Latest / The Money Puzzle / Is it too late to buy gold!?

Transcript

Is it too late to buy gold!? · 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. Welcome aboard everybody, and thanks everybody for various
0:16
Speaker 1: messages over the last few days. Welcome me back, Thank you. Yes,
0:20
Speaker 1: I was very far away. I was in Greece and
0:23
Speaker 1: I was in Turkey, very interesting places, especially Turkey. Do
0:27
Speaker 1: you know what the inflation rate is in Turkey? It's
0:32
Speaker 1: thirty percent and the interest rate, the benchmark industrate is
0:37
Speaker 1: forty percent, and they are very happy that it's coming down.
0:41
Speaker 1: So there you go. You think we got challenges, Well,
0:44
Speaker 1: i'll tell you what. There are two themes I think
0:47
Speaker 1: dominating investment markets just now. One is AI, which we've
0:52
Speaker 1: covered very well, and the other is gold. We cover gold,
0:57
Speaker 1: and we've mentioned gold we regularly ested obviously as a
1:01
Speaker 1: part of a portfolio. But what we're seeing now is extraordinary.
1:06
Speaker 1: Just this last few weeks, gold the bullion is up
1:09
Speaker 1: about fifty percent or so this year so far, which
1:12
Speaker 1: is extraordinary, not to mention what's happening in other parts
1:15
Speaker 1: of the market with particular gold stocks, et cetera. And
1:19
Speaker 1: I thought, well, wouldn't this intrigue someone who was called
1:24
Speaker 1: the head of investor behavior at NAP Trade, which is
1:27
Speaker 1: Jemmie Dale, How are you, Jemma.
1:30
Speaker 2: I'm well, thanks, how are you good?
1:32
Speaker 1: Good? Have you ever seen anything like this in relation
1:36
Speaker 1: to gold?
1:38
Speaker 2: No, not personally. I mean there will be people who
1:41
Speaker 2: are older than I am who have seen things like this,
1:45
Speaker 2: but you have to be quite a bit older than
1:47
Speaker 2: I am to have seen this before.
1:49
Speaker 1: Like we're going way back.
1:50
Speaker 2: So it's fascinating. If you are pre retirement age or
1:56
Speaker 2: not war into your retirement, this is probably outside the
1:59
Speaker 2: scope of your experience.
2:00
Speaker 1: I think it was the late seventies is the last
2:02
Speaker 1: time that there was an absolute red hot, raging gold
2:07
Speaker 1: rush on gold. And back in those days, of course,
2:09
Speaker 1: it was all about you know, you had to buy gold,
2:12
Speaker 1: you had to physically buy gold. These is it's very
2:14
Speaker 1: different and you can buy no sorts of different ways.
2:17
Speaker 1: I mean, one of the things that we should talk
2:20
Speaker 1: about first of all and for all investors. And I'd
2:24
Speaker 1: be really intrigued to know folks and write in and
2:26
Speaker 1: let us know the money posit at the Australian dot
2:28
Speaker 1: com dot u If you have gold, how much you have,
2:30
Speaker 1: what you think about the concept of holding gold, which
2:34
Speaker 1: I am very comfortable with in my SMSF and I
2:37
Speaker 1: have had it always, but I've never seen it move
2:41
Speaker 1: up like this. And the issue obviously that always restrained
2:44
Speaker 1: people traditionally was it had no income and so then
2:48
Speaker 1: it was totally a capital appreciation price game. So I
2:53
Speaker 1: was saying to you that we've never seen anything like it.
2:56
Speaker 1: And what catches my eye, Gemma, is the last great
3:01
Speaker 1: tech boom conventional tech boom in the market was the
3:04
Speaker 1: dot com boom, which ran in the nineteen nineties, and
3:07
Speaker 1: at that point it was distinct and clear parallel with
3:11
Speaker 1: the AI boom which is in the markets at the moment. However,
3:15
Speaker 1: if you look at what happened back at that point,
3:18
Speaker 1: gold did nothing in that last boom. So is that
3:22
Speaker 1: what's the sort of working theory as to why we
3:24
Speaker 1: have a boom in the stock market off the back
3:27
Speaker 1: of tech but gold is rising at the same time.
3:30
Speaker 2: Yeah, that's the fascinating thing, right. The parallel for previous
3:35
Speaker 2: periods when gold has run quite hard is very different.
3:40
Speaker 2: The macro environment was different, but more specifically, the asset
3:44
Speaker 2: prices and asset price appreciation in other sectors was very different.
3:49
Speaker 2: So traditionally, you buy gold as a defensive asset and
3:54
Speaker 2: as a hedge and as the last safe haven when
3:57
Speaker 2: everything goes to pieces, your gold is the one thing
3:59
Speaker 2: that should retain its value and potentially increase in value
4:04
Speaker 2: when everything else is falling. That was always the theory,
4:07
Speaker 2: and I find your comment that you've always held goal
4:12
Speaker 2: really interesting because for the whole of my career and
4:15
Speaker 2: I started an advice working with advisors and asset consultants,
4:20
Speaker 2: and the people who structured portfolios for advisors, a lot
4:25
Speaker 2: of them go to a sort of centralized pool of
4:26
Speaker 2: investment specialist to get advice on what a model portfolio
4:30
Speaker 2: should look like. For the whole of my twenty five
4:32
Speaker 2: year career, there has been no interest in having a
4:35
Speaker 2: specific allocation to gold. It has been from an institutional
4:41
Speaker 2: perspective or from a financial planning perspective. You can if
4:45
Speaker 2: you want, like two to three percent.
4:47
Speaker 1: You know what was the argument against it, and the item.
4:50
Speaker 2: Has always been other asset classes are where you get
4:54
Speaker 2: your growth, there's where you can value cash flows, that's
4:57
Speaker 2: where you get your income from. And as we've financialized
5:00
Speaker 2: everything and we've been able to list everything and everything
5:06
Speaker 2: can be structured in such a way that you can
5:09
Speaker 2: buy it on a market or that you can buy
5:11
Speaker 2: it and a unit trust and so on. The attraction
5:14
Speaker 2: of holding a physical asset just started to diminish. Certainly
5:18
Speaker 2: if you're a financial advisor, how do you charge fees
5:20
Speaker 2: on a physical asset? Right, So not necessarily the motivation,
5:24
Speaker 2: but it's correlated.
5:26
Speaker 1: It's a very important point. So they don't bring it up.
5:29
Speaker 1: It's like they rarely see, why don't you hold gianto
5:31
Speaker 1: my cash? They don't suggest these things. Yeah.
5:34
Speaker 2: No, So it was never part of any portfolio construction
5:36
Speaker 2: methodology that I ever saw, you know, but occasionally something
5:41
Speaker 2: someone would have a real affinity with gold and feel
5:44
Speaker 2: that it was an important part of the portfolio. But
5:46
Speaker 2: because equities prices ran really hard during the period you
5:48
Speaker 2: were talking about in the late nineties, and then you
5:51
Speaker 2: would sort of move to other asset classes, people move
5:54
Speaker 2: to property particularly, you know, you would feel that those
5:57
Speaker 2: things are going to run really hard, and you don't
6:00
Speaker 2: need gold. You don't need it. It's no use to
6:02
Speaker 2: you when you're in pension phase. That's the other Thing's
6:05
Speaker 2: very difficult to draw down a physical store of gold.
6:08
Speaker 2: So that's another part of it that's really important. Most
6:11
Speaker 2: advice portfolios are looking to retirement as a critical phase.
6:15
Speaker 2: So yeah, just hasn't been part of it.
6:17
Speaker 1: To Tooll, I suppose a lot of that, A lot
6:19
Speaker 1: of that theory was formed pre ETFs, where suddenly gold
6:26
Speaker 1: is liquid, where suddenly you can say I've got whatever,
6:30
Speaker 1: twenty thousand in gold and I want to set a
6:31
Speaker 1: thousand worth today and you can do that a push
6:34
Speaker 1: of a button. Now there are those who say you
6:36
Speaker 1: don't have gold, you have paper that pretends it's covering gold,
6:40
Speaker 1: et cetera. Well I'm comfortable with that. And when I
6:43
Speaker 1: say of gold, I say I have ETF's and gold.
6:46
Speaker 1: I think what happened was I covered? Would you believe
6:48
Speaker 1: the launch of the first ever ETF in gold, from
6:53
Speaker 1: which was launched in Australia, of course, the world's first
6:56
Speaker 1: gold ETF was Australian, which was the original company which
6:59
Speaker 1: is has now been sold in is now global X
7:02
Speaker 1: and remains the biggest gold ETF. That was one thing
7:05
Speaker 1: that convinced me. The other thing was after the GFC
7:09
Speaker 1: in the grizzly period of two nine, when everything was bad,
7:14
Speaker 1: gold held up, and that I think convinced me that
7:19
Speaker 1: it was fine. I never had any problems with these
7:21
Speaker 1: theories that oh what good is it to you? And
7:23
Speaker 1: if the world goes to hell in a handbasket whatever
7:26
Speaker 1: the phrase is, what are you going to do with
7:27
Speaker 1: the gold? You know, you sitting there at a pile of it.
7:29
Speaker 1: I wasn't thinking like that. I was thinking, I want
7:31
Speaker 1: something that will go up when everything else goes down.
7:33
Speaker 1: Non correlated acid. I don't believe bitcoin is a non
7:37
Speaker 1: correlated acid. I do believe that gold is. That's why
7:41
Speaker 1: I was comfortable with it. Now. The thing is, of
7:43
Speaker 1: course we have the additional excellent option in Australia that
7:48
Speaker 1: we have a big gold mining sector. Unfortunately, of course
7:53
Speaker 1: some of the most delicious acids have been picked off
7:57
Speaker 1: and New crest Our, biggest gold miner, was board right
8:01
Speaker 1: smack at the start of this run up of gold
8:04
Speaker 1: and they sold it off and that was a terrible thing,
8:06
Speaker 1: just like Sydney Airport, one of those things that you
8:08
Speaker 1: really wish hadn't happened. However, I'd be really intrigued to
8:11
Speaker 1: know just and we're going to get on in a
8:14
Speaker 1: minute about what you have found out, what people are doing,
8:17
Speaker 1: and it's I think, folks, it's worth the one of
8:18
Speaker 1: the reasons I'm asking, Jemma what people are doing on
8:22
Speaker 1: the NAP trade platform is I work on the theory
8:26
Speaker 1: that it's not what you think is going to happen
8:28
Speaker 1: or what you're doing in terms of markets, it's what
8:31
Speaker 1: everyone else is doing. So so if everyone else thinks
8:34
Speaker 1: gold is going to keep going up, well, guess what's
8:36
Speaker 1: going to go higher and higher. And just before we
8:38
Speaker 1: get into specifics here as to what's going and what's moving,
8:43
Speaker 1: I just want to make the point that gold is
8:45
Speaker 1: about fifty percent. It's around the four thousand US mark.
8:51
Speaker 1: And I don't know about you, Jemma, but in my
8:54
Speaker 1: experience when you ask people was where was gold going
8:57
Speaker 1: to go? It was always very simple. Are you anyone
8:59
Speaker 1: in the golden said it's going to go up? So
9:02
Speaker 1: you ring a gold miner, say hey, what's going on
9:05
Speaker 1: with the price of gold? Where is it going? And
9:06
Speaker 1: guess what they said, it's going to go up. It's
9:09
Speaker 1: a really good time to buy a bit like a
9:10
Speaker 1: real estate agent. But the banks didn't say that. But now,
9:15
Speaker 1: and this is when it's already up fifty percent these weeks.
9:19
Speaker 1: Right now, JP Morgan, Goldman Sachs, Bank of America, all
9:25
Speaker 1: saying it's going to go higher, saying it can go
9:28
Speaker 1: to five thousand easily. Okay, it's four thousand now, folks.
9:31
Speaker 1: That's where we're coming from. Am I naive to take
9:37
Speaker 1: the forecasts of the world's biggest and best investment banks
9:41
Speaker 1: so enthusiastically? Do you think the point I.
9:44
Speaker 2: Was making before about goal not really having a position
9:48
Speaker 2: in any model portfolios, but that included institutional portfolios, which
9:54
Speaker 2: you're in Australia super fun so, but you look off
9:56
Speaker 2: shore and there are certainly enormous institutional mandate that may
10:00
Speaker 2: have an allocation to gold, but plenty of them didn't.
10:03
Speaker 2: The one that I loved, and this was about a
10:05
Speaker 2: month ago, was Morgan Stanley saying we're going to move
10:07
Speaker 2: away from the sixty to forty portfolio to a sixty
10:12
Speaker 2: twenty twenty of which twenty should be gold. So an
10:17
Speaker 2: allocation from zero to twenty is wild, you know. And
10:22
Speaker 2: these are the big investment banks making these statements now, so.
10:25
Speaker 1: The biggest wealth managers. I mean, our top financial advisors list,
10:30
Speaker 1: top one fifty advisors list is dominated by Morgan Stanley
10:34
Speaker 1: and the number one is from Morgan Stanley. And they
10:37
Speaker 1: have and they would follow these precepts if you like,
10:40
Speaker 1: very carefully. If they come out of New York and
10:42
Speaker 1: they are saying take twenty percent of investment portfolioes and gold.
10:47
Speaker 1: I won't say that it was a dependable call, but
10:50
Speaker 1: it was a correct It's a trajectory. Was pretty accurate,
10:55
Speaker 1: that's for sure. If you didn't have any, it was
10:56
Speaker 1: a good time to get some at that time. I
10:58
Speaker 1: have to ask you something before we talk about what's
11:01
Speaker 1: really happening. Do you think it's too late to go
11:05
Speaker 1: into this.
11:06
Speaker 2: Is familiar delation, look to be frank given. And this
11:14
Speaker 2: is why I think it's so fascinating when you do
11:16
Speaker 2: have And so we've got this sixty twenty twenty, which
11:19
Speaker 2: is fascinating. I've never seen that in my career is
11:22
Speaker 2: about twenty five years, so you go back a lot further.
11:24
Speaker 2: I still I'm not aware of it. Nothing that high.
11:28
Speaker 2: There's another talk about a twenty five twenty five twenty
11:30
Speaker 2: five twenty five portfolio, of which twenty five is golden,
11:33
Speaker 2: twenty five is commodities. I mean, just this conversation, it's
11:38
Speaker 2: hard to articulate to someone who doesn't see this stuff
11:40
Speaker 2: how left field it is relative to this standard allocation,
11:45
Speaker 2: and when you have to move that much money to
11:47
Speaker 2: get allocation, even if you go from you know, the
11:50
Speaker 2: most institutional allocations. As a story in Bloomberg this morning
11:54
Speaker 2: talking about most institutional allocations being less than two percent.
11:58
Speaker 2: Obviously you're not going to go from two to twenty.
12:02
Speaker 2: But even if you go from two to three percent,
12:05
Speaker 2: that sheer weight of money is going to be extraordinary
12:07
Speaker 2: in terms of the impact on the price. So even
12:10
Speaker 2: if you feel like it's run really hard, future demand
12:14
Speaker 2: based on simply what is being said by the large
12:18
Speaker 2: asset managers could give you some comfort. There's the potential
12:23
Speaker 2: for it to go high.
12:24
Speaker 1: Yeah, to put it up, certainly, you are certainly not
12:28
Speaker 1: saying it's too late.
12:30
Speaker 2: Look, you know, you'd be pretty lonely if you say
12:33
Speaker 2: you think it's going to fall in price. No, what
12:36
Speaker 2: else seems to be saying that? And it you know,
12:40
Speaker 2: the forecasts arising and the reasons for the forecast rising
12:45
Speaker 2: are very different to people going as we see with
12:48
Speaker 2: equities and any other asset price like, oh, it's going
12:50
Speaker 2: to be ten percent higher this year. You're like, it's
12:52
Speaker 2: really easy to give that forecast. These are kind of
12:54
Speaker 2: weight of money arguments central bank buying, decline of US dollar,
13:00
Speaker 2: macro factors that are quite different to I think in
13:02
Speaker 2: video is going to produce more chips next quarter.
13:05
Speaker 1: What's the factor that you think is the key factor?
13:09
Speaker 1: Central banks have been buying gold since the nineteen nineties
13:12
Speaker 1: weight of money argument. I never listened to.
13:14
Speaker 2: Can Change in the UK was selling gold in the
13:17
Speaker 2: nine nineties, so not.
13:19
Speaker 1: All of them, well as I as a trend as
13:23
Speaker 1: I understand it started maybe the late nineteen nineties. But
13:26
Speaker 1: what do you think is the factor? I mean, personally,
13:29
Speaker 1: I think it's Trump and the instant the immense instability
13:34
Speaker 1: in US and the tarnishing and eroding of the US
13:38
Speaker 1: financial system in terms of its reliability of data, and
13:42
Speaker 1: it's sort of encroaching sort of cronyism from the top.
13:45
Speaker 1: That's what I think. I don't know what do you think.
13:49
Speaker 2: I think financial instability is a nice all encompassing term
13:53
Speaker 2: for geopolitical risk, extremely top evaluations of most asset classes.
14:01
Speaker 2: So there's a bit of a you know, I've got
14:04
Speaker 2: to find safety somewhere kind of mentality. And I don't
14:07
Speaker 2: trust the US dollar anymore, and I don't want to
14:10
Speaker 2: be holding any more US treasuries. And if I'm looking
14:13
Speaker 2: for safety, what's my alternative? You know, it might be
14:18
Speaker 2: Tina for gold. Maybe it's Tina for gold. Maybe that's
14:21
Speaker 2: what it is.
14:22
Speaker 1: Explain what you mean by that's just for those of
14:24
Speaker 1: us who aren't familiar with that. Trump always maxell whatever
14:27
Speaker 1: it means.
14:28
Speaker 2: Old Taco was trump O was chickens out. Tina was
14:31
Speaker 2: about three years ago, which was there is no alternative?
14:33
Speaker 2: Oh yeah, and this was when we cut interest rates
14:36
Speaker 2: to zero. When you're like, well, I have to go along.
14:38
Speaker 2: There's no alternative. I can't sit and gain. Turns out
14:41
Speaker 2: there was an alternative. It was God, but no one
14:42
Speaker 2: was buying it three years ago. Yeah.
14:45
Speaker 1: I don't believe in Tina. I'm not too sure about Taco,
14:48
Speaker 1: and I don't believe in wors of money. Okay for
14:51
Speaker 1: another time. Wrong, they are not by no means, by
14:57
Speaker 1: no means any expression of a view when you or Okay, now, folks,
15:01
Speaker 1: stay with us, because we're gonna look at what people
15:04
Speaker 1: are actually buying. Okay, back in a moment. Hello and
15:16
Speaker 1: welcome back to the Australian's Money Puzzle podcast. I'm James
15:19
Speaker 1: Kirby talking to Jemma Dad head of investor behavior at
15:25
Speaker 1: NAB Trade. The online broker Jemma is a regular guest
15:29
Speaker 1: on the show, and I've asked her for today's show
15:32
Speaker 1: to just take a look at internal data to the
15:35
Speaker 1: extent that she can tell us of what she's seeing
15:38
Speaker 1: on the platform, because I have found in the past
15:41
Speaker 1: it's been very interesting when you see what's going on.
15:46
Speaker 1: I have no idea. By the way, Jemma, I'm guessing
15:48
Speaker 1: they're piling into ETFs and a couple of big name
15:51
Speaker 1: ghost docs, but I have no idea. You haven't told me,
15:53
Speaker 1: so what have you discovered?
15:56
Speaker 2: So you bang on the money. I love this because
16:00
Speaker 2: you're exactly right. The best part of my job is
16:02
Speaker 2: looking at what people do, because it is fascinating how
16:07
Speaker 2: astute individuals are when they're acting on their own on
16:12
Speaker 2: their own account. Right, So we kind of went back
16:14
Speaker 2: a couple of weeks ago and went how early did
16:16
Speaker 2: this start and how active have people been, and how
16:21
Speaker 2: they have they been relative to other things, right, Because
16:23
Speaker 2: if everybody's putting more money into the market, and gold's
16:27
Speaker 2: been a beneficiary of this broad based enthusiasm, then it's
16:30
Speaker 2: not really very telling. So there's obviously many ways you
16:34
Speaker 2: can play the gold thematic easy have so a huge
16:37
Speaker 2: part of the story. And so the one that you
16:41
Speaker 2: alluded to earlier, when we pull it out of our
16:43
Speaker 2: data set, it's technically a preference share, so it doesn't
16:45
Speaker 2: show up in the ETF data set, shows up in
16:47
Speaker 2: the shares data set. That's fine. We've pulled it out.
16:50
Speaker 2: Two hundred percent uplifts so effectively triple the volume going
16:55
Speaker 2: through that. So there's three ways we can cut it.
16:57
Speaker 2: One is the number of people doing it. I'm selling,
17:00
Speaker 2: there's the number of trades, and then there's the size
17:03
Speaker 2: of those trades.
17:04
Speaker 1: In sorry, in gold ETFs are we talking about here, Well.
17:08
Speaker 2: This is whenever we look at any data because you
17:10
Speaker 2: kind of going, yeah, I want to unpick what's happening.
17:12
Speaker 2: Is it a small number of people doing a lot?
17:14
Speaker 1: Yeah? But is it a tripling off trades in gold?
17:16
Speaker 2: Triple of all three things. So this is specifically in
17:20
Speaker 2: the gold ETF that you reference. But when we look
17:22
Speaker 2: across the other gold ETFs, because there are a whole
17:25
Speaker 2: series of them and they do different things. So there's
17:27
Speaker 2: a handful of them that are exactly like the one
17:29
Speaker 2: you alluded to with they basically buy bullion on your
17:31
Speaker 2: behalf and you're buying a component part of that. And
17:35
Speaker 2: as you say, do you trust the piece of paper
17:37
Speaker 2: that says you own the bullion or do you not?
17:40
Speaker 2: Our guys obviously, do you know it's a huge it's
17:42
Speaker 2: a three billion dollar more more than three billion dollars.
17:45
Speaker 2: Now you know structure and it owns the underlying asset
17:49
Speaker 2: and so on. Our guys are very enthusiastic tripling of
17:54
Speaker 2: the value, the number of trades, and the number of people,
17:57
Speaker 2: so this is not like it's a small number of
17:59
Speaker 2: people doing it or lots of people, but small amounts.
18:02
Speaker 2: All three things have risen dramatically over twelve months. We
18:06
Speaker 2: have also seen an uplift in other ETFs that are
18:10
Speaker 2: related to gold. So you can buy gold minor atfs,
18:13
Speaker 2: you can buy international gold miner ETFs, you can buy
18:16
Speaker 2: junior gold minor ETFs if you want to. You can
18:18
Speaker 2: buy this huge range of things. All of them have
18:20
Speaker 2: seen various levels of uplift that are at least double
18:26
Speaker 2: what we've seen in overall market activity. So people are
18:30
Speaker 2: buying equities, but they're buying a lot more exposure to
18:32
Speaker 2: gold miners through ETFs, and they are buying equities, but
18:37
Speaker 2: they are buying triple the exposure to just the physical
18:41
Speaker 2: gold ETFs or preferences as they happen to be, and
18:45
Speaker 2: they're buying the miners.
18:47
Speaker 1: That's I was going to say, So, apart from bullion,
18:51
Speaker 1: what's the next most popular? Is it like local gold miners,
18:55
Speaker 1: international Junior?
18:57
Speaker 2: Yeah, So the inn ETF slash preference share, depending on
19:02
Speaker 2: which one you bought, is far and away the largest
19:05
Speaker 2: uplift and the most significant exposure. And that is partly
19:08
Speaker 2: because people, you know, they're not necessarily advised. These are
19:12
Speaker 2: self director clients, but they have a portfolio. So in
19:15
Speaker 2: a portfolio, they'll make an allocation, be like right, that's it.
19:17
Speaker 2: I'm going from zero to gold to five percent, or
19:20
Speaker 2: I'm going from zero to one percent, I'm going from
19:22
Speaker 2: five percent, ten percent, or whatever it might be. I'm
19:24
Speaker 2: just gonna put a ton in. I'm going to do
19:25
Speaker 2: it today or over a series of days. The exposure
19:29
Speaker 2: to the miners happens in lots of different ways, so
19:32
Speaker 2: they will do it via some of the ETFs. They
19:35
Speaker 2: can buy the ETFs, particularly in the US, because you
19:38
Speaker 2: can buy directly in the US via our platform, and
19:41
Speaker 2: we've seen a lot of that too, So to get
19:44
Speaker 2: exposure to international miners, to get exposure to very specific
19:49
Speaker 2: ETFs that are not available here. And then in terms
19:53
Speaker 2: of the miners, and I find this most interesting. So
19:55
Speaker 2: it's Northern Star way out in front we see el
19:57
Speaker 2: evolution mining.
20:00
Speaker 1: So people can hear them really clearly. Northern Star is
20:02
Speaker 1: the big one. It's the big one, and then what
20:05
Speaker 1: comes next.
20:06
Speaker 2: Then it's evolution mining, and then it tends to go
20:11
Speaker 2: to the smaller and less sort of secure options. Right,
20:16
Speaker 2: so there's sort of more speculative. And what we find
20:19
Speaker 2: when people go to the miners once you get outside
20:22
Speaker 2: the big one or two, and we see the same
20:23
Speaker 2: thing in any kind of mining commodity related stuff, people
20:27
Speaker 2: will happily buy a BHP reo on Fortesque. As soon
20:30
Speaker 2: as you get outside the big ones that are highly
20:32
Speaker 2: profitable and successful, it's a very different cohort of people
20:36
Speaker 2: who will invest in and trade those things, and they
20:39
Speaker 2: tend to have a lot of expertise in that area.
20:42
Speaker 2: They understand production cycles, they understand management capability, they understand
20:46
Speaker 2: the management history, they read the cash flows really carefully,
20:49
Speaker 2: all that kind of stuff, and those guys will take
20:51
Speaker 2: a very different set of plays, but you wouldn't want
20:53
Speaker 2: to extrapolate from what they do because they tend to
20:56
Speaker 2: be specialists in this area and be able to sort
20:59
Speaker 2: of leverage that expertise into their investments, very different to
21:02
Speaker 2: the rest of the base, who are like, I'm not
21:04
Speaker 2: a mining expert, you know. I mean, I can kind
21:06
Speaker 2: of take a guess as to which one of these
21:08
Speaker 2: will be successful, But I'd much rather stick with the
21:10
Speaker 2: top end of town when it comes.
21:11
Speaker 1: To right because they obviously they all say they're going
21:14
Speaker 1: to be successful. But there's a tremendous variability in mining companies.
21:18
Speaker 1: So you say, oh, you know, it's a gold mine,
21:21
Speaker 1: how could you go wrong. If gold is going up,
21:23
Speaker 1: then a gold mine will go up even higher. Not so, folks.
21:27
Speaker 1: The things that gold mining companies do to blow it
21:30
Speaker 1: you just would not believe. I mean a part of
21:32
Speaker 1: the fact that they have practical problems or management problems,
21:35
Speaker 1: or they have floods in the mine, or the railway
21:38
Speaker 1: breaks down or whatever. They do crazy things on hedging,
21:41
Speaker 1: and it's amazing how they can get it wrong. You
21:43
Speaker 1: would think they all get it right. They can't, which
21:46
Speaker 1: brings us back, I think to the attraction of ETFs
21:49
Speaker 1: in this space. So okay, if you buy a gold
21:52
Speaker 1: ETF that's on miners, you're going to buy some good
21:54
Speaker 1: ones and you're going to buy some absolute rubbish. However, certainly,
21:59
Speaker 1: in a bullmarket like this, they've been going very nicely,
22:02
Speaker 1: haven't they, the gold ETFs. When you said that there
22:05
Speaker 1: were people in Australia on your platform, investors, active, independent,
22:10
Speaker 1: smart investors, like everyone listening to this show, we might
22:13
Speaker 1: just rattle the cage by making the point that bitcoin,
22:18
Speaker 1: which is very useful and interesting speculative asset as far
22:23
Speaker 1: as it goes during this gold bull run, is not
22:27
Speaker 1: keeping up. That's one thing, and very interesting. Some of
22:32
Speaker 1: the big bitcoin operators in the US have been buying
22:37
Speaker 1: gold mines. Can you believe this? Which I must say
22:40
Speaker 1: I mind absolutely deeply.
22:43
Speaker 2: Intriguing mining entirely. We all had to learn about bitcoin mining,
22:46
Speaker 2: now we have to learn about gold mining. So look,
22:50
Speaker 2: the most basic stuff is Spider gold, so Spider gold shares.
22:54
Speaker 2: But then you go just looking at what's in the US.
22:57
Speaker 2: We've got Vanneck Junior gold Miners Shares Ultra, so that
23:01
Speaker 2: is leveraged Vanet gold Miners I shares goal Trust. There's
23:05
Speaker 2: a bit of silver gold trying to get exposure to both.
23:09
Speaker 2: A handful lot that. There's some minis. Most of them
23:12
Speaker 2: are not hugely different to what you can get exposure to.
23:17
Speaker 1: Yeah, so I wonder is it a currency play of
23:19
Speaker 1: some sort.
23:20
Speaker 2: It's quite interesting. Look, we do have investors who just
23:23
Speaker 2: like to hold their stuff in the US. Then the
23:25
Speaker 2: number of trades is almost immaterial compared to the number
23:30
Speaker 2: we see in Australia of the domestic ones. But you know,
23:33
Speaker 2: those who are looking for leverage, and we will always
23:35
Speaker 2: have those. There's a few junior minor ones that look
23:37
Speaker 2: a bit different. There's a handful. There's a couple with
23:40
Speaker 2: a specific yield play, which is interesting. I mean, that's
23:43
Speaker 2: quite difficult to get in the gold mining space. But
23:45
Speaker 2: they're looking for that, so they might just have They
23:48
Speaker 2: might be cheaper, that's the other thing. So a lot
23:50
Speaker 2: of the ETFs are less expensive in the US for
23:52
Speaker 2: various reasons, and so.
23:53
Speaker 1: It may be that.
23:54
Speaker 2: But they are a very small number of trades relative
23:57
Speaker 2: to what we see in Australia.
23:59
Speaker 1: Okay, very good, all right, So one thing, last thing
24:02
Speaker 1: I wanted to ask you about this whole thing. The
24:06
Speaker 1: mainstream press as opposed to the financial press and financial
24:09
Speaker 1: media are having great fun watching the cues marketplace, which
24:15
Speaker 1: is really interesting, isn't it. I think this is going
24:18
Speaker 1: to be a milestone. I don't know what sort of
24:20
Speaker 1: a milestone it is. Of course, it could be a
24:23
Speaker 1: milestone where we look back at these cues and we say, wow,
24:26
Speaker 1: those people were miles ahead, or we look back at
24:28
Speaker 1: those cues and we say, gee, they were very close
24:31
Speaker 1: to the top. And there's always that theory that you know,
24:33
Speaker 1: what was the famous line is it from Wall Street
24:36
Speaker 1: in the twenties, when the bellboys buying shares? It's time
24:38
Speaker 1: to get out.
24:38
Speaker 2: Of shine boys? Who they were?
24:46
Speaker 1: What do you think? What does it mean to you
24:49
Speaker 1: someone who's whose study is investor behavior when we see
24:54
Speaker 1: lines of people queuing to buy gold in a very
24:56
Speaker 1: public fashion in the fashion and we've really very I
25:00
Speaker 1: don't know you've ever seen that before. I remember seeing
25:02
Speaker 1: ques buying gold in Hong Kong when I lived there.
25:05
Speaker 1: That was a very particular time, and a lot of
25:07
Speaker 1: that was fear of what was going to happen in
25:09
Speaker 1: Hong Kong and also preddiction for gold anyway in Hong
25:14
Speaker 1: Kong and in China. And also in India, so it's
25:16
Speaker 1: a very distinct thing. What do you think it means?
25:20
Speaker 2: So this is one question I was going to ask,
25:22
Speaker 2: and you know, I've looked at the photos and not
25:24
Speaker 2: spend any time trying to unpickt The demographics of Australia
25:27
Speaker 2: have changed a lot. We have very large Chinese population
25:30
Speaker 2: here and we have an increasingly large Indian population here,
25:33
Speaker 2: So there may be a cultural element to it. You know,
25:35
Speaker 2: certainly a lot of my colleagues and friends who come
25:40
Speaker 2: from China and you are very comfortable owning gold. I
25:43
Speaker 2: was telling you earlier that former colleague of mine received
25:47
Speaker 2: gold for her wedding, very large amounts of gold in
25:50
Speaker 2: the form of jewelry. But it was an asset and
25:52
Speaker 2: a gift, and it's locked away and it's there to
25:54
Speaker 2: be a store of value. So that may be one
25:56
Speaker 2: component of it. I think there is this general awareness
26:02
Speaker 2: that people don't have an exposure to gold, like I
26:05
Speaker 2: don't own any of that. I've been buying some shares,
26:08
Speaker 2: I've been you know, I've been buying other things. I
26:10
Speaker 2: haven't gotten gold. Oh goodness, do I suddenly need gold?
26:13
Speaker 2: So it might be fomo in the slightly different sense.
26:20
Speaker 2: I wouldn't say it's you know, blind ignorance or anything
26:24
Speaker 2: like that, but more just I don't have any exposure
26:27
Speaker 2: to this, and the fear element I think is quite
26:31
Speaker 2: different to the normal fear element, of which is this
26:33
Speaker 2: is going to go on a massive tear and I
26:35
Speaker 2: need to be on board. It might be more of
26:37
Speaker 2: it if things go to pieces. I need to have
26:39
Speaker 2: a bit of this. So it's an interesting this place
26:44
Speaker 2: of given's risk of vension while also attracting to their
26:46
Speaker 2: desire to get into some greater returns from something.
26:49
Speaker 1: For a reflection of the billion dollars that's gone into ETFs.
26:52
Speaker 1: You don't see that. They don't kill in the streets,
26:54
Speaker 1: but been happening too, No, no one cu it's.
26:56
Speaker 2: Not for that. We see it, but it's not as exciting.
26:58
Speaker 1: Stay with us, folks. I've got so many questions for
27:00
Speaker 1: Jemma back in a moment. Hello, Welcome back to the
27:16
Speaker 1: Australians Money Puzzitive podcast. Wasn't that interesting about gold? Gee? Folks?
27:23
Speaker 1: I have to tell you, as I said at the start,
27:24
Speaker 1: there are two themes in the market right now, AI
27:28
Speaker 1: and gold. But what's extraordinary about that is that normally
27:33
Speaker 1: when you have a market boom, gold doesn't go along
27:36
Speaker 1: with it. And so in a way, every phase is
27:40
Speaker 1: you know, in a way, every phase is like no
27:43
Speaker 1: phase you've ever seen before. No one had ever seen
27:45
Speaker 1: zero interest rates before, not that long ago, and no
27:47
Speaker 1: one has ever seen this. A hot share market and
27:50
Speaker 1: a hot gold market. What's going on? You can make
27:53
Speaker 1: your own mind up about that. The fact is it's
27:56
Speaker 1: going on, and it looks like it's going to go
27:58
Speaker 1: for a while. All right, some questions Jenny. Is the
28:02
Speaker 1: ASX fading? I read about its various technical problems, but
28:07
Speaker 1: more importantly, it seems that the big Australian companies are
28:11
Speaker 1: going straight to Wall Street and ignore the local market.
28:15
Speaker 1: Is this a concern? Well, we mentioned how Sydney Airport
28:19
Speaker 1: has gone and New Crest is gone, but that's not
28:21
Speaker 1: what Jenny's talking about. She's talking about people going directly
28:25
Speaker 1: to ignoring these Australian stock exchange like Atlassian famously, and
28:29
Speaker 1: just going straight over to the US and becoming a
28:31
Speaker 1: multi billion dollar company that you know could have happened here.
28:36
Speaker 1: I think Canvall is the big hot IPO this year.
28:40
Speaker 1: I think they're talking about due listing. Are they for
28:42
Speaker 1: the first time, I think, but what do you think.
28:46
Speaker 2: I was going to make the same comment you've made. Actually,
28:49
Speaker 2: which is a decade or two ago, the primary option
28:55
Speaker 2: for a successful company wanting to raise substantial money and
28:59
Speaker 2: or cast shout its founders, which may be a different subjective,
29:05
Speaker 2: was the AX. But with the rise of private equity
29:10
Speaker 2: and private credit, the range of options available to successful
29:14
Speaker 2: private companies is extensive, and I, like you, I don't
29:18
Speaker 2: see it as being to going to the US as
29:20
Speaker 2: the primary one. If you want to raise a huge
29:23
Speaker 2: amount of capital and you're happy with the additional governance
29:28
Speaker 2: requirements and the additional investor attention and all of those things,
29:32
Speaker 2: then you have choices about which exchange to list on
29:34
Speaker 2: if you're a big enough player, and then you get
29:37
Speaker 2: an last end situation where it's a more attractive market
29:41
Speaker 2: for the founder. They get to do some tricky things
29:43
Speaker 2: in terms of retaining their voting rights and so on,
29:45
Speaker 2: which are not available on the AX. So that's one
29:51
Speaker 2: part of it. But the other component is that you
29:56
Speaker 2: can stay private and not take on any of those
29:59
Speaker 2: additional obligation and get plenty of money from private market
30:04
Speaker 2: to fund your growth.
30:05
Speaker 1: And so that too could be a reason that it's
30:09
Speaker 1: it's action the other way. Yeah, okay, very good point.
30:15
Speaker 1: And the other thing, Jenny. For what it's worth, it's
30:17
Speaker 1: not unique to Australia. This is an issue all around
30:20
Speaker 1: the world. And say, all the regional markets in Europe,
30:22
Speaker 1: for instance, outside of London and Frankfort, et cetera, they're
30:25
Speaker 1: really struggling because there's this sort of the money has
30:28
Speaker 1: been either sucked into Wall Street or the big markets
30:32
Speaker 1: or point. I had not thought about it all. It's
30:35
Speaker 1: just not on the markets, doesn't need to be because
30:37
Speaker 1: of the boom in private equity. Okay, final question, Blake.
30:41
Speaker 1: I'm interested in small cap companies and the idea of
30:44
Speaker 1: getting in early, and I've been looking at small cap ETFs.
30:48
Speaker 1: My question is how do these ETFs work mechanically? If
30:51
Speaker 1: a small cap becomes a big cap, does that mean
30:54
Speaker 1: the ETF must sell it and does that mean we're
30:56
Speaker 1: selling our winners? Okay, what do you think, gem Matt?
31:02
Speaker 2: So this is a really good question. There's probably additional
31:05
Speaker 2: things to think about. If this is the area that
31:07
Speaker 2: you're interested in, I think the biggest So if you
31:10
Speaker 2: are talking about a passive ETF, which is what I
31:13
Speaker 2: assume is being talked about, then yes, there's very strict
31:15
Speaker 2: requirements around what can be held. If you say we
31:18
Speaker 2: only hold x one hundred stocks, we only hold the
31:23
Speaker 2: one hundred to the three hundred, for example, then they're
31:26
Speaker 2: usually rebalanced every quarter, and if something's gotten too big
31:30
Speaker 2: for you sell it, they sell it. They have to,
31:33
Speaker 2: and there's specialist timeframe to But if you're talking about
31:36
Speaker 2: an actively managed smaller manager, and the one thing I
31:39
Speaker 2: do want to say about smaller companies, there's some incredible
31:43
Speaker 2: little gems in there that are growing really fast and
31:45
Speaker 2: doing incredible things, but an enormous proportion of them are
31:48
Speaker 2: unprofitable and will not go on that path. So small
31:52
Speaker 2: caps tends to be where you can get more value
31:55
Speaker 2: out of having an active manager do it for you,
31:57
Speaker 2: and they may have less strict requirements about when they're
32:00
Speaker 2: required to sell it, like they're still required to sell
32:03
Speaker 2: it at some point if they're going to be specifically
32:05
Speaker 2: a small gap manager, but they might be a little
32:07
Speaker 2: bit more flexible in what those terms look like, So
32:10
Speaker 2: that might be more attractive to you than just buying
32:12
Speaker 2: a passive option.
32:13
Speaker 1: Yeah, very good point. Very good point, because it's true
32:16
Speaker 1: as Blake says, yes, in the unlikely event that is,
32:19
Speaker 1: in that kind of thousand to one chants that you
32:21
Speaker 1: get a small cap it had a five mediation and
32:24
Speaker 1: it becomes five billion, and they must sell it. In
32:26
Speaker 1: the unlikely event that happens, and it literally disturbs the
32:30
Speaker 1: TF and they must sell it, which it would be
32:33
Speaker 1: terrible to see that, and they step away from it.
32:36
Speaker 1: But yes, you're right, so active perhaps active managers better there, Blake. Okay, terrific. Kay,
32:42
Speaker 1: Thank you very much. Jemma Dale, head of Investor Behavior
32:45
Speaker 1: at Naptrade. Great to have you on. As always, we'll
32:48
Speaker 1: talk again.
32:49
Speaker 2: Thank you so much for having me.
32:51
Speaker 1: Thanks Jemma, and folks the money posit at the Australian
32:55
Speaker 1: dot com dot au please for some correspondence. Getting lots
32:59
Speaker 1: on this new super tax, of course, as I would
33:01
Speaker 1: have expected, and I'm not surprised because I don't even
33:05
Speaker 1: know all the answers on that one yet. By that,
33:08
Speaker 1: I mean we haven't got all the answers yet on
33:10
Speaker 1: how it will really work, and how will CGT work,
33:14
Speaker 1: et cetera, a couple of things that are left swinging
33:16
Speaker 1: in the wind. We'll be back on that one. Talk soon.