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Speaker 1: Welcome to Ask Fear and Greed, where we take your

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Speaker 1: questions and do our best to answer them. I'm Michaele Thompson,

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Speaker 1: and good afternoon, Sean Aylmer.

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Speaker 2: Good afternoon, Michael.

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Speaker 1: Sean. Today's question comes from Joe and she has sent

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Speaker 1: it in on LinkedIn and Joe says, Hi, guys love

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Speaker 1: the show. Sean has mentioned several times there are concerns

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Speaker 1: with super Fun Giants becoming too big in Australia, most

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Speaker 1: recently on Monday's episode discussing the impact they are now

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Speaker 1: having on IPOs and ASX listings. My question is what

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Speaker 1: are the long term ramifications of this an investor might

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Speaker 1: need to consider and how will it impact the economy.

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Speaker 1: And Joe points out that she's she's invests in shares

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Speaker 1: on the AX and kind of involved in Ossie Super.

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Speaker 1: So I would just love to hear a little bit

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Speaker 1: more about this, and so Joe, we are more than

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Speaker 1: happy to oblige over to you.

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Speaker 2: Sean. Yes, yes, yes, Joe. It's a great question. So

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Speaker 2: the long term ramifications of super Giants becoming too big,

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Speaker 2: so Ossie Super and Australian Retirement Trust really dominate the game.

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Speaker 2: They have interests in most top companies, and what they

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Speaker 2: say matters because even the Commonwealth banks and bhps have

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Speaker 2: to listen. But what if what they're saying suits their

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Speaker 2: members short term interest and not the economy. What if

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Speaker 2: the big super funds make the wrong decision. What if

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Speaker 2: their focus isn't on what's best for society? Far too

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Speaker 2: much power in too few hands. That's one big ramification.

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Speaker 2: Another one big local superfunds are going to have a

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Speaker 2: bias towards OSSI equities. We all like buying on the equities. However,

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Speaker 2: what if there's not enough OSI equities to go around. Well,

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Speaker 2: these guys are plowing money into the big stocks. They've

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Speaker 2: got the potential of pushing the ASEX beyond its fundamental

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Speaker 2: value if they rush off to invest overseas, which increasingly

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Speaker 2: they need to do. Are they experts over there? I'm

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Speaker 2: not so sure. Another ramification is that big funds can

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Speaker 2: cause the market to become too constant traded. Big super

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Speaker 2: and private equity funds throw them in there as well.

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Speaker 2: They can go off and buy infrastructure assets like Sydney Airport,

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Speaker 2: for example. They can't really buy a bank, they can't

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Speaker 2: really buy big resource stocks. So what happens is that

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Speaker 2: you end up with banks, financials, and resource stocks dominating

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Speaker 2: the AX. Eight of the top fourteen stocks and the

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Speaker 2: ASEX are either financial or resource companies. There's also CSL

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Speaker 2: West Farmers Goodman Group tells from weistet Global in that

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Speaker 2: top fourteen. But really you just have these mega cap

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Speaker 2: stocks that are dominated in a couple of industries. You

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Speaker 2: just don't have much choice, and that's a real problem

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Speaker 2: for the sector. What happens if the commodity prices bus

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Speaker 2: and we get a bunch of bad loans, some of

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Speaker 2: the share prices are going to dive because the resource

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Speaker 2: stocks and the banks are going to dive as well.

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Speaker 1: All right, So that's the market. What about the second

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Speaker 1: part then, of Joe's question about how it impacts the economy?

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Speaker 1: I suppose it would have a flow on effect.

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Speaker 2: Yeah, I mean I think the narrower the economy, the

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Speaker 2: worse in my view. So what happens banks and retailer

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Speaker 2: is the two big employers, and more sudden, the resource stocks.

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Speaker 2: What happens if the banks go wrong? Not bad wrong?

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Speaker 2: You could have all sorts of people out of a job.

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Speaker 2: For example. Second, what if the big super funds underperform.

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Speaker 2: So we've had over a long term, we've had these

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Speaker 2: industry funds, which are the biggest, performing really well. In

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Speaker 2: recent quarters, the retail funds have been performing better, but

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Speaker 2: we have many more people in the industry funds. Now,

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Speaker 2: if those funds aren't performing, our wealth is not growing,

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Speaker 2: so our super annuation, our retirement income isn't growing. That

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Speaker 2: could be a problem. But the really big one, in fact,

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Speaker 2: the Reserve Bank outlined this last week, is the risk

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Speaker 2: to financial markets caused by big super What they said,

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Speaker 2: the sector's rapid growth, the rise in hrding around common benchmarks,

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Speaker 2: and increased exposure to margin calls means the sectors investment

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Speaker 2: decisions and how much money they have, the liquidity puts

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Speaker 2: in and out of the system has a greater potential

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Speaker 2: than ever before to amplify shocks in the financial system.

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Speaker 2: So if something hits the financial system, because it's so concentrated,

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Speaker 2: you know, you get a couple of those big super

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Speaker 2: funds to have to withdraw a lot of money to

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Speaker 2: actually pay out people. Suddenly you've got a serious shock

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Speaker 2: in the financial system, and that's probably the big impact

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Speaker 2: on the economy. The system just isn't quite as stable

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Speaker 2: as it would have been if the risk is diversified

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Speaker 2: so broadly, in one word, the answer to Joe's question diversification.

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Speaker 1: We could have saved ourselves what four and a half

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Speaker 1: minutes with that one word shot that. It's a good

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Speaker 1: answer though, and it's a big, big, big, big, big question,

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Speaker 1: and it has come up a few times just even

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Speaker 1: just this week because it does feel like it is.

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Speaker 1: It is a topic that is becoming more prevalent.

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Speaker 2: It's a growing problem too in Australia.

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Speaker 1: Okay, great question, Joe, Thank you for sending it on through,

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Speaker 1: and remember if you've got something that you would like

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Speaker 1: to know, then send it through via LinkedIn as Joe did,

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Speaker 1: or Instagram, Facebook, or head along to Fearangreed dot com

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Speaker 1: dot au. Thanks very much, Sean, thank you, Michael, Michael

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Speaker 1: Thompson and this is ask Fear and Greed