Latest / The Money Puzzle / 'Sell in May and go away' - fact or fiction?

Transcript

'Sell in May and go away' - fact or fiction? · The Money Puzzle

• 0:09
  Speaker 1: Hello and welcome to The Australian's Money Puzzle podcast. I'm
• 0:12
  Speaker 1: James Kirby, the wealth editor at The Australian. Welcome aboard, everybody.
• 0:16
  Speaker 1: One of the issues you might have gleaned from the
• 0:20
  Speaker 1: shows in recent weeks is an ongoing separation inside the markets,
• 0:25
  Speaker 1: you know, where The top end of the market is
• 0:28
  Speaker 1: sort of going its own way. In the property market,
• 0:30
  Speaker 1: we dealt with this, where the banks are segregating, literally,
• 0:34
  Speaker 1: the postcodes and giving special deals to like 145 postcodes
• 0:39
  Speaker 1: out of the 3,000 postcodes that we have out there.
• 0:42
  Speaker 1: And look, something similar is going on in all facets,
• 0:46
  Speaker 1: I think, of wealth management and investing. And it's also
• 0:51
  Speaker 1: going to happen in financial advice. It's been happening to
• 0:54
  Speaker 1: a degree. Now the big super funds are going to
• 0:57
  Speaker 1: move in here. And I think you'll find that they
• 1:01
  Speaker 1: will very quickly, if they wish to, and I think
• 1:03
  Speaker 1: they do, they will take millions of people into financial advice.
• 1:08
  Speaker 1: But it would be a form of advice and it
• 1:11
  Speaker 1: would be a limited form of advice. For example, I
• 1:13
  Speaker 1: don't think they'll ever suggest that you leave the super
• 1:16
  Speaker 1: fund and start an SMSF. May I say, I could
• 1:19
  Speaker 1: be proved wrong. I doubt it. So I want to
• 1:22
  Speaker 1: look at that today. I want to look at a
• 1:24
  Speaker 1: few other issues, including the budget coming up. And just
• 1:28
  Speaker 1: before we introduce today's guest, let me tell you that
• 1:32
  Speaker 1: on next Thursday, the 16th of May, I will have
• 1:36
  Speaker 1: the annual budget podcast with Will Hamilton, who has done
• 1:41
  Speaker 1: it every year with me. And it is a very
• 1:44
  Speaker 1: good show. So that is Will Hamilton is very good.
• 1:46
  Speaker 1: So don't miss it.
• 1:47
  Speaker 2: All right.
• 1:49
  Speaker 1: My guest today is Hugh Robertson of Centaur. And he
• 1:53
  Speaker 1: has been on the show before. How are you, Hugh?
• 1:55
  Speaker 2: Hey, James. I'm very well. How are you going?
• 1:58
  Speaker 1: Good. Thank you. Great to have you on. Centaur, what
• 2:01
  Speaker 1: do you call yourself? Centaur Financial Services.
• 2:03
  Speaker 2: Centaur Financial Services based on the Gold Coast.
• 2:07
  Speaker 1: Based on the Gold Coast and based indeed on the
• 2:09
  Speaker 1: legendary figure of Centaurs.
• 2:12
  Speaker 2: All right.
• 2:12
  Speaker 1: C-E-N-T-A-U-R. I'm sure you all know that. Okay. Now, Hugh,
• 2:17
  Speaker 1: this whole thing about how the markets are, This was
• 2:23
  Speaker 1: always the case. We've always had private banks, for instance.
• 2:27
  Speaker 1: We've always had sophisticated investor rules, and it looks like
• 2:30
  Speaker 1: they're going to stay. I don't think anything's going to
• 2:32
  Speaker 1: happen there, reading between the lines, because it doesn't sound
• 2:35
  Speaker 1: like the government are very energised and the opposition don't
• 2:38
  Speaker 1: want them to touch it. But it seems to me
• 2:40
  Speaker 1: that this is a year where it's really starting to happen,
• 2:45
  Speaker 1: that because of the availability probably of data, and the
• 2:50
  Speaker 1: ability to empower data through AI, people can do things
• 2:54
  Speaker 1: they never wanted, never could do before. Is that happening
• 2:59
  Speaker 1: in your world?
• 3:01
  Speaker 2: Yes, we are seeing that there is divergence in the
• 3:06
  Speaker 2: difference between, I suppose, high net wealth availability of investment
• 3:11
  Speaker 2: options versus normal, what we might call retail investment options.
• 3:17
  Speaker 2: And I think if you look at what the big
• 3:19
  Speaker 2: banks or the big institutional banks or investment banks have
• 3:22
  Speaker 2: said over the last couple of years is that they're
• 3:24
  Speaker 2: really driving their clients to illiquid assets and private assets. So,
• 3:30
  Speaker 2: you know, your private equity, everyone's familiar with, but now
• 3:32
  Speaker 2: also private debt, private credit, things like that. And I
• 3:36
  Speaker 2: suppose it's good in a way because it's not correlated
• 3:40
  Speaker 2: to the share market. Over the past sort of decade,
• 3:43
  Speaker 2: we've had bonds and government bonds and shares correlated, highly correlated,
• 3:48
  Speaker 2: which is not good for investors out there worried about
• 3:51
  Speaker 2: their nest egg. So that's given prominence and rise to
• 3:55
  Speaker 2: these private assets, which typically aren't valued and don't have
• 4:00
  Speaker 2: a liquidity function or a daily liquidity function. The challenge,
• 4:04
  Speaker 2: I suppose, for the everyday investor or the retail investor
• 4:08
  Speaker 2: would be that if they've got one to two million
• 4:10
  Speaker 2: in their nest egg, which is well above average in
• 4:13
  Speaker 2: this country, They probably don't feel like they're rich with
• 4:17
  Speaker 2: the cost of living and everything right now. And, you know,
• 4:19
  Speaker 2: probably trying to help their kids out and things like this.
• 4:22
  Speaker 2: And they can't really afford to lock their money away
• 4:25
  Speaker 2: in these illiquid assets for a period of time. So
• 4:28
  Speaker 2: they've got to take market risk. And that's challenging for them,
• 4:31
  Speaker 2: I feel.
• 4:32
  Speaker 3: Right.
• 4:34
  Speaker 1: I mean, that holds for everybody that's exposed to super,
• 4:38
  Speaker 1: unless you're lucky enough to have a defined income. benefit pension,
• 4:43
  Speaker 1: where the world can crash if it wants. And hey,
• 4:46
  Speaker 1: who cares? I've got a defined benefit pension. I'll deal
• 4:50
  Speaker 1: with that later in the show, because I think there
• 4:52
  Speaker 1: was a question in and around that issue. And I've
• 4:54
  Speaker 1: been covering some issues pertinent to that. But just on
• 4:58
  Speaker 1: that broader issue of the market segregating. Property example, I think,
• 5:03
  Speaker 1: is an extremely good example because they're literally doing it
• 5:07
  Speaker 1: by postcode. On the sophisticated investor front, so you have
• 5:11
  Speaker 1: to have 250 grand a year to qualify as a
• 5:16
  Speaker 1: sophisticated investor. And you must have assets of, is it
• 5:20
  Speaker 1: two and a half mil? But you can include your crazy,
• 5:25
  Speaker 1: but you can include your house, which is just daft.
• 5:28
  Speaker 2: So everyone in Sydney is a sophisticated investor.
• 5:31
  Speaker 1: Yeah. That's right. Yeah, exactly. And it's not like they're
• 5:33
  Speaker 1: going to go investing that money either because it's locked
• 5:35
  Speaker 1: into their home. They're not going to sell their home
• 5:37
  Speaker 1: and move into a caravan and start investing. There's a
• 5:39
  Speaker 1: point I'm making. What I want to ask you is,
• 5:42
  Speaker 1: first of all, there's an attempt to change the rules there.
• 5:45
  Speaker 1: And if they change them, it would make them much,
• 5:47
  Speaker 1: much higher. If you think about that ANZ postcode experiment,
• 5:51
  Speaker 1: they were expecting people to have income of 400 grand.
• 5:54
  Speaker 1: That's really high. That's about four times the national average.
• 5:59
  Speaker 1: But I just want to ask you, on that broader
• 6:02
  Speaker 1: issue of sophisticated investors, the advantage, allegedly, is, not allegedly,
• 6:08
  Speaker 1: the advantage of becoming a sophisticated investor, folks, if you
• 6:12
  Speaker 1: want to go and do it, sign the documentation. It
• 6:15
  Speaker 1: lasts for three years, and accountants will do it for
• 6:17
  Speaker 1: you if you match the criteria. And then you can
• 6:19
  Speaker 1: include your house, so you can if you wish. But
• 6:22
  Speaker 1: the advantage is you can get at these things that
• 6:24
  Speaker 1: people couldn't traditionally get at, like private equity funds. In
• 6:29
  Speaker 1: some countries, they simply don't have that. Do you think
• 6:33
  Speaker 1: people need to be protected from themselves? Or do you
• 6:35
  Speaker 1: think that whole area is necessary at all, that sophisticated
• 6:39
  Speaker 1: investor split?
• 6:42
  Speaker 2: This is a great question, something that we talk about
• 6:45
  Speaker 2: a lot internally within the industry. Because you're looking at,
• 6:51
  Speaker 2: it's less documentation for people. Everyone's time poor. They would
• 6:54
  Speaker 2: much rather call themselves a sophisticated investor than if they can,
• 6:57
  Speaker 2: they get access to products and investment strategies that might
• 7:01
  Speaker 2: not be open to them. If they, the opposite is
• 7:03
  Speaker 2: a retail investor, if they class themselves as a retail investor,
• 7:08
  Speaker 2: but you also lose your protections. So if there's a
• 7:12
  Speaker 2: complaint or things like that, you're not, you're not protected
• 7:16
  Speaker 2: to the extent that a retail investor is, if you
• 7:18
  Speaker 2: want to.
• 7:18
  Speaker 1: Or if it goes, if it goes belly up, you
• 7:20
  Speaker 1: can't go running off to AFCA. Is that, is that right?
• 7:23
  Speaker 2: That's right. So, you know, for me, it's, it really
• 7:27
  Speaker 2: comes down to your level of financial literacy and understanding
• 7:30
  Speaker 2: of risk and understanding of the investments and being able
• 7:32
  Speaker 2: to do the due diligence or, you know, having someone,
• 7:37
  Speaker 2: you know, having an advisor that can do the due
• 7:39
  Speaker 2: diligence on it because a lot of the products, you know,
• 7:42
  Speaker 2: we saw, you would remember back in pre-global financial crisis,
• 7:46
  Speaker 2: all the mortgage funds, you know, they were guaranteed 8%,
• 7:51
  Speaker 2: guaranteed 9%, but people lost all their money there. So,
• 7:55
  Speaker 2: All of us financial advisors that were around before the
• 7:58
  Speaker 2: global financial crisis, we get really scared when we start
• 8:02
  Speaker 2: seeing 10% guaranteed signs getting slapped up on billboards.
• 8:06
  Speaker 1: I'm seeing those ads again, Hugh. They don't say the
• 8:08
  Speaker 1: word guaranteed, but they promise.
• 8:13
  Speaker 2: And that's really difficult because if I'm an investor, whether
• 8:16
  Speaker 2: sophisticated or retail, and I know that I want $ 100, 000
• 8:19
  Speaker 2: a year and I've got a million dollars, that kind
• 8:20
  Speaker 2: of that mental maths, that bias. I've just got a
• 8:26
  Speaker 2: bias to want that to work for me. Whereas the
• 8:29
  Speaker 2: reality is that it doesn't. We've got to stick to
• 8:31
  Speaker 2: the principles of, you know, diversification, you know, being broad
• 8:36
  Speaker 2: asset classes, you know, stick to the big end of town,
• 8:39
  Speaker 2: those kind of things. Because long term, the share market,
• 8:43
  Speaker 2: even the public share market, you know, that still generates,
• 8:46
  Speaker 2: you know, on average around 10%, you know, over 100 years.
• 8:50
  Speaker 2: So the long term average is good. It's just that
• 8:52
  Speaker 2: we You know, like last month, the market went down 3%
• 8:55
  Speaker 2: on us guessing what's going to happen with interest rates.
• 9:00
  Speaker 2: The start of the year was going to go down
• 9:04
  Speaker 2: six times the US. Then a couple of months back,
• 9:06
  Speaker 2: it went to three. Then they were scared that it
• 9:08
  Speaker 2: was going to go up. And the share markets reacted.
• 9:12
  Speaker 2: And then on Friday, you know, this is last week,
• 9:16
  Speaker 2: Jerome Powell, the Federal Reserve, met and he said, okay,
• 9:19
  Speaker 2: we want to keep rates as is and the market's
• 9:22
  Speaker 2: rebounded positively. So sometimes we've got to make sure we're
• 9:25
  Speaker 2: going back to our fundamentals and our analysis and not
• 9:27
  Speaker 2: just the noise. But that's the hardest thing now to
• 9:31
  Speaker 2: switch off.
• 9:33
  Speaker 1: So with financial advisors, there used to be 30,000 of
• 9:37
  Speaker 1: them roughly a decade ago. And it's down to about
• 9:41
  Speaker 1: 15,000 now. And not only that, but it's barely replacing itself, right?
• 9:46
  Speaker 1: It's barely replacing itself at that level. If it is
• 9:49
  Speaker 1: even replacing itself, I see different reports. And then at
• 9:54
  Speaker 1: the same time, we know the big super funds, the
• 9:57
  Speaker 1: government are seriously assessing. allowing them to widen financial advice
• 10:03
  Speaker 1: to the point that the advice they might give might
• 10:06
  Speaker 1: be enough for many people, or would seem to be enough.
• 10:09
  Speaker 1: What's the future then for independent advisors like you? What
• 10:14
  Speaker 1: is the answer? Must you go upmarket to to survive.
• 10:18
  Speaker 1: And what is upmarket? Could you define it for us?
• 10:21
  Speaker 2: It's a great question. I feel if you went to
• 10:23
  Speaker 2: most financial advisors, they would say upmarket would be in
• 10:26
  Speaker 2: excess of a million dollars that someone invests through you.
• 10:31
  Speaker 2: Usually there's a fair amount of complexity. I think there's
• 10:36
  Speaker 2: complexity for everyone in today's age, you know, around paying
• 10:39
  Speaker 2: down debt, around estate planning, the intergenerational wealth transfer, housing affordability,
• 10:46
  Speaker 2: affordability just in general, what to do with investments. I
• 10:49
  Speaker 2: think volatility is greater than ever in the world. And
• 10:54
  Speaker 2: it is becoming difficult because there is, within the financial
• 10:59
  Speaker 2: advice profession, there's a lot of red tape. So compliance
• 11:02
  Speaker 2: was very necessary back a few years ago. You know,
• 11:06
  Speaker 2: it needed to become a regulated industry and then they
• 11:09
  Speaker 2: brought out, you know, or the thought was that once
• 11:17
  Speaker 2: you increase these educational requirements that the red tape would
• 11:21
  Speaker 2: start to lower because you would now attract high quality
• 11:26
  Speaker 2: people into, not saying we didn't attract that before, but
• 11:28
  Speaker 2: high quality educated people into the profession. And therefore, because
• 11:34
  Speaker 2: of that, you know, having an educational background, that would
• 11:36
  Speaker 2: be more on a professional services side than a sales side.
• 11:41
  Speaker 2: And with that, you would therefore be able to reduce
• 11:44
  Speaker 2: red tape. Because you're only as good as your weakest link.
• 11:46
  Speaker 2: So that kind of hasn't happened. So what we're seeing
• 11:49
  Speaker 2: and where the rise of, I suppose, industry fund advice
• 11:53
  Speaker 2: will be in the kind of what the big four
• 11:56
  Speaker 2: banks used to do, I guess, in that it is
• 11:59
  Speaker 2: very much.
• 11:59
  Speaker 1: Hopefully not you.
• 12:01
  Speaker 2: Yeah.
• 12:03
  Speaker 1: I mean, the B4 banks were, in the end, basically
• 12:06
  Speaker 1: they were sales teams, weren't they? This was, in essence,
• 12:10
  Speaker 1: the biggest problem in the Haynes Royal Commission was that
• 12:12
  Speaker 1: the banks had people on commission and they were just
• 12:15
  Speaker 1: flogging stuff as if they were flogging car parts.
• 12:17
  Speaker 2: But I wonder how the industry fund is going to
• 12:20
  Speaker 2: remunerate their internal teams. It would have to be on
• 12:23
  Speaker 2: retention of product. And it's similar to if you go
• 12:27
  Speaker 2: into Westpac and you thought you were going to walk
• 12:29
  Speaker 2: away with any other loan other than a Westpac loan.
• 12:32
  Speaker 2: You'd be mistaken. But they walked in to the financial
• 12:36
  Speaker 2: planning side of Westpac and thought they were going to
• 12:38
  Speaker 2: get independent advice. So it was vertically integrated. Now, I
• 12:42
  Speaker 2: feel it's going to be the same with industry funds.
• 12:45
  Speaker 2: And that's not bad. It's just got to be true
• 12:47
  Speaker 2: to label that you're aware that if you walk into
• 12:52
  Speaker 2: XYZ industry super fund, that they're only going to give
• 12:55
  Speaker 2: you advice on the super fund and whether you assess
• 12:59
  Speaker 2: whether it's better to pay down your home loan or
• 13:01
  Speaker 2: make a contribution to super, you're probably not going to
• 13:04
  Speaker 2: get that advice there. Because that's going to be the challenges.
• 13:09
  Speaker 2: It's not holistic. It's going to be just on one
• 13:13
  Speaker 2: element of your financial world. And that might not assess
• 13:16
  Speaker 2: insurances to the extent or estate planning or debt management.
• 13:20
  Speaker 2: And I think that's where advisors like myself will always
• 13:24
  Speaker 2: have a role with clients in that we're really about
• 13:27
  Speaker 2: trying to understand clients' goals and aspirations. And we fit
• 13:32
  Speaker 2: the strategies and the recommendations to that. And sometimes there's
• 13:35
  Speaker 2: no product involved. But with the industry, it's always going
• 13:38
  Speaker 2: to be product.
• 13:39
  Speaker 1: So the big super, they're going to be extremely limited. Yes.
• 13:42
  Speaker 1: They can only be limited because whatever else they say
• 13:46
  Speaker 1: to you, they're not going to say to you, leave.
• 13:49
  Speaker 4: Yes.
• 13:49
  Speaker 1: Or take half your money out and do something else
• 13:51
  Speaker 1: with it. I mean, they may be illegally able to
• 13:56
  Speaker 1: do that, but in reality, I think it's safe for
• 13:59
  Speaker 1: us to say that they're not going to do that.
• 14:01
  Speaker 2: And I think there's a good need and they can
• 14:02
  Speaker 2: fill the space as long as they're honest about what
• 14:04
  Speaker 2: they're doing.
• 14:06
  Speaker 1: Yes, right. Okay. And just on that sophisticated investor scheme
• 14:11
  Speaker 1: that exists, do you think it's is it good or
• 14:17
  Speaker 1: bad for most investors that it exists? Because in my experience,
• 14:22
  Speaker 1: you fill out as many forms as a sophisticated investor anyway.
• 14:27
  Speaker 1: It's just the advisor doesn't fill out as many forms, maybe.
• 14:31
  Speaker 1: The advisor has less to worry about and less paperwork,
• 14:34
  Speaker 1: not the individual.
• 14:36
  Speaker 2: Well, I do feel you've seen a lot of advisors
• 14:38
  Speaker 2: become wholesale-only businesses and sophisticated-only businesses.
• 14:44
  Speaker 1: So they don't, and that keeps it, simple for them yeah.
• 14:47
  Speaker 2: Yeah and it reduces their risk their compliance.
• 14:51
  Speaker 1: Yeah reduces their risk so.
• 14:53
  Speaker 2: And that's been a an inadvertent consequence of the legislation
• 14:58
  Speaker 2: of the regulation that you've got a lot of really
• 15:00
  Speaker 2: great advisors out there that are only going to advise
• 15:03
  Speaker 2: wholesale clients and i think there's a really growing need
• 15:06
  Speaker 2: for that client who isn't who's still got a lot
• 15:08
  Speaker 2: of complexity and wants the independent advisor there's always going
• 15:12
  Speaker 2: to be value for that that person but they might
• 15:15
  Speaker 2: not want to be wholesale. So I think there's a
• 15:17
  Speaker 2: growing niche there, and I feel what industry funds possibly
• 15:22
  Speaker 2: could do would be to take on the new financial
• 15:25
  Speaker 2: advisors at a university, get them through their professional years,
• 15:28
  Speaker 2: and then people from there will graduate into the more
• 15:31
  Speaker 2: independent financial advice because that's, I suppose, when you're at
• 15:34
  Speaker 2: university studying, you're not there thinking you want to give
• 15:37
  Speaker 2: advice just on superannuation. You want to be able to
• 15:40
  Speaker 2: be a, you know.
• 15:41
  Speaker 1: Do the whole thing.
• 15:42
  Speaker 2: Yeah. Yes. Yeah, right.
• 15:44
  Speaker 1: Very interesting. Okay. It's a very interesting part of what's happening.
• 15:50
  Speaker 1: I suppose between the lines, I'm thinking that one of
• 15:53
  Speaker 1: the things you're saying is that the industry will really
• 15:55
  Speaker 1: split even further now if there is this sort of
• 15:58
  Speaker 1: mass advice, highly limited, offered by big super. Then you
• 16:03
  Speaker 1: go that way or you go to an independent advisor
• 16:07
  Speaker 1: and the independent advisors aren't going to bother doing the
• 16:09
  Speaker 1: mass stuff because the super funds do that. And it
• 16:14
  Speaker 1: will split even further than it has. In terms of
• 16:19
  Speaker 1: your world and your advice and what people are looking
• 16:22
  Speaker 1: for this year as an advisor, you mentioned private equity.
• 16:26
  Speaker 1: There's obviously a big push on that at the moment.
• 16:29
  Speaker 1: We've covered that in various ways. I am very much,
• 16:34
  Speaker 1: I am very sceptical about the push into private equity.
• 16:37
  Speaker 1: Nothing wrong with private equity per se. I'm sceptical about
• 16:40
  Speaker 1: the manner in which it's been pushed. As listed vehicles,
• 16:44
  Speaker 1: for instance, that to me is a contradiction. Another issue
• 16:47
  Speaker 1: which I've seen over like three decades is whatever is
• 16:50
  Speaker 1: the new thing, the new fashion in investing comes late.
• 16:55
  Speaker 1: And Mr. and Mrs. Average are at the back of
• 16:59
  Speaker 1: the queue and a lot of the best funds and
• 17:00
  Speaker 1: the best deals are done by the time it's offered
• 17:03
  Speaker 1: to them.
• 17:04
  Speaker 2: That is 100% true.
• 17:06
  Speaker 1: Yeah, okay.
• 17:07
  Speaker 2: Because it takes them that long to get comfortable with
• 17:09
  Speaker 2: the new strategy. So by the time they're comfortable with
• 17:12
  Speaker 2: it and they've seen their friends make money doing it,
• 17:15
  Speaker 2: the mom and dad investor, they then throw in and
• 17:18
  Speaker 2: they don't usually put in a small allocation. They put
• 17:21
  Speaker 2: in more to try and make up for their lost earnings.
• 17:25
  Speaker 1: Yeah. They double their bets at the wrong time. So
• 17:31
  Speaker 1: tell me, how can an everyday investor avoid that distinct risk?
• 17:35
  Speaker 2: It's really being aware of the– person in the mirror
• 17:41
  Speaker 2: and understanding yourself as an investor and that we're all
• 17:45
  Speaker 2: flawed with biases. So for an investor, it would be
• 17:49
  Speaker 2: to set asset allocation limits, how much you're going to
• 17:51
  Speaker 2: limit yourself to allocating, you know, to private equity. You
• 17:54
  Speaker 2: might say, all right, how much am I willing to
• 17:57
  Speaker 2: lose on this? Same as what we would have said
• 17:59
  Speaker 2: to crypto. We've never advised one single client to go
• 18:03
  Speaker 2: into cryptocurrency. But if we've had a client say, we're
• 18:06
  Speaker 2: absolutely going to go into it, We've said, well, what
• 18:09
  Speaker 2: percentage of your portfolio would you be willing to risk
• 18:11
  Speaker 2: losing 100% of? Okay, well, 2%. Okay, well, then that's
• 18:15
  Speaker 2: your allocation.
• 18:16
  Speaker 1: Okay.
• 18:17
  Speaker 2: So it's really, really being strict on yourself and having
• 18:20
  Speaker 2: some discipline around your parameters and your asset allocation.
• 18:24
  Speaker 1: Okay, very interesting.
• 18:26
  Speaker 2: All right.
• 18:26
  Speaker 1: Now, we've got, we're having a terrific range of questions,
• 18:30
  Speaker 1: which I want to try and get through. So I
• 18:33
  Speaker 1: think we'll take a break early and we'll come back
• 18:35
  Speaker 1: in a moment, folks. with a couple of questions that
• 18:38
  Speaker 1: are on hot topic issues. Back in a minute. Hello,
• 18:43
  Speaker 1: welcome back to The Australian's Money Puzzle podcast. I'm James Kirby,
• 18:47
  Speaker 1: the Wealth Editor at The Australian. I'm talking to Hugh
• 18:51
  Speaker 1: Robertson of Centaur Financial Services. Just before we go to questions, actually, Hugh,
• 18:55
  Speaker 1: on the budget, which is next week, are you expecting
• 19:01
  Speaker 1: anything in particular today? Or hoping for anything in particular?
• 19:08
  Speaker 2: With the stage three tax cuts coming in and helping
• 19:11
  Speaker 2: middle Australia, which is necessary and good, what I'm really
• 19:16
  Speaker 2: hoping to see is some things coming for retirees. Because
• 19:20
  Speaker 2: a lot of them aren't going to get the benefit
• 19:21
  Speaker 2: of the stage three tax cuts, so some things to
• 19:24
  Speaker 2: help them with their cost of living is what I'm
• 19:26
  Speaker 2: hoping for next Tuesday night.
• 19:29
  Speaker 1: What an obvious one would be, I think, if I've
• 19:31
  Speaker 1: got it right, the deeming race. Is that due to
• 19:35
  Speaker 1: Flick come off its freeze?
• 19:38
  Speaker 2: I believe so. So we would like to see. Come July,
• 19:46
  Speaker 2: things are going to get indexed up anyway. you know,
• 19:51
  Speaker 2: like our concessional caps and non-concessional caps, some ETP thresholds
• 19:58
  Speaker 2: and things of that nature, I believe. But it's stuff
• 20:02
  Speaker 2: that's going to really help the client that's living off,
• 20:05
  Speaker 2: you know, $ 40, 000, $ 50, 000 in retirement who's drawing down You know,
• 20:11
  Speaker 2: if someone's retired at 60, they're not quite yet age
• 20:14
  Speaker 2: pension age and it's pretty tough for them right now.
• 20:17
  Speaker 2: They might be helping children. Things around that, you know,
• 20:21
  Speaker 2: that might be in the form of some rebates or
• 20:24
  Speaker 2: I'm not sure how the government would implement it, but
• 20:27
  Speaker 2: I'm sure there's a big portion of the voting population
• 20:30
  Speaker 2: who is retired and fits in that cohort. The government
• 20:33
  Speaker 2: would want to help.
• 20:35
  Speaker 1: So in terms of helping that group, what you would
• 20:39
  Speaker 1: do is you wouldn't then exit higher. You'd hold the
• 20:42
  Speaker 1: deeming where it is at present. Okay, well, it would
• 20:47
  Speaker 1: be interesting to see what happens there. I'm sure if people–
• 20:50
  Speaker 1: would you mind just quickly explaining about deeming, what it means?
• 20:54
  Speaker 1: It's the– it's hard to explain exactly, but it drives
• 20:58
  Speaker 1: their returns. It's an assumed return which you must match against.
• 21:02
  Speaker 2: Yeah, the government– couldn't possibly ask every single person on
• 21:06
  Speaker 2: a benefit what their actual earnings were. So they've got
• 21:09
  Speaker 2: to just go with an assumed earnings and they give
• 21:13
  Speaker 2: certain for the first amount, it's charged at a lower rate, sorry,
• 21:19
  Speaker 2: a lower rate. And then the second bit's charged at
• 21:21
  Speaker 2: a higher rate. During the COVID, it went down to
• 21:25
  Speaker 2: a historic low and now going back up. The numbers,
• 21:29
  Speaker 2: for example, is 0.25. For a single person, for the
• 21:33
  Speaker 2: first 60,400 and 2.25 charged, what's over that?
• 21:38
  Speaker 1: So it assumes you're making 2.25% and then your pension
• 21:42
  Speaker 1: access is determined by that, the taper rate. The thing is, folks,
• 21:47
  Speaker 1: obviously cash rates are at four. So really the chances
• 21:51
  Speaker 1: are under natural course of events that they would lift that,
• 21:53
  Speaker 1: but we'll see if they do. That's something I'll be
• 21:56
  Speaker 1: looking out for in the budget. And I'll tell you something, Hugh,
• 21:58
  Speaker 1: I will be in the budget for six hours. There
• 22:00
  Speaker 1: are hundreds of pages and the chances of finding that
• 22:05
  Speaker 1: reference to deeming is just like, it'll take about two
• 22:08
  Speaker 1: solid hours looking for it because they will bury that
• 22:12
  Speaker 1: so deep.
• 22:12
  Speaker 2: Yes.
• 22:12
  Speaker 1: Unless, unless it's good news. If it's bad news, they
• 22:16
  Speaker 1: bury it. If it's good news, there'll be a press
• 22:17
  Speaker 1: release about it. I say that as a veteran of
• 22:21
  Speaker 1: budget coverage. Okay, but I'm getting carried away.
• 22:23
  Speaker 2: How many budgets have you done, do you think? I
• 22:26
  Speaker 2: don't know.
• 22:27
  Speaker 1: I've done about 15, I think. uh which which isn't
• 22:30
  Speaker 1: all of them i could have done more but uh
• 22:33
  Speaker 1: but i've done about 15 yes.
• 22:35
  Speaker 5: Uh that's right 15 by 6 that's right okay darcy
• 22:45
  Speaker 5: is question uh is this it's about hex we had
• 22:48
  Speaker 5: a great show about hex recently uh and of course
• 22:51
  Speaker 5: turns out that um The title of that show, if
• 22:54
  Speaker 5: you go into the archives, folks, was Something's Gotta Give.
• 22:57
  Speaker 1: And hey, something did give ever so slightly this week.
• 23:01
  Speaker 1: And I explain it in a minute. Anyway, Darcy says,
• 23:04
  Speaker 1: I've heard you mention HECS and that it shouldn't be
• 23:07
  Speaker 1: taken into account when borrowing. This is about how the
• 23:10
  Speaker 1: banks take into account your HECS debt when you're being
• 23:14
  Speaker 1: assessed for a loan. My argument was that it shouldn't be.
• 23:18
  Speaker 1: Darcy says, I want to clarify the banks do indeed
• 23:21
  Speaker 1: assess HECS differently to conventional debt. They assess it, the
• 23:25
  Speaker 1: impact it has on your cash flow. And Darcy, which
• 23:31
  Speaker 1: can be male or female, I don't know which, D-A-R-C-Y,
• 23:34
  Speaker 1: says it would be irresponsible if the banks didn't do this. Okay, Darcy,
• 23:40
  Speaker 1: that's your point of view. We'll take that on board.
• 23:43
  Speaker 1: Of course, the point I'm making is that it's not
• 23:47
  Speaker 1: conventional debt. So in any measure, it's not conventional debt,
• 23:52
  Speaker 1: and I don't think it should be treated by the
• 23:55
  Speaker 1: prudential regulators in the fashion it is treated. I have
• 23:59
  Speaker 1: said on air that APRA demands that the banks do that.
• 24:03
  Speaker 1: APRA came on to me pretty quickly about that and said,
• 24:06
  Speaker 1: you're wrong, James. We don't demand it. We expect it.
• 24:11
  Speaker 1: And I'm supposed to make a big deal of that.
• 24:13
  Speaker 1: So here you are. I'm making a deal of it.
• 24:15
  Speaker 1: They say they expect it. OK, the regulator expects it.
• 24:18
  Speaker 1: It doesn't demand it. That fine distinction there being made
• 24:23
  Speaker 1: very clear to me. And back to you, audience. OK, now, Hugh.
• 24:27
  Speaker 1: So about HECS. What they did was, what the government
• 24:30
  Speaker 1: have announced in a pre-budget leak is they're going to
• 24:33
  Speaker 1: in future take, when they're indexing it, they'll take the
• 24:36
  Speaker 1: lower of either wage inflation or consumer price. which is something. Now,
• 24:44
  Speaker 1: the fact is that wages are very rarely higher than
• 24:47
  Speaker 1: the CPI, but that's a start. Now, they haven't sorted
• 24:52
  Speaker 1: out the mechanics of how it's paid yet, but they
• 24:55
  Speaker 1: said there's going to be more, so let's see if
• 24:57
  Speaker 1: there's more next week. Okay, now, defined benefits. Could you
• 25:05
  Speaker 1: explain to the audience what a defined benefits is? is
• 25:10
  Speaker 1: that wonderful thing that they are very rare now?
• 25:14
  Speaker 2: They are truly rare. They are like unicorns nowadays. And effectively,
• 25:19
  Speaker 2: they took all the risk out of you as an
• 25:22
  Speaker 2: employee and the employer absorbed all the risk and said,
• 25:26
  Speaker 2: you know, there's sort of three variables in the calculation.
• 25:30
  Speaker 2: And one of them is, you know, years of service,
• 25:33
  Speaker 2: a contribution factor and your final average salary. So Between that,
• 25:38
  Speaker 2: that would give you X amount and the longer you worked,
• 25:40
  Speaker 2: the more that amount became. And then upon retirement, they
• 25:45
  Speaker 2: would pay you that, that would convert into an income
• 25:48
  Speaker 2: stream and they would pay you that until you passed away.
• 25:52
  Speaker 2: And sometimes some of them even had two thirds would
• 25:54
  Speaker 2: then go on to your partner. So they were very,
• 25:57
  Speaker 2: very generous, hence the reason they're going away. And they
• 26:02
  Speaker 2: were also very, very hard to fund. And that was
• 26:04
  Speaker 2: one of the purposes of starting the future fund. So
• 26:07
  Speaker 2: I think we've seen a lot. I know there's been
• 26:12
  Speaker 2: a lot of defined benefits that used to then pay out.
• 26:15
  Speaker 2: That would be a defined benefit during your accumulation years
• 26:18
  Speaker 2: and then upon retirement pay you the defined benefit as
• 26:22
  Speaker 2: an income stream for life. Now a lot of them
• 26:25
  Speaker 2: and some major super funds have reverted them back to
• 26:27
  Speaker 2: defined benefit while you work, but then it goes into
• 26:30
  Speaker 2: accumulation the day you retire, which is quite scary for
• 26:33
  Speaker 2: someone who's never had market risk. They've only had a
• 26:36
  Speaker 2: lot of these guys are government employees.
• 26:40
  Speaker 1: That kind of pulled the legs from the whole deal,
• 26:43
  Speaker 1: didn't it? I see. And mostly public servants?
• 26:46
  Speaker 2: Mostly, yes.
• 26:47
  Speaker 1: Yeah. And I think around 2004, they.
• 26:53
  Speaker 2: Stopped.
• 26:54
  Speaker 1: So as you can imagine, it's older people. that habit. Now,
• 26:59
  Speaker 1: John's question specifically. I am a member of the Commonwealth
• 27:02
  Speaker 1: Public Service superannuation accumulation plan and my employer calculates super
• 27:08
  Speaker 1: contributions based off our fortnightly contribution salary. However, we will
• 27:13
  Speaker 1: soon be transitioning across to ordinary time earnings, which for
• 27:17
  Speaker 1: me will decrease the contributions made. Can my employer actually
• 27:23
  Speaker 1: do this without my consent? And if so, is there
• 27:26
  Speaker 1: really any benefit to staying with a Commonwealth super fund
• 27:29
  Speaker 1: compared to a normal retail fund? Whoa, zillion dollar question.
• 27:34
  Speaker 1: This is never advice, John, all the Johns in the world.
• 27:37
  Speaker 1: It's information. Any information you want to add there, Hugh?
• 27:42
  Speaker 4: The only thing, trying to sort of think about this,
• 27:49
  Speaker 4: the minimum super is called your superannuation guarantee and is
• 27:52
  Speaker 4: usually based off an income.
• 27:53
  Speaker 2: An employee's ordinary times earnings. So my thinking when I'm
• 27:57
  Speaker 2: looking into this is that there was an award or
• 28:00
  Speaker 2: a workplace like an enterprise arrangement that may have changed.
• 28:03
  Speaker 2: So they may have had an agreement that was quite
• 28:07
  Speaker 2: beneficial and that's changed. Given that, not knowing a lot around,
• 28:13
  Speaker 2: he said that it's an accumulation plan. So the assumption
• 28:18
  Speaker 2: there is that it's not defined benefit, in which case,
• 28:24
  Speaker 2: the employer would still remember a choice of super came out.
• 28:28
  Speaker 2: So the assumption then would be that if you were
• 28:30
  Speaker 2: able to get that benefit that you were getting and
• 28:33
  Speaker 2: you had to stay in the fund, if now it's
• 28:35
  Speaker 2: a like for like and you're going to get the
• 28:37
  Speaker 2: same amount of super, whether you're in the Commonwealth Public
• 28:42
  Speaker 2: Service superannuation account plan or an XYZ, well, now it
• 28:46
  Speaker 2: just opens you up to doing your research and seeing
• 28:48
  Speaker 2: if there's a better plan available. It does.
• 28:50
  Speaker 1: Yeah, and just go on the ATO MyGov site and
• 28:54
  Speaker 1: have a look at how the funds are doing and
• 28:56
  Speaker 1: whether your fund is doing on par with the best
• 29:00
  Speaker 1: funds and make your own decision there, John. Okay, I
• 29:04
  Speaker 1: love this next question. It's from Paul. Why is it
• 29:06
  Speaker 1: that Canadian pension funds appear to be so large they
• 29:10
  Speaker 1: are regularly investing in Australian infrastructure and farms? Our funds
• 29:15
  Speaker 1: have grown significantly due to our compulsory... superannuation terms. And
• 29:20
  Speaker 1: I was wondering how the sides of the sector compare,
• 29:23
  Speaker 1: given the two countries have similar populations. Absolutely true. So
• 29:28
  Speaker 1: Canadian pension funds seem to roam the world, particularly Australia,
• 29:33
  Speaker 1: where I think they've had rich pickings for a long time.
• 29:37
  Speaker 1: People literally know them by name. I mean, the Ontario
• 29:39
  Speaker 1: teacher Fund etc and they have come in and they
• 29:42
  Speaker 1: have bought key infrastructure assets in Australia and it's a
• 29:46
  Speaker 1: very logical question why on earth are Canadian pension funds
• 29:52
  Speaker 1: buying Australian assets why aren't Australians buying them I suppose
• 29:57
  Speaker 1: that's the inference isn't it from Paul what do you
• 29:59
  Speaker 1: think Hugh.
• 30:00
  Speaker 2: When I hear this question, I wonder how many big
• 30:04
  Speaker 2: sort of, you know, mega funds there are over in
• 30:06
  Speaker 2: Canada because to buy them that they, you know, they're
• 30:10
  Speaker 2: buying illiquid assets, which can be good because we talked
• 30:14
  Speaker 2: about the correlation, you know, a negative correlation before. So
• 30:18
  Speaker 2: the thought process there is we've had a lot of
• 30:20
  Speaker 2: small super funds, you know, that we're talking about now.
• 30:24
  Speaker 2: They're more aggregating and becoming mega funds, which gives them
• 30:28
  Speaker 2: the scope to be able to, buy big assets. But
• 30:32
  Speaker 2: you couldn't buy one of these, you know, a big
• 30:33
  Speaker 2: infrastructure asset if it was 10% of your fund, for example.
• 30:38
  Speaker 2: That's great.
• 30:39
  Speaker 1: That's it, isn't it? Yeah, I get it.
• 30:41
  Speaker 2: Scale.
• 30:42
  Speaker 3: Right.
• 30:42
  Speaker 1: So we've got Australian super, which is enormous, and the
• 30:47
  Speaker 1: big 10 funds. But if your super fund is a
• 30:49
  Speaker 1: $ 2 billion fund or a $ 3 billion fund, it can't
• 30:52
  Speaker 1: buy a billion dollar toll road.
• 30:54
  Speaker 2: Is that it? Yeah. So I feel we're going to
• 30:58
  Speaker 2: see more As Australians, I think the numbers by 2030
• 31:02
  Speaker 2: are astronomical what's in our superannuation system. And we're already
• 31:05
  Speaker 2: seeing Australian super and the other big mega funds are
• 31:09
  Speaker 2: starting to do this. The dilemma can be as to
• 31:14
  Speaker 2: what are they going to then invest in, like social
• 31:17
  Speaker 2: infrastructure or social housing. We've then got to make the
• 31:20
  Speaker 2: assessment on, okay, well, is that actually, is that an
• 31:23
  Speaker 2: investment we want our super fund to be? So there
• 31:26
  Speaker 2: needs to be probably a a pretty good level of
• 31:30
  Speaker 2: transparency in where the funds are actually investing. I like
• 31:36
  Speaker 2: the concept of those funds buying big assets. We always
• 31:41
  Speaker 2: talk about you want an economic moat. Buying airports just
• 31:45
  Speaker 2: seems to make sense. You're going to make money from
• 31:48
  Speaker 2: now until the end of time.
• 31:50
  Speaker 1: Except when there's a pandemic or a volcano.
• 31:53
  Speaker 2: No.
• 31:56
  Speaker 1: But there's no perfect investment. There's no perfect investment, folks.
• 32:01
  Speaker 1: But airports at times come pretty close. But the basic
• 32:04
  Speaker 1: point there, Paul, is that it's probably an issue of
• 32:08
  Speaker 1: scale that the big, and the US funds, of course,
• 32:11
  Speaker 1: the Californian CalPERS, which is just like, you know. in
• 32:17
  Speaker 1: another league again in terms of how big they are.
• 32:20
  Speaker 1: But the point that Hugh is making is that they
• 32:22
  Speaker 1: can get to do things that other funds can't do.
• 32:25
  Speaker 1: And we are getting some view of that and some
• 32:28
  Speaker 1: example of that ourselves with what the Future Fund is doing.
• 32:31
  Speaker 1: Australia Super, I think they say they have 50 people
• 32:34
  Speaker 1: in New York in their team. I mean, they're just getting,
• 32:36
  Speaker 1: they are just getting to quite extraordinary levels. But the
• 32:40
  Speaker 1: good part of that, obviously, is they can compete with
• 32:42
  Speaker 1: the Ontario Teachers.
• 32:44
  Speaker 2: Fund, etc.
• 32:45
  Speaker 1: while you know, your local fitters and boiler makers, you know,
• 32:50
  Speaker 1: South Australian Association Superfund, which hopefully doesn't actually exist, can't compete.
• 32:56
  Speaker 1: That's the thing.
• 32:57
  Speaker 2: All right.
• 32:57
  Speaker 1: We'll take a short break. Back in a moment. Hello
• 33:00
  Speaker 1: and welcome back to the Money Puzzle podcast. James Kirby
• 33:04
  Speaker 1: with regular guest Hugh Robertson. Now, Steve has a great question.
• 33:09
  Speaker 1: We've had some coverage of this in The Australian in
• 33:11
  Speaker 1: the last few weeks. Last year, You talked about the
• 33:16
  Speaker 1: pattern of the market dropping away in or around May,
• 33:19
  Speaker 1: says Steve. Hence the phrase, sell in May and go away.
• 33:23
  Speaker 1: My question, if someone was dollar cost averaging into an ETF,
• 33:28
  Speaker 1: would it be a reasonable strategy to anticipate a fall
• 33:32
  Speaker 1: in the markets in the coming month, presenting a buy opportunity?
• 33:39
  Speaker 1: And what would be a significant drop? 2%, 3%, 5%?
• 33:43
  Speaker 1: Let's cut that question into two parts. Sell in May
• 33:47
  Speaker 1: and go away. It sure happens. It seems to be
• 33:52
  Speaker 1: happening again at the start of May this year. But
• 33:55
  Speaker 1: is it anything more than a sort of clever little rhyme?
• 34:00
  Speaker 1: Do you know, Hugh, has it got any empirical evidence
• 34:04
  Speaker 1: to back it up?
• 34:05
  Speaker 2: Sell in May and go away. Buy again on St. Luke.
• 34:09
  Speaker 2: Ledger's day. Was that what it was?
• 34:12
  Speaker 1: When is St. Ledger's day?
• 34:15
  Speaker 2: That was, uh, it's a UK horse race. It's in September.
• 34:18
  Speaker 1: Uh, I see. I didn't know the second part of that. Okay.
• 34:22
  Speaker 2: So, uh, traditionally it, it has looked like it, but it's,
• 34:27
  Speaker 2: you can only connect the dots looking backwards. So this
• 34:29
  Speaker 2: is where it becomes challenging. You know, if someone said
• 34:32
  Speaker 2: to me, should I invest during COVID at the start
• 34:35
  Speaker 2: of COVID, you would have said no. And it was
• 34:36
  Speaker 2: the best buying opportunity, you know? So, And often at
• 34:39
  Speaker 2: times where it feels the worst is when it's the
• 34:41
  Speaker 2: best time to invest. But academically, it's true. There was
• 34:47
  Speaker 2: some recent research done sort of from 1985 to 2023
• 34:52
  Speaker 2: that did show that both US and Australian markets didn't
• 35:00
  Speaker 2: perform as well during those periods. They were still okay.
• 35:04
  Speaker 2: And then since then, So since 2005 to 2023, the
• 35:07
  Speaker 2: Australian market in particular has averaged negatives in May and June,
• 35:11
  Speaker 2: and actually September's the worst month.
• 35:14
  Speaker 1: So it's... Interesting.
• 35:16
  Speaker 2: There's something else. Yeah, and then the US market, you know,
• 35:21
  Speaker 2: that's worst. So the worst month seems to be now
• 35:24
  Speaker 2: in September, both Australia and the US market. But from
• 35:31
  Speaker 2: our perspective on... dollar cost averaging, there might be alternative,
• 35:35
  Speaker 2: which is called value averaging. So rather than putting in
• 35:38
  Speaker 2: the same, I'll leave that one up to Google, but by,
• 35:44
  Speaker 2: you know, sort of instead of putting the same set amount,
• 35:47
  Speaker 2: it could be buying the same number of units or
• 35:49
  Speaker 2: it could be, you know, when you see it down.
• 35:52
  Speaker 2: So get the, you know, if, was it Steve? To
• 35:57
  Speaker 2: Google that. There was a good book written about it.
• 35:59
  Speaker 2: I just can't remember. the name off the top of
• 36:01
  Speaker 2: my head, but it was interesting to look at the
• 36:03
  Speaker 2: different approaches, but certainly dollar cost average across the cycle
• 36:08
  Speaker 2: and in months where it goes down, that's where I
• 36:10
  Speaker 2: would just tip in a little bit more. I wouldn't
• 36:14
  Speaker 2: stop the dollar cost average because the months where it
• 36:16
  Speaker 2: rebounds the most is usually where your best return is.
• 36:20
  Speaker 2: And you usually miss it if you're trying to time
• 36:22
  Speaker 2: the market.
• 36:22
  Speaker 3: Because that's the whole thing about averaging, isn't it? The
• 36:27
  Speaker 3: whole thing is don't vary. The whole thing is, I
• 36:32
  Speaker 3: look at, yes, over a long period of time, dollar
• 36:35
  Speaker 3: cost averaging is a very strong approach. Though I will
• 36:41
  Speaker 3: say there are times it takes real gumption. I went to,
• 36:45
  Speaker 3: we hosted an investor conference around 2009 and it was
• 36:51
  Speaker 3: the absolute best. bottom of the bottom of the market.
• 36:55
  Speaker 3: It was just so miserable. The ASX had tumbled about 50%
• 36:59
  Speaker 3: from its top in November 2007. But the issue was
• 37:04
  Speaker 3: it didn't do it quickly. It did it in a long, slow, extended,
• 37:07
  Speaker 3: painful fashion over two years. And no one knew when
• 37:10
  Speaker 3: it was going to end. And a very famous fund
• 37:13
  Speaker 3: manager at the time stood on stage in Sydney.
• 37:19
  Speaker 1: And talked about dollar cost averaging. And I remember thinking,
• 37:23
  Speaker 1: oh my, oh my, I haven't even heard anyone say
• 37:25
  Speaker 1: that term for so long. And when I think back,
• 37:28
  Speaker 1: of course, he was right. And if you had done it,
• 37:31
  Speaker 1: in fact, you know, it was nothing but uphill from
• 37:33
  Speaker 1: there on. But there are times it takes gumption to
• 37:36
  Speaker 1: stick with it. And that's probably also worth thinking about
• 37:41
  Speaker 1: for Steve and all the Steves out there. Now, the
• 37:43
  Speaker 1: second part of his question was, What constitutes a significant drop?
• 37:47
  Speaker 1: And I love this. He says two, three or five percent.
• 37:51
  Speaker 1: I would say to you that two, three or five
• 37:53
  Speaker 1: percent isn't a significant drop. I would say to you.
• 37:58
  Speaker 1: Fifteen percent is a significant drop. Twenty five, two, three, five.
• 38:04
  Speaker 1: You know, two or three in a day, Steve, wouldn't you?
• 38:08
  Speaker 1: So what's a significant drop you?
• 38:11
  Speaker 2: I'm in complete agreement with you, James. It's. significant is
• 38:16
  Speaker 2: uh is 15 percent uh you know apple apple you
• 38:20
  Speaker 2: know there was a report came out on apple a
• 38:22
  Speaker 2: couple weeks ago and drove the share price down then
• 38:25
  Speaker 2: they came out and didn't say their sales were great
• 38:28
  Speaker 2: but they were less worse less bad than what the
• 38:33
  Speaker 2: the research report had predicted and the share the share
• 38:37
  Speaker 2: price went up 10 percent so yes yeah from our
• 38:40
  Speaker 2: In a broad-based sort of diversified fund, you'd be thinking
• 38:43
  Speaker 2: sort of 10%, 15% is probably a good number. But, again,
• 38:47
  Speaker 2: what you would do is if you– remembering your points
• 38:52
  Speaker 2: from the global financial crisis, there was four distinct dips.
• 38:55
  Speaker 2: So you don't buy the first big dip. You know,
• 38:58
  Speaker 2: if it's down and you've got 100, you know, on
• 39:01
  Speaker 2: the first dip, put in 25 and then see what happens.
• 39:04
  Speaker 2: If there's another dip, you know, another 25. You want
• 39:06
  Speaker 2: to keep some gunpowder dry because– Was it Keane said,
• 39:10
  Speaker 2: you know, markets can stay irrational longer than you can
• 39:13
  Speaker 2: stay solvent. So, you know, just even for the psychological
• 39:18
  Speaker 2: benefit of having some money when the market starts to
• 39:21
  Speaker 2: even recover to put in. Yeah, that's significant. You know,
• 39:26
  Speaker 2: even 15 seems as I'm thinking about it out loud,
• 39:27
  Speaker 2: 15 seems not like a high enough number. Because during
• 39:32
  Speaker 2: COVID it went down.
• 39:33
  Speaker 3: Yes.
• 39:34
  Speaker 2: What was COVID? 20% pretty quickly?
• 39:35
  Speaker 1: Yeah, I think 30%. I think 30% for a few hours, literally,
• 39:40
  Speaker 1: at its very worst. Yeah. So there you are, Steve.
• 39:44
  Speaker 1: It's about being measured. It sounds like your approach is
• 39:47
  Speaker 1: really good. It sounds like sell it, may it go
• 39:50
  Speaker 1: away actually does have some empirical evidence. But then, of course,
• 39:54
  Speaker 1: you'll have years, don't you know, you'll have years where it...
• 39:57
  Speaker 1: It doesn't work being the first year you try and
• 39:59
  Speaker 1: play it, no doubt. So be aware of that. And look,
• 40:03
  Speaker 1: as for a significant drop, two, three, and five, they're
• 40:05
  Speaker 1: not significant drops, Steve. If you know that a correction
• 40:11
  Speaker 1: is 10 or more, as they say in the market,
• 40:16
  Speaker 1: a bear market is 20 from the top to the
• 40:20
  Speaker 1: bottom or from the peak to the trough, as they say.
• 40:24
  Speaker 1: the big issue around those issues, around those themes, is
• 40:28
  Speaker 1: the speed at which it can happen. And remember, you know,
• 40:31
  Speaker 1: there was a time in October 1987 when people woke
• 40:34
  Speaker 1: up in Australia and found out that the Wall Street
• 40:37
  Speaker 1: had fallen by more than 20% in a night. In
• 40:41
  Speaker 1: a night. They got up in the morning and they
• 40:42
  Speaker 1: were down 20%. That's what you call significant.
• 40:45
  Speaker 2: All right.
• 40:46
  Speaker 1: Maybe we'll leave it at that. Terrific. Again, Hugh, thank
• 40:49
  Speaker 1: you very much for being on the show. Great, great
• 40:52
  Speaker 1: answers and really good on all those issues. That's Hugh Robertson, folks.
• 40:56
  Speaker 2: Thanks, Hugh. Thank you very much. I really enjoyed it.
• 40:59
  Speaker 2: It was awesome. Thank you. Very good.
• 41:01
  Speaker 1: And thank you, everybody, for listening to the show. OK, emails,
• 41:05
  Speaker 1: themoneypuzzle at theaustralian.com.au. The emails come in waves, folks. Some
• 41:10
  Speaker 1: weeks I can't keep up. This week I could keep
• 41:13
  Speaker 1: up all too easily. So roll them in on any
• 41:16
  Speaker 1: issue you like, comments, observations, complaints. And as I say,
• 41:21
  Speaker 1: we will have a budget show. We will have the
• 41:24
  Speaker 1: Tuesday show too, but it will be before the budget lockup.
• 41:27
  Speaker 1: So I can't do much about the budget in that.
• 41:30
  Speaker 1: But on the Thursday, being the 16th of May, that
• 41:34
  Speaker 1: show will be a budget special. OK, talk to you soon.