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What the share market pullback tells every investor · The Money Puzzle

• 0:08
  Speaker 1: Hello and welcome to the Australian's Money Puzzle Podcast. I'm
• 0:11
  Speaker 1: James Kirby, the Wealth Editor at The Australian. Welcome aboard, everybody.
• 0:15
  Speaker 1: All investors, I expect, feeling just a little bit nervous
• 0:19
  Speaker 1: this week. It's not every day we have a share
• 0:22
  Speaker 1: market session to kick off the week where we have
• 0:24
  Speaker 1: the worst session in four years, which we had this
• 0:28
  Speaker 1: week on Monday, 3.5% off the market. Definitely rocky times.
• 0:35
  Speaker 1: We see the Nasdaq is already in correction. The S & P,
• 0:38
  Speaker 1: that's the main US market, is down about 7.5% as
• 0:42
  Speaker 1: we speak on Tuesday. And we will see what it
• 0:47
  Speaker 1: does this evening, whether it goes into a full-blown recession.
• 0:50
  Speaker 1: Correction or not? Very hard to say. We can see
• 0:53
  Speaker 1: just middle of the day Tuesday that the Australian market
• 0:56
  Speaker 1: is stabilizing a little, but I can tell you that
• 0:59
  Speaker 1: the slightest downswing, I should say, in the U.S. futures,
• 1:01
  Speaker 1: and we will fall with them faithfully. We will fall,
• 1:04
  Speaker 1: don't you worry. We fall lemming-like every time. We did 3.5%
• 1:09
  Speaker 1: on Monday, and that is barely what happened on the U.S.
• 1:13
  Speaker 1: overnight Monday. Perhaps on our market, but more broadly, I
• 1:18
  Speaker 1: want to talk about For the diversified investor, for the
• 1:22
  Speaker 1: investor who is, like most of you, I'm sure, has shares,
• 1:28
  Speaker 1: probably has property in some fashion, has other assets. You
• 1:32
  Speaker 1: might have gold, you might have cash, you might have
• 1:34
  Speaker 1: alternative assets. How do we handle a period of instability,
• 1:39
  Speaker 1: which we've seen some of, which we may see much
• 1:42
  Speaker 1: more of, because the conditions that have triggered this sell-off
• 1:47
  Speaker 1: are unclear. There is no single trigger. And on that basis,
• 1:50
  Speaker 1: it could happen again at any time. I was thinking,
• 1:52
  Speaker 1: who could we have as the guest on the show
• 1:54
  Speaker 1: to talk about the broader situation? It needed someone who
• 1:57
  Speaker 1: was a diversified investor themselves. And I thought, hey, Anthony Keene,
• 2:02
  Speaker 1: who has been on the show before. He is, of course,
• 2:04
  Speaker 1: the personal finance guru on News Corporation. He operates out
• 2:07
  Speaker 1: of Adelaide. In the end, we're all in the same big,
• 2:11
  Speaker 1: happy family. And we finally met in person, IRL. Great
• 2:15
  Speaker 1: to have you on board today. Tell me, we'll talk
• 2:18
  Speaker 1: about all things, not just the market downturn, but how
• 2:21
  Speaker 1: that could affect everything, how it could affect, for instance,
• 2:25
  Speaker 1: interest rates, how that could in turn affect property. I
• 2:29
  Speaker 1: was entertained by the fact that you had a piece,
• 2:32
  Speaker 1: awfully well-timed, where you mentioned that you had sold all
• 2:37
  Speaker 1: your shares recently. Now, that's not quite a Warren Buffett-like
• 2:40
  Speaker 1: move where you sold all your shares just before the downturn.
• 2:43
  Speaker 1: You have lots of shares. You just sold all your
• 2:47
  Speaker 1: ordinary shares and you've switched entirely to ETFs to exchange
• 2:50
  Speaker 1: traded funds. That's a big call, right? Tell me, is
• 2:53
  Speaker 1: that forever? And why did you do it?
• 2:56
  Speaker 2: You know, and I actually, I have sold every direct
• 3:00
  Speaker 2: share that I've built up and owned, but it's been
• 3:03
  Speaker 2: a gradual thing. I started buying maybe 25 years ago,
• 3:07
  Speaker 2: but this is the first time in a quarter of
• 3:09
  Speaker 2: a century I do not have one individual share to
• 3:11
  Speaker 2: my name. And I'd like to say it was I
• 3:14
  Speaker 2: timed the share market route perfectly, but no, it was
• 3:17
  Speaker 2: purely a strategic and getting old decision. And unlike you,
• 3:21
  Speaker 2: I don't have a self-managed super fund, but As I've
• 3:25
  Speaker 2: got older, my super balance has grown, as everyone's done,
• 3:29
  Speaker 2: and that is through a lot of index funds. I
• 3:31
  Speaker 2: invest in a lot of Australian overseas, as you said,
• 3:33
  Speaker 2: diversified investments through using a lot of index funds through super,
• 3:37
  Speaker 2: but not yet self-managed. But that is something I am
• 3:41
  Speaker 2: considering for both shares and property in the next sort
• 3:44
  Speaker 2: of five to 10 years. And so the reason I've
• 3:48
  Speaker 2: looked to sell out of the direct share ownership is
• 3:51
  Speaker 2: purely because the if you're holding up this stuff in super,
• 3:54
  Speaker 2: the tax benefits that you get from it when you
• 3:56
  Speaker 2: do retire from work and switch your money to, I've
• 3:59
  Speaker 2: written several times about that. I'd like to, I've owned
• 4:02
  Speaker 2: investment properties outside of super, but would like to own
• 4:05
  Speaker 2: one in the future as well, purely for that capital
• 4:08
  Speaker 2: gains tax benefit. It's just, you're talking tens of thousands
• 4:12
  Speaker 2: of dollars of savings by doing that. So I do
• 4:15
  Speaker 2: love shares. I write about shares every day and I
• 4:18
  Speaker 2: do plan to get more in the future, but it's
• 4:21
  Speaker 2: just a matter of strategy, age, timing, moving that direct
• 4:26
  Speaker 2: share ownership with inside superannuation as I get closer to
• 4:30
  Speaker 2: my mid-late 50s and 60s, it'll work better.
• 4:34
  Speaker 1: You don't have to think anymore that you have ETFs.
• 4:39
  Speaker 1: There's an element of truth on that, isn't there? You
• 4:41
  Speaker 1: can put them, you can say, okay, I've got my settings. Really,
• 4:43
  Speaker 1: I don't really care if ComBank goes up 50% or
• 4:45
  Speaker 1: BHP falls 50% anymore. Am I simplifying it?
• 4:50
  Speaker 2: I think you're right. I think the one thing that
• 4:52
  Speaker 2: will hold me back from going direct shares again in
• 4:55
  Speaker 2: the future through a self-managed fund or just through a
• 4:59
  Speaker 2: retail or another super fund that offers that direct share
• 5:01
  Speaker 2: investment is, do you want the headache? Do you just
• 5:06
  Speaker 2: want to trust what the markets are doing? Because I've been,
• 5:09
  Speaker 2: I heard you talking, I think last week on your
• 5:11
  Speaker 2: podcast about Goodman Group, how they were a star in
• 5:14
  Speaker 2: the market as a real estate investment trust. Now, I
• 5:18
  Speaker 2: bought them in the GFC and lost 90% of my
• 5:20
  Speaker 2: money before I sold out. And then I've gone gangbuster since.
• 5:24
  Speaker 2: Had I held them, which I didn't for various reasons,
• 5:27
  Speaker 2: would have gone great. But it's just the damage and
• 5:30
  Speaker 2: the damage it does to your confidence as an investor
• 5:33
  Speaker 2: when you have those sorts of losses. I don't know.
• 5:35
  Speaker 2: I'm not sure that I want to go through all
• 5:37
  Speaker 2: that again. And it's like with the fall we've had
• 5:39
  Speaker 2: in recent days, everyone's super is going to take a hit,
• 5:41
  Speaker 2: but that's everyone's super pretty much, all those that are
• 5:43
  Speaker 2: invested in share markets.
• 5:45
  Speaker 1: So you're comforted by the fact that you won't do
• 5:47
  Speaker 1: any worse than everyone else, basically, than the index from
• 5:51
  Speaker 1: here on, or better.
• 5:54
  Speaker 2: That's exactly right. But shares are great, and a lot
• 5:57
  Speaker 2: of people love that. Watching it, and I have loved
• 6:00
  Speaker 2: it in the past, but is it right for my
• 6:03
  Speaker 2: stage of life? And I know you'd also spoken about it,
• 6:05
  Speaker 2: people do get older. Do you want to spend your
• 6:08
  Speaker 2: time watching the moves of individual stocks every day, or
• 6:11
  Speaker 2: do you want to spend your time enjoying sort of
• 6:13
  Speaker 2: life and retirement and not having to worry about the
• 6:16
  Speaker 2: self-managed super fund compliance and all that sort of stuff?
• 6:20
  Speaker 1: Does your attitude towards property and how much property you have,
• 6:23
  Speaker 1: does it change when you see one of these shock
• 6:27
  Speaker 1: share market sell-offs?
• 6:29
  Speaker 2: You don't see, we saw a 55% fall in the
• 6:33
  Speaker 2: ASX during the global financial crisis. I've never seen anything
• 6:37
  Speaker 2: like that in any of the property markets. Makes me
• 6:40
  Speaker 2: relieved that I'm more exposed to real estate. But the
• 6:44
  Speaker 2: property market in Australia is It's a real variation in
• 6:48
  Speaker 2: what you get. I'm writing a column this week. In
• 6:51
  Speaker 2: the past 12 months, we've had Perth that's done plus 25%
• 6:55
  Speaker 2: and Melbourne, which is down a couple of percent. So
• 6:58
  Speaker 2: that's a massive variation in property as well. But you
• 7:01
  Speaker 2: don't tend to check your prices every day. You see
• 7:05
  Speaker 2: it as a long-term investment. Different people have different preferences
• 7:09
  Speaker 2: as to what they like. And I've got in a
• 7:11
  Speaker 2: bit of trouble with readers in the past riding that,
• 7:14
  Speaker 2: I prefer property over shares any day. But very happy
• 7:18
  Speaker 2: to own shares and index funds through superannuation and have
• 7:22
  Speaker 2: that exposure to the market.
• 7:24
  Speaker 1: It's interesting, on the share market, you've gone for the
• 7:27
  Speaker 1: indexing and got away from the sort of details and
• 7:31
  Speaker 1: the individual variation of shares. On property, you don't really
• 7:34
  Speaker 1: have that choice. I'm just thinking of The point you're
• 7:38
  Speaker 1: making that I can stand here and tell everyone the
• 7:41
  Speaker 1: property prices are up 4% across Australia this year so far.
• 7:45
  Speaker 1: You're laughing at that if you're in Perth. You're saying, hey,
• 7:48
  Speaker 1: we're up 20%. And if you're in Melbourne, you're saying,
• 7:50
  Speaker 1: hang on a second. That's not true in this city.
• 7:53
  Speaker 1: We're down 1%. You live in Adelaide. Adelaide is doing well.
• 7:57
  Speaker 1: If Adelaide keeps going the way it's going to have
• 7:59
  Speaker 1: a higher average price than Melbourne within a matter of weeks,
• 8:02
  Speaker 1: then they're absolutely live. The average dwelling value is in
• 8:06
  Speaker 1: the high sevens, maybe 780 thereabouts. It's neck and neck
• 8:10
  Speaker 1: right now. Do you as a property investor seek to
• 8:16
  Speaker 1: diversify your risk as you've done with the shares? Do
• 8:20
  Speaker 1: you try and basically not have all your eggs in
• 8:22
  Speaker 1: one basket and have a property that isn't that are
• 8:25
  Speaker 1: in different places?
• 8:28
  Speaker 2: Yes, most definitely. Two states at the moment. I always
• 8:32
  Speaker 2: thought that there's no way I would ever be able
• 8:34
  Speaker 2: to afford a property in Melbourne because of the prices there.
• 8:37
  Speaker 2: But having watched that difference, that sort of difference just narrow,
• 8:41
  Speaker 2: I've looked at Hobart a few years ago was like
• 8:46
  Speaker 2: soaring the prices there and and now that now their
• 8:49
  Speaker 2: median price is a hundred thousand sort of less than
• 8:51
  Speaker 2: any other state capital city so there are cycles in
• 8:55
  Speaker 2: each city and diversifying works great as a direct property
• 8:59
  Speaker 2: investor but also great as a property investor from a
• 9:03
  Speaker 2: land tax point of view as well because of the
• 9:08
  Speaker 2: different land tax regimes in the different states. So you'll
• 9:11
  Speaker 2: often find investors trying to diversify to different states. I
• 9:15
  Speaker 2: had planned for Perth, but I've missed the boat on
• 9:17
  Speaker 2: that one. But Melbourne would potentially be on the radar
• 9:22
  Speaker 2: in the next year or two. I know you've spoken
• 9:24
  Speaker 2: recently about oversupply there, so I'll be keeping an eye
• 9:27
  Speaker 2: on that. But definitely diversify.
• 9:31
  Speaker 1: Okay, very interesting. I want to talk to you about
• 9:32
  Speaker 1: a couple of quite topical issues on how this market
• 9:36
  Speaker 1: reversal could affect. wider investing but we'll be back in
• 9:39
  Speaker 1: a moment hello and welcome back to the australians money
• 9:56
  Speaker 1: puzzle podcast i'm james kirby talking to anthony Keene today,
• 9:59
  Speaker 1: my colleague in News Corporation on the finance section of
• 10:06
  Speaker 1: all the papers and digital assets that we have. Guest
• 10:09
  Speaker 1: on the show before, always happy to have him back. Anthony,
• 10:13
  Speaker 1: I was just thinking that one of the things we
• 10:15
  Speaker 1: have at the moment is a fairly lineball market. We've
• 10:18
  Speaker 1: got some softening in Australia. the property market. And traditionally,
• 10:23
  Speaker 1: if you've got a share market, a serious share market reversal,
• 10:26
  Speaker 1: people will move to property. I can give you instances
• 10:28
  Speaker 1: back over the years, very clear instances where that happened. Now,
• 10:34
  Speaker 1: we don't know how bad this will get, but it's
• 10:36
  Speaker 1: been a pretty bad week so far on the market,
• 10:39
  Speaker 1: the worst week for four years. And you could argue
• 10:43
  Speaker 1: it wouldn't take much more to knock more off global markets,
• 10:47
  Speaker 1: particularly the U.S., because there are always risks in the market,
• 10:51
  Speaker 1: but there are distinct risks emerging just now. They're geopolitical,
• 10:55
  Speaker 1: particularly U.S. presidency, particularly wars in different parts of the world.
• 11:02
  Speaker 1: These are things that can knock a market out very easily.
• 11:04
  Speaker 1: It's fragile. I think we could say that. And we
• 11:08
  Speaker 1: had a sharp sell-off, which could extend. What I want
• 11:12
  Speaker 1: to draw out from you, as someone who invests right
• 11:15
  Speaker 1: across the board in all classes... What might happen? What
• 11:21
  Speaker 1: can a share market downturn do for broad investments, apart
• 11:26
  Speaker 1: from the fact that your shares have lost value? It
• 11:28
  Speaker 1: takes some energy out of the market, right? What might
• 11:30
  Speaker 1: happen with interest rates for all investors if we have
• 11:35
  Speaker 1: an extended share market sell-off?
• 11:39
  Speaker 2: Yeah, that's a really good question, James, because I think
• 11:43
  Speaker 2: you're right. If this market sell-off continues and steepens, We
• 11:49
  Speaker 2: saw it during COVID, we saw it before that in
• 11:52
  Speaker 2: the GFC when interest rates just drop really sharply. That's
• 11:57
  Speaker 2: going to obviously not be good news for the people
• 12:00
  Speaker 2: that have been in loving their five percent plus returns
• 12:03
  Speaker 2: on on cash in the last couple of years because
• 12:06
  Speaker 2: if the reserve bank cuts rates quickly obviously those rates
• 12:10
  Speaker 2: will fall but i think in the past as well
• 12:13
  Speaker 2: it could be great for bonds now i've never invested
• 12:15
  Speaker 2: directly in bonds most people have probably never invested directly
• 12:18
  Speaker 2: in bonds but you might have a portion in your
• 12:21
  Speaker 2: super but i remember because as high interest rates the
• 12:25
  Speaker 2: You can get great returns from bonds when they're sharp
• 12:28
  Speaker 2: falls in central bank interest rates because of that inverse
• 12:31
  Speaker 2: way that they work. So it might be great for that.
• 12:35
  Speaker 2: Falling rates might be beneficial for property if it becomes
• 12:39
  Speaker 2: easier to borrow to invest in real estate as well.
• 12:42
  Speaker 2: So there's potential there.
• 12:44
  Speaker 1: It could be actually easier to finance investments.
• 12:47
  Speaker 2: Could be, yes, but there's also going to be a
• 12:48
  Speaker 2: lot of gloom and a lot of people losing a
• 12:50
  Speaker 2: lot of confidence and stuff. And let's hope we don't
• 12:52
  Speaker 2: have anywhere near the falls we had in that sort
• 12:54
  Speaker 2: of flash crash in COVID or the huge falls we
• 12:56
  Speaker 2: had back around 2008, 2009.
• 12:59
  Speaker 1: If you, with your move to ETFs, if you saw
• 13:04
  Speaker 1: a flash crash, a harder crash than we've had, let's
• 13:07
  Speaker 1: say we're down, let's say that the US market is
• 13:10
  Speaker 1: down approximately 7.5% is the drop so far. But let's
• 13:15
  Speaker 1: say it dropped really sharply and we had a 20%
• 13:17
  Speaker 1: drop or so in the US market. Would that disturb
• 13:20
  Speaker 1: your plan about ETFs forever? Would you say, gosh, there
• 13:23
  Speaker 1: are bargains here, I can't resist it?
• 13:25
  Speaker 2: Yeah, you're right. And a lot of the brokers and
• 13:30
  Speaker 2: the share specialists I've been speaking to have literally been
• 13:32
  Speaker 2: waiting for a fall, for a breather, whether it's 10%
• 13:36
  Speaker 2: or 20%. And they've had this money sitting on the
• 13:38
  Speaker 2: sidelines because market drops 20%, you're effectively buying at a discount.
• 13:44
  Speaker 2: I've still got scars from the GFC, James. I listened
• 13:46
  Speaker 2: to all of that and bought it at 10% or 20%
• 13:48
  Speaker 2: discount heavily, very heavily, and then lost another 35% on
• 13:53
  Speaker 2: my money and took years and years to get.
• 13:55
  Speaker 1: You sound like someone who's been through the war, Anthony.
• 13:59
  Speaker 1: It shaped you forever. Look, I'm so glad you've brought
• 14:02
  Speaker 1: this up because I know a lot of our listeners
• 14:06
  Speaker 1: have not really experienced the grueling experience of a share
• 14:11
  Speaker 1: market fall. When I say share market fall, what you're
• 14:15
  Speaker 1: talking about was worse. It was much worse than the
• 14:17
  Speaker 1: COVID drop. The GFC was, it rattled confidence in the
• 14:21
  Speaker 1: deepest possible way. Banks, folks, banks were being saved in
• 14:25
  Speaker 1: the UK, in the US, here. And then on top
• 14:29
  Speaker 1: of that, you had the worst type of market. Anthony
• 14:33
  Speaker 1: says it fell 55%. But it took two years to
• 14:35
  Speaker 1: do that. It took peaked in late 2007. It was
• 14:41
  Speaker 1: the middle of March 2009 when we hit the bottom.
• 14:44
  Speaker 1: And of course, we didn't know we'd hit the bottom
• 14:46
  Speaker 1: because it seemed to have been going down forever. So
• 14:49
  Speaker 1: it's one thing to be an investor, go through the
• 14:51
  Speaker 1: COVID crash, which was short and sharp. And the stock
• 14:55
  Speaker 1: markets were flying back up within months of the initial downturn.
• 15:00
  Speaker 1: They're much harder to go through something like the GFC,
• 15:02
  Speaker 1: where there's two solid years for people where the stocks
• 15:05
  Speaker 1: just slowly sink, chug, chug, down by 50%. That's really
• 15:08
  Speaker 1: difficult So glad you brought that up, Anthony. And I
• 15:11
  Speaker 1: bet it does shape you. Did it push you more
• 15:14
  Speaker 1: towards property investing than it might have, than you might have?
• 15:18
  Speaker 2: I think it did. And look, I've been fortunate being
• 15:22
  Speaker 2: from Adelaide that Adelaide tends not to have the heavy
• 15:26
  Speaker 2: downturns in real estate prices that the big eastern capitals do.
• 15:31
  Speaker 2: But that said, before these, I went about eight or
• 15:34
  Speaker 2: nine years before these recent sort of run-ups around the
• 15:38
  Speaker 2: sort of COVID period, of zero growth. Holding onto a
• 15:42
  Speaker 2: property and getting zero growth but still having to pay
• 15:45
  Speaker 2: all the holding costs and the fees and things. But
• 15:49
  Speaker 2: my view is if all you've got to do with
• 15:51
  Speaker 2: your whole real estate, if you go through two price cycles,
• 15:54
  Speaker 2: two price booms, then you're set up for life because
• 15:57
  Speaker 2: of the magnitude and the size of the money that's
• 16:00
  Speaker 2: invested in one individual property. most people would not put $ 500, 000, $ 600, 000,
• 16:07
  Speaker 2: $ 700, 000 just into one individual share or even a portfolio.
• 16:11
  Speaker 2: A lot of people don't do that. Property gives you
• 16:13
  Speaker 2: that leverage. So I think you're right, they did. As
• 16:16
  Speaker 2: I said, I've still owned shares all through the recovery.
• 16:19
  Speaker 2: And geez, it was a long recovery as well. We
• 16:21
  Speaker 2: only to the All Ords and the ASX 200 only
• 16:24
  Speaker 2: a few years ago. It took over 10 or 12
• 16:27
  Speaker 2: years just to get back to where they were in
• 16:29
  Speaker 2: November 2007. Whereas Steady as she goes, property market just
• 16:34
  Speaker 2: kept plodding high. And as I said, flat for a
• 16:37
  Speaker 2: long period while I was watching other states go higher.
• 16:41
  Speaker 2: But it's been SA's turn. But look, I'd be nervous
• 16:44
  Speaker 2: about investing in SA or WA at the moment, even
• 16:48
  Speaker 2: Queensland to a degree, because of the size of the
• 16:52
  Speaker 2: gains that they've had. Nothing keeps going up forever. But
• 16:56
  Speaker 2: you've got that argument. You've got various arguments for the
• 16:59
  Speaker 2: undersupply of real estate nationally, the huge population growth. I
• 17:02
  Speaker 2: just think the fundamentals are still there. And a roof
• 17:07
  Speaker 2: over your head is the best investment you can make,
• 17:09
  Speaker 2: whether it's your own home or whether it's an investment
• 17:12
  Speaker 2: property or two. I've really believed that for a long
• 17:15
  Speaker 2: time because of the security that it gives you.
• 17:18
  Speaker 1: Okay, terrific. We'll take a short break. We're going to
• 17:20
  Speaker 1: have some great questions from Alex and Christopher and Margaret
• 17:23
  Speaker 1: and If we get to it, Orpheus, back in a moment. Hello,
• 17:33
  Speaker 1: welcome back to the Australian's Money Puzzle podcast. I'm James Kirby.
• 17:37
  Speaker 1: I'm talking to Anthony Keene. We have some great questions here.
• 17:42
  Speaker 1: Alex says, I'm in my early 30s. I've been contributing
• 17:45
  Speaker 1: into super with the goal of starting a self-managed super fund.
• 17:49
  Speaker 1: to buy a house in Sydney. The 30-year-long price growth
• 17:54
  Speaker 1: for capital cities is 5%. Assuming I can even find
• 17:58
  Speaker 1: a house in Sydney, this asset will depreciate to 3
• 18:00
  Speaker 1: million in 30 years' time, at which point unrealized gains
• 18:03
  Speaker 1: and earnings will be taxed at 30%. More broadly, it
• 18:07
  Speaker 1: seems like the two tax hacks of super and negative
• 18:10
  Speaker 1: gearing will be phased out in the not-too-distant future. How
• 18:14
  Speaker 1: is this fair? Okay, Alex at least has packed an
• 18:18
  Speaker 1: awful lot into that question. A couple of things. He says,
• 18:22
  Speaker 1: first of all, that negative gearing could go in the
• 18:26
  Speaker 1: near future. I don't know about that. Actually, there's absolutely
• 18:30
  Speaker 1: no evidence about that, Alex, at all. This is never advice.
• 18:33
  Speaker 1: This is only information. But you could argue quite strongly
• 18:36
  Speaker 1: that the ALP lost the election they might have won
• 18:40
  Speaker 1: on the basis that they went near negative gearing and
• 18:42
  Speaker 1: had a plan to reform it. Certainly that and the
• 18:45
  Speaker 1: frank dividend reforms combined was an expensive exercise for them.
• 18:50
  Speaker 1: And I don't think there's the political will to go
• 18:52
  Speaker 1: near negative gearing for some time. It's not even been
• 18:55
  Speaker 1: discussed by either party. However, on super, you make the
• 18:59
  Speaker 1: point that... He's making the point, folks, that the new
• 19:02
  Speaker 1: super tax... which kicks in at 3 million, and then
• 19:09
  Speaker 1: you pay 15% new tax on any earnings over 3 million,
• 19:15
  Speaker 1: that that is going to hit his property plans in
• 19:19
  Speaker 1: super over the long period of time because it's not indexed.
• 19:22
  Speaker 1: There is no plan to index it. I would say
• 19:25
  Speaker 1: to you, Alex, yes, it's not fair that that new
• 19:27
  Speaker 1: tax isn't indexed. It should be indexed. It also shouldn't
• 19:31
  Speaker 1: be on unrealized gains. That should be unrealized gains, and
• 19:35
  Speaker 1: if they can't do that, it should be deemed. But
• 19:38
  Speaker 1: I would just say it's a long, you're talking about
• 19:40
  Speaker 1: a long period of time. And whether a particular super
• 19:43
  Speaker 1: tax was or wasn't indexed in 30 years' time is
• 19:48
  Speaker 1: unlikely to make a major difference. impact on your property
• 19:51
  Speaker 1: returns he says bravely but that's my view what do
• 19:57
  Speaker 1: you think anthony.
• 19:59
  Speaker 2: I agree with you on the negative gearing side i
• 20:02
  Speaker 2: think that once bitten twice shy with that with the
• 20:05
  Speaker 2: labor party but also with these new unfair sort of
• 20:09
  Speaker 2: tax plans. I'm a bit of an optimist on that.
• 20:11
  Speaker 2: And I figure we are going to have a coalition
• 20:14
  Speaker 2: government at some time in the next 10 or 20 years.
• 20:16
  Speaker 2: And I think that we're going to fight back against
• 20:20
  Speaker 2: some of the most unfair parts of those rules. I
• 20:24
  Speaker 2: really think that it's not going to last. So yeah.
• 20:28
  Speaker 2: thinking of what government's saying today is probably going to
• 20:31
  Speaker 2: be completely different sort of 10, 20, 30 years from now.
• 20:35
  Speaker 2: And I think eventually everything does revert back to fairness
• 20:39
  Speaker 2: as well. It just might take time. And if you're
• 20:42
  Speaker 2: lucky enough to get caught out, the period where it
• 20:44
  Speaker 2: is unfair, and we might see that next year with
• 20:47
  Speaker 2: some several horror stories that unfold in the next year
• 20:49
  Speaker 2: or two once that new tax comes in, people being
• 20:52
  Speaker 2: forced to sell stuff.
• 20:53
  Speaker 1: Yeah, exactly. I think you might have some farmers that
• 20:55
  Speaker 1: go broke or something or have terrible stories, and that
• 20:58
  Speaker 1: will be enough to turn the wider public to actually,
• 21:00
  Speaker 1: first of all, have a look at it, see what
• 21:02
  Speaker 1: is actually wrong with it. It's hard to feel sorry
• 21:04
  Speaker 1: for people who have 3 million in super. I take
• 21:06
  Speaker 1: that on board in two seconds. But also, taxes should
• 21:11
  Speaker 1: have a certain shape and And they should be broadly equitable,
• 21:15
  Speaker 1: as you say, across the board. OK, do you want
• 21:17
  Speaker 1: to read the question from Christopher?
• 21:18
  Speaker 2: Yes, sure. Christopher is wondering what we think will be
• 21:21
  Speaker 2: the impact of a Trump presidency on the Australian dollar.
• 21:26
  Speaker 2: He's asking, is there a decent US ETF that focuses
• 21:29
  Speaker 2: on US energy stocks? Because he expects that they're about
• 21:33
  Speaker 2: to go gangbusters if Mr. Trump gets in. Do you
• 21:37
  Speaker 2: want me to share my thoughts on that first? Yes, sure.
• 21:42
  Speaker 2: I think he might be on the money as far
• 21:44
  Speaker 2: as demand for US energy stocks. I heard that Donald
• 21:48
  Speaker 2: Trump and his frenzied crowd chanting at one of his
• 21:51
  Speaker 2: rallies or speeches drill baby drill drill baby drill that
• 21:55
  Speaker 2: was what they were calling for and so that does
• 21:59
  Speaker 2: but as far as the impact on the Aussie dollar
• 22:02
  Speaker 2: some of the stuff that I've read and I'm not
• 22:03
  Speaker 2: a currency specialist but obviously like you I get a
• 22:06
  Speaker 2: lot of stuff comes across my desk all the time
• 22:08
  Speaker 2: and there seems to be talk that may not be
• 22:10
  Speaker 2: very good for the Aussie dollar or global exports overall
• 22:15
  Speaker 2: for anybody because of the talk of heavy tariffs that
• 22:19
  Speaker 2: Trump might bring in, particularly towards China. And I do
• 22:23
  Speaker 2: know that the Aussie dollar is what I think it's
• 22:25
  Speaker 2: like the fifth most traded currency in the world, largely
• 22:28
  Speaker 2: because it's a proxy for investing in global trade and
• 22:32
  Speaker 2: investing in China in particular. They'll buy the Aussie dollar
• 22:35
  Speaker 2: based on the sort of China. So if we have
• 22:38
  Speaker 2: this massive trade war with US and China and huge
• 22:40
  Speaker 2: tariffs and things, I don't think that's going to be
• 22:42
  Speaker 2: good for the Aussie dollar at all.
• 22:44
  Speaker 1: Okay, very good. All right. I hope that's useful to you, Christopher.
• 22:48
  Speaker 1: I think it's beyond doubt that if Trump won, and
• 22:52
  Speaker 1: this will get priced into the market instantly, but if
• 22:55
  Speaker 1: Trump wins... It's beyond doubt it's good for oil and
• 22:58
  Speaker 1: fossil fuel stocks, and it's also beyond doubt that it's
• 23:00
  Speaker 1: not good for ESG-related investments, especially where ESG investments have
• 23:05
  Speaker 1: been packaged up into some sort of a fund or
• 23:07
  Speaker 1: an ETF. That's a flip side. Okay, Margaret, M-A-R-G-A-R-E-T. I'm
• 23:14
  Speaker 1: a new listener to your podcast, and I wonder if
• 23:15
  Speaker 1: you can offer me information. Recently, my super fund had
• 23:20
  Speaker 1: a data outage that was caused by a third party.
• 23:23
  Speaker 1: It took more than a week to resolve. Give me
• 23:25
  Speaker 1: time to ponder. How safe is my super? What if
• 23:28
  Speaker 1: there was a malicious attack and my super disappeared? I
• 23:32
  Speaker 1: completely understand this question, how somebody would ask this. And
• 23:36
  Speaker 1: she also says, I understand the banks have some kind
• 23:39
  Speaker 1: of insurance known as the financial claim scheme, which will
• 23:41
  Speaker 1: cover up to 250k. Okay, two different things there, Margaret. Yes,
• 23:45
  Speaker 1: all cash in Australia is held in banks, or to
• 23:49
  Speaker 1: be precise, approved deposit-taking institutions, which is more than just banks,
• 23:54
  Speaker 1: is guaranteed by the government explicitly to the tune of
• 23:59
  Speaker 1: 250,000 per person per bank. Okay, so that's there. Put
• 24:02
  Speaker 1: that to one side. Nice thing to know. Now, about
• 24:05
  Speaker 1: how safe is your super? I think we'll just focus
• 24:07
  Speaker 1: on how safe is your super in relation to malicious attacks,
• 24:12
  Speaker 1: shall we say, IT attacks or scams. The reality is
• 24:17
  Speaker 1: that this is wide open, and the funds have had problems.
• 24:23
  Speaker 1: I had a piece in the paper, in the section
• 24:25
  Speaker 1: which I used this week, which was actually a guest
• 24:28
  Speaker 1: piece by Heather Gray, AFCA, the Australian Financial Complaints Authority,
• 24:33
  Speaker 1: and she makes the point that this is very, in super,
• 24:37
  Speaker 1: in the big super, in the industry super funds or
• 24:39
  Speaker 1: the other funds, it's a small issue, numerically. But That
• 24:45
  Speaker 1: small number of people who have been unfortunate enough, where
• 24:49
  Speaker 1: there has been some scams, our IT issue, whether they
• 24:52
  Speaker 1: were malicious or not, it has been a problem inside.
• 24:56
  Speaker 1: And for the people who were, for the handful of
• 24:58
  Speaker 1: people who have been exposed to this danger inside Superfund,
• 25:01
  Speaker 1: it's been a problem. So she makes the point that
• 25:03
  Speaker 1: it's a small number of people that have had any
• 25:05
  Speaker 1: issues in Superfund. with IT or IT scams. But those people,
• 25:09
  Speaker 1: it's big news for them because she mentions figures. She
• 25:12
  Speaker 1: actually put some figures on it. $ 80, 000, I think, was
• 25:15
  Speaker 1: the precise number she put on one of the issues
• 25:19
  Speaker 1: inside Super. I don't think anyone knows, Anthony, that I
• 25:22
  Speaker 1: don't think anyone can stand in front of your Super
• 25:24
  Speaker 1: fund and say, listen, this fund is immune from IT
• 25:27
  Speaker 1: attacks because they're always coming, they're always breaking through.
• 25:31
  Speaker 2: Yes, and I agree. It is really hard to say it.
• 25:36
  Speaker 2: We haven't been really tested with a major attack like
• 25:39
  Speaker 2: we saw with private health insurance details a year or
• 25:42
  Speaker 2: so ago that we wouldn't have thought that that would happen,
• 25:46
  Speaker 2: but it did. Your super's always at risk to markets
• 25:51
  Speaker 2: and things, and this is just another potential risk. But
• 25:55
  Speaker 2: I think the bigger risk might be just people being
• 25:57
  Speaker 2: scammed from people. I know there have been reports of
• 26:00
  Speaker 2: scammers like cheating people out of their money by getting
• 26:03
  Speaker 2: them to transfer to an early release service. scheme or
• 26:07
  Speaker 2: fund or some other thing and then stealing it that way.
• 26:10
  Speaker 1: So yes and that's money coming out of super but
• 26:13
  Speaker 1: while the money is is safely inside super just for
• 26:16
  Speaker 1: what it's worth this piece from heather gray margaret said
• 26:19
  Speaker 1: that africa received 11 000 complaints in relation to scams
• 26:23
  Speaker 1: last year only 20 20 out of 11 000 came
• 26:27
  Speaker 1: from superannuation fund members And she says, while these complaints
• 26:31
  Speaker 1: are a smaller number, the average loss claimed in them
• 26:33
  Speaker 1: was 88,000 and ranged as high as 344,000. So it's
• 26:39
  Speaker 1: like being struck by lightning, right? It's very unlikely, but
• 26:41
  Speaker 1: if it happens, it's trouble for the people involved. I
• 26:44
  Speaker 1: think we'll come back to this another time. I think
• 26:47
  Speaker 1: this is worth a deeper dive. Thank you very much
• 26:49
  Speaker 1: for the questions. That's about as far, I think, as
• 26:51
  Speaker 1: we could go on that one today. All right. Orpheus,
• 26:57
  Speaker 1: do you want to try Orpheus's questions? Anthony. Yes.
• 27:02
  Speaker 2: Orpheus says that a lot of your guests have discussions
• 27:04
  Speaker 2: about how to make money through investing, but he asks,
• 27:07
  Speaker 2: what about protecting your final wealth and standard of living
• 27:11
  Speaker 2: if a health event or death cuts your working life short?
• 27:13
  Speaker 2: He's talking about life insurance or protecting your ability to
• 27:16
  Speaker 2: earn an income and pay down debt if you do
• 27:18
  Speaker 2: become sick or injured and can no longer work or
• 27:21
  Speaker 2: if you pass away. wants to talk about life, TPD, trauma,
• 27:25
  Speaker 2: and income protection insurance cover, both inside and outside of super,
• 27:30
  Speaker 2: and would like to sort of this.
• 27:31
  Speaker 1: You're a diversified investor, Anthony. Do you have all those insurances?
• 27:35
  Speaker 2: Yes, and Orpheus is right because he says it's an
• 27:38
  Speaker 2: unsexy but essential need to protect wealth. And you're right.
• 27:42
  Speaker 2: And there are arguments of having it both within and
• 27:45
  Speaker 2: outside of super.
• 27:46
  Speaker 1: Do you have your insurances? Are they inside super or outside?
• 27:50
  Speaker 2: Mostly inside super and that's purely from apart from some
• 27:54
  Speaker 2: trauma cover which you cannot have inside super but death
• 27:58
  Speaker 2: cover tpd and income protection you can have that with
• 28:01
  Speaker 2: inside super and it's yes my my children are getting
• 28:05
  Speaker 2: older and finishing school now but i've been in the
• 28:08
  Speaker 2: process in the last couple of years of winding down
• 28:11
  Speaker 2: some of that cover within super because you've always got
• 28:14
  Speaker 2: to some people can waste a lot of money with
• 28:16
  Speaker 2: huge insurance cover through super because obviously the cover school
• 28:20
  Speaker 2: fees and the like if you do pass away but
• 28:24
  Speaker 2: when those or big mortgages same sort of thing you
• 28:27
  Speaker 2: people can get caught being over-insured later in life. That said,
• 28:32
  Speaker 2: the vast majority of Aussies are under-insured and don't have
• 28:35
  Speaker 2: enough and think that maybe the default $ 100, 000 of cover
• 28:39
  Speaker 2: they might have in their industry super fund or whatever
• 28:41
  Speaker 2: is going to be enough, and it's not if anything happens.
• 28:43
  Speaker 2: So yes, definitely worth looking at, definitely worth speaking to
• 28:47
  Speaker 2: a specialist about that.
• 28:49
  Speaker 1: Okay, terrific. And I would say, as you say, very true,
• 28:53
  Speaker 1: the vast majority of people are under-insured. However, I would
• 28:56
  Speaker 1: say to our audience, who I instinctively feel would be
• 28:59
  Speaker 1: quite across the basics of this anyway, watch out that
• 29:03
  Speaker 1: you're not over-insured. As Anthony says, as you get older
• 29:06
  Speaker 1: and you have all these insurance settings, particularly if you
• 29:10
  Speaker 1: have income protection insurance or even life insurance, and if
• 29:13
  Speaker 1: you've got a substantial amount in super, then you do
• 29:17
  Speaker 1: ask yourself, why did I get this once upon a time? 15,
• 29:21
  Speaker 1: 20 years ago, I got all these insurances because I
• 29:23
  Speaker 1: really needed to cover things because I was really exposed, right?
• 29:26
  Speaker 1: I didn't fully own my house or I didn't have
• 29:29
  Speaker 1: much in super, etc., etc. Is that still the case?
• 29:34
  Speaker 1: An insurance broker, I'm afraid, will never tell you to
• 29:37
  Speaker 1: have less super, to have less insurance, etc. Not in
• 29:40
  Speaker 1: my experience anyway. They don't actually suggest you buy less.
• 29:44
  Speaker 1: And if you say to them, maybe I should have less,
• 29:46
  Speaker 1: the doctor says you shouldn't smoke. And you say, if
• 29:48
  Speaker 1: I had one a year, would it make a difference?
• 29:50
  Speaker 1: They say, just don't smoke at all. An insurance broker
• 29:52
  Speaker 1: will say the same thing. They will say, if you say,
• 29:54
  Speaker 1: should I still have all this insurance? They say, why not?
• 29:57
  Speaker 1: Just in case. But that's not an argument. That's not
• 30:00
  Speaker 1: a powerful argument. That's not a proper argument. I would
• 30:02
  Speaker 1: review your individual circumstance each year and be very careful
• 30:07
  Speaker 1: that you don't over-insure. It's an oddly seductive thing when
• 30:10
  Speaker 1: they say, listen, you're insured for 2 million or 1
• 30:13
  Speaker 1: million and the figures get high and it sounds great.
• 30:16
  Speaker 1: And you say, gosh, yes, I suppose I'm worth that.
• 30:18
  Speaker 1: But you pay through the nose for that. As Anthony says,
• 30:22
  Speaker 1: keep an eye on it and keep an eye on
• 30:24
  Speaker 1: it as your life evolves. changes. If you've got a
• 30:28
  Speaker 1: house full of kids, that's one thing. If you don't,
• 30:33
  Speaker 1: it's a completely different set of circumstances. I have an
• 30:36
  Speaker 1: advisor on this show who says basically once you're in
• 30:39
  Speaker 1: your early 60s, if you have a substantial amount in super,
• 30:45
  Speaker 1: you don't need life insurance at all because your super
• 30:48
  Speaker 1: fund can cover it and you can save yourself thousands
• 30:51
  Speaker 1: a year which you could invest in your super fund.
• 30:54
  Speaker 1: There's a plan that we might think about for another day,
• 30:57
  Speaker 1: but we will leave that one hanging out there for
• 30:59
  Speaker 1: everyone to kick around until we talk again. Hey, Anthony,
• 31:02
  Speaker 1: thank you very much. Lovely to have you on the show.
• 31:04
  Speaker 2: Thanks for having me, James. It's been great.
• 31:06
  Speaker 1: That's Anthony Keene, folks. He's the person and finance writer
• 31:09
  Speaker 1: on News Corporation, colleague of mine. Do keep the emails coming.
• 31:14
  Speaker 1: If you want to support the show, just mention it
• 31:16
  Speaker 1: to one other person. Just mention it to one person
• 31:18
  Speaker 1: this week. That's what we would really appreciate. And thank
• 31:22
  Speaker 1: you very much if you do. If you'd like to correspond,
• 31:25
  Speaker 1: ask a question, complain, whatever you want, the email is there, themoneypuzzleattheaustralian.com.au.
• 31:33
  Speaker 1: And I will talk to you soon.