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Key person risk: Musk, White & co…are they worth it? · The Money Puzzle

0:11
Speaker 1: Hello, and welcome to the Australians Money Pluzzle the podcast.
0:14
Speaker 1: I'm James Kirkby. Welcome aboard everybody. Now, look, we've spent
0:17
Speaker 1: a fair bit of time on the show explaining and indeed,
0:21
Speaker 1: you know, promoting virtually passive investing, and that invariably for
0:26
Speaker 1: most people most of the time, means index funds, exchange
0:29
Speaker 1: traded funds. They're very useful. They're a very reliable way
0:33
Speaker 1: to enter the market, to start as an investor, to
0:37
Speaker 1: underpin and an investment portfolio at whatever stage you're at. Meanwhile,
0:43
Speaker 1: of course, the people who provide this passive investing, the
0:46
Speaker 1: big index funds, they have ambitions of their own. So
0:49
Speaker 1: the big groups like Vanguard and etc. They're working all
0:54
Speaker 1: the time, I'm supposed to expand their business and they
0:56
Speaker 1: have ambitions of their own. So the thing is, we
0:58
Speaker 1: loved massive investing in its original guys as exchange traded
1:05
Speaker 1: funds that very simply murdered the ASEX, so you could
1:08
Speaker 1: buy the ASEX, you could buy NaSTA, you could buy
1:11
Speaker 1: the S and P. Beautiful piece of work. Everyone loved it.
1:15
Speaker 1: More recently, these funds have become more and more ambitious
1:17
Speaker 1: to keep trying new things active funds, thematic funds, and
1:22
Speaker 1: now even ambitions to get into the area of alternative assets,
1:27
Speaker 1: private equity, private credit. This sort of murky world where
1:33
Speaker 1: the big super funds play and they've had such success,
1:37
Speaker 1: and I wonder how far you can go with this,
1:39
Speaker 1: since similarly it's worth annoying that the regulators are wondering
1:41
Speaker 1: how far you can go with this, So Assex this
1:43
Speaker 1: week making a big move to ask questions really about
1:46
Speaker 1: how big super funds invest outside of share markets, and
1:51
Speaker 1: whether we know what they're doing, and whether it's entirely
1:54
Speaker 1: reliable what they're doing, and if things went wrong, what
1:57
Speaker 1: would happen, not just those on listed in liquid funds,
2:02
Speaker 1: but what would happen to everyone's super what would happen
2:04
Speaker 1: to invest in generally, Because there's no way on earth
2:07
Speaker 1: that if the big super funds get trouble in their
2:09
Speaker 1: private side, that the public markets as we know them,
2:14
Speaker 1: real Essex, our share portfolios would be affected. I want
2:18
Speaker 1: to put this issue and other issues and as some
2:21
Speaker 1: great questions from listeners to my guest today, my very
2:25
Speaker 1: good guest today who's been on the show before. It's
2:27
Speaker 1: Jackie Clark. She is many things, She's an advisor primarily
2:32
Speaker 1: to a number of family officers, so she's dealing with
2:35
Speaker 1: very wealth declinents. She's an author. I'll stop worrying about money,
2:40
Speaker 1: start planning now. The title is longer than that. That's
2:43
Speaker 1: all I can recall for the moment. How are you, Jackie?
2:45
Speaker 2: Great? James. It's excellent to pay here with you today.
2:50
Speaker 1: Great to have you, great, to have you on the show.
2:52
Speaker 1: Tell me just a passive investing right? It really has worked,
2:56
Speaker 1: and I'm a hearty advocate of from many people in
3:02
Speaker 1: many ways, whatever you invest in passive vesting, you're going
3:06
Speaker 1: to get as good or as bad as anybody else.
3:09
Speaker 1: You won't shoot the lights out, and you probably won't
3:11
Speaker 1: lose your shirt either. You will do more or less
3:14
Speaker 1: what the market does. And that's good enough for many people,
3:17
Speaker 1: or at least it's good enough to underpin portfolios. But
3:20
Speaker 1: I wonder is it getting is it losing direction? Basically
3:26
Speaker 1: because of the ambitions of these big players in passive investing.
3:32
Speaker 2: Yeah, it's a great question. I read something the other
3:35
Speaker 2: day which you'll love. Our true friends are compound interest
3:39
Speaker 2: and low cost ETFs. Right, So in terms of a strategy,
3:44
Speaker 2: there's no question I feel that it's generational as well.
3:50
Speaker 2: So the passive investment style is an access to ETFs
3:54
Speaker 2: or a way of accessing the market, where I guess
3:58
Speaker 2: the reverse of that is active management. Now right now, arguably,
4:03
Speaker 2: if you've got an advisor, it's quite active. You've got
4:06
Speaker 2: a fund manager somebody looking out for you, making decisions
4:10
Speaker 2: on buyers and sells perhaps, which is somewhat different to
4:13
Speaker 2: the management, if you like, of the ETF. So handing
4:18
Speaker 2: it off to a fund manager is fine if you've
4:20
Speaker 2: got the cash to be invested that way, But actually
4:23
Speaker 2: otherwise the passive approach is more accessible to Australians. Perhaps
4:29
Speaker 2: The only different thing which you just commented on, ever
4:32
Speaker 2: so briefly, was how buying into the index which you
4:35
Speaker 2: can do with the ETFs now they are becoming more
4:38
Speaker 2: exotic and so how passive are you really being by
4:44
Speaker 2: taking that approach, because you could easy. I think that
4:47
Speaker 2: one thing is short in some respects ETFs can replace
4:54
Speaker 2: the fund manager, but you want to have like a
4:58
Speaker 2: long horizon when you're doing that as well.
5:00
Speaker 1: Set and forget, Yes, but a lot of people to
5:03
Speaker 1: say forget, didn't it? And I mean many people like that.
5:06
Speaker 1: But more than that, people like to the security of
5:13
Speaker 1: knowing that they will do fairly well if the markets
5:17
Speaker 1: do fairly well, they will do okay if the market's
5:20
Speaker 1: do okay. And obviously hanging over this entire conversation is
5:25
Speaker 1: the fact that the majority of active from managers don't
5:27
Speaker 1: even match the market, and that has been proven forty
5:32
Speaker 1: five different ways in recent times. I wonder just with
5:35
Speaker 1: your own from your view about it. And you've seen interesting,
5:40
Speaker 1: isn't it that Thedlastic makes such a big push this
5:44
Speaker 1: week at the regulator and openly said, look, we want
5:47
Speaker 1: to know more about what's going on here, and they
5:50
Speaker 1: are concerned. And even if you aren't, if you think
5:53
Speaker 1: you're not inbout in these listener's, you are because if
5:56
Speaker 1: you've got super your super fund's probably got thirty forty
5:58
Speaker 1: percent in this area, right, But let's just call it
6:01
Speaker 1: private investing, what the public investing. I think the point
6:05
Speaker 1: Joe Longo, the chairman Mad, which was very powerful, was
6:09
Speaker 1: it's not going to be self contained and if the
6:11
Speaker 1: big super funds have problems in that area, it's got
6:15
Speaker 1: to spill in two. It's going to affect everyone because
6:19
Speaker 1: it's so such a giant amount of money it's not
6:22
Speaker 1: like they can fix it without some knock on effects.
6:26
Speaker 1: But the shere market, so we're all involved, really aren't,
6:28
Speaker 1: whether we like it or not.
6:31
Speaker 2: Yeah. Absolutely, And in the context of yeah, I mean,
6:34
Speaker 2: the exposure is significant and super funds obviously have the
6:37
Speaker 2: ability to shape investing in our country naturally by which
6:42
Speaker 2: direction they take, recognizing though they have generally speaking, very
6:48
Speaker 2: good governance structures in place to make those decisions to
6:51
Speaker 2: protect Australian super.
6:52
Speaker 1: Yes, generally, Well, yeah, I look, it's a different issue
7:00
Speaker 1: that's worth asking you. I mean, we did a lot
7:02
Speaker 1: of coverage of the troubles at SEBOS, and there's other problems,
7:06
Speaker 1: like Australia is super refined during the week. They're not perfect.
7:11
Speaker 1: But I do want to pose a question to you
7:13
Speaker 1: off the coff which is even major super fund is
7:16
Speaker 1: having a lot of problems in one area at the
7:19
Speaker 1: board level, for instance, or at the executive level. People
7:22
Speaker 1: are coming or going, or people are unhappy but they're politicized,
7:25
Speaker 1: which they are clearly politicized in a fund like SEBUS,
7:29
Speaker 1: can that be quarantined from their investment performance? And people
7:32
Speaker 1: ask me, I'm in CBUS. I don't like what I
7:34
Speaker 1: hear what's going on, and I say, well, their investment
7:36
Speaker 1: performance is fine. But the midi of dollar question is
7:39
Speaker 1: can that can their investment performance of a big fund
7:44
Speaker 1: be quarantined from octions I'd be like on the board
7:48
Speaker 1: that might be political or otherwise.
7:50
Speaker 2: It's a tough one. It depends, I think, is the answer,
7:55
Speaker 2: because the underlying assets you'd like to think will not
7:58
Speaker 2: be impacted by that performers. But we have to go
8:02
Speaker 2: back to the decision making that got us into those
8:04
Speaker 2: investments in the first place. And the other probably the
8:08
Speaker 2: thing that bothers me the most is typically the cost structures,
8:12
Speaker 2: because who's deciding or how are they deciding on how
8:15
Speaker 2: they're investing money in, recruiting people, retaining the right people,
8:21
Speaker 2: having the right qualifications, all those things, which maybe doesn't
8:24
Speaker 2: get the exposure that a typical public company might get
8:27
Speaker 2: in Australia.
8:29
Speaker 1: Couldn't you're not even able to see it. Sure, you're
8:31
Speaker 1: not even have to go to their agms unless you're so.
8:36
Speaker 2: So you'd have to question that to what extent does
8:41
Speaker 2: that affect then the performance of the business. Well, it
8:43
Speaker 2: may well affect the underlying profit or performance of the
8:45
Speaker 2: business for sure, which is what's not going into your supergrowth.
8:51
Speaker 1: So you can't quarantine that's what you're saying.
8:54
Speaker 2: Well, I don't think you can quarantine any executive or
8:57
Speaker 2: board from the performance of a business.
9:00
Speaker 1: Yeah yeah, okay, very good. Now tell me in your world, Dinney,
9:04
Speaker 1: with family officers and the operanda worth, your investors, what's
9:07
Speaker 1: their attitude And this is a general question, but our
9:10
Speaker 1: listeners would love to know what is their attitude towards
9:13
Speaker 1: passive investing? I doubt assess and forget, but what's their
9:17
Speaker 1: general attitude towards passive.
9:19
Speaker 2: You might be surprised. I think it depends where people
9:22
Speaker 2: have come from, so again, whether they've made their money
9:25
Speaker 2: and property, whether they've made that in an operating business.
9:29
Speaker 2: I think that there's an element of passive investment in everyone.
9:32
Speaker 2: But it might be passive in a different way, which
9:34
Speaker 2: is if your father or grandfather went into a particular
9:39
Speaker 2: area you just stay in that area. It becomes passive
9:41
Speaker 2: because you're not passionate about it, you're sort of required
9:44
Speaker 2: to stay in it. But my sense is that predominantly
9:49
Speaker 2: our money is active, and so you know, wealthy Australians
9:54
Speaker 2: take quite a proactive approach, and particularly those who have
9:57
Speaker 2: exited businesses where they've got a bucket load of cash.
10:01
Speaker 2: That's their next thing, so that's where they do spend
10:04
Speaker 2: their time. But having people who I mean most of
10:08
Speaker 2: the times with us, with family officers, we have multiple
10:11
Speaker 2: advisors looking after portfolios of cash, So not one singular advisor,
10:15
Speaker 2: but multiple advisors, which I think is great because you
10:18
Speaker 2: can kind of keep a competitive tension around performance, around fees,
10:23
Speaker 2: all those types of things which are really important in
10:26
Speaker 2: deciding on who looks after you. But yes, definitely i'd
10:30
Speaker 2: say active, and that probably goes also to what's the
10:36
Speaker 2: you know, where people think where are people focusing their
10:39
Speaker 2: time and energy right now? Because we've had a chat
10:42
Speaker 2: before about defensive types of assets.
10:44
Speaker 1: Yes, I hope that one more and actually we'll come
10:47
Speaker 1: to that after the brief because it's probably what people
10:49
Speaker 1: are starting to think. Just still the way the markets
10:51
Speaker 1: are so volatile, which is such a robbery word. What
10:54
Speaker 1: does volatile mean? Does it mean scary? Sometimes? It does,
10:57
Speaker 1: I think, But just back on that. So people who
11:00
Speaker 1: made them money taking risks continue to take risks. I
11:03
Speaker 1: think I'm bessing and guessing this. Okay, what are the
11:06
Speaker 1: people who didn't take risks. So there were top re
11:09
Speaker 1: insurgent make millions every year. What they're like, I doubt
11:14
Speaker 1: I don't want to assume. Are they the ones for passive?
11:17
Speaker 2: It's personality James, Yeah, so I think I still feel
11:22
Speaker 2: like it's a combination. Yeah, there's a portfolio of passive investments,
11:27
Speaker 2: or everyone would have a portfolio some of which you
11:30
Speaker 2: consider to be passive. It's like the equities market and
11:34
Speaker 2: holding shares. Some people will just always hold your CBA's
11:40
Speaker 2: and your bhps. It's like, yeah, people just want to
11:45
Speaker 2: let go of them.
11:46
Speaker 1: Is that the lack of imagination.
11:48
Speaker 2: Or maybe consistent track records of performance but over a
11:52
Speaker 2: long cycle. Yeah, that's what people look for or recognize
11:57
Speaker 2: and maybe don't invest any more time in understanding it.
12:00
Speaker 1: I was looking at a charity recently which is a
12:03
Speaker 1: major charity with a serious balance sheet and plenty in
12:07
Speaker 1: the foundation, and the entire investment portfolio was completely passive.
12:13
Speaker 1: What do you think of that? Is that typical? Is
12:16
Speaker 1: that to be recommended?
12:18
Speaker 2: I would suggest that's not typic cool?
12:20
Speaker 1: Yeah, right, okay, so they do take risks, they absolutely okay, Yeah,
12:25
Speaker 1: and what would the balance typically be of a family?
12:27
Speaker 1: I know this is a very hard question to answer.
12:29
Speaker 1: But of a typical family office. I know it's different
12:35
Speaker 1: stocks for different folks, but give us some idea of
12:38
Speaker 1: what percentage might be passive.
12:41
Speaker 2: It could be up to fifty percent.
12:43
Speaker 1: Okay, all right, so I think.
12:45
Speaker 2: To be fair, it could be up to it could
12:47
Speaker 2: be more risk. Appetite is a very interesting thing. It
12:50
Speaker 2: depends where the money came from, if you made it,
12:53
Speaker 2: if another generation made it. Yeah, what your expectations are
12:57
Speaker 2: distributing that wealth over a period of time. You mentioned
13:00
Speaker 2: a foundation, which is also interesting. Quite typically a more
13:04
Speaker 2: passive approach to a foundation because of by nature, just
13:09
Speaker 2: from an investment perspective, how you want to present that
13:13
Speaker 2: foundation to the universe needs to have that consistency in
13:18
Speaker 2: its portfolio management, which when I was saying this is
13:21
Speaker 2: he means more passive than active, because you can't be
13:24
Speaker 2: jumping around things making moves necessarily in a passive in
13:28
Speaker 2: a foundation context.
13:30
Speaker 1: Okay, just before we go to the break, you're talking
13:32
Speaker 1: about how people made their money. Here's the family office. Okay.
13:35
Speaker 1: They made their men one hundreds of millions off their
13:38
Speaker 1: widget making factories that were all around Australia. Granddad was
13:41
Speaker 1: the founder her generation. They have never worked on the
13:48
Speaker 1: factory floor. They're very wealthy. Everyone they know is wealthy.
13:52
Speaker 1: They have no idea really what the rest of the
13:54
Speaker 1: world is like. Do they take more risk or less risk?
14:02
Speaker 2: Oh, I'm thinking of someone in particular. Yeah, I still
14:06
Speaker 2: think it well. I think it would be a balanced
14:08
Speaker 2: approach and there would be an element of risk for sure.
14:14
Speaker 2: But also the reality is if you've come into genuine
14:17
Speaker 2: money and you're not living off a dividend every year
14:20
Speaker 2: that you may have been historically, then there's a bit
14:22
Speaker 2: of lass a fair about some of it. So let's
14:26
Speaker 2: say twenty percent.
14:28
Speaker 1: Because you can afford to lose.
14:30
Speaker 2: Yeah. Absolutely, I'm not saying easy come, easy go. I'm
14:33
Speaker 2: just saying, realistically, we've got more than we've ever had.
14:37
Speaker 2: Let's say let's put this at risk. It's very different too.
14:41
Speaker 2: If you've been a senior executive in an organization you've
14:44
Speaker 2: got bucket loads of money from options and shares over
14:47
Speaker 2: a period of time. That's harder and cash in a
14:50
Speaker 2: somewhat different way where you might want to preserve and
14:53
Speaker 2: grow to get particular outcomes. Someone who's sold a family
14:56
Speaker 2: business that might be three generations in manufacturing in Australia
15:00
Speaker 2: actually say all right, in terms of what price we achieved,
15:04
Speaker 2: there's a part of that we're happy to put at
15:07
Speaker 2: risk and play. I do say that it's quite interesting.
15:11
Speaker 2: There's definitely a play element to the classic sort of
15:13
Speaker 2: Australian entrepreneur, even if it is generational, like say down
15:18
Speaker 2: the pipeline, there's a little bit of you know, have
15:21
Speaker 2: some fun, try some different things, talk to some mates,
15:25
Speaker 2: which I try and tell people not to do.
15:28
Speaker 1: My meeting the yacht club says there's a very good
15:31
Speaker 1: opportunity in x. Okay, we'll take a break back in
15:33
Speaker 1: the moment. Hello, Welcome back to The Australian's Money Positive
15:47
Speaker 1: James Kirby talking to Jackie Clark here regular rather show. Now,
15:51
Speaker 1: I wanted to ask you in terms of today where
15:55
Speaker 1: we are very late debutary, very early days. Trump administration
16:02
Speaker 1: just come off fabulous year in the stock markets around
16:06
Speaker 1: the world being twenty twenty four, risingly good late twenty
16:10
Speaker 1: twenty four with the anticipation that Trump would come in
16:15
Speaker 1: now maybe an element of sobriety just starting to creep
16:18
Speaker 1: in as we enter at the end of the first
16:21
Speaker 1: quarter of twenty twenty five and earning season as well,
16:26
Speaker 1: but more more importantly on a macro basis, it changed tone.
16:32
Speaker 1: The markets are almost decompining from let's put it the
16:35
Speaker 1: other way, the political geopolitical reality sort of decompining from
16:39
Speaker 1: the market. So we have this tariff trust from the US,
16:47
Speaker 1: which is provocative and disturbing the order that this entire
16:52
Speaker 1: generation of investors are familiar with. Does that prompt defensive
16:58
Speaker 1: thinking among wealthyer investor and if it does, how is
17:02
Speaker 1: it being displayed?
17:06
Speaker 2: James, very interesting time, As you say, the answer is
17:11
Speaker 2: people are cautious, but not defensive. So what we are
17:17
Speaker 2: seeing is closer monitoring of the markets. And so to
17:24
Speaker 2: your listeners, I'd be saying, and keep watching or if
17:28
Speaker 2: you're not, you know, to step up your game. So
17:32
Speaker 2: most people are fully invested. Nobody's setting cash aside necessarily
17:37
Speaker 2: to take the opportunity, yes, which you might see people
17:43
Speaker 2: do in the coming months.
17:45
Speaker 1: How would we even see that local film managers cash
17:48
Speaker 1: cash cash weetings going up? Would that be the indicator?
17:53
Speaker 1: Could be?
17:54
Speaker 2: I mean, I'm probably too close to it to answer that,
17:57
Speaker 2: as in I would see or recognize the behavior of
18:00
Speaker 2: fund managers recommending that approach exiting investments, moving things into
18:06
Speaker 2: cash or making I'm not saying aggressive changes in portfolios occur. Yeah,
18:15
Speaker 2: I mean, I guess the interesting thing is the correlation
18:17
Speaker 2: of assets in your portfolio will have an impact on this,
18:21
Speaker 2: the nature of them, whether they're advisably uncorrelated, so that
18:27
Speaker 2: you've got that waiting if you like in the market.
18:31
Speaker 1: What just expensive listeners. That the idea I won't say
18:35
Speaker 1: that the idea, which is marvelous and theory difficult in practice,
18:39
Speaker 1: but on correlated portfolio the idea mis Jackie is putting
18:42
Speaker 1: forward is that you have certain investments that go the
18:47
Speaker 1: opposite way to your main investments. So, for instance, very simply,
18:51
Speaker 1: it's a share market crash. Shares have got forward, a
18:54
Speaker 1: lot of other things have got the fort what war Ford,
18:56
Speaker 1: what my co op of the was the share market crash?
18:58
Speaker 1: The obvious one is very simply. The obvious one is gold.
19:01
Speaker 1: For instance, property can also be very steady. You think
19:04
Speaker 1: of the GFC. So to a retail listener of this
19:09
Speaker 1: show who is operating on their own, what non correlated
19:15
Speaker 1: options are there is gold, one is bitcoin one? H
19:20
Speaker 1: when you're talking about that, what are you talking about?
19:22
Speaker 1: What are you thinking of?
19:24
Speaker 2: Yeah? I mean, there you've chosen to that at the
19:26
Speaker 2: opposite ends of the spectrum, aren't they are? You did
19:31
Speaker 2: quite nicely pick two very uncorrelatedre no and I would
19:36
Speaker 2: think of the tech sector versus mining in Australia, you
19:40
Speaker 2: think of banking versus manufacturing, so they're they're uncorrelated to
19:49
Speaker 2: some extent, and perhaps then domestic versus international as well.
19:55
Speaker 2: But you are you talk about gold, and I'm not
19:58
Speaker 2: a fan of gold, only because we're apart from wearing it.
20:02
Speaker 2: But the actual the difficulty of gold is it doesn't
20:05
Speaker 2: pay you income, no, and we all like to generate
20:10
Speaker 2: income from our investments. So perhaps for some people, like
20:12
Speaker 2: gold's been good, like it's performed well. I just can't
20:16
Speaker 2: quite imagine the joy of having a block some someone
20:20
Speaker 2: holding a block of gold somewhere.
20:22
Speaker 1: But what do you think is performing well? Because it's
20:24
Speaker 1: absolutely should be the lights out by by by historic
20:28
Speaker 1: this year, yeah, last year. So why do you think
20:30
Speaker 1: that is?
20:33
Speaker 2: I actually don't know the answer to that, James. Why
20:35
Speaker 2: gold is performing well? Actually I don't know the answer.
20:39
Speaker 2: Is it a bit like fixed income you know has
20:43
Speaker 2: done well? Of course, you know, comparatively, if you look
20:47
Speaker 2: one of the interesting statistics is what the Aussie share
20:49
Speaker 2: market's historical dividendal It is four percent, and people get
20:55
Speaker 2: hung up on trading equities all the time. You think, well,
20:58
Speaker 2: that's interesting you dividend yield, isn't it compared to say
21:01
Speaker 2: fixed interest that will deliver you today still higher than
21:04
Speaker 2: that as a yield. So many difference is with goal.
21:08
Speaker 2: Whilst you might get the growth in value which you
21:10
Speaker 2: can exit from, you just don't get income strain, which
21:14
Speaker 2: I would consider a goal to be quite speculative.
21:16
Speaker 1: M M. So if I have if I know that
21:20
Speaker 1: I should be more cautious. If I know that I
21:24
Speaker 1: don't really have on correlated assets in my portfolio. I
21:27
Speaker 1: have shares and cash, I have some property. I really
21:31
Speaker 1: have nothing that is pronounced or would be defined as
21:36
Speaker 1: not correlated. What would I look at to begin the
21:39
Speaker 1: process of getting some non correlated assets in there?
21:45
Speaker 2: Yeah, so I would think about things like innovation. So
21:49
Speaker 2: where in the market do you see innovation starting to
21:52
Speaker 2: make money? So is that as a contrast to what
21:56
Speaker 2: you were suggesting, whether you're like in a bank for example, Yeah,
21:59
Speaker 2: So looking at I guess the index and seeing i'd
22:03
Speaker 2: look at dividend yield as a basic fundamental. I'd look
22:06
Speaker 2: at the revenue of the business if you could, if
22:10
Speaker 2: you've seen that at growth, if they if you do
22:13
Speaker 2: your homework or your due diligence, and you understand whether
22:16
Speaker 2: they've made acquisitions, do they have debt? I guess that's
22:20
Speaker 2: getting into the detail of a business. But at the
22:24
Speaker 2: end of the day, we're looking for a return on investment.
22:26
Speaker 1: That's still shares, right, and it does a crash, they're
22:28
Speaker 1: all going to crash anyway, high dividend, little to fall. Yeah,
22:33
Speaker 1: So what is would you think of that's non correlated
22:37
Speaker 1: for the average.
22:40
Speaker 2: Well, it would be so debt type of assets would
22:43
Speaker 2: be interesting. So, yes, that's going down the defensive path.
22:47
Speaker 2: But and if you're happy to talk about things like
22:51
Speaker 2: private credit market, yes, yeah, or private debt, depending on
22:54
Speaker 2: which side of that coin you're on a little riskier
22:58
Speaker 2: part of the market, I would argue, But it depends
23:01
Speaker 2: on who's managing that private credit Yeah.
23:04
Speaker 1: Okay, so death credit funds, but the track record, yes.
23:09
Speaker 2: Yeah, absolutely, Look, and that's I'm saying. I see people
23:14
Speaker 2: borrowing money in those markets, and I'm also an invest
23:17
Speaker 2: in myself on the other side, So it's quite a
23:19
Speaker 2: fascinating area because they're you know, I guess there are
23:23
Speaker 2: some loan sharky types out there that I wouldn't necessarily trust.
23:26
Speaker 2: So I'd hate to be investing through a fund that
23:29
Speaker 2: they were borrowing from, so to speak, you know, the
23:31
Speaker 2: low dock loan environment.
23:34
Speaker 1: Yeah, so how does the just wouldn't I have seen
23:37
Speaker 1: all that? How does the average investor make their way
23:41
Speaker 1: through this? They hear about death funds or private credit
23:45
Speaker 1: funds they put in front of them. What they don't
23:49
Speaker 1: know is one's really good and one's really bad.
23:50
Speaker 2: How do you just have to do your due diligence.
23:53
Speaker 2: You do need to understand who the board is. You
23:56
Speaker 2: need to look at relative I would look at three
23:58
Speaker 2: years and five years perform.
24:00
Speaker 1: Okay, very good, So you.
24:01
Speaker 2: Do have to do the hard yards. You can take
24:04
Speaker 2: the barbecue conversation not wise because it's often based on
24:10
Speaker 2: information that's spinning spruit, could be marketing in you know,
24:18
Speaker 2: disguising performance.
24:19
Speaker 1: Yeah right, okay, So truck record, nature of the board,
24:24
Speaker 1: nature of the brand. Basically that's putting this in front
24:27
Speaker 1: of you. Who are the what's the truck record? What
24:30
Speaker 1: area are they in? And as you say, two unfortunately
24:34
Speaker 1: books you go to do your own homework on this.
24:38
Speaker 1: I expect a good advisor should be able to steer it. Ideally,
24:42
Speaker 1: it should be able to steer you between the good,
24:44
Speaker 1: the bad, and the elderly in this area we would
24:47
Speaker 1: call Yeah.
24:47
Speaker 2: The other thing we talk about, just a small thing,
24:50
Speaker 2: is the nature of the income to James, So we're like,
24:53
Speaker 2: whether it's a franked dividend or an unfranked dividend, or
24:56
Speaker 2: whether it's interesting income, or if it's a trust distribution, like,
24:59
Speaker 2: what is it look like? Because that will have an
25:01
Speaker 2: impact on its profile comparing that to another asset. So
25:04
Speaker 2: there are the important things to understand.
25:08
Speaker 1: Well, if folks keep that in mind, I think this
25:10
Speaker 1: is an issue we're going to come back to quite
25:12
Speaker 1: readily in the near future. I just know this because
25:16
Speaker 1: at the very best, the year we're heading into is
25:19
Speaker 1: going to be volatile. And what volatile means, for what
25:24
Speaker 1: it's worth is regular periods for the market unwinds and
25:28
Speaker 1: loses before your eyes. It's well going on a sub
25:32
Speaker 1: version of what's going on right now. But then you
25:34
Speaker 1: can see it, even say in the backstocks, you can
25:36
Speaker 1: see how they are healing off in terms of how
25:39
Speaker 1: much they're worth Off the back of their results, they're
25:41
Speaker 1: all what softer than they were even a month ago.
25:43
Speaker 1: But what we're waiting for hasn't happened yet. But as
25:46
Speaker 1: sure as I follows day, there will be a correction
25:49
Speaker 1: in the US and when that comes in, I think
25:51
Speaker 1: we'll get some real charity as to what sells and
25:54
Speaker 1: what doesn't sell and what people are nervous about with
25:56
Speaker 1: my debt. Okay, we might go to questions back in
25:59
Speaker 1: a second. Hello, Welcome back to the Australians Money Puzzle
26:16
Speaker 1: James Kirby with Jackie Clark, author and advisor, regular guest
26:20
Speaker 1: on the show. Okay, question from Susie, I noticed many
26:24
Speaker 1: of your guests so far this year have presence referenced
26:28
Speaker 1: ticking out some puppets from last year's bumper results. My
26:33
Speaker 1: question is how does this work at super investment choice.
26:36
Speaker 1: If you're in a big supermont and you're in high growth,
26:38
Speaker 1: will those managers be doing with enacting this team of
26:42
Speaker 1: selling and waiting for a drop? And if you agree
26:45
Speaker 1: with that, we can't expect those sort of highate trans
26:49
Speaker 1: again this year. Would you need to actually change your
26:52
Speaker 1: investment choice to something more conservative for this year. Great
26:55
Speaker 1: question cuts through so much that we've been talking about
26:59
Speaker 1: if it's getting more of all the time, if historically
27:02
Speaker 1: the chances of a very good year coming in this
27:04
Speaker 1: year are slimp, because history would suggest you just don't
27:09
Speaker 1: get those sort of those years in the row. The
27:11
Speaker 1: reality of Trump and the wildness of the policies that
27:16
Speaker 1: he is unleashing day by day internationally suggests that the
27:20
Speaker 1: markets are going to be rockets. Is it? Does that
27:24
Speaker 1: mean that someone who took the high growth option in
27:27
Speaker 1: the super fund should certainly change their views? What do
27:30
Speaker 1: you think?
27:32
Speaker 2: Well, look, I've been asking about this as well, and
27:35
Speaker 2: the immediate answer is not right now, but it is
27:42
Speaker 2: something that I would be contemplating being prepared soon. Yeah.
27:47
Speaker 2: So it's a bit like we don't have the crystal
27:48
Speaker 2: ball on this market. Nobody does. And the worst thing
27:52
Speaker 2: is that stressing about every movement in the share market.
27:55
Speaker 2: You're absolutely right about returns. They're down, so you would
27:59
Speaker 2: say that we're heading into a period where it's not
28:02
Speaker 2: looking great from a growth perspective. So probably, if you're
28:06
Speaker 2: reading the tea leaves, you say, yes, now might be
28:08
Speaker 2: a good time to contemplate this. I guess what I'm
28:11
Speaker 2: saying is talking to fund managers, we're being cautious, we're
28:15
Speaker 2: not heading in the defensive asset pathway, but we're monitoring carefully. Now,
28:22
Speaker 2: of course, monitoring carefully is one thing. You can't change
28:24
Speaker 2: your super strategy and get that impact straight away either, right.
28:28
Speaker 1: So just one thing that when you say they're being
28:32
Speaker 1: cautious but not defensive, why they're not that scared? Right,
28:40
Speaker 1: So they believe there's still a fair bit of steam
28:43
Speaker 1: left in this market? Is that it?
28:47
Speaker 2: Yes, I'd agree with that. There's plenty of activity. There's sure.
28:53
Speaker 2: We are influenced heavily by the US. It's very difficult
28:56
Speaker 2: to tell which direction that leadership will take the financial
29:02
Speaker 2: performance of the country, and in turn, like the tariffs
29:04
Speaker 2: and others, how they'll actually affect all of us. So
29:07
Speaker 2: it's still a bit of a wait and see.
29:09
Speaker 1: Okay, all right, okay, thank you and thanks for the question, Susie.
29:13
Speaker 1: Great question, cut through cut I love the questions that
29:17
Speaker 1: cut through it all. All right, Adam, does the board
29:20
Speaker 1: of a listed company have a responsibility to reign in
29:23
Speaker 1: a CEO who is obviously destroying shareholder of value? Thinking
29:28
Speaker 1: of Elon musk here or our small shareholders unprotected from
29:32
Speaker 1: these CEOs. He talks about Tesla, but he could easily
29:36
Speaker 1: have talked about Richard White there. You could have said
29:38
Speaker 1: the same things. But that's Richard Wise tech books. If
29:41
Speaker 1: you don't know the story, I'm sure you do. But
29:44
Speaker 1: basically was there was the moment. You can't miss that.
29:48
Speaker 1: And basically, very simply, there's a guy who created the company.
29:51
Speaker 1: It went, it formalized itself into a stock market lister company,
29:55
Speaker 1: it did very well. He had controversy with the inappropriate behavior.
30:03
Speaker 1: He agreed to step aside, and he hasn't stepped aside.
30:07
Speaker 1: In fact, he's come back, and basically everyone's run away
30:10
Speaker 1: from the board. Just as it is today, he's saying,
30:14
Speaker 1: I'm here, it's mine, take it or leave it. It's
30:16
Speaker 1: me or not me. It's like the personification of this issue,
30:20
Speaker 1: keep pressing risk, we call it. How does it? How
30:23
Speaker 1: does an every day shareholder deal with that sort of thing?
30:27
Speaker 2: Yeah, it's a great question actually that Adam's asked. And
30:31
Speaker 2: I think the first most important part is that it
30:34
Speaker 2: is absolutely the board's responsibility to address the CEO's performance.
30:41
Speaker 1: So, but they don't always.
30:44
Speaker 2: No look, and I've been in difficult situations where the
30:47
Speaker 2: board has had to spill essentially, which is partly what
30:50
Speaker 2: you could say has happened in Richard White's case, but
30:53
Speaker 2: not a full board spill where everyone says okay with
30:56
Speaker 2: your behavior is not acceptable where out or there's leaky
31:00
Speaker 2: governance for one of a better words. There's definitely some
31:02
Speaker 2: issues with both the companies that you mentioned, so it
31:06
Speaker 2: is difficult. I think the interesting thing is if you
31:09
Speaker 2: are a founder CEO and you've listed, you have taken
31:15
Speaker 2: shareholders money, so there is a responsibility here. It's no
31:20
Speaker 2: longer your baby. Once you list a company, it very
31:24
Speaker 2: quickly is the public's company. It needs to be looked
31:27
Speaker 2: after in the right way.
31:29
Speaker 1: What did Buy challenge that and said, look, if you
31:32
Speaker 1: buy a superstar CEOs company where the person is the company,
31:37
Speaker 1: Greg Goodman Group, it's him and it's his company. You're
31:42
Speaker 1: buying him. That's the deal and all the other governance.
31:46
Speaker 1: I want to say the governance doesn't matter, but what
31:48
Speaker 1: I'm saying is he matters more than everything else. If
31:50
Speaker 1: he leaves, it's over as we know it. Richard White
31:54
Speaker 1: leaves Wistech, it's over as we know it. Same with Tesla.
31:58
Speaker 1: What do you say to that approach where you just
31:59
Speaker 1: say you're buying one of those companies you're buying the person,
32:03
Speaker 1: accept that or don't accept it. If you don't accept it,
32:06
Speaker 1: don't by them.
32:08
Speaker 2: Yeah, I think that's spot on because it is buyer beware.
32:11
Speaker 2: Part of your due diligence, James, is to actually understand
32:14
Speaker 2: that CEO track record will In all of our reviews
32:19
Speaker 2: of companies, we always look at the board and the
32:22
Speaker 2: CEO performance and understanding getting to meet. I mean, obviously
32:27
Speaker 2: a everyday Australian investor won't get to meet a CEO.
32:31
Speaker 2: They can certainly turn up though to the shareholders meetings
32:34
Speaker 2: and the annual general meetings and meet them or get
32:37
Speaker 2: a feel or read about them, whatever it might be.
32:40
Speaker 2: But there's definitely you are buying into that person personality
32:44
Speaker 2: for what it's worth, their contribution to society.
32:48
Speaker 1: So what would you do then? If you're representing you're
32:52
Speaker 1: on a family office board and they love the stockscoring great,
32:56
Speaker 1: But the problem is the CEO male or female? Is
32:59
Speaker 1: it true? For some reason? Right, some atrocity goes on.
33:02
Speaker 1: You don't you don't like that. I'm not saying it
33:05
Speaker 1: and I'm not thinking of any of the people we've
33:07
Speaker 1: just mentioned. But I'm saying, in theory, you bought a
33:10
Speaker 1: stuff because the distinguishing feature was a single person was
33:15
Speaker 1: brilliant of what they do and they attained that brilliance,
33:18
Speaker 1: and that's the promise of the company. However, you are
33:21
Speaker 1: aware that there is issues that you are very unhappy with.
33:26
Speaker 1: They may be a behavior, they may be financial dealings,
33:30
Speaker 1: there may be anything, and it's you're absolutely split. You
33:35
Speaker 1: don't like the person you love what they're doing with
33:39
Speaker 1: this stuff. What do you do?
33:41
Speaker 2: You got to make a call?
33:43
Speaker 1: Have you can you recall making a call? You don't
33:46
Speaker 1: have to name absolutely.
33:47
Speaker 2: It's the classic sort of fatal for that a senior
33:51
Speaker 2: executive may be described as having. I've seen this happen,
33:55
Speaker 2: particularly in professional services. It's like you have the big
33:59
Speaker 2: fee winning partner in a firm, but who might be
34:04
Speaker 2: under some investigations. You have to make a decision to
34:06
Speaker 2: the firm, take the revenue and deal, you know, shove
34:09
Speaker 2: the bad behavior under the carpet. You just can't do
34:12
Speaker 2: that for an extensive period of time. So you have
34:15
Speaker 2: to make a decision. What's it going to be Now?
34:17
Speaker 2: I think it goes the same. It goes the same
34:19
Speaker 2: with investing. You have to recognize that individual might have
34:22
Speaker 2: got the company to a certain point, but it can't
34:25
Speaker 2: take it to the next point. I think this is
34:27
Speaker 2: the strong issue with founder CEOs also is that it's
34:32
Speaker 2: okay to play by their rules to hear, but once
34:36
Speaker 2: you have a very strong public profile, you've taken share
34:39
Speaker 2: public money, it's different and maybe CEO can't make it
34:44
Speaker 2: to that level.
34:45
Speaker 1: Yes, yeah, okay. Perverse argument for equity, isn't it, because
34:52
Speaker 1: they say, hey, this is don't worry about you know,
34:55
Speaker 1: you like to your company.
34:56
Speaker 2: I think the difficult is too, is it's a really
34:58
Speaker 2: fine line when getting that founded to decide do you
35:02
Speaker 2: want the public money to grow this business. If you do,
35:04
Speaker 2: you've got to make a decision and possibly be coached
35:07
Speaker 2: out of the role.
35:08
Speaker 1: Yeah. Yeah, easier self than doll elevation.
35:11
Speaker 2: Just like loaning money. The Richard White cases, great example,
35:14
Speaker 2: it was his business. He loans money to his former
35:17
Speaker 2: brother in law wherever it is. That's what you do,
35:21
Speaker 2: but not anymore.
35:23
Speaker 1: Not anymore because it's a public company. Yeah, okay, very good.
35:27
Speaker 1: I think we might leave it there. That was very
35:29
Speaker 1: interesting about the CEO it's an issue. I suppose this
35:33
Speaker 1: is the best example we've ever had in Australia, But
35:37
Speaker 1: we have many companies that were so closely bound to
35:44
Speaker 1: a single person. Many of them you can go back
35:47
Speaker 1: to Harvey Norman and Jerry Harvey, as I said, Goodman
35:50
Speaker 1: in property, but loads of them. Often there was reasons
35:55
Speaker 1: that some entrepreneurs didn't school public. Pratt family, for instance,
36:01
Speaker 1: could easily go public any time, an enormous company, marvelous business,
36:05
Speaker 1: but they decide that they like to do things their
36:10
Speaker 1: way and they like the flexibility. Then you have the
36:13
Speaker 1: reverse where you have say Jack Ganson co at Chemist Warehouse,
36:16
Speaker 1: where they built this huge business and they were partners,
36:19
Speaker 1: they were private, they did what they like and now
36:22
Speaker 1: they must go public. But then they're closer to retirement.
36:25
Speaker 1: So then Richard White is so they quite intense to
36:29
Speaker 1: stick around. We'll see how that story goes. Very interesting story.
36:33
Speaker 1: Terrific to talk to you, Jackie, Thanks James, thanks very
36:36
Speaker 1: much for coming on the show. And by the way, folks,
36:38
Speaker 1: thank you very much for some reviews recently. Let's have some.
36:42
Speaker 1: Let's have some. I would really appreciate it if you
36:44
Speaker 1: would put some reviews on the podcast as you know,
36:47
Speaker 1: Apple and that sort of thing, and similarly keep the
36:51
Speaker 1: emails rolling money puzzle at the Australian dot com dot au.
36:57
Speaker 1: Having some more questions on the share market late, why
37:01
Speaker 1: not let's have some more. I said, we'll do a
37:03
Speaker 1: special very soon on the on shares because I just
37:08
Speaker 1: noticed that there's more and more questions coming in specifically
37:11
Speaker 1: on them. So we have, among other things, we'll have
37:15
Speaker 1: Roger Montgomery coming up on Thursday week to do that
37:20
Speaker 1: and others. Okay. Today's show was produced by Nias Sammaglu.
37:25
Speaker 1: Talk to you soon,