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Red-hot sharemarket - your next moves · The Money Puzzle

• 0:11
  Speaker 1: Hello and welcome to the Australian's Money Puzzle podcast. I'm
• 0:14
  Speaker 1: James Kirby, the wealth editor at The Australian. Welcome aboard, everybody.
• 0:19
  Speaker 1: I expect you are more than aware just how good
• 0:24
  Speaker 1: share market investing is right now. Our share market, folks,
• 0:28
  Speaker 1: even the ASX, is up 11% in over the last
• 0:32
  Speaker 1: 12 months. Add dividends to that, there's 15% in the bag.
• 0:37
  Speaker 1: The U.S. market is steaming along. It's up 24% in
• 0:41
  Speaker 1: the last 12 months and more than that. There are
• 0:45
  Speaker 1: so many signs that this market has got the ideal
• 0:49
  Speaker 1: conditions to keep going on a broad basis. There's always
• 0:53
  Speaker 1: things you can worry about and you can always worry,
• 0:55
  Speaker 1: I can tell you, about a slump or a surprise
• 0:58
  Speaker 1: setback or a correction in the September, October period when
• 1:01
  Speaker 1: the Americans get wobbly every year as they face Christmas.
• 1:05
  Speaker 1: Winter is coming. You've seen Game of Thrones. You know
• 1:06
  Speaker 1: what it means. Same thing in the share market. Now,
• 1:09
  Speaker 1: on top of all that, we've got Donald Trump, who,
• 1:12
  Speaker 1: you know, I think we might as well take it
• 1:13
  Speaker 1: as read this morning, that the markets at least think
• 1:16
  Speaker 1: he's going to be re-elected. And there's like a 60%
• 1:19
  Speaker 1: or 67% probability in the money markets right now that
• 1:22
  Speaker 1: he will be re-elected. That means a Republican administration. That
• 1:26
  Speaker 1: means a pro-business administration. And that means a big lift
• 1:30
  Speaker 1: in stocks traditionally. You know, Trump, first time round, from
• 1:35
  Speaker 1: the day he was elected... So when COVID arrived, the
• 1:38
  Speaker 1: US market went up 60% or so. People will be
• 1:43
  Speaker 1: thinking that there's a good chance that that would happen again.
• 1:45
  Speaker 1: So I want to talk about shares today. And just
• 1:47
  Speaker 1: before I start, by the way, one or two pieces
• 1:50
  Speaker 1: of correspondence about when I talk about shares and do
• 1:53
  Speaker 1: I have a conflict of interest, etc. I mean, I
• 1:56
  Speaker 1: have an SMSF and of course I want to invest.
• 1:59
  Speaker 1: I have all the things that you have. In terms
• 2:01
  Speaker 1: of shares, just to clear the air, In terms of
• 2:05
  Speaker 1: ordinary shares, this isn't ETFs or funds. In my portfolio,
• 2:08
  Speaker 1: I try to keep it to 10 always. Just now,
• 2:11
  Speaker 1: these are the 10 shares I have. I'm not going
• 2:13
  Speaker 1: to give you weightings or anything, but here they are.
• 2:15
  Speaker 1: Are you ready? Commonwealth Bank, CSL, Hanson Technology, Macquarie Bank,
• 2:20
  Speaker 1: Macquarie Technology, NAB, Next DC, Cube, Ramsey, and Rio. Some
• 2:28
  Speaker 1: of them I've had for 20 years. Some of them
• 2:30
  Speaker 1: I've had for a year. My guest today is a
• 2:36
  Speaker 1: regular on the show, friend of the show. It's Gemma Dale,
• 2:39
  Speaker 1: Head of Investor Behaviour and SMSF at NAB Trade. How
• 2:43
  Speaker 1: are you, Gemma?
• 2:44
  Speaker 2: I'm well, thank you. How are you?
• 2:46
  Speaker 1: What do you think of my portfolio?
• 2:49
  Speaker 2: That's the million dollar question, isn't it?
• 2:52
  Speaker 1: Instinctive response.
• 2:53
  Speaker 2: Probably my first question would be what else you have.
• 2:55
  Speaker 1: I'm not telling you what else I have. Oh, I
• 2:57
  Speaker 1: have ETFs and I have some active funds and I
• 3:00
  Speaker 1: have gold. I feel, I like to think my SMSF
• 3:04
  Speaker 1: is very well diversified. I mean, I'm obsessed with diversification
• 3:10
  Speaker 1: and I do think it's very well diversified. Though I
• 3:13
  Speaker 1: find the share component constantly gets bigger than I meant
• 3:18
  Speaker 1: it to for the simple reason shares have been so
• 3:21
  Speaker 1: good for so long.
• 3:22
  Speaker 2: Yeah, that's quite interesting. I mean, the most interesting thing
• 3:26
  Speaker 2: about that is we focus on the individual stocks because
• 3:32
  Speaker 2: you can see their performance. It's very hard to get
• 3:35
  Speaker 2: excited about the performance of your ETFs, to be honest,
• 3:39
  Speaker 2: and some of the very well diversified components of your portfolio,
• 3:43
  Speaker 2: even though they're going to be thousands of securities by
• 3:47
  Speaker 2: the time you add them all up would be my guess.
• 3:49
  Speaker 2: And so you've probably got exposure to thousands of things.
• 3:52
  Speaker 2: And yet you look at the 10 that you can
• 3:54
  Speaker 2: definitely put a number on and worry about those. And
• 3:57
  Speaker 2: we're all the same. We all do it. You've got
• 4:00
  Speaker 2: a lot of banks in there, but you're doing very
• 4:02
  Speaker 2: well out of them. So certainly can't complain at the moment.
• 4:07
  Speaker 1: There's no dogs in there. There's one dog. Let me
• 4:09
  Speaker 1: call it out loud and clear. I wish I didn't
• 4:11
  Speaker 1: have it. I'm stuck with it. And I should have
• 4:13
  Speaker 1: the guts to sell it. But then every time I
• 4:15
  Speaker 1: look at it, I say, maybe it's coming around, which
• 4:17
  Speaker 1: is Ramsey Healthcare. And there's one absolute ripper in there,
• 4:20
  Speaker 1: which is NextDC, followed closely, I might add, by Macquarie Technology.
• 4:24
  Speaker 1: And both those stocks are AI plays in my mind,
• 4:28
  Speaker 1: though I have NextDC for years, but Macquarie Technology relatively recently. Anyway,
• 4:32
  Speaker 1: I'm just putting that out there, folks, just to clear
• 4:34
  Speaker 1: the air on it, because we're going to talk about
• 4:35
  Speaker 1: shares today exclusively, because I think it's a terrific market. Gemma,
• 4:42
  Speaker 1: tell me, first of all, because you see all the
• 4:44
  Speaker 1: data in NAB Trade and you see what's coming in
• 4:46
  Speaker 1: and what people are doing, Do you detect any change
• 4:50
  Speaker 1: in the flavor of share trading, the volume of share trading,
• 4:53
  Speaker 1: the demographics of share trading in these last few months
• 4:56
  Speaker 1: as people are starting to realize, gee, the market's damn
• 4:59
  Speaker 1: good for quite some time?
• 5:00
  Speaker 2: Yeah, it's so interesting. The last few years have been fascinating.
• 5:04
  Speaker 2: I mean, we've talked about this before, but the well over...
• 5:09
  Speaker 2: half of our investor base has joined us since COVID.
• 5:13
  Speaker 2: So the huge influx of new investors and new accounts
• 5:17
  Speaker 2: for us, but new investors came through in that COVID
• 5:20
  Speaker 2: period when the market fell off a cliff. So that 30%
• 5:23
  Speaker 2: in three weeks dip on the ASX, we saw very
• 5:26
  Speaker 2: similar responses from share markets around the world, was when
• 5:29
  Speaker 2: the vast majority of our new accounts were opened. And
• 5:32
  Speaker 2: in the subsequent sort of 12 months, so people came
• 5:35
  Speaker 2: to investing during that period. and had this incredible opportunity
• 5:38
  Speaker 2: to buy shares at a very discounted price. And then
• 5:42
  Speaker 2: they rocketed back very quickly. So many of our investors
• 5:46
  Speaker 2: have had a really interesting first experience. If you started
• 5:49
  Speaker 2: trading for the first time in 1999, you had a
• 5:52
  Speaker 2: very different experience than somebody who started in 2000. And
• 5:54
  Speaker 2: a lot of people who have been around for a
• 5:57
  Speaker 2: long time felt that was anomalous, that period. But if
• 6:00
  Speaker 2: it was your first experience, it wasn't, right? That's what
• 6:02
  Speaker 2: share investing is for you now. And so those people
• 6:06
  Speaker 2: are familiar with a pretty strong market. That's half of
• 6:10
  Speaker 2: our investors. Those who've been around a long time tend
• 6:14
  Speaker 2: to have much bigger portfolios. They've had a lot more
• 6:16
  Speaker 2: time to build up their wealth. You mentioned you've got
• 6:19
  Speaker 2: CBA and Macquarie and CSL. They're the kind of shares
• 6:23
  Speaker 2: that have made people a lot of money over the
• 6:26
  Speaker 2: long term. If you're buying those in the 90s, and
• 6:28
  Speaker 2: a lot of our investors were, then you have done
• 6:30
  Speaker 2: extremely well. Those people are moving money around but feeling
• 6:38
  Speaker 2: a little reluctant to throw a lot of money at
• 6:42
  Speaker 2: this market which I find really interesting so our cash
• 6:44
  Speaker 2: book is very high at the moment and newer and
• 6:48
  Speaker 2: younger investors are mostly buying ETFs and just buying them
• 6:51
  Speaker 2: consistently as a wealth creation strategy that's a very common
• 6:55
  Speaker 2: strategy now. More and more people are doing it and
• 6:58
  Speaker 2: they're pretty agnostic as to market movements. They will buy
• 7:02
  Speaker 2: more on a down day, which I find fascinating. So
• 7:04
  Speaker 2: you think they're agnostic, but they're very aware of what
• 7:07
  Speaker 2: is going on in the market and they will absolutely
• 7:09
  Speaker 2: buy more. If the market gets hammered in the US
• 7:11
  Speaker 2: overnight and futures are down, they will throw more into
• 7:14
  Speaker 2: an ETF that day than they would if futures were
• 7:17
  Speaker 2: really positive. But it's a And then our more mature
• 7:25
  Speaker 2: investors are a little bit anxious, right? They're seeing CBA
• 7:29
  Speaker 2: above $ 130. They're seeing prices that feel quite stretched in
• 7:33
  Speaker 2: some areas of their portfolios. And because those portfolios have
• 7:36
  Speaker 2: been around a long time and tend to hold things
• 7:39
  Speaker 2: they're very familiar with and know very well, they're a
• 7:43
  Speaker 2: little inovie, I would guess. They're not super keen to
• 7:46
  Speaker 2: chase these prices. Right. Okay.
• 7:48
  Speaker 1: Let's take that on board. One of the things we
• 7:51
  Speaker 1: were saying about And I imagine our listeners are something
• 7:55
  Speaker 1: broadly similar, right? So they have the ETFs, the core
• 7:57
  Speaker 1: and satellite. Maybe they only have ETFs. Maybe they have
• 8:00
  Speaker 1: some ETFs like I have to achieve certain things, right?
• 8:04
  Speaker 1: To access most of the offshore. As you notice, all
• 8:08
  Speaker 1: those stocks are Australian. On offshore, I'm using ETFs and
• 8:13
  Speaker 1: funds mostly. But when you look at the composition of
• 8:17
  Speaker 1: the market, so people will say... The thing we're obsessed,
• 8:21
  Speaker 1: why do we talk about individual shares when ETFs are
• 8:24
  Speaker 1: so important or they may be for our listeners? Because
• 8:28
  Speaker 1: they're the swing factor, right? That's the difference between having
• 8:31
  Speaker 1: an ordinary year, the same as everyone else, or winning
• 8:34
  Speaker 1: big or losing. And that's, I think that that will never,
• 8:37
  Speaker 1: I don't know, but I don't think that will ever change.
• 8:40
  Speaker 1: That will never go. The attraction of shares and the
• 8:44
  Speaker 1: particular attraction of shares is, that they can do so well.
• 8:48
  Speaker 1: And ETFs are fine. They're great. But you will never,
• 8:51
  Speaker 1: ever do any better than the norm.
• 8:57
  Speaker 2: With an ETF? Yeah, absolutely. Really interesting to me. As
• 9:01
  Speaker 2: I said, there's a very strong preference for ETFs, particularly
• 9:05
  Speaker 2: in younger investors. And funnily enough, you talk about using
• 9:08
  Speaker 2: ETFs for offshore, but our investors tend to start with
• 9:12
  Speaker 2: the ASX. And when I say tend to, I mean,
• 9:15
  Speaker 2: There is a dramatic difference between the number of investors
• 9:19
  Speaker 2: and the amount of money they put to the ASX
• 9:21
  Speaker 2: 200 as the first investment versus what is a long
• 9:24
  Speaker 2: way down the list, which is the S & P
• 9:26
  Speaker 2: 500 as the second option. It is a long way behind.
• 9:30
  Speaker 2: So people start buying the ASX first. And then they
• 9:33
  Speaker 2: diversify beyond that, which I find fascinating. And yet the
• 9:38
  Speaker 2: appeal is really obvious, which for so many young people
• 9:41
  Speaker 2: and so many people new to market, I don't know
• 9:43
  Speaker 2: what to buy. That's always the biggest question. I don't
• 9:45
  Speaker 2: know what to buy. ETF just takes that problem away
• 9:48
  Speaker 2: for you, right? Just buy the whole market. You'll be fine.
• 9:50
  Speaker 2: And as you say, then you don't have any opportunity
• 9:53
  Speaker 2: to outperform. You're going to get the market minus a
• 9:56
  Speaker 2: tiny fee. But you can get market. That's great. It's
• 9:59
  Speaker 2: better than nothing. right? It's very good based on how
• 10:02
  Speaker 2: performance has been over the last 12 months. There are
• 10:06
  Speaker 2: many others who are looking for something much better than
• 10:10
  Speaker 2: that and they feel very strongly about making their own choices.
• 10:14
  Speaker 2: Funnily enough, they tend to be more experienced investors. They're
• 10:17
  Speaker 2: not young people, you know. willing to bet their shirts, right?
• 10:20
  Speaker 2: It's quite the opposite. It's people who are very experienced.
• 10:23
  Speaker 2: They know what they're doing and they're absolutely going to
• 10:27
  Speaker 2: try to get a better return than the market. Or,
• 10:30
  Speaker 2: and it was something I didn't ask you about your portfolio,
• 10:33
  Speaker 2: they've got a very specific need. So a lot of
• 10:35
  Speaker 2: our older investors invest for yield and they are not
• 10:38
  Speaker 2: looking for high growth. That's not what they're after. They're
• 10:41
  Speaker 2: not going to take a punt on Zip. They just
• 10:43
  Speaker 2: want yield and that's what they're going to invest for.
• 10:45
  Speaker 1: Yeah, very true. The irony is that they would have
• 10:50
  Speaker 1: been twice, literally have made twice as much money if
• 10:52
  Speaker 1: they had bought a US ETF, the S & P 500,
• 10:57
  Speaker 1: rather than the ASX, year after year.
• 11:00
  Speaker 2: Certainly the last 20 years have been pretty astonishing for
• 11:03
  Speaker 2: US equities.
• 11:04
  Speaker 1: 20 years will do, Gemma.
• 11:07
  Speaker 2: That'll do it for the vast majority of people. For
• 11:10
  Speaker 2: most of us, that is long enough as a timeframe.
• 11:12
  Speaker 2: So yeah, absolutely. The US has been astonishingly strong in
• 11:16
  Speaker 2: terms of its performance. And that has been the rise
• 11:18
  Speaker 2: of tech, right? It's very clear what drove that performance.
• 11:22
  Speaker 2: And it's very clear when you look at the composition
• 11:24
  Speaker 2: of the S & P 500 now, what has driven
• 11:26
  Speaker 2: that performance. There's a lot of people making comparisons to
• 11:29
  Speaker 2: sort of the 99-2000 era right now based on the
• 11:32
  Speaker 2: hype around AI. But we haven't seen the pullback. We
• 11:36
  Speaker 2: thought we saw it in 22 and it just came
• 11:39
  Speaker 2: around again, right?
• 11:40
  Speaker 1: Comes around again. The other thing is, yes, I know 1999, sure.
• 11:45
  Speaker 1: But maybe it's not 1999. Maybe it's 1995. And there's
• 11:50
  Speaker 1: four fabulous years to go. I mean, I don't know.
• 11:52
  Speaker 1: And I'm not going to... Both of us are experienced
• 11:55
  Speaker 1: enough that I'm not silly enough to ask you, do
• 11:57
  Speaker 1: you know where the market's going? And I'm not going
• 11:59
  Speaker 1: to pontificate as to where it's going. But there's a
• 12:02
  Speaker 1: couple of things I do want to ask you. When
• 12:04
  Speaker 1: we sit there now as investors on the share market,
• 12:08
  Speaker 1: so we look at the return on the share market,
• 12:11
  Speaker 1: and it's well above average, right? It's above average on
• 12:14
  Speaker 1: historical figures. It's above average on recent figures. There is 4% inflation,
• 12:20
  Speaker 1: of course. So really, you've got to put that in.
• 12:24
  Speaker 1: If you say, oh, my shares did 10% last year,
• 12:26
  Speaker 1: it's great. Yeah, they did, but it's 4% inflation. So
• 12:29
  Speaker 1: you've got to put that in mind. When there was
• 12:31
  Speaker 1: no inflation, 6% would have been the same. That's one thing.
• 12:35
  Speaker 1: And we have the dividends. The big dilemma, I think,
• 12:37
  Speaker 1: for Australian investors is You mentioned about so many people
• 12:41
  Speaker 1: who want yield and the older, very broadly, the older
• 12:44
  Speaker 1: you are, the more you want yield. It's as simple
• 12:47
  Speaker 1: as that. And by the time you retire, it's all
• 12:50
  Speaker 1: you want, right? I talked to someone the other day, very,
• 12:53
  Speaker 1: very well-known financial journalist, and they are, for the first
• 12:57
  Speaker 1: time in their life, they're looking for advice. Because they're
• 13:02
  Speaker 1: so confident in their own ability that they never thought
• 13:04
  Speaker 1: of asking anybody else for advice before. But I said, well,
• 13:07
  Speaker 1: what do you want? You know, what do you want?
• 13:10
  Speaker 1: And this person simply said, I just want income. We,
• 13:14
  Speaker 1: his wife and him, just want income. And that's what
• 13:16
  Speaker 1: happens when you get to a certain point. And that's
• 13:18
  Speaker 1: fair enough. And you maybe do you think you lose
• 13:21
  Speaker 1: your nerve as you get older as well in terms
• 13:24
  Speaker 1: of investing?
• 13:26
  Speaker 2: I don't think it's not necessarily. You just don't need
• 13:28
  Speaker 2: to take the risk anymore. You know, a young person
• 13:32
  Speaker 2: is trying to build from nothing. You know, unless you've
• 13:36
  Speaker 2: inherited some money or you happen to have a cost
• 13:38
  Speaker 2: of windfall or something, you are taking any excess cash
• 13:42
  Speaker 2: flow you've got from your job and trying to build
• 13:44
  Speaker 2: something aggressively. You've got to build it fast. You know,
• 13:48
  Speaker 2: when you're young, you've got to build it fast because
• 13:49
  Speaker 2: you're coming off such a low base. Whereas when you're older,
• 13:52
  Speaker 2: it's about the preservation of what you have. And You
• 13:56
  Speaker 2: have far more to lose. And we know about sequencing risks.
• 13:59
  Speaker 2: So for anyone who's not familiar with the concept, you
• 14:02
  Speaker 2: understand it intuitively, but it's really, there's a lot of
• 14:05
  Speaker 2: academic work around it now. Sequencing risk is effectively when
• 14:09
  Speaker 2: you are drawing down on your money. So say you
• 14:12
  Speaker 2: have a million dollars to provide for your retirement and
• 14:14
  Speaker 2: you're taking out $ 50, 000 a year. If you suffer a
• 14:18
  Speaker 2: massive downturn in the market in year one, And that
• 14:22
  Speaker 2: million dollars turns into $ 600, 000, which sounds dramatic, but this
• 14:26
  Speaker 2: happened to a colleague of mine in 2008, 2009. He
• 14:28
  Speaker 2: was back at work.
• 14:31
  Speaker 1: It happened to everyone in 2008 and 2009. The market
• 14:33
  Speaker 1: fell 50%. We must never forget that.
• 14:35
  Speaker 2: Yeah, and he had a diversified portfolio. He'd taken a
• 14:38
  Speaker 2: lot of care. He worked in finance and markets and
• 14:39
  Speaker 2: knew what he was doing. And he was back at
• 14:41
  Speaker 2: work 12 months after retirement to rebuild. Because when you're
• 14:45
  Speaker 2: pulling down $ 50, 000 a year out of $ 600, 000, it runs
• 14:46
  Speaker 2: out very quickly and compared to pulling it out of
• 14:51
  Speaker 2: a million that might be growing. So that sequencing risk,
• 14:55
  Speaker 2: if you suffer an adverse event right at the beginning
• 14:58
  Speaker 2: of your retirement, is very damaging to the long-term outcome
• 15:01
  Speaker 2: of your portfolio and your wealth, frankly, and your lifestyle.
• 15:05
  Speaker 2: So people, it makes sense to be anxious about losing
• 15:09
  Speaker 2: a lot early in retirement in particular. And as you
• 15:12
  Speaker 2: get older, it doesn't matter so much, you're okay. The
• 15:14
  Speaker 2: vast majority of older people I speak to and retired people,
• 15:17
  Speaker 2: they don't want to draw down on their capital at
• 15:19
  Speaker 2: all in retirement. They want to preserve the whole lot
• 15:21
  Speaker 2: and just live off the income. And that's where that
• 15:23
  Speaker 2: desire for yield comes from. It's not a really chunky yield.
• 15:27
  Speaker 2: And I don't want to think about drawing down on
• 15:29
  Speaker 2: the capital. That's too much risk for me.
• 15:31
  Speaker 1: Yeah, yeah. And that is, I suppose, in a way,
• 15:35
  Speaker 1: it's the optimal. It's the optimal situation. I think we
• 15:38
  Speaker 1: should be careful. And we had Ashley Owen on the show,
• 15:41
  Speaker 1: very interesting, a few weeks ago about that whole issue,
• 15:45
  Speaker 1: about how, you know, I mean, yes, you'd rather not
• 15:47
  Speaker 1: draw down on capital. But similarly, you're not going to
• 15:50
  Speaker 1: live for a thousand years. There is a point at
• 15:53
  Speaker 1: which you could safely actuarially make an estimate and say, okay,
• 15:56
  Speaker 1: I'll assume I live to 110. you know, and then
• 15:58
  Speaker 1: you can work backwards from there. And that would be,
• 16:00
  Speaker 1: I would imagine, safe enough for most people, even today
• 16:03
  Speaker 1: with the longevity risk that we have. But on the
• 16:05
  Speaker 1: market and where it's going. So we crossed the 8,000
• 16:08
  Speaker 1: mark on the ASX 200 the other day. Big number,
• 16:12
  Speaker 1: very important milestone, important to show that we are in
• 16:16
  Speaker 1: blue sky, that the ASX is really starting to move.
• 16:21
  Speaker 1: And let's just put the US to one side just
• 16:23
  Speaker 1: for the moment at this part of the show and
• 16:25
  Speaker 1: talk about the ASX. One other very big change occurred
• 16:30
  Speaker 1: just around the same time that was happening. And that
• 16:32
  Speaker 1: was that our market is, as everyone knows, very much
• 16:37
  Speaker 1: based on two things, banks and miners. And BHP had
• 16:41
  Speaker 1: been the biggest stock in the market for years. And
• 16:45
  Speaker 1: CBA on Monday morning this week, because I was going
• 16:49
  Speaker 1: to do a story, Gemma, about how it was going
• 16:52
  Speaker 1: to overtake BHP. And as I was doing it on
• 16:54
  Speaker 1: Monday morning, I had it actually written and I had
• 16:57
  Speaker 1: it written in this way that said it's going to overtake.
• 16:59
  Speaker 1: And at about lunchtime, I looked again and the numbers
• 17:03
  Speaker 1: had changed around and it had overtaken. So a bit
• 17:05
  Speaker 1: of luck that I was able to say on the day, hey,
• 17:08
  Speaker 1: CBA is after becoming the biggest stock. It happened before
• 17:11
  Speaker 1: my eyes. But and I think This time around, it's
• 17:14
  Speaker 1: going to stay there. And I think it stayed there before,
• 17:17
  Speaker 1: about four years ago, it was there for a year.
• 17:20
  Speaker 1: And here we are again. What does that mean, do
• 17:23
  Speaker 1: you think, that our biggest stock is a bank now
• 17:26
  Speaker 1: and the banks are under the pinning, our ASX now,
• 17:29
  Speaker 1: not the miners?
• 17:30
  Speaker 2: Yeah, it's an interesting one, not least because I work
• 17:33
  Speaker 2: for a bank.
• 17:34
  Speaker 1: Yeah, I know, but we're talking about bank stocks as
• 17:37
  Speaker 1: a generic.
• 17:38
  Speaker 2: I'll talk about them generally, but it's worth calling out CBA.
• 17:41
  Speaker 2: CBA is... broadly understood to be the most expensive bank
• 17:47
  Speaker 2: in the world based on its share price and its valuation.
• 17:51
  Speaker 2: That's an extraordinary thing. And it is a very high
• 17:54
  Speaker 2: quality bank. You know, it doesn't carry the risk of
• 17:58
  Speaker 2: US banks and a lot of the other alternatives out
• 18:00
  Speaker 2: there in the world. It is very exposed to the
• 18:04
  Speaker 2: Australian consumer through home loans. It's a very strong franchise.
• 18:10
  Speaker 2: And it continues to maintain this massive premium over the
• 18:17
  Speaker 2: other Australian banks and over other global banks because over
• 18:21
  Speaker 2: literally decades, it's continued to maintain its margins to an extent,
• 18:28
  Speaker 2: better than others, let's put it that way. It continues
• 18:31
  Speaker 2: to have this very strong footprint and have the largest
• 18:35
  Speaker 2: home loan share in the Australian market. The Australian home
• 18:39
  Speaker 2: loan market continues to hold up despite constant predictions of
• 18:44
  Speaker 2: fall in house prices. All of the things that are
• 18:47
  Speaker 2: supposed to undermine the share price of CBA and the
• 18:50
  Speaker 2: Australian banks just don't come to fruition. It doesn't mean
• 18:55
  Speaker 2: they never will. It just means that it's called the
• 18:58
  Speaker 2: window to make a trade for a reason, shorting the
• 19:00
  Speaker 2: Australian banks. It has cost a lot of people a
• 19:03
  Speaker 2: lot of money. We keep thinking they can't continue to
• 19:05
  Speaker 2: grow at this rate in terms of the share prices.
• 19:08
  Speaker 1: And yet, And it's really worth thinking about this, folks.
• 19:12
  Speaker 1: And it's not just because Gemma works for a bank.
• 19:15
  Speaker 1: And by the way, I mean, I would think a
• 19:17
  Speaker 1: lot more of her. There's no way that she would
• 19:19
  Speaker 1: simply talk her book or anything like that because I've
• 19:22
  Speaker 1: had her on the show lots of times.
• 19:23
  Speaker 2: I think a lot more of her if she didn't
• 19:24
  Speaker 2: work for a bank. I was like, oh, thanks.
• 19:26
  Speaker 1: No, no. But she doesn't talk her book. And anyway,
• 19:28
  Speaker 1: here's the facts. It's very hard to find a buy note.
• 19:32
  Speaker 1: It's almost impossible to find a single stockbroker in the
• 19:34
  Speaker 1: Australian stock market that will tell you to buy banks
• 19:37
  Speaker 1: right now. There's hodls and underweights and everything across the
• 19:42
  Speaker 1: board on all the banks and on CBA. And here's
• 19:45
  Speaker 1: the thing. All those brokers are wrong and they're wrong
• 19:49
  Speaker 1: all year. and they're wrong month after month. This is August.
• 19:52
  Speaker 1: They're saying it since late last year. That doesn't mean,
• 19:55
  Speaker 1: as Gemma says, they will be wrong in the future.
• 19:57
  Speaker 1: But I tell you what, right now they're wrong. So
• 20:00
  Speaker 1: the point I'm making is that we have the banks
• 20:02
  Speaker 1: now dominant on our market and then we have the
• 20:04
  Speaker 1: miners and we have the usual suspects, CSL, and some
• 20:08
  Speaker 1: of the biggest stocks. Macquarie Bank, too, also never forget
• 20:11
  Speaker 1: in there, very much so now, in the top 10,
• 20:14
  Speaker 1: even though it's an investment bank and not typical, and
• 20:17
  Speaker 1: would have a lot more risk and a different nature
• 20:19
  Speaker 1: of risk than what we might call high street banks,
• 20:22
  Speaker 1: the big four that we all know. So, Gemma, what
• 20:25
  Speaker 1: are your troops on NAB Trade? What else are people buying? Because,
• 20:29
  Speaker 1: you know, one of the things that I always think about,
• 20:32
  Speaker 1: one of the great quotes about stock market investing is
• 20:35
  Speaker 1: that you can look at a stock, And you can
• 20:38
  Speaker 1: have your opinion on it and you could be very
• 20:40
  Speaker 1: good mathematically, you could have it all worked out and
• 20:42
  Speaker 1: you might think that it's going to go up and
• 20:45
  Speaker 1: that's all fine. But actually what matters is whether other
• 20:48
  Speaker 1: people think it's going to go up. That's what matters, right?
• 20:51
  Speaker 1: So I'm digging here and I'm trying to find out
• 20:53
  Speaker 1: from you, what are your database of millions of investors?
• 20:58
  Speaker 1: What are they looking at now? What are they like?
• 21:01
  Speaker 2: It's always the best question. The one thing I found
• 21:04
  Speaker 2: about working in this part of the industry. So working
• 21:08
  Speaker 2: with non-advised, the people who trade via NAB Trade generally
• 21:12
  Speaker 2: don't have a financial advisor. They're making their own decisions.
• 21:15
  Speaker 2: Non-advised individuals managing their own money is it is amazing
• 21:20
  Speaker 2: how astute people are when it's their own money on
• 21:22
  Speaker 2: the line. They are not outsourcing this decision and they
• 21:25
  Speaker 2: tend to be very thoughtful about it. There's a lot
• 21:28
  Speaker 2: of talk about how ignorant retail investors can be and
• 21:32
  Speaker 2: they refer to the dumb money. We just don't see
• 21:34
  Speaker 2: that at all. You see quite the opposite. Very thoughtful,
• 21:37
  Speaker 2: very well-considered investing. And the COVID period was the classic
• 21:40
  Speaker 2: example where people went out and the top 10 stocks
• 21:42
  Speaker 2: were stuff your mum would tell you to buy. All
• 21:45
  Speaker 2: big four banks were in there, all four of them.
• 21:48
  Speaker 2: The HP and Rio were in there. The ASX 200
• 21:51
  Speaker 2: ETF was in there, right? That's what people bought during COVID.
• 21:53
  Speaker 2: Every single one of those things has performed extremely strongly since,
• 21:57
  Speaker 2: and it was an incredible opportunity. So to your question
• 21:59
  Speaker 2: about what people are doing, they are all– loaded to
• 22:02
  Speaker 2: the eyeballs with banks, right? Everyone has bought banks at
• 22:05
  Speaker 2: various points over the last couple of decades, in some
• 22:08
  Speaker 2: cases back in the 90s. And then they bought a
• 22:10
  Speaker 2: ton more during COVID, which was a brilliant decision across
• 22:13
  Speaker 2: the board. You were buying three of the big four,
• 22:16
  Speaker 2: sort of sub $ 16, you had a good time. And
• 22:18
  Speaker 2: $ 70 range for CBA, people have so many banks, right?
• 22:22
  Speaker 2: And so they're not buying banks at the moment. This
• 22:25
  Speaker 2: is not what they need. There's been a very dramatic
• 22:28
  Speaker 2: rotation into materials and that's been going on for about
• 22:30
  Speaker 2: 12 months now.
• 22:32
  Speaker 1: Explain broadly what materials are, because it's more than just miners,
• 22:35
  Speaker 1: isn't it?
• 22:36
  Speaker 2: It is, but to be honest with you, for our guys,
• 22:38
  Speaker 2: it's mostly BHP and Rio.
• 22:40
  Speaker 1: Right, okay.
• 22:41
  Speaker 2: I'm using a general term, but I'll be more specific.
• 22:44
  Speaker 2: A lot of interest in BHP, a lot of interest
• 22:47
  Speaker 2: in Rio. Fortescue has been our biggest trade for literally years,
• 22:52
  Speaker 2: but that's a small handful of very wealthy traders. who
• 22:56
  Speaker 2: mostly traded very actively, so it doesn't.
• 22:58
  Speaker 1: And they're literally, they're trading it off the iron ore
• 23:00
  Speaker 1: price because it's a pure connection.
• 23:02
  Speaker 2: It's a pure play, right? So it's a very straight
• 23:03
  Speaker 2: line between what happened with the iron ore price, what
• 23:06
  Speaker 2: happens with the Fortescue price. And if you're very onto that,
• 23:09
  Speaker 2: you can make a lot of money, but you need
• 23:10
  Speaker 2: to be very onto it. So we have people who
• 23:12
  Speaker 2: do that. That is very much, that's their thing. And
• 23:15
  Speaker 2: there's another group of investors who are very interested in Fortescue,
• 23:18
  Speaker 2: comes and goes from their portfolios as well. There was
• 23:21
  Speaker 2: a brief lithium moment and there are people who kind
• 23:23
  Speaker 2: of flirt with it again at the moment. But we
• 23:26
  Speaker 2: just have seen this real shift back to materials from
• 23:33
  Speaker 2: an investing perspective because people feel that perhaps everything's not
• 23:40
  Speaker 2: fully priced yet, whereas they feel with financials they are.
• 23:45
  Speaker 2: And then when they're looking to the broader market, there's
• 23:47
  Speaker 2: sort of less that people are excited about and we
• 23:49
  Speaker 2: start to see more ETF investing and so on.
• 23:52
  Speaker 1: Okay. All right. I hope they're right. about the materials
• 23:57
  Speaker 1: i mean the iron ore is the thing i mean
• 23:59
  Speaker 1: you can have all the interest in nickel and lithium
• 24:01
  Speaker 1: that you like but really if the iron ore price
• 24:04
  Speaker 1: sinks folks i'm sorry the ship goes with it okay
• 24:07
  Speaker 1: we have to stop right there we're going to take
• 24:09
  Speaker 1: a break when we come back we're going to talk
• 24:10
  Speaker 1: about the trump trade what would the election of trump
• 24:14
  Speaker 1: mean how important is the u.s to our market and
• 24:19
  Speaker 1: what may be ahead in the rest of the year
• 24:21
  Speaker 1: back in a moment Hello, welcome back to the Australian's
• 24:34
  Speaker 1: Money Puzzle podcast. James Kirby here with Gemma Dale from
• 24:38
  Speaker 1: NAB Trade. So Gemma, I thought the market was looking
• 24:43
  Speaker 1: pretty good. I thought the US markets were steaming along.
• 24:46
  Speaker 1: Because I'm looking at it for 40 years, I'm very
• 24:49
  Speaker 1: aware that the September-October period is a damn rocky period
• 24:53
  Speaker 1: in global markets because of the US. And the US
• 24:56
  Speaker 1: now represents, just to reiterate, folks, the US represents... 70%
• 25:02
  Speaker 1: of the global market just now, the Morgan Stanley Capital
• 25:05
  Speaker 1: International Index. That's extraordinary. What happens in the US is
• 25:10
  Speaker 1: of extreme importance to what happens to all markets, including ours.
• 25:14
  Speaker 1: And if it rises, we will rise with it. And
• 25:16
  Speaker 1: if it falls, we will fall with it. And so
• 25:19
  Speaker 1: it really matters. And so it leads us to the question,
• 25:22
  Speaker 1: if Trump wins with his pro-business agenda, with his track
• 25:26
  Speaker 1: record of lifting markets the last time, with his track
• 25:30
  Speaker 1: record of pushing old industry, fossil fuels, oil, coal. He's
• 25:36
  Speaker 1: certainly anti-environmental advocacy. He's not pro-electric cars, despite all the
• 25:40
  Speaker 1: money Elon Musk wants to give him. He's going to dictate,
• 25:44
  Speaker 1: to a serious extent, the nature of the market as
• 25:47
  Speaker 1: it comes along. He used to be mixed on tech.
• 25:50
  Speaker 1: But he now has J.D. Vance as his running mate,
• 25:53
  Speaker 1: as his VP, who is big with Silicon Valley, backed
• 25:57
  Speaker 1: by Peter Thiel, who I'm sure you will know, who
• 26:01
  Speaker 1: is behind Palantir. With that extraordinary preamble, it's tough, isn't it, Gemma?
• 26:07
  Speaker 1: I ask you, what difference will Trump make? Just tell us,
• 26:10
  Speaker 1: what do you think?
• 26:11
  Speaker 2: It's fascinating, isn't it? There's so many questions that all
• 26:16
  Speaker 2: market participants are trying to answer because the biggest question
• 26:20
  Speaker 2: in markets for the last 12 months has been when's
• 26:22
  Speaker 2: the Fed going to cut, right? So question one was
• 26:25
  Speaker 2: when do we cut? And that answer at the moment
• 26:30
  Speaker 2: is September. There have previously been six cuts in the year.
• 26:33
  Speaker 2: That's what we were expecting. That's the market pricing in
• 26:36
  Speaker 2: six cuts. Now they're back to two. They're expecting September.
• 26:39
  Speaker 2: So it was always about rate cuts. And despite the
• 26:43
  Speaker 2: market's extraordinary enthusiasm for cuts, historically, the Fed is cutting
• 26:49
  Speaker 2: because the economy is falling off a cliff. And so
• 26:51
  Speaker 2: those first cuts are quite positive for the market. And
• 26:53
  Speaker 2: then after that, it all looks very bleak. And so
• 26:56
  Speaker 2: you actually sort of you want to you can get
• 26:58
  Speaker 2: out in front of the first couple. And then after that,
• 27:00
  Speaker 2: it really looks ugly. In terms of what Trump is
• 27:03
  Speaker 2: going to do, it's fascinating. So the first question, I think,
• 27:05
  Speaker 2: for a lot of investors, what is going to happen
• 27:07
  Speaker 2: with tax cuts at a corporate level? If we look
• 27:10
  Speaker 2: at his first election, when there was a dramatic uplift
• 27:15
  Speaker 2: in corporate profitability post-Trump And it was all tax cuts.
• 27:19
  Speaker 2: Every dollar of it was tax cuts. That has some
• 27:22
  Speaker 2: implications for an economy that is as heavily indebted or
• 27:25
  Speaker 2: a government that's as heavily indebted as the US. So
• 27:28
  Speaker 2: there's a lot of questions about the US dollar. There's
• 27:30
  Speaker 2: a lot of questions about what happens with the Treasury
• 27:35
  Speaker 2: and the debt that is being carried currently and being
• 27:39
  Speaker 2: raised regularly. It's quite extraordinary to try and unpick the
• 27:45
  Speaker 2: range of things that are on the table currently. There's
• 27:48
  Speaker 2: tariffs as well and trade wars that may start again.
• 27:51
  Speaker 2: Do we know about this? It's obviously feeding into the
• 27:53
  Speaker 2: NASDAQ at the moment. There is talk that Jamie Dimon
• 27:58
  Speaker 2: may become the next Secretary of the Treasury. That is
• 28:02
  Speaker 2: very appealing to a lot on Wall Street for a
• 28:04
  Speaker 2: lot of reasons. They would love that. But I think
• 28:08
  Speaker 2: that would also calm the market a bit because he's
• 28:10
  Speaker 2: obviously not known to be a highly political character. He's
• 28:14
  Speaker 2: known to be A money guy knows what he's doing.
• 28:18
  Speaker 1: But can I ask you, between the lines to me,
• 28:21
  Speaker 1: it seems to me that you're saying, okay, the deficits,
• 28:23
  Speaker 1: et cetera, that's going to push up interest rates, it's
• 28:25
  Speaker 1: going to push up inflation to the U.S. And we'll
• 28:27
  Speaker 1: just put that to one side, but that would seem
• 28:29
  Speaker 1: to be a natural consequence of his disposition and the
• 28:33
  Speaker 1: American administration's disposition that we could expect under Trump and Vance.
• 28:37
  Speaker 1: Here's the thing. Tell us then what the most interesting
• 28:41
  Speaker 1: thing is about the U.S. dollar. And I notice more
• 28:44
  Speaker 1: and more this talk about de-dollarization. Can you explain what
• 28:48
  Speaker 1: the theory is about the U.S. dollar? What could happen
• 28:51
  Speaker 1: to it and what would it mean for us as
• 28:53
  Speaker 1: Australian investors?
• 28:55
  Speaker 2: This is a really interesting one and it is getting
• 28:58
  Speaker 2: more and more attention. Trump appears to be of the
• 29:02
  Speaker 2: view that the U.S. dollar is too strong and is
• 29:05
  Speaker 2: the world's reserve currency and has been for a long
• 29:07
  Speaker 2: time and at current and historical levels. it is too
• 29:12
  Speaker 2: strong or more to the point that everyone has been
• 29:14
  Speaker 2: happily devaluing their currencies against the US, which allows them
• 29:19
  Speaker 2: to export to the US and has, in his view,
• 29:22
  Speaker 2: and this is an interesting choice, hollowed out American industry,
• 29:27
  Speaker 2: particularly manufacturing, that you can't produce goods in the US
• 29:32
  Speaker 2: because they're too expensive to export. He mentioned tractors, which
• 29:35
  Speaker 2: is quite interesting. So his view is when you've got
• 29:38
  Speaker 2: a very strong dollar, you hollowing out US manufacturing, the
• 29:42
  Speaker 2: sort of middle America that votes for him. And to
• 29:45
  Speaker 2: that extent, he does not want a strong US dollar.
• 29:49
  Speaker 2: He would like the dollar to fall relative to other currencies,
• 29:54
  Speaker 2: which would allow them to be far more competitive in
• 29:56
  Speaker 2: export markets. in manufacturing, but has huge implications for everybody else.
• 30:02
  Speaker 2: And so it's interesting. I mean, Australia, the US is
• 30:05
  Speaker 2: not our number one export market and the things that
• 30:08
  Speaker 2: we export are not easily substitutable. So your point about
• 30:12
  Speaker 2: iron ore is a really good one, right? You're not
• 30:14
  Speaker 2: going to go and get your iron ore from a
• 30:15
  Speaker 2: lot of other places. There are alternatives and most of
• 30:18
  Speaker 2: it goes to China. Then the question becomes, if China
• 30:21
  Speaker 2: can't export to the US, does that have implications for Australia?
• 30:25
  Speaker 2: When you look at a company like CSL, where their
• 30:27
  Speaker 2: earnings are priced in US dollars, is that a problem?
• 30:30
  Speaker 2: So you can see ripple effects across so many different areas.
• 30:34
  Speaker 2: And this is, I think, why so many people would
• 30:36
  Speaker 2: be very keen for someone like Diamond to go in
• 30:38
  Speaker 2: and be working with the administration to ensure that maybe
• 30:41
  Speaker 2: some of those implications are thought through before we aggressively
• 30:44
  Speaker 2: try to devalue the currency.
• 30:46
  Speaker 1: Right. And if they did devalue the currency, which of
• 30:48
  Speaker 1: course we... Okay, so quick win for US... Heartland America
• 30:52
  Speaker 1: feels better about itself. But then the U.S. wouldn't be,
• 30:55
  Speaker 1: the U.S., the decline of the U.S. as a reserve currency, which,
• 30:58
  Speaker 1: by the way, has barely occurred. But if it started
• 31:02
  Speaker 1: to occur, what would that mean then for Australia?
• 31:05
  Speaker 2: There's a few different things to consider. One is how
• 31:07
  Speaker 2: much in Australia is priced in U.S. dollars. We're not
• 31:11
  Speaker 2: a country that is as heavily dependent on the U.S.
• 31:14
  Speaker 2: dollar as many others. So you can see the implications
• 31:17
  Speaker 2: for China, for example. For us, they're probably secondary effects.
• 31:21
  Speaker 2: rather than direct. And so we don't see quite as
• 31:26
  Speaker 2: much anxiety here. It's more going, if we have to
• 31:30
  Speaker 2: work through this, what are the implications? But for some
• 31:32
  Speaker 2: companies and some sectors, the implications are quite significant. Okay.
• 31:36
  Speaker 1: One last thing. What would it mean for gold? Rhetorical question.
• 31:43
  Speaker 2: Rallying for a while, right? People have been watching this.
• 31:47
  Speaker 2: And it's quite interesting to observe. And the major hypothesis
• 31:51
  Speaker 2: for why it's been rallying is that central banks have
• 31:53
  Speaker 2: been buying. Have they been buying in anticipation of a de-dollarization?
• 31:58
  Speaker 2: Maybe they have. And so there is a hypothesis that
• 32:01
  Speaker 2: there will be more upward pressure on the gold price
• 32:04
  Speaker 2: and that it's quite attractive, even though it has rallied
• 32:07
  Speaker 2: very strongly.
• 32:08
  Speaker 1: By the way, talking about the top 10 stocks, we
• 32:10
  Speaker 1: talked about banks and miners, but you know, the miner
• 32:13
  Speaker 1: that's appeared in the top 10 is Newmont. Newcrest just
• 32:17
  Speaker 1: sold at the wrong time, folks. Sorry, but there you are. Oh, Lord, Newcrest,
• 32:23
  Speaker 1: it's tough. Honestly, they floundered around for years and years,
• 32:26
  Speaker 1: and then they sold to Newmont, and guess what? Gold
• 32:29
  Speaker 1: is going beautifully. Remember, folks, that just because gold is
• 32:33
  Speaker 1: going up doesn't mean the gold miners go up because
• 32:36
  Speaker 1: they have to mine, and often they get it wrong
• 32:39
  Speaker 1: big time. But in the main, they should do better.
• 32:42
  Speaker 2: It's never a perfect correlation, that one. It's a disappointment.
• 32:46
  Speaker 1: Oh, no. Oh, man. It's a particularly unreliable relationship, the
• 32:51
  Speaker 1: direction of the gold price and the direction of gold miners. Okay,
• 32:54
  Speaker 1: that's for another show. We'll be back in a moment.
• 32:56
  Speaker 1: We've got some great questions. Hello and welcome back to
• 33:09
  Speaker 1: the Australian's Money Puzzle podcast. I'm James Kirby, the Wealth
• 33:13
  Speaker 1: Editor at The Australian, talking to friend of the show,
• 33:16
  Speaker 1: Gemma Dale, Head of Investor Behaviour and SMSF at NAB Trade.
• 33:21
  Speaker 1: As I have often said, one of my favourite job titles.
• 33:24
  Speaker 1: It's funny, when I go on other people's shows, they say, oh,
• 33:26
  Speaker 1: I love your title, Wealth Editor. But I like Head
• 33:30
  Speaker 1: of Investor Behaviour, I must say. I love that one.
• 33:33
  Speaker 1: All right, now.
• 33:34
  Speaker 2: I'm not telling them what to do. I'm just looking
• 33:35
  Speaker 2: at it.
• 33:36
  Speaker 1: Yeah, I know, but it's such an interesting area. All right.
• 33:39
  Speaker 1: Bruce says, what is the difference between infrastructure investments made
• 33:43
  Speaker 1: by private equity and those made by infrastructure ETFs? And
• 33:47
  Speaker 1: does this explain the relatively poor performance of infrastructure ETFs? Bruce,
• 33:52
  Speaker 1: that's a terrific question. I wonder, are we perhaps thinking
• 33:56
  Speaker 1: that the private equity performance of infrastructure is better than
• 34:00
  Speaker 1: they say it is? Or we're led to believe it's
• 34:02
  Speaker 1: so good because how do we know? But what do
• 34:03
  Speaker 1: you think, Gemma?
• 34:05
  Speaker 2: I think there's multiple parts to this question. I thought
• 34:07
  Speaker 2: about it a lot, actually. Private equity firms will have
• 34:12
  Speaker 2: an infrastructure arm in many cases, but that doesn't mean
• 34:14
  Speaker 2: they approach it the same way they do private equity,
• 34:17
  Speaker 2: the way they would a tech sort of startup, for example.
• 34:20
  Speaker 2: So the goal of private equity is to get in
• 34:22
  Speaker 2: very early, take a very active role in the company,
• 34:26
  Speaker 2: and sometimes it will be a turnaround. A big company
• 34:28
  Speaker 2: that's existed for a long time, it's really broken. Private
• 34:30
  Speaker 2: equity will buy it up, get in there, restructure it,
• 34:34
  Speaker 2: turn it around. That's quite different to infrastructure where your
• 34:38
  Speaker 2: goal is effectively to own something that generates a pretty
• 34:42
  Speaker 2: consistent return over time.
• 34:44
  Speaker 1: It's just tipping over. It's tipping along.
• 34:47
  Speaker 2: Yeah, something that's ticking over. So quite different. So even
• 34:50
  Speaker 2: though it may be a private equity firm that is
• 34:52
  Speaker 2: owning the assets, it's not approaching it like a private
• 34:55
  Speaker 2: equity business. There is a lot of unlisted infrastructure. It's
• 34:59
  Speaker 2: not stuff that is available on the SX or a
• 35:01
  Speaker 2: listed exchange. And then you've got your listed plays and
• 35:04
  Speaker 2: then you've got ETFs and then you've got passive versus active.
• 35:07
  Speaker 2: So it's all very, it depends on what you're comparing.
• 35:10
  Speaker 2: Infrastructure is a really good example of where it's a
• 35:12
  Speaker 2: very broad term that covers a lot of different things.
• 35:16
  Speaker 2: And you need to look at the underlying assets to go,
• 35:18
  Speaker 2: is this something I want to invest in? Because the
• 35:19
  Speaker 2: performance will be dramatically different. We saw during COVID that
• 35:24
  Speaker 2: all of these things that were supposed to be great
• 35:27
  Speaker 2: long-term investments that just spit out a long-term return and
• 35:30
  Speaker 2: you don't have to worry too much about volatility. ended
• 35:33
  Speaker 2: up being very volatile. Toll roads, airports, all of that stuff,
• 35:38
  Speaker 2: complete disaster during COVID, did the exact opposite of what
• 35:41
  Speaker 2: they were supposed to do long term because of this
• 35:44
  Speaker 2: very dramatic change in the world. So the other thing
• 35:47
  Speaker 2: that is very important to some people, less so others,
• 35:51
  Speaker 2: but absolutely matters if you're an institutional investor, is there's
• 35:54
  Speaker 2: a lot of energy exposure in some funds. So you'll
• 35:58
  Speaker 2: see some with 30% or more exposed to non-renewable energy sources,
• 36:04
  Speaker 2: fossil fuels, let's be frank. And then they will have pipelines,
• 36:08
  Speaker 2: which are also, let's be frank, non-renewable energy sources in
• 36:11
  Speaker 2: most cases. That can be 40 or 50% of the assets.
• 36:15
  Speaker 2: And if that's not for you, you need to think
• 36:18
  Speaker 2: about that. But also there are a lot of institutional
• 36:20
  Speaker 2: investors who will not touch something that's 50% fossil fuels.
• 36:23
  Speaker 2: It's just a much, bigger universe than perhaps people anticipate,
• 36:28
  Speaker 2: and you want to look at what is actually being
• 36:30
  Speaker 2: held in it and think long and hard about whether
• 36:32
  Speaker 2: or not it's for you and whether you think it's
• 36:34
  Speaker 2: going to perform the way it wanted to, right?
• 36:36
  Speaker 1: Yeah, that's a really good answer. As you say, it's
• 36:38
  Speaker 1: a world within a world, Bruce. And, you know, with
• 36:42
  Speaker 1: an infrastructure ETF, you know what the deal is. With
• 36:46
  Speaker 1: the private equity ETF, infrastructure play. You've no idea what's
• 36:50
  Speaker 1: going on there. They might be firing the entire management.
• 36:53
  Speaker 1: They might be changing the entire plan. You know, don't
• 36:55
  Speaker 1: build that bridge, build another one. Completely different. It's almost
• 36:58
  Speaker 1: not comparing apples with apples, though it sounds like it. OK,
• 37:02
  Speaker 1: really good. Thank you for that, Gemma. Now, Bruce cleverly
• 37:05
  Speaker 1: puts in a second question, and that's always fine, folks.
• 37:07
  Speaker 1: You can put in two questions if they both make
• 37:09
  Speaker 1: sense to me and they're both relatively succinct. They have
• 37:12
  Speaker 1: a very good chance of being read out. OK, his
• 37:14
  Speaker 1: second one is the debate over the minimum amount of
• 37:17
  Speaker 1: required for a self-managed super fund rages on. One factor
• 37:22
  Speaker 1: often mentioned is the running cost. Scary figures are sometimes used.
• 37:27
  Speaker 1: Last year, our SMSF cost a total of 2,600. That's
• 37:32
  Speaker 1: the tax return preparation orders in ASIC. Note, no financial advice,
• 37:37
  Speaker 1: as we didn't use any. And we keep getting letters
• 37:40
  Speaker 1: from people offering to do it for less. Can you
• 37:42
  Speaker 1: explain The discrepancy between the quoted figures. This is a
• 37:45
  Speaker 1: great question, Bruce. Again, two in a row. Well done. Bruce,
• 37:48
  Speaker 1: I'm the same. Okay, I have an SMSF for about
• 37:51
  Speaker 1: 20 years and I get letters all the time from
• 37:54
  Speaker 1: these people. I don't know how they get my name
• 37:56
  Speaker 1: and address. I'd love to know how they get it
• 37:59
  Speaker 1: because I didn't give it to them. And they're offering,
• 38:01
  Speaker 1: they just said the SMSF owners. They don't actually know
• 38:04
  Speaker 1: who I am, but they've got enough information to get
• 38:07
  Speaker 1: a letter to my home. And they offer to do
• 38:10
  Speaker 1: my SMSF for tiny amounts. The discrepancy, I imagine, is
• 38:15
  Speaker 1: the same as anything else. You know, you'll have two
• 38:17
  Speaker 1: people drop a leaflet in your door saying they've cleaned
• 38:20
  Speaker 1: your gutters and one says they'll do it for 50
• 38:22
  Speaker 1: bucks and one says 500. And you can kind of
• 38:24
  Speaker 1: guess why one's 50 and why one's 500. Maybe that's
• 38:28
  Speaker 1: rather simplistic. Gemma, who is, you must remember, head of
• 38:32
  Speaker 1: SMSF at one of the nation's biggest banks, may have
• 38:34
  Speaker 1: a more sophisticated answer.
• 38:37
  Speaker 2: So this is funny because a friend of mine uses
• 38:39
  Speaker 2: one of the very low cost administrators for his SMSF.
• 38:43
  Speaker 2: And when I say he uses it, what I mean
• 38:44
  Speaker 2: is his wife is an accountant and she does all
• 38:48
  Speaker 2: the paperwork and then submits it to them. And then
• 38:50
  Speaker 2: they do the last tiny bit. So it's quite fascinating. Effectively,
• 38:55
  Speaker 2: what happens is you do most of the work and
• 38:57
  Speaker 2: then you provide it to the administrator and they do
• 39:00
  Speaker 2: the bare minimum at the end, which is required. I
• 39:03
  Speaker 2: imagine cost it out at her hourly rate, it's probably
• 39:06
  Speaker 2: a very poor decision on their part, but, you know,
• 39:08
  Speaker 2: it's got to be done. So this is, I find
• 39:11
  Speaker 2: this fascinating and I've looked at this so many times
• 39:14
  Speaker 2: and it's always worth noting who has done this research
• 39:17
  Speaker 2: in emphatic commas about what the cost is and what
• 39:20
  Speaker 2: their motivation might be for putting it out there. The
• 39:24
  Speaker 2: assumption is often that you have a financial advisor, which
• 39:26
  Speaker 2: in your case, Bruce is, not the case, right? You
• 39:30
  Speaker 2: don't have an advisor. So you can chuck out several
• 39:32
  Speaker 2: thousand dollars worth of fees that have been assumed in
• 39:35
  Speaker 2: this situation. And there are always a lot of assumptions.
• 39:39
  Speaker 2: The other thing they will assume is asset management fees.
• 39:43
  Speaker 2: So they assume that you have managed funds generally. or
• 39:48
  Speaker 2: they used to, maybe they will say now they're actively
• 39:51
  Speaker 2: managed ETFs and they will put in 100 basis points
• 39:53
  Speaker 2: for that or 150 basis points for that. Or they
• 39:56
  Speaker 2: might assume you have a retail managed fund and it
• 39:58
  Speaker 2: might be 200 basis points for that. So they layer them, right?
• 40:01
  Speaker 2: So they go, your accountant's going to charge you $ 5, 000
• 40:04
  Speaker 2: a year and then the auditor is going to charge
• 40:05
  Speaker 2: you $ 1, 000 a year. And then you are going to
• 40:09
  Speaker 2: pay 2% of your assets if you're in managed funds. Now,
• 40:12
  Speaker 2: they may have brought these down because obviously fees for
• 40:15
  Speaker 2: all of these things have fallen dramatically over the last
• 40:17
  Speaker 2: 10 years. So I'm not quite sure exactly what their
• 40:20
  Speaker 2: assumptions are now. They have hopefully reflected the market a
• 40:24
  Speaker 2: bit better. And then an advisor fee. So many people
• 40:28
  Speaker 2: will pay an advisor a fee of anywhere between 60
• 40:31
  Speaker 2: and 100 basis points if you pay an asset-based fee.
• 40:34
  Speaker 2: So once you add all of those things up, you
• 40:35
  Speaker 2: can be talking $ 10, 000 plus to run a fund. But
• 40:39
  Speaker 2: the vast majority of people don't do that, right? Like
• 40:40
  Speaker 2: when I look at what we have on Naptrade, which
• 40:42
  Speaker 2: is a very meaningful number of SMSFs, they're people running
• 40:46
  Speaker 2: their own share portfolio. There's no holding cost because they're
• 40:51
  Speaker 2: HIN-based assets and they just sit on the platform. Then
• 40:54
  Speaker 2: you get your statement at the end of the year
• 40:56
  Speaker 2: and just give it to your accountant or you give
• 40:58
  Speaker 2: it to your administrator.
• 40:59
  Speaker 1: Have you any idea what percentage of them use advisors?
• 41:02
  Speaker 2: On Naptrade, virtually none, right?
• 41:05
  Speaker 1: Yeah, I would have thought so. I would have thought
• 41:06
  Speaker 1: so because the whole thing is It's self-managed.
• 41:09
  Speaker 2: That's right. And it's not to say that investors who
• 41:13
  Speaker 2: have SMSFs don't use advisors. Many of them do. They
• 41:17
  Speaker 2: tend to be, ironically, the wealthy ones who want quite
• 41:22
  Speaker 2: sophisticated advice. And so we do see a lot of that.
• 41:25
  Speaker 2: So Nav owns J.B. Weir, for example, and most of
• 41:28
  Speaker 2: our J.B. Weir clients will have a self-managed super fund.
• 41:30
  Speaker 2: But they don't have it necessarily for the share of advisors.
• 41:33
  Speaker 2: They have it because they have a business real property
• 41:35
  Speaker 2: in there, because they have other assets in there that
• 41:38
  Speaker 2: are quite complex and would not otherwise be able to
• 41:41
  Speaker 2: be held inside super. So for the vast majority of people,
• 41:45
  Speaker 2: you have a self-managed super fund for a specific set
• 41:47
  Speaker 2: of reasons. A lot of people do it just for
• 41:50
  Speaker 2: control because they want to run it themselves. If you're
• 41:52
  Speaker 2: doing that and you're only holding shares and ETFs, your
• 41:56
  Speaker 2: running costs are super low. If you have a far
• 41:59
  Speaker 2: more complex fund and you're trying to hold those assets
• 42:02
  Speaker 2: for specific reasons, and you wanted to own business real property.
• 42:05
  Speaker 2: So you can own a property that your business leases
• 42:09
  Speaker 2: from your SMSF inside super. That's an amazing strategy for
• 42:13
  Speaker 2: some people. You might want to borrow to buy property
• 42:15
  Speaker 2: inside super, which is much harder to do than it
• 42:17
  Speaker 2: used to be, but it does work for some people,
• 42:18
  Speaker 2: usually very wealthy people. That's got a completely different set
• 42:21
  Speaker 2: of costs, right? So you can't compare these things. Again,
• 42:24
  Speaker 2: not apples with apples. If you're happy with costs you're
• 42:28
  Speaker 2: paying and a couple of grand a year is not bad,
• 42:31
  Speaker 2: you're just not. Those assumptions that you use are just
• 42:34
  Speaker 2: not relevant to you. Don't worry about it.
• 42:37
  Speaker 1: Yeah, yeah. I think that's broadly right too, as you say.
• 42:41
  Speaker 1: You know, if it's two grand on an SMSF and
• 42:45
  Speaker 1: we're assuming your SMSF isn't tiny, then it's going to
• 42:50
  Speaker 1: make sense really. And you don't use financial advice. And
• 42:53
  Speaker 1: if you did, the number is supposed to be 4,300
• 42:55
  Speaker 1: a year, which is so different and would change everything. Unfortunately,
• 42:59
  Speaker 1: I think that just must be paid And the discrepancy
• 43:03
  Speaker 1: between the quoted figures, there's all sorts of games, as
• 43:05
  Speaker 1: Gemma alluded to, some of which I didn't even know.
• 43:08
  Speaker 1: But also, I mean, get what you pay for, you
• 43:10
  Speaker 1: would think as well.
• 43:10
  Speaker 2: I should note, though, financial advice is not just what
• 43:15
  Speaker 2: to hold in your resume, etc. So the advice might
• 43:17
  Speaker 2: be what contributions you should be making every year, how
• 43:20
  Speaker 2: much you should be withdrawing. There can be some tax
• 43:22
  Speaker 2: advice in that, not the accounting sense of tax advice,
• 43:25
  Speaker 2: but just how you structure those things. There could be
• 43:27
  Speaker 2: all sorts of value-added advice in there that's not specifically
• 43:31
  Speaker 2: just about how the SMSF is run. So again, a
• 43:35
  Speaker 2: bit disingenuous to include the whole cost of financial advice
• 43:39
  Speaker 2: in that cost of running an SMSF. It's a lot
• 43:43
  Speaker 2: of assumptions.
• 43:44
  Speaker 1: Very interesting. Now, Bruce, you monopolized the question segment of
• 43:48
  Speaker 1: our show this week, which are two very smart questions.
• 43:50
  Speaker 1: So congratulations. No one's ever done that before. But you
• 43:54
  Speaker 1: have because we've run out of time. But that was terrific.
• 43:57
  Speaker 1: Thank you very much, Gemma Dale, Head of Investor Behaviour
• 44:01
  Speaker 1: and SMSF at Navtrade. Great to have you on as always.
• 44:04
  Speaker 2: Thank you so much.
• 44:05
  Speaker 1: Thank you. And we'll talk again. OK, folks, do recall
• 44:09
  Speaker 1: that we have an email which I would love you
• 44:11
  Speaker 1: to send some questions, observations, complaints to themoneypuzzle at theaustralian.com.au.
• 44:19
  Speaker 1: Talk to you soon. Thank you.