Should You Still Invest if You Think the Market Will Crash?

23:21I always laugh when I see the big institutions predict, oh, growth in the UK is going to be 2 % next year and then 3 % the year after, and then it's going to steady down to 4%. And all of those, they're always wrong. Go look at the OBR reports. Does anyone go back and actually check? I do. I go back through them and they're always wrong they're always redrawing the line oh this is what we thought it'd be now but when you trace it over time it's like it's like miles apart it doesn't so i almost think it's almost pointless it's almost pointless trying to predict i know it's very tempting the the the temptation is because we we go back in the past and we look at all this amazing data it's really easy to go back and explain oh the stock market did this because of x the stock market did this because of y and it crashed because of y therefore in the future if we avoid these things we can we're going to do that but it doesn't work like that and it but it's so tempting to there's i think it was a great quote.

24:06It's like the ease at which we explain the past makes us fall into a trap of being able to predict the future or something like that. Yeah. And again, the psychology of a new investor should be, I want to crash because if higher valuations today lead to poor expected returns, if the market crashes and you start investing, then you've got higher expected returns going forwards. You want to buy those burgers for half price. It's funny. And yeah, going back to psychology as well, everyone says, oh, I can't wait for a market crash and I can't wait for the buy sort of cheaper and then they don't yeah the way when it comes they want the market's crashing because people are dumping yeah people are scared more sellers than buyers both of us will remember 2022 um through through our videos and stuff and the comments that you get you do notice people being a lot more bearish that oh it's a lot more to come now are you going to talk about the recent drop all the time i think i also remember at the end of each year i tend to do a video about getting people to predict what they think is going to happen and i also remember going into 2025 or 2024, it's one of the years so far, and everyone was like, guaranteed recession, going to drop 30%, I'm all out, and nothing happened.

25:14What have we had for the last two years? Almost like a crazy, insane bull run. Whether it's justified or not, I don't know, but I do know the danger of trying to predict it is just something that a lot of people are going to fall into. People really struggle with the idea that the economy is not a good predictor of the stock market in the short term, especially. And people think they get really clever listening to economists and go, oh, it's going to crash. But it's not like that. It's just, it isn't. Do you think it's because there's so much emotion in the stock market? I think it's billions, trillions of individual inputs all over the world.

25:46Like, people think of the market, and the market was, like, labelled as such because it was interesting for papers to report on it in the past. They developed an index so that they could go, this is the market, because they wanted to talk about stuff every day. What the market actually is, is plane companies, weapons companies, drinks manufacturers, blah, blah, blah. Diageo has a bad day and you see that reflected in your global portfolio in the market. You don't even know why, but they might have just had like a factory closure or something. So for me to say, I can predict the market, I'm predicting the outcomes of billions of inputs, like across multiple sectors, like it's impossible.

26:23So that's why, because, you know, like people get attached to sweeping narratives. They don't realize the complexity of the market. it's the aggregated intelligence of every activity and input of the whole human race go outside and try and predict what five people do yeah exactly yeah go like guess you're not going to do it well you want to eat for dinner and then yeah yeah all of it everything on the menu the whole world in fact you did you did a video i think it was a couple of years ago um do you remember that derren brown experiment about betting on the horse racing it's fascinating that one it would basically get the fact that if you get enough people to predict an outcome of something you will get one person you'll get like 50 things right in a row that doesn't mean they're a genius it just means statistically you're going to find someone and this is a great topic in investing as well when we come back to because we talk about the market and we talk about trying to beat the market now there will be people and there are people who do beat the market consistently and have been it for years the likes of warren buffett with berkshire hathaway you know the like so John Templeton, you had other popular famous investors.

27:29Now that's all well and good. Who's going to beat the market moving forward? I mean, I don't know. Other people may suggest, well, you just go with the people that have beaten before. They've got a good track record, but I personally think that's a - Warren Buffett could literally be the guy with the winning horses. He could be the guy, you know, you line up at 20 ,000 people, get them all to predict stocks, you get one at the end and would you hold him up as going, he's the messiah? Or do you go, he's the guy that just he's the only one which actually proves that it's you know statistically really hard because because also it's so difficult so although his track record is really good and you know unmatched by but by by almost everyone it's really really difficult to then suggest that he can do that just basically moving forward and also not every pick has worked out correct as well he's made plenty of mistakes too it's just the the winners of course when you have big winners have made the huge difference to the portfolio um it's just it's such an interesting topic And I think the reason people will keep trying to beat the market, though, is because there's so much at stake.

28:25If you get it right. The reason Warren is so rich is because the rewards for doing something are massive. And the rewards are so massive because the risk is so high. Because risk and reward correlates perfectly in that sense. Why is he worth hundreds of billions? Because he did one of the riskiest things on the planet and won. Basically, yeah. If you want to try and replicate that, you've got to understand that the chances of you doing it are very low. Because there's no easy way to earn 100 billion quid. That's it, yeah. I always I try and think about investing I've tried and compare it to something else but I think it's quite difficult I always try and think about is is finding a good investor like trying to predict a good footballer or you know like like like pop idol or something or trying to trying to find the next next hot person it's like I bet for every I think it's like maybe like musicians there's so many talented people that on face value if you sat there and listen to them for half an hour you'd be like yeah they've got it but it's so random so if you make and it's luck and opportunity yeah and a few things it's like i think the music musical world is full of talented people exactly most of them there's loads we've obviously got more than ever it's like and it's like footballers there'll be so many people up and down the country or go and play it's probably a messy in brazil that never yeah there's probably a messy out there right now but unless they get the luck and the break to get into a team that their potential is never realized but then you also think okay then i then i'm trying to think is that not a good way of looking at it because let's say you get like David Beckham, for example, you know, how many times he was out there practicing curling the ball into the back of the net.

29:51How much of that is then skill on the day? Or does he get a bit of luck as well on the day as well? How much goes into it? But that's trying to predict who's going to have good stock picks in the future, I think is so difficult. But we still do it because I still have a few, you know, still play around. For Warren Buffett, Berkshire Hathaway, they've got, they're sitting on a large amount of cash. Correct. I love this. And I hear that like, I hear it all. So that means you should have all your cash. Does that mean we should therefore have loads of cash because there's a crash on us? And like loads of, like you always hear, like when these big investors or big JP Morgan does this, people are, oh, they've done this.

30:23So therefore it means that we should do this and we should follow them. Like, is there any correlation or it could be? Personally, I'd always say, no, you should never follow other people because they're not in the same situation as you are. And actually on this specific topic, Warren Buffett has made it very clear that he wanted to have a large cash pile specifically for basically his successor to be able to have a bit more free reign. so that was a specific reason for that one um yeah this comes up all the time you know if that's true yeah you could just say that but there's also there's also this like they operate at a scale that is unimaginable to you don't compare your 300 quid a month to his 300 billion it's true yeah how try spending that try spending that in the market go find a company that's worth 300 billion that's undervalued because companies of that scale are so closely monitored that it's really far to find opportunities.

31:12This is one issue that Warren has that you alluded to. He's so big that effectively he can't buy anything because he can't buy 300 companies a billion each. It would take too much time for him to research them. He needs huge deals, but they're really hard to find at that level. So I think it's really interesting that people would mimic their behavior of someone who lives on a different universe to them, basically. And that's what they're doing. it's tempting though again it comes back to this that because we we feel like we can explain the past really easily because we can look at all the data it's like a i don't know like an f1 race or just anything anything like that or you can go back on a tennis match you can say you can look at all the statistics and go and then try and basically guess the future from that but you in investing you absolutely can't because there's just so many things that are unknown which then comes back to the fact that should you even bother trying to time the market or should you buy individual stocks well i don't know it's a tough one because it comes back to emotions because saying all of this out loud, I know all of us in this room will still have, you know, have our own little investments on the side or different things and individual stocks.

32:16Okay, T, talk to me about your attitudes towards risk. I mean, I like a bit of risk in my investments, but I definitely would say since the podcast, I've toned it down a little bit, not quite as gung-ho and like carefree as I was in risk. Yeah, shooting from the hip all the time, weren't you? Yeah. I think personally that you should take risks, but it should always be in areas where you have a unique skill set, an edge, expertise, like your job, things like this. One area that I wouldn't take any risks is compliance. Yeah, the risk changes you grow in business and you need to be on top of it, which is why we partner with Vanta.

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33:23There's a link in the description. well you know you know i trade i tell everyone i love to buy a dip but on friday i bought some crypto i had a trade open trump said something about china the whole thing got liquidated and then i was like wow and i was like well it is a dip i could buy it but i was so aggressive of course not exactly i was so shocked that like it took me about 12 hours i didn't buy the dip till the next day and obviously it come back a bit but like i always say yeah buy dip is a great price but i was like i can't believe it dumped so hard what that what's going to happen maybe it's going to go to zero i knew it wouldn't but i was like maybe it is and then this is the next day i like calm myself i'm like buy the dip it's a good time to buy but it's still like for me it's still difficult yeah it's hard to control your emotions in that moment and there's also times where the dip doesn't come back you get a lost decade and it's 10 years and you bought in i don't buy any individual companies anymore i sold them all um i used to as of 12 months ago but what i realized was the headspace, the worrying.

34:18It takes a lot. Yeah, I'd rather not. I can earn way more money by just being focused on the activities that I do day to day. So yeah, I got rid of it all. I literally just own a global index now. I own money market funds as well. Trying to think if there's anything else. Bit of Bitcoin, but that's it. Yeah. Easy life, isn't it? Easy life, mate. That's a good... Tell you what about market timing though, T. One person did make over, I think it was about$200 million shorting Bitcoin just at the right time. Maybe they predicted something. Who knows? Maybe it's Trump's son. Who knows? But yeah, the last trade they made was 8.59.

34:53Then he tweeted at 9 a.m. And then they made like two, I think it's a little bit. Some of the heaviest shorts I've ever seen. The heaviest short I've ever seen. It's outrageous. Outrageous. It's outrageous. Can't keep going away with this. I mean, there's one argument that the market will keep going up because Trump will just make it. Because his whole image rests on that market going up, right? Yeah, for sure. So, you know, as long as he's alive, we'll probably be all right. I wanted to talk about the reasons that it might continue going up now then. Let's look at the individual businesses a little bit or the profits that exist within them.

35:26One thing I see all the time is it's the new dot-com bubble or it's going to be the 2008 crash. I looked at the details around the 2008 crash, 07, 08. The scale of the money was so much bigger then because what had happened was you had like a trillion of mortgage lending to basically people who couldn't buy, couldn't pay for their houses. And then we had these like derivative products on top, which bet on top of that mortgage market. So it was multiple trillions, eight, 10 trillion. The money today is a lot, but it's not to that scale. And also it's not reliant on individuals who are not going to pay their mortgages.

36:05It's basically massive companies spending their cash reserves. So you can't really draw a line between the two. maybe the dot-com bubble, but what does the profit of these businesses say at the minute? Where are their cash flows? At the moment, and when I did my last video into this and looked into the latest data on this, I think JP Morgan do this really good reports every month, or I forget, I think it's monthly or quarterly. But basically at the moment, we're in this weird space where stocks are highly valued, but also their earnings, their profits have never been higher. So they are backing it up with the money at the moment.

36:39There'll always be a question of how much do you pay for those profits? and we go back to these PE ratios. For every£100 you put into the stock market, if you only get back a pound, that's not a very good investment. And there's only so long you can, how long you want to keep paying for that. So at some point you could say it's too high. But then again, it comes all down to basically how much in the future do you think these companies are going to earn? Lots of people are very, very confident that they're going to make a lot of money and they could do. They very well could do. I think this really then all comes down to the market i think the market at any time is basically everyone's best guess of what we think it's going to be the bears and the balls of people who think it's bad people think it's good this is the price um but generally so far it's a weird trying to compare today with the likes of the global financial crash and the dot-com bubble i think it's a bit difficult i mean in the dot-com bubble the companies weren't really making revenue that's the thing like yeah lots of speculation and all this speculation actually have earnings whereas nvidia have a lot of earnings so So does that indicate that we might not be at the crash or at the top of the bubble because we've got a long way to go because they're actually making earnings, whereas dot-com they actually weren't generating?

37:51For sure, definitely, yeah. I think it's a good narrative. I think you can make a strong argument that we're – you can make an argument that we might be inside of a start of a bubble, but you can make an argument that we're nowhere near the end of it. Yeah. And until prices get so extreme that there's no connection there. the the the you know the popular saying is that the stock market in the short term is a voting machine in the long term it's a weighing machine meaning that really it's all about the power of a company in the long term and the actual earnings of the company but in the short term people can do crazy things but but certainly at the moment it's really hard to point to the super negative stuff if we look back for example i guess the the nearest thing in in our memory is probably 2021 when you had nfts and pokemon cards going through the roof that's when you you probably should have stepped back and thought, hmm, this Spider-Man NFT is probably not worth$100 ,000, is it really?

38:40You know, and millions for little things like that. But now I think it's really difficult. It's such a difficult question because everything is up at prices that we've not seen before. Yet you've also got inflation still running quite relatively high as well. It's a really difficult question. I could make a strong argument either way. But I think the really, really important question is always okay knowing all of this or guessing all of this what do you actually what should you do as a just an everyday investor with this information and i always think it comes back to just comes back to the basics of just basically you shouldn't react to this information if you're brand new starting out right now in my view you should just just start waiting is going to like damien says going to take up so much headspace and cause you so much stress just get started and even if even if the crash happens tomorrow because you put your money and you think it's the worst thing ever that's not going to be the only time you ever invest in your life the next month you buy in the dip you're going to do it again and the next one and it's like yeah you know just don't invest every penny you're ever going to invest on day one no just start just start gradually buying into the market because that's what most of us do anyway even if it's funny there'll be lots of people watching who probably don't necessarily actively invest and choose to invest.

39:57But most people who are watching this will be employed and will have a pension. Effectively, every single month out of their paycheck, they're putting money into, generally, the global stock market and some bonds. So they're doing it every single month without even thinking about it. Now, if they can do that in their normal lives, I think most people would be pretty good. But it's hard to know. No one knows. One thing that I wonder, so you're talking about the companies and you're saying oh the companies the big the big hitters are making money right i wonder like how much of the private equity and vc is taking that hit in terms of buying absolute dross businesses because in the past it was the playbook was get pets.com get a domain let's take you to ipo and let's dump you on the market we've seen in the last 10 20 years that companies come to the market much later because they can raise finance through vc and private equity and i'm wondering are those the people that are buying do you know i mean like is it all trapped there because there is definitely we've got we've got these big companies but there's definitely a load of companies at the minute that are just coming to the market that i see that are just like oh we are the ai of whatever stick ai in it you saw it when you were working for that company when i was working in venture capital yeah if you didn't have ai in the name you weren't getting money right we're a glass company ai glasses yeah it's like why are glasses at AI, they just are.

41:17We just put AI in it. No connection. They just knew that it would get them invested. So that's bubbly. That's like speculative territory, right? Oh, 100%. Yeah, you can make the case there. One interesting thing, though, if you go back to the IPOs, I was looking at the stats, and this year so far isn't really a particularly great year for IPOs. It's been fairly standard. 2021 was the crazy year where there was like over 1 ,000 IPOs. Was that SPACs? And we had SPACs as well. Chamath and all that. Yeah, which probably hit the button for that. But those were basically blank check companies. You have a company on the stock market.

41:46You guys, too far. Your turn. There you go. Second time lucky. But yeah, a SPAC, basically, a company already on the stock market, millions of dollars can basically buy another company to get them onto the stock market rather than that company who they bought directly listing onto the stock market. So they create these shell companies. You bet they have a shell company, yeah. Then they get everyone to buy in for like a tenner and then they use that money to go and buy a business to get it on, backdoor it onto the stock market. I heard Chamath talking about him again the other day. He's like, they're one of the best vehicles.

42:18I was like, here he goes. We've reached the top, guys. Chamath's talking about SPACs. And again, these are all things which in hindsight we're going to look back on and thought, okay, maybe we're reaching the top. But at the moment, we're not yet. It's difficult. It's a very difficult time though. And it was funny, I was thinking of another phrase which a very popular investor a long time ago was quoted by saying, it's tempting as a bullish investor to fall into this trap of saying this time it's different the dangerous four words um to justify why you should why everything should keep going up but um i think this time it's always different which makes it so hard yeah well i think it's always different for anyone for anyone that's like our age right so mid mid to late 30s i would just say that you've seen in your life the dot-com bubble the global crisis a pandemic you've seen some crazy stuff and here we are at an all-time high yeah so what what's next who knows right but it's either going to be the end of the world or we're all just going to have to shake it off and crack on yeah and if it's the end of the world we won't be worried about how much our investments are worth anyway that's what i mean so you know people will be fighting over cat food and gold if you believe the gold bugs um but yeah i just think we've we've been through quite a lot haven't we and here we are at all-time highs yeah for sure and it's a it's just it's just a good reminder that in the short term, all of these things really should have no impact on what you do as a long-term investor.

43:47But it's all easier said than done. You just got to really focus on what matters. Focus on your job, like you were saying. For the 99.99 % of people, our job is going to be our income. If you want income, get a better job. Investing is not for income today. Later on, much later on in life, if you want to retire early or pull money out, then you can maybe start having that conversation about what your investments can pay you. But for the time being, trying to waste your time on stock market picks and wasting your time trying to predict the market, I think you... This is a really good point because what people are doing by asking, is the market about to drop is they're basically turning the stock market into a money for today question, not a money for tomorrow.

44:27If it's a money for tomorrow question, well, then you want it to drop today so they can buy more units at a cheaper price. And if you just focus on earning as much and going about your day and then putting it into the market. And what the market's there to actually do is to turn the results of your labour into long-term support for you when you have no labour left. And what you're really doing is outrunning inflation. A hundred percent, yeah. I always try and bring it back because investing can be quite an abstract topic. And we forget that when you actually do invest, at least in the stock market, in real companies, you're basically getting a really small slice of everyone's labour.

45:02So everyone leaves their house and wakes up in the in the morning and goes to work and makes a very tiny bit of money for you that's a nicer way to look at it you know every every every nvidia graphics card that gets sold every apple iphone that gets bought basically you are entitled to a tiny tiny tiny fraction of those profits and i think we'd probably have a bit of a better world if more of us were engaged in that and we could all you know benefit from from that those rise in in good companies the reason anyone with a company hires people is because it gives them scale it gives them ownership of that person's labour which allows them to grow that business bigger than their individual effort so by buying the stock market you buy the labour of the world yeah and i think that's it everyone becomes your employee yeah and it's like you know unless we all get nuked into oblivion is there ever going to be a day where everyone doesn't get up and go to work you might believe that who knows i mean i mean our robot overlords could come and do everything for us but then i mean bring it on that sounds glorious to me so cool with the robots man one time later You're just trying to be pally pally with them.

46:02Like it's not cool. Just be good with our jobs. Put the guns down. I just, you know, like the way I see it is, when I had a cat, I was pretty nice to him. So if I'm like a robot cat, like cat to a robot, they're so insignificant. They're like, oh, look at my cute little pet. Just getting pet and getting nice food, get strokes. So now I'm picturing the robot now patting Damien. Literally. There's a good Damien. You've done well today at your little job. Yeah, I mean, yeah, bring on the robots, mate. There's a long way between Skynet going live, surely, and where we were at. Not even before Skynet, though, like the jobs.

46:40Because if they're taking lots of people's jobs, I'm just worried that like a lot of people, AI will take loads of jobs, machines will take loads of jobs. The washing machines will go to people's jobs. Right now we're filming this in the heart of Manchester, basically where the Industrial Revolution started. You know, all these canals which used to bring raw cotton to all the different factories, just literally, you know, moments away. Now, what's funny is the first machines in these factories, people would smash them up because they were fearful. The Luddites. Yeah, the machines would take people's jobs.

47:07Now, what really happened was they freed up their labour to do other jobs. Rather than having one factory, you can now have 10 factories. Now, the conditions in those factories were not very nice. So this is not a commendation of what happened during that time. But it boomed because basically we created really machines and robots to do these jobs. AI is going to be such an interesting one because is it going to be like that where basically it frees up people's labor to do other good stuff? So like Damien said, washing machines. We already have robots in our houses. Washing machines, dryers. Fridges.

47:44Fridges. They're not humanoid robots, but they're basically machines which do labor, which used to take up most of people's time. I mean, in certain countries in the world, still, you know, washing is taking up hours and hours of people's time. Right now, we free up our time with machines. In the future, how much of our time is going to be freed up there? But we also free up jobs with machines. Sainsbury's, they've got all these self-service checkouts. That used to be someone's job. They would hire like 10 people, now they hire two people. Correct. When I got my job taken away from me due to COVID and furlough, I started this YouTube channel.

48:15Like, someone freed up my labor and I sat there. I got drunk for two weeks and played Skyrim. Great game. and then I went, oh, I best do something with my time and I started a YouTube channel and every single YouTuber I know started basically in 2020. There's a few that were before it, but all of the like finance ones are like, oh yeah, 2020-ish, 2021, because we had a bit of free time. Most people, if you, like you put them, you free them from this like, oh, do that job. They will find stuff to do. I do think we need to think about it carefully from like a - The dream would be like rubbish manual jobs, which really people don't want to do if that could all be freed up so we can do the better jobs, I guess, you know, the more service jobs, the less manual jobs, that would be the dream.

48:58But however, I think we could be onto something that even the middle layer jobs could also be done by AI. Then what do we leave after that? I mean, then we go into this future. I mean, I would argue that like a manual job is more important than a lot of the middle managers I ever had when I was at work. Oh, they're really important, for sure. They're really important. And also, I don't think it's that easy. If you think about, I mean, just having the amount of trades people I've had around my house at the moment. No robot on the planet right now can do plumbing, can do electrics to any level of dexterity.

49:29They can do building and construction though. They can do some level of that. They can like paint a wall a hundred times quicker than we can paint a wall. But it's better, the human with the sprayer is better than the robot with the sprayer, at least at the moment anyway. At some point, if we do have the robots, maybe I'll come back on and we'll have a different discussion. We should talk about job, I think on the other side of it, it's like what's the job creation? Because every technology that's destroyed jobs has created them on the other side. The problem is how painful is that transition?

49:52Yeah. That's what we're worried about. We don't want millions of people to lose their incomes. No, that's the thing. I think an economy would be rubbish if millions of people were unemployed. That would be a rubbish economy. It wouldn't actually benefit anyone because then you'd have so many people unemployed, loads more people would need benefits. So actually, we need more employment. So I'm definitely interested in where it goes. I'm less cynical about where everyone's going to get their job taken. I'm quite optimistic. I used to watch Tomorrow's World when I was a kid. Yeah. And I used to buzz off that show.

50:21One day you'll have a computer in your hand. And I'd be like, what? And I'm living in the future. I'm living in the future. I get offered that on my YouTube. I was watching that from the BBC archive and they didn't go far enough. So they would say, oh, you're going to get a computer in your hand, like you said, like a watch. But all they thought it might be able to do is type in some basic stuff or, oh, you've got a computer with a printer in a briefcase. Imagine that. They didn't go far enough. Because they couldn't even imagine what's possible. Now you don't need to print anything. Now you don't need to.

50:53You still can't print anything. Printing. Never try printing anything. Bloody hell. HP, that would be racket. Robots should replace them guys. Yeah. I hate them. Print three sheets and it's like, you need new ink. What's just going on? I just got the ink. Ink costs more than the printer. Anyway, should we get back to Bubbles? Get back to Bubbles. You've got a question. Why is it that whenever the market, the stock market gets record high, it's all crypto or anything, why do people always act so like so emotional and like so why is it that people don't know how to act because we invest to see we want that result so when it happens everyone's like what do i do now do i sell like is a dip coming like why why are we like that i think you need to get a psychologist on but from from the stuff that i read and some of the interesting stuff and some of the interesting work by like daniel kahneman um it's all that poor human psychology unfortunately that we have a loss aversion bias.

51:45So we're basically more biased to fear and scary things. That's why our headlines are scary, basically. And we're attracted to those things. That's why we're afraid of a loss twice as much as we are of a gain, for example. And basically, it comes down to emotions, like you said. So we're just afraid of losing, basically. It's like a resource thing, isn't it? It's a resource. If you were like a caveman or whatever, and you found a bush with some berries on it, and you were like, I should probably take all these now because I don't know if they're going to be here tomorrow. Whereas what investment is, is this sacrifice of today for tomorrow, which is complete odds with what we're designed to do.

52:27It's against human psychology in a way, because we're not wired to think decades ahead. We're barely wired to think a week ahead. It didn't help us survive. we wanted to go day-to-day survival have i got my food have i got my water have i got my shelter and i'm okay and now look what's happened to us so yeah it's going to keep coming around and it's funny even though we've got all this 100 years of data we can look back on stock market investing and what you should do people are still going to fall into the same traps i think and it's really interesting i think we're going to repeat the same mistakes our memories are just so short and i think the way i could compare this to anything like um eating well and working out of the gym, all these things, you think that most people already know these things.

53:06Oh, you should, you know, eat less calories than you, you know, than you consume or whatever, burn and you'll lose weight. Or you should eat, you know, a healthy balanced diet and you'll probably be okay. And you'll, or progressive overload at the gym. And again, you'll probably build muscle. Most people you think know these things, doesn't mean they'll do them. But it's like the gym, I always say is the perfect analogy for the stock market. Because imagine you've been going to the gym for 10 years, it worked, you're looking swollen, and you're like, right, I'll stop going to the gym now just in case it disappears.

53:34It's like that kind of logic, isn't it? It's like, oh, stop doing that, the thing that works. It's worked so well. Because it has worked, we've got the results. And then, you know, there's no one workout that you will ever do that is the workout that you go, that's the one that made me fit. It's the consistency of habit over decades that basically get you to where you want to be. You know what, it's funny, actually, on that analogy, we can even make that better. One person at the gym might think, wow, just the bicep curl has made me really has made me really strong therefore that must be the thing to do and it's like stock market investing saying oh every time this chart goes to this level i better buy it and it's worked out well for me so far and they'll attribute that to that one thing even though it has nothing to do with it yeah people who are into fitness are the perfect for long-term investing because they have the exact mindset of long-term sacrifice and commitment doing the boring stuff consistency yeah i say that to my pt all the time because he's like he's like should i buy uh this company i'm like no mate like yeah and i said to him should i should should i go over there and lift like 200 kilograms on the squat he's like no that's stupid i'm like well there you go yeah that's pretty much yeah yeah yeah i think one one comment we'll probably get is not just the impending oh will it crash it's more i've got a pot of money now should i I stick it all in the market or should I weigh or should I drip feed it?

54:54What would you say to that person? I get this all the time. This must pop up at least like three times a week on my channel. It comes down to the same thing. So generally speaking, if we look at all the statistics and all the data we have in the stock market, it's always, almost always, which sounds like something out of film, almost always a good time to put everything you have in the market that you're comfortable investing with, comfortable sticking away for a long time right now. However, most people, I think, really need to decide for themselves of what level of risk they're happy with and goes back to that test you mentioned as well.

55:25But if you can sleep at night, I think you should then potentially think about if you've got a big sum of money now, maybe you should invest it every week, every month, every couple of months. It's truly up to you. But generally speaking, lump summing it in now would be the best thing to do. And actually, if you are an investor who invests every month into your pension from your workplace, technically you are a lump sum investor because you are putting in money that you have right now. Yeah, it's a head and a heart thing. It is always. Because the market tends to go up more than it goes down, it makes sense to put all your money in straight away to get that long-term ride.

56:00But if the market drops tomorrow, you were unlucky. Yeah. If you're the kind of person that would hate that so much, well, then break it up into chunks and just deploy it over time because that's the heart element. It's got to be for that, yeah. And actually, there's an interesting data that says since 1950 in the S &P 500, if you would have invested at just all-time highs, you basically make nearly as much money as a lump sum investor would have if they just invested from day one. So if you literally just invested at all all-time highs, you still nearly make as much money. Yeah. One thing actually I wanted to talk about then was there's a lot more chat nowadays around how indexes and the wall of money that flows into markets might actually be a bad thing.

56:43how much do valuations do you think could be this just passive approach? People like me and you basically just peddling this mantra. Every month we just buy, buy, buy. At some point, everyone can't just do this because if everyone just did the same thing, basically we'd all get the same returns or the returns would be removed from the stock market. So everyone can't do just passive investing. right? So we do need a healthy, active market out there. So I think the latest stats, I think passive investing is still just over half or a bit more over half of all investing at the moment. The true active investing, I think, is actually only a very small fraction.

57:22But let's just look at the market at the moment. So recently, the news with OpenAI investing into AMD or the other way around, AMD share price went up about 30 % in a couple of hours in a day. So the active market at the moment is very healthy, I would argue. And I did a video on this one, again, a while back saying, okay, what if we were in a world where everyone was passive and there was no active market because we've told everyone how bad active stock picking is? Well, the way I would see it, if everyone was just passive and we just kept pumping money into the same companies, the big ones, then surely the few active stock pickers that were left would have an absolute field day, right?

58:04Because the pricing would be wrong in a lot of these companies. They would go, there's no way you can value this company at$15 trillion. It should be worth, it's only bringing in, you know, bringing in 500 billion, for example. So, and then what that would do is really it's incentive structure again. People investing passively would go, hey, I'm only making 1 % a year, but this active guy over there is making 20%. Their money would start going into active. So active and passive is just going to keep fighting each other. And because, and I think it's always going to balance each other out at some stage.

58:32I don't know what the right percentages. But for the ones who, because there's so much reward potential for active investors, there's always going to be people active investing. But I like the fact that passive investing has grown because active investors, as most of you will know, has still shown itself to be pretty poor. Even before and after their fees, most of the time, the vast majority of them fail to beat the returns of the market average in the short term and especially in the long term. Yes, there are a few who make an absolute killing and there are a few who make a killing by following them, going with them.

59:05But generally speaking, you do need a healthy active market. So it's a really difficult one because although the vast majority of average people should probably just stick to passive investing, we do need a healthy active market. So in a way, we need people to be naive, ambitious, to risk it, basically, to go for it. So it's a bit of a weird narrative to talk about. So maybe should we all have a little bit of an active side to us as well when we invest? But then it's like, you know, maybe the active guys actually need to know what they're doing. It's like, what type of active? Because, you know, everyone just buying their favorite stonk is probably not the kind of price discovery we're looking for.

59:45We're looking for people that are valuing businesses and going, oh, no, and yes. For sure, yeah. But I would also say they can buy it for whatever reason they want. They can buy it because they woke up and they felt good that day. I almost don't care, but we do need a good healthy market out there. We also, lots of people forget, every time you buy the market, even if you buy your ETF or a mutual fund, someone else is selling you shares. So there is a market there. For every one of us out here buying, there's plenty of retirees drawing down on their investment funds as well. So there's always a healthy market.

1:00:18Yeah, and we have to remember that. Especially with an aging population, There's going to be a massive cohort of decumulators that are going to be selling raw DB schemes and their own private assets. You could argue that that could even be a bearish thing. You could say, wow, more people are going to be selling in the next few decades. It's going to crash, get out. Could be a crash. But then you could also say then there might be more people inheriting enormous sums of money that they'd never inherited before. So therefore, there's more wealth than there's ever been before. What are they going to do with it?

1:00:49So is it overvalued, Toby? What's the answer? I would say it's basically an impossible question to ask. And I think if you're asking the question, I think you're asking the wrong question. Because what you're really saying, like you said earlier, you're trying to time the market. If you're asking that question, you're worried about losing money. Now, I would say if you're a long-term investor and you're going to invest regularly every single month, it's not a question you should ever worry about. I think it's really interesting to look at all the data, but no data from the past can ever tell you if the stock market is going to be overvalued unless you knew the future.

1:01:24Because, for example, the future could have more returns than we can ever even realise. And it could be justified. But until we know that, we can't ever know truly. And the best guess at any time, whether the market is overvalued or the right price, is just the market at this price right now. Every stock on the stock market right now is priced at the moment because this is what all the buyers and sellers basically have agreed right now. If you want to disagree with that, you're very, very welcome to do that. But those who do tend to disagree with those and buy things on their own whim as an active investor do tend to lose, generally.

1:02:01But there's always winners. And I would add to that, if you're every night asking yourself, is the market overvalued? Maybe the action that you take is to consider the percentage allocation that you have. Because you might be overexposed to the market. If you're losing sleep because you're 100 % equities and you think it's going to drop, and if it did drop, it would ruin your life. Maybe you need to rebalance and de-risk. For me, I'm like, 100 % equities. If it drops, bring it on. Where's the robots at? Yeah, but you're right. Bring on the robots. That's right. You know I want that sex robot, hey.

1:02:31They'll be like, good day, bud. You've been a good YouTuber today. Thank you. Yeah, that's what you want. Yeah, call me daddy pig. well welcome to late night money we're gonna we're gonna dim the lights down turn this did you like the podcast uh i think it was a great episode um hopefully got people to you know calm down a little bit not panic thinking that the crash is about to happen it might be able to happen we don't know the future but um i think we should all be looking at well not all of us but we should be looking at the long long investment horizon was the most important thing yeah i'm feeling long term don't get emotional with all these things i'm feeling slightly panicked and unnerved by you standing behind us it's like a hostage situation i'm also slightly worried about my admission around sex robots uh but you know we we do we love robots here so actually we've developed an ai that segway mate so smooth that was smooth so we we know we know we know the challenges that ai present we know that they can hallucinate and we know that they can be a bit rubbish at times but we also know that they can be excellent and you can ask an ai your personal finance questions without judgment.

1:03:38So we've developed one of our own. We'll link it below. We're looking for some people to test it, try and break it, see if there's any weird quirks that come out of this just to see if we've made something good and we're onto something. But yeah, send help, Toby. Send help. Send help. He went into the robot. He did a robot. Yeah, that was cool. He literally went, you were like, send help. And he was like... I recently spoke at an Odoo event in Brussels and the scale of this thing blew my mind. There was tens of thousands of people there. It was a huge event and really it made me realise the scale of Odoo as well.

1:04:1715 million customers use their services worldwide now. And if you're starting or running a business, you really need to check them out. So one of the worst bits about running a business is knowing all of the different subscriptions, software and services that you need to use to run the thing. Odoo solves all of that easily and cheaply. So you can think of them as a bit like an app store for business apps. They've got apps for accounting, document signing, project management, point of sale, basically whatever you need to run your business. And the reason I say it's like an app store is because although they make their own apps, they're open source, so they have thousands of developers building different business apps for different use cases, all hosted on the Odoo platform.

1:04:56Now, what you need for your business depends, of course, but you can get Odoo's native 45 apps that are pretty much everything you need to run a business for a really good price of£20 a month. That's cheaper than you probably pay for a single business subscription to one service, whereas these guys are giving you 45 different apps for that. You can also get the first app for free forever with unlimited hosting and support, and you can sign up for that using the link in the description. We'll leave that below for you.