Latest / The Money Puzzle / Struggling in the final lap: Your 2025 investment year

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Struggling in the final lap: Your 2025 investment year · The Money Puzzle

• 0:09
  Speaker 1: Hello and welcome to the Australians Money Puzzle Podcast. I'm
• 0:13
  Speaker 1: James Kirby. Welcome aboard everybody. This is the last regular
• 0:16
  Speaker 1: show for the year and just a little teaser about
• 0:20
  Speaker 1: what's coming up over the holiday season. I do have
• 0:22
  Speaker 1: some things lined up for you next Christmas Week. Our
• 0:26
  Speaker 1: special holiday edition is wait for this because it's quite different.
• 0:31
  Speaker 1: It's about money and movies. Okay, it's the best money movies.
• 0:36
  Speaker 1: And I'm sure you all of movies, and I'm sure
• 0:38
  Speaker 1: you all of money movies. I sure do. And I
• 0:40
  Speaker 1: got the Australians film critic Steven Roma to come and
• 0:44
  Speaker 1: do a show about the best money movies. I think
• 0:47
  Speaker 1: you love it. That's Christmas Week. I'm also having some
• 0:50
  Speaker 1: replays of our most popular shows from the year and
• 0:55
  Speaker 1: you'll hear them come out over the middle of the
• 0:57
  Speaker 1: holiday season. We're back with you then in early January,
• 1:02
  Speaker 1: where I imagine you will all be back like me,
• 1:05
  Speaker 1: ready ready to return to making successful investments now before
• 1:11
  Speaker 1: it's too late and I forget. I want to thank
• 1:15
  Speaker 1: in particular my producer Leah Samuelu, who does a great
• 1:19
  Speaker 1: job every week behind the scenes producing the show that
• 1:22
  Speaker 1: you get to here and let me tell you, folks,
• 1:24
  Speaker 1: you don't know about this, but things go wrong on
• 1:26
  Speaker 1: this show just about every week and she fixes them.
• 1:30
  Speaker 1: We have so many issues, as you can imagine, because
• 1:32
  Speaker 1: we are talking to guests from all over Australia and
• 1:35
  Speaker 1: they're often in different places at different times, which is
• 1:38
  Speaker 1: marvelous that we can do it, but it is actually
• 1:40
  Speaker 1: quite a chance. So thank you, Leah, and thanks also
• 1:42
  Speaker 1: to our guests through the year, and of course, most
• 1:44
  Speaker 1: importantly thanks to you listeners. I'm delighted to say that
• 1:48
  Speaker 1: the audience for the show has grown again this year.
• 1:52
  Speaker 1: And most of all, what I like about that growth
• 1:55
  Speaker 1: in the audience I'm getting we are getting on the
• 1:57
  Speaker 1: show is that it's not volatile. It's like the best investment.
• 2:02
  Speaker 1: It just grows reliably as we keep building out our following.
• 2:06
  Speaker 1: So thank you all folks very much. Indeed, okay, now
• 2:09
  Speaker 1: you ask what on earth is he going to do
• 2:11
  Speaker 1: on the show this week? We are going to look
• 2:13
  Speaker 1: at how you did this year, what happened this year,
• 2:16
  Speaker 1: and what on earth is happening just now as we
• 2:19
  Speaker 1: enter the final stretch where unfortunately some of the numbers
• 2:22
  Speaker 1: are going the wrong way to join me, is our
• 2:25
  Speaker 1: most regular guest I think on the show, James Girard,
• 2:29
  Speaker 1: How are you, James?
• 2:30
  Speaker 2: I'm doing great. Thanks for having me on, James and
• 2:32
  Speaker 2: listening to a little preamble. Next week, I hope you
• 2:35
  Speaker 2: cover a boiler Room, which is a classic two thousand
• 2:38
  Speaker 2: movie about this company that shills Penny Stocks has got
• 2:41
  Speaker 2: Vin Diesel and ben Ethlete.
• 2:42
  Speaker 3: That's one of my favorites.
• 2:43
  Speaker 1: Oh really, what as you like?
• 2:45
  Speaker 3: Oh? What was it one with Jordan Beillfort. Yeah, the
• 2:48
  Speaker 3: Wolf of Wall Street. Wolf of Wall Street. How you
• 2:51
  Speaker 3: can't go past that?
• 2:51
  Speaker 1: That is fabulous, isn't it? Well, folks, that's yes, Wolf
• 2:54
  Speaker 1: of Wall Street, boiler Room. You know what else do
• 2:57
  Speaker 1: we have? Well, we don't just restrict ourselves to the
• 3:00
  Speaker 1: narrow gen that might be the business movie. We look
• 3:03
  Speaker 1: at The Social Network, for instance, which is a terrific
• 3:05
  Speaker 1: movie about Facebook. There will be blood. We go all
• 3:09
  Speaker 1: the way back to the nineteen fifties with the Treasure
• 3:11
  Speaker 1: of Sierra Madra, directed by John Houston, which is about gold,
• 3:16
  Speaker 1: which happens to be their very best investment this year.
• 3:19
  Speaker 1: You see, so you can see how it all links. Actually, James,
• 3:22
  Speaker 1: let's just have a look. First of all, I think
• 3:24
  Speaker 1: it's interesting, and I can remember years where this happened.
• 3:28
  Speaker 1: If we had done this show even a month ago,
• 3:30
  Speaker 1: I think things would be looking a lot better than
• 3:32
  Speaker 1: they are. That's not to say things are looking bad,
• 3:36
  Speaker 1: but folks, as we wrap out the year, I think
• 3:38
  Speaker 1: there's a clear sign that the markets, the investment markets
• 3:41
  Speaker 1: are foltering in this last lap. So, just to bring
• 3:46
  Speaker 1: you up to date our ASX, which I suppose is
• 3:49
  Speaker 1: still so important to everybody, the AX two hundred is
• 3:54
  Speaker 1: barely straggling along at eight percent really for the year,
• 3:58
  Speaker 1: maybe four and a half for something on price appreciation,
• 4:03
  Speaker 1: in three and a half on dividends a little bit more,
• 4:05
  Speaker 1: but you know, eight which is actually not quite the
• 4:08
  Speaker 1: average that you would expect historically. So not wonderful really.
• 4:13
  Speaker 1: But of course the US has been a terrific operator
• 4:16
  Speaker 1: as a market through the year, and then the other things,
• 4:19
  Speaker 1: I think, the things gems that really pulled it up
• 4:21
  Speaker 1: are surprises. Tell us first of all, tell us your
• 4:23
  Speaker 1: impressions about that. What does it look like? Do you
• 4:25
  Speaker 1: think we're going to end up with a pretty average
• 4:28
  Speaker 1: year for the market.
• 4:31
  Speaker 3: Here looks that way. Yeah.
• 4:33
  Speaker 2: So while the US has gone up a lot, double
• 4:35
  Speaker 2: digits like mid teens. The Australian market has sort of
• 4:38
  Speaker 2: fizzled out. It's gone down five percent over the past month,
• 4:41
  Speaker 2: and so as you say, it looks like we'll get
• 4:43
  Speaker 2: a return of four ish percent on price appreciation, and
• 4:46
  Speaker 2: then we do get good dividends, which is fortunate, so
• 4:48
  Speaker 2: that does help bring the total return up. But the
• 4:51
  Speaker 2: issue for our market is it's really concentrated across banking
• 4:54
  Speaker 2: stocks in the resource sector, and the resource sector has
• 4:57
  Speaker 2: been mixed. You know, some companies have gone up ten
• 5:00
  Speaker 2: or twenty percent, but then others have come down the
• 5:01
  Speaker 2: same amount, and the banking sector overall has only gone
• 5:04
  Speaker 2: up four five percent. Having gone up quite lofty prices,
• 5:08
  Speaker 2: investors are realizing that, all right, well, there's mean reversion
• 5:11
  Speaker 2: around that price to earnings ratio thing. So as companies
• 5:14
  Speaker 2: get more expensive, they're eventually going to hit a point
• 5:16
  Speaker 2: where the future earnings don't support the current prices. And
• 5:19
  Speaker 2: as we're saying, the prices come back down again, and
• 5:21
  Speaker 2: so given the weighting of the financial stocks on the ASX,
• 5:24
  Speaker 2: that's led to where we are now. We're only barely
• 5:27
  Speaker 2: keeping up with inflation. With the gains on the share
• 5:29
  Speaker 2: market for this calendar year.
• 5:30
  Speaker 1: It's yeah, it's I think maybe, I imagine many of
• 5:34
  Speaker 1: our listeners. The way to look at it really perhaps
• 5:36
  Speaker 1: is with ETFs, because ets is very handy to use
• 5:39
  Speaker 1: as a big picture instruments. So if you have an ETF,
• 5:42
  Speaker 1: for instance, on the ASX two hundred, well that's what
• 5:46
  Speaker 1: you're going to get, folks. Eight percent, as we call
• 5:48
  Speaker 1: it today. We're to close off the markets today, which
• 5:51
  Speaker 1: is kind of just a little below average. It's not great.
• 5:54
  Speaker 1: You're depending on the dividends. Again, if you had a
• 5:57
  Speaker 1: US ETF an S and P FI five hundred, ETF
• 6:01
  Speaker 1: making seventeen per well, that market made seventeen percent, and
• 6:06
  Speaker 1: to get that, of course you need to have a
• 6:08
  Speaker 1: hedged one, wouldn't you, James. That's the thing that the
• 6:11
  Speaker 1: that it's one of those years where the currency did
• 6:14
  Speaker 1: hit us. But the point I spoose is that those
• 6:18
  Speaker 1: US markets, you know, seventeen percent on DAK, fifteen percent
• 6:22
  Speaker 1: on S and P five hundred, twice as good as
• 6:24
  Speaker 1: our market yet again yet another year. Should we accept
• 6:30
  Speaker 1: that is how it goes?
• 6:33
  Speaker 2: I think we have to, and I guess you have
• 6:35
  Speaker 2: to think about why why did our market only go
• 6:37
  Speaker 2: up a few percent, and why did the US markets
• 6:40
  Speaker 2: go up so much? And all I can put it
• 6:42
  Speaker 2: down to is the simplistic argument around AI and technology stocks.
• 6:46
  Speaker 2: The US has the biggest technology companies in the world,
• 6:49
  Speaker 2: and video Apple, Microsoft, Amazon, Meta, Tesla. You keep going
• 6:54
  Speaker 2: on from there and or they've all done pretty well
• 6:56
  Speaker 2: with it this year, and as this whole AI boom
• 6:59
  Speaker 2: is taken off, that's lead for the US markets to
• 7:02
  Speaker 2: just keep pushing ahead, whereas we don't have that same
• 7:05
  Speaker 2: AI focus on our markets. Where a mining share market,
• 7:09
  Speaker 2: where a banking share market. So we haven't had those
• 7:11
  Speaker 2: AI tel wins like overseas markets have.
• 7:13
  Speaker 1: No, we haven't, but then we haven't had the scares either.
• 7:16
  Speaker 1: So you can see that they're starting like that fifteen
• 7:18
  Speaker 1: percent was better a few days ago, folks, even a
• 7:21
  Speaker 1: week or two ago. That overall return from the US
• 7:23
  Speaker 1: market is falling in this last few days, and there
• 7:26
  Speaker 1: are some serious sell offs going on. Oracle, for instance,
• 7:30
  Speaker 1: Big US. Everyone knows Oracle that is seriously down because
• 7:34
  Speaker 1: they took a big AI bet and that is seen
• 7:37
  Speaker 1: to be too risky and has not convinced the market
• 7:40
  Speaker 1: and our own AI sector. Next TC for instance, you
• 7:44
  Speaker 1: know it was actually gone nowhere this year where you
• 7:47
  Speaker 1: would have thought it would have shot out the lights,
• 7:49
  Speaker 1: but it didn't. So there is that there is there
• 7:51
  Speaker 1: is a softness. Maybe it's just a pocket and air pocket,
• 7:56
  Speaker 1: or maybe it's the beginning of a rolloff. We just
• 7:58
  Speaker 1: don't know. We can only tell you what's happening so far.
• 8:00
  Speaker 1: But just sticking to that notion of having ETFs, well,
• 8:03
  Speaker 1: I mean, the great thing is that you can go
• 8:04
  Speaker 1: and buy things. So you could buy NASDAK, or you
• 8:06
  Speaker 1: can buy s and P five hundred, you can buy
• 8:10
  Speaker 1: emerging markets. If you had an emerging markets ETF, you'd
• 8:16
  Speaker 1: be up about twenty percent. So that's an excellent I
• 8:20
  Speaker 1: suppose the example, isn't it of diversification, which is this
• 8:23
  Speaker 1: thing we say on the show you need all the time,
• 8:25
  Speaker 1: don't you. You need to have that across and this
• 8:27
  Speaker 1: is a time for example it pays off. The other
• 8:30
  Speaker 1: one was gold Lacrosse James sixty twelve months.
• 8:35
  Speaker 2: WHOA, yes, do you have the equivalent in Melbourne? In
• 8:40
  Speaker 2: Sydney we've got Martin Place and there's one of the
• 8:43
  Speaker 2: larger gold companies in Martinplace, prime position, and at the
• 8:47
  Speaker 2: peak of the gold fever, there was lines out the
• 8:50
  Speaker 2: door every day, which just reinforced this fear of missing
• 8:53
  Speaker 2: out mentality around getting gold.
• 8:55
  Speaker 3: Did something similar happen in Melbourne?
• 8:57
  Speaker 1: I don't think there's a highly visible gold shop like that,
• 9:00
  Speaker 1: actually so so. But hey, we saw the stills on TV,
• 9:04
  Speaker 1: we saw the cues outside Martin Place, and as you say,
• 9:08
  Speaker 1: it paid off, didn't it. I mean, gold really paid
• 9:11
  Speaker 1: off this year fifty six percent. So there was a
• 9:13
  Speaker 1: fear of missing out on that occasion. It was actually
• 9:15
  Speaker 1: accurately placed because it was the trade to be in
• 9:19
  Speaker 1: this year. And bitcoin then, on the other hand again
• 9:22
  Speaker 1: and another way people will listen to the show might
• 9:25
  Speaker 1: get into an area would be to get it. Just
• 9:27
  Speaker 1: get a bitcoin ETF to sort of play in that space,
• 9:31
  Speaker 1: and that's been flat. So I think at least that
• 9:36
  Speaker 1: this year puts the debate over gold and bitcoin to rest.
• 9:40
  Speaker 1: That the idea that bitcoin is some sort of digital gold,
• 9:43
  Speaker 1: I think, personally forget it. This year shows that I
• 9:46
  Speaker 1: think fifty six percent today on gold minus seven percent
• 9:50
  Speaker 1: on bitcoin. What does that tell us, James, I think.
• 9:54
  Speaker 2: That tells you that investors are looking for the next
• 9:58
  Speaker 2: shiny thing, and for the past couple of years, it's
• 10:01
  Speaker 2: been bitcoin, but you look at the past month and
• 10:03
  Speaker 2: a bit, it's fallen by thirty percent in value, and
• 10:06
  Speaker 2: it's over the twelve month calendar year it's down twenty
• 10:09
  Speaker 2: percent or a bit over twenty percent. And why because
• 10:12
  Speaker 2: it's not shiny anymore. AIS come along and that's where
• 10:15
  Speaker 2: people are placing their bets. I can't tell the amount
• 10:17
  Speaker 2: of people that I speak to who have said I've
• 10:19
  Speaker 2: put money into Nvidia. And actually I have one client
• 10:23
  Speaker 2: who where transitioning his portfolio that he manages over to me,
• 10:26
  Speaker 2: and I'm looking at what he purchased, and he bought
• 10:28
  Speaker 2: two thousand dollars worth of Nvidia, which is now where.
• 10:31
  Speaker 3: Fifty six thousand dollars.
• 10:33
  Speaker 2: So yeah, people have made a decent amount of money
• 10:36
  Speaker 2: to chasing this new shiny ball of AI. So yeah,
• 10:39
  Speaker 2: I think that's why people have sold bitcoin, is to
• 10:42
  Speaker 2: sell bitcoin, which was previously the in a vogue thing
• 10:46
  Speaker 2: and move over to AI stocks.
• 10:48
  Speaker 1: So for the conservative investor, I mean, you're not supposed
• 10:52
  Speaker 1: to do this. You're not supposed to chase the new
• 10:53
  Speaker 1: shiny thing. You're supposed to take a diversified, steady, reliable
• 10:58
  Speaker 1: approach and build where steadily that is the best way
• 11:02
  Speaker 1: to do it. We know that, we have a million
• 11:04
  Speaker 1: surveys to prove that. How does it investor with that
• 11:07
  Speaker 1: frame of mind approach this market, which is volatile. Doesn't
• 11:12
  Speaker 1: really quite capture it, but it's the best word for it.
• 11:14
  Speaker 1: In other words, it's an unpredictable market. We talked about
• 11:19
  Speaker 1: the ASX two hundred been disappointing. Small caps on the
• 11:22
  Speaker 1: ASX are up eighteen percent, and small caps is an
• 11:25
  Speaker 1: area where people can lose money quite easily. But this
• 11:28
  Speaker 1: year has been very good. Similarly in the US, yes,
• 11:31
  Speaker 1: they've had a marvelous run, but it's volatile. So for instance,
• 11:35
  Speaker 1: and as we moved to Christmas, there's really signs of
• 11:37
  Speaker 1: that market folding. And you mentioned Telsla. I mean a
• 11:41
  Speaker 1: lot of Tesla is about what time you went in.
• 11:44
  Speaker 1: I mean, it's had great periods, it's had dreadful periods.
• 11:47
  Speaker 1: I mean you could have just got it completely wrong
• 11:49
  Speaker 1: on timing it. You've taught right to time you're buying
• 11:52
  Speaker 1: and selling in Tesla. So how does the average every
• 11:55
  Speaker 1: day investor approach this market?
• 12:00
  Speaker 2: So I'd say that firstly, it's never been a better
• 12:02
  Speaker 2: time to be an investor because you have so many
• 12:05
  Speaker 2: ETFs available to your disposal to build such a great portfolio.
• 12:10
  Speaker 2: Go back five six years ago. You can build a
• 12:12
  Speaker 2: basic portfolio with ETFs. But now if you want Korean
• 12:15
  Speaker 2: share market exposure, if you want lithium only companies, there's
• 12:19
  Speaker 2: so many little narrow avenues that you can buy segments
• 12:23
  Speaker 2: via ets it's fantastic. So coming back to well, how
• 12:27
  Speaker 2: do you deal with all this constant change. The way
• 12:29
  Speaker 2: that I think about it is that you have a
• 12:32
  Speaker 2: large part of your portfolio where you have long term
• 12:34
  Speaker 2: discipline to it. So you're buying low cost ETFs that
• 12:38
  Speaker 2: have exposure to the ASX two hundred, the s and
• 12:41
  Speaker 2: P five hundred. So they're the cornerstone, the building blocks
• 12:44
  Speaker 2: because you know that on average you're going to get
• 12:47
  Speaker 2: close to ten percent return if you just hold this
• 12:49
  Speaker 2: thing and ride out.
• 12:49
  Speaker 3: The cycles ups and downs.
• 12:51
  Speaker 2: But then you have a part of your portfolio where
• 12:52
  Speaker 2: you go, I'm happy to rotate and I'm happy to
• 12:55
  Speaker 2: chase themes. So that's what we call it the tactical
• 12:57
  Speaker 2: part of the portfolio, and that's where we're chasing the
• 12:59
  Speaker 2: shiny ball for you know, maybe it might allocate five
• 13:02
  Speaker 2: percent of the portfolio for shiny ball chasing, so it
• 13:04
  Speaker 2: might have gone from bigcoined over to AI and then
• 13:07
  Speaker 2: you may decide to overweight certain themes as well. So
• 13:10
  Speaker 2: you set a percentage of a portfolio to say that
• 13:13
  Speaker 2: this is not the core. I'm happy to move this
• 13:15
  Speaker 2: around it and chase the theme to try and outperform
• 13:18
  Speaker 2: what my base call long term portfolio is going to achieve.
• 13:22
  Speaker 1: That's really interesting. Just tell us a little bit more
• 13:24
  Speaker 1: about that and why you think that that notion of
• 13:26
  Speaker 1: that it's the best time to be an investor, because
• 13:29
  Speaker 1: obviously the point you're making is you have access to
• 13:32
  Speaker 1: everything where once upon a time you didn't. Where once
• 13:35
  Speaker 1: upon a time you would hear about spectacular companies in
• 13:39
  Speaker 1: Europe or the US or Japan, and you just couldn't
• 13:42
  Speaker 1: get them. It was extraordinarily difficult. Now you can just
• 13:45
  Speaker 1: say I want to put ten grand into Japan and
• 13:49
  Speaker 1: you can literally just buy an idio of Japan. Is
• 13:51
  Speaker 1: that what you're driving out.
• 13:53
  Speaker 2: Absolutely, there's more access, there's more number of investments, the
• 13:57
  Speaker 2: administrations a lot less as well. So go back twenty
• 14:00
  Speaker 2: years ago, when I was a junior, I was filling
• 14:02
  Speaker 2: out paper application forms for managed funds.
• 14:05
  Speaker 3: You don't need to do that anymore.
• 14:06
  Speaker 2: If you want to manage fun, you go buy it
• 14:08
  Speaker 2: on the share market, or you can set up at
• 14:09
  Speaker 2: a very low cost what we call platform to access
• 14:13
  Speaker 2: thousands of different managed funds. So yeah, it's really easy
• 14:16
  Speaker 2: for someone to be an investor. But I guess that's
• 14:19
  Speaker 2: a double edged sword as well, because it's easy to
• 14:21
  Speaker 2: get set up and invest, but then it's easy to
• 14:24
  Speaker 2: not have discipline and just chuck everything at AI, or
• 14:27
  Speaker 2: chuck everything at technology in Australia, or pick some little
• 14:30
  Speaker 2: narrow niche of investment that could go very wrong. But
• 14:34
  Speaker 2: also the other thing which I'd noticed, that there's so
• 14:36
  Speaker 2: much information out there. Like twenty years ago, there wasn't
• 14:39
  Speaker 2: the money puzzle podcasts around, so people had to go
• 14:43
  Speaker 2: to a professional advisors to go get advice, whereas today
• 14:45
  Speaker 2: they can listen to fantastic publications like this and learn
• 14:49
  Speaker 2: and educate themselves. So education plus access is there. That's
• 14:52
  Speaker 2: why it's a great time to be an investor.
• 14:54
  Speaker 1: I like that, and I think it's substantially true. You know.
• 14:58
  Speaker 1: I think of when I would talk to people previously,
• 15:02
  Speaker 1: fifteen years ago, something about markets, the people who knew
• 15:05
  Speaker 1: about them, or they didn't basically, and it was, you know,
• 15:08
  Speaker 1: it was a very significant sort of journey to really
• 15:11
  Speaker 1: get in and understand it all. But I've talking to
• 15:14
  Speaker 1: a guy actually last night at our Christmas party, young guy,
• 15:18
  Speaker 1: and he that's exactly what he was doing. He was
• 15:21
  Speaker 1: playing the market. He was he didn't know everything he
• 15:24
  Speaker 1: needed to know about markets, but he knew the fundamentals
• 15:28
  Speaker 1: and it was through ETFs, which was which is a
• 15:32
  Speaker 1: very interesting way to play it, certainly to have it
• 15:35
  Speaker 1: as your core and as you say, you can move
• 15:37
  Speaker 1: out from the sides. I suppose the issue is that
• 15:40
  Speaker 1: the ETF will will really only do moderately well or
• 15:44
  Speaker 1: moderately badly. So if we have a bad year, you will,
• 15:48
  Speaker 1: you will, it will be reflected in your ETAF for
• 15:50
  Speaker 1: a good year similarly. But the thing is, I suppose
• 15:52
  Speaker 1: you're missing when a stock comes right, it comes so right,
• 15:57
  Speaker 1: and this is so good when you have like anyone,
• 16:00
  Speaker 1: even the CBA might have rolled down a bit this year,
• 16:03
  Speaker 1: but anyone who has CBA for a long time will
• 16:05
  Speaker 1: tell you that is a stock at it at.
• 16:06
  Speaker 3: Its most, at its best.
• 16:08
  Speaker 1: It's so splendid because you get this capital growth, you
• 16:11
  Speaker 1: get strong dividends and they do bttfs out the door.
• 16:14
  Speaker 1: Let's have a break and come back and talk about
• 16:17
  Speaker 1: shares this year and what happened and what we need
• 16:20
  Speaker 1: to know. Hello, Welcome back to the Australians Money Puzzle podcast.
• 16:33
  Speaker 1: James Kirby here with James gerard Offinancial Advisor dot com
• 16:37
  Speaker 1: dot au. Okay, James, Now we did talk about sort
• 16:40
  Speaker 1: of the big picture of the market and what's happened
• 16:43
  Speaker 1: and concealed. I think behind those sort of bland numbers
• 16:46
  Speaker 1: of maybe an eight percent for total return on the
• 16:50
  Speaker 1: ASX two hundred and maybe sixteen percent with their one
• 16:54
  Speaker 1: point three percent dividend on Wall Street, the S and
• 16:58
  Speaker 1: P five hundred, there is quite extraordinary divergence inside the
• 17:02
  Speaker 1: share market throughout the year. In our own market, I
• 17:07
  Speaker 1: suppose the big theme of the year, James, has been
• 17:09
  Speaker 1: the banks really rolled off, didn't they Combank, Macquarie Bank.
• 17:14
  Speaker 1: I think there was If they had held up, we
• 17:16
  Speaker 1: would have had one hell of a year, but they
• 17:17
  Speaker 1: were sought off through the year. And you said at
• 17:20
  Speaker 1: the start of the show, this is a local market
• 17:22
  Speaker 1: which is heavily based on banks, financials and miners. Why
• 17:26
  Speaker 1: do you think those big bank stocks were sought off
• 17:29
  Speaker 1: in the second half of the year.
• 17:31
  Speaker 3: I think there's been a lot of optimism.
• 17:33
  Speaker 2: We had a bit of a hiccup in share markets
• 17:35
  Speaker 2: around that March April period when Trump came out with
• 17:38
  Speaker 2: the trade tariffs, and that caused markets to drop, But
• 17:41
  Speaker 2: beyond that, people have been looking forward saying that we're
• 17:45
  Speaker 2: in a growth market. They're happy with company evaluations. They've
• 17:48
  Speaker 2: been buying into these growth companies, and that's meant that
• 17:52
  Speaker 2: the value stocks, the blue chips, which the financial sector,
• 17:55
  Speaker 2: the banking sector is part of, they have become out
• 17:58
  Speaker 2: of favor with investors as investors have chased these more
• 18:01
  Speaker 2: sexy technology in AI based stocks. And so we see
• 18:06
  Speaker 2: this with our data. So we run multiple portfolios. We
• 18:09
  Speaker 2: run a growth portfolio and we run a value portfolio,
• 18:12
  Speaker 2: and the growth portfolio has far outpaced the growth of
• 18:16
  Speaker 2: the value portfolio. But that said, I think that we
• 18:19
  Speaker 2: could be in for a bit of a change next
• 18:21
  Speaker 2: year because if these big companies, mainly in America, the
• 18:25
  Speaker 2: technology companies, don't hit their earnings forecasts very quickly, we're
• 18:29
  Speaker 2: going to see a big drops in those markets. That said,
• 18:32
  Speaker 2: you look at some of the big banks, JP Morgan,
• 18:34
  Speaker 2: Goldman Sachs. They're both saying that they think the S
• 18:36
  Speaker 2: and P five hundred is going to be ten percent
• 18:38
  Speaker 2: higher by end of calendar year twenty twenty six.
• 18:41
  Speaker 1: Yes, yes, well we have to take that seriously. We
• 18:45
  Speaker 1: also have to know the history that they say that
• 18:47
  Speaker 1: most years, because nobody knows, folks. I'd love to tell
• 18:52
  Speaker 1: you that we know, but we don't, and not do JP,
• 18:55
  Speaker 1: Morgan or anyone else to tell you whatever they may
• 18:58
  Speaker 1: say is going to happen next year. Well, they're just guessing.
• 19:01
  Speaker 1: It's an educated guess, but it's a guess. I'm just
• 19:04
  Speaker 1: going to take a look quick look at some winners
• 19:05
  Speaker 1: this year, James. Interestingly, Real twenty percent. Look at that
• 19:11
  Speaker 1: against the market, that's that's what did we see? Four
• 19:14
  Speaker 1: and a half percent? So Real one of the few
• 19:17
  Speaker 1: big blue chips that really pushed it out this year.
• 19:19
  Speaker 1: The minor some of the reeds Murvak very strong, some
• 19:24
  Speaker 1: traditionals like coals in the teens, so sort of really
• 19:29
  Speaker 1: mixed bag. There isn't there of miners, reats. What do
• 19:35
  Speaker 1: you think that tells us about where we're going from here?
• 19:39
  Speaker 2: It's a very chopping market and so that's that's one
• 19:43
  Speaker 2: of the benefits of buying ASX two hundred is that
• 19:45
  Speaker 2: you get in this blended return against some of the
• 19:48
  Speaker 2: outperformers that you've mentioned, against some of the underperformers. You
• 19:51
  Speaker 2: look at see itself down thirty five percent, and.
• 19:53
  Speaker 1: That's a shock, isn't it. That is a show that
• 19:55
  Speaker 1: was our biggest stock for a couple of years, big
• 19:58
  Speaker 1: bigger stock on the market. So what did you see
• 20:01
  Speaker 1: a thirty percent plus?
• 20:02
  Speaker 2: Yeah, yeah, it's down massively, and a couple of others
• 20:05
  Speaker 2: treasury wines down similar amount as well. So if you're
• 20:09
  Speaker 2: an individual stock picker, great time, because there's a large
• 20:12
  Speaker 2: divergence there of some that have shot the lights out
• 20:14
  Speaker 2: and others with which haven't. But if you're more ever
• 20:18
  Speaker 2: a passive investor or more focused on I just want
• 20:21
  Speaker 2: the average return of the market. Eachs a great place
• 20:23
  Speaker 2: to be at the moment. And as you mentioned, the
• 20:25
  Speaker 2: small cap and microcap stocks that have done really well,
• 20:28
  Speaker 2: and I called that as being a theme earlier in
• 20:30
  Speaker 2: the year for newsletter, because you just see the prices
• 20:34
  Speaker 2: of these large caps, particularly the banks, and you think
• 20:36
  Speaker 2: it has to go back to a normal price, and
• 20:38
  Speaker 2: you look at these small caps, and they're all hovering
• 20:40
  Speaker 2: on very low valuations, so they had room to grow,
• 20:43
  Speaker 2: and I still believe they have more room to grow
• 20:45
  Speaker 2: as well. So overall, you know, if you say the
• 20:48
  Speaker 2: market's going to do a ten percent return next year,
• 20:50
  Speaker 2: you're probably not going to be wrong most of the times,
• 20:52
  Speaker 2: as you say, because that's the average return of the
• 20:53
  Speaker 2: share market of a long periods of time.
• 20:56
  Speaker 1: Taking no risks saying that, yeah, okay, I'll hold some
• 21:00
  Speaker 1: want to get into small caps beyond an ETF where
• 21:03
  Speaker 1: you know it's fine to say small caps for up
• 21:05
  Speaker 1: eighteen percent, that means you know, roughly two thousand little
• 21:08
  Speaker 1: companies where are up on average by eighteen percent, and
• 21:10
  Speaker 1: there will be extraordinary divergence within that. What do you think?
• 21:16
  Speaker 2: Now you're opening the philosophical door to passive ETF versus
• 21:20
  Speaker 2: active managed funds. So if you're an active small cap
• 21:24
  Speaker 2: fund manager, you're going to argue that small cap ETFs
• 21:29
  Speaker 2: always underperform. Why because the small cap ETF will buy
• 21:32
  Speaker 2: the whole small cap market. But once you take away
• 21:34
  Speaker 2: the ETF manager fee, you're going to get lower than
• 21:37
  Speaker 2: the market average. Whereas the ETF manager will say that
• 21:41
  Speaker 2: go for passive because research shows that ninety percent of
• 21:44
  Speaker 2: active fund managers will underperform just buying the index over
• 21:47
  Speaker 2: a ten year period, so it's really about having it.
• 21:51
  Speaker 2: In my opinion, we do a blend, almost a fifty
• 21:53
  Speaker 2: to fifty blend. We go, all right, we're going to
• 21:56
  Speaker 2: place our bets in fifty percent passive because we want
• 21:59
  Speaker 2: the average return, and then the other half we're going
• 22:01
  Speaker 2: to do research and find that top quarter manager that's
• 22:05
  Speaker 2: consistently outperformed the index net of their fees. And with
• 22:09
  Speaker 2: small cap managers in particularly, you need to be quite
• 22:12
  Speaker 2: conscious of the fees because not only will they charge
• 22:14
  Speaker 2: a base fee, which can be roughly one percent, but
• 22:17
  Speaker 2: they have these things called performance fees. So if they
• 22:20
  Speaker 2: generate a return more than they sent benchmarks, and sometimes
• 22:24
  Speaker 2: they get cheeky and set the benchmark as the cash rate,
• 22:26
  Speaker 2: so if they do better than cash, they're going to
• 22:28
  Speaker 2: take twenty percent of that excess return.
• 22:31
  Speaker 1: Which it's pretty easy to beat really at the best
• 22:33
  Speaker 1: of times, isn't it.
• 22:34
  Speaker 2: That's right, Yeah, So your total fee can end up
• 22:38
  Speaker 2: being two three four percent after their performance fee has
• 22:41
  Speaker 2: been taken into account. But hey, if they're getting you
• 22:44
  Speaker 2: thirty percent whereas the index got your twenty percent, you're
• 22:46
  Speaker 2: happy to pay them their three percent fee. But just
• 22:48
  Speaker 2: picking that consistent manager and maybe having a blend of
• 22:51
  Speaker 2: the passive versus the active would be my two cents.
• 22:54
  Speaker 1: Do you think the fund managers in small caps have
• 22:58
  Speaker 1: a better chance of performing than fund managers and large caps?
• 23:03
  Speaker 3: I do. Yeah.
• 23:04
  Speaker 2: I caught up with a fund manager recently. He was
• 23:06
  Speaker 2: a former Sydney Swans player turned fund manager, and less,
• 23:12
  Speaker 2: I wouldn't know.
• 23:13
  Speaker 1: What it is anyway, I don't know any of our sport.
• 23:17
  Speaker 2: And I said, really, there's small companies like can you
• 23:20
  Speaker 2: add that much value? And his argument was that, well, yes,
• 23:24
  Speaker 2: because we're a fund manager, we're dealing with these small
• 23:26
  Speaker 2: cap companies. So the management open their arms to us
• 23:29
  Speaker 2: because they know that if they say the right things
• 23:32
  Speaker 2: to us and we're happy with them, we're going to
• 23:33
  Speaker 2: invest in them.
• 23:34
  Speaker 3: We could actually move their share price.
• 23:35
  Speaker 2: So the biggest thing with a small cap fund manager
• 23:38
  Speaker 2: that they say their advantage is access. They get to
• 23:41
  Speaker 2: meet with the management of these ASEX listed small and
• 23:43
  Speaker 2: microcap companies and really eyeball the CEO, CFO in upper
• 23:48
  Speaker 2: management and then make decisions around whether they not only
• 23:51
  Speaker 2: trust what they're getting through ASEX releases, but what they
• 23:54
  Speaker 2: get in the vibe of the meeting as a meeting
• 23:56
  Speaker 2: with these companies.
• 23:57
  Speaker 1: Yeah, and I imagine that's very true. So you take
• 23:59
  Speaker 1: something like PHP results, you know there's going to be
• 24:01
  Speaker 1: forty two analysts sitting on a conference call. They don't
• 24:04
  Speaker 1: know the CEO. But if you go to see a
• 24:08
  Speaker 1: company which has got whatever a two hundred million market
• 24:11
  Speaker 1: cap or a ten million market cap, you can get
• 24:14
  Speaker 1: in the door and you pas a manjie as you say,
• 24:16
  Speaker 1: you can eyeball these people who are in charge of
• 24:18
  Speaker 1: the company. And that is extremely important, which is not
• 24:21
  Speaker 1: something that most not to mention casual investors, but even
• 24:24
  Speaker 1: professional investors get to do. It's a really good point. Okay,
• 24:27
  Speaker 1: very interesting. We'll be back in a moment. Hello, Welcome
• 24:37
  Speaker 1: back to the Money Puzzle podcast. James Kirby with James Gerard. Now, James,
• 24:42
  Speaker 1: a couple of things that just want to on a
• 24:43
  Speaker 1: wrap of the year, and in terms of what our
• 24:46
  Speaker 1: investors which really mattered to them. I think it was
• 24:49
  Speaker 1: a couple of things that we might just quickly look at.
• 24:52
  Speaker 1: You talked about still some buoyancy in the share market,
• 24:55
  Speaker 1: some positive forecasts. Maybe the chance that the small caps
• 25:00
  Speaker 1: it will also outperform again next year. That's on shares again,
• 25:03
  Speaker 1: that the US will may well outperform the ASX. Certainly
• 25:07
  Speaker 1: it has done so for twenty solid years in a
• 25:11
  Speaker 1: row or not in a row, but on average, there
• 25:13
  Speaker 1: was a year I think it was twenty twenty one
• 25:15
  Speaker 1: where we did better than them, but it's very rare.
• 25:17
  Speaker 1: So you got those two things and we can put
• 25:19
  Speaker 1: them on the table. Then in our local economy as such,
• 25:23
  Speaker 1: I think the big surprise of the year was the
• 25:25
  Speaker 1: change of direction of interest rates, right, so we thought
• 25:27
  Speaker 1: there was more cuts coming. I think that's over now,
• 25:30
  Speaker 1: so we're going to have potential rate rises. How would
• 25:33
  Speaker 1: that play out for investors in markets? In investment markets locally.
• 25:40
  Speaker 2: It would be definitely a negative for a couple of reasons.
• 25:43
  Speaker 2: The basic economics of rising cash right, is that it's
• 25:47
  Speaker 2: more expensive for companies to leverage their balance sheet, so
• 25:50
  Speaker 2: more expensive for them to access capital to expand and
• 25:53
  Speaker 2: acquire other companies, so that hurts the profitability of share
• 25:56
  Speaker 2: market companies.
• 25:57
  Speaker 3: The other aspect is around.
• 25:59
  Speaker 2: The effect to the economy when interest rates go up,
• 26:02
  Speaker 2: people spend less on discretionary things that go on holidays. Less,
• 26:06
  Speaker 2: they don't upgrade their cars, don't upgrade their TVs as much,
• 26:09
  Speaker 2: and so GDP comes down, the activity in the economy
• 26:13
  Speaker 2: comes down, so again that that's bad for share markets.
• 26:16
  Speaker 2: So I think that the Reserve Bank will be somewhat
• 26:19
  Speaker 2: cautious given that we were expecting more rate cuts to happen.
• 26:22
  Speaker 2: But now if that inflation bumping back up, I think
• 26:24
  Speaker 2: they're going to sit on rates and hopefully it will
• 26:26
  Speaker 2: just remain flat next year, That's what I think, which
• 26:29
  Speaker 2: will then sort of negate any positive or negative impact
• 26:32
  Speaker 2: of share markets.
• 26:33
  Speaker 1: Okay, all right, I think we might just leave it
• 26:36
  Speaker 1: right there, because I think it's kind of poised perfectly, James,
• 26:40
  Speaker 1: as you see a lot of attention about this changing
• 26:44
  Speaker 1: direction in industry as folks, and a lot of attention
• 26:47
  Speaker 1: to the fact that the money markets and some analysts
• 26:49
  Speaker 1: are saying that there will be a rate to increase.
• 26:52
  Speaker 1: Perhaps there will be, but maybe we could work on
• 26:54
  Speaker 1: the basis that it's going to be unchanged. That's certainly
• 26:57
  Speaker 1: going to be unchanged till you come back from your
• 26:59
  Speaker 1: holiday break and I come back for our holiday break.
• 27:02
  Speaker 1: So I think on that mildly positive note. We may
• 27:06
  Speaker 1: just draw a line. Hey, Thank you very much, James Gerard.
• 27:09
  Speaker 3: My pleasure.
• 27:10
  Speaker 2: Thank you for another year of having me on. I
• 27:12
  Speaker 2: look forward to more appearances in twenty twenty six. We
• 27:14
  Speaker 2: will have you back early. We will have you back
• 27:16
  Speaker 2: early in twenty twenty six. I have plans for you, James. Okay,
• 27:20
  Speaker 2: very good, folks. Thank you for everything across the year.
• 27:22
  Speaker 2: Keep the correspondence coming.
• 27:23
  Speaker 1: I love to see it coming in on any issue
• 27:26
  Speaker 1: that you like, the money puzzle at the Australian dot
• 27:29
  Speaker 1: com dot au. Talk to you soon,