Gold rush
August was a month of two halves, commencing with a very strong rally, led by resources - in particular, gold. When US Treasury Secretary Bessent intervened in the bond market, that sent a signal to investors that the debasement trade (moving out of currency and bonds into hard assets like gold) was back on. Aussie gold miner Genesis Minerals, which is across a few of our funds, rallied over 50% during the month before giving some of those gains back in the final week of the month to close up 40%.
The bond market calls the shots
Higher interest rates were also a feature, with some large moves at the long end of the curve i.e. 30 year rates. For context, a 30 year rate is important but not as important as the 10 year rate. That's where most government funding and liquidity is. The current US administration clearly has a sensitivity to interest rates, now that their interest bill exceeds the annual military budget. I think the stock market matters, but the bond market matters more to them and is what ultimately caused a tariff pivot back in April 2025.
This is a great quote from James Carville, political strategist during the Clinton era, who said this in 1993:
"I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.”
Property's long hangover
The property market both here and in Australia seems to be getting some attention again. Higher interest rates and a flat or declining market, a hangover from decades of an unrelenting bull market, continue to challenge the domestic economy. As we know, dairy, sheep and beef, gold, oil and gas and AI are booming, but property still drives a big part of our economy. According to a recent RNZ story drawing on data from Cotality, in real (inflation adjusted) terms, the Auckland property market has suffered a staggering 37% decline from its late 2021 peak.1
How our funds fared
It was also a two speed month for fund performance. The Pie Emerging Companies Fund returned +9.5%, while the Pie Property & Infrastructure Fund returned -3.2% (after fees, before tax). The resource and AI names carried the growth funds; higher rates continued to weigh on the property book.
History repeating
The war in the Middle East drags on, and this continues to weigh on markets. Higher oil prices lead to higher inflation and are a strain on consumer spending. But perhaps an end is near. I read this week that US Secretary of War, Pete Hegseth, has dismissed 24 generals since taking office. A purge that eerily reminds me of some infamous leaders of the past.
"Those who cannot remember the past are condemned to repeat it." - George Santayana
Where to from here?
I had lunch with an old friend who is now retired from the market. He had a giggle as he described me as "Mike the Bull". But I do take a very balanced approach. I'm always looking at the bear case and listening to those who present it, like Ed Zitron's "AI is fake" theory (you can watch him on the ‘Diary of a CEO’ or ‘The Compound and friends’ podcasts).
I disagree with him, by the way. Ultimately, I'm here to make you money and, statistically, markets go down 20% of the time, so scanning for risks and then digging into them is what I do every day. It's the first thing any investor should learn: risk management.
Strong opinions, weakly held
Finally, I thought I’d share a story about Spring. It's not often I'm dead certain on something. But when my teenage daughter asked me when Spring started, I thought it was a joke. Spring starts on 1 September every year, I said, dumbfounded that she was even asking me. Dad, Spring also starts on 23 September, she replied. I said that was ridiculous, it's always been the start of the month. I even offered a bet. But she showed me her phone, and the fact that, yes, there are two official start dates for Spring. The meteorological spring (1 September) and the astronomical Spring (23 September). So let this be a reminder that we can have strong opinions, but they should be weakly held.
As always, thank you for your ongoing trust.