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Investing in Trump time · The Money Puzzle

• 0:13
  Speaker 1: Hello and welcome to the Australian's Money Puzzle podcast. I'm
• 0:15
  Speaker 1: James Kirby, wealth editor at The Australian. Now, folks, we've
• 0:19
  Speaker 1: had a few days to digest what it all means
• 0:24
  Speaker 1: about Donald Trump arriving, rebounding back into the White House.
• 0:30
  Speaker 1: But what does it mean for investors? And it is
• 0:32
  Speaker 1: actually a very front and centre and extremely important development
• 0:37
  Speaker 1: for investors. There are aspects to it about our market
• 0:40
  Speaker 1: that's going to matter straight away. For instance... The big miners,
• 0:43
  Speaker 1: it's going to be tougher for them, for instance. But
• 0:45
  Speaker 1: more importantly, really, is that if you don't have global shares,
• 0:52
  Speaker 1: you should have. And if you're not in, you can't win.
• 0:56
  Speaker 1: It's as simple as that. Now, if you look at
• 0:58
  Speaker 1: our market over the last year to date, over the
• 1:01
  Speaker 1: last 12 months, we are up something in the order
• 1:04
  Speaker 1: of 8%. OK, and that sounds fine. Here's the thing.
• 1:07
  Speaker 1: The US market's already up 24%, right? Three times more.
• 1:11
  Speaker 1: You're making three times more money in the U.S. And
• 1:14
  Speaker 1: no one knows the future, but there's every indication that
• 1:18
  Speaker 1: this Trump bump, as they called it when he was
• 1:21
  Speaker 1: in power the last time, will continue this time. I
• 1:24
  Speaker 1: would actually argue the conditions for shares, U.S. shares, are
• 1:28
  Speaker 1: better now than they were, particularly blue-chip U.S. shares, not
• 1:33
  Speaker 1: so much the tech leaders, and smaller and medium-cap American shares.
• 1:38
  Speaker 1: And just as the week has passed, we're starting to
• 1:42
  Speaker 1: see the shape of this Trump financial administration, which is
• 1:45
  Speaker 1: all the show is interested about on this occasion. So
• 1:49
  Speaker 1: we're getting people like Elon Musk is going in as
• 1:52
  Speaker 1: what they call the efficiency czar. We'll see how that works,
• 1:54
  Speaker 1: I imagine. Elon Musk has about five hours a week
• 1:57
  Speaker 1: to give to that job. But importantly, probably more importantly,
• 2:01
  Speaker 1: a man called Scott Besant goes in as Treasury Secretary.
• 2:04
  Speaker 1: That's an extremely important position. job. He's a fund manager,
• 2:07
  Speaker 1: billionaire fund manager. So whatever else he is capable of,
• 2:12
  Speaker 1: we'll assume that he is a pretty capable investor. And
• 2:17
  Speaker 1: you can see straight away that the American share market
• 2:20
  Speaker 1: continues to rise and so does our market. Now, what
• 2:23
  Speaker 1: I'm really interested in is what have Australians actually been
• 2:29
  Speaker 1: buying and investing in up until now, on the US
• 2:33
  Speaker 1: markets and on our own markets as well, where you
• 2:35
  Speaker 1: can easily buy ASX-listed ETFs that are invested in the
• 2:41
  Speaker 1: US market, which is a very simple way in, actually.
• 2:44
  Speaker 1: But also, is it changing? And how might it change?
• 2:47
  Speaker 1: I've got the ideal guest. She's been on the show before.
• 2:51
  Speaker 1: It's Gemma Dale, Head of Investor Behaviour at Naptrade. That
• 2:54
  Speaker 1: is the online broker. How are you, Gemma?
• 2:56
  Speaker 2: I'm well, thanks.
• 2:57
  Speaker 1: How are you?
• 2:58
  Speaker 3: Good.
• 2:58
  Speaker 1: Good to have you on the show again.
• 3:00
  Speaker 2: Lovely to be here.
• 3:02
  Speaker 1: We have talked in the past about this whole area.
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  Speaker 1: Before we start, just tell us, give us a picture,
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  Speaker 1: if you would, of what we might call the traditional
• 3:12
  Speaker 1: situation with Australia and the Wall Street share market. I
• 3:16
  Speaker 1: gather it was largely younger, by that I mean under 35,
• 3:20
  Speaker 1: that were actively buying individual shares in the US and
• 3:23
  Speaker 1: older investors were a bit slower, but occasionally they'd buy ETFs.
• 3:27
  Speaker 1: Is that still the case? And what shares do they like?
• 3:30
  Speaker 3: Yeah, such a good question because the demographic shifts, I think,
• 3:35
  Speaker 3: are largely due to what was available at the time
• 3:38
  Speaker 3: people started investing.
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  Speaker 2: Yeah, really.
• 3:40
  Speaker 3: It's not that people are lacking in education or even
• 3:45
  Speaker 3: appetite for a lot of different things. It just depends
• 3:47
  Speaker 3: on what is easy and accessible at the time you started.
• 3:50
  Speaker 3: So most of our older investors have fairly rich and
• 3:54
  Speaker 3: deep Aussie equities portfolios. They started... let's say in the
• 4:00
  Speaker 3: 90s with the big floats. So they own CBA and
• 4:03
  Speaker 3: they bought it very cheaply and they've done very nicely
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  Speaker 3: out of that. And they own BHP and they own
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  Speaker 3: the big Australian companies. And they would have bought Woolies
• 4:10
  Speaker 3: in the float, all those sorts of things. And a
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  Speaker 3: lot of our baby boomer investors have these portfolios that
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  Speaker 3: are dominated by big Australian names. They're very familiar with
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  Speaker 3: the companies. They know what they do. They've held them
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  Speaker 3: for a long time. They probably have quite substantial capital
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  Speaker 3: gains liabilities attached to those positions. And it has taken
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  Speaker 3: them time to diversify offshore because pre, let's say, 2010,
• 4:38
  Speaker 3: you would be mostly, probably 2015, let's be honest, mostly
• 4:42
  Speaker 3: looking at unlisted managed funds if you wanted to buy
• 4:45
  Speaker 3: a international equities and diversify your portfolio. The big thing
• 4:50
  Speaker 3: people used to buy was Platinum Asset Management, the Platinum
• 4:53
  Speaker 3: International Fund. They would buy that as an LIC. So
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  Speaker 3: there's a lot of stuff that people did hold that
• 4:59
  Speaker 3: they would buy quite some time ago and some of
• 5:01
  Speaker 3: the other listed international options. But broadly speaking, they just
• 5:06
  Speaker 3: built their portfolios in domestic equities and then they've taken
• 5:09
  Speaker 3: their time to get more international exposure and Online brokers
• 5:14
  Speaker 3: have made a big difference. It's much, much cheaper and
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  Speaker 3: easier to buy stuff now that is not just domestically focused.
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  Speaker 3: You don't have to buy it in the float and
• 5:21
  Speaker 3: then wait for your statement every six months. And also,
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  Speaker 3: you can buy directly.
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  Speaker 1: You can just buy $ 1, 000 worth of Walt Disney or
• 5:29
  Speaker 1: you can buy $ 1, 000 worth of Coca-Cola. That was just impossible, basically.
• 5:33
  Speaker 3: It's impossible. And if you could do it, you'd have
• 5:36
  Speaker 3: to ring a broker and it'd cost you $ 100 to
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  Speaker 3: buy $ 1, 000 worth of stock.
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  Speaker 2: So it was very difficult.
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  Speaker 3: So now it's much less expensive. It's very transparent as well.
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  Speaker 3: So you can see what you're paying in FX. You
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  Speaker 3: can see what you're paying for the stock, all those
• 5:47
  Speaker 3: sorts of things. You can hold them in roughly the
• 5:49
  Speaker 3: same portfolio. So younger investors, that's how they've chosen to
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  Speaker 3: invest because.
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  Speaker 2: They have access to it and it's affordable.
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  Speaker 3: And the other thing I think that's made a dramatic
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  Speaker 3: difference is you've got really high quality research now.
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  Speaker 2: Realistically, for free, everywhere, Google, but also inside your platform.
• 6:08
  Speaker 1: You just have to be special to get that research.
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  Speaker 2: The research you can get now.
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  Speaker 3: on the standard platform is better than the average fund
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  Speaker 3: manager had in the 90s, right? It's amazing what's available.
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  Speaker 3: So it's just much more accessible. Funnily enough, though, yes,
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  Speaker 3: we do have younger investors who buy directly offshore. So
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  Speaker 3: NAB Trade, it's US, UK, Germany, Hong Kong. There are
• 6:28
  Speaker 3: other markets, obviously. 90 plus percent for.
• 6:31
  Speaker 2: Us is in the US. That's really what people want.
• 6:34
  Speaker 3: Yeah.
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  Speaker 1: And why wouldn't it be? Because the vast majority of
• 6:37
  Speaker 1: the MSCI... The Morgan Stanley Capital International Index is US anyway,
• 6:43
  Speaker 1: and that's probably even more true with each passing year
• 6:47
  Speaker 1: as the US does so well. But tell us then,
• 6:50
  Speaker 1: what up until very recently were the favourite stocks or funds,
• 6:55
  Speaker 1: which invariably will be ETFs, that Australians have been buying
• 7:01
  Speaker 1: on Wall Street?
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  Speaker 2: So it's an awesome question.
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  Speaker 3: It's actually been quite concentrated at the top end. There's
• 7:08
  Speaker 3: a really long tail of individual things that people will buy,
• 7:12
  Speaker 3: but they tend to be one or.
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  Speaker 2: Two trades a day.
• 7:14
  Speaker 3: It's a long, long tail, but it's very concentrated at.
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  Speaker 2: The top end.
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  Speaker 1: Yeah, bits and pieces. So who's at the top end?
• 7:23
  Speaker 3: So if we strip out the rats and mice, it
• 7:24
  Speaker 3: was all about Apple for probably the first five years
• 7:28
  Speaker 3: that we had international trading available leading up until COVID.
• 7:33
  Speaker 3: Then there was a real regime shift, if you want
• 7:35
  Speaker 3: to call it that, all about Tesla. And I think
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  Speaker 3: I've told you this before. At one point, Tesla was
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  Speaker 3: our 11th largest holding on the platform above Rio, above Woolworths,
• 7:47
  Speaker 3: above all.
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  Speaker 2: Of these big Australian names. It was enormous.
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  Speaker 3: Big chunk of that was capital appreciation, like people who
• 7:53
  Speaker 3: bought it relatively cheaply and it had just run very hard.
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  Speaker 2: But it was all about Tesla for a while.
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  Speaker 3: It's still largely about Tesla, apart from those people who
• 8:02
  Speaker 3: bought NVIDIA and it's rocketed. And that is a capital
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  Speaker 3: appreciation story, much smaller base.
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  Speaker 1: Oh, yes. Yes. NVIDIA, of course. Yeah, the AI chip
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  Speaker 1: maker supreme. Okay, so NVIDIA being the new kid on
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  Speaker 1: the block, Apple being the original of the species, Tesla,
• 8:22
  Speaker 1: all the time I expect and still there. Anything else?
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  Speaker 1: Berkshire Hathaway? Microsoft?
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  Speaker 2: So then you get the other.
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  Speaker 3: Sort of mega cap tech names plus Berkshire Hathaway.
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  Speaker 2: So Berkshire Hathaway, absolutely.
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  Speaker 3: And I love it when you occasionally see someone buy
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  Speaker 3: their Class A shares, which are many hundreds of thousands
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  Speaker 3: of dollars. Remember the first time I saw a single
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  Speaker 3: $ 350, 000 stock? And I was like, wow.
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  Speaker 2: But people would buy one.
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  Speaker 1: But generally, you can buy it cheaper, right? Because there's
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  Speaker 1: Class B.
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  Speaker 3: So you can buy Class B, which is the split version,
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  Speaker 3: but it's the same thing.
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  Speaker 2: And you can buy smaller parcels.
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  Speaker 3: So yes, we see Berkshire Hathaway, absolutely, and people do
• 8:59
  Speaker 3: like to accumulate that over time. Microsoft, absolutely big favourite
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  Speaker 3: last 12 months in particular. It sort of got a
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  Speaker 3: bit unsexy for a while there, but it's.
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  Speaker 2: Very much back.
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  Speaker 3: Apple, Amazon, Alphabet, Microsoft, all of the sort of magnificent
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  Speaker 3: seven names are in there, but it's very much the
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  Speaker 3: more sexy consumer-facing stocks that were super popular. Meta was
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  Speaker 3: never that big, which I find really interesting because it's
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  Speaker 3: not It's not quite as fun, right?
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  Speaker 1: Well, it's a roller coaster, Meta being Facebook, the shares. OK,
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  Speaker 1: now here's the thing. So those are the main shares.
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  Speaker 1: And you didn't mention ETFs, but I think they'd probably
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  Speaker 1: be a very good proxy for interest as well. So far,
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  Speaker 1: what ETFs, exchange traded funds, index funds are popular that
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  Speaker 1: people are using to buy the US market and Wall Street?
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  Speaker 3: Yeah, it's such a good question, right? Because you do
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  Speaker 3: have the option of just buying a domestically listed ETF
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  Speaker 3: that gives you the exposure. And the underlying holdings, it's
• 10:01
  Speaker 3: not a synthetic. So you're buying that exposure, but you're
• 10:05
  Speaker 3: just buying it at home and it's much easier from
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  Speaker 3: a tax perspective.
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  Speaker 2: It's just a bit cleaner for people.
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  Speaker 3: ETFs, they start with the ASX 200. And I find
• 10:14
  Speaker 3: this fascinating. So if you look at our numbers, it's
• 10:16
  Speaker 3: ASX 200, Daylight, Global exposure, but as you say, it's
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  Speaker 3: based on misky world usually, and so it's mostly US exposure.
• 10:26
  Speaker 3: And then S & P 500.
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  Speaker 1: Okay, not NASDAQ.
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  Speaker 3: Look, here and there, but it is not anywhere near
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  Speaker 3: as dominant as you would imagine it would be.
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  Speaker 1: Okay.
• 10:39
  Speaker 3: Niche exposure is unkind, but it's very much a sleeve
• 10:42
  Speaker 3: of people's portfolio. They start with the ASX 200 to
• 10:45
  Speaker 3: build a core. And then they go for these other
• 10:48
  Speaker 3: things and they'll go S & P 500 first or world.
• 10:51
  Speaker 3: And then they'll go specifically NASDAQ or some other niche.
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  Speaker 1: Okay. All right. That's interesting. And the individual shareholdings, is
• 11:00
  Speaker 1: there bigger money in them than in the ETFs?
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  Speaker 3: In aggregate, they're probably close to even. But when you
• 11:09
  Speaker 3: consider the ETFs are a handful and....
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  Speaker 2: The U.S.
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  Speaker 3: Equities is a long list of things. And I did
• 11:16
  Speaker 3: say when you look at the individual trades, there'll be
• 11:18
  Speaker 3: one or two things. What's fascinating is in the one
• 11:20
  Speaker 3: or two trades a night, some of them are half
• 11:23
  Speaker 3: a million dollars.
• 11:24
  Speaker 2: So they're not $ 1, 000.
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  Speaker 3: Some of them can be enormous and much larger sometimes
• 11:30
  Speaker 3: with people with very specific preferences. There's not a large
• 11:33
  Speaker 3: pool of people with that preference.
• 11:36
  Speaker 1: Okay. Okay, really interesting. One thing I want to talk
• 11:38
  Speaker 1: to you about just quickly before the break is this. HSBC...
• 11:43
  Speaker 1: issued a survey recently and they said the number of
• 11:45
  Speaker 1: Australians intending to invest overseas is actually declining and that
• 11:50
  Speaker 1: less intend to do it next year compared to last year,
• 11:53
  Speaker 1: which I found, A, baffling, B, hard to believe. This
• 11:58
  Speaker 1: was before Trump was elected. But what do you think?
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  Speaker 3: Look, the joy of my job is we see a
• 12:03
  Speaker 3: lot of surveys and we participate in some and we
• 12:05
  Speaker 3: ask our customers and our clients to participate in some
• 12:09
  Speaker 3: that are run by third parties. And There's always a
• 12:13
  Speaker 3: fascinating lag between what people say they're going to do
• 12:17
  Speaker 3: and what they actually do. I can guarantee you if
• 12:20
  Speaker 3: the market falls 20% in three weeks like it did
• 12:23
  Speaker 3: in COVID, fell 30% in three weeks during COVID, we
• 12:26
  Speaker 3: will see a massive influx into Australian and international equities. 100%
• 12:30
  Speaker 3: I would put my house on that.
• 12:32
  Speaker 2: People will do.
• 12:32
  Speaker 3: What the market presents them with as an opportunity. So
• 12:36
  Speaker 3: if the market continues the way it has, I can
• 12:38
  Speaker 3: see people being reluctant.
• 12:40
  Speaker 2: To put more money into U.S. equities. If they fall
• 12:43
  Speaker 2: off a cliff, I can see them chasing them very hard.
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  Speaker 1: So you think because they think they've run too hard?
• 12:51
  Speaker 3: So very clearly in our data set, you can see
• 12:54
  Speaker 3: that people are nervous about where the market is. You
• 12:56
  Speaker 3: ask which stocks people hold and what they trade. But
• 13:00
  Speaker 3: if we talk about what they're doing, Tesla is more
• 13:03
  Speaker 3: of a sell than a buy at the moment. Nvidia
• 13:05
  Speaker 3: is more a sell than a buy at the moment.
• 13:07
  Speaker 3: And that is primarily because people think they're quite toppy
• 13:10
  Speaker 3: and also their portfolios get really out of whack. If
• 13:12
  Speaker 3: you've held those things for a while, you can end
• 13:14
  Speaker 3: up with 14% of your, 40% of your portfolio in
• 13:18
  Speaker 3: a handful of things.
• 13:19
  Speaker 1: Or 90.
• 13:20
  Speaker 2: Or 90, depending on when you started and what else
• 13:22
  Speaker 2: you've got. So people, you know, they will rebalance. At
• 13:25
  Speaker 2: some point, it's going to come back.
• 13:27
  Speaker 3: So our investors do get nervous when the market's really
• 13:30
  Speaker 3: toppy and they will take money off the table. We
• 13:32
  Speaker 3: see it in Australian banks in particular this year. Like
• 13:34
  Speaker 3: they've just been trimming and trimming. They go $ 150 for
• 13:37
  Speaker 3: CBA is mental.
• 13:39
  Speaker 2: It didn't grow its revenues by 50%.
• 13:41
  Speaker 1: That's right. And every broker in town says they're worth $ 100. Yeah,
• 13:44
  Speaker 1: but every broker's wrong so far. OK, we'll hold it
• 13:48
  Speaker 1: right there. Back in a moment. Hello and welcome back
• 13:59
  Speaker 1: to the Australian's Money Puzzle podcast. I'm James Kirby. I'm
• 14:02
  Speaker 1: talking to Gemma Dale from NAB, Head of Investor Behaviour.
• 14:05
  Speaker 1: Always great to talk to Gemma and very good to
• 14:08
  Speaker 1: talk to her this week as we're starting to get
• 14:11
  Speaker 1: a sense that we're starting to understand, first of all,
• 14:14
  Speaker 1: that Donald Trump is back. More than that, that's a
• 14:17
  Speaker 1: Republican president. Markets like Republican presidents. It's entertaining, I must
• 14:22
  Speaker 1: tell you, historically, to find out that on an annual
• 14:25
  Speaker 1: basis that Democrat presidents during their regime have higher returns
• 14:29
  Speaker 1: per annum on the market than Republican presidents. Republicans would
• 14:33
  Speaker 1: argue that the Republicans come in and clean it up,
• 14:35
  Speaker 1: of course, just like the Libs would argue that's what
• 14:37
  Speaker 1: happens here. But we'll put that to one side. There
• 14:40
  Speaker 1: are the facts that Democrat presidencies per annum returns have
• 14:45
  Speaker 1: been higher than Republican presidents per over a long period
• 14:49
  Speaker 1: of time, and I've done a whole report on that
• 14:51
  Speaker 1: in The Australian recently. But here's the point I want
• 14:53
  Speaker 1: to make. So the thing with Trump is that, of course,
• 14:57
  Speaker 1: there's this sugar hit at the start and excitement by
• 14:59
  Speaker 1: the markets because they've got a pro-market president coming in.
• 15:03
  Speaker 1: Longer term, there's concerns about tariffs, protectionism, and other issues
• 15:09
  Speaker 1: such as strength of the US dollar and what that
• 15:11
  Speaker 1: might mean. Bond yields, which have been going up, even
• 15:17
  Speaker 1: though the US Fed has been cutting rates. So various
• 15:20
  Speaker 1: signals coming out there. But from an investment point of view,
• 15:23
  Speaker 1: I think, folks, the outstanding dimension of this is that
• 15:26
  Speaker 1: there's a sense that the US markets will continue to
• 15:29
  Speaker 1: be good, but it won't be the big tech stocks.
• 15:32
  Speaker 1: This is the narrative at the moment. We don't know
• 15:34
  Speaker 1: if it's right or wrong, but the narrative is that
• 15:36
  Speaker 1: the big tech stocks will struggle now under Trump because
• 15:41
  Speaker 1: he's not as globalist. as his predecessors. That's one thing. Secondly, then,
• 15:46
  Speaker 1: that implies that the traditional US blue chips, the Coca-Colas,
• 15:51
  Speaker 1: the Disneys, that they will actually do better than the
• 15:56
  Speaker 1: Magnificent Seven. Tesla to one side, because obviously Tesla is
• 16:00
  Speaker 1: just this complete one-off, and now you have Musk literally
• 16:03
  Speaker 1: inside the White House cabinet. And then also there's a
• 16:07
  Speaker 1: sense that U.S. small caps will do better than big caps.
• 16:09
  Speaker 1: And certainly looking at the U.S. small cap ETFs, they
• 16:12
  Speaker 1: have been really good. 43%, I see, up in a
• 16:16
  Speaker 1: year on the U.S. small cap ETFs. That is a
• 16:18
  Speaker 1: hell of a return for an ETF. What do you
• 16:20
  Speaker 1: think about that, Gemma? Do you think you don't see
• 16:22
  Speaker 1: anything in your numbers to suggest that people are moving
• 16:27
  Speaker 1: in that way yet, responding to those ideas?
• 16:31
  Speaker 2: I think it's really interesting. We're only talking.
• 16:36
  Speaker 3: a week ago that people were thinking this would be
• 16:40
  Speaker 3: an extremely tight election. No one was predicting a clean sweep.
• 16:46
  Speaker 3: No one was predicting a very dominant Trump presidency. And
• 16:50
  Speaker 3: so the fact that everyone's come out and gone, right,
• 16:52
  Speaker 3: this is what's going to happen in the market is
• 16:53
  Speaker 3: hilarious to me because we were all wrong.
• 16:55
  Speaker 2: About a week ago about pretty much everything.
• 16:58
  Speaker 3: Pundits and pollsters, some would argue that the betting markets
• 17:02
  Speaker 3: were accurate, but even those took a while.
• 17:04
  Speaker 2: They moved very hard on the day. They took some time.
• 17:07
  Speaker 1: They were right in the last 48 hours, yeah.
• 17:10
  Speaker 3: They were, but 48 hours, no prizes, surely. But you
• 17:13
  Speaker 3: had a fair bit of data to work with in
• 17:15
  Speaker 3: the last little bit. So it's quite fascinating to me
• 17:18
  Speaker 3: that everyone's got a strong view and they're very confident
• 17:20
  Speaker 3: what's going to happen now and you should shift accordingly.
• 17:23
  Speaker 2: Look, there have been.
• 17:25
  Speaker 3: I'm just trying to unpick all the different parts of that.
• 17:28
  Speaker 3: The one that you haven't mentioned that I am hearing
• 17:30
  Speaker 3: a lot is energy. That energy has to be part
• 17:33
  Speaker 3: of the mix because.
• 17:35
  Speaker 1: And specifically, old world energy gets a better run on
• 17:40
  Speaker 1: the Trump.
• 17:40
  Speaker 2: Yeah, traditional energy.
• 17:41
  Speaker 1: Traditionally, oil and gas.
• 17:43
  Speaker 2: Yeah, let's call it traditional energy. A couple of different things.
• 17:46
  Speaker 3: One is there's just this insane demand for energy for
• 17:51
  Speaker 3: building out AI and data centers. So that's a story
• 17:54
  Speaker 3: that's been going all year and everyone's talking about it.
• 17:56
  Speaker 3: And pretty much every fund manager I speak to is like, look,
• 17:59
  Speaker 3: data centers are what they are. We've already seen NVIDIA
• 18:01
  Speaker 3: run super hard on the sort of more tech side
• 18:04
  Speaker 3: of things. realistically is how you're going to fuel these things.
• 18:07
  Speaker 3: That's the issue. And let's talk about the data centers
• 18:10
  Speaker 3: and how we power them. And that's why uranium is
• 18:12
  Speaker 3: on a run because we think nuclear might be the solution.
• 18:14
  Speaker 3: We're going to talk about Three Mile Island.
• 18:16
  Speaker 2: All of this stuff.
• 18:16
  Speaker 3: So there's that component, which is very interesting. I didn't
• 18:20
  Speaker 3: do this research myself, so I need to attribute it appropriately.
• 18:24
  Speaker 3: The guys at Plato Asset Management did some work. This
• 18:27
  Speaker 3: story about the tech giants going and actually buying nuclear
• 18:30
  Speaker 3: power plants because they need to be able to fuel
• 18:32
  Speaker 3: their own their own extraordinary demands for power as AI
• 18:36
  Speaker 3: kind of grows exponentially.
• 18:38
  Speaker 1: So what does it mean, sorry, for shareholders then? What
• 18:40
  Speaker 1: does it mean?
• 18:41
  Speaker 2: So this is quite interesting.
• 18:42
  Speaker 3: Like if you're an Australian shareholder, you're starting to look
• 18:45
  Speaker 3: to the resources sector. So even though we're quite concerned
• 18:49
  Speaker 3: about lack of super exciting stimulus out of China and
• 18:53
  Speaker 3: the downward pressure on commodity prices as a result of
• 18:56
  Speaker 3: a fair bit of stuff going on there, if there's
• 18:58
  Speaker 3: insane demands for power and traditional energy, that's not bad
• 19:01
  Speaker 3: for Australians.
• 19:03
  Speaker 2: As a sort of primary producer in those areas.
• 19:07
  Speaker 3: That's quite interesting to me, and I'm hearing that a lot,
• 19:09
  Speaker 3: and we see that a little bit in our numbers.
• 19:11
  Speaker 2: What I was going to say, though, that piece from.
• 19:12
  Speaker 3: Plato, that was saying that traditional energy stocks did better
• 19:16
  Speaker 3: under Biden, and renewable energy did better under Trump, which
• 19:20
  Speaker 3: is hilarious, right?
• 19:20
  Speaker 2: So everything you think should happen doesn't.
• 19:22
  Speaker 1: That is a fact. I saw that report, and that
• 19:24
  Speaker 1: the oil and gas didn't do as well under Trump,
• 19:26
  Speaker 1: mark one, than people thought it would do. That doesn't
• 19:29
  Speaker 1: mean it won't do better under him second time around. OK,
• 19:32
  Speaker 1: just in terms of just looking over various pots, like
• 19:35
  Speaker 1: what does it mean that the Magnificent Seven mightn't be
• 19:38
  Speaker 1: quite as good relative to the rest of the market
• 19:40
  Speaker 1: than they have been under Trump?
• 19:42
  Speaker 3: I think the challenge is they have run so incredibly hard.
• 19:46
  Speaker 3: Any risk for downside is going to to cause quite
• 19:51
  Speaker 3: significant contraction potentially in those share prices, right? They're all
• 19:54
  Speaker 3: priced for absolute perfection. And so that there's always downside
• 19:58
  Speaker 3: risk for those guys. There's, I think, given how the
• 20:03
  Speaker 3: major appointments are being made currently and they're happening in
• 20:06
  Speaker 3: real time, right?
• 20:07
  Speaker 2: You and I are getting updated.
• 20:08
  Speaker 3: By the hour, who's in charge of what, who's in
• 20:11
  Speaker 3: charge of what and what they think and how they
• 20:13
  Speaker 3: do stuff.
• 20:14
  Speaker 2: That is, that will probably take some time to play out.
• 20:18
  Speaker 3: So I don't feel anyone needs to be chasing anything
• 20:24
  Speaker 3: at the moment. Mostly what we see from our investors
• 20:26
  Speaker 3: is they're taking money off the table and The one
• 20:29
  Speaker 3: thing you didn't mention, though, that I do see our
• 20:31
  Speaker 3: investors really interested in is crypto and particularly Bitcoin.
• 20:36
  Speaker 1: Yes.
• 20:37
  Speaker 2: So that is coming through quite strongly.
• 20:39
  Speaker 1: By buying Bitcoin, what, ETFs?
• 20:43
  Speaker 3: So one is MicroStrategy, the company which is 100% invested
• 20:48
  Speaker 3: in Bitcoin. And then the other is Bitcoin ETFs, which
• 20:51
  Speaker 3: are listed in the US, these ones specifically. They're very
• 20:54
  Speaker 3: small trades, I must say. And it's not huge numbers
• 20:57
  Speaker 3: of people, but they've gone from being one or two
• 21:00
  Speaker 3: way down the list to popping right up in the
• 21:02
  Speaker 3: last week. And there are many Bitcoiners who believe that
• 21:05
  Speaker 3: Trump and Elon in particular are very pro-crypto and therefore
• 21:10
  Speaker 3: there's a real opportunity there.
• 21:11
  Speaker 1: And it's up 90% this year.
• 21:14
  Speaker 3: Yeah. been incredible yeah if you're not already in these
• 21:18
  Speaker 3: things is it the time to chase them i don't
• 21:21
  Speaker 3: know for those who are already holding it's a bit
• 21:23
  Speaker 3: of a different story.
• 21:24
  Speaker 1: I think yeah right okay and i'm sure listeners are
• 21:27
  Speaker 1: aware that trump part of his campaign was to go
• 21:31
  Speaker 1: appropriate pro crypto and to deregulate around crypto and most
• 21:37
  Speaker 1: importantly to create a situation where Bitcoin could be a
• 21:42
  Speaker 1: strategic reserve asset for the US, which is a spectacular
• 21:47
  Speaker 1: piece of information if he goes that far. And it
• 21:50
  Speaker 1: means that Bitcoin basically ranks beside gold and the US
• 21:55
  Speaker 1: dollar inside the US administration. Now, that hasn't come to pass,
• 21:59
  Speaker 1: but he said that. Not everything that Trump says comes
• 22:02
  Speaker 1: to pass, of course, but it's worth knowing. We'll take
• 22:04
  Speaker 1: a short break. We've got a very good multi-part question,
• 22:06
  Speaker 1: which I think will probably capture the entire segment in
• 22:09
  Speaker 1: a moment from Declan. Hello, welcome back to the Australian's
• 22:18
  Speaker 1: Money Puzzle. I'm James Kirby with Gemma Dale. We are
• 22:22
  Speaker 1: having a great discussion, I think, about Trump, what it
• 22:26
  Speaker 1: means for investors, what it means for Australian investors in particular.
• 22:30
  Speaker 1: And I think in the early part of the show there,
• 22:32
  Speaker 1: it's worth just covering off a couple of things there.
• 22:35
  Speaker 1: As Gemma said, the favourites of Australian investors, they buy
• 22:39
  Speaker 1: ETFs or they buy the big seven, the tech stocks
• 22:44
  Speaker 1: that we are all familiar with. Or they buy Berkshire Hathaway.
• 22:49
  Speaker 1: That seems to be it. Warren Buffett's Berkshire Hathaway. They're
• 22:51
  Speaker 1: the leaders and they haven't changed for what it's worth.
• 22:53
  Speaker 1: We don't see any change so far in the numbers.
• 22:56
  Speaker 1: People aren't betting, if you like, that there'll be a
• 22:58
  Speaker 1: swing towards the traditional blue chips or oil and gas,
• 23:02
  Speaker 1: Exxon and co. in the US just yet. The other
• 23:05
  Speaker 1: thing is Bitcoin, which, of course, is absolutely racing up
• 23:08
  Speaker 1: on the back of the fact that Trump wants to
• 23:10
  Speaker 1: make it a part of a strategic reserve in the US.
• 23:15
  Speaker 1: And Elon Musk, another pro-crypto person, has become actually inside
• 23:19
  Speaker 1: the administration of the Trump cabinet. I noticed, though, that
• 23:24
  Speaker 1: he shares the job, which would suggest that he said,
• 23:28
  Speaker 1: I can only spend so much time on this one, Donald.
• 23:31
  Speaker 1: All right. Now, Declan's question. Bear with me here. It's
• 23:34
  Speaker 1: in several parts. It's really interesting. In your recent episode,
• 23:37
  Speaker 1: you said... If people opt to invest in ETFs via
• 23:41
  Speaker 1: super funds, the fees should come down. In fact, the
• 23:44
  Speaker 1: super funds actually charge additional administration fees to access these options.
• 23:49
  Speaker 1: My wife and I left... I will mention names here
• 23:51
  Speaker 1: on this occasion. It's never advised. Remember, it's only information.
• 23:55
  Speaker 1: I think we can mention the name because it's the
• 23:56
  Speaker 1: biggest super fund in Australia. My wife and I left
• 23:58
  Speaker 1: Australian Super to set up an SMSF four years ago.
• 24:02
  Speaker 1: And then he makes the point that Australian Super has
• 24:04
  Speaker 1: the lowest fees, among the lowest fees out there. But
• 24:07
  Speaker 1: even still... the Australian super fees with the member direct
• 24:11
  Speaker 1: option would add up to more than what it costs
• 24:13
  Speaker 1: to run our SMSF. I will have Australian super on
• 24:17
  Speaker 1: the line to me after this show. Don't you worry
• 24:19
  Speaker 1: about that. Anyway, his main point is over the four
• 24:23
  Speaker 1: years so far, our SMSF has outperformed the option that
• 24:27
  Speaker 1: they might have taken in the big super fund by 1%
• 24:30
  Speaker 1: per annum. And what we're doing is very simple. We
• 24:33
  Speaker 1: invest in a few ETFs from some of the major players,
• 24:37
  Speaker 1: all of which have a long track record and very
• 24:39
  Speaker 1: low fees. Okay, a couple of very interesting points there.
• 24:44
  Speaker 1: The funds, the big industry funds, which dominate the super
• 24:48
  Speaker 1: fund sector, do offer ETF options. And they all do.
• 24:53
  Speaker 1: And they put in ETF options for the simple reason
• 24:57
  Speaker 1: that they, I would say at least, I would say
• 24:59
  Speaker 1: that they were worried that the ETFs were so successful
• 25:01
  Speaker 1: that they knew people would actually say, listen, I'll just
• 25:04
  Speaker 1: put my money into an ETF, start an SMSF, and
• 25:06
  Speaker 1: have really low fees. So they included them in their menus.
• 25:10
  Speaker 1: That would be all the big funds you would expect
• 25:12
  Speaker 1: them to have ETF options. Whether it is cheaper or not,
• 25:16
  Speaker 1: that will depend entirely on your SMSF, the structure of it,
• 25:20
  Speaker 1: the nature of the accountant and auditors, et cetera, that
• 25:24
  Speaker 1: you use. But no doubt it could be cheaper. I'm
• 25:27
  Speaker 1: sure it could for somebody What do you think of
• 25:31
  Speaker 1: that basic observation, Gemma, about the ETFs inside the big super?
• 25:36
  Speaker 1: If you had a choice of an ETF-heavy SMSF or
• 25:40
  Speaker 1: an industry fund where your focus was ETFs, would there
• 25:44
  Speaker 1: be much difference?
• 25:45
  Speaker 3: So the comment I would make is that an ETF
• 25:49
  Speaker 3: is just a wrapper. It depends on what you're buying
• 25:52
  Speaker 3: as what the actual composition is, right?
• 25:56
  Speaker 2: So if you're buying.
• 25:57
  Speaker 3: the ASX 200 and the S & P 500 and
• 26:00
  Speaker 3: index-based ETFs, like big global indices. Most super funds, not all,
• 26:10
  Speaker 3: will offer an index option. So you could just go
• 26:14
  Speaker 3: into the index option in your public office super fund,
• 26:17
  Speaker 3: which is theoretically much cheaper and giving you exactly the
• 26:20
  Speaker 3: same underlying exposure. So I'm very pro-ETF, I'm very pro-SMSF
• 26:25
  Speaker 3: for the right person, right? They're fantastic things. A lot
• 26:27
  Speaker 3: of the big super funds do offer index options and
• 26:30
  Speaker 3: they're super cheap, right? Like an ETF is five basis
• 26:34
  Speaker 3: points if you're buying the really big indices and an
• 26:38
  Speaker 3: index-based option inside a super fund should be very cheap
• 26:42
  Speaker 3: because they're very cheap to run. You're not paying professionals,
• 26:45
  Speaker 3: you're just getting it done for you. So the fair
• 26:49
  Speaker 3: comparison is not between the member direct option and an ETF.
• 26:52
  Speaker 3: The fair comparison is between the index option and an
• 26:55
  Speaker 3: SMSF with ETFs. And frankly, it depends on how much
• 26:58
  Speaker 3: money you've got in the fund and who you're employing
• 26:59
  Speaker 3: to run it for you and all that kind of business.
• 27:01
  Speaker 1: Yes, yeah. And are you comparing apples with apples in
• 27:04
  Speaker 1: terms of the weightings and the exact choice, etc.? And
• 27:08
  Speaker 1: the other thing, if I was about to call a journalist...
• 27:13
  Speaker 1: who had just read such a piece of correspondence out,
• 27:16
  Speaker 1: I would say you have to take a global view,
• 27:19
  Speaker 1: a holistic view. You're getting your insurance cheaper through your
• 27:22
  Speaker 1: fund and all that. They would have plenty of answers
• 27:24
  Speaker 1: on that one. But a really interesting point, Declan, and
• 27:27
  Speaker 1: you know it comes up all the time. And I
• 27:30
  Speaker 1: would just say also that people often say to me,
• 27:32
  Speaker 1: should I get ETFs or should I put the money
• 27:35
  Speaker 1: into super? And I do regularly say, you do know
• 27:38
  Speaker 1: you can get ETFs in your super. You do know that,
• 27:40
  Speaker 1: don't you? Which people don't always know, but Declan certainly
• 27:43
  Speaker 1: knew and was able to compare the two. And in
• 27:45
  Speaker 1: his case, it was better to have an SMSF. OK,
• 27:48
  Speaker 1: thank you, Declan. Now, final question. Andy, employer contributions and
• 27:54
  Speaker 1: yearly caps aside, is there any difference between salary sacrificing
• 27:57
  Speaker 1: $ 100 a week Or 5,200 being 52 weeks at the
• 28:03
  Speaker 1: end of the financial year and claiming it as the
• 28:06
  Speaker 1: concessional contribution. Do I ultimately get the same tax saving?
• 28:10
  Speaker 1: I'm just risking the game of timing the market versus
• 28:14
  Speaker 1: timing the market. It's tempting to do so and jump
• 28:17
  Speaker 1: in late. Answer?
• 28:18
  Speaker 2: There's not a huge difference. Difference? There's not a huge difference.
• 28:24
  Speaker 2: I mean, it's really part of it is discipline.
• 28:27
  Speaker 1: When you say there's not a huge difference, do you
• 28:29
  Speaker 1: mean history would suggest?
• 28:31
  Speaker 2: History would suggest.
• 28:32
  Speaker 3: I think it's more behavioral than anything else. Are you
• 28:34
  Speaker 3: going to make sure you put the $ 100 aside if
• 28:37
  Speaker 3: you get paid weekly, whatever it is, if it's monthly, whatever?
• 28:40
  Speaker 3: Are you going to put the money aside and have
• 28:41
  Speaker 3: it at the end of the year and have the
• 28:44
  Speaker 3: discipline to do it and not accidentally miss the cutoff
• 28:47
  Speaker 3: date for your super fund or whatever?
• 28:49
  Speaker 2: Because there's just these little things that trip you up.
• 28:52
  Speaker 1: What about dollar cost averaging?
• 28:54
  Speaker 3: Yeah, so dollar cost averaging is very effective, but I
• 28:57
  Speaker 3: think to an extent it is mostly about the discipline
• 29:00
  Speaker 3: of making sure you do it. But if you're putting
• 29:03
  Speaker 3: it in a mortgage offset account for the full year
• 29:05
  Speaker 3: and then putting it in with a deduction, maybe that's.
• 29:08
  Speaker 2: Very effective for you. I think there's a few variables.
• 29:11
  Speaker 1: Maybe that's very effective if you have a mortgage. I
• 29:13
  Speaker 1: like that.
• 29:13
  Speaker 2: Yeah, if you're that person. But don't torture yourself.
• 29:16
  Speaker 1: Don't torture yourself. And it's not advice, Andy. And by
• 29:18
  Speaker 1: the way, just in case, dollar cost averaging, folks... You
• 29:21
  Speaker 1: do know what this is, I hope. It's the theory
• 29:24
  Speaker 1: that very regular set identical payments paid through the season,
• 29:30
  Speaker 1: monthly or weekly or whatever, over a long period of time,
• 29:34
  Speaker 1: you will be better off because you don't get caught
• 29:38
  Speaker 1: in market crashes. or downturns so on average you pay
• 29:42
  Speaker 1: about the right price all the time so for the
• 29:44
  Speaker 1: times you pay too much when the market's hot you
• 29:47
  Speaker 1: also buy in the low times and it strips out
• 29:52
  Speaker 1: the human tendency to try and grab a bargain which
• 29:55
  Speaker 1: is a pretty good idea.
• 29:56
  Speaker 3: I think, again, that's behavioral, right? You can look at
• 29:59
  Speaker 3: it over different timeframes and it works.
• 30:01
  Speaker 1: This is your thing, right? Investor behavior. You're ahead of
• 30:03
  Speaker 1: investor behavior.
• 30:04
  Speaker 2: It depends. There are times when it's a terrible idea.
• 30:08
  Speaker 3: If you're just dollar cost averaging up, you may as
• 30:09
  Speaker 3: well have just bought at the beginning and off you go.
• 30:11
  Speaker 3: But it depends if you have also a lump sum
• 30:14
  Speaker 3: to work with. If you don't have a lump sum
• 30:16
  Speaker 3: to work with, it's irrelevant, isn't it? You have to
• 30:18
  Speaker 3: dollar cost average because that's your only way of getting in.
• 30:21
  Speaker 3: If you have a lump sum and you're nervous about
• 30:23
  Speaker 3: timing the markets, then it just takes away the anxiety.
• 30:27
  Speaker 3: So again, I think the maths is less important than
• 30:32
  Speaker 3: the behavioral element, which is just making sure you get in.
• 30:35
  Speaker 1: The healthy habit, is it, of investing in that manner?
• 30:37
  Speaker 1: I think it's very good. And I must say, that
• 30:39
  Speaker 1: doesn't mean I do it myself. I do it, of course,
• 30:42
  Speaker 1: because I do it in my super, because my super
• 30:46
  Speaker 1: was clipped off my salary. So to that extent, the
• 30:48
  Speaker 1: contributions are cost averaging, but the distributions, it's human to
• 30:54
  Speaker 1: look for the cheap opportunities. But it's quite strong, folks.
• 31:00
  Speaker 1: It's really good. Dollar cost averaging. If you want to
• 31:02
  Speaker 1: know more about it, write in and let us know
• 31:04
  Speaker 1: and we will have a show on it. Look, it
• 31:07
  Speaker 1: was always a strong theory. There was a period when
• 31:10
  Speaker 1: it went out of fashion and it went out of
• 31:12
  Speaker 1: fashion during the ghastly period of 2007 to 2009 where
• 31:16
  Speaker 1: the markets fell 50% in a long, slow way over
• 31:19
  Speaker 1: two years. And the unfortunate fund managers who stood on
• 31:22
  Speaker 1: stage and propounded on dollar cost averaging, they had a
• 31:25
  Speaker 1: bit of answering to do to people who said, well,
• 31:27
  Speaker 1: I've been following your idea and the market just keeps
• 31:30
  Speaker 1: going down. And we'd get periods like that again, but
• 31:33
  Speaker 1: long periods.
• 31:33
  Speaker 2: Then you just bought all the way down. That's awesome.
• 31:36
  Speaker 2: It's better than buying all the way up.
• 31:38
  Speaker 1: As long as you kept going, right?
• 31:40
  Speaker 2: As long as you kept going, didn't panic and take
• 31:42
  Speaker 2: it out.
• 31:42
  Speaker 1: As long as you didn't say, I'm out, I'm not
• 31:45
  Speaker 1: doing this anymore, and you missed the turn. You've got
• 31:47
  Speaker 1: to keep doing it. You can't fool around with this
• 31:49
  Speaker 1: dollar cost averaging. You have to stick to it. It's
• 31:51
  Speaker 1: very interesting. Let us know if you want to hear
• 31:53
  Speaker 1: more about it. Okay, we're running out of time. Gemma Dale,
• 31:56
  Speaker 1: NAB Trade Head of Investor Behaviour. Thank you very much
• 31:59
  Speaker 1: for coming on the show. Great to have you.
• 32:01
  Speaker 2: Thank you so much. It's always fun.
• 32:03
  Speaker 1: It's always fun. Thank you. And let's have some emails, folks.
• 32:07
  Speaker 1: The email is themoneypuzzle at theaustralian.com.au. Talk to you soon.
• 32:24
  Speaker 3: Thank you.