April 27, 2025 • 41 mins
It's a tough time for the markets and the volatility has been hard to keep track of.
The tariffs have obviously had an impact - but some experts say AI developments are also a contributor.
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Speaker 1 (00:05):
You're listening to the Weekend Collective podcast from News Talks by.
Speaker 2 (00:41):
Yes, welcome back to excuse me, I've breathed the wrong time.
Hang on a second or one that music up just
for sec Yes, I just breathed at the wrong moment
there and a fit of the coughs, but then there
we go. Welcome back to the show. If you've just
joined us. This is Smart Money on Tim Beveridge if
(01:02):
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Collective and Politics, we were having a chat with Simmy
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(01:24):
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for the Weekend Collective. But right now it's time for
(01:44):
Smart Money and we're gonna have a chat. We want
your calls on this. You're welcome to join us and
ask any questions you like on O. E one hundred
and eighty ten eighty or give your take on things,
because I well, I don't think it's beyond dispute that
it's an interesting time, a tough time for markets, with
the volatility that's been hard to keep track of. We've
had tarafs that are on again, off again and obviously
(02:07):
impacting things. But are there other factors that are driving
the rockiness? Isn't it? And Chris Deliver he is the
head of multi asset and global Investments at harb Rasset Management,
and he is our guest for Smart Money. And Chris
joins me. Now good a Chris.
Speaker 3 (02:19):
Hog Hey, Tim, I'm good. How are you.
Speaker 2 (02:22):
Or not too bad it? Have you had a more
interesting time in your gig lately, just with the tariffs
on again, off again, trade wars all that sort of stuff.
Speaker 3 (02:33):
Yeah, I mean to be honest, it has been an
interesting past five years now. Someone asked me this the
other day just about more recently the volatility we've seen.
But actually at the start of this year, we're looking
back at the last five years and going well in
twenty nineteen. If you told me we were going to
(02:54):
have a global pandemic, two bear markets, the highest inflation
we've ever seen, highest increase to interest we've ever seen,
I would have thought there's no way you could squeeze
it into five years. And then you get the highest
tariffs we've ever seen this month. So yeah, it's definitely
(03:17):
been an interesting month so far from markets tim a
lot of the listeners, you would have heard some pretty
large falls on Wall Street. We didn't feel them quite
as heavily here in New Zealand, but we definitely did
see some big falls earlier in the month. What's quite
(03:38):
amazing though, is month to date we're actually not looking
too bad as we get to the end of the month.
So last week we saw a really strong bounce back
in the US share market in particular, and that's got
us to say, for your average can we save a
(03:58):
balance fund it's probably down about you know, call it
one one and a half percent so far this month.
If I bring that back, you know, right to live data.
Speaker 2 (04:11):
Well, that doesn't feel so dramatic, does it, because I mean,
for the average punter, unless you've got under one percent,
doesn't I looked at mine, it sort of went off
a bit and it wasn't much, and I thought, oh, well,
no big deal, was it.
Speaker 3 (04:25):
Yeah, I mean, look, it definitely was looking pretty pretty hairy.
Earlier in the month, we were having falls of you know,
above five percent in a single day. So that is
obviously really unnerving for investors, whether they're key we say
for investors, even as professional investors, we're not. We're not
(04:46):
immune to getting up in the morning and seeing what's
happened in US markets and tariffs and you know, getting
a bit of a shock and thinking, oh, you know,
maybe I just roll back over and go back to
bed this morning. But now, look, it has been a
really good bounced back tim which has been which has
been good, but it has it's been a tough year
so far. But look that follows a really strong year
(05:09):
last year where we saw kind of your average balance
fund up around kind of twelve percent last year. So
we have had a few good years in markets, but
it has been volatile so far this year.
Speaker 2 (05:21):
How come we haven't seen quite the same dramatic pauls
as as maybe the United States or other markets have experienced.
Does that because we're a bit more insulated than we
might think, Yeah.
Speaker 3 (05:33):
We definitely are. So if you think of let's just start.
You know what are tariffs, right, So tariffs are taxes
that are placed on goods and they get collected by governments. Right,
so somebody has to pay for these tariffs. Now, what
happens in reality is companies put their prices up. If
(05:54):
they've got really good pricing power, they'll pass on the
full cost of the tariff to their customers. But in
a competitive environment, it's really hard to have that level
of pricing power. So what happens with companies is they
tend to absorb some of the tariff, right, so they'll
take lower profits, and they might increase their prices as well,
(06:18):
so the customer will fail an impact as well. So
look tariffs. The first order effect of them is they're
typically not good for corporate profits. But if you look
at say, you know, Apple, who has one of the
world's largest companies, has pretty much its entire supply chain
(06:39):
in China, are some in India and some other emerging
economies as well. The hit to them is so much
more than say any New Zealand company I can identify
on the stock exchange. And if you look at some
of our companies, so you know Fresher and bikele Health
here for example, they're one that that is impacted. They've
got production in Mexico, some here in New Zealand. But
(07:04):
say you look like a Contact Energy, Auckland Airport, Spark Fletcher,
you know they're really not getting hit as hard as
some of these US companies are when it comes to tariff.
So yep, our share market when we saw those really
big falls earlier in the month, we certainly fell, but
not to the same extent as what we saw in
(07:25):
the US end globally.
Speaker 2 (07:28):
Okay, look, we're going to take some calls as well,
by the way, on our one hundred and eighty ten
eightys lots for Chris and I to dig into. But
we've got our first caller of the day, Chris, so
let's get into it. John.
Speaker 4 (07:36):
Hello, oh hi.
Speaker 5 (07:40):
On the first of July, the government I supposedly introduced
in the depositors Guarantee scheme. I'm just like, I just
wanted to know when that's introduced. I see already there's
a lot of finance companies into it, which are offering
six or six and a half percent, whereas the banks
are only offering four percent for a term deposit.
Speaker 2 (08:05):
Really six and a half percent seems like a high return.
Speaker 5 (08:08):
Well, a lot of them are offering six percent. This
is finance companies. We will always been high risk, but
once they're under the depositors guarantee schemes, they'll be guaranteed.
And I see a lot of them already are. There's
General Finance and Ecceeder and all these ones. You'd be
afford to put money in with the bank, wouldn't you
if you're guaranteed that you can't one hundred thousand dollars.
(08:31):
I'll guarantee up to one hundred thousand dollars. Well, why
would you put your money on the bank at four
percent when you can get six interesting questions?
Speaker 2 (08:40):
This your ballpark, Chris.
Speaker 3 (08:43):
I've got to be honest and say I'm not fully
across where how far that scheme extends to. And I
thought it just applied to capital as opposed to the
interest payments. But I've just got to tap out here
and say, to be honest, I'm not across the full
(09:05):
scope of that.
Speaker 2 (09:06):
Okay, sorry about that, John, It might be it's an
interesting question though. I'm just looking at it now. It
looks like it looks like it guarantees the deposits, I guess,
And his point is like, well, if I can get
six percent, I don't think your interest rates protected. It
just looks like it there's some protection up to one
hundred and thousand dollars of the actual deposit. That's my
(09:27):
quick Google. That was that I managed to do during
the course of your answer there, Chris. But yeah, we'll
move on to that, shall we. Hey, by the way,
Chris on the sorry, thanks for you call that. John
really appreciate it. Now, Chris, just on the tariffs, where
are we at with tariffs? Who's got what tariff on whom?
Because I find it difficult to keep in touch with
it because it didn't Trump talk about dropping the China tariff,
(09:50):
but I don't know if he has and China have
reciprocated and what that means for global trade and trade
him and what tariff have we got on us at
the moment and has it kicked in? Where are you
at with the updates on that?
Speaker 6 (10:02):
Yeah?
Speaker 3 (10:03):
So look at changes daily and that that's and look,
you know that's one of the issues, tim So. I
talked about earlier about the direct impact of tariffs, i e.
Customers have to pay and corporate profits get hit. But
actually what is bigger is the indirect effect. And what
(10:24):
I mean by that is when you have the world's
largest economy changing policy on a whim, it really undermines
confidence and it actually makes it hard to make investment decisions.
So what I mean by that, and I will I
will get to you to your key point of your
(10:46):
question in a moment. But what I mean by that is,
let's say you're the CEO of Apple right and most
of your manufacturing is in China at the moment. If
you need to build a new factory right now, where
would you build it? And the only answer I can
(11:07):
get to is it's hard to know where you'd build it, because, Okay,
we know China is a key target of the US,
but they haven't been immune to enforcing tariffs on say
the Mexicans or Vietnam. They got hit really hard with
reciprocal tariffs.
Speaker 2 (11:25):
Well, I can tell you where I wouldn't build it.
I wouldn't be building it in the States because it
wouldn't be economical.
Speaker 3 (11:31):
And that's right. So it is hard to see through
some of these some of these policies, right because you know,
there isn't a line. I mean, unemployment in the US
is like very very low, around four percent, So there
isn't a line of people waiting to work at these
factories anyway, you know, even if they did get repatriated
(11:52):
into the US. But the real issue with these tariffs
and the way that they're moving around is just how
it undermines confidence. So investment decision making is being put
off as a result of people not knowing what the
landscape is going to be for the foreseeable future. So
you wouldn't build right now a factory in China, you
(12:16):
wouldn't build it in Mexico because you don't know what
that tariff rate is going to be in one month,
three months, or even by the hour.
Speaker 2 (12:26):
More concerning you, would you even make any decision at all?
Which is also a slow death for business, isn't it.
Speaker 3 (12:33):
Oh? Absolutely yeah, So that is the casue. And what
we're started to see is some of that people just
not doing people just not doing anything. So look, there
has been we have part of the bounce back we've
seen in the US team has been around some of
the rollback in tariffs, particularly as it relates to tech,
(12:57):
because when Trump made his original announcement on reciprocal tariffs
and then we had the escalation in China to one
hundred and forty five percent, that was really going to
impact the profits of these tech companies that have a
lot of their production lines in China. So we've started
(13:17):
to see you know, we've seen an official roll back
there on some tech components. So that's seen a really
good bounce back in some of the big tech names
in the in the US market. But look with New Zealand,
you know, we're still sitting on ten. But the key
thing here is we need to arrive at whatever that
(13:38):
finishing point looks like. We need to arrive at it soon.
And the key reason for that is just around that
confidence the impact that it's having on market confidence.
Speaker 2 (13:50):
Right now, here's the thing we need to arrive. Sorry
you said, we need to arrive at that point of
knowing where we're exactly where sitting. But the problem is
the rhetoric. And look, you know, people know I don't
like Donald Trump very much, but stepping away from that.
I mean, regardless of we the love them or low them,
how certain can anyone be that this is the end
position when it comes to where the tariffs are going
(14:12):
to sit.
Speaker 3 (14:14):
Yeah, And I think what's come out around that is
that there are guardrails around him. So when we started
to get when we got those first reciprocal tariffs, quite frankly,
the first thing was no one could figure out how
he'd got to the numbers, because he had the numbers
of what countries are charging the US, and he included
(14:37):
things included things in their currency manipulation and GST for example,
in there. And then he had the US reciprocal tariff
right which was lower than the left hand side of
the equation. Now, what really concerned US market people there,
and quite frankly most people in general, was just how
(15:01):
there seemed to be little rhyme or reason in those numbers.
And we actually heard that, you know, potentially they weren't
the numbers that some of his Congress were expecting to
see come up on the board. They are a surprised,
we even some people within Congress. But from there, what
(15:21):
we've seen is there has very clearly been pushed back
within his own party and from his own advisors. And
we have seen quite a consistent direction of travel since then.
So we saw the announcement, we saw the big escalation
with China, and we've started to see the de escalation.
(15:43):
Now if that direction of travel continues, Tim, I think
markets will give them the benefit of the doubt around
these tariffs. It's but I completely get what you are saying,
and what markets won't react really well to is further
escalation and de escalation because that's just us on that
(16:05):
roller coaster ride again.
Speaker 2 (16:08):
Well, you mentioned guardrails. What are the guardrails on that?
Speaker 3 (16:11):
Is it?
Speaker 2 (16:11):
Because he understands that he's got that, he doesn't have
so many more chances with the confidence of the markets
or what?
Speaker 3 (16:18):
Oh, I think it's so, it's so it's a few things.
So we saw the US bond market rarely sell off,
So we saw the US ten year bond yield go
from three point eight percent to around four and a
half percent in a matter of days. Now, when the
(16:39):
US issues debt, you know, that is one of the
interest rates they pay because they issue ten year bonds,
so they have to pay that rate of interest. So
that hurts, right when your interests rate or bond yield
is going up. As a country, that hurts you because
when you assue new debt, you've got to pay it.
So that was so that's a market guardrail. The other
(17:01):
thing was investors were voting with their fee and taking
money out of the US and as a result, you know,
we saw the US dollar versus the keiw for example,
go from fifty six cents to sixty cents, so you know,
that would have been a bit of a shock to
(17:21):
the US. Trump wouldn't have minded it to be fair
because he's always said he wants a weaker currency so
they can compete a little bit more. But that move
was quite disorderly and quite quick. So that's the market
sending feedback to them that you know what you're doing,
we really don't like. We heard of a lot of
European investors pulling money out of the US as well,
(17:45):
so that's the market guardrails. But we've actually heard since
that there has been a lot of challenge from within
his own party on some of the particularly the escalation
with China. So that's what I mean by guardrails. There's
there's guardrails put in place by the market, but also
so the people around him in his own party, and
(18:09):
right at the beginning, markets were worried that actually there
weren't enough, you know, so to speak adults in the room,
or there weren't enough guardrails, you know, to really keep
that narrative under control. And since then, I think, you know,
we have seen people influence them, because we have started
to see a rollback of many of the more punitive
(18:32):
measures he put in place on April second.
Speaker 2 (18:35):
Which do you think of the most effective guardrails, the
market guardrails you've talked about or the political ones.
Speaker 3 (18:42):
Not sure, you know, I'll take both. I'll take both.
I think the bond yield because Trump has really made
a big point about wanting lower bond yeals. You would
have overheard, you know, you would have heard him saying
about how he doesn't like your own power, the US
Federal Reserve chair, because he wants him to cut rates
(19:04):
and he's been too slow to do so. That's because
Trump wants lower interest rates, because that is good for
companies they're borrowing at lower rates. It's also good for
the US government that has a lot of debt which
they need to refinance, and they'd like to do that
at lower interest rates, So I think the bond yield
(19:27):
tim was the one that really they looked at as
an administration and said, this is not going the way
that we wanted it to.
Speaker 2 (19:34):
Okay, right, we need to quick break. We'll be back
with lots more to discuss. One with Chris de Lever
here is the head of multi asse and Global Investments
at Harbor Asset Management, and we're talking about basically market
volatility and how you see your way through it if
you're trying to make your own decisions for investing, although
often I would suggest you maybe talk to the good
folks or look at some of the funds that they've
(19:54):
got there at Harbor Asset Management as well, because the
market anyway, Like I won't say anymore, but I think
the market usually is ahead of you unless you're a
bit of a genius on that stuff. It's twenty six
and a half past five, though eight hundred and eighty
ten eighty is the number back in a moment, Are
you worried about funding a comfortable retirement, Well you're not alone.
The cost of living crisis is heading home for a
lot of people. So it's no surprise people are looking
(20:15):
for ways to make the most of their savings and
get a little bit more income to supplement the New
Zealand super One interesting solution is to invest in an
income fund like the Harbor Income Fund. It works by
holding a mix of interest paying securities and shares that
have been designed to generate a steady and sustainable income
no matter the market. The Harbor Income Fund is actively
(20:36):
managed and currently it pays a distribution of five point
twenty five percent per annum after fees and taxes paid
out in monthly installments. To find out more about Harbor's
Income Fund, just head to their website or speak with
your financial advisor. This is not intended as personalized advice.
The product Disclosure Statement for Harbor Investment Funds issued by
Harbor Asset Management is available at Harbor asset dot co
(21:00):
dot nz.
Speaker 1 (21:01):
Insightful Entertaining and always Moody Point Beverage. On the weekend
Collective News Talk, sa'd.
Speaker 2 (21:08):
Be yes, Welcome back to the show. Our guest is
Krystal Levery's director and head of that multi asset and
global investments at Harbor Asset Management. And before we carry
on with our conversation, Chris, let's bring in Shane.
Speaker 7 (21:19):
Hello, can you hear me.
Speaker 2 (21:23):
Okay, yeah, better road noise, but we got you there. Yep, Yeah, it's.
Speaker 8 (21:28):
Very quick quick Christian On that's okay. I'm just DeFi
and cheesy, and I've kind of told my tax account
that they only see that. It's for the dividends for
the text.
Speaker 6 (21:45):
They only seen that and.
Speaker 8 (21:47):
Not the actual.
Speaker 6 (21:50):
That you would sell your company for. Do you have
to actually pay text, say like a pig by a
company for develop Do you have to pay tax on that.
Speaker 2 (22:08):
Just for information? How long would you have held those
shares for? Perhaps hello, hello, hello, No, I got you, Shane.
How long would you have held those shares for?
Speaker 4 (22:20):
Basically I had them for probably about six months.
Speaker 2 (22:24):
Okay, So if you've bought some shares and you've sold
them within six months, sort of thing, the questions around tax. Okay,
I'm going to jump in before Chris, but well, I'm
not going to jump in but Chris, that's a difficult one,
isn't it Because it's really a question for your accountant.
But if you've bought the shares with an idea for
selling them for profit, technically you a tax on them,
don't you.
Speaker 3 (22:44):
Yeah? So look, I can talk generally about about how
the tax works on shares and fixed income and other things.
So look with shares, it does depend where they are bought,
so different tax applies to New Zealand shares than Global shares,
(23:07):
for example. So with New Zealand, the way it generally
works is if you're not classified as a trader by
the idea, and you'll you'll need to just look up
how that works. The dividends are taxable. Typically they have
(23:28):
what are called imputation credits attached to them, which you know,
for all intentsive purposes, is just a tax credit that
you can put on your tax return to offset any
kind of tax liability you have with regards to the
share itself. Though you say you buy it for ten
and you sell it for twenty, Generally there's no capital
(23:49):
gains tax applied to that unless the investor is classified
as a as a trader. With global shares, it becomes
a little bit more complicated because there is a regime
that appl eyes. They're called the fair dividend rate. So
essentially the way that works is that instead of taxing
(24:14):
dividends and leaving the capital gains, the fair dividend rate
assumes that you get five percent income from your share
per annum. Now, it essentially means that you treat that
five percent like you would a dividend, and you'd have
to put it on your tax return. So often people
(24:36):
who have accounts on things like Chas E's, they will
get assistance in preparing that because they'll print you off
a really nice statement to help you. So look, hopefully
that gives you some help. If they're held, say through
(24:57):
a managed fund, all that is done for you in
the managed fund. You just tell the managed fund what
your pir right, which is what your tax rate is.
So that's how it works directly. Bonds is interesting in
cash because actually there's you pay. You generally pay tax
(25:18):
on the return that you get. So say you get
a five percent coupon from your fixed income, typically five
percent is what goes on the on the tax return.
So look, no financial advice. I just want to give
people a general overview of how that works for different vehicles.
Speaker 2 (25:41):
How's that has that suit you there? Shane? Is that
helpful or yeah?
Speaker 4 (25:45):
Yeah, yeah, I do understand it a little bit. Obviously,
I'm learning some valuable lessons through she is right now,
and the one I'm talking about in particular, I did
it a bit of an experiment. I bought it for
thirty sold for seventy and made forty bucks off it.
And I sort of did it before tax to see
what sort of tax LD have to pay, and nothing
(26:06):
came up. But what I'm worried about is I've actually
bought some other shares which I've bought incredibly cheap, and
it's a gold mining company, and they're actually going up
quite a lot, and I'm like, I'm worried, Like if
I bought them for like less than five cents a
year and if they go to a dollar and then
I sell them and I'll go about three thousand years,
(26:27):
how much tax does have the power that or do
we go towards my.
Speaker 2 (26:30):
Income or Yeah, it is. It is complex because technically,
I think if you brought them with the with the
idea of making a profit and the idea of a
crack at you. But the question is you probably wouldn't
be targeted by this, would you, Chris? But if you
it is it's tricky stuff, isn't it.
Speaker 3 (26:46):
Yeah, I look, tax text is always tricky and if
it's a mining company, i'd assume as it listed in Australia, Shane.
Speaker 4 (26:55):
No this one's actually lifted in New Zealand.
Speaker 3 (26:57):
It's listed in New Zealand.
Speaker 2 (26:58):
Yeah.
Speaker 3 (26:59):
Look, I mean the key thing for you is, you know,
have a chat to an accountant, because it's just about
it's about whether you know you're deemed to be a
trader and you know, because if you're deemed to hold
the shares long term, that is different than say, if
you're buying and selling all the time. But it's look,
(27:20):
it's very murky kind of it's a very murky kind
of tough area. So I do think in your case
the best thing is to go and go and talk
to go and talk to an expert on it. But look, generally,
you know, if you're holding it long term, as I say,
capital gains typically don't apply. But I don't know the
(27:44):
history around your trading activity, so it would be best
to go and have a check to an account.
Speaker 2 (27:48):
Good on your thanks, Shane. Yeah, because for an example
would be so you spend five thousand bucks on some
gold mining shares. In three weeks later you're selling for
ten thousand bucks. Well that's problematic possibly, isn't it, Chris.
Speaker 3 (28:00):
Yeah, it's a bit different than buying and holding something
for ten years. Isn't it, And that that's where the
tax rules of whether you're a trade or not, so
that that's where it's better to just ask the USK
the experts.
Speaker 2 (28:13):
Yeah, I'm sure that shares he's actually on its website
also has a bit of advice on that too as well,
because it is probably a fairly common question. Right, I
tell you what next, we'll come back with more of
our chat shore we Chris in just a moment, and
this is news Talks, he'd be. It's we're with Kristal
Lever from Harbor Asset Management. It's twenty two minutes to six.
Speaker 5 (28:31):
Can hear you were.
Speaker 6 (28:34):
When I'm dreaming?
Speaker 3 (28:36):
You try to skill telling you.
Speaker 7 (28:44):
When you can go.
Speaker 2 (28:48):
That's welcome back to the show. My guest is Krista
Lever from Harbor Asset Management. This is this is smart Money. Hey, Chris,
just probably take another call on things, just talking about
market volatility. What's what our strives market volatility apart from
the stuff we've we've touched on AI part of the
whole thing.
Speaker 3 (29:07):
Yes, So AI has been interesting so far this year
because last year it was really the thing that drove
markets a lot higher. So you know, the Global Share
Index that we follow called the MSI or country Wood Index,
that was up around twenty two percent last year. And
a key contributor to that was the US market that
(29:28):
was driven forward by a lot of these big tech
companies being in Nvidia, Apple, Amazon, Microsoft, just to name
a few of them. And so you kind of hidden
behind this, you know, Tariff's chaos. I suppose has been
some interesting developments within those companies. So and the key
(29:55):
one being around the infrastructure build with regards to AI.
So you know, a lot of a lot of listeners
would used AI models, so be it. Perplexity is a
popular one chat GPT, a lot of others. I used
(30:15):
Gemini for example.
Speaker 2 (30:16):
I've never heard of perplexity. What's that one?
Speaker 3 (30:19):
Oh, Perplexity is a good one, tim, Give that one
a go. What it is is it mixes a AI
kind of chat GPT like model with a search engine,
so the results you get are very up to date,
(30:40):
very topical, whereas sometimes if you put it purely into
a large language model, you'll only get data updated to
a certain point of time for when that model was trained. So,
you know, a lot of people might put things into
chat GPT and you might ask about something that happened yesterday.
And if you're not on the premium version, they'll say,
(31:02):
I'm a large language model. I was only trained to
data to this point. So that's why Perplexity is quite cool.
So it uses the power of a search engine and
behind as well as a large language model, so you
get some really interesting results when you put when you
put your particular query. But so what's been happening in
(31:26):
the AI space is just some real questioning about whether
there might be an overbuild. So a lot of companies
are putting a lot of capital expenditure into building big
GPU clusters. These are the GPUs, say Bath and Video
to train their large language models. Now we've seen some
(31:51):
quotes from the likes of Sashi and Adella from Microsoft
who's talked about the potential for an overbuild in AI infrastructure.
What the market has also started to focus on is monetized.
So a lot of money has been spent on AI
that so far, it's been a tough one to monetize, right,
(32:12):
So think about in your own daily usage of AI,
what do you actually pay for. So if you go
on Perplexity, for example, if you go on to the
non paid version of CHET, GPT. There's not even really
many ads there at the moment, so they're not monetizing
(32:33):
the people who are using their product yet. So really
big thing around AI at the moment is how are
they actually going to monetize this because they need to
monetize it. Right, They've spent all this money building the infrastructure,
but you know, people haven't really taken up the paid
products in the droves that might have been expected and
(32:58):
in some people once they've gone past the kind of
novelty factor of using it, because you know, when you
use it for the first time, it is cool, right,
you know, you me and my kids going to Gemini,
and you know, we create images. So my kids love
my kids love trucks, so you know, they say, Gemini,
create me a truck, this color and this landscape and
(33:21):
it's all really really cool. But actually that's not what's
going to put money in the pocket of the companies
that are creating these models. So the monetization and the
use cases are still you know, the juries out and
whether they're going to stack up for the amount of
money that's being put into AI. So we have seen
(33:42):
the share prices of some of those companies rarely come
off the boil so far this year. And we've also
seen the emergence of deep Seek. And you know, if
you ask someone last year who is going to own AI?
Who is going to be the dominant country, ten out
of ten people would have said to you correct, Yeah,
(34:06):
deep Zeek is China. But late last year everyone would
have said that the US is the country that's going
to absolutely dominate AI. But along came China with the
deep Seek model. And it's not just deep Seek, Ali, Baba, Baidu.
They're all developing large language models and although they don't
apparently have the cutting edge chips because the US has
(34:30):
prohibited them being shipped to China, they're still building really
really good models. So that's bringing down the cost of
AI and probably getting rid of some of the moat
that people thought was around some of these US companies.
So we have seen some pretty sharp pullbacks of US
(34:51):
tech as a result.
Speaker 2 (34:52):
Really it feels like quite early days stall then, doesn't it? Right? Hey,
we can take some calls and some more calls Murray.
Speaker 7 (34:58):
Gooday, Yeah, I'm just for a question to ask. I've
got some in a trust and if I'm just wondering
what the protection is if I went into a or
my family went into an age home. One is protection
from the government actually using that money in the trust
(35:20):
to pay for that care rather than actually have it
owned by me as a person.
Speaker 2 (35:26):
That might be a bit of a legal question. I think, Chris,
that you need to talk to you Laura about.
Speaker 3 (35:31):
Yeah, sorry, Mary, that's a I love to answer questions,
but that one I just don't have the answer.
Speaker 2 (35:38):
Yeah, you know, if you put the money now in
a trust, I know a little bit about it. But
if you stick your money and a trust simply to
try and hide it, then the government to look probably
through that unless it's been in a trust for a
long time.
Speaker 7 (35:51):
I don't know it's been in the trust for a
long time. But I just don't know whether to actually
get rid of the trust from a paying or whether
to actually have it there because that at that asset.
Speaker 2 (36:08):
For well, that sounds like you definitely want to be
picking up the the Yeah, they definitely have to be
talking to a lawyer about it. But by the way,
I think next week, when we discuss personal finance, we
might have somebod who might be answered answered that question
for you. Murray. I'm just checking on the producer so
maybe you've only got a week to go.
Speaker 7 (36:28):
And if you want to sound good.
Speaker 2 (36:30):
Okay, Well I'm not exactly sure who we've got, but
my producer tells me we may be able to help
you next week. It is. Yeah, thanks for calling me. Sorry, Marry, No, no,
no worries. Hey, Actually we'll take quick break, Chris, and
then we'll come back in just a moment. We're with
christ de Lever. He's director of head of multi Asset
and Global Investments in Harbor Asset Management. It is coming
up to ten minutes to six news talks. He'd be
(36:52):
this's welcome back. My guest is CHRISTA Lever, director of
head HIT. He's a director and head of multi asset
and Global Investments at Harbor Asset Management. We've been talking
about market volatility. Time for one more little topic we're
to dig into. With only about three or four three
minutes to go there, Chris. But here's a simple question
I reckon that most people have asked themselves a few
times in the last month or two or three. Is
(37:14):
the share market actually the right place to have your
money right now?
Speaker 6 (37:18):
Oh?
Speaker 3 (37:19):
Good question? Or wasn't expecting that one? Tim You've got
me off guard.
Speaker 4 (37:22):
There.
Speaker 3 (37:25):
It depends. It depends on no, I mean it really does.
So let me share with you some of our ten
year forecast because I think that'll be really, really handy.
So our projections for shares over the next ten years
is to deliver a return of around seven seven and
(37:45):
a half percent. Now that doesn't mean it's going to
be a flat rate per year, but we think over
the next ten years on average, that's what you'll get
from share markets. Now, if I look back to what
share markets have done over the past ten years, that
number is a lot higher than seven seven and a
half percent. It's more like twelve percent if we look
(38:06):
at say the US market. So I think the key
thing for investors is to not look in the rear
view mirror when it comes to investing, because that's actually
when a lot of people can get attracted into shares
is when they see people do really, really well out
of them. So why do we think share markets will
do a bit less for this next decade. It comes
(38:30):
down to valuations. So the increase in share prices we
saw through to the end of last year that got
shares to levels which really we're quite expensive, and Hamish
Pepper and I we put out a piece at the
end of each year, got our top ten risks and opportunities,
and that's something we really drew out at the end
(38:51):
of last year was just how expensive markets have gotten.
Speaker 2 (38:56):
Now.
Speaker 3 (38:56):
On the other side, Tim, people always talk to me
about bonds and say, you know, bonds haven't been a
good investment, and that that's true because if you look
over the past ten years, shares have given you ten
to twelve percent bonds might have given you, depending on
the bond market you're in, they might have given you
two or three percent, So you've done ten percent better
(39:17):
roughly out of shares looking purely backward looking, but unlike
the share market, bond yields are actually at quite attractive
levels at the moment, so we can get about a
five or six percent of it a yield for holding
some quite high quality bonds out there. So look, shares
(39:39):
aren't the be all end all. There was a point there, Tim,
where interesst rates got so low that shares were your
only option, right, you know, in terms deposits weren't even
an option for a bit there. If we look back
to twenty twenty, interest rates got close to zero and
people had to take more risks because they just weren't
(40:01):
getting anything for the risk free rate that has changed.
Now we'll get an okay amount in the bank. We
think that OCR will continue to come down though, and
that will that will reduce returns for say term deposits.
But actually you've got a few healthy asset classes aside
from justh shares.
Speaker 2 (40:22):
Yeah, hey, just quickly, because we've only got about forty
seconds left. Actually I will have to wait till last night.
We'll have to leave that as a cliffhanger. Actually it
was based on just the last five years of the
S and P vers the next five but you know what,
we'll have to wait hold until next time, Chris.
Speaker 3 (40:38):
But thanks, I can't wait.
Speaker 2 (40:40):
Thanks so much for your time this afternoon. Go to
Harbrasset dot cot and zaid if you want to check
any of the products that Harbrasset have got, and we'll
look forward to your company again next weekend. Thanks my producer,
Tyre Roberts. And Sunday six is next. It's three and
a half minutes to six. News Talk said, be enjoy
the rest of the rest of your Sunday. We'll catch
(41:01):
you in.
Speaker 1 (41:05):
Time for more from the weekend collective. Listen live to
news talks it'd be weekends from three pm, or follow
the podcast on iHeartRadio
You're listening to the Weekend Collective podcast from News Talks by.
Speaker 2 (00:41):
Yes, welcome back to excuse me, I've breathed the wrong time.
Hang on a second or one that music up just
for sec Yes, I just breathed at the wrong moment
there and a fit of the coughs, but then there
we go. Welcome back to the show. If you've just
joined us. This is Smart Money on Tim Beveridge if
(01:02):
you've missed any of the previous hours. A great interesting
discussion where we actually did stick more to the theme
than we usually do with the Health Hub with Dr
John Cameron chatting about heart health and all those and
questions around that, and so you can go and check
that out wherever you get podcasts up for the Weekend
Collective and Politics, we were having a chat with Simmy
and Brown about the changes to physicians' assistance I'm not
(01:24):
sure what associates that's the word, and also Chris Bishop
around the plan the government to lend have interest free
loans for a short period of time to get thousands
of ev charges by twenty thirty. So you can go
and listen to any of those interviews and the talkback
that followed on the news talks website or iHeartRadio look
for the Weekend Collective. But right now it's time for
(01:44):
Smart Money and we're gonna have a chat. We want
your calls on this. You're welcome to join us and
ask any questions you like on O. E one hundred
and eighty ten eighty or give your take on things,
because I well, I don't think it's beyond dispute that
it's an interesting time, a tough time for markets, with
the volatility that's been hard to keep track of. We've
had tarafs that are on again, off again and obviously
(02:07):
impacting things. But are there other factors that are driving
the rockiness? Isn't it? And Chris Deliver he is the
head of multi asset and global Investments at harb Rasset Management,
and he is our guest for Smart Money. And Chris
joins me. Now good a Chris.
Speaker 3 (02:19):
Hog Hey, Tim, I'm good. How are you.
Speaker 2 (02:22):
Or not too bad it? Have you had a more
interesting time in your gig lately, just with the tariffs
on again, off again, trade wars all that sort of stuff.
Speaker 3 (02:33):
Yeah, I mean to be honest, it has been an
interesting past five years now. Someone asked me this the
other day just about more recently the volatility we've seen.
But actually at the start of this year, we're looking
back at the last five years and going well in
twenty nineteen. If you told me we were going to
(02:54):
have a global pandemic, two bear markets, the highest inflation
we've ever seen, highest increase to interest we've ever seen,
I would have thought there's no way you could squeeze
it into five years. And then you get the highest
tariffs we've ever seen this month. So yeah, it's definitely
(03:17):
been an interesting month so far from markets tim a
lot of the listeners, you would have heard some pretty
large falls on Wall Street. We didn't feel them quite
as heavily here in New Zealand, but we definitely did
see some big falls earlier in the month. What's quite
(03:38):
amazing though, is month to date we're actually not looking
too bad as we get to the end of the month.
So last week we saw a really strong bounce back
in the US share market in particular, and that's got
us to say, for your average can we save a
(03:58):
balance fund it's probably down about you know, call it
one one and a half percent so far this month.
If I bring that back, you know, right to live data.
Speaker 2 (04:11):
Well, that doesn't feel so dramatic, does it, because I mean,
for the average punter, unless you've got under one percent,
doesn't I looked at mine, it sort of went off
a bit and it wasn't much, and I thought, oh, well,
no big deal, was it.
Speaker 3 (04:25):
Yeah, I mean, look, it definitely was looking pretty pretty hairy.
Earlier in the month, we were having falls of you know,
above five percent in a single day. So that is
obviously really unnerving for investors, whether they're key we say
for investors, even as professional investors, we're not. We're not
(04:46):
immune to getting up in the morning and seeing what's
happened in US markets and tariffs and you know, getting
a bit of a shock and thinking, oh, you know,
maybe I just roll back over and go back to
bed this morning. But now, look, it has been a
really good bounced back tim which has been which has
been good, but it has it's been a tough year
so far. But look that follows a really strong year
(05:09):
last year where we saw kind of your average balance
fund up around kind of twelve percent last year. So
we have had a few good years in markets, but
it has been volatile so far this year.
Speaker 2 (05:21):
How come we haven't seen quite the same dramatic pauls
as as maybe the United States or other markets have experienced.
Does that because we're a bit more insulated than we
might think, Yeah.
Speaker 3 (05:33):
We definitely are. So if you think of let's just start.
You know what are tariffs, right, So tariffs are taxes
that are placed on goods and they get collected by governments. Right,
so somebody has to pay for these tariffs. Now, what
happens in reality is companies put their prices up. If
(05:54):
they've got really good pricing power, they'll pass on the
full cost of the tariff to their customers. But in
a competitive environment, it's really hard to have that level
of pricing power. So what happens with companies is they
tend to absorb some of the tariff, right, so they'll
take lower profits, and they might increase their prices as well,
(06:18):
so the customer will fail an impact as well. So
look tariffs. The first order effect of them is they're
typically not good for corporate profits. But if you look
at say, you know, Apple, who has one of the
world's largest companies, has pretty much its entire supply chain
(06:39):
in China, are some in India and some other emerging
economies as well. The hit to them is so much
more than say any New Zealand company I can identify
on the stock exchange. And if you look at some
of our companies, so you know Fresher and bikele Health
here for example, they're one that that is impacted. They've
got production in Mexico, some here in New Zealand. But
(07:04):
say you look like a Contact Energy, Auckland Airport, Spark Fletcher,
you know they're really not getting hit as hard as
some of these US companies are when it comes to tariff.
So yep, our share market when we saw those really
big falls earlier in the month, we certainly fell, but
not to the same extent as what we saw in
(07:25):
the US end globally.
Speaker 2 (07:28):
Okay, look, we're going to take some calls as well,
by the way, on our one hundred and eighty ten
eightys lots for Chris and I to dig into. But
we've got our first caller of the day, Chris, so
let's get into it. John.
Speaker 4 (07:36):
Hello, oh hi.
Speaker 5 (07:40):
On the first of July, the government I supposedly introduced
in the depositors Guarantee scheme. I'm just like, I just
wanted to know when that's introduced. I see already there's
a lot of finance companies into it, which are offering
six or six and a half percent, whereas the banks
are only offering four percent for a term deposit.
Speaker 2 (08:05):
Really six and a half percent seems like a high return.
Speaker 5 (08:08):
Well, a lot of them are offering six percent. This
is finance companies. We will always been high risk, but
once they're under the depositors guarantee schemes, they'll be guaranteed.
And I see a lot of them already are. There's
General Finance and Ecceeder and all these ones. You'd be
afford to put money in with the bank, wouldn't you
if you're guaranteed that you can't one hundred thousand dollars.
(08:31):
I'll guarantee up to one hundred thousand dollars. Well, why
would you put your money on the bank at four
percent when you can get six interesting questions?
Speaker 2 (08:40):
This your ballpark, Chris.
Speaker 3 (08:43):
I've got to be honest and say I'm not fully
across where how far that scheme extends to. And I
thought it just applied to capital as opposed to the
interest payments. But I've just got to tap out here
and say, to be honest, I'm not across the full
(09:05):
scope of that.
Speaker 2 (09:06):
Okay, sorry about that, John, It might be it's an
interesting question though. I'm just looking at it now. It
looks like it looks like it guarantees the deposits, I guess,
And his point is like, well, if I can get
six percent, I don't think your interest rates protected. It
just looks like it there's some protection up to one
hundred and thousand dollars of the actual deposit. That's my
(09:27):
quick Google. That was that I managed to do during
the course of your answer there, Chris. But yeah, we'll
move on to that, shall we. Hey, by the way,
Chris on the sorry, thanks for you call that. John
really appreciate it. Now, Chris, just on the tariffs, where
are we at with tariffs? Who's got what tariff on whom?
Because I find it difficult to keep in touch with
it because it didn't Trump talk about dropping the China tariff,
(09:50):
but I don't know if he has and China have
reciprocated and what that means for global trade and trade
him and what tariff have we got on us at
the moment and has it kicked in? Where are you
at with the updates on that?
Speaker 6 (10:02):
Yeah?
Speaker 3 (10:03):
So look at changes daily and that that's and look,
you know that's one of the issues, tim So. I
talked about earlier about the direct impact of tariffs, i e.
Customers have to pay and corporate profits get hit. But
actually what is bigger is the indirect effect. And what
(10:24):
I mean by that is when you have the world's
largest economy changing policy on a whim, it really undermines
confidence and it actually makes it hard to make investment decisions.
So what I mean by that, and I will I
will get to you to your key point of your
(10:46):
question in a moment. But what I mean by that is,
let's say you're the CEO of Apple right and most
of your manufacturing is in China at the moment. If
you need to build a new factory right now, where
would you build it? And the only answer I can
(11:07):
get to is it's hard to know where you'd build it, because, Okay,
we know China is a key target of the US,
but they haven't been immune to enforcing tariffs on say
the Mexicans or Vietnam. They got hit really hard with
reciprocal tariffs.
Speaker 2 (11:25):
Well, I can tell you where I wouldn't build it.
I wouldn't be building it in the States because it
wouldn't be economical.
Speaker 3 (11:31):
And that's right. So it is hard to see through
some of these some of these policies, right because you know,
there isn't a line. I mean, unemployment in the US
is like very very low, around four percent, So there
isn't a line of people waiting to work at these
factories anyway, you know, even if they did get repatriated
(11:52):
into the US. But the real issue with these tariffs
and the way that they're moving around is just how
it undermines confidence. So investment decision making is being put
off as a result of people not knowing what the
landscape is going to be for the foreseeable future. So
you wouldn't build right now a factory in China, you
(12:16):
wouldn't build it in Mexico because you don't know what
that tariff rate is going to be in one month,
three months, or even by the hour.
Speaker 2 (12:26):
More concerning you, would you even make any decision at all?
Which is also a slow death for business, isn't it.
Speaker 3 (12:33):
Oh? Absolutely yeah, So that is the casue. And what
we're started to see is some of that people just
not doing people just not doing anything. So look, there
has been we have part of the bounce back we've
seen in the US team has been around some of
the rollback in tariffs, particularly as it relates to tech,
(12:57):
because when Trump made his original announcement on reciprocal tariffs
and then we had the escalation in China to one
hundred and forty five percent, that was really going to
impact the profits of these tech companies that have a
lot of their production lines in China. So we've started
(13:17):
to see you know, we've seen an official roll back
there on some tech components. So that's seen a really
good bounce back in some of the big tech names
in the in the US market. But look with New Zealand,
you know, we're still sitting on ten. But the key
thing here is we need to arrive at whatever that
(13:38):
finishing point looks like. We need to arrive at it soon.
And the key reason for that is just around that
confidence the impact that it's having on market confidence.
Speaker 2 (13:50):
Right now, here's the thing we need to arrive. Sorry
you said, we need to arrive at that point of
knowing where we're exactly where sitting. But the problem is
the rhetoric. And look, you know, people know I don't
like Donald Trump very much, but stepping away from that.
I mean, regardless of we the love them or low them,
how certain can anyone be that this is the end
position when it comes to where the tariffs are going
(14:12):
to sit.
Speaker 3 (14:14):
Yeah, And I think what's come out around that is
that there are guardrails around him. So when we started
to get when we got those first reciprocal tariffs, quite frankly,
the first thing was no one could figure out how
he'd got to the numbers, because he had the numbers
of what countries are charging the US, and he included
(14:37):
things included things in their currency manipulation and GST for example,
in there. And then he had the US reciprocal tariff
right which was lower than the left hand side of
the equation. Now, what really concerned US market people there,
and quite frankly most people in general, was just how
(15:01):
there seemed to be little rhyme or reason in those numbers.
And we actually heard that, you know, potentially they weren't
the numbers that some of his Congress were expecting to
see come up on the board. They are a surprised,
we even some people within Congress. But from there, what
(15:21):
we've seen is there has very clearly been pushed back
within his own party and from his own advisors. And
we have seen quite a consistent direction of travel since then.
So we saw the announcement, we saw the big escalation
with China, and we've started to see the de escalation.
(15:43):
Now if that direction of travel continues, Tim, I think
markets will give them the benefit of the doubt around
these tariffs. It's but I completely get what you are saying,
and what markets won't react really well to is further
escalation and de escalation because that's just us on that
(16:05):
roller coaster ride again.
Speaker 2 (16:08):
Well, you mentioned guardrails. What are the guardrails on that?
Speaker 3 (16:11):
Is it?
Speaker 2 (16:11):
Because he understands that he's got that, he doesn't have
so many more chances with the confidence of the markets
or what?
Speaker 3 (16:18):
Oh, I think it's so, it's so it's a few things.
So we saw the US bond market rarely sell off,
So we saw the US ten year bond yield go
from three point eight percent to around four and a
half percent in a matter of days. Now, when the
(16:39):
US issues debt, you know, that is one of the
interest rates they pay because they issue ten year bonds,
so they have to pay that rate of interest. So
that hurts, right when your interests rate or bond yield
is going up. As a country, that hurts you because
when you assue new debt, you've got to pay it.
So that was so that's a market guardrail. The other
(17:01):
thing was investors were voting with their fee and taking
money out of the US and as a result, you know,
we saw the US dollar versus the keiw for example,
go from fifty six cents to sixty cents, so you know,
that would have been a bit of a shock to
(17:21):
the US. Trump wouldn't have minded it to be fair
because he's always said he wants a weaker currency so
they can compete a little bit more. But that move
was quite disorderly and quite quick. So that's the market
sending feedback to them that you know what you're doing,
we really don't like. We heard of a lot of
European investors pulling money out of the US as well,
(17:45):
so that's the market guardrails. But we've actually heard since
that there has been a lot of challenge from within
his own party on some of the particularly the escalation
with China. So that's what I mean by guardrails. There's
there's guardrails put in place by the market, but also
so the people around him in his own party, and
(18:09):
right at the beginning, markets were worried that actually there
weren't enough, you know, so to speak adults in the room,
or there weren't enough guardrails, you know, to really keep
that narrative under control. And since then, I think, you know,
we have seen people influence them, because we have started
to see a rollback of many of the more punitive
(18:32):
measures he put in place on April second.
Speaker 2 (18:35):
Which do you think of the most effective guardrails, the
market guardrails you've talked about or the political ones.
Speaker 3 (18:42):
Not sure, you know, I'll take both. I'll take both.
I think the bond yield because Trump has really made
a big point about wanting lower bond yeals. You would
have overheard, you know, you would have heard him saying
about how he doesn't like your own power, the US
Federal Reserve chair, because he wants him to cut rates
(19:04):
and he's been too slow to do so. That's because
Trump wants lower interest rates, because that is good for
companies they're borrowing at lower rates. It's also good for
the US government that has a lot of debt which
they need to refinance, and they'd like to do that
at lower interest rates, So I think the bond yield
(19:27):
tim was the one that really they looked at as
an administration and said, this is not going the way
that we wanted it to.
Speaker 2 (19:34):
Okay, right, we need to quick break. We'll be back
with lots more to discuss. One with Chris de Lever
here is the head of multi asse and Global Investments
at Harbor Asset Management, and we're talking about basically market
volatility and how you see your way through it if
you're trying to make your own decisions for investing, although
often I would suggest you maybe talk to the good
folks or look at some of the funds that they've
(19:54):
got there at Harbor Asset Management as well, because the
market anyway, Like I won't say anymore, but I think
the market usually is ahead of you unless you're a
bit of a genius on that stuff. It's twenty six
and a half past five, though eight hundred and eighty
ten eighty is the number back in a moment, Are
you worried about funding a comfortable retirement, Well you're not alone.
The cost of living crisis is heading home for a
lot of people. So it's no surprise people are looking
(20:15):
for ways to make the most of their savings and
get a little bit more income to supplement the New
Zealand super One interesting solution is to invest in an
income fund like the Harbor Income Fund. It works by
holding a mix of interest paying securities and shares that
have been designed to generate a steady and sustainable income
no matter the market. The Harbor Income Fund is actively
(20:36):
managed and currently it pays a distribution of five point
twenty five percent per annum after fees and taxes paid
out in monthly installments. To find out more about Harbor's
Income Fund, just head to their website or speak with
your financial advisor. This is not intended as personalized advice.
The product Disclosure Statement for Harbor Investment Funds issued by
Harbor Asset Management is available at Harbor asset dot co
(21:00):
dot nz.
Speaker 1 (21:01):
Insightful Entertaining and always Moody Point Beverage. On the weekend
Collective News Talk, sa'd.
Speaker 2 (21:08):
Be yes, Welcome back to the show. Our guest is
Krystal Levery's director and head of that multi asset and
global investments at Harbor Asset Management. And before we carry
on with our conversation, Chris, let's bring in Shane.
Speaker 7 (21:19):
Hello, can you hear me.
Speaker 2 (21:23):
Okay, yeah, better road noise, but we got you there. Yep, Yeah, it's.
Speaker 8 (21:28):
Very quick quick Christian On that's okay. I'm just DeFi
and cheesy, and I've kind of told my tax account
that they only see that. It's for the dividends for
the text.
Speaker 6 (21:45):
They only seen that and.
Speaker 8 (21:47):
Not the actual.
Speaker 6 (21:50):
That you would sell your company for. Do you have
to actually pay text, say like a pig by a
company for develop Do you have to pay tax on that.
Speaker 2 (22:08):
Just for information? How long would you have held those
shares for? Perhaps hello, hello, hello, No, I got you, Shane.
How long would you have held those shares for?
Speaker 4 (22:20):
Basically I had them for probably about six months.
Speaker 2 (22:24):
Okay, So if you've bought some shares and you've sold
them within six months, sort of thing, the questions around tax. Okay,
I'm going to jump in before Chris, but well, I'm
not going to jump in but Chris, that's a difficult one,
isn't it Because it's really a question for your accountant.
But if you've bought the shares with an idea for
selling them for profit, technically you a tax on them,
don't you.
Speaker 3 (22:44):
Yeah? So look, I can talk generally about about how
the tax works on shares and fixed income and other things.
So look with shares, it does depend where they are bought,
so different tax applies to New Zealand shares than Global shares,
(23:07):
for example. So with New Zealand, the way it generally
works is if you're not classified as a trader by
the idea, and you'll you'll need to just look up
how that works. The dividends are taxable. Typically they have
(23:28):
what are called imputation credits attached to them, which you know,
for all intentsive purposes, is just a tax credit that
you can put on your tax return to offset any
kind of tax liability you have with regards to the
share itself. Though you say you buy it for ten
and you sell it for twenty, Generally there's no capital
(23:49):
gains tax applied to that unless the investor is classified
as a as a trader. With global shares, it becomes
a little bit more complicated because there is a regime
that appl eyes. They're called the fair dividend rate. So
essentially the way that works is that instead of taxing
(24:14):
dividends and leaving the capital gains, the fair dividend rate
assumes that you get five percent income from your share
per annum. Now, it essentially means that you treat that
five percent like you would a dividend, and you'd have
to put it on your tax return. So often people
(24:36):
who have accounts on things like Chas E's, they will
get assistance in preparing that because they'll print you off
a really nice statement to help you. So look, hopefully
that gives you some help. If they're held, say through
(24:57):
a managed fund, all that is done for you in
the managed fund. You just tell the managed fund what
your pir right, which is what your tax rate is.
So that's how it works directly. Bonds is interesting in
cash because actually there's you pay. You generally pay tax
(25:18):
on the return that you get. So say you get
a five percent coupon from your fixed income, typically five
percent is what goes on the on the tax return.
So look, no financial advice. I just want to give
people a general overview of how that works for different vehicles.
Speaker 2 (25:41):
How's that has that suit you there? Shane? Is that
helpful or yeah?
Speaker 4 (25:45):
Yeah, yeah, I do understand it a little bit. Obviously,
I'm learning some valuable lessons through she is right now,
and the one I'm talking about in particular, I did
it a bit of an experiment. I bought it for
thirty sold for seventy and made forty bucks off it.
And I sort of did it before tax to see
what sort of tax LD have to pay, and nothing
(26:06):
came up. But what I'm worried about is I've actually
bought some other shares which I've bought incredibly cheap, and
it's a gold mining company, and they're actually going up
quite a lot, and I'm like, I'm worried, Like if
I bought them for like less than five cents a
year and if they go to a dollar and then
I sell them and I'll go about three thousand years,
(26:27):
how much tax does have the power that or do
we go towards my.
Speaker 2 (26:30):
Income or Yeah, it is. It is complex because technically,
I think if you brought them with the with the
idea of making a profit and the idea of a
crack at you. But the question is you probably wouldn't
be targeted by this, would you, Chris? But if you
it is it's tricky stuff, isn't it.
Speaker 3 (26:46):
Yeah, I look, tax text is always tricky and if
it's a mining company, i'd assume as it listed in Australia, Shane.
Speaker 4 (26:55):
No this one's actually lifted in New Zealand.
Speaker 3 (26:57):
It's listed in New Zealand.
Speaker 2 (26:58):
Yeah.
Speaker 3 (26:59):
Look, I mean the key thing for you is, you know,
have a chat to an accountant, because it's just about
it's about whether you know you're deemed to be a
trader and you know, because if you're deemed to hold
the shares long term, that is different than say, if
you're buying and selling all the time. But it's look,
(27:20):
it's very murky kind of it's a very murky kind
of tough area. So I do think in your case
the best thing is to go and go and talk
to go and talk to an expert on it. But look, generally,
you know, if you're holding it long term, as I say,
capital gains typically don't apply. But I don't know the
(27:44):
history around your trading activity, so it would be best
to go and have a check to an account.
Speaker 2 (27:48):
Good on your thanks, Shane. Yeah, because for an example
would be so you spend five thousand bucks on some
gold mining shares. In three weeks later you're selling for
ten thousand bucks. Well that's problematic possibly, isn't it, Chris.
Speaker 3 (28:00):
Yeah, it's a bit different than buying and holding something
for ten years. Isn't it, And that that's where the
tax rules of whether you're a trade or not, so
that that's where it's better to just ask the USK
the experts.
Speaker 2 (28:13):
Yeah, I'm sure that shares he's actually on its website
also has a bit of advice on that too as well,
because it is probably a fairly common question. Right, I
tell you what next, we'll come back with more of
our chat shore we Chris in just a moment, and
this is news Talks, he'd be. It's we're with Kristal
Lever from Harbor Asset Management. It's twenty two minutes to six.
Speaker 5 (28:31):
Can hear you were.
Speaker 6 (28:34):
When I'm dreaming?
Speaker 3 (28:36):
You try to skill telling you.
Speaker 7 (28:44):
When you can go.
Speaker 2 (28:48):
That's welcome back to the show. My guest is Krista
Lever from Harbor Asset Management. This is this is smart Money. Hey, Chris,
just probably take another call on things, just talking about
market volatility. What's what our strives market volatility apart from
the stuff we've we've touched on AI part of the
whole thing.
Speaker 3 (29:07):
Yes, So AI has been interesting so far this year
because last year it was really the thing that drove
markets a lot higher. So you know, the Global Share
Index that we follow called the MSI or country Wood Index,
that was up around twenty two percent last year. And
a key contributor to that was the US market that
(29:28):
was driven forward by a lot of these big tech
companies being in Nvidia, Apple, Amazon, Microsoft, just to name
a few of them. And so you kind of hidden
behind this, you know, Tariff's chaos. I suppose has been
some interesting developments within those companies. So and the key
(29:55):
one being around the infrastructure build with regards to AI.
So you know, a lot of a lot of listeners
would used AI models, so be it. Perplexity is a
popular one chat GPT, a lot of others. I used
(30:15):
Gemini for example.
Speaker 2 (30:16):
I've never heard of perplexity. What's that one?
Speaker 3 (30:19):
Oh, Perplexity is a good one, tim, Give that one
a go. What it is is it mixes a AI
kind of chat GPT like model with a search engine,
so the results you get are very up to date,
(30:40):
very topical, whereas sometimes if you put it purely into
a large language model, you'll only get data updated to
a certain point of time for when that model was trained. So,
you know, a lot of people might put things into
chat GPT and you might ask about something that happened yesterday.
And if you're not on the premium version, they'll say,
(31:02):
I'm a large language model. I was only trained to
data to this point. So that's why Perplexity is quite cool.
So it uses the power of a search engine and
behind as well as a large language model, so you
get some really interesting results when you put when you
put your particular query. But so what's been happening in
(31:26):
the AI space is just some real questioning about whether
there might be an overbuild. So a lot of companies
are putting a lot of capital expenditure into building big
GPU clusters. These are the GPUs, say Bath and Video
to train their large language models. Now we've seen some
(31:51):
quotes from the likes of Sashi and Adella from Microsoft
who's talked about the potential for an overbuild in AI infrastructure.
What the market has also started to focus on is monetized.
So a lot of money has been spent on AI
that so far, it's been a tough one to monetize, right,
(32:12):
So think about in your own daily usage of AI,
what do you actually pay for. So if you go
on Perplexity, for example, if you go on to the
non paid version of CHET, GPT. There's not even really
many ads there at the moment, so they're not monetizing
(32:33):
the people who are using their product yet. So really
big thing around AI at the moment is how are
they actually going to monetize this because they need to
monetize it. Right, They've spent all this money building the infrastructure,
but you know, people haven't really taken up the paid
products in the droves that might have been expected and
(32:58):
in some people once they've gone past the kind of
novelty factor of using it, because you know, when you
use it for the first time, it is cool, right,
you know, you me and my kids going to Gemini,
and you know, we create images. So my kids love
my kids love trucks, so you know, they say, Gemini,
create me a truck, this color and this landscape and
(33:21):
it's all really really cool. But actually that's not what's
going to put money in the pocket of the companies
that are creating these models. So the monetization and the
use cases are still you know, the juries out and
whether they're going to stack up for the amount of
money that's being put into AI. So we have seen
(33:42):
the share prices of some of those companies rarely come
off the boil so far this year. And we've also
seen the emergence of deep Seek. And you know, if
you ask someone last year who is going to own AI?
Who is going to be the dominant country, ten out
of ten people would have said to you correct, Yeah,
(34:06):
deep Zeek is China. But late last year everyone would
have said that the US is the country that's going
to absolutely dominate AI. But along came China with the
deep Seek model. And it's not just deep Seek, Ali, Baba, Baidu.
They're all developing large language models and although they don't
apparently have the cutting edge chips because the US has
(34:30):
prohibited them being shipped to China, they're still building really
really good models. So that's bringing down the cost of
AI and probably getting rid of some of the moat
that people thought was around some of these US companies.
So we have seen some pretty sharp pullbacks of US
(34:51):
tech as a result.
Speaker 2 (34:52):
Really it feels like quite early days stall then, doesn't it? Right? Hey,
we can take some calls and some more calls Murray.
Speaker 7 (34:58):
Gooday, Yeah, I'm just for a question to ask. I've
got some in a trust and if I'm just wondering
what the protection is if I went into a or
my family went into an age home. One is protection
from the government actually using that money in the trust
(35:20):
to pay for that care rather than actually have it
owned by me as a person.
Speaker 2 (35:26):
That might be a bit of a legal question. I think, Chris,
that you need to talk to you Laura about.
Speaker 3 (35:31):
Yeah, sorry, Mary, that's a I love to answer questions,
but that one I just don't have the answer.
Speaker 2 (35:38):
Yeah, you know, if you put the money now in
a trust, I know a little bit about it. But
if you stick your money and a trust simply to
try and hide it, then the government to look probably
through that unless it's been in a trust for a
long time.
Speaker 7 (35:51):
I don't know it's been in the trust for a
long time. But I just don't know whether to actually
get rid of the trust from a paying or whether
to actually have it there because that at that asset.
Speaker 2 (36:08):
For well, that sounds like you definitely want to be
picking up the the Yeah, they definitely have to be
talking to a lawyer about it. But by the way,
I think next week, when we discuss personal finance, we
might have somebod who might be answered answered that question
for you. Murray. I'm just checking on the producer so
maybe you've only got a week to go.
Speaker 7 (36:28):
And if you want to sound good.
Speaker 2 (36:30):
Okay, Well I'm not exactly sure who we've got, but
my producer tells me we may be able to help
you next week. It is. Yeah, thanks for calling me. Sorry, Marry, No, no,
no worries. Hey, Actually we'll take quick break, Chris, and
then we'll come back in just a moment. We're with
christ de Lever. He's director of head of multi Asset
and Global Investments in Harbor Asset Management. It is coming
up to ten minutes to six news talks. He'd be
(36:52):
this's welcome back. My guest is CHRISTA Lever, director of
head HIT. He's a director and head of multi asset
and Global Investments at Harbor Asset Management. We've been talking
about market volatility. Time for one more little topic we're
to dig into. With only about three or four three
minutes to go there, Chris. But here's a simple question
I reckon that most people have asked themselves a few
times in the last month or two or three. Is
(37:14):
the share market actually the right place to have your
money right now?
Speaker 6 (37:18):
Oh?
Speaker 3 (37:19):
Good question? Or wasn't expecting that one? Tim You've got
me off guard.
Speaker 4 (37:22):
There.
Speaker 3 (37:25):
It depends. It depends on no, I mean it really does.
So let me share with you some of our ten
year forecast because I think that'll be really, really handy.
So our projections for shares over the next ten years
is to deliver a return of around seven seven and
(37:45):
a half percent. Now that doesn't mean it's going to
be a flat rate per year, but we think over
the next ten years on average, that's what you'll get
from share markets. Now, if I look back to what
share markets have done over the past ten years, that
number is a lot higher than seven seven and a
half percent. It's more like twelve percent if we look
(38:06):
at say the US market. So I think the key
thing for investors is to not look in the rear
view mirror when it comes to investing, because that's actually
when a lot of people can get attracted into shares
is when they see people do really, really well out
of them. So why do we think share markets will
do a bit less for this next decade. It comes
(38:30):
down to valuations. So the increase in share prices we
saw through to the end of last year that got
shares to levels which really we're quite expensive, and Hamish
Pepper and I we put out a piece at the
end of each year, got our top ten risks and opportunities,
and that's something we really drew out at the end
(38:51):
of last year was just how expensive markets have gotten.
Speaker 2 (38:56):
Now.
Speaker 3 (38:56):
On the other side, Tim, people always talk to me
about bonds and say, you know, bonds haven't been a
good investment, and that that's true because if you look
over the past ten years, shares have given you ten
to twelve percent bonds might have given you, depending on
the bond market you're in, they might have given you
two or three percent, So you've done ten percent better
(39:17):
roughly out of shares looking purely backward looking, but unlike
the share market, bond yields are actually at quite attractive
levels at the moment, so we can get about a
five or six percent of it a yield for holding
some quite high quality bonds out there. So look, shares
(39:39):
aren't the be all end all. There was a point there, Tim,
where interesst rates got so low that shares were your
only option, right, you know, in terms deposits weren't even
an option for a bit there. If we look back
to twenty twenty, interest rates got close to zero and
people had to take more risks because they just weren't
(40:01):
getting anything for the risk free rate that has changed.
Now we'll get an okay amount in the bank. We
think that OCR will continue to come down though, and
that will that will reduce returns for say term deposits.
But actually you've got a few healthy asset classes aside
from justh shares.
Speaker 2 (40:22):
Yeah, hey, just quickly, because we've only got about forty
seconds left. Actually I will have to wait till last night.
We'll have to leave that as a cliffhanger. Actually it
was based on just the last five years of the
S and P vers the next five but you know what,
we'll have to wait hold until next time, Chris.
Speaker 3 (40:38):
But thanks, I can't wait.
Speaker 2 (40:40):
Thanks so much for your time this afternoon. Go to
Harbrasset dot cot and zaid if you want to check
any of the products that Harbrasset have got, and we'll
look forward to your company again next weekend. Thanks my producer,
Tyre Roberts. And Sunday six is next. It's three and
a half minutes to six. News Talk said, be enjoy
the rest of the rest of your Sunday. We'll catch
(41:01):
you in.
Speaker 1 (41:05):
Time for more from the weekend collective. Listen live to
news talks it'd be weekends from three pm, or follow
the podcast on iHeartRadio
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