Emptying an overflowing mailbag! January 12, 2024

In short

Podcast Summary: Motley Fool Money - Episode: Emptying an Overflowing Mailbag! January 12, 2024

Overview This episode of *Motley Fool Money* features hosts Scott Phillips and Andrew Page as they address a variety of listener questions in a mailbag format. The discussion covers a wide range of topics, including balance sheets, investment strategies, political engagement, and economic concepts.

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Key Topics Discussed

Lazy Balance Sheets
Discussion Points:
A lazy balance sheet refers to companies holding excess cash instead of fully investing.
The hosts argue that having a buffer of cash allows companies to capitalize on opportunities during downturns.
Scott clarifies that while he aims to be fully invested, he maintains a personal rainy day fund, which he believes is analogous to a company's lazy balance sheet.

Engagement in Politics
Listener Comment:
A listener suggests that Scott and Andrew should consider entering politics due to their insightful discussions on economic matters.

Response:
Both hosts express their reluctance to participate in politics, citing the challenges and cynicism inherent in the political system.
They emphasize the importance of constructive public discourse and the value of engaging with political issues informally.

Investing in Emerging Markets
Listener Question:
Should investors consider emerging market ETFs over developed market ETFs for higher returns?

Key Takeaways:
Andrew and Scott caution against emerging markets, citing historical volatility and governance issues that often hinder potential growth.
They emphasize the importance of discernment and skepticism when approaching investments in regions with less stable political and economic environments.

Cybersecurity ETFs
Listener Question:
A listener inquires about the lack of distributions from a cybersecurity ETF despite substantial underlying dividends from top holdings.

Host Insights:
The hosts explain that distributions from ETFs can vary based on various internal policies and market conditions.
They note that total return should be prioritized over the frequency of distributions, as reinvestment can lead to compounding growth.

Economic Policy Discussion
Listener Question:
A listener suggests raising taxes as an alternative to increasing interest rates to curb spending and inflation.

Hosts' Views:
Scott and Andrew attribute the preference for interest rate hikes over tax increases to political considerations and the desire to avoid unpopularity.
They discuss the complexities of using fiscal policy to manage economic problems and the potential pitfalls of such approaches.

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Key Takeaways and Learning Points

Understanding Balance Sheets:
Investors should consider a company’s liquidity as a strategic advantage for future growth opportunities.

Political Engagement:
While engaging in politics can seem daunting, it’s essential for informed citizens to contribute to public discourse.

Investment Strategy:
Caution is advised for investments in emerging markets due to historical patterns of corruption and governance issues.

ETF Considerations:
Investors should focus on total returns rather than distributions alone, as market conditions can impact dividend payments.

Economic Policy Implications:
Understanding the motivations behind monetary policy decisions can provide insights into broader economic health and stability.

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Conclusion This episode of *Motley Fool Money* encourages listeners to delve deeper into the dynamics of investing, the impact of political decisions on economic outcomes, and the importance of informed financial decision-making. The hosts foster a thoughtful discussion, emphasizing long-term investment strategies and critical analysis of market conditions.

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Transcript

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0:10Welcome to Motley Fool Money, our, well, not normally, a very special mailbag day and yet a very special Friday mailbag edition. We got so many great emails and posts and social media DMs, people sliding into our DMs, as the cool kids say, that we thought we would bring you a special Friday mailbag and try and get through some of the spectacularly great questions we got from our listeners. Now, when I say we, it would be rude of me. It would be inappropriate of me. It would be... I would feel like the world had shifted off its axis. If I didn't introduce the man, the myth, the legend, It's one of our preferred intros that our listeners like Ram, so I thought I'd use that one.

0:50Andrew Ram Page. How are you, mate? Very good. It's all of those things, and it is contractual to introduce me in that way. Just to remind you. Can I say, speaking of contractual, I've been very disciplined this year so far. Oh, yeah?

1:08What are you laughing about? Nothing. I just thought of something funny. Please go in. Oh, good, good, good. You want to share it with the audience or just keep it to yourself? No, no, no. No, inside baseball, I shouldn't have done it. I fully retract that snigger and invite you to continue. Well, it just occurs to me that since you and I work together, you've been busy on another project, and I'm not sure whether we've mentioned it before. Okay. Go on. What have you been doing with your time? What's been occupying your time and attention and your efforts when it comes to your workday these days?

1:44My workday. You know, my workday is often the same. I like to keep track of the markets and look at interesting companies to invest in and communicate and discuss that with other members of a private online investment forum. Is that right? Yes. A forum or a club though? Probably a club. Let's go with a club. Probably a club, okay. And have you come up with a name or is it still one of those, you're keeping under wraps? No, no, it's strawman.com. Strawman.com. Wow. All right, cool. well mate I'm glad you're doing something with yourself this year it's um alright let's move on half the people have already switched off or skipped ahead we should have some sort of audio marker so they can go straight there we'll put chapters in chapter one Scott tells terrible joke chapter two the boys actually finally get down to it and by the way chapter one and a half is random tangent inserted between those two things which is also a various length and likelihood mate we are pre-recording this I will give that away So this, again, as I said last week and probably a couple of times over the last couple of weeks, if anything big's happened in the meantime, we're not here.

2:51I wouldn't put it past us one day maybe to throw in an extra episode if something did break and we felt like we kind of owed it to our listeners to at least opine on it. But we're long-term investors. One of the great things about, frankly, I don't know, speaking of tangents, here we go. I don't know about you, mate. I've been away for weeks at a time and I've gone bush. I go bush in winter, generally speaking. I say go bush, you know, we jump in the family, get in the car and take the camper trailer out somewhere out west of where I live, in the middle of Australia generally, or up north. And I leave my portfolio alone.

3:21And I've had so many people say, what do you mean, what if something happens? Like, well, then it'll happen. You know, there's a real, the illusion of control or the desire to somehow do a thing or avoid a thing or be a thing is so prevalent amongst people. I'm going to go on holidays, not for very long. We don't get away for a week and a bit. I may or may not bother looking at the markets or may not bother looking at my portfolio. But there are people who are like, well, I'm going. I've got to sell everything in case something happens while I'm gone. I just, I'm not going to. You? No. I mean, I think it's very adorable that people think that they can do something about it in the sense that, generally speaking, when something happens, it happens.

4:02You know, it's sort of, it's not like, oh, they release an announcement saying the CFO has flown to Bermuda with all of the company funds. And then you're the only one who happens to read it and gets onto the market and trades out before anyone else's react. I mean, the news hits and their reaction is instant, you know, and all of the bids get pulled. All of the offers get lowered. It's just you kind of can't react. I mean, yeah. Yes, I guess you can always sell then and maybe selling at a 20 percent loss is better than a 50 percent loss that may eventually. But it's kind of like the damage is largely done very, very quickly.

4:37Markets react incredibly quickly. So it's kind of, one, there's nothing really you can react too much to. Two, I think it's not an either-or thing. It's not a black and white, you know, one is I just do not look full stop at all. And the other is I spend eight hours in front of my 12-screen, you know, computer, you know, checking every data point under the sun. It's just like I will pull out the smartphone occasionally, tap onto, you know, I use ComSec for better or worse and, you know, have a look. Is there any market sensitive analysis, any major moves? No, life goes on, right? If it is, maybe I can tap on that, read the PDF and then have a think about it.

5:19So you can really dial it back and still keep, you know, quote unquote, the finger on the pulse, so to speak. But I mean, I definitely lean to your side of things, whereas less is more. And in fact, generally speaking, taking myself out of the equation is generally a positive for a lot of these things. And just letting things unfold is often a good. It sounds negligent. It really does. But I guess I would argue that the effort and the work is done prior to the trade. In other words, you know, I try to really try to make sure that I know what I own and why I own it. And, you know, if I'm buying a company and, you know, they come out with a new contract win or something that's a little bit bad, I can put that in context very quickly.

6:08I don't have to go back from first principles and work out what that means, how it impacts. Because you've built up an understanding, a thorough understanding, hopefully, of the business. and you know you know what i mean it it is um if you find yourself in a situation where and i've got to be careful here because there'll always be the the unknown unknowns and the complete black swan unexpected but generally speaking you not that you can predict the specifics and the timing of events but you can game theory it sort of through what happens if you know what are the risks of x y and z and and you can you can when when or if it does happen you've you've thought about the consequences in the context of a long-term investor so a good example here might be a retailer that has a really crappy quarter you know now is there is there something structurally wrong with the business or is just you know everyone tightening their belts and this is just the normal cyclicality of a of of the retail sector you know there's two very different things.

7:12Am I going to flip out and run for the hills every time that there's a slight dip in same store sales? If so, why am I investing in a retailer in the first place? Again, it comes back to knowing what I own, why I own it, what I would reasonably expect. I don't know. Does that make sense to you? I feel as though - Yeah, totally. If you're panicking, what does this mean? I have no idea. This is completely out of - It probably, not always, but it probably suggests you didn't do enough work prior to to becoming an owner in the business. I like that, mate. I'm going to say two things. One is, you're right.

7:45The most compelling thing is that, well, I think it's two. The first is your point about, you know, there's no free time window where you get to respond or act before everyone else does. And there is something in investing in life in general, but specifically about investing, where it's like, you want to play the game. You want to play your game, not someone else's game. Yep. If you are trying to play the game of, I'm going to be the fastest drawer in the West, I mean, good luck, right? You've got people who are, literally people who are doing this for a quid, who are sitting at their terminals.

8:12You've got computers who are programmed to do this before you even get close to it. Like, really? If you're saying the game I'm going to play is, I'm going to try and react quickly to new news, I swear, you might as well try win a 100-meter race with no legs. It's not going to happen. You are not in the race. It's not going to happen. The other thing, by the way, and this is, I think, more powerful overall, is when people say, I better sell just in case something happens. What that suggests to me is, and I'm not, well, I'm a bit of a poly, and you know that I'm a bit of an optimist, but what that says to me is they're focusing on the downside.

8:46What if the thing that happens is a massive 50 % spike on a takeover announcement or something of the sort? Or not even that, mate. We're recording this towards the back end of December. And we said on one of the recent podcasts, the six weeks, seven weeks from late October, to middle of December, the market was up really strongly. Now, you know, and in one week, the week of, I think it was week commencing the, whatever it was, week last week, so week commencing the 10th or something, 11th. The market was up 3.5 % in that week alone. Now, you know, losing 3.5 % is not a big deal. Missing it out is not a big deal.

9:23It's not going to kid you overall. But that thing you're trying to avoid, I mean, you know, avoiding a market gain, yes, things tend to fall faster and harder, But if they don't happen and the market goes up, like it did that week, like it's done in the last six weeks, imagine going on a six-week holiday and missing a, you know, what is it, 9 % jump or something? I mean, you know, I just think it's worth thinking about when people say, what might I miss? Everyone's minds. This is, again, I've said so many times, I'm going to trademark this one. You know, successful investing is the ability to overcome, to suppress our natural human instincts, our evolutionary biology, right?

9:59If you can suppress that evolutionary biology like Warren Buffett does, like others do, you're doing well. And so when we say, what might happen while I'm gone? 95 % of our thoughts, 9 out of 10 people say, oh, you mean when something goes wrong? As opposed to, what if something goes right while I'm gone? It's not something you think about. And I think that's really worth just keeping in mind. Yeah. Sorry. I mean, you did set this tangent up. So we're going to go a little bit down the rabbit hole. The first one I wanted to make the mention of is the cost element of that. Maybe brokerage isn't a big deal these days, but there's tax consequences around that.

10:35So you've got to factor that in. The other thing is, I'm going to forget the stats off the top of my head, but there's a variety of sort of flavors of this analysis. But if you take the top 10 best days out of a given year, there's 200 business days or trading days or something like that in a year. but you just take out five or 10, the difference overall is substantial. It doesn't feel as like, well, it's only a few days, like how much can it move? And it's not as necessarily these are huge, giant moves, but it's just the way that incrementally all sort of, the way the maths works and it all comes together.

11:10It's just like being out of the market where you, yes, you might miss the five worst days, and so the opposite is also true, but you might miss the five best days, or you might miss three of the five best days, In which case, at the end of the year, even assuming you have no transaction costs and no taxation burden to worry about, you could still be like a good 5%, 10 % behind. And that kind of stuff really adds up. So, yeah, I wouldn't – look, if you're a trader, it's a different story. If you're an investor, yeah, it's a nonsense trying to sort of move yourself out of the way. I mean, one final example, there's a company that's a lot of our members have been following for a little while called Neuron Pharmaceuticals.

11:50And, you know, they had a very good result recently and shares shot up substantially. And there's a few people I was speaking to who were like, I'm just waiting for the clinical trials to come out and then I'll buy. And it's like, well, look, and by the way, this isn't my bag. I'm not, I'm not one to sort of go for this style of company, but, but it felt like an odd thing to do because it's kind of like the upside is in whether or not this happens. Once it happens, it'll be priced in almost immediately. Guess what? It was priced in almost immediately. Yeah, exactly. So now you go, oh, the results are great.

12:22Bang, massive jump up in the share. Great. Oh, now I'm going to buy. It's like, yeah, but it's happened. Not that there's no more upside from here, but if that was the thing that was holding you back, that thing has now been priced in. And now you need other sort of, for want of a better term, catalysts or drivers to sort of lift it even further beyond that. So we're all a little bit too clever by half when it's just, as I said, it feels a bit laissez-faire, it feels a little bit lazy. But really, you want to roll with those punches. And in rolling with those punches and the ups and downs, it's actually just make sure that you are strapped in when things go your way.

13:04Yeah, that's right. I think we go to a whole different tangent on how to think about valuing something with that kind of binary, you know, yes, no approval coming through. And I think you're absolutely right, mate. I do think there is some value sometimes in weighting as an outcome. I know I'm going to pay 30 % more, but at least I know this has happened. Yes. The share price might have fallen 30 % if it hadn't gone ahead. So there are still those, that range of outcomes. And we don't know in advance, of course, which outcome we will get. So that's absolutely true. But that's a whole different set of conversations.

13:36Mate, we started with a tangent, but let's move back to the mailbag. if that's okay. A question from Francis says, Hi, gents. Many thanks for the hours of time you invest in us so that we may become better investors. I like that. Thanks, Francis. Despite being a staunch property man, you have made me dabble in shares and I now understand why I have never previously been successful at it. Oh, dear. Sorry, mate. So the question is relating to another question you answered in regards to the benefits of a, quote, lazy balance sheet, end quote, where you both approved of companies that have funds set aside for a rainy day.

14:12They're then able to make investments when others may not have the capital to do so opportunistically. I see where this is going. What I don't get is that this seems contrary to your ethos on fully investing yourself, Scott, and also seems contrary to your previously disclosed views on short selling. As the way I see it, short selling is costing you the time value of capital, and so are funds sitting on your balance sheet, not being vested in the company. Kind regards, Francis. I'm going to go first with this one, mate, because it's directed at me, but I'd love your thoughts as well. Francis, I think that's a very, very, very reasonable critique.

14:51But in doing so, I'm going to say that that possibly might be because either I wasn't clear enough or maybe you haven't heard me talk a little bit more fully about the way I conduct my own personal affairs. And I think the analogy you draw is a great one. I just think there's extra stuff to that analogy that when I add to it, we'll end up in the same place. And so I am absolutely fully invested all the time when I, well, I say that and I always feel a bit guilty, mate. It's like the plumber with a leaky tap, right? I absolutely, every time I get paid every month, I put money from my transaction bank account into my investment account.

15:22And I say fully invested, I don't actually place the trades every month necessarily because I just sometimes don't get around to it. So I will say effectively fully invested or theoretically or mostly fully invested, not because I'm doing anything other than just being lazy and not getting around to it, rather than any strategic decision or tactical decision to hold more cash. So occasionally, I might have a couple of months worth of, I think sometimes three or four months actually, of cash I haven't just got around to putting in the market yet. So that's true, but it's not for any other reason.

15:49Look, I don't need to necessarily disclose that because no one would know the difference. And it's not that big a deal, but I kind of feel like being a little more fully honest, also sharing the foibles that I have, hopefully is a little more honest and gives people a little more sense of how I do what I'm doing and also that I'm not perfect. When it comes to be fully invested, Francis, I am absolutely fully invested with a massive asterisk. And that is my wife and I also have a rainy day account. We have money set aside for the times when we might need to do a thing. Now, we had our house flood, the bottom of our house flooded in January, February, March last year.

16:25We have a very large excess on our insurance because it was cheaper premiums. And so we had to pay that down. We have had circumstances sometimes we've got to replace a fridge or a microwave or a TV or whatever. And there's money in that account to do those things. And frankly, if my boss was to knock on my proverbial door one day and say, Scott, it's been fun, but out you go, or my wife's business wasn't going quite so well, having that rainy day account means we can meet our expenses if income dried up for any one of a number of different reasons. So I am absolutely fully invested with the money that I have available to invest, again with that asterisk, but I also have a rainy day account.

17:03And to my mind, mate, this is where I think the analogy you rightly highlight, I actually think still holds because I want companies to have a rainy day account of their own. That lazy balance sheet is effectively the rainy day account. And I think that's an important way to think about the way they operate, the way we operate. Aiming to maximize your upside at every single opportunity is fine until you need to actually minimize your downside. And if you don't have the flexibility, the structure to allow you to do both of those things with a rainy day account for me, with a lazy balance sheet for a company, then that's exactly what you want.

17:38If you are so finely tuned that you say, if everything goes right, I'm going to make a squillion dollars, but if everything goes wrong, I'm stuffed. Versus if everything goes right, I'll make half a million dollars. If everything goes wrong, I'm completely covered and I'm fine and I'll be all right. Thanks very much. That is still far and away. on my personal finances, for a company's finances, absolutely the way I think you should approach investing. I think you should approach property investing the same way. If your tenant moves out, you want to have some cash. I think those things are absolutely not, there's no issue, there's no, to my mind anyway, issue with holding those views at the same time.

18:17I don't want companies to have a squill. If they've got excess cash they can't use, don't use, won't use, can ever possibly need, then they should pay a special dividend or buy back some shares. So I'm not saying, for instance, any amount of money on a company balance sheet is okay. And when we say lazy balance sheet, we're saying enough cash, not so much cash that it's ridiculous. And I don't think we ever implied that. I don't even think you necessarily think we did either, by the way. But while I'm answering the question most fully, there is an amount of money that's too much money. If you know you can cover your downsides and you've got no good ideas for investing it and you don't think it's going to happen anytime soon, then give it back to shareholders.

18:50buy back special dividend for me if our running day account gets too big i'm going to take some of that money and invest it i think that's absolutely consistent right yeah i i think you you did that really well it these are that this is the hard thing about rules of thumb right it was like well you know there is this and there is that and and and i guess like a little bit more nuance here i would i would adjust that slider of how much i invest versus how much is in the rainy day fund depending on the nature of my income. So for example, let's say I'm a contractor or I'm a small business owner and, you know, it's just my income may be very decent over the course of a year, but it might fluctuate quite a bit.

19:33That's very different to someone who's a career public servant, who's got long service leave tucked away and, you know, all kinds of redundancy protections and, you know, just in other words, an incredibly, incredibly reliable income is like, it'd be hard for you to get, you'd have to do some pretty bad things to get fired, right? And so, and that's, that actually, that analogy I think is true for a company as well. If you're a business like, geez, I don't know, like a tollway operator or, you know, something like that, where the revenues are incredibly dependable, that's very different from a business who has a great degree of variability in their revenues as well.

20:10So both would want that sort of quote unquote rainy day fund, sure, you don't want to stretch yourself to the limit. But one, it's a little bit more permissible to be fully invested as opposed to the other, which probably needs a little bit of a buffer. So I think you have to look at it in all of those contexts. But the short answer here is, yes, stay as fully invested as you can, ensuring that there is a little bit of money there that if the unexpected were to happen, that you're not a forced seller. Never a forced seller be is always a good rule, whether it's property or shares or anything. Beautiful.

20:46I think that's exactly right, mate. The only other thing I'd add, mate, is just to have some humility in terms of the range of outcomes. Even the public servant with the super and everything else, you say, well, I mean, look, in most cases, I should be okay. You got to work out for yourself where that slider sits on most versus all. At some point, you say, well, I'm going to hold five years expenses in cash just in case. I think that's silly, obviously. You can't cover every possible eventuality. By the way though i will say income protection insurance something i personally have for exactly that reason i've got from a day account up to a certain amount of money and then if it's longer than that probably something catastrophic's gone wrong and so i've got income protection insurance to cover exactly that that eventuality uh but but the key thing for me at least in between those two parts is just you know yes in my view um we've said so many times like going back to zero is going back square one's just it's an absolute tragedy financially right so yeah bigger issues in the world bigger problems than financial problems but still pretty bad problems um so just just be just Just, you know, Ram's absolutely right.

21:41The slider of, you know, how secure is your income? What are your range of outcomes? Do you have a partner? What's that partner earning? How employable are they? How employable are you? Those things are all true. I would just, personally, I would add a margin of safety to use the investing term, just to make sure you're going to go, well, yeah, look in, you know, if I plot the range of outcomes, I want to be covered for 90 % of the outcomes, not 51 % of the outcomes. Because, you know, you don't want to be tossing a coin when it comes to that sort of stuff, in my opinion, anyway. No, no, no, I agree.

22:06Hey, mate, this one comes from an anonymous listener. who signs off with an anonymous listener, who starts with Hi Scott and Andrew from anonymous listener. So I'm going to take the hint here. And I'm going to say this one's from an anonymous listener. He or she says, you guys do an amazing job every week at capturing the good stuff that should be talked about in the wider community. Thank you. Immigration, inflation, housing, politics, fiscal policies, or lack thereof, and the occasional accounting 101. Please don't apologize for any of it. Well, okay, if you say so. I always find myself as one of the three people left in the room still listening.

22:43Well, at least you've got one of them ticked off. Find the other two, we're home. My rant. Oh, here we go. My rant. I'm an immigrant who benefited in the richness of what Australia has to offer from the age of 10 during the Paul Keating days. Educated at a public school and started a career in investment banking here. I went abroad to work for 15 years, came back with young children last year with the hope of giving them the same richness that I enjoyed growing up. But I now often ask myself, what happened to this country? Why does everything seem to have gone backwards? From childcare to public schools to jobs to housing to unsustainable levels of debt, even before the higher for longer inflation rates we are to expect.

23:23It seems to me we've already burned through a whole generation of wealth in real terms. Hope or despair? How do I explain to my kids in 15 years time why I brought them back here? I'd like to think that at least 51 % of us Could apply common sense to social Economic decisions and demand This from our government instead of giving The candidates a free pass at each election With a choice between the lesser of Two evils or have we Already become the short-sighted popular Society that we dread Becoming here's a thought How about you fellas throw your hat In the ring and give these pollies A run for their money or Taxpayer money says our listener there's no adults in the room anyway huh well i'm not sure what let's let's stop there mate are you uh should we should we start the uh motley straw party or the the straw fool party what do you reckon have we got a chance here no i i i'm not a masochist frankly i this is this is the this is probably one of the root causes of the problems i mean the people best equipped to to be in that line of work probably don't want to be and those that are desperate for it are there for the the status and the power they're not necessarily there for the the uh good although it's a little bit harsh i think a lot of people do start off that way and then you gotta get sucked into the cynicism of the machine and you realize that there's a certain way that the game is played and if you want to succeed you got to kind of play it maybe or maybe that i don't know maybe that's a little bit too bleak but uh no i'm not i'm not gonna put my hand up anytime soon and i imagine if i did i would very much malmeninger it you know we're just someone would shove a camera in my face and uh i would just say the dumbest thing and then go oh it's gonna be there forever so yeah no not for me

25:12i i occasionally have delusions of wanting to actually go make a difference in canberra mate honestly yeah um but i don't think i would ever do it and this is you know i i want to for exactly the reasons you say you know i won't say if not me who because there's plenty of other people who do it right and i think by the way some of the independents doing a spectacular job i don't always agree with them uh but they are a massive breath of fresh air i'm just excited about the group you know i i might choose some and not others if i was given the choice but if i had to take them all or none of them i'd take them all you know i think they've done a really really great even some of the polo i i reckon jackie lamby is just brilliant right i don't agree with her maybe a third of the time uh but she cares she just genuinely cares she's a genuinely normal person from you know normal the normal world saying hey i can put my hand out of a go here and i'll try and do what's right and you know i said i would i would have her do different things i disagree with you know both majors and the teals and other independents from time to time too right but you just find with people like her um david pocock's probably the other one in terms of just genuine passion genuine commitment the courage of their convictions uh where even some of the other independents are you kind of get the sense they are already playing politics uh not the others aren't necessarily they were always very mindful of it uh david pocock's done a great job if you're follow him on social media um half his tweets are about the big issues and half the tweets are about you know stadiums in in the act and public schools in in a particular suburb he gets he gets retail politics right and good on him um that's actually but speaking of which though why i don't think i would well no major party is going to have me uh and i don't know any i'm going to have people to vote for me as an independent i probably wouldn't want to stand for any of the majors anyway by the way no um and and you kind of think like well how would i get how would i get elected and then what what i have to do to stay elected i you know i'm i'm a relatively moderate person generally speaking other than when i'm ranting i just but i don't i don't too i've never been very good at office politics for example and i've got myself into trouble more than once not in a not a you know um bad behavior out of class or anything just one of those things where it's just i just can't be bothered and i can't be bothered making the effort because i just i don't think it should be the case and it's really stupid and naive and immature of me to do it that way it's like i should play the game and i should do this i should do that um you know you know me better than that mate i just i can't bother and i just figure if i was going to do politics i have to do the whole here's what i think here's how i am unvarnished like it or not i'll try and do the right things i'll make some mistakes i've been imperfect i'll be imperfect this is what you get and unless you're bobcatter you kind of can't get away with that you've got to play the david pokok game you've got to you know you've got to be the retail politician so i i don't know if i if i did ever um put my hand up uh i have a i have a suspicion that in doing so uh i would I would probably not be there for very long.

27:46I do like, I think I've mentioned this more than one occasion, but it's always stuck with me, the Douglas Adams line in Hitchhikers where he says like anyone in regard to Zaphoid Brebelbrock's is anyone who has the capacity to get themselves elected should be disqualified on that basis. Like the skills needed to get elected are not the elements you want in a leader. So it's a bit of a conundrum. Yeah, again, it's not going to happen. As I said, again, for my sins, mate, I rant and carry on on social media as my way of hopefully adding something to the debate. I kind of feel like it's arrogant, right?

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28:28It's just it is. I'm not going to pretend it's anything other than that. But I feel like I've got some thoughts on some things sometimes. And I think sometimes those thoughts hopefully add value somehow. And if I can give people some thoughts and if I can add to the public debate in some modest way, then I think that's about as much as I can do. Hopefully this podcast helps. Again, it's a finance podcast, but these issues don't exist in a vacuum. They exist in a world of policy and politics and other things. So hopefully we're doing a half decent job of at least adding to the conversation. If we can make people think and make people think about their vote or the way they talk about or to their politicians or policy, then even if they disagree with us, if we've helped add to the debate, if we've advanced the debate, then I reckon we've done a reasonably good job.

29:08Maybe we could do more, but I reckon we've probably done okay. Yeah, I think that's something, whether you have a podcast or not, right? I think just having the conversations with people and, you know, you have to, again, have to be a bit of a masochist though, right? Speaking, like I think this is something that you will have found, no doubt, over Christmas when you're around the table with your family and loved ones. And, you know, old Uncle Jim makes a statement that makes you bristle a little bit. You can get into some heated topics, but they're good. They're good to have these conversations.

29:41So, you know. Yeah, exactly. Hopefully we're helping. Sunlight is the best disinfectant, as they say. So get it all out in the open. I love that. Mate, let's go with the questions from our listener who says, anyway, now to the questions. One, if technology drives real growth and growth is what we are looking for in any meaningful time period, why do we even bother with the S &P or the ASX when we could go with the NASDAQ ETFs or even tech-focused ETFs? Good question. What say you? Yeah, so I just want to share in the nihilistic opening statement there and say that I definitely get the despair around where the country is going.

30:23Oh, yeah, we should have talked about that. Sorry. Yeah, thank you. I just acknowledge it because I think a lot of us get it. Australia used to be – we really prided ourselves on being a meritocracy and not having a lot of the baggage that came from the old world where it depended on what mummy or daddy did as to where my station in life was. Whereas if I was a productive, capable, hardworking person, that I could almost be guaranteed a reasonable level of success. And I think that's not true today, but it's less true than it was. And I think we are seeing a wealth divide. And it's always not a problem if you're the person who's dividing in the right direction.

31:10But even if you are there, I think it is a problem because you, I mean, do you want to be in the top 1 % in a failing state? Or would you ever be like right bang in the middle of a very flat society where everyone's pretty rich? China, which I would rather be. That's not an advertisement for communism, by the way, before anyone writes in. But, you know, anyway, so that's a very deep rabbit hole. Yeah, so tech. So I think technology is absolute. God, I've thought a lot about this this year. Technology is the basis of all of the wealth that we have. I mean, otherwise we'd be going around as hunter-gatherers still, right?

31:51And then we invented better ways to do things. And every invention made us more, you know, economists call it productive, but, you know, it just means we could do less with more. I've used it before, but, you know, I can go out with a spear and try and catch some fish and, you know, get reasonably good at that. And then someone invents a net and then someone invents a trawler, you know, and it's just like, wow. And I've since started to look at the world through this lens, I see it everywhere. Everywhere I go, you just kind of think, wow, what I am able to do with these tools. Even if I'm like fixing something at home and I, you know, I'm not a tool guy, but I've got a few, you know, it's like, wow, that was really cool that I could do that.

32:35Imagine not having a hammer and trying to do this or, you know what I mean? Yeah, that's right. Yeah, yeah. And what you realize is that it is the source of all real well. Look at the things around you that you really value and make your life better. There's all the technology that's there. And where I'm sort of headed with this, well, a couple of things. One is technology compounds. So it actually forms a – like technologies themselves become the foundation of the next level of discovery in technology. You can't have computers without silicon chips, you know, or not good ones at least anyway.

33:09And you can't do that without a deep insight into Boolean logic and mathematics, et cetera, et cetera. So everything sort of layers upon – and that's why we're having exponential growth, frankly. frankly um so it's really it's really a fundamental thing i think the trouble is is that in the modern era technology has been captured as a term to mean computer stuff um and but technology is anything right like a wheel is technology fire yes yes technology farming techniques uh a technology so i would say anything in the broader indices that aren't quote unquote tech focus. They're all using technology, even if they're business processes, quote unquote technology, they do different ways of doing things that are more efficient and more better.

33:53So it's, it's, it is, I think it is wrong. I get, I get where the question is coming from here, but I think it's wrong to think that anything that isn't of that narrowly defined technology label, if it doesn't have that, that therefore it can't be a source of productivity and wealth creation. It's just that it might be a different type of technology or it might just be, there are some companies out there that are as boring as anything and really don't have any technology advantage, but they have incredible systems and processes and just wonderful at executing. And their innovations are more around maybe from an HR lens and how they manage their people.

34:36A lot of people, businesses, they're the assets, right? There isn't really, there's a coffee machine, a photocopier and a bunch of cubicles. There's no factory that is there. But two companies of that character can be wildly different because of the culture that's in place and the morale and all of these other kinds of things. So this is a very long-winded answer, but yes, technology. The other thing I'll add here is that it's not just the technology, it's the use of that technology. So, you know, email and computers have been around for a good while now. And, you know, every company uses them.

35:14Some companies use them incredibly well. Others don't use them well at all.

35:21And some of those technologies are available to everyone, you know. So it's kind of like just having the technology itself is not enough. You actually kind of need to take that technology just to stay even with everyone else who's competing with you. does that make sense? So yeah. That was a hundred percent. Yeah. And another, sorry. And another point, another point is there are technologies that come along, but they can take a long time to mature. And so I think this is where we're at with AI. I mean, I'm, I think people will know my view on AI. I'm hyper bullish on it, but at the same time I can keep two thoughts in my head, which is, it's also very likely to be a bubble right now because every company's branding itself with, Oh, we use AI and we do this.

36:03And there's just, They're just sort of like, yeah, it's technically true, but I don't think of you as an AI company. I don't think what you're doing there really distinguishes you from what others in the space might be doing. It is huge potential, massive implications for productivity and life in general. But does that mean I'm going to invest in, you know, helpful ever just in AI? is like, no, I actually want to see those companies that can really make the most of it and take that technology, which is largely available to all of us, and employ that in creative and new and novel ways and then carve out competitive advantages around that.

36:42So there's a few layers there. That's a really good question. A really good point, mate. I think I'm going to kind of straddle both. You're absolutely right. I 100 % agree. Tech is a massive misnomer. it is probably the most useless term in investing right now. What isn't tech? Everything. Who's not using tech? Well, nobody. Everyone's using tech to some degree. Is Amazon tech? Yes. Is Woolworths tech? No. Okay, well, why? Well, because Amazon's got a greater percentage of its sales on the internet. Okay, if that's – you know what I mean? It's just – and it's not to say that companies using what we call modern technology more aren't probably better placed.

37:22So, again, I'm not even disagreeing with the questioner, right? Because part of me thinks – I've said this before – Those companies are the ones inventing the future. The next big innovation that genuinely puts more zeros on the end of a portfolio is probably not Woolies launching a new product range or opening a new store, even though they're using technology. The ability for a capital light business with a massive footprint, super smart people to invent a whole new... Think about Amazon, right? I own shares, as we know. They invented Amazon Web Services. The entire cloud computing offering of Amazon came about because Amazon said, actually at night when no one's ordering anything from our bookshop, the computer's sitting idle what if we could use that computing power that's literally how it started right so you go well you know we'll just try to get in the masters in hardware and didn't and closed down and went home so i'm gonna i'm gonna take both sides of this i think that azac will outperform but i don't think it'll outperform where there's anywhere near as much conviction as i would need to say abandon everything else only do that two reasons one um you know the internet is a technology everyone the motley field uses it straw man uses it bulwurst uses it uh you know So my internet's out at the moment, as I told you before we started recording.

38:28The bloke who's going to come and fix it uses an online SaaS tool to book appointments. Now, he obviously also installs internet. But that idea of anyone using all this stuff, the local tradie who uses high pages to get jobs, he's a tradie, he's a brickie, he's a carpet layer, he's a whatever, uses the internet. But I do think those companies are more likely to invent the future. So am I right? I don't know. Would I abandon everything else and take a concentrated bet that I might be? No, that would be crazy in my mind. Secondly, though, am I sure the valuations are attractive enough right now, given what might happen?

39:04No. So I own the NASDAQ ETF. I love the NASDAQ ETF. I've recommended the NASDAQ ETF. I absolutely think everyone should own some of it, or at least some US businesses. But for all of that, I think it's worth saying the... I wouldn't just do it because there's no point in concentrating your bets that specifically. If you're right, you'll be glad you did. If you're wrong, you'll be horrified. And again, we'll go back to square one, which we just spoke about. Yep. Speaking of which, the second question from our anonymous questioner, in light of growth again, would we not expect the emerging markets ETFs to generate better returns than ETFs that track the developed markets in the next 10 to 15 years?

39:46Have I missed a trick? What do you say? Yeah, no, steer clear. I can't give advice. So I won't say that. I'll reframe that. You may want to consider steering clear. You may want to consider steering clear. Too many people say it and advise it because it sounds good and it sounds smart. Why does it sound good? Well, you know, there is a lot of people and potential outside of the US and Australia and Europe. Right? Like, in fact, billions. And they're emerging. In other words, they're growing. Right? So that sounds super smart. And because of diversification and all the rest of it. Here's the thing.

40:31Name, for me, five countries that are emerging, developing, third world, whatever term, global south is another one you hear lately. The names change, but that have actually emerged. That's right. So there's Taiwan. That's done it successfully. China. Yep. Well, still, it depends who you ask, right? Still in some words, some cases are developing. Some cases are developed. Yeah, yeah. I can't think of any others. I mean, South America has been developing for 100 years. Yes, exactly. Now, why is that? Lazy people, not very capable, not very intelligent people? Well, no, that's BS, right? So that's definitely not true.

41:19I actually saw a post the other day. I'm not going to be able to find it on the fly on Twitter where they were talking about the Chinese market. So you can say what you like about China, but officially it's grown at like 7%, 8 % compound for 30 years, right? And then you can even be more specific. It's like, well, no, I'm going to invest in Alibaba or Tencent. or that you're like, shareholders have done woefully bad here. Companies that have genuinely made a lot of money. What's, and you know, and on this tweet, I think the posts have put governance matters. And that's a nice way of saying that who's extracting the value here?

42:05We are such in a privileged bubble in Australia. We sometimes forget that and that we are very good. Now, I would back to the earlier point from another question, like some of these institutional advantages are probably being eroded over time. But we do have very good institutions at making sure that there are protections for small investors and, you know, in what must be reported and the rest of it. And we get to share more equally in value that is created. In other parts of the world, and again, I'm not going to mention any specific names here, but there's plenty of value being, well, not plenty, but there is value being created.

42:45It's just it's siphoned off through corruption and poor institutions and the rest of it. So, I mean, let's say straw man all of a sudden goes to a billion dollars in revenue and any shareholders there would go, well, that's going to be a good thing. Well, not if I start paying myself a billion dollars each year. The net profit's not really going to be there. Or maybe I start using a bunch of related party transactions to pay other companies that I own and have a major stake in and pay them exorbitant. You could write a book. People have written books on all of the shenanigans that you can get up to to extract value away from shareholders.

43:23And unfortunately, unfortunately, the scenario is in much of the developed world. When I say much, like a very significant majority where they have all kinds of endemic problems with corruption and poor institutional protections and the rest of it, and they just never emerge. And any time that there is something that is to be celebrated in terms of a local success story there, those spoils are generally not equally shared. And so for me, although it sounds good, I'd stay a mile away. maybe you can argue the other way the other way be keen actually because i i feel as i'm a little bit too hard line on it but i just i just haven't seen good evidence as to as to why that would be the case so i actually agree with you not as not as a not as um confidently and not as strongly but on the balance of probabilities where you start with am i confident in a probabilistic outcome that i'm going to make a lot of money so even if you're even if you're wrong it's still there's still no evidence to be sure that you will be wrong if that makes sense or put the other way around is it possible emerging markets will do well yes given history and given the circumstances how sure am i would i want to invest that way and the answer for me is no so i'm not saying it can't happen it won't happen stay away i'm saying including your investment or universe so differently to you, including your investment universe when you're considering ideas, but then ask yourself, how would I handicap the odds of making money on that and with enough certainty to actually put my scarce resources, some of those into emerging markets?

44:58And I still come back with the same answer. So different perspective, same kind of response. Now, my view is that I... Australia was an emerging market. Australia was a developing market. We had wool, you know, and then we had gold and then we had some manufacturers and then we had some resources. And then we, you know, there is, you know, there are more examples, I think, that we maybe realise of companies who have gone from developing to developed, I think, in any meaningful way. But I also think here's a couple of things. Firstly, those emerging countries are being colonised, not in a political sense.

45:38And that's probably a loaded term. So maybe I should have thought about a different term. but they are effectively being infiltrated by the West when it comes to capitalism. You go to those emerging markets, you will find Coke. You will find Toyotas. So as those countries grow, you've got to ask yourself, firstly, will they grow? Don't know. Will they grow enough? Don't know. Will their local industries succeed? Don't know. Will their listed companies do better than the listed companies elsewhere? And again, you might be surprised to hear me say, don't know. And so that combination of ideas, far more than just will they emerge, will they develop, will they become and join the developed world, even if they do.

46:21You don't get to just buy a leveraged share of GDP and then say, well, if and when they, you know, Australia grows this way. If you'd bought a share of China's GDP 50 years ago and you were able to somehow leverage that, you'd be a squillionaire. The compound growth of China has been phenomenal. But their stock market hasn't necessarily done that. Why? Well, because the country's growth hasn't necessarily been reflected in their listed companies. The price you might have paid in the past may or may not have been too high because everyone else already expected that sort of growth to come through.

46:50So any investment you make, even in the same idea of, we've said so many times, but I'll go back to the old Hackney example, airlines. Airline flights will grow a thousandfold between 1970 and 2020. Fill your boots. And you would have gone broke. So I get the theme. I get the idea. It's not a silly thought. anonymous listener uh but trying to make be successful in that space is a much much harder thing i think no i i actually the other um i'll point another finger this is going to be really controversial but i think when you look into it it's less so there's a really good book well i've i've heard the author interviewed on several podcasts i haven't read the book yet it's on order it's called hidden repression it's by a gentleman called alex gladstein uh it's basically how the IMF and World Bank basically exploit a lot of these countries.

47:43The simplest way of doing it is they act like loan sharks. So it's like, here, we're going to lend you a bunch of money. We know you'll never pay it back. And when you can't, we'll come in and demand structural changes to your industry, which benefits us. We basically turn a lot of these countries into banana-type republics, and it's just compounded by the fact that they've got a very corrupt political elite. And so it's very jarring as a Westerner to go, whoa, you're saying the IMF and the World Bank are doing this? Not as an evil cabal of lizard people, but just misinformed altruism that, you know, trying to do good?

48:20Oh, let's help the poor developing nations. and it's like, get dudes, stop. You're not helping. You're absolutely not helping. And when they invariably fail at repaying the terms that you've set out, you then go in and demand all kinds of things which just hobble the country. There's a really great John Oliver on chocolate recently. If you want to be depressed about eating chocolate, watch that. The IMF and World Bank's fingerprints are all over it. So there's a bigger macro forces at play there. And again, I don't want to sound conspiratorial. I think it comes from a good place, but it's just really not helped.

48:59The other thing, just to go back while you were charting there, I looked up some figures here. So let's go back 10 years and put all our money in the BlackRock, iShares, China, large cap ETF, right? You would have gotten a 0.73 % return. Like what? Like 10 years? Like a lot. Like, my goodness, what has happened in China over the last 10 years? You know, it's called an economic miracle. And yet I'm flat. In fact, in inflation-adjusted terms, I'm assuming this is not an inflation-adjusted figure. I've gone backwards very significantly over 10 years. And could you, again, imagine going back in time and saying, I'm from the year 2023.

49:41China is going to have explosive, between now, 2013 and 2013, it is going to have explosive growth. It's going to be on the cusp of being the world's largest economy. do you think this is a good area to invest? Hell yeah. What's GDP done? It's done this. Wow. What a corporate profit's done. It's done that. Okay. I'm in and I've done terribly. More specifically, Alibaba. So I'm just on Yahoo Finance. I can go back to 2014. So almost, yeah, actually almost 10 years ago. And I could have bought shares in Alibaba at 86 US dollars. They're$75 today. And they went via$310 along the way. Now you might think, oh, but things have gone really bad recently.

50:20It's like, no, no, revenue's doubled in the last three years. Again, just looking at Yahoo Finance. The gross profit has gone from$227 billion to$350 billion. You know, these are businesses and countries who under all published metrics are going right. And yet, and yet that has happened. So this requires some very serious second order thinking. And yeah, so we've made the point, But I'll just end where I started, which was I would advise you to think very carefully about investing in emerging markets. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

51:04Mate, Dave says a question which I love to start off. Hi, pod machinists, he says. Thank you, Dave. I heard your recent call out for questions for the pre-recorded Christmas mailbag episodes. Well, we're still doing them. I own units in the BetaShares HAC Global Cybersecurity ETF. Over the past five years, this ETF has paid a relatively handsome annual dividend. However, this year there was no distribution at all. A quick search tells me that three of the top five underlying holdings paid dividends prior to the end of June 2023. What happens to these dividends if the fund does not distribute them to unit holders?

51:44Do they simply carry over to the next distribution? How does this impact the value of the ETF? Should distribution frequency and reliability be a consideration in selecting an ETF? Merry Christmas, fellas, says Dave. Enjoy a well-deserved break. Thank you, mate. Much appreciated. We did. We're back, although we're not back. We've pre-recorded this one. We'll be back with you probably next week, actually. So brand new episodes recorded next week. Mate, in the meantime, what do you reckon? I actually don't know, Dave. I mean, it depends on the specific policy of HACC, which I'm not familiar with.

52:21So I'm actually not sure. You've probably got a better answer than that, Scott. Go for it. So I'll go for the backwards and work forwards. I don't know that I would be buying a cybersecurity ETF for the dividend, honestly, Dave. So should distribution frequency and reliability be a consideration? No, unless that's exactly what you're looking for. And then the answer is yes, absolutely. Because that's what you're looking for. Total return is total return. If you're going to reinvest your proceeds into either this ETF or something else, then all you're really doing is saying, well, I'm getting part of my total return this way, but I'm accumulating, I'm compounding.

52:58So the money goes back in one form or another. So in that sense, should it be? Well, not unless you want it to be. Now, some people want the income. some people just like companies to pay dividends for reasons we've talked about before it forces discipline it gives you some capital uh return uh in the form of a dividend it allows you to uh you know it's often tax advantaged um it gives you a sense of how much cash the business is throwing off there's there's lovely reasons for dividend paying companies if that's your thing um but also if it's not your thing that's okay too uh so don't worry about it distributions etfs are really really really really really weird they are super volatile they're all over the place i think I was going to try and stab at the ETF but I can't quite bring it to mind now mate hence the lack of research we do on this podcast but there's other ETFs that do exactly the same thing and are all over the place it does tend to be a combination of the income received from the companies, the cash available to the trust sometimes the trust rules that require income to be paid out it might depend on whether the losses have been made elsewhere where ETF dividends are an absolute mess, which again, shouldn't discourage anybody unless you're literally looking for it.

54:08But they are going to be all over the place, Dave. What I would say, mate, is because these things are effectively trust, they're set up that way, or the fund is a trust-style structure, it will absolutely be reflected in the value of the ETF one way or the other. Your total return is still going to be the same thing. If they paid you out or they keep the money, your wealth is increasing by that amount. Now, obviously, if they're keeping it, then you've got to believe they're going to reinvest it well. If they're paying it out, you've got to choose to reinvest it well. But yeah, as I've said before, a share price of a 50 cent dividend is still the dollar.

54:40A dollar share price of no dividend is a dollar. The results are the same either way. But I can't give you, well, sorry, the advice I should give you or the information I should give you is, yeah, know that all ETFs, except for those that specifically set themselves up as yield ETFs, they are designed effectively exactly that way. don't assume or rely on that. Certainly, this is probably the biggest bit of advice. There have been people trapped by looking at past dividends saying, this last year's dividend was brilliant. I'm going to buy some shares now or buy some units in this trust now. And then next year is nothing.

55:13And they go, oh, what happened? You shouldn't ever use historical dividends from those ETFs. Again, unless they are specifically set up to do this as an indication of your likely income returns from the ETFs themselves. Yeah, and the other thing to do too is just, which I have, although I'm not a fast enough reader to give you a definitive answer on this, but you go to the BetaShares website and you'll find the product disclosure statement, the PDS, and they'll tell you, just Google, oh, it's not Google, just search distributions there. And it'll tell you the fund intends to pay distributions at least annually.

55:44It may include dividends received, realized gains or losses, or other accessible income. It depends. After we've paid for our fees. It seems to me this isn't a bad thing, right? But there is a discretion from the operators of this ETF. And yeah, it depends on what's happening underlying there, what opportunities they see, whether they feel as though their investors want it. So it's not something that is set in stone by the looks of it, but it's 132-page PDFs. And it's messy as hell. Yeah. Actually, you mentioned one thing I should have mentioned, but I didn't, a horrible oversight from my account.

56:21paying out gains is often the key thing that drives that income distribution volatility. So if they sell a lot of positions in a given year for whatever reason they choose to sell them, it might be a takeover. They might think it's not valuable enough. They might want to put money somewhere else. When they sell those, that can create a distribution requirement because there's really sitting a bit rules on trust. It's a bit like family trust and other things where all income must be distributed. And so you kind of, they can't retain some of that stuff. So sometimes they choose to, other times they have to because that's the rules that are set by the accounting bodies or the lawyers or whatever else.

56:50so that's kind of just the way those things tend to work yep hey mate let's finish off with a question from Richard I'm loving some of those questions I'm getting in some of the comments as Tony Jones might say Dear Scott and Andrew instead of increasing interest rates to reduce spending for those with debt and therefore inflation why doesn't the government simply raise taxes for everyone for a stated number of months this way every salary wage earner beneficiary and business owner rich or poor would receive less income Therefore, we'd be less inclined to spend while this temporary measure was in place.

57:24The return to normal taxation could be gradual to discourage pent-up desire to spend. The current practice of raising interest rates is discriminatory against those with debt and has no effect on the debt-free population. Why not have a solution that involves everyone in the nation to solve the nation's problem? I know the Reserve Bank is tasked with inflation reduction. Why not allow the government to help? Thanks for your informative podcast. It is the only one, wow, I listen to on a regular basis. That's very kind, Richard. Thank you, mate. And really, really great question. Do you want to kick this one off, mate?

57:55Yeah, it's easy. The answer is politics. Pure and simple. Yes. Pure and simple. Yes, it entirely is. So Anthony Albanese gets up and goes, hey, you're all spending too much, so we're going to tax you more. And he gets a big kick on the bum. And then who's the other one? Dutton goes, well, we would never do that. We actually give you a tax cut. He's like, I'm voting for that dude, right? Like, you know, the idea that we are as a nation or as a people, you know, going to see the bigger picture from it through a non-selfish lens is just, you know, it's so depressingly true, but it's true. So that's why.

58:33That is exactly why. Even if that wasn't true, I mean, this is where we're going to get philosophical, but I feel I have a problem with the arrogance that where we feel as though we can control this kind of thing. I mean, no one takes, I mentioned the word communism before and no one takes that. Well, okay. Maybe if you're 19 and at university, you know, and your heart's in the right place, but you just completely. Young listeners, thank you. Yeah. No, no world experience or I've ever read a history book. And I say this as being the greeny lefty university student in stinky clothes that, you know, needs a shave.

59:17Like that was exactly me. Right. but yeah it's it's a bad idea to try and to try and plan an economy and yet and yet we plan the most central part of our economy which is money and so you know you and i have had this discussion several it's a really great discussion so i'm not going to rehash that but i i think i think the the intent is good um i think the idea is reasonable but in in trying to in trying to control money and plan for money we just make things worse i think the evidence is pretty clear if you actually look at it and and then and then you can sort of say well we can move that control mechanism from one institution to another but you still having someone who's going to control try and and control it and if that is going to be the case and is the point the excellent point that you've long made is was like well that's all well and good andrew but here's the world we live in and that you know the other is not being disbanded anytime so it's like That's a very good point, right?

1:00:15So if that is going to be the world we live in, I would much rather it be a semi-independent organization that is not political in nature with its hand on the – rather than someone who's there for a four-year term and is desperately trying to get re-elected. You know what happens? You get Argentina. You get Lebanon. You get Turkey. You get all of these other places in the world all kinds of massive problems because of politicians trying to sort of steer the economy in ways that might be good for them and their supporters, but just ends up ruining it for everyone. Yeah. I can't disagree with you much, mate.

1:01:00I think I have a slightly different lens on RBA and other things, which is influence rather than control. And I think that does have a different – kind of creates a different set of actions potentially. The folly of trying to pretend you can forecast interest rates out or inflation out by two years is stupid. To believe you can get a desired outcome with A plus B equals C type response I think is equally stupid. So I actually agree with you on control. I do think you can influence activity in the direction you want it to. A bit of the nudge, the kind of – the bumpers on the bowling alley type stuff.

1:01:32Sure. you can kind of allow to try for doing some of those things. But we've talked about that before, as you said. On the tax thing, I think you're absolutely right, Richard. We've talked before about using superannuation contributions for that purpose as a slightly more politically palatable version, i.e. you get to keep the money, but just not yet, as opposed to I'm going to take the money off you or the bank's going to take the money off you when you pay your bills or when you pay interest, that kind of idea. So that's something that I think is worth thinking about. You could absolutely do it with taxes.

1:01:58I've raised that before here and certainly on social media. again not expecting they will do it but but you're absolutely right mate here's the here's the hard part though right um having an independent rba lets the government effectively make them the bad guy and avoid all action which you kind of go that sucks and then you watch what if the rba wasn't independent then and the treasurer said interest rates which treasurer to your point about taxes ram which treasurer would say actually guess what guys i'm going to put your uh interest rate up 4.25 % in the space of 18 months because that's what we need to do at least if the RBA is right now they may not be but let's assume they are for now as you say mate it's the world we're in so let's let's assume that was necessary and that's what the best minds in the bureaucracy believed or the econocracy econocrats econocracy let's go with that um can tillion is another one that's a there's got a different meaning altogether but go on go on correct correct um yeah you know it was necessary treasurer charmers and or treasurer friedenberg before him would have said okay up up up up and again think about the political implications of that it's bad enough already people hate the government already for not doing enough on cost of living and if they were actually the people who pushed that button 13 times or 14 times whatever it is um imagine how even less popular they'd be and therefore not that i'm worried about their popularity but how much less likely they would have been to actually have done it maybe you'd be at three and a half or three and a quarter right now because they just couldn't bring themselves to be more unpopular and therefore did whatever you know and again assuming the rba is right that's a big assumption but let's go with it you know squibbing the last one percent or so of interest rate increases because it was politically unpopular that would be a horrible outcome for the for the economy if again the rba is right then by definition less than what they've done would be would be bad yeah and so you kind of think that through and you know i would love the politicians to use superannuation contributions in fact i give the rba the right given the choice i'd say the rba you guys get to now you know decide on superannuation contributions to do exactly what But I'm saying it because it puts the adults in the room in charge.

1:03:58And as much as we have someone doing this thing, and you've talked about the price of money before, Ram. I don't know what your view is on using tax for the same thing because at some point it's either let the economy do its thing or automatic stabilizers work. And we'll have that conversation another day. But I think I would give the RBA the capacity to flex superannuation contributions plus or minus X percent, whatever that is, around a given number. So we don't want to go to zero. We don't want to go to 40%. But if we're saying, hey, we want the average person to put away 12 % of their income in super, if that was up to 15 % in really, really boom times and down to 9 % or 10 % in tough times to put a bit more money back in the economy, as long as it kind of averaged about that 12%, I think we could absolutely justify something like that.

1:04:41And maybe the RBA is the only one who could actually get away with it. Yeah. I'm hesitant here because I want to say something really badly, but I know I've got to anger. no I'm not no gosh that's too deep don't bag the boomers no well don't have a go at the university students we had a we had some friends around for dinner the other night and and I classed them and I'm pretty sure they don't listen to the pod god I hope they don't listen to the pod don't do this don't do it don't do it I feel as though that they were representative of a lot of a lot of conversations I've sort of had which is yeah right bloody RBA and this and that and I've had to, my bills have gone up and this.

1:05:24And I get the pain. I'm a renter, man. I get the pain because poo rolls downhill and it stops at the renting class. I also really got to fund all of this stuff. So I get it and I get that it sucks. However, I feel as though some of us lack any sense of accountability. I have sympathy some sympathy for people in this situation others I kind of just want to grab by the collar and go what were you thinking what were you bloody thinking you you leave it up to the eyeballs and then you turn around and go and said oh but he said he wasn't going to put interest rates up for three years like well even if he didn't right like the amount the mountain of debt that you were under, did you really think that you were going to meet that massive interest burden and pay off enough principal in three years such that when interest rates were going to go up at that point, that you were going to be in such a better position?

1:06:25Like, I mean, it would have been relatively better than it is today, but let's not pretend that this strategy was anything other than extraordinarily reckless. You went into the casino and you said, I'm putting it all on black. and then it's spun up on red and it's everyone's fault except for yours. Now, this is, I'll just take a deep breath and step back a little bit here. I know that sounds harsh, but it's sort of like you must in investing. I don't care whether it's property and it's property in this case because that's what everyone's land against or shares or whatever it happens to be. But you must account for the downside that IE maybe this thing won't double every seven years.

1:07:08Maybe I'll lose my job. Maybe I won't find a tenant. Maybe I won't be able to put the reins up. Maybe, you know, a sink or a door will need replacing. This is what you do as a sensible, intelligent, rational person that goes into this is that obviously you want to better your situation. Obviously, it's a smart thing to do, to think long term and make prudent investments. But if you're going to structure yourself in such a precarious and fragile manner and then things slightly go against you and then to blame everyone else. I'm not saying that the listener is doing this, but I'm not pointing them out in particular.

1:07:47But a lot of people and my friends included in this case, I just feel as like cry me a river. This is investing, right? Like no one gives – if I – again, just to give a – I think a perfectly equivalent example. Could you imagine if on this pod I said to you, oh, mate, start of 2022, I took on a$50 ,000 personal loan, I put it all in Bitcoin, and then it went down. It's really unfair. You know, someone should do something about that. And like, no, you idiot. What were you thinking? that that's you know had it gone well you know you would have taken full credit for that right and because it hasn't gone well you you won't take the blame for that you'll you'll point to everyone else and i think too many australians are in this situation i think the politicians will absolutely pandered to it because it is such a such a significant part of the voting blog because they can because they can and i i just all i will say is i look i'll come back full circle I agree.

1:08:48Fiscal policy, taxation policy should play a much, much, much greater role if we had some very serious long term adults in the room, so to speak. I absolutely agree with all of that. But we don't. And we have a very unfair system in the sense that it is all the debt holders that are responsible for fighting or bearing the bun as we fight inflation. but you can have the world as it is or how you would have it to be and if you have it the way as it is what that means is don't structure yourself in such a way that that you are going to be right on the edge or worse if if if a certain set of assumptions don't come to fruition that is that is just purely reckless and i'm and i'm hopefully i'm being a bit mean here but but i'm I want to shake a few people out of some misapparant, some, you know, faulty thinking here.

1:09:45Am I wrong? Am I wrong? Or am I too harsh? I know. Well, well, let me say this. Let me, let me say this. I'll say this to, to, to save, save a little bit of face. I actually don't blame individuals too much. I, I blame the money sucking middlemen, a-holes like i.e agents mortgage brokers bankers you know that the people who participate who propagate this because they benefit from it i mean how many times do we have to watch the big short to get the lesson here and it's sort of like the the average mom and dad who just go to see their financial planner slash accountant or go to the band they're just trying to better their situation and they're doing something that everyone is doing is massive social proof they feel as though they're being prudent and people in expensive suits who had the best education who work for a very illustrious organizations are telling you do this and then you do it i i feel as though a lot of the blame is held there so stop asking the barber if you need a haircut and and think think for yourself and and remember these people are not your friends these people are there to to profit from you and i don't think that's too conspiratorial to say i think i think it's just factual sorry man i cut you off but i just i just wanted to add that so yeah nope that's that's that that was the only point i would make man i think other than that you're absolutely spot on um i struggle to blame people you you and i uh you know there are medicos who have medical podcasts who say why would the patients do this or do that and the answer is because they don't know any better and they just trusted the people they spoke to and i think in a society like ours they shouldn't be expected to have done so much research to have learned about behavioral psychology and the long-term path to mid-interest rates and to kind of go, you know what?

1:11:28I want a house and the house costs this much and the bank said I could borrow that much and that seems reasonable and so I did it. I don't believe for a second, by the way, 95 % of people who say I borrowed the money because the RBA governor promised me rates wouldn't go up for two years. I think that is an excuse in the event. I think it's a self-preservation mechanism for almost everybody. They've convinced themselves. I think they believe it, by the way. I just don't believe it's true. Oh, and the media has fanned that view as well. Like they have really leaned into that narrative and it's just it's it's like i've got no love for central bankers as you know but it's just it's really unfair i think to lay the blame and feel low for that and and worse mate not just unfair but it also it leads to bad outcomes because people then think it's okay to blame phil low and again whether you know what's crying for phil he's got a fortune he's fine he doesn't care um but but the point is it it it makes faith in this it reduces faith in the system it makes people believe there was some there was some older alternative that could have been foreshadowed or followed uh it just make it makes a mess of the whole thing it means we're not having proper conversations yep yeah hey mates um i reckon we're pretty dumb will you come back on sunday for me i feel as i finished finished in a fiery mood um so you did i i oh punching pages back i like it i like it a lot so do so did that well there wasn't usually three people listening you've offended one of them so there's only two but that's okay uh we appreciate those two people hanging around long enough tough love we make next until we meet next sunday full on cheers The Motley Fool and people appearing in this program may have positions in the companies mentioned.

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