Hello and welcome to The Australian's Money Puzzle podcast. I'm James Kirky. Welcome aboard, everybody. The single biggest investment call of the last decade at least has been around the US. Were you in US stocks or were you not in US stocks? And that really was dictating the outcome for many people in terms of how their portfolio went and same it you're super okay. Now, for the first time in a long time, the situation of the US is
being questioned economically and financially. It is. It doesn't just you know, dominate world stock markets. It is the world stock market. It literally dominates the market cap of all the global markets. It is the world bond market. And for the first time in a long time this has really been questioned now the pre eminence of the US.
I'm talking strictly financially here, the pre eminence of the US market, the pre eminence of the US dollar in particular, which has had its weakest opening period going all the way back to Nixon basically this year. So serious investors, professional investors, big investors around the world, they are casting about to cover themselves in relation to what's going on
in the US. And they're buying everything else. They're buying gold, some are buying crypto, they're buying European shares, they're buying emergent marketing, emerging market shares, because there is an enormous question about where it goes from here and will it be as good as it used to be? Simple as that.
One of our favorite guests on the show is Win Hamilton, Will Hamilton of Hamilton Wealth Partners, and once the year, if you recall, Will goes on a world tour where he goes to a number of key investment and wealth management conferences around the world, and when he comes back, I grill him on what we need to know if we had the time or I suppose the money to go to those conferences. How are you well?
Very well, James, Thank you for having me.
Great to have you on, and you know there is so much we could cover, but I think we should cut to the chase for the Australian investor and look at this issue. I mean, first of all, do you accept what I said in the preambum.
Look, yes, what you're saying is very right and it was a major topic of discussion. But I'm just sort of you cast some doubt on this is euphoria towards European equities that I heard, and we can talk about that in a little bit more detail. And I think because the US is the US, and you know, you canvas looking to IPO and that's going to list in the US, it's not listing in Australia.
So you're not deep you're not deeply questioning the pre eminence of the US, are you.
No. Look, there was the big debate from the perspective of European investors has been the US risk premium. So it is the US suddenly considered high risk?
Is it worth the prices on those markets?
Yeah? Okay, Yeah, And the consensus seemed to be there is a high risk attributed to the US now. And you're very right. With respect to the weaker US dollar, that seemed to be a major focus and people were still talking it down on the simple fact that the US president wants it weaker.
Yeah, So we take it that they wanted to drop, and the mechanics are there for them to use for it to drop. So we can, to the extent that you can safely assume anything in financial markets, We'll make the assumption that the US donar will weaken through the year yeap.
So what does that mean is the fact that the
US president. So for Australian investors, if you're having US dollar holdings and you know you can either look to take some hedging strategy and so like if you're invested in managed funds, you can take a hedge class if that exists, or you just realize that when coming back to Australian dollars, you are if you're invested in US equities, you're going to see you're going to see a currency adjusted return which will be negatively impacted through a weaker US dollar.
So you're existing if you had existing holdings in US dollar as well, if you had most people and on listening to the show, they're explosure to US is through funds mostly tfs or perhaps managed funds. Wouldn't the existing holdings call open value?
Well, what you what you can see in if you've got a weaker US dollar? No, you're you're seeing a weaker US dollar impact. Now you can't hedge that. You can't hedge that. If you're in some of the funds, they do have a hedge class and that can give you and impact their.
So are you recommending that people if they're going in fresh and they hadn't been in before, so they don't get the advantage perhaps of what's happened so far. If you're buying today US stocks, US funds, managed funds, ETFs, then are you saying, whereas in the past we didn't really have to consider it, that we should consider hedged options, and all those ones tend to have hedged around hedged options.
Yeah, I'd be looking at a hedged option at the moment.
Correct, Okay, right, that's very interesting. That's a fresh sort of perspective.
Now.
The big question I suppose is that investors are also looking beyond the US, aren't they. They're looking elsewhere, and gold seems to be the alternative of choice. And though golds had a good run, all the conditions would seem to be in place for it to keep running. What do you think.
I was just saying yesterday when I was talking to staff here internally, that when you talk to other managers, they always to you the good stories and never tell
you the bad stories. And I didn't meet anybody that wasn't long gold and one of the big Swiss banks, for instance, I was shocked by the extent of the holding that the god and gold, and they were talking about the fact that in the first quarter of this year more slow went when you're looking at what they considered exits out of US dollars, more went into gold
than the euro. So they're seeing gold as the proxy to the US dollar as opposed to the euro, and they saw still considerable downside in the US dollar and
therefore they were still very bullish on gold. To the extent some of the figures they were throwing around, I'm sort of going, wow, this is It was one firm and I spoke then one to one of the portfolio managers in this Swiss private bank and he said, yeah, but we've always held gold, and he said for years we had at least a two percent holding, and it was one of those things that you was that was where the bad discussion came about. And he said, yes,
it's about five percent now our holdings in gold. But he said, you know, for the first time in a long time, we're having positive discussions on it.
So you've got Swiss private Swiss banks being a sort of proxy for what very wealthy investors are thinking. Doubling there holding in gold and more than that actively discussing what buying more.
Yeah, and further upside in the goal price. Their whole logic seems to be, you know a lot of people saying central banks, et cetera. They're saying, no, it's seen as the proxy to the US dollar, which was a different perspective from Bloodhead.
Yeah, so global money uncomfortable with the trajectory and what's going on around the US donor they're only alternative, perhaps as a global currency proxy is gold.
Yep. Yeah, that's what they're saying, and they claim more money's gone into gold the neuros.
Yes, explain why that's important to to the general listener.
Well, I think that the I think there's this enormous excitement about Europe at the moment. I think it might be a bit overdone, but you know, there's this tail wind from the amount of spense, defense spending and infrastructure spending, and therefore everyone's getting very excited. But is this in reality,
I don't, I don't know. I think this. You can see it's not necessarily going into the euro people buying therefore European stocks, and I think the Euros stock index is a very old index like Australia but it doesn't have the cyclicality that Australia has. So we've got some cyclical stocks which at times is therefore very worthwhile'ts.
And it's it's a dopey old market, I would say, And it's been dopy for years. Do you do you see anything to me people think they should reconsider European stocks apart from the fact that Trump has made them spend more on defense. Do you see any other sort of structural reason to be attracted to it that wasn't there before?
No, Well, that everyone was talking up Europe, and they're Europeans and UK citizens talking up Europe. But let you know, when you sort of take a deep breath and look back, you go, well, what do you invest in? Okay, So they're talking about infrastructure, defense spending and the government is not going to this is self fulfilling for the US because most of the armaments are US companies, that's the
other thing. And you just you look at it and you go, well, I just don't understand what they're going to invest in. I think that things are just getting a little bit ahead of themselves over there. It's done well. And one manager, as you pointed out to me, Europe has not outperformed the US this century, this century, right this century, so in the last twenty five years, and I thought.
And it's had so many four starts.
Yes, and also and the other one thing is which I think is really important is GDP growth. As Capital Economics said to me, GDP growth in Europe and the US twenty twenty five is going to be about even. But next year you're looking at one full percentage point. So you're looking approximately two point five percent in GDP growth in the US and one point five percent in Europe. And that's that I think is a very that's something you have to take into consideration.
Okay, just turning it all back in terms of portfolio construction and portfolio allocation for private investors in Australia, what did you take when you came back? What did you think that you should do that you haven't been doing before In terms of gold or US donor exposure, we.
Or are already hedged. So yeah, but at some point we will if we've got some strength in the Australian dollar, we would look to reverse that some of that, not all of it, but some of it. At this point time on gold, would I be going in again at those levels. It's run so hard. But yeah, for those that have got gold in their portfolios, you know, I would be sticking with it, and on US, I would be sticking with the US market. I think that, yes, Europe's had a run. Let's just be sensible about things.
I still struggle on what to buy in Europe.
Okay, Okay, all right, very interesting and obviously if possible that's hedged obviously the US exposure, okay, which is not normally the case right from many investors. All Right, I think we'll take a short break. We'll be back in a moment. There's a couple of really key aspects of this I want to talk to Will about. Hello and welcome back to the Australians Money Puzzle Podcast. James Kirby talking to win Will Hamilton of Hamilton Wealth Managers, regular
on the show Hamilton Wealth Partners. Tell me Will, Okay, so let's take it that from the first segment we've got a sort of updated picture of the risks and opportunities and the changing risks and opportunities around the weaker US donor potentially de dollarization of markets. As you see that strength of gold which is happening there. So in terms of what people are looking at in terms of where they put their money, is it stick with the
US which is very interesting? How about emerging markets? Because if the US donor is weakening and continue to is that a tailwind for emerging markets?
Not just that seventy percent of global growth in the next twenty years is going to come from emerging markets. So yeah, I think it's a combination of what you just said, which is positive, combined with the fact that emerging markets do have real growth and superior growth to the rest of the world, so they performed well year to date and also rolling on a twelve month basis,
and I can I see that continuing. The only area in emerging markets where people seem to be hesitant, and it's probably one of the cheapest stock markets in the world is China, which is a big.
Chunk of emerging markets, isn't it if you're going into a fund or an ETF yep.
And but interestingly I hear that a lot of the industry funds now are looking at em x China, and so a lot of and a lot of professional managers are looking x China. In the way they approach this part of this asset class, and likewise in internationally that seems to be the case as well. So because of political risk?
Is that because emerging markets x China has been the best component of the index?
Yeah that is yeah, yeah, right.
One thing, what about tariffs? You would have thought actually that the tariffs would be negative for that area.
You would, But the simple fact is it seemed to have growth. And I think that the world is looking outside of the US in many respects as well. Look at Australia's looking at FTA with free Trade Agreement with Europe, and so it seems to be an x US sort of equation that people are looking at tariffs. I think the whole debate on tariffs has raised its ugly head again in the last week or two. But when I was away, I think people were looking at a more at that ten percent level. But a few other figures
have been thrown out since. But it's a geopolitical risk. Whereas we've been always told geopolitical risks provide buying opportunities. Now it seemed to be on geopolitical risks that you look at scenario analysis around it. So what is you know, we're looking at a base case of ten percent, What if it was higher, what if it was lower?
What do you mean by base case of ten percent there.
On tariffs that the US is going to inflict on them the rest of the world. So correct, So people are looking at geopolitical risks now as something that you do have to adjust for, but on taking into cat scenario scenario analysis.
So put simply, gold and emerging markets would seem to be the hot ticket five for investors. Yeah, okay, very interesting. Okay, that's very I've wanted to get across that for some time. One thing for our listeners who may not be that may be all new to them, emerging markets. Gold is pretty obvious what you can do. I mean, gold is not complicated. It's a commodity that goes up or it doesn't go up. Emerging markets are terribly complicated. A bit
of a bit of nonsense, really. I mean it's because someone in London or New York said, let's put them all into a basket. That Russia, China, Indonesia, and Mexico. These countries have nothing in common except this classification. So what I'm driving out.
Is many of the amount emerging markets, like seth career in Taiwan.
Yeah sure, yeah, sure, so so what and you go in and you see time in the semiconductor is like a major holding, but that's not an emerging market stuff. What I want to ask you, Will is how does the everyday investor get at this area?
Well through you know, there's some very good managers out there, and all I would suggest in approaching it is have a look at the downside participation when things go tough in emerging markets in selecting a manager, and make sure you're comfortable with a downside participation. There are managers that have less and that's what we always look at. So I'm not going to mention names. There's some very good managers out there.
And it sounds like you don't like ETFs on this one.
I know, I think that you've this is something you do definitely need an active manager out like we actually use managers that don't like China.
Okay, or maybe you will at at very least perhaps an ETF X China are such a thing which are not aware of. But if you see, we're not there to let us know. Okay. I have some really good questions I want to talk to Will about. But I want to there's something else I want to ask in which is not on the broad theme today about the US and what it means for you. It's about the sixty to forty rule. And I've been reading some very
interesting things. A really terrific piece last weekend. It was about the sixty forty rule, which I'm sure most of our listeners are familiar with. This idea that you have sixty percent of your money at risk and you have forty percent of your money in safer investments. And traditionally globally that was sixty percent in shares or risk assets that are listed, forty percent in what they call fixed income traditionally bonds. This has really changed in recent times.
Bonds have been disappointing for years and years, and there has been new areas that have mushroomed before our eyes, private equity, private credit. I just want to ask you Will, for this whole sixty to forty rule, what do you what in your eyes the forty percent that people should have that isn't that is a fixed rather than ash risk. What does it comprise of these days?
Well, for growth portfolio, where approximately seventy thirty we do have. It all depends on the client how much money they've got, how comfortable they are holding a degree of ill liquidity and their portfolios. So for a decade now we've invested in private equity, infrastructure, diverse FOI credit and direct real estate. But this is something that clients have to be comfortable
with illiquidity and their portfolio. Now there are what's called these evergreen funds which have come about and you know they're in at you in particular and infrastructure and private equity. They some people call them semi liquid which I think is a terrible term. I'd like to ren think of it as variable liquidity. In other words, you can get your money out in normal environment with you that there's
out slow caps et cetera. However, if things were to go bad, these things have the right to lock up two seconds.
Yes, sorry, what I was driving out.
Was that's why it's use the term variable.
You didn't see the word bonds when you listed out the four key elements of the of the your fortunate bond.
But that's what we put all of these in the risk base. But we have reduced a defensive allocation. Now, this was a big debate and to what extent you go into what is your waiting in these private market assets. Yeah, and as I said, it's very dependent on a client by client basis and the comfort with illiquidity. And I think that's that is the number one question you've got to take. You take into account and how do you how do you categorize an asset as being a liquid
So we're quite conservative on that. We say it's monthly liquidity. So it's very conservative on an approach. And there's some firms out there that recommend very high ratings. Yeah, thirty percent plus. We're not anywhere near that, but we think, yes, somewhere between fifteen and twenty if if it's a big if the client is comfortable, and if they're not, well, it goes lower.
And so if you want to go into these areas private equity, you mentioned infrastructure, what were the other there's two more you.
Mentioned diversified credit and direct real estate.
Divers boy credit and direct real estate. What you're saying is, as a guide, you should be able to get your money up once a month.
We define something as a liquid as monthly or greater. So in some cases these windows are quarterly, sometimes they're annually. But you're weere conservative in the way we classify that some other firms classified as quarterly or greater.
But be aware of folks. If you are going into one of these funds for the first time and it says you can take your money out monthly, watch the fine print that they will invariably say unless we change our minds, and that can happen, So you must bear that in mind. It's not the stock market. There's always a liquidity in the stock market. You can always get your money out of shares nine times out of ten,
especially large caps or mid caps. I mean occasionally you might get a squeeze on a small cap, but that's very rare. And ETFs even more so that they're exceptionally liquid. That is there, that is their advantage. Only so much we can cover. Very interesting. Okay, well, just while before we go to the break, in terms of anything else, you discovered that perhaps we are not right up to speed on global markets. In terms of trends, we didn't
talk about crypto. I detect a serious change in attitude from our listeners on the money pustle towards crypto in the space of a year. I think in terms of the Grand Tour, you had.
Well, the same Swiss private bank that was talking about gold Is said to us, said to me that they're about to bring crypto into their portfolios and a very small waiting, tiny waiting, but there that's it. I was shocked when I heard that. I sort of why were you shocked?
I mean AMP has done a GP, Morgan has done.
Well. I think that when you look at, in particular, some of the UK investors, Yeah, they're waiting in private markets is so low and they won't even debate putting something like crypto in They really are conservative, whereas you know these some of these more European institutions such as this West Private Bank. Yeah, they are saying, well, start to put a small holding. So it's a very different approach from the UK.
Yeah, and it's growing right, the acceptance.
Absolutely yeah, yeah.
Throughout institution and investment investors around the world. Okay, or I wanted to cover that because we've had some lively discussion on bitcoin and crypto in recent times on the show, and we had Jackie Clark who was completely against it and had a lot of criticism from our listeners. And then I said, okay, well let's get Shane Oliver on from AMP. Since the AMP is you know, the definitive
institutional investment in Australia. And they've put twenty seven million into crypto, which is, you know, not a lot, but it's also twenty seven million into crypto for AMP. And he explained their side, and it was a bit like you were saying, it was, by no means an enthusiastic. I didn't think it was an enthusiastic I think it was more a sort of acceptance that this acid class is here to stay. All right, we'll be back on that one. Of course, Let's have some questions. We'll be
back in a moment. Hello, Welcome back to the Australians Money Puzzle podcast. James Kirby here, I've been keeping some questions for Will Hamilton of Hamilton Wealth Partners and they are rather the difficult, but always interesting as you can imagine the difficult ones. Can you see them?
Will? I can? Would you like me to read the first one? Yeah? Okay, so Bernie. I'm an experienced investor in shares, residential and commercial property, but almost always pick up something new or inspiring. So some comments from your guests this week were a little disheartening. I don't hold Lockheed Mark Martin directly, but the inference seemed to be that investors in it may not be moral people, as they drop bombs on families. A bit extreme, But this does raise a great point. How do how do the
top investors now establish guardrails on ethical considerations? So Lockheed US, both Amazon and Microsoft extensively across their businesses, yet both companies were picks for your guest. So look, values is the way I like to look at it. I won't use the word ethics because what's ethical to one person is not to another. But values, Yeah, that's something that
a lot of investors like to take into account. And when it comes to armaments, it's a very big consideration which you don't generally exist on the ASX, but you can get exposure to in global equity markets, and it's something that's most investors we find actually it's something they do want to exclude. However, where do you draw the line? It's like alcohol. You know, when some people take alcohol into consideration, did you then go and ban coals because
they sell it? And where to what extent do you draw that line? So do you and the alcohol companies, But do you then know when it's a smaller percentage of their total revenue do you ban those companies? So Bernie is right Locke to use both Amazon and Microsoft. You know, it's where do you draw that line?
It's very difficult, Bernie, and it's one of the reasons that the wholes swing away from ESG has been that the lack of definition, and perhaps in some way it's the difficulty of definition. A serious ethical investor would pull this sort of toll very quickly and say listen cot
to the chase, you can do it. I think the only way, in Bernie, this is not advice, never is information, only is to look at the more pure play ethical investment groups, the oldest, probably best known as Australian Ethical Investments, and you would like to think that their benchmarks are as good as you will find if you're very interested in that area. But there is always, as Will says, there is always. It's just really hard to cut it. To cut it. So you say, okay, I'm not going
to buy Lockheed Martin. I don't want to buy Lockheed Martin. They make bombs, okay, fine, or they make fighter bombers or whatever. Then do you say you don't buy Amazon because they use Amazon? Do you say you won't buy a standard four x nine ETF on the US market because Lockheed Martin will be in there, so you can see. It's up to you. You've got to design your own portfolio to a large extent, I believe, all right, but
thank you, Bernie, really good question, Charles. A common misconception that came up on your shoe on exchange traded funds was the idea that these funds need to buy more of a company when it performs well and sell it when it performed poorly. In reality, ETFs or index funds passively reflect the composition of the index. They don't need to make those active trades. The only time index funds actively buy our sell is when money flows in or out of the fund, or when a stock enters or
exits the index. So Charles is saying that my contention, if you like here in the show when in print, has been that the ETFs are now at a point where they are driving markets to a degree, and certain stocks to a degree. And the outstanding example was common Wealth Bank, where the part I was making was the higher it goes, the more they must buy it, and so to some extent they self perpetuated. Charles is saying, no, that's not right. That's not how it works. He's just
explained how it works technically. What do you think, well, is our ETF's then neutral in the market in terms.
Of that they are and momentum. It's all about momentum. And as money comes in, and there's money that goes into your twelve percent of people salaries going to in a superannuation every month, and people are buying the index, and as such they're buying a large percentage of when they're buyingn ETF, they're buying a large percentage of CBA. Likewise, as waitings change, those ETFs have to chase those waiting changes as well, up or down.
So they they pushed the momentum down.
Correct, And I don't think it's just as simplistic as saying everything static and therefore it just moves up or down because there is the cash that chases these markets.
Okay, okay, I hope that's a I hope that's a useful explanation to everybody. Childs might like it, but but there you are, Childs, I would agree with well on that. All right, Why don't you read the last question there are from Bruce, which is probably the sort of thing you get in your office sometimes.
Yeah, so can you provide some clarification on the tax on inherited super? So I used to be under the impression that if super was left to your estate then it would be passed on untaxed. However, recent podcasts have led me to doubt this. He asked his his accountant and ended up more confused than ever. So can you get someone to explain the situation and the various components tax free, untaxed, taxable. Look, let's just have if we don't have time, we don't have another ran.
Bruce, We'll just tell you one thing which with stands unchallenged. There is tax uninherited super, isn't there? And you might explain, let's say I inherit Let's say if my dad had lived in Australia. Un let's say he had super. Unless say he left me two hundred thousand dollars and it was his whole super, how would that be taxed?
So you're we're making an assumption here that it's that there is some There are quite a number of things you've got to take into account and I'm not going to go into this in any detail. And this is why you do need to get You know, this is not advice, and you need to get specific advice. So were you a dependent? Is it paid as a lump sum or an income stream? The income stream is it account based or capped? Yeah? The super tax is it
taxable or tax free? And so if you look basically, the bottom line is it's sevente and a percent, but or your age and the age of the deceased person when they die. So there's a lot of things that have to be taken in account. There is no clear, simple, one answer across the board, and that's why you ended up confused and wanted to know, well, what are the various answers? There are many answers.
There are many, and you need to talk to as well as unfortunately you need If it's individual and it's substantial, it's probably worth paying an advisor. But there's a couple of core things that are true. Bruce, adults, dependents being adults who inherit super, the super they inherent the person who had the super. To make it simple, we'll assume that they never voluntarily contributed to super. It was all mandated. There was all their SGC. That means that was tax.
That that means that there was tax pre component in all that. That means there's tax to be paid, and that tax works out at seventeen percent. This is what the seventeen percent figure that we'll mention it. There's also some complications with the new division two nine six, but we won't go there because we don't have two hours. But basically, don't think that you're super coming through has no tax on it. Unfortunately, but most people don't realize this.
When Paul Keaton created the supersystem and when he created the concession for super whereby the bit that goes in from your employer which is now twelve percent, believe it or not, when that comes out the other side as an inheritance to you, they want to recover the tax concession and that works out at seventeen percent of that figure. Simple, simplified answer. But that's it.
We have a site Texas in Australia and that's three souper.
That's right. So it's funny people said, is there an inheritance tax and people say, no, there's no inheritance tax in Australia. Well, if you inherit super there is. But technically that's a super tax, not an inheritance tax. You cant have a whole show about debating that one. Okay, terrific, terrific, Thanks very much, Will Hamilton, well partner's great to have you on the show again.
Thank you for having me, appreciate it.
Nice to have you back on land and we'll talk to you again. Okay, terrific. Great questions Today a number of people have done the clever thing of batching questions together and sending two or three questions in at the same time. That's great. Keep it up. Why not if you're going to make the effort to send in a question, send in two or three. I will try and cover them all and we do get to cover them on the show. The addresses the money Puzzle at the Australian dot com dot au talk to you soon.
At the pad, the h