Ren was wrong, talking to parents about investing & Bryce speaks to Henry Jennings

Bryce: [00:00:15] Welcome back to another episode of Equity Mates, or should I say, hop on and pedal with us on another stage of Equity Mates, the podcast that gives you up on the race of investing. As always, I'm joined by my equity buddy Ren. And who am I? 

Alec: [00:00:28] Bryce, You are Lance Armstrong.

Bryce: [00:00:32] Yes, correct. 

Alec: [00:00:33] My challenge here. So for people new to the show, welcome. Every episode, Bryce gets ChatGPT to translate his standard intro into a character that we then have to guess. The problem is Lance Armstrong doesn't speak like that. 

Bryce: [00:00:49] Hop on and pedal with us into another stage of equity mates. 

Alec: [00:00:52] What I mean is that Lance Armstrong doesn't torture cycling analogies to make everyone know that he's a cyclist. 

Bryce: [00:00:58] I know what you mean.We need to finesse the input that we're giving ChatGPT to provide a result that's not quite as literal. 

Alec: [00:01:11] Yeah, you said way there, but.

Bryce: [00:01:14] Mean producer Sascha. 

Alec: [00:01:15] Okay. As long as I don't have to do any work. 

Bryce: [00:01:17] No, never. Now, while we are licensed, we're not aware of your personal circumstances. So any information on this show is for entertainment and education purposes. Any advice is general? 

Alec: [00:01:26] All right, Bryce, we've got a jam packed episode of Equity Mates today. We've got a question from Sam from the Equity Mates community. Who wants us to help him convince his parents that he should invest rather than buying a house? Yes. And then we're going to be hearing from your mentor, Henry Jennings, who's back from his European vacation. Yes. And you and him are going to sit down, touch base and talk about stocks. Yeah. Hopefully you've done your homework.

Bryce: [00:01:51] Always, Ren.

Alec: [00:01:53] Nice. But first, let's talk about what's in the news. What we've been doing with our portfolios. And I want to take the mike to start with because I need to offer a mea culpa. I got something wrong last week. And producer Sascha pointed it out. We were speaking about Ozempic, the weight loss drug, and Novo Nordisk, the company that sells it. I said I hadn't been able to buy it in Europe. Producer Sascha made the point that it's also listed in the US and you can just buy the US listed version on any broker that offers access. So she used Stake and she was like, What are you guys talking about? I can see it in Stake. So I was wrong. If you want to try and buy the Danish version like I try to, for some reason you might have some trouble, but there is a US listed version. 

Bryce: [00:02:44] How good. I bought it. 

Alec: [00:02:46] You've bought it? Yeah. 

Bryce: [00:02:48] Yeah, I saw it in the notes, went into Stake and bought it. I think the reason I have done this is because.

Alec: [00:02:55] You said it would get to 1.5 trillion easy last episode. Not advice. 

Bryce: [00:03:01] Not advice. I'm looking at this like Nvidia was in December last year.

Alec: [00:03:07] I'm looking at this like BHP was in 19. 

Bryce: [00:03:10] And what I mean, what I mean by that is what I mean by that is Nvidia came out with an incredible market update that said, you know, the sales have gone through the roof and then it became pub, you know, it became the zeitgeist and, and then they did another round of revenue update sales update and it was another huge jump up. You can see the same thing happening here with Novo Nordisk, I think, and everyone's talking about it, but you can just see how they're just you would imagine they're going to continue to outpace market expectation in terms of what is being sold. That's my theory. 

Alec: [00:03:47] That's your thesis. Yeah. There's another world where market expectation has got so far ahead of reality that it doesn't. Yeah, that often happens. 

Bryce: [00:03:57] Yes, it can go either way. 

Alec: [00:03:59] Have you heard of lithium this year. 

Bryce: [00:04:01] Yeah, but I didn't say this is the core lithium of this time. 

Alec: [00:04:07] You're saying this is in video rather than core lithium? Yeah. And I'm saying there's always a shortcoming when you just try and reason by analogy.

Bryce: [00:04:15] Yeah. Well, have you bought it, you're going to buy it. 

Alec: [00:04:17] Yeah, but not investment advice. But yeah, I also just have a general view on pharmaceuticals. We spoke to Ricky Bannon from IFM Investors, who is a small cap investor. She spoke about two small caps. One of them was a cancer treatment and she was saying that up here, that's also doing a similar treatment over in the US, just got bought by Eli Lilly and you look at Ozempic, Eli Lilly and Pfizer are both now pushing into Novo Nordisk Space and doing a similar drug GLP one receptors. Is the argument in pharmaceuticals just by Pfizer and Eli Lilly, and whatever hits, they'll buy it. 

Bryce: [00:05:00] Scope it out. It could be an argument. 

Alec: [00:05:02] I mean, yeah, the challenge is, you know, they've got such a diversified portfolio of so many different drugs and all of that stuff. What's actually driving growth? But it just feels like anything that hits them. 

Bryce: [00:05:14] Like alcohol. The big alcohol brands just skip. 

Alec: [00:05:18] Yeah. Anyway, late stage capitalism. 

Bryce: [00:05:20] Well, I mean, if that's the case and if they do buy Novo Nordisk but. 

Alec: [00:05:26] Well I think in this case they haven't needed to buy Novo Nordisk. So it's just a recovering drug. So that Eli Lilly, Pfizer and Novo Nordisk are all in different stages of trials for the pills. Anyway, we spoke about this last week. We don't need to speak about it again.

Bryce: [00:05:41] Why not?

Alec: [00:05:42] It just feels like. It feels like it's being spoken about more than AI. 

Bryce: [00:05:46] Yeah, definitely. I was taken aback. 

Alec: [00:05:49] I was over the idea of AI 

Bryce: [00:05:50] Yeah. Yeah. This is my point. This is the Nvidia of December 2021.

Alec: [00:05:55] Yeah. Okay. You've made that point. Well, let's move on. What else is going on? 

Bryce: [00:06:00] While it's not really moving on because it's kind of it's kind of tying it back a bit. You've spoken about ResMed on the show and the impact the S&P has had on its share price and the opportunity that that created to buy like a really good quality Australian company. And you even spoke about it with Andrew Page and your mentor. Then there's a number of companies, good quality Australian companies that are being hit and I'm not saying this to buy or sell either, but CSL is getting hammered at the moment and hammered objectively speaking, because it doesn't it doesn't generally move, you know, ten, 20% often and it's down 22% from sort of the same period where ResMed got hit. And it's one of those stocks where, you know, it might be overplayed. There was once a period where people were saying you just buy CSL whenever it's on the throne. It's currently trading at 238. 

Alec: [00:06:59] So for people unfamiliar with what CSL does, biotechnology, they do a lot of blood treatments, particularly for kidney and heart disease. So make the case that a Danish weight loss drug is related to an Australian blood plasma company. 

Bryce: [00:07:17] Well, they're saying that one of the side effects or use cases for Ozempic is treating kidney disease and the efficacy of it was so successful in trial that they just stopped the trial because they just like it is so clear. Yeah, it is so clear that this has positive effects of treating kidney disease, which flows back to the impacts that they're going to have on this this drug. I know, I know. So that flows down to CSL, where 15% of group revenue is driven from this kidney disease business. So that's kind of where it started. And the blood plasma business is also under margin compression from since COVID. And so profits are under stress. So it's not just as mpic. I think they're facing a few headwinds at the moment, but this is having flow on effects. And so I think the argument stands where it's like it's a good quality Australian business that has been compounding time and time and time again might be worth having a look under the hood a bit more.

Alec: [00:08:17] The big three of Australian health care giants, CSL, ResMed, Cochlear, what does Cochlear get hit next? All of a sudden, all of a sudden as Ozempic stops hearing? Yes. 

Bryce: [00:08:32] Geez I mean other companies that might well probably be worth looking at would be the pathology ones, Sonic Health.

Alec: [00:08:39] Looking at them. What's that.

Bryce: [00:08:40] Well it hasn't been impacted by SMP thing. Anyway, I thought that could be worth doing the same exercise that you did on ResMed. We'd say so. 

Alec: [00:08:55] Okay, now can we please move on from this.

Bryce: [00:08:58] I promise. 

Alec: [00:08:59] What else is in the news? 

Bryce: [00:09:01] He's an interesting one. So a few weeks ago Netflix sent their very last DVD, which if you know the history of Netflix, they started with DVD delivery service and then obviously transitioned to online streaming. So I thought it was interesting that they actually were still sending them who's still getting DVDs sent these days? 

Alec: [00:09:27] Beach houses always have board games and a bucket of TV. So that's actually very true. Yeah. 

Bryce: [00:09:33] Okay. Faecal. Well, the last one was sent, but now have you heard of Netflix? It's. They're going viral in real life Netflix house. 

Alec: [00:09:45] I haven't. Is this like the Barbie house? Is it just like a market? 

Bryce: [00:09:47] No they're creating. They're building. It feels like what Amazon tried to do but they're building bricks and mortar dining retail and end to. Inspired shops where it's like a Netflix brick and mortar and you go and hang out. What? Yeah yeah they've done a real it's not a pivot, but they're trying It's called reset net I've got it here. Netflix recently sent its last DVD but the stream is not teaching physical offerings Introducing Netflix House to Biz said the venues will feature dining retail entertainment inspired by its top shows and movies. The first two locations are set to open in U.S. in 2025 and global spots could follow.

Alec: [00:10:28] Is this the start of like a Disney play, potentially like Disney have a lot of kids stuff like kids, IP, you know, Marvel, the Disney princesses, all of that stuff. And so then they are like theme parks is the natural extension to like engage kids in the real world. You know, Netflix has a lot of more adult focussed IP bridgerton House of Cards potentially. And then it's like, how do we monetise that IP? In a real world? You can go to like a 

Bryce: [00:10:58] Squid game. 

Alec: [00:10:58] Squid game. Yeah, that's actually a good one. Yeah, yeah, yeah.

Bryce: [00:11:02] Not even the.

Alec: [00:11:03] Squid game escape, right? Yeah. Like people would have to work Christmas for days. I mean, this is all new to me, but it kind of feels like maybe that's. Oh, like a stranger Things. That Stranger Things is Netflix, right? Yeah, yeah, yeah. Like a stranger things world where you. Through stuff. 

Bryce: [00:11:23] It just feels like it just feels it feels unnecessary. But maybe you're right. It does. It does mirror how Disney leverage their IP. So yeah, watch this space 2025. It's expected to be a Netflix house. Yeah. It goes on to say they haven't actually said what they're going to be selling. 

Alec: [00:11:41] The thing is Netflix have tried to monetise their IP in a few ways outside of monthly video subscriptions. I don't know if any of them have hit like, have you ever played a Netflix game?

Bryce: [00:11:52] No. 

Alec: [00:11:52] Well, they have a gaming division. 

Bryce: [00:11:54] Yeah, I'm just reading that now. It invests in mobile games. 

Alec: [00:11:56] Yeah. And they make like there's a Stranger things game and stuff like that, but it's just like. 

Bryce: [00:12:01] I'm saying, it won't be any good calling it now. 

Alec: [00:12:05] Fair enough. I'm going to say it'll be all right. Be sorry. So it'll be a lot more. It'll be more revenue. That's not good. That's no good. Well, I mean, like, it's better than most businesses. 

Bryce: [00:12:20] True.

Alec: [00:12:20] Like most businesses would love to be.

Bryce: [00:12:25] True. Anyway, anything.

Alec: [00:12:26] I should be more profitable than Equity Mates. 

Bryce: [00:12:31] You would hope so. 

Alec: [00:12:34] Now, look, I think that's covered it. Our analysis isn't going to get any better from here. Let's take a quick break. Let's recenter and reset and then come back and answer Sam's question. 

Bryce: [00:12:46] Hi. Equity Mates , Bryce here. Have you caught up on our new series Ask an Advisor. It's when we put questions to some of Australia's best professional financial advisors from you, the Equity Mates community. Hey, Bryce, Ren I've got a question. How do you Recommend managing a share portfolio with employee share Entitlements? What happens to that money? Probably one of my biggest concern. When is it okay. To let emotion drive your investing decisions? Ask An Adviser, live in Equity Mates feed now. 

Alec: [00:13:16] We've taken a deep breath. We are back and we are answering a question from Sam from the Equity Mates community. He wrote in to ask an equity mate sitcom, and it was such a good question and such an interesting question that we asked him to record it as a voice note. 

Sam: [00:13:32] Hi Bryce and Ren, a long time with no first time running in. Well, I'm a 24 year old who has acquired boomer parents that their typically love housing market. I've got a bit of money saved up qualities of wiring working for them, and that was in buying index ETFs and acquired like it. My parents, however, want me to buy an investment property in Sydney, but I don't want to commit to the long term mortgage and associated baggage, especially because I'm currently setting my age. And I'm not saying this is a flex. Just trying to say that I'm on a quite a low income and women will be next year. So essentially my question is, how do I tell my parents that I want to start probably designing into index funds instead of buying into the housing market? Yeah, I know that you guys going make your general information, but I'd appreciate anything to you guys of the show. 

Alec: [00:14:20] Love it. 

Bryce: [00:14:20] Nice. Thanks, Sam. Great question. 

Alec: [00:14:22] Well, I mean, my first response is, you know what? You've got to get your parents for Christmas. I bought a copy of Don't Stress, Just invest. Yes. Because that is really just a 60,000 word. It's not quite 60,000 word, but it's a book length argument for index investing and why that's enough to build meaningful wealth.

Bryce: [00:14:41] I guess the challenge is they would say we built meaningful wealth through the property market. 

Alec: [00:14:47] Yeah. So I think like I think so. I think for me there's probably two key parts of this argument. The first is expected return and then the second is accessibility. And accessibility has a few things under it. But like expected return, let's start there. Australian housing has been great for a long time and you know, your parents would believe that it's going to build wealth for another generation of Australians and maybe that's true, but the stock market has also been great. It's just been less spoken about when you look at the Australian, All Ordinaries returns back to 1900 to today include reinvestment of dividends. It's about 13% annual return. You can build more than enough wealth getting 13% a year. A lot of housing markets haven't returned 13% a year. So I think the first thing is historically, unlike the last 30 years, Australian housing and Australian shares have both been great performers. So from an expected return point of view, unless something, you know, massively changes in the housing market, you probably expect to do well on a dollar. I think. 

Bryce: [00:16:00] That's fair. I mean, historically that is true. 

Alec: [00:16:02] And over the long term in the future. For me, the reason that investing in shares makes a lot of sense for someone in your life situation, Sam, is because it's a lot more accessible and it's a lot more portable. Your 24 is studying a pay day. You're living in Sydney now, but who knows where you will live in the future? The fastest way to lose money on property is to need to move a lot is to incur the stamp duty and the transaction costs of buying a place in Sydney. And then once you finish your pay day, getting a job overseas or in another city and having to move and sell and buy somewhere else or start renting somewhere else. I like the obvious answer in the dream for everyone is just buy in Sydney, get it to positively geared, build some equity and then you can go and rent wherever you live and you can rent the place out in Sydney. But like servicing a mortgage and paying rent is difficult. Getting too positively geared is difficult. So I think for me, like the accessibility and portability is a big one. 

Bryce: [00:17:08] I think the nuance there is that if, you know, his parents are saying Sam's parents came by an investment property. So hopefully it's not something that if you move you have to sell. 

Alec: [00:17:18] Didn't hear that. Okay. 

Bryce: [00:17:19] What I think for me though, it's similar to that it's just a pure maths game. It's more about the costs associated when you're on a low income and you know you're going to be at uni. The costs associated with starting to build wealth in property is enormous. Like you've got stamp duty, you've got legal fees like all of these costs that go into it, that if you just put on a piece of paper in front of your parents and say, I'm going to pay 50 to 90K down the drain immediately with stamp duty, which is essentially the deposit I've saved it, which I could just fade into stocks over the next period of while I'm at university. Then it becomes a pretty compelling argument. I think also, if you look at just the repayments that you would have to be paying, the way I would do this is I would just make the case on a piece of paper with literally the maths involved. [

Alec: [00:18:12] And now just thinking like if you had 90K., 20k goes in stamp duty. So 70 K, you call your fear deposit. 

Bryce: [00:18:18] Where you can get up to 95%, but then you've got LMI mortgage insurance. 

Alec: [00:18:22] So what if you don't want LMI, you need 80%. 

Bryce: [00:18:25] Yeah, 80. So you're looking at. So it's 600 grand thereabouts. 

Alec: [00:18:29] Less than that even. If you've got 70 grand deposit. 

Bryce: [00:18:32] Yeah, true.

Alec: [00:18:33] Let's say you wanted 95% deposit. 70 grand. I saw a $1.4 million house, $1.3 million mortgage. There's no way you're servicing that. So I had to look at servicing $1,000,000 mortgage at 6% interest. And you're looking at about six grand a month in mortgage payments. 

Bryce: [00:18:56] Yeah. Which for a university student is just for me. 

Alec: [00:19:02] If that is me and my partner will, like, this is going to be 100% tough.

Bryce: [00:19:05] Yeah. Put that in front of your parents. Case closed. Yeah. I think also, mortgage insurance is a cost. The stamp duty, the repayment. But also just like the average price of, like a 600,000 loan or like if 70,000 in deposit. The average unit price here is, what, 800 grand. 

Alec: [00:19:25] I guess if it's an investment property you wouldn't buy in Sydney. So we're talking about city prices here where you pay over $1,000,000 for a one bedroom apartment. Yeah, but if you're buying it as an investment property, you would probably look at like south east Queensland or Tassie or WS cheap. But who knows if it's going to grow. 

Bryce: [00:19:42] And the argument would be someone would be paying the rent on that, you know, servicing money. 

Alec: [00:19:47] Yeah. Do you, do you miss out on a number of benefits if the first place you buy is an investment property rather than an owner occupied property, first home by first home buyers and stuff like that, I'm not sure. 

Bryce: [00:20:00] I would imagine so. Yeah. The government wouldn't be like, Oh, you can afford an investment property? I don't know. I'm speaking out school. 

Alec: [00:20:05] So I think to summarise because we've kind of jumped to a few places, I think the first argument is you're right, your argument, the maths of it or I don't think works. Like on a low income having saved 90 K, I don't know if you've got just wasting. 

Bryce: [00:20:20] Yeah. Not wasting money but yeah. Huge upfront coast 

Alec: [00:20:22] Huge upfront costs which is really an indictment on Australia's housing market but we are where we are. The second argument is I think accessibility like you can just invest what you can afford into shares. You don't, you're not faced with these massive repayments and it just means that you have flexibility in your life if you want to keep studying, If you want to take an academic position, you don't have to go and take the corporate job after doing the patch day because you've got this whopping big mortgage that you got to keep servicing. So the second thing is like accessibility. And then third thing, I think expected return. You're not going to be any worse off than shares. Some may make the argument that you'll be better off in shares than in property. Depends where you buy all that stuff, but I think not worse off is great. 

Bryce: [00:21:14] Yeah. Don't rush it. What's the rush? Finish uni. 

Alec: [00:21:16] But I mean, pressure from your parents. 

Bryce: [00:21:18] Oh, no, absolutely. I completely empathise with that. 

Alec: [00:21:21] And buy it. Buy them a copy of our book. 

Bryce: [00:21:23] Let's get on the show. We'll. We'll talk to them. 

Alec: [00:21:26] Should we. Should we put that offer out? Sam, if you want us to speak to your parents, we will. 

Bryce: [00:21:31] Stocks vs Shares the Boomer Millennial debate. 

Alec: [00:21:35] We do like a debate live. 

Bryce: [00:21:37] Streamed on Instagram. 

Alec: [00:21:39] That's not a bit like a high school debate where I'm like. Yeah. You know, it's like, yeah. And then Sam's parents are definitely Sam's adjudicator. 

Bryce: [00:21:47] 30 seconds though. Anyway, Ren, let's keep going. If you do want to submit a question, you can send them through at ask at equitymates.com. And a reminder that we do have our ask an adviser episode coming up very soon. We'll put all of the questions that come through to our advisor. 

Alec: [00:22:05] Maybe we put a pin in Sam's question and also put this to a professional I have.

Bryce: [00:22:10] It'll be in the email coming up.

Alec: [00:22:12] Oh, nice. 

Bryce: [00:22:12] Yeah. So if you haven't signed up to our weekly newsletter, head to it equity mates dot com slash email and you'll see a professional response to this question. 

Alec: [00:22:22] Yes, Yeah, yeah, yeah. And it's not just Bryce wearing a Groucho mask, it's actually a professional advisor. Yeah. Every Thursday we put one of your questions to an adviser and get them to answer it. So sign up to the equity mates email. But Bryce, let's take a quick break here because on the other side, you're going to speak to Henry Jennings, your mentor. He's been away in Europe and you have been keenly awaiting his return. So I'm excited to hear what you to get up to. Welcome back to Equity Mates. For people new to the show. Welcome. At the start of the year, Bryce and I each found ourselves a mentor. We really love this idea of being lifelong learners. Every expert we speak to really embrace this. And they're constantly reading, constantly listening, constantly learning because the market is constantly changing. New companies are coming. Being curious and learning is so important as an investor. So each found a mentor to keep us honest and to keep us learning. I've been working with Andrew Paige. You've been working with Henry Jennings.

Bryce: [00:23:31] Hard to know who's keeping who honest.

Alec: [00:23:33] Interesting. Well, that is a comment, and we'll put that to Henry later on. But he's been in Europe. He's got back and you and him. 

Bryce: [00:23:43] It's been a big break, actually, because I went to Europe. Then he went pretty much the day I got back. So we had a lot to catch up on about our Europe trip. 

Alec: [00:23:54] So we'll see how much of that makes it into the final cut. But here's Bryce and Henry. 

Bryce: [00:23:58] Let's get stuck in. So, Henry, we've both been over in Europe. 

Henry: [00:24:04] We have.

Bryce: [00:24:04] Did you tune out of the markets on your way? 

Henry: [00:24:07] I did, actually, Bryce. And just decided to sort of disengage and try and get a fresh head space. Come October?

Bryce: [00:24:14] Yeah. So the ASX and the S&P sort of tracked each other somewhat. Now, when I went away, there was somewhat of a feeling of a little bit of optimism. It now feels like the market has reversed somewhat. This is at least how I'm saying, and people are getting a little bit nervous again. We saw inflation pop up. The commentary coming from the Fed is that maybe rates will be higher for longer. How are you saying the market now that we're back in action?

Henry: [00:24:45] Well, I guess September seasonally can be quite a weak month. There's a lot of fund managers that come back from Long Island and Nantucket and all these places in America, Martha's Vineyard. And they're cranky. They've had the juniors look after the market in the summertime in the northern hemisphere and they get back in there cranky. And September can be a bit of a downer as a month. October traditionally is actually one of the best months of the year, despite the fact that we've seen one or two perilous crashes in October. But September certainly wasn't good. Lot of companies going ex-dividend as well on the ex on the ASX. So that does take points off the index. Some of that money now is coming back into the market because the cheques have dropped into the accounts or the bank accounts are stuffed full of money again. So we are seeing things pick up a little bit. The interesting thing I guess is that is the narrative around what the Fed's doing and you were talking about that the higher for longer. That certainly seems to be pervasive now and that they are going to keep rates higher for longer. But the narrative has changed, I guess, in the last week or so from just higher for longer for no more rate rises, but maybe no more rate cuts. And the soft landing that we were talking about and thinking about in the past, maybe that's happening as we speak and when we've still got very, very good jobs numbers coming out of the US, that nonfarm payrolls was huge that we saw last week. We're still seeing good economic growth here, low jobs, unemployment as well here. So we're kind of muddling through at the moment and the market is been very oversold. So we are seeing some buying creep back in into October, and especially as there's a lot of cash on the sidelines from all these dividends. And in the US, a lot of selling has meant that there is this cash build up. So I'm slightly more optimistic. There are a lot of things happening as well on the macro front, you know, with oil and gold and of course what's happening in Ukraine and now what's happening with Israel and Hamas. So it complicates things. But markets do tend to try and look through these sorts of things unless there are direct implications. Now, we saw a spike up in the oil price, which is kind of oil trading, 1 to 1 gold spiked up, gold trading 1 to 1. But it hasn't really kicked or followed through yet. So we'll wait and see how that pans out. 

Bryce: [00:26:59] What I'm trying to sort of get my head around at the moment is we've had 13 interest rate rises over the last 12 months. Call it, you know, a little bit for and we're having this mortgage cliff. We're kind of halfway through rolling out at the moment. We've had bond traders in here or bond fund managers aware on, you know, distribution lists. That shows what you can buy. And if you've got the money to do it and don't get returns off or yields of 12, 13% in some instances, which is all well and good for those that can afford it. Firstly, do you buy bonds in it? Does it become more attractive for you now or is it just not part of it? How do you approach it? 

Henry: [00:27:36] It's not part of my thinking, to be honest. It's not easy for small guys to buy.

Bryce: [00:27:43] Impossible.

Henry: [00:27:43] It's impossible. Yeah, it is not easy. I mean, obviously you can just leave the money in cash management or something like that, and you're getting relatively good rates now. But as far as you know, the thing about the bond market is it's for big boys. It really is for big boys. And in times of you're, you know, the bond movements were very small. You know, you didn't have these massive 14 basis point changes in ten year yields overnight every night. You know, you didn't have that. It was very small, little marginal increases or decreases. So because that was we have to throw a lot of money at it and it attracts the big players and it's all the big money in the world. The US has got to fund what is $31 trillion of debt. All this stuff they've got to issue. So it's a big boys game and there are a couple of bond ETFs that you can you can trade, which is probably the simplest way for retail people to trade it. And there are a couple of now there are guys out there that do specialise in the retail end for bonds, but it's, you know, from our perspective at markets today, we looked at obviously the risk free rate because everything is therefore priced off the back of that, but that's probably as far as it goes for us with our equities people. 

Bryce: [00:28:55] I want to go there because getting now four and a half plus in bank accounts. Five and five and a half for some of the good savings accounts. And you're right. I can't remember a time in my life that it has been that good. Maybe early days, early days like school, but like, I'm just thinking through uni and stuff. Even when I was at the bank, you had to go to, like, long term deposits and that sort of things. But, you know, at called transient savings accounts, I can get five and a half percent. And so it's, it's sort of, you know, it changes the way you think about what you do with that powder on the side. Yeah. So how has it changed what you're looking at or buying over the last sort of 12 months? 

Henry: [00:29:36] Well, I guess, you know, a lot of the speculative end of the market and not talking about the good tech stocks, the US kind of tech stocks, which have been on different basis, the AI boom, etc.. But certainly from a perspective of our minuscule tech sector and our small caps in biotechs or whatever, you know, having money in dead stocks that aren't doing anything that you're waiting for six months for them to do something, you know, that that is costing you money. In the past, you know, a year or two ago when you were getting zero on your deposit rates, it wasn't costing you anything. You know, you could sit there because you got no alternative. We had Tina as opposed to Tara. Now we've got there are reasonable alternatives. And as a result, you know, you've got a time things a little better because the price of money, the cost of money, you're competing all the time. And we have seen small caps sell off considerably. All that speculative money, the hot money that was in the lithium space, a lot of that has been well and truly shaken out, which I think is a good thing. It will make people a lot more disciplined, I think. And it means that you've got to think about where you're allocating a capital to because you do have a you do have an alternative, and that is just sitting there with cash. 

Bryce: [00:30:53] So does that mean you're wanting to allocate into stocks that are either paying a yield or that aren't what you just sort of set are going to sit there and be dead? Like, are you looking for much more sort of short term catalyst that's going to give you a more immediate return? 

Henry: [00:31:09] I think we've seen a lot more momentum trading, not just in in equities but also in other markets. And people have been jumping on board things and just being part of that momentum because you don't want to be in the dead money because you can get that return elsewhere. So you want to get on the stuff that's moving fast and maybe you need to be more active in what you do. I think that's certainly something a bit more disciplined with your capital allocation. I think, you know, the good companies are still doing relatively well and the ones that are high yielding and have fully franked dividends, of course, which you don't get on the deposit accounts are still in demand. We've seen that with the banks. The I have a big bank basket, which I call it, which many years ago you could buy all four local banks for 100 bucks. So I've been tracking that forever for the last ten, 11 years when you could buy that. And it's now about $176 and it tops out at about $215 and it bottomed at 107. That doesn't include any dividends. That's just the full share prices. Add it up. But that has stayed pretty stable for the last little while. And certainly, you know, investors just keep buying the banks. It's such a bedrock, fully franked dividends. The appeal of BHP and Rio has waned slightly in terms of dividends and Fortescue because of, you know, they were quite generous at times recently, but they have been less generous as commodity prices have come off. But I think, you know, the high yielding stocks have done okay. They've held up, whereas others, you know, we've seen wisetech coming issues. CSL, which was a market darling, that myth has been well and truly busted at the moment the same with ResMed. So a lot of things have come back into a more normal kind of pricing. I'd say in the next 12 months we're going to see more muddling. 

Bryce: [00:33:05] I was just thinking about that, like if the what's the ASX up at the moment, 200 year to date is down 1.9%, Yeah, it'd be sort of flat call it.

Henry: [00:33:15] So chucking in dividends of four and a half percent you've got to.

Bryce: [00:33:19] So it's, it's probably matching a high interest savings account. 

Henry: [00:33:24] Doesn't make you rich. Doesn't make a lot of trouble because we've, we've seen your you know, you're young and you haven't seen this, but you know, when I started in the markets back in the early nineties or the early eighties, actually, you know, interest rates went to 17% in the UK and all the time they were kind of three, four, five. Even when John Howard came in, they were looking at raising rates to 7% at one stage and everyone was screaming blue murder. So it's not unknown long term. These are not abnormal interest rates. What is abnormal is the speed that the central banks have moved. It has been unprecedented. It's great where it is now, but it has been unprecedented in the speed they have moved and it has taken people by surprise and it needs people to adjust and work out okay. There are alternatives now to shares. Maybe the bond market is the good place to be. Maybe we should look at hybrids. Maybe we should look at just cash in the deposit account. There are alternatives.

Bryce: [00:34:27] So we had a listener question come through that I think would be relevant. And it was pretty much a they understood the value of dollar cost averaging. Assuming they're our age, I'm just getting it into the market. Yeah, but now they're faced with the opportunity of putting that money into five and a half percent interest rate. What would your, I guess, just advice be to someone or everyone sitting there listening now to there's an opportunity cost and also pursuing a strategy of long term money in the market.

Henry: [00:34:58] I think it's going to still be hard to beat long term money in the market. Okay. You know, I think even if we saw interest rates spike from here, which I don't think we're going to see, I think we're kind of close to peak. There might be one more, but it's pretty close to the peak. I think, you know, at some stage we are going to have issues again and central banks are going to have to tickle the market a little bit to the economy. So I think at the end of the day, equities will still win out or even housing to some extent. But equities is really what we're talking about. And dollar cost averaging over the long term has been a proven winner. Just leaving your money in the bank at four and a half percent, that's fine. You're not getting any tax breaks out of that. So, you know, if you're paying the high rate of tax, you're still going to be you know, it's still two and a half percent. So you're not going to get too rich on two and a half percent. You're going to wash your face. And by the time the bank takes its fees and charges and charges, you're dead, uncle. Except for those fees and charges, then you know, you're not really going to be going forward, whereas you will be going forward ultimately in the stock market. You know, and especially if you're buying ETFs, say, that have got good yields or stocks that are got good yields, you know, you won't really we did some work on, you know, how retirees and older people don't care about share prices. I really have no interest in the share price. All I care about is that dividend check. The share price is only of a consideration to their kids who will get the shares when they die. Yeah. And they'll go, Oh, I need the income now. So they'll keep them forever. I mean CSL people are still from CSL from when it listed or CBA, they don't care whether it goes up a dollar, down a dollar on a daily basis. They just want their dividend cheque That's what they want. And you know, I still think equities will be the place to be, but you just got to be more disciplined because there are now alternatives, at least in the short term. It might not be the long term, but in the short term there are alternatives. 

Bryce: [00:37:03] And then to close and maybe to leave us with something to think about before we connect next, it's where are you looking at the moment to buy? And I guess, have you bought anything post Europe? What's your plan of attack over the next couple of months? 

Henry: [00:37:19] I've been looking at some of the really bombed out sectors, Lithium one. I still find it confusing. Again, that's a good word that we've been using a lot. Confusing. You know, Janus bought it in 19% Liontown. 

Bryce: [00:37:32] And so how are you using what's going on there to invest in around it?

Henry: [00:37:38] Well, I guess, you know, we've got everything in the market is a relative basis, whether it's the risk free rate or whether it's a corporate transaction. There's a sort of a liquidity event Liontown is a liquidity event for the long term shareholders, obviously. But it also puts the line in the sand as to what an industry player like Albemarle values a company. It's valuing Liontown. It's nearly $7 billion. Yeah, it's a lot of money for a company that hasn't produced anything and is still building the project. So then you look at various other companies of various different stages and then you can derive a little bit more value. It's like something like Pilbara, which has had a massive tanking and as I say, 12% of the stock is is shorted. That's capped at about 13, 14 billion, but it's got 3 billion in cash. And it produces and it's got downstream assets and it's got expansion plans, etc.. So you look at that and go, well, that looks relatively compared to lines down. That looks pretty good value at these kind of prices. And then I guess you can look at other lithium companies and in the same space, because you want to compare apples with apples and you can say, well, okay, this one's got this big resource. Is this far down the timeline? We know that lines and sold for 7 billion. Therefore this one is worth 1 billion or 2 billion. 

Bryce: [00:39:06] And where it's at

Henry: [00:39:06] On depending on where it's in that timeline. So you can kind of look from there. And the same and same applies in any industry when you get a big takeover target and we're losing them, we're losing ASX, the Hawks, you know, origin, you know, again, you can, you can look at Origin and go cable, Brookfield, Pay whatever they're going to pay because we don't really know what they're going to pay if they pay $9.15 or whatever, that gives the value of 18, 19 billion. And then we can look at API or another kind of company. And if same with Virgin, you know, virgin floats, is Qantas cheap and try and get Virgin. So you're trying to compare apples with apples and relative things. So at the moment I'm looking at stocks that have been whacked disproportionately to their business and some of those are in the tech space, some in the lithium space based metal stocks as well, and to some extent, gold stocks. You know, they have recovered recently because of the uptick in the bullion price and what's happening around the world. But in Aussie dollar terms, gold price held up pretty well. And some of these Aussie like Newcrest for me looks kind of interesting because the merger with Newmont is about to be consummated. We're in the final countdown there. What does this big behemoth now look like and who is going to be interested in this? From an investment point of view, Newcrest has gone down to Sideways during this whole process because there's always uncertainty and moving parts, etc. But you know, when you put one and one together, do you get two and a half? I suspect you might. And you might see big funds go, okay, well, this is now such a big gold company and other metal company that you can't ignore it and you'll get Newcrest, Newmont, the combined entity, rewrite higher. So, you know, there are there are stocks out there that you look at anything CSL. 

Bryce: [00:41:02] Did you have a look at ResMed.

Henry: [00:41:04] Yeah, we've talked about ResMed in the past. I hated it for a long time and was very vocal about it. And then when it dropped after the results, I started to get interested in it a little early and there's all this chat about how, you know, weight loss drugs are going to change the world. And so, you know, no one's ever going to get sleep apnoea again. It's everyone's going to be slim, trim and look like candle. That is not going to happen. You know, that is not going to happen. We saw it last night. PepsiCo, their results came out. I said not, you know what I'm saying? Yeah, I haven't seen that. It's not, it's not one it's not cheap. You know, if you wanted to do that in Australia, 300 bucks a month. And it's every month. Yeah. It's not just two months and we're done. 

Bryce: [00:41:44] And it's not. Yeah exactly. Yeah. You either keep going for likely to put it back to. 

Henry: [00:41:49] And you know we're now starting to see reports of some of the side effects which can be interesting now nausea, diarrhoea, constipation, so how that works. But, but you know, it's not the other. So I think ResMed, the problem they've got is once you've bought a machine, that's it. And the machines cost the same, you know the 1500-1600 hundred bucks. That's, it's, it's, there's no, it's not assessment. There's no, there's nothing else. and they've got to get more customers. And the problem is that a lot of the existing guys, you know, they quit because they don't want to look like Maverick. Yeah, because, you know, it's not very romantic. So a lot of people quit quite early and they don't go back to it because it's just too hard. Yeah, others continue, but there's no ongoing and I think that's where they failed to really capture the on going this and turn it into to some sort of SAS smaller recurring.

Bryce: [00:42:46] Yeah. I mean finally LRS, Latin resources. We spoke about it before we went away. Still holding.

Henry: [00:42:54] It's still holding. I did, I did sell some the other day at $0.29, having bought some at 23 and a half on a bit of a sell then still hold holding still like the story. Obviously it's you know it's following a playbook Sigma lithium is the playbook next door not immediately next door but that's you know they're very close to them, both geographically and also corporately, that's a word. But they are very close. They got quite big ties between the two companies. So I still like that one. I saw some research. There's been some guys doing some work on it, 45, $0.50, popping back up to 30. You know, there by below 25, there are still at 40, as far as I'm concerned. And here at 30, they're kind of sloshing around a bit. We are seeing a little bit of interest in lithium stocks again. And some of it's short squeeze. I'm sure Some of it is just, you know, brokers have started to go, oh, we may have worked out lithium forecast a little too much because at the end of the day, if lithium prices went down another 50%, there's going to be no one out there doing it. 

Bryce: [00:43:59] Yeah. Yeah. 

Henry: [00:44:00] You know, you killed supply.

Bryce: [00:44:01] That happened, though. 

Henry: [00:44:03] It's, you know, it's possible and it may there may come a time when we just look upon lithium as just another chemical. Yeah. Which is what it is rather than a mining, you know, it's a chemical process as opposed to a mining process to some extent, especially with the brine. But there's no doubt that we all friends electric, you know, you only got to drive around Europe. Yeah, I know. Especially in London. London's got these new ultra low emission zones. Oh, wow. Oh, yeah. They're a beauty. Some people, when they drive out of their driveway in the morning, custom $12.50 because they're in a they've just been named as an ultra low emission zone. Whoa. And because their car is old.

Bryce: [00:44:45] You got so. 

Henry: [00:44:46] It doesn't qualify. So you have to pay £12.50 a day. So it's £4.50 a day, 25 bucks. 

Bryce: [00:44:52] To drive around. 

Henry: [00:44:54] To drive around in your own area. My brother can't drive his car from where he lives to the local shopping centre because that's just, wow, you know, ultra low emission zone and it will cost him £12.50 to do so. So it's funny because in the UK some of the old car now are getting very cheap if you're in one of those zones because you can't sell them to anybody who lives in those zones. So you can pick up some real bargains because people have got no choice but to get out of their cars. And it's not just London. It's starting to spread now to other areas of the UK and it's also starting to take hold. You know, it used to just be the congestion charge, but now it's kind of everywhere and I love it. I had a couple of hybrids while I was in Europe to drive and they are, you know, you go to the petrol station and you fill up and you go, hmm, I can. 

Bryce: [00:45:44] Yeah, see what they're talking about.

Henry: [00:45:47] And see what hat's because, you know, petrol is expensive. So you can see the oil price going to hasten the everything you know and the choice of models is getting. It's not just, oh you can have a Tesla what colour you want. Now it's this a big, big range. The Chinese are flooding Europe, the flooding the market, we're seeing it here. You know, EVs are under 45 grand now. Compared to Tesla's ICE vehicles, they've dropped the prices so much. So it ain't changing this. This is unless someone invents or pushes the sodium battery on. Lithium is in the middle of the Venn diagram and it still is.

Bryce: [00:46:26] There you go, Ren. When it was great to catch up with Henry. Ren, thoughts on his view on ResMed. 

Alec: [00:46:31] Yeah, that difference of might, yes. But as the great American publisher William Feather once said, "Every time one person buys, another sells and both think they are astute."

Bryce: [00:46:41] Well said. 

Alec: [00:46:42] So time will tell.

Bryce: [00:46:44] Who was it? 

Alec: [00:46:45] William Feather. 

Bryce: [00:46:46] William Feather. Time will tell. But look, we're going to try and get both Andrew and Henry on the show a couple more times before the end of the year to close out 2023 with them. Plenty has been going on. Before we get into final bold predictions and close out the year. So it's going to be honest before we know it, but we'll close it there. If you want to ask us a question, a reminder, ask head equity mates dot com and sign up to our weekly email equitymates.com/email. Let's leave it there. We'll pick it up on Thursday. 

Alec: [00:47:16] Sounds good.