November 17, 2024 • 41 mins
Investment markets have recovered significantly over the past two years following a weak 2022.
And, Donald Trump winning the U.S. election is bound to have impacts on New Zealand's markets and the U.S. dollar.
Director and Head of Multi Asset & Global Investment at Harbour Asset Management, Chris Di Leva joins.
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Speaker 1 (00:05):
You're listening to the Weekend Collective podcast from News Talks,
it'd be that ain't let I can make this counting.
That's some boy myself.
Speaker 2 (00:15):
Don't back let you help me pull it bottle ourself
b TB.
Speaker 3 (00:20):
Every weekend.
Speaker 4 (00:21):
If you can't tell.
Speaker 2 (00:22):
They say sea where basic train or handsome? Hell you
flamee crling, gory, lucky, thank you something already, its game, it's.
Speaker 3 (00:44):
You and runs his kids up, get.
Speaker 1 (00:49):
The jos.
Speaker 3 (00:53):
After and welcome back to the show. This is smart
this is smart money on the Weekend Collective. I'm Tim Beverige.
If you missed any of our previous discussions, Politic Central
was fascinating discussion with Duncan Webb, he's Justice spoke expresson
for Labor about the Treaty Principles Bill. Followed up with
the discussion and feedback from David Seymour who's the architect
(01:15):
of the bill as well. That was a fascinating and
also a chat with Carle McDonald on the Health Hub
on loneliness. You can check it out week podcasts the
Weekend Collective go to iHeartRadio would be a great starting point,
but now it is time to move on the conversation
and with Smart Money, and my guest is from Harbor
Asset Management and his name is Chris Deliver and Chris
(01:37):
joins me. Now, gooday, Chris, how are you going?
Speaker 5 (01:39):
Hey?
Speaker 4 (01:39):
Tim, nice to be with you.
Speaker 3 (01:42):
Yeah, you too. We're going to have a chat about well,
basically investment markets as a result of Donald Trump winning
the US election, which is obviously going to have an
impact on New Zealand's trade and the US dollar, etc.
What should we kick off with? What are your first
what are your first thoughts about this?
Speaker 4 (02:02):
Yeah? I mean a lot of Keywhi's probably look at
Trump and you might not agree with his politics. And
the initial reaction we get when we normally talk to
people is, oh, no, you know, what's this going to mean?
What's this going to mean for our key? We save
a portfolios? What is this going to mean for the
share market? And often there's a lot of a lot
(02:25):
of fear, to be honest, you know, thinking about about
his agenda. Now, we've done a lot of research into
this and you know, following the Republican clean sweep, talk
to a lot of offshore strategists and I've been able
to kind of, you know, paint a picture of how
things might look over the next few years. Of course,
(02:49):
with Trump, there's always uncertainty, and that's what leads to
a lot of apprehension. But I suppose the key things,
if I look at on the positive side, are that
the key driver of share markets over the long term earnings,
and as an investor in a company, you get earnings
that are after tax. So one of the big fears
(03:12):
before the election was that a lot of Trump's tax
cuts from when he was last in power would lapse,
and that would have quite a severe impact on the
US economy, both personal tax cuts and company tax cuts.
So the good news for people who are investing in
companies and people with key we saver accounts. A lot
(03:33):
of the global share market is in the US. One
thing that we know that Trump won't do is repel
his own tax cuts, and what he may do has
cut them further. So for US shares it's largely been
a really good story so far. They're rallied pretty strongly
(03:54):
following the election results. One of the things that we
have to be more apprehensive on, however, his trade policy,
and we don't know what that would look like, and
that's kind of a negative for markets. Markets don't light
up like uncertainty, and at the moment we just don't
know how far he's going to go with tariffs, but
(04:19):
he has made some pretty outlandish promises so far. So look,
those are the initial thoughts. There's some really, there is
some good there, but there's also a few things to
keep an eye on.
Speaker 3 (04:31):
Right we are talking with Chris Deliver. He's director ahead
of multi asset and Global Investments from Harvard Asset Management.
We'd like your calls on this, by the way, oh,
eight hundred and eighty ten eighty. In the wake of
the Trump victory, clean sweet. Basically, he's going to have
more power than he had last time. Where are you
going to be putting your money? Or have you got
any questions that you want to run by Chris. I'm
(04:53):
sure he'll he'll make a good fist of answering well,
of course, without giving any specific financial advice. Chris, my
first question to you is, I'm guessing that when you're
looking at what we might see happened as a result
of Trump's presidency, you might have cast your mind back
eight years to what happened. There are there any lessons
from history that might repeat themselves or not?
Speaker 4 (05:17):
Here there are. And actually, if we look at the
last time he was in power, the initial reaction from
share markets and this all happened in one day, believe
it or not, tim but the initial reaction from markets
was actually a really negative one, so as it looked
like he was going to win, but actually as markets
(05:38):
started to digest what his policies would mean, we actually
had a really good period for share markets when Donald
Trump was last in What was the key driver of that.
The key single driver was his tax package. So we
saw him put some policies in place around repatriation of earnings,
(06:01):
but also lower income tax rates for companies and that
led to higher post tax earnings of course, so that's
something we can learn that actually last time, despite being
a result that the market wasn't expecting, it actually turned
out okay for investors. We did see him last time, though,
(06:25):
create a lot of uncertainty with regards to his trade policy.
We saw tariffs. Interestingly, the tariffs he put on were
largely not actually repealed, so they're still in place today.
So I think it was something indirectly that both administrations
actually supported are given Biden didn't repeal them. But look overall,
(06:48):
it was a pretty good period for markets, taking away
the fact that he was still in power when COVID
broke out and we saw a pretty large fall in
share markets then. But I don't think we can quite
say that he was the driver of that.
Speaker 3 (07:04):
Actually, my initial search on the share market because how
long is it since the since the election?
Speaker 4 (07:12):
Now what it's a couple of weeks, right, And the
initial reaction was was really really positive. So there is
some trades in the market which are kind of known
as Trump winners. So those are, yeah, test less two.
Speaker 3 (07:28):
And forty bucks on the fourth of November to three
hundred and fifty dollars. It's tailed off a little bit
since then. Yeah, yeah, what did you make?
Speaker 4 (07:38):
So that's been a winner, And it's I don't think
there's any great science to what People look at them
and go, well, Elon Musk is right next to Trump.
It's it's got to be really really good for Tesla. Right.
Some of the other winners have been banks, bitcoin, in cryptocurrencies,
they've been they've been winners. I read a stat the
(08:00):
other day which astounded me. A doggie coin, which is
kind of a meme crypto coin. The market cap of
that is actually larger than the top four US banks,
which is kind of mind boggling, But that's gone up,
and that's because Trump's agenda is more around deregulation or
(08:24):
softer regulation, and that tends to benefit banks and certainly cryptocurrency.
Small companies have been doing really well, so smaller companies
tend to be more cyclical and linked to the fortunes
of the US economy. They've gone pretty well, but there
have been some losers. So renewable energy stocks have done
(08:47):
really poorly. We know that Trump isn't a big supporter
of renewable so solar stocks, wind stocks went down quite significantly,
and bond yields have gone up, and that's because there's
the expectation that Trump's administration will rack up a lot
(09:11):
more debt and that means that the government will need
to issue more bonds.
Speaker 3 (09:15):
Yeah. I was actually wondering what because the other one
that's taken it is health stocks and vaccine companies that
work on health stocks take a bit have taken a
bit of a beating because RFK, who's going to be
the Health secretary, obviously is a vaccine well he's a skeptic,
but conspiracy theorist on that stuff as well actually wonder
(09:35):
if that actually might be a goodbye because they take
a hit initially, then you sort of wonder whether they're
going to actually have a bit of perspective and recover
a bit. That's very specific opinion I'm seeking, But what
do you reckon?
Speaker 4 (09:49):
Yeah, so I think it's a good point in looking at,
you know, what is the initial reaction versus what do
you think will happen over the long term, because actually,
when we look at last time he was in power,
and you ask for lessons of the previous time, if
(10:10):
I actually look at what renewable stocks did when Trump
was last in power, they actually did perfectly good. So,
you know, so some of that initial reaction around these
things might not necessarily be the correct one. And I
think the other thing to take into account is there's
a lot of uncertainty on exactly what the policy agenda
(10:33):
will look like. So whether it's you know, twenty percent
tariffs on China, whether it's sixty percent tariffs on China,
whether he reduces the text the corporate tax rate from
twenty one percent to fifteen percent, you know, these are
things that you don't actually know. So at the moment,
these initial trades that have that have gone taken place
(10:56):
in the market. There's some of them are more on
what people might expect Trump to do, as opposed to
any kind of of finite policy agenda that's been put forward.
Speaker 3 (11:09):
Okay, let's say, let's take some calls, and who's first, Peter, Hello.
Speaker 6 (11:16):
Good afternoon. Well, I don't know who you can believe,
because I think the New York Times said that Trump
had a discussion with Pusen, which was denied, then it
was Elon Musk had a discussion with the UN investor
in New York, which was later denied. And then in
January the debt ceiling for the US comes up for renewal.
(11:38):
So how can you produce taxes when the deficit has
never been high and carries on been high, especially with
higher interest rates?
Speaker 3 (11:50):
Are you basically raising the question of what Trump's rhetorics
versus what he's actually going to be able to do.
Speaker 6 (11:56):
Yeah, well, they're saying they can't reduce him. Is he
going to cut and slash the budget, you know, to
fund his tax cuts? You know what, what do you believe?
That's what I'm funny.
Speaker 3 (12:07):
Oh, well, for instance, you mean the two million dollars
two trillion dollars. Sorry, I was only about a billion
times out the two trillion dollars of savings that Elon
and the other guy I want to want to save.
You mean, do what do we read into that? Is
that what you are?
Speaker 6 (12:22):
Well? How can we believe anything?
Speaker 3 (12:24):
Well?
Speaker 6 (12:25):
A louder than words?
Speaker 3 (12:26):
Well, yeah, I mean, just before we go to go
to Christopher his opinion, how much do you believe?
Speaker 6 (12:33):
Well, Trump says everything, so anyone who leaves a little
bit of what he says, they might believe him. But
at the end of the day, actions are louder than words.
And I think a lot of it was campaign a lecture,
especially with tarifs, and I don't think he's going to
do anything like that at all.
Speaker 3 (12:53):
Would you put your money where your mouth is on this?
And if so, where would you be putting it?
Speaker 6 (13:00):
Well, the thing is that you know, he says he's
not going to have wars and he has water. I
I think I put my money on that Trump making
more money from from politics, you know, That's where I
put my money. Okay, regardless of the outcome.
Speaker 3 (13:15):
You should put buy shares in Trump Inc. I mean,
what do you what do you think about the rhetoric, Chris,
when it comes to what Trump says he's going to do,
because that for instance, that two trillion dollars of saving,
that savings that Elon Musk and I can't remember the
last guys and the other guy, Vivek Ramaswami. I think
it might be, you know, they want to they want
(13:36):
to get rid of the FBI, to abolish the Department
of Education, all that sort of stuff. What does that
actually firstly, Chris, what does that actually mean that rhetoric,
what does it Does it have any effect or what?
Speaker 4 (13:49):
So? I mean, it's a good point, and it's kind
of what I was trying to bring up earlier around
a lot of what actually will transpire in the future
might not be what people are considering today because we
don't know the the clear policy agenda. I mean, the
debt ceiling is troubling, but it's actually been troubling for
(14:12):
nine a decade now. So we frequently have a debt
ceiling discussions and they get close to it and there's
political brinkmanship around, you know, whether it gets raised, and
it always ends up being raised, but with certain concessions
between the two respective parties. So look you know, debt
(14:35):
is concerning for the US, debts actually concerning for a
whole load of countries, including Japan and some others. But yeah,
I mean that's the element that Trump brings. As I
was mentioned earlier, it's the uncertainty, and that brings some
volatility with it. So yeah, I mean we've just got
(14:58):
to wait and I suppose see the agenda. But the
result of the election, the fact that there was an
election result and a clear result, that's actually been good
for markets, right because there was a there was a
potential way that this plays out, that there wasn't a
clear result, we could get something horrible like like what
(15:20):
happened last time at Capitol Hill take place. So we've
no administration is going to have a complete certainty. But look,
the initial signs for markets is that actually we've digested
it pretty well. With Trump gets inaugurated January twentieth, following there,
(15:42):
we'll see a more finite policy agender. I mean, he
did two tariffs last time, but we don't know the
extent of what due this time.
Speaker 3 (15:54):
I'll just forgo to our next call. It does obviously
change in the US administration. It does bring opportunities as
we say, you know, we see share prices bouncing around.
Does it bring opportunities beyond on the guesswork though? Are
there things that you can look at and that you
know that your team would look at and say, well
we can based on our research and our understanding what's
(16:14):
likely to happen, we can confidently invest here and here
or is it all just well who knows?
Speaker 4 (16:21):
Oh yeah, I mean.
Speaker 3 (16:24):
Two extreme, Yeah it is.
Speaker 4 (16:29):
I mean, I'll tell you the way it does impact
the way we invest. So we definitely don't preempt anything
that the politicians do because that just comes with too
much unpredictability. But for example, we do look at someone
at a country like China and companies that we invest
into that are exposed to China, and it makes us
(16:52):
more apprehensive, right because we know Trump's going to go
in He's going to have a policy agenda that's probably
not that China friendly.
Speaker 3 (17:02):
I think that's we can be sure of that one.
Speaker 4 (17:04):
Yes, yes, So at the margin, we look at that
and we take it very seriously when we look at
a company. So what I'm talking about there is you know,
say a company like b HP lots of relies on
China a lot for its exports. We will take into
account that the policy agenda won't be friendly towards their
(17:30):
main export market, and we think that's really sensible way
to play it, as opposed to go and you know,
Trump's not going to be great for you know, or
Trumps can be great for banks. Let's go buy banks.
You know, we don't. We don't kind of react like that.
Speaker 3 (17:48):
Yeah, okay, right, let's take some more calls. Mary. Hello, oh, hello, I.
Speaker 7 (17:53):
Really enjoy your show. It's been a great afternoon. Thank you.
I just wanted to get your guests about crypto because
I find it's quite difficult to understand it, really, and
it seems to be more difficult to be able to
work out how they actually value it. And I just
didn't know whether his you know, what he thought about
including it in one's retirement portfolio or something like that.
Speaker 3 (18:18):
Okay, yeah, crypto, Yes, Mary.
Speaker 4 (18:25):
I've got to be completely honest and say I've got
crypto completely wrong. And lots of other people, you know,
from traditional finance background probably have too, so I think,
you know, Warren Buffett and Charlie Munger there've been some
of the most vocal critics of cryptocurrency in the portfolios
(18:48):
that we manage. So I managed multi SAT portfolios and
can we save the portfolios. Look, we don't include it,
and the key reason for us is we just don't
know how to value it. So when I when we
invest in a company, right, we know how to value
that company. We might not get it completely right every time,
(19:09):
but we have a really solid framework on valuing a company.
So I can value a company by looking at the
earnings that it's going to deliver me over the next
ten years in discount it to today's prices. With cryptocurrency,
I just can't do that. I'm effectively getting my return
through changes in the price, and I find it really
(19:31):
hard to determine what those changes are in the prices.
So that's why we don't invest in it and don't
include it in portfolios. But then that pigs the question
you go, well, if you're not investing in it, all
these people are making so much money that coin price
keeps going through the roof, and what's the deal with that?
(19:53):
So there has always been so since the world moved
to fiat currency, and what fiat currency is is when
your currency is not backed with anything. So you know,
back through or forty years ago currency was backed by
gold in the US, for example. Ever since then, people
have been really worried about storing their money purely in cash,
(20:20):
okay or in a bank account. Now, that's why gold
has been such a popular investment for so long. It's
been an anti feart or anti cash way of storing
your money, and very much bitcoin has that characteristic as well.
Speaker 7 (20:41):
Can I just ask this, what therefore do you how
do you view the incoming administration in the States as
apparent seemingly going to review regulations around bitcoin? What does
that mean exactly?
Speaker 4 (20:57):
So the incoming administration, and one of the key reasons
bitcoin has read lead and banks have rallied is that
it doesn't look to be on their policy agenda to
create further regulation around bitcoin and further regulation around banks.
(21:21):
So that's in essence, just creating more rules and hoops
for them to jump through. So that's largely been seen
as positive, and that's why both bank stocks and cryptocurrencies
like bitcoin. That's why they've rallied. Because what can really
kill a share price or the price of an asset
is really strong regulation. We saw that with banks following
(21:45):
the global financial crisis, where they delivered really poor returns
to customers because they were under quite a large regulatory impost,
so the banks made them hold more capital against their assets.
So that's why with this administration, people have been quite
positive on bitcoin and banks.
Speaker 3 (22:05):
Came here. Yep, got on it. Thanks for that, Thank
you so much.
Speaker 6 (22:08):
Okay, thanks, but.
Speaker 3 (22:09):
Gosh, what wohen you have given to buying a bitcoin
when it was only about ten cents.
Speaker 4 (22:14):
My brother actually tagged me and he sent me this
post he saw on Facebook where somebody you know, was
given a few bitcoin in because they sold something to
someone and apparently they sold it something like ninety thousand
(22:35):
and it's worth tens of million dollars today. Yeah, there's
lots of lots of stories like that. It is. It's
quite unbelievable the price it.
Speaker 3 (22:45):
Yeah, I remember getting emails about bitcoin and it was
like you get buy it for about I don't know.
I think there was a time it was about a
dollar or something. If you bought a thousand bucks of bitcoin,
then you'd have a thousand times one hundred and fifty
four thousand. Let's not do those numbers, because you know,
it's like the world is full of investment stories like that.
But there's probably also the old alternative one where people
(23:06):
buying at a great price neck and it doesn't do
so well. But anyway, hey, look we need to take
a break. We're back in a moment Chris with Smart
Money with Christa Lever talking about the impact of the
Trump victory in the election, taking your cause on O
eight one hundred and eighty ten eight and we've got
lots more to talk about. We're back in just to
tickets coming out to half past five news talks. He'd
be welcome back to Smart Money on the weekend collecting.
(23:49):
My guest is Chris de Lever. He's director ahead of
a multi asset and global investments at Harbor Asset Management.
Let's take some more calls. Chris Nigel, Hello.
Speaker 5 (24:00):
Good afternoon, the young tim. It's a gorgeous day underneda
guys and sunshine with a bit of cloud that it's
going to be stinking, hottened and needing. Tomorrow is supposed
to give up to twenty degrees. That we called for
you as a.
Speaker 3 (24:14):
Oh they're bunschilling up here. Anyway, have you got a call?
Have you got a question for Chris to Lever?
Speaker 5 (24:21):
Yeah, we'll get on the money.
Speaker 3 (24:23):
Yep.
Speaker 5 (24:24):
Yep, what does he think of reverse mortgages? Oh, someone
on the cusp of retirement.
Speaker 3 (24:31):
Slightly different question for you there, Chris.
Speaker 4 (24:35):
Yeah, I'm not a big expert, to be honest, and
I hold myself out to be one. You know, looking
at them that the key thing to look at it
as just the fees em better than them. We've got
a couple of our analysts in the team who cover
some of the companies that do reverse mortgages, and yeah,
(24:57):
I know that the fees em better than them, can
be quite can be quite high. Look, I mean I
see I see a role for them in the market,
you know, because there are actually just so few investment
kind of vehicles out there where you can kind of
get paid out a certain amount kind of each month,
(25:18):
you know, to help with living goths like saying annuity
would So, look, I get the purposes of them, but
you know, the key thing I'd look at when assessing
them is just the fees and obviously therefore the interest
rate embedded kind of within them.
Speaker 3 (25:36):
There was actually there's an episode we had a little
while ago, not the last one with Martin Hughes, but
the one before Nigel. You can go and check it
was I think it was called a reversion mortgage. Wasn't
it was something else. It was when they it's worth
looking out the alternative to reverse mortgages. I can't remember
what it was called, but it was it's based on
you selling part of your house to them, but they
(25:57):
can't actually do anything with it.
Speaker 4 (26:01):
I think that one is a new one offered by Lifetime.
So I think the players in New Zealand there have
been Heartland and Lifetime has offered a slightly different, as
you say, products, So yeah, there are some options kind
of out there. But yeah, yeah, I'm not sure.
Speaker 3 (26:23):
To be honest, if you go to that's that's fine.
We probably weren't expecting some too much detailing with you
on that one, Chris the but Nigel, yeah, go and
look for the go and look for the smart money
with Martin Hawes. Not the last time, but the previous time.
It's all on the website and he talks about that
there and it's a different it's a it's an alternative
you could have a look at.
Speaker 5 (26:43):
And it's hold it. What do you remember when I
was talking to the other day, I'm still living in
the yether love world. I can't afford that.
Speaker 3 (26:51):
Okay, well, I'll see if I can find it. I'll
see if I can find it and give it a mention. Okay,
but yeah, okay, sorry.
Speaker 5 (26:57):
And also one final thing, one final thing, if I could,
what about the four Bergossi banks owned banks in New
Zealand not do reverse mortgages.
Speaker 3 (27:07):
I don't know. It's not really Chris's area of expertise
unless you've got something you can offer on that, Chris.
Speaker 4 (27:12):
I don't actually think they do. But yeah, I wouldn't
be able to say that with a high degree of confidence.
Speaker 3 (27:20):
No, no, all good. Hey, thanks for your call that, Nigel.
Nice to hear from you. But by the way, last
time on the show, you're talking a lot about bonds
is a good investment versus cash? Is that still the case?
Speaker 4 (27:31):
It's not as good as it was, And the key
reason for that is we've actually seen since then bond
returns have been really, really strong. So when I was on,
I think we were talking about bonds versus cash because
you know, cash was kind of delivering you five and
(27:51):
a half percent at the time, and we thought there
was some scope for bond yields to fall, particularly in
New Zealand, as inflation started to become more under control.
You know, we still think they're a pretty good investment,
but actually not as good as they were. Jeez, I
(28:12):
think I was on six or eight months ago to
I must have done something to offend you, because I
haven't been on since then. You have, no, I think
that was the last time I was on was probably
six to eight months ago.
Speaker 1 (28:23):
Yeah.
Speaker 3 (28:24):
I think that's down to your team because we have
different members from Harbor Asset Management and really to check
that out. I'm feeling guilty about that.
Speaker 4 (28:32):
Oh no, it's only Jacob. Yes, No, Look, bonds have done,
Bonds have done really well since then. Look, you know,
I still think they've got a good role to play
in a portfolio, to kind of be that defensive ballast
(28:53):
for when equities are having a tougher time. But a
lot of that return, you know that we talked about
six or eight months ago, has has kind of come,
which has been which has been really good. I think
there'd be a few investors looking at term deposits at
the moment and probably observing that they've come down. You know,
particularly if I look at the twelve month rates, you
(29:17):
could easily get kind of five and a half percent,
say you know, six or twelve months ago. You know
today it's more four to seventy five, you know, to
a bit under five percent the way, given inflation is
running at two point two percent over the past twelve months.
No cash rates they will continue to come down. You know,
(29:41):
that's been priced by the market. So key thing i'd
say to call is looking at term deposits at the moment.
Is that what you're getting at the moment. Market forecasts
probably show that they come down another you know, one
to one and a half percent over the next twelve months.
So I think, you know, bonds and relativity to cash.
(30:04):
You know, for me, they're still attractive, but not quite
where they were.
Speaker 3 (30:08):
Yeah, good stuff. Actually, I see it was seventeenth of
Junior last time, so it has been a while between
drinks for you. You must have you must have had
a couple of other people at Harbor Assid who jump
the queue.
Speaker 4 (30:18):
Oh we definitely yeah, no, we definitely know, we must have.
Speaker 3 (30:22):
I'll have a chet to Andrew, Andrew and Shane just
so hey, back off, I've got to play some ketch
up here. Anyway. Hey, look we've got to take a break.
We'll be back in just a moment. We're talking with
Chris de Lever. He's a director and he's head of
multi Asset and Global Investments. Any questions you've got about
especially looking at the New Zealand dollar it's weakened through
(30:42):
the against the United States dollar, and also the questions
around what Trump means for investment markets. If you've got
your take or you want there's a question you've got
for Chris, we'd love to hear from you on eight
hundred eighty ten eighty it's twenty to six News Talks.
He'd be a pusaels adioynversation. Welcome back to smart Money.
(31:13):
This is the week in Collective. I'm Tim Beverage. My
guest is Chris de Lever. He is head of multi
Asset and Global Investments in Harbor Asset Management. A few
questions we've got to get through with your Chris. The
first one is so the New Zealand dollar has weakened
a lot versus the United States dollar. And we'll get
the details on that because it's always relevant if you
go into holiday, especially to the States. But how's the
(31:34):
New Zealand dollar looking against other currencies like the euro?
My guess, and I don't have the data and you can.
This is why I'd just like to guess, fun that
not great for holiday to the States. But if you
go to Europe, I'm guessing the euro is also falling
against the United States dollar? Am I right or wrong?
Speaker 4 (31:51):
Yeah, you're right. It's a case of US dollar strength
as opposed to New Zealand dollar weakness. And what's driven
that US dollar strength really actually it's really had another
leg stronger following the US election results, and you kind
(32:14):
of go, well, why is that? The key reason is
that you know Trump will Trump will run deficits, which
means that he'll pump a good amount of money into
the economy, so the US will have a pretty strong
economic growth. The other thing is that the US economy,
(32:37):
actually even before Trump and any anticipation of that, is
running really really strong, so and particularly in comparison to ours. Right, So,
if you look at New Zealand, we tightened or signaled
that we're tightened interest rates about six months earlier than
(32:57):
the US and the rest of the world, and we've
really had some quite severe economic slowing. And the reason
for that is that when we put up infrast rates
in New Zealand, that impact occurs really fast. So a
lot of us, when we fix our mortgages, we fix
them for six months, one year, two years, very seldom
(33:19):
beyond that. So when we put up infestrates in New Zealand,
that really started to bite. But now we're starting to
put them down and we have inflation within target, we're
starting to come out the other side of that. So
what we think, you know, is at current levels, we're
at fifty eight cents versus the US dollar. It's pretty
(33:42):
much a twelve month low. In recent times, it got
to about fifty five cents in COVID. But yeah, our
view as a firm, and what we're doing in portfolios
is to actually have less exposure to US dollars at
the moment, because we think, you know, fifty it's actually
(34:03):
quite a decent level for us to short some of
our US dollar exposure. So we think from there it
won't happen in the next kind of one month, two months,
or one month too, two weeks. You know, it's a
longer term view that we think that the key we
(34:23):
can probably strengthen versus versus the US.
Speaker 3 (34:28):
Okay, I've got a text here that assumes some facts
that might not be in evidence, but it says, how
might possible US stagflation effect New Zealand specifically the housing market?
And I guess the question is, well, the two questions
are because I can never remember exactly how to define
stagflation and is it actually a possibility? And then it's
a loaded text. Really what is it? Could it happen
(34:50):
in the States, and what would it mean for US?
Speaker 4 (34:53):
So stagflation is essentially when inflation goes up more than
economic growth does, so it's really what you don't want.
And it's typically not a good thing for share markets
as well, because it essentially means that interest rates will
go up, but earnings, which are linked to economic growth,
(35:17):
won't go up as quickly. So it's rarely when I
look at economic scenarios that you don't want, stagflation is
very very high on the list. So what does that
mean in a stagflationary environment? It means that US interest
rates will need to stay higher. It means a very
(35:39):
strong US dollar, So it probably means it's probably not
terrible news for New Zealand exporters because they'll be earning.
They'll often earn commodities that are drived in US dollars.
And bring them back to Key. We But look, it
wouldn't be a great environment for people, say, Key we
(36:00):
save the portfolios. If your largest economy in the world
that makes up you know, seventy percent of the global
share market is in stagflation. What's the risk of stagslation?
It's look, it's it doesn't seem really high that you know.
(36:22):
The key scenario that could lead to it is if
Trump just keeps spending money and racking up deficits in
the menorflation runs on tax cuts.
Speaker 3 (36:35):
Really, isn't it correct?
Speaker 4 (36:37):
Yeah, so it would be it would be tax cuts.
It will also be if people get worried about interest
rates and interest rates kind of go up again, bond
yields go up again, that that wouldn't be particularly good.
Speaker 3 (36:52):
Just a quick dumb question. I look at the simple
explanation of a stagflation that you've referred to, so high inflation,
low economic growth, and high unemployment. Have we been in
a situation of stagflation? Because it doesn't sound like a
description which is necessarily that rare.
Speaker 4 (37:09):
Yeah, I mean we got pretty close to New Zealand,
right We had really really high inflation and we had
kind of we had kind of growth coming off that.
We didn't really have it for a sustained period of time.
It was kind of a fleeting moment in time. Really
we still had high inflation. We're tightening interest rates, but
(37:32):
now we've kind of settled to more inflations within the band.
Growth in New Zealand still pretty weak, right, But yeah,
I'd say if we were in stagflation, it was very,
very minor good stuff.
Speaker 3 (37:45):
We got to take a break. We'll be back in
a moment with christ Deliver. He's head of multi asse
and Global Investments at the harbor Asset Management. You want
to check out their work and go to harbor Asset
dot co dot nz. We'll be back in a moment.
It's ten to six. Yes, welcome back to smart Money.
(38:11):
Yes we haven't. There's another our themed tune for you.
I think that's Gwen Stefani. If I were a rich girl,
believe it or not, fun fact for you, would you
ever believe you'd hear and asked like Gwen Stefani singing
a song which is pretty much a rip off of
something from Fiddler on the Roof, which is if I
were a rich man, and I don't imagine how many
of our fans would realize how old school that song is. Anyway.
(38:34):
Chris de Levera from Harbor Asset Management, Lucky. Last question,
because we're just about wrapping up now, how are we
going with inflation in New Zealand now? Because we we're
hearing a lot less about it. Are we under control?
Speaker 4 (38:48):
Yeah? Well, I mean we're within the band. So the
reserve band co operates a band of one to three percent.
We're running at two point two percent at the moment.
So yeah, it's mission accomplished for the Reserve Bank of
New Zealand. We've kind of scene it globally come off
(39:08):
quite significantly, and part of it's due to monet pary
policy tightening I use central banks putting up interest rates,
but a lot of it is just that normalization of
the supply chain issues that we saw happen during COVID
and that created bottlenecks. It actually took quite some time
(39:31):
to fully work through. And you know it wasn't just COVID.
You know, following COVID, we had Russians, Russia's invasion of Ukraine,
you know, which created further supply issues with key commodities
like oil and gas. So with a lot of that
(39:52):
in the rear vision mirror. Now unfortunately the war isn't
in the rearview mirror. But you know, COVID is we've
seen that normalization and that's kind of term ys markets
have been performing so strongly, right. We went from this
period where people thought, oh no, we're going to have
inflation forever, but actually central banks around the world, the
(40:16):
US in particular, have managed to get inflation down while
not killing economic growth. So it's actually been quite an
achievement when you look back on it. I can remember
doing shows tim when inflation was rampant, right, and there
were cues at the ports with ships going for miles.
(40:40):
So isn't it amazing where we've come?
Speaker 5 (40:42):
Oh?
Speaker 3 (40:42):
It is indeed. Look we've got about forty seconds left,
but just quickly. The cash rate's going to be announced
in the about twenty seventh in November. Of any revision
of it. What are you picking? It's four point seventy
five at the moment, isn't it? Have I got the wrong?
It's it four point twenty five? What have I got anyway?
Speaker 4 (40:58):
Yeah, it's four point seventy five at the moment. Look,
market expectations are for half a percent are cut, so
I think our fixed interest team is roughly there or thereabouts.
And yeah for one point twenty five over the next
year or so.
Speaker 3 (41:15):
Good stuff. Hey Chris, thanks so much for your time,
make great work and we'll look forward to next time. Harbor,
thanks so much, Tim ye Haarbrest Co and Z. Thanks
my producer Tira and Franka Jackson. Next with Sunday six.
Thanks for your company. You catch up the Weekend Collective podcast.
Speaker 1 (41:29):
For more from the Weekend Collective, listen live to News
Talk ZB weekends from three pm, or follow the podcast
on iHeartRadio.
You're listening to the Weekend Collective podcast from News Talks,
it'd be that ain't let I can make this counting.
That's some boy myself.
Speaker 2 (00:15):
Don't back let you help me pull it bottle ourself
b TB.
Speaker 3 (00:20):
Every weekend.
Speaker 4 (00:21):
If you can't tell.
Speaker 2 (00:22):
They say sea where basic train or handsome? Hell you
flamee crling, gory, lucky, thank you something already, its game, it's.
Speaker 3 (00:44):
You and runs his kids up, get.
Speaker 1 (00:49):
The jos.
Speaker 3 (00:53):
After and welcome back to the show. This is smart
this is smart money on the Weekend Collective. I'm Tim Beverige.
If you missed any of our previous discussions, Politic Central
was fascinating discussion with Duncan Webb, he's Justice spoke expresson
for Labor about the Treaty Principles Bill. Followed up with
the discussion and feedback from David Seymour who's the architect
(01:15):
of the bill as well. That was a fascinating and
also a chat with Carle McDonald on the Health Hub
on loneliness. You can check it out week podcasts the
Weekend Collective go to iHeartRadio would be a great starting point,
but now it is time to move on the conversation
and with Smart Money, and my guest is from Harbor
Asset Management and his name is Chris Deliver and Chris
(01:37):
joins me. Now, gooday, Chris, how are you going?
Speaker 5 (01:39):
Hey?
Speaker 4 (01:39):
Tim, nice to be with you.
Speaker 3 (01:42):
Yeah, you too. We're going to have a chat about well,
basically investment markets as a result of Donald Trump winning
the US election, which is obviously going to have an
impact on New Zealand's trade and the US dollar, etc.
What should we kick off with? What are your first
what are your first thoughts about this?
Speaker 4 (02:02):
Yeah? I mean a lot of Keywhi's probably look at
Trump and you might not agree with his politics. And
the initial reaction we get when we normally talk to
people is, oh, no, you know, what's this going to mean?
What's this going to mean for our key? We save
a portfolios? What is this going to mean for the
share market? And often there's a lot of a lot
(02:25):
of fear, to be honest, you know, thinking about about
his agenda. Now, we've done a lot of research into
this and you know, following the Republican clean sweep, talk
to a lot of offshore strategists and I've been able
to kind of, you know, paint a picture of how
things might look over the next few years. Of course,
(02:49):
with Trump, there's always uncertainty, and that's what leads to
a lot of apprehension. But I suppose the key things,
if I look at on the positive side, are that
the key driver of share markets over the long term earnings,
and as an investor in a company, you get earnings
that are after tax. So one of the big fears
(03:12):
before the election was that a lot of Trump's tax
cuts from when he was last in power would lapse,
and that would have quite a severe impact on the
US economy, both personal tax cuts and company tax cuts.
So the good news for people who are investing in
companies and people with key we saver accounts. A lot
(03:33):
of the global share market is in the US. One
thing that we know that Trump won't do is repel
his own tax cuts, and what he may do has
cut them further. So for US shares it's largely been
a really good story so far. They're rallied pretty strongly
(03:54):
following the election results. One of the things that we
have to be more apprehensive on, however, his trade policy,
and we don't know what that would look like, and
that's kind of a negative for markets. Markets don't light
up like uncertainty, and at the moment we just don't
know how far he's going to go with tariffs, but
(04:19):
he has made some pretty outlandish promises so far. So look,
those are the initial thoughts. There's some really, there is
some good there, but there's also a few things to
keep an eye on.
Speaker 3 (04:31):
Right we are talking with Chris Deliver. He's director ahead
of multi asset and Global Investments from Harvard Asset Management.
We'd like your calls on this, by the way, oh,
eight hundred and eighty ten eighty. In the wake of
the Trump victory, clean sweet. Basically, he's going to have
more power than he had last time. Where are you
going to be putting your money? Or have you got
any questions that you want to run by Chris. I'm
(04:53):
sure he'll he'll make a good fist of answering well,
of course, without giving any specific financial advice. Chris, my
first question to you is, I'm guessing that when you're
looking at what we might see happened as a result
of Trump's presidency, you might have cast your mind back
eight years to what happened. There are there any lessons
from history that might repeat themselves or not?
Speaker 4 (05:17):
Here there are. And actually, if we look at the
last time he was in power, the initial reaction from
share markets and this all happened in one day, believe
it or not, tim but the initial reaction from markets
was actually a really negative one, so as it looked
like he was going to win, but actually as markets
(05:38):
started to digest what his policies would mean, we actually
had a really good period for share markets when Donald
Trump was last in What was the key driver of that.
The key single driver was his tax package. So we
saw him put some policies in place around repatriation of earnings,
(06:01):
but also lower income tax rates for companies and that
led to higher post tax earnings of course, so that's
something we can learn that actually last time, despite being
a result that the market wasn't expecting, it actually turned
out okay for investors. We did see him last time, though,
(06:25):
create a lot of uncertainty with regards to his trade policy.
We saw tariffs. Interestingly, the tariffs he put on were
largely not actually repealed, so they're still in place today.
So I think it was something indirectly that both administrations
actually supported are given Biden didn't repeal them. But look overall,
(06:48):
it was a pretty good period for markets, taking away
the fact that he was still in power when COVID
broke out and we saw a pretty large fall in
share markets then. But I don't think we can quite
say that he was the driver of that.
Speaker 3 (07:04):
Actually, my initial search on the share market because how
long is it since the since the election?
Speaker 4 (07:12):
Now what it's a couple of weeks, right, And the
initial reaction was was really really positive. So there is
some trades in the market which are kind of known
as Trump winners. So those are, yeah, test less two.
Speaker 3 (07:28):
And forty bucks on the fourth of November to three
hundred and fifty dollars. It's tailed off a little bit
since then. Yeah, yeah, what did you make?
Speaker 4 (07:38):
So that's been a winner, And it's I don't think
there's any great science to what People look at them
and go, well, Elon Musk is right next to Trump.
It's it's got to be really really good for Tesla. Right.
Some of the other winners have been banks, bitcoin, in cryptocurrencies,
they've been they've been winners. I read a stat the
(08:00):
other day which astounded me. A doggie coin, which is
kind of a meme crypto coin. The market cap of
that is actually larger than the top four US banks,
which is kind of mind boggling, But that's gone up,
and that's because Trump's agenda is more around deregulation or
(08:24):
softer regulation, and that tends to benefit banks and certainly cryptocurrency.
Small companies have been doing really well, so smaller companies
tend to be more cyclical and linked to the fortunes
of the US economy. They've gone pretty well, but there
have been some losers. So renewable energy stocks have done
(08:47):
really poorly. We know that Trump isn't a big supporter
of renewable so solar stocks, wind stocks went down quite significantly,
and bond yields have gone up, and that's because there's
the expectation that Trump's administration will rack up a lot
(09:11):
more debt and that means that the government will need
to issue more bonds.
Speaker 3 (09:15):
Yeah. I was actually wondering what because the other one
that's taken it is health stocks and vaccine companies that
work on health stocks take a bit have taken a
bit of a beating because RFK, who's going to be
the Health secretary, obviously is a vaccine well he's a skeptic,
but conspiracy theorist on that stuff as well actually wonder
(09:35):
if that actually might be a goodbye because they take
a hit initially, then you sort of wonder whether they're
going to actually have a bit of perspective and recover
a bit. That's very specific opinion I'm seeking, But what
do you reckon?
Speaker 4 (09:49):
Yeah, so I think it's a good point in looking at,
you know, what is the initial reaction versus what do
you think will happen over the long term, because actually,
when we look at last time he was in power,
and you ask for lessons of the previous time, if
(10:10):
I actually look at what renewable stocks did when Trump
was last in power, they actually did perfectly good. So,
you know, so some of that initial reaction around these
things might not necessarily be the correct one. And I
think the other thing to take into account is there's
a lot of uncertainty on exactly what the policy agenda
(10:33):
will look like. So whether it's you know, twenty percent
tariffs on China, whether it's sixty percent tariffs on China,
whether he reduces the text the corporate tax rate from
twenty one percent to fifteen percent, you know, these are
things that you don't actually know. So at the moment,
these initial trades that have that have gone taken place
(10:56):
in the market. There's some of them are more on
what people might expect Trump to do, as opposed to
any kind of of finite policy agenda that's been put forward.
Speaker 3 (11:09):
Okay, let's say, let's take some calls, and who's first, Peter, Hello.
Speaker 6 (11:16):
Good afternoon. Well, I don't know who you can believe,
because I think the New York Times said that Trump
had a discussion with Pusen, which was denied, then it
was Elon Musk had a discussion with the UN investor
in New York, which was later denied. And then in
January the debt ceiling for the US comes up for renewal.
(11:38):
So how can you produce taxes when the deficit has
never been high and carries on been high, especially with
higher interest rates?
Speaker 3 (11:50):
Are you basically raising the question of what Trump's rhetorics
versus what he's actually going to be able to do.
Speaker 6 (11:56):
Yeah, well, they're saying they can't reduce him. Is he
going to cut and slash the budget, you know, to
fund his tax cuts? You know what, what do you believe?
That's what I'm funny.
Speaker 3 (12:07):
Oh, well, for instance, you mean the two million dollars
two trillion dollars. Sorry, I was only about a billion
times out the two trillion dollars of savings that Elon
and the other guy I want to want to save.
You mean, do what do we read into that? Is
that what you are?
Speaker 6 (12:22):
Well? How can we believe anything?
Speaker 3 (12:24):
Well?
Speaker 6 (12:25):
A louder than words?
Speaker 3 (12:26):
Well, yeah, I mean, just before we go to go
to Christopher his opinion, how much do you believe?
Speaker 6 (12:33):
Well, Trump says everything, so anyone who leaves a little
bit of what he says, they might believe him. But
at the end of the day, actions are louder than words.
And I think a lot of it was campaign a lecture,
especially with tarifs, and I don't think he's going to
do anything like that at all.
Speaker 3 (12:53):
Would you put your money where your mouth is on this?
And if so, where would you be putting it?
Speaker 6 (13:00):
Well, the thing is that you know, he says he's
not going to have wars and he has water. I
I think I put my money on that Trump making
more money from from politics, you know, That's where I
put my money. Okay, regardless of the outcome.
Speaker 3 (13:15):
You should put buy shares in Trump Inc. I mean,
what do you what do you think about the rhetoric, Chris,
when it comes to what Trump says he's going to do,
because that for instance, that two trillion dollars of saving,
that savings that Elon Musk and I can't remember the
last guys and the other guy, Vivek Ramaswami. I think
it might be, you know, they want to they want
(13:36):
to get rid of the FBI, to abolish the Department
of Education, all that sort of stuff. What does that
actually firstly, Chris, what does that actually mean that rhetoric,
what does it Does it have any effect or what?
Speaker 4 (13:49):
So? I mean, it's a good point, and it's kind
of what I was trying to bring up earlier around
a lot of what actually will transpire in the future
might not be what people are considering today because we
don't know the the clear policy agenda. I mean, the
debt ceiling is troubling, but it's actually been troubling for
(14:12):
nine a decade now. So we frequently have a debt
ceiling discussions and they get close to it and there's
political brinkmanship around, you know, whether it gets raised, and
it always ends up being raised, but with certain concessions
between the two respective parties. So look you know, debt
(14:35):
is concerning for the US, debts actually concerning for a
whole load of countries, including Japan and some others. But yeah,
I mean that's the element that Trump brings. As I
was mentioned earlier, it's the uncertainty, and that brings some
volatility with it. So yeah, I mean we've just got
(14:58):
to wait and I suppose see the agenda. But the
result of the election, the fact that there was an
election result and a clear result, that's actually been good
for markets, right because there was a there was a
potential way that this plays out, that there wasn't a
clear result, we could get something horrible like like what
(15:20):
happened last time at Capitol Hill take place. So we've
no administration is going to have a complete certainty. But look,
the initial signs for markets is that actually we've digested
it pretty well. With Trump gets inaugurated January twentieth, following there,
(15:42):
we'll see a more finite policy agender. I mean, he
did two tariffs last time, but we don't know the
extent of what due this time.
Speaker 3 (15:54):
I'll just forgo to our next call. It does obviously
change in the US administration. It does bring opportunities as
we say, you know, we see share prices bouncing around.
Does it bring opportunities beyond on the guesswork though? Are
there things that you can look at and that you
know that your team would look at and say, well
we can based on our research and our understanding what's
(16:14):
likely to happen, we can confidently invest here and here
or is it all just well who knows?
Speaker 4 (16:21):
Oh yeah, I mean.
Speaker 3 (16:24):
Two extreme, Yeah it is.
Speaker 4 (16:29):
I mean, I'll tell you the way it does impact
the way we invest. So we definitely don't preempt anything
that the politicians do because that just comes with too
much unpredictability. But for example, we do look at someone
at a country like China and companies that we invest
into that are exposed to China, and it makes us
(16:52):
more apprehensive, right because we know Trump's going to go
in He's going to have a policy agenda that's probably
not that China friendly.
Speaker 3 (17:02):
I think that's we can be sure of that one.
Speaker 4 (17:04):
Yes, yes, So at the margin, we look at that
and we take it very seriously when we look at
a company. So what I'm talking about there is you know,
say a company like b HP lots of relies on
China a lot for its exports. We will take into
account that the policy agenda won't be friendly towards their
(17:30):
main export market, and we think that's really sensible way
to play it, as opposed to go and you know,
Trump's not going to be great for you know, or
Trumps can be great for banks. Let's go buy banks.
You know, we don't. We don't kind of react like that.
Speaker 3 (17:48):
Yeah, okay, right, let's take some more calls. Mary. Hello, oh, hello, I.
Speaker 7 (17:53):
Really enjoy your show. It's been a great afternoon. Thank you.
I just wanted to get your guests about crypto because
I find it's quite difficult to understand it, really, and
it seems to be more difficult to be able to
work out how they actually value it. And I just
didn't know whether his you know, what he thought about
including it in one's retirement portfolio or something like that.
Speaker 3 (18:18):
Okay, yeah, crypto, Yes, Mary.
Speaker 4 (18:25):
I've got to be completely honest and say I've got
crypto completely wrong. And lots of other people, you know,
from traditional finance background probably have too, so I think,
you know, Warren Buffett and Charlie Munger there've been some
of the most vocal critics of cryptocurrency in the portfolios
(18:48):
that we manage. So I managed multi SAT portfolios and
can we save the portfolios. Look, we don't include it,
and the key reason for us is we just don't
know how to value it. So when I when we
invest in a company, right, we know how to value
that company. We might not get it completely right every time,
(19:09):
but we have a really solid framework on valuing a company.
So I can value a company by looking at the
earnings that it's going to deliver me over the next
ten years in discount it to today's prices. With cryptocurrency,
I just can't do that. I'm effectively getting my return
through changes in the price, and I find it really
(19:31):
hard to determine what those changes are in the prices.
So that's why we don't invest in it and don't
include it in portfolios. But then that pigs the question
you go, well, if you're not investing in it, all
these people are making so much money that coin price
keeps going through the roof, and what's the deal with that?
(19:53):
So there has always been so since the world moved
to fiat currency, and what fiat currency is is when
your currency is not backed with anything. So you know,
back through or forty years ago currency was backed by
gold in the US, for example. Ever since then, people
have been really worried about storing their money purely in cash,
(20:20):
okay or in a bank account. Now, that's why gold
has been such a popular investment for so long. It's
been an anti feart or anti cash way of storing
your money, and very much bitcoin has that characteristic as well.
Speaker 7 (20:41):
Can I just ask this, what therefore do you how
do you view the incoming administration in the States as
apparent seemingly going to review regulations around bitcoin? What does
that mean exactly?
Speaker 4 (20:57):
So the incoming administration, and one of the key reasons
bitcoin has read lead and banks have rallied is that
it doesn't look to be on their policy agenda to
create further regulation around bitcoin and further regulation around banks.
(21:21):
So that's in essence, just creating more rules and hoops
for them to jump through. So that's largely been seen
as positive, and that's why both bank stocks and cryptocurrencies
like bitcoin. That's why they've rallied. Because what can really
kill a share price or the price of an asset
is really strong regulation. We saw that with banks following
(21:45):
the global financial crisis, where they delivered really poor returns
to customers because they were under quite a large regulatory impost,
so the banks made them hold more capital against their assets.
So that's why with this administration, people have been quite
positive on bitcoin and banks.
Speaker 3 (22:05):
Came here. Yep, got on it. Thanks for that, Thank
you so much.
Speaker 6 (22:08):
Okay, thanks, but.
Speaker 3 (22:09):
Gosh, what wohen you have given to buying a bitcoin
when it was only about ten cents.
Speaker 4 (22:14):
My brother actually tagged me and he sent me this
post he saw on Facebook where somebody you know, was
given a few bitcoin in because they sold something to
someone and apparently they sold it something like ninety thousand
(22:35):
and it's worth tens of million dollars today. Yeah, there's
lots of lots of stories like that. It is. It's
quite unbelievable the price it.
Speaker 3 (22:45):
Yeah, I remember getting emails about bitcoin and it was
like you get buy it for about I don't know.
I think there was a time it was about a
dollar or something. If you bought a thousand bucks of bitcoin,
then you'd have a thousand times one hundred and fifty
four thousand. Let's not do those numbers, because you know,
it's like the world is full of investment stories like that.
But there's probably also the old alternative one where people
(23:06):
buying at a great price neck and it doesn't do
so well. But anyway, hey, look we need to take
a break. We're back in a moment Chris with Smart
Money with Christa Lever talking about the impact of the
Trump victory in the election, taking your cause on O
eight one hundred and eighty ten eight and we've got
lots more to talk about. We're back in just to
tickets coming out to half past five news talks. He'd
be welcome back to Smart Money on the weekend collecting.
(23:49):
My guest is Chris de Lever. He's director ahead of
a multi asset and global investments at Harbor Asset Management.
Let's take some more calls. Chris Nigel, Hello.
Speaker 5 (24:00):
Good afternoon, the young tim. It's a gorgeous day underneda
guys and sunshine with a bit of cloud that it's
going to be stinking, hottened and needing. Tomorrow is supposed
to give up to twenty degrees. That we called for
you as a.
Speaker 3 (24:14):
Oh they're bunschilling up here. Anyway, have you got a call?
Have you got a question for Chris to Lever?
Speaker 5 (24:21):
Yeah, we'll get on the money.
Speaker 3 (24:23):
Yep.
Speaker 5 (24:24):
Yep, what does he think of reverse mortgages? Oh, someone
on the cusp of retirement.
Speaker 3 (24:31):
Slightly different question for you there, Chris.
Speaker 4 (24:35):
Yeah, I'm not a big expert, to be honest, and
I hold myself out to be one. You know, looking
at them that the key thing to look at it
as just the fees em better than them. We've got
a couple of our analysts in the team who cover
some of the companies that do reverse mortgages, and yeah,
(24:57):
I know that the fees em better than them, can
be quite can be quite high. Look, I mean I
see I see a role for them in the market,
you know, because there are actually just so few investment
kind of vehicles out there where you can kind of
get paid out a certain amount kind of each month,
(25:18):
you know, to help with living goths like saying annuity
would So, look, I get the purposes of them, but
you know, the key thing I'd look at when assessing
them is just the fees and obviously therefore the interest
rate embedded kind of within them.
Speaker 3 (25:36):
There was actually there's an episode we had a little
while ago, not the last one with Martin Hughes, but
the one before Nigel. You can go and check it
was I think it was called a reversion mortgage. Wasn't
it was something else. It was when they it's worth
looking out the alternative to reverse mortgages. I can't remember
what it was called, but it was it's based on
you selling part of your house to them, but they
(25:57):
can't actually do anything with it.
Speaker 4 (26:01):
I think that one is a new one offered by Lifetime.
So I think the players in New Zealand there have
been Heartland and Lifetime has offered a slightly different, as
you say, products, So yeah, there are some options kind
of out there. But yeah, yeah, I'm not sure.
Speaker 3 (26:23):
To be honest, if you go to that's that's fine.
We probably weren't expecting some too much detailing with you
on that one, Chris the but Nigel, yeah, go and
look for the go and look for the smart money
with Martin Hawes. Not the last time, but the previous time.
It's all on the website and he talks about that
there and it's a different it's a it's an alternative
you could have a look at.
Speaker 5 (26:43):
And it's hold it. What do you remember when I
was talking to the other day, I'm still living in
the yether love world. I can't afford that.
Speaker 3 (26:51):
Okay, well, I'll see if I can find it. I'll
see if I can find it and give it a mention. Okay,
but yeah, okay, sorry.
Speaker 5 (26:57):
And also one final thing, one final thing, if I could,
what about the four Bergossi banks owned banks in New
Zealand not do reverse mortgages.
Speaker 3 (27:07):
I don't know. It's not really Chris's area of expertise
unless you've got something you can offer on that, Chris.
Speaker 4 (27:12):
I don't actually think they do. But yeah, I wouldn't
be able to say that with a high degree of confidence.
Speaker 3 (27:20):
No, no, all good. Hey, thanks for your call that, Nigel.
Nice to hear from you. But by the way, last
time on the show, you're talking a lot about bonds
is a good investment versus cash? Is that still the case?
Speaker 4 (27:31):
It's not as good as it was, And the key
reason for that is we've actually seen since then bond
returns have been really, really strong. So when I was on,
I think we were talking about bonds versus cash because
you know, cash was kind of delivering you five and
(27:51):
a half percent at the time, and we thought there
was some scope for bond yields to fall, particularly in
New Zealand, as inflation started to become more under control.
You know, we still think they're a pretty good investment,
but actually not as good as they were. Jeez, I
(28:12):
think I was on six or eight months ago to
I must have done something to offend you, because I
haven't been on since then. You have, no, I think
that was the last time I was on was probably
six to eight months ago.
Speaker 1 (28:23):
Yeah.
Speaker 3 (28:24):
I think that's down to your team because we have
different members from Harbor Asset Management and really to check
that out. I'm feeling guilty about that.
Speaker 4 (28:32):
Oh no, it's only Jacob. Yes, No, Look, bonds have done,
Bonds have done really well since then. Look, you know,
I still think they've got a good role to play
in a portfolio, to kind of be that defensive ballast
(28:53):
for when equities are having a tougher time. But a
lot of that return, you know that we talked about
six or eight months ago, has has kind of come,
which has been which has been really good. I think
there'd be a few investors looking at term deposits at
the moment and probably observing that they've come down. You know,
particularly if I look at the twelve month rates, you
(29:17):
could easily get kind of five and a half percent,
say you know, six or twelve months ago. You know
today it's more four to seventy five, you know, to
a bit under five percent the way, given inflation is
running at two point two percent over the past twelve months.
No cash rates they will continue to come down. You know,
(29:41):
that's been priced by the market. So key thing i'd
say to call is looking at term deposits at the moment.
Is that what you're getting at the moment. Market forecasts
probably show that they come down another you know, one
to one and a half percent over the next twelve months.
So I think, you know, bonds and relativity to cash.
(30:04):
You know, for me, they're still attractive, but not quite
where they were.
Speaker 3 (30:08):
Yeah, good stuff. Actually, I see it was seventeenth of
Junior last time, so it has been a while between
drinks for you. You must have you must have had
a couple of other people at Harbor Assid who jump
the queue.
Speaker 4 (30:18):
Oh we definitely yeah, no, we definitely know, we must have.
Speaker 3 (30:22):
I'll have a chet to Andrew, Andrew and Shane just
so hey, back off, I've got to play some ketch
up here. Anyway. Hey, look we've got to take a break.
We'll be back in just a moment. We're talking with
Chris de Lever. He's a director and he's head of
multi Asset and Global Investments. Any questions you've got about
especially looking at the New Zealand dollar it's weakened through
(30:42):
the against the United States dollar, and also the questions
around what Trump means for investment markets. If you've got
your take or you want there's a question you've got
for Chris, we'd love to hear from you on eight
hundred eighty ten eighty it's twenty to six News Talks.
He'd be a pusaels adioynversation. Welcome back to smart Money.
(31:13):
This is the week in Collective. I'm Tim Beverage. My
guest is Chris de Lever. He is head of multi
Asset and Global Investments in Harbor Asset Management. A few
questions we've got to get through with your Chris. The
first one is so the New Zealand dollar has weakened
a lot versus the United States dollar. And we'll get
the details on that because it's always relevant if you
go into holiday, especially to the States. But how's the
(31:34):
New Zealand dollar looking against other currencies like the euro?
My guess, and I don't have the data and you can.
This is why I'd just like to guess, fun that
not great for holiday to the States. But if you
go to Europe, I'm guessing the euro is also falling
against the United States dollar? Am I right or wrong?
Speaker 4 (31:51):
Yeah, you're right. It's a case of US dollar strength
as opposed to New Zealand dollar weakness. And what's driven
that US dollar strength really actually it's really had another
leg stronger following the US election results, and you kind
(32:14):
of go, well, why is that? The key reason is
that you know Trump will Trump will run deficits, which
means that he'll pump a good amount of money into
the economy, so the US will have a pretty strong
economic growth. The other thing is that the US economy,
(32:37):
actually even before Trump and any anticipation of that, is
running really really strong, so and particularly in comparison to ours. Right, So,
if you look at New Zealand, we tightened or signaled
that we're tightened interest rates about six months earlier than
(32:57):
the US and the rest of the world, and we've
really had some quite severe economic slowing. And the reason
for that is that when we put up infrast rates
in New Zealand, that impact occurs really fast. So a
lot of us, when we fix our mortgages, we fix
them for six months, one year, two years, very seldom
(33:19):
beyond that. So when we put up infestrates in New Zealand,
that really started to bite. But now we're starting to
put them down and we have inflation within target, we're
starting to come out the other side of that. So
what we think, you know, is at current levels, we're
at fifty eight cents versus the US dollar. It's pretty
(33:42):
much a twelve month low. In recent times, it got
to about fifty five cents in COVID. But yeah, our
view as a firm, and what we're doing in portfolios
is to actually have less exposure to US dollars at
the moment, because we think, you know, fifty it's actually
(34:03):
quite a decent level for us to short some of
our US dollar exposure. So we think from there it
won't happen in the next kind of one month, two months,
or one month too, two weeks. You know, it's a
longer term view that we think that the key we
(34:23):
can probably strengthen versus versus the US.
Speaker 3 (34:28):
Okay, I've got a text here that assumes some facts
that might not be in evidence, but it says, how
might possible US stagflation effect New Zealand specifically the housing market?
And I guess the question is, well, the two questions
are because I can never remember exactly how to define
stagflation and is it actually a possibility? And then it's
a loaded text. Really what is it? Could it happen
(34:50):
in the States, and what would it mean for US?
Speaker 4 (34:53):
So stagflation is essentially when inflation goes up more than
economic growth does, so it's really what you don't want.
And it's typically not a good thing for share markets
as well, because it essentially means that interest rates will
go up, but earnings, which are linked to economic growth,
(35:17):
won't go up as quickly. So it's rarely when I
look at economic scenarios that you don't want, stagflation is
very very high on the list. So what does that
mean in a stagflationary environment? It means that US interest
rates will need to stay higher. It means a very
(35:39):
strong US dollar, So it probably means it's probably not
terrible news for New Zealand exporters because they'll be earning.
They'll often earn commodities that are drived in US dollars.
And bring them back to Key. We But look, it
wouldn't be a great environment for people, say, Key we
(36:00):
save the portfolios. If your largest economy in the world
that makes up you know, seventy percent of the global
share market is in stagflation. What's the risk of stagslation?
It's look, it's it doesn't seem really high that you know.
(36:22):
The key scenario that could lead to it is if
Trump just keeps spending money and racking up deficits in
the menorflation runs on tax cuts.
Speaker 3 (36:35):
Really, isn't it correct?
Speaker 4 (36:37):
Yeah, so it would be it would be tax cuts.
It will also be if people get worried about interest
rates and interest rates kind of go up again, bond
yields go up again, that that wouldn't be particularly good.
Speaker 3 (36:52):
Just a quick dumb question. I look at the simple
explanation of a stagflation that you've referred to, so high inflation,
low economic growth, and high unemployment. Have we been in
a situation of stagflation? Because it doesn't sound like a
description which is necessarily that rare.
Speaker 4 (37:09):
Yeah, I mean we got pretty close to New Zealand,
right We had really really high inflation and we had
kind of we had kind of growth coming off that.
We didn't really have it for a sustained period of time.
It was kind of a fleeting moment in time. Really
we still had high inflation. We're tightening interest rates, but
(37:32):
now we've kind of settled to more inflations within the band.
Growth in New Zealand still pretty weak, right, But yeah,
I'd say if we were in stagflation, it was very,
very minor good stuff.
Speaker 3 (37:45):
We got to take a break. We'll be back in
a moment with christ Deliver. He's head of multi asse
and Global Investments at the harbor Asset Management. You want
to check out their work and go to harbor Asset
dot co dot nz. We'll be back in a moment.
It's ten to six. Yes, welcome back to smart Money.
(38:11):
Yes we haven't. There's another our themed tune for you.
I think that's Gwen Stefani. If I were a rich girl,
believe it or not, fun fact for you, would you
ever believe you'd hear and asked like Gwen Stefani singing
a song which is pretty much a rip off of
something from Fiddler on the Roof, which is if I
were a rich man, and I don't imagine how many
of our fans would realize how old school that song is. Anyway.
(38:34):
Chris de Levera from Harbor Asset Management, Lucky. Last question,
because we're just about wrapping up now, how are we
going with inflation in New Zealand now? Because we we're
hearing a lot less about it. Are we under control?
Speaker 4 (38:48):
Yeah? Well, I mean we're within the band. So the
reserve band co operates a band of one to three percent.
We're running at two point two percent at the moment.
So yeah, it's mission accomplished for the Reserve Bank of
New Zealand. We've kind of scene it globally come off
(39:08):
quite significantly, and part of it's due to monet pary
policy tightening I use central banks putting up interest rates,
but a lot of it is just that normalization of
the supply chain issues that we saw happen during COVID
and that created bottlenecks. It actually took quite some time
(39:31):
to fully work through. And you know it wasn't just COVID.
You know, following COVID, we had Russians, Russia's invasion of Ukraine,
you know, which created further supply issues with key commodities
like oil and gas. So with a lot of that
(39:52):
in the rear vision mirror. Now unfortunately the war isn't
in the rearview mirror. But you know, COVID is we've
seen that normalization and that's kind of term ys markets
have been performing so strongly, right. We went from this
period where people thought, oh no, we're going to have
inflation forever, but actually central banks around the world, the
(40:16):
US in particular, have managed to get inflation down while
not killing economic growth. So it's actually been quite an
achievement when you look back on it. I can remember
doing shows tim when inflation was rampant, right, and there
were cues at the ports with ships going for miles.
(40:40):
So isn't it amazing where we've come?
Speaker 5 (40:42):
Oh?
Speaker 3 (40:42):
It is indeed. Look we've got about forty seconds left,
but just quickly. The cash rate's going to be announced
in the about twenty seventh in November. Of any revision
of it. What are you picking? It's four point seventy
five at the moment, isn't it? Have I got the wrong?
It's it four point twenty five? What have I got anyway?
Speaker 4 (40:58):
Yeah, it's four point seventy five at the moment. Look,
market expectations are for half a percent are cut, so
I think our fixed interest team is roughly there or thereabouts.
And yeah for one point twenty five over the next
year or so.
Speaker 3 (41:15):
Good stuff. Hey Chris, thanks so much for your time,
make great work and we'll look forward to next time. Harbor,
thanks so much, Tim ye Haarbrest Co and Z. Thanks
my producer Tira and Franka Jackson. Next with Sunday six.
Thanks for your company. You catch up the Weekend Collective podcast.
Speaker 1 (41:29):
For more from the Weekend Collective, listen live to News
Talk ZB weekends from three pm, or follow the podcast
on iHeartRadio.
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