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Your complete 2025 investment outlook · The Money Puzzle

0:10
Speaker 1: Hello, and welcome to the Australians Money Puzzle podcast. I'm
0:13
Speaker 1: James Kirby, the Wealth editor at The Australian. Welcome aboard everybody,
0:17
Speaker 1: and welcome to the final concluding episode of our summer
0:20
Speaker 1: series telling you what to expect in the year ahead.
0:24
Speaker 1: You may, I'm sure, ask yourself, why would we ask
0:29
Speaker 1: experts what's going to happen in the year ahead when
0:31
Speaker 1: we know that so often they get it wrong. But
0:34
Speaker 1: the thing is, as an investor, you need to know
0:39
Speaker 1: what everyone else is thinking. It's what everyone else is
0:41
Speaker 1: thinking is what moves markets, right. It's not what you
0:44
Speaker 1: think is going to happen to a certain share price,
0:47
Speaker 1: it's what everyone else thinks. So that's why you need
0:49
Speaker 1: to know the contentus even if it's wrong, and trust me,
0:52
Speaker 1: they're often wrong, but it's a major part of understanding
0:56
Speaker 1: the context in which you invest, and you need to
0:58
Speaker 1: know basically how to reset in any given years. So
1:00
Speaker 1: that's why we had a look at share markets and
1:03
Speaker 1: shares and property so far in this series. And I
1:07
Speaker 1: hope you enjoyed those shows. I certainly enjoyed them. They
1:09
Speaker 1: were really good and we had really good people, I
1:11
Speaker 1: must say talking about the share markets, market individual shares.
1:17
Speaker 1: On the ASX we had June Bailleu and she of
1:22
Speaker 1: the ten group was very good on opportunities and risks,
1:26
Speaker 1: perhaps in our own market. Stuart William's covered off on property.
1:31
Speaker 1: So you say, well, what's left. Whether we need to
1:33
Speaker 1: talk about cash, we need to talk about gold, we
1:36
Speaker 1: need to talk about bitcoin, we need to talk about alternatives,
1:40
Speaker 1: and I think, more than any thinks, we need to
1:42
Speaker 1: put it all together. What have we found out now,
1:44
Speaker 1: now now that we starting into the new twenty twenty
1:47
Speaker 1: five years, what do we know about the markets, what
1:50
Speaker 1: do we know about the consensus outlook? And what should
1:53
Speaker 1: investors be expecting. To help me put all that together,
1:58
Speaker 1: I've got James Girard of Financial Advisor dot com dot you.
2:02
Speaker 2: How are you, James? I'm doing them very well. James,
2:05
Speaker 2: thanks for having me on.
2:07
Speaker 1: Nice to have you on. And I think this is
2:09
Speaker 1: the Tester Show, this is the one that we put
2:12
Speaker 1: it all together, because there's quite a lot to put together.
2:15
Speaker 1: The early part of the series was recorded just prior
2:19
Speaker 1: to Christmas and things were looking a little better then,
2:22
Speaker 1: so you'd hear on talking about ASX returns in the
2:25
Speaker 1: order of in the teens teen percent at one stage
2:29
Speaker 1: for the return for the year now as it finished
2:32
Speaker 1: on December thirty one, when we were not working and
2:36
Speaker 1: I'm sure you weren't working either, listener. The finally cut,
2:39
Speaker 1: if you like, of the AX was we did about
2:41
Speaker 1: eleven percent eleven and a half for the year, which
2:44
Speaker 1: is good. Okay, the long term average is tenth. That's
2:46
Speaker 1: pretty good. Of that, you know, four percent or sober dividends.
2:50
Speaker 1: That was our outcome for the ASEX. And on the
2:53
Speaker 1: S and P five hundred being the sort of core
2:56
Speaker 1: US market, the representative Bellweather market, if you like, for
2:59
Speaker 1: the US, they did twenty three percent, which was extremely good,
3:04
Speaker 1: and they didn't fall off to the same degree that
3:06
Speaker 1: we did, which tells you perhaps once again that the
3:10
Speaker 1: US market, whatever is, if things are good, it tends
3:14
Speaker 1: to be twice as good as the ASEX. And that
3:16
Speaker 1: actually segues into the forecast that was offered by Mark Jokuns.
3:21
Speaker 1: He said that US chairs should do twice as well
3:24
Speaker 1: in twenty twenty five as ASEX chares, and he meant
3:27
Speaker 1: that US chairs could do eight percent and we might
3:30
Speaker 1: only do four total return. That is, on both markets.
3:33
Speaker 1: It remains to be seen if that's ever going to
3:37
Speaker 1: come to pass. But James Girard, I imagine your most
3:42
Speaker 1: of the people on your books were pretty happy this year.
3:46
Speaker 2: I mean.
3:48
Speaker 1: It must be in some ways a relatively easy year.
3:50
Speaker 1: There have been a financial advisor to have too many stressed,
3:53
Speaker 1: angst ridden codes.
3:56
Speaker 3: That's right, Yeah, almost all that's a classes went up.
4:00
Speaker 3: Cash rates of high property markets went up in most
4:04
Speaker 3: capital cities. Share markets here have been great. International share
4:07
Speaker 3: markets on the whole have been great as well. Gold
4:10
Speaker 3: went up, Crypto went up if you're into that high
4:13
Speaker 3: risk stuff, private equity, so the alternatives.
4:17
Speaker 2: Yeah, everything went up.
4:18
Speaker 1: Everyone's happy, and everyone thinks that they've got it masters
4:22
Speaker 1: they're good investors. I'm a good investor. I bought bitcoin
4:26
Speaker 1: and it went up. I must be good. Bit of
4:28
Speaker 1: a not a scare, not at all, but a bit
4:31
Speaker 1: of a down turn at the end of the year
4:35
Speaker 1: calendar year and pretty mixed so far these early weeks
4:38
Speaker 1: of January on global markets. As sense perhaps of rates,
4:45
Speaker 1: the US records may never come to pass from here
4:47
Speaker 1: after the last batch of figures, there's a sense of that.
4:50
Speaker 1: Am I over egging that?
4:52
Speaker 2: No? I think you correct to there.
4:54
Speaker 3: What we saw in December was that in the US
4:57
Speaker 3: the payroll data was really strong. The labor market data
4:59
Speaker 3: was really strong as well, and that's meant that share
5:02
Speaker 3: markets going, oh okay, well, the Fed Reserve might not
5:05
Speaker 3: do all those rate cuts as quick as what we expect,
5:08
Speaker 3: and the share markets like those rate cuts to come through.
5:10
Speaker 3: So there's been a temperion of that expectation, and so
5:13
Speaker 3: share markets are then come back. And also through some
5:15
Speaker 3: of Donald Trump's recent comments around Greenland, Canada, Panama, Camanal
5:20
Speaker 3: that sort of scared share markets a little bit around
5:22
Speaker 3: He's pending inauguration and coming into his presidency and depending
5:27
Speaker 3: on when you listen to this podcast in a week
5:28
Speaker 3: or so, which will be a testing time for share
5:31
Speaker 3: markets because everybody is looking at this as a weight
5:34
Speaker 3: and see type moment almost and I don't think I'm
5:36
Speaker 3: overplaying this that the fate of almost everybody's pension fund
5:39
Speaker 3: depends on this one man and what he does once
5:41
Speaker 3: he becomes president in a week's time.
5:45
Speaker 1: Oh yeah, hmm, isn't that great? Isn't that wonderful? Depend
5:54
Speaker 1: on that Donald Trump's whims. I just I thought, it's
5:58
Speaker 1: not that, I it's not that I just agree with you.
6:00
Speaker 1: I don't want to agree with you, and so I'm
6:02
Speaker 1: not going to. But I know exactly what you're saying.
6:05
Speaker 1: There are some very obvious and we need to put
6:08
Speaker 1: them on the table. About Trump being elected, a couple
6:10
Speaker 1: of things I always say. First of all, you know
6:12
Speaker 1: it's in a republican president has been elected pro market,
6:16
Speaker 1: pro deregulation president. That's good for markets. That's why we
6:19
Speaker 1: had a great final quarter at the end of last year.
6:22
Speaker 1: Certain things I think we can safely say. ESG style
6:25
Speaker 1: investing is not just it's not just a less fashionable.
6:30
Speaker 1: It is in trouble because you have someone who is
6:33
Speaker 1: actively anti ESG, and there are anti ESG elements in
6:37
Speaker 1: the US state legislators, of course, been environmental, social, and
6:42
Speaker 1: governance issues. In other words, that's sort of investing ethical
6:44
Speaker 1: investing for want of a better word, as defined. And
6:47
Speaker 1: share markets at least is in trouble, and that is
6:51
Speaker 1: very obvious now and they are rushing out of their responsibilities.
6:56
Speaker 1: In the US, A black rock is turntail on ESG
6:59
Speaker 1: having you know, bard us all silly with their ESG
7:01
Speaker 1: stuff for years. Facebook obviously been a spectacular example of
7:05
Speaker 1: a company that's just like in an extremely unimpressive way
7:10
Speaker 1: trying to curry favor with Trump by dropping the mediated
7:15
Speaker 1: content that it had promised for so long. You know,
7:18
Speaker 1: really bad behavior there. But we're looking at it as investors,
7:22
Speaker 1: and the outcome of that is that shares US shares
7:27
Speaker 1: particularly have a win behind them, except for ESG shares.
7:31
Speaker 1: What about Because we've covered shares, so I want to
7:33
Speaker 1: ask you about a couple of other things, and the
7:35
Speaker 1: obvious one is gold. James, where do you sit on gold?
7:38
Speaker 3: It's interesting, it's gone up quite a lot over the
7:41
Speaker 3: past year or so, and looking across the experts, from
7:44
Speaker 3: the fund managers to the economists at the banks, the
7:47
Speaker 3: consensus there is that we might be up for another
7:50
Speaker 3: ten twenty percent increase in the price of gold. The
7:53
Speaker 3: gold price has been supported strongly with the what do
7:57
Speaker 3: you call them? The treasuries of countries around the world
8:00
Speaker 3: up gold, increasing their gold reserves last year, and then
8:03
Speaker 3: there's been the other usual cases for gold. There's a
8:05
Speaker 3: bit of a safe haven. So we're not sure what's
8:08
Speaker 3: going to happen with these geopolitical tensions that are happening
8:10
Speaker 3: around the world, and gold's used for injury and that's
8:13
Speaker 3: increased in demand as well over the past twelve months.
8:16
Speaker 2: So I've just using an anecdote.
8:19
Speaker 3: I've got a client who has a self managed super
8:21
Speaker 3: fun and going back about five years ago, we bought
8:23
Speaker 3: two kilos of gold and at that point in time,
8:25
Speaker 3: it was about eighty thousand dollars per kilo of gold.
8:28
Speaker 3: And yeah, when we got to early twenty twenty four,
8:32
Speaker 3: we decided, okay, let's take some of this goal because
8:35
Speaker 3: being in the retirement phase of super we need to
8:38
Speaker 3: generate income. And you know, it's great, this goal's going
8:40
Speaker 3: up in value, but it's not paying the bills and
8:42
Speaker 3: cost of living pressures that are going up. So let's
8:44
Speaker 3: sell half of it. So we sold half of it,
8:46
Speaker 3: which was great. We deployed it into bond style investments,
8:48
Speaker 3: picked up seven eight percent income there, and then the
8:51
Speaker 3: other half of the gold has gone up. So now
8:53
Speaker 3: we face this second point, which I'm saying this story
8:55
Speaker 3: because maybe some investors wire holding gold in similar positions,
8:58
Speaker 3: thinking what do I do now my goal. Do I
9:01
Speaker 3: continue to hold it hoping that the price goes up,
9:03
Speaker 3: or do I sell it? And my suggestion would be
9:06
Speaker 3: to start to in a gradual way decreased the exposure.
9:09
Speaker 3: So every time it goes up another five or ten percent,
9:12
Speaker 3: sell a little bit of it if you can, so
9:14
Speaker 3: that you're averaging it.
9:15
Speaker 2: You sell price.
9:16
Speaker 3: Because nobody has at crystal Ball, no one can tell
9:19
Speaker 3: when that the peak of the gold price will be.
9:21
Speaker 1: This person did they hold the gold? They had the
9:23
Speaker 1: gold and bullion, you see they did.
9:25
Speaker 3: Yeah, we bought physical gold, one kilo blocks, and we
9:29
Speaker 3: took out a bank safety deposit box. And it's really
9:32
Speaker 3: hard to find a safety deposit box. We had to
9:34
Speaker 3: walk around to several branches of major banks to try
9:37
Speaker 3: and find one, and some of them said, look, we
9:39
Speaker 3: can put your name down, but there's going to be
9:41
Speaker 3: a five to ten year waiting list.
9:42
Speaker 2: But luckily we found one.
9:44
Speaker 3: I think it was at Westpac from memory, and the
9:46
Speaker 3: client left these two kilos of gold there. So that's
9:49
Speaker 3: another thing to think about practically with gold, is that sure,
9:51
Speaker 3: it's great to buy it, and maybe how you buy it.
9:54
Speaker 3: Will you buy the physical goal we buy a gold
9:57
Speaker 3: etf we buy gold mining companies. But if just go
10:00
Speaker 3: for the simple approach of buying some physical gold, you
10:02
Speaker 3: also need to think about where you're going to store
10:05
Speaker 3: it and whether where you're storing it has insurance attached
10:08
Speaker 3: to it, or whether you need to go get your
10:10
Speaker 3: separate insurance policy to protect that that gold bar that
10:13
Speaker 3: you've just bought.
10:14
Speaker 1: What what did this particular person have against ETF?
10:18
Speaker 3: So wonder they had an issue with the ETFs, and
10:21
Speaker 3: I think it's somewhat misfounded. But they felt that the
10:24
Speaker 3: ETF was synthetic and not backed one for one with
10:27
Speaker 3: gold reserves, whereas when I read the details of the
10:30
Speaker 3: gold ETF, they seem to be backed. So as someone
10:33
Speaker 3: buys a goal ETF, the ETF provide will go buy
10:35
Speaker 3: some physical gold. But the client just wanted to be
10:38
Speaker 3: dead certain that if everything went to crumbs, that they
10:41
Speaker 3: have a chunk of gold that can hack a little
10:43
Speaker 3: bit of way of to barter to survive, that they'd
10:45
Speaker 3: have those gold bars there.
10:48
Speaker 1: Sounds like your client probably be most please if they
10:52
Speaker 1: had the bullion under the under their pillar. Would they
10:55
Speaker 1: have gone beside it?
10:56
Speaker 2: Something like that?
10:57
Speaker 3: Yeah, gold's a funny has a lure to it.
11:02
Speaker 1: It's funny one, isn't it. And I talked to I
11:05
Speaker 1: talked to a person who's on the board of a
11:06
Speaker 1: family office and the family Office had got into gold
11:10
Speaker 1: and they had this exact same conversation and the family
11:13
Speaker 1: office were skeptical about this aspect of gold, and the
11:17
Speaker 1: conversation went down the same line, At what point if
11:20
Speaker 1: you're really worried about things being absolutely dreadful and if
11:23
Speaker 1: it's the last resort, then how far do you go?
11:28
Speaker 1: How about the vault? Would they get into the vault
11:31
Speaker 1: on the day if they need to, etc. You could
11:35
Speaker 1: kind of go on forever with that. So that's something
11:37
Speaker 1: everybody has to figure out for themselves. But it's pretty interesting,
11:40
Speaker 1: and it's also interesting, James, you mentioned that it might
11:43
Speaker 1: be time to take profits on gold. That's an interesting
11:45
Speaker 1: point of view. I would tend to be fully bullish
11:49
Speaker 1: on gold again this year, as I have been last
11:53
Speaker 1: year and the year before, and I have it in
11:54
Speaker 1: my own SMSF. I have it in the form of vtfs,
11:57
Speaker 1: and I see it at a hedge against Trump, basically
12:00
Speaker 1: a hedge against Trump's, a hedge against Trump's whims tendency
12:04
Speaker 1: towards chaos, and the fact that all elected officials have
12:09
Speaker 1: a honeymoon period and then it ends, and the Trump
12:13
Speaker 1: honeymoon period when it ends. I think gold could be
12:16
Speaker 1: a very useful acid in death context. That's very much
12:19
Speaker 1: a personal view. Okay, we'll take a break. We'll be
12:22
Speaker 1: back in a moment. Hello, Well, welcome back to The
12:31
Speaker 1: Australian's Money Puzzle podcast. I'm James Kirby, Well, the editor
12:35
Speaker 1: at The Australian, talking to James Girard. This is the
12:38
Speaker 1: final episode of our outlook for the year. So if
12:41
Speaker 1: you recall in the first segment I laid out how
12:45
Speaker 1: the consensus is for the year ahead, pretty ordinary on
12:49
Speaker 1: Australian chairs, pretty good on American chairs, US shares. The
12:54
Speaker 1: consensus for property, such an important asset to our listeners,
12:59
Speaker 1: is also it's fairly mild, a national average of three percent.
13:03
Speaker 1: That could move either way if you think about it.
13:05
Speaker 1: This year the national average that is twenty twenty four
13:08
Speaker 1: of the national average was four point nine. Which they're
13:12
Speaker 1: all key figures, James, But they're modest enough, really, aren't they.
13:15
Speaker 1: For property, it's certainly a period of it's a pretty
13:18
Speaker 1: mixed out look on every level, not just regionally but
13:22
Speaker 1: generally for property. What are you saying to people on
13:25
Speaker 1: their property holdings? What's your sort of default position at
13:29
Speaker 1: the moment on that?
13:30
Speaker 3: So when we're talking about property, we were either talking
13:33
Speaker 3: about rates or physical property. And I was really interested
13:36
Speaker 3: to listen to Stuart Wims, and I'd encourage everyone if
13:38
Speaker 3: they haven't listened to that podcast on the Money Puzzle,
13:41
Speaker 3: to listen to that because really insightful. He's an expert
13:44
Speaker 3: on property markets, and he spoke about sentiment and market
13:47
Speaker 3: cycles and why Perf went up and Melbourne went down.
13:51
Speaker 3: But broadly, what I'm saying to clients is that I
13:54
Speaker 3: feel that what I'm seeing is my clients, particularly the
13:57
Speaker 3: ones in Sydney and Melbourne, with these one million two
14:00
Speaker 3: million dollar mortgages, they're starting to struggle. They're eating up
14:05
Speaker 3: into their officed accounts, their savings because a fair chunk
14:08
Speaker 3: of these people have gone from two percent interest rates
14:11
Speaker 3: to six to six and a half percent interest rates,
14:14
Speaker 3: and that's stopping them from upgrading their home, from in
14:16
Speaker 3: buying investment properties. And so I just feel that we
14:19
Speaker 3: just once these rate cuts happened from the Reserve Bank,
14:23
Speaker 3: it will be this confidence boost because property markets run
14:26
Speaker 3: on sentiment, Mum and Dad sentiment in terms of buying
14:29
Speaker 3: and selling, and I think that once we just get
14:32
Speaker 3: that first twenty five basis points rate cut that the
14:35
Speaker 3: floodgates will open and the property markets will will go
14:38
Speaker 3: back up. And I was really interested to hear she
14:40
Speaker 3: will talk about Melbourne in particular and all these property
14:43
Speaker 3: taxes and the tough time you guys have had over
14:46
Speaker 3: the past five to ten years with your market compared
14:48
Speaker 3: to Sydney ten property taxes, two new ones. Yeah, yeah,
14:53
Speaker 3: I hope you had lots of facilities and resources and
14:55
Speaker 3: things afforded for all these taxes that you've been slugged with.
14:59
Speaker 1: Oh, yes, of course, each one of them was so beneficient. Yes,
15:02
Speaker 1: I know. It's it's a really is an issue. You've
15:05
Speaker 1: got the prices falling and you've got the taxes rising.
15:08
Speaker 1: It's as simple as that. And you had three percent
15:11
Speaker 1: de client in the City of Melbourne last year, a
15:13
Speaker 1: forecast de client of up to five percent this year,
15:16
Speaker 1: and the property taxes are mounting. So there is indisputable evidence. Actually,
15:22
Speaker 1: Ria the Proper Track Group have provided evidence to me
15:26
Speaker 1: which I wrote about, that investors have been moving out
15:28
Speaker 1: of the state on the basis of those taxes, and
15:32
Speaker 1: very simply on the average year, on the average city
15:35
Speaker 1: or state in Australia, something like six percent of investors
15:39
Speaker 1: sell and in Melbourne it's running at nine percent, so
15:42
Speaker 1: basically a third higher than you would expect it to be.
15:46
Speaker 1: So I thought between the line Stewart was saying that
15:49
Speaker 1: looking at the national market, he thought Melbourne, you know,
15:52
Speaker 1: had potential course as if you believe in cycles, but
15:56
Speaker 1: she does, then Melbourne. Is you your dollar invested in
16:01
Speaker 1: a metament might be better awarded than anywhere else, just
16:04
Speaker 1: now and properly, what do you think of that?
16:05
Speaker 3: Yeah, it makes sense when you look at the value
16:09
Speaker 3: they're in the Melbourne market relative to its closest competitor,
16:12
Speaker 3: which is a Sydney market, it makes sense to be
16:15
Speaker 3: looking to to buy in Melbourne. I guess I look
16:19
Speaker 3: more across the country and one thing I noticed that
16:21
Speaker 3: people like to buy in their backyard. People feel more
16:24
Speaker 3: comfortable buying in their own local town that they live.
16:28
Speaker 2: It's just inherent of us.
16:29
Speaker 3: We like comfort, we know what we like, we have
16:32
Speaker 3: experience of Yeah, that's right, So people will always continue
16:37
Speaker 3: to do that, whether it's an upcycle, down cycle, good time,
16:40
Speaker 3: bad time with properties. But if I look more broadly
16:42
Speaker 3: around the country, my personal opinion is that it's a
16:45
Speaker 3: pretty hard time to buy investment property at the moment
16:47
Speaker 3: because we've had Perth go up a lot and although
16:51
Speaker 3: professionals like Stuart believe it will keep going up, my
16:54
Speaker 3: opinion is that we're not getting on the ground floor.
16:56
Speaker 3: We've already had a lot of growth in Perth. Some
16:58
Speaker 3: properties have gone up fifty percent, some have gone up
17:00
Speaker 3: one hundred percent over the past five years. So you know,
17:03
Speaker 3: the question is how much more growth will there be
17:05
Speaker 3: before the market peaks? And Adelaide's a similar thing. Although
17:09
Speaker 3: it may continue to grow, we're not on the ground floor.
17:11
Speaker 3: And places like Hobart in Tasmania that had already peaked
17:14
Speaker 3: and started to fell. Places in Queensland you go to
17:17
Speaker 3: Brisbane and North and South, they've had fifty to seventy
17:20
Speaker 3: percent growth over the past three years. Sydney's at record
17:24
Speaker 3: highs and so you have to sort of look further
17:26
Speaker 3: and broader. Do you go regionally? Do you go to Darwin,
17:28
Speaker 3: do you go to you know, I'd hate to say this,
17:31
Speaker 3: but Melbourne. Do we buy in Melbourne as well? We
17:33
Speaker 3: have to go to places that we wouldn't usually go
17:34
Speaker 3: to buy investment property these days.
17:37
Speaker 1: Because the numbers are soft enough to suggest that an
17:41
Speaker 1: ordinary investment will do pretty ordinary and you have to
17:44
Speaker 1: try a little harder.
17:45
Speaker 3: That's yeah, absolutely right where your interest rate if you're borrowing,
17:50
Speaker 3: most investments will borrow eighty percent have twenty percent deposits.
17:53
Speaker 3: Some will do a cashless transaction, so they typical mum
17:57
Speaker 3: and dad will have the family house with some equity
18:00
Speaker 3: in it, and then they'll go look to buy an
18:01
Speaker 3: investment property and the bank will draw a loan against
18:04
Speaker 3: their home and then they'll get an eighty percent loan
18:06
Speaker 3: against investment property. So they haven't put a dollar in
18:08
Speaker 3: of cash. It's all borrowed money. So where you have
18:11
Speaker 3: that type of typical situation and you're having to pay
18:14
Speaker 3: six and a half percent interest on the mortgage. Average
18:17
Speaker 3: rents in capital cities, the rental yields there are like
18:19
Speaker 3: three three and a half percent, so already you're a
18:22
Speaker 3: good three percent behind. Then you add your outgoings on top,
18:25
Speaker 3: which is typically another one percent of the property value.
18:27
Speaker 3: So in short, the property's costing people around seven seven
18:31
Speaker 3: and a half percent, but they're only getting three three
18:33
Speaker 3: and a half percent income. So that difference of that
18:35
Speaker 3: circle four percent they need to pay out of their
18:38
Speaker 3: own pocket, so it's a good saving grace that we
18:40
Speaker 3: have the negative gearing system here in Australia, which has
18:43
Speaker 3: been useful in the past three years after the thirteen
18:46
Speaker 3: interest rate rises we've had.
18:48
Speaker 1: Yeah, yeah, that's true. I mean definitely. One thing I
18:50
Speaker 1: would say too, listeners is that many and we have
18:55
Speaker 1: many property guests on the show, they are making the
19:00
Speaker 1: point that, of course all property is local. Of course
19:04
Speaker 1: there's always opportunities. Just at this time as we wait
19:07
Speaker 1: for rates to fall. The market is challenging enough in
19:13
Speaker 1: that the figures sound good on average, but there is
19:16
Speaker 1: soft spots, particularly in the larger cities, particularly in the
19:19
Speaker 1: inner city apartment markets and the outer suburban regions of
19:24
Speaker 1: those larger cities. So if you are considering this year,
19:27
Speaker 1: folks getting into property or extending property that you own,
19:33
Speaker 1: the bias towards home standalone houses remains strong and remains
19:38
Speaker 1: advisable I think in many ways because I can we
19:41
Speaker 1: can see that the property the inner city apartment markets
19:44
Speaker 1: particularly are the weakest spot. We'll have a look at
19:46
Speaker 1: this in this closing segment. In a couple of moments,
19:49
Speaker 1: we'll take a break and we'll talk about opportunities and
19:52
Speaker 1: threats for you in the year ahead. Hello, welcome back
20:05
Speaker 1: to The Australian's Money Puzzlive podcast. James Kirby here with
20:08
Speaker 1: James Girard. So, James Girard, when we look ahead this year,
20:16
Speaker 1: it's not easy, but have a goal. Tell our listeners
20:18
Speaker 1: what do you think. Let's talk first of all about
20:21
Speaker 1: where the danger points are there, but what might be
20:24
Speaker 1: the obvious danger points in a divers portfolio that most
20:29
Speaker 1: of our listeners have.
20:31
Speaker 3: I think there's big danger points are around uncertainty and
20:35
Speaker 3: a lot of that is coming out of the US
20:37
Speaker 3: with regards to how Donald Trump takes power and will
20:41
Speaker 3: his bark be bigger than his buy it when it
20:44
Speaker 3: comes to immigration, illegal immigration and tariffs and these type
20:48
Speaker 3: of things, because that will definitely affect share markets. And
20:51
Speaker 3: also if he has lots of stimulus and adds to
20:55
Speaker 3: the economy, that will create more inflation as well, which
20:57
Speaker 3: will delay just rate cards and have all these ripple effects.
21:00
Speaker 2: So I think.
21:01
Speaker 3: Watching what happens in the US is very important as
21:03
Speaker 3: well as those geopolitical events, so they're sort of the
21:07
Speaker 3: known risks that we have with global markets. And then
21:09
Speaker 3: here in Australia, I think it's really crucial around the
21:13
Speaker 3: Reserve Bank cutting those interest rates because I feel that
21:16
Speaker 3: we're in a lot more danger than what the numbers indicate.
21:20
Speaker 3: So the default rates on loans aren't that bad on
21:22
Speaker 3: the moment at the moment for home loans and investment loans,
21:24
Speaker 3: but that's because people are just hanging on. But another
21:26
Speaker 3: couple of months and I think that we could start
21:28
Speaker 3: to see things turn bad. So we really need to
21:30
Speaker 3: see those rate drops. That's a key thing in Australia,
21:33
Speaker 3: and then that will mean that everything will be fine,
21:36
Speaker 3: I feel for the Australian economy.
21:39
Speaker 1: Okay, yes, that's really interesting. And I think that issue
21:42
Speaker 1: with the US being so important, of course, that instantive
21:45
Speaker 1: becomes that the US markets are so important, and the
21:48
Speaker 1: US markets will dictate the tenor of the market this year.
21:53
Speaker 1: So folks, as Games were saying, watch the US, don't
21:56
Speaker 1: think for one moment that the US share market could
22:00
Speaker 1: have a downturn and we would escape it, because we won't.
22:03
Speaker 1: In fact, history would suggest we will fall, not just
22:06
Speaker 1: in tandem, but we may actually fall further if they
22:09
Speaker 1: come off in any way. The other sort of scenario,
22:12
Speaker 1: which perhaps is more likely, is Trump being, if nothing else,
22:18
Speaker 1: a clearly pro business politician will seek to prolong the power,
22:28
Speaker 1: if you like, of US markets and the US exceptionalism,
22:31
Speaker 1: as they say. But the manner of doing that, he
22:35
Speaker 1: may well stoke inflation way very well. I think it's
22:38
Speaker 1: likely he will stoke inflation. I think it's likely that
22:40
Speaker 1: they will not be able to cut rates. It was
22:42
Speaker 1: a big call anyway that the US could be cutting
22:45
Speaker 1: rates while they had a president that was basically lighting
22:50
Speaker 1: fires under the engines of US business. And so the
22:54
Speaker 1: likely outcome perhaps is that the US market overheats and
22:58
Speaker 1: that inflation re peers as a real problem in the US.
23:01
Speaker 1: And there's the signals of that already just now these
23:04
Speaker 1: weeks on the markets, as we see that these expected
23:07
Speaker 1: US fed rates that James mentioned at the start of
23:10
Speaker 1: the show, that you know, they were seen us to
23:12
Speaker 1: be they were seen us for sure at the end
23:15
Speaker 1: of last year, and now they are not for sure
23:18
Speaker 1: at all, and they may never come, and that would
23:20
Speaker 1: change the whole nature of global markets. So keep that
23:23
Speaker 1: in mind.
23:24
Speaker 2: That's all about.
23:24
Speaker 1: Share markets, I suppose. On the property market, the interest
23:28
Speaker 1: rate cut, of course is hoped for. If you're an optimist,
23:32
Speaker 1: it's worth knowing that several of the major banks have
23:34
Speaker 1: actually peeled back their expectations, brought them back. I should
23:38
Speaker 1: say that a rate cut may actually come as soon
23:41
Speaker 1: as February. Most people have been talking about May personally,
23:46
Speaker 1: who knows. I don't know why. I sure as I
23:48
Speaker 1: wouldn't be waiting for a rat cut in February. I
23:50
Speaker 1: wouldn't be expecting that, not with what we see in
23:52
Speaker 1: the US markets. And all these markets are interlinked. That's
23:56
Speaker 1: the thing I think that's so important these days to
23:58
Speaker 1: keep in mind, folks. Markets are so interlinked with over
24:01
Speaker 1: the LA bushfires on radio this morning, and you know
24:05
Speaker 1: there was a time where the l bushfires would have
24:07
Speaker 1: been a distant matter. These days, with reinsurance scale and
24:12
Speaker 1: scope of the LA bushfires will play straight into the
24:15
Speaker 1: Australian market because of the reinsurance costs, because they lay
24:19
Speaker 1: their risk off here and we lay our risk off there.
24:22
Speaker 1: So everything is interconnected, and the US is this sort
24:25
Speaker 1: of locomotive of old market. So that's why James is
24:28
Speaker 1: saying to keep an eye on it. Okay, they are
24:31
Speaker 1: some of the more obvious threats. Just to drill down
24:34
Speaker 1: a little bit deeper on that, James on the local
24:36
Speaker 1: shares and as jun Bee Lu made this point more
24:39
Speaker 1: than once in her segment on the show, that the
24:42
Speaker 1: banks can't possibly do that again. You can't expect Comwell
24:47
Speaker 1: Bank to go forty five percent again next year, and
24:50
Speaker 1: you can't expect them to carry the whole market. So
24:53
Speaker 1: it's pretty obvious then that the financial stocks in our
24:58
Speaker 1: market would seem to be not a threat, but you
25:03
Speaker 1: couldn't possibly expect them to do as well this twenty
25:05
Speaker 1: five as they did in twenty twenty four.
25:07
Speaker 2: What do you think?
25:07
Speaker 3: I agree with that and was interested to listen to
25:10
Speaker 3: June talk about the financial stocks on the AX. So
25:14
Speaker 3: I think there's an emerging trade opportunity occurring around a
25:18
Speaker 3: rotation out of the banks, or reduction of exposure to banks,
25:21
Speaker 3: given how well they've done, and into the underloved sector,
25:25
Speaker 3: which is the resource sector. We're seeing most of the
25:27
Speaker 3: big resource companies down in share price over the twelve
25:30
Speaker 3: months while the banks have been going through the roofs.
25:33
Speaker 3: I think that will start to see investors take profits
25:36
Speaker 3: from the banks move into the resource sector. But overall,
25:40
Speaker 3: I think that the AX will have a pretty stable
25:42
Speaker 3: twelve month period, which is in line with what the
25:44
Speaker 3: others have been saying, and.
25:46
Speaker 1: This rotation is that is basically the institution investors moving
25:49
Speaker 1: out of banks and going back into other areas where
25:51
Speaker 1: they think there will be some action this year. Resources
25:54
Speaker 1: as you see, and also industrials are in industrial shares
25:58
Speaker 1: that also have been only ticking along in twenty twenty four.
26:03
Speaker 1: Very strange year twenty twenty four on the Australian share market.
26:06
Speaker 1: Not just that banks carried everything, but banks carried everything
26:11
Speaker 1: despite the fact that all institutional investors said that they
26:14
Speaker 1: would not do that, and that there was sell notes.
26:17
Speaker 2: You know, I remember this.
26:18
Speaker 1: I can remember periods of a year or more where
26:20
Speaker 1: you would not see a single sell note on an
26:22
Speaker 1: Australian bank stock, and all the brokers had sell notes
26:27
Speaker 1: all through the year on Australian bank stocks and every
26:30
Speaker 1: one of those sell notes was wrong. That's a strange year.
26:35
Speaker 1: So there's always something you don't expect. Let's look at
26:37
Speaker 1: the other side, then, let's we look at the opportunities.
26:40
Speaker 1: So part of that obviously would be non bank blue
26:44
Speaker 1: chip shares in Australia being leading resource stocks, perhaps some
26:48
Speaker 1: recovery in good industrial shares, even health care shares. There
26:54
Speaker 1: is some possibility and that they were off the boy
26:57
Speaker 1: last year it stocks of course went very strong along
27:00
Speaker 1: with banks. Not as important on a market cap basis,
27:04
Speaker 1: but important nonetheless, and so you can't expect them to
27:07
Speaker 1: do quite so well next year, you would think history
27:09
Speaker 1: would suggest. But in terms of opportunities, you have those industrials,
27:13
Speaker 1: you have industrials, you have resource stocks. What about rets
27:16
Speaker 1: games you mentioned in passing there in the first part
27:19
Speaker 1: of the show you mentioned reats Australian property trusts starting
27:23
Speaker 1: to see a few pieces suggesting you know, the worst
27:26
Speaker 1: is over for them. Maybe the worst is over for them.
27:28
Speaker 2: What do you think? I believe it is.
27:30
Speaker 3: Cash rates drop in have several benefits for rates. One
27:35
Speaker 3: of them is that rates are a bond proxy that
27:38
Speaker 3: both produced income and bonds have had high yields over
27:41
Speaker 3: the past couple of years in line with the increases
27:43
Speaker 3: in the cash rates both here and around the world.
27:47
Speaker 3: But as the cash rates start to come down, the
27:48
Speaker 3: bonds look less attractive and people move back towards the
27:52
Speaker 3: rates and also the financing of the rates. A lot
27:54
Speaker 3: of them have gearing of anywhere from thirty to fifty
27:57
Speaker 3: percent in their portfolios to acquire these commercials, properties and
28:00
Speaker 3: interest rates are quite high internally in these reats to
28:03
Speaker 3: finance their debt, and that will come down which will
28:06
Speaker 3: improve their yields as well. There's some tail winds there,
28:09
Speaker 3: as I would say for the reads, and so that's
28:11
Speaker 3: an area that I'm positive on. And just finishing my
28:15
Speaker 3: comments on the resource sector, they're one thing I forgot
28:18
Speaker 3: to mention, which is both a risk and an opportunity
28:21
Speaker 3: is China and that linkage to our Australian market. So
28:25
Speaker 3: there's different interconnecting pieces. You have the US there, what
28:28
Speaker 3: are they going to do with tariffs and trade walls
28:31
Speaker 3: with China? And then what's the Chinese economy going to
28:33
Speaker 3: do with stimulus to sort of get their engine up
28:36
Speaker 3: and running again. And then how does that impact the
28:38
Speaker 3: Australian market given that iron ore is a big export
28:41
Speaker 3: that we center to China, And so if I look
28:44
Speaker 3: into that, Crystal Board says that China keeps stimulating their
28:47
Speaker 3: economy they get it back underway, which is great for
28:50
Speaker 3: the resource prices. And then if I just look at
28:52
Speaker 3: a couple of different of the mining companies in Australia,
28:55
Speaker 3: so BHP about fifty percent of their profits comes from
28:58
Speaker 3: iron ore, forty few metals is really heavy iron about
29:01
Speaker 3: ninety percent of their revenue is from iron ore, and
29:03
Speaker 3: then Rio Tinto is about the same as HP fifty
29:05
Speaker 3: sixty percent of their their profits. So if you wanted
29:07
Speaker 3: to go heavy on that China theme resource sector, you
29:10
Speaker 3: go forward Skew. But if you want to be more diversified,
29:12
Speaker 3: you go for BHP or Rio Tinto.
29:15
Speaker 1: Okay, And for what it's worth of folks, the world's
29:18
Speaker 1: most famous stockbroker, the vampire squid, Golma Sas, has just
29:24
Speaker 1: twenty hours ago put out a pretty interesting report and
29:31
Speaker 1: they say that stocks China stocks China stocks being a
29:36
Speaker 1: proxy for Australian or or you can, you can use
29:40
Speaker 1: it both ways, are expected to rise twenty percent twenty
29:44
Speaker 1: percent in the calendar year twenty twenty five. So if
29:47
Speaker 1: you want to talk about opportunities, I'm not suggesting you
29:50
Speaker 1: do this, but I'm telling you that the most powerful
29:52
Speaker 1: stockbroker in the world, investment bank, Gorman Sacks, has come
29:56
Speaker 1: out this week with estimation that China stocks will lift
29:59
Speaker 1: by twenty t which would suggest that China obviously is
30:03
Speaker 1: going to turn this year, which would suggest that the
30:05
Speaker 1: idea of resource stocks in the Australian market would be
30:10
Speaker 1: a good call. So let's see if that turns out
30:12
Speaker 1: to be true. Certainly worth keeping in mind before you go,
30:15
Speaker 1: James Bitcoin, you are among our guests on the show.
30:21
Speaker 1: You have been someone who's always made sure you're in
30:24
Speaker 1: on bitcoin through thick and thin. Where do you stand
30:28
Speaker 1: after an extraordinary year? I think it was the single
30:31
Speaker 1: most successful acid class, and I think we have to
30:33
Speaker 1: call it an acid class these days, whether we like
30:35
Speaker 1: it or not.
30:36
Speaker 2: Where do you stand now the process?
30:38
Speaker 3: Bit Coin's gone up about five hundred percent since the
30:41
Speaker 3: start of this cycle, and last cycle went up from
30:44
Speaker 3: memory around six hundred percent. So similar to some capital
30:49
Speaker 3: city property markets in Australia, you look at where are
30:51
Speaker 3: we in the cycle, and on one hand, with cryptocurrency,
30:55
Speaker 3: a lot of people are thinking, geez, it's in the news,
30:57
Speaker 3: it's going up. I don't want to miss out. But
30:59
Speaker 3: then you have to think, well, the people that bought
31:01
Speaker 3: when it was much cheaper than what it is today,
31:04
Speaker 3: they're probably going to start selling out and taking their profits,
31:06
Speaker 3: and you're coming in to buy to sort of cash
31:09
Speaker 3: them out and let them have that five six hundred
31:11
Speaker 3: percent gain. So I would say it's a high risk,
31:16
Speaker 3: high lost, high potential gain type investment, and it's probably
31:21
Speaker 3: where a small dabble in there. The way that you
31:23
Speaker 3: can do it is you can either just set up
31:25
Speaker 3: an exchange account with one of the exchanges. You just
31:27
Speaker 3: need to be careful because they're not really regulated. Regulation
31:30
Speaker 3: is coming in from the Australian government on this on exchanges,
31:34
Speaker 3: sort of like with the places where you go to
31:35
Speaker 3: buy cryptocurrency, but still emerging, so be careful who you
31:38
Speaker 3: use to set up with. And then you can buy
31:41
Speaker 3: a bit of bitcoin, which is the big staple, and
31:43
Speaker 3: then you can spread money. And one thing which I
31:45
Speaker 3: suggested recently in the Australian last weekend in the Wealth
31:48
Speaker 3: section was that you can look at this averaging situation
31:52
Speaker 3: where you go, all right, what are the biggest twenty
31:54
Speaker 3: cryptocurrency coins. I don't really know the difference between Stellar
31:58
Speaker 3: versus ripple and what they do, why they go up
32:01
Speaker 3: and while they go down, but I want a piece
32:02
Speaker 3: of the action. So it might be to spread five
32:05
Speaker 3: or ten thousand dollars and put five hundred dollars in
32:08
Speaker 3: ten or one thousand dollars in twenty or something like that,
32:11
Speaker 3: just to get a bit of a spread exposure because
32:13
Speaker 3: it's just so hard to figure out why they go
32:15
Speaker 3: up and down, even though I follow them quite closely.
32:17
Speaker 3: You need to really understand a lot of technical stuff,
32:21
Speaker 3: which I don't do, and I don't think most people
32:23
Speaker 3: do either. I think they're really just following crowds and forums.
32:26
Speaker 1: Okay, so it gives you a chance to buy a
32:28
Speaker 1: diverse of id spread off crypto coins. Correct, Yeah, yeah,
32:31
Speaker 1: in a single in a basket of them. I kind
32:34
Speaker 1: of ANYTF like approaches where you buy everything and help
32:37
Speaker 1: for the best. Yeah, Well, buying everything and help for
32:40
Speaker 1: the best, hopefully for the best is probably a very good,
32:42
Speaker 1: probably a very good disposition to have an investing It's
32:45
Speaker 1: one thing A very clever person who I worked with
32:50
Speaker 1: one time and who had a PhD in the treatment
32:55
Speaker 1: of time in Shakespeare please, was also stockbroker at one stage,
33:02
Speaker 1: very very Eridivepresson said to me one time, and I've
33:07
Speaker 1: never forgotten it, and it's probably a good thing for
33:09
Speaker 1: looking ahead for the year. About being an investor, he said,
33:12
Speaker 1: the main thing is to be the same. If you're
33:15
Speaker 1: going to be bullish, always be bullish. If you're going
33:17
Speaker 1: to be bearish, always be verish, just don't.
33:20
Speaker 2: Chop and change.
33:22
Speaker 1: I really like that. I think there's an awful lot
33:24
Speaker 1: to it. Maybe somebody would like to write in and
33:26
Speaker 1: tell us what they think of that approach and what
33:29
Speaker 1: they think of the series which we've put together for
33:32
Speaker 1: you for the year ahead. I hope it was useful
33:36
Speaker 1: to you. Thank you very much James for coming on
33:37
Speaker 1: the show today.
33:38
Speaker 2: My pleasure is always thanks for having me on.
33:41
Speaker 1: And folks, next week we really zoom normal transmission okay
33:45
Speaker 1: with two shows a week Tuesdays and Thursday, starting next Tuesday,
33:50
Speaker 1: January twenty one. The letter box is only half full.
33:54
Speaker 1: We can take some suggestions, questions, comments, lovely to have
34:01
Speaker 1: them rolling in again. The email is the money Puzzle
34:04
Speaker 1: at the Australian dot com dot Au. Today's show was
34:08
Speaker 1: produced by Leah Summerglue. Thank you very much, Lee, and
34:10
Speaker 1: thank you everyone for listening.
34:11
Speaker 2: Talk you soon.