Mailbag: incl. Evaluating turnaround investments. August 6, 2023

25:28It does not exist, right? And the best analogy I can give here is let's go back to 1993 and have someone explain to you in a pithy short sentence why the internet is a big deal. Yeah, right. It's just really – so I can't do it. So when you say you've only got five minutes, I mean, in fact, I don't think I could do it in 20 minutes. So I'm not even going to try. I guess the one point I would make is that what people I think – mistaken in is assuming that there needs to be some authority that anoints this as legitimate so so um i don't collect barbies i went to the barbie movie the other day actually took my little girl and a friend and i really loved it i thought it was really great dad points well done yeah yeah i was just great really good messaging but you know like bit of plastic as far as I'm concerned, absolutely worthless.

26:26There are literally hundreds of thousands of people around the world who collect these things and they have real value. Now, who am I to say that they're wrong? I mean, they're not. It actually goes even further than that, Matt. It's actually, I mean, it's gold. Speaking of digital gold, I mean, there have been sovereign currencies for I don't know how many centuries, but gold existed long before that. It didn't need, it still doesn't need an authority or a central issuing agency. Yeah. And this is what I think people miss with Bitcoin is that you can stay on the side. Like, no, I'm the last person to convince anyone to try and do it.

27:07Don't do it. If you don't understand it or you're not comfortable with it, for the love of God, don't do it, right? But the fact, and this is fact, is that as every day passes, the level of adoption increases. More and more people are doing it. I don't know. maybe it levels out tomorrow and it remains this hyper niche kind of trading card kind of thing. Maybe that's, that's entirely a possibility, but you know, we've now got BlackRock, the world's biggest asset manager preparing for it. We've got Larry Fink who in 2016 was calling it an index of money laundering now saying it's a really good hedge.

27:39I missed that quote. That's pretty. Oh yeah. You've got, you've gotten three or four presidential candidates talking about it at rallies. You've got fortune 500, like significant, not a majority, but a non-material percentage of Fortune 500 companies with it on their balance sheet. Now, the trend is going in one direction there. And it might be that 50 % of the world never gets involved. 70 % of the world never gets involved. But as long as more people do and they find it valuable and they get utility out of it, here's the other thing too, unlike a trading card or something, there is actual genuine utility in it.

28:16And again, I don't have the time to get into that. then it's going to be a thing, right? And all I would say, I'll finish by saying is everyone gets Bitcoin at the price they deserve, right? And so for some people, it won't, you know, it'll never be valid. That sounds like a crypto laserized meme, that one, mate. It is very much. It's all memes all the way down, by the way. Society is memes all the way down. But so don't do it. It's not for you at this point. And you may find that it is in the future. You may find it's not. But until then, don't do a damn thing with it. Stay away. Well done. I'm going to let you keep going very briefly, mate, because the next question was from Craig.

28:55And nicely answered. Thank you for doing it concisely. I appreciate it. Not because I don't want you to talk about Bitcoin, just because we need to talk about more than just Bitcoin. It's hard to do. The conversation was long enough, I know. This is a single question from Craig relating to Bitcoin again, which hopefully has a single short-ish answer. Hi, Scott and Andrew. Could Andrew please address the Bitcoin scalability problem? He has BSNP all in uppercase. I assume it's a thing. No Bitcoin thesis is complete without addressing this issue. Globally, he says Bitcoin can only process seven transactions per second.

29:26This is hard-coded and cannot be changed. As a result, confirmation times get slower with increased adoption. The purported solution, the Lightning Network operates off-chain and defeats the purpose of using Bitcoin in the first place. Kind regards, Craig. So I think the problem is at a surface level, at least relatively self-evident. What is the solution, mate? And does the Lightning Network solve or is it by definition self-defeating because it actually takes things away from the blockchain? It's really good. I mean, you know, I will start by saying 2013 called and it wants its FUD back. FUD being fear, uncertainty and doubt.

30:07Really good valid points, but like in 2023, we're at a point where like these have been so thoroughly answered as to. Oh, okay. Yeah, they really have. And I asked all the same questions and I think any smart person will ask those questions. And if you're only just coming across it, I want to be critical here. I mean, it's exactly the right question to ask. Not only does it process very slowly, but usually you want to wait for at least, gosh, I would say three or four blocks to be confirmed. So it can take like an hour to confirm it. You can't buy coffee with this kind of stuff on the base chain.

30:41So the solution is it scales in layers. That's true of the internet. It's true of all technologies. It's true of the current financial system. I mean, none of us are transacting on Swift when I buy my coffee. And if the world decided to process all of its commercial activities on Swift, the Swiss network wouldn't handle it. But it's perfectly adequate as a base layer of money, right? In fact, Bitcoin's already faster than that on that basis, I believe. So you're right. It needs a scaling solution. There are multiple. There's liquid. There's lightning. There's a whole bunch of competing ones. Are you comfortable with the scaling solution given the things you've talked about, about it being anonymous and provable and that kind of stuff?

31:20Does moving it from Bitcoin to another layer not undermine at least some of it? It's a genuine question. I'm assuming it's a solid answer. Yeah, yeah. Great question. I'm asking it partly to be devil's advocate. Given all the purported benefits of Bitcoin, how can they not be given up when you have to leave that layer to do whatever you're doing? Yeah, so this is where it's going to get a little bit technical, but it doesn't leave the layer. So Lightning just locks up the Bitcoin on-chain through a multi-sig solution. I mean, we're already going to get complicated, but it doesn't. So I can close my Lightning channel at any point in time and settle it without the other person say so or whatever.

32:02It layers on top of it. It's not separate from. So Lightning is also open source. Lightning is also a protocol. It's not owned or controlled by anyone. And it's very much tied to the base chain. So it's not a separate. It's a separate thing in the same way that like when I go to the internet, when I say to someone, you know, jump online, you probably think of opening a browser, a Chrome or whatever. And you are online, right? In a very real sense. but the protocol that the computers are actually talking with themselves at the base layer is what's really going on there. They're tied together. They're not separate.

32:44Yeah, okay. But you don't give up any of the benefits of Bitcoin by using those other layers? The one, there's always trade-offs in everything, in engineering, in this, in a regular fine. And so there is less sovereignty, I guess you could probably argue, if you're using Lightning. There's slightly less security. In the same way that if I had a million dollars in cash, it's probably dumb to put that in the suitcase under my bed. But if I'm going to walk around the street with 100 bucks in my wallet, it's probably not that big a deal. And so I've got the majority of my Bitcoin on chain in a hardware wallet and I've got a bit of walking around cash in my Lightning wallet.

33:26That's probably the way to think about it. So Lightning facilitates commerce. and Bitcoin facilitates the base layer. But look at, I would just say to it, was it Craig? Just look into it. Like there's a lot of good material that's out there and once you understand that, the technology, you'll get that it's actually a really, really interesting solution. And that itself is growing at a very, very phenomenal rate. And if I was in, if I was in Western Union, I'd be really scared, put it that way. Motley Fool Money For more, subscribe to the free newsletter at fool.com.au forward slash listener

34:13Hey, let's change tack Yeah, let's change tack With something for you, something for me and something for the listeners We have a question from Matt who writes today Hi Scott, Ram and the Pod Machine Telling you mate, they love the Pod Machine Scott, you'll love this, says Matt I'm 28 and I've been investing for a few years Ram, you'll love this. I'm 28 and I've been investing in crypto for a few years. Sorry, Scott, he says. Scott, you'll also love that I'm a subscriber to Motley Fool Share Advisor. So thank you, mate. Something for everyone. Well done, well done. Now, he's talking about Share Advisor here, mate.

34:46I don't generally love talking about inside baseball stuff because I don't want to be promoting our business and also making it not relevant for everybody else. So I'm going to ask the question the way it's written and then I'll invite you to be as generic about the answer as you want to be outside, just obviously an individual investing service. Matt says, people can relate, with the rising costs of the world, I'm having to lower the amount I'm investing every month, which sucks, but I also have to feed a fiance and a relatively new child and boy, can he eat. Matt, I hardly endorse feeding your family.

35:18It's a very, very good strategy, even if it means you have to invest a few less dollars. He says, with Share Advisor, we get five best buyers now and one recommendation each month. My question is, how should person X, this is me in brackets, allocate capital across the month? This is of course not financial advice, says Matt. I can't invest enough month to month to cover all the buyers and all the recommendations. So if they already exist in the portfolio, do I allocate to the lowest percentage weighting? If they are new, do I prioritize these? If one stock is down by a larger percentage, do I dollar cost into this and lower my average cost?

35:56I appreciate the advice. And the car drives filled with informative rants and tangents on my way to footy training. Cheers, Matt. Matt, go and give them hell on the field. It's a good question, Ram. So again, this is a bit about share advisor, but it's also hopefully an interesting question for anyone thinking about building a portfolio. When they're presented with good ideas, should they buy the newest ones? Should they allocate to the lowest weightings and kind of, you know, kind of reweight their portfolio from the bottom? Should they look at the biggest losers and add to those to bring the cost base down?

36:28How should they think about taking new ideas into an existing portfolio? Yeah. I mean, it depends on the nature of the service, but given what I know about ShareAdvisor and most sort of newsletters, I've long said that I treat them as an idea generator. and here dear subscriber are some of our ideas and i think that the best way to to make advantage of of those services is to go thank you very much you've saved me going through 2 000 stocks on the asx you've given me a short list and now i'm going to go off and decide which one is best for me and it's almost a point where i need to get this tattooed on me because i say it so often but you can borrow an idea, but you can't borrow the conviction.

37:15And so, you know, Scott says on ShareAdvisor that he likes this. Oh, great. I'm going to buy it. You wait what happens. And when that goes down 20%, as some of them invariably will, right? Like it's just going to happen. Even if you're subscribing to Warren Buffett, it's inevitable. And at that point, it's just like, oh, now what do I do? So it's kind of like, I feel as though you take the idea, You look into it yourself and you build your own conviction. The only other alternative is I'm just going to go for this verbatim. I'm going to do literally everything you say and I'm just going to go in the same way that the scorecard is structured.

37:51If I want to replicate the scorecard, I'm going to do exactly what the scorecard does, which is each month I'm going to buy the latest recommendation. I definitely would not allocate based on the which one is up or down the most definitely wouldn't do that because that says nothing about value that just says what's happened on the market lately but you you'll articulate it better than me mate what what do you think yeah again I don't really want to make it about our service because it's boring for people I don't want to be you know look like I'm I'm pushing this stuff um but yes I that's that's exactly my approach we our monthly recommendations are our best idea.

38:29Sometimes they're brand new, sometimes they're existing. Our best buyers now are, hey, if you've already got enough of the stock or you don't like it, to your point, because you've done your research, you're like, yeah, don't love that one. What else could I buy? It's basically an additional way to think about if you've got more money to invest, then you don't want to buy the recommendation. You bought it already or you already owned it. What else could I buy? That's what it is. So it's a best of the rest list. And so that's how I encourage our members to use that because that just makes sense to me and to us.

38:57The one thing I would say to Matt is don't chase the one that's down by the biggest amount for the sake of it. It's only ever about what the future looks like. So adding to your biggest losers can work sometimes, doesn't work other times, but often chairs are down for good reasons. So just be a little bit careful not to do that as arbitrarily as you otherwise might. Personally, I do look at big losers for opportunities because if the market's, you know, really hating on something, I get a chance to buy it. So I wouldn't ignore it. But, you know, here's the thing. If someone's gone from five to two, if I bought it at one, I'm up 100%.

39:34If I bought it at five, I'm down by 60%. Neither is right or wrong. They were what they were, they are what they are. The only question is what comes next. So it can be an opportunity to look for some stuff that maybe the market's hating on that you can buy cheaply while the sentiment is against it. So I wouldn't ignore that, but I would never, ever make that the basis of my investing. The other one, Matt, for you, and I can't give you personal advice, but think about portfolio size. And weighting is a good way to think about it, but I wouldn't just chase the lowest one. I would not add to one that I felt was uncomfortably high.

40:10So I take, again, the reverse approach that you're taking is I wouldn't say I'll pick the lowest one and add to that. They don't all need to be the same weighting. Sometimes, again, the bigger weightings are because the company is doing well and the market's recognizing that, right? If Amazon had gone from$1 to$2 to$5 to$10 to$20 to$80, if you'd bought it at a buck, the shares went from$80 then to whatever they are now, you miss out on a massive opportunity if you said, well, they're already up and it's already big, I'll go and do something else. So if it's too big, don't add to it. Don't unbalance your portfolio.

40:41But again, I wouldn't choose arbitrary rules. I would start with which companies do I feel best about for the long term? whether they're new or existing. Add that unless you have too much of it already or unless there's some other reason there's better opportunities elsewhere. But don't get stuck in the past is my general advice on that one. Yep. Anything else on that? No, I think you nailed it. Beautiful. Mate, I've got a question from Willow that I'm trying to bring up. Here we go. He says – oh, this is interesting. So he says, hi, Scott. I've been pondering a question on the back of your latest AusBiz chat with Carl Capolingua.

41:17Can I text you a question? Of course you can. He says, clearly you and Carl have completely polar opposite investing styles. I think I recall Carl saying one day he might only have... My screen's reset. Sorry, Matt.

41:34Here we go. So Facebook is resetting my page every time I try and scroll up. I'll hold it here. No, it's not going to work. Anyway, basically, Willow wants to know Are there any times when we would use, or I would use, but I want to ask you too, Ram, charts, technicals to suggest an entry or exit point from a stock? No. Why not?

42:01It's always a controversial stuff. It's like they say never talk about religion or politics. I think in ours, like never talk about charting. Like it just... Go on. And I just, as a younger man, I used to love to get into the debates. I don't care. I don't care anymore. You know, everyone needs to look at, there are 4 ,000 ways to skin a cat when it comes to investing. And there's a whole bunch of legitimate stuff and there's even more crap that's out there. And we all have to go on a journey and figure out not only what is legitimate, but what is legitimate for the kind of person we are, not just in terms of our goals and financial situation, but the kind of temperament that we have and the kind of things that we're trying to do.

42:45So straw man, we're very broad church. We've got a bunch of guys on there who love their charts and I wish them well, you know, and there's a bunch of guys who look at the stuff I'm holding and think I'm an idiot and probably right. You know, it's, it's each to their own. And in my personal journey, and I've, I've looked at it plenty of times, especially when I first got going on this was very enamored by it. The prospect, the allure of being able to not just find good businesses, but use this to time my entry. I could never do it. I could just never do it, certainly to a point where it was statistically valid.

43:18And when you look at some of the studies that have been published on this, I don't see any evidence for it. When you look around the world of successful investors, right? Just look at the world's greatest investors. I can't think of a single trader, a technical analyst. There's probably one or two. I should be fair here. I'm sure there are a couple of them. Like law of large numbers, right? There's going to be some out there. I'm sure of it. But when you think of the Peter Lynch's, the Philip Fish's, the Warren Buffett's, the whatever, they all are business-oriented investors. The people who have compounded at attractive rates for very long periods of time.

43:55In fact, not only do they not do it, but as far as I'm aware, most of them actively say, don't waste your time. Buffett used to chart stuff on graph paper back in the day. Remember that? Like he did, like it's in his biography. Yeah, yeah, yeah. And we all dabble with it, right? We all dabble with it. So look, that's why I keep it short. The initial answer was the best one, no, because it doesn't work for me and I'm yet to be convinced by it. I might be wrong, but don't send me any letters. I don't want to, like, you know, just do what you want to do, but just make sure that you're comfortable in your belief that there is decent legitimacy to it.

44:35For me, there's not, but there might be for others. Yeah, that's very diplomatic, mate.

44:44I think we all understand the allure of it, right? If you could somehow work out a systemic way to apply some logic, some thinking, an approach that worked regularly, you could just kind of roll it through the xerox machine you know and kind of it'd be it'd be you know it's a it's an option or a potential solution a potential way of solving a problem and i really really get it as you said i equally am not 100 sure it can be reasonably reliably used

45:18I think here's the thing I'm also a reasonably keen student of very keen student of behavioral psychology I have no trouble believing that people behave like lemmings and that when everyone's running one way you know we see it all the time with over and under you know shooting of markets You know, when people get super excited, people get, you know, super disappointed, all that kind of stuff. Like it's all that, it's all up and down crap, you know, and you kind of think, excuse my language, and you kind of think, well, do I really want to, you know, so is there something going on there? Yes. Is there something, I mean, contrarian investors almost kind of, they don't use charts, I don't hate me even using this in the same context, but they're looking for, you know, they want to do the reverse.

46:04When everyone's getting excited, you can then sell. So they're saying the crowd's saying one thing, I can do something else. Or you could flip around and say, well, the crowd's moving, let's move with them. When the crowd stops going that way, then we'll pull out and do something different. That back and forth should have some validity, I actually think. Here's the thing, though. When everyone's doing it the same way, where is your edge? What do you know differently? What are you doing differently to the rest of the market? Because if all you're doing is what everyone else is doing, then you're getting whatever else has got and you're back to an average.

46:32So just buy the ETF. Just buy the index and be done. Yeah. And so while part of me thinks there is probably some directional validity, if you're the only person with the insight, is it possible you might use that systemically? Maybe, yeah. I mean, you know, Ben Graham used a very systemic approach. It wasn't charts, but it was buying businesses below their net asset value until everyone else did the same thing and the entire investing opportunity completely resolved because there was no opportunity left because everyone arbitraged that away. So my broadest thing is the more people that are trying to do it a certain way, the less chance there is opportunity left in it, even if there ever wasn't the first place.

47:07So back to your first question, no. I think that's the important one. Hey, I will say this quickly, mate. So we've got a question from Ben. Ben asks also similarly about using charts. He said, I enjoy reading, watching, listening to quant traders explain and predict things through charts with all their wonderful and varied models. I think there's a bit of sarcasm there. He says, quote, the index has been range-bound but it's formed a heads and shoulders, knees and toes pattern and if you could break the 4 ,200 resistance level in the pike position, it would go on to do great things. B.S., he says.

47:43So we've just covered exactly that, Ben, so I won't ask the question twice, except to say that Ben did me the very solid favour of taking his question, whacking a chat GPT and doing it in the style of Adam Smith from The Wealth of Nations. I was going to read the first paragraph just for amusing. It came out, esteemed companions, for numerous years a vexing query has incessantly plagued my thoughts, possessing an answer that ought to be glaringly evident, yet somehow eluding my grasp. Nevertheless, I am confident that such a conundrum shall present no challenge for astute individuals such as yourselves.

48:19And I just thought that was very funny. So well done, Ben. Thank you for the question and enjoyed that very, very much. Hey, Dave. Before you go on, very quickly, I have to share this story. Someone posted it on Strongman, Fyadris, the username. He said, I've just seen my wife's grandfather's portfolio. He's from the US. He's a truck driver and he's got four industrials left in it. These are companies I wasn't familiar with. Ingersoll, Rand, Lincoln Electric, you know, train technologies. Anyway, it's a 16 bagger, a 26 bagger, a 10 bagger and a 15 bagger, right? Wow. It's from a truck driver who didn't have any financial sort of experience or whatever.

48:59And I said, well, that's amazing. I bet you he had lots of other losers and stuff in there. But the thing that he did well was he didn't take profits along the way. He didn't trade in and out. He didn't trade the latest shiny thing. And it reminded me back in the day, I'm sure you did a few of these as well. We do like the trade shows, right, where the mob that you're representing is there and a whole bunch of people walk through looking for the next way to turn lead into gold. and I'd always get some young, it was always a guy, it was always young and they'd have some eight screen trading set up and the most sophisticated system that you could imagine.

49:36And, you know, they were never there the next year. Yet there was always the little old lady who did nothing other than save a little bit of the paycheck each week, put it into a range of stuff, whole bunch did really ordinary, whole bunch did really bad. and then there is just this handful that just your jaw would drop and you say you bought CSL for how much? You know, and all they did was, again, spend less than what they earned, regularly invest that into a range of decent businesses and just let compounding do its thing. That's it. That is it. Now, someone approaches you and says, oh, but no, you can get, yeah, absolutely, you should do that, but you can even do even better if you get managed to time it better.

50:24Oh, and if you do this one under this structure and blah, blah, blah. And again, the sophistication gets layered and layered and layered and layered on top of it. And it actually doesn't tend to help you. In fact, it's not just the criticism of I'll not, you know, pat you on your little darling head and say, not for you, leave it to the big boys. It's like, no, the big boys continually, and again, use the gendered term there very deliberately because it's always dudes. It's legion how often and significantly they underperform the market despite the PhDs, despite the sophistication, despite the closer access to management, despite everything else that they have.

50:59Perhaps because of those things forward as well. Perhaps because of it. And then Action Man, another member said, actually reminds me of a story. He posted this wonderful link, a rural janitor and gas station attendant at age 92 left behind a fortune worth over$8 million, left it all to charity. And these stories are really everywhere. Ronald Reed was his name and you can find a Wikipedia article on him. Same story, same story, right? Keep it simple. And it's the most, no one wants to be told how to get rich slow. Like it's just like no one's come into my booth to hear that. But at least what I'm selling is true.

51:35You can go to the get rich quick if you want and do all the other stuff because it's so much more saleable. But it just has that small little problem of not working. So, you know, keep it real. No, that's absolutely true. I'm going to add, by the way, you can say something about fundamental investing. You can go buy an index, not pick a single stock and do remarkably well. So if you're out there thinking we're just throwing stones at other people, you know, I have long said start with the market will do a wonderful job for you. If you then want to add, fantastic, go for it. You don't need to. Don't let anyone tell you you have to.

52:10Do it if it's something you think is going to make a whole lot of sense for you and you're investing, you want to give it a go. I encourage you to give it a go if you think you're made for it, cut out for it. But either way, you'll do very, very, very well just buying an index or even just a representative sample of stocks and letting them do their thing. Yeah, and get on with life. Get on with life. Yep. Mate, Dave says, hi, Andrew and Scott. I'm a long-term listener, first-time questioner. Thank you, mate. But I'm loving the podcast and envy the way you guys can simplify complex info and ideas for the layman.

52:42Dave, I'll let you let it out a bit of a secret, mate. I'm a very, very, very simple man. And so keeping things simple is just how I managed to get by in the world. But thank you. I appreciate the assumption that I'm doing it deliberately. Keep it up, he says, and thanks for all you do for those of us trying to navigate to retirement. So mates and I have been debating a question. See, when you say things like that, guys, I want to know who's debating what and what the bet is. But I was hoping you could shed some light on. The question being, here's the quote, Andrew. with higher interest rates at around 6 % plus.

53:14Would a long-term investor with another 20 years before retirement be better off paying down investment property debt or continuing to dollar cost average into a share portfolio, assuming the investment property is cash flow neutral? If we knew what the stock market interest rates were going to do, he says, in future, this would all be easy to figure out. However, in the real world, I guess we have to develop our own thesis of what may or may not happen. Paying down debt is a guaranteed cost saving with say a tax rate of being 37%. But with investment interest being tax deductible, developing a thesis becomes tricky, especially when you're trying to consider a margin of safety.

53:53So to pay down debt or invest in the future, he puts one of those little emojis with a man with his hands in the air, that kind of universal, I don't know, gesture. I'd be very grateful, says Dave, if you could share any general thoughts you have on this question or topic. Full on, Dave. What say you, mate? Great question. I mean, it depends is the answer. I mean, you know, the tax deductibility is a nice thing and that's something you've got to factor in. But which is going to grow more, the market average or the capital value of the house in question? I don't know. I mean, the comments earlier in the pod would probably belie my bias, which is I feel as though, put it this way, long, long-term averages here and other comparable places, property grows at about the rate of inflation, about 3%, 4%, if you're lucky.

54:52So that's what history says. when it comes to the indices and there is a churn within the indices. But again, I would say exactly. That's the point. But they tend to grow up a single digit, 9%, 10%, 11 % even. So if you just want to extrapolate based on history, even allowing for a little bit of tax deductibility, I'd say continuing your dollar cost average is probably, the inter-shares is over a 20-year period probably the way to go. I mean, interest rates will impact both asset classes, so that's to be aware of. And I think the other thing outside of the pure monetary is the sleep at night factor, which is super important.

55:40And, you know, I agree. If you can afford to pay some down, as Dave said, it's a guaranteed return on the home and it gives you a much more sleep, better sleep at night factor. Here's a wild thought, you know, blow everyone's mind here. Wouldn't it be great to have an investment property that had a positive yield? Like, wow, you know, we're so enamoured with losing money each year and we're so impressed with ourselves if we're neutrally geared. It's like, no, go for it. I mean, if you pay some down and the price you pay for that, the punishment is that you get a positively yielding asset. I'd say it's a pretty good thing.

56:19I'd say it's a pretty good thing. So there's no right or wrong answer with the way it's been framed. It depends, but I – and it depends also on how much risk you want to take on it. I personally, it's just me, would probably err towards paying down some of the house. It's funny, you know, mate, I tend to agree with your conclusion. A couple of different thoughts just as we wrap this up. First for me is we're talking about repayments here rather than the investment itself. So leverage goes away. And that's an important thing to think about when you're trying to differentiate between do I buy an investment property with leveraging it five to one?

57:01Well, then how do I pay down the debt? Because the debt, dollar for dollar, has no leverage attached to in itself, if that makes sense. The dollar you pay off, you save the interest payment or the interest compound, if you like, but no more than that. Now, as you rightly ask us, Dave, it depends on what tax rate you're on as to what the after-tax component of that is, but saving 6 % and then a guaranteed 6 % without any tax obligation, that starts to get up there. So that's a pretty attractive way to be, but the leverage itself doesn't exist. Then you go back and say, I can now look at the shares options.

57:41And again, on the shares, you've got not only is it, you know, you've got a capital gains tax element if it grows. I think about that. Potentially though, if it's paying a dividend, the cashflow from that is also tax advantaged. So it is a really, really complex one. Here's my general take. So first thing, I would start with you and with Ram. Marginal safety slash sleep at night, do that first. So I would want to be positively geared to Andrew's point, not only because it generates cash, but because it's a buffer if rates continue to go up because that gearing can go away quite quickly and all of a sudden you're in negative gearing again or negatively a negative cash flow again so think about that i i would want i would want to get ahead after that and this is where my take is a little bit different to others you've got a fixed dollar debt assuming the debt is manageable and the repayments are manageable on on a hopefully growing asset at whatever rate so at some point you got a million dollar property you got a hundred thousand dollars worth of debt uh you don't pay a cent of that debt off in theory You do, but let's just work it forward for 100.

58:40When it's worth$2 million, you still only owe$100 ,000 worth of debt. So to some degree, you're saving the interest, absolutely, but the asset continues to grow separately without it. On the flip side, buying more shares actually grows your equity pile because there is no leverage. And so the money you're paying down off debt, yes, it reduces your cash outgoings in future. It reduces the amount of debt you have. It reduces your future interest bills. That's all true. if you're buying more shares, something that's going to compound at a faster rate, you're a much, much, much better position. So that's where I'm a little bit different.

59:18I think I would get ahead of the game on a positive gearing, positive cashflow basis. I'm not sure, Ram, I wouldn't then though invest more in shares and let both grow independently and separately, maximizing the growth, assuming that all the other things are manageable. And And again, it's not even necessarily a – it's partly a financial decision. To my mind, it's far more than that. It's actually – it's partly financial decision. It's partly behavioural psychology, knowing that adding to both over time generates more total equity value in the long run, in my opinion. I think that the nub of it there is that assuming that everything else is manageable and comfortable.

59:56Exactly. That's literally the starting point. Without that, we don't even pass go. Exactly. Mate, I have thoroughly enjoyed spending my Sunday morning with you. at least virtually, at least metaphorically, at least, well, in a pre-recorded fashion. If our listeners want to get in touch with us, are you still on Elon's new thing called X? Oh, my gosh. We need to talk about that at some stage. But, yes, I am. I am. X has marked the spot. For as long as it remains, very, very tiny, quick aside, I had a spam or scammer impersonate my account. I sent the Twitter link with my ID to Twitter. And I got an email back this morning.

1:00:40We recorded this on Thursday morning, of course, a bit of behind the curtain. And Twitter said, we've reviewed your request and the account doesn't violate policies because that person's not really impersonating you. Yeah, the exact same thing happened to me, yeah. They're literally using my photo. They're using my description. They've got the same Twitter handle with the character at the end. I don't know if that's an impersonation. It's clearly not parody. They're trying to scam people. I don't entirely know what else it could be. No one looked at it, right? So it's a bot reply. And just like, you know, I think there's a bit of truth in this.

1:01:13Like there was a lot of bloat in Silicon Valley, easy money, you know. Elon comes in and goes, oh, I'm going to get rid of half, you know, 80 % of the workforce. Like, well, I'm sure there was some bloat. That's a horrible term because people, we're talking about people's livelihoods here. But, you know, there were probably a lot of cost savings to be had. But you still need some stuff, right? And to the point now, it's like there's just no – you can complain all you like to X and there's just no one there at the other end. So it's just getting worse and worse and worse. Yeah, it's really sad because, I mean, I really liked Twitter and I'm liking it less and less.

1:01:50Yeah, I know what it's going to look like. Anyway, in the meantime, rather than getting too far in that rabbit hole, you can follow Andrew for as long as he's there, for as long as Twitter exists, at Sage underscore Simeon. You can follow Strawman, which apparently is a... Online investment company. Oh, I had to tip my tip. Oh, thank you. That's right. That's right. There you go. At Strawman Invest. Grab me on Twitter or Insta or threads at TMF Scott P. I am still officially mastered on Andrew, but that's probably going to go by the way. Also, grab me on Facebook, facebook.com forward slash Scott Phillips money.

1:02:22You can look up The Motley Fool Australia on all those platforms as well. Mate, will you come back on Friday? Yeah, looking forward to it. I cannot wait. Should we talk about X? I think we have to a bit, don't we? I don't know. If you want to talk about X, let us know. If you'd rather us not, let us know that too. We are nothing if not slaves to the best interests of our listeners. Until Friday, you'll have to wait and see. And fool on. See ya. 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.

1:02:57Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.