May 1, 2025 • 26 mins
Fund manager Geoff Wilson is at it again...campaigning for investors against poorly designed tax changes...and this time he has a major fight on his hands. Taxing unrealised gains (or paper gains) in super is a shocker, but it's a key policy for the government...and the government is set to be returned after the election.
Geoff Wilson of Wilson Asset Management joins James Kirby, Associate Editor-Wealth in this episode
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In today's show, we cover...
* The problem with the new super tax...and how it could be fixed
* Why Australian interest rates may fall a lot further than the market expects
* The case for sticking with US shares
* Defensive stocks for the months ahead
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 (00:08):
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirby Fund the Australian. Welcome aboard everybody now. My
guest today is one of the best known figures in
the investment markets in Australia. It's Jeff Wilson and he
runs the six billion dollar Wilson Asset Managed Group. It
is a group which has funds listed on the stock market.
(00:28):
It also has an operation aside operation if you like,
which is the Future Generation Fund. It's a charitable operation
and we had Caroline Gurney on the show a few
months ago who runs that side of things. Now, in
recent years Jeff has come to prominence because more than
just acting as a fund manager, he does act as
something of an investor representative for momandell investors across Australia
(00:49):
because he has about one hundred and thirty thousand investors
on the books. And he came to prominence in the
public domain some years ago in the Frank Dividends of affair.
We might call it the ill fated attempt to change
Frank dividend rules, which he mounted quite a successful campaign on.
Now today, with the ALP almost certain to be re
elected in the new parliament. He's come to prominence again
(01:13):
because the reelection of Albanesi Chalmers combination will mean it
will mean, folks, the reintroduction of an attempt to put
in a new tax on super And it's not so
much that it's a new tax, okay, but it's the
nature of this tax based on realized gains, unrealized gains,
that is, paper gains, that's going to cause all sorts
(01:33):
of trouble down the track. Since I've got him in
the studio, first of all, I just want to take
the opportunity to ask him about how he sees investment
markets right now.
Speaker 2 (01:43):
How are you, Jeff James. I'm in good form, good,
a little bit stressed because I know everyone's going to
buy it in a couple of days time. And the
consequences what you said of this new tax, the tax
on unrealized guains, I think will be pretty devastating for
number people and probably not for the reasons people think
that we can talk about that lighter.
Speaker 1 (02:04):
Yeah, yeah, we will. And first of all, we mentioned
how you run Wilson Asset Management and it has sort
of fingers and all sorts of pies these days, since
even since I told you last year, have a whole
range of funds. But tell me got feeling. I mean,
one of the big debates at the moment is not
just about Trump and tariffs and what's happened with the
share markets and how they're particularly volatile, but a sense
(02:26):
that and a debate, open debate among the big super funds,
that this golden era that we've known all our lives
for the US is the be all and end all
of investment markets where it's seventy percent or so of
the global index, that that might be coming to an
end waning, and that people shouldn't be in the US
as much as they used to be. That's you or
(02:47):
me or anyone. What's your view on that?
Speaker 2 (02:49):
I think that's a little bit more on the extreme side.
I think no doubt over the next period of time.
If you're looking in the next six months, where would
you prefer to have your mind? One of the places
I prefer to have my money is actually in Australia.
When I look at countries, I try to look at
them similarly to how I look at companies. So if
(03:10):
I'm buying shares in a company, like what we try
to do is buy undervalue growth companies when we can
see a catalyst is going to change the valuation. And
we've got a rating system, and on our rating system,
one of the significant parts of that rating system is management. Now,
if I looked at the US and thought, do I
want to invest in the US? I really like the business,
(03:32):
I like the structure, I like the entrepreneurial spirit, I
like a lot of things. But do I like the CEO?
And how would I rate him? And we rate our
CEOs out of ten, I'd probably rate him four. Okay,
maybe I'm generous, right, he wouldn't rate a buy on
our rating system. Okay, But the management is only a
(03:55):
part of it, and that's probably about twenty five percent
of our rating system. The other is the underlying the
position it is, and also the valuation you're paying. So
the US is in a very good position the underlying earnings.
Even though there's going to be a bit of pain
in the short term with the economy when instruments continue
(04:15):
to come down, then you've got a one of the
biggest consumers globally. To me, medium long term, I'm still
positive about the US. The thing is, we've just got
this bad CEO for four years. Let's hope it's twenty
four years.
Speaker 1 (04:31):
I've got to see. Yes, yes, he might be planning
something different, all right, And tell me looking at the
ESX then on the raw numbers that is ourn X
estimate's GDP of the country, the dividend yield that the
AX doesn't seem to be outstanding the attractive this year.
What is it that you like?
Speaker 2 (04:51):
No, I mean it's a fair comment. I suppose what's
my view on the market per se, and this includes
global markets. We've all learned, and we've been around the
markets long enough is it's very hard to market time
and I can never guess the top of the bottom,
and I don't think anyone really can. And what you
learn is it's really time in the market rather than
timing of the market. And so that's the logic. But
(05:15):
if you wanted to time the market a little bit
and watch your view, I think things are going to be.
You know, I remember my dad who's now somewhere else,
passed away, but he loved the selling may and go away.
Oh yes, we're just in May. Looking at the US market,
it is a bit of a selling may and go away.
The economic numbers are going to be very challenging over
(05:37):
the next month or two, and we're going to see
a lot of the negative impacts from the Trump taroff tantrums. Now,
if I was in the US, anything I want for
the next two or three months, I'll be.
Speaker 1 (05:49):
Buying now, right, So why is that, Jeff.
Speaker 2 (05:52):
Well, not shares, but no, this is actually just consumables, okay,
because it takes about fifty to fifty five days for
the inventores to dry.
Speaker 1 (06:03):
Up, and then the tariff extra sort of procula through
the systems that.
Speaker 2 (06:06):
Well, effectively, anything you're buying from China, like they got
turned off a few weeks ago, So anything that's made
in China in fifty to fifty five days from the
day they were turned off, there's going to be no stock.
I think the next month or two from a US
perspective is going to be very challenging. Our higher inflation
(06:28):
maybe like lack of inventory. You know, there's going to
be a lot of confusion from CEOs you're better off.
When does that uncertainty sit on the sideline? I still
think medium long term it's positive and it all work
its way out. But then if you look back at Australia,
we're going to be exported deflation from particularly China, so
our products if anything, might become cheaper.
Speaker 1 (06:50):
You mean our televisions and are got to come down.
Speaker 2 (06:53):
Yeah, exactly, it could. Well, like maybe it's not deflationary,
but it's definitely not inflationary from ours.
Speaker 1 (07:00):
Yeah, they've got the prices will be stable. Tell me
what you think about the there's a theory abroad of
course also that one of the reasons the ASX is
holding up so well is not so much the raw numbers,
but that global fund managers see us as a safe
place and that's one of the reasons. For instance, they
come well bank is defining all criticism, all speculation, and
(07:23):
it's sitting up there at one hundred and sixty bucks
when people think its value with thirty percent lower. What's
your view?
Speaker 2 (07:29):
I think the valuation is probably a lot lower than lower.
Speaker 1 (07:32):
Is that right? Okay to me?
Speaker 2 (07:34):
Unfortunately it's the passive money, like it's trading on what
three and a half times assets. But just going back
to Australia on the big picture, Yes, you know how
the market is forecasting say three or four in straight
cuts on our information, and we've just created a new
fund where income maximizer when known for being equity people.
(07:56):
We've employed some people that used to work at the
Reserve Bank, et cetera, helping us on the debt side.
The income maximizer has equity and debt, and we're getting
really good information on the dead side. Now we would
be saying there's going to be five or six interest
rate cuts in Australia, we think it is going to
be signifantly more similarary and more positive for equities than
(08:18):
the market's anticipating. We think that's very good quality information
that we're getting there.
Speaker 1 (08:24):
Right when we look at the expectations for interest rates,
there's something rare. Three to four is the most I've heard. Yes,
what is it that is suggesting that they could be
deeper than the consensus?
Speaker 2 (08:35):
Now, speaking to people very close to the decision making process,
we think they are obviously concerned from an Australian context,
about the fact that we have deflation and they are
not concerned about inflation at all. So that's a big change.
So they are ready to cut whenever they can.
Speaker 1 (08:55):
Okay, and then this then underpins an optimistic view of
Australian share price valuations. Okay, but reversing that in some ways.
The bell Weather stock for our market is Comebank, and
I didn't mean to talk about one stock, but banks generally,
you think the true valuation is more than thirty percent
lower than where they are. At the same time, we've
(09:16):
got stimminus coming, so that valuation might remain academic one percent.
Speaker 2 (09:21):
People are going to go for yield. I go for
the banks. Shall the passive money. We think it's that
phenomenal amount of money that is passive these days. So
to me, that's been a big driver of the significant
overvaluation of Combank.
Speaker 1 (09:37):
Okay, very interesting, Jeff, Thank you. Look, I think we'll
go for a break and we will come back and
talk about the issue at hand for all investors ultimately,
if they don't make some changes to the plan tax
back in a moment. Hello, Welcome back to The Australian's
(10:03):
Money Puzzle podcast. James Kirby talking to Jeff Wilson of
Wilson Asset Management. Now, folks, to introduce the issue. You
may have heard, I'm sure you have that there's a
lot of controversy around a new supertax which is planned
by the government, and the government plans to reintroduce this
tax or at least have a second go at bringing
(10:24):
it in if they're re elected. It looks very likely
they will be re elected. So here's the thing. It's
a tax on earnings in SUPER above three million. Most
people say, well, who cares?
Speaker 2 (10:36):
You know?
Speaker 1 (10:36):
How many people have earning above three million per capita?
I might add per capita, right, so that's like a
couple could have six million. But the thing is, well,
what most people I have found I'm going to ask
Jeff this I have found in almost everyone I speak to.
It's not that they're crazy angry about attacks. It's the
scheme and nature and design of this tax. Jeff, could
(10:58):
you explain what's so problem about the plan tax to
basically tax wealthy people and super who have earnings above
three million.
Speaker 2 (11:07):
I don't think anyone is concerned that they've increased double
the tax rate on people that have more than three
million dollars in SUPER. I mean one of the big
concerns is for younger people, people that worked hard, people
that have their money in Super. The fact that that
three million dollars isn't indexed.
Speaker 1 (11:26):
To explain to people why that's a big problem. It
means that every year, as inflation kicks in more and
more people get into the net, So three million if
it isn't index in effect they say in ten years time,
that's going to be two millions a day or one
half inter the day. Is it is going to come down,
So bas it's going to come down and trap more
people every year. That's a big problem, isn't it that
(11:47):
it's not indexed.
Speaker 2 (11:48):
One oundred percent? And we did a little white paper
for discussion that we published this week, and in it
we talked about Anthony Albernici. I mean, he's in a
defined benefit scheme so he doesn't get impacted by this,
but it's nearly the equivalent of him having half a
million dollars in today's dollars in super So eventually, if
(12:09):
you're young enough, everyone will get caught because of inflation.
So I'm lucky. I suppose I come in the category.
You probably do two James in the boomer category.
Speaker 1 (12:19):
Just about.
Speaker 2 (12:22):
We've done well. And to me, how can a government
disadvantage the younger people that are in theory going to
have more of the tax burden to look after us
in our old age.
Speaker 1 (12:33):
Because they've got to put thirty percent to effectively thirty
percent on super for people coming down the line. But
the issue that's driving people people are literally enraged about
is that the tax, the new tax. Specifically, folks, Okay,
the new tax is fifteen percent for over three million
on top of the existing fifteen percent for over two million, right,
(12:53):
so it's thirty percent over three million. Effectively, put fifteen
percent the new tax. This is daft the way it's just,
but it's got to be applied on realized games. Can
you explain to the everyday investor what that means, Jeff,
and it's complications?
Speaker 2 (13:09):
Yes, Okay, So if I was fortunate enough, I'm sixty
seven now, but say twenty seven years ago when I
started my business, so I didn't Yeah, I put some
of them my money in Super. I didn't have much
money in Super then, and maybe I put it in
some shares of Promticus and I think they were trading
around sixty or seventy cents. Then now say I put
(13:32):
one hundred thousand dollars in Yeah, I don't know the
exact numbers, but that would be now tens of millions
of dollars.
Speaker 1 (13:38):
Yeah, you hit the jackpot.
Speaker 2 (13:39):
So then what would happen is I added myself managed
Super fun. Of course, I've got more than that three
million dollars and I want to keep it for the
rest of my life because I think he's such a
great manager and it's going to keep going well. But
the government saying, now, no, you can't. Well you can,
but you've got to pay thirty percent tax on the
(14:01):
increase in value above the three million dollars. So how
are you going to pay that tax? You either pay
me personally, so I've got to go and borrow money
and I don't want to do that and pay or
I've got to get the money out of my super
fund and I don't want to sell my shares.
Speaker 1 (14:16):
So it's a paper again, you haven't got the money.
It's a paper gain. And pro Medicus, for all we know,
could have a scandal and it could fall fifty percent one.
Speaker 2 (14:24):
Dred percent and at the end of June, you know,
like we've seen the volatility in the market we've had recently,
and pro Medicus did fall tens of dollars, and they
work it out of the end of June, and then
crashes tend to be in October, like remember the eighty
seven crash, in the eighty.
Speaker 1 (14:40):
Nine crash, Yes, sure, so.
Speaker 2 (14:42):
I've got to pay tax on this pretend gain. Yes,
and then by the time I'm ready to pay the tax,
the share price could have fallen thirty or forty percent.
And to me, it's more brutal than that. It will
destroy all the risk taking. It's the unintended consequences. And
there's four point two trillion dollars in superannuation that supports that.
(15:06):
It's the lifeblood of the Australian economy. Currently. I'm talking
to you from a technology hub and I was talking
to the founder of this technology hub and he was
saying that fifty to sixty percent of their money that
they get people putting into these exciting startups is from superannuation,
(15:28):
self managed superannuation. I know an individual who put two
million dollars into a technology business. He's the major funder,
the major shareholder. It's now worth thirty million dollars. And
he said, what can I do. I can't sell, there's
no liquidity, the company doesn't make any money.
Speaker 1 (15:46):
Yeah, he can't sell, but he's going to be taxed
under this plan every year for the paper improvement and
the value of the business. And this is the CrOx
of the issue, isn't it this is what everyone is
curious about. So, but it seems the government is dead
set on this unrealized gains. Well, maybe we'll briefly say
that the theories as to why they are. One theory
(16:07):
was that the big super funds couldn't give individual member numbers,
so they just went with a disc Another theory that
you it's a theory is that they said, well, really,
well to people who have more than three million and
supertend to have lots of different money in different places,
and so we want to make sure we capture it.
But you said, look, you can put them all into
one fund and nominate that fund and people will be
honest in that and they'll have to. But the thing
(16:30):
is cut to the chase. Your whole premise is that
they should just tax actual gains is common practice across
the super system. But when I look at my own
SMSF Jeff, and I'm sure everyone's is the same, and
I'm not retired far from it, But the actual gains
in my SMS each year and the unrealized gains, the
(16:51):
actual gain is only a fraction of the unrealized games
on a good year like it was last year. So
in the government saying if we just tax actual gains,
we won't get the money we're looking for.
Speaker 2 (17:00):
Well, unfortunately, what they don't realize is they're not going
to get the money they're looking for anyway. Okay, right,
what is that because everyone changes their behavior. Yes, and
we've done a study and we actually think the negative
impact on the Australian economy will be ninety four point
five billion dollars. And that's people not investing in technology
(17:23):
companies which employ people, et cetera, et cetera. And also
on our analysis, we think a lot of people will
take their money out of super I think everyone who
was a tax on realized gains everyone sort of accepted, hey,
look we've had a very good run. It's been very
good for us. We're happy to pay more tax. The
(17:44):
fact that it's on unrealized gains is now changing everyone's behavior.
You mentioned we've got one hundred and thirty thousand investors
that we manage money on their behalf. I've had hundreds
of them contacting us. There was one I was talking
to just the other day. He's a grandfather, worked hard
all his life, had his self managed super fun. He's
(18:05):
got a reasonable amount of money in that self managed
super fund. He said, what I'm going to do is
I'm going to take it all out down to the
three million dollars. He's in his early eighties where he
can do that without any penalties. He said, I'm probably
too old to upgrade my own principal place of residence,
which is no tax. Yes, what I'm going to do
is I'm going to give the money to my grandchildren
(18:26):
to buy their principal place of residence.
Speaker 1 (18:28):
Yes.
Speaker 2 (18:29):
So it's actually going to be negative. And we've seen
this in the UK. The UK increased the capital gains tax.
I think it was close different rates, but close to
twenty percent. So you'd think, oh, if you've increased the
capital gains tax by twenty percent, you'd be receiving twenty
percent more tax. The numbers just came out the other day.
The tax take is down the equivalent of three billion
(18:53):
Australian dollars. It's down ten.
Speaker 1 (18:55):
Percent because people changed, because people knew it was coming
and they said, listen, I'm going to have that. Okay,
what about you mentioned in your paper about Norway where
they had a particular specific unrealized gains tax and the
money just flooded out of the country.
Speaker 2 (19:10):
I mean, just what a disaster for any risk take
to me, the effect will be as significant. So everyone
works out, hey, we don't want to take significant risk
in inliquate assets. We're not going to back any Australian.
We're not going to support Campbell or Alassian in their
early days. And what exactly happened with the unrealized caval
gains tax in Norway their first unicorn, the first person
(19:34):
that has crowded a company worth a billion dollars but
it made no money. He was one of the co founders,
a big shareholder, and he was going to have to
pay tax on a theoretical value that he couldn't do,
and he left. He left Norway. And I think that
people with the greatest amount of money, I think one
hundred of them have left Norway. The impact on Australia
(19:57):
will be seeing multiples of what they might get from
the people that get trapped, you know, like the technology investor.
I said, also, I had a farmer that rang me
the other day. You know, there's three thousand and five
hundred farms. These are sort of generational farms that the
people have put them in the super fun there's three thousand,
(20:20):
five hundred above three million that will be caught by this,
So there'll be three thousand, five hundred farms for sale.
I had someone a farmer ring me the other day.
He's got a farm about eight k out of Goldwin.
He had alone on it. During the GFC the banks
called in the lane. He nearly went under. He sold
half the farm, and then he did, I'm not going
(20:40):
to get caught again. So what did he do? He
put in hisself managed super fun He thought he was
safe for the rest of his life.
Speaker 1 (20:46):
That's probably the extreme version, isn't it. Where you got
a farm, it's a relatively little return on assets in
the farm is but the assets go up because the
landry value said, doesn't mean you're going to sell it,
but you'd have to pay tax on it. Okay, I
think people will understand that now, Jeff.
Speaker 2 (21:01):
Yes.
Speaker 1 (21:01):
So here's the thing. Is there any chance we'll assume
the government get back in. We know the treasure has
said it's unfinished business. He is determined to bring this in.
He needs the revenue. It's one of the few big
ticket revenue items. There was some alternatives proposed. One is
actual just tax actual gains, which was your one. What
about the notion of a deeming rate like they have
(21:23):
for pensions anyway?
Speaker 2 (21:24):
Yeah, Look, anything, I'm incredibly open.
Speaker 1 (21:27):
Anything is better than what's on the table.
Speaker 2 (21:29):
Anything that taxing a profit that you might never make
or may never have. Yeah, and destroying people's livelihoods and
impacting significantly the entrepreneurial spirit of Australia which we've flourished
on for tens of hundreds of years.
Speaker 1 (21:45):
Okay, And it sounds to me your campaign's really only
starting because it's alda start again, isn't it.
Speaker 2 (21:51):
Well one hundred percent. The unfortunate thing is we actually
started when it was announced in February twenty three. And
on any reason it's getting a lot of airplane now
is they've already got it through one House and they've
got to get it through the Senate. And we've been
talking to the various cross benches each of the parties.
(22:12):
We send a letter to the two and twenty eight politicians.
We're going to send our report to them. We're trying
to work out whether we send it before the election
are after. The reason it's getting a lot of play
this week is obviously PI is an election and the
beautiful thing is it's bringing it to everyone's front of mind,
and from my perspective is the government they actually should
lose the election on this. Now, the election occurs on
(22:35):
the weekend. Whatever happens happens, but we've got to keep
fighting to have it stopped going through the Senate. And
what we need is the Libs there, We need Pocock,
we need Lamby and the Cross benches to hold firm
because it's only by one vote and.
Speaker 1 (22:50):
Of course those numbers might be turned upside down in
the election. Okay, we leave that for the moment. We'll
be back in a moment. We have some quick questions
and Jeff's going to stay with us, which I'm delighted
to be able to have him to cover these all.
Right back in the moment. Hello, Welcome back to The
(23:14):
Australian's Money Puzzle. James Kirby here with Jeff Wilson. Okay, Jeff,
we take listener questions every week. I just have kept
two for you. Actually one listen to question. I'll just
briefly read it, but you might well. I think most
people are mystified by this. And even though you're an
experienced for manager, I bet you don't have the answer,
or at least you don't have the answer that the
(23:34):
banks would try and justify it. What happens to money
in the banking system when there are transfers on public holidays.
This is from Paul. My daughter transferred money that left
for Saint George account on Good Friday, and it had
not arrived in my account by Tuesday, the twenty second
of April, that's six days later. I asked the bank
what happened, and they said they do not process transferreds
on weekends or public holidays. I asked where the money
(23:58):
was kept for those five days. I was told they
couldn't answer that. The bank is obviously doing very well
from this archaic practice. Now, once upon a time, when
money was pushed around, perhaps carried in little paper bags
from one bank to another, we could understand a couple
of days. It's now I expect a bush of a button.
I expect it takes about two microseconds from money beta transferred.
(24:19):
Is that the answer? Do you reckon, Jefford? Do you
know anything else?
Speaker 2 (24:22):
Yeah? I think that's a good answer, and to me,
that's right. Who made the interest over that period of time?
Speaker 1 (24:27):
There's a lot of money washing around.
Speaker 2 (24:29):
I know that's what he's got to drill down with.
I mean someone would have Yeah, that's probably pretty good analysis.
Find out who made the money and invest in them.
Speaker 1 (24:38):
That sounds like a bank, all right. Gary asks what
are the best defensive stocks on the ASX during this
very wild period on the share market? Yeah, asked that
all the time. Of course, I don't know if you
want to go quite selective on stocks, but you could
talk about sectors whatever.
Speaker 2 (24:52):
Yeah, I think I think more big picture, like our
view is the interest rates dropping. There's going to be
more interest right falls over the next twelve months than
the market's anticipating. So there, what you want is you
want those high yielding, defensive stocks, you know that will
benefit from lower interest rates. I haven't got any individual stocks, shirt,
(25:16):
We've got twenty people back at the office that drill
down in the individual stocks. A more bigger picture of
these days.
Speaker 1 (25:23):
Okay, but high yielding stocks in good shape obviously with
decent fundamentals as well. Okay, very good. Hey, great to
have you on the show, Jeff, and thank you very
much for coming on.
Speaker 2 (25:35):
I thank you, James. I've really enjoyed it, and I
really appreciate everything. You've done in terms of keeping the
Australian community up to date with investing, and you've been
a great voice insanity. You know where there can be
a lot of insanity out there.
Speaker 1 (25:53):
I'm flattered by the same part at least. Okay, thank
you very much, love you to have you, and love
you to have Jeff on the show that was Jeffs Management.
Keep the correspondence coming, please love to have some more questions.
We have unusually a bit of space to answer more questions,
so let's have them the Money Puzzle at the Australian
dot com dot au. Talk to you soon.
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirby Fund the Australian. Welcome aboard everybody now. My
guest today is one of the best known figures in
the investment markets in Australia. It's Jeff Wilson and he
runs the six billion dollar Wilson Asset Managed Group. It
is a group which has funds listed on the stock market.
(00:28):
It also has an operation aside operation if you like,
which is the Future Generation Fund. It's a charitable operation
and we had Caroline Gurney on the show a few
months ago who runs that side of things. Now, in
recent years Jeff has come to prominence because more than
just acting as a fund manager, he does act as
something of an investor representative for momandell investors across Australia
(00:49):
because he has about one hundred and thirty thousand investors
on the books. And he came to prominence in the
public domain some years ago in the Frank Dividends of affair.
We might call it the ill fated attempt to change
Frank dividend rules, which he mounted quite a successful campaign on.
Now today, with the ALP almost certain to be re
elected in the new parliament. He's come to prominence again
(01:13):
because the reelection of Albanesi Chalmers combination will mean it
will mean, folks, the reintroduction of an attempt to put
in a new tax on super And it's not so
much that it's a new tax, okay, but it's the
nature of this tax based on realized gains, unrealized gains,
that is, paper gains, that's going to cause all sorts
(01:33):
of trouble down the track. Since I've got him in
the studio, first of all, I just want to take
the opportunity to ask him about how he sees investment
markets right now.
Speaker 2 (01:43):
How are you, Jeff James. I'm in good form, good,
a little bit stressed because I know everyone's going to
buy it in a couple of days time. And the
consequences what you said of this new tax, the tax
on unrealized guains, I think will be pretty devastating for
number people and probably not for the reasons people think
that we can talk about that lighter.
Speaker 1 (02:04):
Yeah, yeah, we will. And first of all, we mentioned
how you run Wilson Asset Management and it has sort
of fingers and all sorts of pies these days, since
even since I told you last year, have a whole
range of funds. But tell me got feeling. I mean,
one of the big debates at the moment is not
just about Trump and tariffs and what's happened with the
share markets and how they're particularly volatile, but a sense
(02:26):
that and a debate, open debate among the big super funds,
that this golden era that we've known all our lives
for the US is the be all and end all
of investment markets where it's seventy percent or so of
the global index, that that might be coming to an
end waning, and that people shouldn't be in the US
as much as they used to be. That's you or
(02:47):
me or anyone. What's your view on that?
Speaker 2 (02:49):
I think that's a little bit more on the extreme side.
I think no doubt over the next period of time.
If you're looking in the next six months, where would
you prefer to have your mind? One of the places
I prefer to have my money is actually in Australia.
When I look at countries, I try to look at
them similarly to how I look at companies. So if
(03:10):
I'm buying shares in a company, like what we try
to do is buy undervalue growth companies when we can
see a catalyst is going to change the valuation. And
we've got a rating system, and on our rating system,
one of the significant parts of that rating system is management. Now,
if I looked at the US and thought, do I
want to invest in the US? I really like the business,
(03:32):
I like the structure, I like the entrepreneurial spirit, I
like a lot of things. But do I like the CEO?
And how would I rate him? And we rate our
CEOs out of ten, I'd probably rate him four. Okay,
maybe I'm generous, right, he wouldn't rate a buy on
our rating system. Okay, But the management is only a
(03:55):
part of it, and that's probably about twenty five percent
of our rating system. The other is the underlying the
position it is, and also the valuation you're paying. So
the US is in a very good position the underlying earnings.
Even though there's going to be a bit of pain
in the short term with the economy when instruments continue
(04:15):
to come down, then you've got a one of the
biggest consumers globally. To me, medium long term, I'm still
positive about the US. The thing is, we've just got
this bad CEO for four years. Let's hope it's twenty
four years.
Speaker 1 (04:31):
I've got to see. Yes, yes, he might be planning
something different, all right, And tell me looking at the
ESX then on the raw numbers that is ourn X
estimate's GDP of the country, the dividend yield that the
AX doesn't seem to be outstanding the attractive this year.
What is it that you like?
Speaker 2 (04:51):
No, I mean it's a fair comment. I suppose what's
my view on the market per se, and this includes
global markets. We've all learned, and we've been around the
markets long enough is it's very hard to market time
and I can never guess the top of the bottom,
and I don't think anyone really can. And what you
learn is it's really time in the market rather than
timing of the market. And so that's the logic. But
(05:15):
if you wanted to time the market a little bit
and watch your view, I think things are going to be.
You know, I remember my dad who's now somewhere else,
passed away, but he loved the selling may and go away.
Oh yes, we're just in May. Looking at the US market,
it is a bit of a selling may and go away.
The economic numbers are going to be very challenging over
(05:37):
the next month or two, and we're going to see
a lot of the negative impacts from the Trump taroff tantrums. Now,
if I was in the US, anything I want for
the next two or three months, I'll be.
Speaker 1 (05:49):
Buying now, right, So why is that, Jeff.
Speaker 2 (05:52):
Well, not shares, but no, this is actually just consumables, okay,
because it takes about fifty to fifty five days for
the inventores to dry.
Speaker 1 (06:03):
Up, and then the tariff extra sort of procula through
the systems that.
Speaker 2 (06:06):
Well, effectively, anything you're buying from China, like they got
turned off a few weeks ago, So anything that's made
in China in fifty to fifty five days from the
day they were turned off, there's going to be no stock.
I think the next month or two from a US
perspective is going to be very challenging. Our higher inflation
(06:28):
maybe like lack of inventory. You know, there's going to
be a lot of confusion from CEOs you're better off.
When does that uncertainty sit on the sideline? I still
think medium long term it's positive and it all work
its way out. But then if you look back at Australia,
we're going to be exported deflation from particularly China, so
our products if anything, might become cheaper.
Speaker 1 (06:50):
You mean our televisions and are got to come down.
Speaker 2 (06:53):
Yeah, exactly, it could. Well, like maybe it's not deflationary,
but it's definitely not inflationary from ours.
Speaker 1 (07:00):
Yeah, they've got the prices will be stable. Tell me
what you think about the there's a theory abroad of
course also that one of the reasons the ASX is
holding up so well is not so much the raw numbers,
but that global fund managers see us as a safe
place and that's one of the reasons. For instance, they
come well bank is defining all criticism, all speculation, and
(07:23):
it's sitting up there at one hundred and sixty bucks
when people think its value with thirty percent lower. What's
your view?
Speaker 2 (07:29):
I think the valuation is probably a lot lower than lower.
Speaker 1 (07:32):
Is that right? Okay to me?
Speaker 2 (07:34):
Unfortunately it's the passive money, like it's trading on what
three and a half times assets. But just going back
to Australia on the big picture, Yes, you know how
the market is forecasting say three or four in straight
cuts on our information, and we've just created a new
fund where income maximizer when known for being equity people.
(07:56):
We've employed some people that used to work at the
Reserve Bank, et cetera, helping us on the debt side.
The income maximizer has equity and debt, and we're getting
really good information on the dead side. Now we would
be saying there's going to be five or six interest
rate cuts in Australia, we think it is going to
be signifantly more similarary and more positive for equities than
(08:18):
the market's anticipating. We think that's very good quality information
that we're getting there.
Speaker 1 (08:24):
Right when we look at the expectations for interest rates,
there's something rare. Three to four is the most I've heard. Yes,
what is it that is suggesting that they could be
deeper than the consensus?
Speaker 2 (08:35):
Now, speaking to people very close to the decision making process,
we think they are obviously concerned from an Australian context,
about the fact that we have deflation and they are
not concerned about inflation at all. So that's a big change.
So they are ready to cut whenever they can.
Speaker 1 (08:55):
Okay, and then this then underpins an optimistic view of
Australian share price valuations. Okay, but reversing that in some ways.
The bell Weather stock for our market is Comebank, and
I didn't mean to talk about one stock, but banks generally,
you think the true valuation is more than thirty percent
lower than where they are. At the same time, we've
(09:16):
got stimminus coming, so that valuation might remain academic one percent.
Speaker 2 (09:21):
People are going to go for yield. I go for
the banks. Shall the passive money. We think it's that
phenomenal amount of money that is passive these days. So
to me, that's been a big driver of the significant
overvaluation of Combank.
Speaker 1 (09:37):
Okay, very interesting, Jeff, Thank you. Look, I think we'll
go for a break and we will come back and
talk about the issue at hand for all investors ultimately,
if they don't make some changes to the plan tax
back in a moment. Hello, Welcome back to The Australian's
(10:03):
Money Puzzle podcast. James Kirby talking to Jeff Wilson of
Wilson Asset Management. Now, folks, to introduce the issue. You
may have heard, I'm sure you have that there's a
lot of controversy around a new supertax which is planned
by the government, and the government plans to reintroduce this
tax or at least have a second go at bringing
(10:24):
it in if they're re elected. It looks very likely
they will be re elected. So here's the thing. It's
a tax on earnings in SUPER above three million. Most
people say, well, who cares?
Speaker 2 (10:36):
You know?
Speaker 1 (10:36):
How many people have earning above three million per capita?
I might add per capita, right, so that's like a
couple could have six million. But the thing is, well,
what most people I have found I'm going to ask
Jeff this I have found in almost everyone I speak to.
It's not that they're crazy angry about attacks. It's the
scheme and nature and design of this tax. Jeff, could
(10:58):
you explain what's so problem about the plan tax to
basically tax wealthy people and super who have earnings above
three million.
Speaker 2 (11:07):
I don't think anyone is concerned that they've increased double
the tax rate on people that have more than three
million dollars in SUPER. I mean one of the big
concerns is for younger people, people that worked hard, people
that have their money in Super. The fact that that
three million dollars isn't indexed.
Speaker 1 (11:26):
To explain to people why that's a big problem. It
means that every year, as inflation kicks in more and
more people get into the net, So three million if
it isn't index in effect they say in ten years time,
that's going to be two millions a day or one
half inter the day. Is it is going to come down,
So bas it's going to come down and trap more
people every year. That's a big problem, isn't it that
(11:47):
it's not indexed.
Speaker 2 (11:48):
One oundred percent? And we did a little white paper
for discussion that we published this week, and in it
we talked about Anthony Albernici. I mean, he's in a
defined benefit scheme so he doesn't get impacted by this,
but it's nearly the equivalent of him having half a
million dollars in today's dollars in super So eventually, if
(12:09):
you're young enough, everyone will get caught because of inflation.
So I'm lucky. I suppose I come in the category.
You probably do two James in the boomer category.
Speaker 1 (12:19):
Just about.
Speaker 2 (12:22):
We've done well. And to me, how can a government
disadvantage the younger people that are in theory going to
have more of the tax burden to look after us
in our old age.
Speaker 1 (12:33):
Because they've got to put thirty percent to effectively thirty
percent on super for people coming down the line. But
the issue that's driving people people are literally enraged about
is that the tax, the new tax. Specifically, folks, Okay,
the new tax is fifteen percent for over three million
on top of the existing fifteen percent for over two million, right,
(12:53):
so it's thirty percent over three million. Effectively, put fifteen
percent the new tax. This is daft the way it's just,
but it's got to be applied on realized games. Can
you explain to the everyday investor what that means, Jeff,
and it's complications?
Speaker 2 (13:09):
Yes, Okay, So if I was fortunate enough, I'm sixty
seven now, but say twenty seven years ago when I
started my business, so I didn't Yeah, I put some
of them my money in Super. I didn't have much
money in Super then, and maybe I put it in
some shares of Promticus and I think they were trading
around sixty or seventy cents. Then now say I put
(13:32):
one hundred thousand dollars in Yeah, I don't know the
exact numbers, but that would be now tens of millions
of dollars.
Speaker 1 (13:38):
Yeah, you hit the jackpot.
Speaker 2 (13:39):
So then what would happen is I added myself managed
Super fun. Of course, I've got more than that three
million dollars and I want to keep it for the
rest of my life because I think he's such a
great manager and it's going to keep going well. But
the government saying, now, no, you can't. Well you can,
but you've got to pay thirty percent tax on the
(14:01):
increase in value above the three million dollars. So how
are you going to pay that tax? You either pay
me personally, so I've got to go and borrow money
and I don't want to do that and pay or
I've got to get the money out of my super
fund and I don't want to sell my shares.
Speaker 1 (14:16):
So it's a paper again, you haven't got the money.
It's a paper gain. And pro Medicus, for all we know,
could have a scandal and it could fall fifty percent one.
Speaker 2 (14:24):
Dred percent and at the end of June, you know,
like we've seen the volatility in the market we've had recently,
and pro Medicus did fall tens of dollars, and they
work it out of the end of June, and then
crashes tend to be in October, like remember the eighty
seven crash, in the eighty.
Speaker 1 (14:40):
Nine crash, Yes, sure, so.
Speaker 2 (14:42):
I've got to pay tax on this pretend gain. Yes,
and then by the time I'm ready to pay the tax,
the share price could have fallen thirty or forty percent.
And to me, it's more brutal than that. It will
destroy all the risk taking. It's the unintended consequences. And
there's four point two trillion dollars in superannuation that supports that.
(15:06):
It's the lifeblood of the Australian economy. Currently. I'm talking
to you from a technology hub and I was talking
to the founder of this technology hub and he was
saying that fifty to sixty percent of their money that
they get people putting into these exciting startups is from superannuation,
(15:28):
self managed superannuation. I know an individual who put two
million dollars into a technology business. He's the major funder,
the major shareholder. It's now worth thirty million dollars. And
he said, what can I do. I can't sell, there's
no liquidity, the company doesn't make any money.
Speaker 1 (15:46):
Yeah, he can't sell, but he's going to be taxed
under this plan every year for the paper improvement and
the value of the business. And this is the CrOx
of the issue, isn't it this is what everyone is
curious about. So, but it seems the government is dead
set on this unrealized gains. Well, maybe we'll briefly say
that the theories as to why they are. One theory
(16:07):
was that the big super funds couldn't give individual member numbers,
so they just went with a disc Another theory that
you it's a theory is that they said, well, really,
well to people who have more than three million and
supertend to have lots of different money in different places,
and so we want to make sure we capture it.
But you said, look, you can put them all into
one fund and nominate that fund and people will be
honest in that and they'll have to. But the thing
(16:30):
is cut to the chase. Your whole premise is that
they should just tax actual gains is common practice across
the super system. But when I look at my own
SMSF Jeff, and I'm sure everyone's is the same, and
I'm not retired far from it, But the actual gains
in my SMS each year and the unrealized gains, the
(16:51):
actual gain is only a fraction of the unrealized games
on a good year like it was last year. So
in the government saying if we just tax actual gains,
we won't get the money we're looking for.
Speaker 2 (17:00):
Well, unfortunately, what they don't realize is they're not going
to get the money they're looking for anyway. Okay, right,
what is that because everyone changes their behavior. Yes, and
we've done a study and we actually think the negative
impact on the Australian economy will be ninety four point
five billion dollars. And that's people not investing in technology
(17:23):
companies which employ people, et cetera, et cetera. And also
on our analysis, we think a lot of people will
take their money out of super I think everyone who
was a tax on realized gains everyone sort of accepted, hey,
look we've had a very good run. It's been very
good for us. We're happy to pay more tax. The
(17:44):
fact that it's on unrealized gains is now changing everyone's behavior.
You mentioned we've got one hundred and thirty thousand investors
that we manage money on their behalf. I've had hundreds
of them contacting us. There was one I was talking
to just the other day. He's a grandfather, worked hard
all his life, had his self managed super fun. He's
(18:05):
got a reasonable amount of money in that self managed
super fund. He said, what I'm going to do is
I'm going to take it all out down to the
three million dollars. He's in his early eighties where he
can do that without any penalties. He said, I'm probably
too old to upgrade my own principal place of residence,
which is no tax. Yes, what I'm going to do
is I'm going to give the money to my grandchildren
(18:26):
to buy their principal place of residence.
Speaker 1 (18:28):
Yes.
Speaker 2 (18:29):
So it's actually going to be negative. And we've seen
this in the UK. The UK increased the capital gains tax.
I think it was close different rates, but close to
twenty percent. So you'd think, oh, if you've increased the
capital gains tax by twenty percent, you'd be receiving twenty
percent more tax. The numbers just came out the other day.
The tax take is down the equivalent of three billion
(18:53):
Australian dollars. It's down ten.
Speaker 1 (18:55):
Percent because people changed, because people knew it was coming
and they said, listen, I'm going to have that. Okay,
what about you mentioned in your paper about Norway where
they had a particular specific unrealized gains tax and the
money just flooded out of the country.
Speaker 2 (19:10):
I mean, just what a disaster for any risk take
to me, the effect will be as significant. So everyone
works out, hey, we don't want to take significant risk
in inliquate assets. We're not going to back any Australian.
We're not going to support Campbell or Alassian in their
early days. And what exactly happened with the unrealized caval
gains tax in Norway their first unicorn, the first person
(19:34):
that has crowded a company worth a billion dollars but
it made no money. He was one of the co founders,
a big shareholder, and he was going to have to
pay tax on a theoretical value that he couldn't do,
and he left. He left Norway. And I think that
people with the greatest amount of money, I think one
hundred of them have left Norway. The impact on Australia
(19:57):
will be seeing multiples of what they might get from
the people that get trapped, you know, like the technology investor.
I said, also, I had a farmer that rang me
the other day. You know, there's three thousand and five
hundred farms. These are sort of generational farms that the
people have put them in the super fun there's three thousand,
(20:20):
five hundred above three million that will be caught by this,
So there'll be three thousand, five hundred farms for sale.
I had someone a farmer ring me the other day.
He's got a farm about eight k out of Goldwin.
He had alone on it. During the GFC the banks
called in the lane. He nearly went under. He sold
half the farm, and then he did, I'm not going
(20:40):
to get caught again. So what did he do? He
put in hisself managed super fun He thought he was
safe for the rest of his life.
Speaker 1 (20:46):
That's probably the extreme version, isn't it. Where you got
a farm, it's a relatively little return on assets in
the farm is but the assets go up because the
landry value said, doesn't mean you're going to sell it,
but you'd have to pay tax on it. Okay, I
think people will understand that now, Jeff.
Speaker 2 (21:01):
Yes.
Speaker 1 (21:01):
So here's the thing. Is there any chance we'll assume
the government get back in. We know the treasure has
said it's unfinished business. He is determined to bring this in.
He needs the revenue. It's one of the few big
ticket revenue items. There was some alternatives proposed. One is
actual just tax actual gains, which was your one. What
about the notion of a deeming rate like they have
(21:23):
for pensions anyway?
Speaker 2 (21:24):
Yeah, Look, anything, I'm incredibly open.
Speaker 1 (21:27):
Anything is better than what's on the table.
Speaker 2 (21:29):
Anything that taxing a profit that you might never make
or may never have. Yeah, and destroying people's livelihoods and
impacting significantly the entrepreneurial spirit of Australia which we've flourished
on for tens of hundreds of years.
Speaker 1 (21:45):
Okay, And it sounds to me your campaign's really only
starting because it's alda start again, isn't it.
Speaker 2 (21:51):
Well one hundred percent. The unfortunate thing is we actually
started when it was announced in February twenty three. And
on any reason it's getting a lot of airplane now
is they've already got it through one House and they've
got to get it through the Senate. And we've been
talking to the various cross benches each of the parties.
(22:12):
We send a letter to the two and twenty eight politicians.
We're going to send our report to them. We're trying
to work out whether we send it before the election
are after. The reason it's getting a lot of play
this week is obviously PI is an election and the
beautiful thing is it's bringing it to everyone's front of mind,
and from my perspective is the government they actually should
lose the election on this. Now, the election occurs on
(22:35):
the weekend. Whatever happens happens, but we've got to keep
fighting to have it stopped going through the Senate. And
what we need is the Libs there, We need Pocock,
we need Lamby and the Cross benches to hold firm
because it's only by one vote and.
Speaker 1 (22:50):
Of course those numbers might be turned upside down in
the election. Okay, we leave that for the moment. We'll
be back in a moment. We have some quick questions
and Jeff's going to stay with us, which I'm delighted
to be able to have him to cover these all.
Right back in the moment. Hello, Welcome back to The
(23:14):
Australian's Money Puzzle. James Kirby here with Jeff Wilson. Okay, Jeff,
we take listener questions every week. I just have kept
two for you. Actually one listen to question. I'll just
briefly read it, but you might well. I think most
people are mystified by this. And even though you're an
experienced for manager, I bet you don't have the answer,
or at least you don't have the answer that the
(23:34):
banks would try and justify it. What happens to money
in the banking system when there are transfers on public holidays.
This is from Paul. My daughter transferred money that left
for Saint George account on Good Friday, and it had
not arrived in my account by Tuesday, the twenty second
of April, that's six days later. I asked the bank
what happened, and they said they do not process transferreds
on weekends or public holidays. I asked where the money
(23:58):
was kept for those five days. I was told they
couldn't answer that. The bank is obviously doing very well
from this archaic practice. Now, once upon a time, when
money was pushed around, perhaps carried in little paper bags
from one bank to another, we could understand a couple
of days. It's now I expect a bush of a button.
I expect it takes about two microseconds from money beta transferred.
(24:19):
Is that the answer? Do you reckon, Jefford? Do you
know anything else?
Speaker 2 (24:22):
Yeah? I think that's a good answer, and to me,
that's right. Who made the interest over that period of time?
Speaker 1 (24:27):
There's a lot of money washing around.
Speaker 2 (24:29):
I know that's what he's got to drill down with.
I mean someone would have Yeah, that's probably pretty good analysis.
Find out who made the money and invest in them.
Speaker 1 (24:38):
That sounds like a bank, all right. Gary asks what
are the best defensive stocks on the ASX during this
very wild period on the share market? Yeah, asked that
all the time. Of course, I don't know if you
want to go quite selective on stocks, but you could
talk about sectors whatever.
Speaker 2 (24:52):
Yeah, I think I think more big picture, like our
view is the interest rates dropping. There's going to be
more interest right falls over the next twelve months than
the market's anticipating. So there, what you want is you
want those high yielding, defensive stocks, you know that will
benefit from lower interest rates. I haven't got any individual stocks, shirt,
(25:16):
We've got twenty people back at the office that drill
down in the individual stocks. A more bigger picture of
these days.
Speaker 1 (25:23):
Okay, but high yielding stocks in good shape obviously with
decent fundamentals as well. Okay, very good. Hey, great to
have you on the show, Jeff, and thank you very
much for coming on.
Speaker 2 (25:35):
I thank you, James. I've really enjoyed it, and I
really appreciate everything. You've done in terms of keeping the
Australian community up to date with investing, and you've been
a great voice insanity. You know where there can be
a lot of insanity out there.
Speaker 1 (25:53):
I'm flattered by the same part at least. Okay, thank
you very much, love you to have you, and love
you to have Jeff on the show that was Jeffs Management.
Keep the correspondence coming, please love to have some more questions.
We have unusually a bit of space to answer more questions,
so let's have them the Money Puzzle at the Australian
dot com dot au. Talk to you soon.
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