Latest / The SME Stream / Chris Di Leva: Investment markets after the U.S. election

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Chris Di Leva: Investment markets after the U.S. election · The SME Stream

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Speaker 1: That's well.
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Speaker 2: He ain't let I can make this kind that's something
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Speaker 2: by myself. Don't bag let you help me pull it?
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Speaker 2: Bottle yourself a TV every weekend.
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Speaker 3: If you can't tell, they say, see where basic tree?
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Speaker 4: Where can I handsome?
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Speaker 2: Hell if.
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Speaker 4: Lame?
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Speaker 2: That's a crumbling gory, lucky lankyuty is something?
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Speaker 4: All read it game?
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Speaker 2: That's you and Runnings his kids up, Get jos after
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Speaker 2: and welcome back to the show. This is smart This
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Speaker 2: is Smart Money on the Weekend Collective. I'm Tim Beverige.
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Speaker 2: If you missed any of our previous discussions Politic Central
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Speaker 2: was fascinating discussion with Duncan Webb, he's Justice Spike Expersson
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Speaker 2: for Labor about the treat Principles bill. Followed up with
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Speaker 2: of the bill as well. That was a fascinating and
1:06
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1:09
Speaker 2: on loneliness. You can check it out week podcasts the
1:12
Speaker 2: Weekend Collective go to iHeartRadio would be a great starting point,
1:17
Speaker 2: but now it is time to move on the conversation
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Speaker 2: and with Smart Money, and my guest is from Harbra
1:23
Speaker 2: asset management and his name is Chris Deliver and Chris
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Speaker 2: joins me. Now, gooday, Chris, how are you going?
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Speaker 4: Hey Tim, nice to be with you.
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Speaker 2: Yeah, you too. We're going to have a chat about well,
1:35
Speaker 2: basically investment markets as a result of Donald Trump winning
1:39
Speaker 2: the US election, which is obviously going to have an
1:42
Speaker 2: impact on New Zealand's trade and the US dollar, et cetera.
1:48
Speaker 2: What should we kick off with? What are your first
1:49
Speaker 2: what are your first thoughts about this?
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Speaker 5: Yeah, I mean a lot of Keywi's probably look at
1:56
Speaker 5: Trump and monitor agree with as politics, and the initial
2:01
Speaker 5: reaction we get when we normally talk to people is, oh, no,
2:05
Speaker 5: you know, what's this going to mean? What's this going
2:06
Speaker 5: to mean for our key we save a portfolios? What
2:09
Speaker 5: is this going to mean for the share market? And
2:13
Speaker 5: often there's a lot of a lot of fear, to
2:16
Speaker 5: be honest, you know, thinking about about his agenda. Now,
2:20
Speaker 5: we've done a lot of research into this and you know,
2:23
Speaker 5: following the Republican clean sweep, talk to a lot of
2:28
Speaker 5: offshore strategists and I've been able to kind of, you know,
2:32
Speaker 5: paint a picture of how things might look over the
2:36
Speaker 5: next few years. Of course, with Trump there's always uncertainty,
2:41
Speaker 5: and that's what leads to a lot of apprehension. But
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Speaker 5: I suppose the key things if I look at on
2:48
Speaker 5: the positive side, are that the key driver of share
2:53
Speaker 5: markets over the long term earnings, and as an investor
2:58
Speaker 5: in a company, you get earnings that are after tax.
3:00
Speaker 5: So one of the big fears before the election was
3:04
Speaker 5: that a lot of Trump's tax cuts from when he
3:07
Speaker 5: was last in power would lapse, and that would have
3:10
Speaker 5: quite a severe impact on the US economy, both personal
3:14
Speaker 5: tax cuts and company tax cuts. So the good news
3:18
Speaker 5: for people who are investing in companies and people with
3:22
Speaker 5: key we saver accounts. A lot of the global share
3:24
Speaker 5: market is in the US. One thing that we know
3:28
Speaker 5: that Trump won't do is repel his own tax cuts,
3:33
Speaker 5: and what he may do has cut them further. So
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Speaker 5: for US shares it's largely been a really good story
3:41
Speaker 5: so far. They're rallied pretty strongly following the election results.
3:47
Speaker 5: One of the things that we have to be more
3:49
Speaker 5: apprehensive on, however, has trade policy, and we don't know
3:55
Speaker 5: what that would look like, and that's kind of a
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Speaker 5: negative for markets. Market st light up like uncertainty, and
4:02
Speaker 5: at the moment we just don't know how far he's
4:05
Speaker 5: going to go with tariffs, but he has made some
4:09
Speaker 5: pretty outlandish promises so far. So look, those are the
4:14
Speaker 5: initial thoughts. There's some really, there is some good there,
4:17
Speaker 5: but there's also a few things to keep an eye on.
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Speaker 2: Right we are talking with Chris Deliver's director ahead of
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Speaker 2: multi asset and Global Investments from Harvard Asset Management. We'd
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Speaker 2: like your calls on this, by the way, oh, eight
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Speaker 2: hundred and eighty, ten and eighty. In the wake of
4:31
Speaker 2: the Trump victory, clean sweet. Basically, he's going to have
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Speaker 2: more power than he had last time. Where are you
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Speaker 2: going to be putting your money or have you got
4:40
Speaker 2: any questions that you want to run by Chris. I'm
4:43
Speaker 2: sure he'll he'll make a good fist of answering well,
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Speaker 2: of course, without giving any specific financial advice. Chris, my
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Speaker 2: first question to you is, I'm guessing that when you're
4:53
Speaker 2: looking at what we might see happen as a result
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Speaker 2: of Trump's presidency, you might have cast your mind back
5:00
Speaker 2: eight years to what happened. There are there any lessons
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Speaker 2: from history that might repeat themselves or not?
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Speaker 5: Here there are and actually, if we look at the
5:12
Speaker 5: last time he was in power. The initial reaction from
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Speaker 5: share markets, and this all happened in one day, believe
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Speaker 5: it or not, tim but the initial reaction from markets
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Speaker 5: was actually a really negative one, so as it looked
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Speaker 5: like he was going to win, but actually as markets
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Speaker 5: started to digest what his policies would mean, we actually
5:31
Speaker 5: had a really good period for share markets when Donald
5:36
Speaker 5: Trump was last in What was the key driver of that.
5:39
Speaker 5: The key single driver was his tax package. So we
5:46
Speaker 5: saw him put some policies in place around repatriation of earnings,
5:51
Speaker 5: but also lower income tax rates for companies and that
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Speaker 5: led to higher post tax earnings of course, so that's
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Speaker 5: something we can learn that actually last time, despite being
6:06
Speaker 5: a result that the market wasn't expecting, it actually turned
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Speaker 5: out okay for investors. We did see him last time, though,
6:15
Speaker 5: create a lot of uncertainty with regards to his trade policy.
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Speaker 4: We saw tariffs.
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Speaker 5: Interestingly, the tariffs he put on were largely not actually repelled,
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Speaker 5: so they're still in place today. So I think it
6:28
Speaker 5: was something indirectly that both administrations actually supported are given
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Speaker 5: Biden didn't repel them. But look, overall, it was a
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Speaker 5: pretty good period for markets, taking away the fact that
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Speaker 5: he was still in power when COVID broke out, and
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Speaker 5: we saw a pretty large fall in share markets then,
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Speaker 5: but I don't think we can quite say.
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Speaker 4: That he was the driver of that.
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Speaker 2: Actually, my initial search on the share market because how
7:00
Speaker 2: long is it since the since the election?
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Speaker 5: Now what it's a couple of weeks, right, And the
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Speaker 5: initial reaction was was really really positive. So there is
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Speaker 5: some trades in the market which are kind of known
7:12
Speaker 5: as Trump winners.
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Speaker 4: So those are yeah, test less tests two and.
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Speaker 2: Forty bucks on the fourth of November to three hundred
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Speaker 2: and fifty dollars. It's tailed off a little bit since then. Yeah, yeah,
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Speaker 2: what did you make?
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Speaker 5: So that's been a winner, and it's I don't think
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Speaker 5: there's any great science to what. People look at them
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Speaker 5: and go, well, Elon Musk is right next to Trump.
7:37
Speaker 5: It's it's got to be really really good for Tesla.
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Speaker 1: Right.
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Speaker 5: Some of the other winners have been banks, Bitcoin, in cryptocurrencies,
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Speaker 5: they've been they've been winners. I read a stat the
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Speaker 5: other day which astounded me. A doggy coin, which is
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Speaker 5: kind of a meme crypto coin. The market cap of
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Speaker 5: that is actually larger than the top four US banks,
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Speaker 5: which is kind of mind boggling, but that's gone up,
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Speaker 5: and that's because Trump's agenda is more around deregulation or
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Speaker 5: softer regulation, and that tends to benefit banks and certainly cryptocurrency.
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Speaker 5: Small companies have been doing really well. So smaller companies
8:24
Speaker 5: tend to be more cyclical and linked to the fortunes
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Speaker 5: of the US economy. They've gone pretty well, but there
8:32
Speaker 5: have been some losers. So renewable energy stocks have.
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Speaker 4: Done really poorly.
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Speaker 5: We know that Trump isn't a big supporter of renewable
8:43
Speaker 5: so solar stocks, wind stocks went down quite significantly, and
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Speaker 5: bond yields have gone up, and that's because there's the
8:53
Speaker 5: expectation that Trump's administration will rack up a lot more
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Speaker 5: debt and that means that the government will need to
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Speaker 5: issue more bonds.
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Speaker 2: Yeah. I was actually wondering what because the other one
9:08
Speaker 2: that's taken it is health stocks and vaccine companies that
9:12
Speaker 2: work on health stocks take a bit have taken a
9:14
Speaker 2: bit of a beating because RFK, who's going to be
9:17
Speaker 2: the Health secretary obviously is a vaccine well he's a skeptic,
9:23
Speaker 2: but conspiracy theorist on that stuff as well. Actually wonder
9:25
Speaker 2: if that actually might be a goodbye because they take
9:28
Speaker 2: a hit initially, then you sort of wonder whether they're
9:31
Speaker 2: going to actually have a bit of perspective and recover
9:33
Speaker 2: a bit. You take, that's very specific opinion I'm seeking,
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Speaker 2: But what do you reckon?
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Speaker 5: Yeah, so I think it's a good point in looking
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Speaker 5: at what is the initial reaction versus what do you
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Speaker 5: think will happen over the long term, because actually, when
9:52
Speaker 5: we look at last time he was in power, and
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Speaker 5: you asked for lessons of the previous time, actually look
10:00
Speaker 5: at what renewable stocks did when Trump was last in power.
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Speaker 5: They actually did perfectly good. So you know, so some
10:09
Speaker 5: of that initial reaction around these things might not necessarily
10:14
Speaker 5: be the correct one. And I think the other thing
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Speaker 5: to take into account is there's a lot of uncertainty
10:20
Speaker 5: on exactly what the policy agenda will look like. So
10:25
Speaker 5: whether it's you know, twenty percent tariffs on China, whether
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Speaker 5: it's sixty percent tariffs on China, whether he reduces the
10:32
Speaker 5: text the corporate tax rate from twenty one percent to
10:34
Speaker 5: fifteen percent, you know, these are things that you don't
10:38
Speaker 5: actually know. So at the moment, these initial trades that
10:43
Speaker 5: have that have gone taken place in the market, there's
10:48
Speaker 5: some of them are more on what people might expect
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Speaker 5: Trump to do, as opposed to any kind of finite
10:56
Speaker 5: policy agenda that's been put forward.
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Speaker 2: Okay, let's say, let's take some calls, and who's first, Peter, Hello.
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Speaker 3: Good afternoon. Well I don't know who you can believe,
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Speaker 3: because I think the New York Times said that Trump
11:13
Speaker 3: had a discussion with put and which was denied. Then
11:15
Speaker 3: it was Elon Musk had a discussion with the UN
11:19
Speaker 3: investor in New York, which was later denied. And then
11:23
Speaker 3: in January the debt ceiling for the US comes up
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Speaker 3: for renewal. So how can you produce taxes when the
11:33
Speaker 3: deficit has never been high and carries on been high,
11:36
Speaker 3: especially with higher interest rates?
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Speaker 2: Are you basically raising the question of what Trump's rhetorics
11:43
Speaker 2: versus what He's actually going to be able to do.
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Speaker 3: Yeah, well, they're saying they can't produce him. Is he
11:48
Speaker 3: going to cut and slash the budget, you know, to
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Speaker 3: fund his tax cuts?
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Speaker 1: You know?
11:54
Speaker 3: You know what, what do you believe? That's what I'm sunny.
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Speaker 2: Well, for instance, you mean the two million dollars two
12:00
Speaker 2: trillion dollars? Sorry, I was only about a billion times
12:03
Speaker 2: out the two trillion dollars of savings that Elon and
12:07
Speaker 2: the other guy I want to want to save. You mean,
12:09
Speaker 2: do what do we read into that?
12:11
Speaker 3: Is that what you're well, how can we believe anything? Well,
12:14
Speaker 3: a louder than words?
12:16
Speaker 2: Well, yeah, I mean, just before we go to go
12:18
Speaker 2: to Christopher his opinion, how much do you believe?
12:23
Speaker 3: Well, Trump says everything, So anyone who leaves a little
12:28
Speaker 3: bit of what he says, they might believe him. But
12:29
Speaker 3: at the end of the day, actions a louder than words.
12:33
Speaker 3: And I think a lot of it was campaign a lecture,
12:37
Speaker 3: especially with Harris, and I don't think he's going to
12:40
Speaker 3: do anything like that at all.
12:43
Speaker 2: Would you put your money where your mouth is on this?
12:45
Speaker 2: And if so, where would you be putting it?
12:50
Speaker 3: Well, the thing is that you know, he says he's
12:52
Speaker 3: not going to have wars and he has water. I
12:55
Speaker 3: think I put my money on that Trump making more
12:58
Speaker 3: money from politics, you know, that's where I put my money. Okay,
13:04
Speaker 3: regardless of the outcome.
13:05
Speaker 2: You should put buy shares in Trump Inc. I mean,
13:08
Speaker 2: what do you what do you think about the rhetoric,
13:10
Speaker 2: Chris when it comes to what Trump says he's going
13:14
Speaker 2: to do because that for instance, that two trillion dollars
13:16
Speaker 2: of saving, that savings that Elon Musk and I can't
13:19
Speaker 2: remember the last guys and the other guy, Vivek Ramaswami.
13:23
Speaker 2: I think it might be, you know, they want to
13:25
Speaker 2: they want to get rid of the FBI, abolish the
13:28
Speaker 2: Department of Education, all that sort of stuff. What does
13:30
Speaker 2: that actually firstly, Chris, what does that actually mean? That rhetoric?
13:34
Speaker 2: What does it? Does it have any effect or what?
13:39
Speaker 5: So, I mean, it's a good point, and it's kind
13:41
Speaker 5: of what I was trying to bring up earlier around
13:45
Speaker 5: a lot of what actually will transpire in the future
13:49
Speaker 5: might not be what people are considering today because we
13:53
Speaker 5: don't know the clear policy agenda. I mean, the debt
13:57
Speaker 5: ceiling is troubling, but it's it's actually been troubling for
14:02
Speaker 5: nine a decade now. So we frequently have a debt
14:06
Speaker 5: sealing discussions and they get close to it and there's
14:09
Speaker 5: political brinkmanship around, you know, whether it gets raised, and
14:14
Speaker 5: it always ends up being raised, but with certain concessions
14:21
Speaker 5: between the two respective parties. So look, you know, debt
14:24
Speaker 5: is concerning for the US, debts actually concerning for a
14:32
Speaker 5: whole load of countries, including Japan and some others. But yeah,
14:37
Speaker 5: I mean that's the element that Trump brings. As I
14:40
Speaker 5: was mentioned earlier, it's the uncertainty, and that brings some
14:44
Speaker 5: volatility with it. So yeah, I mean we've just got
14:48
Speaker 5: to wait and I suppose see the agenda. But the
14:53
Speaker 5: result of the election, the fact that there was an
14:55
Speaker 5: election result and a clear result, that's actually been good
14:59
Speaker 5: for market, right because there was a there was a
15:04
Speaker 5: potential way that this plays out that there wasn't a
15:06
Speaker 5: clear result, we could get something horrible like like what
15:10
Speaker 5: happened last time at Capital Well take place.
15:13
Speaker 4: So we've.
15:16
Speaker 5: No administration is going to have a complete certainty. But look,
15:21
Speaker 5: the initial signs you know for markets is that actually
15:25
Speaker 5: we've digested it pretty well. Trump gets inaugurated January twentieth.
15:32
Speaker 5: Following there we'll see a more finite policy agender. I mean,
15:37
Speaker 5: he did two tariffs last time, but we don't know
15:40
Speaker 5: the extent of what he do this time.
15:43
Speaker 2: I just forgo to our next call. It does obviously
15:46
Speaker 2: change in the US administration. It does bring opportunities, as
15:50
Speaker 2: we say, you know, we see share prices bouncing around.
15:53
Speaker 2: Does it bring opportunities beyond the guesswork though, are there
15:56
Speaker 2: things that you can look at and that you know
15:59
Speaker 2: that your team would look at and say, well, we
16:01
Speaker 2: can based on our research and our understanding what's likely
16:04
Speaker 2: to happen, we can confidently invest here and here or
16:08
Speaker 2: is it all just well who knows?
16:11
Speaker 4: Oh yeah, I mean.
16:14
Speaker 2: Two extreme, Yeah it is.
16:19
Speaker 4: I mean, I'll tell you the way. It does impact
16:22
Speaker 4: the way we invest.
16:23
Speaker 5: So we definitely don't preempt anything that the politicians do
16:28
Speaker 5: because that just comes with too much unpredictability.
16:31
Speaker 4: But for example, we do look at.
16:33
Speaker 5: Someone at a country like China and companies that we
16:38
Speaker 5: invest into that are exposed to China, and it makes
16:42
Speaker 5: us more apprehensive, right because we know Trump's going to
16:45
Speaker 5: go in He's going to have a policy agenda that's
16:49
Speaker 5: probably not that China friendly.
16:51
Speaker 2: I think that's we can be sure of that one.
16:54
Speaker 4: Yes, yes, So at the margin, we look at that and.
16:59
Speaker 5: We take it very seriously when we look at a company.
17:02
Speaker 5: So what I'm talking about there is, you know, say
17:04
Speaker 5: a company like the HP lots of relies on China
17:08
Speaker 5: a lot for its exports. We will take into account
17:14
Speaker 5: that the policy agenda won't be friendly towards their main
17:20
Speaker 5: export market, and we think that's a really sensible way
17:24
Speaker 5: to play it as opposed to go and you know,
17:28
Speaker 5: Trump's not going to be great for you know, or
17:32
Speaker 5: Trumps can be great for banks.
17:33
Speaker 4: Let's go buy banks. You know, we don't, we don't
17:36
Speaker 4: kind of react like that.
17:38
Speaker 2: Yeah, okay, right, let's take some more calls. Mary.
17:40
Speaker 6: Hello, oh hello, I really enjoy your show. It's been
17:44
Speaker 6: a great afternoon, so thank you. I just wanted to
17:48
Speaker 6: get your guests about crypto because I find it's quite
17:51
Speaker 6: difficult to understand it, really and it seems to be
17:54
Speaker 6: more difficult to be able to work out how they
17:57
Speaker 6: actually value it. And I just didn't know whether you know,
18:01
Speaker 6: what he thought about including it in one's retirement portfolio
18:06
Speaker 6: or something like that.
18:08
Speaker 2: Okay, yeah, crypto, Yes.
18:14
Speaker 5: Mary, I've got to be completely honest and say I've
18:20
Speaker 5: got crypto completely wrong. And lots of other people you
18:25
Speaker 5: know from traditional finance background probably have too. So I think,
18:29
Speaker 5: you know, Warren Buffett and Charlie Munger, there've been some
18:32
Speaker 5: of the most vocal critics of cryptocurrency in the portfolios
18:38
Speaker 5: that we manage. So I managed multi SAT portfolios and
18:42
Speaker 5: can we save the portfolios? Look we don't include it.
18:46
Speaker 5: And the key reason for us is we just don't
18:49
Speaker 5: know how to value it. So when we invest in
18:53
Speaker 5: a company, right, we know how to value that company.
18:56
Speaker 5: We might not get it completely right every time, but
18:59
Speaker 5: we have a really solid framework on valuing a company.
19:02
Speaker 5: So I can value a company by looking at the
19:05
Speaker 5: earnings that it's going to deliver me over the next
19:08
Speaker 5: ten years in discount it to today's prices. With cryptocurrency,
19:13
Speaker 5: I just can't do that. I'm effectively getting my return
19:18
Speaker 5: through changes in the price, and I find it really
19:21
Speaker 5: hard to determine what those changes are in the prices.
19:26
Speaker 5: So that's why we don't invest in it and don't
19:30
Speaker 5: include it in portfolios. But then that pigs the question,
19:33
Speaker 5: you go, well, if you're not investing in it, all
19:35
Speaker 5: these people are making so much money that coin price
19:39
Speaker 5: keeps going through the roof, and what's the deal with that?
19:43
Speaker 4: So there has always been.
19:46
Speaker 5: So since the world moved to fiat currency, And what
19:49
Speaker 5: fiat currency is is when your currency is not backed
19:53
Speaker 5: with anything. So you know, back thirty or forty years ago,
19:57
Speaker 5: currency was backed by gold in the US, for example.
20:01
Speaker 5: Ever since then, people have been really worried about storing
20:06
Speaker 5: their money purely in cash, okay or in a bank account. Now,
20:14
Speaker 5: that's why gold has been such a popular investment for
20:18
Speaker 5: so long. It's been an anti feart or anti cash
20:22
Speaker 5: way of storing your money, and very much bitcoin has
20:26
Speaker 5: that characteristic as well.
20:31
Speaker 6: Can I just ask this, what therefore do you how
20:34
Speaker 6: do you view the incoming administration in the States as
20:40
Speaker 6: apparent seemingly going to review regulations around bitcoin? What does
20:45
Speaker 6: that mean exactly?
20:47
Speaker 5: So the incoming administration and one of the key reasons
20:53
Speaker 5: bitcoin has rallied and banks have rallied is that it
20:59
Speaker 5: doesn't look to be on their policy agenda to create
21:04
Speaker 5: further regulation around bitcoin and further regulation around banks. So
21:11
Speaker 5: that's in essence, just creating more rules and hoops for
21:14
Speaker 5: them to jump through. So that's largely been seen as positive,
21:18
Speaker 5: and that's why both bank stocks and cryptocurrencies like bitcoin.
21:23
Speaker 4: That's why they've rallied.
21:25
Speaker 5: Because what can really kill a share price or the
21:29
Speaker 5: price of an asset is really strong regulation. We saw
21:33
Speaker 5: that with banks following the global financial crisis, where they
21:37
Speaker 5: delivered really poor returns to customers because they were under
21:41
Speaker 5: quite a large regulatory impost. So the banks made them
21:45
Speaker 5: hold more capital against their assets. So that's why with
21:49
Speaker 5: this administration, people have been quite positive on bitcoin and banks.
21:54
Speaker 2: Okay, Mary, yep, good on it. Thanks for that, Thank
21:57
Speaker 2: you so much. Okay, thanks, but gosh, what you have
22:00
Speaker 2: given to buying a bitcoin when it was only about
22:02
Speaker 2: ten cents.
22:04
Speaker 5: My brother actually tagged me and he sent me this
22:09
Speaker 5: post he saw on Facebook where somebody was given a
22:17
Speaker 5: few bitcoin in because they sold something to someone and
22:22
Speaker 5: apparently they sold it something like ninety thousand and it's
22:25
Speaker 5: worth tens of million dollars today.
22:29
Speaker 4: Yeah, there's lots of lots of stories like that.
22:33
Speaker 1: It is.
22:33
Speaker 4: It's quite unbelievable the price it.
22:35
Speaker 2: Yeah, I remember getting emails about bitcoin and it was
22:38
Speaker 2: like you could buy it for about I don't know.
22:40
Speaker 2: I think there was a time it's about a dollar
22:41
Speaker 2: or something. If you bought a thousand bucks of bitcoin,
22:43
Speaker 2: then you'd have a thousand times one hundred and fifty
22:45
Speaker 2: four thousand. Let's not do those numbers, because you know,
22:49
Speaker 2: it's like the world is full of investment stories like that.
22:53
Speaker 2: But there's probably also the alternative one where people buying
22:56
Speaker 2: at a great price and it doesn't do so well.
22:59
Speaker 2: But anyway, he look we mean, we need to take
23:00
Speaker 2: a break. We're back in a moment Chris with Smart
23:03
Speaker 2: Money with CHRISTA Lever talking about the impact of the
23:06
Speaker 2: Trump victory in the election, Taking your cause on one
23:10
Speaker 2: hundred and eighty ten eight and we've got lots more
23:12
Speaker 2: to talk about. We're back in just to tickets coming
23:13
Speaker 2: out to half past five news talks. He'd be welcome
23:38
Speaker 2: back to Smart Money on the weekend. Collecting. My guest
23:40
Speaker 2: is Chris de Lever. He's director ahead of a multi
23:43
Speaker 2: asset and global investments at Harbor Asset Management. Let's take
23:47
Speaker 2: some more calls Chris Nigel, Hello.
23:50
Speaker 1: Good afternoon, the young tim. It's a gorgeous day Underneedin
23:54
Speaker 1: buys and sunshine with a bit of cloud, but it's
23:58
Speaker 1: going to be stinging half an the need and tomorrow
24:01
Speaker 1: is supposed to give up to twenty degrees. That we
24:03
Speaker 1: called for you as a.
24:04
Speaker 2: Oh they're bun chilling up here anyway. Have you got
24:09
Speaker 2: a call? Have you got a question for Christal Lever?
24:11
Speaker 1: Yeah, we'll get on the money.
24:13
Speaker 3: Yep, yep.
24:14
Speaker 1: What does he think of reverse mortgages?
24:17
Speaker 3: Oh?
24:18
Speaker 1: Someone on the cusp of retirement.
24:21
Speaker 5: Slightly different question for you there, Chris, yeah, I'm not
24:25
Speaker 5: a big expert, to be honest, I don't, and I
24:27
Speaker 5: hold myself out to be one. You know, looking at
24:31
Speaker 5: them that the key thing to look at it as
24:36
Speaker 5: just the fees embedded in them. We've got a couple
24:39
Speaker 5: of our analysts in the team who cover some of
24:42
Speaker 5: the companies that do reverse mortgages, and yeah, I know
24:47
Speaker 5: that the fees em better than them, can be quite
24:50
Speaker 5: can be quite high. Look, I mean I see I
24:53
Speaker 5: see a role for them in the market, you know,
24:58
Speaker 5: because they are actually just so few investment kind of
25:02
Speaker 5: vehicles out there where you can kind of get paid
25:05
Speaker 5: out a certain amount kind of each month, you know,
25:09
Speaker 5: to help with living goths, like saying annuity would So look,
25:14
Speaker 5: I get the purposes of them, but you know, the
25:16
Speaker 5: key thing I'd look at when assessing them is just
25:19
Speaker 5: the fees and obviously therefore the interest rate embedded kind
25:24
Speaker 5: of within them.
25:26
Speaker 2: There was actually there's an episode we had a little
25:29
Speaker 2: while ago, not the last one with Martin Hrs. But
25:31
Speaker 2: the one before Nigel. You can go and check it was.
25:33
Speaker 2: I think it was called a reversion mortgage, wasn't it
25:36
Speaker 2: was something else? It was when they it's worth looking
25:39
Speaker 2: out the alternative to reverse mortgages. I can't remember what
25:42
Speaker 2: it was called, but it was it's based on you
25:45
Speaker 2: selling part of your house to them, but they can't
25:47
Speaker 2: actually do anything with it.
25:51
Speaker 5: I think that one is a new one offered by Lifetime.
25:55
Speaker 5: So I think the players in New Zealand there have
25:58
Speaker 5: been Heartland and Lifetime has offered a slightly different, as
26:04
Speaker 5: you say, products, So there are some options kind of
26:09
Speaker 5: out there.
26:10
Speaker 4: But yeah, yeah, I'm not sure.
26:13
Speaker 2: To be honest, if you go, that's that's fine. We
26:16
Speaker 2: probably weren't expecting some too much detailing with you on
26:19
Speaker 2: that one, Chris the but Nigel, yeah, go and look
26:22
Speaker 2: for the go and look for the smart Money with
26:25
Speaker 2: Martin Hawes. Not the last time, but the previous time.
26:27
Speaker 2: It's all on the website and he talks about that
26:29
Speaker 2: there and it's a different it's a it's an alternative
26:32
Speaker 2: you could have a look at and it's hold it.
26:35
Speaker 1: What do you remember when I was talking to the
26:37
Speaker 1: other day, I'm still living in the yether love world.
26:40
Speaker 1: I can't afford that.
26:41
Speaker 2: Okay, Well, I'll see if I can find it. I'll
26:43
Speaker 2: see if I can find it and give it a mention. Okay,
26:45
Speaker 2: But yeah, okay, sorry.
26:47
Speaker 1: And also one final thing, one final thing if I could,
26:51
Speaker 1: what about the four Bergossi banks owned banks in New Zealand?
26:54
Speaker 1: Do they not do reverse mortgages?
26:57
Speaker 2: I don't know, I don't know. It's not really Chris's
26:59
Speaker 2: areavex beer teas unless you've got something you can offer
27:01
Speaker 2: on that, Chris.
27:02
Speaker 5: I don't actually think they do. But yeah, I wouldn't
27:06
Speaker 5: be able to say that with a high degree of confidence.
27:10
Speaker 2: No, no, all good. Hey, thanks for your call, th Nigel.
27:13
Speaker 2: Nice to hear from you. But by the way, last
27:15
Speaker 2: time on the show, you're talking a lot about bonds
27:17
Speaker 2: is a good investment versus cash? Is that still the case?
27:21
Speaker 5: It's not as good as it was, And the key
27:25
Speaker 5: reason for that is we've actually seen since then bond
27:28
Speaker 5: returns have been really, really strong. So when I was on,
27:35
Speaker 5: I think we were talking about bonds versus cash because
27:38
Speaker 5: you know, cash was kind of delivering you five and
27:41
Speaker 5: a half percent at the time, and we thought there
27:45
Speaker 5: was some scope for bond yields to fall, particularly in
27:49
Speaker 5: New Zealand as inflation started to become more under control.
27:54
Speaker 5: And you know, we still think they're a pretty good investment,
27:59
Speaker 5: but actually not as good as they were.
28:01
Speaker 4: Jeez, I think I was.
28:02
Speaker 5: On six or eight months ago to I must have
28:04
Speaker 5: done something to offend you, because I haven't been on
28:07
Speaker 5: since then. You have, no, I think as the last
28:11
Speaker 5: time I was on was probably six to eight months ago.
28:13
Speaker 2: Yeah, I think that's down to your team because we
28:16
Speaker 2: have different members from Harbor Asset Management and really to
28:20
Speaker 2: check that I'm feeling guilty about that.
28:22
Speaker 4: Oh no, it's only Jacob.
28:24
Speaker 5: Yes, No, Look, bonds have done, bonds have done really
28:28
Speaker 5: well since then. Look, you know, I still think they've
28:33
Speaker 5: got a good role to play in a portfolio, to
28:39
Speaker 5: kind of be that defensive ballast for when equities are
28:44
Speaker 5: having a tougher time. But a lot of that return
28:49
Speaker 5: you know that we talked about six or eight months ago,
28:51
Speaker 5: has has kind of come, which has been, which has
28:54
Speaker 5: been really good. I think there'd be a few investors
28:56
Speaker 5: looking at at term deposits at the moment and probably
28:59
Speaker 5: a deserving that they've come down. You know, particularly if
29:03
Speaker 5: I look at the twelve month rates, you could easily
29:08
Speaker 5: get kind of five and a half percent, say, you know,
29:11
Speaker 5: six or twelve months ago, you know today it's more
29:14
Speaker 5: four to seventy five. You know, to a bit under
29:18
Speaker 5: five percent the way, given inflation is running at two
29:24
Speaker 5: point two percent over the past twelve months. No cash rates,
29:29
Speaker 5: they will continue to come down. You know, that's been
29:32
Speaker 5: priced by the market. So key thing I'd say to
29:35
Speaker 5: call is looking at term deposits at the moment, is
29:39
Speaker 5: that what you're getting at the moment. Market forecasts probably
29:44
Speaker 5: show that they come down another you know, one to
29:47
Speaker 5: one and a half percent over the next twelve months.
29:50
Speaker 5: So I think, you know, bonds and relativity to cash,
29:54
Speaker 5: you know, for me, they're still attractive, but not quite
29:57
Speaker 5: where they were.
29:58
Speaker 2: Yeah, that good stuff. Actually, and I see it was
30:00
Speaker 2: seventeenth of Junior we last time, so it has been
30:03
Speaker 2: a while between drinks for you. You must have you
30:05
Speaker 2: must have had a couple of other people at Harbor
30:07
Speaker 2: Assid who jump the queue.
30:08
Speaker 4: Oh we definitely yeah, no, we definitely know. We must have.
30:11
Speaker 2: I'll have a chet to Andrew, Andrew and Shane just say, hey,
30:15
Speaker 2: back off, I've got to play some ketch up here. Anyway. Hey, look,
30:20
Speaker 2: we've got to take a break. We'll be back in
30:21
Speaker 2: just a moment. We're talking with Chris de Lever. He's
30:23
Speaker 2: a director and he's head of multi asset and global investments.
30:26
Speaker 2: Any questions you've got about especially looking at the New
30:30
Speaker 2: Zealand dollar it's weakened through the against the United States dollar,
30:35
Speaker 2: and also the questions around what Trump means for investment markets.
30:38
Speaker 2: If you've got your take or you want there's a
30:40
Speaker 2: question you've got for Chris, we'd love to hear from
30:42
Speaker 2: you on eight hundred eighty ten eighty. It's twenty to
30:44
Speaker 2: six news talks.
30:44
Speaker 1: He'd best live PUSA feels like Corde of Nose, just
30:53
Speaker 1: to take.
30:55
Speaker 4: A Marnile history of conversation over look.
31:02
Speaker 2: Welcome back to smart Money. This is the weekend Collective.
31:04
Speaker 2: I'm Tim Beverage. My guest is Chris de Lever. He
31:06
Speaker 2: is head of multi asset and Global Investments in Harbor
31:08
Speaker 2: Asset Management. A few questions we've got to get through
31:10
Speaker 2: with your Chris. The first one is so the New
31:14
Speaker 2: Zealand dollar has weakened a lot versus the United States dollar.
31:17
Speaker 2: And we'll get the details on that because it's always
31:21
Speaker 2: relevant if you go into holiday, especially to the States.
31:23
Speaker 2: But how's the New Zealand dollar looking against other currencies
31:26
Speaker 2: like the euro? My guess, and I don't have the
31:28
Speaker 2: data and you can. This is why I'd just like
31:29
Speaker 2: to guess fun that not great for holiday to the States.
31:34
Speaker 2: But if you go to Europe, I'm guessing the euro
31:36
Speaker 2: is also falling against the United States dollar? Am I
31:39
Speaker 2: right or wrong?
31:41
Speaker 4: Yeah, you're right.
31:43
Speaker 5: It's a case of US dollar strength as opposed to
31:47
Speaker 5: New Zealand dollar weakness. And what's driven that US dollar strength?
31:54
Speaker 5: You know really actually it's really had another leg stronger
32:00
Speaker 5: following the US election results, and you kind of go, well,
32:04
Speaker 5: why is that? The key reason is that you know
32:10
Speaker 5: Trump will Trump will run deficits, which means that he'll
32:16
Speaker 5: pump a good amount of money into the economy, so
32:19
Speaker 5: the US will have a pretty strong economic growth. The
32:23
Speaker 5: other thing is that the US economy, actually even before
32:28
Speaker 5: Trump and any anticipation of that, is running really really strong,
32:35
Speaker 5: so and particularly in comparison to ours. Right, So, if
32:39
Speaker 5: you look at New Zealand, we tightened or signaled that
32:43
Speaker 5: we're tightened interest rates about six months earlier than the
32:47
Speaker 5: US and the rest of the world, and we've really
32:50
Speaker 5: had some quite severe economic slowing. And the reason for
32:55
Speaker 5: that is that when we put up interest rates in
32:58
Speaker 5: New Zealand, packed occurs really fast so a lot of
33:03
Speaker 5: us when we fix our mortgages, we fix them for
33:06
Speaker 5: six months, one year, two years, very seldom beyond that.
33:10
Speaker 5: So when we put up in pistrates in New Zeale
33:12
Speaker 5: and that really started to bite. But now we're starting
33:15
Speaker 5: to put them down and we have inflation within target,
33:20
Speaker 5: we're starting to come out the other side of that.
33:23
Speaker 5: So what we think, you know, is at current levels,
33:27
Speaker 5: we're at fifty eight cents versus the US dollar. It's
33:31
Speaker 5: pretty much a twelve month low. In recent times, it
33:36
Speaker 5: got to about fifty five cents in COVID. But yeah,
33:40
Speaker 5: our view as a firm, and what we're doing in
33:44
Speaker 5: portfolios is to actually have less exposure to US dollars
33:50
Speaker 5: at the moment because we think, you know, fifty it's
33:52
Speaker 5: actually quite a decent level for us to.
33:57
Speaker 4: Short some of our US dollar exposure.
34:01
Speaker 5: So we think from there it won't happen in the
34:04
Speaker 5: next kind of one month, two months, or one month too,
34:08
Speaker 5: two weeks. You know, it's a longer term view that
34:12
Speaker 5: we think that the key we can probably strengthen versus
34:17
Speaker 5: versus the US.
34:18
Speaker 2: Okay, I've got a text here that assumes some facts
34:21
Speaker 2: that might not be an evidence, but it says, how
34:24
Speaker 2: might possible US stagflation effect New Zealand specifically the housing market?
34:28
Speaker 2: And I guess the question is, well, the two questions
34:31
Speaker 2: are because I can never remember exactly how to define
34:33
Speaker 2: stagflation and is it actually a possibility? And then it's
34:38
Speaker 2: a loaded text. Really what is it? Could it happen
34:40
Speaker 2: in the States, and what would it mean for US?
34:43
Speaker 5: So stagflation is essentially when inflation goes up more than
34:49
Speaker 5: economic growth does, so it's really what you don't want.
34:55
Speaker 5: And it's typically not a good thing for share markets
34:58
Speaker 5: as well, because it it essentially means that interest rates
35:02
Speaker 5: will go up, but earnings, which are linked to economic growth,
35:07
Speaker 5: won't go up as quickly. So it's rarely when I
35:10
Speaker 5: look at economic scenarios that you don't want, stagflation is
35:14
Speaker 5: very very high on the list.
35:17
Speaker 4: So what does that mean.
35:20
Speaker 5: In a stagflationary environment? It means that US interest rates
35:25
Speaker 5: will need to stay higher. It means a very strong
35:30
Speaker 5: US dollar, So it probably means it's probably not terrible
35:35
Speaker 5: news for New Zealand exporters.
35:38
Speaker 4: Because they'll be earning.
35:40
Speaker 5: They'll often earn commodities that are drived in US dollars
35:45
Speaker 5: and bring them back to Key We but look, it
35:47
Speaker 5: wouldn't be a great environment for people, say, Key, we
35:50
Speaker 5: save a portfolios. If your largest economy in the world
35:54
Speaker 5: that makes up seventy percent of the global share market
35:59
Speaker 5: is in stagflation, what's the risk of stag flation? It's look,
36:07
Speaker 5: it's it doesn't seem really high that you know. The
36:13
Speaker 5: key scenario that could lead to it is if Trump
36:16
Speaker 5: just keeps spending money and racking up deficits and.
36:23
Speaker 4: Thenslation, run tax cuts.
36:25
Speaker 2: Really, isn't it correct?
36:27
Speaker 4: Yeah, so it would be it would be tax cuts.
36:31
Speaker 4: It will also be if.
36:35
Speaker 5: People get worried about interest rates and interest rates kind
36:38
Speaker 5: of go up again, bond yields go up again, that
36:40
Speaker 5: that wouldn't be particularly good.
36:42
Speaker 2: Just a quick dumb question. I look at the simple
36:44
Speaker 2: explanation of a stagflation that you've referred to, so high inflation,
36:48
Speaker 2: low economic growth, and high unemployment. Have we been in
36:51
Speaker 2: a situation of stagflation? Because it doesn't sound like a
36:54
Speaker 2: description which is necessarily that rare.
36:59
Speaker 5: Yeah, I mean we got pretty close in New Zealand,
37:02
Speaker 5: right We had really really high inflation and we had
37:06
Speaker 5: kind of we had kind of growth coming off, but
37:08
Speaker 5: we didn't really have it for a sustained period of time.
37:13
Speaker 5: It was kind of a fleeting moment in time. Really
37:18
Speaker 5: we still had high inflation. We're tightening interest rates, but
37:22
Speaker 5: now we've kind of settled to more inflations within the band.
37:27
Speaker 5: Growth in New Zealand still pretty weak, right, But yeah,
37:31
Speaker 5: I'd say if we were in stabflation, it was very,
37:34
Speaker 5: very minor good stuff.
37:35
Speaker 2: We got to take a break. We'll be back in
37:37
Speaker 2: a moment with Christ Deliver. He's head of multi asse
37:40
Speaker 2: and Global Investments at the harbor Asset Management. You want
37:42
Speaker 2: to check out their work and go to harbor Asset
37:44
Speaker 2: dot co dot nz. We'll be back in a moment.
37:46
Speaker 2: It's ten to six. Yes, welcome back to smart Money.
38:01
Speaker 2: Yes we haven't. There's another our themed tune for you.
38:06
Speaker 2: I think that's Gwen Stefani. If I were a rich girl,
38:08
Speaker 2: believe it or not, fun fact for you, would you
38:10
Speaker 2: ever believe you'd hear and asked like Gwen Stefani singing
38:13
Speaker 2: a song which is pretty much a rip off of
38:15
Speaker 2: something from Fiddler on the Roof, which is if I
38:17
Speaker 2: were a rich man, and I don't imagine how many
38:20
Speaker 2: of our fans would realize how old school that song
38:23
Speaker 2: is anyway. Chris de Lever from Harbor Asset Management Lucky.
38:26
Speaker 2: Last question, because we're just about wrapping up now, how
38:29
Speaker 2: are we going with inflation in New Zealand now, because
38:32
Speaker 2: we we're hearing a lot less about it. Are we
38:35
Speaker 2: under control?
38:38
Speaker 4: Yeah? Well, I mean we're within the band.
38:39
Speaker 5: So the reserve band co operates a band of one
38:43
Speaker 5: to three percent. We're running at two point two percent
38:47
Speaker 5: at the moment. So yeah, it's mission accomplished for the
38:53
Speaker 5: Reserve Bank of New Zealand. We've kind of seen it
38:56
Speaker 5: globally come off quite significantly, and part of it's due
39:02
Speaker 5: to monet pary policy tightening I use central banks putting
39:07
Speaker 5: up interest rates, but a lot of it is just
39:09
Speaker 5: that normalization of the supply chain issues that we saw
39:15
Speaker 5: happen during COVID and that created bottlenecks. It actually took
39:19
Speaker 5: quite some time to fully work through. And you know,
39:24
Speaker 5: it wasn't just COVID, you know, following COVID, we had
39:28
Speaker 5: Russian Russia's invasion of Ukraine, you know, which created further
39:33
Speaker 5: supply issues with key commodities like oil and gas.
39:37
Speaker 4: So with a lot of that.
39:42
Speaker 5: In the rear vision mirror, now Unfortunately the war isn't
39:45
Speaker 5: in the rearview mirror. But you know, COVID is we've
39:50
Speaker 5: seen that normalization and that's kind of term Ysset. Markets
39:55
Speaker 5: have been performing so strongly, right. We went from this
39:58
Speaker 5: period where people thought, oh no, we're going to have
40:01
Speaker 5: inflation forever, but actually central banks around the world, the
40:06
Speaker 5: US in particular, have managed to get inflation down while
40:11
Speaker 5: not killing economic growth. So it's actually been quite an
40:16
Speaker 5: achievement when you look back on it. I can remember
40:19
Speaker 5: doing shows tim when inflation was rampant, right, and there
40:23
Speaker 5: were cues at the ports with ships going for miles.
40:30
Speaker 5: So isn't it amazing where we've come?
40:32
Speaker 4: Oh?
40:32
Speaker 2: It is indeed. Look we've got about forty seconds left,
40:35
Speaker 2: but just quickly. The cash rate's going to be announced
40:39
Speaker 2: in the about twenty seventh in November. Of any revision
40:41
Speaker 2: of it, what are you picking? It's four point seventy
40:43
Speaker 2: five at the moment, isn't it? Have I got the
40:45
Speaker 2: wrong It's at four point two five? What have I
40:46
Speaker 2: got anyway?
40:48
Speaker 5: Yeah, it's four point seventy five at the moment. Look,
40:51
Speaker 5: market expectations are for half a percent are cut, So
40:56
Speaker 5: I think our fixed interest team is roughly there or thereabouts,
41:01
Speaker 5: and yeah for one point twenty five over the next
41:04
Speaker 5: year or so.
41:04
Speaker 2: Good stuff. Hey Chris, thanks so much for your time,
41:07
Speaker 2: make great work and we'll look forward to next time. Harbors,
41:09
Speaker 2: thanks so much, Tim ye Haarbreast dot Conz, Thanks my
41:12
Speaker 2: producer Tyra and FRANKI Jackson. Next with Sunday six. Thanks
41:16
Speaker 2: for your company. You catch up the Weekend Collective Podcast.