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Two things you must do as the $US drops · The Money Puzzle

0:10
Speaker 1: Hello and welcome to The Australian's Money Puzzle podcast. I'm
0:13
Speaker 1: James Kirky. Welcome aboard, everybody. The single biggest investment call
0:20
Speaker 1: of the last decade at least has been around the US.
0:26
Speaker 1: Were you in US stocks or were you not in
0:29
Speaker 1: US stocks? And that really was dictating the outcome for
0:34
Speaker 1: many people in terms of how their portfolio went and
0:37
Speaker 1: same it you're super okay. Now, for the first time
0:41
Speaker 1: in a long time, the situation of the US is
0:45
Speaker 1: being questioned economically and financially. It is. It doesn't just
0:50
Speaker 1: you know, dominate world stock markets. It is the world
0:53
Speaker 1: stock market. It literally dominates the market cap of all
0:57
Speaker 1: the global markets. It is the world bond market. And
1:01
Speaker 1: for the first time in a long time this has
1:05
Speaker 1: really been questioned now the pre eminence of the US.
1:09
Speaker 1: I'm talking strictly financially here, the pre eminence of the
1:11
Speaker 1: US market, the pre eminence of the US dollar in particular,
1:16
Speaker 1: which has had its weakest opening period going all the
1:20
Speaker 1: way back to Nixon basically this year. So serious investors,
1:25
Speaker 1: professional investors, big investors around the world, they are casting
1:29
Speaker 1: about to cover themselves in relation to what's going on
1:33
Speaker 1: in the US. And they're buying everything else. They're buying gold,
1:37
Speaker 1: some are buying crypto, they're buying European shares, they're buying
1:41
Speaker 1: emergent marketing, emerging market shares, because there is an enormous
1:44
Speaker 1: question about where it goes from here and will it
1:47
Speaker 1: be as good as it used to be? Simple as that.
1:49
Speaker 1: One of our favorite guests on the show is Win Hamilton,
1:52
Speaker 1: Will Hamilton of Hamilton Wealth Partners, and once the year,
1:56
Speaker 1: if you recall, Will goes on a world tour where
1:59
Speaker 1: he goes to a number of key investment and wealth
2:02
Speaker 1: management conferences around the world, and when he comes back,
2:06
Speaker 1: I grill him on what we need to know if
2:09
Speaker 1: we had the time or I suppose the money to
2:13
Speaker 1: go to those conferences. How are you well?
2:16
Speaker 2: Very well, James, Thank you for having me.
2:19
Speaker 1: Great to have you on, and you know there is
2:21
Speaker 1: so much we could cover, but I think we should
2:24
Speaker 1: cut to the chase for the Australian investor and look
2:29
Speaker 1: at this issue. I mean, first of all, do you
2:31
Speaker 1: accept what I said in the preambum.
2:35
Speaker 2: Look, yes, what you're saying is very right and it
2:37
Speaker 2: was a major topic of discussion. But I'm just sort
2:40
Speaker 2: of you cast some doubt on this is euphoria towards
2:45
Speaker 2: European equities that I heard, and we can talk about
2:48
Speaker 2: that in a little bit more detail. And I think
2:50
Speaker 2: because the US is the US, and you know, you
2:53
Speaker 2: canvas looking to IPO and that's going to list in
2:57
Speaker 2: the US, it's not listing in Australia.
2:59
Speaker 1: So you're not deep you're not deeply questioning the pre
3:03
Speaker 1: eminence of the US, are you.
3:06
Speaker 2: No. Look, there was the big debate from the perspective
3:10
Speaker 2: of European investors has been the US risk premium. So
3:15
Speaker 2: it is the US suddenly considered high risk?
3:18
Speaker 1: Is it worth the prices on those markets?
3:20
Speaker 2: Yeah? Okay, Yeah, And the consensus seemed to be there
3:23
Speaker 2: is a high risk attributed to the US now. And
3:27
Speaker 2: you're very right. With respect to the weaker US dollar,
3:30
Speaker 2: that seemed to be a major focus and people were
3:33
Speaker 2: still talking it down on the simple fact that the
3:36
Speaker 2: US president wants it weaker.
3:39
Speaker 1: Yeah, So we take it that they wanted to drop,
3:44
Speaker 1: and the mechanics are there for them to use for
3:46
Speaker 1: it to drop. So we can, to the extent that
3:49
Speaker 1: you can safely assume anything in financial markets, We'll make
3:52
Speaker 1: the assumption that the US donar will weaken through the
3:55
Speaker 1: year yeap.
3:57
Speaker 2: So what does that mean is the fact that the
3:59
Speaker 2: US president. So for Australian investors, if you're having US
4:02
Speaker 2: dollar holdings and you know you can either look to
4:05
Speaker 2: take some hedging strategy and so like if you're invested
4:08
Speaker 2: in managed funds, you can take a hedge class if
4:11
Speaker 2: that exists, or you just realize that when coming back
4:15
Speaker 2: to Australian dollars, you are if you're invested in US equities,
4:19
Speaker 2: you're going to see you're going to see a currency
4:21
Speaker 2: adjusted return which will be negatively impacted through a weaker
4:25
Speaker 2: US dollar.
4:26
Speaker 1: So you're existing if you had existing holdings in US
4:29
Speaker 1: dollar as well, if you had most people and on
4:32
Speaker 1: listening to the show, they're explosure to US is through
4:34
Speaker 1: funds mostly tfs or perhaps managed funds. Wouldn't the existing
4:38
Speaker 1: holdings call open value?
4:41
Speaker 2: Well, what you what you can see in if you've
4:43
Speaker 2: got a weaker US dollar? No, you're you're seeing a
4:46
Speaker 2: weaker US dollar impact. Now you can't hedge that. You
4:50
Speaker 2: can't hedge that. If you're in some of the funds,
4:53
Speaker 2: they do have a hedge class and that can give
4:59
Speaker 2: you and impact their.
5:01
Speaker 1: So are you recommending that people if they're going in
5:04
Speaker 1: fresh and they hadn't been in before, so they don't
5:06
Speaker 1: get the advantage perhaps of what's happened so far. If
5:09
Speaker 1: you're buying today US stocks, US funds, managed funds, ETFs,
5:14
Speaker 1: then are you saying, whereas in the past we didn't
5:18
Speaker 1: really have to consider it, that we should consider hedged options,
5:21
Speaker 1: and all those ones tend to have hedged around hedged options.
5:25
Speaker 2: Yeah, I'd be looking at a hedged option at the moment.
5:27
Speaker 1: Correct, Okay, right, that's very interesting. That's a fresh sort
5:30
Speaker 1: of perspective.
5:31
Speaker 2: Now.
5:32
Speaker 1: The big question I suppose is that investors are also
5:36
Speaker 1: looking beyond the US, aren't they. They're looking elsewhere, and
5:40
Speaker 1: gold seems to be the alternative of choice. And though
5:47
Speaker 1: golds had a good run, all the conditions would seem
5:51
Speaker 1: to be in place for it to keep running. What
5:53
Speaker 1: do you think.
5:54
Speaker 2: I was just saying yesterday when I was talking to
5:56
Speaker 2: staff here internally, that when you talk to other managers,
5:59
Speaker 2: they always to you the good stories and never tell
6:01
Speaker 2: you the bad stories. And I didn't meet anybody that
6:06
Speaker 2: wasn't long gold and one of the big Swiss banks,
6:11
Speaker 2: for instance, I was shocked by the extent of the
6:14
Speaker 2: holding that the god and gold, and they were talking
6:15
Speaker 2: about the fact that in the first quarter of this
6:17
Speaker 2: year more slow went when you're looking at what they
6:22
Speaker 2: considered exits out of US dollars, more went into gold
6:25
Speaker 2: than the euro. So they're seeing gold as the proxy
6:28
Speaker 2: to the US dollar as opposed to the euro, and
6:32
Speaker 2: they saw still considerable downside in the US dollar and
6:37
Speaker 2: therefore they were still very bullish on gold. To the
6:41
Speaker 2: extent some of the figures they were throwing around, I'm
6:43
Speaker 2: sort of going, wow, this is It was one firm
6:47
Speaker 2: and I spoke then one to one of the portfolio
6:49
Speaker 2: managers in this Swiss private bank and he said, yeah,
6:52
Speaker 2: but we've always held gold, and he said for years
6:56
Speaker 2: we had at least a two percent holding, and it
6:58
Speaker 2: was one of those things that you was that was
7:00
Speaker 2: where the bad discussion came about. And he said, yes,
7:03
Speaker 2: it's about five percent now our holdings in gold. But
7:05
Speaker 2: he said, you know, for the first time in a
7:06
Speaker 2: long time, we're having positive discussions on it.
7:09
Speaker 1: So you've got Swiss private Swiss banks being a sort
7:12
Speaker 1: of proxy for what very wealthy investors are thinking. Doubling
7:16
Speaker 1: there holding in gold and more than that actively discussing
7:22
Speaker 1: what buying more.
7:25
Speaker 2: Yeah, and further upside in the goal price. Their whole
7:29
Speaker 2: logic seems to be, you know a lot of people
7:32
Speaker 2: saying central banks, et cetera. They're saying, no, it's seen
7:35
Speaker 2: as the proxy to the US dollar, which was a
7:39
Speaker 2: different perspective from Bloodhead.
7:42
Speaker 1: Yeah, so global money uncomfortable with the trajectory and what's
7:47
Speaker 1: going on around the US donor they're only alternative, perhaps
7:51
Speaker 1: as a global currency proxy is gold.
7:55
Speaker 2: Yep. Yeah, that's what they're saying, and they claim more
7:58
Speaker 2: money's gone into gold the neuros.
8:01
Speaker 1: Yes, explain why that's important to to the general listener.
8:06
Speaker 2: Well, I think that the I think there's this enormous
8:11
Speaker 2: excitement about Europe at the moment. I think it might
8:14
Speaker 2: be a bit overdone, but you know, there's this tail
8:17
Speaker 2: wind from the amount of spense, defense spending and infrastructure spending,
8:22
Speaker 2: and therefore everyone's getting very excited. But is this in reality,
8:28
Speaker 2: I don't, I don't know. I think this. You can
8:30
Speaker 2: see it's not necessarily going into the euro people buying
8:35
Speaker 2: therefore European stocks, and I think the Euros stock index
8:40
Speaker 2: is a very old index like Australia but it doesn't
8:43
Speaker 2: have the cyclicality that Australia has. So we've got some
8:45
Speaker 2: cyclical stocks which at times is therefore very worthwhile'ts.
8:53
Speaker 1: And it's it's a dopey old market, I would say,
8:56
Speaker 1: And it's been dopy for years. Do you do you
8:59
Speaker 1: see anything to me people think they should reconsider European
9:02
Speaker 1: stocks apart from the fact that Trump has made them
9:05
Speaker 1: spend more on defense. Do you see any other sort
9:08
Speaker 1: of structural reason to be attracted to it that wasn't
9:11
Speaker 1: there before?
9:13
Speaker 2: No, Well, that everyone was talking up Europe, and they're
9:17
Speaker 2: Europeans and UK citizens talking up Europe. But let you know,
9:22
Speaker 2: when you sort of take a deep breath and look back,
9:25
Speaker 2: you go, well, what do you invest in? Okay, So
9:28
Speaker 2: they're talking about infrastructure, defense spending and the government is
9:33
Speaker 2: not going to this is self fulfilling for the US
9:35
Speaker 2: because most of the armaments are US companies, that's the
9:39
Speaker 2: other thing. And you just you look at it and
9:42
Speaker 2: you go, well, I just don't understand what they're going
9:44
Speaker 2: to invest in. I think that things are just getting
9:46
Speaker 2: a little bit ahead of themselves over there. It's done well.
9:49
Speaker 2: And one manager, as you pointed out to me, Europe
9:52
Speaker 2: has not outperformed the US this century, this century, right
9:59
Speaker 2: this century, so in the last twenty five years, and
10:01
Speaker 2: I thought.
10:02
Speaker 1: And it's had so many four starts.
10:04
Speaker 2: Yes, and also and the other one thing is which
10:07
Speaker 2: I think is really important is GDP growth. As Capital
10:09
Speaker 2: Economics said to me, GDP growth in Europe and the
10:12
Speaker 2: US twenty twenty five is going to be about even.
10:15
Speaker 2: But next year you're looking at one full percentage point.
10:18
Speaker 2: So you're looking approximately two point five percent in GDP
10:22
Speaker 2: growth in the US and one point five percent in Europe.
10:24
Speaker 2: And that's that I think is a very that's something
10:26
Speaker 2: you have to take into consideration.
10:28
Speaker 1: Okay, just turning it all back in terms of portfolio
10:33
Speaker 1: construction and portfolio allocation for private investors in Australia, what
10:38
Speaker 1: did you take when you came back? What did you
10:40
Speaker 1: think that you should do that you haven't been doing
10:43
Speaker 1: before In terms of gold or US donor exposure, we.
10:49
Speaker 2: Or are already hedged. So yeah, but at some point
10:53
Speaker 2: we will if we've got some strength in the Australian dollar,
10:56
Speaker 2: we would look to reverse that some of that, not
10:58
Speaker 2: all of it, but some of it. At this point
11:00
Speaker 2: time on gold, would I be going in again at
11:03
Speaker 2: those levels. It's run so hard. But yeah, for those
11:05
Speaker 2: that have got gold in their portfolios, you know, I
11:07
Speaker 2: would be sticking with it, and on US, I would
11:11
Speaker 2: be sticking with the US market. I think that, yes,
11:14
Speaker 2: Europe's had a run. Let's just be sensible about things.
11:18
Speaker 2: I still struggle on what to buy in Europe.
11:21
Speaker 1: Okay, Okay, all right, very interesting and obviously if possible
11:26
Speaker 1: that's hedged obviously the US exposure, okay, which is not
11:30
Speaker 1: normally the case right from many investors. All Right, I
11:33
Speaker 1: think we'll take a short break. We'll be back in
11:35
Speaker 1: a moment. There's a couple of really key aspects of
11:37
Speaker 1: this I want to talk to Will about. Hello and
11:48
Speaker 1: welcome back to the Australians Money Puzzle Podcast. James Kirby
11:52
Speaker 1: talking to win Will Hamilton of Hamilton Wealth Managers, regular
11:56
Speaker 1: on the show Hamilton Wealth Partners. Tell me Will, Okay,
11:59
Speaker 1: so let's take it that from the first segment we've
12:02
Speaker 1: got a sort of updated picture of the risks and
12:07
Speaker 1: opportunities and the changing risks and opportunities around the weaker
12:11
Speaker 1: US donor potentially de dollarization of markets. As you see
12:16
Speaker 1: that strength of gold which is happening there. So in
12:19
Speaker 1: terms of what people are looking at in terms of
12:21
Speaker 1: where they put their money, is it stick with the
12:24
Speaker 1: US which is very interesting? How about emerging markets? Because
12:29
Speaker 1: if the US donor is weakening and continue to is
12:33
Speaker 1: that a tailwind for emerging markets?
12:37
Speaker 2: Not just that seventy percent of global growth in the
12:39
Speaker 2: next twenty years is going to come from emerging markets.
12:42
Speaker 2: So yeah, I think it's a combination of what you
12:44
Speaker 2: just said, which is positive, combined with the fact that
12:48
Speaker 2: emerging markets do have real growth and superior growth to
12:51
Speaker 2: the rest of the world, so they performed well year
12:54
Speaker 2: to date and also rolling on a twelve month basis,
12:57
Speaker 2: and I can I see that continuing. The only area
13:01
Speaker 2: in emerging markets where people seem to be hesitant, and
13:04
Speaker 2: it's probably one of the cheapest stock markets in the
13:06
Speaker 2: world is China, which is a big.
13:09
Speaker 1: Chunk of emerging markets, isn't it if you're going into
13:11
Speaker 1: a fund or an ETF yep.
13:13
Speaker 2: And but interestingly I hear that a lot of the
13:16
Speaker 2: industry funds now are looking at em x China, and
13:21
Speaker 2: so a lot of and a lot of professional managers
13:23
Speaker 2: are looking x China. In the way they approach this
13:26
Speaker 2: part of this asset class, and likewise in internationally that
13:31
Speaker 2: seems to be the case as well. So because of
13:34
Speaker 2: political risk?
13:35
Speaker 1: Is that because emerging markets x China has been the
13:37
Speaker 1: best component of the index?
13:41
Speaker 2: Yeah that is yeah, yeah, right.
13:44
Speaker 1: One thing, what about tariffs? You would have thought actually
13:46
Speaker 1: that the tariffs would be negative for that area.
13:51
Speaker 2: You would, But the simple fact is it seemed to
13:55
Speaker 2: have growth. And I think that the world is looking
13:58
Speaker 2: outside of the US in many respects as well. Look
14:00
Speaker 2: at Australia's looking at FTA with free Trade Agreement with Europe,
14:04
Speaker 2: and so it seems to be an x US sort
14:08
Speaker 2: of equation that people are looking at tariffs. I think
14:13
Speaker 2: the whole debate on tariffs has raised its ugly head
14:15
Speaker 2: again in the last week or two. But when I
14:18
Speaker 2: was away, I think people were looking at a more
14:21
Speaker 2: at that ten percent level. But a few other figures
14:23
Speaker 2: have been thrown out since. But it's a geopolitical risk.
14:27
Speaker 2: Whereas we've been always told geopolitical risks provide buying opportunities.
14:33
Speaker 2: Now it seemed to be on geopolitical risks that you
14:36
Speaker 2: look at scenario analysis around it. So what is you know,
14:40
Speaker 2: we're looking at a base case of ten percent, What
14:42
Speaker 2: if it was higher, what if it was lower?
14:46
Speaker 1: What do you mean by base case of ten percent there.
14:49
Speaker 2: On tariffs that the US is going to inflict on
14:52
Speaker 2: them the rest of the world. So correct, So people
14:54
Speaker 2: are looking at geopolitical risks now as something that you
14:57
Speaker 2: do have to adjust for, but on taking into cat
15:01
Speaker 2: scenario scenario analysis.
15:04
Speaker 1: So put simply, gold and emerging markets would seem to
15:09
Speaker 1: be the hot ticket five for investors. Yeah, okay, very interesting. Okay,
15:17
Speaker 1: that's very I've wanted to get across that for some time.
15:20
Speaker 1: One thing for our listeners who may not be that
15:24
Speaker 1: may be all new to them, emerging markets. Gold is
15:26
Speaker 1: pretty obvious what you can do. I mean, gold is
15:28
Speaker 1: not complicated. It's a commodity that goes up or it
15:31
Speaker 1: doesn't go up. Emerging markets are terribly complicated. A bit
15:35
Speaker 1: of a bit of nonsense, really. I mean it's because
15:38
Speaker 1: someone in London or New York said, let's put them
15:40
Speaker 1: all into a basket. That Russia, China, Indonesia, and Mexico.
15:43
Speaker 1: These countries have nothing in common except this classification. So
15:49
Speaker 1: what I'm driving out.
15:50
Speaker 2: Is many of the amount emerging markets, like seth career
15:53
Speaker 2: in Taiwan.
15:54
Speaker 1: Yeah sure, yeah, sure, so so what and you go
15:57
Speaker 1: in and you see time in the semiconductor is like
16:00
Speaker 1: a major holding, but that's not an emerging market stuff.
16:04
Speaker 1: What I want to ask you, Will is how does
16:06
Speaker 1: the everyday investor get at this area?
16:11
Speaker 2: Well through you know, there's some very good managers out there,
16:13
Speaker 2: and all I would suggest in approaching it is have
16:17
Speaker 2: a look at the downside participation when things go tough
16:20
Speaker 2: in emerging markets in selecting a manager, and make sure
16:24
Speaker 2: you're comfortable with a downside participation. There are managers that
16:28
Speaker 2: have less and that's what we always look at. So
16:30
Speaker 2: I'm not going to mention names. There's some very good
16:33
Speaker 2: managers out there.
16:35
Speaker 1: And it sounds like you don't like ETFs on this one.
16:40
Speaker 2: I know, I think that you've this is something you
16:42
Speaker 2: do definitely need an active manager out like we actually
16:46
Speaker 2: use managers that don't like China.
16:50
Speaker 1: Okay, or maybe you will at at very least perhaps
16:52
Speaker 1: an ETF X China are such a thing which are
16:55
Speaker 1: not aware of. But if you see, we're not there
16:57
Speaker 1: to let us know. Okay. I have some really good
17:00
Speaker 1: questions I want to talk to Will about. But I
17:01
Speaker 1: want to there's something else I want to ask in
17:03
Speaker 1: which is not on the broad theme today about the
17:08
Speaker 1: US and what it means for you. It's about the
17:12
Speaker 1: sixty to forty rule. And I've been reading some very
17:14
Speaker 1: interesting things. A really terrific piece last weekend. It was
17:19
Speaker 1: about the sixty forty rule, which I'm sure most of
17:21
Speaker 1: our listeners are familiar with. This idea that you have
17:23
Speaker 1: sixty percent of your money at risk and you have
17:26
Speaker 1: forty percent of your money in safer investments. And traditionally
17:30
Speaker 1: globally that was sixty percent in shares or risk assets
17:33
Speaker 1: that are listed, forty percent in what they call fixed
17:36
Speaker 1: income traditionally bonds. This has really changed in recent times.
17:41
Speaker 1: Bonds have been disappointing for years and years, and there
17:45
Speaker 1: has been new areas that have mushroomed before our eyes,
17:48
Speaker 1: private equity, private credit. I just want to ask you Will,
17:52
Speaker 1: for this whole sixty to forty rule, what do you
17:56
Speaker 1: what in your eyes the forty percent that people should
17:59
Speaker 1: have that isn't that is a fixed rather than ash risk.
18:05
Speaker 1: What does it comprise of these days?
18:08
Speaker 2: Well, for growth portfolio, where approximately seventy thirty we do have.
18:12
Speaker 2: It all depends on the client how much money they've got,
18:15
Speaker 2: how comfortable they are holding a degree of ill liquidity
18:19
Speaker 2: and their portfolios. So for a decade now we've invested
18:23
Speaker 2: in private equity, infrastructure, diverse FOI credit and direct real estate.
18:28
Speaker 2: But this is something that clients have to be comfortable
18:32
Speaker 2: with illiquidity and their portfolio. Now there are what's called
18:36
Speaker 2: these evergreen funds which have come about and you know
18:39
Speaker 2: they're in at you in particular and infrastructure and private equity.
18:43
Speaker 2: They some people call them semi liquid which I think
18:46
Speaker 2: is a terrible term. I'd like to ren think of
18:50
Speaker 2: it as variable liquidity. In other words, you can get
18:55
Speaker 2: your money out in normal environment with you that there's
18:59
Speaker 2: out slow caps et cetera. However, if things were to
19:05
Speaker 2: go bad, these things have the right to lock up
19:10
Speaker 2: two seconds.
19:11
Speaker 1: Yes, sorry, what I was driving out.
19:12
Speaker 2: Was that's why it's use the term variable.
19:16
Speaker 1: You didn't see the word bonds when you listed out
19:17
Speaker 1: the four key elements of the of the your fortunate bond.
19:21
Speaker 2: But that's what we put all of these in the
19:24
Speaker 2: risk base. But we have reduced a defensive allocation. Now,
19:29
Speaker 2: this was a big debate and to what extent you
19:32
Speaker 2: go into what is your waiting in these private market assets. Yeah,
19:37
Speaker 2: and as I said, it's very dependent on a client
19:39
Speaker 2: by client basis and the comfort with illiquidity. And I
19:44
Speaker 2: think that's that is the number one question you've got
19:47
Speaker 2: to take. You take into account and how do you
19:50
Speaker 2: how do you categorize an asset as being a liquid
19:52
Speaker 2: So we're quite conservative on that. We say it's monthly liquidity.
19:56
Speaker 2: So it's very conservative on an approach. And there's some
20:00
Speaker 2: firms out there that recommend very high ratings. Yeah, thirty
20:03
Speaker 2: percent plus. We're not anywhere near that, but we think, yes,
20:08
Speaker 2: somewhere between fifteen and twenty if if it's a big
20:13
Speaker 2: if the client is comfortable, and if they're not, well,
20:17
Speaker 2: it goes lower.
20:18
Speaker 1: And so if you want to go into these areas
20:20
Speaker 1: private equity, you mentioned infrastructure, what were the other there's
20:25
Speaker 1: two more you.
20:26
Speaker 2: Mentioned diversified credit and direct real estate.
20:29
Speaker 1: Divers boy credit and direct real estate. What you're saying is,
20:32
Speaker 1: as a guide, you should be able to get your
20:34
Speaker 1: money up once a month.
20:37
Speaker 2: We define something as a liquid as monthly or greater.
20:43
Speaker 2: So in some cases these windows are quarterly, sometimes they're annually.
20:47
Speaker 2: But you're weere conservative in the way we classify that
20:50
Speaker 2: some other firms classified as quarterly or greater.
20:53
Speaker 1: But be aware of folks. If you are going into
20:54
Speaker 1: one of these funds for the first time and it
20:56
Speaker 1: says you can take your money out monthly, watch the
21:01
Speaker 1: fine print that they will invariably say unless we change
21:04
Speaker 1: our minds, and that can happen, So you must bear
21:09
Speaker 1: that in mind. It's not the stock market. There's always
21:11
Speaker 1: a liquidity in the stock market. You can always get
21:14
Speaker 1: your money out of shares nine times out of ten,
21:17
Speaker 1: especially large caps or mid caps. I mean occasionally you
21:19
Speaker 1: might get a squeeze on a small cap, but that's
21:21
Speaker 1: very rare. And ETFs even more so that they're exceptionally liquid.
21:25
Speaker 1: That is there, that is their advantage. Only so much
21:27
Speaker 1: we can cover. Very interesting. Okay, well, just while before
21:31
Speaker 1: we go to the break, in terms of anything else,
21:33
Speaker 1: you discovered that perhaps we are not right up to
21:36
Speaker 1: speed on global markets. In terms of trends, we didn't
21:39
Speaker 1: talk about crypto. I detect a serious change in attitude
21:45
Speaker 1: from our listeners on the money pustle towards crypto in
21:49
Speaker 1: the space of a year. I think in terms of
21:53
Speaker 1: the Grand Tour, you had.
21:57
Speaker 2: Well, the same Swiss private bank that was talking about
22:01
Speaker 2: gold Is said to us, said to me that they're
22:03
Speaker 2: about to bring crypto into their portfolios and a very
22:07
Speaker 2: small waiting, tiny waiting, but there that's it. I was
22:12
Speaker 2: shocked when I heard that. I sort of why were
22:15
Speaker 2: you shocked?
22:15
Speaker 1: I mean AMP has done a GP, Morgan has done.
22:19
Speaker 2: Well. I think that when you look at, in particular,
22:24
Speaker 2: some of the UK investors, Yeah, they're waiting in private
22:27
Speaker 2: markets is so low and they won't even debate putting
22:30
Speaker 2: something like crypto in They really are conservative, whereas you
22:35
Speaker 2: know these some of these more European institutions such as
22:39
Speaker 2: this West Private Bank. Yeah, they are saying, well, start
22:42
Speaker 2: to put a small holding. So it's a very different
22:45
Speaker 2: approach from the UK.
22:46
Speaker 1: Yeah, and it's growing right, the acceptance.
22:50
Speaker 2: Absolutely yeah, yeah.
22:52
Speaker 1: Throughout institution and investment investors around the world. Okay, or
22:56
Speaker 1: I wanted to cover that because we've had some lively
22:59
Speaker 1: discussion on bitcoin and crypto in recent times on the show,
23:03
Speaker 1: and we had Jackie Clark who was completely against it
23:08
Speaker 1: and had a lot of criticism from our listeners. And
23:11
Speaker 1: then I said, okay, well let's get Shane Oliver on
23:14
Speaker 1: from AMP. Since the AMP is you know, the definitive
23:17
Speaker 1: institutional investment in Australia. And they've put twenty seven million
23:20
Speaker 1: into crypto, which is, you know, not a lot, but
23:22
Speaker 1: it's also twenty seven million into crypto for AMP. And
23:25
Speaker 1: he explained their side, and it was a bit like
23:28
Speaker 1: you were saying, it was, by no means an enthusiastic.
23:32
Speaker 1: I didn't think it was an enthusiastic I think it
23:34
Speaker 1: was more a sort of acceptance that this acid class
23:38
Speaker 1: is here to stay. All right, we'll be back on
23:40
Speaker 1: that one. Of course, Let's have some questions. We'll be
23:42
Speaker 1: back in a moment. Hello, Welcome back to the Australians
23:50
Speaker 1: Money Puzzle podcast. James Kirby here, I've been keeping some
23:53
Speaker 1: questions for Will Hamilton of Hamilton Wealth Partners and they
23:57
Speaker 1: are rather the difficult, but always interesting as you can
24:01
Speaker 1: imagine the difficult ones. Can you see them?
24:03
Speaker 2: Will? I can? Would you like me to read the
24:06
Speaker 2: first one? Yeah? Okay, so Bernie. I'm an experienced investor
24:12
Speaker 2: in shares, residential and commercial property, but almost always pick
24:15
Speaker 2: up something new or inspiring. So some comments from your
24:18
Speaker 2: guests this week were a little disheartening. I don't hold
24:21
Speaker 2: Lockheed Mark Martin directly, but the inference seemed to be
24:24
Speaker 2: that investors in it may not be moral people, as
24:27
Speaker 2: they drop bombs on families. A bit extreme, But this
24:30
Speaker 2: does raise a great point. How do how do the
24:32
Speaker 2: top investors now establish guardrails on ethical considerations? So Lockheed US,
24:38
Speaker 2: both Amazon and Microsoft extensively across their businesses, yet both
24:42
Speaker 2: companies were picks for your guest. So look, values is
24:47
Speaker 2: the way I like to look at it. I won't
24:49
Speaker 2: use the word ethics because what's ethical to one person
24:52
Speaker 2: is not to another. But values, Yeah, that's something that
24:55
Speaker 2: a lot of investors like to take into account. And
24:57
Speaker 2: when it comes to armaments, it's a very big consideration
25:01
Speaker 2: which you don't generally exist on the ASX, but you
25:05
Speaker 2: can get exposure to in global equity markets, and it's
25:09
Speaker 2: something that's most investors we find actually it's something they
25:12
Speaker 2: do want to exclude. However, where do you draw the line?
25:15
Speaker 2: It's like alcohol. You know, when some people take alcohol
25:18
Speaker 2: into consideration, did you then go and ban coals because
25:21
Speaker 2: they sell it? And where to what extent do you
25:23
Speaker 2: draw that line? So do you and the alcohol companies,
25:27
Speaker 2: But do you then know when it's a smaller percentage
25:30
Speaker 2: of their total revenue do you ban those companies? So
25:34
Speaker 2: Bernie is right Locke to use both Amazon and Microsoft.
25:38
Speaker 2: You know, it's where do you draw that line?
25:41
Speaker 1: It's very difficult, Bernie, and it's one of the reasons
25:42
Speaker 1: that the wholes swing away from ESG has been that
25:48
Speaker 1: the lack of definition, and perhaps in some way it's
25:50
Speaker 1: the difficulty of definition. A serious ethical investor would pull
25:53
Speaker 1: this sort of toll very quickly and say listen cot
25:55
Speaker 1: to the chase, you can do it. I think the
25:57
Speaker 1: only way, in Bernie, this is not advice, never is information,
26:00
Speaker 1: only is to look at the more pure play ethical
26:04
Speaker 1: investment groups, the oldest, probably best known as Australian Ethical Investments,
26:09
Speaker 1: and you would like to think that their benchmarks are
26:11
Speaker 1: as good as you will find if you're very interested
26:14
Speaker 1: in that area. But there is always, as Will says,
26:17
Speaker 1: there is always. It's just really hard to cut it.
26:21
Speaker 1: To cut it. So you say, okay, I'm not going
26:23
Speaker 1: to buy Lockheed Martin. I don't want to buy Lockheed Martin.
26:26
Speaker 1: They make bombs, okay, fine, or they make fighter bombers
26:29
Speaker 1: or whatever. Then do you say you don't buy Amazon
26:32
Speaker 1: because they use Amazon? Do you say you won't buy
26:34
Speaker 1: a standard four x nine ETF on the US market
26:37
Speaker 1: because Lockheed Martin will be in there, so you can see.
26:40
Speaker 1: It's up to you. You've got to design your own
26:42
Speaker 1: portfolio to a large extent, I believe, all right, but
26:46
Speaker 1: thank you, Bernie, really good question, Charles. A common misconception
26:51
Speaker 1: that came up on your shoe on exchange traded funds
26:54
Speaker 1: was the idea that these funds need to buy more
26:57
Speaker 1: of a company when it performs well and sell it
26:59
Speaker 1: when it performed poorly. In reality, ETFs or index funds
27:04
Speaker 1: passively reflect the composition of the index. They don't need
27:07
Speaker 1: to make those active trades. The only time index funds
27:11
Speaker 1: actively buy our sell is when money flows in or
27:14
Speaker 1: out of the fund, or when a stock enters or
27:17
Speaker 1: exits the index. So Charles is saying that my contention,
27:23
Speaker 1: if you like here in the show when in print,
27:25
Speaker 1: has been that the ETFs are now at a point
27:29
Speaker 1: where they are driving markets to a degree, and certain
27:34
Speaker 1: stocks to a degree. And the outstanding example was common
27:39
Speaker 1: Wealth Bank, where the part I was making was the
27:41
Speaker 1: higher it goes, the more they must buy it, and
27:44
Speaker 1: so to some extent they self perpetuated. Charles is saying, no,
27:47
Speaker 1: that's not right. That's not how it works. He's just
27:49
Speaker 1: explained how it works technically. What do you think, well,
27:52
Speaker 1: is our ETF's then neutral in the market in terms.
27:57
Speaker 2: Of that they are and momentum. It's all about momentum.
28:01
Speaker 2: And as money comes in, and there's money that goes
28:05
Speaker 2: into your twelve percent of people salaries going to in
28:08
Speaker 2: a superannuation every month, and people are buying the index,
28:13
Speaker 2: and as such they're buying a large percentage of when
28:16
Speaker 2: they're buyingn ETF, they're buying a large percentage of CBA. Likewise,
28:21
Speaker 2: as waitings change, those ETFs have to chase those waiting
28:24
Speaker 2: changes as well, up or down.
28:27
Speaker 1: So they they pushed the momentum down.
28:32
Speaker 2: Correct, And I don't think it's just as simplistic as
28:34
Speaker 2: saying everything static and therefore it just moves up or
28:37
Speaker 2: down because there is the cash that chases these markets.
28:41
Speaker 1: Okay, okay, I hope that's a I hope that's a
28:45
Speaker 1: useful explanation to everybody. Childs might like it, but but
28:48
Speaker 1: there you are, Childs, I would agree with well on that.
28:51
Speaker 1: All right, Why don't you read the last question there
28:53
Speaker 1: are from Bruce, which is probably the sort of thing
28:56
Speaker 1: you get in your office sometimes.
28:59
Speaker 2: Yeah, so can you provide some clarification on the tax
29:02
Speaker 2: on inherited super? So I used to be under the
29:05
Speaker 2: impression that if super was left to your estate then
29:08
Speaker 2: it would be passed on untaxed. However, recent podcasts have
29:11
Speaker 2: led me to doubt this. He asked his his accountant
29:16
Speaker 2: and ended up more confused than ever. So can you
29:18
Speaker 2: get someone to explain the situation and the various components
29:21
Speaker 2: tax free, untaxed, taxable. Look, let's just have if we
29:25
Speaker 2: don't have time, we don't have another ran.
29:28
Speaker 1: Bruce, We'll just tell you one thing which with stands unchallenged.
29:33
Speaker 1: There is tax uninherited super, isn't there? And you might explain,
29:39
Speaker 1: let's say I inherit Let's say if my dad had
29:44
Speaker 1: lived in Australia. Un let's say he had super. Unless
29:47
Speaker 1: say he left me two hundred thousand dollars and it
29:49
Speaker 1: was his whole super, how would that be taxed?
29:55
Speaker 2: So you're we're making an assumption here that it's that
29:59
Speaker 2: there is some There are quite a number of things
30:01
Speaker 2: you've got to take into account and I'm not going
30:03
Speaker 2: to go into this in any detail. And this is
30:05
Speaker 2: why you do need to get You know, this is
30:07
Speaker 2: not advice, and you need to get specific advice. So
30:10
Speaker 2: were you a dependent? Is it paid as a lump
30:13
Speaker 2: sum or an income stream? The income stream is it
30:16
Speaker 2: account based or capped? Yeah? The super tax is it
30:20
Speaker 2: taxable or tax free? And so if you look basically,
30:23
Speaker 2: the bottom line is it's sevente and a percent, but
30:26
Speaker 2: or your age and the age of the deceased person
30:28
Speaker 2: when they die. So there's a lot of things that
30:30
Speaker 2: have to be taken in account. There is no clear, simple,
30:33
Speaker 2: one answer across the board, and that's why you ended
30:37
Speaker 2: up confused and wanted to know, well, what are the
30:40
Speaker 2: various answers? There are many answers.
30:42
Speaker 1: There are many, and you need to talk to as
30:44
Speaker 1: well as unfortunately you need If it's individual and it's substantial,
30:48
Speaker 1: it's probably worth paying an advisor. But there's a couple
30:51
Speaker 1: of core things that are true. Bruce, adults, dependents being
30:55
Speaker 1: adults who inherit super, the super they inherent the person
31:00
Speaker 1: who had the super. To make it simple, we'll assume
31:04
Speaker 1: that they never voluntarily contributed to super. It was all mandated.
31:09
Speaker 1: There was all their SGC. That means that was tax.
31:13
Speaker 1: That that means that there was tax pre component in
31:15
Speaker 1: all that. That means there's tax to be paid, and
31:18
Speaker 1: that tax works out at seventeen percent. This is what
31:21
Speaker 1: the seventeen percent figure that we'll mention it. There's also
31:23
Speaker 1: some complications with the new division two nine six, but
31:26
Speaker 1: we won't go there because we don't have two hours.
31:29
Speaker 1: But basically, don't think that you're super coming through has
31:32
Speaker 1: no tax on it. Unfortunately, but most people don't realize this.
31:36
Speaker 1: When Paul Keaton created the supersystem and when he created
31:39
Speaker 1: the concession for super whereby the bit that goes in
31:44
Speaker 1: from your employer which is now twelve percent, believe it
31:47
Speaker 1: or not, when that comes out the other side as
31:49
Speaker 1: an inheritance to you, they want to recover the tax
31:53
Speaker 1: concession and that works out at seventeen percent of that figure. Simple,
31:59
Speaker 1: simplified answer. But that's it.
32:01
Speaker 2: We have a site Texas in Australia and that's three souper.
32:05
Speaker 1: That's right. So it's funny people said, is there an
32:07
Speaker 1: inheritance tax and people say, no, there's no inheritance tax
32:10
Speaker 1: in Australia. Well, if you inherit super there is. But
32:14
Speaker 1: technically that's a super tax, not an inheritance tax. You
32:18
Speaker 1: cant have a whole show about debating that one. Okay, terrific, terrific,
32:22
Speaker 1: Thanks very much, Will Hamilton, well partner's great to have
32:24
Speaker 1: you on the show again.
32:26
Speaker 2: Thank you for having me, appreciate it.
32:28
Speaker 1: Nice to have you back on land and we'll talk
32:30
Speaker 1: to you again. Okay, terrific. Great questions Today a number
32:34
Speaker 1: of people have done the clever thing of batching questions
32:37
Speaker 1: together and sending two or three questions in at the
32:39
Speaker 1: same time. That's great. Keep it up. Why not if
32:42
Speaker 1: you're going to make the effort to send in a question,
32:44
Speaker 1: send in two or three. I will try and cover
32:47
Speaker 1: them all and we do get to cover them on
32:50
Speaker 1: the show. The addresses the money Puzzle at the Australian
32:54
Speaker 1: dot com dot au talk to you soon.
33:00
Speaker 2: At the pad, the h