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Your complete 2026 investment outlook · The Money Puzzle

0:11
Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
0:14
Speaker 1: James Kirby. Well, welcome aboard everybody, and I do hope
0:17
Speaker 1: you've been enjoying the first few episodes of the Outlook series.
0:22
Speaker 1: Today we tie it all together. Okay. We looked at
0:24
Speaker 1: investment markets in the first show, we looked at stocks
0:28
Speaker 1: in particular and stock picks. In the second show we
0:31
Speaker 1: looked at property, and today we're going to add some
0:36
Speaker 1: more and have the complete investment Outlook for twenty twenty six.
0:39
Speaker 1: It's a big call, I know, but we can nail
0:42
Speaker 1: it because we have indeed done this before. Will Hamilton
0:46
Speaker 1: and I my guest down the show. Will Hamilton and Hamilton,
0:48
Speaker 1: well partners. How are you?
0:49
Speaker 2: Will? Very well? James, thank you very much for having
0:51
Speaker 2: on you.
0:53
Speaker 1: Ready to go with this panoramic view of all things
0:55
Speaker 1: investment for twenty twenty six.
0:57
Speaker 2: Correct now, crystal ball. But you've got a lot of
1:00
Speaker 2: points to discuss.
1:01
Speaker 1: I have a lot of prices to discuss, and you've
1:02
Speaker 1: done your homework and I've sent you I've sent you
1:05
Speaker 1: VOLUMEUS thoughts and notes on it, so I think it
1:08
Speaker 1: will be good. All right, Look, let's start and start.
1:11
Speaker 1: I want Will to imagine that basically, I am sitting
1:14
Speaker 1: across I'm sitting across from you. Okay, I'm on your
1:16
Speaker 1: top investors. You're crazy about me. I do so well
1:19
Speaker 1: every year, but I'm worried this year. It's been very good.
1:23
Speaker 1: It's been very good for too long, I feel. I mean,
1:26
Speaker 1: there are obvious worries like Trump and erratic policies, but
1:29
Speaker 1: there are other worries that are deeper for a seasoned investor,
1:33
Speaker 1: like inflation. For instance, when Will rear its ugly head again,
1:36
Speaker 1: and it's certainly going to how long can these inflated
1:40
Speaker 1: share prices last? Et cetera. There are many things to
1:43
Speaker 1: talk about, but let's make it into a logical layout
1:47
Speaker 1: for the listener. What are they outstanding? Let's start with
1:52
Speaker 1: a positive note. What are the outstanding opportunities do you
1:54
Speaker 1: think in the year ahead?
1:57
Speaker 3: So emerging markets is an area that we are overweight.
2:01
Speaker 3: It performed very well at the end of twenty twenty five.
2:04
Speaker 3: We're maintaining that position coming into twenty twenty six. I
2:07
Speaker 3: think Mark also was overweight from memory and liked emerging.
2:10
Speaker 1: Markets a global access.
2:13
Speaker 3: He was correct, and we think that your China is
2:18
Speaker 3: going to continue to parallelng We do like India longer term,
2:22
Speaker 3: and we like some of the other Latin American countries,
2:25
Speaker 3: especially as you've got some your tailwinds on commodity prices,
2:30
Speaker 3: but Asia overall as positive. We're overweight infrastructure. We think
2:33
Speaker 3: that's a very good inflation hedge, and we have rotated
2:38
Speaker 3: a little bit, so we actually went from neutral to
2:41
Speaker 3: slightly overweight developed market equities at the end of last year,
2:44
Speaker 3: but that was in mid caps, so we had exposure
2:48
Speaker 3: in mid caps. So I think this broadening of the
2:50
Speaker 3: rallies is very important. But the other thing I do
2:52
Speaker 3: agree on with respect to what Mark Joakam said was
2:56
Speaker 3: twenty twenty six is going to be a year we're
2:57
Speaker 3: going to be very pleased that you're diversified, and I
3:00
Speaker 3: think diversification is an absolute key.
3:03
Speaker 1: Okay, So you're talking, first of all, that the active
3:07
Speaker 1: investors should broaden their exposure to pretty positive markets. And
3:13
Speaker 1: in that context that would mean from a market perspective,
3:17
Speaker 1: developed markets, the AX and the US markets. That would
3:21
Speaker 1: mean broadening out from the in the case of the US,
3:24
Speaker 1: the big tech seven. In the case of our own market,
3:27
Speaker 1: it would mean broadening out beyond the usual suspects of
3:30
Speaker 1: the big, big blue chips. Okay two. The second one
3:33
Speaker 1: was emerging markets. For most of our listeners, it's going
3:35
Speaker 1: to be a very simple question of do I or
3:37
Speaker 1: don't I have an emerging market fund? Could be a
3:40
Speaker 1: managed fund, er, could be an ETF. I completely spack
3:43
Speaker 1: what you're saying on that one, and I see the
3:45
Speaker 1: logic of it. Will I know the emerging markets CTF
3:48
Speaker 1: did at least twenty percent last year, and interestingly they
3:51
Speaker 1: did better. It seems to me that the currency conversion
3:55
Speaker 1: back to the Australian investor did better than the Wall
3:57
Speaker 1: Street numbers on the funds and and ETF I have
3:59
Speaker 1: at least And the third one was infrastructure, so our
4:02
Speaker 1: listener knows how to get started in emerging markets. We've
4:05
Speaker 1: just told you. We'll pick up on that broader issue
4:07
Speaker 1: of widening rally or widening returns from more stocks on
4:15
Speaker 1: both markets local and overseas. And infrastructure. When you say infrastructure,
4:20
Speaker 1: how does the listener to the show get in on.
4:22
Speaker 2: That global infrastructure?
4:24
Speaker 3: I think is really important because what you like with
4:27
Speaker 3: all things, especially in the markets we're as we're entering, well,
4:31
Speaker 3: we haven't we're not entering. We are in the fourth
4:33
Speaker 3: year of effectively a ball market rally. You make sure
4:38
Speaker 3: you've got i think diversification amongst the asset classes, but
4:42
Speaker 3: also within the asset classes, and so therefore having exposure
4:46
Speaker 3: to a very broad collection of assets I think is important.
4:50
Speaker 3: So there are open ended funds like Partners Group, Hamilton Lane,
4:54
Speaker 3: et cetera that you can utilize to get exposure, and
4:57
Speaker 3: they're evergreen structures. So i'd fine evergreen as variable liquidity,
5:02
Speaker 3: not semi liquid. Yeah, because they do have the right
5:04
Speaker 3: to lock these things up.
5:06
Speaker 1: Does it include listed infrastructure funds listed.
5:09
Speaker 3: In stocks, Yeah, there are in Australia, there are some global.
5:13
Speaker 2: It's a good question. There are some global open ended
5:16
Speaker 2: funds such as Maple Brown and yet they've performed extremely
5:20
Speaker 2: well and they've got good European exposure, good global exposure.
5:23
Speaker 1: Okay, folks, this is not advice, of course, it's information only.
5:26
Speaker 1: There are many other funds than those that will have suggested,
5:29
Speaker 1: but the point being very clearly okay, broadening of the
5:33
Speaker 1: diversifying the stockholdings, opening up to emerging markets. If you haven't,
5:38
Speaker 1: everything suggests that's going to rally forward and infrastructure on
5:42
Speaker 1: the broader diversification team. We'll come back to some of
5:45
Speaker 1: this in a minute. Okay, the risks will what are
5:49
Speaker 1: the outstanding lists is here?
5:50
Speaker 2: Inflation.
5:51
Speaker 3: It's it, without doubt, the number one risk as far
5:53
Speaker 3: as I'm concerned. We're living in Australia. We do not
5:56
Speaker 3: have inflation under control.
5:57
Speaker 1: And this theory that the rates will lift is actually
6:00
Speaker 1: getting harder and more convincing by the day. That's locally okay,
6:04
Speaker 1: and overseas obviously will. The issue is that the US
6:07
Speaker 1: isn't is actually cutting reads. So your fear of inflation,
6:11
Speaker 1: that's it seems to be. Is that sort of instinctive
6:14
Speaker 1: rather than after numbers.
6:16
Speaker 3: Well, no, I think that what you've got is three
6:17
Speaker 3: things in the United States. So you've got potentially cash handouts,
6:20
Speaker 3: you've got decrease, you've got lower interest rates as you
6:23
Speaker 3: just mentioned, but you've also gotten very strong growth. And
6:27
Speaker 3: so if you overstimulate, there's one thing that you're going
6:29
Speaker 3: to get is inflation. And it's not necessarily under control.
6:33
Speaker 3: It's under it is underneath there. And if you get
6:37
Speaker 3: US inflation, I think that as I mentioned before, in
6:41
Speaker 3: the fourth year of a rally, I think people need
6:43
Speaker 3: to go back, not just and remember April last year,
6:46
Speaker 3: They've got to go back and remember twenty twenty two
6:48
Speaker 3: and what can go wrong? And that was all on
6:51
Speaker 3: the back of higher interest rates and inflation. Now at
6:54
Speaker 3: the moment, we've got the US looking to get interest
6:58
Speaker 3: rates to be going in a different direction to what
7:00
Speaker 3: is occurring in Australia. So there's an implication on that
7:02
Speaker 3: stronger Australian dollar week at US dollar. It's all about
7:06
Speaker 3: does the US economy become overstimulated. If it does, inflation
7:10
Speaker 3: will rear itsugly ahead.
7:12
Speaker 1: And just very generally for the general listener, higher inflation,
7:16
Speaker 1: then what do the textbooks tell us as investors if
7:19
Speaker 1: you've higher inflation hard assets? Right, So we're talking gold,
7:23
Speaker 1: we're talking infrastructure, we're talking share markets.
7:27
Speaker 2: Yeah, and it's property even yeah.
7:30
Speaker 1: Okay. The thing about the broadening of the share market,
7:34
Speaker 1: it seems to me the idea that the investor should
7:36
Speaker 1: be careful to widen out from the larger market cap dominance.
7:42
Speaker 1: Doocks in all markets hours and the US it seems
7:47
Speaker 1: a little broad. I just want to bring it back
7:50
Speaker 1: to Australia for a moment. If you were to do
7:52
Speaker 1: that here you'd pull away from BHP and real when
7:54
Speaker 1: you were pulling away from CBA and the banks at
7:56
Speaker 1: the same time. Would that be a good idea?
7:58
Speaker 2: No, I won't.
7:59
Speaker 3: I think that the resources, you know, because the difference
8:03
Speaker 3: in resources is you've got some supply issues. You have
8:06
Speaker 3: supply issues with respect nickel, copper, nickel, with respect to
8:10
Speaker 3: Indonesia and what they've done there, copper globally, even on
8:13
Speaker 3: things like gold, we're not it's demand is exceeding supply,
8:18
Speaker 3: the increase in supply. So it's really interesting. I think
8:21
Speaker 3: that the commodities have a tail wind for a different reason,
8:24
Speaker 3: and it's a supply constraint, and that's what's fueling your
8:28
Speaker 3: underlying commodity prices. And at this point in time now
8:33
Speaker 3: and look at it on the opposite, Venezuela could be
8:35
Speaker 3: coming in and pushing it in the US could be
8:37
Speaker 3: pumping out more oil.
8:38
Speaker 2: So what's the your price doing. Because supply has gone up,
8:40
Speaker 2: it's going down.
8:41
Speaker 3: So you need to watch those the supply side of
8:44
Speaker 3: on the commodity side very closely. And so therefore I'm
8:49
Speaker 3: positive the commodity side, yeah.
8:53
Speaker 1: So that there are actually exceptions that would pull get
8:56
Speaker 1: rule on that one, you know, correct, I wasn't trying
8:58
Speaker 1: to trap you. I was just checking, sincerely checking on
9:03
Speaker 1: that all right. Now, one other thing I wanted to
9:05
Speaker 1: do in this first half. Many of your clients are
9:07
Speaker 1: wealthier clients and would be in the top whatever two
9:10
Speaker 1: or three percent in terms of their wealth in Austria.
9:13
Speaker 1: What's their mood going into this market? Are they broadly?
9:18
Speaker 1: Are they bullished with that caution on inflation? What's the picture?
9:24
Speaker 3: I used the term which I borrowed from a podcast,
9:27
Speaker 3: so it's not my term, but I've used it a lot.
9:29
Speaker 3: And there's a lot of fully invested bears out there.
9:33
Speaker 1: And tally invested the bears.
9:37
Speaker 2: Yeah, I love it.
9:38
Speaker 3: Okay, So people are hesitant, especially as we've had this run,
9:41
Speaker 3: and I think they they see the issues at a
9:45
Speaker 3: macro level and I think I'm one of the big
9:47
Speaker 3: things which's dominating is geopolitics. And we're only a month
9:51
Speaker 3: into the year yet, you know, just there's been Venezuela,
9:55
Speaker 3: there's been Greenland, there's been the threats to the Federal
9:57
Speaker 3: Reserve chairman. You know that everything it's gone on geopolitically
10:01
Speaker 3: is it's extreme. It's you know, we've had in a
10:04
Speaker 3: month what we sometimes get in a year, and so
10:06
Speaker 3: that's sort of dominated, that's dominating mood, I think.
10:10
Speaker 1: But all things considered, everyone, each of those things, each
10:14
Speaker 1: of those items in and of itself, could, under normous circumstances,
10:19
Speaker 1: spark a sell off. None of them did. Venezuela, and
10:24
Speaker 1: perhaps the most worrying from a financial perspective, intimidation of
10:27
Speaker 1: the Federal Reserve. And so we have all these fully
10:30
Speaker 1: invested bears. I like that. Okay, probably I'm fully invested
10:34
Speaker 1: bear myself, and maybe that's typical. What's the danger of
10:37
Speaker 1: that scenario when we have fully invested bears dominating the market?
10:41
Speaker 3: I think the thing The interesting thing is you've got
10:43
Speaker 3: all these people that like to point out all the negatives,
10:46
Speaker 3: but their own methodology is to be fully invested. The
10:49
Speaker 3: danger is if they do all head to the exit
10:51
Speaker 3: because of the fact is that there is that the
10:54
Speaker 3: fact that they are invested. But as you rightly said,
10:56
Speaker 3: you're going to have to have some very major vent
11:00
Speaker 3: at this point because I think everyone's looking there and
11:02
Speaker 3: looking at the tail winds that exist, as I pointed out,
11:05
Speaker 3: in the US, and it is a very strong economy. Therefore,
11:10
Speaker 3: the earnings flow through is strong, and therefore the equity
11:13
Speaker 3: market is being supported.
11:17
Speaker 1: So hence the strong, relatively strong, maybe above average forecasts
11:22
Speaker 1: for both the certainly for the US market yet again
11:25
Speaker 1: and for our own market. Here's the thing. I just
11:28
Speaker 1: wander on one thing. Yes, nothing moved, right, so Venezuela,
11:35
Speaker 1: Greenland intimidation, gross intimidation, extraordinary intimidation of the US Federal Reserve,
11:42
Speaker 1: suggesting no respect at hold for a crucial institution in
11:45
Speaker 1: world markets. None of them moved the dial. But they
11:48
Speaker 1: move perhaps they move gold. How do you read the
11:51
Speaker 1: fact that gold was of fifty percent last year and
11:53
Speaker 1: it's flying already this year.
11:54
Speaker 2: Again, I think God's not just you're right somethings. Political
12:00
Speaker 2: events are one thing.
12:01
Speaker 3: But secondly, if you go by what you read and hear,
12:06
Speaker 3: you have non aligned central banks that have not been
12:10
Speaker 3: buying US treasuries and therefore turning away from the US
12:13
Speaker 3: dollar and have been supporting gold. And that's been going
12:15
Speaker 3: on for a number of years. So yes, there's a
12:17
Speaker 3: supply side, but there's been very strong demand. Like I
12:21
Speaker 3: was at a conference last year, and I must be
12:22
Speaker 3: the strategist from Pictape when she said in the middle
12:25
Speaker 3: of last year five thousand as a target for gold.
12:28
Speaker 3: I sort of really raised my eyebrows, But she's going
12:31
Speaker 3: to be right.
12:32
Speaker 1: What do you think of Morgan Stanley's Mike Wilson, who
12:36
Speaker 1: is their chief investment officer on the web side, probably
12:40
Speaker 1: the most influential wealth thinker in the world, saying that
12:45
Speaker 1: you could have up to twenty percent of your portfolio
12:47
Speaker 1: on gold.
12:49
Speaker 3: I know one or two individuals that actually do have that.
12:52
Speaker 3: They feel that there's the overall risks that you know
12:55
Speaker 3: we talked about just before underpin that that point that
12:58
Speaker 3: you should have.
12:59
Speaker 1: A large girl listeners should have as an exposure. I
13:02
Speaker 1: know it's a tough question, but what do you think. Well,
13:04
Speaker 1: let's cut to the shay. Should they have gold?
13:06
Speaker 3: First of all, I was in Sydney yesterday and I
13:10
Speaker 3: took a picture of it because I couldn't believe it.
13:11
Speaker 3: I was seeing the line for ABC Bullion going down
13:14
Speaker 3: Martin Place and around the corner into Pitt Street.
13:17
Speaker 2: It was extraordinary, excellent.
13:19
Speaker 1: It is extraord and if they and of course if
13:20
Speaker 1: they wanted, if there was they could open a second
13:23
Speaker 1: office and not have that line. But hey, the line's
13:25
Speaker 1: the best advertising creature they've ever had no But so okay,
13:30
Speaker 1: here's the thing. Most people do in big super funds
13:32
Speaker 1: can be comfortable in the fact that, do you know what,
13:34
Speaker 1: your big super fund probably has no gold. There's no
13:37
Speaker 1: evidence that any of those big super funds have gold.
13:39
Speaker 1: They've missed it. I want to come back to that
13:40
Speaker 1: in the future. But here's the thing. Will how assuming
13:44
Speaker 1: that I'm taking it on board that you think people
13:46
Speaker 1: should have gold in their portfolios. Tradition people used to
13:49
Speaker 1: say two three percent in this extraordinary market extraordinary times.
13:55
Speaker 1: If I was sitting on opstitute and I didn't have
13:56
Speaker 1: any what would you say.
13:58
Speaker 3: If you didn't have any you having we apter five
14:00
Speaker 3: percent as a conservative allocation would be a good thing
14:04
Speaker 3: to have.
14:04
Speaker 2: If you're coming in now.
14:05
Speaker 1: Yeah, okay, is that new to you? If I said
14:08
Speaker 1: we were talking ten years ago, what answer would you
14:10
Speaker 1: have given?
14:11
Speaker 2: Zira?
14:13
Speaker 1: Yeah, okay, very good. We will leave it right there.
14:16
Speaker 1: We will have a break. Hello, Welcome back to The
14:30
Speaker 1: Australian's Money Puzzle podcast. I'm James Kirby and I'm talking
14:33
Speaker 1: to Win Hamilton of Hamilton Win Partners, who, if you
14:35
Speaker 1: don't know, by the way, apart from being a regular
14:38
Speaker 1: on the show, is one of Australia's Top Advisors, and
14:40
Speaker 1: is one of a tiny handful of advisors who have
14:44
Speaker 1: managed to be on the Baron's Top Advisors list since
14:49
Speaker 1: the day it was launched, almost a decade ago. Now,
14:52
Speaker 1: will let's just try and divide this up, this notion
14:55
Speaker 1: of broad We'll take it on board that the consensus
14:58
Speaker 1: is that the markets are good enough to stay in.
15:01
Speaker 1: By that, I mean there's no need. No one's rushing
15:03
Speaker 1: to cash just now. That's for sure. There is a
15:06
Speaker 1: danger of inflation, but inflation means you should be invested anyway.
15:11
Speaker 1: You're not going to cash has come to be even
15:13
Speaker 1: worse if inflation takes off. So let's just talk about
15:16
Speaker 1: the two markets in this sense of broadening, because it
15:19
Speaker 1: seems to be applicable in both our local market and
15:22
Speaker 1: in the global market, which invariably means the US market.
15:26
Speaker 1: It's the same thing seventy percent of the MSCI. Let's
15:29
Speaker 1: talk about the local market first of all. You know,
15:31
Speaker 1: the big surprise last year I thought was that small
15:33
Speaker 1: captive eighteen percent the ASX two hundred barely staggered across
15:39
Speaker 1: the line. Really, okay, we got I mean in fact,
15:41
Speaker 1: we got ten in the end, which was good and
15:44
Speaker 1: was a surprise possibly and may reflect more of what
15:46
Speaker 1: was happening in the very few weeks at the end
15:48
Speaker 1: of December. But more broadly we got three. You know,
15:52
Speaker 1: we've got a dividend the year of three and a
15:53
Speaker 1: half percent, and we've got a very mixed market which
15:57
Speaker 1: is dragged down by banks last year and could be
15:58
Speaker 1: dragged down by banks this year. Have you only all
16:02
Speaker 1: reviews you'd give us on the AX.
16:06
Speaker 3: Well, yes, it was dragged down by banks last year,
16:08
Speaker 3: but if you look at the first half, it was
16:10
Speaker 3: supported by banks. So the banks sold off in the
16:13
Speaker 3: second half, and therefore index funds when banks were performing,
16:17
Speaker 3: did very well because of the heart because bank's high
16:19
Speaker 3: weighting in index. In the index, I think the banks
16:22
Speaker 3: are going to continue to struggle cost to income ratio issues.
16:25
Speaker 3: They are just vanilla banks now. There's very little else
16:28
Speaker 3: that they do here in this market. And then, most importantly,
16:31
Speaker 3: the valuation argument, principally with CBA, which was at one
16:36
Speaker 3: stage and I think it still is the most expensive
16:38
Speaker 3: bank in the world.
16:39
Speaker 1: It would have to fall twenty two percent from here
16:41
Speaker 1: to get to its consensus cluation and it's already fallen
16:44
Speaker 1: a long way.
16:45
Speaker 3: Yes, the banks I think are going to continue to struggle,
16:49
Speaker 3: but as we mentioned before, this tailwind support on the
16:51
Speaker 3: supply side, which is supporting resources. So I think that
16:55
Speaker 3: the resource stocks are going to do well. However, we
16:58
Speaker 3: do need to watch for it closely to see if
16:59
Speaker 3: the re are glad Core takeover goes through, because if
17:02
Speaker 3: it does, I actually think you'll get larger red Look,
17:05
Speaker 3: this is not advice.
17:06
Speaker 2: Again.
17:06
Speaker 3: You probably will see large rotation out of RIO into BHP,
17:10
Speaker 3: and you've already seen people I think positioning for that
17:12
Speaker 3: and one reason why behp's done very well. Then you've
17:15
Speaker 3: got to pure metal stocks. And likewise, I think on
17:19
Speaker 3: the mid caps, as they lagged and that valuation differential
17:22
Speaker 3: was there, we've seen them rally. Will that continue. I
17:26
Speaker 3: think it will for the moment, but just watch that closely.
17:29
Speaker 3: There is a point in time where people will say
17:31
Speaker 3: enough is enough, because I think on my mid caps
17:34
Speaker 3: very easy to buy sometimes when if everyone sells them
17:37
Speaker 3: at the same time, we know what can happen, and
17:39
Speaker 3: hence the volatility you see in that sector. Sure, I
17:43
Speaker 3: think the big thing is and I think one of
17:45
Speaker 3: your questions was you know, what shouldn't people do? Just
17:47
Speaker 3: remember that this is the fourth year of as I've
17:50
Speaker 3: said twice before in this podcast, of this rally, we're
17:54
Speaker 3: now into that there are people that are just going
17:57
Speaker 3: to stick to the same old thing and heavily overweight certain.
18:02
Speaker 2: Tech related stocks.
18:03
Speaker 3: Got no problems people taking a market a marketweight position,
18:07
Speaker 3: but there's no as they say, you never go broke
18:09
Speaker 3: taking a profit and fading into rallies as important. I
18:13
Speaker 3: think the other thing that you know, I've listened to
18:15
Speaker 3: a lot of podcasts and what a lot of people
18:17
Speaker 3: are saying is this year, especially the large investment banks,
18:20
Speaker 3: they are confident that you will see, especially in the US,
18:23
Speaker 3: the IPO market open up stocks like SpaceX, et cetera
18:26
Speaker 3: coming on. So you know, there's some large companies potentially
18:29
Speaker 3: at very large companies, not just large, extremely large companies
18:32
Speaker 3: potentially to come on to the S and P five hundred.
18:36
Speaker 1: So what does that in fair? Why is that important?
18:40
Speaker 2: That will that will gobble up cash?
18:42
Speaker 3: But it's also it's a positive sign for the market
18:45
Speaker 3: that large IPOs can get away. And there was a
18:49
Speaker 3: lot lined up in twenty twenty five, and then that
18:52
Speaker 3: we saw April twenty twenty five in the tariff tantrum,
18:55
Speaker 3: so to speak, March April, and that put a lot
18:58
Speaker 3: of those on hold. But the large investment banks are
19:01
Speaker 3: very confident that you will see a lot of companies
19:05
Speaker 3: to become public in twenty twenty six.
19:09
Speaker 1: Let's go back to this scenario that I'm your client,
19:12
Speaker 1: I'm your active investor, I'm your ideal client. I'm wealthy,
19:16
Speaker 1: I'm an active investor. I listened to all your advice.
19:19
Speaker 1: Take it forward now, I said to you, I did
19:21
Speaker 1: very well last year. Well good, I know it's we're
19:24
Speaker 1: talking about the fourth year of a bullmarket. History suggests
19:26
Speaker 1: the odds are now stacking up against me that this
19:29
Speaker 1: is going to work. Regardless of whatever facts we talk
19:31
Speaker 1: about today, History suggests it gets harder to keep going.
19:35
Speaker 1: There's also the risk of inflation. You talked about feeding
19:38
Speaker 1: into rallies. What does that mean? Tell me about the
19:40
Speaker 1: thinking of that is.
19:41
Speaker 3: If you're overweight, it's as things, you know, markets perform
19:47
Speaker 3: very strongly, it's just slightly just reducing that exposure. So
19:50
Speaker 3: fading from an overweight position down to a more neutral position.
19:55
Speaker 1: Where does somebody go then?
19:57
Speaker 2: Yeah, so that's the good question.
19:58
Speaker 3: So That's where I mentioned before diversification, and I think
20:02
Speaker 3: diversifications absolutely crucial. I've just talked about the fact that
20:07
Speaker 3: you will see some you'll see IPOs open up. There's
20:11
Speaker 3: some evergreen private equity funds for instance, which I think
20:14
Speaker 3: private equity at a small amount in portfolios be that.
20:18
Speaker 3: And it depends on the size of the client and
20:20
Speaker 3: what their liquidity appetite is whether they take that evergreen
20:24
Speaker 3: exposure or they go more a liquid But I think
20:25
Speaker 3: that those more evergreen structures are going to be releasing
20:28
Speaker 3: some of the holdings that they've had for a long
20:30
Speaker 3: time into the IPO market. So that's one thing you
20:33
Speaker 3: could do. The second thing is, as I mentioned, is infrastructure.
20:36
Speaker 3: We are overweight relative to our strategic position in infrastructure,
20:42
Speaker 3: whilst we are neutral on diversified credit. It's a very
20:48
Speaker 3: large bucket and it's a very broad bucket. If clients
20:51
Speaker 3: are not neutral on a strategic benchmark that diversified credit exposure,
20:56
Speaker 3: they should potentially look at that. But the big thing
20:59
Speaker 3: is where do you put that money? And we're found
21:02
Speaker 3: that definitely do not go into a liquid private credit
21:04
Speaker 3: at this point in time. We found that the returns
21:06
Speaker 3: you're getting a liquid private credit, very similar slight premium
21:10
Speaker 3: to liquid So you want to see that that liquid
21:13
Speaker 3: private credit.
21:14
Speaker 1: The liquid private credit would be listed fund, would it
21:18
Speaker 1: or no?
21:19
Speaker 3: Some of them are open ended funds, but you're investing
21:23
Speaker 3: in liquid securities over the counter.
21:28
Speaker 1: Just to translate it, don't lock up, don't lock up?
21:30
Speaker 1: Is that what you mean? Don't lock up for a
21:32
Speaker 1: long time?
21:33
Speaker 2: Correct? Yeah?
21:34
Speaker 3: And yeah, look the negative in this in some of
21:37
Speaker 3: these is your margin spreads come right in and it's
21:40
Speaker 3: very fine. But the fact is on an OTC basis,
21:43
Speaker 3: these securities trade, and I think that's important. And you
21:46
Speaker 3: also want to see large diversification within the structure that
21:50
Speaker 3: you invest in. And when we say large diversification, I
21:55
Speaker 3: don't mean thirty I mean two hundred securities.
21:59
Speaker 1: Okay, So the constant message here and how how does
22:03
Speaker 1: the average investor get access to that sort of diversification.
22:07
Speaker 3: There are funds that you have been into, funds that
22:09
Speaker 3: you can look at to get that exposure. Yeah, and
22:13
Speaker 3: there's some that are are listed on the on the
22:15
Speaker 3: six as well.
22:16
Speaker 1: Okay, now jumping to another issue, but very relevant. You
22:22
Speaker 1: mentioned how the the US dollar is declining and the
22:26
Speaker 1: US dollar has declined against all major currencies last year
22:29
Speaker 1: quite sharply. And again we can only talk about the consensus, folks.
22:33
Speaker 1: No one knows what's going to happen next, but the
22:35
Speaker 1: broad consensus is that the US dollar will continue to
22:38
Speaker 1: decline this year. Now, many of our listeners would have
22:41
Speaker 1: started in recent years to diversify away from Australia. What
22:45
Speaker 1: if you if we're standing here and you and I
22:47
Speaker 1: agree and the world agrees that the US is going
22:50
Speaker 1: to decline, which means the Aussie dollar is going to
22:51
Speaker 1: rise against the American dollar, what can we do and
22:54
Speaker 1: what should we do?
22:57
Speaker 2: So?
22:57
Speaker 3: First of all, the Ausie dollar underperformed, Yes, it appreciated
23:00
Speaker 3: against the US dollar last year, but at unperformed relative
23:02
Speaker 3: to other currencies. But if we are looking at the
23:05
Speaker 3: scenario that we expect, where interest rates in Australia go
23:07
Speaker 3: up and decrease in the US, you are going to
23:09
Speaker 3: see US dollar weakness against the Australian dollar. And therefore
23:13
Speaker 3: you know we have we've got well hedged positions. Our
23:18
Speaker 3: portfolios are probably about sixty percent hedged on develop market equities.
23:23
Speaker 2: So and you can you can.
23:25
Speaker 1: Get what would it traditionally be.
23:27
Speaker 3: We would be below fifty percent, So we would be
23:30
Speaker 3: traditionally probably around thirty percent, depending on have you Yeah.
23:34
Speaker 1: Yes, I mean I know again, textbooks, the textbooks stuff
23:37
Speaker 1: would suggest thirty percent. Heged is sort of natural for
23:41
Speaker 1: a lot of Australian funds. But if an investor of
23:44
Speaker 1: one of our listeners is saying, okay, you know, I've
23:46
Speaker 1: got to make a move on some of the suggestions
23:49
Speaker 1: you're making here, and they had a choice between a
23:51
Speaker 1: hedged fund and a non hedged fund, could you explain
23:55
Speaker 1: to them what they should do? And they're sort of
23:58
Speaker 1: risks and opportunities around that.
24:01
Speaker 3: So the risks are that the Australian dollar depreciates, so
24:04
Speaker 3: we get all, we're all talking one thing, but we
24:07
Speaker 3: get it wrong. So that's your biggest risk and hence
24:11
Speaker 3: why you don't put all your ex in one basket.
24:13
Speaker 3: But you know, if you do see this playing out
24:16
Speaker 3: as we expect, you can buy hedged class or invest
24:20
Speaker 3: in a hedged class of an underlying security. So that's
24:24
Speaker 3: not available in all cases, but in many cases that
24:27
Speaker 3: is available.
24:28
Speaker 1: Yeah it is. And with the ets, I noticed the
24:30
Speaker 1: hedged ones did so much better this year than the
24:34
Speaker 1: unhedged ones, and the hedge ones are much smaller. By that,
24:36
Speaker 1: I mean much less money in them. There's one thing
24:39
Speaker 1: I want to ask you will the danger not the danger,
24:43
Speaker 1: but the issue I imagine that investors need to be
24:45
Speaker 1: reminded of is these things change. So you took the
24:48
Speaker 1: hedged you know, US share market ETF and it was
24:51
Speaker 1: really good in twenty twenty six. But how do you
24:54
Speaker 1: know when to turn off the dial and go back
24:58
Speaker 1: to hedge to unhedged?
25:00
Speaker 3: So depending on your position, where you think the Australian
25:03
Speaker 3: dollar will get to and then you need to unwind that.
25:05
Speaker 3: So if we saw the Australian dollars go through seventy,
25:08
Speaker 3: we will start to reduce Yeah we were talking about
25:11
Speaker 3: fading before, we would start to reduce that exposure.
25:13
Speaker 1: Yeah, okay, okay, very good. I think that hopefully is
25:17
Speaker 1: clear to you folks. I know we are going we
25:19
Speaker 1: are This is the nature of this show. It is
25:21
Speaker 1: a very broad, panoramic show. We're going to touch off
25:24
Speaker 1: some issues. Somebody you'll want to hear more of, somebody
25:25
Speaker 1: you want to hear less of. That's the nature of it.
25:28
Speaker 1: But I want to take a break and move into
25:30
Speaker 1: the final section of the show, where we're going to
25:32
Speaker 1: look at We've talked about the markets, and we've talked
25:34
Speaker 1: about listed shares, et cetera. I know a lot of
25:37
Speaker 1: people want to talk about but we haven't covered so
25:40
Speaker 1: far in this series, okay, which is property and private equity,
25:43
Speaker 1: private credit, even crypto. We'll be back in a moment. Hello,
25:58
Speaker 1: Welcome back to the Australian Money Possible podcast. I'm James
26:01
Speaker 1: Kirby talking, should I say, interrogating Will Hamilton on the show.
26:07
Speaker 1: This is a very demanding show. I got to tell
26:10
Speaker 1: you for any guests, and I appreciate you Will for
26:12
Speaker 1: taking the hot seat on this one. Okay. Now, look
26:15
Speaker 1: we talked and folks, if you listen to the three
26:18
Speaker 1: preceding shows, a lot of this will really come into
26:21
Speaker 1: focus for you because we've done listed markets, we've done
26:24
Speaker 1: share picks, we've done property. So let's just take a
26:27
Speaker 1: more holistic look. Now I'm sitting here again, Will, I'm
26:30
Speaker 1: your active investor. I've got a nicely diversified portfolio. Before
26:35
Speaker 1: we go into deep dive on one or two things
26:37
Speaker 1: on property. One of the points I thought which Stuart
26:40
Speaker 1: Williams made so clearly in the Property Show, and you
26:46
Speaker 1: know he's obviously he's broadly supportive of property, particularly of
26:51
Speaker 1: apartments which are in catch up mode basically with standalone houses.
26:56
Speaker 1: But more broadly, the point he made was, if you
26:58
Speaker 1: want to talk about that as an investor in the
27:03
Speaker 1: share market, you are really digging deep for a value
27:06
Speaker 1: I mean you, I mean where on north is it?
27:08
Speaker 1: Or what is its relative case? And value managers. A
27:11
Speaker 1: lot of value managers that we would have regarded as
27:13
Speaker 1: deeply conservative value managers, they've one anchored. Basically, they're doing
27:19
Speaker 1: things that they would never have done because three years
27:21
Speaker 1: of a bull market is killing them. Now, how does
27:25
Speaker 1: property sway up to you as in value terms? Visit
27:29
Speaker 1: vie listed investments.
27:32
Speaker 3: So on real property we went overweight about halfway through
27:39
Speaker 3: last year. However, the reality is I doubt any client
27:43
Speaker 3: is because you've got to find the assets to buy.
27:46
Speaker 3: So whilst that's the positioning, finding the right assets, and
27:50
Speaker 3: of course there's lots of managers that want to show
27:52
Speaker 3: you assets, but whether they're right for our clients is
27:55
Speaker 3: another thing altogether. Stuart Wims, one of the things is
27:59
Speaker 3: that you have said is SIP in Melbourne being outstanding
28:01
Speaker 3: value and on the apartment market and if you look
28:05
Speaker 3: at the what people are paying for rent, especially for
28:09
Speaker 3: one or two bedroom apartments versus the cost of fund
28:12
Speaker 3: in if you if you replacement costs you, I think
28:16
Speaker 3: that there comes a point regardless of YEA, this is
28:19
Speaker 3: a depressed market. It's been depressed because of the taxes
28:22
Speaker 3: that came that were introduced by the state government. And
28:25
Speaker 3: I also saw another figure the median house price differential
28:29
Speaker 3: between Melbourne and Sydney is now six hundred thousand dollars
28:31
Speaker 3: well that which is just blown out to an extremely
28:34
Speaker 3: high level. So I think if you look at all
28:36
Speaker 3: the points Melbourne residential property has been, it's depressed and
28:41
Speaker 3: there comes a point where value takes over, especially when
28:45
Speaker 3: you've got to look at net migration that comes into
28:47
Speaker 3: Melbourne versus a lot of other cities, so that demand
28:50
Speaker 3: for rental property is there as well. And then likewise
28:53
Speaker 3: on commercial property, and just anecdotally talking to a couple
28:55
Speaker 3: of people that are trying to renegotiate commercial leases which
28:59
Speaker 3: they took on five years ago, there are signs in
29:03
Speaker 3: Sydney that you know they're looking at twenty five percent
29:05
Speaker 3: upticks in a grade buildings and likewise in Melbourne probably
29:10
Speaker 3: ten percent.
29:10
Speaker 1: Are you saying that that the A reats property trusts
29:14
Speaker 1: in commercial property may have reached the bottom of the cycle.
29:19
Speaker 2: Yes, I think that there's but you're.
29:21
Speaker 1: Talking strictly a grade right, strictly top top of town.
29:25
Speaker 3: Direct and have a look at what's training at a discount.
29:27
Speaker 3: It's a neck tangible asset backing.
29:29
Speaker 1: Yeah right, okay, okay, we won't do much more in property, folks,
29:34
Speaker 1: except I wanted to bounce what that show said, what
29:37
Speaker 1: Stuart Williams had put forward off will It's interesting. Okay,
29:43
Speaker 1: he agrees, and I'm not surprised he does. Who wouldn't
29:46
Speaker 1: a couple of random things for our listeners, and let's
29:48
Speaker 1: divide them very cleanly. Private equity, in private credit, private
29:52
Speaker 1: credit boom times for those guys, that's all fine. The
29:55
Speaker 1: idea is that the banks were withdrawing that private credit
29:57
Speaker 1: was terrific. Everybody loves private credit. Hey, private credit, you're
30:01
Speaker 1: missing the boot in our market. It is known and
30:07
Speaker 1: time if I'm wrong that the majority of that ends
30:09
Speaker 1: up being property financed, and we are heading towards higher rates.
30:15
Speaker 1: What's that market looking like now as we speak now
30:17
Speaker 1: start of twenty twenty six.
30:22
Speaker 3: We have exited property probably October. The last property holdings
30:25
Speaker 3: we had we started reducing in late twenty twenty two.
30:29
Speaker 1: You mean, sorry, well you've exited the just private credit
30:32
Speaker 1: property credit.
30:33
Speaker 2: Yeah, okay, yep, and we are now out.
30:36
Speaker 3: Yeah. I just think again, what you're getting paid for
30:40
Speaker 3: the risk that You've got to look at everything. It's
30:43
Speaker 3: just not what you're getting paid. What are you getting
30:45
Speaker 3: paid for the risk you're taking? And this is a
30:49
Speaker 3: very set, This is a saturated market. There's a large
30:51
Speaker 3: disparity in quality between managers, and whilst we might be out,
30:55
Speaker 3: we took the view that we weren't getting paid for
30:57
Speaker 3: the risk of taking and we can always get back
30:59
Speaker 3: in again. There are some great managers out there, and
31:02
Speaker 3: in that sector, there's some managers that we probably definitely
31:05
Speaker 3: wouldn't look at. And so I think be careful. Make
31:09
Speaker 3: sure you're not in second tier debt or mezzanine. You
31:12
Speaker 3: want to have first tier exposure if that's what you
31:14
Speaker 3: want to do, and make sure the fund is very
31:16
Speaker 3: well diversified, and make sure you understand and I think
31:20
Speaker 3: this is the really important thing is we wanted whatever
31:23
Speaker 3: we invested, and we wanted to be able to look
31:25
Speaker 3: at underneath the bonnet and have full transparency of what
31:29
Speaker 3: that fund is investing in. There's a lot of headlines
31:33
Speaker 3: out there are funds that you have had some issues.
31:37
Speaker 3: Make sure you understand what you're investing in and you've
31:40
Speaker 3: got full transparency, and I think that's a really important thing. Now,
31:44
Speaker 3: private credit, though, isn't just a lot. There's a lot
31:46
Speaker 3: of global managers that have come in. They're very well diversified.
31:49
Speaker 3: You know that you've got your Blue Hours, your Bearings,
31:51
Speaker 3: your Blackstones, et cetera. So there's lots of big US
31:54
Speaker 3: funds that are coming here. Make sure you come If
31:56
Speaker 3: there's leverage in the fund, have again investigate that. Look
31:59
Speaker 3: at the leverage. Are you comfortable with that? Are they
32:03
Speaker 3: well diversified. The majority of these are extremely well diversified.
32:07
Speaker 2: So there's a lot of things you've got to look at.
32:09
Speaker 3: What is the exposure And because a lot of it
32:12
Speaker 3: is effectively private equity credit, it's funding private equity funds.
32:18
Speaker 3: So make sure you're comfortable with these funds. And again
32:22
Speaker 3: remember you can always get in. If you decide to
32:24
Speaker 3: sit on the sidelines for the moment, you can always
32:27
Speaker 3: get back in.
32:28
Speaker 1: Okay, Look, one last thing we were talking about the
32:32
Speaker 1: wider markets, listed investment markets at the start, and I
32:35
Speaker 1: think one of the things that came across and even
32:36
Speaker 1: the first sort of bag of correspondence we've had for
32:39
Speaker 1: the new year, is that investors, a lot of investors
32:43
Speaker 1: looking for something. They're looking for this. They know the
32:48
Speaker 1: markets are strong, and they know that the trans are
32:50
Speaker 1: above average, and they know gold, ironically, when I say ironically,
32:55
Speaker 1: paradoxically is also very strong, even though it's not supposed
33:00
Speaker 1: to be a non correlated acid, and so people are
33:03
Speaker 1: looking for a non correlated acid. They're looking the people
33:05
Speaker 1: are looking for something that isn't listed, that will pay
33:10
Speaker 1: more than cash, much more than cash. But it seems
33:14
Speaker 1: to me there isn't much out there apart from these
33:16
Speaker 1: areas that you mentioned, private equity, private credit, debt of sorts.
33:20
Speaker 1: Is there any other tier? If I was asking you
33:24
Speaker 1: where I could look? Is there anywhere else I could look?
33:27
Speaker 2: We have exposure of water.
33:29
Speaker 3: Right and there's listed choices and there's unlisted choices, and
33:35
Speaker 3: so you know, we live on.
33:37
Speaker 1: Live up is that as the utility will.
33:40
Speaker 3: Well, we feel all such kind of cyclical We live
33:42
Speaker 3: on a dry continent. Yes, some parts of the continent
33:45
Speaker 3: have had a lot of rain, but other parts haven't,
33:49
Speaker 3: such as the state wearing and that Again it's about
33:52
Speaker 3: if you do your homework. The supply demand constraints have
33:56
Speaker 3: very much changed as the demand on things like armon
34:01
Speaker 3: farms and so. Yeah, when you plant trays, if you
34:03
Speaker 3: don't worder them, they die crops. You can make a
34:06
Speaker 3: decision yourself plant this year or I won't. But yeah,
34:10
Speaker 3: so the demand supply quation has changed.
34:12
Speaker 1: Yeah, okay, terrific. All right, I think we will leave
34:15
Speaker 1: it there. That's about it. As much I think as
34:17
Speaker 1: the average person, the average investor could hold in their head,
34:21
Speaker 1: I would imagine for a single show. The transcript of
34:24
Speaker 1: this is available, of course, and you can see that
34:28
Speaker 1: on wherever you see your or listen to your podcast.
34:31
Speaker 1: Make have a look at that. Thank you very much,
34:34
Speaker 1: Will Hamilton of Hamilton Wealth Partners. We're talking again. Through
34:36
Speaker 1: the year. Nothing will be as demanding I imagine as
34:38
Speaker 1: that one will. Thank you, James, You're welcome, and thanks
34:42
Speaker 1: to Leah Samaglu who produced today's show. And keep the
34:45
Speaker 1: correspondence coming. They are I'm collecting them, don't worry. But
34:49
Speaker 1: that is it actually for the outlook shows, so we
34:52
Speaker 1: will resume normal transmission from next week. So let's have
34:55
Speaker 1: some correspondents the money puzzle at the Australian dot com
34:58
Speaker 1: dot au to you soon.
35:01
Speaker 2: The s