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Speaker 1: Kya and welcome to Shared Lunch, brought to you by Shares's.

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Speaker 1: I'm Helen Madison. Today we bring you part two of

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Speaker 1: our episode on what Investors need to Know for twenty

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Speaker 1: twenty six. In our first episode, we focused on share

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Speaker 1: markets and the economic recovery in New Zealand. We now

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Speaker 1: turn to the housing market, the popularity of shares versus

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Speaker 1: property crypto within a portfolio, and what effect might the

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Speaker 1: election have on our economic outlook. For expert opinion and predictions,

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Speaker 1: I'm joined by Craig's Investment Director Mark Lister and Keewy

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Speaker 1: Bank chief economist Jared Kerr. Before we get started, here's

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Speaker 1: some important information.

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Speaker 2: Investing involves the risk you might lose the money you

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Speaker 2: start with. We recommend talking to a licensed financial advisor.

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Speaker 2: We also recommend reading product disclosure documents before deciding to invest.

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Speaker 2: Everything you're about to see and here is current at

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Speaker 2: the time of recording.

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Speaker 1: Jared, let's look at the mortgage Mary go round. At

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Speaker 1: the end of last year. It seemed to me anyway

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Speaker 1: that quite a lot of people were switching, which we

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Speaker 1: haven't seen so much in New Zealand anyway, and cash

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Speaker 1: backs seem to be the reason, why are we seeing

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Speaker 1: a different level playing field, if you like, in terms

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Speaker 1: of banks and competition, and actually people actually think it's

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Speaker 1: not so hard to shift our well.

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Speaker 3: Yeah, potentially.

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Speaker 4: I mean cashbacks have been around for a while. We've

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Speaker 4: been a bit more aggressive on the on the actual

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Speaker 4: amount you can get. You know, don't quote me, but

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Speaker 4: I think you can get up to like a percent

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Speaker 4: of your of your mortgage, right, which is quite significant

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Speaker 4: for a lot of people and worth having a look at.

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Speaker 4: Well if we'll keep you for four years though, But yeah,

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Speaker 4: that they are definitely a part of the marketing strategy.

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Speaker 4: I think appetite from banks has been quite volatile in

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Speaker 4: recent years. So you know, this post COVID period, like

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Speaker 4: we obviously had to help out a whole lot of

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Speaker 4: businesses and ouseholds over that period, and it took a

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Speaker 4: long while for them to get their balance sheets back

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Speaker 4: on order. But just in the last couple of years,

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Speaker 4: we've noticed the big the big banks, their appetite for

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Speaker 4: mortgages and business lending had dropped off a cliff, and

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Speaker 4: the RBNZ surveys show that it's been negative, like collectively

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Speaker 4: across the big four banks for a couple of years

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Speaker 4: and you know, a Q bank sort of make hay

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Speaker 4: while the sunshine sort of thing.

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Speaker 3: So we we've.

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Speaker 4: Grown at an extraordinary rate in the last couple of years.

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Speaker 4: And I thought, well, from an economist point of view,

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Speaker 4: you know, oh, that's a nice story for Key Bank.

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Speaker 4: No no, no, no, that's a macroeconomic shock when your banks,

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Speaker 4: when the appetite contracts like that, that's a macroeconomic shock

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Speaker 4: that exacerbates the recession. Now, the good news over the

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Speaker 4: last six months, all banks are back, all of them

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Speaker 4: and fired up. And we've seen a lot of competition

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Speaker 4: from Big four across just about everything that we do.

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Speaker 4: So mortgage brokers were telling me a year ago that hey, look,

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Speaker 4: you know, I'm bringing clients and it's basically you and

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Speaker 4: ben Z to no one else. And I was hearing

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Speaker 4: that from our business bankers as well, and I thought

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Speaker 4: that's extraordinary. Now the same broker all five.

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Speaker 1: So was that to do with the Aussie's thinking forget

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Speaker 1: about New Zealand, it's in recession.

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Speaker 3: No, No, I don't think.

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Speaker 4: I think it was banks just wanting to this is

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Speaker 4: bad and maybe there was a few boffins in the

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Speaker 4: back that call themselves you risk managers saying no, we

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Speaker 4: better call the jets a little bit precisely, the wrong

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Speaker 4: moment to do that from your client's point of view,

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Speaker 4: made everything worse. But I mean, the rbn Z surveys

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Speaker 4: data is there. It just shows it very clearly that

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Speaker 4: you know, bank happetite was negative for two years. So

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Speaker 4: that for me is a massive shock. And sitting here now,

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Speaker 4: I'm a lot more comfortable in our forecast for a

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Speaker 4: recovery this year based on the fact that the banks

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Speaker 4: are back.

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Speaker 1: Okay, what about house prices?

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Speaker 4: It's everybody's yeah, well, we write a few mortgages, so

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Speaker 4: we've got a little bit of an interest in the

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Speaker 4: housing market gone nowhere for the last couple of years. No,

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Speaker 4: and that that's by design from the regulators and the

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Speaker 4: and the central Bank. Right, we had this extraordinary period

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Speaker 4: coming out of COVID. We all put a higher value

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Speaker 4: on our homes and when you get a mortgage rate

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Speaker 4: at two percent, well, you know, off it goes.

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Speaker 3: Let's not let that happen again. Okay.

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Speaker 4: So basically the housing market's been walloped with interest rate rises,

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Speaker 4: a whole bunch of things coming through triple CFA, which

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Speaker 4: is probably.

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Speaker 3: The worst of the lot, really changing the playing field.

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Speaker 4: And then you know, we wake up now and house

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Speaker 4: surprices have fairly gone nowhere. You would have expected a

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Speaker 4: little bit of recovery by now hasn't happened. Green shreets

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Speaker 4: just tend to die away. But again, we've finally got

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Speaker 4: interest rates, mortgage rates at levels that actually entice people.

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Speaker 4: So I quite regularly stand up in front of, you know,

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Speaker 4: property investors, and I'm like, why aren't you doing anything,

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Speaker 4: And They're like, the mortgage rates seven and a half percent,

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Speaker 4: mortgage rates five and a half percent, mortgage rates in

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Speaker 4: the low force. So a real difference in psychology when

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Speaker 4: your mortgage rate is getting closer to your rental yield.

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Speaker 3: And we're getting there now.

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Speaker 4: So I do think that this time, the confidence that

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Speaker 4: has been lifted actually feeds into activity. Plus we're seeing

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Speaker 4: it as a bank, we're actually seeing a little bit more.

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Speaker 1: So when the investor actually investors have been making some

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Speaker 1: money for once rather than all the rates and everything

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Speaker 1: else that erodes.

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Speaker 3: Any Oh, there was a lot of that, a lot

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Speaker 3: of that.

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Speaker 4: But if we look at our lending, lending to first

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Speaker 4: home buyers over the last three years has been higher

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Speaker 4: than investors, now first home buyers that bigger pool. Investors

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Speaker 4: are this bigger pool, and then you owner occupiers, which

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Speaker 4: are there is for first home buyers to be doing

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Speaker 4: more lending than investors is just that goes back to

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Speaker 4: that economic shock that I was mentioning around bank appetite.

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Speaker 4: So now I think that the investors have been the

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Speaker 4: missing piece of the puzzle.

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Speaker 3: As they come.

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Speaker 4: Back in, the market will recover we think two to

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Speaker 4: three percent this year, which is not sheoting the lights up,

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Speaker 4: but at least it's a recovery, and then probably five

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Speaker 4: percent next year thanks to interest rates remaining low for

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Speaker 4: that period.

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Speaker 1: I think we're at a point where other investments like

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Speaker 1: shares or bonds or whatever it might be, crypto that key,

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Speaker 1: we are actually thinking more about those other things than

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Speaker 1: just property, because I mean, Bernard Hickey coined the phrase

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Speaker 1: probably twenty years ago that we are the economy as

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Speaker 1: a housing market with bits tapped on. Do you think

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Speaker 1: we're actually shifting that because we've talked about it a

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Speaker 1: lot on this program, but it doesn't seem to have

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Speaker 1: gone anywhere.

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Speaker 3: Well.

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Speaker 4: I still get a giggle every time I mention this

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Speaker 4: in one of my presentations, I say, look, there is

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Speaker 4: only one asset, and they all joke and like, yeah,

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Speaker 4: it's property. Let's talk about it, you know. And I say,

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Speaker 4: we've all got a little sharesy's account on the side,

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Speaker 4: but it's probably one percent of our wealth, right, so

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Speaker 4: you know, people will laugh at that, but it's true

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Speaker 4: as our balance sheet, you know, is very much housing.

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Speaker 4: It's same with Australia and other parts. But in the

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Speaker 4: United States, for example, they've got a much but larger

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Speaker 4: slice of their pie into the fun stuff that you do,

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Speaker 4: which is you know, the stock markets and bonds and

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Speaker 4: all that other stuff. We are very kind of one

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Speaker 4: dimensional in that space, and I think it's it's sad

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Speaker 4: because I believe New Zealand's financial markets would have matured

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Speaker 4: a lot faster had we had a more diversified portfolio

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Speaker 4: as a as a nation. But I look at my

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Speaker 4: father as a classic example. He owned shares in nineteen

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Speaker 4: eighty six, all of a sudden, didn't own shares in

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Speaker 4: nineteen eighty seven, never bought another share in his life.

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Speaker 3: Yeah, put it's still life.

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Speaker 4: So I think that's a classic example. Had we somehow

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Speaker 4: gotten more money into into our stock market. From my

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Speaker 4: point of view into bond markets, you know, made more

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Speaker 4: money available for small to medium you know, businesses. We

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Speaker 4: would have a much better functioning economy. I think your

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Speaker 4: job would be more fun than it. It's alreally pretty fun, Jared. Yeah,

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Speaker 4: I've got the funnest job in the world in my opinion.

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Speaker 4: I think that's changing big time. I think Jared's right.

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Speaker 5: The eighty seven crash, remember New Zealand got hit much

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Speaker 5: harder than everywhere else in the eighty seven crash for

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Speaker 5: a whole range of reasons. Our share market took ten

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Speaker 5: years to get back to those levels. It fell harder,

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Speaker 5: fell about sixty percent, and then it didn't get back

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Speaker 5: to those eighty seven levels until about ninety seven, whereas

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Speaker 5: the US and other parts of the world fell less

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Speaker 5: and in twelve months they were back to where they started.

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Speaker 5: So that turned in a whole generation of Kiwi's off shares,

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Speaker 5: pushed them into property and we've been battling that for

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Speaker 5: a whole generation ever since. But it is changing. I

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Speaker 5: think it's one hundred percent changing. And I started at

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Speaker 5: Craigs in two thousand and four, so I've been doing

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Speaker 5: this for twenty two years now, and back then, property property, property,

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Speaker 5: you know, we're really battle really hard to get people

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Speaker 5: to think about other investments. But in the last decade,

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Speaker 5: and I've got to think shares these for being a

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Speaker 5: part of this, because you guys have been in our

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Speaker 5: corner trying to push the same barrow, and it's one

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Speaker 5: hundred percent working. You know, young people, maybe because they

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Speaker 5: can't afford houses, or maybe because they're more in tune

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Speaker 5: what's happening around the world. They are very much more

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Speaker 5: familiar with investing in financial assets. And the boomers too,

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Speaker 5: you know, I meet them every week. You know, older

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Speaker 5: folk who have just got sick of the property are

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Speaker 5: and there's policy changes, and now there's interest deductibility, and

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Speaker 5: all the rates and the insurance eat into my yield

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Speaker 5: and I'm not making any money. And now that the

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Speaker 5: capital gains have dried up, you know, it's pretty hard

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Speaker 5: to actually do well out of property. And meanwhile, you

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Speaker 5: look at you know, the US or Japan or any

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Speaker 5: share market, and you know a lot of them have

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Speaker 5: doubled in the last three, four or five years. So

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Speaker 5: I'm seeing it across all demographics. And that doesn't mean

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Speaker 5: I'm anti property, you know, I think it's a good

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Speaker 5: time to buy a property, and it's a It's an

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Speaker 5: important part of a portfolio real estate, but it's not

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Speaker 5: the be all and end all anymore. So I reckon

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Speaker 5: that tipping point is one hundred being reached. Key we

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Speaker 5: save is a big part of it too, and I

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Speaker 5: think it will continue to shift as you see. You

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Speaker 5: know that that generation that lived through eighty seven, you know,

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Speaker 5: replaced by the younger generations who have got a different mindset.

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Speaker 5: So I'm really optimistic for kiwis and financial literacy and

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Speaker 5: their openness to other assets.

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Speaker 4: That that's sorry that different mindset. Is it more growth orientated?

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Speaker 4: If you go to look at shareholder appetite, we go

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Speaker 4: more into growth stuff or we.

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Speaker 5: I mean growth growth stocks. You mean yeah, yeah, I

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Speaker 5: think so, Like I mean the New Zealand share market

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Speaker 5: traditionally has been sort of the high income, the high

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Speaker 5: yield work like you're buying New Zealand chairs if you

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Speaker 5: want a high income. Always had the real estate companies,

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Speaker 5: always had the utilities, the electricity companies, and because of

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Speaker 5: imputation credits, companies are incentivized to return capital via dividends.

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Speaker 5: It's a really tax efficient way to give money back,

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Speaker 5: whereas in the US. You know, it's not tax efficient,

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Speaker 5: so you do a buyback. You don't pay a dividend.

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Speaker 5: So if you want income, you buy New Zealand shares.

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Speaker 5: If you want you know, capital growth, you go offshore.

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Speaker 5: And you know, the younger generation and the older generation

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Speaker 5: has pivoted to be more sort of growth focused, although

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Speaker 5: I think that's that's partly just education and understanding, and

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Speaker 5: you know, we're in an age now where everyone everyone

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Speaker 5: understands sort of some of these global products. We're not

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Speaker 5: as insulate.

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Speaker 3: You know.

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Speaker 5: The other big change I've seen in my time in

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Speaker 5: the industry is back when I started, we used to

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Speaker 5: have to really battle to get people to go international

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Speaker 5: and their share investments. People would really see it as

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Speaker 5: a bridge too far. It's higher risk to go to

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Speaker 5: the US or somewhere, and they want to hunker down

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Speaker 5: in New Zealand. It's like, actually, it's not. You know,

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Speaker 5: you're all invested in this tiny little country on a

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Speaker 5: major fault line with one product that it sells to

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Speaker 5: one customer. We're actually the risk. But you know, these

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Speaker 5: days it's you know, everyone naturally sort of is drawn

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Speaker 5: to the United States or other parts of the world,

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Speaker 5: and again I think that's healthy as well.

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Speaker 1: Yeah, it is. What about those alternative assets? Crypto has

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Speaker 1: been up and down. I see last year it didn't

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Speaker 1: do so well, but it's such a volatile asset. It's

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Speaker 1: probably that people need to think differently if they're older

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Speaker 1: and they've had a more traditional portfolio with say, you know, shares, bonds, property,

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Speaker 1: but they're getting dipping their toe in the water. And

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Speaker 1: we've definitely got quite a lot of those on Cheesy's

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Speaker 1: having launched crypto last year. I mean, they probably need

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Speaker 1: to think about it differently. Would you say or how

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Speaker 1: would you describe, you know, how to go about it?

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Speaker 5: Yeah, I think that whole space is really interesting alternative assets.

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Speaker 5: And you know, ask three different people, you get three

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Speaker 5: different answers of what as an alternative asset. But anything

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Speaker 5: that's not shares or bonds or property is basically alternative.

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Speaker 5: So you know, it's commodities, it's private businesses, it's private credit,

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Speaker 5: it's infrastructure, it's gold, and it's crypto. And I think

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Speaker 5: alternative assets is something you've got to have these days.

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Speaker 5: We do a lot in the sort of private credit,

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Speaker 5: private equity because there's lots of opportunities there crypto. I

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Speaker 5: don't think it is a must own, but it is

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Speaker 5: mainstream these days. You know, we don't call it cryptocurrency

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Speaker 5: anymore because it's not a currency, it's an asset, so

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Speaker 5: it is it is part of the mainstream, and it

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Speaker 5: is an investible option. So while well, I've got a

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Speaker 5: little bit, a little bit of bitcoin, you know, call

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Speaker 5: it one percent, maybe one and a half percent of

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Speaker 5: my portfolio. So you know, that's kind of the level

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Speaker 5: that I think is appropriate. Any more than that, and

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Speaker 5: you're sort of you've got to know what you're doing.

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Speaker 5: And I don't understand it as much as some, but

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Speaker 5: you know, I think I think it's just buyer beware.

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Speaker 5: Even since twenty eighteen, which is what's that sort of

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Speaker 5: eight years ago, crypto has been cut in half four times,

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Speaker 5: four different times, it's fallen more than fifty percent, and

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Speaker 5: then I think another three times it's fallen thirty percent.

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Speaker 5: So you know, just be up for the roller coaster.

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Speaker 5: You know, you can't you can't just sort of buy it,

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Speaker 5: and it's not a get rich quick scheme. So if

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Speaker 5: you want it, there is a strategic allocation. That's fine,

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Speaker 5: each to their own, but you just got to be

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Speaker 5: aware that you might face some pretty serious you think

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Speaker 5: shares a volatile you know, cryptos and other hiddler fish.

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Speaker 1: Jo Just getting back to our economy. Some of the

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Speaker 1: things that have been on my mind is like the dollar,

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Speaker 1: the key where he has been you know, in the

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Speaker 1: dol drooms if you like, against the Green Bank obviously,

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Speaker 1: but even against the Aussie Do you see that coming

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Speaker 1: back in twenty twenty six. I know it's good for exporters,

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Speaker 1: but for the rest of us, you know, wanting to

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Speaker 1: do things overseas or whatever it might be, it's quite hard.

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Speaker 4: Yeah, no, we do. And we've underperformed. Because we've underperformed, right,

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Speaker 4: we need to take a good look at ourselves and

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Speaker 4: go why was thebn Z so heavy handed, up down

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Speaker 4: sideways compared to say the RBA, which was a lot

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Speaker 4: lighter touch, or other parts of the world.

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Speaker 3: Why did we.

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Speaker 4: Have such a bad recession and others didn't. So it's

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Speaker 4: been reflected in the currency.

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Speaker 3: So you know, the.

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Speaker 4: Keiwi is just that, right, it is Kiwi versus dollar,

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Speaker 4: and the dollar despite a lot of what Trump's tried

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Speaker 4: to do or talked about wanting to do, it hasn't

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Speaker 4: fallen off a Cliff. As far as I'm concerned, the

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Speaker 4: US dollar is still the global reserve currency and it

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Speaker 4: will be so long as the US has got the

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Speaker 4: greatest military on the planet. So that whole d dollarization

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Speaker 4: has played out a little bit and a little bit

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Speaker 4: into crypto and a little bit here. Yeah, diversify out

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Speaker 4: of dollars yet, but they haven't done to do. They've

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Speaker 4: taught and we've heard these bond market virginities for thirty

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Speaker 4: odd years. US dollars still king at this point in history,

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Speaker 4: and I think it will be for the rest of

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Speaker 4: my life right just out there. So, yes, we've we've

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Speaker 4: gone down against the big dollar, which is helpful for

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Speaker 4: our exporters, and that's great for that that export part

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Speaker 4: of the story. But when you are importing something from

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Speaker 4: the United States, it's costing you more. So there's we've

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Speaker 4: seen a little bit of an inflation pulse, if you like,

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Speaker 4: on the on the weak are ki we and it

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Speaker 4: shows up in things like petrol prices and the like.

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Speaker 4: Against the Aussie we've underperformed, you know, even even further.

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Speaker 4: And that that to me is even more important because

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Speaker 4: a lot of what we manufacture.

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Speaker 3: Here goes to goes to Australia.

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Speaker 4: So that's actually quite an important cross for us, you know,

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Speaker 4: very very low trading partner of ours, great friend ally

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Speaker 4: and that weeker not only helps tourism, but it helps

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Speaker 4: you know, that whole export story.

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Speaker 3: So it's been good.

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Speaker 4: But we do think the Kiwi dollar recovers and we

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Speaker 4: do think the key wei ossie recovers this year, just

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Speaker 4: because we finally got interest rates at a level that matter,

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Speaker 4: and we're going to see better growth here relative to

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Speaker 4: the others. So we're gonna we're gonna pick ourselves up

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Speaker 4: off the ground. Ki We you know, sixties, yes, will

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Speaker 4: it go as high as sixty three? That's our forecast.

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Speaker 4: That's my forecast for the end of the year, which

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Speaker 4: means it could be you know, sixty five and higher,

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Speaker 4: but in that upward you know, upward stream, rather than

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Speaker 4: trading down like we were saying pretty much all of

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Speaker 4: last year.

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Speaker 1: So twenty twenty six, we've got an election. Both of

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Speaker 1: you would like to quite know what you're thinking. I know, Mark,

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Speaker 1: you've already said that you think National will get back

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Speaker 1: in again, they'll scrape in. Just thinking about what does

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Speaker 1: that mean for our economy and this recovery.

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Speaker 5: Yeah, I do think they'll scrape back in. I think,

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Speaker 5: you know, if there was an election today would be

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Speaker 5: pretty tight. You know, National is not doing super well

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Speaker 5: in the polls, but economic recoveries do tend to be

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Speaker 5: supportive for the incumbents. So if the view that Jared

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Speaker 5: and I both share that things will be a lot

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Speaker 5: better by September, October, November, then they should be in

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Speaker 5: a stronger position. I still think it'll be pretty close

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Speaker 5: for investors. My advice would be, don't sort of get

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Speaker 5: to hung up on what's happening in politics. You know,

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Speaker 5: there's always something going on, always a policy change. Focus

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Speaker 5: on you know, profits over politics. Focus on what's happening

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Speaker 5: with businesses. With the economy. We've got to maybe fine

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Speaker 5: tune our strategy depending on winners and losers at a

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Speaker 5: sector level. But generally, when you look back through history,

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Speaker 5: you know, good businesses will still perform well regardless of

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Speaker 5: who is in power. And I think that, you know,

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Speaker 5: that's a message that goes further afield till we've got

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Speaker 5: the midterms in the US, so it's not just here

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Speaker 5: in the Zealand And we've got big political stuff going.

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Speaker 5: But look, if you've chosen to sell everything and sit

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Speaker 5: on the sidelines because Trump got in either the first

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Speaker 5: time all the second time. You know, whether you like

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Speaker 5: the guy or not, whether you agree with some of

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Speaker 5: the policies or the approach, you would have left a

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Speaker 5: lot of money on the table. So you know, just

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Speaker 5: don't get too hung up on what's happening in politics.

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Speaker 4: Jared, I completely agree, absolutely agree. I think you know,

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Speaker 4: we've got a lot of sensitivity coming into this election.

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Speaker 4: Full enough, a lot of investors, a lot of a

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Speaker 4: lot of clients of ours are asking, you know, what's

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Speaker 4: going to happen, And I wonder whether they'll still be

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Speaker 4: asking if the economy's grown at three percent, if inflation

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Speaker 4: is contained, if the stock market's up ten percent. I

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Speaker 4: think that worry will subside somewhat. People hurt more in

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Speaker 4: bad times, and they obviously try to vote more radically

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Speaker 4: in bad times. When things are going well, and I

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Speaker 4: think things will be going well into the election, people

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Speaker 4: will be a lot more settled and just breeze through it.

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Speaker 4: It's not like the elections we got in the eighties

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Speaker 4: and nineties, which were quite violent. These are a lot

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Speaker 4: more centralist parties. We're not as not as radical. So

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Speaker 4: from my point of view, I think we will roll

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Speaker 4: right through it.

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Speaker 1: Okay, last question, Jared and Mark, Let's think about, in

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Speaker 1: sixty seconds or less, what is the most important thing

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Speaker 1: or things that investors need to know this year twenty

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Speaker 1: twenty six.

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Speaker 3: Jared, we're growing, Finally, we're growing.

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Speaker 4: So look to this year with a bit more optimism

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Speaker 4: and look to get involved, you know, actually look to

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Speaker 4: do some investing and actually look to expect and your business.

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Speaker 4: I think now is the time. You know, policy settings

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Speaker 4: are about right, So I think this is it, This

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Speaker 4: is this is a good good recovery.

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Speaker 3: Mac and me.

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Speaker 5: I just think the most important messages keep your eye

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Speaker 5: on the long game, especially when we're talking about asset

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Speaker 5: classes like shares. It's a long term ass yet, so

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Speaker 5: remember that. Don't get hung up on some of the noise,

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Speaker 5: some of the worries and the here are now. You know,

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Speaker 5: uish shares last thirty years, done to ten percent per annum.

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Speaker 5: Over those three decades, you've seen what three recessions. You've

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Speaker 5: had two times where the market fell fifty percent. You've

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Speaker 5: had a pandemic, you've had a housing crisis, You've had

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Speaker 5: numerous sort of wars, or geopolitical conflicts. You've had a

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Speaker 5: whole bunch of times when the market foil ten or

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Speaker 5: twenty percent recovered, but you know it still did well

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Speaker 5: over that period, So just get on with things. You know,

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Speaker 5: if you want to sit on the sidelines, I can

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Speaker 5: give you ten reasons to be worried and sit on

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Speaker 5: the sidelines at any point in time, whether it's good

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Speaker 5: times or bad times. But you know, I think people

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Speaker 5: do well when they just focus on that longer term.

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Speaker 1: Cool look, thanks guys for the long chat. We could

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Speaker 1: have probably kept going forever here, So thanks Jeron and

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Speaker 1: thanks Mark for joining us today.

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Speaker 3: Much appreciated. Thanks for having us. Yeah, thank you, and.

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Speaker 1: Thank you for tuning in. You can watch Shared Lunch

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Speaker 1: on YouTube or follow us on your favorite podcast step.

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Speaker 1: Leave us a rating and let us know what you'd

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Speaker 1: like to hear next.

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Speaker 4: Ma to Well