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Speaker 3: After and welcome back to the show. This is smart
Speaker 3: this is smart money on the Weekend Collective. I'm Tim Beverige.
Speaker 3: If you missed any of our previous discussions, Politic Central
Speaker 3: was fascinating discussion with Duncan Webb, he's Justice spoke expresson
Speaker 3: for Labor about the Treaty Principles Bill. Followed up with
Speaker 3: the discussion and feedback from David Seymour who's the architect
Speaker 3: of the bill as well. That was a fascinating and
Speaker 3: also a chat with Carle McDonald on the Health Hub
Speaker 3: on loneliness. You can check it out week podcasts the
Speaker 3: Weekend Collective go to iHeartRadio would be a great starting point,
Speaker 3: but now it is time to move on the conversation
Speaker 3: and with Smart Money, and my guest is from Harbor
Speaker 3: Asset Management and his name is Chris Deliver and Chris
Speaker 3: joins me. Now, gooday, Chris, how are you going?
Speaker 5: Hey?
Speaker 4: Tim, nice to be with you.
Speaker 3: Yeah, you too. We're going to have a chat about well,
Speaker 3: basically investment markets as a result of Donald Trump winning
Speaker 3: the US election, which is obviously going to have an
Speaker 3: impact on New Zealand's trade and the US dollar, etc.
Speaker 3: What should we kick off with? What are your first
Speaker 3: what are your first thoughts about this?
Speaker 4: Yeah? I mean a lot of Keywhi's probably look at
Speaker 4: Trump and you might not agree with his politics. And
Speaker 4: the initial reaction we get when we normally talk to
Speaker 4: people is, oh, no, you know, what's this going to mean?
Speaker 4: What's this going to mean for our key? We save
Speaker 4: a portfolios? What is this going to mean for the
Speaker 4: share market? And often there's a lot of a lot
Speaker 4: of fear, to be honest, you know, thinking about about
Speaker 4: his agenda. Now, we've done a lot of research into
Speaker 4: this and you know, following the Republican clean sweep, talk
Speaker 4: to a lot of offshore strategists and I've been able
Speaker 4: to kind of, you know, paint a picture of how
Speaker 4: things might look over the next few years. Of course,
Speaker 4: with Trump, there's always uncertainty, and that's what leads to
Speaker 4: a lot of apprehension. But I suppose the key things,
Speaker 4: if I look at on the positive side, are that
Speaker 4: the key driver of share markets over the long term earnings,
Speaker 4: and as an investor in a company, you get earnings
Speaker 4: that are after tax. So one of the big fears
Speaker 4: before the election was that a lot of Trump's tax
Speaker 4: cuts from when he was last in power would lapse,
Speaker 4: and that would have quite a severe impact on the
Speaker 4: US economy, both personal tax cuts and company tax cuts.
Speaker 4: So the good news for people who are investing in
Speaker 4: companies and people with key we saver accounts. A lot
Speaker 4: of the global share market is in the US. One
Speaker 4: thing that we know that Trump won't do is repel
Speaker 4: his own tax cuts, and what he may do has
Speaker 4: cut them further. So for US shares it's largely been
Speaker 4: a really good story so far. They're rallied pretty strongly
Speaker 4: following the election results. One of the things that we
Speaker 4: have to be more apprehensive on, however, his trade policy,
Speaker 4: and we don't know what that would look like, and
Speaker 4: that's kind of a negative for markets. Markets don't light
Speaker 4: up like uncertainty, and at the moment we just don't
Speaker 4: know how far he's going to go with tariffs, but
Speaker 4: he has made some pretty outlandish promises so far. So look,
Speaker 4: those are the initial thoughts. There's some really, there is
Speaker 4: some good there, but there's also a few things to
Speaker 4: keep an eye on.
Speaker 3: Right we are talking with Chris Deliver. He's director ahead
Speaker 3: of multi asset and Global Investments from Harvard Asset Management.
Speaker 3: We'd like your calls on this, by the way, oh,
Speaker 3: eight hundred and eighty ten eighty. In the wake of
Speaker 3: the Trump victory, clean sweet. Basically, he's going to have
Speaker 3: more power than he had last time. Where are you
Speaker 3: going to be putting your money? Or have you got
Speaker 3: any questions that you want to run by Chris. I'm
Speaker 3: sure he'll he'll make a good fist of answering well,
Speaker 3: of course, without giving any specific financial advice. Chris, my
Speaker 3: first question to you is, I'm guessing that when you're
Speaker 3: looking at what we might see happened as a result
Speaker 3: of Trump's presidency, you might have cast your mind back
Speaker 3: eight years to what happened. There are there any lessons
Speaker 3: from history that might repeat themselves or not?
Speaker 4: Here there are. And actually, if we look at the
Speaker 4: last time he was in power, the initial reaction from
Speaker 4: share markets and this all happened in one day, believe
Speaker 4: it or not, tim but the initial reaction from markets
Speaker 4: was actually a really negative one, so as it looked
Speaker 4: like he was going to win, but actually as markets
Speaker 4: started to digest what his policies would mean, we actually
Speaker 4: had a really good period for share markets when Donald
Speaker 4: Trump was last in What was the key driver of that.
Speaker 4: The key single driver was his tax package. So we
Speaker 4: saw him put some policies in place around repatriation of earnings,
Speaker 4: but also lower income tax rates for companies and that
Speaker 4: led to higher post tax earnings of course, so that's
Speaker 4: something we can learn that actually last time, despite being
Speaker 4: a result that the market wasn't expecting, it actually turned
Speaker 4: out okay for investors. We did see him last time, though,
Speaker 4: create a lot of uncertainty with regards to his trade policy.
Speaker 4: We saw tariffs. Interestingly, the tariffs he put on were
Speaker 4: largely not actually repealed, so they're still in place today.
Speaker 4: So I think it was something indirectly that both administrations
Speaker 4: actually supported are given Biden didn't repeal them. But look overall,
Speaker 4: it was a pretty good period for markets, taking away
Speaker 4: the fact that he was still in power when COVID
Speaker 4: broke out and we saw a pretty large fall in
Speaker 4: share markets then. But I don't think we can quite
Speaker 4: say that he was the driver of that.
Speaker 3: Actually, my initial search on the share market because how
Speaker 3: long is it since the since the election?
Speaker 4: Now what it's a couple of weeks, right, And the
Speaker 4: initial reaction was was really really positive. So there is
Speaker 4: some trades in the market which are kind of known
Speaker 4: as Trump winners. So those are, yeah, test less two.
Speaker 3: And forty bucks on the fourth of November to three
Speaker 3: hundred and fifty dollars. It's tailed off a little bit
Speaker 3: since then. Yeah, yeah, what did you make?
Speaker 4: So that's been a winner, And it's I don't think
Speaker 4: there's any great science to what People look at them
Speaker 4: and go, well, Elon Musk is right next to Trump.
Speaker 4: It's it's got to be really really good for Tesla. Right.
Speaker 4: Some of the other winners have been banks, bitcoin, in cryptocurrencies,
Speaker 4: they've been they've been winners. I read a stat the
Speaker 4: other day which astounded me. A doggie coin, which is
Speaker 4: kind of a meme crypto coin. The market cap of
Speaker 4: that is actually larger than the top four US banks,
Speaker 4: which is kind of mind boggling, But that's gone up,
Speaker 4: and that's because Trump's agenda is more around deregulation or
Speaker 4: softer regulation, and that tends to benefit banks and certainly cryptocurrency.
Speaker 4: Small companies have been doing really well, so smaller companies
Speaker 4: tend to be more cyclical and linked to the fortunes
Speaker 4: of the US economy. They've gone pretty well, but there
Speaker 4: have been some losers. So renewable energy stocks have done
Speaker 4: really poorly. We know that Trump isn't a big supporter
Speaker 4: of renewable so solar stocks, wind stocks went down quite significantly,
Speaker 4: and bond yields have gone up, and that's because there's
Speaker 4: the expectation that Trump's administration will rack up a lot
Speaker 4: more debt and that means that the government will need
Speaker 4: to issue more bonds.
Speaker 3: Yeah. I was actually wondering what because the other one
Speaker 3: that's taken it is health stocks and vaccine companies that
Speaker 3: work on health stocks take a bit have taken a
Speaker 3: bit of a beating because RFK, who's going to be
Speaker 3: the Health secretary, obviously is a vaccine well he's a skeptic,
Speaker 3: but conspiracy theorist on that stuff as well actually wonder
Speaker 3: if that actually might be a goodbye because they take
Speaker 3: a hit initially, then you sort of wonder whether they're
Speaker 3: going to actually have a bit of perspective and recover
Speaker 3: a bit. That's very specific opinion I'm seeking, But what
Speaker 3: do you reckon?
Speaker 4: Yeah, so I think it's a good point in looking at,
Speaker 4: you know, what is the initial reaction versus what do
Speaker 4: you think will happen over the long term, because actually,
Speaker 4: when we look at last time he was in power,
Speaker 4: and you ask for lessons of the previous time, if
Speaker 4: I actually look at what renewable stocks did when Trump
Speaker 4: was last in power, they actually did perfectly good. So,
Speaker 4: you know, so some of that initial reaction around these
Speaker 4: things might not necessarily be the correct one. And I
Speaker 4: think the other thing to take into account is there's
Speaker 4: a lot of uncertainty on exactly what the policy agenda
Speaker 4: will look like. So whether it's you know, twenty percent
Speaker 4: tariffs on China, whether it's sixty percent tariffs on China,
Speaker 4: whether he reduces the text the corporate tax rate from
Speaker 4: twenty one percent to fifteen percent, you know, these are
Speaker 4: things that you don't actually know. So at the moment,
Speaker 4: these initial trades that have that have gone taken place
Speaker 4: in the market. There's some of them are more on
Speaker 4: what people might expect Trump to do, as opposed to
Speaker 4: any kind of of finite policy agenda that's been put forward.
Speaker 3: Okay, let's say, let's take some calls, and who's first, Peter, Hello.
Speaker 6: Good afternoon. Well, I don't know who you can believe,
Speaker 6: because I think the New York Times said that Trump
Speaker 6: had a discussion with Pusen, which was denied, then it
Speaker 6: was Elon Musk had a discussion with the UN investor
Speaker 6: in New York, which was later denied. And then in
Speaker 6: January the debt ceiling for the US comes up for renewal.
Speaker 6: So how can you produce taxes when the deficit has
Speaker 6: never been high and carries on been high, especially with
Speaker 6: higher interest rates?
Speaker 3: Are you basically raising the question of what Trump's rhetorics
Speaker 3: versus what he's actually going to be able to do.
Speaker 6: Yeah, well, they're saying they can't reduce him. Is he
Speaker 6: going to cut and slash the budget, you know, to
Speaker 6: fund his tax cuts? You know what, what do you believe?
Speaker 6: That's what I'm funny.
Speaker 3: Oh, well, for instance, you mean the two million dollars
Speaker 3: two trillion dollars. Sorry, I was only about a billion
Speaker 3: times out the two trillion dollars of savings that Elon
Speaker 3: and the other guy I want to want to save.
Speaker 3: You mean, do what do we read into that? Is
Speaker 3: that what you are?
Speaker 6: Well? How can we believe anything?
Speaker 3: Well?
Speaker 6: A louder than words?
Speaker 3: Well, yeah, I mean, just before we go to go
Speaker 3: to Christopher his opinion, how much do you believe?
Speaker 6: Well, Trump says everything, so anyone who leaves a little
Speaker 6: bit of what he says, they might believe him. But
Speaker 6: at the end of the day, actions are louder than words.
Speaker 6: And I think a lot of it was campaign a lecture,
Speaker 6: especially with tarifs, and I don't think he's going to
Speaker 6: do anything like that at all.
Speaker 3: Would you put your money where your mouth is on this?
Speaker 3: And if so, where would you be putting it?
Speaker 6: Well, the thing is that you know, he says he's
Speaker 6: not going to have wars and he has water. I
Speaker 6: I think I put my money on that Trump making
Speaker 6: more money from from politics, you know, That's where I
Speaker 6: put my money. Okay, regardless of the outcome.
Speaker 3: You should put buy shares in Trump Inc. I mean,
Speaker 3: what do you what do you think about the rhetoric, Chris,
Speaker 3: when it comes to what Trump says he's going to do,
Speaker 3: because that for instance, that two trillion dollars of saving,
Speaker 3: that savings that Elon Musk and I can't remember the
Speaker 3: last guys and the other guy, Vivek Ramaswami. I think
Speaker 3: it might be, you know, they want to they want
Speaker 3: to get rid of the FBI, to abolish the Department
Speaker 3: of Education, all that sort of stuff. What does that
Speaker 3: actually firstly, Chris, what does that actually mean that rhetoric,
Speaker 3: what does it Does it have any effect or what?
Speaker 4: So? I mean, it's a good point, and it's kind
Speaker 4: of what I was trying to bring up earlier around
Speaker 4: a lot of what actually will transpire in the future
Speaker 4: might not be what people are considering today because we
Speaker 4: don't know the the clear policy agenda. I mean, the
Speaker 4: debt ceiling is troubling, but it's actually been troubling for
Speaker 4: nine a decade now. So we frequently have a debt
Speaker 4: ceiling discussions and they get close to it and there's
Speaker 4: political brinkmanship around, you know, whether it gets raised, and
Speaker 4: it always ends up being raised, but with certain concessions
Speaker 4: between the two respective parties. So look you know, debt
Speaker 4: is concerning for the US, debts actually concerning for a
Speaker 4: whole load of countries, including Japan and some others. But yeah,
Speaker 4: I mean that's the element that Trump brings. As I
Speaker 4: was mentioned earlier, it's the uncertainty, and that brings some
Speaker 4: volatility with it. So yeah, I mean we've just got
Speaker 4: to wait and I suppose see the agenda. But the
Speaker 4: result of the election, the fact that there was an
Speaker 4: election result and a clear result, that's actually been good
Speaker 4: for markets, right because there was a there was a
Speaker 4: potential way that this plays out, that there wasn't a
Speaker 4: clear result, we could get something horrible like like what
Speaker 4: happened last time at Capitol Hill take place. So we've
Speaker 4: no administration is going to have a complete certainty. But look,
Speaker 4: the initial signs for markets is that actually we've digested
Speaker 4: it pretty well. With Trump gets inaugurated January twentieth, following there,
Speaker 4: we'll see a more finite policy agender. I mean, he
Speaker 4: did two tariffs last time, but we don't know the
Speaker 4: extent of what due this time.
Speaker 3: I'll just forgo to our next call. It does obviously
Speaker 3: change in the US administration. It does bring opportunities as
Speaker 3: we say, you know, we see share prices bouncing around.
Speaker 3: Does it bring opportunities beyond on the guesswork though? Are
Speaker 3: there things that you can look at and that you
Speaker 3: know that your team would look at and say, well
Speaker 3: we can based on our research and our understanding what's
Speaker 3: likely to happen, we can confidently invest here and here
Speaker 3: or is it all just well who knows?
Speaker 4: Oh yeah, I mean.
Speaker 3: Two extreme, Yeah it is.
Speaker 4: I mean, I'll tell you the way it does impact
Speaker 4: the way we invest. So we definitely don't preempt anything
Speaker 4: that the politicians do because that just comes with too
Speaker 4: much unpredictability. But for example, we do look at someone
Speaker 4: at a country like China and companies that we invest
Speaker 4: into that are exposed to China, and it makes us
Speaker 4: more apprehensive, right because we know Trump's going to go
Speaker 4: in He's going to have a policy agenda that's probably
Speaker 4: not that China friendly.
Speaker 3: I think that's we can be sure of that one.
Speaker 4: Yes, yes, So at the margin, we look at that
Speaker 4: and we take it very seriously when we look at
Speaker 4: a company. So what I'm talking about there is you know,
Speaker 4: say a company like b HP lots of relies on
Speaker 4: China a lot for its exports. We will take into
Speaker 4: account that the policy agenda won't be friendly towards their
Speaker 4: main export market, and we think that's really sensible way
Speaker 4: to play it, as opposed to go and you know,
Speaker 4: Trump's not going to be great for you know, or
Speaker 4: Trumps can be great for banks. Let's go buy banks.
Speaker 4: You know, we don't. We don't kind of react like that.
Speaker 3: Yeah, okay, right, let's take some more calls. Mary. Hello, oh, hello, I.
Speaker 7: Really enjoy your show. It's been a great afternoon. Thank you.
Speaker 7: I just wanted to get your guests about crypto because
Speaker 7: I find it's quite difficult to understand it, really, and
Speaker 7: it seems to be more difficult to be able to
Speaker 7: work out how they actually value it. And I just
Speaker 7: didn't know whether his you know, what he thought about
Speaker 7: including it in one's retirement portfolio or something like that.
Speaker 3: Okay, yeah, crypto, Yes, Mary.
Speaker 4: I've got to be completely honest and say I've got
Speaker 4: crypto completely wrong. And lots of other people, you know,
Speaker 4: from traditional finance background probably have too, so I think,
Speaker 4: you know, Warren Buffett and Charlie Munger there've been some
Speaker 4: of the most vocal critics of cryptocurrency in the portfolios
Speaker 4: that we manage. So I managed multi SAT portfolios and
Speaker 4: can we save the portfolios. Look, we don't include it,
Speaker 4: and the key reason for us is we just don't
Speaker 4: know how to value it. So when I when we
Speaker 4: invest in a company, right, we know how to value
Speaker 4: that company. We might not get it completely right every time,
Speaker 4: but we have a really solid framework on valuing a company.
Speaker 4: So I can value a company by looking at the
Speaker 4: earnings that it's going to deliver me over the next
Speaker 4: ten years in discount it to today's prices. With cryptocurrency,
Speaker 4: I just can't do that. I'm effectively getting my return
Speaker 4: through changes in the price, and I find it really
Speaker 4: hard to determine what those changes are in the prices.
Speaker 4: So that's why we don't invest in it and don't
Speaker 4: include it in portfolios. But then that pigs the question
Speaker 4: you go, well, if you're not investing in it, all
Speaker 4: these people are making so much money that coin price
Speaker 4: keeps going through the roof, and what's the deal with that?
Speaker 4: So there has always been so since the world moved
Speaker 4: to fiat currency, and what fiat currency is is when
Speaker 4: your currency is not backed with anything. So you know,
Speaker 4: back through or forty years ago currency was backed by
Speaker 4: gold in the US, for example. Ever since then, people
Speaker 4: have been really worried about storing their money purely in cash,
Speaker 4: okay or in a bank account. Now, that's why gold
Speaker 4: has been such a popular investment for so long. It's
Speaker 4: been an anti feart or anti cash way of storing
Speaker 4: your money, and very much bitcoin has that characteristic as well.
Speaker 7: Can I just ask this, what therefore do you how
Speaker 7: do you view the incoming administration in the States as
Speaker 7: apparent seemingly going to review regulations around bitcoin? What does
Speaker 7: that mean exactly?
Speaker 4: So the incoming administration, and one of the key reasons
Speaker 4: bitcoin has read lead and banks have rallied is that
Speaker 4: it doesn't look to be on their policy agenda to
Speaker 4: create further regulation around bitcoin and further regulation around banks.
Speaker 4: So that's in essence, just creating more rules and hoops
Speaker 4: for them to jump through. So that's largely been seen
Speaker 4: as positive, and that's why both bank stocks and cryptocurrencies
Speaker 4: like bitcoin. That's why they've rallied. Because what can really
Speaker 4: kill a share price or the price of an asset
Speaker 4: is really strong regulation. We saw that with banks following
Speaker 4: the global financial crisis, where they delivered really poor returns
Speaker 4: to customers because they were under quite a large regulatory impost,
Speaker 4: so the banks made them hold more capital against their assets.
Speaker 4: So that's why with this administration, people have been quite
Speaker 4: positive on bitcoin and banks.
Speaker 3: Came here. Yep, got on it. Thanks for that, Thank
Speaker 3: you so much.
Speaker 6: Okay, thanks, but.
Speaker 3: Gosh, what wohen you have given to buying a bitcoin
Speaker 3: when it was only about ten cents.
Speaker 4: My brother actually tagged me and he sent me this
Speaker 4: post he saw on Facebook where somebody you know, was
Speaker 4: given a few bitcoin in because they sold something to
Speaker 4: someone and apparently they sold it something like ninety thousand
Speaker 4: and it's worth tens of million dollars today. Yeah, there's
Speaker 4: lots of lots of stories like that. It is. It's
Speaker 4: quite unbelievable the price it.
Speaker 3: Yeah, I remember getting emails about bitcoin and it was
Speaker 3: like you get buy it for about I don't know.
Speaker 3: I think there was a time it was about a
Speaker 3: dollar or something. If you bought a thousand bucks of bitcoin,
Speaker 3: then you'd have a thousand times one hundred and fifty
Speaker 3: four thousand. Let's not do those numbers, because you know,
Speaker 3: it's like the world is full of investment stories like that.
Speaker 3: But there's probably also the old alternative one where people
Speaker 3: buying at a great price neck and it doesn't do
Speaker 3: so well. But anyway, hey, look we need to take
Speaker 3: a break. We're back in a moment Chris with Smart
Speaker 3: Money with Christa Lever talking about the impact of the
Speaker 3: Trump victory in the election, taking your cause on O
Speaker 3: eight one hundred and eighty ten eight and we've got
Speaker 3: lots more to talk about. We're back in just to
Speaker 3: tickets coming out to half past five news talks. He'd
Speaker 3: be welcome back to Smart Money on the weekend collecting.
Speaker 3: My guest is Chris de Lever. He's director ahead of
Speaker 3: a multi asset and global investments at Harbor Asset Management.
Speaker 3: Let's take some more calls. Chris Nigel, Hello.
Speaker 5: Good afternoon, the young tim. It's a gorgeous day underneda
Speaker 5: guys and sunshine with a bit of cloud that it's
Speaker 5: going to be stinking, hottened and needing. Tomorrow is supposed
Speaker 5: to give up to twenty degrees. That we called for
Speaker 5: you as a.
Speaker 3: Oh they're bunschilling up here. Anyway, have you got a call?
Speaker 3: Have you got a question for Chris to Lever?
Speaker 5: Yeah, we'll get on the money.
Speaker 3: Yep.
Speaker 5: Yep, what does he think of reverse mortgages? Oh, someone
Speaker 5: on the cusp of retirement.
Speaker 3: Slightly different question for you there, Chris.
Speaker 4: Yeah, I'm not a big expert, to be honest, and
Speaker 4: I hold myself out to be one. You know, looking
Speaker 4: at them that the key thing to look at it
Speaker 4: as just the fees em better than them. We've got
Speaker 4: a couple of our analysts in the team who cover
Speaker 4: some of the companies that do reverse mortgages, and yeah,
Speaker 4: I know that the fees em better than them, can
Speaker 4: be quite can be quite high. Look, I mean I
Speaker 4: see I see a role for them in the market,
Speaker 4: you know, because there are actually just so few investment
Speaker 4: kind of vehicles out there where you can kind of
Speaker 4: get paid out a certain amount kind of each month,
Speaker 4: you know, to help with living goths like saying annuity
Speaker 4: would So, look, I get the purposes of them, but
Speaker 4: you know, the key thing I'd look at when assessing
Speaker 4: them is just the fees and obviously therefore the interest
Speaker 4: rate embedded kind of within them.
Speaker 3: There was actually there's an episode we had a little
Speaker 3: while ago, not the last one with Martin Hughes, but
Speaker 3: the one before Nigel. You can go and check it
Speaker 3: was I think it was called a reversion mortgage. Wasn't
Speaker 3: it was something else. It was when they it's worth
Speaker 3: looking out the alternative to reverse mortgages. I can't remember
Speaker 3: what it was called, but it was it's based on
Speaker 3: you selling part of your house to them, but they
Speaker 3: can't actually do anything with it.
Speaker 4: I think that one is a new one offered by Lifetime.
Speaker 4: So I think the players in New Zealand there have
Speaker 4: been Heartland and Lifetime has offered a slightly different, as
Speaker 4: you say, products, So yeah, there are some options kind
Speaker 4: of out there. But yeah, yeah, I'm not sure.
Speaker 3: To be honest, if you go to that's that's fine.
Speaker 3: We probably weren't expecting some too much detailing with you
Speaker 3: on that one, Chris the but Nigel, yeah, go and
Speaker 3: look for the go and look for the smart money
Speaker 3: with Martin Hawes. Not the last time, but the previous time.
Speaker 3: It's all on the website and he talks about that
Speaker 3: there and it's a different it's a it's an alternative
Speaker 3: you could have a look at.
Speaker 5: And it's hold it. What do you remember when I
Speaker 5: was talking to the other day, I'm still living in
Speaker 5: the yether love world. I can't afford that.
Speaker 3: Okay, well, I'll see if I can find it. I'll
Speaker 3: see if I can find it and give it a mention. Okay,
Speaker 3: but yeah, okay, sorry.
Speaker 5: And also one final thing, one final thing, if I could,
Speaker 5: what about the four Bergossi banks owned banks in New
Speaker 5: Zealand not do reverse mortgages.
Speaker 3: I don't know. It's not really Chris's area of expertise
Speaker 3: unless you've got something you can offer on that, Chris.
Speaker 4: I don't actually think they do. But yeah, I wouldn't
Speaker 4: be able to say that with a high degree of confidence.
Speaker 3: No, no, all good. Hey, thanks for your call that, Nigel.
Speaker 3: Nice to hear from you. But by the way, last
Speaker 3: time on the show, you're talking a lot about bonds
Speaker 3: is a good investment versus cash? Is that still the case?
Speaker 4: It's not as good as it was, And the key
Speaker 4: reason for that is we've actually seen since then bond
Speaker 4: returns have been really, really strong. So when I was on,
Speaker 4: I think we were talking about bonds versus cash because
Speaker 4: you know, cash was kind of delivering you five and
Speaker 4: a half percent at the time, and we thought there
Speaker 4: was some scope for bond yields to fall, particularly in
Speaker 4: New Zealand, as inflation started to become more under control.
Speaker 4: You know, we still think they're a pretty good investment,
Speaker 4: but actually not as good as they were. Jeez, I
Speaker 4: think I was on six or eight months ago to
Speaker 4: I must have done something to offend you, because I
Speaker 4: haven't been on since then. You have, no, I think
Speaker 4: that was the last time I was on was probably
Speaker 4: six to eight months ago.
Speaker 1: Yeah.
Speaker 3: I think that's down to your team because we have
Speaker 3: different members from Harbor Asset Management and really to check
Speaker 3: that out. I'm feeling guilty about that.
Speaker 4: Oh no, it's only Jacob. Yes, No, Look, bonds have done,
Speaker 4: Bonds have done really well since then. Look, you know,
Speaker 4: I still think they've got a good role to play
Speaker 4: in a portfolio, to kind of be that defensive ballast
Speaker 4: for when equities are having a tougher time. But a
Speaker 4: lot of that return, you know that we talked about
Speaker 4: six or eight months ago, has has kind of come,
Speaker 4: which has been which has been really good. I think
Speaker 4: there'd be a few investors looking at term deposits at
Speaker 4: the moment and probably observing that they've come down. You know,
Speaker 4: particularly if I look at the twelve month rates, you
Speaker 4: could easily get kind of five and a half percent,
Speaker 4: say you know, six or twelve months ago. You know
Speaker 4: today it's more four to seventy five, you know, to
Speaker 4: a bit under five percent the way, given inflation is
Speaker 4: running at two point two percent over the past twelve months.
Speaker 4: No cash rates they will continue to come down. You know,
Speaker 4: that's been priced by the market. So key thing i'd
Speaker 4: say to call is looking at term deposits at the moment.
Speaker 4: Is that what you're getting at the moment. Market forecasts
Speaker 4: probably show that they come down another you know, one
Speaker 4: to one and a half percent over the next twelve months.
Speaker 4: So I think, you know, bonds and relativity to cash.
Speaker 4: You know, for me, they're still attractive, but not quite
Speaker 4: where they were.
Speaker 3: Yeah, good stuff. Actually, I see it was seventeenth of
Speaker 3: Junior last time, so it has been a while between
Speaker 3: drinks for you. You must have you must have had
Speaker 3: a couple of other people at Harbor Assid who jump
Speaker 3: the queue.
Speaker 4: Oh we definitely yeah, no, we definitely know, we must have.
Speaker 3: I'll have a chet to Andrew, Andrew and Shane just
Speaker 3: so hey, back off, I've got to play some ketch
Speaker 3: up here. Anyway. Hey, look we've got to take a break.
Speaker 3: We'll be back in just a moment. We're talking with
Speaker 3: Chris de Lever. He's a director and he's head of
Speaker 3: multi Asset and Global Investments. Any questions you've got about
Speaker 3: especially looking at the New Zealand dollar it's weakened through
Speaker 3: the against the United States dollar, and also the questions
Speaker 3: around what Trump means for investment markets. If you've got
Speaker 3: your take or you want there's a question you've got
Speaker 3: for Chris, we'd love to hear from you on eight
Speaker 3: hundred eighty ten eighty it's twenty to six News Talks.
Speaker 3: He'd be a pusaels adioynversation. Welcome back to smart Money.
Speaker 3: This is the week in Collective. I'm Tim Beverage. My
Speaker 3: guest is Chris de Lever. He is head of multi
Speaker 3: Asset and Global Investments in Harbor Asset Management. A few
Speaker 3: questions we've got to get through with your Chris. The
Speaker 3: first one is so the New Zealand dollar has weakened
Speaker 3: a lot versus the United States dollar. And we'll get
Speaker 3: the details on that because it's always relevant if you
Speaker 3: go into holiday, especially to the States. But how's the
Speaker 3: New Zealand dollar looking against other currencies like the euro?
Speaker 3: My guess, and I don't have the data and you can.
Speaker 3: This is why I'd just like to guess, fun that
Speaker 3: not great for holiday to the States. But if you
Speaker 3: go to Europe, I'm guessing the euro is also falling
Speaker 3: against the United States dollar? Am I right or wrong?
Speaker 4: Yeah, you're right. It's a case of US dollar strength
Speaker 4: as opposed to New Zealand dollar weakness. And what's driven
Speaker 4: that US dollar strength really actually it's really had another
Speaker 4: leg stronger following the US election results, and you kind
Speaker 4: of go, well, why is that? The key reason is
Speaker 4: that you know Trump will Trump will run deficits, which
Speaker 4: means that he'll pump a good amount of money into
Speaker 4: the economy, so the US will have a pretty strong
Speaker 4: economic growth. The other thing is that the US economy,
Speaker 4: actually even before Trump and any anticipation of that, is
Speaker 4: running really really strong, so and particularly in comparison to ours. Right, So,
Speaker 4: if you look at New Zealand, we tightened or signaled
Speaker 4: that we're tightened interest rates about six months earlier than
Speaker 4: the US and the rest of the world, and we've
Speaker 4: really had some quite severe economic slowing. And the reason
Speaker 4: for that is that when we put up infrast rates
Speaker 4: in New Zealand, that impact occurs really fast. So a
Speaker 4: lot of us, when we fix our mortgages, we fix
Speaker 4: them for six months, one year, two years, very seldom
Speaker 4: beyond that. So when we put up infestrates in New Zealand,
Speaker 4: that really started to bite. But now we're starting to
Speaker 4: put them down and we have inflation within target, we're
Speaker 4: starting to come out the other side of that. So
Speaker 4: what we think, you know, is at current levels, we're
Speaker 4: at fifty eight cents versus the US dollar. It's pretty
Speaker 4: much a twelve month low. In recent times, it got
Speaker 4: to about fifty five cents in COVID. But yeah, our
Speaker 4: view as a firm, and what we're doing in portfolios
Speaker 4: is to actually have less exposure to US dollars at
Speaker 4: the moment, because we think, you know, fifty it's actually
Speaker 4: quite a decent level for us to short some of
Speaker 4: our US dollar exposure. So we think from there it
Speaker 4: won't happen in the next kind of one month, two months,
Speaker 4: or one month too, two weeks. You know, it's a
Speaker 4: longer term view that we think that the key we
Speaker 4: can probably strengthen versus versus the US.
Speaker 3: Okay, I've got a text here that assumes some facts
Speaker 3: that might not be in evidence, but it says, how
Speaker 3: might possible US stagflation effect New Zealand specifically the housing market?
Speaker 3: And I guess the question is, well, the two questions
Speaker 3: are because I can never remember exactly how to define
Speaker 3: stagflation and is it actually a possibility? And then it's
Speaker 3: a loaded text. Really what is it? Could it happen
Speaker 3: in the States, and what would it mean for US?
Speaker 4: So stagflation is essentially when inflation goes up more than
Speaker 4: economic growth does, so it's really what you don't want.
Speaker 4: And it's typically not a good thing for share markets
Speaker 4: as well, because it essentially means that interest rates will
Speaker 4: go up, but earnings, which are linked to economic growth,
Speaker 4: won't go up as quickly. So it's rarely when I
Speaker 4: look at economic scenarios that you don't want, stagflation is
Speaker 4: very very high on the list. So what does that
Speaker 4: mean in a stagflationary environment? It means that US interest
Speaker 4: rates will need to stay higher. It means a very
Speaker 4: strong US dollar, So it probably means it's probably not
Speaker 4: terrible news for New Zealand exporters because they'll be earning.
Speaker 4: They'll often earn commodities that are drived in US dollars.
Speaker 4: And bring them back to Key. We But look, it
Speaker 4: wouldn't be a great environment for people, say, Key we
Speaker 4: save the portfolios. If your largest economy in the world
Speaker 4: that makes up you know, seventy percent of the global
Speaker 4: share market is in stagflation. What's the risk of stagslation?
Speaker 4: It's look, it's it doesn't seem really high that you know.
Speaker 4: The key scenario that could lead to it is if
Speaker 4: Trump just keeps spending money and racking up deficits in
Speaker 4: the menorflation runs on tax cuts.
Speaker 3: Really, isn't it correct?
Speaker 4: Yeah, so it would be it would be tax cuts.
Speaker 4: It will also be if people get worried about interest
Speaker 4: rates and interest rates kind of go up again, bond
Speaker 4: yields go up again, that that wouldn't be particularly good.
Speaker 3: Just a quick dumb question. I look at the simple
Speaker 3: explanation of a stagflation that you've referred to, so high inflation,
Speaker 3: low economic growth, and high unemployment. Have we been in
Speaker 3: a situation of stagflation? Because it doesn't sound like a
Speaker 3: description which is necessarily that rare.
Speaker 4: Yeah, I mean we got pretty close to New Zealand,
Speaker 4: right We had really really high inflation and we had
Speaker 4: kind of we had kind of growth coming off that.
Speaker 4: We didn't really have it for a sustained period of time.
Speaker 4: It was kind of a fleeting moment in time. Really
Speaker 4: we still had high inflation. We're tightening interest rates, but
Speaker 4: now we've kind of settled to more inflations within the band.
Speaker 4: Growth in New Zealand still pretty weak, right, But yeah,
Speaker 4: I'd say if we were in stagflation, it was very,
Speaker 4: very minor good stuff.
Speaker 3: We got to take a break. We'll be back in
Speaker 3: a moment with christ Deliver. He's head of multi asse
Speaker 3: and Global Investments at the harbor Asset Management. You want
Speaker 3: to check out their work and go to harbor Asset
Speaker 3: dot co dot nz. We'll be back in a moment.
Speaker 3: It's ten to six. Yes, welcome back to smart Money.
Speaker 3: Yes we haven't. There's another our themed tune for you.
Speaker 3: I think that's Gwen Stefani. If I were a rich girl,
Speaker 3: believe it or not, fun fact for you, would you
Speaker 3: ever believe you'd hear and asked like Gwen Stefani singing
Speaker 3: a song which is pretty much a rip off of
Speaker 3: something from Fiddler on the Roof, which is if I
Speaker 3: were a rich man, and I don't imagine how many
Speaker 3: of our fans would realize how old school that song is. Anyway.
Speaker 3: Chris de Levera from Harbor Asset Management, Lucky. Last question,
Speaker 3: because we're just about wrapping up now, how are we
Speaker 3: going with inflation in New Zealand now? Because we we're
Speaker 3: hearing a lot less about it. Are we under control?
Speaker 4: Yeah? Well, I mean we're within the band. So the
Speaker 4: reserve band co operates a band of one to three percent.
Speaker 4: We're running at two point two percent at the moment.
Speaker 4: So yeah, it's mission accomplished for the Reserve Bank of
Speaker 4: New Zealand. We've kind of scene it globally come off
Speaker 4: quite significantly, and part of it's due to monet pary
Speaker 4: policy tightening I use central banks putting up interest rates,
Speaker 4: but a lot of it is just that normalization of
Speaker 4: the supply chain issues that we saw happen during COVID
Speaker 4: and that created bottlenecks. It actually took quite some time
Speaker 4: to fully work through. And you know it wasn't just COVID.
Speaker 4: You know, following COVID, we had Russians, Russia's invasion of Ukraine,
Speaker 4: you know, which created further supply issues with key commodities
Speaker 4: like oil and gas. So with a lot of that
Speaker 4: in the rear vision mirror. Now unfortunately the war isn't
Speaker 4: in the rearview mirror. But you know, COVID is we've
Speaker 4: seen that normalization and that's kind of term ys markets
Speaker 4: have been performing so strongly, right. We went from this
Speaker 4: period where people thought, oh no, we're going to have
Speaker 4: inflation forever, but actually central banks around the world, the
Speaker 4: US in particular, have managed to get inflation down while
Speaker 4: not killing economic growth. So it's actually been quite an
Speaker 4: achievement when you look back on it. I can remember
Speaker 4: doing shows tim when inflation was rampant, right, and there
Speaker 4: were cues at the ports with ships going for miles.
Speaker 4: So isn't it amazing where we've come?
Speaker 5: Oh?
Speaker 3: It is indeed. Look we've got about forty seconds left,
Speaker 3: but just quickly. The cash rate's going to be announced
Speaker 3: in the about twenty seventh in November. Of any revision
Speaker 3: of it. What are you picking? It's four point seventy
Speaker 3: five at the moment, isn't it? Have I got the wrong?
Speaker 3: It's it four point twenty five? What have I got anyway?
Speaker 4: Yeah, it's four point seventy five at the moment. Look,
Speaker 4: market expectations are for half a percent are cut, so
Speaker 4: I think our fixed interest team is roughly there or thereabouts.
Speaker 4: And yeah for one point twenty five over the next
Speaker 4: year or so.
Speaker 3: Good stuff. Hey Chris, thanks so much for your time,
Speaker 3: make great work and we'll look forward to next time. Harbor,
Speaker 3: thanks so much, Tim ye Haarbrest Co and Z. Thanks
Speaker 3: my producer Tira and Franka Jackson. Next with Sunday six.
Speaker 3: Thanks for your company. You catch up the Weekend Collective podcast.
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