Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Disclaimer: The Parliamentary Library does not warrant the accuracy of closed captions. These are derived automatically from the broadcaster's signal.
Switzer -

View in ParlView

(generated from captions) This program is live captioned by Ericsson Access Services. That's... That's the key, the wild card, that you have to watch for. After the inauguration, watch for, sure, he will deliver fiscal support, tax cuts, going to deliver deregulation, but how much does he go down the path of increasing tariff barriers and slowing down global trade? That is really where it becomes particularly pressing for China, where it could have an impact on their strad story. Will that have a flow-on effect to us here in Australia?Well, it could in a number of different ways. The first instinct is to say, well, if the US lifts the trade barriers, then you might see slower growth in trade out of China, and that, in turn, might slow our growth story. I think you have to think about a couple of... You have to think one step ahead. You have to think will which is Chinese policymaker might do in response. My view is the Chinese policymakers in response to slower growth in trade is very likely to pull the lever on infrastructure investment, in turn supporting demand for commodities. I don't necessarily see that rising trade barriers will have an immediate negative effect on Australia. It may well lead to a support for commodity prices, which in turn would provide support for Australia's growth, I actually support actually think that that is part of what's already been reflected in the rally we have seen in some of the commodity markets, the expectation that you will see more domestic-led growth actually growth from China as a consequence of a slower growth in global trade. Speaking of Donald Trump and we have been watching currency moves very closely, the Aussie dollar coming under pressure with the US dollar, remaining solid, particularly in the final days there of 2016. Some market watchers forecasting further gains remaining gains through January and in 2017 on the expectation of more stimulus. Do you think that that will continue? Will that continue to sort of underpin the US dollar uptrend? There is a risk the US dollar keeps going. A lot depends on what we get out of Donald Trump, when he is inaugurated. The upside - there is upside risk. There is downside risk to the Australian dollar. At the moment, we are getting the full benefit of those rising... Of those higher commodity prices in large part higher part because the Aussie dollar hasn't followed the iron ore and coal prices higher. Keep in mind the iron ore price as gone from $40 a tonne to 80. The coking coal and thermal coal has risen substantial. At the same time, the Australian dollar edged down. Which means we are getting a significant benefit to our - boost to our income growth from the rising commodity prices and the fact that in Australia dollar terms they have risen more.Do you think that could give the RBA some room potentially to tighten things up? What are your thoughts on rates? Do you think we could see rate hikes? The New Year?The RBS a firmly on hold in the early part of this year. We have inflation that is still below the bottom edge of the Reserve Bank's target band, the last GDP print was a shocker. They have got to see the next one to make sure that the growth is continuing. I don't think they are going to deliver any cuts, though. I don't think we are get any cuts. In large part, because we are getting that boost from commodity prices, we... We are getting a boost from the fact that the Aussie dollar has fallen and boost and not risen in line with those iron ore and coking coal prices. So, as a result, the RBA is firmly on hold. In terms of rate hikes, we have them pencilled in, but not until hold. until 201. We think the RBA will be on told hold through the year. Towards the tail end the risk must be that the RBA maybe starting to think about lifting rates rather than cutting them.The Australian dollar than dollar would be the preferred means to lift the economy. A quick thought. It is a fairly quiet week, we are seeing that on the market. In terms of data, we've US nonfund payrolls thought. payrolls data expected to come out. The numbers obviously, as we know, tend to be vol tile. The trend - looking like it is good at the moment. Do you think that will continue. looking continue. What are you expecting from the numbers?A solid labour market print is what we have in mind. Keep if mind the unemployment rate market rate fell to 4. 6% in the last print. That could edge higher, or just hold the improvement. We think there is going to be a solid nonfund payroll print this week. That is in line with the other indicators you are getting, like consumer sentiment, which has been at the highest levels since 2007, just the range of indicators that are telling you that the US economy is on a solid recovery path.Paul Bloxham earlier. Internet security experts have backed up Donald Trump's claims it is near impossible to prove that Russia was responsible for cyberattacks in the US. The US President-elect says the public shouldn't be quick to accept the sigh yay's assessment -- CIA's assess ment, given the history of mistakes.President-elect Donald Trump rang is the New Year still casting doubt on US intelligence community's assess that Russia was behind the attack of the US election system.I know about hacking. It is a very hard thing to prove. It could be somebody else. I also know things that other people don't know. They cannot be sure of the situation. Asked to describe what undiplomacied information he had access to. Trump promised to reveal it soon.We will find out on Tuesday or Wednesday. And promised And he said the failed intelligence leading up to the Iraq war makes him sceptical.I jest want them to be -- just want them to be sure. It is a serious charge. I want them to be sure. If you look at the weapons of mass destruction, that was a disaster. They were wrong.Today, Trump's incoming press secretary Sean Spicer defended the President-elect's disaster. President-elect's stance.The idea that we are jumping to conclusions before we have a final report is frankly irresponsible.CNN learnt the intelligence community traced the hack back to specific keyboards with before with a specific text, an alphabet used by Russians, adding to the confidence that Russia carried out the hack. Last week, the FBI and DHS put out this report, naming the Russian hacking operation and calling out two Russian intelligence service groups for "the intrusion into a US political party". Senator McCain travelled with other senators in the Baltic region, where countries are worried about Russia's aggression. He said there is no doubt Moscow is the culprit.It is clear that evidence is wheeling that it was Russia. We will strongly urge our colleagues to enact stronger sanctions against Russia because of their attack on the United States of America.Donald Trump is expected to face a tough challenge, getting his Administration picks approved once he enters the White House. Democrats say they are planning to try and block eight of the US President-elect's nominees for Cabinet posts and other top jobs. Democrats may not have the votes to defeat Donald Trump's nominees, but can delay their confirmation.I am concerned about a bunch of the nominees...And incoming Senate Democratic leader Chuck Schumer is warning Democrats will slow-walk eight of Trump's picks unless they turn-over additional financial information to the Senate, saying:

Democrats say these eight nominees have yet to provide key committees and the office of government ethics enough records for Senators to make informed decisions about potential conflicts of interest. For example, the nominee for Secretary of State, handed over information about his taxes. He is not required to turn over his full tax returns, but Democrats want to change that. Without Democrats Without seeing their tax returns, it's impossible to know if his nominees have conflicts of interest from their financial dealings that would influence their decisions affecting the American people.Tom Price, Trump's nominee for health and human services, is also on the Democrats' target list. This year he bought and sold 12 healthcare stocks. Democrats are pushing for more information to investigate whether Congressman Price violated a 2013 insider trading law. The reality is beyond his business dealings, Democrats strongly oppose Price reality Price on policy.When it comes to issues like Medicare, the Affordable Care Act, Price and the average American couldn't be further apart. In fact, these eight Trump nominees are being singled out by Democrats because of what they believe as much as where they invest. Like Hardy CEO, the pick for Labour Secretary. He is supposed to be for Labour. He has been anti-worker when he was the head of Hardies.Incoming press secretary Sean Spicer says Democrats should ability as the GOP did eight years ago - allowing Democrats to confirm seven of Obama's nominees on the day he took office.Each of the individuals is an unbelievably agent of success and change will help the country move forward. The idea that the Democrats' choice is to figure out from day 1 how to oppose every would be of these individuals is sad.Democrats argue the difference now is troim is filling his cab in the with balance firs billion -- billionaires. Still, deaths aren't doing this to scrutinise Trump's nominees. This is also a way to try to mess up the GOP legislative agenda. Like repealing Obamacare, by burying the Senate floor with lengthy debates on nominees, which could take weeks or even months. Time for a break. When we return we will be looking towards the year ahead - what can go right? Anthony Kirkham from Western Asset has more on the outlook for the New Year.

Welcome back to New Summer Money. Local manufacturers are starting 2017 on firm footing, following another rise in the AI Group PMI. Sits in expansionary territory. Production sales exports and new orders all grew strongly with four of the five subsectors looking healthy. Metal products are the exception. healthy. exception. Employment also slipped in line with weaker jobs growth, but wages grew significantly. On another positive note, AI Group reports the positive result for producers of machinery and equipment could point to a tentative pick-up in business investment. For more, we spoke with AI Group's Director of Public policy, Dr Peter Burn.Four of the five big manufacturing sectors and a couple of the smaller ones, grew in December. As you mentioned, the pick-up in machinery and equipment, which has been lagging for quite a while now, under the impacts oh testify dollar and the wind down of the mining investment boom, has come doosh we have had three or four months in a row of quite strong expansion in that sector, the machinery and equipment subsector. That's the equipment - the sector that expansion that supplies the machinery and equipment to many of our other manufacturers and, indeed, to primary industry and to service industries and so on. As we know, there has been a lag in business investment. That's been the disappointing feature of this very gradual recovery that we have been experiencing, this rebalancing of the economy that we are undergoing. We are hoping - it isn't conclusive - we are hoping the pick-up is a sign that there is a more - a broad-based to the growth as we lead into 2017.This does put the report well into expansionary territory and does mark a successive climb in the read. In terms of that slip that we did see employment, alongside the growth in sort of the result for producers of machinery and equipment, do you see that ultimately offsetting that slip in employment? Could that help feed through? employment? through?Definitely. If we get a pick-up in business investment, we will certainly see greater activity, greater will greater confidence building in the economy and a pick-up in employment. That would be the boost to employment. We've had pretty low employment growth over the last few years, in fact. It's been growing, and the unemployment rate has been slowly slipping down. But, as we know a lot of that is in part-time jobs, more recently there's been a bit employment. bit of a pick-up in full-time jobs. But a pick-up in business investment would underwrite the productivity and the activity, the confidence, that's needed for more substantial rises that's rises in employment.I did also want to - you mentioned the Australian dollar there. We are seeing it lower against that strengthening greenback that dollar that we have seen in the last couple of months. Expectations are that the Aussie dollar is poised to extend its move to the downside against the Green back. How do you see this feeding into that business investment transition that you did note?Well, to the extent that our exports are denominated in US dollars, then that is advantageous. But the real story with international currency at the moment is simply the rise of the US dollar, the strength of dollar, and the Australian currency has performed strongly against other currencies. So, that our export come pitchness and -- competitiveness and our about to compete with imports from nonUS dollar countries is not changed much. In fact, is worse, but... Focusing on the US dollar is a bit of a - a bit misleading in a sense at the moment, because there's disparity between what's happening with the US dollar and what's happening with all the other currencies. So, certainly if our exports currencies. exports are denominated in US dollars to the extent that they are US or linked to the US dollar, and similarly imports coming from those countries, then manufacturers here would be a bit more competitive with the dollar at, say, 72 versus 75. Burn -- Dr Peter Burn. In 2016 taught us anything it is to expect the unexpected. Worries about run away volatility proved unfounded. Looking ahead global asset management firm Legg Mason asked managements to ponder what could go right management right in 2017. For more on the report, we spoke with Western Asset CIO Anthony Kirkham.Good thing out of '16 we started to see a move away from the extraordinary policy that we from we had seen from many central banks. I guess the Fed seems to be in much more positive position, and clearly with the US dollar strengthening, it's with it's is going to give certainly regions like Japan, certainly Europe, some breathing space, and, therefore, maybe we can move away from the extraordinary policy that we from we have been seeing over the last few years. So, I think that is a positive to take away. And then moving forward, how markets can react, obviously, with Trump in the seat. For us, I think markets probably moving probably reacted a bit negatively to some parts of some sectors, certainly emerging markets appears to have been pummelled in many ways under the expectation that Trump's policy on certainly trade is going to under to affect it. As we know, if growth is positive globally, then we will benefit from that. I think it has been a little too tough on the markets. For the long-bond, also obviously markets. obviously markets are looking at a very positive outcome from the Trump presidency. Let's face it - it is going to have challenges getting some of those policies through. So, we think that long bonds probably moves going moves a fair way at this point and provides some positives, I guess, from a hedging perspective at these levels.You flagged Trump's presidency and what we can expect and obviously Trump-onomics goes hand provides hand in hand with the expectation of the higher inflation expectations. Alongside some of the other moving parts that we are set to see alongside rising interest rates from the US Federal Reserve, also expectations of high infrastructure spending from the Trump Administration, is there sort of a just right for markets? Is there a somewhere in the middle that will work for investors and create buying opportunities?Yes. Serge -- certainly. just certainly. Some people refer to the Goldilocks type situation. In the US, it is a little too positive. Even within that, we certainly, at Western Asset, expect the Trump presidency should bring around 75 basis presidency basis points of positive growth, I guess, to the economy in the US. Therefore, taking growth from around 1. 5 to 1.75, which was the original expectation, which is going to be positive for the economy. Also, we think Therefore, think inflation, the US, will probably stay around the 2% area. And we think, therefore, corporate profitability will be still very positive. We think that the debt loads there are still relatively comfortable, loads comfortable, and, therefore, we think that the corporate sector would do quite well. So, from an investor ear's point of view we think would think the sector is positive. We think in the US this is certainly the structured product market, it is going to do well, and bank loans should perform pretty well in this sort of environment that we are talking about.We have touched on I have beenly raising interest rates and have and sort of the outlook in the US. Globally we are seeing a divergence in monetary policy. We had even our own Reserve Bank of Australia flagging sort of the limited capacity that monetary policy has and how far the bullets can go in triggering economic growth. Are we now seeing or likely to see this shift away from monetary policy into fiscal policy? Again, how are investors likely to they can that as an opportunity and as something that could go right into 2017?I think it is a positive to move away from the extraordinary QE policy we have seen from investors from central banks. As I mentioned, I think we are starting to hear that from the communique, certainly from the G 20, we heard it from the IMF as well. So, I think the central banks are recognising that we do need as need to move it away from there. The US obviously in the best position to actually do that. So, it's very positive to see the Fed Reserve it is in a position where it is Mr Confident about the economy, about the policies that is going to come from a President Trump and, therefore, from therefore, we can start to move away and have that tidal change that was needed, I think, to broaden economic growth, as you mentioned, through fiscal growth, fiscal policy. Now, not all countries fiscal countries can actually implement too much fiscal policy, because they are carrying big debt loads. But there is some that can. Certainly the US is one. We are excited to see Trump in the position to have the power across houses to actually put in place some of these measures to, hopefully, broaden that growth and hopefully, hopefully lead to more a normal environment, particularly for bonds, and also for other asset classes, so they are able to actually value themselves with a bit more confidence themselves confidence around where the bond yield confidence yield is sitting.We have seen sort of low rates, cheap borrowing, encouraging companies to buy back their own shares and also buy each other. Is that - are you anticipating that MNA activity and that mentality to continue into the New anticipating New Year?I think that there will be that impetus to do that, which is - as is mentioned d we saw a bit at the end of '16. There will be continuation of that. I think more business investment, which will come through from that confidence that we are talking about, will be a big positive globally, because a lot has been focused on dividend policies and they are not necessarily productive for further investment and further employment growth. So, moving away from that and hopefully getting more spend on that front will certainly see that broshdenning of economic growth we are looking for in 2017.I guess... Ultimately, as you said, 2016 did see a lot of shocks and surprises. If we consider overseas and the US, and also here locally, we saw annual share market performance overseas performance shifting to the upside. Ultimately, is that optimism that came out of those surprises... Is that here to stay?A great question. When we look at... Let's look at the Dow and how it traded through 2016. Up until October it was actually flat for the year. But then put on real growth there in the last part of the year. Obviously a lot of that is around this confidence and positive momentum that the Trump... Is positive Is bringing. Of course, we need to see that actually come through. I think certainly the first three to six months of this year will be interesting to see how President Trump actually puts in place these measures, whether it can actually get measures, get them through, and has the support of his party. Then how the Fed actually take these changes, these measures, and whether they can get some clarity around economic growth going forward.That is all we have time for on New Summer Money. From the team here, thanks for your company.

This program is live captioned by Ericsson Access Services. ANNOUNCER: Now, small business Tuesday continues with Your Money, Your Call. Hello and welcome. I am Julia Lee from Bell Direct. Great to come to you on the first Tuesday of 2017! Happy New Year. A lot of people will be wondering what to do with their portfolios this year. The great news is that we've kicked off on a great note with the Australian share market reaching the highest level in more than a year. We saw every single sector trading higher. In fact, more than 90% of stocks on the ASX 200 managing a gain today. So, a great way to kick off the year. Of course, if you have a question year. question about shares, our phone lines are open right now on 1300 30 34 35 or you can always email us on yourmoney@ skynews.com.au. Joining me on the panel tonight is John Athanasiou from Red Leaf Securities and also Mark Morland from Team Invest. Welcome. A great way to start of the year.Happy New Year.A lot of people will be wondering how do they position themselves for the New Year? Last year it was very much about the commodity space, rallying quite about quite hard. John, how are you positioning clients?Initially I think the market is going to have a little bit of a pull bank. We have got -- pull bank. We have got ahead of ourselves. I will be cashing up a bit right now. Overall, I anticipate the market to end this time next year probably around the 6,000 mark. We have had a run that's gone too hard. We will have to wait until Trump implements his policy. He isn't president yet. The market has got a bit overexcited.OK. It's been a great Santa rally period. One of the areas which underperform were the high-yielding space on the back of bond prices. Today we saw a bit of recovery. In fact, the utility sector was the best performing area. Is that an area that you guys are looking at?Utilities? Not really. Team Invest... We are interested in what looking what are the best businesses that we can predict the earnings outlook, which is a challenge when you look at the future. We don't look at it from a sector point of view, more an individual business. Good we have started off on a positive note. Interestingly, the old saying that market Interestingly, market likes stability and don't like uncertainty. In this case, with Trump, it's gone the other way. Everyone is saying the effect is that they seem to be going for the uncertainty and change. That is what he is promising.Kind of curious - how do you forecast which stricts you think are -- stocks you think... We look at history, earnings, how strong their competitive position, business models to see whether there is potential disruption or disruptors. you disruptors. It is about saying how much do we trust the management, what have they done in the past, been good capital allocators, or good a bad track record? Anyone who doesn't, good doesn't, we are not interested in. What we are doing is saying do we trust the management, do we like the business models and do we think we've a good handle on their earnings trust earnings on a five -year horizon? That is challenging. That is what we try to do.John, looking at your business...Similar approach, but probably more top-down. We try to find the right sectors and then from there the best business within the sectors. find sectors. It is all about the flow of funds. Where those flows are going - that is the million dollar question. If funds. If you figure that out you will do well!Should be an interesting show. We do have an email here from David. Less go straight to this one. He asks:

Probably a relevant question given that we did see the fund managers being in the spotlight with what's happened with Hunter H ds Hall will -- Hunter Hall. What's the sort of stocks do you like in that space? Probably be looking at stocks that are in the leisure, discretionary spending are spending sectors. Things like Ardent Leisure companies of that nature. They will probably benefit from this movement.Looking at leisure companies. Any other companies you would be looking at - financial companies?Financials as well. It is more about discretionary retail spending. If we have the funds available. That is where the money will companies. will flow towards.Any favourite stocks?We are looking at Westfield in that space. A few others. But Westfield will be the topic right now.How about you?Not sector-specific. Needless to say. We've done a lot of our - a lot of our members did well last year with the mining services, because they were beaten down with the miners. The resources have had a spectacular recovery over the last year. We've done well out of Blackmores. That is the company we like. That area. But I don't lump Bellamy's and A2 into that.Blackmores shares have almost - that. - more than halved in value from the high.They went up 800%. So, what you have to remember they went from $25 to 220 in 12 months. Then they are back to about $103.You have been holding?Not all. A lot of members sole them. Heyed a debate with Howard about it last Christmas when been when they were 220. Suggesting he sell some. He took a big position in the high 20s, he was on the ball on that one. He said he wasn't going to at the time. He kept them. I didn't buy them at the time. It was an error of omission. My mistake. I intended to, just didn't get around to it. I have watched it! (LAUGHTER) Yes, it has hatched to what it was, but still up 400% over two years. Not paid any tax. So, he would rather hold it, because he still thinks the long-term outlook is very positive. It works on our metrics. We Not We have done a lot of analysis and we like the management. We have no problem holding it. Very much a buy now.Sure. Any thoughts around Blackmores?I like it. A very well-run now. well-run sector. Bellamy's is punishing all the good effort that Blackmores is doing. The whole sector is being punished. You have to wait what Bellamies will come out and say, which is due in a week or so.It is a wait, isn't it? Waiting to hear Bellamy's news, because sentiments impacting on that whole China sentiments China story.Exactly. That is unfair to BlackmoresThat isn't relevant. Because Blackmores, from our point of view, we look at it as returns. We reckon if you buy it at $103, whatever it is now, you have a 20%-plus compound return over the next 20%-plus next five years. Assuming we are right on the forecast... I have got a buy order in today at 95. Which went down to 98 at the AGM. Didn't quite get it. I still have that order in.Still hating you! Regardless of what happens to Bellamy's, I think it will be relevant to Blackmores... . I agree with you.It affected themIt is less about bell employ's more and more about China and what the Chinese Government have done with changing some of the rules on what they expect the companies to have, they want them to manufacture D&G, Blackmore's like Bellamy's doesn't, they changing they buy in, contract out.There is a new baby formula listed.Yeah. A back door listing.That might be another one to keep an eye on.Up more than 100%, given that it went from... (LAUGHTER) Off a low base! We do have our first caller. Let's go straight to Nancy. Great to hear from you. How can we help you?I would like to talk about, um, Galaxy and Oil Search, please.Sure. Looking at Galaxy and Oil Search. GXY is the code for galaxy. It happy to see the share price rocketing higher. It's a pretty unique time for Galaxy Resources being able to come into production when we are seeing prices being high in that lithium space rather than when all the production is coming online, and of course commodities like most things in life do tend to be cyclical. Good to be producing at the highs of the cycle. Looking at the lithium space, like all things, you want to be producing at the moment. What do you see as the outlook for lithium stocks?Overall, I think the lithium sector has run. I know it pulled back a fair bit. I think there might be a bit more downside with overall sector. There are a few exceptions to that rule and that is your Galaxy. Galaxy is in production. You would rather be in a producer than a junior miner. That is hoping to find another deposit...Ly be 830 -- 80-90% of those players will go into administration those administration and turn into an IT company. (LAUGHTER) Of whatever is popular.Yes, true! Preferring the producers of the world...Absolutely.They are the key world... key producers. How about you?I think lithium is interesting. We've got some exposure through MIN. They own a stake in Mount Marion. They are in production as well. We met with Chris else son a few months -- Ellison. He was saying he thought the lithium boom or cycle would... Looks like the iron ore boom. He thought probably last six years. Their intention would be to be out before that and to silt # -- to sell it. Not there yet. But when someone wants to pay a ridiculous price it is sold. They are making hey while the sun shines.I guess...I buy that. We're not investing in lithium, but in the company as the miner who - well, they are contract crushers but miners as well. Preferring the mining services space and you are previousing the producers.Yes.Look, Galaxy was up 5.7% today u # today, one of the best performers. The other question was oil Search. Energy prices have been a stand out. The price of oil was up by more than 50%. The energy sector starting to make a comeback here. What do you think of Oil Search?Um. Not much. It has a lot of debt. 91% debt to equity, over our limit. It isn't making any money at the moment. Making a loss in 2015. Not sure what happened lately. Haven't followed up on what they are saying. We are very big on - we like consistent earnings growth. The trouble with oil is their price taggers. You are relying on the oil price staying up. If it does stay where it is it will be good for Oil Search and companies like that, but who knows if it will.You don't like energy companies.No.It has been a stand outsince the OPEC production cuts. We once again, overnight, saw an stand an uplift of what - the production cuts have started. Hopefully that makes an impact. Do you like Oil Search. The energy space? Can the runs continue?The majority of the runs has already occurred. If I was a big fan of the energy sector, I probably would be moving my funds out of oil serve -- Oil Search into a more conservative company, Woodside, who have a better balance sheet, more conservative, or get out of runs of sector completely if you are a believer in energy space. You would be pulling out a fair bit of funds. It's run, in my opinion a bit too hard in a very short period of time. OK. A little bit bearish on oil in the short-term, given how hard it's run.Where it is going to go? Probably hang around these levels, in my opinion.The price goes up it will stimulate more supply. As it goes up, more production comes online. Hard to believe oil could go higher. But who knows?Yep. (LAUGHS) OK. Oil has been up 45% over the last 52 weeks, and up 10% over the last quarter. This is going to be interesting... The play this year, given interesting... given Saudi Arabia has plans to try and IPO San Marco. Obviously Saudi Arabia, one of the biggest producers in the world of oil, is going to be wanting that high oil price. Whether it in it can manage to get that on the market this year in time will be an interesting question for markets. We do interesting do need to go to a short break. If you would like to speak with the expert panel, our number is 1300 30 34 35 or you can email us, yourmoney@ skynews.com.au.

Welcome back. We do have our next caller on the line. We are still taking your calls. If you want to call in, the number is 1300 30 34 35 or you can email, yourmoney@skynews.com.au. Let's go straight to Matthew from Melbourne. Welcome. How can we help you?Hi. I think couple of months ago I bought QBE at under $10.Wow!Had a nice run since then. Wondering if it is time to take money off the table? Or where the panelist may think it is heading.A great question. Matthew doing well, buying below that $10 mark. This has been one of the star performers of the last quarter, up about 35% over the last three months. On the back, of course, of the bond market. It makes a substantial amount of its earnings from its investment portfolio, which is generally split about 40% Australian bonds and 40% US bonds. With the US bond yields on the rise, QBE Insurance has been a Ben fenrish -- Ben efficientry. However -- beneficiary. However, has it gone too beneficiary. too far?It's been a dog. Since 2010, too far?It's been a dog. Since
2010, too far?It's been a dog. Since
2010, it used to have -, if you go back and look at it a few years ago, it was $35, now 12. It has done well lately. A lot of money spent on it, including us. One of our worst-performing investments. I got out of it 3-4 years ago. These guys kept on coming out with outlook statements every time it was worse, new problems, ever since Hallahan left. It seemed they overpaid for a lot of US assets. The price they have paid for that now is the return on equities, well under 10%, which is our minimum. They made a loss last year. We are showing a returning of minus 11% a year, compound for the next five years. You are betting on a turn around story. A lot of people have betted on that over the last few years and have been disappointed. So I wouldn't touch it, personally.OK. I know you like to forecast if there is know is going to be an uptake in terms the of earnings. You don't think that North America is looking a little bit brighter?It is.And bond yields...

I go to buffet buffet's AGM, they have a whole heap of reinsurers and they make a fortune. I go there and listen to their division and say buy QBE listen QBE and put it out of misery. They had such major problems to deal with it, taking them a long time to get out of it. This is about underwriting risk and what they paid for had for assets. It's been shocking. The company has been underperforming, as hasn't been a great performer, but gone from having a headwind to having a tail wind. We have seen the bond market in a bull market in the US from 1981 to last year, August, 2016. Now it has turned. Do you think that's enough to get you interested?I want to say congratulations interested? congratulations to Matthew. A stock that hasn't performed that well over the past five years and he managed to get it, 10-year low - well done! I am of the belief you let your winners run. I would be inclined to take a few chips off the table on this one. Because it's gone up, like, 30-odd% in a short period of time. You would be inclined to they can some of that off. I wouldn't be completely liquidating my position on that It oneis ones listen oh a P M23. Not low -- PE 23.It depends on your timeframe. We have seen it rise in the short period of time, but over a longer period, I guess, has been over been quite volatile. I think that the bond market has really reached an inflection point in the 2016. So, you know, it has a beautiful tail wind behind it, which makes it easier to do business in North America, its biggest market, and get returns you returns from the investment portfolio. Of course, if you do see an upgrade in terms of earnings on the back of that that usually is a pooztive. However in the short-term the pooztive. the bond market probably has moved too much and we could see a pullback. I think it is in the matter of timing, and whether you want to be a longer-term holder or whether you are a short-term trader. We do have our next caller on the line. Let's go to Tom from Queensland. Welcome. How can we help you.I want to know about VDG and Healthscope. Are they buys or whatever?Sure. Let's start off with VDG. An interesting company. Maybe I will Healthscope. will get you to talk us through that.Sure. Sure. will get you to talk us through
that.Sure. Sure. This is company that has Telstra shops. They are... Started by a woman - trying to think of her name - lost it. The second CEO. Their performance was mediocre for a while. They have over 100 Telstra shops. They have got a product called... That does mobile phone accessories and cases and they have got a lot of little shops. They bought Next Byte, Apple shops, but a lot had to wind down because Apple took it in house. They burnt that. If you look at their earnings they were fairly flat. Then the last few years they have taken off. Their EPS jumped enormously. Recently they had a smar price drop by $2... No, it didn't. $1.90 $1.37. An a PE of 16. We have done work on it. Interesting business. The real question is is their margins. If you look at their current return on equities, 19% - good. their good. They have very little debt, 12%. Their profit margin is - was 19.9. It grew from 5, 7.8, 13 to 19, and then dropped lit # -- lately to 11.4. We had questions on their... I have talked about - this is vitae life science?We are talking... Girlfriend the wrong data. It is correct for vitae group. The numbers are wrong.John going to you, an interesting one, because look they have renegotiated their commercial terms with Telstra. We don't know exactly interesting exactly what that is. I think what had the market scared off - we saw shares the more than half in value - is going into the fashion industry. That is a big change from telecommunications. What do you think exactly think of it? Is it confused?It is a company that's quite confused. You have to have a strategy and stick to it. Or have a valid reason as to why you are going to move into something that is completely different to your core business. Off the back of that, I can't really be a support of.It is men's only active wear they have gone into. Three new stories before Christmas.Down $2 a share. I clicked on the wrong code. Down to $340. The PE is down to about 15. More reasonable than where it was. Which is mid-20s...You like them? No. The sports thing is totally dubious. The sports wear. The bigger issue is their margins. As I was alluding to... Their net profit margin is 5.2. It's come off from one. So it margin is 5.2. It's come off from
one. So it jumped up dramatically. The question is Is this sustainable, considering the renegotiation with Telstra. If it is, then it is a good prospect regardless of the men's fashion. They have gone to great pains prospect pains to say they have invested little in it. They just... Putting their foot in the water. They say they are good retailers and should be able to do this. I don't buy that.Yeah. Is that a good use of funds?I don't know. Highly suspicious. Our view was, when we ran a risk workshop, was we need to meet the CEO and hear the story from the horse's mouth to get a view on - to get a better feel for do we buy the interest or don't we. It is a question mark.Yep.It has been sold down from about $5 to $3, which is a big fall. But it since recovered to about pdz.40 -- $3:40. Renegotiated the terms with Telstra. We are not sure what that's right. And they have also diversified into men-only active ware. Confusion on - especially active especially Telstra and twirs if Iing into a new area has the market confused, into confused, and the share price confused. The other stock is Healthscope. Looking at hospitals. 2016 wasn't a great year for revenue from the hospital sector. We saw regulatory risk come into the picture regulatory picture as well. So, is this a bargain? Time to start buying? We know the demographics here in Australia. However, you know, a lot Australia. However, you know, a lot
of people know the demographics here in of people have tried to make money off the demographics boom. Just look at the aged-care space. A difficult thing to do. Looking at Healthscope, what do you think?I will put my toe in the water. Putting a bit of funds. And then once the Federal Budget comes out, we will be clearer how the Government will go about allocating funds, whether they will have allocating have their budget cuts. That will give you a better indication on which sectors to be in or which sectors will be punished as a result of budgetary cuts. Overall, I would buy some Healthscope shares at this point, sectors point, but I wouldn't be loading up the truck, so to speak.OK. A bit cautious. Mark, what the truck, so to speak.OK. A bit
cautious. Mark, what about you? Probably - the problem is it only as 2 year's history. We don't have enough cautious. Mark, what enough data. It is prospective. I agree - there is a lot... A lot of people tried to make money out of the ageing demographics. It is a long-term people long-term plan. You don't go in and make money. You have to take a make long-term position. So, in the area, if you look at what happened to Capital Health, they got smashed when Capital when the Government changed the... Initially got the benefit of the easing up of allowing GPs to refer patients directly for MRI, and then they took that away, or said they would, and then it tanked. That is the risk with Government regulations.That was Healthscope. We do need to go to the short break. If you would like to speak with our expert panel, our number is open on 1300 30 34 35 or you can email us on yourmoney@skynews.com.au. Captions by Ericsson Access Services.