Speaker 1: Hello, and welcome to the Australians Money Puzzle podcast. I'm
Speaker 1: James Kirby, the Wealth editor at The Australian. Welcome aboard everybody,
Speaker 1: and welcome to the final concluding episode of our summer
Speaker 1: series telling you what to expect in the year ahead.
Speaker 1: You may, I'm sure, ask yourself, why would we ask
Speaker 1: experts what's going to happen in the year ahead when
Speaker 1: we know that so often they get it wrong. But
Speaker 1: the thing is, as an investor, you need to know
Speaker 1: what everyone else is thinking. It's what everyone else is
Speaker 1: thinking is what moves markets, right. It's not what you
Speaker 1: think is going to happen to a certain share price,
Speaker 1: it's what everyone else thinks. So that's why you need
Speaker 1: to know the contentus even if it's wrong, and trust me,
Speaker 1: they're often wrong, but it's a major part of understanding
Speaker 1: the context in which you invest, and you need to
Speaker 1: know basically how to reset in any given years. So
Speaker 1: that's why we had a look at share markets and
Speaker 1: shares and property so far in this series. And I
Speaker 1: hope you enjoyed those shows. I certainly enjoyed them. They
Speaker 1: were really good and we had really good people, I
Speaker 1: must say talking about the share markets, market individual shares.
Speaker 1: On the ASX we had June Bailleu and she of
Speaker 1: the ten group was very good on opportunities and risks,
Speaker 1: perhaps in our own market. Stuart William's covered off on property.
Speaker 1: So you say, well, what's left. Whether we need to
Speaker 1: talk about cash, we need to talk about gold, we
Speaker 1: need to talk about bitcoin, we need to talk about alternatives,
Speaker 1: and I think, more than any thinks, we need to
Speaker 1: put it all together. What have we found out now,
Speaker 1: now now that we starting into the new twenty twenty
Speaker 1: five years, what do we know about the markets, what
Speaker 1: do we know about the consensus outlook? And what should
Speaker 1: investors be expecting. To help me put all that together,
Speaker 1: I've got James Girard of Financial Advisor dot com dot you.
Speaker 2: How are you, James? I'm doing them very well. James,
Speaker 2: thanks for having me on.
Speaker 1: Nice to have you on. And I think this is
Speaker 1: the Tester Show, this is the one that we put
Speaker 1: it all together, because there's quite a lot to put together.
Speaker 1: The early part of the series was recorded just prior
Speaker 1: to Christmas and things were looking a little better then,
Speaker 1: so you'd hear on talking about ASX returns in the
Speaker 1: order of in the teens teen percent at one stage
Speaker 1: for the return for the year now as it finished
Speaker 1: on December thirty one, when we were not working and
Speaker 1: I'm sure you weren't working either, listener. The finally cut,
Speaker 1: if you like, of the AX was we did about
Speaker 1: eleven percent eleven and a half for the year, which
Speaker 1: is good. Okay, the long term average is tenth. That's
Speaker 1: pretty good. Of that, you know, four percent or sober dividends.
Speaker 1: That was our outcome for the ASEX. And on the
Speaker 1: S and P five hundred being the sort of core
Speaker 1: US market, the representative Bellweather market, if you like, for
Speaker 1: the US, they did twenty three percent, which was extremely good,
Speaker 1: and they didn't fall off to the same degree that
Speaker 1: we did, which tells you perhaps once again that the
Speaker 1: US market, whatever is, if things are good, it tends
Speaker 1: to be twice as good as the ASEX. And that
Speaker 1: actually segues into the forecast that was offered by Mark Jokuns.
Speaker 1: He said that US chairs should do twice as well
Speaker 1: in twenty twenty five as ASEX chares, and he meant
Speaker 1: that US chairs could do eight percent and we might
Speaker 1: only do four total return. That is, on both markets.
Speaker 1: It remains to be seen if that's ever going to
Speaker 1: come to pass. But James Girard, I imagine your most
Speaker 1: of the people on your books were pretty happy this year.
Speaker 2: I mean.
Speaker 1: It must be in some ways a relatively easy year.
Speaker 1: There have been a financial advisor to have too many stressed,
Speaker 1: angst ridden codes.
Speaker 3: That's right, Yeah, almost all that's a classes went up.
Speaker 3: Cash rates of high property markets went up in most
Speaker 3: capital cities. Share markets here have been great. International share
Speaker 3: markets on the whole have been great as well. Gold
Speaker 3: went up, Crypto went up if you're into that high
Speaker 3: risk stuff, private equity, so the alternatives.
Speaker 2: Yeah, everything went up.
Speaker 1: Everyone's happy, and everyone thinks that they've got it masters
Speaker 1: they're good investors. I'm a good investor. I bought bitcoin
Speaker 1: and it went up. I must be good. Bit of
Speaker 1: a not a scare, not at all, but a bit
Speaker 1: of a down turn at the end of the year
Speaker 1: calendar year and pretty mixed so far these early weeks
Speaker 1: of January on global markets. As sense perhaps of rates,
Speaker 1: the US records may never come to pass from here
Speaker 1: after the last batch of figures, there's a sense of that.
Speaker 1: Am I over egging that?
Speaker 2: No? I think you correct to there.
Speaker 3: What we saw in December was that in the US
Speaker 3: the payroll data was really strong. The labor market data
Speaker 3: was really strong as well, and that's meant that share
Speaker 3: markets going, oh okay, well, the Fed Reserve might not
Speaker 3: do all those rate cuts as quick as what we expect,
Speaker 3: and the share markets like those rate cuts to come through.
Speaker 3: So there's been a temperion of that expectation, and so
Speaker 3: share markets are then come back. And also through some
Speaker 3: of Donald Trump's recent comments around Greenland, Canada, Panama, Camanal
Speaker 3: that sort of scared share markets a little bit around
Speaker 3: He's pending inauguration and coming into his presidency and depending
Speaker 3: on when you listen to this podcast in a week
Speaker 3: or so, which will be a testing time for share
Speaker 3: markets because everybody is looking at this as a weight
Speaker 3: and see type moment almost and I don't think I'm
Speaker 3: overplaying this that the fate of almost everybody's pension fund
Speaker 3: depends on this one man and what he does once
Speaker 3: he becomes president in a week's time.
Speaker 1: Oh yeah, hmm, isn't that great? Isn't that wonderful? Depend
Speaker 1: on that Donald Trump's whims. I just I thought, it's
Speaker 1: not that, I it's not that I just agree with you.
Speaker 1: I don't want to agree with you, and so I'm
Speaker 1: not going to. But I know exactly what you're saying.
Speaker 1: There are some very obvious and we need to put
Speaker 1: them on the table. About Trump being elected, a couple
Speaker 1: of things I always say. First of all, you know
Speaker 1: it's in a republican president has been elected pro market,
Speaker 1: pro deregulation president. That's good for markets. That's why we
Speaker 1: had a great final quarter at the end of last year.
Speaker 1: Certain things I think we can safely say. ESG style
Speaker 1: investing is not just it's not just a less fashionable.
Speaker 1: It is in trouble because you have someone who is
Speaker 1: actively anti ESG, and there are anti ESG elements in
Speaker 1: the US state legislators, of course, been environmental, social, and
Speaker 1: governance issues. In other words, that's sort of investing ethical
Speaker 1: investing for want of a better word, as defined. And
Speaker 1: share markets at least is in trouble, and that is
Speaker 1: very obvious now and they are rushing out of their responsibilities.
Speaker 1: In the US, A black rock is turntail on ESG
Speaker 1: having you know, bard us all silly with their ESG
Speaker 1: stuff for years. Facebook obviously been a spectacular example of
Speaker 1: a company that's just like in an extremely unimpressive way
Speaker 1: trying to curry favor with Trump by dropping the mediated
Speaker 1: content that it had promised for so long. You know,
Speaker 1: really bad behavior there. But we're looking at it as investors,
Speaker 1: and the outcome of that is that shares US shares
Speaker 1: particularly have a win behind them, except for ESG shares.
Speaker 1: What about Because we've covered shares, so I want to
Speaker 1: ask you about a couple of other things, and the
Speaker 1: obvious one is gold. James, where do you sit on gold?
Speaker 3: It's interesting, it's gone up quite a lot over the
Speaker 3: past year or so, and looking across the experts, from
Speaker 3: the fund managers to the economists at the banks, the
Speaker 3: consensus there is that we might be up for another
Speaker 3: ten twenty percent increase in the price of gold. The
Speaker 3: gold price has been supported strongly with the what do
Speaker 3: you call them? The treasuries of countries around the world
Speaker 3: up gold, increasing their gold reserves last year, and then
Speaker 3: there's been the other usual cases for gold. There's a
Speaker 3: bit of a safe haven. So we're not sure what's
Speaker 3: going to happen with these geopolitical tensions that are happening
Speaker 3: around the world, and gold's used for injury and that's
Speaker 3: increased in demand as well over the past twelve months.
Speaker 2: So I've just using an anecdote.
Speaker 3: I've got a client who has a self managed super
Speaker 3: fun and going back about five years ago, we bought
Speaker 3: two kilos of gold and at that point in time,
Speaker 3: it was about eighty thousand dollars per kilo of gold.
Speaker 3: And yeah, when we got to early twenty twenty four,
Speaker 3: we decided, okay, let's take some of this goal because
Speaker 3: being in the retirement phase of super we need to
Speaker 3: generate income. And you know, it's great, this goal's going
Speaker 3: up in value, but it's not paying the bills and
Speaker 3: cost of living pressures that are going up. So let's
Speaker 3: sell half of it. So we sold half of it,
Speaker 3: which was great. We deployed it into bond style investments,
Speaker 3: picked up seven eight percent income there, and then the
Speaker 3: other half of the gold has gone up. So now
Speaker 3: we face this second point, which I'm saying this story
Speaker 3: because maybe some investors wire holding gold in similar positions,
Speaker 3: thinking what do I do now my goal. Do I
Speaker 3: continue to hold it hoping that the price goes up,
Speaker 3: or do I sell it? And my suggestion would be
Speaker 3: to start to in a gradual way decreased the exposure.
Speaker 3: So every time it goes up another five or ten percent,
Speaker 3: sell a little bit of it if you can, so
Speaker 3: that you're averaging it.
Speaker 2: You sell price.
Speaker 3: Because nobody has at crystal Ball, no one can tell
Speaker 3: when that the peak of the gold price will be.
Speaker 1: This person did they hold the gold? They had the
Speaker 1: gold and bullion, you see they did.
Speaker 3: Yeah, we bought physical gold, one kilo blocks, and we
Speaker 3: took out a bank safety deposit box. And it's really
Speaker 3: hard to find a safety deposit box. We had to
Speaker 3: walk around to several branches of major banks to try
Speaker 3: and find one, and some of them said, look, we
Speaker 3: can put your name down, but there's going to be
Speaker 3: a five to ten year waiting list.
Speaker 2: But luckily we found one.
Speaker 3: I think it was at Westpac from memory, and the
Speaker 3: client left these two kilos of gold there. So that's
Speaker 3: another thing to think about practically with gold, is that sure,
Speaker 3: it's great to buy it, and maybe how you buy it.
Speaker 3: Will you buy the physical goal we buy a gold
Speaker 3: etf we buy gold mining companies. But if just go
Speaker 3: for the simple approach of buying some physical gold, you
Speaker 3: also need to think about where you're going to store
Speaker 3: it and whether where you're storing it has insurance attached
Speaker 3: to it, or whether you need to go get your
Speaker 3: separate insurance policy to protect that that gold bar that
Speaker 3: you've just bought.
Speaker 1: What what did this particular person have against ETF?
Speaker 3: So wonder they had an issue with the ETFs, and
Speaker 3: I think it's somewhat misfounded. But they felt that the
Speaker 3: ETF was synthetic and not backed one for one with
Speaker 3: gold reserves, whereas when I read the details of the
Speaker 3: gold ETF, they seem to be backed. So as someone
Speaker 3: buys a goal ETF, the ETF provide will go buy
Speaker 3: some physical gold. But the client just wanted to be
Speaker 3: dead certain that if everything went to crumbs, that they
Speaker 3: have a chunk of gold that can hack a little
Speaker 3: bit of way of to barter to survive, that they'd
Speaker 3: have those gold bars there.
Speaker 1: Sounds like your client probably be most please if they
Speaker 1: had the bullion under the under their pillar. Would they
Speaker 1: have gone beside it?
Speaker 2: Something like that?
Speaker 3: Yeah, gold's a funny has a lure to it.
Speaker 1: It's funny one, isn't it. And I talked to I
Speaker 1: talked to a person who's on the board of a
Speaker 1: family office and the family Office had got into gold
Speaker 1: and they had this exact same conversation and the family
Speaker 1: office were skeptical about this aspect of gold, and the
Speaker 1: conversation went down the same line, At what point if
Speaker 1: you're really worried about things being absolutely dreadful and if
Speaker 1: it's the last resort, then how far do you go?
Speaker 1: How about the vault? Would they get into the vault
Speaker 1: on the day if they need to, etc. You could
Speaker 1: kind of go on forever with that. So that's something
Speaker 1: everybody has to figure out for themselves. But it's pretty interesting,
Speaker 1: and it's also interesting, James, you mentioned that it might
Speaker 1: be time to take profits on gold. That's an interesting
Speaker 1: point of view. I would tend to be fully bullish
Speaker 1: on gold again this year, as I have been last
Speaker 1: year and the year before, and I have it in
Speaker 1: my own SMSF. I have it in the form of vtfs,
Speaker 1: and I see it at a hedge against Trump, basically
Speaker 1: a hedge against Trump's, a hedge against Trump's whims tendency
Speaker 1: towards chaos, and the fact that all elected officials have
Speaker 1: a honeymoon period and then it ends, and the Trump
Speaker 1: honeymoon period when it ends. I think gold could be
Speaker 1: a very useful acid in death context. That's very much
Speaker 1: a personal view. Okay, we'll take a break. We'll be
Speaker 1: back in a moment. Hello, Well, welcome back to The
Speaker 1: Australian's Money Puzzle podcast. I'm James Kirby, Well, the editor
Speaker 1: at The Australian, talking to James Girard. This is the
Speaker 1: final episode of our outlook for the year. So if
Speaker 1: you recall in the first segment I laid out how
Speaker 1: the consensus is for the year ahead, pretty ordinary on
Speaker 1: Australian chairs, pretty good on American chairs, US shares. The
Speaker 1: consensus for property, such an important asset to our listeners,
Speaker 1: is also it's fairly mild, a national average of three percent.
Speaker 1: That could move either way if you think about it.
Speaker 1: This year the national average that is twenty twenty four
Speaker 1: of the national average was four point nine. Which they're
Speaker 1: all key figures, James, But they're modest enough, really, aren't they.
Speaker 1: For property, it's certainly a period of it's a pretty
Speaker 1: mixed out look on every level, not just regionally but
Speaker 1: generally for property. What are you saying to people on
Speaker 1: their property holdings? What's your sort of default position at
Speaker 1: the moment on that?
Speaker 3: So when we're talking about property, we were either talking
Speaker 3: about rates or physical property. And I was really interested
Speaker 3: to listen to Stuart Wims, and I'd encourage everyone if
Speaker 3: they haven't listened to that podcast on the Money Puzzle,
Speaker 3: to listen to that because really insightful. He's an expert
Speaker 3: on property markets, and he spoke about sentiment and market
Speaker 3: cycles and why Perf went up and Melbourne went down.
Speaker 3: But broadly, what I'm saying to clients is that I
Speaker 3: feel that what I'm seeing is my clients, particularly the
Speaker 3: ones in Sydney and Melbourne, with these one million two
Speaker 3: million dollar mortgages, they're starting to struggle. They're eating up
Speaker 3: into their officed accounts, their savings because a fair chunk
Speaker 3: of these people have gone from two percent interest rates
Speaker 3: to six to six and a half percent interest rates,
Speaker 3: and that's stopping them from upgrading their home, from in
Speaker 3: buying investment properties. And so I just feel that we
Speaker 3: just once these rate cuts happened from the Reserve Bank,
Speaker 3: it will be this confidence boost because property markets run
Speaker 3: on sentiment, Mum and Dad sentiment in terms of buying
Speaker 3: and selling, and I think that once we just get
Speaker 3: that first twenty five basis points rate cut that the
Speaker 3: floodgates will open and the property markets will will go
Speaker 3: back up. And I was really interested to hear she
Speaker 3: will talk about Melbourne in particular and all these property
Speaker 3: taxes and the tough time you guys have had over
Speaker 3: the past five to ten years with your market compared
Speaker 3: to Sydney ten property taxes, two new ones. Yeah, yeah,
Speaker 3: I hope you had lots of facilities and resources and
Speaker 3: things afforded for all these taxes that you've been slugged with.
Speaker 1: Oh, yes, of course, each one of them was so beneficient. Yes,
Speaker 1: I know. It's it's a really is an issue. You've
Speaker 1: got the prices falling and you've got the taxes rising.
Speaker 1: It's as simple as that. And you had three percent
Speaker 1: de client in the City of Melbourne last year, a
Speaker 1: forecast de client of up to five percent this year,
Speaker 1: and the property taxes are mounting. So there is indisputable evidence. Actually,
Speaker 1: Ria the Proper Track Group have provided evidence to me
Speaker 1: which I wrote about, that investors have been moving out
Speaker 1: of the state on the basis of those taxes, and
Speaker 1: very simply on the average year, on the average city
Speaker 1: or state in Australia, something like six percent of investors
Speaker 1: sell and in Melbourne it's running at nine percent, so
Speaker 1: basically a third higher than you would expect it to be.
Speaker 1: So I thought between the line Stewart was saying that
Speaker 1: looking at the national market, he thought Melbourne, you know,
Speaker 1: had potential course as if you believe in cycles, but
Speaker 1: she does, then Melbourne. Is you your dollar invested in
Speaker 1: a metament might be better awarded than anywhere else, just
Speaker 1: now and properly, what do you think of that?
Speaker 3: Yeah, it makes sense when you look at the value
Speaker 3: they're in the Melbourne market relative to its closest competitor,
Speaker 3: which is a Sydney market, it makes sense to be
Speaker 3: looking to to buy in Melbourne. I guess I look
Speaker 3: more across the country and one thing I noticed that
Speaker 3: people like to buy in their backyard. People feel more
Speaker 3: comfortable buying in their own local town that they live.
Speaker 2: It's just inherent of us.
Speaker 3: We like comfort, we know what we like, we have
Speaker 3: experience of Yeah, that's right, So people will always continue
Speaker 3: to do that, whether it's an upcycle, down cycle, good time,
Speaker 3: bad time with properties. But if I look more broadly
Speaker 3: around the country, my personal opinion is that it's a
Speaker 3: pretty hard time to buy investment property at the moment
Speaker 3: because we've had Perth go up a lot and although
Speaker 3: professionals like Stuart believe it will keep going up, my
Speaker 3: opinion is that we're not getting on the ground floor.
Speaker 3: We've already had a lot of growth in Perth. Some
Speaker 3: properties have gone up fifty percent, some have gone up
Speaker 3: one hundred percent over the past five years. So you know,
Speaker 3: the question is how much more growth will there be
Speaker 3: before the market peaks? And Adelaide's a similar thing. Although
Speaker 3: it may continue to grow, we're not on the ground floor.
Speaker 3: And places like Hobart in Tasmania that had already peaked
Speaker 3: and started to fell. Places in Queensland you go to
Speaker 3: Brisbane and North and South, they've had fifty to seventy
Speaker 3: percent growth over the past three years. Sydney's at record
Speaker 3: highs and so you have to sort of look further
Speaker 3: and broader. Do you go regionally? Do you go to Darwin,
Speaker 3: do you go to you know, I'd hate to say this,
Speaker 3: but Melbourne. Do we buy in Melbourne as well? We
Speaker 3: have to go to places that we wouldn't usually go
Speaker 3: to buy investment property these days.
Speaker 1: Because the numbers are soft enough to suggest that an
Speaker 1: ordinary investment will do pretty ordinary and you have to
Speaker 1: try a little harder.
Speaker 3: That's yeah, absolutely right where your interest rate if you're borrowing,
Speaker 3: most investments will borrow eighty percent have twenty percent deposits.
Speaker 3: Some will do a cashless transaction, so they typical mum
Speaker 3: and dad will have the family house with some equity
Speaker 3: in it, and then they'll go look to buy an
Speaker 3: investment property and the bank will draw a loan against
Speaker 3: their home and then they'll get an eighty percent loan
Speaker 3: against investment property. So they haven't put a dollar in
Speaker 3: of cash. It's all borrowed money. So where you have
Speaker 3: that type of typical situation and you're having to pay
Speaker 3: six and a half percent interest on the mortgage. Average
Speaker 3: rents in capital cities, the rental yields there are like
Speaker 3: three three and a half percent, so already you're a
Speaker 3: good three percent behind. Then you add your outgoings on top,
Speaker 3: which is typically another one percent of the property value.
Speaker 3: So in short, the property's costing people around seven seven
Speaker 3: and a half percent, but they're only getting three three
Speaker 3: and a half percent income. So that difference of that
Speaker 3: circle four percent they need to pay out of their
Speaker 3: own pocket, so it's a good saving grace that we
Speaker 3: have the negative gearing system here in Australia, which has
Speaker 3: been useful in the past three years after the thirteen
Speaker 3: interest rate rises we've had.
Speaker 1: Yeah, yeah, that's true. I mean definitely. One thing I
Speaker 1: would say too, listeners is that many and we have
Speaker 1: many property guests on the show, they are making the
Speaker 1: point that, of course all property is local. Of course
Speaker 1: there's always opportunities. Just at this time as we wait
Speaker 1: for rates to fall. The market is challenging enough in
Speaker 1: that the figures sound good on average, but there is
Speaker 1: soft spots, particularly in the larger cities, particularly in the
Speaker 1: inner city apartment markets and the outer suburban regions of
Speaker 1: those larger cities. So if you are considering this year,
Speaker 1: folks getting into property or extending property that you own,
Speaker 1: the bias towards home standalone houses remains strong and remains
Speaker 1: advisable I think in many ways because I can we
Speaker 1: can see that the property the inner city apartment markets
Speaker 1: particularly are the weakest spot. We'll have a look at
Speaker 1: this in this closing segment. In a couple of moments,
Speaker 1: we'll take a break and we'll talk about opportunities and
Speaker 1: threats for you in the year ahead. Hello, welcome back
Speaker 1: to The Australian's Money Puzzlive podcast. James Kirby here with
Speaker 1: James Girard. So, James Girard, when we look ahead this year,
Speaker 1: it's not easy, but have a goal. Tell our listeners
Speaker 1: what do you think. Let's talk first of all about
Speaker 1: where the danger points are there, but what might be
Speaker 1: the obvious danger points in a divers portfolio that most
Speaker 1: of our listeners have.
Speaker 3: I think there's big danger points are around uncertainty and
Speaker 3: a lot of that is coming out of the US
Speaker 3: with regards to how Donald Trump takes power and will
Speaker 3: his bark be bigger than his buy it when it
Speaker 3: comes to immigration, illegal immigration and tariffs and these type
Speaker 3: of things, because that will definitely affect share markets. And
Speaker 3: also if he has lots of stimulus and adds to
Speaker 3: the economy, that will create more inflation as well, which
Speaker 3: will delay just rate cards and have all these ripple effects.
Speaker 2: So I think.
Speaker 3: Watching what happens in the US is very important as
Speaker 3: well as those geopolitical events, so they're sort of the
Speaker 3: known risks that we have with global markets. And then
Speaker 3: here in Australia, I think it's really crucial around the
Speaker 3: Reserve Bank cutting those interest rates because I feel that
Speaker 3: we're in a lot more danger than what the numbers indicate.
Speaker 3: So the default rates on loans aren't that bad on
Speaker 3: the moment at the moment for home loans and investment loans,
Speaker 3: but that's because people are just hanging on. But another
Speaker 3: couple of months and I think that we could start
Speaker 3: to see things turn bad. So we really need to
Speaker 3: see those rate drops. That's a key thing in Australia,
Speaker 3: and then that will mean that everything will be fine,
Speaker 3: I feel for the Australian economy.
Speaker 1: Okay, yes, that's really interesting. And I think that issue
Speaker 1: with the US being so important, of course, that instantive
Speaker 1: becomes that the US markets are so important, and the
Speaker 1: US markets will dictate the tenor of the market this year.
Speaker 1: So folks, as Games were saying, watch the US, don't
Speaker 1: think for one moment that the US share market could
Speaker 1: have a downturn and we would escape it, because we won't.
Speaker 1: In fact, history would suggest we will fall, not just
Speaker 1: in tandem, but we may actually fall further if they
Speaker 1: come off in any way. The other sort of scenario,
Speaker 1: which perhaps is more likely, is Trump being, if nothing else,
Speaker 1: a clearly pro business politician will seek to prolong the power,
Speaker 1: if you like, of US markets and the US exceptionalism,
Speaker 1: as they say. But the manner of doing that, he
Speaker 1: may well stoke inflation way very well. I think it's
Speaker 1: likely he will stoke inflation. I think it's likely that
Speaker 1: they will not be able to cut rates. It was
Speaker 1: a big call anyway that the US could be cutting
Speaker 1: rates while they had a president that was basically lighting
Speaker 1: fires under the engines of US business. And so the
Speaker 1: likely outcome perhaps is that the US market overheats and
Speaker 1: that inflation re peers as a real problem in the US.
Speaker 1: And there's the signals of that already just now these
Speaker 1: weeks on the markets, as we see that these expected
Speaker 1: US fed rates that James mentioned at the start of
Speaker 1: the show, that you know, they were seen us to
Speaker 1: be they were seen us for sure at the end
Speaker 1: of last year, and now they are not for sure
Speaker 1: at all, and they may never come, and that would
Speaker 1: change the whole nature of global markets. So keep that
Speaker 1: in mind.
Speaker 2: That's all about.
Speaker 1: Share markets, I suppose. On the property market, the interest
Speaker 1: rate cut, of course is hoped for. If you're an optimist,
Speaker 1: it's worth knowing that several of the major banks have
Speaker 1: actually peeled back their expectations, brought them back. I should
Speaker 1: say that a rate cut may actually come as soon
Speaker 1: as February. Most people have been talking about May personally,
Speaker 1: who knows. I don't know why. I sure as I
Speaker 1: wouldn't be waiting for a rat cut in February. I
Speaker 1: wouldn't be expecting that, not with what we see in
Speaker 1: the US markets. And all these markets are interlinked. That's
Speaker 1: the thing I think that's so important these days to
Speaker 1: keep in mind, folks. Markets are so interlinked with over
Speaker 1: the LA bushfires on radio this morning, and you know
Speaker 1: there was a time where the l bushfires would have
Speaker 1: been a distant matter. These days, with reinsurance scale and
Speaker 1: scope of the LA bushfires will play straight into the
Speaker 1: Australian market because of the reinsurance costs, because they lay
Speaker 1: their risk off here and we lay our risk off there.
Speaker 1: So everything is interconnected, and the US is this sort
Speaker 1: of locomotive of old market. So that's why James is
Speaker 1: saying to keep an eye on it. Okay, they are
Speaker 1: some of the more obvious threats. Just to drill down
Speaker 1: a little bit deeper on that, James on the local
Speaker 1: shares and as jun Bee Lu made this point more
Speaker 1: than once in her segment on the show, that the
Speaker 1: banks can't possibly do that again. You can't expect Comwell
Speaker 1: Bank to go forty five percent again next year, and
Speaker 1: you can't expect them to carry the whole market. So
Speaker 1: it's pretty obvious then that the financial stocks in our
Speaker 1: market would seem to be not a threat, but you
Speaker 1: couldn't possibly expect them to do as well this twenty
Speaker 1: five as they did in twenty twenty four.
Speaker 2: What do you think?
Speaker 3: I agree with that and was interested to listen to
Speaker 3: June talk about the financial stocks on the AX. So
Speaker 3: I think there's an emerging trade opportunity occurring around a
Speaker 3: rotation out of the banks, or reduction of exposure to banks,
Speaker 3: given how well they've done, and into the underloved sector,
Speaker 3: which is the resource sector. We're seeing most of the
Speaker 3: big resource companies down in share price over the twelve
Speaker 3: months while the banks have been going through the roofs.
Speaker 3: I think that will start to see investors take profits
Speaker 3: from the banks move into the resource sector. But overall,
Speaker 3: I think that the AX will have a pretty stable
Speaker 3: twelve month period, which is in line with what the
Speaker 3: others have been saying, and.
Speaker 1: This rotation is that is basically the institution investors moving
Speaker 1: out of banks and going back into other areas where
Speaker 1: they think there will be some action this year. Resources
Speaker 1: as you see, and also industrials are in industrial shares
Speaker 1: that also have been only ticking along in twenty twenty four.
Speaker 1: Very strange year twenty twenty four on the Australian share market.
Speaker 1: Not just that banks carried everything, but banks carried everything
Speaker 1: despite the fact that all institutional investors said that they
Speaker 1: would not do that, and that there was sell notes.
Speaker 2: You know, I remember this.
Speaker 1: I can remember periods of a year or more where
Speaker 1: you would not see a single sell note on an
Speaker 1: Australian bank stock, and all the brokers had sell notes
Speaker 1: all through the year on Australian bank stocks and every
Speaker 1: one of those sell notes was wrong. That's a strange year.
Speaker 1: So there's always something you don't expect. Let's look at
Speaker 1: the other side, then, let's we look at the opportunities.
Speaker 1: So part of that obviously would be non bank blue
Speaker 1: chip shares in Australia being leading resource stocks, perhaps some
Speaker 1: recovery in good industrial shares, even health care shares. There
Speaker 1: is some possibility and that they were off the boy
Speaker 1: last year it stocks of course went very strong along
Speaker 1: with banks. Not as important on a market cap basis,
Speaker 1: but important nonetheless, and so you can't expect them to
Speaker 1: do quite so well next year, you would think history
Speaker 1: would suggest. But in terms of opportunities, you have those industrials,
Speaker 1: you have industrials, you have resource stocks. What about rets
Speaker 1: games you mentioned in passing there in the first part
Speaker 1: of the show you mentioned reats Australian property trusts starting
Speaker 1: to see a few pieces suggesting you know, the worst
Speaker 1: is over for them. Maybe the worst is over for them.
Speaker 2: What do you think? I believe it is.
Speaker 3: Cash rates drop in have several benefits for rates. One
Speaker 3: of them is that rates are a bond proxy that
Speaker 3: both produced income and bonds have had high yields over
Speaker 3: the past couple of years in line with the increases
Speaker 3: in the cash rates both here and around the world.
Speaker 3: But as the cash rates start to come down, the
Speaker 3: bonds look less attractive and people move back towards the
Speaker 3: rates and also the financing of the rates. A lot
Speaker 3: of them have gearing of anywhere from thirty to fifty
Speaker 3: percent in their portfolios to acquire these commercials, properties and
Speaker 3: interest rates are quite high internally in these reats to
Speaker 3: finance their debt, and that will come down which will
Speaker 3: improve their yields as well. There's some tail winds there,
Speaker 3: as I would say for the reads, and so that's
Speaker 3: an area that I'm positive on. And just finishing my
Speaker 3: comments on the resource sector, they're one thing I forgot
Speaker 3: to mention, which is both a risk and an opportunity
Speaker 3: is China and that linkage to our Australian market. So
Speaker 3: there's different interconnecting pieces. You have the US there, what
Speaker 3: are they going to do with tariffs and trade walls
Speaker 3: with China? And then what's the Chinese economy going to
Speaker 3: do with stimulus to sort of get their engine up
Speaker 3: and running again. And then how does that impact the
Speaker 3: Australian market given that iron ore is a big export
Speaker 3: that we center to China, And so if I look
Speaker 3: into that, Crystal Board says that China keeps stimulating their
Speaker 3: economy they get it back underway, which is great for
Speaker 3: the resource prices. And then if I just look at
Speaker 3: a couple of different of the mining companies in Australia,
Speaker 3: so BHP about fifty percent of their profits comes from
Speaker 3: iron ore, forty few metals is really heavy iron about
Speaker 3: ninety percent of their revenue is from iron ore, and
Speaker 3: then Rio Tinto is about the same as HP fifty
Speaker 3: sixty percent of their their profits. So if you wanted
Speaker 3: to go heavy on that China theme resource sector, you
Speaker 3: go forward Skew. But if you want to be more diversified,
Speaker 3: you go for BHP or Rio Tinto.
Speaker 1: Okay, And for what it's worth of folks, the world's
Speaker 1: most famous stockbroker, the vampire squid, Golma Sas, has just
Speaker 1: twenty hours ago put out a pretty interesting report and
Speaker 1: they say that stocks China stocks China stocks being a
Speaker 1: proxy for Australian or or you can, you can use
Speaker 1: it both ways, are expected to rise twenty percent twenty
Speaker 1: percent in the calendar year twenty twenty five. So if
Speaker 1: you want to talk about opportunities, I'm not suggesting you
Speaker 1: do this, but I'm telling you that the most powerful
Speaker 1: stockbroker in the world, investment bank, Gorman Sacks, has come
Speaker 1: out this week with estimation that China stocks will lift
Speaker 1: by twenty t which would suggest that China obviously is
Speaker 1: going to turn this year, which would suggest that the
Speaker 1: idea of resource stocks in the Australian market would be
Speaker 1: a good call. So let's see if that turns out
Speaker 1: to be true. Certainly worth keeping in mind before you go,
Speaker 1: James Bitcoin, you are among our guests on the show.
Speaker 1: You have been someone who's always made sure you're in
Speaker 1: on bitcoin through thick and thin. Where do you stand
Speaker 1: after an extraordinary year? I think it was the single
Speaker 1: most successful acid class, and I think we have to
Speaker 1: call it an acid class these days, whether we like
Speaker 1: it or not.
Speaker 2: Where do you stand now the process?
Speaker 3: Bit Coin's gone up about five hundred percent since the
Speaker 3: start of this cycle, and last cycle went up from
Speaker 3: memory around six hundred percent. So similar to some capital
Speaker 3: city property markets in Australia, you look at where are
Speaker 3: we in the cycle, and on one hand, with cryptocurrency,
Speaker 3: a lot of people are thinking, geez, it's in the news,
Speaker 3: it's going up. I don't want to miss out. But
Speaker 3: then you have to think, well, the people that bought
Speaker 3: when it was much cheaper than what it is today,
Speaker 3: they're probably going to start selling out and taking their profits,
Speaker 3: and you're coming in to buy to sort of cash
Speaker 3: them out and let them have that five six hundred
Speaker 3: percent gain. So I would say it's a high risk,
Speaker 3: high lost, high potential gain type investment, and it's probably
Speaker 3: where a small dabble in there. The way that you
Speaker 3: can do it is you can either just set up
Speaker 3: an exchange account with one of the exchanges. You just
Speaker 3: need to be careful because they're not really regulated. Regulation
Speaker 3: is coming in from the Australian government on this on exchanges,
Speaker 3: sort of like with the places where you go to
Speaker 3: buy cryptocurrency, but still emerging, so be careful who you
Speaker 3: use to set up with. And then you can buy
Speaker 3: a bit of bitcoin, which is the big staple, and
Speaker 3: then you can spread money. And one thing which I
Speaker 3: suggested recently in the Australian last weekend in the Wealth
Speaker 3: section was that you can look at this averaging situation
Speaker 3: where you go, all right, what are the biggest twenty
Speaker 3: cryptocurrency coins. I don't really know the difference between Stellar
Speaker 3: versus ripple and what they do, why they go up
Speaker 3: and while they go down, but I want a piece
Speaker 3: of the action. So it might be to spread five
Speaker 3: or ten thousand dollars and put five hundred dollars in
Speaker 3: ten or one thousand dollars in twenty or something like that,
Speaker 3: just to get a bit of a spread exposure because
Speaker 3: it's just so hard to figure out why they go
Speaker 3: up and down, even though I follow them quite closely.
Speaker 3: You need to really understand a lot of technical stuff,
Speaker 3: which I don't do, and I don't think most people
Speaker 3: do either. I think they're really just following crowds and forums.
Speaker 1: Okay, so it gives you a chance to buy a
Speaker 1: diverse of id spread off crypto coins. Correct, Yeah, yeah,
Speaker 1: in a single in a basket of them. I kind
Speaker 1: of ANYTF like approaches where you buy everything and help
Speaker 1: for the best. Yeah, Well, buying everything and help for
Speaker 1: the best, hopefully for the best is probably a very good,
Speaker 1: probably a very good disposition to have an investing It's
Speaker 1: one thing A very clever person who I worked with
Speaker 1: one time and who had a PhD in the treatment
Speaker 1: of time in Shakespeare please, was also stockbroker at one stage,
Speaker 1: very very Eridivepresson said to me one time, and I've
Speaker 1: never forgotten it, and it's probably a good thing for
Speaker 1: looking ahead for the year. About being an investor, he said,
Speaker 1: the main thing is to be the same. If you're
Speaker 1: going to be bullish, always be bullish. If you're going
Speaker 1: to be bearish, always be verish, just don't.
Speaker 2: Chop and change.
Speaker 1: I really like that. I think there's an awful lot
Speaker 1: to it. Maybe somebody would like to write in and
Speaker 1: tell us what they think of that approach and what
Speaker 1: they think of the series which we've put together for
Speaker 1: you for the year ahead. I hope it was useful
Speaker 1: to you. Thank you very much James for coming on
Speaker 1: the show today.
Speaker 2: My pleasure is always thanks for having me on.
Speaker 1: And folks, next week we really zoom normal transmission okay
Speaker 1: with two shows a week Tuesdays and Thursday, starting next Tuesday,
Speaker 1: January twenty one. The letter box is only half full.
Speaker 1: We can take some suggestions, questions, comments, lovely to have
Speaker 1: them rolling in again. The email is the money Puzzle
Speaker 1: at the Australian dot com dot Au. Today's show was
Speaker 1: produced by Leah Summerglue. Thank you very much, Lee, and
Speaker 1: thank you everyone for listening.
Speaker 2: Talk you soon.