Latest / The Curve / Why Flights Are Still Expensive, What Nike's Hiding & Are ETFs Losing Their Charm?

Transcript

Why Flights Are Still Expensive, What Nike's Hiding & Are ETFs Losing Their Charm? · The Curve

• 0:01
  Coming up in today's episode, the oil crisis is technically over. So why are airline prices still 30% higher than last year? We dig into why. Is anyone wearing Nike shoes still? I'm not sure what's going on, but basically they have just announced the last quarter they made a billion dollars.
• 0:21
  which makes you think, okay, wow, they must be doing so well. Everyone's buying Nike shoes. Actually, what's going on in this company underneath the hood is not all that great. So we're going to explain what's going on. In the first six months of this year, we have seen record money pouring into ETFs. And the ETFs doing well aren't necessarily the ones that you think. They're not AI. Spoiler. So we're going to talk about what those investments are and why they're doing so well.
• 0:50
  This is The Curve Weekly where we read the finance news so you don't have to. I'm Vic Harris, I'm a finance professional and I've had a career making money for other people. And I'm Sophie Hall-Wright, ex-TV and radio producer who was really sick and tired of being overwhelmed and feeling completely stupid when it comes to all things money and the economy. So we started this podcast. But before we dive into today's headlines, here's a word from today's sponsor. Thank you.
• 1:14
  This episode of The Curve Weekly is made possible by Pathfinder KiwiSaver Plan, helping you invest alongside your values. Pathfinder's one mindful money, best ethical investing provider for five years running. So we've teamed up with them to bring you the ethical hotline. Got questions about the ethics of an investment or unsure where you draw the line? Submit your questions via the link in the podcast show notes. And thank you so much to Pathfinder for making this episode of The Curve Weekly possible. Pathfinder Asset Management Limited is the issuer of the Pathfinder KiwiSaver Plan. A product disclosure statement is available at pathfinder.kiwi.
• 1:44
  Where are you Soph? I'm missing you in the studio. I'm living my best country life. I'm in Devon with my, I hate saying the word partner. Do you say partner? Yeah. Do you? Okay, maybe I need to get into that. I'm at his family house in Devon. Nice. And it is so nice to be in the country.
• 2:04
  I wonder if I could do this as my lifestyle. I don't know if I love being in the country because it's a nice reprieve from the city. Yes. You know, like I think it's so exciting and lovely because it's not my everyday. I actually have something quite fun to tell you that I've been thinking about spending money and time on. But I think I might save it for our new Wednesday episode, which is such a tease. But I really need input from the community. It's a huge life decision. Yeah.
• 2:33
  Moving to the country. No, not that, not that, not that. But it's probably equally as massive, honestly. Buying a house in the country. God, I wish, no, I wish, no, I wish. Just tell us. Okay, fine. So basically, I... You know, I've been talking for...
• 2:49
  ages about getting a dog. Oh, yes. Yeah. Oh. I've been genuinely looking at it. So am I calling him Moped Man? I'm pretty sure that's how we've named what we've named my partner slash boyfriend. So it's his birthday in a week. Oh, my God. You're going to buy him a dog. Have you spoken to him about it? I mean, yeah. We've talked about the idea of getting a dog before. Definitely. This is not like a totally random, you know, basically since I met him, we've both been like, you should get a dog. No, you should get a dog. So I was like, okay, this could be kind of fun. I get it, but it's actually yours.
• 3:19
  Yeah, yeah, yeah. I got you a dog. It's your responsibility. But my question for you and anyone listening is, am I having a mare? Like, do you think, is this actually a really bad idea? Because you travel a lot and everyone keeps saying to me, it's such a responsibility. You know, everyone is putting the fear of God into me. Like my parents, everyone's like, this is a terrible idea.
• 3:43
  But you seem to just manage it so fine and me so is the best thing that's ever happened to you. Yeah. Is it hard? Yes, it's hard, but you make it work. It's like with anything. It's like having kids. Yeah. Yes, it's life changing. Yes, it's added responsibility, but you make it work. Yeah, that's exactly what I'm thinking.
• 3:59
  I remember my sister sat me down before I got my dog. She was like, Vic, you don't realise your life is going to change. You can't go out for dinner. And I was like, I can leave my dog at home. You can't leave your kids at home. Yeah, anyway, it's been the best thing. Anyone, I think, should get a dog. They're just amazing. Do you know what is quite interesting? I was looking at strays because I was trying to get these, you know, like Labradoodles, which everyone has, and I thought, this is me. I've always wanted one there.
• 4:23
  A puppy is £3,500. Yes, but it depends what type. You can also adopt one, right? Well, this is the thing. So I was then looking at strays from Romania. Guess how much they are? £50. £700 for a Romanian stray dog. I reckon you should budget for it. I reckon you should make a plan. And I think that you should get it.
• 4:44
  I'm like, I really love that you've said this. Even though you know me and my lifestyle, you're like, do it. I'm thinking of getting another one. Really? No, I'm not. Oh, okay. I've just had my niece and nephew stay and they are obsessed with me. So absolutely obsessed, like fighting over, can I take a fork? And then I was like, maybe I just need to get another dog so they don't have to fight over my one dog. They visit once and they're here once every two years. And Vic's like, I need to get a second dog for when they're visiting.
• 5:12
  Do you think though that having Miso being small financially and time-wise has been a really good thing? Because this stray dog I'm looking at, I'll send you a photo, is medium size, so it gets like 18 kgs. Miso's not that big, right? No, she's nine. Yeah. See, that's what I'm... Like, am I going to have to be going on a marathon every day? Yeah.
• 5:31
  It's a huge financial decision, though. I will say it is expensive and I need to be sensible and I want to be a good dog mom, you know. So I was saying to Moped Man in the car yesterday, I was like, if we got a dog, I know Emily loves dogs. Maybe I'll just write it in her job description that she...
• 5:46
  Just to look after. If I'm away, Emily, you're in charge of the dog. Yeah, yeah, yeah. You have godparents, you know, that are like, okay, if anything happens to me, you take care of the dog. But seriously, if there's someone listening, I do want some feedback. If you've got a dog, you massively regret it for financial reasons or lifestyle reasons. I actually genuinely am taking...
• 6:05
  any and all feedback. So whether that's a voice note on the hotline, whether that's a DM, before I make this life-changing decision, could you please all weigh in on whether or not this is a terrible idea? Thank you so much. Right, now on to the reason that we have a podcast and more important things.
• 6:26
  Our first story today is all about flying travel and oil prices. And it's so interesting that we're talking about this, Vic, because it's one of those examples where if you've read the news or seen what's going on, you may look at sort of face value and interpret it. But obviously, you have seen this headline and then dug deeper into why and what's going on. So let's just explain what's happening with the prices and why this sparked your interest.
• 6:53
  So if we look at jet fuel prices, so they spiked when the Iran conflict was going on. So they went from about $2.50 a gallon before the war. Like don't need to know how much a gallon is or anything, just like conceptually. I was literally thinking –
• 7:09
  What is a gallon? And also, gallon sounds like we're pirates, since when are we still measuring in gallons? I know, it feels like we're doing big barrels on a pirate ship or something. It's so odd. But it's gone from $2.50 to nearly $5.00, so it's pretty much doubled in price. I guess with the war, we've got a ceasefire at the moment, which is great.
• 7:30
  So oil prices have fallen. And then I'm sitting here going, but how come air fares haven't fallen? Because for most airlines, the biggest cost is fuel. And the biggest input into fuel is oil. So it's like, well, how come air fares aren't falling if the oil price has fallen? It's all a case of like, you can't just switch and air fares drop the same rate or go up the same rate or drop the same rate as oil prices. And it's because...
• 7:56
  They lock in their fuel prices. So we are not going to see a drop in airfares for probably a very long time. And also I feel like the airlines are a bit cheeky. They're like, you know what? We're struggling. We've got to put out – like COVID, they hiked their prices. They didn't come back down.
• 8:12
  I agree. And I don't know if this is true or not. You probably have more data and insight into this. But it feels like five, 10 years ago, we used to be able to buy flights for actually quite a reasonable amount. It feels to me like over the last 10 years, prices have hiked and hiked and hiked and airlines just feel...
• 8:33
  I don't know, it feels cheeky to me as well. I feel like there's an opportunity and they just hike them a bit, hike them a bit, and they've never come down again, whereas other prices have inflated and then kind of leveled again, whereas flights have just got incrementally more expensive across the board.
• 8:52
  Yeah, no, I 100% agree. You never hear of airlines dropping prices. But that's a function of inflation, cost of living. But then you get walloped with this increase in the jet fuel price as well. And so airlines are scrambling to increase prices to cover their costs. Like the United Airlines CEO said they have to increase their airfares by 20% just to cover prices.
• 9:14
  the jet fuel cost, let alone anything else around inflation, wages, any other costs in their business, just jet fuel, they have to raise their airfares by 20%. And US domestic airfares now are tracking at 30% rise. This is crazy. That's a...
• 9:32
  $100 airfare, yeah, going to $130. Like, that is a huge increase. And if you think about it on, you know, going back to New Zealand from the UK, 30% is a huge, huge jump. And so, Vic, when you say the most expensive thing for an airline or their biggest cost is fuel, the war and the increase in price around oil and how that's then impacted what they need to increase their prices at just to, like, stay steady is...
• 10:01
  Is jet fuel, is it just petrol? It's a makeup of oil. So it's, I mean, I don't really know the mechanics of jet fuel, but its biggest input is oil. And same with petrol. It's a type of petrol. So when the oil price goes up, the jet fuel price goes up. So the jet fuel price has doubled, and that's a result of the oil price going up in the conflict in Iran. The reason we're now not seeing airfares fall, even though the oil price is pretty much back to where it was,
• 10:30
  and the conflict in Iran is on pause at the moment, is because all these airlines, because it is their biggest cost, they do what we call hedge that cost. So they lock in prices for a set period of time. It could be six months, it could be 12 months, and that's because they need to run these businesses. They need to have visibility on what their cost base is going to be. And so if they lock in a price of...
• 10:55
  you know, $3 a gallon, at least, you know, they're locking that in and they don't have to weather this volatility of the underlying commodity, which is the jet fuel price or the oil price. Does that make sense? So then when those roll over or when they kind of terminate or run out –
• 11:13
  you then have to lock in another hedging contract or hedging policy that might be at a higher rate. So this is why it's not oil prices go up, airfares go up, oil prices come down, airfares come down. Because everything is, it's not like moving in the same way, if that makes sense. There's a delay because airlines hedge these prices.
• 11:35
  So I think a really good example, in fact, two really good examples for this is if you thought about your mortgage and the idea of locking in your mortgage price, you can choose floating, fixed. There's so many different ways that you can arrange the way that you pay back your interest, your principal, et cetera. If you were to lock in a 6% interest rate, but actually interest rates have gone down to 2%, yeah.
• 11:59
  you've committed to that 6%, whereas if interest rates go up and you've committed to 6%, it's actually a win. So you can kind of, that's an example of everyday hedging. But also if you look at something like electricity businesses, they do the same thing where they lock in prices in the future. It can also work in reverse, right? A lot of these airlines are rolling off these hedging contracts and having to lock in higher prices for jet fuel
• 12:29
  And the jet fuel price might keep falling and falling and falling and you've locked in these higher prices. So it can work in the reverse. But the whole preface of it is to give you visibility and give you consistency to not be impacted by these volatile spikes.
• 12:45
  Ryanair was a really good example. They hedge about 80% of their jet fuel price. So they weren't as impacted with these spikes as some other airlines. Yeah, some other US airlines had like no hedging and so just like hit them straight away. And also like imagine being an airline, your jet fuel cost, you know, pretty much doubles.
• 13:06
  You can't feed those prices through quick enough. You've got people traveling on your airlines that have paid for tickets already. Like you've got, you know, to make those changes straight away across your airline is like so difficult. Like honestly, I can't even imagine the person's job dealing with this and like having to figure it all out. And it's pretty intense and difficult.
• 13:27
  This is the reason why we're not seeing oil prices fall and airline prices fall. But also on top of that, not only is that just because of the hedging, I think what we were talking about before, there is an opportunity here that if the oil price and the jet fuel price falls, then the airlines are all of a sudden – and they keep their high prices – the airlines are all of a sudden in a really good position.
• 13:49
  I mean, I get it. Yeah. You know, it's also, you know, it's kind of, it would be so scary to not know what's going to be happening with oil. And it's your biggest cost base. It's the thing that's going to impact whether you make money or not. If you're in a position where you probably, I'd say people that run airlines almost think of it and it'll sort of hopefully work itself out in the wash. Where there'll be times where you're...
• 14:12
  Like you can get oil quite cheap and therefore you're making a little bit of money. But there's times like what's just happened where it's a total blowout. All these companies that used to hedge now don't and therefore didn't see this huge spike in oil coming and have been really impacted by it. But what I take from this, there's so many different things. And we've spoken a lot on this podcast about how much...
• 14:36
  Oil and the price of oil is in almost every single business. So like almost all businesses rely on oil to some extent. And so those prices are going to be fed down to consumers and everything's going to get more expensive. Yeah. One of the things I was thinking about is, okay, cool. You could then think about this and look at it and say, if I want to be financially expensive,
• 14:58
  I don't know, clever, make decisions that I'm going to ideally save money or be, yeah, just being tactful about what's going on in the world and therefore not, I don't know, being hit in the same way by all these like raging prices. You could plan your holiday 12 months in advance or six months in advance. You can hedge your own bets when it comes to flights. But what about other things in our life? Because if every business is being hit by the oil price, are there other things we can hedge our bets?
• 15:26
  in terms of if we paid for something in advance, it could be really beneficial for us. Like I'm trying to think about, you know, is there stuff we could automate or pay for that's not just flying, but that's actually quite a clever financial decision. And I was thinking about, I was like, what do I pay for in my life that's not a fixed price that does float?
• 15:47
  And I actually couldn't really think of any examples, but I wondered if this is something that's crossed your mind where you're like, okay, how can I navigate the landscape of rising costs in a way where I'm not as impacted? I mean, the mortgage is probably the biggest one because that's my biggest expense as well.
• 16:02
  Some electricity providers, you can lock in certain prices or others you can do like you can do a fixed rate or a variable rate. Variable, slightly more expensive, fixed because you've got that visibility, but you might not use all of that electricity in the month, but hey, you've paid for it, that kind of thing.
• 16:18
  But I was thinking even maybe I should automate getting toilet paper dropped off at my house. Yes, but then the price would – if the toilet paper company needed to increase its prices, you just pay the higher prices. Unless you negotiated with them, hey, if I have an order every month for 12 months and I have a contract with you, can I get this lower price? Yes.
• 16:38
  That's hedging. It's also saving two pounds, you know, like whoop-dee-doo. Yeah. But I think that probably what I'm getting from this conversation is the biggest thing you could do as a financial hack is book your holidays in advance. Yes. There's probably not – like the flight that I booked in December thinking I was the most organized person ever buying my flight for my family holiday degrees, it was 100 pounds. I looked this morning because I booked the wrong day, classic, and had to rebook –
• 17:05
  And it's now $180. So, I mean, that's quite a significant saving if I'd booked in advance. That dog from Romania is going to be expensive flying it from Romania to London. What I'm hearing is – Get the dog ASAP. Get it quickly.
• 17:26
  We've also had a result out from Nike. So I think this story is really interesting because when I saw the headline that they had been doing really, really well and they'd got a billion dollars in, you know, profit this quarter and blah, blah, blah. As soon as I started reading about this and seeing it, I thought, amazing. Wow. Oh, my God. Go Nike. Nike's finally making a comeback. Yeah.
• 17:48
  And then it's so classic that the further along I got with your research, looking at what you'd found, I was like, oh, it's never what it seems, is it? This is such a classic example of it might look shiny and exciting on the outside and what's reported publicly, but you so have to look beyond the hood and understand what's going on.
• 18:06
  Yeah, what is happening, Vic? And can you just explain why this is maybe not as big a win as people might think? Yes, so Nike posted a billion dollars for the last quarter in terms of profits. This is five times what it made last year. So it is doing so incredibly well. But the share price is down like 30% this year.
• 18:27
  So before you look at that and go, oh, my God, this is five times greater than last year. It's like this is a really, really good example of reading between the lines because that billion dollars in quarterly profit.
• 18:42
  A big chunk of that was driven by a refund that it got due to Trump's tariffs. So it was hugely impacted when Trump brought out those tariffs. And then we spoke a month or so ago now about how it was actually deemed illegal, how he put those in place. Therefore, companies like Nike were applying for refunds. So Nike got a $986 million tariff refund. Are you joking?
• 19:11
  Which just shows, I'm like, wow, it must have been impacted. If that's the refund it's getting, imagine how impacted it was last year. So this just goes to show there's so much volatility. And if you just took that headline number of a billion dollars in profit and looked at that versus last year and go, whoa, Nike's doing so well. But you need to look operationally how it's doing because that shows the true health of a business.
• 19:35
  The tariff you're not going to get next year. You know, you're not going to get a tariff refund next year. So in order to look at like the underlying operations of the business, you need to like strip out all these like one-offs and, you know, things that aren't going to happen again. I've actually got a good example, like a personal example. So let's just say that you got a – you looked at your account one week.
• 19:56
  And you thought, oh, it's looking pretty dire in there. I've spent way too much this month. But then you forgot actually that your friend owes you 300 pounds and they transfer you. And all of a sudden what's in your account looks way better. It's like an artificial number. You're not all of a sudden going to have an extra 300 pounds every single month coming in. It's a one-off. It's like a tax refund or something like that. You can't. It's an anomaly.
• 20:21
  factor it into your budget you can't continue to expect to live off it like it's the icing on the cake it's not the cake it's the it's the snack that you got on the side after dinner it's like an after dinner mint but they may have run out of mints you know you've had them for maybe monday tuesday wednesday and then they're done yes yeah i also hate after dinner mint oh i love them reminds you of my grandma like love her but hate them
• 20:44
  So if we look under the hood at Nike, it's actually not so great. So China, so it's got kind of three markets. It's got US, China, and then it's got like everything else. China is actually doing really badly. It's dropped about 12% and that's its kind of big growth market is China.
• 21:04
  That's why the share price hasn't done well. This kind of was expected with the share price being down 30% even before the result. So people are like, Nike's not actually doing too well. They're also laying off a lot of staff, which is not a good sign. It's the second round of layoffs this year. They've got a new CFO. The last thing is that it might be dropped out of the index. Not the S&P 500, but the Dow Jones, which is like kind of another really reputable index.
• 21:31
  More of an old world index. So it has a lot of telecommunications companies, you know, real like old world companies. But it's an index that's been around forever. And just like any index, if you're dropped from that index...
• 21:46
  And you've got money, like passive money coming in, people investing in these ETFs into that index. You're not getting those, those shares aren't being bought in your stock because you're not in the index. Does that make sense? Yeah. So whenever a company's dropped from index or added to an index is a really good thing. But when you're dropped from an index, really bad thing.
• 22:05
  Oh, example, you go into a bookstore and you are on the front, you know, you're on the window, you're presented as top books to read, editors picks, favorite shop book, whatever. Lots more people are going to see that and buy that book than if they're on level four and hidden away. And it's a real step up, even for podcasting. Let's say we got boosted and I don't know. And we'll put in some playlist of like top business podcasts to listen to. Yeah.
• 22:28
  There'll be a whole lot of inflow of listeners that wouldn't have otherwise listened to us because we kind of had this little head start. That's kind of a good way to think of it. Yeah. You get more eyeballs. Therefore, you get more interest. More people buy the book, listen to the podcast. Yeah, it's exactly like that. For a lot of people, though, Nike is still in the S&P 500. A lot of people own that index or that ETF. So you still will own shares in Nike. But I think this is a really good learning experience of –
• 22:55
  You see a really great headline, but the share price is down. And you're going, hang on a second. If Nike's producing five times more profit than last year, why is the share price down? And I think that's a really good sign. And this could be any company, right? They produce a really good result.
• 23:12
  Why is the share price not up? That's when you need to like look under the hood and be like, okay, there's something else going on operationally that's not as good. So yeah, it's more about like just reading past the headlines or just listen to this podcast and we'll do it for you. One of the things I thought, Vic, when I was looking at this –
• 23:29
  When I first read the headline and I saw the profit they'd made, I thought, oh my God, amazing. And then I thought instantly, damn, I wish I'd invested in that. It's obviously done really well, which it hadn't. But I was initially almost like kicking myself. I thought I knew that the share price for Nike was doing badly. Vic always talks about the idea of invest in things when they're undervalued and when they have growth potential. I almost wonder if it would be interesting to do an episode at some stage on growth.
• 23:56
  Companies that are doing really badly that are actually maybe shopping opportunities rather than and not telling people what to buy, but using it as an example where we all jump on the hype bandwagon when everyone's talking about NVIDIA and it's doing so well or SpaceX or whatever. But actually, you want to be buying the Nike when it's doing badly before it does better. Yeah.
• 24:18
  And I think it could just be an interesting example to look at a couple of stocks that are doing badly where you might want to run away and think it's a terrible idea. But actually, if you look at it in more detail, it's a really valuable business still and it has growth potential.
• 24:32
  And I guess that's the subjective thing, right? Yeah. The growth potential. You know, it's like we could both sit here and look at Nike and come away with very different opinions of what the future of their business looks like based on our research. So I could be like, oh, no, this is great. They're doing this, this, this, this. And you're like, yes, but they're also doing this, this, this, which means they're going to continue to struggle in China. Like it's that's the fun part that I love about investing is that.
• 24:56
  It's like whenever you're buying a share, you're buying it from someone who's selling. So there's always someone that's got a differing view to you. And if you're selling your shares, someone's buying them. So, you know, there's always two sides to every transaction and there's two sides to every decision about a stock. So I love that. I must say it.
• 25:16
  who's going to be right? I think the reason I don't like it is I'm so, and I actually really dislike this about myself, such a perfectionist in the sense that I think you work hard, you get the goodies, you know, or you do the research, you get the right answer, or you study for the test, you get a good result. It's not like that with investing. You know, you could do all the research, you could make this decision that you think is really clever and have been a really good student and still F it up, which I kind of hate.
• 25:44
  But that kind of brings us to this next topic that we're going to look at in a second after the break, because it's all about ETFs, which is how you can be incredibly diversified and buy a whole lot of businesses at one time. And so I think, yeah, this is super interesting. I don't know if you want to give a little tease for what we're going to talk about, Vic, but basically they're booming and there's so much money going into them right now.
• 26:07
  But yeah, we need to kind of look again under the hood at what's going on. And does it mean that investing in these types of, yeah, there's like, is it a good idea or not? I think you just teased it. Okay. Well, do you want to do my line? But first here, sorry. Oh my God.
• 26:23
  Shit, no. No, no. No, no. But first, here is a word from today's sponsor. Something that we often get asked is whether you can actually invest ethically. It's such a common concern. Honestly, a lot of people think money is bad, and so they assume that investing must be too.
• 26:38
  Yeah, I feel like pre-2000s, most investing focused entirely on profits, and that was above planet people, all of those things. But things have changed now, and it's so much easier to invest in a way that balances both financial returns as well as doing the right thing. And that's why we partnered with Pathfinder, because they make ethical investing understandable and accessible. Thanks to Pathfinder for making this episode of The Care Weekly possible.
• 27:02
  Pathfinder Asset Management Limited is the issuer of the Pathfinder KiwiSaver plan. A product disclosure statement is available at pathfinder.kiwi. There is an enormous debate going on in the world of investing right now. Are we about to have a ginormous, huge crash?
• 27:20
  Honestly, the amount of headlines, stories, podcasts about this, I'm like, God, everyone just loves to have a view. Everyone wants to be the person that called the top of the market or that, you know, is making the biggest song and dance. And everyone's asking me for opinion as well. I'm like, oh, can't we just, you know, I'm just more of a boring investor, you know, just invest consistently, regularly, no matter what, you know, you don't always need to have a
• 27:48
  you know, outsized opinion. Like, yes, having a view is great and absorbing all this information, but what we are seeing at the moment in the stock market and in ETFs is incredible. So this year, investors have shoved more than a trillion US dollars, a trillion, into ETFs in six months. So to the end of June...
• 28:10
  There's been a trillion dollars that's gone into ETFs. That is a record amount. And this year it's on track. So we've done a trillion already and people are expecting it's going to be over two trillion by the end of the year. And to put that in perspective, it was one and a half trillion last year. And that was a previous record. So people are...
• 28:30
  pouring into ETFs and pouring into the US stock market. This is not just in large cap S&P 500 ETFs either. It's also in small companies that we're starting to see as well. And they're having their best run they've had since 1991. And the key thing, I know I'm just like...
• 28:51
  hounding you with facts and figures here. But with small companies, they are almost the most risky, the ones that kind of tend to do the best later on. Once everyone's poured into the large caps and the large caps are doing really well, then the money kind of flows down into the small caps. And people are like, right, I'm feeling really confident about the world right now. I'm going to start pouring money into some higher risk small companies. And so the fact that they are doing really well
• 29:19
  Not only is people like a bit nervous, but I personally think it's great to see like such diversification. Yes, we've got the large companies doing well, we've got the small companies doing well. Also, yes, we've got US ETFs doing well, but we've also got...
• 29:35
  Really, the international and emerging market fund's doing really well. So there's just money coming in from all angles into ETFs. And it's just such an efficient way of investing, such an efficient way to get diversification. And yeah, people are lapping it up.
• 29:54
  So you put in a dollar and you get a basket. Yes. You know, ETFs, the whole reason that so many people are investing in this way and the reason that there's so much money pouring into them is that a lot of people are not like Vic and do not know how to pick a company or...
• 30:10
  don't feel comfortable choosing a bunch of different companies to invest in. And when you invest in this way, it's just the most stress-free, almost like taking sort of the power out of your hands to make a decision. And you just sort of invest in a big bucket of different things. And I wonder that, you know...
• 30:29
  Because I've seen a lot of headlines about ETFs no longer being a good way to invest because they're so not diversified anymore because there's so many tech companies and so many AI companies that actually it's kind of like lost its charm in terms of the best way to invest. So why are there...
• 30:47
  record amounts of money being poured into these investments that? Well, we now have more ETFs than stocks available to purchase. So that in itself is wild. So you've got so much choice, not only in stocks, but ETFs.
• 31:02
  Can we explain that? Because I think almost when you said it just then is the first time that it's ever landed. So when you have a company that's public, it means you can invest in it, you can buy shares. There are what? How many thousands of listed companies in the world? Oh, like 20,000? There's a lot. It depends. Yeah, it depends on different stock markets and stuff, but...
• 31:21
  Yeah, about 20,000. Yeah, so like in an ETF, the point of them is that they've taken a whole lot of those listed companies and bucketed them together to give someone diversification. Which means there's a lot of businesses that you're investing in at one time. Like it's amazing. But now, because ETFs have become so popular, there's more baskets of ETFs. So different makeups of different companies than there are individual companies.
• 31:47
  Which is so wild. So you can have one company in multiple baskets, essentially. Yeah, yeah, yeah. There's more baskets than there are actual items to go in the baskets, which is just crazy. Yes, that's exactly right. And your point before was correct. People are getting worried now that because AI and tech –
• 32:08
  is so massive in the US, in the US stock market, and in the S&P 500 tech stocks and AI stocks, like that's effectively what you're buying. They kind of make up, I think it's over 40% of the index. So you're not getting as diversified as you were before we had this massive, massive outperformance of tech and AI stocks. So if you're buying the US stock market right now, it's a tech play. You know, you are...
• 32:35
  making a decision about investing in AI, because that is what's driving that stock market. Whereas if you invested in the UK stock market, for example, you've got much more diversification. You've got oil companies, you've got financial companies, you've got telecos, you've got healthcare, you've got a much broader range of companies when you're investing in that stock market.
• 32:55
  So this is what people are saying right now. They're like, well, it's not as diversified as you think because of all these AI companies and the concentration that they have made in the index. It's not what it used to be. But we're also seeing this play out. So if we look at international and emerging market funds, they actually outperformed and did better.
• 33:15
  in the six months of this year, the first six months of this year, than the US stock market. And so people are now going, actually, you know what, that is really way too concentrated in the US and I do want some diversification and they're putting money elsewhere and it's doing really well. And so it's a really good example of, you're right, you might think you're diversified by investing in a US...
• 33:38
  ETF, maybe the S&P 500, but actually, are you diversified? And maybe you should be looking at putting money outside of the US or just making sure that you are as diversified as you want to be. And there's actually merit for it because countries outside the US are actually doing better.
• 33:56
  One of the things I wanted to ask you, Vic, and maybe this is a whole nother kettle of fish that we should look at another time, but a lot of investors are starting to look at what is called like the AI stack, you know? So it's almost the idea, and we've spoken about this before, so it might sound familiar, but in the same way, you know, you look at AI and you think, oh, AI is just artificial intelligence. And it means that
• 34:20
  But actually when you look underneath AI and you look at all the different things that are powering it, there's so many of those, you know, you've got data centers, there's the chips, you know, that power them, there's memory, you've got sort of like power that then, you know, there's so many different things that are kind of like the supply chain below AI and,
• 34:41
  And I wanted to know, we've spoken about some of those things. Have you seen anything else where it's like, oh, this is kind of an interesting space that might be a part of that kind of AI stack that might come next? Or are there things that we haven't realized? And I guess to explain why I'm asking this, so the whole reason when things do well with investing is when there's like a...
• 35:03
  a limited supply of something, right? So like, let's just say that AI needed heaps of lollipops to be successful. And actually there's only so many lollipops in the world. And so if you found the company that was producing the lollipops where there's a limited supply that is then kind of like what is absolutely needed for AI. I just wondered if you've seen any interesting little like, ah, wow, that might be a part of the AI system.
• 35:29
  kind of like what you could invest in that people haven't even kind of thought about yet. I definitely think...
• 35:36
  Water is one, and one we've spoken about a few weeks ago in terms of, you're right, moving down the value chain in terms of AI. Water is needed to cool the power produced in data centers, and so that's something that people might not have thought of. You're right, all those things that you spoke about, like we've seen data center companies do absolutely phenomenally well, and then it's like, okay, let's keep moving down the value chain, and water –
• 36:04
  And the demand for water is one of those. And so... It's weird, though, because that doesn't feel like there's like a lack of water. There's not enough water. Isn't there a lot of water in the world? Yes, but it's also the companies that get it from A to B, you know, that actually distribute it. They get, yeah, there's like, there's so much in it. But also, in some countries, you have to have like water rights and stuff. Because, yeah, otherwise, it's just everyone would suck out all the water from the ocean.
• 36:32
  But you're right in your thinking. It's like, okay, what's next? And that's what everyone's thinking about. But also what scares me about this is what if we're wrong? How much of that stack is going to unravel and the impact it's going to have? If we have got the demand at the very top wrong? For AI in general, you mean?
• 36:53
  In AI in general, yeah, with that ripple effect. If we've overestimated, if everyone's getting super excited and, you know, all these companies are investing billions and billions and the demand isn't what it seems. And I'm not saying it's nothing, but I'm saying, you know, it's not maybe as big as people expect. Those flow on effects are going to be absolutely detrimental.
• 37:15
  I mean, and that's what everyone's talking about when we're sort of saying everyone's panicking about this crash. It's quite interesting because like we weren't going to have time to talk about this. And I want to really, really, really quickly just mention it because the other story we wanted to look at is there's something going on in the UK at the moment that's basically trying to encourage people to invest more. And I think just at a really high level, people in the UK are obsessed with savings more so than other countries.
• 37:40
  So they're trying to encourage more people to invest. And I had this almost like, oh my God, shit moment where I thought, amazing that they're trying to encourage people to have less money in savings and actually invest because we all know, hopefully if you're listening to this podcast, that putting your money in the bank is like really not a great place for it to be multiplying and growing. You want to be investing it. But...
• 38:01
  You know, if this happens and if we do have a big tumble because everyone's overestimated AI and then you sort of have all these first time investors that have got all excited and put all this money in stocks, you know, the last thing you want is these beginner investors to get so badly burnt by investing and get scared and they not do it again.
• 38:21
  And I just thought, shit, maybe it is something to think about and just remind people, even if you're not super beginner, is that whether this big tumble happens or not, and yeah, the AI, everything we're talking about is like we've overestimated it. It's okay because there will be new trends in the next sort of 5, 10, 15 years that mean, you know, like...
• 38:45
  So many of them. And actually we just released a Raising the Curve episode on this, on the idea of like the amount of market crashes there've been and,
• 38:54
  The fact that we've only actually finished down six out of 30 years, you know, like, I think it's more just you just have to remember what Vic always talks about, which is long term, long term, long term. And it's time in the market, not timing the market. And yes, the market could shit itself tomorrow and you've just invested as a first time investor. But...
• 39:16
  markets recover 100% of the time. We've been here before. We've had big market corrections before, and we always recover from them. And what if what we're talking about is not actually true? What if the demand is 10 times bigger than we expect, and we are literally just at the beginning of another 10-year massive stock market run
• 39:41
  and you don't invest because you think the market's going to fall you know like you just you just can't predict it in the short term you just have to take the facts of the US stock market has delivered you know over 10% return over the last 30 years. I think that's probably a really good place to finish actually like we had so many other stories that we wanted to get through today but I actually just think if you are listening to this and you're feeling a bit nervous about what's going on in the market and the idea that
• 40:06
  yeah you just sort of feel like you're wanting to avoid investing because it feels scary the episode we just released why now is never the right time to invest I highly recommend listening to that we do a big breakdown on all the crashes and what's happened look at the stats look at the data and I think when we recorded that I just thought okay right
• 40:23
  I've just got to block it out. I've got to block it all out and just like keep going. But it is really hard. It is hard when there's headlines and there's, yeah, but it's psychology. It's like the more that you can block it out, the better off you'll be, to be honest. Stay informed, but don't get distracted.
• 40:39
  Is that a good bumper sticker? No. No, I'm not going to lie. It's not the most exciting, motivating kick up the bum. Well, maybe we workshop that. Yes, okay. Because we actually would love to get some merch made, you know. Like you were just talking heaps in that episode about market caps and we've spoken for so long how fun it would be to get a cap that has like market cap on it. We get cool hoodies with like embroidery. On Wednesday this week, we have our first ever –
• 41:05
  Second Curve Weekly in one week. To be honest, we did a brainstorm on this a while ago. We were like, we probably shouldn't call it the Curve Weekly if we're doing it twice a week, but we just love the name. So it's the Curve Weekly squared, really. We've got another episode. So we're going to do Monday and Wednesdays. And this is something we've been planning for so long. We have...
• 41:24
  We have all this research that goes on behind the scenes at The Curve, and we have so many things that we want to talk to you about. And every week when we go to plan these episodes, we're having to cut so much out and just try and keep it short so that we're not taking up everyone's entire week by creating five-hour-long episodes. But what we've decided is to bring out a second episode so that we can really go deep in some of these big stories, how they're impacting the economy, how they're going to be impacting your investments,
• 41:52
  It's one of those things like Vic does such amazing research and she goes so deep in things, but often we have to kind of be like, oh, wrap it up, quickly get to the next one. Otherwise, we don't get through it. So we're really excited to release our first ever Wednesday episode. Mark it in the calendars. Actually, follow the podcast wherever you're listening because then you'll be notified as soon as the episode drops. But yay, very exciting. We will see you on Wednesday. See you Wednesday.
• 42:16
  Thank you so much for listening to The Curve Weekly. Make sure you hit subscribe or follow wherever you're listening so you're always up to date with the latest finance and investing news. And feel free to leave a comment to let us know what you thought about this episode because we would love your feedback. We've got new Curve Weekly episodes for you to listen to every Monday, but until then, listen to Erasing the Curve. These are our in-depth podcast episodes where we chat about all things money. We're also around all week on socials if you're hungry for more Curve content and all the links are in this podcast show notes. We hope you have a great week and we'll catch you
• 42:46
  day.
• 42:54
  Okay, quickly, the curve was created to empower and educate you about investing, but we are not financial advisors. Our platform exists for educational purposes only, and it doesn't provide personalized investing advice for your individual needs and should not be relied upon to make an investment or financial decision. And always remember to do your own research before making any investment or financial decision. We're here for any knowledge and support you need, but the final call is always yours. And thanks for being here. You got this. Yeah, we know you got this.