if gold 232 00:12:43,080 --> 00:12:46,360 Speaker 2: is sold off quickly this time. But you know, as 233 00:12:46,480 --> 00:12:48,360 Speaker 2: much as it was back in two thousand and seven, 234 00:12:48,400 --> 00:12:50,880 Speaker 2: which was only a sort of a few back in COVID, 235 00:12:50,920 --> 00:12:53,319 Speaker 2: I think it's sold off very quickly, but it recovered 236 00:12:53,400 --> 00:12:57,439 Speaker 2: very quickly. Yeah, so I wouldn't. I wouldn't abandon gold 237 00:12:57,520 --> 00:13:02,920 Speaker 2: is proven. It has come back as a viable defensive asset. 238 00:13:02,960 --> 00:13:05,720 Speaker 1: Even in the GFC it didn't. It didn't pop straight away, 239 00:13:05,840 --> 00:13:08,720 Speaker 1: probably because just what you're saying, people were using it 240 00:13:08,720 --> 00:13:12,120 Speaker 1: to sell to get some cash because they well. 241 00:13:12,040 --> 00:13:14,480 Speaker 2: They probably didn't take the treasuries. You know, they might 242 00:13:14,520 --> 00:13:17,880 Speaker 2: sell a treasury. But we did see some government bond 243 00:13:18,240 --> 00:13:22,640 Speaker 2: malfunction during COVID twenty twenty, which was unusual. The bond 244 00:13:22,679 --> 00:13:25,840 Speaker 2: market wasn't working very well, and you might require that's 245 00:13:25,880 --> 00:13:29,720 Speaker 2: why the US and the Australian and many other central 246 00:13:29,720 --> 00:13:32,720 Speaker 2: banks of the world bought government bonds with printed money. 247 00:13:33,040 --> 00:13:36,560 Speaker 2: So that's they didn't print gold. So as a reminder 248 00:13:36,679 --> 00:13:39,600 Speaker 2: to be maybe some of the assumptions we have around 249 00:13:39,720 --> 00:13:43,400 Speaker 2: government treasuries being the safest security need to be challenged. 250 00:13:44,120 --> 00:13:47,240 Speaker 1: Yes, we put that, Just put that to one side 251 00:13:47,240 --> 00:13:50,439 Speaker 1: for the moment because that's another show. Just finally, look 252 00:13:50,679 --> 00:13:54,760 Speaker 1: on yes on gold and the notion of the alternative 253 00:13:55,440 --> 00:13:59,360 Speaker 1: two shares, the non correlated asset. We have to put 254 00:13:59,360 --> 00:14:03,920 Speaker 1: it to you a crypto and bitcoin. I've had Chane Oliver, 255 00:14:04,160 --> 00:14:06,320 Speaker 1: chief economists at A and P on the show. A 256 00:14:06,440 --> 00:14:11,360 Speaker 1: and P have actually both bitcoin. What's your view as 257 00:14:11,960 --> 00:14:19,760 Speaker 1: on bitcoin as a alternative in the manner that gold is. 258 00:14:21,600 --> 00:14:28,360 Speaker 2: I struggle with an asset that we don't know who 259 00:14:28,400 --> 00:14:32,400 Speaker 2: invented it. It hasn't been around for four thousand years. 260 00:14:33,000 --> 00:14:35,600 Speaker 2: For much of its life, it's behaved like an equity, 261 00:14:36,000 --> 00:14:38,640 Speaker 2: not a bond. And I've heard one commentator said, if 262 00:14:38,960 --> 00:14:41,400 Speaker 2: you know gold and crypto are different, and if you 263 00:14:41,480 --> 00:14:43,800 Speaker 2: want them, you know, put ten percent gold in your 264 00:14:43,840 --> 00:14:47,760 Speaker 2: defensive portfolio and put ten percent crypto into your equity portfolio. 265 00:14:47,920 --> 00:14:51,040 Speaker 1: So based on that logic, that's making the assumption that 266 00:14:51,080 --> 00:14:52,200 Speaker 1: bitcoin is correlated. 267 00:14:52,800 --> 00:14:53,560 Speaker 2: Yeah, that's right. 268 00:14:53,680 --> 00:14:55,600 Speaker 1: Yeah, are you of the view that it is? And 269 00:14:55,640 --> 00:14:57,640 Speaker 1: so it's not an un correlated asset. So it's not 270 00:14:57,680 --> 00:14:58,359 Speaker 1: a gold. 271 00:14:59,200 --> 00:15:01,480 Speaker 2: Oh, it's quite different to gold in my opinion. It's 272 00:15:01,520 --> 00:15:05,880 Speaker 2: not a central bank held asset. Banks commercial banks who 273 00:15:05,920 --> 00:15:08,000 Speaker 2: hold it don't get credit for it. 274 00:15:08,000 --> 00:15:08,040 Speaker 1: It. 275 00:15:08,120 --> 00:15:11,120 Speaker 2: Look, it's an incredibly clever system and there are some 276 00:15:11,200 --> 00:15:15,000 Speaker 2: appeals to its logic, but there's also enough question marks 277 00:15:15,160 --> 00:15:18,480 Speaker 2: to make me worry about using it in a portfolio. 278 00:15:18,600 --> 00:15:20,880 Speaker 2: But that's not a universal held view. And maybe i'm 279 00:15:20,960 --> 00:15:23,120 Speaker 2: because I'm turning sixty this year. I'm just an old 280 00:15:23,160 --> 00:15:25,800 Speaker 2: fart James, and you need to ask that question of 281 00:15:25,880 --> 00:15:26,680 Speaker 2: someone younger. 282 00:15:26,720 --> 00:15:29,240 Speaker 1: But I don't know what were the reasons. One of 283 00:15:29,280 --> 00:15:32,360 Speaker 1: the reasons I asked Shane to come on was because 284 00:15:32,440 --> 00:15:35,400 Speaker 1: he was definitionively the chief economist at AMP, which is 285 00:15:35,440 --> 00:15:38,480 Speaker 1: one of the oldest institutions in Australia. The Australian ritual 286 00:15:38,520 --> 00:15:41,400 Speaker 1: problem will fond of whatever it was. I thought that 287 00:15:41,520 --> 00:15:45,000 Speaker 1: was really interesting that their economics, their investment portfolio committee 288 00:15:45,000 --> 00:15:47,000 Speaker 1: had a meeting and they passed it off, they signed 289 00:15:47,000 --> 00:15:49,560 Speaker 1: it off, and they put twenty seven million into it. 290 00:15:50,120 --> 00:15:54,320 Speaker 1: So I think we're moving beyond that actually to a 291 00:15:54,320 --> 00:15:57,280 Speaker 1: sort of more nuanced view of Okay, this is an asset. 292 00:15:58,080 --> 00:16:00,680 Speaker 1: This would appear to be an old term of assets. 293 00:16:00,680 --> 00:16:03,440 Speaker 1: Some say it is soon to be included in US 294 00:16:03,480 --> 00:16:06,320 Speaker 1: strategic reserves. If you don't mind, it's not going to 295 00:16:06,320 --> 00:16:08,160 Speaker 1: go away. So then the question is what is it 296 00:16:08,200 --> 00:16:12,480 Speaker 1: and is it correlated or not? And yes, it's interesting 297 00:16:12,520 --> 00:16:16,080 Speaker 1: that you say that you're ob view that history suggests 298 00:16:16,120 --> 00:16:20,480 Speaker 1: it's correlated. By that, folks, we mean when shares go 299 00:16:20,800 --> 00:16:22,760 Speaker 1: it goes up. When shares go down, it goes down. 300 00:16:22,800 --> 00:16:26,000 Speaker 1: And if that's the case, it's not a match for gold. 301 00:16:26,440 --> 00:16:29,400 Speaker 1: Is that a fair summary of Yeah. 302 00:16:29,240 --> 00:16:32,920 Speaker 2: It might be more a substitute for equity, James. Yeah, 303 00:16:32,920 --> 00:16:36,120 Speaker 2: it certainly is a speculative asset and some people have 304 00:16:36,160 --> 00:16:42,400 Speaker 2: become very rich on it, and we're thrilled for them. 305 00:16:42,600 --> 00:16:44,640 Speaker 1: That's a speculative assid you might as well just go 306 00:16:44,720 --> 00:16:48,200 Speaker 1: and by a speculative share. All right, We leave it 307 00:16:48,240 --> 00:16:50,320 Speaker 1: there for the moment. We have some very I know 308 00:16:50,400 --> 00:16:53,120 Speaker 1: that we have enormous interest of course in the super tax, 309 00:16:53,520 --> 00:16:55,440 Speaker 1: but we dealt with it quite a bit on the show. 310 00:16:55,800 --> 00:16:57,800 Speaker 1: We've left it alone for a while. There has been 311 00:16:57,880 --> 00:17:01,200 Speaker 1: various developments and people are really starting to think about 312 00:17:01,240 --> 00:17:03,480 Speaker 1: it for the simple reason that, folks, it's going to happen. 313 00:17:04,200 --> 00:17:06,160 Speaker 1: It's going to go through. It's going to go through 314 00:17:06,320 --> 00:17:08,720 Speaker 1: as planned. I don't believe there's going to be any 315 00:17:08,840 --> 00:17:12,879 Speaker 1: deviation or concessions on this from our sources in the 316 00:17:12,920 --> 00:17:15,840 Speaker 1: Australian through Canberra. We will be back to you in 317 00:17:15,840 --> 00:17:25,280 Speaker 1: a moment. Hello, Welcome back to The Australian's Money Puzzle podcast. 318 00:17:25,359 --> 00:17:28,760 Speaker 1: James Kerby here talking to doctor Douc Turek, regular on 319 00:17:28,840 --> 00:17:32,479 Speaker 1: the show, one of my oldest and most favorite guests 320 00:17:32,520 --> 00:17:35,320 Speaker 1: on the show who goes way back and has always 321 00:17:35,359 --> 00:17:40,320 Speaker 1: featured regularly with his very distinct views on investment. For 322 00:17:40,480 --> 00:17:44,480 Speaker 1: you now on the new supertax, just through recap. It 323 00:17:44,560 --> 00:17:47,439 Speaker 1: is a tax which comes in above three million on 324 00:17:47,520 --> 00:17:52,240 Speaker 1: earnings above three million in Super. It is a news tax. 325 00:17:52,280 --> 00:17:55,600 Speaker 1: It is a fifteen percent tax. There is already a 326 00:17:55,640 --> 00:17:58,399 Speaker 1: fifteen percent tax on amounts above two millions, so it 327 00:17:58,520 --> 00:18:04,000 Speaker 1: becomes effectively thirty percent tax. That's the simple part. The 328 00:18:04,000 --> 00:18:06,639 Speaker 1: bigger issue is that it's a completely new tax that 329 00:18:06,680 --> 00:18:09,119 Speaker 1: we've never seen before in Super and it's based on 330 00:18:09,240 --> 00:18:13,359 Speaker 1: realized gains paper gains. So whatever the value of the 331 00:18:13,359 --> 00:18:17,000 Speaker 1: stated value paper value of your portfolio is at the 332 00:18:17,119 --> 00:18:19,879 Speaker 1: end of the year compared to the start of the year, 333 00:18:20,320 --> 00:18:26,359 Speaker 1: the taxes imposed on the alleged paper profit made through 334 00:18:26,400 --> 00:18:29,800 Speaker 1: that period very controversial and everything the Treasurer says suggests 335 00:18:29,840 --> 00:18:33,080 Speaker 1: it's going to put it in exactly as planned. Also, 336 00:18:33,400 --> 00:18:36,240 Speaker 1: it's not index for inflation, which means more people will 337 00:18:36,280 --> 00:18:39,879 Speaker 1: be caught in it every year. In your world, Doug, 338 00:18:40,160 --> 00:18:44,639 Speaker 1: are they now making the assumption along the lines of 339 00:18:44,680 --> 00:18:46,320 Speaker 1: what I've just said that it's going to happen, and 340 00:18:46,320 --> 00:18:48,919 Speaker 1: it's going to happen as they have framed it. 341 00:18:50,680 --> 00:18:55,280 Speaker 2: In my world? No, I'm not. I'm maybe naively hopeful 342 00:18:55,600 --> 00:19:00,320 Speaker 2: that the Frankenstein nature of this tax is being worked, 343 00:19:00,640 --> 00:19:04,600 Speaker 2: being understood, and maybe there'll be some modifications. And you know, 344 00:19:04,640 --> 00:19:08,119 Speaker 2: we really can't because there is no penalty, there's no 345 00:19:08,280 --> 00:19:11,080 Speaker 2: urgency to act now. It really is wait and see 346 00:19:11,440 --> 00:19:13,760 Speaker 2: in our professional world. But it doesn't stop us thinking 347 00:19:13,840 --> 00:19:16,679 Speaker 2: what are some of the strategies we may implement, But 348 00:19:16,840 --> 00:19:19,360 Speaker 2: we don't. You know, if this is going to be implemented, 349 00:19:19,520 --> 00:19:22,600 Speaker 2: it's going to have to be. It may not be retrospective. 350 00:19:22,680 --> 00:19:25,639 Speaker 2: We're already you know, time is flying or almost through July. 351 00:19:26,359 --> 00:19:28,520 Speaker 2: So are we going to you know, go backwards in 352 00:19:28,600 --> 00:19:31,240 Speaker 2: time with this tax or will it start eleven months 353 00:19:31,280 --> 00:19:31,680 Speaker 2: from now? 354 00:19:31,760 --> 00:19:36,760 Speaker 1: It will be retrospective because it's when it's legislated. It's 355 00:19:36,800 --> 00:19:40,440 Speaker 1: it's legislated for July one, twenty twenty six, which would 356 00:19:40,680 --> 00:19:43,800 Speaker 1: refer to the previous financial year, which is already upon us. 357 00:19:45,119 --> 00:19:47,399 Speaker 2: Well, it's one argument. The other one is you're looking 358 00:19:47,480 --> 00:19:51,480 Speaker 2: backwards in time at a balance before the legislation even started. 359 00:19:52,359 --> 00:19:56,000 Speaker 2: So anyway, I live in Hope, James, you are You're 360 00:19:56,040 --> 00:19:58,639 Speaker 2: not optimist that guy. I live in Hope, and in 361 00:19:58,720 --> 00:20:00,720 Speaker 2: terms there is no I'm not a aware of any 362 00:20:00,800 --> 00:20:05,320 Speaker 2: penalty for urgent action, and I guess I live more 363 00:20:05,320 --> 00:20:07,760 Speaker 2: in fear than hope to be frank, and that is 364 00:20:07,920 --> 00:20:12,040 Speaker 2: the insatiable demand of government to keep spending simply means 365 00:20:12,040 --> 00:20:15,199 Speaker 2: there'll be more and more tax and so I worry 366 00:20:15,240 --> 00:20:17,919 Speaker 2: more the bigger picture of what are the other taxes coming? 367 00:20:18,119 --> 00:20:20,240 Speaker 2: Are they coming for franking credits? Are they coming for 368 00:20:20,320 --> 00:20:23,879 Speaker 2: capital gains tax? Are they coming to introduce a wealth tax? 369 00:20:23,960 --> 00:20:28,880 Speaker 2: That this tax can very be easily extended to be So, do. 370 00:20:28,800 --> 00:20:32,840 Speaker 1: You mean this tax, this unrealized gains tax, could be 371 00:20:32,880 --> 00:20:34,280 Speaker 1: easily extended. Is that what you mean? 372 00:20:34,400 --> 00:20:36,000 Speaker 2: Yeah, that's right. Well let's just call it a I 373 00:20:36,080 --> 00:20:38,719 Speaker 2: like to think of it as a balance difference tax, 374 00:20:38,880 --> 00:20:44,400 Speaker 2: because you actually use the phrase thirty percent on earnings. Well, 375 00:20:44,440 --> 00:20:47,199 Speaker 2: as you pointed out, it's not earnings, it's just on 376 00:20:47,240 --> 00:20:49,160 Speaker 2: the difference of the balance. You may not have earned 377 00:20:49,200 --> 00:20:51,520 Speaker 2: that money. Earnings to me are money that's been paid 378 00:20:51,520 --> 00:20:55,040 Speaker 2: to you. This is just the fact that you're imagine 379 00:20:55,040 --> 00:20:57,600 Speaker 2: if a Commonwealth bank goes back two hundred dollars a 380 00:20:57,640 --> 00:20:59,800 Speaker 2: share and stops being the most expensive bank in the 381 00:20:59,800 --> 00:21:02,520 Speaker 2: world world. But along the way, if it just happened 382 00:21:02,560 --> 00:21:04,919 Speaker 2: to be two hundred dollars a share on thirty June 383 00:21:05,520 --> 00:21:09,480 Speaker 2: twenty twenty six, you'll have been paid tax on that 384 00:21:09,560 --> 00:21:12,520 Speaker 2: you never earned it. You to me, a dividends an earning, 385 00:21:12,720 --> 00:21:15,520 Speaker 2: or a sale, a crystallized gain is an earning. So 386 00:21:15,880 --> 00:21:19,080 Speaker 2: I consider just a balanced differential tax. And all we're 387 00:21:19,080 --> 00:21:22,200 Speaker 2: doing is counting your super based on inputs given to 388 00:21:22,240 --> 00:21:24,399 Speaker 2: the ATO. Well, maybe the ATO wants to know the 389 00:21:24,480 --> 00:21:29,359 Speaker 2: value of your company, your value of your share portfolio 390 00:21:29,400 --> 00:21:31,440 Speaker 2: outside super, maybe it wants to know the value of 391 00:21:31,480 --> 00:21:33,800 Speaker 2: your home. And then we have a wealth tax, which 392 00:21:34,119 --> 00:21:37,400 Speaker 2: you know is alive and working in Europe as we speak. 393 00:21:37,840 --> 00:21:42,159 Speaker 2: It's just a active annual version of a state tax. 394 00:21:42,440 --> 00:21:46,159 Speaker 2: So maybe just skip bringing back a state taxes and 395 00:21:46,200 --> 00:21:48,840 Speaker 2: gift taxes just goes straight to the annual wealth tax. 396 00:21:49,240 --> 00:21:53,240 Speaker 2: Get them while you're alive. So anyway, that's where my 397 00:21:53,520 --> 00:21:56,399 Speaker 2: naivety says, there's no urgency to act, and the rules 398 00:21:56,400 --> 00:22:00,000 Speaker 2: may change because it is such an obviously badly designed 399 00:22:00,160 --> 00:22:04,560 Speaker 2: tax for and designed understandably for administrative reasons. But we're 400 00:22:04,560 --> 00:22:09,240 Speaker 2: turning superannuation into Frankenstein. You know, three different taxation regimes 401 00:22:09,240 --> 00:22:12,440 Speaker 2: of income, three different taxation reams of money you take 402 00:22:12,480 --> 00:22:13,200 Speaker 2: out of Super. 403 00:22:13,800 --> 00:22:17,080 Speaker 1: It's oh, it's so complicated. Only that I create every day. 404 00:22:17,440 --> 00:22:19,840 Speaker 1: The only reason I can remember how it all works. 405 00:22:19,880 --> 00:22:23,080 Speaker 1: Just one thing. People are doing the opposite of what 406 00:22:23,119 --> 00:22:28,600 Speaker 1: you say. They're dashing to do things, set up family trusts, 407 00:22:29,000 --> 00:22:32,560 Speaker 1: put money into education boonds, anything they can find that 408 00:22:32,600 --> 00:22:37,200 Speaker 1: they feel is an alternative tax shelter. Do you think 409 00:22:37,280 --> 00:22:39,359 Speaker 1: what do you think of people who are doing that? 410 00:22:39,760 --> 00:22:41,800 Speaker 1: I mean, my gut feeling is they should be careful 411 00:22:41,800 --> 00:22:44,679 Speaker 1: because I imagine the treasure is quite aware of what 412 00:22:44,720 --> 00:22:47,320 Speaker 1: the alternatives are and could easily chase them down those 413 00:22:47,520 --> 00:22:49,800 Speaker 1: paths as well well. 414 00:22:50,000 --> 00:22:51,720 Speaker 2: And that's one of the reasons we want to wait 415 00:22:51,760 --> 00:22:54,439 Speaker 2: and see, because maybe rushing the money out of Super 416 00:22:54,480 --> 00:22:57,240 Speaker 2: isn't a good idea. So, and it's interesting, it's a 417 00:22:57,359 --> 00:23:02,360 Speaker 2: very individual circumstance ridden solution to what you do if 418 00:23:02,400 --> 00:23:04,800 Speaker 2: the tax comes out as proposed. So if you've got 419 00:23:04,840 --> 00:23:07,760 Speaker 2: a for instance, if you've got a couple who you know, 420 00:23:07,880 --> 00:23:10,880 Speaker 2: have four million in SUPER and nothing else because they've 421 00:23:10,880 --> 00:23:14,120 Speaker 2: been so diligent putting it into a tax free regime, 422 00:23:14,640 --> 00:23:17,680 Speaker 2: well they just they'll be reminded that they pay zero 423 00:23:17,760 --> 00:23:20,480 Speaker 2: tax on the first twenty five thousand each of income. 424 00:23:20,520 --> 00:23:23,960 Speaker 2: That's fifty thousand of taxable income. So they should just 425 00:23:24,000 --> 00:23:25,760 Speaker 2: pull a million dollars out of SUPER and invest it 426 00:23:25,840 --> 00:23:28,800 Speaker 2: tax free, Which you know, is why these ideas that 427 00:23:28,840 --> 00:23:32,040 Speaker 2: we should just have a uniform percentage tax rate and 428 00:23:32,160 --> 00:23:34,560 Speaker 2: SUPER makes no sense to me, because we have What 429 00:23:34,640 --> 00:23:36,680 Speaker 2: we're going to do is empty the SUPER of a 430 00:23:36,680 --> 00:23:39,160 Speaker 2: whole bunch of people who can invest tax free using 431 00:23:39,200 --> 00:23:42,120 Speaker 2: the very generous tax free thresholds we have in Australia. 432 00:23:42,240 --> 00:23:44,520 Speaker 1: To clarify for listeners, and just to ensure that I 433 00:23:44,600 --> 00:23:47,160 Speaker 1: understand what you're saying, and I imagine that the listeners too. 434 00:23:47,600 --> 00:23:51,159 Speaker 1: What you're saying is, don't forget folks, that all income, 435 00:23:51,200 --> 00:23:54,280 Speaker 1: regardless of your age, you don't pay tax upen to 436 00:23:54,400 --> 00:23:58,080 Speaker 1: a certain point. Yeah, so you can have the investment 437 00:23:58,119 --> 00:24:01,600 Speaker 1: income outside of SUPER. It doesn't matter that it's investment income, 438 00:24:01,720 --> 00:24:04,520 Speaker 1: it's just income. And you don't pay tax on Did 439 00:24:04,560 --> 00:24:06,480 Speaker 1: you say, what was the number you used with that? 440 00:24:06,560 --> 00:24:07,080 Speaker 1: For a couple. 441 00:24:07,480 --> 00:24:10,000 Speaker 2: Yeah, for a senior retired couple, they can generally earn 442 00:24:10,040 --> 00:24:12,479 Speaker 2: around twenty five thousand dollars each tax free. So if 443 00:24:12,480 --> 00:24:14,639 Speaker 2: you have a million dollars, you pull out of SUPER, 444 00:24:14,680 --> 00:24:17,240 Speaker 2: put it in a joint term deposit, and say you 445 00:24:17,320 --> 00:24:21,280 Speaker 2: get fifty thousand dollars of income, split it twenty five 446 00:24:21,320 --> 00:24:25,879 Speaker 2: thousand each. There's zero tax to pay. So if someone 447 00:24:25,920 --> 00:24:27,520 Speaker 2: comes up with the idea and I've read it that 448 00:24:27,560 --> 00:24:30,240 Speaker 2: we should, I think it was can't one of Ken 449 00:24:30,280 --> 00:24:33,960 Speaker 2: Henry's suggestions you make a uniform single tax rate and Super, Well, 450 00:24:34,000 --> 00:24:37,800 Speaker 2: that'll just lead to the perverse emptying of of people 451 00:24:37,800 --> 00:24:39,920 Speaker 2: holding a million dollars out of SUPER. So that look, 452 00:24:40,400 --> 00:24:43,120 Speaker 2: one regime is take it out, invest in your other name. 453 00:24:43,560 --> 00:24:46,400 Speaker 2: Another thing for ultra wealthy, which this tax will hit 454 00:24:46,640 --> 00:24:50,159 Speaker 2: is probably buy a bigger principal place of residence, enjoy 455 00:24:50,280 --> 00:24:53,560 Speaker 2: its tax free land tax. The next thing is to say, look, 456 00:24:53,560 --> 00:24:55,640 Speaker 2: eventually we're not going to spend this money, so let's 457 00:24:55,640 --> 00:24:58,399 Speaker 2: help the kids. So the bank of mom and dad 458 00:24:58,480 --> 00:25:02,320 Speaker 2: becomes bigger, and that we get your kids, our kids 459 00:25:02,359 --> 00:25:05,480 Speaker 2: into houses bigger houses than they might have before we 460 00:25:05,520 --> 00:25:08,560 Speaker 2: pay off their mortgages. We do things like that. I'd 461 00:25:08,600 --> 00:25:10,800 Speaker 2: like to propose a you've heard a bank of mum 462 00:25:10,800 --> 00:25:14,040 Speaker 2: and dad BOMAD, Well, I wouldn't be surprised if we 463 00:25:14,119 --> 00:25:17,879 Speaker 2: will make people so mad. And we'll talk about SOMAD, 464 00:25:18,080 --> 00:25:21,480 Speaker 2: which is super annuation on mum and dad. And you 465 00:25:21,560 --> 00:25:23,520 Speaker 2: might recall a self managed super fund can now have 466 00:25:23,600 --> 00:25:27,840 Speaker 2: up to six members. So a family can take out 467 00:25:28,000 --> 00:25:31,840 Speaker 2: one hundred thousand dollars per child, their grandchild and put 468 00:25:31,880 --> 00:25:34,439 Speaker 2: it right back into their self mad superfund in the 469 00:25:34,520 --> 00:25:38,560 Speaker 2: names of their children or grandchildren and top up the 470 00:25:38,640 --> 00:25:41,560 Speaker 2: kids super and yet still manage it in the self 471 00:25:41,600 --> 00:25:43,960 Speaker 2: mad superfund. And even worse, and this will hurt the 472 00:25:43,960 --> 00:25:47,760 Speaker 2: government's revenue. They can even help the kids claim a 473 00:25:47,840 --> 00:25:51,200 Speaker 2: tax deduction for some of that contribution. So if you 474 00:25:51,280 --> 00:25:53,440 Speaker 2: know a child was making one hundred thousand dollars a 475 00:25:53,560 --> 00:25:57,359 Speaker 2: year very successfully and their employer put ten thousand into super, well, 476 00:25:57,560 --> 00:26:00,320 Speaker 2: mum and dad could help the children put another twenty 477 00:26:00,400 --> 00:26:03,320 Speaker 2: thousand dollars and the child could claim a tax deduction 478 00:26:03,440 --> 00:26:05,800 Speaker 2: on that, and the government's going to be out of pocket. 479 00:26:05,960 --> 00:26:08,440 Speaker 2: You know, a few the childre are gonna get about 480 00:26:08,440 --> 00:26:09,639 Speaker 2: a six thousand dollar tax return. 481 00:26:10,760 --> 00:26:13,800 Speaker 1: So there's plenty you can do. I think in some 482 00:26:13,840 --> 00:26:14,480 Speaker 1: way there are. 483 00:26:14,560 --> 00:26:16,880 Speaker 2: And they're very personal. They'll depend on your tax rate, 484 00:26:16,920 --> 00:26:20,120 Speaker 2: They'll depend on your asset position. Do you have another pension, 485 00:26:20,160 --> 00:26:22,080 Speaker 2: do you have other taxable income. They'll depend on your 486 00:26:22,080 --> 00:26:26,160 Speaker 2: family circumstances and your right family trusts and beneficiary companies 487 00:26:26,280 --> 00:26:29,399 Speaker 2: are you know, quite a possible alternate structure. I prefer 488 00:26:29,440 --> 00:26:32,640 Speaker 2: them more than insurance bonds slash investment bonds, which really 489 00:26:32,640 --> 00:26:35,240 Speaker 2: have the same tax structure but have some inflexibilities and 490 00:26:35,280 --> 00:26:38,359 Speaker 2: fees associated with them. And of course it's a dynamic 491 00:26:38,400 --> 00:26:41,800 Speaker 2: situation because the government will just come up with another tax, 492 00:26:42,160 --> 00:26:44,800 Speaker 2: so one should be careful pulling money out of super 493 00:26:45,320 --> 00:26:47,000 Speaker 2: just to put it into another frying pan. 494 00:26:47,600 --> 00:26:50,320 Speaker 1: Okay, all right, keep that in mindful, so be back 495 00:26:50,320 --> 00:26:52,320 Speaker 1: in a moment. We have some really interesting questions. Us 496 00:26:52,320 --> 00:27:03,000 Speaker 1: it back in a moment. Hello, Welcome back to The 497 00:27:03,000 --> 00:27:06,640 Speaker 1: Australian's money Plussing podcast. James Crave here with Doug Trurek. 498 00:27:07,119 --> 00:27:09,600 Speaker 1: We're going to have a look at some pretty interesting 499 00:27:09,640 --> 00:27:12,080 Speaker 1: questions I've had put aside for Doug on all sorts 500 00:27:12,119 --> 00:27:13,840 Speaker 1: of things. I suppose, Doug, we might start with the 501 00:27:13,840 --> 00:27:16,160 Speaker 1: first one because it was about two nine three. We've 502 00:27:16,160 --> 00:27:19,000 Speaker 1: just been talking about that. The new supertax is from Susie. 503 00:27:19,200 --> 00:27:23,080 Speaker 1: Interested in your views on the division to nine three tax? Okay? Now, 504 00:27:23,119 --> 00:27:26,760 Speaker 1: two nine three tax, folks, is the existing high income 505 00:27:26,800 --> 00:27:31,040 Speaker 1: earner super tax. It kicks in when you make two 506 00:27:31,080 --> 00:27:34,400 Speaker 1: one hundred and fifty thousand a year or more. If 507 00:27:34,400 --> 00:27:37,840 Speaker 1: you're in that category or make more than that, you paid. Basically, 508 00:27:38,000 --> 00:27:41,359 Speaker 1: you want to contribute to super you pay thirty percent. Okay. Now, 509 00:27:41,800 --> 00:27:45,119 Speaker 1: Susie says, it seems to be another tax that hasn't 510 00:27:45,160 --> 00:27:47,680 Speaker 1: been indexed, but I have personal discussion about it when 511 00:27:47,720 --> 00:27:51,760 Speaker 1: tax reform is mentioned. Just quickly, Susie, you're absolutely right, 512 00:27:52,640 --> 00:27:56,200 Speaker 1: and it is not indexed. And let me tell you something. 513 00:27:56,600 --> 00:28:00,480 Speaker 1: It was introduced from two twelve and it's never been inxed. 514 00:28:01,000 --> 00:28:06,040 Speaker 1: That's thirteen years ago. So when people say, oh, look, 515 00:28:06,080 --> 00:28:09,000 Speaker 1: don't worry about this new supertax not being indexed, of 516 00:28:09,000 --> 00:28:14,159 Speaker 1: course it'll be indexed. Don't wait for it to be indexed. 517 00:28:14,400 --> 00:28:17,760 Speaker 1: The existing high ironer supertax has never been indexed after 518 00:28:17,800 --> 00:28:21,080 Speaker 1: twelve years, so there's no reason historically to believe that 519 00:28:21,119 --> 00:28:23,399 Speaker 1: the new supertax will be indexed either. Just put that 520 00:28:23,440 --> 00:28:24,520 Speaker 1: one out there, okay. 521 00:28:24,760 --> 00:28:28,560 Speaker 2: And also, Susie, remember in twenty nineteen Federal Labor took 522 00:28:28,680 --> 00:28:31,840 Speaker 2: to the election that threatshold was supposed to be two 523 00:28:31,880 --> 00:28:34,840 Speaker 2: hundred thousand, so it was the opposite of indexed. They 524 00:28:34,840 --> 00:28:38,080 Speaker 2: wanted to tinker with it and make it even more punitive, 525 00:28:38,120 --> 00:28:40,680 Speaker 2: and some suggested it should be linked to the top 526 00:28:40,720 --> 00:28:43,680 Speaker 2: marginal rate of one hundred and eighty thousand, which is 527 00:28:43,720 --> 00:28:46,720 Speaker 2: now about up to ninety. And a reminder, the most 528 00:28:46,760 --> 00:28:50,320 Speaker 2: important thresholds are not indexed, and that's your income tax. 529 00:28:51,200 --> 00:28:53,360 Speaker 1: That's right, That's why you have bracket creep. And in 530 00:28:53,360 --> 00:28:55,320 Speaker 1: a way, this is bracket creep too, isn't it every 531 00:28:55,440 --> 00:28:56,720 Speaker 1: year because it's not indexed. 532 00:28:57,160 --> 00:29:00,080 Speaker 2: And it's just another example of how we've muddied Super 533 00:29:00,320 --> 00:29:02,480 Speaker 2: that your money in Super is tack going in it's 534 00:29:02,560 --> 00:29:09,160 Speaker 2: taxed at zero, fifteen or thirty. And unfortunately, an average 535 00:29:09,360 --> 00:29:13,840 Speaker 2: intelligent Australia Australian cannot manage their affairs to an optal 536 00:29:13,880 --> 00:29:18,200 Speaker 2: position without getting professional advice. There's so many tinkerings with 537 00:29:18,520 --> 00:29:19,080 Speaker 2: the system. 538 00:29:19,240 --> 00:29:22,200 Speaker 1: Yeah, okay, if one final question, it's from Joshua, would 539 00:29:22,240 --> 00:29:23,680 Speaker 1: you like to read that question about Enron. 540 00:29:23,960 --> 00:29:27,040 Speaker 2: I've been reading about Enron, which is really fascinating. The 541 00:29:27,120 --> 00:29:29,800 Speaker 2: blurb on the affair doesn't do it justice. It is 542 00:29:29,840 --> 00:29:33,520 Speaker 2: a winding path of greed, deception, ambition, among other things. 543 00:29:33,600 --> 00:29:37,680 Speaker 2: Amazing story. I understand there are more safeguards in place 544 00:29:37,720 --> 00:29:40,560 Speaker 2: nowadays to prevent something like this happen at the scale 545 00:29:40,600 --> 00:29:44,040 Speaker 2: that Enron achieved. I'm wondering though, could it happen again? 546 00:29:44,200 --> 00:29:49,120 Speaker 2: And a suggestion could be an ao AI crypto pe 547 00:29:49,520 --> 00:29:50,680 Speaker 2: Interested in your thoughts? 548 00:29:51,680 --> 00:29:55,280 Speaker 1: Yes, okay, well, just in case Auel doesn't remember Enron. 549 00:29:55,880 --> 00:29:59,720 Speaker 1: It was the most spectacular corporate collapse. I think it 550 00:29:59,800 --> 00:30:02,160 Speaker 1: was a this collapse ever. Actually in the US it 551 00:30:02,200 --> 00:30:07,320 Speaker 1: was an energy company, but it became synonymous with corporate fraud, 552 00:30:08,480 --> 00:30:13,000 Speaker 1: and it had some extraordinary dimensions. But essentially it was 553 00:30:13,600 --> 00:30:18,960 Speaker 1: put forward as a stunningly innovative company run by some 554 00:30:19,040 --> 00:30:23,920 Speaker 1: of the allegedly most sophisticated financial brains in the world, 555 00:30:24,320 --> 00:30:26,800 Speaker 1: the smartest guys in the room. Wasn't that the phrase 556 00:30:26,840 --> 00:30:28,680 Speaker 1: they used, And of course it turned out to be 557 00:30:28,680 --> 00:30:32,160 Speaker 1: an enormous fraud. Now we're not saying anything else is 558 00:30:32,200 --> 00:30:35,920 Speaker 1: an enormous fraud here, and I'm sure Josh isn't implying that. However, 559 00:30:37,240 --> 00:30:39,680 Speaker 1: could it happen again? Could it happen in the world 560 00:30:39,720 --> 00:30:43,240 Speaker 1: of crypto? Could it ever? I mean, my short answer 561 00:30:43,320 --> 00:30:45,800 Speaker 1: is to to that, Josh is you bet it could. 562 00:30:46,480 --> 00:30:49,160 Speaker 1: We've had small versions and I'm sure we're going to 563 00:30:49,200 --> 00:30:52,600 Speaker 1: have big versions in the future. What do you think, Hug. 564 00:30:53,040 --> 00:30:55,800 Speaker 2: I'm fraid it's just human nature and there are some 565 00:30:55,880 --> 00:30:59,840 Speaker 2: bad apples in society, and they can be individuals and 566 00:31:00,120 --> 00:31:02,760 Speaker 2: just see that with a failure of super Fund in 567 00:31:02,760 --> 00:31:06,240 Speaker 2: the last few weeks, or it can be giant corporates. 568 00:31:06,280 --> 00:31:08,400 Speaker 2: And Ron was an accounting scandal where they did a 569 00:31:08,440 --> 00:31:11,760 Speaker 2: lot of off the books accounting. It is disappointing that 570 00:31:11,840 --> 00:31:15,000 Speaker 2: the federal government now does off the books accounting. So 571 00:31:15,200 --> 00:31:17,840 Speaker 2: the NBN is off the books and some of the 572 00:31:17,920 --> 00:31:21,440 Speaker 2: other things. And I have a feeling that we're actually 573 00:31:21,480 --> 00:31:24,160 Speaker 2: in a worse place than better place. I think I've 574 00:31:24,160 --> 00:31:26,960 Speaker 2: heard it said we're living in the age of grift, 575 00:31:27,720 --> 00:31:31,520 Speaker 2: and some politicians even overseas, you know, are it's paid 576 00:31:31,560 --> 00:31:35,240 Speaker 2: to play or pay for patronage involving crypto is a 577 00:31:35,280 --> 00:31:39,600 Speaker 2: payment mechanism. So I am not optimistic that there won't 578 00:31:39,640 --> 00:31:41,880 Speaker 2: be more of this happening. So we come back to, 579 00:31:42,280 --> 00:31:47,000 Speaker 2: you know, dealing with reputable organizations being very under careful 580 00:31:47,040 --> 00:31:51,080 Speaker 2: about who who has custody of your assets, spreading your assets. 581 00:31:51,240 --> 00:31:53,400 Speaker 2: I in fact listen to one of the fathers of 582 00:31:53,440 --> 00:31:57,600 Speaker 2: AI recommending you should have multiple banks because he thinks 583 00:31:57,600 --> 00:32:01,960 Speaker 2: there'll be a crypto a I bank cyber attack on 584 00:32:02,040 --> 00:32:06,080 Speaker 2: a major bank. So yeah, I don't see things getting better. 585 00:32:06,160 --> 00:32:11,000 Speaker 2: And you know magice AI is allowing voices and images 586 00:32:11,040 --> 00:32:15,120 Speaker 2: to be impersonated. So yes, so not to be too pessimistic, 587 00:32:15,400 --> 00:32:17,960 Speaker 2: but I don't think things will get better. 588 00:32:18,480 --> 00:32:21,600 Speaker 1: Not to be too pessimistic, Josh. But yes, of course 589 00:32:21,600 --> 00:32:24,480 Speaker 1: it could happen again. It may not happen in duplicate 590 00:32:24,480 --> 00:32:26,520 Speaker 1: fashion to end on, but the notion of a very 591 00:32:26,640 --> 00:32:30,360 Speaker 1: large operator in the center of the financial system, possibly 592 00:32:30,360 --> 00:32:30,640 Speaker 1: in the. 593 00:32:30,680 --> 00:32:33,960 Speaker 2: US, well even I've heard it said in video's accounts 594 00:32:34,080 --> 00:32:36,720 Speaker 2: are a bit creative in how they book sales, and 595 00:32:36,840 --> 00:32:40,080 Speaker 2: they're selling to themselves chips and how do we It's 596 00:32:40,120 --> 00:32:42,880 Speaker 2: beyond some of my understanding. 597 00:32:43,000 --> 00:32:45,240 Speaker 1: Could be anything anywhere except to say that it will 598 00:32:45,240 --> 00:32:47,720 Speaker 1: happen again, just like there is a sense of history 599 00:32:47,760 --> 00:32:50,880 Speaker 1: repeating very good. Okay, none of that was advice, of course, 600 00:32:51,080 --> 00:32:54,600 Speaker 1: it's information only terrific to TOLTI, don't you rech love 601 00:32:54,600 --> 00:32:56,120 Speaker 1: you to have you on the show again. We must 602 00:32:56,120 --> 00:32:56,920 Speaker 1: talk again soon. 603 00:32:57,640 --> 00:32:59,920 Speaker 2: Always enjoy it and safe investing. 604 00:33:00,440 --> 00:33:03,120 Speaker 1: Thank you Doug, and thank you everyone, and keep those 605 00:33:03,240 --> 00:33:06,440 Speaker 1: emails rolling. The money puzzle at the Australian dot com 606 00:33:06,600 --> 00:33:08,120 Speaker 1: dot au dot you soon