Is the opportunity window for investors closing? February 20, 2026

27:12So if – I heard this the other day. Again, this is – we'll see. I'll see what you think. So we have noticed the sass apocalypse. Sass apocalypse, I can't say. It's the term that's been phrased. I think you're on mute, mate. I can see your lips moving, but not talking. I am, sorry, mate. Yes, sass apocalypse, absolutely. So things started to fall there, and then they really fell, and then they really fell. Now, to patient long-term investors who have been waiting to get in on some of these companies for a long time. Like, yay, potentially. But, you know, I, and I think others, I'm not the first to make the guess that it's just like, I reckon you're just seeing a bunch of bots going, oh, it's falling, go short.

28:04Oh, it's falling more, go short. Like you're seeing these momentum traders, bots amplifying a return that otherwise might, you know. So does it mean that this leads to a far greater market efficiency? Well, if they're all kind of applying a similar-ish kind of technique, it actually probably leads to greater standard deviation, greater variance around the mean in terms of, yeah, we sort of on average still the market, still the waiting machine, not the voting machine, but the swings are just insane. Because everyone is like within a microsecond of the news being released, everyone's done that, inferred something, a trend has started and everyone's just piled onto that train unthinkingly.

28:47and they're doing such advanced things with multi-legged different strategies with derivative instruments and the rest. And it's hard to sort of find any real genuine signal in all of that, which is, again, if you're sort of coming at this with the mindset, it feels intimidating that you're up against that. I'd actually say it still leaves a bit of a gap for us that A, can think independently and B, can operate on longer timescales. And C, aren't playing that game, aren't playing that high-volume speculative short-term gain. It's unusual for you to be the optimist or maybe the pessimist here, mate.

29:22Yeah, it is. What's going on? I actually think... So I think that's right to the extent that we're talking about the current level of algorithmic trading. The argument would have been, well, Ben Graham will always have net nets because everyone else is doing something different and nets will always be there. And as long as you're focusing on that, not on the hyper-trading, you'll always have an opportunity. And eventually the trade just gets crowded. And you're right. That's a horrible phrase, but basically it's lots of buyers and therefore the price goes up. I think you're absolutely right. We're not competing with the algos at all for that part of the market.

29:53But if enough people put enough effort and technology towards other than the momentum following day trading stuff, and maybe they won't because maybe the value, maybe the money is all the hyperfrequency trading for all I know. But you won't need that many, a lot, but proportionally, that many people start thinking, what if I could try to codify, for example, to your point, Buffett's investing. if we if we could point a bot at buffett and say right he's got a public record for 65 years find the things that he would normally have liked to buy at scale and in a in a probabilistic basis not every every company but the ones that kind of match that and if enough people are doing that in that way you simply have more people chasing that stuff and i don't know i'm not making a prediction i don't i don't i don't know maybe i i just say it's a change of i don't know what's wrong with me why i'm feeling less optimistic and i'm not i'm not giving up the job and i'm happy to stay for as long as we stay but if in 5 10 20 years time we look back and go even the best non-momentum non-technical traders are now outperforming by less than they used to i will be not a single the slightest bit surprised i think that's more likely than not because you just got more power being pointed in different directions for the longest time you couldn't put that stuff in because the computers are powerful enough you could absolutely look just at the volatility of shares or whatever the algos use to trade and go okay that's a known data set it's a very it's a very small in a relative sense defined limited data set all i look at is prices and volumes and orders and whatever and i just do that and that's easy for a not a 2022 computer to do because you can do it at speed at pace it came down how close you were to the exchange that was the game you played i just think with the outbreak of llm and other ai type activity taking that i I mean, language by definition, to your point, the stuff we're doing, which is not mechanical, but it's actually about understanding the qualitative stuff.

31:47I mean, that's modern LLMs, right? Large language models, for those who don't know the acronym. The chat GPTs of the world, that's kind of what they do. It's the language, not just the numbers. They do numbers really well too. And so I'm not, I guess I'm not giving up. I'm not saying the day of the stock picker is over, but I suspect average outperformance narrows in future relative to today because you can throw more of that at it. And your point, you kind of used the member who, a strongman member who's using AI, I think that's exactly what happens. And it's the old line we've said before. I don't remember whose line originally it is, but AI won't steal your job, but someone else using AI will steal your job.

32:18And I suspect it might be that with returns, right? AI won't steal my returns, but someone else using AI and everyone else using AI, that arbitrage just gets a little bit, levels up just bit by bit by bit. And I suspect just erodes modestly too significantly the degree of outperformance I think I can expect. I hope I'm wrong. But that's my response. I mean, that's totally fair. It's a question of degree and timeframe, I suppose. Yes, kind of thing. I'm not being pretty interested in it, by the way. Yeah, yeah. But here's the really interesting thing. Let's just do a hypothetical. Okay. What I said was really interesting.

32:54This is actually worth listening to. Because, I mean, so far it's not exactly an inspiring conversation because what I'm hearing is you can't win, don't try. Right, right? Yeah, which is exactly not what I'm saying for the record, but yeah, keep going. Which is not what you're saying, but it could be easily interpreted that way. And me too, everything I've said. But does that mean that stocks all of a sudden become a really bad investment? Well, again, let's just, we'll play a hypothetical where we don't have to guess the future. We'll just assume that AI is really, really, really good at the qualitative kind of stuff, at the more subjective kind of stuff.

33:35It's thinking longer term. We've got Buffett bought 1 ,000 out there just doing it and a million copies of it and it's doing all those things. Let's do a bit of inductive thinking. What happens in that situation? Well, it's probably fair to say that the risk premium that equities attract reduces a little bit. Now, that's just a fancy way of saying that on average to convince an investor to put their money in shares as opposed to at least traditionally a bond or a property or something else. like they're more volatile, they're more risky. I need to have an expectation of a higher return to induce me to take that risk.

34:13I mean, if I can get 3 % by holding CBA shares or 3 % by just putting money in the bank, I'm going to put money in the bank every single day of the week. Why would I take the volatility and the risk and all that when it's just like it's near enough guaranteed in the bank? So you get a little bit of a risk premium there. With AI being super genius and super but brilliant and getting rid of as much uncertainty as human or not humanly, machinely impossible to get rid of. Maybe the premium that you need is less, but there's still a premium because relative to the other thing. So it's sort of like I can put it in cash.

34:53I can put it in a term deposit. I can put it in a bond. I can put it in an investment property or I can put it into shares. I've still got that menu in front of me. Maybe the long-term outperformance and the gap, because equities have always been the best returning over the long-term because of that risk premium, it's still worth doing because it's still the best-looking horse in the glue factory. And maybe it does advocate even more strongly for the broad-based index sort of passive style of investing. But if that's the option in front of you, it's like, what do you want? Do you want 3 % in a savings account or do you want 6 % through an ETF?

35:26It's like, well, I know historically I could have reasonably expected 9%, 10%, 11 % in an ETF. I would still take the 6 % because it's better than nothing. What else are you going to do?

35:39So equities have still got their use. I think it's exactly right. Don't ask the barber if you need a haircut. I'm a share guy. I think it's almost certainly the case. In fact, I would, I don't know. I think the sources of outperformance between the individual shares and the market narrows more than the risk premium goes away for shares, is my speculation. So if I'm going to forecast out, I was going to say 20 years, but man, it's probably five. How far is that? Two years, you know, is enough. So let's say 10 to give it enough time. I mean, we haven't got flying cars yet. The Jetson's promised it in the 70s.

36:19We're still waiting. So sometimes things move really quickly. Sometimes they just never happen. um i i if i was going to bet i would bet money on the combination of the risk premium shares falling modestly but very very modestly i would suspect because the asset class is still volatile and for all the reasons that i'm talking about picking stocks on mass not not stock market giving less or more money going to stocks necessarily because that would change the value right so again you could be right i'm not i'm not i disagree with you but not with any confidence. My working suspicion is the risk frame drops a little bit because investing seems less risky because the bots are doing it.

36:58And that might just be an emotional and behavioral change, actually more than a mathematical one. But I suspect the areas of outperformance when I get to find a stock at a price, either no one's looking at the company or no one wants to pay that price because my approach is different. That difference in approach, if it can be codified starts to become arbitraged away a little bit. So I suspect the risk premium drops a bit. So shares outperformance versus other assets drops a bit. But I suspect the ability to pick stocks at scale and earn a meaningful outperformance probably falls further than the risk premium falls.

37:35Oh, yes, I agree with that. That's how I expect it would kind of play out. Now, still worth buying ETFs. And frankly, still worth picking stocks until such time as you know this is not happening. That's the thing, the prediction, maybe it happens at five, is like, okay, well, I've got five years to make some money. Why would I not do that at least? And if I'm wrong about five years, then great, I get to keep doing it. So you're right, man. I'm not saying for a second, give it away. You can't do it. It's too hard. I'm saying you absolutely can do it. The evidence is very clear you can do it. The avenues to do it are narrower than I think they've been in the past.

38:01I think objectively, I think we can say that from the Ben Grahams and others. And I suspect that continues to narrow. I guess that's where my head's at. Not that stock goes away entirely necessarily or that you won't be able to beat the market for an extended period of time. just directionally I would suspect that's where it's heading yeah we'll find out man it's the future's wild yeah and it's gonna happen whether we like it or not so we're gonna have to buckle up hey um should we get to the agenda this might be a record 38 minutes in and we still haven't covered the first we've got written down yeah yeah we're good let's awkwardly segue to actually we had planned to great conversation I'm glad we talked about it hopefully that's part of what I hope our listeners enjoy this podcast there's two blokes going hey this is interesting and then just kind of following the following the string and seeing where it leads um pulling the thread yeah pulling the thread we we have a new federal liberal party leadership team and a new shadow treasurer and i don't want to get into the politics of it at all but i think it's interesting to me that we've talked a lot about some policy changes we'd make we're not going to rehash those um we've been there before We might touch on one too in the passing.

39:11We're not going to spend a lot of time on it. I am – can we change back to our usual roles? I'm going to be the hopeful optimist here. And I wrote during the week, if you're on our mailing list, you'll see this email. I was going to write an email called Dear Angus, which is basically, hey, here's what I want you to do, right? Here's some of the economic policy I think would be useful for the country. And speaking of ego and hubris, there's a lot of ego and hubris in someone going, I've got all the answers. Let me tell you what you should do, Angus. And I didn't call it Dear Angus because people would have seen it as either supporting or, you know, criticizing one part of the other, it's just so as well, whatever.

39:41But what I am really hopeful of, mate, and this is stupid because we know what the past has looked like. And so this is me just, I don't know. I don't know. I think I just need to believe it to kind of live in this world. I don't know. They've started talking about stuff that they haven't been talking about before. And so I'm just kind of hopeful that if we can get past the political spin and the, hey, here's a great talking point, we're actually going to have an economic debate for a change. You know, the last election, can you, other than pretend fights on affordability, I can't remember an economic topic that was actually even meaningfully part of the conversation.

40:16There was kind of this bipartisan, it's not an agreement because I didn't actually agree, but kind of a bipartisan approach to just ignoring the economy. I'll give you money for housing. Well, no, I'll give you money for housing. All right, thanks. I'll give you electricity subsidy. Well, I'll give you a tax cut. All right, thanks. But where's the actual economy? There was no conversation at all about the budget or the economy or anything else. And I've got to say, there's a lot of, and I guess I'm not going to be political, it's not going to be too political. Tim Wilson, God love him, is a very good communicator.

40:44And he's already started talking about hope and about small business and about entrepreneurship and about, you know, he does talk about hopefully the budget and the economy. So I'm kind of hopeful. And maybe this is pure politics. And if you're a Liberal Party supporter now, you're like, no, no, no, he's really going to do it. And if you're Labour's a supporter, you're saying, no, they won't do it. They're just talking rubbish. And again, I don't care. I'm not here for the politics. But I just, I'm kind of hopeful, mate, that we actually might have some different policies that actually allow us to eventually vote on that basis as well as other bases, but also actually have that conversation, actually have a contest of ideas in the economic sphere, which has been pretty missing for the last five or 10 years.

41:18And I suspect a large part of, you know, we've got some productivity issues and they're not just about the government at all. But I don't know. Am I stupid to hope that maybe a different, two different views give us the chance to actually have some conversations about what's good for the country? All right, fine. Yes. I'm mindful. Someone mentioned on Twitter during the week, he's like, guys, I get it. But you've got to stop crapping on the government. Not in a partisan way. It's just sort of like, it is. And I was just like, it was a real like, yeah, we've got to go to one. Me in particular, I just did a one trick pony.

41:57So I'm going to try and not play my normal role. Yes, I think it's encouraging that it's at least touted as a conversation. I just hope it's a genuine conversation. The hard part of it, I would, this is me being cynical again, but it's hard to have a proper conversation in the political sphere because at the root, in terms of economics, because economics is at root a science of scarcity, compromise and opportunity cost. That's what it is. Art rather than science? Can we say that? Yeah. Yeah, you can. I'm saying it's more an art than a science, I think. We flatter it by calling it a science. Yeah, I mean, it's not a hard science, that's for sure.

42:40At best, you could call it a soft science. and and what that what that says is that effectively is that hard decisions need to be made and that just takes a huge amount of guts because we've if you want to if you want to just acknowledge that you're implicitly saying well we're going to do some stuff some of you are going to be worse off like that's that's politically it's poison what you want is the magic pudding of where i can do this and no one's worse off and and that that it's almost a um uh it's an impossibility right and and it's it is what it is i'm not saying it's a good thing or a bad thing it's just like otherwise we'd all have a mansion made out of gold with 20 ferraris in the front we just we can't right we we can we can certainly try and make sure there's more of that stuff so we've all got a better chance of sort of getting it there.

43:35But it's these things are very, very, very difficult. And the electorate doesn't like the hard truth, you know, the brutal reality of things. So that's where I feel as though it's kind of doomed from the start to have a thorough conversation. I was mentioning actually to my wife on the weekend, it's sort of because I was having a whinge about the GST, I've got to pay for the business because that's what you do as a business, only a whinge about tax. And it was sort of like, I think these days when you ask, not everyone, but you ask most people, they go, yeah, GST, consumption tax, it was a really good idea.

44:16Do you remember how controversial that was? Do you remember how long it took to get through? Do you remember how many concessions and exceptions and everything that needed to happen on that. And that was for something that I would argue, at least if you want to take a objective, hard-nosed economic lens, it's like, oh, yeah, it's a really good move. You know, I'm not saying it was executed perfectly. I'm not saying it was set at the right, but just as a concept, it was a really, really, really good base. Yeah. Okay. And we barely got it. And I'll do one more example. Resources, rent tax or something of that.

44:53To me, it's just sort of like, who in the country is possibly against that except very, very narrow vested interests? We couldn't get that up. And so here you're saying is, well, you know, the shadow treasurer feels as though he wants to make a, like, I'll believe it when I see it. Sorry, sorry. I'm being negative again. No, I'm going to take one of those two. And at least, at least because I have to just, again, believe this to be true so I can go about my day. We got the GC actually through. We did. So I'm going to say you're absolutely right about the fear campaign and the rubbish that goes with it.

45:24But I'm going to hold it up again as you can hold it up very, very, very justified. Well, right, as some sense of actually a conviction politician with a good idea who spends the time, effort, and energy to actually make things better can, in some cases, get away with it. The resource rent's actually right. If you're listening to this and you are following me on Twitter and you're one of those people, I'm going to apologise to you in advance because I'm going to blanket your comments. I am stunned about the number of people who do the whole resources tax should be lower we shouldn't be we shouldn't be screwing these miners they're putting the capital to work how dare we actually want something reasonable for our resources I just cannot for the life of me understand a world view where it's like no no we should get rid of our commonwealth for peanuts and just let anyone who wants to have it and just they can they can privatize the benefits jobs I just mate and it's ideological right They never mention jobs.

46:18They never mention jobs. It's just like, well, they're doing the hard work. They're putting the capital in. Why should they get money for it? It's because of that bloody property. It's like someone saying, oh, I went and started your car because you weren't really driving it. I'm going to use it. I put the effort into stealing the car. You didn't put the effort into stealing the car. It was just in the driveway. I'm going to steal it, then I'm going to drive for Uber, so I'm being more productive for the economy. You're just sitting it in the garage, you selfish bugger. It is just, and again, if you're that person, and that's your ideology, knock yourself out.

46:44But there's some uber capitalists or libertarians or anarchists or whoever the hell they are. I was like, yeah, who wants to get it and do whatever they can with it. I just find that idea that there is no understanding of acceptance or value in the common wealth, literally the stuff that we collectively own. There's something we should sell for peanuts and who cares. I find that view so incredibly, I just find it bizarre. I cannot, I have my views on different policies and audiologies and I can generally say to someone, all right, I hear where you're coming from. I disagree, but I understand at least your motivation and how you come to that view.

47:16I just cannot for the life of me come to a view of, no, I might have had too much short tax already. We shouldn't increase rents because they might make less money. I just don't get it, mate. And yeah, maybe some of our best interest in - Go on. Sorry, mate. It's like a lot of things. Subtlety, there's nuance, there's elements of truth to it. I mean, you're right. Someone needs to make the investment. Someone needs to do the work. Someone needs to take the risk. And they're not going to do that unless there's an incentive at place, you know, that I need to think that the very least I can take out more than I put in in terms of my capital investment.

47:49That's perfectly reasonable. And you're not arguing against that. I just want to be clear here because people hear what they want to hear. What you're just saying is like, absolutely, we need you to do that. And we applaud you to do that. And if you're successful at doing that and you create jobs and dividends and, you know, everyone's better off, then that's fantastic. What you're saying is, is just like, we're not just going to give you your raw materials for free because we own them. So, you know, think about your own backyard. You know, let's say that someone discovers oil in your backyard.

48:17It's like, oh, Jolla just knocks on the front door. Scott, do you realize you've got 40 ,000 barrels of oil on the ground? It's like, brilliant. I'm rich. Well, no, you're not. Get it out. That's right. Yeah, exactly. Get it out. Go on. Get it out in a way that is usable. It's like, oh, how much? Okay. So you ring up a few tradies and go, hey, how much are you going to? I need a quote for an oil rig and a refinery and blah, blah, blah, blah, blah. I go, yeah, no worries, Scott. We can get those barrels out for you today. It's going to cost$14 billion. Are you up for it? So obviously. But then someone else knocks on your door and goes, I'll do it.

48:52You go, brilliant. Brilliant. Oh, thank goodness. But you don't say have at it for free or for peanuts. You say have at it, but it is ultimately my oil, whether it's trapped for me personally. If you want it, you need to make it worth my oil. And that's all you're saying here is we collectively as the Commonwealth is just like by all means do what you need to do and before anyone gets on their favorite hobby or absolutely do it in an environmentally responsible way, all of that kind of stuff, obviously. obviously well maybe it's not obvious but i i think it's i think it's very obvious um you know but but but that's all that's all you're sort of saying there you know just to try and flesh it out with an example thank you i appreciate it because that's exactly what it is and it's just it's market pricing who goes to work and says i could probably get 100 grand working for the other bloke but i'll work you 50 why oh because you're an important industry and uh you put all the work into to to growing your business and you you invest in the machines i'm going to be driving so I'll cut your deal, I'll work for half the price.

49:55No, you wouldn't do it. No, of course no one does. Of course no one does that. Why would you do it? Which shopkeeper says, well, BHP, you're doing a really good job. I'll send you petrol for half the price because I know you're working really hard and I want you to be successful and I want you to build and grow GDP and so micro-intubation has said the fuel you use for half the price, whatever the numbers are. And it's just, anyway, that's a massive tangent. I love that example though. My head explains. I do use that on what I like to call my champagne socialist friends. who, you know, this and that and capitalism's evil.

50:23It's like, you're a capitalist. You are. It's like, oh, I've known a business. But you own yourself. You own your time and you sell that in the marketplace and you rightly go out and get the highest price that you can possibly get. No one's, you know, if you want to lean into some of these ideals you're espousing, you really should stop working as, you know, the CTO for this company and go over there and work for the Salvation Army for a much lower price. You know, like, why not? You selfish bugger, you know? That's right. People are going, it's just like once you really get down to it, when you deal more in sort of general concepts as opposed to very narrow sort of definitions, we're all capitalists at the end of the day and we're all seeking to maximise our own return.

51:06And all we're trying to do is do it in a way which is cumulatively positive without any net adversity to any one party. I mean, if you can do all of that, then that's a pretty good thing to my way of thinking. Yeah. Yeah, that's exactly right. Yes. So I hope we have some different policy outcomes, but maybe we don't. Let me hope. Hey, um. Of course, can I just say on that, though? Oh, yeah. Go on. Yeah, go on. Go on. Knock me down further. Go on. Stop that last bit of hope. Blow out that last candle just so you feel better about it. Go on. Go on. There's a couple of things. So what the new Libs sort of said, you know, we're going to, we need to get the budget in order.

51:49We need to cut spending. Yeah. We need to increase defense spending. It's like, what? You know, and they both said as if they're mutually compatible and there's nowhere else that needs to suffer. So you can reduce spending and increase defense. Actually, that's perfectly logically possible. It just means massive cuts elsewhere. So again, we have this magic pudding kind of sort of thinking, which is, you know, again, it makes you hard not to be a bit cynical. The other one that gets my eye at the moment is because with the budget coming up, it's all about productivity, productivity. You've got the CEO of NAB going, oh, government needs to do something about productivity.

52:27And it's like, think that logically through. It's like, so what does productivity mean? It means we can do more with less. Ah, so we can do it cheaper. Yeah. That leads to lower prices. Yeah. But when we want higher prices, well, a little bit. You get to these impossible contradictions again. It was like, well, what we really want is we want enough productivity to bring inflation down just a little bit to offset some of the other stuff that we're doing. You know what I mean? It's kind of - I do. There are all these things that get said in isolation that kind of sound good in isolation. You put them all together and it's like, these are all largely mutually incompatible.

53:05Mostly. I would say we've had a massive boost of productivity in the 20th century where we also had massive increase in inflation. Yeah, what's the difference though? On a real basis. So the way I've, the mental model here is that inflation equals monetary expansion minus productivity is the way to think of it. Yeah, sure. So let's say there's zero monetary, let's say there's zero productivity growth. We don't get better at doing anything. and, well, inflation is just going to ultimately, over time, steady state to whatever the growth in the money supply is going to be. Or let's say that, well, let's hold the other variable steady and say there's absolutely no monetary printing, but productivity improves things 2x.

53:50Well, price is going to go down. There's an algebraic calculus that's at play here. So you're right. We have had both, but it's because the... only in things like consumer electronics and certain narrow domains, the productivity growth has been so great as to offset the vast expansion in the monetary base, you know. As long as we can walk that tightrope, I suppose it's okay. I'm not arguing the inflation angle. I'm just arguing the productivity angle. The productivity in and of itself is good for us because it simply means we have more stuff. Oh, it's great for us. That's the only point I'm making.

54:24I'm not making the inflation-linked argument. I'm just saying even if we continue to have inflation that is too high, monetary or otherwise, and you would say all inflation is monetary, but either way, the productivity benefit is beneficial to whatever the counterfactual happens to be at any level of monetary inflation. Well, think about this. It must be by definition. It must be that. Let's say, well, we've got to go back to my little formula. Let's say productivity doubles across the board. And yet when we double the money supply. But let me say productivity doesn't increase and we still double the money supply.

54:57So versus the counterfactual is what I'm saying. So whatever the money supply change is, increased productivity is better than we would otherwise have been. Yes, it is. But the argument – yes, you're right. But the argument is always put forward. And that was the core of the – I forget his name. Sorry, the NAB. Irvine was saying, with heat peak Australia, life for Australians is not going to get better unless we improve productivity. And all else being equal, he's 100 % right. Yes. All I'm saying is if we're gunning for productivity and at the same time money, printer, go brr, then it's the red queen effect.

55:38We're just running on the treadmill here. So it's sort of like you just can't have the discussion in isolation. So to what end? What is the point? The counterfactualism. I see your point. But it's not going to help. We are not better off if one washes the other, I suppose. Yeah, better than we might have otherwise been. I think, as I said, I don't think we should exclude the productivity conversation until we fix the inflation problem, otherwise we don't fix either. It's still a question of what things can we do. And again, not for a second saying you're not correct and we shouldn't have that conversation as well as.

56:13I just think to say, don't talk about productivity because money's broken. It's like, well, yeah, but also - Oh, I'm not saying that. Yeah, I'm just saying if we want to get the benefits of productivity, we've got to put it in that context. Yes. The full benefit of it. That's what we need to do. Absolutely true. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

56:37Hey, speaking of productivity, mining. Well, not really productivity, price really, speaking of inflation. There was a really fascinating article in the Australian Financial Review. And it was this week. I think it was this week. Yeah, a couple of days ago, Tuesday. And you can't do the graph justice on radio or on audio, so I'm not going to be able to. Other than to say it paints a really beautiful picture. Beautiful because lots of different colours. It's actually quite an attractive little chart. It's done by UBS, and the chart talks about the change in earnings per share forecast by sector.

57:15Okay, so the sectors of the ASX, real estate, financials, healthcare, materials, you know the story. And it aggregates them together, stacks the bars. And what we've seen really since the beginning of 2026, maybe the middle of 2025, is if you look at the chart, you've got massively growing mining profits. You've got significantly growing financials profits, so banks, insurers. And every single other sector, as far as I can tell from the charts, a little bit small, is negative. and so the article basically makes the point of the the asx x factor is mining when mining profits are down the market tends to be down when mining profits are up the market tends to be up or at least almost flat because the others are dragging it down but mine is keeping us steady um it it is a really stark chart if you if you want to if you've got an afr subscription look it up australia's x factor saves the day but for how much longer is the article uh nice clickbaity headline.

58:15But a really, really fascinating one, Matt, I just thought it was worth pointing out for a couple of reasons. I think we kind of instinctively know how big the miners and the financials are. And that really shows the story. We also know, we'll talk about commodity price in a second, that commodity prices swing and it can have massive impact on mining company profits. And combine those two together, and it's no wonder the ASX kind of gets pushed around all over the place. We think that the Australian market follows the US, and we kind of do from a a sentiment perspective and from a cost of money perspective to some degree.

58:45The flow of capital matters to some degree. We've seen the Australian dollar move around. But just purely on the impact of those earnings, it is just a phenomenal size chart. And I think that's meaningful for that. The third part, the third reason it matters, and this is kind of the key one for most of us, we spent the first half of the first half an hour talking about stock picking. If you're commercially off against the market, you've got to be really careful about the timeframe you use. I mean, the market is up really strongly recently. But what's up? Banks and miners. And that's fine if you've got them.

59:13And I'm not saying you shouldn't have them. I'm not, this is not, maybe it's a bit sour grapes, I don't own any, but I own some Fortiscue shares. But it's more the point that if you're comparing yourself against the market, understand that at different times, those prices and profits move very, very differently by sector. And so the market in short periods of time is not the best measurement for you. Now, I'm not saying you handpick other measurements that look better or look worse. Equally, I could say the argument at the end of 2024, mining profits absolutely crated and that dragged the market down.

59:42And at that point, having too much joy of, hey, I'm beating the market, I'm doing really well, also misses the points. This is not just because it's up. We're seeing it because it's up because that's when the article was written a couple of days ago. But I thought it was a really fascinating chart, but it's a really important reminder. Yes, over the long term, compare yourself to the market because these things average out. Over the short term, it can be really hard, really hard in both ways, hard to keep yourself humble. when you're winning, hard to stop the pain when you're losing. But yeah, unless your portfolio mirrors the sector breakdown of the ASX, you are going to have periods of really significant outperformance and really significant underperformance in all likelihood just because of the way that market nets out.

1:00:22Yeah, it really does tell a thousand ways. Such a cool chart. Really? I mean, in a good or bad way, just it's really illustrative. Yeah, I mean, it just jumps out at you, right? I mean, the first thing is even if you don't do the stacked bar chart and you just do the overall, like the net of all of that, it's just such a beautiful demonstration of how over time markets follow earnings. Or as you rightly said, these are earnings per share forecast. So the market's always forward looking and it's always chasing what it thinks earnings are going to do. So if everyone's convinced that earnings are going to fall, the market's going to fall.

1:00:55Everyone thinks they're going to go up beyond what they already expected. It's going to go up. And it just, to me, as a stock picker, it just reaffirms that the focus must always be on the cash flows of the business or the profits of the business. That's the anchor that says, yes, sentiment will change it. Yes, all this algorithmic stuff will change, all the stuff that we do. There's a lot of noise that sort of distorts the signal. But you step back. You know, I'm not saying step back 100 years to get the full context. You know, in this particular chart, it's three years, right? It's like, oh my gosh, the correlation is as clear as day.

1:01:31I mean, you've still got to figure out what companies are going to grow more than what has already been expected. And that's no easy task. But it shows you the North Star to follow, right, which is really keen. And then I won't repeat what you just said. And then it just makes the very obvious point. And we started off the conversation today with this is like, oh, there's a lot of mining companies on the ASX. Oh, you know, when commodity prices are going to the moon. And, oh, yes, you were going to expect higher earnings and that's probably going to do a lot of heavy lifting here. Yeah, nothing else to add?

1:02:03So then starting with resources is the other part of that story. We had BHP and Santos report this week, among others. And if you're going to be a resource, I own a small number of Fortescue shares and probably, I don't know if I checked the trade price recently, probably should sell them at some point. I wonder about... the way it's not new Investors tend to love, and you mentioned the earnings per share forecast. You mentioned share prices following earnings per share forecast, mate. You're right. The other thing is they tend to follow them at a multiple or in a leveraged way. Because when things get really optimistic, earnings per share goes up a little bit or forecasts go up a little bit, investors get excited about the future and pay even more.

1:02:45So you tend to find generally, and this is not going to be every time in every company in every sector all the time, but when there's optimism in the market about earnings, the optimism also goes to earnings, but also to the price earnings multiple. Not only are you paying a higher price for higher earnings, you're paying a higher multiple of those earnings because everything feels really good. And so you get these really leveraged swings. On the other hand, when earnings per share are down, particularly in the short term, oh my God, this is all going to hell in a handbasket. We've seen some really big falls over the past two weeks of earnings season.

1:03:14And a lot of that, or three weeks now, a lot of that has actually been modest falls in profit or simply Templar Webs is a great example. Those profits are up 20%. Oh, sorry, sales are up 20%. and the shares were like 30%. It's like when you see a meaningful change in sentiment, that kind of amplifies any change in earnings per share. So you've got this really big swing. And then you look at the miners. We saw BHP hit a record high because they delivered a 28 % increase in profit, like a really nice one. Except here's the thing. It came from a 32 % increase in the price of copper and a 4 % increase in the price of iron ore.

1:03:50Now, I don't know what happens next. No one does, which is part of the challenge of investing in resources companies. But just worth kind of pointing that out. Santos has had profit for 35%. It's going to fire 10 % of its workforce, largely because oil prices fell. And so you get this kind of idea, and I kind of say you see these numbers, and you've really got to ask yourself whether investors are actually paying attention through the rest of the year. One of the great things about miners, if you want to follow them, is they produce volume production reports during the year and you get to see the price trade in real time plus you get to see their hedging now normally they'll disclose their hedging so you kind of can do the maths a little bit in advance and kind of say okay copper's been up there's not a lot of copper okay that should be a good result i'm the only surprise is people were surprised by the bhp result and the same with santos and yet the share prices did move in a direction you kind of go guys were you even paying attention um but it's a reminder we just came on the back of that mining conversation we had of why those earnings per share numbers move around so much, why the share prices move so much, and why the market moves so much.

1:04:53And it's just on the back of those commodity prices. Notable that BHP had copper earnings and sales higher than iron ore for the first time ever, which says a lot too about the geopolitical and macro kind of environment around what copper is being used for and what the future might look like, which is probably a different conversation. But I just thought it was an interesting reminder. And again, the hubris or the pessimism, If you're miserable at Santos' earnings falling, what did you expect? If you're stoked about BHP's earnings rising, again, be happy about it, but you kind of should have expected that too.

1:05:23Just don't get carried away and remember that these things tend to fluctuate a lot. Yeah. Most quality non-resource companies' profits improve sequentially most years. Resource companies are all over the joint. For all, it's not a, well, maybe that's a good thing about it. It's not a criticism. It just is what it is because they're selling a global commodity that trades at a global price and that price tends to fluctuate a lot. remind me when you bought your fortescue's because i know you talked about it on the pod and it it actually it actually i'm using you as an example because it illustrates the point no no but in a good way like all right you're you talk i think correct me if i'm wrong but your thesis at the time i mean that had a few kind of issues price of iron ore was down everyone was freaking out.

1:06:11And your thesis was essentially like, well, pretty sure the world needs steel and iron. And at some point that's going to pick up again. And at this current price, a lot of iron ore producers just aren't viable. So you're going to find lost supply coming onto the market and actually played out really well. This is a theme that you see across all sectors of the market, but particularly in mining, it's sort of like the worst time to buy is when prices are high. That's exactly it. Because everyone else sees it, right? And not just other investors, but other miners see it and go, hey, actually, you know, all those, all that, I'm trying to think of the word, tenements that we have, that we just were not viable at lower prices or all of a sudden viable.

1:07:05Hey, let's crank them up. Let's take these operations that were mothballed and fire them back up again because now it makes sense to do it. So the cure for high – who said it? The cure for high prices is high prices, right? Yeah. And what that really means is that all of a sudden you start seeing this big supply side response. We've talked about it a ton of times, which supply and demand and everyone who's done year nine economics will get. That'll push the price down and then the cycle will continue. And so what you really want is a commodity in which you feel very confident there's going to be a long-term demand.

1:07:39The operator that you're looking to back has established operations. They've made most of their capex and they have very low cost of production. Because while their earnings are going to suck, while prices are low, they're probably still viable. They're still making money. So they're not bleeding cash. They're not eroding your equity. and as all of the marginal players fall away and their supply dries up, you know, lower prices are also the cure for lower prices, right? And then around we go. This isn't an in and out in a week kind of trade, but it's also not a 25-year cycle trade either. It's sort of like you – it's amazing how, you know, you can almost set your watch to some of these commodity cycles as well.

1:08:21Not that I've ever tried to play because there's a whole bunch of other dynamics there. But that was – well, correct me if I'm wrong. I'm painting you in a certain light here. Was that pretty much the thesis and the thinking? Yeah, that was exactly the thesis was the iron ore price was low. It was relatively close to the marginal cost of production. Fortescue, BHP and Rio as a group have very, very low costs of production. So as any supply gets washed out, these guys are likely to survive and then potentially thrive as it comes back. And just to interrupt, if they're not making money, there's no – if they're not doing it, and if they're not doing it, there is no copper.

1:08:53There is no iron ore. It's not here. yeah chopper no copper um no copper yeah so of course in this case but yes i think the um so yes you're absolutely right i also had hope which frankly has been dashed since that um some two years green stuff might actually take off was one of those some of those i was fortescue was so cheap you're effectively buying some of that potential for yeah close enough to nothing now turns out that's probably what it was worth so that's why you don't want to pay up for for blue sky right it shouldn't have backed hydrogen that was his mistake but that's another conversation And there's green steel.

1:09:23There's a whole lot of other stuff. And it's just one of those things that, you know, it was worth a go. And again, counterfactual, maybe we're in a world now where it works and you go, wow, that's amazing. It's been incredible. And all of a sudden we're off to the races and whatever. It was just a case of, okay, well, the iron ore business was cheap. They're trying some other stuff. I'm not paying anything for that other stuff because the iron ore business is so cheap I'm covering it. It's worth a go. I will slightly humble brag, just because it's funny because you asked. So I bought them for, I can't see now.

1:09:49I'm up 16.8 % since I bought them, which is a capital gain of 6.5 % and dividends of 12.2%. That was the other thing. I was paying a very nice dividend yield at the time that looked sustainable based on the current iron ore. So imagine buying an iron ore and getting two-thirds of your return from dividends. That's a heck of a thing. And I will say over that period of time, the ASX or the SPDR S &P ASX 200 ETF that is kind of Sharesight's tracker is up 8.7%. So I'm still ahead just. I had been, by the way, the shares did get to$27 and I didn't do it. $29 in 2023 while I owned them. They're now back down to$20.

1:10:24So I missed the chance to sell there. Selling is harder than buying, my friend, as we often say. They were under the market. I mentioned the humble brag. Only in June 2025, they were lagging the ASX 200. We had that conversation back then. I would have said, yeah, not only am I down, I've lost to the market over that period of time. So as we said about following the market in general, these things fluctuate wildly. Don't take too much for granted. Oh, there you go,$15.47 I paid. and they are$20.32. So there you go. That's the story. I should have sold at a higher price. I was just, you're right, not only is selling harder, mate, I don't pay enough attention to my own portfolio.

1:10:58Honestly, because Fortiscue is not one of our recommendations in the services I run. Why was I not selling at$20? I didn't expect it. It was just dumb. There was zero reason not to be selling at that price. Now, the question comes down to what price do you sell? I still don't know. Probably not, I said before, I probably should sell because the green stuff's washed out. The iron price is up 4 % year on year. Now, I've had it for longer than that. I bought them in 2021. So at some point, I've got to have another look and work out why I think it's worth owning. I will say too quickly, it's also 99 % of what I own is a recommendation of a service that we run because I think that's the right thing to do.

1:11:33Why is Fortescue not in those services? Because I thought it was risky at the time. I still think it is too risky for me to have sufficient confidence to recommend it to our members. I just look at that and go, I don't know. Maybe it goes well. Maybe it doesn't. I don't know. and I don't know with enough conviction to put other people's money into it. That's literally why it's not a recommendation because I don't know what happens next and also means that's why I'm not following it as closely. So I don't know the answer to some of those questions. I should have a look at the iron ore price, particularly after earnings, and just go, hey, what does the future look like?

1:12:00How close is it to the marginal cost of production and go from there? Yeah, yeah, it's a good thing. I may not, but I should. Yeah, but that's the point though, isn't it? The point is that's what I need to look at. What you don't want to look at is, oh, price has gone up recently, I should buy it, which is 99.9 % of investors. Yes, yes. Or the world's going to need more iron ore, even though I think it's one step in the right direction, but it's still not deep enough, right? It's like, yeah, well, yes, demand is good. We like increased demand. That helps prices. But in isolation, it's not going to tell you much.

1:12:34Demand could double and supply could triple and the price is going to fall down. And that's why mining is hard. It goes back to Mitch at BHP and Santos. I mean, I have no informed view on those company shares. specifically um i just think if you're an investor in this stuff you know the memento mori right the slave behind you saying you know you're mortal um just the roman general that comes from you know wondering what the slave references um i just don't i just think you want to be really really careful taking too much for granted enjoy your gains commiserate your losses of course you know people are human i'm not trying to steal your glory or or paper over your losses i'm just saying just remember that commodity prices are commodity prices and speaking of trying to outbid people i am i will be a little bit critical of resource investors just for a second and apologies if you're a resources investor listening i you have to have a lot of hubris to pick stocks right i get that and yes our our success or otherwise is to some degree based on our expectation of the future so that's also true but i do look at that and think who buys bhp going oh i think this time next year the iron price will be X and the copper price will be Y.

1:13:46And I've got a better chance of judging that than the rest of the entire commodities trading mechanism and the stock market. I just, I find, you know, in terms of levels of hubris, and maybe I'm just forgiving myself and criticizing others, but I really do find it, someone who can buy BHP today going, I think it's going to make more money next year because I think this is what's going to happen to all these commodity prices. I don't know, I've never been able to be confident enough in that. When I bought Fortescue, it wasn't because I thought the price was necessarily going to go up necessarily.

1:14:14It was, the downside was limited. And so I thought the risk was asymmetric, which is your favorite word. It is. But to buy BHP at a high and go, yeah, it's going to be even higher. It's like, if you've got a view on demand, I think the one's going to use more copper. Yeah, me too. What's the price going to be? Higher. Why is that? What could more people are going to use it? Yeah, what's the supply response? Oh, I don't know. Shouldn't you need to know if it's about the price then? If economics 101 means anything, does supply matter? Yeah. Do you know what it's going to be? No. all right, so tell me again why you've got that.

1:14:46I used to say to people, you've got to have a view on the commodity price. And some say, I do. So I say, okay, so now I've got to say, you have to have some sort of ability to - Informed and reasonable. Right, yes. Based on some sort of evidence rather than I just think. And again, if you're a resource investor, my apologies. And by all means, write in and tell us why we're wrong and what approach you take and what I'm missing. Because if I am missing something, I'd love to know. So I just find that the inherent need to be right in an uncertain world where everyone else's crystal ball is broken as yours is, I find that really difficult to imagine I could do successfully.

1:15:24Why don't we invest in research? Even some people say, oh, the geopolitics in the world and Trump. And it's like, man, if you could forecast the last year, let alone the next five, good luck because that's just bloody hard. Well, I would say those that are successful at it, I mean, they are successful because they just focus on the right things, right? So they, you know, maybe there's, I mean, not maybe, there's always luck in anything that all of us kind of do to a degree, right? But, you know, it's like, actually, let's talk about BHP, right? So it's going great guns. Why is it going great guns?

1:15:57Copper's going great guns. Now, they've always had a finger in the pie, the copper pie, But it was only this year that copper surpassed iron ore as the major earner. Right. And on the back of a 32 % or 3 % increase in price, it wasn't like a slow sequential. It was like, bang, big price increase, happened to do well. And here's my point. They didn't just go, you know what, copper's up. Let's get into copper. This year. They made this billion, I'm going to say 8 billion, maybe it's a little bit less than that, acquisition of Oz Minerals. back in the day, right? They did, they were Pure Play Copper and Nickel producer.

1:16:37And that was like early 2020s. And then Google helped me out here. And then there was another big one as well. So my, and full credit to the CEO, I think it was Mike Henry, right? He basically said, there's a mega trend. And it sounds pretty cool. Mega trend. What's a mega trend? It's like a trend that's big. and the mega trend here is like electrification of the world, you know? So what does that mean? Oh, it means everyone's going to need a ton of copper. So they are reaping the seeds that they sowed many, many, many years ago. And this is always the lesson of investing for me. It just comes back again and again and again.

1:17:24No company that's out there grabbing the headlines today, sales going through the roof just appeared on the scene it's that classic saying of the overnight success that was 10 years in the making bhp is gonna like any miner is gonna get lucky because commodity prices do the right thing but they they are very much they deserve a lot of credit for seeing the writing on the wall and positioning themselves and at no point did the ceo go i think copper price is going up next year like he or the year after he's like i'm looking out over decades And I have to look out over decades because this stuff is big and expensive.

1:18:03If I'm making an investment now, you know, umpteen billion dollars are going out the door today. And I hope in 10 years time, that'll be a good decision. That's the calculus that these people are making. Whereas the punter, the retail, you know, quote unquote retail punter is going, oh, share price going up. I know this iron ore price done this. I'm going to buy. And I was like, they're two, they're worlds apart. They're like universes apart there. And so the people who have long-term held BHP under that thesis of they're trying to see around the corner here, they're not trying to position for a short-term pop in commodity prices.

1:18:40They're trying to make sure that as broader trends start to sort of reveal themselves, that they're the ones who own the best, the lowest cost copper. And in hindsight, it kind of feels like you're not Nostradamus here, mate. Yeah. We're probably going to use more electricity. Yeah. We can't send it over the air yet. You know, it needs copper, you know. Ten years ago, they probably didn't forecast the data to an AI boom necessarily to the size it's been either. So even when you say credit to Mike Henry, I think you're right to some degree. I would also though say - A lot of luck though, yeah. Right?

1:19:15A truckload of luck. So maybe electric fashion doesn't advance as quickly as expected. AI doesn't become a thing or takes another 10 years until it becomes a thing. And by the way, it also assumes for all of that, that there wasn't a supply response by every other miner in the world, in which case they would have been right about the demand and still not being paid any extra because everyone did it. And so I'm not bagging Mike Henry. Look, he made the right call. He did what was under... Here's the other thing. Miner companies, you should judge them not on their results, which sounds stupid to say.

1:19:41Judge them on their operational efficiency and their execution. Because all they can control is, can I get it out of the ground? The return on invested capital is the other big one there as well. Even then, that's what relies on the price though, right? So I'm still like, you're right, But at some level, it's like, you know, can you control the return of investor capital? No, I can control the investor capital. And then wherever the price is, tells me what my return on that investor capital is. I can make an investment that even under very negative assumptions, there's still a positive return.

1:20:07Like, I'm not going to buy any copper mine. Yeah, yeah. Exactly, exactly. So, dude, he's done that very well. So, I'm not going to bag the guy. But I do think we've got to be careful of Monday morning quarterbacking a little bit across all parts of, you know, I've talked about this before. CEOs have had a good, great, it's like, oh, that CEO is great. Look at the results they've got. It's like, well, did they do something special? or were they just in the right place at the right time like everyone else was? If you're a telco executive through the 2010s, you look like a genius. And maybe they were.

1:20:32But, you know, like we all used a lot of a thing called the internet and we had lots of big cables and pipes and paid a lot for that data. And all you had to do was kind of turn up. And again, that sounds really dismissive, but I don't mean it at all that way. You got to work bloody hard. You got to be smart. You got to be lucky. All that kind of stuff's got to happen. But also, if you've got a massive tailwind at your back and you can put a bedsheet on a stick and put it on a raft, you're probably going to get somewhere really impressive, right? So it's just, as we said before, the kind of success porn of, sorry, I meant hour 23 kids, of the business success books.

1:21:07Like, this is all you've got to do. This is all I had to do. It's like, maybe. And again, same with the failures, right? It's always going to fail. No, not, you know. It's just a lot of it is circumstantial. We give too much credit. Did you make the right decision? Did you make the best decisions based on the available information? is a very boring way to assess a business and management. That's the only way you genuinely legitimately can without using the Monday morning quarterback hindsight bias and saying, of course it was going to happen because this person was obviously very smart. It just doesn't work that way in the real world.

1:21:35It doesn't. I mean, it is also true that you make your own luck, which is true in life and individually and for business as well. That's why I've mentioned before on the pod, I'm really forgiving of senior executives that make a strategic blunder. If A, it was well-reasoned and B, it was a modest bet that wasn't likely to blow the business up. I mean, you need to be taken. If everything you touch works out, you're not taking enough risk, right? And that sounds like, what? What do you mean? That is one of the truest over time of my mind. Like it just like, yes, I say it all the time. It's just sort of like, you show me an investor that hasn't made any losses.

1:22:19One, you're a liar. So I don't believe you. And two, it's just like, well, I bet your returns are really ordinary because you haven't caught the ones that deliver those really big outsized returns because they almost definitionally require you to take a little bit of extra risk. And it's like with us as investors as well. It's like there's nothing wrong with backing a company that doesn't work out. There's everything wrong with we're putting 100 % or 90 % of your money into one particular company that is pretty high risk. And so that's the same with businesses as well. It's like we think X, Y, and Z.

1:22:57We're going to position ourselves for that, but we're going to position ourselves in a way where if the bet doesn't pay off, it's not an existential one, right? And also, too, you can course correct here. These aren't point-in-time bets. I've made the bet. That's it. We can't ever do the direst cast. Like, no. It's like, we'll dip the toe in. Oh, it's not working. Okay, let's back out. Oh, it's working. Maybe let's add a little bit more. Oh, let's add a bit more resources. Actually, it's going really well. You know, like these kinds of things, I think, are just absolutely fundamental to any kind of earnings growth.

1:23:31At the beginning, there's a process here. There's a temporal component to it all. It's not just point-in-time stuff. It's because people made decisions, took actions, allowed that to ripen and mature and then reap the benefits of that. And all along the way, course correcting here and there. And it's sort of, you know, it feels impossibly long to us. Go back to pre-COVID. I mean, that just feels like 1983 at this sort of point. But it was those decisions sort of around that time that have sown the success that is here. And it's not that anything was guaranteed, but if you're going to be a long-term investor in something like BHP, You still had to have that view shared with the CEO that actually that mega trend is probably reasonable and the bets that they are making are reasonable.

1:24:14And it's been done in a conservative and level-headed kind of way. And I just, for me, it's not to be too sycophantic, the BHP CEO here as well. But I just, and maybe with commodity players, they do have to think further ahead than a lot of other companies do. but it is such a rarity these days to find a board and leadership team that is genuinely thinking long term. Yeah, because you have to. You have to, right? It's like, God, I was going to dig a hole. Come back in a decade. That's what they're doing, right? And I'm going to have a few billion dollars to do it. Oh, and it's going to cost$10 billion.

1:24:51Yeah. Exactly. I mean, it's late in the podcast. What's fascinating about that, mate, is that was normal in business up until the 90s, I'm going to say. I mean, capital light businesses that we talk about, capital light means you don't need much capital, much money to get these things going because they scale pretty quickly. You don't require massive amounts of physical equipment or machines to make it happen. And largely, there's a software business or service businesses. You opened up a Shopify account and started selling something. It was like super easy. And so I think that's kind of the...

1:25:23You said Shopify, I heard Spotify. I was thinking, saying Spotify, that'd be interesting. But yeah, no, you're right. So why do I say that? I guess I don't really know other than that was more normal than we are used to today. And on average - The financialization of everything, I would say. Yeah, which is kind of both good and bad, right? Because I'm trying to work out what I think about that. I haven't really - Bad. I'm glad that Capitalite businesses can build themselves in a way that people like and want to use and can get value from. I mean, think about YouTube as just a single example, right?

1:25:57Lots of servers, but pretty bloody Capitalite. Now I'm owned by Google, Alphabet I own shares in. Is that a benefit to signing? Yeah. I mean, probably too many cat videos, but yeah. Zero, cloud accounting. Is that better than having a shoebox full of receipts? Yeah, I mean, and I'm glad that exists and I'm glad that those things are some of the things that are improving, speaking of productivity and all those things. I mean, the growth of capital-like businesses is generally pretty good. It does make us less likely to think long-term because we don't have to. As investors, as humans, as business people, as customers, as suppliers.

1:26:30It makes it more flighty. I'm not sure that's a great thing. I think some sort of, you know, think slow, act slow is probably better than think fast, act fast in a lot of cases. It feels like, you know, move fast and break things. Was that Facebook's motto for a while? Yeah. You know, I'm not sure whether that's necessarily great, but it has its benefits. I don't really have a strong view. There's something about it I like. Yeah, if you don't take it too literally. Yeah. Yeah. Can I make one very small point, the risk of segwaying off somewhere else. But look, there's a lot of stuff that you see in the news about, so you mentioned Santos and there'll be the usual, they pay no tax and everyone will get very angry at them.

1:27:08They made this much money, they didn't pay any tax. Now, let me caveat everything with here saying, I agree, they don't pay enough tax, right? And we had the conversation earlier about, you know, resource rents and all of that. So that is all very much true. But I think too often what gets missed when people get very, very angry with that is like the reason they're not paying tax is because they're wearing these depreciation costs from that$20 billion investment that they did make 10 years ago, just to connect the dots between those two things. That's the whole point of amortization and depreciation.

1:27:39I spend all the money in year one, but then I have an asset that lasts for 20 years. It's just perfectly right and normal to spread that cost over that period to get a true, more accurate economic picture here. So revenues can be high. but actual cash profits can be different and also don't forget in the years where they make like you anyone listening if you make a capital loss you can carry that forward businesses can do the same as well so again for the sake of absolute clarity Andrew is not standing up for the love of God I am definitely not doing that and I definitely think that we need as we've said repeatedly they They don't pay enough tax.

1:28:21But in the way that things are set up, I think too often people are a little bit shallow in that critique, even though there's a very valid criticism to be made. Yeah, I think that's stupid. And I blame the tax office directly actually for this one. It's just really unnecessary other than if they want to be kind of muckraking. And by the way, hide the ATO. I love you guys. Please don't audit me. I don't have anything wrong, but just back off. You don't want to know what you're going to find, ATO. Correct, correct. That's right. I promise all the above board. I just don't want to have to deal with it.

1:28:50Yeah. No one does. They talk about the companies who pay no tax, right? Yeah, that report that comes out. And it's not the – the ATO doesn't decide these numbers, but what they do is they present income, which is actually revenue. Yes. And so they have total income and then taxable income and then tax payable, right? So if you have no – if you have total income, you don't – no one – well, if you work, you pay tax on your income. If you're a business, you pay tax on your profits. So if you sell a lot of stuff and don't do it profitably, you don't pay any tax. That's a feature, not a bug. I mean, it's kind of, you know, by the way, if that happens, you've provided a service for free because you've paid your suppliers and employees, hopefully.

1:29:30You've made no extra money out of it, so you've been a conduit for economic activity for nothing. You've got nothing out of it, right? If you're a shareholder, you hate that. If you're a customer, you're probably happy that, you know, you're getting stuff for cost. But, yeah, when they say, oh, this company got this much in total income and paid no tax, it muddies the waters. It is income in the sense of labour income, the way the tax office talks about it. So they're not wrong. But they really show up total revenue, then taxable profit, and then tax payable. And that starts to put these things in context.

1:30:00So even those companies that do, I can't remember Santos whether it made a profit or not, but it looks like it's a big company because it's got lots of taxable income. It doesn't mean it's got any profit that actually can be taxed. And so even then, even if it's not carried forward losses, is just they didn't make any money. So they don't pay any tax. It's a feature, not a bug. It's the way the system's actually designed. Yep, absolutely. And it could be designed a lot better, let's be honest. Oh, that's a hard one. And there's all the transfer pricing and Cayman Island nonsense as well. Let's be real.

1:30:30Let's be a minor. BHP having a marketing hub in Singapore that used to allegedly make all the profit and they're making money mining. They just made money marketing it out of Singapore. It's like, come on, guys. I mean... I don't even get angry at them. I don't even get angry at them. I get angry at policymakers. Like, why wouldn't they do it? I mean, it's like, oh, but it's wrong. It's like, it is, but I mean, who among us? Let he without sin cast the first rock, who are like volunteers to pay more tax than we need to, right? Who waves the deduction and says, don't worry about it, yeah. Yeah, I mean, is it wrong?

1:31:00Yeah. Is it outrageous? Yeah. Like, but we wrote the laws. Our representatives wrote the laws that allow them to, how many get angry at the people that enabled this? Like the enablers are the ones that wear the blame here, right? I 83 % agree. Okay. I think there's one thing of saying I'm allowed to deduct work-related expenses. As another saying, if I pretend I'm Scottfield's Proprietary Limited and I actually live in the Cayman Islands, there are steps taken to avoid tax by moving jurisdictions rather than taking advantage of legitimate deductions. And that's the 83%. So do I blame them for minimizing their tax?

1:31:39No. Is it kind of sleazy and dodgy and, you know, If you're pretending you're making profit somewhere, can you legally get away with it? It turns out, by the way, they had to pay a settlement at the ATO. So the answer was no, not entirely. But to me, that's kind of like, let's say it was James Hardy. It moved to the Netherlands and it moved to Ireland. It's like, you guys have just taken the thingo. That's the way I do. But they were allowed to, though. They were allowed to. Yes, but that's, if we do it just for that reason, you are trying to screw over Australia in doing so. That's the bit that, you know, am I allowed to set up a...

1:32:11Their job isn't to, they're not there. They do not exist for the benefit of all Australians. I'm going to criticise them for doing it. No, but I'm going to criticise them. Oh, sure, you are. That's the bit I'm saying 83%. You're saying you're not criticising them, you're criticising us for making the laws. I agree with that 83%. The bit I don't agree with is just the bit where it's like, all right, you guys literally screwed us over because you could. And that's okay. You can. But don't expect me to go, well, I don't expect you to do anything different. It's like, actually, you know, be reasonable corporate citizens and do the right thing.

1:32:40Yes, don't pay your, don't pay your, Take advantage of your workplace deduction by all means. Have you carry forward losses absolutely appropriately, totally. Pretending to move ahead off so you can save a couple of dollars on tax. That's just crappy. And that's the bit I'm like, it's not illegal at all. So you're right, they can do it and they're entitled to do it. Don't expect me to say, well, good on you guys. You just took advantage of the opportunities that were there for you. That's the bit that I'm like, no. Oh, I'm not going to applaud them for it. All I'm just saying is that it's rational.

1:33:05And for us to expect a moral standard from corporate actors whose very mandate is to maximize return for shareholders, it's just an unreasonable thing to hope for. I think whenever outcomes are dependent on people, because at the end of the day, it's all just people, I just think people should be more ethical and nicer. I was like, well, me too. But back in the real world, you know, even if 90 % of us are that, there's 10 % that aren't. Like, it's just, it's too much to hope for. It's too much to hope for, which is why we have laws. Yeah, that's just absolutely the answer, totally. Otherwise, we would just rely on everyone.

1:33:46We don't need laws. We don't need police because everyone's going to do the right thing. And tax is just charity. Yeah, exactly. Yeah, but obviously that's not going to happen. So, you know. I agree. Help me with my rose-coloured glasses here for a second, though. Do you reckon that... Have we become less ethical? No. I wonder about the size of... Read some history books, man. We've done some dark things as a species in the past. But as communities... Dark, dark things, man. As communities. When we were smaller suburban communities and you, the bank manager by name and that kind of stuff. Nah.

1:34:19Was there a standard of behaviour that was more likely to be upheld? I'm going to say there was. No, individual bad... I don't think you can look at history and say... There might have been... These people did the wrong thing. Go on. There might have been a different societal standard. Yes. But behind the scenes, I mean, every horrible thing you can imagine was happening 100 years ago as is happening today, right? Okay. We haven't changed. We haven't changed in 60 ,000 years, man, or longer. I mean, it's well known amongst anthropologists and,

1:34:56I forget the domain name, but, you know, You go back in the time machine, grab a baby from the year 10 ,000 BC, and they could grow up to be the world's best AI programmer, right? Like it just, there's nothing different. And so, no, I don't think, I mean, look at, oh, God, let's pick one of a million examples. Look at the Prohibition era, right? It's like, oh, drinking alcohol is bad. We need to ban us. Yeah, how'd that go? People are getting crazy drunk all the time, right? I just, you know, was it less apparent to the casual observer if you went back in time? I'm sure you wouldn't see bars and drunks all over the street and stuff was still going on.

1:35:34I don't know. I don't buy into the, you know, kids these days are any different or, you know, humans are getting worse. Look at the arc of legislative policy over the past 200 years in Australia. What do you mean? Go back to 1950 and tell me how many women are working, how many Aboriginal people are treated properly, whether homosexuality is a problem. You're not wrong. And again, we're in our usual corners of optimism and pessimism here. I think the arc of progress is generally pretty positive. Now, I'm not saying that is a justification from my point of ethical behaviour necessarily at all, by the way.

1:36:09But I don't think we should say the way we treat people in the same way we treat people today. I think there's objectively social safety nets as a general rule. Slavery is the big one. That was extremely widespread. It was just normal throughout much of human history. Yeah. Yeah, so standards, yeah, standard. So you're right, standards change. Social evidence is just, I think we are, again, I have to believe these things. I have to believe we are improving. I think things are. Well, maybe. But look, maybe that's true at the margin. I don't know. I mean, look, there's so many things happening right now around the world.

1:36:44I mean, like, dude, there's neo-Nazis out the front of state parliament. You know, it's 2026. Like, we haven't improved that much. And I guess my broader point is... Is that a danger of looking at the individual, though? There's 28 new United States at the front of the State Parliament if anything's changed. You're not wrong that they're there. I wouldn't want to use the individual to... But the potential is always there, I suppose. Yes, you're right about that. That you're absolutely right about. Yeah, we could take a turn hard left or hard right in any direction very, very, very quickly. My point was just that I am always nervous when we're just going to rely on good vibes.

1:37:22I agree with that. That's dangerous, right? And then it comes back to the corporate tax point. It's like, yeah, you're right. They're buggers. I'm not going to applaud them for doing it. I'm just not going to be surprised when they do do it, right? Like that's, you know. That's the right, yeah, yeah, yeah. And to get upset, I guess the original point was if you're going to get upset, by all means get upset, but if you're upset that they could have done better and they didn't, you're upset really at human nature here than anything else. Get upset at the things, at the people and institutions that can actually do something about it and choose not to do something about it.

1:38:00That's where the anger should be directed. Can I point our listeners to a great conversation I had? I'm no philosopher at all. Clearly, you listen to that. I know it's bloody late in the podcast. I don't know what's listening anymore, but hi, mum. Alexander Lefebvre is his name. It was in The Good Oil, and he's a philosopher. out of Uni View, South Wales. And we spoke about liberalism broadly and also a bit about morality. And it was just a real, I just, because I'm a nerd, right? And I just, The Good Oil is a great podcast. You don't talk about business investing here. The Good Oil is ostensibly about kind of businesses and investors and CEOs and other people.

1:38:37But I've kind of cast a very, very, very broad net on that one. So just like, I was someone who'd listen to our podcast who said, hey, you guys talked about liberalism. I think we were talking about democratic capitalism or something. He said, what you really talk about is liberalism. and talk to this guy. So I did. So thank you to that person if you're still listening. I will check that out. That sounds fascinating. It was a really, my questions are probably awful so maybe just read his book rather than listen to me talk about it. But it was really cool. It was just that question of, you know, what is morality as opposed to don't be surprised when they do stuff?

1:39:04And that kind of idea of what are we, what is humanity like? What is, you know, is it just, you know, survival of the fittest, don't be surprised if everyone screws you over? At one level, that's right. On the other level, it's like, well, to be human and have a consciousness that animals don't have is to accept there is a level of morality or ethics that's individual and we're not going to make other people do stuff but there is a sense of we are a different type of animal and that and that we didn't go the biology of it but that idea of there is some sort of innate morality at some level which is not just if i could screw you i will and if i get away with it there's a whole lot of society who would say well if i could murder you and put you in a shallow ditch never get caught would i do it there's no reason not to if you're not going to get caught but most of us won't because there is some sort of inherent morality that matters to us I haven't really listened to that podcast in a long time, but really cool guy.

1:39:51He's written a great book. Highly, highly recommend it. Not because I did it, just because he's a great guy to listen to. And he's a very accessible, some of the philosophers are kind of, you know, from the clouds. Super accessible. Great guy. I really love the conversation. So if you're even half interested, give it a listen. It was fun to do. I'll check it out. I don't mind a bit of philosophy. There you go. A bit of Nietzsche, you might not be surprised. What's that, Jim? Nietzsche. He's very pessimistic. Pessimistic, nihilistic philosophy. Oh, dear. It resonates. You might be shocked. Listen to Alexander before and see if he can change your mind.

1:40:24I think you might be able to. In the meantime, have a philosophical weekend. We'll talk to you on Sunday and fall on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.