Speaker 1: Hello.
Speaker 2: My name is Sanatasha Nabananga Bamblet. I'm a proud your
Speaker 2: the Order, Kernie Whoalbury and a waddery woman. And before
Speaker 2: we get started on She's on the Money podcast, I
Speaker 2: would like to acknowledge the traditional custodians of the land
Speaker 2: of which this podcast is recorded on a wondery country,
Speaker 2: acknowledging the elders, the ancestors and the next generation coming
Speaker 2: through as this podcast is about connecting, empowering, knowledge sharing
Speaker 2: and the storytelling of you to make a difference for
Speaker 2: today and lasting impact for tomorrow.
Speaker 1: Let's get into it. She's on the Money. She's on
Speaker 1: the Money.
Speaker 3: Hello, and welcome to She's on the podcast from millennials
Speaker 3: who want financial freedom Today, we are diving deep into
Speaker 3: the concept of bear markets, which, to be honest, is
Speaker 3: a term I only heard for the first time in
Speaker 3: the news very recently, and if I'm being Frank, I.
Speaker 1: Don't really get it. Your name's Georgia, not Frank.
Speaker 3: A good one and thankfully here to shed a little
Speaker 3: light and to explain what a bear market is, what
Speaker 3: it means for us, and how it compares to a
Speaker 3: bull market. It's Victoria Devine of course VD, welcome back
Speaker 3: from Europe.
Speaker 1: Good to have you, Gosh, thank you. I love that.
Speaker 1: Just before this episode, we're having a chat and you
Speaker 1: were like, what is a bear market? Like, how does
Speaker 1: it work? Why is it called a bear market? What
Speaker 1: does that mean? I'm like, it's legitimately a bear, the
Speaker 1: animal bear like a bear, and then the bull market
Speaker 1: is legitimately the bull How many people just didn't know
Speaker 1: that and they were like, Oh, I must be this
Speaker 1: complex investing term. It's not. Probably, it's real cute.
Speaker 3: And that's what we're going to break down today. I
Speaker 3: feel like the most sensible place to start is that
Speaker 3: the start with the basics. What is a bear market?
Speaker 1: That is a smart place to start at, George. But
Speaker 1: before we get there, let's just have a chat about
Speaker 1: investing markets as a whole. And I think we've seen
Speaker 1: it in the She's on the Money community a lot recently, right,
Speaker 1: like last six months, since Christmas, even before Christmas, right,
Speaker 1: We've seen so many posts in the community. We're talking
Speaker 1: about the Facebook community here about you know, oh my gosh,
Speaker 1: my spaceship accounts down, or someone's like, oh my gosh,
Speaker 1: my rais is down, or I was looking at my
Speaker 1: portfolio and I'm still behind. And there's just been this
Speaker 1: consistent piece of conversation around our investments as a whole
Speaker 1: not doing well. And I think it started with like,
Speaker 1: oh my gosh, is it spaceship and we're like, no,
Speaker 1: it's not the platform, it's the market as a whole,
Speaker 1: and we have been going in this direction down. Bear
Speaker 1: market spoiler is when the market decreases in value. We'll
Speaker 1: get to that in a hot second. But if we
Speaker 1: look at the community and we look at the markets
Speaker 1: as a whole, I feel like we've all been really
Speaker 1: concerned about it and we haven't really known what's going on.
Speaker 1: And obviously there's lots of implications. There's been war and
Speaker 1: COVID and you know, after the bushfire, has so much
Speaker 1: happened in Australia but also in the wider world, and
Speaker 1: it now makes sense to be talking about it. Not
Speaker 1: that we haven't been this entire time, but we're currently
Speaker 1: or now officially in what is known as bear market George.
Speaker 1: A bear market, to define it really quickly, is when
Speaker 1: the market falls by twenty percent or more from its
Speaker 1: fifty two week high. So many people say that it
Speaker 1: is typically a sign of negative investor sentiment, which kind
Speaker 1: of makes sense, like we're all feeling a little bit apprehensive,
Speaker 1: we're more likely to, you know, stockpile some cash under
Speaker 1: the mattress because of the tumultuous times that might be ahead,
Speaker 1: especially after what we've been through. But essentially, a bear
Speaker 1: market is where people are selling shares, getting rid of things,
Speaker 1: stocking away their cash in their mattress, and hibernating for
Speaker 1: the winter, which is where I mean, there's a lot
Speaker 1: of hearsay around where bear came from, but we're going
Speaker 1: to define it as we're hibernating. So a bear hibernates cute, right, sure.
Speaker 1: The opposite bull market. You're not following yet, are you? No?
Speaker 3: No, I'm picking up little bits.
Speaker 1: The opposite is a bull market, and a bull as
Speaker 1: an animal really aggressive, like you see them with the flags.
Speaker 1: They'll go ya. But that is where the value of
Speaker 1: the market has risen by a minimum of twenty percent
Speaker 1: from the previous fifty two week high. So a bull
Speaker 1: is buying shares and like charging at the market, and
Speaker 1: a bear is kind of like stockpiling their acorns. Bears
Speaker 1: eat acorns, no, but they do hibernate for the winter.
Speaker 1: So believe it there? Does that make sense? Are you
Speaker 1: following me? Now? I feel like bear.
Speaker 3: It's also like kind of a double meaning, like bear
Speaker 3: market means like people, there's barely anyone there. It's a
Speaker 3: bear people are treating it's it.
Speaker 1: Works, you know, I'm not always silly. What's the sentient
Speaker 1: on ball? Don't need one, don't mean one, don't know
Speaker 1: that's it?
Speaker 3: You said a fish there before, Victoria Devine. So has
Speaker 3: this happened very recently, because I have heard it has,
Speaker 3: but I haven't.
Speaker 1: Been happy in June at my love. So as of
Speaker 1: mid June, we officially made it into a bear market,
Speaker 1: which means that the market has now officially fallen by
Speaker 1: twenty percent, which sounds really scary and it absolutely shouldn't be.
Speaker 1: At the same time as like, it is a good
Speaker 1: time to review your investment strategy. It is a good
Speaker 1: time to think about money, but it's also a good
Speaker 1: time to And this is a quote that I have
Speaker 1: seen all over the internet recently, purely because obviously the
Speaker 1: markets have gone down. But when in doubt, zoom out,
Speaker 1: so like when you're in doubt, obviously it feels really scary,
Speaker 1: but we have been through so many market changes over time.
Speaker 1: Like if we now look at a chart that shows us,
Speaker 1: you know, investment performance over time, those blips that we
Speaker 1: see on a market chart look really small now, but
Speaker 1: then you look and go, wow, hold on, zoom in.
Speaker 1: That's the GFC in two thousand and eight, two thousand
Speaker 1: and nine that now look like a very small bump.
Speaker 1: It went down and then it's obviously recovered and gone back.
Speaker 1: We're at one of those blips again. So it's going
Speaker 1: to feel really dramatic because twenty percent nobody Like if
Speaker 1: I said to you, ge, do you want to invest?
Speaker 1: You go yeah, V then you lost twenty percent. You're
Speaker 1: gonna be happy with me. I'm want to be loving that.
Speaker 3: No, it's going to be loving it.
Speaker 1: But if I took you back to two thousand and
Speaker 1: nine and was able to show you what the future
Speaker 1: looked like and that the market would recover and it
Speaker 1: will be okay, and you're actually well above and beyond
Speaker 1: what you were before, you'd be like, no, I want
Speaker 1: to hold on. But in the moment, it is really scary.
Speaker 1: And that's why on Sheese on the Money, we talk
Speaker 1: so significantly about behavior all investing people, often, especially in
Speaker 1: a bear market, they go, oh my gosh, everybody else
Speaker 1: is selling. The market's going down. I want to save
Speaker 1: my money, like I don't want to lose any more.
Speaker 1: So they often crystallize their losses and pull their money
Speaker 1: out and they're like, no, no, no, I don't want to
Speaker 1: lose more, when in reality that can actually harm you
Speaker 1: because you're pulling money out while it's worthless instead of
Speaker 1: just riding the wave and going no, I know that
Speaker 1: this is how it works. We're going to ride that
Speaker 1: wave and it will rebound at some point in the future.
Speaker 3: So what's happening right now? Why are we in a
Speaker 3: bear market situation?
Speaker 1: Oh, because bears are real cute and everyone's like, it's true,
Speaker 1: let's switch. Well, not as cute as a bear, but no,
Speaker 1: we're in a bear market right now, which is actually
Speaker 1: called a correction. So the market's correcting our itself. It
Speaker 1: was flying and going up, and remember there was just
Speaker 1: like so many people, maybe like just pre COVID talking
Speaker 1: about investing and being like, oh my god, investing, I'm
Speaker 1: making so much money. Like everyone's gloating on shees on
Speaker 1: the money, how much they're making their spaceship and their
Speaker 1: raise accounts, and stuff. Remember that, and then they were
Speaker 1: complaining about it because they're like, is it spaceship and
Speaker 1: we need to remember that it's actually market driven, not
Speaker 1: platform driven. If the underlying assets that your platform own
Speaker 1: are you know, really reflective of the market. But essentially,
Speaker 1: right now we're going through a market correction which has
Speaker 1: been going on for a while now, and it's actually
Speaker 1: due to one inflation, which we're hearing a lot about
Speaker 1: at the moment. It's due to the ongoing impacts of
Speaker 1: Russia's invasion into Ukraine, which is still terrifying, still baffles
Speaker 1: me in twenty twenty two that that is what's going
Speaker 1: on and the implications of that on global trade. So
Speaker 1: obviously those things are really significant, but that is from
Speaker 1: what all the economists are saying, is what is driving
Speaker 1: current downturn in the market. And when you say that,
Speaker 1: v is this an Australian situation or is it global situation?
Speaker 1: It is global situation. So it's not something where it's like,
Speaker 1: oh my god, it'sh Australian shares. No, this is across
Speaker 1: the board. So a couple of weeks ago, the inflation
Speaker 1: numbers out of the US came through and everyone was
Speaker 1: really scared, but they were higher than expected, and we
Speaker 1: know this because we've been talking about it in the community.
Speaker 1: But essentially it hit a four decade high in the
Speaker 1: US in Australia of eight point six percent, So inflation
Speaker 1: in the US is now at a level that has
Speaker 1: not been seen since December nineteen eighty one. So it
Speaker 1: makes sense that we're a bit like, what is going on?
Speaker 1: This is really scary. So we've seen a lot and
Speaker 1: here in Australia, the Reserve Bank actually early June, I
Speaker 1: believe it was like the seventh of June, an announcement
Speaker 1: came out that the Reserve Bank had the single biggest
Speaker 1: rise in the cash rate in twenty two years, which
Speaker 1: is again scary. And Australia's Central Bank tried to quash
Speaker 1: inflation before it got out of control, and the RBA board,
Speaker 1: they have a regular monthly meeting, they lifted the cash
Speaker 1: rate fifty basis points, so it went up to zero
Speaker 1: point eight five And if you follow us on Instagram,
Speaker 1: we posted about that and that was much higher than
Speaker 1: what everybody expected. But essentially that happened because we wanted
Speaker 1: to quash inflation, like it's not going to stop. It
Speaker 1: but it's just stopping it impacting you as significantly. And
Speaker 1: then closely following that, we got the announcement that Albow
Speaker 1: had increased the minimum wage, which is obviously a really
Speaker 1: good thing, but I do think that was really driven
Speaker 1: by the fact that inflation is so significant right now.
Speaker 1: If you're a She's on the Money regular, Hi, thanks
Speaker 1: for listening. But also you've heard Jess and I and
Speaker 1: George talk for weeks on the Friday Drinks episodes about
Speaker 1: like fuel prices and how expensive things are, Like this
Speaker 1: is impacting not just investors but everyday people who are
Speaker 1: just trying to get to work and put food on
Speaker 1: the table. So I think it's important to look at
Speaker 1: what a bear market means, whether you're an investor or not.
Speaker 1: It's not just like, oh, if you're a serious investor,
Speaker 1: the bear market's really important to understand. No, it's not.
Speaker 1: It's important to understand if you're an individual who uses money,
Speaker 1: full stop, end of story, because inflation in the US
Speaker 1: has you know, obviously been wild and not been seen
Speaker 1: that high since December nineteen eighty one, Like that's crazy
Speaker 1: to think that we're back there, and that's obviously then
Speaker 1: sent the stock market further into a bit of a bit.
Speaker 3: Of a panic.
Speaker 1: You're a bit worried. So I think it's really important
Speaker 1: to understand that our governments are doing a lot to
Speaker 1: try and curb this and put us in a position
Speaker 1: where it doesn't impact the everyday person as much. But
Speaker 1: if you're an investor, you're going to feel this pretty
Speaker 1: significantly in your share portfolio. And as an investor myself,
Speaker 1: it is not that fun logging into my share portfolio.
Speaker 1: As you guys know, I'm a pretty aggressive investor. It's
Speaker 1: down pretty significantly. I don't like seeing that. Just because
Speaker 1: I run cheese on the money doesn't mean I'm immune
Speaker 1: to feeling sick when I look at my investment. But
Speaker 1: like I can't tell you you never get over that.
Speaker 1: But what you do do is you educate yourself and
Speaker 1: you're like, no, Victoria, you can't sell your asset. Stop
Speaker 1: doing that, Stop thinking like that, and go back to
Speaker 1: the advice you give everybody else. Yeah, still easier to
Speaker 1: give advice than he needs to take it.
Speaker 3: George, Well, that's the thing. It sounds to be, frank
Speaker 3: quite scary. My mind is going, well, bear market stressful
Speaker 3: times recession. That's like the line that I'm drawing. Is
Speaker 3: that fair, like, are we heading down that? Or is
Speaker 3: it not as dark as that? No, it is absolutely
Speaker 3: as dark as that.
Speaker 1: I absolutely go to see a recession coming, and it's
Speaker 1: because the market's in a way gotten away from us
Speaker 1: and it needs to readjust. It does mean that we
Speaker 1: need to be quite careful with our spending. I don't
Speaker 1: want to scare people. We actually need to. I guess
Speaker 1: talk about here market corrections and what that means, and
Speaker 1: a lot of economists are predicting it, and we will
Speaker 1: probably do an entire podcast on a recession and what
Speaker 1: that means and how that works. But we are young, George,
Speaker 1: and we're in that very privileged position where you know,
Speaker 1: if you look at the risk return chart we have
Speaker 1: on our side time and I've spoken to people in
Speaker 1: our community who are sixteen and listening to the podcast.
Speaker 1: I've spoken to people who are sixty six and listening
Speaker 1: to the podcast, and we're all in different circumstances. To me,
Speaker 1: if you are, you know, a millennial and you're an investor,
Speaker 1: it is not anything that you need to jump up
Speaker 1: and down about and really worry about unless you have
Speaker 1: a very volatile employment situation, in which case I would
Speaker 1: always recommend an emergency fund regardless of who you are
Speaker 1: or what you do. But from my perspective, these types
Speaker 1: of things really impact you. If you're close to retirement,
Speaker 1: where you know, a significant downturn in your investment portfolio
Speaker 1: or your superannuation is going to mean that you're not
Speaker 1: retiring within the timeframe that you want to. It could
Speaker 1: also mean that, you know, George, let's say you own
Speaker 1: a home and you're like, oh, v I wanted to
Speaker 1: own the home for five years, but then a recession
Speaker 1: hits and it's not worth as much as you wanted
Speaker 1: it to be worth. So therefore your time frames on
Speaker 1: your goals have changed, because we actually should push that
Speaker 1: goal out because I don't want you losing money by
Speaker 1: selling that property today and not getting what you needed
Speaker 1: from it, if that makes sense. So a lot of
Speaker 1: privilege plays into this as well, because during a recession,
Speaker 1: a lot of people are forced to do a lot
Speaker 1: of things that they wouldn't want to do, especially when
Speaker 1: it comes to money, which is why I think it
Speaker 1: is so important to go back to that emergency fund
Speaker 1: piece and talk about what that means. But essentially all
Speaker 1: of that in mind, and the fact that you know
Speaker 1: inflation is so prevalent and such a big key point,
Speaker 1: markets are now taking that into consideration. Hence the fall
Speaker 1: like that has been very well timed, the fall in
Speaker 1: the market with when inflation was announced in Australia internationally, Like,
Speaker 1: that's what is driving that this time. And as much
Speaker 1: as the economic news isn't great and it all sounds
Speaker 1: really negative, let's flip this. Shares are on sale. Baby.
Speaker 1: That's a good point.
Speaker 3: That's a nice spin done that.
Speaker 1: I love that. But prices falling means that we are
Speaker 1: looking at having more attractive investment options if you're in
Speaker 1: a position to invest, Like as an investor right now,
Speaker 1: I'm looking at the market going like okay, cool, Like
Speaker 1: what are some things I might want to pick up
Speaker 1: that are discounted that are going to be really solid
Speaker 1: players in my investment portfolio for the long term. Like
Speaker 1: it's really exciting. Like when you're out shopping and you
Speaker 1: see twenty percent off, you get excited. But when we
Speaker 1: see it in the share market, we we nearly wet
Speaker 1: our pair. It's Georgia King.
Speaker 3: And we usually say, don't get sucked into sales. But
Speaker 3: on this occasion, not.
Speaker 1: About all shy if you can, but also be really
Speaker 1: smart and have an emergency fund, because we all want
Speaker 1: to be safe. But it's important to understand that this
Speaker 1: is not just one platform that's going to be impacted.
Speaker 1: It's not just your Spaceship account or your Raise account,
Speaker 1: like everybody across the market is going to be impacted.
Speaker 1: I'm a direct investor, I'm impacted. It's not something that
Speaker 1: you know people are going to be immune from. But
Speaker 1: I think we need to go back to behavioral investing
Speaker 1: and understand that the behavioral investing chart has ebbs and flows,
Speaker 1: and Warren Buffett said it best be greedy when people
Speaker 1: are fearful, and be fearful when people are greedy. And
Speaker 1: that goes back to if the market's really high and
Speaker 1: people are really excited. Remember Bitcoin when everyone was like
Speaker 1: super stoked on it, and every man and his dog
Speaker 1: was buying a bitcoin. Not that you can buy a
Speaker 1: single bitcoin because that is now worthwait much, but they
Speaker 1: were buying parts of bitcoin and then it crashed and
Speaker 1: then everybody was really worried. Like that's the emotional rollercoaster
Speaker 1: that is investment, that is the investing journey. And I
Speaker 1: think We need to just be super aware of what
Speaker 1: that means and how that works, because we can get
Speaker 1: carried away and we can crystallize losses. Like how many
Speaker 1: people in the She's on the Money community have we
Speaker 1: seen George Message just going oh my god, my spaceship
Speaker 1: portfolio was down, so I just sold all my shares
Speaker 1: or I got rid of it. And I'm like, oh
Speaker 1: my gosh. Like I feel mean saying this, But have
Speaker 1: I taught you, sir? Like I feel like a mum
Speaker 1: at the dinner table, Like I remember way back when, right,
Speaker 1: I was like at the dinner table with my dad,
Speaker 1: have no idea what I was talking about, but I
Speaker 1: was like, Dad, there's this great thing I did XYZN.
Speaker 1: He just looked at me and he's like, are you joking?
Speaker 1: And I was like, Dad, I'm really excited, Like why
Speaker 1: aren't you sharing my excitement for this? Obviously very independent
Speaker 1: in discovery, he is, I have been telling you that
Speaker 1: for months.
Speaker 3: Hang on, are you talking about investing?
Speaker 1: No, it's interesting in general, no idea, but like I
Speaker 1: thought i'd discovered it for the first time. I was
Speaker 1: not listening to my dad. I feel like that's my
Speaker 1: community today.
Speaker 3: Sure, I guess what I kind of wanted to bring
Speaker 3: up is that she's on the money. He's been alive
Speaker 3: for three years. It was our third birthday last week.
Speaker 1: Whild how cute do we? And for a lot of.
Speaker 3: Us, this is our really our first test into a
Speaker 3: real market downturn, and this is kind of our challenge
Speaker 3: to take it upon ourselves to be like, what have
Speaker 3: we learned over the past three years? We hold on
Speaker 3: is that the message that you would say to the girl.
Speaker 1: Is absolutely and I think it's really important to remember
Speaker 1: that it's actually about education, and the more educated you are,
Speaker 1: the more comfortable you're going to be going through this.
Speaker 1: And you know, not to call anybody out individually, but
Speaker 1: if you have sold your shares because you've been really
Speaker 1: concerned about the falling prices, I think now's the time
Speaker 1: to go why did you make that decision, because usually
Speaker 1: that decision has been made out of fear, and fear
Speaker 1: comes from a lack of education. The more educated you
Speaker 1: are about something, the less fearful you are of it,
Speaker 1: because you're like, well, I know what that is. It
Speaker 1: doesn't matter what it is or how it works. Like
Speaker 1: people who are super educated on ghosts. George not scared
Speaker 1: of them me terrified. I love this, but it makes sense, right,
Speaker 1: Like the more you know about a particular topic. Our
Speaker 1: producer is laughing at us. I don't know if I
Speaker 1: can carry on. But the more you know about a
Speaker 1: certain topic, the more comfortable you are with it when
Speaker 1: confronted with it.
Speaker 3: Yeah, that's true.
Speaker 1: So I think it's really important to go if I'm
Speaker 1: scared about making this decision anywhere in life, Let's be honest.
Speaker 1: Maybe I just need a bit more education. Maybe I
Speaker 1: need to read a blog. Maybe I need to read
Speaker 1: a book, maybe I need to listen to the Shees
Speaker 1: on the Money podcast. Like, it's not a bad thing.
Speaker 1: I think we just need to talk about it and
Speaker 1: what it actually means. And a bear market is not
Speaker 1: something to be scared of. It just means that the
Speaker 1: US stock price declined. It declined twenty two percent from January.
Speaker 1: It peaked in January, and share prices have been bouncing
Speaker 1: around for the last twelve months. And now we're seeing
Speaker 1: a term being put on that. But we all kind
Speaker 1: of saw this coming. We've been having this conversation. We've
Speaker 1: seen it. I've said before on the podcast, Well, I
Speaker 1: feel like there might be a recession coming, like this
Speaker 1: makes sense, and then economists are saying the same thing now,
Speaker 1: and I'm like, yeah, this makes sense. I'm an educated investor, though,
Speaker 1: and I want to be able to empower the rest
Speaker 1: of the community with that education so that they have
Speaker 1: that confidence to feel like, okay, cool, Like, let's reframe this.
Speaker 1: Let's see this as an opportunity because I'm young, and
Speaker 1: I can create wealth and I can do this, and
Speaker 1: I can do that instead of going, oh my gosh,
Speaker 1: everyone's talking about it being a terrible market, so your
Speaker 1: shares are on sale.
Speaker 3: Yeah, yeah, listen to your sisters at Cheese on the money,
Speaker 3: take it seriously, but zap out the emotion.
Speaker 1: Yeah, what I mean? Right, let's go to it. Right,
Speaker 1: let's do it. Let's at more bear market and bullmarket
Speaker 1: when we gave back fabulous.
Speaker 3: Alrighty, guys, welcome back. Great to have you.
Speaker 1: If you're still with us, do you reckon they're still
Speaker 1: with us? We are about such dry content.
Speaker 3: No, it's dry, but I think the way that you've
Speaker 3: explained it is genuinely so interesting and engaging and as I.
Speaker 1: Said, really cute. So why would you go anywhere?
Speaker 3: Well, they are, but as I said at the top
Speaker 3: of the episode, like I've heard this term, but I
Speaker 3: haven't understood it. It's kind of hard to grasp when
Speaker 3: you're reading it on a page. So it's really good
Speaker 3: to have you explain it. So thank you so much.
Speaker 3: The you mentioned earlier the term market correction, I did,
Speaker 3: how does that differ from a bear market and what
Speaker 3: does it mean?
Speaker 1: I feel like I accidentally used those a little bit interchangeably,
Speaker 1: and they're actually two different things. So corrections in bear
Speaker 1: markets are both defined not defined, but they're both associated
Speaker 1: with you could say, falling share markets, so falling prices
Speaker 1: of shares. The difference between the two is I guess
Speaker 1: how big that for is? So a correction or a
Speaker 1: market correction is typically defined as a share market fall
Speaker 1: of about ten percent, okay, so half of a bear market.
Speaker 1: And as we said before, a bear market is when
Speaker 1: we have a minimum of a twenty percent drop. And
Speaker 1: so in the month of June twenty twenty two, we
Speaker 1: saw the US stock price, so the SMP five hundred index,
Speaker 1: which you can ask me in a hot second to
Speaker 1: what that is entered officially bear market territory when we
Speaker 1: had a twenty two percent decline from its peak in January,
Speaker 1: so officially we're there, but a market correction is about
Speaker 1: ten percent, and then a bear market's twenty.
Speaker 3: Okay, so it's yeah, bear market's worse. That's good to know.
Speaker 3: Here we are what you said just before, SMP markets.
Speaker 1: Oh, the SMP five hundred, which you've probably seen before
Speaker 1: usually like in the really tiny text at the bottom
Speaker 1: of the TV when you're watching the news at night,
Speaker 1: and you would hear people being like in the SMP
Speaker 1: index is up by it or it's down by You've
Speaker 1: heard this before, right, Like that feels familiar. So the
Speaker 1: SMP is actually called the Standard and Pause five hundred,
Speaker 1: or simply put the SMP five hundred, and it is
Speaker 1: a stock market index tracking the stock performance of five
Speaker 1: hundred large companies that are listed on the US Exchange
Speaker 1: in the United States, and it is one of the
Speaker 1: most commonly followed indices, so it is one of the
Speaker 1: most commonly used I guess measures of what's going on
Speaker 1: in the market. So if you ever hear sm P
Speaker 1: five hundred, it's actually not that complex. It's just the
Speaker 1: five hundred top companies that are used for us to
Speaker 1: measure what's going on in the market.
Speaker 3: Okay, makes sense, all right, sure for sure.
Speaker 1: And as of today, George, if you google SMP five hundred,
Speaker 1: I won't tell you what today's date is, but you
Speaker 1: can work out what date we recorded by this number.
Speaker 1: We are down eleven point six three percent, which is
Speaker 1: point three percent today. G So back to recession chats,
Speaker 1: love recession chats. The word recession is terrifying, it is, right,
Speaker 1: Why why do you feel feel like that's terrifying? What
Speaker 1: are your attachments to that one?
Speaker 3: So my mind goes to the global financial crisis over
Speaker 3: in the US and visions of that for me, like
Speaker 3: people losing their jobs, everyone's selling up, just a really
Speaker 3: scary time.
Speaker 1: Like great depression kind of vibes because that was also
Speaker 1: a recession.
Speaker 3: And people like losing their homes and all of these
Speaker 3: really really serious things. And you just said before that
Speaker 3: like a recession is coming, So how can we not
Speaker 3: be afraid of that? Like is it as scary as
Speaker 3: that picture I have.
Speaker 1: In my head?
Speaker 3: Or is it not going to be that bad?
Speaker 1: Look a recession? Honestly, it is really scary and it
Speaker 1: can be really scary, and like, let's define it. But essentially,
Speaker 1: a recession is a significant decline in economic activity that
Speaker 1: lasts for months or even years. Obviously, the Great Depression
Speaker 1: is a really good example of that. That was so significant.
Speaker 1: I mean at the time, it wasn't called the Great Depression.
Speaker 1: They named it after that happened, because you don't know
Speaker 1: what you're in for with a recession, you don't know
Speaker 1: how long it's going to play out for. Then the GFC,
Speaker 1: which is the Global financial crisis, which we should do
Speaker 1: an entire episode on I reckon. That would be from
Speaker 1: a financial advisers perspective, Maybe we should go out to
Speaker 1: the community and they even ask so they want this,
Speaker 1: but like, what is the global financial crisis? Why are
Speaker 1: people still talking about it? When it happened in two
Speaker 1: thousand and eight, two thousand and nine, What started it?
Speaker 1: How did that work? But essentially, experts they declare a
Speaker 1: recession when a nation's economy experiences negative gross domestic product GDP.
Speaker 1: GD probably heard of that before, rising levels of unemployment,
Speaker 1: falling retail sales, so people are shopping less and contracting
Speaker 1: measures of income and manufacturing for an extended period of time,
Speaker 1: which we I feel like we're starting to feel right
Speaker 1: in the conversations we're having so lettus lettus, which is
Speaker 1: twelve dollars lettuce, twelve dollar letters, petrol, petrol. All of
Speaker 1: those things are indicators, all of them. All the lettuces
Speaker 1: and all of the petrols are indicators. But they're genuine
Speaker 1: indicators of recession because we are in a situation where
Speaker 1: our product and our ability to supply product to the
Speaker 1: masses is not able to keep up with demand, and
Speaker 1: so things become astronomically expensive and they become really limited resources.
Speaker 1: And watching this happening is an indicator of recession. But
Speaker 1: you can also see how it might start to happen
Speaker 1: when there's global war and looking at what's going on
Speaker 1: in Russia invading Ukraine and how that's impacted the ability
Speaker 1: of product to flow around the world, and you see
Speaker 1: it in our industry right. Like, I'm probably a little
Speaker 1: bit more privy to this at the moment because as
Speaker 1: a lot of you know, I'm trying to renovate my
Speaker 1: house and it is so expensive. I'm talking to my
Speaker 1: build up and they're like, look, they we're going to
Speaker 1: be up for a minimum of thirty percent more because
Speaker 1: that's how much more product is worth now. So like timber,
Speaker 1: not that everybody else knows what this is. But timber
Speaker 1: prices have increased by a minimum of thirty percent. So
Speaker 1: now for me to build a wall, it is going
Speaker 1: to be thirty percent more. That is putting significant pressure
Speaker 1: one on my budget, but on everybody else's budget. Like,
Speaker 1: think about the building industry and how many contracts have
Speaker 1: been signed to you know, build your metricron home that's
Speaker 1: now costing them more. And there are these contracts where
Speaker 1: they're like, great, I signed this contract. It's now going
Speaker 1: to cost that business far more. That's going to significantly
Speaker 1: impact that business negatively. So it's kind of like a
Speaker 1: snowball and you pick up small things along the way,
Speaker 1: and small things become big things, and that big thing
Speaker 1: happens to be the recession.
Speaker 3: So it sounds like it's basically a perfect storm.
Speaker 2: Right.
Speaker 3: We've had the bushfires to kick us off, then we
Speaker 3: had two years of lockdowns, a pandemic that ended so
Speaker 3: many lives and impacted so many lives around the world. Yep,
Speaker 3: and now we have a war happening in Ukraine.
Speaker 1: It's insane. Yeah, the world is insane. But essentially, and unfortunately,
Speaker 1: recessions are considered a very unavoidable part of business. And
Speaker 1: of the business cycle. As we mentioned before, we have
Speaker 1: been through recessions before. We will come out the other side.
Speaker 1: But yeah, there are some negative things that are going
Speaker 1: to come out of it, and people are going to
Speaker 1: suffer through this because not everyone is going to get
Speaker 1: away with it's got free. But essentially it's kind of
Speaker 1: like the expansion and contraction of the market and working
Speaker 1: out like if you grow too fast, your bubble's probably
Speaker 1: going to pop, and that's kind of what's happening here.
Speaker 3: Well, just on a light note, like light when we
Speaker 3: come out the other side, is it going to be
Speaker 3: like the Flapper.
Speaker 1: Era popping on our dresses?
Speaker 3: It's going to be great, said my mind's gone. It's
Speaker 3: going to be good eventually.
Speaker 1: Yes and no, Yes and no, shut me out. Sorry, sorry,
Speaker 1: Georgia King. I don't think we are going to be
Speaker 1: going into the flapper era again.
Speaker 3: I'm going back.
Speaker 1: Okay, Well I can I go to the party. Actually,
Speaker 1: I've recently moved into a rental property, as you guys know,
Speaker 1: perfect to hold a flapper parties to it. Let's see
Speaker 1: it there. It was my birthdate. We hate to haven't
Speaker 1: had a proper party. We we'll get onto that really,
Speaker 1: But when we're talking about timelines, I think it's important
Speaker 1: to educate you on that. Did you know that the
Speaker 1: average recession lasts eleven months? So if we look at
Speaker 1: the average lengths of recessions from nineteen forty five until
Speaker 1: two thousand and nine cough, that was when our last
Speaker 1: one was, the average recession actually lasts about eleven months,
Speaker 1: or let's call it a year. And that is kind
Speaker 1: of scary because we're not talking about like, oh, gee,
Speaker 1: it'll just be a couple of months. Like eleven months
Speaker 1: is a long time, Like that is longer than just
Speaker 1: making a baby. Is that a good measure of time? Sure?
Speaker 1: I feel like it's too measure of time. It's a
Speaker 1: really good measure of time. I literally use the time
Speaker 1: it takes to create human life as a measure of things.
Speaker 1: It is quite good. Like if someone says, oh, three months,
Speaker 1: I'm like, oh, that's like baby is cooked. Yeah. Literally,
Speaker 1: if someone's like ten months, I'm like, guys, that's so
Speaker 1: long you could literally create human in that period of time.
Speaker 3: Interesting, it's not as long as I thought, recession wise.
Speaker 3: But you saying that a recession typically lasts for eleven months,
Speaker 3: does that mean we can predict these kinds of things
Speaker 3: if we understand that, like why can't we You know
Speaker 3: what I'm saying.
Speaker 1: Look uncertain. So given that economic forecasting is uncertain, like
Speaker 1: I've said it before on the podcast, like, if I
Speaker 1: could predict the shell markets, sir, I'd be rich and
Speaker 1: I wouldn't have to do this podcasts No.
Speaker 3: I did do it anyway, because you love it.
Speaker 1: I literally do. I did this when I wasn't being paid,
Speaker 1: and now I'm being paid. I'm like, this is great, guys,
Speaker 1: But no, you can't predict it in a really easy way,
Speaker 1: in the same way you could predict when you're able
Speaker 1: to see Mars in the sky. Right. But there are
Speaker 1: a few things that were tell tale signs, and we've
Speaker 1: spoken about them. Bushfires, coronavirus, war like, all of these
Speaker 1: things add up to economists going there's probably gonna be
Speaker 1: a recession at some point, but there are some indicators
Speaker 1: or warning signs that can give you a little bit
Speaker 1: more time to figure out how to plan for a
Speaker 1: recession or when one is coming. So the first again
Speaker 1: financial advisor had is being put on an inverted yield cycle.
Speaker 1: So a yield cycle is a graph that essentially plots
Speaker 1: market value or the yield, So yield is essentially how
Speaker 1: much money it makes. And when an economy is functioning normally,
Speaker 1: yield should be higher on long term bonds and you know,
Speaker 1: solid assets. But when long term yields are lower than
Speaker 1: short term yields, so when long term cash coming in
Speaker 1: is lower than short term cash coming in, it shows
Speaker 1: investors are a little bit worried about recession. So it
Speaker 1: means that they're you know, not putting so many eggs
Speaker 1: in so many baskets. They're holding their cards a little
Speaker 1: bit closer to their chests. And this is like quote,
Speaker 1: a phenomenon known as a yield curve inversion. And as
Speaker 1: a financial advisor, I obviously look at this and I go, okay, cool,
Speaker 1: that makes sense. I read the textbook. But economists will
Speaker 1: look at that and go, hey, this has been something
Speaker 1: that has happened before every single recession that has ever happened.
Speaker 1: The next is declining consumer confidence. So consumer confidence is
Speaker 1: like how willing you are to buy stuff? Like right now? Gee,
Speaker 1: if I said got and invest, you'd be like, ah,
Speaker 1: but the market's down, like not sure if I want
Speaker 1: to do that? And this is able to be measured
Speaker 1: with consumer spending. So if surveys that are done on
Speaker 1: you know, what Australians and what Americans are spending shows
Speaker 1: us sustained dropping consumer confidence, it could be a sign
Speaker 1: that we're going into some economic trouble. So essentially, people
Speaker 1: are spending less because they're trying to save more money
Speaker 1: because they're a little bit apprehensive of the future. Another
Speaker 1: is a sudden stock market decline, so we have just
Speaker 1: seen that and ours was a result of inflation. And
Speaker 1: then the other is rising unemployment. And we mentioned this before,
Speaker 1: but it essentially goes without saying that if people are
Speaker 1: losing their jobs, it's a pretty bad sign for the economy.
Speaker 1: Like that ain't a good thing. And just a few
Speaker 1: months of pretty steep job losses is a pretty good
Speaker 1: indicator that there is an imminent recession, because that is businesses.
Speaker 1: It's not because people are not willing to work and
Speaker 1: they're all going on holiday and not coming back. It's
Speaker 1: because businesses are being a little bit more apprehensive and
Speaker 1: they're less likely to hire. They might go, gee, like,
Speaker 1: I know we want to expand, but maybe let's put
Speaker 1: this off another quarter or another six months. So there's
Speaker 1: less jobs in the job market in saying that that's
Speaker 1: quite contradictory to the information that she's on the money's
Speaker 1: been talking about about the great resignation, right, like everyone's
Speaker 1: getting a new job and it's really great. But that
Speaker 1: is actually a really entitled view because that's for educated people,
Speaker 1: not for the workers that usually lose their jobs during
Speaker 1: a recession. If that makes sense.
Speaker 3: Yeah, yeah, So v back to the bear market situation
Speaker 3: where we currently are existing. Is there a particular type
Speaker 3: of stock that people are fearfull of buying that they're
Speaker 3: pulling out, that they're losing faith in or is it
Speaker 3: loss the board.
Speaker 1: I don't think people are losing faith in it. You
Speaker 1: drama queen.
Speaker 2: You.
Speaker 1: I mean, this is some scary shit, but it's one
Speaker 1: of those things where I don't think people are losing faith,
Speaker 1: but they are less likely to buy things that are
Speaker 1: not stockstanded. So this is where blue chip shares shine.
Speaker 1: And I've spoken about it before, but essentially a blue
Speaker 1: chip share is a share with a national or international
Speaker 1: reputation of equality, reliability, and the ability to operate profitably
Speaker 1: in good and bad times. And that's where people fall
Speaker 1: back on industries that are going to stand the test
Speaker 1: of time, Wollice Coals banks things that are essential for
Speaker 1: the operation of our economy and less likely to invest
Speaker 1: in things that are a little bit more frivolous. So
Speaker 1: like people often end up pulling back on things like
Speaker 1: tech where they're like, oh, I don't need that so much,
Speaker 1: but I will invest in something that I know is
Speaker 1: tried and true. In saying that, something that I think
Speaker 1: you're going to find really interesting. Is the lipstick effect.
Speaker 1: Have you heard of this before?
Speaker 3: Uh? No, No, that was I was trying to think of.
Speaker 3: I'm assuming it means like making something look glossier than
Speaker 3: it is.
Speaker 1: Oh that's cute. No, but it's not it at all.
Speaker 1: But like, that's actually a really good analogy of it.
Speaker 1: I thought you were going to be like the I
Speaker 1: don't wear makeup, don't like lipstick, not gonna happen. Not wrong,
Speaker 1: but it's quite interesting. So the lipstick effect is the
Speaker 1: theory that when facing an economic crisis, consumers and people
Speaker 1: are more likely to buy less costly luxury goods. So
Speaker 1: instead of like buying designer bags and shoes and stuff like,
Speaker 1: we're more likely to go and make ourselves feel better
Speaker 1: with small purchases like lipstick interesting, and this is where
Speaker 1: cosmetic companies thrive during a recession, which I probably bet
Speaker 1: you didn't see coming.
Speaker 3: So invest in Mecca is our advice today.
Speaker 1: I will absolutely be doing that today and every day.
Speaker 1: In fact, low key, I'm a little bit salty. Lost
Speaker 1: by level three.
Speaker 3: I don't know what that means.
Speaker 1: Okay, well, if you know, you know, Just to be super.
Speaker 3: Clear there, don't invest in Mecca. Do it if you want,
Speaker 3: but we're certainly not telling you to because this is
Speaker 3: not about financially.
Speaker 1: I mean, invest in the products from Mecca. I'm sure
Speaker 1: ten out of ten, kiss me stunning.
Speaker 3: Back to it. We're about to wrap up, so I
Speaker 3: want to you're going to rap fish, I'm gonna I'm
Speaker 3: gonna start playing the Oscars music. I'm mean to end
Speaker 3: it selfishly. How does this impact me personally? How does
Speaker 3: it impact people community? What does this mean?
Speaker 1: I mean, I could be really dramatic and be like,
Speaker 1: you're at risk of losing your job, not you, Georgia King,
Speaker 1: because we will continue to make content forever. But unemployment
Speaker 1: levels are rising, and I think that it is important
Speaker 1: to be quite aware of that and quite aware of
Speaker 1: your education and what you're doing in case that job
Speaker 1: is not as sustainable or as stable as you might
Speaker 1: think it is. So not only is our community feels
Speaker 1: so bad, but not only is our community much more
Speaker 1: likely to lose their current job, it's going to be
Speaker 1: harder to find a job replacement since more people are
Speaker 1: out of work and looking for a job at the
Speaker 1: same time. So it's a very competitive environment to be
Speaker 1: and if you're looking for a new role, So people
Speaker 1: who are keeping their jobs, they might see no pay rises.
Speaker 1: So as much as inflation's going up and we have
Speaker 1: this expectation that our employers will meet that level of inflation,
Speaker 1: they might not be able to afford to do so,
Speaker 1: and it might make it harder for you to negotiate
Speaker 1: further pay rises, which obviously actually's on the money. We're
Speaker 1: always like, no, you're worth but also, let's read the room,
Speaker 1: and let's see how hard it is for our actual community. Right,
Speaker 1: So it's going to be really dependent on the type
Speaker 1: of business that you're in. You might be thriving, you
Speaker 1: might get a massive pay rise. In a lot of
Speaker 1: industries that might not be as possible. Investments like shares
Speaker 1: and bonds and real estate is probably going to be
Speaker 1: valued less, which could be a blessing or it could
Speaker 1: be a curse. Like if that's your investment and you're
Speaker 1: looking at it going, oh my gosh, my ship football,
Speaker 1: it's worth so much less. Not a good thing. It
Speaker 1: will recover, It's okay, don't stress. But it also could
Speaker 1: be a great opportunity if some people in our community
Speaker 1: have been hustling and hustling to get their home deposit together.
Speaker 1: And I'm hoping this is how it works out for
Speaker 1: miss Jizicarucci. Property is going to be hopefully a little
Speaker 1: bit cheaper, a little bit more affordable, a little bit
Speaker 1: more accessible. Like I mean, surely everybody is seeing that coming.
Speaker 1: Given avocados are what a dollar twenty at the supermarket.
Speaker 1: Thing that I'm not that's true. If we can afford
Speaker 1: avocados at that price, surely soon millennials will be taking
Speaker 1: over the property market. So that is going to happen. Obviously,
Speaker 1: when we see downturn in the share price, it means
Speaker 1: that our retirement savings are going to look a little
Speaker 1: less sexy. If you're in that situation where you are
Speaker 1: planning for retirement, definitely speak to a financial advisor or
Speaker 1: organize your financial affairs to be a little bit more stable. Unfortunately,
Speaker 1: if you're in a situation where you know the prospect
Speaker 1: of losing your job is real, it might make paying
Speaker 1: bills really hard. It might make you know, keeping the
Speaker 1: mortgage repayments up really challenging. And I think that that's
Speaker 1: where to day and every day I'm a stauncher advocate
Speaker 1: of an emergency fund, but I think now more than ever,
Speaker 1: it's just really important to have that in your back pocket.
Speaker 1: Or even if you're in the privileged position of being
Speaker 1: able to beef it up a little bit more, I
Speaker 1: absolutely would consider that because it's so important. As a
Speaker 1: business owner. I know there are lots of business owners
Speaker 1: in the Shees on the Money community because a little
Speaker 1: while ago we did a census and twenty percent of
Speaker 1: people said they were either a business owner or a
Speaker 1: side hustler. Really really cool, and thankfully in Australia we
Speaker 1: are in again a very privileged country where during a
Speaker 1: recession our government usually tries very hard to support small businesses,
Speaker 1: but small businesses are more likely to feel the brunt
Speaker 1: of it, purely because people are like spending less and
Speaker 1: small businesses are more likely to feel that because they're
Speaker 1: already harder to access, right, I think understanding what a
Speaker 1: bear market is and what preparing for a recession actually means.
Speaker 1: But I think that all of the things that I'm
Speaker 1: recommending are actually thinks we should be doing, regardless of
Speaker 1: the economic situation, to put ourselves in the best possible
Speaker 1: financial situation. So I don't want to end this on
Speaker 1: a oh my gosh, everything's going up the wall, like
Speaker 1: this isn't good at all, Like it is what it is.
Speaker 1: We went through a market correction earlier this year when
Speaker 1: it went down by ten percent. We're now at twenty
Speaker 1: two percent, and it's been labeled a bear market. It's
Speaker 1: not as scary as you think it is. The market
Speaker 1: always recovers. If you are in doubt, zoom out and
Speaker 1: have a look at the bigger picture and see what
Speaker 1: every other market recovery has looked like and how long
Speaker 1: that takes. But there is always light at the end
Speaker 1: of the tunnel, and this is just how economics works perfectly.
Speaker 3: Well, I'm feeling a little bit less frightened than I
Speaker 3: was at the start, So thank you so much for
Speaker 3: explaining it all, making it a little bit more understanding.
Speaker 1: I've loved this chat, though, let's do an entire one
Speaker 1: on a recession and the GFC and all of this.
Speaker 3: Do you think people want us excited?
Speaker 1: In my d that absolutely what you want us to do,
Speaker 1: I mean, also makes my content planning a lot easier.
Speaker 3: That's true.
Speaker 1: That is true.
Speaker 3: Thank you, boring but important stuff.
Speaker 1: Go for it, do it alrighty guys.
Speaker 3: Please remember that the advice shared on She's on the
Speaker 3: Money is general in nature and does not consider your
Speaker 3: individual circumstances.
Speaker 1: Except for when buying nas Shigo.
Speaker 3: Ten out of ten. She's on the Money exists purely
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Speaker 3: make an investment or a financial decision. And we promise
Speaker 3: Victoria Divine and She's on the Money are authorized representatives
Speaker 3: in Focus Securities Australia Proprietary Limited a BAN four seven
Speaker 3: zero nine seven seven nine seven zero four nine AFSL
Speaker 3: two three six five two three. And please guys join
Speaker 3: us in the Facebook community if you're not there already,
Speaker 3: especially if you're feeling really daunted at the moment. It's
Speaker 3: the safest place and there's going to be a lot
Speaker 3: of girls in there that are feeling the same way.
Speaker 3: And we can all support each other.
Speaker 1: See her on Friday.
Speaker 3: My love bye guys,