June 30, 2025 • 38 mins
It's the first week of the new financial year: Time to reset your portfolio for the year ahead. Hot share markets, patchy property prices and new rules for super: You need to get up to speed but more than that, you need to stick with your investment principles.
Author Noel Whittaker joins Associate Editor - Wealth, James Kirby in this episode
In today's show, we cover:
- Property - Challenging the positive outlook
- After double-digit returns for shares, prepare for the Black Swan
- Yes, Super rules are changing, but be careful, don't overreact!
- Crypto - This sceptic remains...ahem, very sceptical
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:10):
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirby. Welcome aboard everybody. It is the first week
of the new financial year, brimming with opportunities for you,
and I want to explore opportunities and risks in the
new financial year with my special guest today, the author
Noel Whitaker. Who better to join us for a panoramic
(00:33):
look at what's in store for investors over the next
twelve months. It's an ambitious agenda. I will concede immediately,
so I think we should split it into Property Super
then we'll do shares and we'll have a look at
some questions as well. How are you, Noel?
Speaker 2 (00:53):
Very good, James, so nice to be back with you again.
Speaker 1 (00:56):
Delighted to have you on. I know that you are
skeptical about the very notion of a property market. Why
is that you don't even like this notion that we
could talk about the property market terminology.
Speaker 2 (01:09):
There is no such thing as a property market that
we've been pointed by per houses or Black Town units
or Cairne's apartments. I mean, I can talk about property
in a very general way, but people need to understand
that there are many property markets or maybe doing different things.
Speaker 1 (01:27):
I think that's actually come Just this morning, the Rehite
Group have issued a report which is really interesting with
six years of data, and they are saying that the
Australian property landscape has fundamentally changed and that basically the
Queensland coastal regions, Gold Coast, particularly on Sunshine Coast are
(01:47):
the new hotspots in the market. That their price gains
have outpaced the city of Melbourne for instance, four years now,
and that this new order, if you like, where it
always was Sydney first, Melbourne second, Brisbane third, and prices
kind of went into predictable fashion. That they think that's
fundamentally changed. I mean that's relevant, isn't it if you
(02:08):
were an investor.
Speaker 2 (02:11):
Yes. And I also think investing in property is difficult
as we know in Victoria they have passed very harsh
laws against landlords, which is one of the reasons. The
key to property is to add value, which you can't
do to an apartment, which means houses. Now the medium
(02:31):
home in Brisbane's about over one million dollars. Now to me,
it'll be a big leap of faith to buy a
one million dollar investment property when you can be buying
a million dollars of shares. It's a no brainer. Yeah.
Speaker 1 (02:45):
But in terms of this year and the you know,
the parameters of this new financial year, we've had pretty
ordinary property prices performance around the country this year, spectacular, spectacular,
very strong year for shares. Property is about to experience
the impact of interest rates dropping, so I think, I mean,
(03:09):
wouldn't it be a reasonable thing to say that the
outlook for property is promising whatever it might be.
Speaker 2 (03:15):
Well, as you say, interest rates are dropping, and the
more they drop, there are more buyers. Every state government
in the federal government is doing instead for first home buyers.
So you're creating an increasing demand for property, but no
more supply. I mean, they talk about supply, so I
(03:36):
think it's going to be an even type of market
for first home buyers.
Speaker 1 (03:40):
What about foreign investors? I take your point about the incentives.
I mean, Brisbane's leading the pack, aren't they. The state
budget has a scheme for a two percent deposit and
you can buy a million dollar home. I know it's
shared equity, but it stands for two percent twenty thousand dollars.
You can get a million dollar home under a government
scheme in Brisbin and now in the state budget. What
(04:01):
do you think of it.
Speaker 2 (04:02):
I think that's a copy of the federal government scheme. James.
It seems fairly much the same to me. All I
know is that the bar is getting higher and higher,
but also much say, as an investor for a long time,
I don't like property as an investment. It's got big
entry costs. It's the friends of ours just bought a
four million dollar apartment two hundred and fifty thousand dollars
(04:26):
in stamp duty, and you've got big exit fees, and
you've got on the land taxes going up. So with
land tax and rates and insurance and vacancies, you know,
plus the fact that all governments are making it hard
to be a landlord, I think you're much better off
in shares. Shares are so simple. There's nothing to do.
Speaker 1 (04:47):
There's nothing to do when it goes right. But there's
nothing to do when it goes wrong either except dowd
there and watch it. If you have a property, you
can at least improve it, just as you're making that
point at the start.
Speaker 2 (04:58):
But that's what they call the curse of liquidity. Because
shares are liquid, it means that we can buy and
sell any time. We like a an liquidity place with
your mind. If your shares going well, that's great. If
it's not, that I sell or keep. That's why I
think for most people the index fund is just such
a lovely investment. It's average nine percent for one hundred
(05:20):
and twenty years and there are no decisions to make.
You just hang in there. Whereas if you go for
speculative share then there's the bit do I buy or
do I sell?
Speaker 1 (05:31):
Yes, And in terms of just the immediate, as I said,
in terms of the year ahead, in terms of property,
the consensus is that rests will fall, the property prices
will improve. They're currently doing about two percent a year,
two or three, they're going to move to five percent
a year. That's the kind of consensus. How do you
sit with that? Are you would you think that's a
(05:53):
sound or.
Speaker 2 (05:55):
Well, again, it depends on the type of property in
the low Mark and I'd say yes. You talked about
the Sunshine Coast and the Gold Coast. They are two
different markets. The Gold Coast now is just a concrete
jungle with a tower going up on every corner with
no more roads. That's why people are going to the
(06:16):
north coast because you've got trees and no traffic lights.
It's a different area.
Speaker 1 (06:22):
So all property is highly particular, highly localized.
Speaker 2 (06:27):
Very much.
Speaker 1 (06:28):
So Yeah, I mean.
Speaker 2 (06:31):
You're either on the beach or off the beach if
you're buying beachfront property. Big key factors are close to
infrastructure like transport and shops, major key. And I've also
said if you're buying property, the key factory is location
because you can't change that.
Speaker 1 (06:51):
And do you think these other factors and property are
marginal housing incentives, tax lures, or inducements.
Speaker 2 (07:00):
Well, they talk about negative gearing, but given the thirty
percent van now goes to one hundred and thirty five
grand a year, if you lose ten thousand dollars, you
pay seven thousand dollars at that. I mean, negative gearing
is not the magic pudding they think it is. You're
still paying seventy percent.
Speaker 1 (07:20):
Yes, you're still paying out. You're still paying out week
after week or a month after month as you try
to get these capital gains.
Speaker 2 (07:27):
Sure, and if you've got two million dollars in property
and I've got two million dollars in shares, and we
both want one hundred thousand dollars you can't sell the
back bedroom. I can just ring the broker and I've
got the money next day. And that's the big difference.
Speaker 1 (07:41):
Ye hyeah, you can you can't. You can't sell a
part of a property. It's very true. Okay, what we're
going to do is we're going to talk in a
moment about the share market. That's obviously that what everyone's
interested in this year. We've just had an amazing year
ten percent plus on the local market, even better in
the US despite all the distractions. Let's have a look
at the yearhead in one moment. We'll be back in
(08:03):
a minute. Hello, Welcome back to the Australians Money Puzzle
podcast James Kirby with Noel Whittaker. Now we are going
to talk about the share market for a few minutes
and have a look at the year ahead. So let's
(08:23):
just put it on the table. What happened in the
year to June? Noel, a ten percent plus on the
share market eleven or twelve percent plus in the US.
On top of that, dividendial still holding up at four
over four percent in our market. How did you respond
(08:44):
to that performance this year? I mean, was it better
than you might have expected?
Speaker 2 (08:49):
Well, when Donald Trump got in, I'm being asked to myself,
and I say, it's a long game. Hang in there.
No one can pick the short term movements of the market,
but we do know long term it's got an upturned bias.
And as interest rates fur shares are realty more attractive.
(09:10):
So it's interest rates four. If I can get an
effective yield of six percent franc it's much better than
three percent on the term deposit. Yeah, but it's interesting
that every time I make a speech, I ask two
questions tax would you rather pay income tax or GST
(09:31):
or capital gains tax? And nobody knows. Now the no
brain is capital gains tax because you don't pay it
till you sell the asset and death doesn't trigger it,
and you get fifty percent discount when you do that.
I say, who understands franking? No one gets it. They
don't understand it's money for nothing. So once people understand
(09:54):
the unique benefits of shares and franking, credits still go
for them. See I had an investment property. It cost
me two hundred and thirty thousand dollars twenty years ago.
An apartment I've just solved for seven forty I'm only
stell in because it's old. If that would have been
(10:15):
in the index, it would have been worth one point
four million dollars and there would be no sale needed.
That's the big difference with Shees. She could hang on in. Yeah.
But also, as I'm all say too, don't forget the
supervaluation is going to twelve percent this month in July.
That's more money which we're going into the share market
(10:38):
and what I'm moving my portfoilion and that more and
more overseas investment. It's a bigger market, and I'm only
using good managed funds. I would never try to pick
oversea shares on my own, and your accountant says to me,
don't do it. It's a tax nightmare. So stay away
from direct share investment, but you can use good managed funds.
Speaker 1 (11:00):
So when you look at the share market, we did
ten percent. What's a long term average? What would people
reasonably expect on the share market on the AX the.
Speaker 2 (11:08):
Long term average for the all lords accumulation. That's interesting.
Dividends a sorry growth and dividends is about nine percent.
But don't forget there are normally four negative years and
six positive years, and the biggest rises always come after
the biggest falls because people say, how about I jump
(11:29):
out now and get back when the time is right.
When the time is right, it's too late. This is
the whole point. So also, if you look at a
one month, sorry, a one year chart, almost every year,
there'll be up months and down months. See, you've got
a long term upward trend, but you've got a short
(11:50):
term up and down trend. And that's what scares people.
Speaker 1 (11:53):
Yeah, so that's why you're a lot of surprised. I
think that we finished with a ten percent for the year.
Speaker 2 (11:58):
It just happens. I'm and it's to me, it's no
point forecasting. All I know is if you hang on
there for long term, it's going to be great again.
Speaker 1 (12:06):
And again, tell me your views on the ETFs and
also on frank dividends and do they overlap to some extent.
Speaker 2 (12:13):
Okay, most people don't understand the difference between ETFs and LICs. Now,
an ETF is an exchange traded fund, which means it's
listed on the stock market and it always trades at
net asset value, which to meets a great it's a
great advantage. Now ETFs it's a broad church. I mean,
(12:37):
there's bitcoin and there's gold, and there's shares. It's there's
all kinds of them, but the essences they are liquid
and they trade at net value a listed investment company.
They trade at what the market pays. So if I've
got one hundred million, if you've got one hundred million
dollar portfolio, the ETF, it will be one hundred million,
(13:00):
but that could be worth as an ally six ninety
five million dollars because it could be. That's why I
much prefer et allies alwise.
Speaker 1 (13:08):
Yes, just to frame it for people listening about the
in terms of looking at this year ahead, you mentioned
that SGC everyone should be alert, of course to the
fact that take a look at your take home pay, folks,
and you will find that it's actually it would have reduced,
I'm sure, because your compulsory mandatory payment into the superannuation
(13:32):
system has now lifted to twelve percent from July one,
twenty twenty five, and that hopefully is the top of
the ladder. Hopefully that's about as far as it goes.
It's going to stop there, we think. But no, just
so you're one of the things you were saying was
because of this more money pours into the market, is
that it literally has to find a.
Speaker 2 (13:50):
Home more demand and I have funds now have to
go up shore because there's not enough Australian shares. But
also just one point there, the boss would normally pay
the superanui himself themselves. You don't. They don't normally reduce
your salary for the for the super.
Speaker 1 (14:08):
But your take home package, if it's inclusive of Super,
the amount going into super actually goes up from eleven
and a half twelve, so your take on cash would
go down in many instances, wouldn't do.
Speaker 2 (14:21):
That's if you've got to take package probably.
Speaker 1 (14:23):
Okay, yes, yes, yeah, all right.
Speaker 2 (14:25):
But for the average working person, the boss will play sleeper.
It's just another on cost on the.
Speaker 1 (14:31):
Boss, right right, okay. And if you're in that, if
you're better off. If you are, if you have that arrangement,
you are better off. But for people are interested in
terms of the share market, then you were talking about
a couple of things you think are very enduringly attractive,
and you mentioned two things. One was frank dividends and
(14:52):
the second was actually you're increasing disposition if you'd like
to invest overseas, explain it. For most people who are
interested in the share market and looking at the new year,
how that might play out this year for them or
should play out for them.
Speaker 2 (15:08):
Well, our share market is only about three percent of
world markets. If you stick to Australia, you're missing out
of ninety seven percent. So I'd rather invest with good
fund managers and they've been doing very good returns in
the Ambassa's market. But you don't get franking. That's the
big difference.
Speaker 1 (15:26):
And your dividends aren't as good.
Speaker 2 (15:27):
No, but the growth is better, yes, And that's going
to be interesting when when the new super reels come
in from next year, because maybe you're better off not
having such huge growth, depends on your portfolio. What I'm
really hoping is we finish this year on a strong note.
(15:50):
So what I wouldn't like is to finish this year
on a very low note, which means there's a much
bigger chance of a big unreal life capital gain in
the twelve months going forward.
Speaker 1 (16:00):
Would Yeah, Actually, what we do we talk about super
in the in the next segment, but just on share market. Okay,
So you make that point that you like many investors
in Australia have gradually and incrementally put more money offshore
than you used to outside the ax and how do
you approach that? You said you really like ETFs, which
(16:22):
you said you also like fund managers, So which how
do you access? How do you start? You're skeptical about
going in and buying a share like Apple or Brukshire
Hathaway or whatever. You think funds are the way.
Speaker 2 (16:32):
In my Accountain told me, don't you did buy any
direct shares I sites, he said, do not do it.
I won't name them, but there's some very good IBOSS
fan managers here. I don't particularly like an Ibos's index
fan because there's too many fans. I'm very happy with
a local index fan, but I did not like an
(16:52):
ices index fan.
Speaker 1 (16:54):
Right. How about buying an index fund that's an Australian
based fund that's investing internationally.
Speaker 2 (17:01):
Well, I'm happy. Well, no, I don't like any I
don't like an indexed obceas portfoilio. I'm very happy with
the OSSI portfoil Yoh. Yes, but I really don't. I
want my overseas manager to be picking the tests and
the palentes and the VIDs.
Speaker 1 (17:18):
Right, yeah, So index for a home base active for overseas, yes, okay, interesting? Yes?
And on the frank dividends front. You mentioned how you
say from many people ETFs side of the way, then
you also say that franking is perhaps underestimated by the
wider population. Are there ETFs that zone in on franking?
Speaker 2 (17:40):
Look, I invest in an ETF which invests in the
top two hundred Ossie shares. But as I said before,
you could have a gold ETF, you can have a
bitcoin e T if you can have any sort of ETF.
What I like about the ETF is liquidity and trains
a net asset and at net asset value. That's what
(18:03):
I like about them. And they're simple.
Speaker 1 (18:05):
Yet, and what do you think in terms of returns
for the year? Had people think that the AESX is
already at the level that it was supposed to reach
at the end of the calendar year. But here we
are at the start of July and the AESX has
basically done its dash. According to many researchers, they think
that it's this is as high as it gets for
the year. What's your view on that.
Speaker 2 (18:27):
After fifty years in this business, I've given up on forecasts.
All forecasts do is give great newspaper headlines. And my
friend Don Stammer had a thing called Factor REX and
don in fact Rex was it was like the black swan,
the thing we never expected like COVID was that factor Rex.
(18:52):
The market plunged with COVID. Remember when Donald Trump did
his tariff thing a few months ago, we had the
biggest fall in the biggest rise in about sixty years.
And that's why I say with shares you must take
a long term view.
Speaker 1 (19:09):
And when these incidents occur, then these X factor incidents
or these black Swan incidents, which is which, as you see,
is what really matters, and you can't forecast them. So
everyone has a forecast for the market, but what they
don't have they couldn't have, and if they did, there
would be zillionaires. Is the item of the event we
can't see coming. Yeah, yeah, so this year's was the tariffs.
Speaker 2 (19:33):
But also what happens is the papers have shock headlines
and this confirms the you of many people's shares. It
too risky for me, and they can't afford to invest
in property and they have and they just sit with
cash in the bank and so don't get the returns
they could get if they knew to hang in there.
Speaker 1 (19:57):
Yeah, this is obviously a concern, isn't it for older Australians.
They're holding on to too much cash. All the reports
show us that, the ATO show us that, but the
returns would have been a little bit better known for
cash recent times.
Speaker 2 (20:10):
Yes, but it's going down. And don't forget that cash
is attacked by inflation and there's no franking. I always
say to people keep if you're retired, keep three years
money in cash or in reliable income streams so you're
never forced to dump good assets when the market's having
(20:33):
one of its normal downturns. And I stress normal downturns.
Once you get around your head that downturns are normal,
it's okay.
Speaker 1 (20:42):
That would apply for everybody, wouldn't it that they should
never sell? Yeah, you don't ever want to sell at
the time. You don't want to sell. You don't ever
want to sell into a distress market.
Speaker 2 (20:52):
And absolutely so, how do.
Speaker 1 (20:54):
People do that if they are when people are in
accumulation phase, is it should they have some cash buffer
or how would you approach that?
Speaker 2 (21:01):
Well, if you're an accumulation funds, you're probably a salary
and wagers earner. I'm talking about mainly with people with
no other income than their portfolio, and then you simply
you can have it all in SUPER and have it
in buckets inside that you can have x in the
cash component. But the trouble there is a lot of
supervanuation funds don't pay very well in the cash components,
(21:24):
and a couple can have eight hundred thousand dollars outside
SUPER and paino attacks. So I'd be keeping my two
or three years cash buffer outside the system.
Speaker 1 (21:36):
Yes, right, outside Super entirely.
Speaker 2 (21:38):
Well, it's easier, you'll get better returns. I mean most
of these funds have allows the cash balance, as I
can tell you.
Speaker 1 (21:45):
Right, So as a structure, you'd have your SUPER, but
you'd also have a cash buffer and that would be
outside SUPER.
Speaker 2 (21:50):
Sure, I think, yeah.
Speaker 1 (21:52):
And this is something you recommend regularly, is it?
Speaker 2 (21:55):
Yes?
Speaker 1 (21:56):
Okay? Very interesting And.
Speaker 2 (21:58):
Also don't forget if you're an older retired couple and
one person dies, the last thing he wants all the
money in Super because it might take you twelve months
to get it. And that's why cashplaff is very important,
particularly if you're.
Speaker 1 (22:12):
Ouder Okay, And I think it's an interesting point for anyone. No,
at any point, as you say, imagine if you had
a cash puffer in earlier this year when the market
took a turn with the tariffs, you'd actually have been
able to take up opportunities. It's something that we don't
talk about very often on the show.
Speaker 2 (22:31):
Sure, but again you must keep that cash. Remember, the
wisest man knows not when the Big four might be
a precursor to another four.
Speaker 1 (22:41):
Yes, well, I.
Speaker 2 (22:43):
Think you're better off just to hang in there. And
how the steady coset irrespective if there's rough seas.
Speaker 1 (22:49):
Yes, okay, very interesting. I want to move into Super
for that. We have a segment coming, folks. We are
going to do some really interesting questions which I've kept.
I've spent kept for No because they're particularly tricky. And
I say to myself, these are the sort of questions
that if no Foot can't answer them, no one can.
I've got them. Are you ready for those? All right, Look,
(23:12):
we take a break. We'll just have a quick look
at Super and then we'll do the questions. Hello, welcome
back to the Australians Money Puzzle Podcast. No, just before
we do go to questions on Super, I think we
should bring people up to speed on two very important things.
One is that the SGC is now moving to twelve percent.
(23:33):
And as we say, there's two dimensions to that. First
of all, be aware of how much your super mandatory
super is to you. Now twelve percent is quite a lot.
How much of your salary is going into super That's
one thing. And also to weigh that up in terms
of what else you do, how else you save, how
else you invest? And as Node says, the flip side
(23:54):
of that, he said, it's twelve percent of every Australian worker.
If their money is going into a super fund, it's
a big super They in turn must invest and in
a way as part of the momentum of the markets. No,
what about the we won't go too far on this,
but Division two ninety six the new super tax fifteen
(24:15):
percent on earnings on amounts above three million, on indexed
and based on realized and on realized gains, very controversial.
Do you think it'll pass in the form that it's
designed and what do you think the impact will be?
Speaker 2 (24:32):
I think they've got the numbers to do it in Parliament.
First thing, I think it's wrong. But be very careful
about moving your affairs around because the more I research this,
you'd probably better staying in sleep with and moving out
of it. This is the whole thing. Now, if your
balance is under three million dollars at June next year,
(24:57):
you are not affect that. You can forget about it.
But the first era of people are making is I've
got a four million dollar fund. I've got I've got
a five million dollar fund. I'm fine, No, you're not.
It's per member, not per fund. So if a five
million dollar fund has got one member with four and
one with one, the four member four billion member is affected.
Speaker 1 (25:21):
Yeah, it's a per capita individual.
Speaker 2 (25:24):
Yes. And the second thing is I keep getting asked
what are my how will it affect my siege by
cost base. What people don't get is their balance sheet
will be prepared as normal. This is not going to
affect their profit loss or balance sheet one iota. This
is just a separate tax as a method of calculating
a super tax. But what they probably don't get is
(25:48):
if you've got a four million dollar balance and your
total capital gain hypothetic. We will say one hundred thousand
dollars on the twelve months, you're only paying fifteen percent
of a core because only the difference. So if you've
got four million dollars in Seper, then it's one quarter
of one quarter of your phone is affected. So the
(26:11):
tax is fifteen percent of one quarter of the gain,
which probably isn't that much. And I spoke to a
doctor who's got sixteen million dollars in Super, mainly in property.
We worked out for him it's going to be about
ninety eight thousand dollars. It's quite small in relation to
his portfolio, and the cost of moving property would be
(26:32):
milliontant stamp duty.
Speaker 1 (26:34):
Right, So you're saying that, whatever it is, and whatever
it's false, that moving it outside Super would be more expensive.
Speaker 2 (26:44):
Possibly because see it's hard to get money out. If
you're wealthy enough to have over three million in Super
each you've probably got a fair bit of money outside Seeper,
and it's very hard to get under the thirty percent racket.
So for most my strong advice is, as I've done,
(27:04):
talk to your account and run the numbers, and I've
decided you're better to stay in even though we hate it.
But also one more thing, one more thing, the transfer
balance cap was increasing to two million dollars. People don't
understand the transfer balance cap. It's the amount you can
transfer to Super Now I did my transfer years ago
(27:30):
at one point six million, my transfer cap is over.
But if I were to put one million dollars, I'd
still have six hundred thousand left to do. So many
people have only used part of the transfer balance cap.
Then they can use part of the remaining if they
wish to to transfer more to Super. And the other
(27:50):
misconception is it does not limit what your pension can
grow to. I know two people have had a very
good year. Their pension balances down four million, but that's
the growth. So if your money in pension mode is
earning more than your withdrawals, then it's growing, which is fine.
Speaker 1 (28:10):
Interesting, okay, all right, as you say it's a very
hot area. I'man just interested in the broad sweep of
what you're saying that in most cases, most of the time,
it's worth reconsidering the tax that even if it arrives,
the difficulty will be moving it will be moving it
outside could be more expensive. And the second short there,
as you say two million, it goes to two million.
(28:30):
That is, folks, two million tax free the amount you
can happen super tax free.
Speaker 2 (28:34):
Now not the amount you could happen super. Yeah, you
can transfer to super after Jene thirtieth, Yes, you haven't
done anything before.
Speaker 1 (28:42):
Then, transfer balance cap. That's right. Strictly technically the taxfer
balance cap, which is our guidance on how much is
tax free and super each year, which is moving from
one point nine to two. Isn't that right?
Speaker 2 (28:51):
July want how much you can move to super? It
can then grow as long as your earnings exceed your withdrawals.
It'll grow.
Speaker 1 (28:59):
That's fine, Yes, and it can as you say, there's
no limit on that. It can grow as much as
it wants.
Speaker 2 (29:06):
Sure. Yeah, but you're still going to take your mandatory
withdrawals and they get bigger as you get out.
Speaker 1 (29:11):
Yeah, that's right. They start at four percent or so
and they go okay, now, questions, all right, where will
we start? I think that we'll start with Mix says, notwithstanding,
that's super bigan a lot smaller than today. It's now
twelve percent as we said, and it starts goes from
eleven point five to twelve percent. This did I want
it started? Mick says. Pension outflows will usually be four percent.
(29:37):
That is the amount that must be spent. Do you
expect someone like me in my thirties will see superannuation
invested more conservatively, given that the big super funds will
have to consider shorter investment horizons to have their liquidity
mixed accurate in the next decade, And what could that
do to my returns? Really good question, Mick. So, what
(29:59):
Mick is saying is he's thirty or so. He knows
that super is changing. He knows that the context in
which are SUPER operates. It used to be that nearly
everybody was in accumulation. It's going to the point where
nearly everybody would be in retirement. Basically, what I'm saying
here is that the emphasis change. The funds must pay
more than they used to, They must pay more pensions
(30:21):
than they used to. Well, that change the nature of
them and SUPER returns ultimately for people like Mick.
Speaker 2 (30:26):
Do you think no, Well, bear in mind, there's a
baby boomer bulge in thirty years. The baby boomers are
all dead and we have a live birth rate and
Marcaels will be wrong. So I've got no fear of
that at all, No fear at all.
Speaker 1 (30:44):
Right, what about pressure on the funds to pay pensions
that weren't there before?
Speaker 2 (30:49):
Yes, but that will be gone by the time he's
sixty five, there will be gone right, the bulge will
be over.
Speaker 1 (30:55):
I see, and I've got a sign.
Speaker 2 (30:57):
If you take control the things you can control, you
won't need to worry about the things you can't. His
major issue now should be investing while he's trying to
get the benefit of compounding. Don't worry about things. Why
a miscontroled.
Speaker 1 (31:11):
Yes, yes, that's there's an observation for you make and
remember this is not advice, information only all right from
David A constant listener. I bought an exchange traded funds
in US small cap shares. I think David is implying
that he bought them having listened to the show directly.
(31:32):
Volatility no problem, but the distributions are at pittance and
on franked. Yes, okay, bringing us back to what we were
talking about at the start of the show, moving cash
out of Australia looking for investments. An easy way, a practical,
pragmatic way into offshore markets is to buy funds. Some
(31:53):
people will buy ETFs, some people will buy active funds.
One thing they have in common know is us dividends
are are really small, right, They're like one point something percent.
Hours are four percent, and you don't get to franking,
so David was surprised when he got his small cap returns.
I think with the US you have to you have
(32:14):
to take that on board, don't you. You The game
is all about growth of the price of your shares
or your fund, not the dividends.
Speaker 2 (32:21):
Hey, James, I think forty years ago you and I
bought Berkshire Hathaway never paid a dividend. I think we'd
be very happy.
Speaker 1 (32:28):
Yes, yes, yeah, very happy because American companies reinvest the profits.
Why don't we? Why don't we.
Speaker 2 (32:38):
Because as sherhowlders want their Frank dividends and they got
to have them.
Speaker 1 (32:42):
So the Frank dividends actually a negative then for the
economy in some ways.
Speaker 2 (32:47):
I don't think they are. But I'm saying that investors
in Australia like Frank dividends and expect companies to pay dividends.
We are more dividend driveling company than most people. This
is why I'm concerned about this unrealized capital gains business
because overseas shares will tend to grow quicker than Australian
shares because we've got more in the yield, we've got
(33:09):
more distributions.
Speaker 1 (33:12):
So you think that's a structural thing that's going to
just that's the way it is now from now on.
Speaker 2 (33:16):
The way it is. Yeah. Right, if you invest the
other thing overseas, you've got a risk in the currency.
That's another issue.
Speaker 1 (33:24):
And how do you account for that?
Speaker 2 (33:26):
Well, it's just life. I mean you're either buy something
hedged or just copied.
Speaker 1 (33:31):
Yes, and what do you do?
Speaker 2 (33:33):
Well, every investment has good points and bad points. I
only invest to manage funds from Australia and most of
them are hedged, but some aren't.
Speaker 1 (33:43):
Okay, So no strict rule on that. Okay. Now finally
question from Ben. This was off the back of course,
we did two shows No lo on crypto. We did it.
Speaker 2 (33:52):
Don't stop me on that.
Speaker 1 (33:53):
Yes, here we go, Yes, yes, I wonderful side you
would have been on. We had a cryptoskeptic who put
forward the skeptics case, and then we did a crypto supporter, which,
believe it or not, was AMP, which of course reacent
if we're twenty seven million into crypto. So we had
the two sides of the bitcoin and we were debating
(34:15):
it basically in the show with two consecutive shows. Now
from those shows, Ben asks isn't a stable coin from
Walmart just like a souped up gift card. Why would
you give Walmart real money for a stable coin just
so they can give you real money back without interest.
I think you're really onto something, Ben. I think the
(34:35):
arrival of very big players into crypto JP Morgan, Walmart, Amazon,
I think they are seeing the payment system change before
their eyes and there it's a grab for territory and power,
and they are getting involved because they say, this is
a new payment system and if we can get a
slice of it early, we will increase our power in it.
(34:58):
I think that's actually self explanatory. The harder it is
people actually investing in it, because they are putting forward
an investment case. And we had Shane Oliver aren't chief
economist of AMP, and he was explaining why AMP put
twenty seven million, twenty seven million into crypto even though
there's no intrinsic value. And I thought to take away
from Shane's explanation was that investment can operate without intrinsic value.
Speaker 2 (35:25):
What do you think, No, Well, think about the tulips
in Holland. Yeah. I mean, look, if you want to
back a horse, you can pick the race and the
jockey and the track. If you want to buy property,
you can pick location. Everything else. You want to buy shares,
you can pick all sorts of factors. You only buy
(35:45):
crypto because you think it's going up. I just don't
like to invest that way, you know. I mean, I
just like things. I know, I understand cash, property in shares.
I don't like dambing and things know nothing about. Look,
it's a gamble to me if you want to gamble, gamble.
Speaker 1 (36:04):
Do you think if if you saw more action in
this area of the RBA AMP, maybe major super fund
coming next, that is an industry fund comes in next,
would you change review?
Speaker 2 (36:15):
No?
Speaker 1 (36:17):
Right?
Speaker 2 (36:19):
You know. The main thing about bitcoin, it's supposed to
be anonymous. This is the point. It suits people who
don't want to be chased by the ato. You know.
But let's see, ok, let's see.
Speaker 1 (36:34):
Let's see, let's see. Indeed. All right, very good, No God,
thank you very much for coming on the show today.
Great to have you on board again. Lovely to talk
to you.
Speaker 2 (36:42):
We'll talk again always, pleasure lovely.
Speaker 1 (36:46):
Thank you, Noel, and thank you everyone for that. Responses
on a crypto shows interesting. I must say we got
a lot much more. We got much more complaints about
Jackie's approach and her skepticism than we did about AMP being,
you know, a century old financial institution putting twenty seven
(37:08):
million into crypto, even though it has yet to be
determined in many ways. If ever, it'll be determined whether
it has intrinsic value or not. That's the debate that
sits there. I thought it was very interesting today looking
forward to the new financial year, and I like where
NOL was coming from. Really, it's not the time you
join the market, it's your time in the market, and
(37:29):
I think that's appropriate for all the acid classes. We
had to look at, Okay, the money puzzle at the
Australian dot com dot au. If you need to tell
us something, to send in something, talk to you soon.
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirby. Welcome aboard everybody. It is the first week
of the new financial year, brimming with opportunities for you,
and I want to explore opportunities and risks in the
new financial year with my special guest today, the author
Noel Whitaker. Who better to join us for a panoramic
(00:33):
look at what's in store for investors over the next
twelve months. It's an ambitious agenda. I will concede immediately,
so I think we should split it into Property Super
then we'll do shares and we'll have a look at
some questions as well. How are you, Noel?
Speaker 2 (00:53):
Very good, James, so nice to be back with you again.
Speaker 1 (00:56):
Delighted to have you on. I know that you are
skeptical about the very notion of a property market. Why
is that you don't even like this notion that we
could talk about the property market terminology.
Speaker 2 (01:09):
There is no such thing as a property market that
we've been pointed by per houses or Black Town units
or Cairne's apartments. I mean, I can talk about property
in a very general way, but people need to understand
that there are many property markets or maybe doing different things.
Speaker 1 (01:27):
I think that's actually come Just this morning, the Rehite
Group have issued a report which is really interesting with
six years of data, and they are saying that the
Australian property landscape has fundamentally changed and that basically the
Queensland coastal regions, Gold Coast, particularly on Sunshine Coast are
(01:47):
the new hotspots in the market. That their price gains
have outpaced the city of Melbourne for instance, four years now,
and that this new order, if you like, where it
always was Sydney first, Melbourne second, Brisbane third, and prices
kind of went into predictable fashion. That they think that's
fundamentally changed. I mean that's relevant, isn't it if you
(02:08):
were an investor.
Speaker 2 (02:11):
Yes. And I also think investing in property is difficult
as we know in Victoria they have passed very harsh
laws against landlords, which is one of the reasons. The
key to property is to add value, which you can't
do to an apartment, which means houses. Now the medium
(02:31):
home in Brisbane's about over one million dollars. Now to me,
it'll be a big leap of faith to buy a
one million dollar investment property when you can be buying
a million dollars of shares. It's a no brainer. Yeah.
Speaker 1 (02:45):
But in terms of this year and the you know,
the parameters of this new financial year, we've had pretty
ordinary property prices performance around the country this year, spectacular, spectacular,
very strong year for shares. Property is about to experience
the impact of interest rates dropping, so I think, I mean,
(03:09):
wouldn't it be a reasonable thing to say that the
outlook for property is promising whatever it might be.
Speaker 2 (03:15):
Well, as you say, interest rates are dropping, and the
more they drop, there are more buyers. Every state government
in the federal government is doing instead for first home buyers.
So you're creating an increasing demand for property, but no
more supply. I mean, they talk about supply, so I
(03:36):
think it's going to be an even type of market
for first home buyers.
Speaker 1 (03:40):
What about foreign investors? I take your point about the incentives.
I mean, Brisbane's leading the pack, aren't they. The state
budget has a scheme for a two percent deposit and
you can buy a million dollar home. I know it's
shared equity, but it stands for two percent twenty thousand dollars.
You can get a million dollar home under a government
scheme in Brisbin and now in the state budget. What
(04:01):
do you think of it.
Speaker 2 (04:02):
I think that's a copy of the federal government scheme. James.
It seems fairly much the same to me. All I
know is that the bar is getting higher and higher,
but also much say, as an investor for a long time,
I don't like property as an investment. It's got big
entry costs. It's the friends of ours just bought a
four million dollar apartment two hundred and fifty thousand dollars
(04:26):
in stamp duty, and you've got big exit fees, and
you've got on the land taxes going up. So with
land tax and rates and insurance and vacancies, you know,
plus the fact that all governments are making it hard
to be a landlord, I think you're much better off
in shares. Shares are so simple. There's nothing to do.
Speaker 1 (04:47):
There's nothing to do when it goes right. But there's
nothing to do when it goes wrong either except dowd
there and watch it. If you have a property, you
can at least improve it, just as you're making that
point at the start.
Speaker 2 (04:58):
But that's what they call the curse of liquidity. Because
shares are liquid, it means that we can buy and
sell any time. We like a an liquidity place with
your mind. If your shares going well, that's great. If
it's not, that I sell or keep. That's why I
think for most people the index fund is just such
a lovely investment. It's average nine percent for one hundred
(05:20):
and twenty years and there are no decisions to make.
You just hang in there. Whereas if you go for
speculative share then there's the bit do I buy or
do I sell?
Speaker 1 (05:31):
Yes, And in terms of just the immediate, as I said,
in terms of the year ahead, in terms of property,
the consensus is that rests will fall, the property prices
will improve. They're currently doing about two percent a year,
two or three, they're going to move to five percent
a year. That's the kind of consensus. How do you
sit with that? Are you would you think that's a
(05:53):
sound or.
Speaker 2 (05:55):
Well, again, it depends on the type of property in
the low Mark and I'd say yes. You talked about
the Sunshine Coast and the Gold Coast. They are two
different markets. The Gold Coast now is just a concrete
jungle with a tower going up on every corner with
no more roads. That's why people are going to the
(06:16):
north coast because you've got trees and no traffic lights.
It's a different area.
Speaker 1 (06:22):
So all property is highly particular, highly localized.
Speaker 2 (06:27):
Very much.
Speaker 1 (06:28):
So Yeah, I mean.
Speaker 2 (06:31):
You're either on the beach or off the beach if
you're buying beachfront property. Big key factors are close to
infrastructure like transport and shops, major key. And I've also
said if you're buying property, the key factory is location
because you can't change that.
Speaker 1 (06:51):
And do you think these other factors and property are
marginal housing incentives, tax lures, or inducements.
Speaker 2 (07:00):
Well, they talk about negative gearing, but given the thirty
percent van now goes to one hundred and thirty five
grand a year, if you lose ten thousand dollars, you
pay seven thousand dollars at that. I mean, negative gearing
is not the magic pudding they think it is. You're
still paying seventy percent.
Speaker 1 (07:20):
Yes, you're still paying out. You're still paying out week
after week or a month after month as you try
to get these capital gains.
Speaker 2 (07:27):
Sure, and if you've got two million dollars in property
and I've got two million dollars in shares, and we
both want one hundred thousand dollars you can't sell the
back bedroom. I can just ring the broker and I've
got the money next day. And that's the big difference.
Speaker 1 (07:41):
Ye hyeah, you can you can't. You can't sell a
part of a property. It's very true. Okay, what we're
going to do is we're going to talk in a
moment about the share market. That's obviously that what everyone's
interested in this year. We've just had an amazing year
ten percent plus on the local market, even better in
the US despite all the distractions. Let's have a look
at the yearhead in one moment. We'll be back in
(08:03):
a minute. Hello, Welcome back to the Australians Money Puzzle
podcast James Kirby with Noel Whittaker. Now we are going
to talk about the share market for a few minutes
and have a look at the year ahead. So let's
(08:23):
just put it on the table. What happened in the
year to June? Noel, a ten percent plus on the
share market eleven or twelve percent plus in the US.
On top of that, dividendial still holding up at four
over four percent in our market. How did you respond
(08:44):
to that performance this year? I mean, was it better
than you might have expected?
Speaker 2 (08:49):
Well, when Donald Trump got in, I'm being asked to myself,
and I say, it's a long game. Hang in there.
No one can pick the short term movements of the market,
but we do know long term it's got an upturned bias.
And as interest rates fur shares are realty more attractive.
(09:10):
So it's interest rates four. If I can get an
effective yield of six percent franc it's much better than
three percent on the term deposit. Yeah, but it's interesting
that every time I make a speech, I ask two
questions tax would you rather pay income tax or GST
(09:31):
or capital gains tax? And nobody knows. Now the no
brain is capital gains tax because you don't pay it
till you sell the asset and death doesn't trigger it,
and you get fifty percent discount when you do that.
I say, who understands franking? No one gets it. They
don't understand it's money for nothing. So once people understand
(09:54):
the unique benefits of shares and franking, credits still go
for them. See I had an investment property. It cost
me two hundred and thirty thousand dollars twenty years ago.
An apartment I've just solved for seven forty I'm only
stell in because it's old. If that would have been
(10:15):
in the index, it would have been worth one point
four million dollars and there would be no sale needed.
That's the big difference with Shees. She could hang on in. Yeah.
But also, as I'm all say too, don't forget the
supervaluation is going to twelve percent this month in July.
That's more money which we're going into the share market
(10:38):
and what I'm moving my portfoilion and that more and
more overseas investment. It's a bigger market, and I'm only
using good managed funds. I would never try to pick
oversea shares on my own, and your accountant says to me,
don't do it. It's a tax nightmare. So stay away
from direct share investment, but you can use good managed funds.
Speaker 1 (11:00):
So when you look at the share market, we did
ten percent. What's a long term average? What would people
reasonably expect on the share market on the AX the.
Speaker 2 (11:08):
Long term average for the all lords accumulation. That's interesting.
Dividends a sorry growth and dividends is about nine percent.
But don't forget there are normally four negative years and
six positive years, and the biggest rises always come after
the biggest falls because people say, how about I jump
(11:29):
out now and get back when the time is right.
When the time is right, it's too late. This is
the whole point. So also, if you look at a
one month, sorry, a one year chart, almost every year,
there'll be up months and down months. See, you've got
a long term upward trend, but you've got a short
(11:50):
term up and down trend. And that's what scares people.
Speaker 1 (11:53):
Yeah, so that's why you're a lot of surprised. I
think that we finished with a ten percent for the year.
Speaker 2 (11:58):
It just happens. I'm and it's to me, it's no
point forecasting. All I know is if you hang on
there for long term, it's going to be great again.
Speaker 1 (12:06):
And again, tell me your views on the ETFs and
also on frank dividends and do they overlap to some extent.
Speaker 2 (12:13):
Okay, most people don't understand the difference between ETFs and LICs. Now,
an ETF is an exchange traded fund, which means it's
listed on the stock market and it always trades at
net asset value, which to meets a great it's a
great advantage. Now ETFs it's a broad church. I mean,
(12:37):
there's bitcoin and there's gold, and there's shares. It's there's
all kinds of them, but the essences they are liquid
and they trade at net value a listed investment company.
They trade at what the market pays. So if I've
got one hundred million, if you've got one hundred million
dollar portfolio, the ETF, it will be one hundred million,
(13:00):
but that could be worth as an ally six ninety
five million dollars because it could be. That's why I
much prefer et allies alwise.
Speaker 1 (13:08):
Yes, just to frame it for people listening about the
in terms of looking at this year ahead, you mentioned
that SGC everyone should be alert, of course to the
fact that take a look at your take home pay, folks,
and you will find that it's actually it would have reduced,
I'm sure, because your compulsory mandatory payment into the superannuation
(13:32):
system has now lifted to twelve percent from July one,
twenty twenty five, and that hopefully is the top of
the ladder. Hopefully that's about as far as it goes.
It's going to stop there, we think. But no, just
so you're one of the things you were saying was
because of this more money pours into the market, is
that it literally has to find a.
Speaker 2 (13:50):
Home more demand and I have funds now have to
go up shore because there's not enough Australian shares. But
also just one point there, the boss would normally pay
the superanui himself themselves. You don't. They don't normally reduce
your salary for the for the super.
Speaker 1 (14:08):
But your take home package, if it's inclusive of Super,
the amount going into super actually goes up from eleven
and a half twelve, so your take on cash would
go down in many instances, wouldn't do.
Speaker 2 (14:21):
That's if you've got to take package probably.
Speaker 1 (14:23):
Okay, yes, yes, yeah, all right.
Speaker 2 (14:25):
But for the average working person, the boss will play sleeper.
It's just another on cost on the.
Speaker 1 (14:31):
Boss, right right, okay. And if you're in that, if
you're better off. If you are, if you have that arrangement,
you are better off. But for people are interested in
terms of the share market, then you were talking about
a couple of things you think are very enduringly attractive,
and you mentioned two things. One was frank dividends and
(14:52):
the second was actually you're increasing disposition if you'd like
to invest overseas, explain it. For most people who are
interested in the share market and looking at the new year,
how that might play out this year for them or
should play out for them.
Speaker 2 (15:08):
Well, our share market is only about three percent of
world markets. If you stick to Australia, you're missing out
of ninety seven percent. So I'd rather invest with good
fund managers and they've been doing very good returns in
the Ambassa's market. But you don't get franking. That's the
big difference.
Speaker 1 (15:26):
And your dividends aren't as good.
Speaker 2 (15:27):
No, but the growth is better, yes, And that's going
to be interesting when when the new super reels come
in from next year, because maybe you're better off not
having such huge growth, depends on your portfolio. What I'm
really hoping is we finish this year on a strong note.
(15:50):
So what I wouldn't like is to finish this year
on a very low note, which means there's a much
bigger chance of a big unreal life capital gain in
the twelve months going forward.
Speaker 1 (16:00):
Would Yeah, Actually, what we do we talk about super
in the in the next segment, but just on share market. Okay,
So you make that point that you like many investors
in Australia have gradually and incrementally put more money offshore
than you used to outside the ax and how do
you approach that? You said you really like ETFs, which
(16:22):
you said you also like fund managers, So which how
do you access? How do you start? You're skeptical about
going in and buying a share like Apple or Brukshire
Hathaway or whatever. You think funds are the way.
Speaker 2 (16:32):
In my Accountain told me, don't you did buy any
direct shares I sites, he said, do not do it.
I won't name them, but there's some very good IBOSS
fan managers here. I don't particularly like an Ibos's index
fan because there's too many fans. I'm very happy with
a local index fan, but I did not like an
(16:52):
ices index fan.
Speaker 1 (16:54):
Right. How about buying an index fund that's an Australian
based fund that's investing internationally.
Speaker 2 (17:01):
Well, I'm happy. Well, no, I don't like any I
don't like an indexed obceas portfoilio. I'm very happy with
the OSSI portfoil Yoh. Yes, but I really don't. I
want my overseas manager to be picking the tests and
the palentes and the VIDs.
Speaker 1 (17:18):
Right, yeah, So index for a home base active for overseas, yes, okay, interesting? Yes?
And on the frank dividends front. You mentioned how you
say from many people ETFs side of the way, then
you also say that franking is perhaps underestimated by the
wider population. Are there ETFs that zone in on franking?
Speaker 2 (17:40):
Look, I invest in an ETF which invests in the
top two hundred Ossie shares. But as I said before,
you could have a gold ETF, you can have a
bitcoin e T if you can have any sort of ETF.
What I like about the ETF is liquidity and trains
a net asset and at net asset value. That's what
(18:03):
I like about them. And they're simple.
Speaker 1 (18:05):
Yet, and what do you think in terms of returns
for the year? Had people think that the AESX is
already at the level that it was supposed to reach
at the end of the calendar year. But here we
are at the start of July and the AESX has
basically done its dash. According to many researchers, they think
that it's this is as high as it gets for
the year. What's your view on that.
Speaker 2 (18:27):
After fifty years in this business, I've given up on forecasts.
All forecasts do is give great newspaper headlines. And my
friend Don Stammer had a thing called Factor REX and
don in fact Rex was it was like the black swan,
the thing we never expected like COVID was that factor Rex.
(18:52):
The market plunged with COVID. Remember when Donald Trump did
his tariff thing a few months ago, we had the
biggest fall in the biggest rise in about sixty years.
And that's why I say with shares you must take
a long term view.
Speaker 1 (19:09):
And when these incidents occur, then these X factor incidents
or these black Swan incidents, which is which, as you see,
is what really matters, and you can't forecast them. So
everyone has a forecast for the market, but what they
don't have they couldn't have, and if they did, there
would be zillionaires. Is the item of the event we
can't see coming. Yeah, yeah, so this year's was the tariffs.
Speaker 2 (19:33):
But also what happens is the papers have shock headlines
and this confirms the you of many people's shares. It
too risky for me, and they can't afford to invest
in property and they have and they just sit with
cash in the bank and so don't get the returns
they could get if they knew to hang in there.
Speaker 1 (19:57):
Yeah, this is obviously a concern, isn't it for older Australians.
They're holding on to too much cash. All the reports
show us that, the ATO show us that, but the
returns would have been a little bit better known for
cash recent times.
Speaker 2 (20:10):
Yes, but it's going down. And don't forget that cash
is attacked by inflation and there's no franking. I always
say to people keep if you're retired, keep three years
money in cash or in reliable income streams so you're
never forced to dump good assets when the market's having
(20:33):
one of its normal downturns. And I stress normal downturns.
Once you get around your head that downturns are normal,
it's okay.
Speaker 1 (20:42):
That would apply for everybody, wouldn't it that they should
never sell? Yeah, you don't ever want to sell at
the time. You don't want to sell. You don't ever
want to sell into a distress market.
Speaker 2 (20:52):
And absolutely so, how do.
Speaker 1 (20:54):
People do that if they are when people are in
accumulation phase, is it should they have some cash buffer
or how would you approach that?
Speaker 2 (21:01):
Well, if you're an accumulation funds, you're probably a salary
and wagers earner. I'm talking about mainly with people with
no other income than their portfolio, and then you simply
you can have it all in SUPER and have it
in buckets inside that you can have x in the
cash component. But the trouble there is a lot of
supervanuation funds don't pay very well in the cash components,
(21:24):
and a couple can have eight hundred thousand dollars outside
SUPER and paino attacks. So I'd be keeping my two
or three years cash buffer outside the system.
Speaker 1 (21:36):
Yes, right, outside Super entirely.
Speaker 2 (21:38):
Well, it's easier, you'll get better returns. I mean most
of these funds have allows the cash balance, as I
can tell you.
Speaker 1 (21:45):
Right, So as a structure, you'd have your SUPER, but
you'd also have a cash buffer and that would be
outside SUPER.
Speaker 2 (21:50):
Sure, I think, yeah.
Speaker 1 (21:52):
And this is something you recommend regularly, is it?
Speaker 2 (21:55):
Yes?
Speaker 1 (21:56):
Okay? Very interesting And.
Speaker 2 (21:58):
Also don't forget if you're an older retired couple and
one person dies, the last thing he wants all the
money in Super because it might take you twelve months
to get it. And that's why cashplaff is very important,
particularly if you're.
Speaker 1 (22:12):
Ouder Okay, And I think it's an interesting point for anyone. No,
at any point, as you say, imagine if you had
a cash puffer in earlier this year when the market
took a turn with the tariffs, you'd actually have been
able to take up opportunities. It's something that we don't
talk about very often on the show.
Speaker 2 (22:31):
Sure, but again you must keep that cash. Remember, the
wisest man knows not when the Big four might be
a precursor to another four.
Speaker 1 (22:41):
Yes, well, I.
Speaker 2 (22:43):
Think you're better off just to hang in there. And
how the steady coset irrespective if there's rough seas.
Speaker 1 (22:49):
Yes, okay, very interesting. I want to move into Super
for that. We have a segment coming, folks. We are
going to do some really interesting questions which I've kept.
I've spent kept for No because they're particularly tricky. And
I say to myself, these are the sort of questions
that if no Foot can't answer them, no one can.
I've got them. Are you ready for those? All right, Look,
(23:12):
we take a break. We'll just have a quick look
at Super and then we'll do the questions. Hello, welcome
back to the Australians Money Puzzle Podcast. No, just before
we do go to questions on Super, I think we
should bring people up to speed on two very important things.
One is that the SGC is now moving to twelve percent.
(23:33):
And as we say, there's two dimensions to that. First
of all, be aware of how much your super mandatory
super is to you. Now twelve percent is quite a lot.
How much of your salary is going into super That's
one thing. And also to weigh that up in terms
of what else you do, how else you save, how
else you invest? And as Node says, the flip side
(23:54):
of that, he said, it's twelve percent of every Australian worker.
If their money is going into a super fund, it's
a big super They in turn must invest and in
a way as part of the momentum of the markets. No,
what about the we won't go too far on this,
but Division two ninety six the new super tax fifteen
(24:15):
percent on earnings on amounts above three million, on indexed
and based on realized and on realized gains, very controversial.
Do you think it'll pass in the form that it's
designed and what do you think the impact will be?
Speaker 2 (24:32):
I think they've got the numbers to do it in Parliament.
First thing, I think it's wrong. But be very careful
about moving your affairs around because the more I research this,
you'd probably better staying in sleep with and moving out
of it. This is the whole thing. Now, if your
balance is under three million dollars at June next year,
(24:57):
you are not affect that. You can forget about it.
But the first era of people are making is I've
got a four million dollar fund. I've got I've got
a five million dollar fund. I'm fine, No, you're not.
It's per member, not per fund. So if a five
million dollar fund has got one member with four and
one with one, the four member four billion member is affected.
Speaker 1 (25:21):
Yeah, it's a per capita individual.
Speaker 2 (25:24):
Yes. And the second thing is I keep getting asked
what are my how will it affect my siege by
cost base. What people don't get is their balance sheet
will be prepared as normal. This is not going to
affect their profit loss or balance sheet one iota. This
is just a separate tax as a method of calculating
a super tax. But what they probably don't get is
(25:48):
if you've got a four million dollar balance and your
total capital gain hypothetic. We will say one hundred thousand
dollars on the twelve months, you're only paying fifteen percent
of a core because only the difference. So if you've
got four million dollars in Seper, then it's one quarter
of one quarter of your phone is affected. So the
(26:11):
tax is fifteen percent of one quarter of the gain,
which probably isn't that much. And I spoke to a
doctor who's got sixteen million dollars in Super, mainly in property.
We worked out for him it's going to be about
ninety eight thousand dollars. It's quite small in relation to
his portfolio, and the cost of moving property would be
(26:32):
milliontant stamp duty.
Speaker 1 (26:34):
Right, So you're saying that, whatever it is, and whatever
it's false, that moving it outside Super would be more expensive.
Speaker 2 (26:44):
Possibly because see it's hard to get money out. If
you're wealthy enough to have over three million in Super
each you've probably got a fair bit of money outside Seeper,
and it's very hard to get under the thirty percent racket.
So for most my strong advice is, as I've done,
(27:04):
talk to your account and run the numbers, and I've
decided you're better to stay in even though we hate it.
But also one more thing, one more thing, the transfer
balance cap was increasing to two million dollars. People don't
understand the transfer balance cap. It's the amount you can
transfer to Super Now I did my transfer years ago
(27:30):
at one point six million, my transfer cap is over.
But if I were to put one million dollars, I'd
still have six hundred thousand left to do. So many
people have only used part of the transfer balance cap.
Then they can use part of the remaining if they
wish to to transfer more to Super. And the other
(27:50):
misconception is it does not limit what your pension can
grow to. I know two people have had a very
good year. Their pension balances down four million, but that's
the growth. So if your money in pension mode is
earning more than your withdrawals, then it's growing, which is fine.
Speaker 1 (28:10):
Interesting, okay, all right, as you say it's a very
hot area. I'man just interested in the broad sweep of
what you're saying that in most cases, most of the time,
it's worth reconsidering the tax that even if it arrives,
the difficulty will be moving it will be moving it
outside could be more expensive. And the second short there,
as you say two million, it goes to two million.
(28:30):
That is, folks, two million tax free the amount you
can happen super tax free.
Speaker 2 (28:34):
Now not the amount you could happen super. Yeah, you
can transfer to super after Jene thirtieth, Yes, you haven't
done anything before.
Speaker 1 (28:42):
Then, transfer balance cap. That's right. Strictly technically the taxfer
balance cap, which is our guidance on how much is
tax free and super each year, which is moving from
one point nine to two. Isn't that right?
Speaker 2 (28:51):
July want how much you can move to super? It
can then grow as long as your earnings exceed your withdrawals.
It'll grow.
Speaker 1 (28:59):
That's fine, Yes, and it can as you say, there's
no limit on that. It can grow as much as
it wants.
Speaker 2 (29:06):
Sure. Yeah, but you're still going to take your mandatory
withdrawals and they get bigger as you get out.
Speaker 1 (29:11):
Yeah, that's right. They start at four percent or so
and they go okay, now, questions, all right, where will
we start? I think that we'll start with Mix says, notwithstanding,
that's super bigan a lot smaller than today. It's now
twelve percent as we said, and it starts goes from
eleven point five to twelve percent. This did I want
it started? Mick says. Pension outflows will usually be four percent.
(29:37):
That is the amount that must be spent. Do you
expect someone like me in my thirties will see superannuation
invested more conservatively, given that the big super funds will
have to consider shorter investment horizons to have their liquidity
mixed accurate in the next decade, And what could that
do to my returns? Really good question, Mick. So, what
(29:59):
Mick is saying is he's thirty or so. He knows
that super is changing. He knows that the context in
which are SUPER operates. It used to be that nearly
everybody was in accumulation. It's going to the point where
nearly everybody would be in retirement. Basically, what I'm saying
here is that the emphasis change. The funds must pay
more than they used to, They must pay more pensions
(30:21):
than they used to. Well, that change the nature of
them and SUPER returns ultimately for people like Mick.
Speaker 2 (30:26):
Do you think no, Well, bear in mind, there's a
baby boomer bulge in thirty years. The baby boomers are
all dead and we have a live birth rate and
Marcaels will be wrong. So I've got no fear of
that at all, No fear at all.
Speaker 1 (30:44):
Right, what about pressure on the funds to pay pensions
that weren't there before?
Speaker 2 (30:49):
Yes, but that will be gone by the time he's
sixty five, there will be gone right, the bulge will
be over.
Speaker 1 (30:55):
I see, and I've got a sign.
Speaker 2 (30:57):
If you take control the things you can control, you
won't need to worry about the things you can't. His
major issue now should be investing while he's trying to
get the benefit of compounding. Don't worry about things. Why
a miscontroled.
Speaker 1 (31:11):
Yes, yes, that's there's an observation for you make and
remember this is not advice, information only all right from
David A constant listener. I bought an exchange traded funds
in US small cap shares. I think David is implying
that he bought them having listened to the show directly.
(31:32):
Volatility no problem, but the distributions are at pittance and
on franked. Yes, okay, bringing us back to what we were
talking about at the start of the show, moving cash
out of Australia looking for investments. An easy way, a practical,
pragmatic way into offshore markets is to buy funds. Some
(31:53):
people will buy ETFs, some people will buy active funds.
One thing they have in common know is us dividends
are are really small, right, They're like one point something percent.
Hours are four percent, and you don't get to franking,
so David was surprised when he got his small cap returns.
I think with the US you have to you have
(32:14):
to take that on board, don't you. You The game
is all about growth of the price of your shares
or your fund, not the dividends.
Speaker 2 (32:21):
Hey, James, I think forty years ago you and I
bought Berkshire Hathaway never paid a dividend. I think we'd
be very happy.
Speaker 1 (32:28):
Yes, yes, yeah, very happy because American companies reinvest the profits.
Why don't we? Why don't we.
Speaker 2 (32:38):
Because as sherhowlders want their Frank dividends and they got
to have them.
Speaker 1 (32:42):
So the Frank dividends actually a negative then for the
economy in some ways.
Speaker 2 (32:47):
I don't think they are. But I'm saying that investors
in Australia like Frank dividends and expect companies to pay dividends.
We are more dividend driveling company than most people. This
is why I'm concerned about this unrealized capital gains business
because overseas shares will tend to grow quicker than Australian
shares because we've got more in the yield, we've got
(33:09):
more distributions.
Speaker 1 (33:12):
So you think that's a structural thing that's going to
just that's the way it is now from now on.
Speaker 2 (33:16):
The way it is. Yeah. Right, if you invest the
other thing overseas, you've got a risk in the currency.
That's another issue.
Speaker 1 (33:24):
And how do you account for that?
Speaker 2 (33:26):
Well, it's just life. I mean you're either buy something
hedged or just copied.
Speaker 1 (33:31):
Yes, and what do you do?
Speaker 2 (33:33):
Well, every investment has good points and bad points. I
only invest to manage funds from Australia and most of
them are hedged, but some aren't.
Speaker 1 (33:43):
Okay, So no strict rule on that. Okay. Now finally
question from Ben. This was off the back of course,
we did two shows No lo on crypto. We did it.
Speaker 2 (33:52):
Don't stop me on that.
Speaker 1 (33:53):
Yes, here we go, Yes, yes, I wonderful side you
would have been on. We had a cryptoskeptic who put
forward the skeptics case, and then we did a crypto supporter, which,
believe it or not, was AMP, which of course reacent
if we're twenty seven million into crypto. So we had
the two sides of the bitcoin and we were debating
(34:15):
it basically in the show with two consecutive shows. Now
from those shows, Ben asks isn't a stable coin from
Walmart just like a souped up gift card. Why would
you give Walmart real money for a stable coin just
so they can give you real money back without interest.
I think you're really onto something, Ben. I think the
(34:35):
arrival of very big players into crypto JP Morgan, Walmart, Amazon,
I think they are seeing the payment system change before
their eyes and there it's a grab for territory and power,
and they are getting involved because they say, this is
a new payment system and if we can get a
slice of it early, we will increase our power in it.
(34:58):
I think that's actually self explanatory. The harder it is
people actually investing in it, because they are putting forward
an investment case. And we had Shane Oliver aren't chief
economist of AMP, and he was explaining why AMP put
twenty seven million, twenty seven million into crypto even though
there's no intrinsic value. And I thought to take away
from Shane's explanation was that investment can operate without intrinsic value.
Speaker 2 (35:25):
What do you think, No, Well, think about the tulips
in Holland. Yeah. I mean, look, if you want to
back a horse, you can pick the race and the
jockey and the track. If you want to buy property,
you can pick location. Everything else. You want to buy shares,
you can pick all sorts of factors. You only buy
(35:45):
crypto because you think it's going up. I just don't
like to invest that way, you know. I mean, I
just like things. I know, I understand cash, property in shares.
I don't like dambing and things know nothing about. Look,
it's a gamble to me if you want to gamble, gamble.
Speaker 1 (36:04):
Do you think if if you saw more action in
this area of the RBA AMP, maybe major super fund
coming next, that is an industry fund comes in next,
would you change review?
Speaker 2 (36:15):
No?
Speaker 1 (36:17):
Right?
Speaker 2 (36:19):
You know. The main thing about bitcoin, it's supposed to
be anonymous. This is the point. It suits people who
don't want to be chased by the ato. You know.
But let's see, ok, let's see.
Speaker 1 (36:34):
Let's see, let's see. Indeed. All right, very good, No God,
thank you very much for coming on the show today.
Great to have you on board again. Lovely to talk
to you.
Speaker 2 (36:42):
We'll talk again always, pleasure lovely.
Speaker 1 (36:46):
Thank you, Noel, and thank you everyone for that. Responses
on a crypto shows interesting. I must say we got
a lot much more. We got much more complaints about
Jackie's approach and her skepticism than we did about AMP being,
you know, a century old financial institution putting twenty seven
(37:08):
million into crypto, even though it has yet to be
determined in many ways. If ever, it'll be determined whether
it has intrinsic value or not. That's the debate that
sits there. I thought it was very interesting today looking
forward to the new financial year, and I like where
NOL was coming from. Really, it's not the time you
join the market, it's your time in the market, and
(37:29):
I think that's appropriate for all the acid classes. We
had to look at, Okay, the money puzzle at the
Australian dot com dot au. If you need to tell
us something, to send in something, talk to you soon.
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