Hello, and welcome to the Australians Money Puzzle podcast. I'm James Kirby. Welcome aboard everybody. Now, folks, we are in the middle of what looks like a sharp share market shakeout and what I'm going to do in the next two shows is I'm going to split it. And today I'm going to talk to a professional inside sharebrooking right, who's also an expert on investor behavior usefully about what's happening,
what's happened so far and why. And later in the week I'm going to talk to doctor Sam Wiley and he's going to take We're going to take a deeper look at what's perhaps evolving in the market now and what are the dangers and opportunities for you the investor going forward and put together, I think this is going
to be very useful to you. And just before we start, if you need contexts, you should know the Australian share market as we speak in early April, it's down around ten percent for the year and Wall Street is down around fifteen percent for the year as we talk this morning, after an extraordinary session overnight whereby the Dow ended flat but conceals a lot of drama, and it was actually
touching bear market levels. That is, at one point in the Wall Street session on Monday this week, American Monday, they were touching bear market levels twenty percent down from the top. They had a rally at the end based on a report that was later contradicted, if not denied, by the Trump administration that they were going to cool
off on tariffs. Another thing to keep in mind, especially if you are interested in property, is that interest rates will now almost certainly Fowell and I've been skeptical about
that to date. Not only that, but they will probably accelerate the pace of the cuts that were coming through this year, and it would seem that we could have anything up to we could see your mortgage basically falling from six's to six ish to five ish percent, perhaps official rates falling from four to closer to three percent. Very important change in the market. So all linked, of course, and also I think some renewed focus on the capacity
and capabilities inside big super lots to talk about. Okay, my guest today is Jemma Dale, head of investor behavior at NAP Trade. She's been on the show before.
How are you, Gemma, I'm well, thanks, how you good.
Great to have you on today, Ideal to have you on today. So let's just talk first and for what we were talking before the show, and I think listeners be really interested in this. So what everyone sees so far is the usual thing. By that I mean share market plunge. Now, you see, we all use these words too often, plunge, and we see we get up in the morning, we see a headline share market plunge is
one percent, two percent. That's not a plunge, right, that's four if it falls nearly five percent in the single session, the worst session since COVID. Okay, I'll accept the word plunge. This week, on that day, only market's falling. We know why, no mystery is there because of tariffs and the threat of that. This continues and escalates and gets oursel works, and until the market sees that there's an end to it of some sort, we simply cannot make a call
as to when it's going to stop. However, you've been looking at now this is only a single brokerage, but it's a big brokerage and ab nap trade. And you tell me that you're seeing people buying more than selling, tell me a little bit more about that and what exactly and who are This.
Is the best part of my job and it's so interesting. And we had a clear example of how investors respond to market volatility, but particularly falls. Right, you talk about volatile. No one cares about the up and down. What we care about is the down. Everyone gets a bit bored, particularly because it's slower and unless interesting. Yeah, or out the window, out the window, sorry if it's out the window. So market has plunged, as you say, We saw this
in COVID as well. So COVID market peaked to trough in three weeks. That was a plunge, right, that was a very significant collapse, very sharp. Then it turned around and it raced back up again. And what we saw from our investors during that period was just an extraordinary switch from holding cash and very modest trading levels to very aggressive buying through the fall and as the market turned around and started climbing back up again. So we went from a sort of let's say forty five percent sell,
fifty five percent buy. There's always a slight buyas toward buying because people are building over time, right, the vast majority of people are not selling shares over time. They're trying to build a portfolio, so there's always a bit more selling on average, s a bit more buying on average.
During COVID it went to eighty twenty, so eighty percent buying twenty percent selling, and most of the selling was to get back into something else you were rotating through your portfolio, So huge buying through COVID and also a huge influx of new investors so our customer base. And this was true across most of the retail brokerages during that period.
Okay, now, so we don't want to talk about which too much. I'm trying to get a broader picture. But what you're saying is really interesting. Okay, So this week, then, in this downturn, your turnover is lifting again and you are seeing, yet again, you are seeing, let me just clarify this beyond all doubt, you are seeing people doing more buying than selling this week.
Yes, So what we saw on Monday, which was when the market sort of bottomed out, down six percent very early in the morning, just after the open, that was our largest trading day ever including the pandemic. It was about ten percent higher than our previous largest volumes, and it was absolutely more buying than selling.
So the listener will say, if that's going on in every share Brookridge Fly, is the market.
Falling Because retail investors are less than twenty percent of the market, that's the main reason. So the vast majority of the ASX and global markets is institutional money. That is superfunds and algorithmic traders and hedge funds and any number of large institutional investors. They're driving the flows generally, and retail investors are at the margin what we see, so they will know you will very rarely see except in some smaller stocks in particular, which are kind of
retail focused. You tend not to see retail investors driving the price, particularly as aggressive of when you see volumes like this, So they're a smaller part of the market. But we have seen so we have seen some of our larger investors selling, so they're trimming positions, they're not selling their whole portfolio. It's always really important to go you know, if I sell five percent of my portfolio, that's not the same as selling one hundred percent of
my portfolio. So they're trimming, and some of them will be trimming positions that they just want to kind of settle down. There has been a huge influx of cash to our book over the last twelve months. So cash has been climbing and climbing.
Yeah. So these every day investors have built up cash positions in recent times much more than big super funds would have, and now they are bargain hunting faster than big super funds have. Here's the thing. To what extent do you think your experience in that which is a major share roker in the market is mirrored in other houses?
It appears to be relatively similar. I will say our database were attached to a bank, they skew slightly older, they skew more experienced. For obvious reasons. You know, younger people might be attracted to a sort of flashy and more techi kana name. We tend to have sort of a lot of self managed super fund retirees. We have lots of younger investors as well, but it's more representative the total population rather than a newer broker that might attract younger people.
So the chances are the newer brokers younger people are. The pattern might even be more pronounced.
It may be, it absolutely may be so younger investors. I find this really interesting. Younger investors learn to investor in COVID, and what they learned was by the dip, and that's what they do.
And they learned in one crash, yes, that you bought the and it went flying back up. Right, So it's a V. COVID is extraordinary. And it was a V shaped recovery.
Yeah, there's a Nike swoosh. It kept going past the V.
Yes. Yeah. And if they had been around in two or eight, they would have watched the market take two years to fall fifty in the slow mind.
Yeah, it didn't make experienced month fIF.
Right, eighteen months fifty five percent slow torture, a crumbling share market where you kept thinking it was turned the corner and it hadn't, Which leads to the question, And I can't I wouldn't even ask you this. I wouldn't ask any one person because no one knows. But I could frame it this way. This generation of bargain hunters that we're seeing come out of the woodwork this week, emboldened by COVID. Is there a danger that this is not like COVID as a reversal.
I think you're absolutely correct. There is a real risk because this is restructuring the global economy right if the tar stick. And this is the difficulty. No one knows the trump and if you think you do, you're wrong. You know, it's highly volatile. The decision making is it's volatile, let's call it that. So it's very difficult to predict to what extent the twers was stick. There'll be retaliation
and so on. But we do assume that there is an intention to restructure the global economy and US dominance. So if we assume that to be correct, inflation will rise under tariffs, absolutely will, particularly in the US. It might be deflationary in Australia if we get lots of cheap goods from China and other people who can't sell them elsewhere, but inflationary in the US. That puts up with pressure on rates, which is interesting. It puts downward
pressure on share prices. The US consumer could be absolutely crushed by this, So there's a real risk that we sort of fall dramatically into a recession. That is what has happened in the previous instances of tariff's being implemented like this. But we're going back a century. Don't have great data on this.
We're going back to nineteen the thirties, yeah, okay, on what people are doing. So we've established that for listeners that it would seem that people are responding very like COVID, that they are actually looking for bargains, that they are actually buying more than selling. This is active every day investors who sort of people who listen to this show, they are also perhaps if they are selling there, they're maneuvering.
Maybe they're selling out of gold for instance, after getting a big run and buying I don't know just about anything, right, yes, so.
Northern Star was our biggest sell yesterday. You're absolutely correct, that was the biggest sell.
Yeah, okay, and that's a gold gold miner. So just before we go into that sort of deep dive, the patterns of what people are buying. Are they going back into the US? Are they going back, if you like, into the fire? Are they going straight back to the U? Is it the US bias? Are the ATS?
We yeah, so not specifically only the US. When we see ETF buying, it is usually the ASX two hundred and the S and P five hundred, but there is also now some world. So misky world is sort of the benchmark that the UTF matches. I should note all of the utfs that we see typically are just basic index ets. They're not managed, they're not leverageda Clain Vanilla, right,
very simple stuff. You know exactly what you're getting, very cheap as well, very low mars, and lots of good historical data on the value of investing in that kind of product if you don't want to pick the stops yourself. Right. So we have seen that. We have also seen Nasdaq one hundred and quite a lot of that and World
more broadly. But World is sort of seventy percent US at the moment, so one would trust that investors know when you are buying a World ETF, you are getting a lot of US exposure in that and then a smaller amount, much smaller amount of the rest of the world.
Okay, really interesting. We got to take a short break and we will be back very quickly because this is enthralling. Okay, back in the moment. Hello, Welcome back to The Australian's Money Puzzle podcast. James Kirby with Jamma Dale from Nabdate, head of Investor Behavior, who is always good to talk to. Ani Date have to mention in the middle of a
share market downturn. Okay, so tell us now what your data in channel that is showing about people what they're buying and what they're buying, what they're selling, to the extent that you could.
Yeah, absolutely, So one thing I will comment on because you just sort of asked this question before. There are different types of investors obviously in any customer set, and we have hundreds and hundreds of thousands of customers and so they are quite different. Younger people obviously have a different portfolio and different trading slash investing behavior than older people, which is quite typical. One of the main reasons is older people have been doing it longer and they're much
less likely to own a lot of ETFs. They started buying direct stocks, so they tend to hold BHP, CBA, CSL, Macquarie. You know, big Australian companies has been around a long time. So what though, those guys are doing it at the moment, and our active trade is they are materials, particularly BHP and Woodside. Woodside has been absolutely smashed because the oil prices come off so hard. Uh, BHP obviously a lot of exposure to China.
Sorry, just to clarify, people are with these stocks they're buying or selling them.
They're buying them.
They're absolutely they're buying them. They're buying Woodside after the sell off of the oils because the oil is down because of a variety of things, including which almost got lost. We'll pick I've allowed it to go off in the middle of all this, which which would normally have been big news, but it didn't get through the crash news. Okay, So commodity old time commodity miners EH, fossil fuel giants.
Yes, and banks. Interestingly enough, Westpac, so, CBA, NAB and I and Z are strong by at the moment, less so Westpac. But sometimes that's a normalist. That's just one day and for whatever reason, that just wasn't the So I don't want to say that's a trend. It just is what happened yesterday when McQuary got hit really hard yesterday morning and then bounced quite a lot. So it was obviously brought in the morning when it was under
a lot of pressure. And mccrary's one of the companies in Australia with a lot of US earnings and obviously a lot of exposure to the US.
Yes, and you sign up people searching in they're doing that. Do you think there's an element of swinging towards defense in the chase for income and dividends from the bank shares particularly.
It could be that. I think the real risk with bank shares, and now investors are acutely conscious of this is they've been until quite recently. If you look at three of the big four, they've come off very hard. It looks like CBA has come off hard, but it hasn't really. I mean CBA was at one hundred dollars or eighteen months ago. It's still it, what one hundred
and forty ish. Yes, it made it to one hundred and sixty, but it's not exactly a dramatic pullback when you consider it is a bank and it perhaps should not have run sixty percent in eighteen months. It was quite an extraordinary price, and the year was back at around three percent. So for our guys, they know the bank share process is extremely well and they're very reluctant to chase. They were mostly trimming banks through the last eighteen months because they felt they had just run too hard.
The rotation back in is interesting. I think it's more of a quality play than a dividend play, mostly because they've got lots of banks already.
Yes, okay, and as you say, it's worth hearing this folks. You know the franking are fully frank. Years on the bank shows coming up at seven and eight percent now with the exception interesting the comebob banks. That is the thing is it doesn't fall what was it doesn't fall, but it was the one that was supposed to fall hardest. Yes,
the scause it's run the hardness, but it hasn't. So that's an interesting I often find when you get this period of supervolatility in a big sell off there it's always really worth looking the next thing said, well, what did actually happen? Which stocks did forward? And the other themes we could look at? What about the AI and tech gang.
In the US. So we'll say that just that difference between more mature investors, the ones who've been doing this a long time and have stock portfolios versus newer investors who tend to have ETF portfolios, because they're quite different cohorts. The ETF portfolio guys are just loading up, absolutely up, and we.
Were loading up on ETFs. Sorry, there's no evidence of them.
Broadening, and it may happen, but not yet. So what has happened, and we ran this analysis last year. So interesting to me is that yes, people buy ettfs and there's a bit of a just keep buying mentality, and a lot of it is younger people trying to build a portfolio over time. And you can extrapolate to say they're saving up to by home or whatever it is. They're just trying to build up a portfolio over time.
They use ETF to do that. What we found through a bit of sort of begging through our data and analysis is they are not just blindly buying. They are far more likely to buy. And I mean by a magnitude of like fifty percent on a day the market falls by more than one percent, So on a day when it falls six percent in the morning, they are going to buy dramatically more and dramatically more people are going to buy. And I kind of love that. I'm like, well,
you guys, know what you're doing. This is not just random buying. You're actually trying to time just little winds. They're little accreative wins, right, Like if you just buy it one percent cheaper, but you're doing it consistently, that's quite nice, right, And I think to your question a little bit earlier, like, do we know whether this is a V shape recovery like COVID or a horrendous bleed like two thousand and eight. We don't know. Obviously, we
don't know at this point. But for those people who are doing cumulative ETF buying, I don't know if they care an enormous amount. This is just a long term buying strategy and they will try to buy weakness, and that tends to be the newer investors. That's just their strategy.
It's okay, sort of an aggressive exactly.
Is it quite a sophisticated, simple strategy?
Yes? Right, okay, very interesting and no obvious swing back towards the defensive alleged defensive quality of the ASEX with the high dividend yield.
Not really. I mean, obviously we sow enormous buying, but we have seen so much cash piling up. We absolutely knew people were waiting for a pullback, and they are absolutely moving on the pullback, which is good to see. They're not just sitting on cash indefinitely. What is always interesting to see is what happens as it continues. You know, it's unlikely you get a sell off. That's three days only and then it's all over and back to the races. So it'll be interesting to see what happens.
It will be interesting to see what happens. Well, that's sure, but we ruled off the books this morning. We would all be in trouble, wouldn't we. We'd be all our super funds. If we were in big super they would be down considerably because our big super funds are we know from the statistics, more exposed if you like, to the US share market and have elevated that exposure recent times. And they also have more exposure to on listed assets,
which we haven't talked about. Yes, but either they will drop and if they don't mark them down, they become imbalanced if you like, because their shares are down, but their private equity holdings aren't because they haven't marked them down.
So I can't see your way out of that. I wonder had you look at all at I noticed myself looking at the listed what I call the listed on list, the listed on listed market, which is all these funds which have emerged which give investors exposure to assets that are private technically, and then they list them on the stock market and they say there's no contradiction in that. But I did notice that the funds, private equity funds and private credit funds that are listed on the ASEX.
This is very broad, but they are down perhaps fifty percent more than the market itself. So the market being down ten percent this year so far, some of those big funds down fifteen percent or more. I thought it might didn't be sharper, And I think any observations on that whole scene for our listeners.
I think the comment I would make, we do not see a lot of appetite for that kind of product and structure on. Yeah, So if you look at our younger investors, they're just buying plain vanilla retfs and that is their strategy, and they're very consistent about it. So they're quite sophisticated. They try to time it, but they're quite happy to take a small win rather than looking to time it perfectly and hold out in cash for a year and a half waiting for a pullback. You know,
they're just happy to buy consistently. When you look at our more mature investors, and again this is a bit of an experienced thing. A lot of them are around during the GFC and they have seen what happens to I liquid assets, regardless of whether or not they're in a liquid structure. They've seen what happens, and it's very clear that they are steering well away from things that they don't understand and when they diversify away from direct
equity portfolio. So you know, they have a direct equity portfolio that have some cash. We obviously don't see everything they have off platform. They have lots of other things generally as well. But if they do go into something beyond their ASX listed exposure, they tend to stay with stuff that's pretty vanilla and pretty transparent. You know, they'll go into international equities, you know, they'll go into some rates and so on, but then going into more opaque structures at all.
I just want to ask you almost repeat, is that in your It seems as you have come to a conclusion on your own database at NAP trade that the older investor has stocks. They probably started off someone said to them by ten stocks. They went in, they bolt two banks, two minors, they've got a supermarket. They played around the edges, et cetera. Some years younger went in and they started buying ETFs. Then they both then they
maybe increased their sophistication of their portfolio. They had the AX, the S and P. Then they bought NASDAK, then they bought Miski, then they bought something US small caps or whatever. All fine, here's the thing. It seems to me, if it keeps going the way it is, that the ETF investors will dominate your platform sooner or later.
So I get this question a lot, and it's really interesting, and no, I love it. I think it's such an interesting question. Right, So, pre COVID ETFs were four percent of our holdings. They are now fourteen percent of our holdings. Fourteen percent still pretty small of a yeah, holdings of what people hold overall, so we don't manage it for them. Just sits on the platform. Yeah, fourteen percent. So that's
bigger than any individual holding, It's not dramatically bigger. So the sort of top ten Australian stocks, top ten ASX stocks make up about fifty percent of holdings. You know, has that shrunk?
Has that shrunk to thet You've.
Got to remember our customer base doubled, So the weight of ETF holding sits in the newer investors, the weight not all of them, obviously some of our more mature investors hold ETFs as well, but they tend to add them to their portfolio. They don't go, God, I'm really awful at managing my own portfolio. I'm going to sell it all down and go into an ETF. They go, oh, here's the thing I don't hold. I'll get some S
and P five hundred. So yeah, it's I think what is worth noting is, obviously the number of investors has grown. And I'm extrapolating across the industry here because I suspect it's true, particularly for our bigger competitor. There's one competitor that's bigger th enough. And what you see is your newer investors are growing the ETF book, and your existing investors have a lot of direct equities, and then they might can nearbor. Yes.
Interesting, so, I think, folks, because we are because the large investors, the institution investors, dominate the market and swing the market one way or another. Just be aware of this that though it looks like the everyone's selling and getting out of the stock market, or at least, you know, unloading lots of shares, it's not everyone. It's largely institutional investors and pension funds, your own pension fund, no doubt, your own super fund. But it's not you the active investor,
which is very much our listener. Really interesting. Okay, Gemma, take short break. We'll come back with some questions. Hello, Welcome back to The Australian's Money Puzzle podcast. I'm James Kirby talking to Jemma Dale of KNAB Trade, who's just been telling us some very interesting insights into what's been going on behind the headlines really of this share market downturn. It is very much an mirror image of what happened in the COVID downturn. Except we know how the COVID
downturn ended. We don't know how this one ends. We don't know. Sorry, folks, tell you what we don't. I'm not even going to try a quick not so much question. But a couple of quite a few messages came in over the weekend, basically all say the same thing, that I was biased against industry funds. I'm not at all, and I regularly would say that they suit many people, but I would also very quickly say they should never
be beyond question. Someone also meant the point that as a journalist day and writer, you should regularly declare that you have an SMSF. I regularly declare I have an SMSF. I have an SMSF. I would have mentioned it on the show many times. And just for the record, my other half is in an industry fund, you see, all her life, and despite my entreaties, is involved. Yes, of course trustee of the Curbly Superinnuation Fund, but has her industry fund going too. So let me tell you there
are no biases on that. And look, I would just say it would be silly of me to have them. But there would be times, I suppose on a live show like this where if I'm digging in on a certain theme, it may seem so, but I would strenuously defend that I would have an independent view on, especially on these big themes. But thank you all the same, everybody, and do always give us your impressions or observations on that sort of thing and keep me in line, all right.
Question from Danny. Question relates to government health funds. How those listed private health companies go since they were battered from pillar to post, Gemma, the Ramses and co. I mean they've been sought off anyway. I haven't looked but I preserved they couldn't have been sought off much further
in this route and health scope. My bi hanging on there and in the middle of it of a takeover place should be interesting anyway, quickly, folks, Delly says, if my question relates to government health fund loading fee cover for over thirty one year olds, you all know about that. If you're over thirty one day, they double get you if you don't get your cover. So he says it's often better. You're often better off paying Medicare levy than
the health cover due to expensive loading. So you could easily be persuaded to buy health cover private insurance cover if you are older over thirty one. What are your thoughts on this? Okay? We went to James Gerard, our friend financial advisor. He says the loading is collected by the private health insurer and not forwarded to the government.
It's the private health surer keeps the loading correct. There are several instances where the Medicare levy search charge will work out better than the hospital coverage under a private health insurance policy. This signals the actual benefits of the policy and purely focuses on what is less pain financially,
what is cheaper? Okay? And then James says, as Daney noted, O the people who are liable for a large surcharge and people whose income is just over the threshold for the surcharge may be better off just paying the surcharge. But if you go down the path of paying the surcharge and sidestepping a hospital insurance policy and make sure you have a good public hospital nearby because you never know when you might need it, what there you are?
James Gerard has covered all potential angles there, but it is it's something that has come up, and it's something we're quite acutely aware of. And that's always the answer, to be honest with you, if you if it's strictly speaking, if you want to do with the cheapest way, you know it's quite obvious what to do, but you take a risk, all right? Now? A question from Keaton where Jema can come back in? I hope Keaton first name says, a share I regrettably bought was recently delisted from the
ASX and listed on the NSX. I've never heard of this exchange. My understanding is I need to sell my shares to write off the loss against my gains from selling other more successful shares. What is the easiest way to do this? Help would be appreciated. Okay, no advice. We never give you advice. This is information only and you would never just on the phrasing there. I expect all the I'm talking to, all the Keatons in the world need to sell shares to write off the last
against capital gains. You may do so if you wish, but that would be the theory behind that would be you do it if you want to do it. All right? Ever, hear of the NSX gemen. Do you deal with them at all?
So, yes, I'm aware of it. We do not offer the NSX. We do offer tri X. We don't offer the NX. We offer you off for THEX.
We should help keeping first of all by telling him, you know, it's basically it's in an attempt as an alternative exchange to the AX. There's been several of them. There are several of them, very very small and not particularly well known, but.
Yeah, yeah, still small. If you go to their website, it'd actually list the brokers that you can use to trade through them. So Keaton, if you want to go to their website, you can find out who will be able to place trades on your behalf through that exchange, and you can potentially get them to act on your behalf.
And it's a perfect I mean to make it clear, it's a perfectly legitimate exchange. Have This is just an attempt and there have been several attempts. And there are other exchanges that you mentioned another one X yeah X c hi dah X you see.
Now, goodness may I'm out of date now called used to be called t X. Sorry giving away my age already.
If you think about the US, you know they've got different markets, right, we don't talk about you know, they got the S and P, they got the Dow Jones, they got the nasdak all in the one country and there wasn't There's been attempts to try and build and not to have the AX have a monopoly, which is not a healthy thing at all. But that's the historical background there. NSX is a perfectly just useful small exchange and as Jemma says, just look at their website to
see the brokers they use. And if you then should desire to sell your shares for whatever reason, including the fact that they don't seem to have been going very well. If you say the word regrettably holding them, then you can just pick one of those brokers, all right. Terrific. Well, Gemma, what a great time to have you on. We could talk every day, good market, We could talk every morning for a while and it would all be really interesting
for our listeners. I thought today was terrific, a really fresh insight into what's going up, back, going on, back up, statistically and evidence based, which is what we are all about here. Okay, thanks very much, Gemma.
Absolute pleasure. Thank you for having me.
Great to have you on, as always, great to have Jemma Daye there of trade, head of investor behavior and something of a doyen of market inside trading data, which on days like this or weeks like this, is very interesting to know. So turns out active investors, independent investors are actually in their bargain hunting already, folks. We will see how they get on in the days to come. We will talk to Sam Wiley later in the week.
Until then, let's have some more correspondence. Great to have those questions today The Money Puzzle at the Australia dot Com dot AU. Today's show was produced by the Assema Group. Talk to you soon, HM,