1
00:00:00,480 --> 00:00:03,960
Speaker 1: We're into an era now where politics Trump's the economy

2
00:00:04,000 --> 00:00:06,960
Speaker 1: and trade, so there is a lot of uncertainty and

3
00:00:07,000 --> 00:00:07,880
Speaker 1: baked into that.

4
00:00:08,360 --> 00:00:11,600
Speaker 2: Healthcare is a bit of a beaten up sector are globally,

5
00:00:12,160 --> 00:00:18,160
Speaker 2: mostly because of OURFK Junior getting into power.

6
00:00:18,360 --> 00:00:20,280
Speaker 1: I mean, the one thing we can be sure about

7
00:00:20,520 --> 00:00:23,560
Speaker 1: with the Chinese economic statistics is that they're basically lying.

8
00:00:23,680 --> 00:00:25,479
Speaker 2: An area that I think is quite attractive at the

9
00:00:25,520 --> 00:00:30,920
Speaker 2: moment is the smaller capitalization companies.

10
00:00:33,920 --> 00:00:34,280
Speaker 3: Cure.

11
00:00:34,520 --> 00:00:37,520
Speaker 4: Welcome to Shed Lunch, brought to you by Cheesy's. I'm

12
00:00:37,560 --> 00:00:41,000
Speaker 4: Helen Madison. Today we look at what investors need to

13
00:00:41,040 --> 00:00:44,879
Speaker 4: be thinking about as we navigate twenty twenty five. The risks,

14
00:00:44,960 --> 00:00:46,400
Speaker 4: the opportunities, and.

15
00:00:46,440 --> 00:00:47,920
Speaker 3: Plenty of unknowns.

16
00:00:48,200 --> 00:00:51,960
Speaker 4: I'm joined by Harbor Asset Management's Christa Lever and Business

17
00:00:52,000 --> 00:00:56,720
Speaker 4: Desk founding editor Patrick Smalley. Before we get started, here's

18
00:00:56,760 --> 00:00:57,800
Speaker 4: some important information.

19
00:00:58,080 --> 00:01:01,120
Speaker 5: Investing involves the risk lose the money you start with.

20
00:01:01,440 --> 00:01:05,160
Speaker 5: We recommend talking to a licensed financial advisor. We also

21
00:01:05,240 --> 00:01:09,200
Speaker 5: recommend reading product disclosure documents before deciding to invest. Everything

22
00:01:09,200 --> 00:01:11,280
Speaker 5: you're about to see and here is current at the

23
00:01:11,280 --> 00:01:11,880
Speaker 5: time of recorded.

24
00:01:11,920 --> 00:01:13,360
Speaker 3: Welcome Patrick and Chris.

25
00:01:13,959 --> 00:01:14,039
Speaker 5: Hi.

26
00:01:14,240 --> 00:01:14,800
Speaker 4: Nice to be here.

27
00:01:14,959 --> 00:01:15,400
Speaker 2: Thanks all.

28
00:01:16,840 --> 00:01:20,520
Speaker 4: Let's start with the US. I must say for listeners

29
00:01:20,520 --> 00:01:22,840
Speaker 4: and viewers that we are doing this on the inauguration

30
00:01:23,120 --> 00:01:25,760
Speaker 4: of Donald Trump. Just with that caveat that we do

31
00:01:25,880 --> 00:01:29,600
Speaker 4: know things may have changed since then. Chris would start

32
00:01:29,600 --> 00:01:33,479
Speaker 4: with the markets. The US markets have gone incredibly well

33
00:01:33,520 --> 00:01:36,880
Speaker 4: over the last little while. Many investors are sort of

34
00:01:37,160 --> 00:01:40,320
Speaker 4: questioning how far can the US go?

35
00:01:41,840 --> 00:01:42,720
Speaker 3: Is it overvalued?

36
00:01:42,920 --> 00:01:47,480
Speaker 4: And the tech Titans do seem to have a dominance,

37
00:01:47,560 --> 00:01:49,560
Speaker 4: So are there alternatives?

38
00:01:50,600 --> 00:01:55,040
Speaker 2: Yeah, So, just touching on the US market first, valuations

39
00:01:55,040 --> 00:01:59,120
Speaker 2: are high, okay, so we're currently trading it about twenty

40
00:01:59,160 --> 00:02:03,080
Speaker 2: five times backward looking earnings. That is a very high multiple.

41
00:02:04,160 --> 00:02:07,640
Speaker 2: The issue is multiples don't tell us a lot about

42
00:02:07,680 --> 00:02:11,359
Speaker 2: returns for say twenty twenty five or even twenty twenty six.

43
00:02:12,160 --> 00:02:16,520
Speaker 2: The real information that they give us is longer term

44
00:02:16,560 --> 00:02:22,359
Speaker 2: than that. So we know that current valuations typically have

45
00:02:22,480 --> 00:02:28,919
Speaker 2: led to at these levels quite subpar returns over ten years.

46
00:02:30,200 --> 00:02:32,560
Speaker 2: So then we go back and look at the overall

47
00:02:32,560 --> 00:02:38,760
Speaker 2: market valuation and say what's driving it. While the Magnificent seven,

48
00:02:38,919 --> 00:02:43,720
Speaker 2: or the tech Titans or the AI hyperscalers they get

49
00:02:43,800 --> 00:02:48,120
Speaker 2: all the press, what slips really far below the radar

50
00:02:48,840 --> 00:02:53,280
Speaker 2: is Actually the valuations of US companies are quite high

51
00:02:53,360 --> 00:02:57,360
Speaker 2: across the board, So there's very few sectors in the

52
00:02:57,480 --> 00:03:04,320
Speaker 2: US that are not trading at their top decile valuation wise. Currently,

53
00:03:04,800 --> 00:03:09,520
Speaker 2: lots of people talk about in Nvidia, Amazon, Apple, they're

54
00:03:09,560 --> 00:03:13,079
Speaker 2: trading at about thirty times earnings. But if I look

55
00:03:13,120 --> 00:03:17,120
Speaker 2: through the US market, there's companies like Walmart that are

56
00:03:17,160 --> 00:03:22,000
Speaker 2: trading at over thirty times earnings, Constellation Energy, a nuclear

57
00:03:22,240 --> 00:03:27,680
Speaker 2: energy company that's trading it over thirty times earnings. Financials

58
00:03:28,080 --> 00:03:32,680
Speaker 2: banks they're trading at the highest valuation level that they

59
00:03:32,760 --> 00:03:37,240
Speaker 2: had since the Global financial crisis, or obviously preceding the

60
00:03:37,280 --> 00:03:41,080
Speaker 2: global financial crisis. So I think it's an oversimplified kind

61
00:03:41,080 --> 00:03:45,720
Speaker 2: of narrative saying it's just the magnificent seven. So if

62
00:03:45,800 --> 00:03:48,120
Speaker 2: you look at financials, you say, you know, why is

63
00:03:48,200 --> 00:03:54,119
Speaker 2: that so expensive? It's because one of Trump's big policy

64
00:03:54,160 --> 00:04:00,680
Speaker 2: platforms is deregulation, and that benefits highly regulated sectors outside

65
00:04:00,680 --> 00:04:05,400
Speaker 2: of the US are a lot less pressing. An area

66
00:04:05,480 --> 00:04:07,720
Speaker 2: that I think is quite attractive at the moment is

67
00:04:07,840 --> 00:04:15,800
Speaker 2: the smaller capitalization companies. They're trading at a record low

68
00:04:16,120 --> 00:04:21,840
Speaker 2: relative to larger cap companies, and the key thing that's

69
00:04:21,880 --> 00:04:26,680
Speaker 2: really held these companies back has been that they tend

70
00:04:26,720 --> 00:04:30,520
Speaker 2: to be more indebted with floating rate debt, so they've

71
00:04:30,680 --> 00:04:35,480
Speaker 2: rarely felt the full brunt of those bond yields going up.

72
00:04:37,000 --> 00:04:41,000
Speaker 2: Now we've probably seen the worst in my view, in

73
00:04:41,040 --> 00:04:46,600
Speaker 2: the moves and bond yields, and that should benefit those companies.

74
00:04:47,160 --> 00:04:52,440
Speaker 2: Those companies are also more cyclically exposed, so they need

75
00:04:52,480 --> 00:04:55,480
Speaker 2: a strong economic cycle. And actually when we look at

76
00:04:55,480 --> 00:05:00,159
Speaker 2: the US, their economic cycle looks really really strong. So

77
00:05:00,360 --> 00:05:03,919
Speaker 2: that's for investors looking at a bit more for a

78
00:05:03,920 --> 00:05:07,720
Speaker 2: bit more value outside the top end of the market,

79
00:05:08,080 --> 00:05:13,400
Speaker 2: which is really quite expensive in historical terms.

80
00:05:14,080 --> 00:05:17,200
Speaker 4: With Trump coming in, though, there are lots of unknowns

81
00:05:17,279 --> 00:05:22,440
Speaker 4: and maybe the deregulations, you say, is what is fueling this,

82
00:05:22,920 --> 00:05:26,200
Speaker 4: But Pat, what do you think in terms of where

83
00:05:26,440 --> 00:05:27,080
Speaker 4: it might go?

84
00:05:27,839 --> 00:05:29,839
Speaker 1: So one thing we know about Trump is that we

85
00:05:29,880 --> 00:05:32,560
Speaker 1: don't know what Trump will do next. But the one

86
00:05:32,560 --> 00:05:35,000
Speaker 1: thing we can be sure about is that anything that

87
00:05:35,000 --> 00:05:41,359
Speaker 1: Trump does will be self interestedly pro American, so that

88
00:05:43,160 --> 00:05:46,480
Speaker 1: whatever he does, you can bet on it being something

89
00:05:46,520 --> 00:05:53,240
Speaker 1: which is basically nakedly self interested and therefore probably good

90
00:05:53,320 --> 00:05:57,120
Speaker 1: for the American economy. Notwithstanding the fact that. I don't

91
00:05:57,200 --> 00:06:00,080
Speaker 1: quite see how unless he gets a different person to

92
00:06:00,160 --> 00:06:04,680
Speaker 1: run the US Federal Reserve, you can cut taxes, impose tariffs,

93
00:06:05,000 --> 00:06:06,440
Speaker 1: and chuck out a whole lot of people who are

94
00:06:06,440 --> 00:06:09,000
Speaker 1: currently working illegally in your workforce and not have an

95
00:06:09,040 --> 00:06:13,480
Speaker 1: inflationary burst. Now, I don't think that even Donald Trump

96
00:06:13,560 --> 00:06:18,760
Speaker 1: can stop inflation with that particular triumvirate. Perhaps the question

97
00:06:18,880 --> 00:06:22,239
Speaker 1: is will the American economy, because it's so strong anyway,

98
00:06:22,720 --> 00:06:24,920
Speaker 1: just kind of override that, and so you know that

99
00:06:25,040 --> 00:06:27,279
Speaker 1: inflation becomes a bit of a break as opposed to

100
00:06:27,760 --> 00:06:31,599
Speaker 1: a major problem for the growth trajectory for the United States.

101
00:06:31,960 --> 00:06:35,000
Speaker 4: Where does it leave will trade though, and probably more

102
00:06:35,120 --> 00:06:39,280
Speaker 4: likely Australasia, I mean the tariffs. There's been a lot

103
00:06:39,279 --> 00:06:41,360
Speaker 4: of consternation here about what might happen.

104
00:06:41,600 --> 00:06:45,680
Speaker 1: Well, Trump was a protectionist, Biden is even more protectionist.

105
00:06:45,760 --> 00:06:49,800
Speaker 1: We've had more protectionist US federal settings now for the

106
00:06:49,839 --> 00:06:52,599
Speaker 1: best part of a decade more of the same. I

107
00:06:52,640 --> 00:06:55,400
Speaker 1: don't necessarily think makes a huge amount of difference to

108
00:06:55,440 --> 00:06:58,279
Speaker 1: New Zealand's ability to sell exports into the United States.

109
00:06:58,640 --> 00:07:01,600
Speaker 1: I'd be a bit surprised were to be heavily hit

110
00:07:01,640 --> 00:07:04,240
Speaker 1: by a tariff's way. My impression anyway is that it's

111
00:07:04,240 --> 00:07:08,559
Speaker 1: a manufacturing and goods play rather than a services play.

112
00:07:09,480 --> 00:07:12,240
Speaker 1: So to that extent, you know, maybe it's a good

113
00:07:12,240 --> 00:07:14,240
Speaker 1: thing we never got a free trade agreement with the

114
00:07:14,360 --> 00:07:19,480
Speaker 1: United States because we do know though that that in

115
00:07:19,520 --> 00:07:24,160
Speaker 1: the last Trump administration we had steel tariffs put on

116
00:07:24,240 --> 00:07:27,560
Speaker 1: New Zealand produced steel, which is sort of insulting rather

117
00:07:27,600 --> 00:07:29,720
Speaker 1: than economically debilitating.

118
00:07:29,760 --> 00:07:33,560
Speaker 4: Though, Chris, do you have any thoughts on that just

119
00:07:33,600 --> 00:07:34,360
Speaker 4: on tariffs.

120
00:07:34,480 --> 00:07:39,080
Speaker 2: Yes, he's doing it to be pro American, but we've

121
00:07:39,080 --> 00:07:40,960
Speaker 2: got to be careful here because when we look at

122
00:07:40,960 --> 00:07:43,960
Speaker 2: some of the large companies in the US, the amount

123
00:07:44,000 --> 00:07:48,800
Speaker 2: of revenue that they generate from offshore is really quite high.

124
00:07:49,040 --> 00:07:52,040
Speaker 2: And we know one of the other things we know

125
00:07:52,200 --> 00:07:55,600
Speaker 2: about Trump is that one of the biggest measures of

126
00:07:55,680 --> 00:07:59,840
Speaker 2: popularity that he uses is the US stock market. So

127
00:08:00,120 --> 00:08:05,080
Speaker 2: that gives me some comfort at least, you know, when

128
00:08:05,080 --> 00:08:08,679
Speaker 2: I look at these and it's even the Magnificent seven,

129
00:08:08,760 --> 00:08:11,840
Speaker 2: you know, the amount of income that they generate from

130
00:08:11,880 --> 00:08:16,720
Speaker 2: offshore is really quite high. So yeah, since he does

131
00:08:16,760 --> 00:08:19,480
Speaker 2: like the stock market, sees it as a good barometer,

132
00:08:20,120 --> 00:08:24,680
Speaker 2: that might temper some of his enthusiasm when he's looking

133
00:08:24,720 --> 00:08:27,560
Speaker 2: to hopefully not go all out reckless.

134
00:08:28,000 --> 00:08:30,920
Speaker 4: Crypto is his big thing, though, isn't it. So that's

135
00:08:31,040 --> 00:08:33,839
Speaker 4: one aspect of markets.

136
00:08:34,679 --> 00:08:40,160
Speaker 2: Yes, and it's an aspect which it's an interesting aspect

137
00:08:40,240 --> 00:08:43,720
Speaker 2: in the sense that you know, bitcoins at over one

138
00:08:43,760 --> 00:08:48,520
Speaker 2: hundred thousand dollars and it's one of those esset classes

139
00:08:48,559 --> 00:08:51,959
Speaker 2: where people like myself and traditional finance we sit there

140
00:08:51,960 --> 00:08:54,840
Speaker 2: and scratch our heads and quite frankly, we've missed it.

141
00:08:54,960 --> 00:08:57,880
Speaker 2: You know, if someone asked me five years ago, what

142
00:08:57,920 --> 00:09:00,760
Speaker 2: did you think about crypto'd probably expouse the same views

143
00:09:00,800 --> 00:09:05,360
Speaker 2: as the likes of Warren Buffett, who doesn't have a

144
00:09:05,400 --> 00:09:10,040
Speaker 2: horribly favorable view of that particular asset class. But the

145
00:09:10,040 --> 00:09:12,400
Speaker 2: really is, we've kind of all been wrong, right. It's

146
00:09:12,440 --> 00:09:15,920
Speaker 2: gone on longer and been a lot more successful than

147
00:09:16,080 --> 00:09:20,160
Speaker 2: anyone could have thought. And you know, that anti fe

148
00:09:20,320 --> 00:09:25,959
Speaker 2: art or anti establishment sort of form of holding your

149
00:09:25,960 --> 00:09:29,440
Speaker 2: wealth has found favor with a bunch of different people

150
00:09:29,440 --> 00:09:35,840
Speaker 2: and even institutions in the US and here and here,

151
00:09:35,920 --> 00:09:40,360
Speaker 2: and interestingly enough, you know, it seems that both Donald

152
00:09:40,360 --> 00:09:48,320
Speaker 2: Trump and Millennia Trump have found a way themselves to generalize.

153
00:09:48,440 --> 00:09:51,080
Speaker 1: I actually think that's that's quite dangerous for both of them,

154
00:09:51,840 --> 00:09:53,840
Speaker 1: because it reminds me so much of the n f

155
00:09:53,920 --> 00:09:57,400
Speaker 1: T when you're sitting all sitting around in COVID and

156
00:09:57,440 --> 00:09:59,000
Speaker 1: everyone was buying an f T S and saying it

157
00:09:59,040 --> 00:10:01,599
Speaker 1: was going to be having this mouse thing in a

158
00:10:02,120 --> 00:10:04,360
Speaker 1: digital form was going to be incredibly valuable. Where are

159
00:10:04,360 --> 00:10:06,439
Speaker 1: they now? I don't think anybody talks about or trades

160
00:10:06,559 --> 00:10:09,360
Speaker 1: NFTs and like Yu gi O cards or something like that.

161
00:10:09,440 --> 00:10:12,560
Speaker 1: You know, So there's crypto and there's crypto. I mean,

162
00:10:12,559 --> 00:10:17,120
Speaker 1: bitcoin is one thing, some meme, stock meme crypto that

163
00:10:17,120 --> 00:10:20,240
Speaker 1: that has been made up around around particular individual. I mean.

164
00:10:20,800 --> 00:10:25,520
Speaker 1: The reality of Trump is that he's, as they've described

165
00:10:25,520 --> 00:10:27,480
Speaker 1: in the New York Times to day, he's actually starts

166
00:10:27,520 --> 00:10:29,640
Speaker 1: as a lame duck in the sense that the longer

167
00:10:29,760 --> 00:10:33,719
Speaker 1: his his term goes, the less significant his influence will

168
00:10:33,760 --> 00:10:36,760
Speaker 1: be because he can't stand again. So he will be

169
00:10:36,920 --> 00:10:38,920
Speaker 1: you know, he's going to flood the zone with all

170
00:10:39,040 --> 00:10:43,880
Speaker 1: kinds of populist and economic things in the first nine months,

171
00:10:43,920 --> 00:10:47,240
Speaker 1: twelve ninety twelve months because he has to get going fast,

172
00:10:47,280 --> 00:10:50,600
Speaker 1: and because he also just wants to overwhelm such opposition

173
00:10:50,640 --> 00:10:52,680
Speaker 1: as there is just have too many things going at once,

174
00:10:52,720 --> 00:10:55,920
Speaker 1: sort of Roger Douglas style. Nobody knows what's coming next,

175
00:10:55,960 --> 00:10:58,960
Speaker 1: and so you're in a constant stut of fusion and terror.

176
00:11:00,920 --> 00:11:03,800
Speaker 1: But as time goes on, he becomes less and less influential.

177
00:11:03,880 --> 00:11:06,240
Speaker 1: Somebody has to replace him. What happens to your crypto

178
00:11:07,000 --> 00:11:08,360
Speaker 1: mean crypto at that point.

179
00:11:08,720 --> 00:11:13,560
Speaker 4: AI has had a phenomenal amount of success in recent times,

180
00:11:13,640 --> 00:11:16,760
Speaker 4: and we can't not talk about that when we're talking tech.

181
00:11:17,320 --> 00:11:21,040
Speaker 2: Yeah, I mean, there's two things with megatrends. You know that.

182
00:11:21,120 --> 00:11:23,920
Speaker 2: The first one is to decide whether they are a

183
00:11:24,000 --> 00:11:28,800
Speaker 2: megatrin Right now, with AI, we're going through the capital

184
00:11:28,840 --> 00:11:32,560
Speaker 2: expenditure cycle. There's very little revenue being made from it

185
00:11:32,960 --> 00:11:37,480
Speaker 2: outside say co pilot with Microsoft and some search engines

186
00:11:38,080 --> 00:11:42,960
Speaker 2: and companies. Over the next years are going to determine

187
00:11:43,160 --> 00:11:45,360
Speaker 2: whether this is a good use of capital or not.

188
00:11:46,120 --> 00:11:49,640
Speaker 2: Because you read the headlines and there's hundreds of billions

189
00:11:49,640 --> 00:11:53,160
Speaker 2: of dollars going towards AI. At the end of the day,

190
00:11:53,160 --> 00:11:59,560
Speaker 2: there needs to be monetization to justify that capital expenditure. Now,

191
00:12:00,679 --> 00:12:03,960
Speaker 2: the other thing to bear in mind is we're so

192
00:12:04,280 --> 00:12:07,280
Speaker 2: bad at picking mega trends in an early stage. And

193
00:12:07,320 --> 00:12:10,600
Speaker 2: I always think of the example of at and t

194
00:12:11,480 --> 00:12:15,120
Speaker 2: asking Mackenzie to go out there. This is in the

195
00:12:15,200 --> 00:12:18,000
Speaker 2: lad eighties. They said, look, mobile phones are taking off.

196
00:12:18,320 --> 00:12:20,600
Speaker 2: How many will there be in the year two thousand.

197
00:12:21,160 --> 00:12:23,760
Speaker 2: Mackenzie came back and said, look, we think there'll be

198
00:12:24,679 --> 00:12:27,960
Speaker 2: about nine hundred thousand mobile phones. In the year two

199
00:12:27,960 --> 00:12:32,520
Speaker 2: thousand there was well over one hundred billion mobile phones.

200
00:12:32,679 --> 00:12:37,559
Speaker 2: So even very smart people at Mackenzie struggled to figure

201
00:12:37,600 --> 00:12:41,240
Speaker 2: that one out. That's the overall trend. But then there's

202
00:12:41,240 --> 00:12:44,120
Speaker 2: making money from the trend, and that's a really tough

203
00:12:44,160 --> 00:12:47,959
Speaker 2: thing too, because in the late eighties early nineties, you

204
00:12:48,000 --> 00:12:51,720
Speaker 2: would have said Motorola or Nokia, that's going to be

205
00:12:51,760 --> 00:12:56,520
Speaker 2: the pre eminent phone company. In the early two thousands,

206
00:12:56,559 --> 00:12:59,679
Speaker 2: I remember my first work phone. It was a BlackBerry,

207
00:13:00,200 --> 00:13:03,560
Speaker 2: was great, and they look like they were going to

208
00:13:03,559 --> 00:13:08,240
Speaker 2: assert dominance. And then out came the iPhone. When the

209
00:13:08,280 --> 00:13:12,720
Speaker 2: iPhone first came out, people were laughing at it. They said,

210
00:13:12,760 --> 00:13:15,480
Speaker 2: oh God, such an expensive phone. It doesn't have a keyboard.

211
00:13:16,400 --> 00:13:21,680
Speaker 2: Our thinking changes so much with these trends. So that's

212
00:13:21,760 --> 00:13:26,240
Speaker 2: the cautionary note. With these new mega trends.

213
00:13:26,679 --> 00:13:28,640
Speaker 1: I think you may disagree with me about this. Chris,

214
00:13:28,640 --> 00:13:30,720
Speaker 1: I don't know, but I think there's also an opis

215
00:13:30,840 --> 00:13:37,520
Speaker 1: question with AI. You know, artificial intelligence to produce an

216
00:13:37,559 --> 00:13:40,880
Speaker 1: answer has to use energy to produce the answer. The

217
00:13:40,960 --> 00:13:44,160
Speaker 1: deeper the question, the more energy it uses. And these

218
00:13:44,200 --> 00:13:48,000
Speaker 1: things are starting to suck an enormous amount of electricity

219
00:13:48,040 --> 00:13:50,880
Speaker 1: out of grids everywhere that they're being used. So I

220
00:13:51,440 --> 00:13:54,120
Speaker 1: suspect that there will start to be a metric which

221
00:13:54,160 --> 00:13:58,120
Speaker 1: will be what is the cost per answer for your question?

222
00:13:58,679 --> 00:14:00,520
Speaker 1: And it will be the person with the life cost

223
00:14:00,559 --> 00:14:04,080
Speaker 1: per answer in energy terms and therefore sense per question

224
00:14:04,679 --> 00:14:08,840
Speaker 1: who will win. And if it becomes clear artificial intelligence

225
00:14:08,960 --> 00:14:11,760
Speaker 1: just becomes more and more of an energy chew, it's

226
00:14:11,800 --> 00:14:13,440
Speaker 1: going to be harder and harder to make the case,

227
00:14:13,520 --> 00:14:16,439
Speaker 1: as you said, for where the use cases are where

228
00:14:16,440 --> 00:14:18,200
Speaker 1: it's actually sufficiently valuable.

229
00:14:18,400 --> 00:14:22,080
Speaker 4: That climate question is pretty intense. I mean, there's lots

230
00:14:22,080 --> 00:14:26,920
Speaker 4: of consternation about what might happen. I suppose it's a

231
00:14:26,960 --> 00:14:28,480
Speaker 4: bit of a wait and see. I mean, some of

232
00:14:28,520 --> 00:14:33,120
Speaker 4: the bigger players are saying they're working towards mitigating that.

233
00:14:33,560 --> 00:14:35,600
Speaker 4: I don't think we've seen a lot though. It just

234
00:14:35,600 --> 00:14:37,600
Speaker 4: seems to run ahead of its own steam.

235
00:14:37,640 --> 00:14:39,720
Speaker 1: If you like, well, I suspect we're in for a

236
00:14:40,160 --> 00:14:44,040
Speaker 1: couple of years anyway where the whole focus on climate

237
00:14:44,120 --> 00:14:48,080
Speaker 1: change sustainability, the idea that the brand value and so

238
00:14:48,120 --> 00:14:53,200
Speaker 1: forth in climate change action is actually diminished because of

239
00:14:53,200 --> 00:14:54,880
Speaker 1: what we're seeing in the United States, because of the

240
00:14:55,280 --> 00:14:58,080
Speaker 1: push to the to the right of the political spectrum,

241
00:14:58,680 --> 00:15:03,160
Speaker 1: you know, Black Crop, American banks, all these big players

242
00:15:03,360 --> 00:15:08,400
Speaker 1: pulling back from a kind of a breast beating approach

243
00:15:08,480 --> 00:15:11,800
Speaker 1: to their climate change obligations. I mean basically that the

244
00:15:11,880 --> 00:15:13,960
Speaker 1: United States is at the moment, as the world's most

245
00:15:14,000 --> 00:15:17,600
Speaker 1: powerful economy, is saying we've stopped caring, and a lot

246
00:15:17,640 --> 00:15:19,080
Speaker 1: of people are going to take a lead from that

247
00:15:19,160 --> 00:15:22,080
Speaker 1: because ultimately it's difficult to get about climate change. So

248
00:15:22,360 --> 00:15:25,200
Speaker 1: I worry about that that the sustainability trend is going

249
00:15:25,240 --> 00:15:27,480
Speaker 1: to be quite hard to sustain it, particularly as a

250
00:15:27,480 --> 00:15:30,800
Speaker 1: branding proposition, and quite the way that it has over

251
00:15:30,840 --> 00:15:31,800
Speaker 1: the last ten years.

252
00:15:32,240 --> 00:15:33,920
Speaker 4: Even here in New Zealand. I mean they're looking at

253
00:15:34,000 --> 00:15:40,280
Speaker 4: changing the climate reporting. That could have consequences there too. Yeah.

254
00:15:40,960 --> 00:15:43,840
Speaker 4: Just thinking too about other trade partners besides the US.

255
00:15:43,880 --> 00:15:46,200
Speaker 4: I think they're our second biggest trade partner, but China

256
00:15:46,240 --> 00:15:48,720
Speaker 4: obviously is the big powerhouse, and there's obviously been a

257
00:15:48,760 --> 00:15:51,880
Speaker 4: lot said about the slow down there, but it'd be

258
00:15:51,960 --> 00:15:54,280
Speaker 4: quite good to get an idea of where that is

259
00:15:54,320 --> 00:15:56,680
Speaker 4: actually at. To get anything out of the Chinese government

260
00:15:56,720 --> 00:15:59,160
Speaker 4: is quite tricky. I've seen a number of reports about

261
00:15:59,160 --> 00:16:01,520
Speaker 4: economists and like being muzzled when it comes to gross

262
00:16:01,520 --> 00:16:04,480
Speaker 4: domestic product, which is, you know, a typical measure of

263
00:16:04,520 --> 00:16:07,480
Speaker 4: an economy good or bad. Where do you see that going,

264
00:16:07,520 --> 00:16:10,360
Speaker 4: particularly for New Zealand but also for Australia too.

265
00:16:10,880 --> 00:16:12,880
Speaker 1: The one thing we can be sure about with the

266
00:16:13,000 --> 00:16:17,280
Speaker 1: Chinese economic statistics is that they're basically lying. You know

267
00:16:17,320 --> 00:16:21,680
Speaker 1: that the Communist Party wants us to believe that they're

268
00:16:21,680 --> 00:16:24,280
Speaker 1: growing at about five percent. They'll be lucky if they're doing

269
00:16:24,320 --> 00:16:28,040
Speaker 1: two two and a half. So the Chinese domestic economy

270
00:16:28,120 --> 00:16:31,840
Speaker 1: is weak. If there are tariffs imposed at the sixty

271
00:16:31,840 --> 00:16:34,400
Speaker 1: percent level, will be that much weaker. But at the

272
00:16:34,400 --> 00:16:38,440
Speaker 1: same time, I can't see circumstances under which the Chinese

273
00:16:38,480 --> 00:16:41,480
Speaker 1: Communist Party government doesn't hold hands in such a way

274
00:16:41,480 --> 00:16:45,680
Speaker 1: that it continues to keep basic consumer demand in the

275
00:16:45,760 --> 00:16:49,240
Speaker 1: Chinese economy ticking over and to the extent that New

276
00:16:49,360 --> 00:16:52,800
Speaker 1: Zealand anyway perhaps less so Australia where they're into hard

277
00:16:52,840 --> 00:16:55,400
Speaker 1: minerals and so forth. But New Zealand we're selling protein,

278
00:16:56,640 --> 00:17:02,920
Speaker 1: and we're selling commodity protein mainly. Unless that unless the

279
00:17:03,000 --> 00:17:06,800
Speaker 1: Chinese decide that I want to stay healthy, or that

280
00:17:07,119 --> 00:17:10,320
Speaker 1: they are earning so little that they can't afford protein anymore,

281
00:17:10,359 --> 00:17:13,320
Speaker 1: I think we're probably okay. And I suspect that if

282
00:17:13,480 --> 00:17:17,439
Speaker 1: the flow of Chinese goods to the United States is

283
00:17:17,480 --> 00:17:19,880
Speaker 1: cut off to some degree, we'll probably see cheaper stuff here.

284
00:17:21,720 --> 00:17:23,200
Speaker 4: Chris, have you any thoughts on that.

285
00:17:24,040 --> 00:17:28,679
Speaker 2: Structurally, China's still in such a hard spot. I think

286
00:17:29,200 --> 00:17:32,480
Speaker 2: we're so used to out of China waiting for these

287
00:17:32,520 --> 00:17:39,399
Speaker 2: big Berzuka stimulus announcements, and essentially since COVID, they've just

288
00:17:39,560 --> 00:17:43,159
Speaker 2: disappointed and disappointed and disappointed. And that's because there's some

289
00:17:43,200 --> 00:17:48,640
Speaker 2: really big structural issues there. The mechanism of which they

290
00:17:49,359 --> 00:17:55,560
Speaker 2: provided stimulus to their people was through property, but unfortunately

291
00:17:55,720 --> 00:17:57,879
Speaker 2: that can only go on for so long, and it

292
00:17:58,440 --> 00:18:02,560
Speaker 2: went on to a point at China where they inflated

293
00:18:02,680 --> 00:18:06,080
Speaker 2: quite a large bubble and they don't have the population

294
00:18:06,320 --> 00:18:11,680
Speaker 2: growth anymore to paper over the cracks. So I think

295
00:18:11,760 --> 00:18:16,800
Speaker 2: it's not a one year, two year kind of cycle

296
00:18:16,840 --> 00:18:19,439
Speaker 2: that you have to think about. In China now, I

297
00:18:19,440 --> 00:18:22,359
Speaker 2: think it's the next decade. I think they're really struggling

298
00:18:22,440 --> 00:18:27,760
Speaker 2: to starve off deflation. It's starting to look a little

299
00:18:27,840 --> 00:18:32,280
Speaker 2: bit like Japan did in the late eighties, and they're

300
00:18:32,920 --> 00:18:37,320
Speaker 2: economic case study of just how tough it can be

301
00:18:38,119 --> 00:18:42,240
Speaker 2: to get your economy going after you've had quite a

302
00:18:42,280 --> 00:18:48,640
Speaker 2: substantial asset price bubble. There's we can kind of fear

303
00:18:48,720 --> 00:18:52,280
Speaker 2: in New Zealand, there's probably some parallels with property. As

304
00:18:52,280 --> 00:18:54,600
Speaker 2: I talk, I think, oh goodness me, my house price

305
00:18:54,640 --> 00:18:59,399
Speaker 2: hasn't done actually hasn't done anything. It's gone backwards over

306
00:18:59,440 --> 00:19:02,240
Speaker 2: the past three years, and like most keys, I look

307
00:19:02,240 --> 00:19:05,679
Speaker 2: at it and go, well, I feel less wealthy. People

308
00:19:05,720 --> 00:19:08,440
Speaker 2: definitely aren't going to the insurance broker like they did

309
00:19:08,480 --> 00:19:11,480
Speaker 2: in the twenty twenty twenty twenty one and going hey,

310
00:19:11,520 --> 00:19:13,600
Speaker 2: I'd love to put a sparple, a new car, boat,

311
00:19:14,680 --> 00:19:18,080
Speaker 2: insert fancy shiny thing here on my mortgage. So you know,

312
00:19:18,440 --> 00:19:22,359
Speaker 2: us as key as we understand the positive stimulus that

313
00:19:22,400 --> 00:19:25,640
Speaker 2: a rising property market can give us. And that's where

314
00:19:25,640 --> 00:19:31,520
Speaker 2: they're really struggling in China, and some of the multiples

315
00:19:31,560 --> 00:19:37,960
Speaker 2: of house price to income rental yield in some of

316
00:19:38,000 --> 00:19:43,480
Speaker 2: the Tierwan cities looking just as acute as Japan in

317
00:19:43,520 --> 00:19:45,480
Speaker 2: the late eighties. So I don't think it's an easy

318
00:19:45,480 --> 00:19:49,000
Speaker 2: fix in China. I really like it when I hear

319
00:19:49,040 --> 00:19:53,520
Speaker 2: governments talking about diversifying our trade partners and looking at

320
00:19:53,560 --> 00:19:57,520
Speaker 2: what we can what we can do to decrease our

321
00:19:57,560 --> 00:19:59,720
Speaker 2: alliance there, because I think it's going to be pretty

322
00:19:59,760 --> 00:20:02,680
Speaker 2: tough going in China for quite a while. I completely

323
00:20:02,720 --> 00:20:06,320
Speaker 2: respect what you've said Patrick about I'd much rather be

324
00:20:06,760 --> 00:20:13,159
Speaker 2: exporting what we do to China than what Australia is exporting,

325
00:20:13,200 --> 00:20:19,560
Speaker 2: which is far more aliant on the construction cycle. Maybe

326
00:20:19,600 --> 00:20:21,840
Speaker 2: it's the thing we can't expect is for Chinese tourism

327
00:20:21,920 --> 00:20:27,240
Speaker 2: to recover. Domestic budgets and Chinese households are stretch. They're

328
00:20:27,240 --> 00:20:29,639
Speaker 2: not going to be going let's go to New Zealand

329
00:20:29,680 --> 00:20:31,000
Speaker 2: for a couple of weeks.

330
00:20:31,280 --> 00:20:36,440
Speaker 4: So again, alternative markets, that's what we need to focus on, Chris,

331
00:20:36,440 --> 00:20:37,440
Speaker 4: what about Australia.

332
00:20:37,560 --> 00:20:38,480
Speaker 3: I mean, with.

333
00:20:40,280 --> 00:20:42,600
Speaker 4: Lots of investors think in the US is the best thing.

334
00:20:42,680 --> 00:20:45,240
Speaker 4: There's not a lot happening in the z X for

335
00:20:45,280 --> 00:20:50,399
Speaker 4: a lot of people on shares is anyway, ACEX has

336
00:20:50,440 --> 00:20:52,560
Speaker 4: always been known for its miners, but is that changing

337
00:20:52,640 --> 00:20:55,240
Speaker 4: and is there value in some of the other types

338
00:20:55,280 --> 00:20:56,760
Speaker 4: of sectors and stocks.

339
00:20:57,200 --> 00:21:01,280
Speaker 2: Do you think yes, I'd break apart Ralia into three parts.

340
00:21:02,359 --> 00:21:04,800
Speaker 2: So they've got these two really big sectors. So you've

341
00:21:04,840 --> 00:21:09,200
Speaker 2: got you've got banks, and the yield curve is steepened

342
00:21:10,359 --> 00:21:15,480
Speaker 2: over the past six months. That's great for banks. It's

343
00:21:15,520 --> 00:21:17,600
Speaker 2: great for their business model of that they tend to

344
00:21:17,680 --> 00:21:22,240
Speaker 2: lend long, borrow short. A steep yield curve is exactly

345
00:21:22,280 --> 00:21:25,080
Speaker 2: what they want. That hasn't been lost on the market.

346
00:21:25,720 --> 00:21:30,200
Speaker 2: Australian banks at the moment are more expensive than they've

347
00:21:30,240 --> 00:21:35,760
Speaker 2: ever been relative to history miners. Again, it's that it's

348
00:21:35,800 --> 00:21:38,919
Speaker 2: that China link. We're a little bit apprehensive there on

349
00:21:38,960 --> 00:21:41,680
Speaker 2: the reliance. And then there's kind of everything else that's

350
00:21:42,040 --> 00:21:44,560
Speaker 2: a third bucket. It's quite a few healthcare names we

351
00:21:44,800 --> 00:21:48,800
Speaker 2: like in Australia. Healthcare is a bit of a beaten

352
00:21:48,920 --> 00:21:58,680
Speaker 2: up sector globally, mostly because of RFK Junior getting into

353
00:21:58,720 --> 00:22:02,560
Speaker 2: power and in the US in that key healthcare role

354
00:22:02,680 --> 00:22:05,919
Speaker 2: that's kind of sent shockwaves through the healthcare sector. The

355
00:22:05,960 --> 00:22:08,400
Speaker 2: other one is the impact of the g LP one

356
00:22:08,640 --> 00:22:17,280
Speaker 2: weight loss drugs that was tipped to impact a lot

357
00:22:17,320 --> 00:22:23,040
Speaker 2: of healthcare companies. So any company involved in the likes

358
00:22:23,040 --> 00:22:27,919
Speaker 2: of kidney dialysis for example, completely sold off because GLP

359
00:22:28,080 --> 00:22:31,600
Speaker 2: one was seen to be quite a promising healthcare development

360
00:22:31,720 --> 00:22:35,119
Speaker 2: in that particular area. But yeah, there's a number of

361
00:22:35,160 --> 00:22:38,359
Speaker 2: companies we like in Australia in that healthcare space that

362
00:22:38,400 --> 00:22:41,840
Speaker 2: have been I suppose caught up by that negative global

363
00:22:42,600 --> 00:22:43,680
Speaker 2: health care narrative.

364
00:22:44,920 --> 00:22:46,960
Speaker 3: So you're saying they're cheap at the moment, Yeah.

365
00:22:46,760 --> 00:22:50,600
Speaker 2: They are cheap relative to history, but we're kind of

366
00:22:50,600 --> 00:22:52,600
Speaker 2: our style is to not kind of you go up

367
00:22:52,640 --> 00:22:56,680
Speaker 2: to purely cheap companies. The growth has to be there too.

368
00:22:56,920 --> 00:23:00,359
Speaker 4: Thinking about our own market then, z X, it's no

369
00:23:00,800 --> 00:23:03,920
Speaker 4: secret that it has been having a tough time. We

370
00:23:03,960 --> 00:23:06,760
Speaker 4: did an index just recently, the Chezies Index, which is

371
00:23:06,800 --> 00:23:09,879
Speaker 4: a quarterly sort of litmus test of what investors are

372
00:23:09,920 --> 00:23:13,080
Speaker 4: thinking where they're putting their money in terms of confidence.

373
00:23:12,680 --> 00:23:15,960
Speaker 3: And nine out of ten of.

374
00:23:15,760 --> 00:23:18,400
Speaker 4: The stocks that people were investing in they are no

375
00:23:18,440 --> 00:23:22,160
Speaker 4: longer because it is inz X and the US and

376
00:23:22,320 --> 00:23:26,159
Speaker 4: to a lesser extent, Australia is taking their money. Just

377
00:23:26,240 --> 00:23:29,199
Speaker 4: wondering what you think about where things could head for

378
00:23:29,240 --> 00:23:31,600
Speaker 4: the inset X. There's been a lot of people talking about,

379
00:23:32,280 --> 00:23:34,480
Speaker 4: you know, we need to put fire under it, we

380
00:23:34,520 --> 00:23:36,400
Speaker 4: need to do something else or alternatives.

381
00:23:36,640 --> 00:23:40,200
Speaker 1: What's your perspective, So this is not just an INSIDEX problem.

382
00:23:40,640 --> 00:23:44,760
Speaker 1: Lots of exchanges around the world, publicly traded equities generally

383
00:23:45,600 --> 00:23:47,200
Speaker 1: have been out of favor of me in so much

384
00:23:47,240 --> 00:23:52,720
Speaker 1: private equity activity. Now inst x is a very small market.

385
00:23:52,760 --> 00:23:56,560
Speaker 1: I mean, I've been reporting the enertisecs since nineteen ninety three,

386
00:23:56,640 --> 00:24:01,400
Speaker 1: so I've now carbondated myself and the daily turnover it's

387
00:24:01,440 --> 00:24:05,320
Speaker 1: not that much more today than it was then from

388
00:24:05,320 --> 00:24:08,760
Speaker 1: my recollection anyway, my personal view is that we've it's

389
00:24:08,800 --> 00:24:11,240
Speaker 1: got to get closer to the AASEX. You know, if

390
00:24:11,240 --> 00:24:13,520
Speaker 1: it's got to be called the NZX, fine, but we

391
00:24:13,640 --> 00:24:16,240
Speaker 1: need to be part of a much bigger, more liquid market.

392
00:24:17,080 --> 00:24:19,119
Speaker 1: And you can see New Zealand companies voting with their

393
00:24:19,119 --> 00:24:21,000
Speaker 1: feet on that. We've got a number of the more

394
00:24:21,000 --> 00:24:24,320
Speaker 1: interesting New Zealand companies. I think of Aroa Biosurgery for example,

395
00:24:25,080 --> 00:24:28,919
Speaker 1: good example of a company which should have a lot

396
00:24:28,960 --> 00:24:31,960
Speaker 1: of growth potential in the health sector, based in Auckland,

397
00:24:32,720 --> 00:24:37,719
Speaker 1: listed in Australia and those companies which make it into

398
00:24:37,760 --> 00:24:41,240
Speaker 1: the big indicies for passive fund and indexes and so

399
00:24:41,280 --> 00:24:44,280
Speaker 1: for passive fund managers and so forth, are almost all

400
00:24:44,840 --> 00:24:46,760
Speaker 1: dual listed on the AX. So I think we've just

401
00:24:46,800 --> 00:24:48,920
Speaker 1: got to get over ourselves a wee bit. And so

402
00:24:49,080 --> 00:24:51,560
Speaker 1: it's a small market, how to get a multiplier effect

403
00:24:51,560 --> 00:24:54,760
Speaker 1: out of it? While also saying, yeah, it's important that

404
00:24:54,800 --> 00:24:56,679
Speaker 1: we have a capital market that works in New Zealand.

405
00:24:56,880 --> 00:25:00,600
Speaker 4: What about our currency? We know the key we've been

406
00:25:01,080 --> 00:25:03,199
Speaker 4: tanking if you like the Aussie hasn't me doing that

407
00:25:03,240 --> 00:25:06,640
Speaker 4: well either? Watch and investors think about there.

408
00:25:06,680 --> 00:25:07,560
Speaker 3: I mean, good for our.

409
00:25:07,480 --> 00:25:11,560
Speaker 2: Exporters, but we're just looking at levels now. The way

410
00:25:11,640 --> 00:25:14,600
Speaker 2: to think of the US dollar is it kind of

411
00:25:14,640 --> 00:25:17,560
Speaker 2: operates like a smile. So what I mean by that

412
00:25:17,800 --> 00:25:21,959
Speaker 2: is when the world is fearful, things are going really

413
00:25:22,000 --> 00:25:25,359
Speaker 2: really badly, the US dollar is really really strong. So

414
00:25:25,440 --> 00:25:29,280
Speaker 2: that was like twenty twenty, right, And when kind of

415
00:25:29,720 --> 00:25:33,439
Speaker 2: the global economy is kind of trucking away, okay, the

416
00:25:33,560 --> 00:25:39,720
Speaker 2: US dollar will tend to weaken. But then there's another

417
00:25:39,760 --> 00:25:44,600
Speaker 2: scenario when the US economy is really really strong and

418
00:25:44,760 --> 00:25:49,520
Speaker 2: other global economies are really really weak. People want to

419
00:25:49,600 --> 00:25:52,639
Speaker 2: hold the US dollar. That is where we are today,

420
00:25:53,280 --> 00:25:56,920
Speaker 2: the theme of US exceptionalism. At the end of last year,

421
00:25:57,600 --> 00:25:59,680
Speaker 2: We've got a stack of outlooks from all the global

422
00:25:59,720 --> 00:26:03,879
Speaker 2: and banks. I couldn't find one of them that thought

423
00:26:04,200 --> 00:26:08,199
Speaker 2: the US wasn't going to be the best performing economy

424
00:26:08,520 --> 00:26:12,600
Speaker 2: in the world, and that's really showing in their currency.

425
00:26:12,800 --> 00:26:15,480
Speaker 2: At the moment. You've got economies like here in New

426
00:26:15,560 --> 00:26:19,800
Speaker 2: Zealand that have priced in a fairly aggressive rate cutting

427
00:26:19,840 --> 00:26:25,400
Speaker 2: cycle to around three percent. We've got inflation relatively under

428
00:26:25,440 --> 00:26:29,119
Speaker 2: control the US. It's not quite there yet, you know,

429
00:26:29,200 --> 00:26:33,240
Speaker 2: they're still printing high two s, low threes, depending on

430
00:26:33,280 --> 00:26:36,920
Speaker 2: the measure of inflation that you're looking at. Our view

431
00:26:36,960 --> 00:26:40,000
Speaker 2: at the moment is that actually is a lot of

432
00:26:40,000 --> 00:26:46,040
Speaker 2: good news priced in to the US dollar, a really

433
00:26:46,440 --> 00:26:49,320
Speaker 2: high consensus view that the US is going to go

434
00:26:49,480 --> 00:26:53,600
Speaker 2: very well, and that means that at current levels we

435
00:26:53,640 --> 00:26:56,240
Speaker 2: actually see it as relatively attractive. I think for investors,

436
00:26:56,400 --> 00:26:59,440
Speaker 2: the key thing they've got to consider is that your

437
00:26:59,520 --> 00:27:04,720
Speaker 2: share aren't the only thing that generated you returns last year.

438
00:27:05,200 --> 00:27:07,159
Speaker 2: It was the currency that your shares were held in.

439
00:27:07,640 --> 00:27:09,440
Speaker 2: So a lot of people who are holding these US

440
00:27:09,480 --> 00:27:12,919
Speaker 2: shares directly, they've got a great return, they've got twenty

441
00:27:12,920 --> 00:27:15,400
Speaker 2: odd percent, but then they've got another you know, call

442
00:27:15,440 --> 00:27:20,280
Speaker 2: it twelve from the currency on top of that. So

443
00:27:20,440 --> 00:27:25,080
Speaker 2: while we focus so much on the picking a good stock,

444
00:27:25,680 --> 00:27:29,760
Speaker 2: actually the currency that you're picking it in is really

445
00:27:29,880 --> 00:27:32,679
Speaker 2: key as well. So I think for investors that is

446
00:27:32,720 --> 00:27:35,119
Speaker 2: the key thing they have to take into account. You know,

447
00:27:35,240 --> 00:27:38,679
Speaker 2: how much of my money is wrapped up in a

448
00:27:38,760 --> 00:27:44,840
Speaker 2: currency that is quite expensive relative to historical levels.

449
00:27:45,800 --> 00:27:48,760
Speaker 4: Thinking about coming back to New Zealand and we can't

450
00:27:48,760 --> 00:27:51,760
Speaker 4: have a conversation really to think about the year without

451
00:27:51,840 --> 00:27:55,120
Speaker 4: talking about infrast rates. Here it's easing and it's looking

452
00:27:55,160 --> 00:27:57,080
Speaker 4: like we're going to get another rate cut in February.

453
00:27:57,320 --> 00:27:59,680
Speaker 3: Pat, Just what's your perception.

454
00:27:59,359 --> 00:28:01,840
Speaker 4: On whether or not that has provided the relief that

455
00:28:02,240 --> 00:28:04,719
Speaker 4: businesses who have been torink quite hard here and needed

456
00:28:05,720 --> 00:28:08,680
Speaker 4: mortgage holders, you know, they're the next ones on the list.

457
00:28:08,760 --> 00:28:12,399
Speaker 1: I suppose my presumptions on that are pretty pretty bog standard.

458
00:28:12,520 --> 00:28:14,760
Speaker 1: You drop interest rates far enough and it will have

459
00:28:14,800 --> 00:28:18,760
Speaker 1: an impact on economic sentiment and you will see something

460
00:28:18,800 --> 00:28:21,840
Speaker 1: of a recovery. I just worry a little bit that

461
00:28:22,600 --> 00:28:24,400
Speaker 1: in New Zealand have got something a little bit more

462
00:28:24,800 --> 00:28:27,320
Speaker 1: deep seated going on. You know, we had a round

463
00:28:27,320 --> 00:28:30,200
Speaker 1: of tax cuts last year, which nobody seemed to notice.

464
00:28:30,720 --> 00:28:35,520
Speaker 1: We've went through we's all reasonable electronic card spending over Christmas,

465
00:28:35,720 --> 00:28:38,320
Speaker 1: but wasn't anything write home about. But it's coming back

466
00:28:38,320 --> 00:28:42,960
Speaker 1: a wee bit. But I sense more that I was

467
00:28:43,080 --> 00:28:47,600
Speaker 1: trying to contrast the American inauguration. We've got a president,

468
00:28:47,760 --> 00:28:50,680
Speaker 1: no matter what you think of him, who is telling

469
00:28:50,760 --> 00:28:53,760
Speaker 1: a big story about what America is going to become.

470
00:28:54,680 --> 00:28:56,840
Speaker 1: In New Zealand, we have a government that that is

471
00:28:56,920 --> 00:28:59,080
Speaker 1: struggling to tell a story about what New Zealand is

472
00:28:59,120 --> 00:29:01,280
Speaker 1: going to become. And a lot of New Zealanders are

473
00:29:01,320 --> 00:29:03,320
Speaker 1: worried that New Zealand is becoming a place that people

474
00:29:03,320 --> 00:29:07,560
Speaker 1: will leave. You know, we go through these cycles. You know,

475
00:29:08,800 --> 00:29:10,840
Speaker 1: this reminds me, has been reminding me for a long

476
00:29:10,880 --> 00:29:12,640
Speaker 1: time about the sort of three or four year period

477
00:29:12,680 --> 00:29:16,040
Speaker 1: around early nineteen nineties when it just felt as if

478
00:29:16,040 --> 00:29:17,680
Speaker 1: New Zealand was going down the drain and it was

479
00:29:17,720 --> 00:29:19,200
Speaker 1: never going to get better. And then sort of one

480
00:29:19,240 --> 00:29:22,120
Speaker 1: day the sun came up and I thought, ah, actually

481
00:29:22,160 --> 00:29:25,200
Speaker 1: it's not that bad. But there's still not a narrative

482
00:29:25,560 --> 00:29:29,520
Speaker 1: or a sense from this government as yet that they

483
00:29:29,560 --> 00:29:31,480
Speaker 1: actually know what to do to make the place grow.

484
00:29:32,840 --> 00:29:35,960
Speaker 1: Just rely on interest rates to get everybody back into

485
00:29:36,000 --> 00:29:37,840
Speaker 1: the warehouse in mine attend isn't enough.

486
00:29:38,000 --> 00:29:40,200
Speaker 2: I think there are some green shirts though, I mean

487
00:29:40,240 --> 00:29:43,640
Speaker 2: a measure that we look at a lot as the

488
00:29:43,880 --> 00:29:49,960
Speaker 2: own activity measures within business confidence surveys. They've bounced off

489
00:29:50,040 --> 00:29:54,320
Speaker 2: lows and typically that has had quite a strong forward

490
00:29:54,320 --> 00:30:01,000
Speaker 2: looking relationship with GDP. I think how's is just so

491
00:30:01,200 --> 00:30:05,320
Speaker 2: key here. So if we get those interest rates coming down,

492
00:30:06,320 --> 00:30:10,000
Speaker 2: if I look across the Reserve Bank, I look across

493
00:30:10,040 --> 00:30:13,720
Speaker 2: the main bank economists, if we get the between five

494
00:30:13,880 --> 00:30:18,920
Speaker 2: and say, you know, high single digit house price appreciation,

495
00:30:19,480 --> 00:30:22,480
Speaker 2: that starts getting a back a bit of bit of

496
00:30:22,520 --> 00:30:25,600
Speaker 2: wealth effects, a little bit of animal kind of spirits

497
00:30:25,640 --> 00:30:29,240
Speaker 2: into the into the market and into the economy. So

498
00:30:29,520 --> 00:30:33,040
Speaker 2: I just we can't underestimate just how strong our alliances

499
00:30:33,760 --> 00:30:37,719
Speaker 2: on property in New Zealand and just how intimately our

500
00:30:37,760 --> 00:30:41,880
Speaker 2: wealth effect is tied to that. I think the good

501
00:30:41,920 --> 00:30:45,280
Speaker 2: news for a lot of investors is within the interidets,

502
00:30:45,320 --> 00:30:47,160
Speaker 2: a lot of that is priced in. So you look

503
00:30:47,160 --> 00:30:50,960
Speaker 2: at our cyclical companies, they're trading at really low valuations,

504
00:30:51,040 --> 00:30:54,840
Speaker 2: So you know, think of the likes of the likes

505
00:30:54,840 --> 00:30:58,760
Speaker 2: of Fletchers. You know, they're a key one where you know,

506
00:30:58,800 --> 00:31:02,240
Speaker 2: people don't have high expectations for our cyclical companies. Same

507
00:31:02,240 --> 00:31:05,920
Speaker 2: with the retailers, you know, Warehouse, cat Man, do Briscos

508
00:31:05,960 --> 00:31:08,680
Speaker 2: the other day. You know, it's all been relatively weak

509
00:31:08,800 --> 00:31:13,320
Speaker 2: that's now baked into share prices. So yeah, while the

510
00:31:13,360 --> 00:31:18,800
Speaker 2: New Zealand economy doesn't look particularly good, I can remember

511
00:31:18,840 --> 00:31:21,760
Speaker 2: being here on previous episodes and I wasn't confident enough

512
00:31:21,800 --> 00:31:24,600
Speaker 2: to kind of pick a turning point for New Zealand.

513
00:31:24,880 --> 00:31:27,040
Speaker 2: We kind of we have picked a turning point for

514
00:31:27,080 --> 00:31:30,360
Speaker 2: New Zealand over the past few months and actually moved

515
00:31:31,280 --> 00:31:36,480
Speaker 2: to relatively finding the New Zealand market more attractive than

516
00:31:36,800 --> 00:31:40,320
Speaker 2: the global share market. So yeah, just a little warning

517
00:31:40,360 --> 00:31:42,760
Speaker 2: out there. You know, New Zealand economy may not look great,

518
00:31:42,880 --> 00:31:45,720
Speaker 2: but actually if you look at our share market, it's

519
00:31:45,760 --> 00:31:48,920
Speaker 2: not a great reflection of the New Zealand economy at all.

520
00:31:49,400 --> 00:31:52,840
Speaker 2: And actually the individual companies within there are quite reasonably priced.

521
00:31:53,280 --> 00:31:56,560
Speaker 2: And although it's hard to find a turning point for

522
00:31:56,600 --> 00:32:00,240
Speaker 2: those cyclicals, you're not paying a high valuation to be

523
00:32:00,240 --> 00:32:01,000
Speaker 2: in them at the moment.

524
00:32:01,360 --> 00:32:02,920
Speaker 1: If we are at the battle of the cycle. Then

525
00:32:03,400 --> 00:32:05,840
Speaker 1: this ought to be the time to be thinking hard

526
00:32:05,880 --> 00:32:08,040
Speaker 1: about whether a cheap stock is was buy it.

527
00:32:08,920 --> 00:32:13,480
Speaker 4: So what is the recommendations for investors?

528
00:32:13,520 --> 00:32:14,600
Speaker 3: Do you think this year?

529
00:32:14,640 --> 00:32:19,280
Speaker 2: Then with all of that, I think bonds actually still

530
00:32:19,280 --> 00:32:24,240
Speaker 2: look good, so yields, and you've got to think about

531
00:32:24,720 --> 00:32:28,960
Speaker 2: the risks that they're hedging you for. So if you

532
00:32:28,960 --> 00:32:31,640
Speaker 2: look back to twenty twenty two, everyone says our bonds

533
00:32:31,640 --> 00:32:35,120
Speaker 2: didn't work. My equities went down, my bonds went down.

534
00:32:35,200 --> 00:32:38,600
Speaker 2: It was just horrible. There's no diversification. Bonds don't ensure

535
00:32:38,680 --> 00:32:41,280
Speaker 2: you for an inflation shock. They ensure you for a

536
00:32:41,280 --> 00:32:47,280
Speaker 2: growth shock. And right now the consensus view is that

537
00:32:47,400 --> 00:32:51,920
Speaker 2: everything goes along really, really well, and that's why bond

538
00:32:52,000 --> 00:32:54,760
Speaker 2: yields are higher than they are us growth will be

539
00:32:55,400 --> 00:33:02,040
Speaker 2: pretty robust, but the world mysterious place where things like

540
00:33:02,680 --> 00:33:05,920
Speaker 2: COVID nineteen happen, and then you need your bonds to

541
00:33:06,040 --> 00:33:08,880
Speaker 2: ensure your portfolio. You are getting paid to be there

542
00:33:08,920 --> 00:33:12,720
Speaker 2: at the moment. The one caveat I'd really give is

543
00:33:12,840 --> 00:33:17,560
Speaker 2: that the additional return you're getting for buying a corporate

544
00:33:18,160 --> 00:33:22,280
Speaker 2: bond or a corporate bond fund is really really low

545
00:33:23,080 --> 00:33:27,240
Speaker 2: at the moment, So i'd favor. I do favor in

546
00:33:27,280 --> 00:33:32,040
Speaker 2: portfolios having more of a sovereign bent than a corporate bent,

547
00:33:32,280 --> 00:33:38,240
Speaker 2: because that's rarely going to help you with your downside protection.

548
00:33:38,560 --> 00:33:40,840
Speaker 2: So yeah, I think they look good. As I said,

549
00:33:42,440 --> 00:33:48,479
Speaker 2: New Zealand a bit more relatively attractive compared to global shares,

550
00:33:48,600 --> 00:33:53,480
Speaker 2: and that's largely because of just how wide the breadth

551
00:33:53,560 --> 00:33:58,040
Speaker 2: of expensiveness goes, particularly in the US to a lesser

552
00:33:58,760 --> 00:34:00,720
Speaker 2: extent Gladly as well.

553
00:34:00,840 --> 00:34:02,719
Speaker 1: You know, when you talk about downside protection, I think

554
00:34:02,720 --> 00:34:05,080
Speaker 1: it's worth thinking hard about that because the one thing

555
00:34:05,120 --> 00:34:08,120
Speaker 1: that I think has changed from in the last say,

556
00:34:08,200 --> 00:34:11,680
Speaker 1: three or four years compared to almost the whole of

557
00:34:11,719 --> 00:34:15,400
Speaker 1: the rest of my career is we've been through a

558
00:34:15,440 --> 00:34:23,120
Speaker 1: period of globalization, trade liberalization, internationally accepted rules. We're now

559
00:34:23,239 --> 00:34:27,719
Speaker 1: into where economy kind of trumped politics. We're into an

560
00:34:27,800 --> 00:34:31,360
Speaker 1: era now where politics trump's the economy and trade. So

561
00:34:31,680 --> 00:34:34,200
Speaker 1: there is a lot of uncertainty and baked into that.

562
00:34:35,680 --> 00:34:39,320
Speaker 1: You know, it can just be Trump saying something different

563
00:34:39,360 --> 00:34:42,640
Speaker 1: every day, or it can be the Chinese economy tanking

564
00:34:42,680 --> 00:34:45,200
Speaker 1: so badly that they need to create a distraction and

565
00:34:45,200 --> 00:34:49,240
Speaker 1: decide to invade Taiwan. You know, all sorts of things

566
00:34:49,280 --> 00:34:53,560
Speaker 1: can happen when politicians rather than markets are driving things

567
00:34:53,600 --> 00:34:55,799
Speaker 1: which you don't see coming. So I do think that

568
00:34:56,360 --> 00:34:58,880
Speaker 1: while there's a lot of upside there in the US story,

569
00:34:59,280 --> 00:35:02,279
Speaker 1: and I really take your point about new Ual, it

570
00:35:02,320 --> 00:35:04,839
Speaker 1: may not look very exciting, but if it's cheap enough,

571
00:35:04,840 --> 00:35:08,719
Speaker 1: it's always exciting. I would be taking a lot of

572
00:35:09,239 --> 00:35:13,359
Speaker 1: cognizance of the potential for something to come created by

573
00:35:13,560 --> 00:35:18,399
Speaker 1: our fellow man and women, but mainly man, which will

574
00:35:18,480 --> 00:35:20,600
Speaker 1: up end the applecart, and which has nothing to do

575
00:35:20,760 --> 00:35:25,080
Speaker 1: with actual economic conditions and has everything to do with geopolitics.

576
00:35:25,680 --> 00:35:27,640
Speaker 4: On that note, I think we'll leave it there. Thank

577
00:35:27,680 --> 00:35:30,960
Speaker 4: you so much for coming in and giving us those insights,

578
00:35:31,239 --> 00:35:32,799
Speaker 4: and thanks everyone for tuning in.

579
00:35:32,920 --> 00:35:35,799
Speaker 3: You can watch Share Lunch on YouTube or follow.

580
00:35:35,600 --> 00:35:38,560
Speaker 4: Us on your favorite podcast app, leave us a rating

581
00:35:38,760 --> 00:35:41,080
Speaker 4: and comment about what you'd like to hear next.

582
00:35:41,120 --> 00:35:43,160
Speaker 3: And until next time, ma TWA