Discussion panel: Nine ways to play the recovery trade with our Future Generation fund managers

James Thomson: Welcome to this special panel discussion today which forms part of Future Generation’s Virtual Investment Forum.  My name is James Thomson and I’m a chanticleer columnist at the Financial Review and I’ll be wrangling today’s fantastic panel featuring three of the stars of Australia’s funds management community.  We’re joined by Geoff Wilson, who as well as being the Godfather of the Wilson Asset Management empire, he’s the founder and a director of the Future Generation’s family of companies.  Can I also welcome Ben Griffiths, the managing director and senior portfolio manager of small cap manager, Eley Griffiths.  And finally, please welcome Jacob Mitchell who’s the founder and CIO of global manager, Antipodes.  And Geoff, if I can just start with you please.  It’s been amazing year.  We’ve seen the panic of March and the rebound through the remainder of the year.  What’s your sense of where we’re at and are there any investment lessons that have jumped out in such a strange and unprecedented year?

Geoff Wilson: Yeah.  I mean as you said it has been an incredible year.  You know from an investment perspective we’ve been through that tough part.  It nearly seems a bit surreal in terms of what we’ve been through, whether just emotionally being positioned in Australia where we had the bushfires and dealing with the smoke in all the capital cities and then effectively with Covid.  In the equity market we had a bushfire in the equity market with longest bull market coming swiftly to an end in March but resulting in the shortest bear market nearly in history which is normally that is bizarre.  So it has been a very weird year.  In terms of going forward, I mean obviously the cheap money that’s still seems to be the theme.  Record low interest rates, pushing up valuations, and I know we’ll talk about it a little later, whether there is a tech bubble or not, and how we’re going to deal with or the end result from the US election which seems to be after the first debate, it seems unreal what’s going on over there.  So as an investor obviously bull markets always do climb walls of worry.  I tend to be on the more conservative side.  But looking forward I think it really does depend a little bit who does win the US election.

James Thomson: Yeah well we will come back to that.  Ben, the word ‘unprecedented’ has been a sort of catchphrase during the earning season and I guess for every commentator over the last nine or ten months now.  What’s your sense of what we can sort of take out of this period?  Are there new lessons we need to learn from something that’s been quite unusual or have the old sort of maxims of investing stayed pretty true?

Ben Griffiths: Look James, I think, and I’m on the record of saying this with a few people actually, that every crisis, every panic, every market sell off is different but the play book tends to be the same.  I think if there’s three things I took away from what we went through and boy did we go through some extraordinary turbulence that Geoff has just touched on that.  I saw a great headline that said ‘When two black swans collide’ and you had an equity market implosion hit with an oil market collapse with spectacular results.  And I think the three key things that I’ve taken away and I suppose I went into the crisis having them ready, I didn’t think I’d actually need them, but the first thing is beware of extrapolation bias or recency.   The idea that when you’re stuck in one of these meltdowns, these horrific market episodes, you feel like you’re never going to get out of it, and we are now destined to be in a miserable market setting for years, you’re going to get out and realise that markets do mean reverse and so beware of the recency effect.  It can cloud your decisions.  I think the other key take away for me again which is time honoured is in times of meltdown, get after stocks that are quality and good well regarded names, well managed names, quality first and foremost, [inaudible] bounced back hard and I think we certainly saw that from March going forward.  And the final yardstick that I will run with and I have been for years is, is always keep an eye on the price chart.  Actually the ASX200 and small ordinaries, when the market was melting in March, it’s amazing how both those indices were captured by support line that came out of December 1992.  Essentially that is the long term market bull trend that’s held equity markets aloft since the early 90s.  The last time the market was tested was with the GFC and we bounced.  We saw it again this time.  So I think looking at price charts and being very aware of support levels is critical.  We saw the market touch that level in March and within a couple of weeks we realised that was a genuine validation of that support line and we got investing and we got spending.  So they’re the three things I think I’ve taken away.

James Thomson: Thanks Ben.  Jacob, how have you sort of approached the last seven or eight months I guess?  It’s been a rollercoaster.  Have you tried to sort of keep as steady as possible and keep emotion out of it?

Jacob Mitchell: I think as Ben mentioned the crises are different but the playbook can be somewhat similar.  You know investors generally got very bearish about what a health crisis meeting a credit crisis really meant, cause I think what you were facing was a genuine seizing up of the credit markets and at Antipodes we sort of had relatively good insurance against that cause we’d seen, you know look over the last five years a lot of crowding and lending into weaker businesses encouraged by pretty loose policy environment and as you know we went into Covid with a fiscal deficit in the US, close to full employment, fiscal deficit, and pretty forgiving monetary policies.  So settings were very loose and hence there was a lot of pretty poor investing or capital allocation taking place prior to Covid.  And you know you could see the credit crisis coming, Covid just made it happen faster.  Probably the playbook is well how quickly does the policy response take traction and I think that’s always difficult and you know I think from our perspective we were probably too slow to pivot in terms of the upside. How quickly not just the fact that the Fed was willing to socialise credit or credit risk, but also that the income stimulus was going to be spent.  Probably the biggest single factor that has fed into the rebound into certain equities and certain sectors in the market has simply been those on low incomes that effectively received a doubling of their income overnight in the US, actually went out and spent.  Now you could say well wasn’t that always going to happen?  Well it looks simple in hindsight and it certainly fed into a decent rebound, you know household incomes in the US have actually grown.  You’re up 8% year on year, so it’s been a pretty interesting sort of outcome to have such effective policy in such a short period of time.  The question I suppose is, is there any longer term cost.  I think there clearly has to be but the markets at the moment are not focussed on that.

James Thomson: No, not at all.

Jacob Mitchell: So we all say we’re long term investors.  At the moment I don’t think any of the long term has really been factored into the price action.

James Thomson: Yeah.  If I can stay with you Jacob.  Just giving us a bit of the global view, I know a lot of fundies have become epidemiologists over the last little while, perhaps on an amateur basis sometimes.  What’s your sense of where we’re at with the vaccine and perhaps if you could give us a little bit of a global context because it’s important to know I’m here in lockdown Melbourne, it’s a bit hard to see beyond the 5K bubble that I’m in sometimes, but there’s very different paces of recovery in Asia and Europe and the US.  How are you sort of thinking about that?  Where do you think we’re at and are you starting to position for a re-opening?

Jacob Mitchell: Look, I think to answer that question about a reopening, I think as an investment team we have our internal expert in the area, Nick Cameron, who’s well qualified to actually have an opinion and you know his opinion is that we will get this virus one way or another via a vaccine within a normal investment horizon.  With or without vaccines, we’re actually just getting better at managing the impact of infections.  Like the spike in US infections that happened in their summer period in the south actually didn’t really lead to a spike in fatalities.  I think as you go through the northern hemisphere winter you’ll have another spike in infections.  The markets are sort of worried about that, but I suspect it won’t flow through to a very bad outcome on fatalities.  And that’s just the healthcare system getting better and managing the problem.  It’s also a function of probably just the fact that we’re starting to build up a little bit of immunity and and then we’ve got probably a vaccine sometime next year and I think we see a pathway to reopening, I think it makes sense if they’re very strong companies that have been hit in this environment, there’s no reason why you shouldn’t be thinking about investing in them.  I think Covid overtime is becoming less of a health crisis and it’s really just a question of how governments respond to these infection spikes.  My view is that we won’t go into a hard lockdown in Europe or the US similar to what’s happened in Melbourne.  There’ll be soft lockdowns but they’ll very much resist a hard lockdown and they’ll put their faith in their healthcare systems.  I don’t know, Geoff and Ben, what you think?

Ben Griffiths: Well yeah.  I’ve got some pretty clear views on this James.  I mean simply 30 million people have died of AIDS since the late 1980s and we still haven’t got a vaccine.  No doubt this time the efforts are redoubled and looks like we’ve got three syndicates that are closing in on a vaccine of sorts with various levels of advancement.  I think something will probably drop but I’m assuming in the back of my mind that it could be up to five years before we’ve got a universal solution or a drug.  We’ll have therapeutics along the way that will provide relief and go someway to assisting with this thing, but I think the base case is to never underestimate how humans can normalise and how quickly they do normalise and adjust to a new environment.  I think that’s the process there.  I think the cold hard reality of this is increasingly the governments won’t have the option about going to lockdown.  They can’t afford it.  Central banks have played and deployed almost ever tool at their disposal and governments are kind of pretty well at the end of how much fiscal stimulus they can throw at it.  It’s pretty well we’re going to have to evolve some strategies that don’t involve or that can’t suitably justify total shutdown and subsidisation or safety nets.  So I think we’re on that trajectory and that is the reality that governments probably haven’t got a heck of a lot more to throw at it.  It’s going to be down to personal practice, social distancing and living with this new world.  That’s my belief.

James Thomson: Geoff, what’s your sense?  Does Australia need to get the borders open and move a bit quicker as Ben points out sort of learning to live with this?

Geoff Wilson: I definitely think both Jacob’s and Ben’s comments that this will eventually normalise is very important.  Talking about periods where there’s been some extreme situations, I remember I was working in London around the time that the IRA were blowing up pubs and you know they blew up the first one and I remember then I was very young in those days and used to go out to the pub.  Then of course for the next couple of weeks we didn’t go to the pub.  Then we eventually go back then they blow another one up and then you know maybe it takes us a week to go back.  But then eventually we go to the pub and accept the risk of going to the pub is getting blown up and I suppose as human beings, as Ben and Jacob have said, we do adjust our behaviour to cope with various things.  I mean Ben used how we’ve dealt with AIDS.  So I would assume that we will normalise.  Covid will be something that we’ll live with.  Whether there’s vaccines or no vaccines, it’ll just be something that we learn to live with.

Jacob Mitchell: Yeah.  I think when you look at China, China’s economy is effectively reopened without a vaccine.  How do we measure that?  I mean if you just take domestic airline passenger movements, they’re very close to flat.  I think they’re down 2% year on year.  Hotel occupancies are back to where they were pre-Covid.  There’s a lot of people movement happening in China.  Outside of Beijing, mobility measures as in let’s call it mass transit public transport, that type of movement is sort of back very close to where it was.  Their property market, auto sales, without a lot of income stimulus, China seems to have been able to come through Covid.  GDP this year will grow 2% year on year.  Now it usually grows at 6%, so it’s had an impact but we’re not talking about a catastrophic impact on the economy where you’ve had to take the budget deficit to 23% of GDP is where you’re probably going to end up in the US this year.  China’s done something very un-Chinese.  They haven’t actually done any real stimulus.  For the guys who probably had the handbook in you know let’s call it investment stimulus, they haven’t really needed to do much.  So think that speaks to probably pent-up demand and maybe Covid forces people to think about China through a different lens.

James Thomson: Jacob, that’s a really good point.  It’s a nice Segway into thinking about the sort of macro picture.   What do we think comes next?  Ben mentioned that the central banks are largely out of bullets.  Does that put all the pressure on governments to ramp up fiscal spending and do you expect to see a wave of fiscal spending across the globe that could be a tailwind for stock prices?

Ben Griffiths: Well that was actually going to be my [inaudible] to what I was going to say which is the New York Fed put out a paper a couple of researches [inaudible] put pen to paper on their interpretation of what we’ve just been through and they likened the [inaudible] experience to really less of a lingering economic catastrophe but more like a natural catastrophe like Hurricane Katrina where you have a cathartic impact on the economy that creates a giant shock as in the case of Katrina.  But in the case of the economy you have a normal stimulus thrown at it.  You have safety ?? government and you get a rapid recovery in economic [inaudible] example initial claims were 9 ½ million in the weeks after the March meltdown of the market and the panic.  Just recently initial claims and ?? were printing at about 700,00 or 800,000 people or applicants.  So you’ve had the cathartic effect, you’re now starting to see the rebound, the natural reaction to stimulus that was provided whether it was interest rates artificially suppressed or whether it’s governments’ safety nets and so on, you’re seeing the rebound effect of that.  Money supply what the figures have been turned on in a liquidity perspective, money supply in the US [inaudible] across the globe.

James Thomson: Jacob, are you expecting, we mentioned the US election just before, are you expecting to see a sort of explosion in spending coming out of that from regardless of wins almost?

Jacob Mitchell: Look the only scenario where I think that happens is if there’s a convincing clean sweep by the Democrats and I think that’s a low probability.  I think it’s going to be very tight for what it’s worth.  I think it is going to be a very tight election.  So that may not be great for fiscal policy.  If the Republicans control the Senate, I think they’re not necessarily going to give Democrats what they want from a fiscal perspective.  So you could have more gridlock and then you’ve got the midterm elections in two years where a third of the Senate comes around for re-election.  Politics it’s a blood sport in the US.  The only scenario for a lot of fiscal stimulus is that clean sweep where Democrats then put in place social wage, let’s call it the European version of a green new deal, that type of spending.

James Thomson: But beyond that, Jacob, do you see sort of an increase in fiscal measures across the globe?  You just mentioned the spending we’re seeing in Europe and that’s got a green badge on it I guess, but we’re seeing other programs including in Australia, the infrastructure programs, announcements around manufacturing and all sorts of things.  Will that continue?

Jacob Mitchell: Yeah, I think governments are becoming a bit more pragmatic.  The central banks are telling them that they’re you know, as Ben mentioned, increasingly out of bullets.  So they’ve made rates low and the private sector doesn’t seem to want to borrow a lot so it’s really for the government to step in and take advantage of low rates and then hopefully do something productive when it comes to spending the money.  I think in Europe you could argue that you know look climate change regardless of what your personal views are it seems to be an off the shelf decarbonisation seems to tick two boxes for government right.  It’s capital intensive and it’s labour intensive.  It actually creates jobs.  You know an environment where we’ve had a big tech boom, it creates a lot of productivity, arguably it doesn’t create a lot of jobs.  They’re looking for a policy that will stimulate job growth and decarbonisation absolutely does that and you know if you add up what the Europeans are talking about, hopefully they’ll get to action, but you know four trillion dollars over ten years to get to about a 50% emissions cut.  Now they have an ETS so they actually have a price on carbon so some of this will happen regardless, and then it’s up to national governments I think to step in to drive additional policy.  We think this is the beginning of a very let’s call it a super-cycle in renewable investment driven largely because the technology’s pretty competitive.  I mean wind and solar are becoming competitive base load power sources and throw in some carbon, let’s call it carbon incentives, and you can get that investment cycle going.

James Thomson: Geoff, if I can come to you.  One of the things Jacob just mentioned there was the tech boom we’re having which is a boom in many respects including in valuations of tech companies.  How do you sort of assess that trend over the last little while?  Does it look overcooked to you?

Geoff Wilson: Yeah.  Like from my perspective it’s overcooked.  I mean one of the things that worries me a little bit about the market in terms of there’s probably a bit too much heat in the market, whether it’s technology stocks or not is, hey I do a bit of cycling and one of the guys I cycle with was telling me how his son lost his job and he’s 28 and he’s just been punting the market and making money so he’s going to this for the rest of his life. Now unfortunately investing in the market isn’t that easy.  Now we know the market over time goes up about 9% or 10% per annum.  But in that there is a lot of volatility and so to me for a lot of people it’s just been a one-way bet and I think probably there has to be a wash out at some point in time where the people that think it’s very easy realise that it’s not very easy.  You know I was always taught when I started in the equity market that you make your money in your second bull market and that means you actually learn your lessons in the first bull market and one of those lessons is the market doesn’t go up forever.  And of course obviously you know with record low interest rates, with companies that potentially have some growth, being the technology stocks, they’ve been pushed to very high levels.  Now more recently now they seem to have hit a bit of a soft spot and my view is that there has been a lot of one way traffic in terms of people just thinking it’s easy money there.  So it wouldn’t surprise me if those valuations for a lot of those technology companies does continue to struggle and they have over the last sort of few weeks.

James Thomson: Ben, what have you made of the big explosion in tech valuations?  We sort of have this sense that fundamentals perhaps don’t matter anymore and when your assets are intangible you know there needs to be a different view taken by investors.  Do you subscribe to that?  Are there metrics we should be looking at with tech stocks?

Ben Griffiths: The whole tech mania really, James, comes down to the market is lusting for structural growth stories and it’s not just US tech, it’s Aussie tech, it’s Chinese technology companies, the ChiNext is actually outperforming the NASDAQ.  So it’s a lusting for structural growth, enduring(?) growth and that’s precisely what tech gives you.  Yes, there’s no doubt about there’s been over reaching across the board but not everywhere.  There are examples in our market, WiseTech on sort of 47 times EV the sales and seemingly in third whereas you’ve got TechOne on 7 ½ times EV the sales so you’ve got a good disparity in valuations there.  Look has it over-reached?  I was speaking to a fellow the other day who said don’t look it tech stock valuations through the lens of short term valuation metrics.  You need to pull the focus out and set aside your fundamental tools, set them aside.  These companies are building models now, their business models, and in time you’ll sit down and you can judge them by more conventional yardsticks.  I found that conversation quite terrifying actually cause that’s now how we’ve traditionally approached investment in any stock.  But I guess what the message there is saying pay heed to qualitative features of these businesses which are significant, whether it’s the opportunity that they’re seizing, the technology they’re developing and the people that are behind it.  So it’s pay heed to the qualitative aspects and visit the valuation yardsticks later.  Now I’m not so sure about that.  The yardsticks are the EV to sales and EV to EBITDA are the measures that we try and use to put some sense around a lot of it and there are pockets of good value and attractive stocks that are align not too bad a level of EV to EBITDA.  So yes, there’s pockets of excess but there’s also stocks that I think if you’re looking for an appropriate valuation for growth, they’re still quite reasonable.

James Thomson: Yeah.  It’s a good point, Ben, cause you know I often hear from fund managers that a lot of the strength or the skill is in sticking to your disciplines and your process and your method.  I guess in a period like this it can be tempting to go away from that and say yeah we do need to look at these in a different way.  Is it difficult to resist that sometimes, Ben?

Ben Griffiths: Absolutely.  I mean we’re in the performance business, all three of us on the podcast are in the performance business.  For as long as we’re measured monthly, we need to be delivering good numbers and so you can’t ignore price ?? like we’ve been seeing in a number of these stocks which is why I guess many of us evolve a greater consideration and respect for the qualitative features.  The quality and the growth prospects of the business for the industry that they’re targeting, the size of the investable market, the quality of the teams so there’s no doubt we’ve all evolved a few qualitative measures that we’ve introduced which has meant we’ve been able to own some but not all of these sorts of names to really to stay with the market, to be cynical.  But also cognisant of the fact that we are seeing the industry leaders of the future being born today.  These stocks ?? I remember in fact all through ?? the panellists will remember when the Hong(?) Kong crash happened in 2000 you had a number of these fledgling names that I thought were going to go to dust and never see again and of course they ended up being the leaders of today.  That’s the Apples and the Amazons of this world end up being the leaders.  So when it started in 2000, they had a very painful three years thereafter after that awful meltdown and it’s taken almost 20 years to have these businesses assert themselves as the new industrial leaders.  You can’t ignore them as a [inaudible] would be irresponsible.  But sometimes you’ve just got to modify the way in which you approach the process of investing and how you look at these businesses.  So you know they’re not going away.  These stocks are the new industrial order and Geoff’s point, there’s no doubt there’s been some over reach, valuations have gone far too far in some cases and there’ll be a correction also and there’ll be a deep correction which will bring these stocks back into range and that’s when portfolio managers and investors generally need to have a shopping list ready and they need to own some of these businesses because for the rest of our working lifetime and beyond, I believe these businesses are going to be the businesses that are going to prosper.  Exxon as it once was, it’s going to be Amazon.  It’s going to be these video gaming stocks and so on.

James Thomson: That’s a great point, Ben.  Jacob, one of the sort of interesting dichotomies I guess at the moment is value V growth.  And as a value investor, Antipodes, I know you like that idea of pragmatic value which I think is a nice way to think about it.  But how have you sort of come at having some of these big tech names in your value portfolios?

Jacob Mitchell: It’s probably just the observation that what we’re seeing, as Ben mentioned, is this sort of desire to get exposure to structural growth.  As real rates have gone lower and are now negative, you know over ten years the US bond market is pricing in a negative 50 basis points per annum of real growth decline, investors have simply said we’ll give me growth and I’ll pay whatever a price I can for it.  And that’s across sectors.  I mean it’s not just the tech phenomenon.  I mean it’s PE dispersion, you know the premium you’re paying for the top quintile of growers verses the bottom quintile of growers has never been more stretched.  Now as a pragmatic value investor, we take the view that it’s paying the right price regardless of what the growth is.  So yes, you pay a higher PE for a higher growth company, and you should pay a lower PE for a lower growth company, but one’s not necessarily better than the other.  Now the weird environment we’re in now is that those growth stocks are just getting more and more and more expensive.  So is there a point where you just have to say well there’s no more opportunities left?  Well, look, they get harder to find and we’ve tried to manage through this environment by stylistically not taking too bigger bet against growth.  It’s difficult because the market’s becoming extremely sensitive to growth and growth is you know the market cap concentration in the market.  It might astound you but the top quintile of growers is on a PE of roughly 50.  The bottom quintile of growers is on a PE of 7.  That relationship’s never been more extreme.  So like we own Facebook, we own Microsoft but you know they’re not on PEs of 50 and we think they’re very let’s call it quite resilient businesses.  It’s sort of as you get into some of these other businesses, you know some of the Sass companies that are very narrow and they’re competing against ultimately Microsoft 365 and Office 365 has a global outage.  You know, Microsoft shareholders don’t really care.  It’s just such a fundamental essential infrastructure.  So you know paying a PE of 30 for Microsoft, well in a world where the discount rate’s very low and the risk around Microsoft’s growth is very very low, I can actually justify that from a valuation perspective.  The problem is you’re paying 30 times revenue for a lot of the Sass competitors.  No earnings and 30 times revenue.  Now that’s where I struggle and that’s where I think the bubble has definitely formed.  Statistically you can prove it’s a bubble.  I think you can statistically.  So then it’s a question of what actually triggers that?  I have no issue with the longer term fundamentals of the world will use a lot more software and you want to be exposed to that, but I do think it will be a winner takes most outcome and I think that lends itself to some of those bigger companies and a lot of some of the smaller companies getting into a lot of competitive difficulties similar to 2003.  You can have a growth trap in this market.  There’ll be far more growth traps I think than there will be value traps.  Many of the value traps are well known.  They’re priced as value traps and I think to change the narrative around that and to see some sort of mean reversion in that, let’s call it valuation dispersion, to tighten that up, you need something that changes people’s views of some of these cheaper stocks, some of these industrial companies.  And that’s where I think you know fiscal stimulus will ultimately play a role and where if you get a new investment cycle focussed around, you know you can’t have a fleet of EVs without increasing your fleet of generation right.  That’s the interesting thing.  If you want to cut emissions by 50%, you’ve got to grow your power output by about 40%.  Tell me that’s priced in to the companies that are going to spend, you know that’s just hard investment, that’s old fashioned copper in the grid you know building renewables which are all copper intensive, fortifying the grid.  You know it’s great to have someone, you might have a neighbour with a Tesla, you don’t want too many neighbours with Teslas because your grid’s going to start to become pretty unreliable.

James Thomson: Great point.

Jacob Mitchell: That’s not a SaaS company.

Geoff Wilson: Like Benny’s internet connection today.

Jacob Mitchell: That’s right.

Geoff Wilson: That’s why we’ll end up with something like that.

Jacob Mitchell: That points itself to resources and all sorts of stocks and sectors that haven’t really participated in this bull market.  So I think you can get an environment where PE dispersion starts to mean revert.  Now it doesn’t mean you have to pile into everything, be very selective I think at both ends of that.  Be selective.  Avoid the growth traps and avoid the value traps.

James Thomson: Alright.  We’re reaching the end of our time so I’m going to ask you all to be selective.  I’m going to ask the same question to all of you.  Give me the next big event that you’re watching out for and the stock that we should be watching over the next little while.  Geoff, let’s start with you.

Geoff Wilson: Okay.  Why don’t I start with the stocks?

James Thomson: Sure.

Geoff Wilson: Because we definitely think in Australia, you know what we do is we try to buy undervalued growth companies and buy them when we see a catalyst is going to change the valuation of the company.  Now we think it is time to embrace the Australian reopening trade and for that, you know you look at travel, I think Australia spends something like $40 billion domestically and $50 billion internationally on travel.  Now obviously the international travel’s probably off for a period of time so that $50 billion is probably going to be more utilised more domestically.  And some of those companies, the big leader there say, Flight Centre, they’ve done an exceptional job getting costs out.  The probably more smaller ones that we like in there are the likes of the SeaLinks on a PE of 17 times and growing at 30% per annum.  You know that’s the ferry play over in Kangaroo Island and also buses here and Tourism Holdings are two we like there.  And then also housing.  We think with these record low interest rates the housing sector is cheap and the more direct plays there are like the Brickworks and say the CSRs but the mortgage broking business, AFG, trading on about 12 times.  So you know they’re a couple of the plays.  In terms of the next big event.  Obviously what do I really worry about is all the liquidity being pumped into the system and interest rates backing up, but really our feeling is it’s probably three to five years away.  Obviously I’d keep a really close eye in interest rates backing up and probably I think the US election in the short term will be significant.  And probably one of the interesting things to look at.  I started in the market in the 80s and I remember the 82 recession and we have had in some areas there’s no doubt well we are in recession, and what you do find is companies have a fantastic ability of reducing their costs and their cost structure so when revenue does come back you really get a very leveraged earnings growth there.  So to me that’s just something to be aware of.

James Thomson: Great point.  Ben?  Stock to watch and your next big event that’s keeping you up at night?

Ben Griffiths: Okay.  Well I think the next big event in the very short term I think in the United States’ market sentiment will be dictated heavily by the stimulus bill that has yet to get through the House.  I think that is an issue that’s niggling at the market.  It’s niggling at at investors and I think we need to see a secure passage of the stimulus bill through the US and that has been problematic to date.  We need to see that.  Following on from that ahead of the election, I think is the reporting season, the third quarter reporting season.  United States’ companies will start reporting in the third week of October.  No one’s really talking about it.  We’re going to get live information and data as to how corporate America’s fairing.  Are we getting corporates being set up for 2021 which I think is going to be good in an earning sense in the United States.  My earlier comments on a mini-spending boom are coming.  So the two big events ahead of the election are the stimulus bill’s got to get through without too much fuss and we need to have a satisfactory US reporting season I think to set investor expectations right for 2021.  So that’s important.  Look stocks.  Geoff touched on a couple.  I’ll give you two.  One is naturally like everyone we’re all spying the reopening trade, where do we place a bet on that?  There’s one stock that we have bought progressively through the challenge market back in March and April and then we’ve bought it periodically through this rallying market and that’s Auckland International Airport for a whole bunch of reasons.  We’re on the record on various media about saying this but monopoly operator in a tremendous market with no curfew and there are extraordinary managers there so we think Auckland who I think if we can get a bubble between Australia and New Zealand and if they can get back their other Asia pack travel, they can be back at 75% of pre-Covid levels fairly promptly.  So I like Auckland.  And the other one which is not quite in keeping with the recovery theme but all the same is a turnaround story that will benefit from consumers increasing ?? of course is The Reject Shop.  It’s a stock that I know is near and dear to the guys at Geoff Wilson’s shop.  The Reject Shop offers a classic turnaround.  It’s pitched at that end of the market where costs conscious value consumers will dwell.  They’re doing a ton of smart things in merchandising and remodelling in the business so we like Auckland International Airports, we love The Reject Shop and we’re bullish on the markets through 2021.

James Thomson:  Great.  Thank you Ben.  Jacob, take us out with the global view.

Jacob Mitchell: Probably in terms of event risk, look the US election I think is going to be very very close and I don’t think that’s good necessarily just with the biggest tail risk just being the dollar, the US dollar.  The Feds been given a free pass in terms of the amount of monetary stimulus and the fact that they’re just basically buying you know effectively financing the US fiscal deficit.  It hasn’t really been reflected in the currency.  As you know it’s not going to be reflected in inflation yet, but it’s just how the US dollar, you know I think you lose your reserve currency status slowly and then you lose it quickly.  And the question you know when does that accelerate and I think a lot of that is to do with well is there an alternative, you know the Euro?  The Euro zone always seems to be able to snatch defeat out of the jaws of victory.  And you know China.  But I think China’s clearly I think’s starting to emerge and this is where my in terms of stock ideas, I think I’d lead with a sector region and say look Antipodes is broadly overweight Chinese consumer stocks.  Some of them are very well known stocks and you’ll find them in most portfolios like Ali Baba and Ten Cent.  But I think you can make a case that their valuations they make a lot of sense.  When you think about the market cap of Chinese internet is about a third of the US let’s call it mega-cap tech space.  You’re talking about an addressable market that’s potentially over time over a long time larger population-wise and they don’t typically have very large incumbent competitors.  Amazon always has Walmart lurking as a larger competitor.  Ali Baba doesn’t really have a Walmart equivalent.  So I think you can see that part of the world doing well.  And then I think you know just thinking about investment beneficiaries and also if you look at Western markets no one really wants to touch any auto companies except for Tesla.  I think there’s a good chance of a company like VW which because of diesel-gate they had to really accelerate their adoption of EV technology and will be in a good position to potentially produce more EVs than Tesla within the next couple of years and using the technology, really using it as a platform technology.  So trying to transform themselves.  Not just make old cars, you know you’ve got this internal combustion engine technology and you don’t change anything and you just drop an EV power train into it, but actually building EVs from the ground up.  And VW’s a great way to also play a China rebound.  They’re the largest Western auto maker in China and also you come with luxury brands.  You know you’ve got Porsche and Audi in there.  It’s a very undervalued stock priced at booker point six PE of 6-7 times for what I think is an emerging leader in what cars are going to look like over the next ten years.

James Thomson: Brilliant.  Well gentlemen, thank you very much for participating in today’s panel.  It’s been a really wide ranging interesting discussion.  So thanks to Geoff, Ben and Jacob and thanks to you for being part of this Future Generation Virtual Investment Forum Panel.  Thanks.