Mailbag: incl. Are my advisor fees justified? January 26, 2025

28:51They tuned up my insurances, got my wife's super slightly better set up, and offered me prudent tactical advice whenever I care to contact them. With that in place, I get a few nice lunches and seminars each year, an annual update report, and some minor help in optimising concessional super contributions. However, all things considered, I don't consider the services rendered versus the fees paid to represent compelling value at this stage of my game. You may ask, why don't I just abort their services for the time being? Mark answers his own question, Ram. He says, well, it's my wife. Without being critical in any way whatsoever, she has no interest in money, finances, investing, insurance, or planning.

29:29Her amazing contributions to our marriage and our family are in almost the complete opposite areas to mine. Thank goodness, says Mark. And I think you and I know the truth of that, Ram. She barely knows who we bank with, how to log in, how many accounts and loans we have, where the money comes from, where it goes, what we're insured for, what our super is, how the credit card gets paid, how to track our investments, what wills and powers of attorney exist, or really anything to do with money, investment, finances, and estate planning. I therefore, he says, justify the ongoing relationship and fees of our financial advisor, predominantly as a safety net for her.

30:02My instructions to her, should I ever drop dead, are to simply turn up at the front door of the advisor's office in tears, ask for our advisor who has a comprehensive knowledge of and access to all of our family's financial resources. I'm confident that should that unfortunate situation ever arise, every cent of our fees will have been worth it to ensure my wife and family are well taken care of. So to my question, says Mark, is this approach to justifying the value of ongoing financial advice wise? And two, how else might one go about mitigating risks when financial proficiency between two partners is so imbalanced?

30:36Keep up your brilliant podcasts. Regards, Mark. That's a very, very, very good question. I've not heard the financial advice value equation expressed that way before, mate. I'll let you go first. What do you reckon? Is that a reasonable way to make sure that the family I looked after should Mark meet an untimely demise or is he wasting money? No, not at all. I mean, Mark's answered it. Like, that's the value. There's a non-financial peace of mind feeling of security. There's nothing more valuable, really, not many things more valuable than a feeling of security. And that's important for everyone, and it's clearly important for your wife, Mark.

31:16So, yeah. I'm the last person in the world to tell you not to do that.

31:24How you might go about changing it if you weren't thrilled with the value proposition is education. which is really the answer to a lot of challenges in life, really. Oh, it was Bitcoin. And I just – well, same thing. Educate yourself. Touche. Keep going. Keep going.

31:47In the sense that I think anyone who's not had a natural interest in this stuff or invested any time in learning about it, it is – you've got to put yourself outside of your own head. Other people – and I know this for a brutal experience. most people find it as boring as the proverbial right and just just not that interested and so they've never looked into it and there's no harm no fail i know very little about uh cross stitch you know i know very little of a whole bunch of things i'm not interested is that right or wrong no it's just relative to my interests and the time i've invested in learning about so i just haven't right so but but i'm saying if i did want to remedy the situation the only way would would be to and i'm not i'm not saying it in a um a critical way at all but or a condescending way yeah go for it yeah no but i mean to you what like oh you need to educate your wife it sounds so patriarchal you know i i mean i would say it if the genders were reversed here it's like whoever the interested party is yeah regardless of their sex needs to educate the other is the sort of the say hey and let me tell you my wife educates me on a number of things very often and I'm grateful for it.

33:00So I just want to really make that point. But it is, I think that as with anything, something that feels very intimidating and scary becomes less so the more you know about it. As you know and everyone knows, we moved to a more rural setting about a year ago and there's snakes everywhere. And I've educated myself. I've watched a lot of YouTube rabbit holes, watched a lot of snakes. And you know what? I'm just less scared of them now. I know that's a bit of an out left field kind of example, but I think people who are rightly, let me say this, understandably scared of shares and managing finances are only scared because they don't know enough about it.

33:41Once you've taken the journey, it's like, oh, it's not that scary, right? Once you start to understand, and the more you understand it, it don't only becomes less scary, it becomes an imperative. It goes from, gosh, I should, oh, it's really scary. Oh, it's not that bad. Oh my God, why would I buy anything else? You know, you go on that sort of arc there. And I'm sure that would be the exact same for your wife. So, and you might sort of say, listen, this is how things are structured. I've left it this way because I don't want you to have to worry about it. But by the way, if you're interested, and maybe you're not, but if you are interested, I'm happy to sort of walk you through some of the thinking, some of the approaches and explain to you why it's not that risky, blah, blah, blah, blah, blah, blah.

34:21and if she takes that journey with you and comes out the other end, then you've just saved. Everyone wins, right? She's got the security and peace of mind and you've got the security and peace of mind of not paying someone that you're not entirely happy with themselves or see great value for money. Or it may come out as a consequence of that conversation that she goes, yeah, I just know myself. I know I'm never going to be interested in it and I just, you know, they might not be the perfect optimal solution, but it's an easy solution. You know, I can do my tax, but I don't. Yeah, that's the same.

34:55Exactly right. I probably should. Yep, 100%. I probably should, right? Yep. I just can't be bothered. And am I right? Am I right? Well, in my context, I'm 100 % right. And your partner would be 100 % right too if that was the conclusion that she happened to reach. So I would just have the conversation and see where she lands. I think I agree completely, Ram. I have as you've been talking I've been thinking about what you're saying and kind of trying to reshuffle my thoughts on this one I your last comment is the right one right what's right for you and what's right for your wife Mark and we can't tell you what you should do obviously we can't give advice but the first question would be to your wife is we're paying this much money is that worth it to you so you don't have to worry about it the answer is yes thank God please keep doing it then you've answered your own question not even your question you let your wife answer the question that you're trying to answer for yourself, which is probably, and again, you know this, but that's probably the, rather than asking us, I'd ask her, you know, is this worthwhile?

35:54Or would you like me to talk you through what we're doing while we're doing it so you've got the information? There is a famous, rather famous article written by one of our US colleagues, Robert Brokamp. And it's literally entitled A Letter From Your Dead Husband. And it's a story of a US Motley Fool member who had literally, and I recommend this to everybody, even Mark with you, with your financial advisor doing their thing. It's obviously a provocative title, but it's literally what this member had called this letter. It's literally a letter for your dead husband. It's one of those, if I'm dead, you're reading this, here's what you need to know about our finances.

36:28Here is where everything is, bank account details, loans, all that kind of stuff. Because even if the – well, firstly, we can never assume everyone's on the level. So your wife would at least be prepared to ask the right questions and to reasonably interrogate the answers given. and I don't want to scare anyone about their financial advisors. 99.9999 % of them are wonderful people. Even those who charge too much, they're still on the level and trying to help you even if they're getting a lot of fees. They'll be the occasional one. How many celebrity managers have run off with the money? I would want my wife to at least know a bit about that so she had the right questions to ask and the right list of things to do.

37:04And by the way, it includes things like, I'm not going to say write down pin numbers because the banks will yell at me, but it's access to things that otherwise might not be obviously available through. it might be you know electricity bills and account details and whatever else it is this this letter from your dad husband idea was just a kind of you know these are this is what you will need to know if i'm not here and your financial advisor will take care of a chunk of that i'm not saying i'm not forming a view i said ask your wife mark but um additionally to whatever she says something like that letter from your dad husband i think is vital so that if anything does happen it's easy to solve um that that would be my my first my first thought my second thought i suppose is um

37:44I want to say man's not a plan, which is too trite and whatever. But I think, you know, I do think that while people should only bother with the things that are genuinely worth it to them, you know, I would like to think that two partners in any relationship, and frankly, they can be, you know, same-sex relationships for all that care. So it does not, not male or female or vice versa. Just know enough about their own finances to be prepared and understand what's going on and make their own choices. And frankly, my wife and I are similar to yours, Mark, not to the same degree, but I do most of the financial admin in our house because it's just my thing, right?

38:19Because what I do for a quid. So why wouldn't I? And my wife doesn't have to worry about it. That's fine. But she also knows exactly where everything is and what's there and why it matters. And she's on board. Right, exactly. She's on board. Exactly. And that's important. I've talked about my mother-in-law super a dozen times, but I've chosen some shares for her to generate some income for her in retirement. I've told her what to do if I fall off the perch because there's, you know, 19, 20 individual companies there with, she's not going to want to deal with that after I go. So here's what you should do at that point is my suggestion, my advice.

38:52You know, you'll need some help to do it but someone can help her do the thing and then it's done. She'll change the approach. She'll still get some income but won't have to choose the socks herself because she just doesn't want to and that's, you know, obviously reasonable for her. So that's kind of, I think that that's probably all I've got to add to what you said around. I think you've covered it beautifully but Marco, yeah, I would encourage your wife to be more involved because it's important for her personally. I don't think it's a good idea in any relationship for one of the partners not to know at least the basics about the finances.

39:21I think it's useful. But it doesn't need to take a daily interest in it. That's what I do with my wife. Here's what we're doing. Here's all the money. Every now and then I say, here's what we've got. Here's this portfolio, that insurance, that whatever. Here's how we're doing. Okay, cool. Thanks. Good to know. Off she goes and doesn't worry about it until I mention it again. so that you know I would knowledge is power I would encourage that education I think is useful in the same vein as you said Ram that's probably all I've got I'm chuckling because my wife gets worried when I don't talk about it because is Bitcoin down again honey because when things are going well it's like honey check this out you know and then it's like oh and then hey you haven't mentioned that for a while I don't worry about it can i say i actually i don't do that i haven't for exactly that reason but in reverse i have a better risk tolerance yes or high risk tolerance my wife and so if i if i'd say here's the good stuff then i kind of feel obliged to say hey here's the bad stuff so i don't do either not to keep it in the dark just not to make a point of it it's a bit like checking your portfolio right if you if you enjoy the wins the problem with enjoying the wins is it conditions you to check more often and then you have the pain of the losers if you condition yourself not to celebrate the wins too much, you kind of then don't worry too much about the losers, at least that's my take.

40:38Yeah. And even before the depressing death angle sort of comes into it, I still – my wife, she's interested in other things, right? So she's never going to take one of my small cap holdings and read the annual report. And if I was to sort of walk her through every aspect of what I'm thinking, it's just not going to be interesting to her in any way, shape or form. she's certainly not going to take the ball and run with it afterwards. But she gets the big picture. And the big picture is just like, you know, sweetheart, this is a very good asset class. This is what history sort of shows us. Worst case scenario, when it all goes, chuck it all into an index fund and just get on with your life.

41:20It's like, oh, I can handle that. And it's going to be super. But she and I have together walked through many cycles. So she's actually really great. there's been a few moments with friends and family where someone's asked something and she's answered before I have. And it's like, oh. It's all right right there, right? I doubt it's not home syndrome. No one's really sure. One of the two, one of the two. Hey, can I add a coda to this story? Subsequently to that article being written, the man who wrote the story, the letter to the husband actually did pass away, not Robert Brokamp, but the member.

41:57And his wife actually wrote in and said how valuable she found it, how useful it was and just wanted to actually basically encourage people who'd seen the first article, hadn't even seen the first article, that not only was it a good idea in theory, but that memory did actually pass away and she was able to take that letter and use it for exactly the intent that he had intended, so the reason he intended. So one of those good stories, but also, I mean, obviously horrible that the husband died, but an idea that's good in theory is not as good as an idea that's good in practice. and I just wanted to mention that it was something that she found really, really useful, obviously, in her grief and everything else, but not having to worry about that.

42:35Her point was I didn't have to worry about that stuff because I knew it was done. That's the other thing. Mark, I can't criticise you, mate. If you find it valuable, it gives you peace of mind, it gives your wife peace of mind, it's cheap. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

42:55This is one we got from Bernard, which I just absolutely love, mate. It's a bit about The Motley Fool and a bit about the podcast. So apologies for me, a bit self-indulgent about The Motley Fool. But Bernard wrote and said, Hi, Scott. I've been meaning to write this thank you email for a while now. So a big thank you for the work you and Andrew do on the pod machine and for the work you do at TMF Motley Fool. As a very happy member of Motley Fool Share Advisor in Australia and Epic in America, I can't express enough thanks to The Motley Fool as I've become smarter and, yes, richer, thanks directly to your services and podcasts.

43:26Six years ago, I invested a gift I was given. Two years of my modest social services salary, which was just a little over$100 ,000. I'm not a finance person. No one in my family is. No one owned stocks or had any idea about stocks in my family. And yet I could see that earning a living in social services was not going to give me a financially secure life. Yet I could see the returns available to people investing in companies through the stock market. Before investing the money I was given, I read many books for a year and finally picked my own stocks and went for a typical 60 % stocks, 40 % bonds portfolio.

44:01It didn't go well, says Bernard. During that first year in the market, I started listening to and reading Motley Fool content and your podcast. It was during that year when Motley Fool picks were rising and my portfolio was flatlining that I figured there was a better or different way to invest. I bit the bullet in 2019 and I'm grateful I have. I'm now up well over 130 % since 2019 and even if I can manage to continue to meet my 10 to 12 % per annum target return rate, I'll have a better retirement than if I just left my money in a vanilla industry fund. What have you done for me specifically?

44:34In 2021, I wrote to you mentioning that my superannuation, which was in a wrap fund, dropped 50 % from the time that I rolled it into the service. You and Ram answered my questions and you signed off with a hang in there. I kept hearing your voice in my head and I still do. As it turns out, I have hung in there. And now finally, that portfolio is 30 % back in black. It was hard to see half of my life's super savings disappear during the last bear market. And while I experienced other downturns, including the COVID crash, the slow grinding erosion of the super portfolio and my pessimistic projections about my future super account hurt.

45:11As you often mention, and I paraphrase here, investing seems to go against our biological predispositions towards the here and now and instant gratification. I'm older than you, not by much, so you don't have to be envious. And I started late in my life, but I'm glad I have, as I aim to continue to stay invested for the rest of my life. I'm really grateful how you and Rand call out the industry crooks and do so with logic and honesty. You have both introduced me to ideas I never would have explored and ways of seeing and understanding the finance world and the economy and society that I had no clue about.

45:43Fingers crossed that overall return and in the long run, sorry fingers crossed that overall in the long run the market continues to go up and we all prosper i'm also very grateful you especially talk about inequality i find it is not something finance people generally talk about so many people are doing badly and a sliver have never had it better i'm glad you can talk about that but also stay level-headed and sensible that capitalism can work but that crony capitalism hurts most people in a society so keep up the great work he finishes with this, Ram, you'll like this. He says, I know Ram would not be the same person without your twice-weekly therapy sessions, and I know my weeks and my investing and therefore my family's financial future would not be the same either.

46:25Long may you both live with good health, wealth, and happiness. Kind regards, Bernard. Hi, thanks, Bernard. That's awesome. It's pretty good, isn't it? I really appreciate that, Bernard. It was very, very kind of you to say. Look, obviously, you know, so I'm able to read out praiseworthy emails all day, But I wanted to read that one out, A, because it was kind of burned to right. B, I think the lesson in the middle of that was kind of what really grabbed me. And, you know, you and I have talked a lot about why we do the podcast and largely it's just to hear ourselves talk. But other than that, for the small business left over, it genuinely is to try and help people kind of stay the course.

47:00And, you know, we'd all like to be Warren Buffett. But for me personally, and I'm sure for you, mate, if we can help our listeners just do a little bit better, just hang in there a bit more, commit a bit more money to the market, feel a little bit more confident, have a little bit more support when things go rough. It's kind of what it's about, right? I mean, you and I could earn a lot more money helping family offices of billionaires make a little tiny bit more money. Percentage-wise, you'd be a lot more cash. But for me, at least, the satisfaction, the value is in helping people actually kind of take control of their finances and be prepared to stay the course and invest well on the process.

47:35Yeah, I agree with that. And I guess it's good to be, I'll speak for myself here, a role model in the sense that you can look at someone who's not very intelligent and who can still make a go of it investment-wise. If I can do it, you can do it, right? If these two Muppets can make a dollar. Exactly. Exactly. That idiot? Let me just put some context here as well. I am not trying to hint in any way, shape or form that I'm knocking it out of the park here. But that's the point though, right? It's sort of like, it's just so, it's almost too simple to be true. It's just, you know, spend less than what you earn, invest it sensibly, be patient, don't get scared off by volatility.

48:24I mean, I can't ever, for legal reasons, say, I guarantee you will do well if you do that. But I will make a statement that is as close to that statement as I can without saying those words. Because – and nothing is guaranteed. But it is as close as you can get to it. And it's just like I can't tell you the number of times I've met people who, if we were to do an IQ test, would have an extra 50 points than me. Who are just the worst investors in the world, right? And it's just – and then you see – you come across people who are just like, holy moly, you've just crushed it. and they're just, they've got a good temperament and they've got extreme patience and they're just sensible with their finances.

49:08It's like, okay, tick, tick, tick. Anyone can do that. Right. Anyone can do it, right? And do really well. Really well doesn't mean investing better than Buffett. It means compounding at a decent rate for a long enough period of time to amass a large enough nest egg to make it worthwhile. It's not a race. You don't have to be first. everyone in the race wins right and being 5th or 500th or frankly 5 millionth in the race is still a fantastic result if you're the 5 millionth highest investment return over the next 40 years you'll be very very very happy with that result yeah absolutely keep up the great work that's brilliant I'm so grateful for that letter it warms the heart I thought so too So I did share that internally with some of the team.

49:56And it feels a bit self-indulgent, but it was more that lesson in the middle of just Bernard's – a lived experience is a bit of a cliche these days. But just that, you know, Bernard is proof of what happens going through some of those. And so for people who haven't been through those downturns yet, we can't promise the returns will always be the same. But that's kind of hopefully our advice. And actually here's one I prepared earlier. Might hopefully just share with a few people that haven't been through it. Just some of the real world examples of what can happen if you do stay the course. Yep.

50:25Mike, Rod sent us an email with a question that we've actually answered before a long time ago. In fact, we didn't even answer it. It was proposed to us, which I'm ashamed to say, not because I expect to have all the answers, but I had not thought of and I love that I've repeated a million times since. And Rod's asking the same question. So listeners will know the answer, but I like where he finishes this. So he says, G'day, Scott and Ram. I really enjoy the rants of the pod machine. Thank you, Rod. My question is about interest rates. I know the idea of raising interest rates to curtail higher inflation and take money out of the system.

50:53I know the government normally don't help, and that usually makes it worse. Yes, we've certainly seen that. My question is, could the government make people put extra money in super, for example, to take money out of the system or temporarily increase income tax while inflation is high and maybe pay down government debt instead of just wiping their hands and leaving it to the Reserve Bank? I'm interested in your thoughts on what more government can do in these situations. That was the bit that I quite like. We have talked a little bit about super, and that's the bit a listener wrote in and said what about that and I went oh my god that's brilliant and I've repeated that a million times unfortunately with that attribution because I can't remember who said it but we did talk about it on the pod I think using super as a balancing item on top of rates instead of but on top of rates a really really smart thing to do maybe you might say instead of RAM given the concern you have about central banks but I think that's a really really smart way if you're going to and again you may or may not reject the premise of the question but if a government instrumentality is going to have some input into trying to curb economic circumstances.

51:56Using super rather than tinkering with both the price of money and the supply of money and the amount of money, which I know is a passion of yours, Ram. I think it's a much, much, much better. I would do it as well as. You might do it on top of it, maybe not at all. But I really, really like that. Increasing income tax is absolutely one of them, Rod. Politically impossible, but absolutely smart. The benefit of that is you get to target which brackets and by how much and make sure you are kind of having the right impact in the right areas. So I would do, again, if I didn't have to stand for re-election, I would do both of those things.

52:26Ram, your thoughts on using super or tax for that? We can get into other ideas after that. Oh, gosh. Yes. Lots of thoughts. The challenge here is to be concise. Just don't mention Bitcoin and we'll halve the amount of time that the answer takes. I won't. I won't. But it's not – I'm not against – the sentiment I agree with, it's the execution that i have the trouble with so could the government do that yeah they could can the government be relied on to do the right thing all the time and a government right rather than the government just so we're clear so any any government of any stripe with any any prime minister yep yes absolutely this is why you've got to be very careful with certain laws that are passed it's got nothing to do with finance it's like i mean i was a little bit uncomfortable with some of the stuff that came through after 9-11 it's just like not because i'm in support lot of terrorists but it's like well in 20 years time when this is more or less ancient history and there's like some crook in charge you know it's just like they might abuse that so so i this is where i have the problem with mmt modern monetary theory because i actually think okay that's a very deep rabbit hole but i think there's a lot of merit to it intellectually yes exactly but i think it's i think it's a disaster though because it relies on someone correct doing the right thing and also the tldr here is is that what modern monetary theorists say don't worry about the amount of money in fact when things are really bad print money like crazy and put it out in the economy and when things are really great take it out by increasing taxes yeah and if you can be someone who can see all every aspect of the economy and know where it's going and put it in at the right place and take it out at the right place at the right time in all circumstances then yes i agree with you it's not really if you think that it's the discipline to do so because they're politicians well it's also the foresight like you've got it you've got to be across every good and service and supply and demand demand dynamic in the economy and you need to be able to trust it it's just it's it's kind of it's not the perfect comparison but it's a bit like communism it's like well in theory that could work really really well if you had some super ethical agi that can run it all.

54:40It's probably a good system, but it just, it never works. Why doesn't it work? Because the answer is, in one word, humans. That's why it doesn't work. And so, and so, and that's why, it's also why I have a problem with central banks. It's like, I don't think they're evil. I don't think there's anyone at the RVA there who's part of an evil cabal, but they're humans. They're flawed. All is it people? They don't know what's going on. All is it people? And they've got a tiny, tiny handful of tools. And it's an impossible task to expect that they can be across everything and time everything and do it.

55:15They just can't do it. So I like systems, you know, like any kind of system that minimizes the human element to it. And that might be whether I'm talking about the flight controls on a modern airplane or those controlling an economy. Like just minimize it, right? Because someone somewhere at some time will do the wrong thing. We're seeing it play out in real time right now with super. When here we are talking about the common sense of using that as a tool to take some heat out of the economy, what's the government doing? They're not putting extra money in. They're taking money out and letting people take money out to invest in nonproductive assets and overheat certain asset classes that are already arguably overheated.

56:00So that's the case in point right there. And the purists would say, oh, yeah, but they shouldn't do that. I agree, but they are, and they will continue to do so. And this is in Australia, which is actually one of the more robust institutional frameworks on planet Earth, let alone what's happening in Turkey or Egypt or Lebanon or Brazil or, you know, there are 160 sovereign nations that are out there. And when you do a survey and census of them all, it is a litany of disaster and ineptitude and corruption. and it's not me as an Australian in a first world country sort of you know having some sense of exceptionalism it's just it's just human nature right and and so I does this make sense I I really do agree with the sentiment but I just I just I think the practicalities make it very very very hard and that is why something like Bitcoin which is no human element to it right That is actually the perfect system because it doesn't have any human element to it.

57:06Yeah. I mean, you and I disagree on the role of central banks, and I don't want to get back into the debate on that. Feel free to listen to other pods we've done about that sort of stuff. You pick a random pod from the last two years, and you'll find a rant on it. Pretty much. Pretty much. Or at least, yeah, go through three or four of them. You'll absolutely hit at least one. Yeah. So I will. And that's Ram's, I reject the premise of your question, which is completely justified. If we are, however, going to metal, I didn't usually word metal, but, you know, that sense. Metal's the exact right word.

57:36But if we're going to do it, then interest rates are a horribly blunt tool. Even if they were used correctly, as in if the RBI knew exactly what, when, and how much to change rates, the impact it would have is on a very specific group of people. That's generally borrowers, and generally borrowers of the last five or seven years before, the increase is done because if you borrowed 23 years ago, you still got a mortgage, but it's tiny in terms of the amount you got to pay off and you pay a lot less for the house. So even if we say one third of borrowers of that third, probably a third again, so we're talking less than 10%, are genuinely impacted by it.

58:16And so they're the ones that are going to have the most impact in terms of the changes in their spending behaviours, right? Because they simply can't afford to pay the mortgage without doing something. If you sell a house, I don't know, for$100 ,000 30 years ago, and their repayments are$300 a month and they're earning$100 ,000 a year, they're not probably going to change. Even if it goes to$300 to$500, they're not going to change much, right? Whereas if you bought a house last year for$1.3 million and you're both working and you already were paying 48 % of your income as rates go up, so you're the ones who are absolutely getting skewered by it.

58:48And I think that's where, I don't blame the RBA for using rates because that's what they've got. The government has the levers and tools and the mandate, by the way, they've been given. The government's got levers and tools and choices I say regularly, you know, the IBS flying a biplane, it's up, down or sideways. That's all they've got. That's the choice, right, of one lever. They've got kind of money, pretty much, you've got to add to that a little bit. But realistically, that's it. Government can do whatever they want, wherever they want, whenever they want, to whatever degree they want, with almost complete, you know, carte blanche inside the allowances of the constitution.

59:18So, yes, I would absolutely use... There are three tools you can use to varying degrees, or there are more. But the big ones are superannuation contributions, which is where I would start, Rod. And I would have done that over the last few years and I would keep doing it now. By the way, you can also have people put less money in if you're going to use it when the economy needs support to put demand back into the economy. So you can use it counter-cyclically. That would be exactly what I would do. I would do it tomorrow under the model of meddling. I would absolutely do that, yes. You can use GST similarly, increase the GST to 11 % or 12%, decrease to 8 % or 9%.

59:55and you can use income tax rates, brackets, rates. You can apply it by income level, which is kind of fairer, right? Because if you've got massive inflation, whacking low-income earners with more cost through GST or super contributions or income tax would be pretty rugged. Juno and Twiggy can probably afford to put more in the kick when times are tougher. So I would use the progressive nature of those income tax scales to choose where and by how much I made an impact. And again, you can do the reverse as soon as the, you know, when we need stimulus, you do the same. So those are absolutely tools we can and should be using.

1:00:29There's a whole lot more to rod on inflation. Governments who are all investing in infrastructure projects, the timing and size and start of those can be absolutely managed, moved around. There are ways of increasing and decreasing transfer payments, timings of those. So think about welfare. Think about, again, taxes, the other side of that, same side, the other side of the same coin. There's a heap of different options, mate. They can increase corporate tax rates. They could increase resource royalties and levies. There's a million things you could do. So, yeah, there are heaps that should be going on.

1:01:04Well, that's right, right? Good, but won't. Right. If you're designing the system and you knew that, and to Ram's point, the issue is always, I'm just more idealistic than Ram. He's more pessimistic than me. I still believe in a better way and designing something that people could hopefully follow and try and make things better rather than giving up and saying, i think i score but anyway let's not bother uh but but the realistic part of me kind of looks at it goes i see where you're coming from yeah i can understand why you might think or say that that makes that makes perfect sense to me um uh yeah i'm a better angels of our nature kind of guy uh i'm a pollyanna from way back as everyone knows by now so yeah i would i think using interest rates is is perfectly the rba is doing exactly what they are tasked to do given the mandate and the tools um that doesn't mean they're the only mandate the only tools that should be brought to bear by a government or alternative government agency i'd give the i'd frankly give the rba those tools myself rather than rather than with the treasurer of the day you say the rba right you got rates and superannuation contributions and gst and whatever else you want to add use those use those combination around a central point so you want the gst to be 10 over time so 11 sometimes 9 other times you want superannuation contributions to be eventually 12 but sometimes it might be 13 and a half and sometimes it might be 10 um it's never gonna be perfect but you you task them to cycle around that average um so you just you're adding and reducing demand around a central point it's it's the and by the way this is exactly what the federal budget is supposed to do so just quick tangent ram we'll come back to it um the best thing the government could actually do more than any of those things is run a structurally balanced budget and the reason for that is that when if structurally balanced means it's balanced across the cycle you spend more when or sorry you run a deficit when things are crook why not because of any it's an automatic stabilizer right so not because of any actual choice when things are crook the tax take goes down because fewer people are working and businesses are making less money welfare payments go up because more people are unemployed and they get more welfare payments and you run a deficit because the lower revenue and higher costs just result in that in the good times you run a surplus budget again you don't do anything differently but tax take goes up unemployment payments go down it's a i mean there's other other payments and revenues but that's you as a model.

1:03:11So what happens? You run a surplus because you collect a whole lot more tax. You're paying a bugger on unemployment benefits. And what does that do? It actually takes money out of the economy. That surplus is money that isn't spent because it's being banked by the government. The deficit is being spent and not banked, taken back out of the bank. It's wheat in the silo. When there's good harvest, you put more wheat aside. When there's bad harvest, you eat some of the wheat in the silo. It's old as agriculture itself, right? We know what happens. We know how to do this. And that would require no action at all.

1:03:37that the automatic stabilisers would be stimulatory and contractionary just by the working of the budget. The fact that governments don't and won't do that, and to your point, Ram, this is the will they should they do. They never do. Right. This is the point. Like, point to me one nation state that has done what you're saying. Exactly. Oh, wait, right? Like, there's none. I'm not being negative for the sake of it. It's just like the historical example is crystal clear. Correct. The benefit of the automatic stabilisers is it doesn't require a government of the day to do things to you know no government's going to say everybody i'm putting your taxes up yeah you're welcome or you know everyone you got less money in super yeah i know but you're welcome what they do say is that awful lady at the rba she put your rates up and i feel very sorry for you and i wouldn't have done it if i was and she's done it she's the bad thing we're helping you which is what they do now right which is to your point ram if if there was a again will i ever have a structural budget balance probably not for the reasons you've talked about where it's easier than what I'm talking about.

1:04:36It requires no deliberate action at that point where you can point to a treasurer of the day and say, they did this to me, the collections go up or down. Their welfare payments go up or down. And that automatic nature of it is the beauty of doing it. What they have to commit to, which is your point, is actually having a structurally balanced budget in the first place. Treasurer of Chalmers has delivered two straight surpluses, which is good. Those surpluses should have been literally 20 or 30 times the size of what they were. We were banking$2 and$5 billion. We should have been banking$70 to probably$150 billion.

1:05:11Why? Because taxes were through the roof. Iron ore prices were up. Bracket creep was up. Welfare payments. We haven't had this unemployment this low for 50 years. We should have been absolutely rolling in surplus dough. And just to your point, what would have happened then? That money would have come out of the economy. But because we're not running a balanced budget, the money doesn't come out of the economy it stays in the economy and keeps stimulating at a time when it should not be uh and and reverses the reverse is true in the in the really bad times we have even bigger bigger deficits but we never pay them back and that's we kind of started to about debt deficit this week on on friday ram and we kind of end up in the same spot which is those are related topics a bit of responsibility in politics wouldn't hurt coincidentally this morning i was reading something um from ray dalio who's the founder of Bridgewater is the biggest bond manager in the world.

1:06:00They're a giant. And he's written a bunch of books. But most recently, he's done a very detailed survey of sovereign debt crisis and failures and stuff and goes over 130 years. Very comprehensive. That's cool. Yeah. Again, the short version is it's like it never works out well. Maybe this time it's different, maybe, but it never has. And I think the problem starts, It's not that there's not good intention and there's not interesting intellectual decisions. It's the very starting presumption that the economy is something that can and should be managed. That's my problem with it. And to give an analogy or a metaphor here, it's like the referee, the government who represents us should be there to ensure a nice, even playing field where the rules are clear and everyone is made to play within those rules.

1:07:04But then the players do what they like. It's not the referee's job to substitute players on and off and to change the rules as they go. So that's the sort of the problem. The economy, I hate the word the economy because it's sort of, the economy is really an emergent thing that comes out of as a consequence of every single individual one of us. And there's 8 billion plus of us on the planet, each just going about our lives making personal decisions. To feel that that can be in aggregate, even conceived and understood, let alone managed, is just the height of hubris as far as I'm concerned. And I think some of the better thinkers of the 20th and 21st century have sort of thought about this, kind of all arrive at that kind of conclusion.

1:07:46So it's just, I don't want to get into it again, but just to sort of explain myself here, because it makes people very quickly jump to, oh, so it's all about laissez-faire and this and that. It's not. It's really not. But there is – the road to hell is paved with good intentions. And I just feel as though you will find that we cannot avoid, like, droughts, natural disasters, and business failure, and disruption. And nor should we – I mean, I was going to say we should not should we try to. We just can't. Yeah. Period. Full stop. We can't. Well, you can, but the other things break. the remedy sometimes can be worse than the cure can be worse than the illness you avoid business failure tomorrow is paying businesses money to not fail you could do it absolutely but the implications of that would be awful so it's one of those I completely agree just let people get on and do that we've talked about it before in what was the book oh I've gone blank in terms of those researchers that did that big sweeping study on WhatsApp Why are some nations rich?

1:08:57Oh, why nations fail. Yeah. Why nations fail? I basically said it. It came back to the bottom line there was it's nothing to do with natural abundance or anything. It's just like the quality and strength of their institutions. In other words, people in those economies, everyone knows the rules. They don't change haphazardly. They do the best that they can to make them sort of fair and transparent and open. And then people just through the interaction and their own self-interest will result in some really good things in aggregate. Does that mean that bad things never happen? Of course they happen, but they're going to happen either way.

1:09:32It's not a question of trying to sort of be really brutal and harsh on people. It's just like the world is already a harsh place. It just is. And to deny that reality, I think we can just create – most of our problems are self-inflicted when it comes to economic problems. and we are getting very much to the pointy end of, we talked about Trump on Friday, right? Like despite all their hard talk, some of the things they're going to do in trying to fix problems from previous administrations, this goes back a long, long, long way, it's not just the previous mob, but going back over multiple parties over many decades, they're just going to accelerate the problem and make it worse to be a bigger issue to deal with in the first place.

1:10:14They just keep coming back to stop helping. You know, it is like having a central department of meteorology who sits atop a hill and calls the weather, you know, and tries to manage it. It's just as stupid. Anyway, rant's over. Paused. Not over. Paused. To be continued. In the interest of time, I will let you have the last word on that one. I have some questions I will ask you maybe next time we have this conversation. I love it. There's time and a place. It's cool. And it's super consequential, right? Like it's, I mean, we talk about it because it's kind of interesting and stimulating, but it really matters in getting this stuff right.

1:10:52And again, to your point, right is not even an outcome, but less wrong in whatever form and whatever. You know, there are people who quote their favourite economists and the quotes from the economists are more about the economist than the quote. So it's kind of one of those, if I quote this economist, then I'm telling you I believe everything they say. So, again, in the world of a very partisan, just public opinion, I will use it, but there are no solutions, only trade-offs. And I think that's fundamentally whichever way we go, your version, my version, somewhere in between, something entirely different.

1:11:25We just need to accept that through whatever we do or don't do, we're not going to solve the problem. We can optimise for one or the other, knowing that that optimisation must by definition end up with trade-offs. And that, frankly, means bad stuff and good stuff. that's what happens you've said a lot of times I've agreed with you, perfect communism would be wonderful except it doesn't work so it's kind of okay well and that's you know I'm a Pollyanna right and even I at that point say well communism would be the best solution for everyone it just would be right, communism as described by the theorists of course everyone has enough of everything everyone contributes and we're all very happy what's not to love and the answer is well the reality that you can't do it.

1:12:13So you kind of at some point you say, modern monetary theory, same thing. Great idea, not going to happen. Okay, well, let's live in the land of pragmatic optimism or whatever you want to call it. Do the things that are worth doing, but only if they can be done. And that combination is really where the axis sits. I so agree with you too in terms of, it sounds like these conversations seem really wonkish, you know, technical. I can't think of anything more consequential to the world right now or ever. I mean, every single political party, entrenched party, is being turfed out for some more extreme version of the other side.

1:12:51Right. And it all comes – in my humble view, it all comes down to cost of living, right? Like everyone around the world has found that life is getting harder. It's the economy, stupid. Bill Clinton was right. Bill Clinton was right. It's the economy. Yeah. It's getting – and so it's not some sort of highfalutin economic discussion and how you might – it impacts everything. And when you think of something as consequential as the unit of account that you work for and pay for, and everyone agrees that inflation is this massive problem. But you go into any street. You go, in fact, even to an economist conference.

1:13:29You ask 100 people what causes it. You'll get 100 different answers. We can't even settle on that. And so how can you even begin to prescribe a solution to it if we can't even agree on what the actual problem is in the first place? And, yeah, it is all bound up with ideology. Like with science, it tends to progress one funeral at a time because these ideas are very sneaky and they do need, you know, you often need a new generation to come through to try sort of something else. But again, I just can't think of a more consequential debate right now. Because of all the debates that are happening, look at the recent US election, whether it's things such as immigration, trade policy, it all comes back to the quote unquote, the economy, the money type thing.

1:14:20and yet all we do is sort of shout at each other about things that sort of tend to sort of resonate and sound good within our own intellectual, our own ideological kind of bubble without anyone really objectively trying to sort of look at it. Talk about a favourite economist. Mine is hands down Milton Friedman and the one thing I like about him, and we don't have time to get into it, but the one thing I loved about him was he was an empiricist. In other words, he had strong opinions but then he went out and tried to disprove them. It was very scientific in his approach, you know, and it was sort of like, I've got this view because the data very strongly supports that view.

1:14:58And in the instances where he had a view that the data didn't support, he changed his mind. And I tell you what, the world would be a lot better if he took that approach. Yes, I agree. I agree. Than anything else. But yeah, I love talking about this stuff. Obviously, it's so fascinating. We'll finish up, but I just want to repeat your point, actually, just to highlight and kind of add to it a little bit, which is the changes in governments over the past few years are absolutely as a result of more moderate parties and governments and even people within those parties, frankly. Again, I'm absolutely alluding, not even very cleverly, to the Republican Party that's lost its original, not even original, originally it was a very different party, Democrats with the slave owners, which is just a weird concept in modern times.

1:15:43But the Republicans were taken over. Remember the Tea Party? We kind of thought that was a funny kind of, you know, rump of the Republicans that would go away. That morphed into MAGA and took the party over. And a large part of that, a large part of the Trump appeal, really honestly, whether you love him or hate him, and if you love him, you love him because of what he's doing, which is almost my point, is that when the moderate voices, when the incumbents don't solve the problems because they're too, I'll say feckless, to actually genuinely deal with them because they'd rather kick them down the road, you can kick the can down the road until someone picks the can up and throws it at you, right?

1:16:14And that's kind of where you see those other parties who are saying, this isn't working for me, it's not working for you, I will fix it. Now, if we're lucky, those I will fix it people are benevolent, kind, thoughtful people who genuinely want to fix the problem. If we're unlucky, they're the ones who stir up, frankly, a whole lot of stuff, including other things like xenophobia and envy and greed and all that sort of stuff and say, screw them, we can fix this. Let's pick up proverbial or literal arms and go at this. that that is you know very like i'm not i'm not a doom and gloomer and i'm not a i'm not a catastrophist but that happens when when moderates abandon the field we will see it we've seen with immigration currently and we've talked again a whole different topic but when when moderate voices won't talk about it because it's too hard or too uncomfortable the the field has left it open for the more extreme voices and that's exactly what's happening um and so to your point not as any consequential but it's it's consequential economically it's consequential frankly socially right because that's how some of those voices parties groups people end up taking seizing being given power because people are so sick of the currents and well i'll try something new again if we're lucky the new is great if we're unlucky the new is awful and and that's a bloody big risk to take for the lack of frankly guts i use that word to actually tackle the issues by the incumbents i'll go oh here's a here's how's this for a grand statement i think the the root cause of every civilizational decline throughout history has been economic in nature um and and there might have been things that sort of catalyzed some of the economic outcomes whether that be war or or natural disaster or whatever right but it's usually been in response to some external factor that someone's buggered up the economy, which has led...

1:18:04Yeah. I mean, the economy is... You know what it really is? It's just this great big amorphous thing that tries to allocate scarcity in an environment of unlimited demand. That's probably the best way to describe it. Yep. And there's, you know, how do you do that? That's one of the great questions of existence. Like, how? And not how would you do it to suit yourself and those close to you, But how would you do it if you couldn't choose what station in life that you had and couldn't know what the future will bring? It's very, very, very, very, very difficult to do. But it is at the same time, you know, it's the same reason as I'm big on spending a lot of money on research and development, even if it doesn't really amount to anything.

1:18:50I think just the very attempt in trying to address these questions, very worthwhile because, you know, I mean, what's the alternative, right? It's just like, I don't know, it's too hard. But I'm going to do this because I think it does not work out well. And I think we can see, again, in real time with, I don't know if this is the outlandish thing to say or not, but I feel as though the US empire is on a decline. And I think it's very much economic in nature. You've got to put the proper timescales on. This is something that will play out over decades, right? And it may be reborn for other consequences, but the current trajectory is not good.

1:19:31Yeah. Our current problems now can be traced back to COVID. Problems from that can be traced back to the GFC. Problems of that can be traced back to the dot-com bus. Problems from that can be traced back to the excesses of the 80s, and so on and so on. As Morgan Housel once said, you know, it's one damn thing after another. right and it's it it is it is you know again it's a hackney um example but it it is the it is the drunk putting off that the hangover by drinking more and it just plays out again and again and again and again and i know we've got so far off the original question but that's true you want sometimes sometimes rod you just gotta have a hangover you know you just gotta do it and you just gotta work through it and you will come out the other side um i think i think stronger and and better for it.

1:20:19I will let you have the last word, Mr. Page. We hope you've enjoyed this very long and very... What's the right word? Serious? No. Rambling? Yes, rant-filled. Earnest is the word I was looking for. Earnest. Okay, earnest. Hopefully it's helped you think a little bit more about some options. Hopefully you've agreed with some of us and disagreed with some of us because you've been thinking differently. That is the aim here. We're not looking to create sycophants or followers or acolytes. In fact, Ram and I don't even agree, let alone wanting our listeners to, What we want you to do is... Hopefully it never changes.

1:20:50Right, well, that's what we're going to do. Hopefully it just might give you something to think about and you'll come to your own conclusions on that and that is better. I've always said I'd rather have a discussion with someone who I disagreed with than someone who was apathetic. But take a position, hold that position, challenge it, as you've said about Friedman. That's how we progress, I reckon. Yeah, look, if we've made you think, then job done. There you go. Whatever conclusion you arrive at. Enjoy the rest of your thinking. Enjoy the rest of your weekend. And until next Friday when Andrew will absolutely join me again, I won't even ask him because he's got so much left to say.

1:21:22Full on. Guaranteed. 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 License 400691. Thank you.