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The Muster-Tom Shallard: Craigs IP · The Muster on Hokonui

• 0:00
  Speaker 1: I fell into a... The muster financial segment with Craig's
• 0:04
  Speaker 1: Investment Partners in Gore. This information is general in nature
• 0:08
  Speaker 1: and is not financial advice. Craig's Investment Partners limited financial
• 0:12
  Speaker 1: advice provider disclosure statement can be found at craigsip.com.
• 0:19
  Speaker 2: Tom Shallard of Craig's Investment Partners joins us in studio
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  Speaker 2: once again. How you doing?
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  Speaker 3: Good afternoon, Andy. I'm doing not too bad, but just
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  Speaker 3: thinking back to... Last month when I was on the show,
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  Speaker 3: we were talking up a mild spring. That didn't materialise,
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  Speaker 3: did it?
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  Speaker 2: Was it my fault? You just can't ignore the situational
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  Speaker 2: way it's unfolding out there. It's not what you expect
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  Speaker 2: for September, but there's a lot of things out of
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  Speaker 2: the ordinary at the moment. We're talking finance matters today, Tom.
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  Speaker 2: Let's start off first. Regarding the domestic economy, how are
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  Speaker 2: we faring here in relation to the rest of the world,
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  Speaker 2: all things considered?
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  Speaker 3: Yeah, the domestic economy, I mean, closer to home, things
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  Speaker 3: are better than fair. So we had some GDP data
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  Speaker 3: for the June quarter, which came in mildly positive at 0.2%. Again,
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  Speaker 3: that's the rural sector doing the heavy lifting. Interestingly, annual
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  Speaker 3: GDP growth is at 2.6%, so that's actually the strongest
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  Speaker 3: in three years, despite a global energy shock. But that's
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  Speaker 3: on the back of, I guess, a couple of years
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  Speaker 3: that could be described as a bit of an economic pothole. But, yeah,
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  Speaker 3: things domestically are OK. Housing remains soft. Prices are down
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  Speaker 3: about a percent year on year and still 17% below 2021.
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  Speaker 3: Southland's the obvious outlier, up 10% year on year, which
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  Speaker 3: has got a bit of coverage, and that's on the
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  Speaker 3: back of strong commodity prices.
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  Speaker 2: And that's on the back of all this investment happening
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  Speaker 2: down here as well.
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  Speaker 3: Yes, yep. No, Southend's the place to be at the moment,
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  Speaker 3: and it certainly is the jewel in the crown of
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  Speaker 3: the regions.
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  Speaker 2: Well, it might not be for the weather, but certainly
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  Speaker 2: for growth in other areas. And the fuel situation too.
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  Speaker 2: It sounds as though I heard something the other day.
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  Speaker 2: Depending on what happens with the US midterms, we're going
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  Speaker 2: to keep these high prices up.
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  Speaker 1: Yep.
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  Speaker 3: What a difference a few weeks makes. I mean, last
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  Speaker 3: month we were talking easing tensions and falling oil prices,
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  Speaker 3: and here we are with oil over or around $ 100
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  Speaker 3: a barrel again. And what we're seeing is central banks responding.
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  Speaker 3: So the Federal Reserve lifted rates last week, and they're
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  Speaker 3: talking another rate into Christmas. That's the first time they've
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  Speaker 3: moved rates since 2023, so the Fed fund rate's at 4%.
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  Speaker 3: Bank of Japan, their cash rate's at the highest level
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  Speaker 3: since 1995, and Europe have hiked a couple of weeks
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  Speaker 3: ago as well, and our own Reserve Bank moved to 2.75.
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  Speaker 3: So back to a synchronised global tightening cycle, Andy, as
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  Speaker 3: a result of this energy shock.
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  Speaker 2: I heard something the other day as well. The OCR
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  Speaker 2: possibly moving like three days out before the election.
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  Speaker 3: Yeah, well, there's one more meeting before the election in October.
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  Speaker 3: One more meeting in October.
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  Speaker 2: Just before the election.
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  Speaker 3: Just before the election. So look, probably, well, almost certainly
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  Speaker 3: a hike there now, just on the back of what's
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  Speaker 3: happened in global interest rate markets. And yeah, there are
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  Speaker 3: some commentators out there that are forecasting even potentially a
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  Speaker 3: hike early into next year. So It's still a wait
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  Speaker 3: and see. It really just depends on what happens with
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  Speaker 3: this energy crisis and hopefully if the cost of oil
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  Speaker 3: gets back down to $ 70, $ 80, that might not be necessary.
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  Speaker 2: Generally speaking, are global share markets doing all right?
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  Speaker 3: Yep. No, despite all the noise, it's been a really
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  Speaker 3: strong year for global share markets. So in Kiwi dollar terms,
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  Speaker 3: the US share market's up around 12% year to date
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  Speaker 3: Japan's up more than 20%. And the emerging markets, which
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  Speaker 3: we've talked about before, are doing really well. They're up
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  Speaker 3: over 22%. So that's on the back of really robust
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  Speaker 3: corporate earnings. Economic growth has proven, as we've discussed, more
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  Speaker 3: resilient than expected. And look, this AI boom is continuing
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  Speaker 3: with the chip makers in Taiwan and Korea powering on
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  Speaker 3: some impressive corporate profits.
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  Speaker 2: From a financial perspective, is AI moving too quickly?
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  Speaker 3: It's an interesting one. I did actually scratch together a
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  Speaker 3: couple of notes for a client on some of the
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  Speaker 3: commentary in the media recently about AI and if things
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  Speaker 3: need to slow down. I mean, yeah, I'm not a regulator.
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  Speaker 3: I think things are moving at a pretty impressive pace
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  Speaker 3: and it's a revolutionary technology. So, yeah, my view, keep
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  Speaker 3: the foot on the gas.
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  Speaker 2: So we can't be going too quickly in the AI space,
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  Speaker 2: in your opinion? Because some people are saying it is
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  Speaker 2: moving too quickly.
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  Speaker 3: Yeah, but you've got to be realistic. If we regulate
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  Speaker 3: it in the West, it's not going to be regulated
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  Speaker 3: in China. So we'd rather have that technology than some
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  Speaker 3: of our trading partners.
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  Speaker 2: So we can continue to see New Zealand currency on
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  Speaker 2: the back burner in regards to the likes of the
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  Speaker 2: powers of about 40 cents to a pound now. Jeez,
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  Speaker 2: back in the early 2000s, we were like 30 cents.
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  Speaker 2: We're starting to get towards, we're not there yet, but
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  Speaker 2: all of a sudden it comes into the equation, doesn't it?
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  Speaker 3: The Kiwi remains quite depressed, I mean, pretty much against
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  Speaker 3: all of its major trading pairs. No quick fix to that.
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  Speaker 3: You look at where we are in our interest rate
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  Speaker 3: cycle versus globally. So Fed fund rate at 4 now.
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  Speaker 3: The RBA in Australia at 4.35 with a hike next
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  Speaker 3: week looking likely. We're at 2.75. So, you know, from
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  Speaker 3: what's called a carry trade, if you get a high
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  Speaker 3: risk-free rate in another country, money flows there and vice versa.
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  Speaker 3: So that's why the Kiwi's under pressure. But look, it's
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  Speaker 3: good for exporters. So, you know, if you're paid in
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  Speaker 3: US dollars for your commodities, if that's your benchmark, then,
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  Speaker 3: you know, there are some benefits.
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  Speaker 2: Absolutely. And look, closer to home as well, like GDP
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  Speaker 2: for the June quarter up 0.2%.
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  Speaker 3: No, and as I said, I'm on the back of
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  Speaker 3: a strong rural sector.
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  Speaker 2: Yeah.
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  Speaker 3: So it'll be interesting to see what happens into year end.
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  Speaker 3: Obviously the election can, September can be, September, October in
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  Speaker 3: an election year can be quite quiet months with lack
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  Speaker 3: of investment and whatnot as people wait to see what
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  Speaker 3: will unfold in early November.
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  Speaker 2: Yeah. Foodstuffs, all this talk around supermarket duopolies wanting to
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  Speaker 2: split things up, we'd heard nothing until about two or
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  Speaker 2: three weeks ago. Now anyone and everyone's wanting to do
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  Speaker 2: something around it.
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  Speaker 3: Isn't it fascinating that a supermarket break-up's found its way
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  Speaker 3: to the centre of the election? It seems to be
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  Speaker 3: the most popular topic at the moment. But from my
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  Speaker 3: point of view, I mean, a pack and save split
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  Speaker 3: from New World and Foursquare, it's not a solution for
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  Speaker 3: lower grocery prices. It's not the fix, I think, you know,
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  Speaker 3: some of these people think it might be. I mean,
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  Speaker 3: New Zealand's a very, very small, isolated country at the
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  Speaker 3: bottom of the earth. You know, we're spread out across
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  Speaker 3: a lot of land, which already makes getting food on
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  Speaker 3: shelves rather expensive. So, you know, foodstuff stores are owned independently, owner-operated.
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  Speaker 3: So splitting up a co-op you'd be duplicating supply chains,
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  Speaker 3: distribution and technology. So ultimately consumers would be paying for that.
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  Speaker 3: The idea to me of duplicating operating costs leading to
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  Speaker 3: cheaper groceries is illogical.
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  Speaker 2: There's a whole lot that's intriguing for me to say
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  Speaker 2: the least and that's when you look at Woolworths. They
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  Speaker 2: were Woolworths. That Woolworths superstore originally, like in the early 2000s,
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  Speaker 2: they rebranded to Countdown. Then they spent all these millions
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  Speaker 2: of dollars rebranding their organisation back to Woolworths again. So
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  Speaker 2: it makes you wonder how flippantly these outfits throw money about.
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  Speaker 3: Yeah, well, the only real winner, and from what I
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  Speaker 3: can see of foodstuff, is split up, would be Woolworths.
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  Speaker 2: And they're Australian owned.
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  Speaker 3: Yeah, exactly, offshore owned. So if we want genuine competition
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  Speaker 3: and lower grocery prices, we do need to bring in
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  Speaker 3: a genuinely different model, bring in a global competitor with
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  Speaker 3: an established, structurally lower cost model. I mean, that's how
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  Speaker 3: free markets work.
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  Speaker 2: Great investment partners. How do people get in touch, Tom?
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  Speaker 3: You can give me a call on 03 209 0152
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  Speaker 3: or we're at 1 Erick Street in Gore.
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  Speaker 2: Good on you, Tom. Thanks for coming in.
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  Speaker 3: Thanks, Andy.
• 8:55
  Speaker 2: Tom Shellard of Craig's Investment Partners based here in Goya
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  Speaker 2: listening to the muster up next. Nathan Nelson from Dairy NZ.