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Speaker 1: Let's get to our guest, William Curtain is with us.

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Speaker 1: He his portfolio manager at Milford Asset Management from Auckland,

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Speaker 1: New Zealand. William, Happy New Year to you. Thanks for

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Speaker 1: being with us. I couldn't help but notice that the

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Speaker 1: NASDAQ one hundred was the worst performing of the major

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Speaker 1: U s ind season thirty three percent down and if

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Speaker 1: you look at it in terms of market capitalization, about

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Speaker 1: six and a half trillion worth of value simply evaporated.

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Speaker 1: Is going to be a similar story, do you think, well,

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Speaker 1: we'll see you mean that if you look at the

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Speaker 1: factors that drove the technology down to it's we think

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Speaker 1: there's a valuation bubble rising interstrates. Uh, certainly we're part

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Speaker 1: of the of the popping of the valuation bubble, but

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Speaker 1: we think weakness in the final month of the year

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Speaker 1: with the next state and the technology stocks continued to

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Speaker 1: be very weak all the way to the end of

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Speaker 1: the year. Uh. Computer other seekers was probably exasperated by

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Speaker 1: a text selling effect where US retail and business and

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Speaker 1: the text here end at the December have lost a

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Speaker 1: lot of money on these technology stops. So by selling

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Speaker 1: and realizing some of these losses at the end of

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Speaker 1: the year, they can save themselves a bit of a

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Speaker 1: text credit um and stay them has in some textbook

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Speaker 1: getting into the new year. So we're really interested to

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Speaker 1: see how they trade this week now that we're into

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Speaker 1: the new year and we don't have the text motivated selling.

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Speaker 1: When you look at New Zealand, for instance, I mean

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Speaker 1: you can see that the Reserve Bank that certainly every

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Speaker 1: basically every commentator said how ahead of the curve they

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Speaker 1: were in terms of tightening monetary policy. So does that

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Speaker 1: give you any insight essentially as you know what the

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Speaker 1: Feds doing and what markets are doing and whether it's

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Speaker 1: everything has been priced in yet it does a little bit.

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Speaker 1: When we over here in New Zealand were one of

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Speaker 1: the first major center banks to raise interest rates, we

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Speaker 1: believe that you will be one of the first major

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Speaker 1: developed a central banks to cut interest rates um and

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Speaker 1: and that's because you you know, just anecdotally looking around

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Speaker 1: talking to people, you know, the market and the economy

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Speaker 1: will not handle more of the drakes at six and

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Speaker 1: a half seven percent where they are today, So we

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Speaker 1: believe they're intentionally driving the economy into recession that will

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Speaker 1: break down inflation as that recession begins, as the weakness

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Speaker 1: and economic pain really begins, then they'll start walking interest

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Speaker 1: rates back with that inflation UM and that we do

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Speaker 1: things a precursor of what will happen to other nations

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Speaker 1: that are actually hiking interustrates reasonably aggressively, the main one

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Speaker 1: obviously being the United States it South, which is still

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Speaker 1: one of the more hawkish developed world nations out there. Um,

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Speaker 1: there's a little bit of a lag effect that when

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Speaker 1: those high industrates will hit the consumers in the US,

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Speaker 1: given the nature of the thirty year fixed mortgages UM

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Speaker 1: and that nation, but ultimately the world by we do

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Speaker 1: think it bit sort of later in the year, and

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Speaker 1: then your risk competing New Zealand, where we think the

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Speaker 1: pain will very much begin to be felt in a

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Speaker 1: big way this current quarter. So I think we can

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Speaker 1: agree that the big story from the last month for

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Speaker 1: the Pacific RIM has been this dramatic, this abrupt reversal

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Speaker 1: of China's COVID zero policy. And over the weekend the

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Speaker 1: data the pm I did that we had forward China

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Speaker 1: showed a real contraction in economic activity. What's the knock

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Speaker 1: on effect for New Zealand. Give me a sense of

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Speaker 1: how the land where you are has been impacted by

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Speaker 1: all of this. China is just such a huge trade

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Speaker 1: partners for New Zealand UM and also for Australia, our

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Speaker 1: neighbor over here. UM with the slowing China's economy and

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Speaker 1: can have a little bit of effect on on the

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Speaker 1: milk consumption, which is New Zealand's main export. But all

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Speaker 1: suit New Zealand exports a lot of timber over to

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Speaker 1: China and the property sit there in China has been

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Speaker 1: an adul drums. So we're experiencing weakness in that sense

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Speaker 1: and in the neighbor next sort. Australia is the largest

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Speaker 1: exporter of iron ore in the world, which sends it

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Speaker 1: a lot of it into China into the steel industry. UM.

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Speaker 1: So there is weakness on the ground, but I would

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Speaker 1: say that's counted by a lot of optimism. The market

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Speaker 1: and the participants are very keen to look through this

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Speaker 1: current weakness. People are saying, we're not surprised that the

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Speaker 1: data coming at is terrible, but we're looking forward to

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Speaker 1: the rosy future as the COVID waves and the economy

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Speaker 1: gets back to reopening in a fast growing um and Milford.

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Speaker 1: We think the market maybe a little bit over estimating

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Speaker 1: how big the boom is. Afterwards, we do think a

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Speaker 1: lot of the weakness and the China's economy has been

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Speaker 1: structural and it's driven by policy, not just like COVID,

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Speaker 1: So we do see room for actually a little bit

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Speaker 1: of a disappointment and how strong this reopening boom is

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Speaker 1: going to be once China and through this co COVID wave. Well,

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Speaker 1: it also tell me here as well. I mean, the

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Speaker 1: thing is it is definitely going to see some pent

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Speaker 1: up demand at least, and so in a way China

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Speaker 1: perhaps dragged the global economy up again. The consumer side, well,

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Speaker 1: we think there's going to be a decent amount of

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Speaker 1: pinned up demand, so we and then even on the

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Speaker 1: oil consumption side, which obviously during COVID with low mobility,

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Speaker 1: you will see a decent amount of tough to mard.

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Speaker 1: So I think for certain consumer stocks exposed to exposed

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Speaker 1: to China, there will be a decent reopening boom um.

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Speaker 1: And we think for certain commodities, particularly energy commod like oil,

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Speaker 1: to be a reopening boom. But we were not believers

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Speaker 1: that this is going to massively move the dover and globally.

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Speaker 1: Can makes sense for for one reason, and that we

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Speaker 1: do think that we still an intentional slowing of the

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Speaker 1: Chinese property market, that that goes beyond the COVID effects.

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Speaker 1: It's it's aimed that reallocated to China's economy from fixed

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Speaker 1: infrastructure and fixed property investment to manufacturing and high end

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Speaker 1: that continues beyond the reopening wave. And secondly, we do think,

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Speaker 1: you know, saying the last couple of days, that a

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Speaker 1: lot of countries around the world will will see quickly

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Speaker 1: sliding growth and into recissions. This and that's going to

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Speaker 1: make the overall global situation it's quite poor. I'd like

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Speaker 1: to get your take on what's going on in Japan,

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Speaker 1: and there's been a pretty dramatic reversal from the b

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Speaker 1: o J in the NIQUE. He is today reporting that

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Speaker 1: the Bank of Japan is intending to boost its inflation

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Speaker 1: projections later this month. Have we seen some type of

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Speaker 1: inflection point in the inflation story in Japan? Absolutely no.

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Speaker 1: We we think it's sort of got to a point.

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Speaker 1: It's been causing issues obviously on the ground, with many

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Speaker 1: consumers struggling with inflation, various important export businesses not handing

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Speaker 1: the quick changes, and the interest rate and then exchange

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Speaker 1: rates very well, um, and it's it's it's causing a

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Speaker 1: slow change in policy. So obviously that only think very

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Speaker 1: marginal changes so far, but it's sort of a window

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Speaker 1: has been opened for more tweaks to the the yelk

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Speaker 1: of kept that they're running. The market is sort of

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Speaker 1: anticipating that they will eventually keep sliding these these these

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Speaker 1: yeld curve caps. That's sort of having it um and

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Speaker 1: impact on exchange rates um, and then that may eventually

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Speaker 1: call off some of the inflation pressures they're coming. But

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Speaker 1: as we're seen in the rest of the world, when

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Speaker 1: inflation begins and it gathers up quite a kind of

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Speaker 1: steam and and the lag of changing policy to impacting

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Speaker 1: inflation appears to be over twelve months. So I can

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Speaker 1: cause a bit of issues if you get behind the

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Speaker 1: curve and take quite quite a lot of adjustments and

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Speaker 1: your financial leavers to get back ahead of the curve.

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Speaker 1: The game and what will be rending in with Japan

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Speaker 1: this year is how they react. Inflation pressures tend to

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Speaker 1: accelerate while they're moving the yield curve or interstrate caps higher.

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Speaker 1: Have you got? I think it only is your high

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Speaker 1: of your portfolio in cash. When does you when do

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Speaker 1: you start getting out of cash and what will you

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Speaker 1: go into and when Well, we've marginally invested some of

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Speaker 1: their cash at the very end of this year the

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Speaker 1: markets coming down, genuinely, they were chocolate and lower into

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Speaker 1: Christmas and a little bit chop chopped lower between Christmas

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Speaker 1: and New Years. So we took that opportunity to invest

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Speaker 1: a little bit of a cash, but the casually overall

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Speaker 1: mains high. On a medium interview, I'll view the years

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Speaker 1: that we will have precisions that both developed world nations

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Speaker 1: that will mean that you know, eventually longerter magistrates can

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Speaker 1: stabilize and come down a little bit. We kind of

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Speaker 1: think more like three and a half per cent of

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Speaker 1: the ten year for the US. As a fair value

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Speaker 1: UM and means equity point of view, we're looking to

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Speaker 1: run run technically higher cash for the first stuff of

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Speaker 1: this year, position and defenses like staples, communications companies, utilities,

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Speaker 1: and avoid the economics at least a sensitive cyclical sectors

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Speaker 1: UM and as if we're right in the recession and

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Speaker 1: that we could broth pays out, it will be it

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Speaker 1: will be a fairly nasty couple of quarters that earnings

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Speaker 1: coming up in their provid it's the real opportunity to

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Speaker 1: set up the generational buying opportunity. We'll have to wait

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Speaker 1: and see what happens. Happy New Year to you, William

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Speaker 1: William Kurtin, portfolio manager at Milford Asset Management, joining us

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Speaker 1: from Auckland, New Zealand. Here on d b A