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Have Aussie shares let you down this year? · The Money Puzzle

0:10
Speaker 1: Hello and welcome to the Australians Money Puzzled podcast. I'm
0:13
Speaker 1: James Kirby. Welcome aboard everybody. I hope you're holding up
0:16
Speaker 1: well in these last working days of the year, and
0:19
Speaker 1: I hope you had a very good year so far
0:22
Speaker 1: as an investor. I expect you would actually be unlucky
0:27
Speaker 1: not to have had a good year as an investor.
0:29
Speaker 1: We've had some really good returns again and one of
0:33
Speaker 1: the big questions is can it all keep going at
0:36
Speaker 1: this pace. My guest today is a regular guest, one
0:41
Speaker 1: of our favorite guests on the show, Jemma Dale, head
0:44
Speaker 1: of Investor behavior at nab Nap Trade. How are you, Gemma?
0:48
Speaker 2: I'm well, Thanks, How are you?
0:50
Speaker 1: I'm good? Thank you. There's so much to talk about,
0:53
Speaker 1: and don't let me end the show without mentioning gold
0:56
Speaker 1: could be the fascinating talk about gold. The last time
0:58
Speaker 1: it turned out to be I say precient. Okay, now,
1:03
Speaker 1: first things first. In a way, yes, it's another good
1:07
Speaker 1: year and I think people will be should be happy
1:10
Speaker 1: with the returns they are getting. I suppose in a
1:12
Speaker 1: way some of the attention is all about super these days,
1:16
Speaker 1: and if you look at super returns, super ratings. For instance,
1:20
Speaker 1: they've just come up with what looks like the year
1:23
Speaker 1: to November. That's this morning, I might add, And we're
1:28
Speaker 1: looking at for the average balance fund eight percent for
1:33
Speaker 1: the year. That's if we closed off the books, you know,
1:36
Speaker 1: a few days ago, which is of course much better
1:39
Speaker 1: than usual, and that's driven yet again by shares. I know,
1:43
Speaker 1: it's a really big question. Can it keep going? But
1:47
Speaker 1: in that trade, is there a sense that this market
1:51
Speaker 1: is in some way justifiable on earnings and fundamentals or
1:56
Speaker 1: is there a sense that this is this market is
2:00
Speaker 1: about to boil over?
2:02
Speaker 2: Yeah, such a good question. I think it's quite clear.
2:06
Speaker 3: From so, we have a cash book, which is very
2:09
Speaker 3: interesting and tends to be the best illustration. So there's
2:13
Speaker 3: kind of a couple of things you can watch to
2:14
Speaker 3: see what people are really thinking and feeling. One is
2:16
Speaker 3: how much cash are people holding? And is it growing
2:19
Speaker 3: over time? Our cash book has just been growing and growing,
2:22
Speaker 3: and that at an increasing rate, far more so. And look,
2:26
Speaker 3: it does get run down at times when people feel
2:28
Speaker 3: the market has been oversold, and that is so it's
2:32
Speaker 3: a reasonable reflection of how people are feeling. So we
2:34
Speaker 3: had huge buying during liber liberation day, and the big
2:38
Speaker 3: one was COVID right when the buying was you know,
2:41
Speaker 3: four out of every five trades was a buy, and
2:43
Speaker 3: that fifth one was usually people selling something to buy
2:46
Speaker 3: something else, and the cash book was running down, but
2:49
Speaker 3: more cash was coming in. It's getting piled in to
2:52
Speaker 3: keep buying during that period. So people will absolutely put
2:55
Speaker 3: that cash to work. It's not just it is a
2:57
Speaker 3: high interest account. It pays you the RBA cash, but
3:00
Speaker 3: it is absolutely used if investors feel there's an opportunity
3:04
Speaker 3: to chase.
3:05
Speaker 2: So that is very high growing all year.
3:09
Speaker 1: Explain to listeners what that means that the cash is growing.
3:12
Speaker 1: Does it mean they are wary of buying at these levels?
3:19
Speaker 2: What it tells us.
3:20
Speaker 3: So the other things that we're seeing are there's less
3:24
Speaker 3: buying and a bit more selling.
3:25
Speaker 2: Right, it's not a huge split.
3:27
Speaker 3: It's not like it's twenty percent buying at eighty percent
3:30
Speaker 3: selling or anything like that.
3:31
Speaker 2: You would never see that because a lot of people.
3:32
Speaker 3: Are accumulating over time and that's never going to be
3:35
Speaker 3: their strategy. But we've seen a slight uptick in selling
3:39
Speaker 3: and a slight down tick in buying through this year,
3:43
Speaker 3: dependent on different times of the year. Obviously, and what's
3:45
Speaker 3: going on in the market. Liberation Day it was all buying,
3:48
Speaker 3: so let's put that to one side. So cash book
3:51
Speaker 3: is rising, That tends to tell you people would rather
3:54
Speaker 3: have some cash on the sidelines and wait for a pullback.
3:57
Speaker 3: There's an uptick in selling and people are taking their
4:01
Speaker 3: dividends and holding them in cash rather than deploying them
4:04
Speaker 3: straight back into the market. So they're the major themes
4:07
Speaker 3: that we see. It's not huge, it's not like people
4:10
Speaker 3: are selling wholesale, but they're trimming things that they feel
4:14
Speaker 3: have run really hard. They've been trimming the banks for
4:16
Speaker 3: a year and a half now, and particularly early this year.
4:20
Speaker 3: Anything else they feel has done very well, they're just
4:22
Speaker 3: starting to take a bit off the table.
4:24
Speaker 1: Okay, trimming the banks wasn't a bad call at all,
4:26
Speaker 1: but we did make that point regularly on the show
4:29
Speaker 1: that they were at elevated levels. Can we put numbers
4:32
Speaker 1: around that in any way? I know fund managers is
4:35
Speaker 1: a similar thing. When you see the big fund managers
4:37
Speaker 1: lifting their cash levels, that suggest they're getting warier of
4:42
Speaker 1: the market they're in. Are you able to give us
4:44
Speaker 1: anything at all? The way of the level is it? Is?
4:47
Speaker 1: It more from five percent to ten percenter or whatever.
4:51
Speaker 3: We don't know what people's whole portfolio looks like, you know,
4:56
Speaker 3: we only know what we see in the platform. So
4:59
Speaker 3: you might have all your Australian equities with NAB Trade,
5:02
Speaker 3: but you might have some managed fund somewhere else, and
5:04
Speaker 3: you're super fund with a professional managed fund, and you
5:07
Speaker 3: might have some term deposits as well as that cash.
5:09
Speaker 2: So I can't really.
5:11
Speaker 3: Sort of go this is exactly people's finite universe of wealth.
5:14
Speaker 3: We just know in terms of the behavior we see
5:18
Speaker 3: within that platform. This is very typical of when investors
5:22
Speaker 3: feel the market has run a bit too hard. And
5:25
Speaker 3: we saw the same thing in twenty nineteen when you
5:29
Speaker 3: remember the market put on nineteen percent. It was completely
5:32
Speaker 3: unexpected because there were two unexpected rate cards. We just
5:35
Speaker 3: saw this cash book just fumped straight up, and then
5:37
Speaker 3: as soon as COVID happened, they threw the money straight
5:40
Speaker 3: back in the market.
5:41
Speaker 1: It's interesting, Yeah, I mean that would all make sense.
5:43
Speaker 1: I mean, am I hon SMSF. I don't actively mean
5:46
Speaker 1: for the cash amount to lift, but it's been lifting
5:50
Speaker 1: due to activity as such, but not buying.
5:56
Speaker 3: Yeah, that's absolutely you know, I can't see anything I
5:58
Speaker 3: really like because I'm just gonna wait a minute, and
6:00
Speaker 3: then suddenly I've got ten percent.
6:02
Speaker 1: Okay, very interesting. Now, the thing is, folks, I was
6:06
Speaker 1: mentioning that it's a good year, okay, and it is
6:08
Speaker 1: a good year. I'm talking about calendar year in the
6:12
Speaker 1: Australian market. However, I think we better be careful here
6:17
Speaker 1: the when we say it's a really good market, what
6:19
Speaker 1: we really mean is that the market, anchored and holy
6:25
Speaker 1: and utterly underpinned by Wall Street, being about sixty six
6:29
Speaker 1: percent of the whole world market is so good, is
6:34
Speaker 1: so strong. As we speak, it's about seventeen percent of
6:38
Speaker 1: the S and P five hundred is of seventeen percent
6:41
Speaker 1: in twelve months. That is a knockout number. Our number
6:46
Speaker 1: is barely six percent. It's a little. It's about five
6:49
Speaker 1: and a half as I speak today, being the eleventh
6:52
Speaker 1: of December. Okay, so it's five percent, and hooray, okay,
6:56
Speaker 1: we have good yields. So let's add the yields in.
6:58
Speaker 1: Let's say the dividends are four we're going to get
7:00
Speaker 1: nine percent. Nine percent is good. It's not shooting the
7:03
Speaker 1: lights out, though, which begs the question Gemma, have we
7:07
Speaker 1: all been in the wrong market? Oh, let's hear your answer,
7:12
Speaker 1: because I mean it isn't it. We've raised this before.
7:16
Speaker 1: Are we all in the wrong market?
7:17
Speaker 2: Yeah, it's such a tough one.
7:19
Speaker 3: We So Australia has a shocking home bias. From an
7:26
Speaker 3: investment perspective, we know that our investors are hugely exposed
7:31
Speaker 3: to the ASEX relative to other global markets, and the
7:34
Speaker 3: ASEX is a very tiny proportion of the global market.
7:37
Speaker 3: You just talked about how big the US market, though,
7:40
Speaker 3: is in the global in the World index. If we
7:43
Speaker 3: look at MISKY World, for example, the US is probably
7:46
Speaker 3: overrepresented and everything else is underrepresented. But we go the
7:50
Speaker 3: other way when we look at people's portfolios, Australia is
7:52
Speaker 3: massively overrepresented and everything else is underrepresented. Has been changing
7:57
Speaker 3: over time, right, so there's always a bit of a
8:00
Speaker 3: legacy effect where so many of our investors bought CVA
8:04
Speaker 3: and the float and have held it ever since, and
8:07
Speaker 3: so they've just got these huge allocations to things they
8:09
Speaker 3: bought a long time ago. And we know older Australians
8:13
Speaker 3: are wealthier on average by and by quite substantial margin.
8:17
Speaker 3: Even if you strip out property, they have much larger shareholdings,
8:20
Speaker 3: they had opportunities to get into those big IPAs, so
8:23
Speaker 3: they tend to have these portfolios that skew the data
8:25
Speaker 3: quite a lot. When we look at our younger and
8:27
Speaker 3: newer investors, they are much more diversified both with their
8:31
Speaker 3: domestic and their international holdings, and they got on top
8:34
Speaker 3: of international quite early. It made sense for them. You know,
8:37
Speaker 3: you hold Apple in your pocket and you watch Netflix,
8:40
Speaker 3: and you have exposure to the big the megacaps in
8:43
Speaker 3: the US all day, every day in your life, and
8:47
Speaker 3: so our younger investors got on that quite early.
8:49
Speaker 2: That made perfect sense for them.
8:51
Speaker 3: I'm like, I use this thing all the time, got
8:53
Speaker 3: reasonable understanding what the company is and what it does.
8:55
Speaker 3: Do I think it's good value? I don't know, but
8:57
Speaker 3: I definitely think it's going to grow. So we do
9:00
Speaker 3: see our younger investors with a fair bit of UIXIT exposure.
9:04
Speaker 2: You really do, and.
9:06
Speaker 1: What it be? I'm just looking back, folks, this is
9:08
Speaker 1: really worth hearing. Okay, so this is one year. But
9:12
Speaker 1: the thing is, if you look historically over the last
9:16
Speaker 1: fifteen years, are you ready for this? The last fifteen years,
9:19
Speaker 1: this is the ASX has done seven point six percent perannum,
9:25
Speaker 1: and the S and P five hundred has done fourteen
9:29
Speaker 1: point three. Paradum Us stocks have done twice as well
9:34
Speaker 1: as Australian stocks, not this year, not last year, four
9:38
Speaker 1: fifteen years in a row, literally half the lifetime of
9:43
Speaker 1: a generation. So every year people say, oh, well, Australia
9:47
Speaker 1: is bound to catch up now, because you know it's
9:49
Speaker 1: the return to the mean, return to normal. We're all
9:52
Speaker 1: clearly undervalued, they're clearly overvalued. Is that a sensible strategy?
9:58
Speaker 1: Knowing what we.
9:59
Speaker 3: Know past before, This is not a guide to future performance.
10:03
Speaker 2: Let's just say this fifteen years. Well, so here's the thing.
10:06
Speaker 3: I started in market in like two thousand and that
10:10
Speaker 3: was an incredible time because you didn't have great daily
10:14
Speaker 3: done like it wasn't fantastic. You weren't necessarily following the
10:16
Speaker 3: market daily the way you can now Internet existed. You
10:19
Speaker 3: definitely did not have a phone in your pocket where
10:21
Speaker 3: you could check real time pricing. Right, so we would
10:24
Speaker 3: all have a look at the Vanguard chart showing international
10:27
Speaker 3: shares doing this and Aussie shares doing this, And the
10:30
Speaker 3: argument was always Australia is an old world economy and
10:34
Speaker 3: has limited value in a new world. It's all about
10:37
Speaker 3: the New World's Internet stocks, all this kind of stuff,
10:41
Speaker 3: and then that was a complete disaster for the next
10:43
Speaker 3: seven or eight years.
10:44
Speaker 2: Two is one of you little.
10:45
Speaker 3: Bit careful going look at the last decade, wasn't this
10:50
Speaker 3: thing amazing? And then yeah, you could do the same
10:52
Speaker 3: thing with Japan in the early nineties. Right, So there
10:55
Speaker 3: will be anomalist periods where one thing just outperforms for
10:57
Speaker 3: quite a long time, way longer than you expect to
11:00
Speaker 3: if it is anomalous, and then you know there is
11:03
Speaker 3: a reversion to the mean, and you get really disappointed
11:05
Speaker 3: with yourself.
11:06
Speaker 2: Because you put it right at the top.
11:08
Speaker 3: But it is worth noting we have hugely different economies,
11:13
Speaker 3: certainly the Australia in the US, and everyone compares to
11:17
Speaker 3: the US.
11:17
Speaker 2: It is the behemoth it is.
11:19
Speaker 1: But crucially also are people missing. They're just literally missing.
11:23
Speaker 1: There is no AI stocks here. Really, Next you sees
11:27
Speaker 1: a data center, Goodman is a property just there is
11:30
Speaker 1: no AI monsters here. There is no pharmaceutical phizorus etc.
11:35
Speaker 1: That're just not here.
11:36
Speaker 3: So we have a different economy and we don't have those.
11:42
Speaker 3: The other thing is these are global companies, so we
11:44
Speaker 3: talk about them as being US.
11:46
Speaker 2: They are US listed, but every.
11:47
Speaker 3: Single one of us is using Apple somewhere, every single
11:50
Speaker 3: one of us is using Microsoft somewhere in our lives.
11:54
Speaker 2: So this idea that they.
11:55
Speaker 3: Are US companies is no longer strictly true. They are
11:58
Speaker 3: a global company and they have global exposure. Can they
12:02
Speaker 3: continue to grow at the rates that are priced in currently?
12:05
Speaker 2: Though?
12:05
Speaker 3: That's really the big question, Like as overshot, even if
12:09
Speaker 3: they're still extraordinary companies doing extraordinary things, have they overshot?
12:13
Speaker 3: And we have plenty of investors who think they've overshot,
12:16
Speaker 3: and plenty who think they're going to keep running, And
12:18
Speaker 3: it's really difficult to know.
12:20
Speaker 2: You know, they're very expensive by historical stands.
12:23
Speaker 1: They're very expensive via historical standards, but then they have
12:25
Speaker 1: tremendous earnings. Tell me structurally though, let's just step aside
12:30
Speaker 1: from the anomalies and everything else. The point you made
12:33
Speaker 1: is that younger investors, and it's interesting how you would
12:36
Speaker 1: define that, but younger investors have a much higher proportion
12:40
Speaker 1: to the global and Wall Street listed companies than older Australians.
12:46
Speaker 1: Who should make a move? Who should in terms of
12:49
Speaker 1: strategy allocation, long term portfolio allocation, I'm not talking about
12:53
Speaker 1: today or tomorrow. Who should make a move. Should the
12:55
Speaker 1: younger investors shift more towards THEX, so, should the order
13:00
Speaker 1: ASX invest just chasing the franctividends shift more towards global companies?
13:07
Speaker 3: Good question, So I think what we see so younger
13:09
Speaker 3: investors usually do tend to start with the AX and
13:12
Speaker 3: they will start buying ETFs, and the proportion of young
13:15
Speaker 3: investors and I'm talking sub forty years of age, right,
13:18
Speaker 3: not super young. I'm not talking so that you can't
13:20
Speaker 3: get an account till you're eighteen, but we have anywhere
13:25
Speaker 3: between eighteen and forty year olds, something like forty percent
13:28
Speaker 3: of them only own ETFs, which is astonishing. Right, four
13:33
Speaker 3: years ago, we would not have been having this conversation,
13:35
Speaker 3: but the growth has been incredible and they love that
13:38
Speaker 3: strategy and it makes perfect sense and it takes a
13:40
Speaker 3: lot of the stress out of investing. They start with
13:42
Speaker 3: the ASX two hundred, but they very quickly add the
13:45
Speaker 3: S and P five hundred, and it's like it's ASEX daylight,
13:49
Speaker 3: S and P five hundred daylight and then everything else.
13:53
Speaker 3: So they're very clearly just those two markets for older investors,
13:58
Speaker 3: particularly retires, and have these big, chunky portfolios that have
14:02
Speaker 3: evolved over time.
14:05
Speaker 2: They're managing them for income.
14:06
Speaker 3: They tend not to want to run down their capital
14:08
Speaker 3: and retirement, which is a different topic entirely.
14:11
Speaker 2: They want to live off the yield.
14:13
Speaker 3: If you're trying to live off the yield, it does
14:16
Speaker 3: make sense to have less exposure to a market like
14:18
Speaker 3: the US which has a very low yield, even though
14:22
Speaker 3: there's a lot of attraction in that growth opportunity there
14:25
Speaker 3: if you're trying to grow some of your capital base.
14:28
Speaker 3: So the behavior is actually reasonably rational based on what
14:32
Speaker 3: people are trying to achieve, but also where they've come from. Right,
14:36
Speaker 3: Young people have come from an app in your pocket,
14:38
Speaker 3: buy an ETF it's super cheap, don't have to think
14:40
Speaker 3: about it, just do it consistently.
14:42
Speaker 2: You're good to go.
14:43
Speaker 3: And older people came from the way to make money
14:45
Speaker 3: is to buy the big floats in the nineties or
14:48
Speaker 3: to buy BHP and the big Australian and those.
14:51
Speaker 2: Sorts of things. So their portfolios have evolved based on
14:53
Speaker 2: when they started.
14:54
Speaker 1: Okay, and folks, it's worth knowing that we have regular
14:58
Speaker 1: guests on the show who have said, if you do
15:00
Speaker 1: want to increase your exposure beyond the ESX ETFs are
15:05
Speaker 1: a very good way to start. I mean they are
15:07
Speaker 1: a very good way to start. That's indisputable. Exchange treated funds.
15:10
Speaker 3: Sorry, I will say our older investors do that, right.
15:15
Speaker 3: So if they have no international experience, they may have
15:17
Speaker 3: had some of the listed international LICs and sort of
15:22
Speaker 3: actively managed funds. And to be honest, the big ones
15:25
Speaker 3: that they bought are very out of fashion now. So
15:27
Speaker 3: they had Platinum back in the day, and then they
15:28
Speaker 3: have Magellan and those brands are no longer sort of
15:32
Speaker 3: where we would ever see anyone putting their money, but
15:36
Speaker 3: they may have that exposure now. It's like I'm just
15:39
Speaker 3: going to get the S and P five hundred. I'm
15:40
Speaker 3: just going to do that easy.
15:41
Speaker 2: Unfinitely older investors have bought that too.
15:44
Speaker 1: Okay, very a good point. And we're not pushing one
15:46
Speaker 1: or the other. Folks. They are all more or less
15:48
Speaker 1: the same. They'll all call me now and say that's
15:50
Speaker 1: not true. But talk about how many engines on the
15:54
Speaker 1: head of a pin? All right, I want to talk.
15:56
Speaker 1: I want to come back to you on a couple
15:57
Speaker 1: of points, but take short break back in a moment. Hello,
16:06
Speaker 1: welcome back, to the Australian's Money Puzzle podcast, James Kirby
16:10
Speaker 1: talking to jem at Dale, regular on the show, head
16:13
Speaker 1: of Investor Behavior at NAP Trade. It's funny, you know.
16:18
Speaker 1: Often I go on things and people joke, Oh well,
16:20
Speaker 1: that sounds like a great job, you know, Associate editor
16:22
Speaker 1: Wealth on The Australian, you must be very wealthy and
16:24
Speaker 1: blah blah blah. And I love your job. You're head
16:28
Speaker 1: of Investor Behavior. I just think I just love that
16:31
Speaker 1: job title. As you do.
16:32
Speaker 2: I don't tell people what to do. I just watch
16:34
Speaker 2: what they do. It's fast.
16:35
Speaker 1: Yeah, yeah, I could say that too. Actually, all right, okay,
16:39
Speaker 1: now a couple of things I want to put to
16:42
Speaker 1: you about the market and the nature of it. Just
16:44
Speaker 1: now we are looking at well, it's passable market. It's good. Look,
16:49
Speaker 1: it's fine. You know at the moment to be ruled
16:51
Speaker 1: off the books on the asx's, I say, it's maybe
16:54
Speaker 1: a little bit better than average, and if we rule
16:56
Speaker 1: off on the US, it's way better than average. Yet again,
17:01
Speaker 1: but overall, your share portfolio should be strong and perhaps
17:05
Speaker 1: if you are fortunate enough and you have had that
17:08
Speaker 1: strategy that Jemma has talked about, that you have both
17:11
Speaker 1: directly into the US, certainly in the way of ETFs,
17:16
Speaker 1: then they should actually gun your portfolio, your shares portfolio
17:20
Speaker 1: well beyond nine percent for the calendar year. All good. Now,
17:24
Speaker 1: a couple of things I think that are sort of emerging.
17:27
Speaker 1: It's a very lively market. There's also some things starting
17:31
Speaker 1: to happen, Like we were just talking before the show
17:33
Speaker 1: about this amazing deal of Netflix buying Warner Brothers Discovery,
17:39
Speaker 1: and there's a joke in markets about Warner Brothers that
17:42
Speaker 1: every time they're in the news, it's the top of
17:45
Speaker 1: the market if you remember, and you will remember because
17:49
Speaker 1: you mentioned dot com that was the famous merger with
17:51
Speaker 1: Aol America Online and that, folks, was the bell. We
17:56
Speaker 1: didn't know it, of course, that was the bell that
17:58
Speaker 1: said it's over the dot com boom. There's something really
18:02
Speaker 1: toppy things starting to happen. And look, another thing in
18:07
Speaker 1: this market which I really don't like, which I think stinks,
18:10
Speaker 1: is about IPO's new share market floats. There was a
18:13
Speaker 1: time where you would participate in a share market float,
18:17
Speaker 1: and the whole thing was obviously that you would it
18:19
Speaker 1: would rise on the day it floated, especially in a
18:22
Speaker 1: strong market which we have at the moment, and we're
18:25
Speaker 1: having these outrageous affairs at the moment where there are
18:27
Speaker 1: new share market floats and they are instantly falling. This
18:32
Speaker 1: is a This is in a strong market. So I wonder, Jema,
18:37
Speaker 1: are these signs really of are there signs that we
18:42
Speaker 1: were talking about whether the market's too high? Is it
18:45
Speaker 1: too hot? But let's put it another way, are there
18:47
Speaker 1: signs that the market is seeing a top? I mean
18:52
Speaker 1: we talked about you know, we've just seen the Netflix
18:55
Speaker 1: deal which was which is kind of a joke really,
18:57
Speaker 1: but maybe it's not a joke that when Hollywood do
18:59
Speaker 1: these maga, these things go very wrong. We have a
19:02
Speaker 1: lot of floats and people are are perhaps there are
19:05
Speaker 1: cases where people are exploiting these faces. These floats are
19:08
Speaker 1: certainly not in christ properly, that's for sure, and other
19:11
Speaker 1: sort of signs. Do you think that's a sign of
19:14
Speaker 1: a toppy market?
19:16
Speaker 2: It's such a good question, this one. I think.
19:18
Speaker 3: I actually had a look back through the float to
19:19
Speaker 3: the last six to twelve months, both in Australia and
19:22
Speaker 3: in the US, and some of them have been extremely successful.
19:24
Speaker 3: So it's not universal that they're all collapsing. It's just pockets.
19:29
Speaker 3: We did see at the peak of the Nasdaq three
19:34
Speaker 3: years ago, the SPACs coming through, like there's a very
19:37
Speaker 3: typical behavior as the market starts to peat. These backs
19:40
Speaker 3: and the special purpose acquisition vehicles, cash box companies, and
19:43
Speaker 3: you would get cash box, I'm an amazing investor. Give
19:47
Speaker 3: me your money, and I shall do something with it,
19:49
Speaker 3: and you're not allowed to know what it is until.
19:51
Speaker 1: Yeah, just give it to me. I don't know what
19:52
Speaker 1: I'm going to do with it, but hand it over. Yeah.
19:54
Speaker 2: Yeah, I don't know what I'm gonna do yet, but
19:55
Speaker 2: I'm great at this.
19:56
Speaker 3: And they almost categorically a disaster one after the and
20:00
Speaker 3: everyone said at the time when they came about, oh,
20:02
Speaker 3: these things are always a disaster, And then they were
20:04
Speaker 3: a disaster.
20:04
Speaker 2: What a surprise.
20:06
Speaker 3: I So a couple of things I would not One
20:08
Speaker 3: is if you are a founder or a business owner
20:12
Speaker 3: or a shonky individual on the make who thinks that
20:14
Speaker 3: they can get away with raising as much capital as
20:18
Speaker 3: humanly possible when the market is high and rising is
20:21
Speaker 3: a really good time to do it. So you want
20:24
Speaker 3: to if you are listing your company, extract as much
20:26
Speaker 3: value as possible from.
20:27
Speaker 2: That, and there will be.
20:31
Speaker 3: Well intended business owners doing that, there will be private
20:35
Speaker 3: equity firms doing that, and there will be others who
20:38
Speaker 3: are less.
20:38
Speaker 2: Reputable doing that.
20:40
Speaker 3: And the days of being sure you're going to make
20:43
Speaker 3: a ton of money out of an IPO well and
20:45
Speaker 3: truly in the past, like you have to do your
20:47
Speaker 3: due diligence and all throughout history you've had to do
20:51
Speaker 3: your due diligence at these times with these sorts of things,
20:55
Speaker 3: there's there are no guarantees said. Some of them actually
20:57
Speaker 3: been pretty good, some of them been very good, some
20:59
Speaker 3: are up sick three months and this sort of business.
21:01
Speaker 3: So in Australia it tends to be the mining companies,
21:05
Speaker 3: like the smaller end. You need to know your stuff
21:07
Speaker 3: if you're going to play in that kit.
21:08
Speaker 1: You really do hyperspeculative, Yeah, okay, hyperspective. All right, Okay, No,
21:14
Speaker 1: there's a very good answer and a fair answer too actually.
21:16
Speaker 1: All right. So then inside the market we're also saying
21:19
Speaker 1: in terms of your clients are hoping to buy individual stocks.
21:23
Speaker 1: There's a stock at the moment which is all the
21:26
Speaker 1: news called Corporate Travel and it was a Brisbane based
21:30
Speaker 1: a corporate travel company that had great success for a while.
21:33
Speaker 1: It then came under what they call a short attack
21:37
Speaker 1: by hedge funds and shorts and survived that came out
21:39
Speaker 1: the other side, and many people actually thought, well, okay,
21:43
Speaker 1: you know, these guys are actually must be quite good
21:44
Speaker 1: because they've survived a short attack. Not every stock does.
21:48
Speaker 1: They then did an extraordinary sort of diversion into the
21:51
Speaker 1: fairly grizzly business of managing refuge hotels and barges for
21:59
Speaker 1: want this is what they call them in the UK,
22:02
Speaker 1: which was a strange diversion for a company that's called
22:06
Speaker 1: corporate travel, used by many companies Disclosure The News Corporation
22:10
Speaker 1: uses them. But anyway, the point I'm bleeding to is
22:15
Speaker 1: that they were suspended some time ago, a long time ago,
22:20
Speaker 1: weeks and weeks ago, and it since transpired that the
22:24
Speaker 1: British government has accused them of overcharging. They've accused them
22:28
Speaker 1: of overcharging using very strong documentation produced by one of
22:31
Speaker 1: the six accountancy companies. This is a disaster in the making.
22:34
Speaker 1: The stock is currently trading at I wish, sorry I
22:37
Speaker 1: could remember the numbers, maybe fourteen fifteen dollars and we
22:41
Speaker 1: now know that when it comes back it's probably going
22:45
Speaker 1: to trade for who knows, it may not trade at all.
22:48
Speaker 1: I mean it may literally go and fund managers are
22:50
Speaker 1: writing down the value of this to ten dollars five
22:53
Speaker 1: dollars less than that dev What I want to ask
22:56
Speaker 1: you is that you don't have to get into the
22:57
Speaker 1: tangle about corporate travel. But what I want to ask
23:00
Speaker 1: you is it seems to be a really bad management
23:02
Speaker 1: here on the share market by the ASX that this
23:06
Speaker 1: was allowed to happen, that these guys were allowed to
23:09
Speaker 1: stay in suspension for weeks and weeks. This is a
23:11
Speaker 1: huge billion dollar company, and I can prove that this
23:16
Speaker 1: was bad management by the fact that we mentioned MSCI earlier, MISKI,
23:21
Speaker 1: the Morgan Standy Capital International Index, they don't allow companies
23:25
Speaker 1: if they've been suspended for a long time, They just
23:28
Speaker 1: they're out. Do you think this could be an important
23:32
Speaker 1: story and how it pans out?
23:34
Speaker 3: That's a really tricky one, isn't it. I think there's
23:36
Speaker 3: multiple factors. The fact that they're being accused of overcharging
23:43
Speaker 3: let's say, not fraud, but.
23:45
Speaker 1: The British government. By the British government, which is no
23:49
Speaker 1: small player.
23:50
Speaker 3: They were It's not a small player.
23:53
Speaker 2: There were credible.
23:55
Speaker 3: Questions about governance, let's say some years ago, as you said,
24:00
Speaker 3: and this is not reason. There's been going on for
24:02
Speaker 3: a long time, credible questions about governance. You know, the
24:05
Speaker 3: press was after them for various things that there were
24:09
Speaker 3: short sellers also, you know, and the difficulty with short sellers.
24:11
Speaker 3: People like, justifiably the difficulty with short sellers. Everyone's like, oh,
24:15
Speaker 3: you're just trying to make money out of it, and
24:17
Speaker 3: you're like sure, but there are credible questions being asked
24:20
Speaker 3: for multiple sources, and now you have probably the.
24:23
Speaker 2: Most credible source.
24:24
Speaker 3: Your UK Government's not one you're going to take on
24:27
Speaker 3: for fun. So it's a really tricky scenario. I know,
24:32
Speaker 3: I can't think of a lot of precedence in my experience,
24:37
Speaker 3: so I can see why the market operator doesn't have
24:41
Speaker 3: necessarily a great set of rules for a scenario like
24:45
Speaker 3: this where there'd be multiple credible questions. They've survived all
24:49
Speaker 3: of them, and then now we've got a very serious question,
24:52
Speaker 3: and then what do you do do you just so
24:54
Speaker 3: then you go, well, we're just going to force you
24:56
Speaker 3: to dlist or are we going to do something else?
24:58
Speaker 2: And so on?
24:58
Speaker 3: You know, whereas ask in this scenario, all those sorts
25:01
Speaker 3: of questions, so I can see why it's in this situation.
25:04
Speaker 2: But it's not ideal for investors, that's for sure.
25:08
Speaker 1: No, it's not. And I think it's a lot to
25:10
Speaker 1: play out there. Okay, we're gon, we're running out of time,
25:14
Speaker 1: which often happens with Gemma because she's so good. And
25:19
Speaker 1: no it's two folks. I mean, she is a great
25:21
Speaker 1: communicator on the market, she really is. That's why she's
25:23
Speaker 1: on the show so often. I'm going to take a
25:25
Speaker 1: short break and I'm going to come back and I've
25:27
Speaker 1: got to pin her with a couple of other difficult
25:29
Speaker 1: questions that most people would run from. Back in a moment. Hello,
25:38
Speaker 1: Welcome back to the Australians Money Puzzle Podcast. James Kirby
25:41
Speaker 1: with Jemma Dale. Out of investor behavior at NAP Trade. Okay,
25:46
Speaker 1: a couple of other random questions for you, Jemma. There
25:49
Speaker 1: are listener questions. I don't know if we'd have time
25:51
Speaker 1: to get through. I'll definitely deal with the one from Tom.
25:54
Speaker 1: But also just a question without notice because it only
25:57
Speaker 1: happened yesterday. But part of your also is SMSFS. I
26:02
Speaker 1: think that's an important part of your role, isn't it?
26:04
Speaker 1: And we all know that there's been all sorts of
26:06
Speaker 1: scandals this year, the first Guardian scandal. This is the
26:08
Speaker 1: biggest scandal in the local financial products for many years.
26:14
Speaker 1: Who's going to pay for it? Big question? The minister,
26:16
Speaker 1: Daniel Belino, Finances Finance Minister, this week has announced that
26:22
Speaker 1: it's going to be a levee and the levee is
26:25
Speaker 1: going to be imposed on all sorts of players in
26:29
Speaker 1: the market, big super funds, financial advisors are going to
26:33
Speaker 1: have to chip into this levee. He's also put forward
26:37
Speaker 1: the notion that smsfs are going to have to pay
26:41
Speaker 1: this levee. I think that's ridiculous because smsfs are not
26:47
Speaker 1: involved in selling dodgy products and smsfs the whole trade off.
26:52
Speaker 1: But having one and taking the risk of one is
26:54
Speaker 1: that you sidestep if you like some of those consumer protections,
26:57
Speaker 1: you're not allowed to access them. So whether you pay
27:00
Speaker 1: for them, have you formed if you want it yet?
27:03
Speaker 3: Look, I won't pretend I've done enough work. Also, as
27:07
Speaker 3: you point out, it's been changing a lot, this one,
27:09
Speaker 3: and it's been fairly contentious.
27:11
Speaker 2: It's been going on for a long time.
27:12
Speaker 3: Trying to find a solution that satisfies all parties and
27:16
Speaker 3: doesn't create moral hazard, because that's the big issue, right
27:20
Speaker 3: Like you're going to provide a backstop that then encourages
27:25
Speaker 3: more risk taking behavior and so on, and you just
27:27
Speaker 3: don't need that in your life right now. So I
27:30
Speaker 3: can see it's a real challenge for self managed super funds.
27:35
Speaker 3: But there has been this question, as you know, like
27:38
Speaker 3: E four, but really at least since the GFC, having
27:42
Speaker 3: seen some of the smsfs that got caught up in
27:44
Speaker 3: fairly difficult situations, what protections are in place in a
27:48
Speaker 3: scenario where they will sold something that you may not
27:53
Speaker 3: have been advice per se, and what do we do
27:55
Speaker 3: in that scenario. So it's a really tricky one, and
27:58
Speaker 3: it's a particularly tricky one, I think the question where
28:01
Speaker 3: the wholesale investor test sits as well, whether that threshold
28:05
Speaker 3: is too low and whether you need to really ramp
28:07
Speaker 3: it up because we don't, you know, it's not really.
28:10
Speaker 1: Do you think smfs should have to pay the levey?
28:12
Speaker 2: Interesting question?
28:13
Speaker 3: If they get no protection from it, then no, it
28:15
Speaker 3: seems laughable, right, you know, for you to be And
28:20
Speaker 3: the question I've got about it actually, which is a
28:22
Speaker 3: bit of a different one is the owner and I'm
28:25
Speaker 3: not mentioning any names of a major platform implied that
28:30
Speaker 3: there should be a compensation scheme like it is your
28:34
Speaker 3: job to provide due diligence on this stuff. That is
28:37
Speaker 3: literally part of your process as a trustee. You should
28:40
Speaker 3: not be getting backstopped by those who do not have
28:45
Speaker 3: that obligation like you do have that obligation. If you
28:47
Speaker 3: provide a trustee service, you absolutely obligation. I'm more concerned
28:51
Speaker 3: about those comments.
28:52
Speaker 1: Okay, I completely agree with that. And folks, just to
28:55
Speaker 1: cut to the chase on this one, tho's three big players.
28:57
Speaker 1: One was Macquarie. They have actually volunteer year to pay
29:00
Speaker 1: out three hundred million already to the victims of this
29:04
Speaker 1: first Guardian and Shield debacle. Another key player was Equity Trustees.
29:08
Speaker 1: They have actually been hauled before the courts to deal
29:11
Speaker 1: with this. Alan Kirklands, the asset Commissioner, was on the
29:13
Speaker 1: show a few weeks ago. Have a listen to that
29:15
Speaker 1: one if you want to know all about this. And
29:17
Speaker 1: the third major player was net Wealthy investment platform, who
29:20
Speaker 1: have got a lawyer who was smart enough to find
29:22
Speaker 1: an obscure clothes in superannuation law, which says that they
29:25
Speaker 1: should be helped compensate if they had to compensate. So
29:29
Speaker 1: we'll see how that plays out. Last final quick question,
29:31
Speaker 1: Tom says, I've never heard a word about European stocks
29:34
Speaker 1: on your show. It's like the only offshore market the
29:38
Speaker 1: world is Wall Street. European stocks have been terrific this year.
29:41
Speaker 1: When now are you going to do something? Tell me
29:43
Speaker 1: this gemma, those offshore active investors of which you have
29:49
Speaker 1: many the eurostocks, the European stocks feature at all.
29:56
Speaker 3: So this year they have started to and this is
29:59
Speaker 3: what happened. So ninety plus percent you via a NAB
30:02
Speaker 3: trade you can buy US, UK, Germany and Hong Kong.
30:07
Speaker 3: Ninety plus percent is the US, Yeah, right, so far
30:11
Speaker 3: out in front. And there's also and what's really fascinating
30:14
Speaker 3: is there's a fair amount of appetite and you just
30:16
Speaker 3: need to look at how the Australian demographic is changing.
30:19
Speaker 3: There's a fair amount of appetite for Ali, Barba and
30:21
Speaker 3: Tencent and so on. But they will buy the ADR,
30:24
Speaker 3: the US listed version, which is super interesting in itself.
30:28
Speaker 2: Right, you can buy the Hong Kong version if you prefer.
30:31
Speaker 3: There has been some European stuff popping up this year,
30:37
Speaker 3: and the one that is most obvious is defense. So
30:41
Speaker 3: it's kind of all been about European defense of run. Mattal,
30:44
Speaker 3: which I'm probably pronouncing incorrectly, has been big in our numbers,
30:48
Speaker 3: certainly through the early part of this year. When I
30:52
Speaker 3: speak to analysts in the space, they're pretty concerned that
30:55
Speaker 3: those European defense stocks have run too hard. Right, Rolls
30:59
Speaker 3: Royce would care out as a European defense stock. Funnily enough,
31:02
Speaker 3: you're on a few others. The other one that I
31:04
Speaker 3: hear from fun manager is Ferrari.
31:06
Speaker 1: Okay, okay, but you know a few of.
31:09
Speaker 3: These sort of interesting ultra premium kind of direct to
31:14
Speaker 3: consumer brands and so on.
31:16
Speaker 2: It's interesting, it's interesting.
31:18
Speaker 3: But we don't get a huge amount of appetite for
31:20
Speaker 3: it because you have to be fairly selective. And the
31:23
Speaker 3: general consensus on the Eurozone economy is not positive, right,
31:28
Speaker 3: it's pretty lackluster. So there have been some really strong performers,
31:32
Speaker 3: but they are largely in the defense space from what
31:34
Speaker 3: we see.
31:35
Speaker 1: Okay, that's it for you, Tom. Never advice, of course,
31:38
Speaker 1: always information. It's been asleep for a long time. European market,
31:41
Speaker 1: there has been a lift. As Emma says, the lift
31:44
Speaker 1: is substantially underpinned by defense companies, which again was substantially
31:48
Speaker 1: underpinned by the fact that Trump basically pulled the rug
31:51
Speaker 1: from under them and said you got to start paying
31:52
Speaker 1: for your rollin NATO. But that's not really a reflection
31:57
Speaker 1: of a big broad upswell in the European stocks, I
32:00
Speaker 1: would argue, but you might tell me something different. Tom Okay,
32:04
Speaker 1: Thank you very much everyone for the questions. Keep them
32:07
Speaker 1: rolling the money puzzle at the Australian dot com dot au.
32:10
Speaker 1: Jemma Dale, thank you very much. We will probably not
32:13
Speaker 1: talk to you again this year, but we sure as
32:15
Speaker 1: hell talk to you next year. Thanks a lot. Great
32:17
Speaker 1: to have you on the show as always.
32:18
Speaker 2: Thank you so much for having me.
32:20
Speaker 1: Thanks Jemma, Talk to you soon, folks.