Mailbag: incl. Forecasts aplenty? March 31, 2024

25:34And it's not like, yes, it protects you from the downside, but it protects you from the upside. If I've got 50 stocks and one of them is Pro Medicus, whoop-dee-doo, like it helps. It doesn't do much though. So to answer the question, yes, absolutely do it. and then I would, depending on your level of interest, is you could grow that over time as you sort of dip your toe in the water and you get a bit of interest for this kind of stuff. Just lower the weighting on the ETF and go more direct. Why not? But there's no wrong answers here. And I think that's the thing. For a lot of my family and friends, they just think stuff I can tell because they give me looks like you give me, which is shut up.

26:15It's not for them, right? And so, buy an ETF. It's absolutely the best solution for them. So, yeah. And we've said it on the pod before, but I'll lean into it, which is do it because you have that curiosity to do it, not because I think I can make more money doing it. Yep. Right? You know, it's sort of like, yes, you want to feel as though you've got an edge in doing it, but it's like if you don't have the interest and the drive, then you won't get the results. Right? If it's a job that you hate and frustrates you and keeps you awake at night, then it's not for you. And I don't say that in a prerogative kind of way.

26:54In a very positive way, it's not for you. I think it's a great answer. I think for me, as you said, the ETF gives you fantastic opportunities for diversification. It does that job for you. There are people who should not buy individual stocks. If you're someone who cannot deal with the volatility of the market, don't buy stocks. Not because I don't want you to do well because I'm worried that you will sell those stocks after a 38 % fall in the year 2000, when the market goes from, well, effectively falls 38 % in a month and four days. Now, we don't all have million dollar portfolios, but imagine you did.

27:32That portfolio is worth a million dollars on February 19, I think it was, 2000. It's worth$620 ,000 on the 23rd of March. Now, you've been a bit blunt about Charlie Munger's comments about if you can't stand a 50 % loss, you should have no business investing. And that's probably right. Well, me who was being blunt, I was just, don't shoot the messenger. You gave the message freely. Let's not pretend. You've got to internalize that stuff. Because if you sold out on March 23 with a, I can't do this anymore. This is terrible. I'm never doing this. Investing was a terrible idea. You've missed the entire recovery plus dividends.

28:10That is stupidly painful. Please, I beg you, don't do that if you're that sort of person. Not because I don't want you to make money, because I don't want you to lose money. That's what that's about. So to Ram's point, be diversified with an ETF, if that's your thing. And as you enjoy investing, scratching that stock-picking itch, as the questioner asked, it's a great way to do it. But do it slowly and methodically. Add a little bit. Add a little bit. maybe it's not even selling 10 % maybe it's just the next level of money you add buy individual shares with it buy one or two or three brokerages pretty cheap see how you go see if you're any good at it, see if it sits with you well see if you can handle the volatility, see if you can handle the stress and frustration if you can, wonderful, keep going if you can't then retreat you know this I bang on about psychological biases and the psychology of finance all the time because there's nothing more important the older I get the more convinced I am nothing I learned in those classes where they teach you the maths of investing is worth a zach if you can't manage your emotions it's just not because if you can't make that reality happen for you you shouldn't be doing it because it just doesn't matter so that's my answer but I think slowly moving into those ideas I would probably go a little more broader than you mate I would say go 3-5 stocks with the 10 % not because you need to for diversification itself, but because if you're going to look at your portfolio mentally and think, right, I've got one section over there that's ETF, one section over there that's individual stocks, and that stock happens to fall 10 % or 15%, and you go, oh, I suck at this.

29:46This is terrible. Then maybe you've learned the wrong lesson because if you bought three or five, maybe the other ones would have done well. So you owe it to yourself. Ram's right mathematically. You don't need to for diversification purposes. But if you want to really see whether it's for you, Give yourself the chance to have done it a few times to really evaluate that for yourself. See how you feel. See if you're any good at it. Now, the hard thing about that, though, is how do you know if you're good at it? Yeah. Because it takes years to know if you're good at it. Yeah. Because you can do really dumb things and get rewarded in a year or two, and you can do really smart things and not get any reward for it.

30:24I had a friend I've mentioned before on the pod who is in a horrible motorcycle accident and long story short, he got a big payout and he put it into the market in 2006 and he was doing it with CFDs, which is dumb. Don't do CFDs. Ever, ever. Anyway, he made a fortune. Like he quadrupled his money and then he lost it all. And it's almost like you had the wrong lesson. So here's me saying, be careful. And he's like, well, I tried it small and then I won and then I won again and I won again. And like, you know, eight months, nine months later, he's going, oh, well, I've done that. I know you're not saying this, but this is the false signals that the market will always send you, which is, you know, and he was being sent the signal of I'm a genius.

31:15And if I could do that with that much money, maybe I should like double down and do it again and again and again. And he just did and he just did and he just did and then until he didn't. And I'm more familiar with the other side of the story, which is buying something and nothing happening and nothing happening. Or it falling. Nothing happening and then it falling. So it's hard. Actually knowing if you're good at it takes time. Yeah, that's true. And also, I think that's the flip side of why you want more companies and less because you want to let that play out before you start to draw those conclusions.

31:45Yeah. Hey, Matt, we've got a question. Well, it's a statement. It's in the form of a backhanded compliment, I think you'll all agree. It simply says, Motley Fool podcast is like days of our lives. You can stop listening for days or months, and the story never changes. Well done, boys. Love it, Paul. As Tony Jones would say, I'm going to take that as a comment. Fair. Fair. Fair. Very fair. Very fair. Thank you for hanging around, by the way. We really appreciate that. Here's another question. bond prices have fallen over the decades the last 10 years two and a half percent down from 12 percent in the 1980s why have they fallen is there any place for bonds in our superannuation again that's from paul he's a question and a comment i like the combination paul no there's no there's no There's no room for bonds.

32:43Forget about bonds. Dear, oh, dear. Waste of time. Dear, oh, dear, oh, dear. Bonds. No, I wouldn't do it. I mean, who's got bonds? I bet you're hardly anyone. There you go. One person. Okay, two people. There's two less listeners. Thank you very much. And it's not... They liked us until you said that. What's the yield on your bond at the moment? Don't pick on the listeners. No, no, I'm not picking on them. You're picking on the listeners. No, it's a genuine question. As I understand it, some of the Aussie sovereigns or even the corporate, 4 % or 5%, something like that. So there's a counterparty risk on that, obviously.

33:25I'm kind of getting that with an ING Saver account. And I can take my money out whenever I want. Now, if you say to me, this is from a government that is really smart with their money. They don't run deficits. They're on a very tight ship. and you're getting a better yield than you can get on call and on demand, hell yeah, but you can't. So my question is, why? Where's the opportunity cost? Well, there is a big opportunity. Where's the upside? Where is the upside? Generally speaking, if you want to impost on me some negative, I need to be compensated with that with the potential for higher return.

34:12So for me, it's just sort of, I don't, I don't see the point. And, and, and then we can even, we can even have a, a pretty factual conversation without talking about South Africa or Zimbabwe or anything like that. I mean, the, the U S bonds have been like the world reserve currency has been a pretty awful investment. Just, it just has in purchasing real terms. And it's like, i don't know i'm just not i'm not so there may be a point where it's kind of like i definitely need this money in the next couple of years and i just want it in something rock solid and my main north star here isn't profit maximization different story and there's a lot of personal circumstances why that might be the case but if i'm going allocating capital over a three five year time frame no way because i'm getting i'm not having volatility that win, I suppose, but there's no free lunch.

35:08I'm getting really bad returns. I would rather the volatility and really good returns. That's just me. So I think that's largely right. I'm going to though, for the sake of balance, because I'm the guy who has to do that, this podcast, I'm going to do the hypothetical, why would you? And I don't disagree with you. I don't own any bonds. I don't envisage owning any bonds anytime soon. There's a couple of reasons. One would be, if you were in a situation where, a bit like the ETF question earlier, you wanted some sense of diversification or volatility protection. If you wanted to be able to say, no matter how bad the market goes, part of my portfolio is giving a positive return or part of my portfolio isn't falling in value.

35:49If that was psychologically important to you as an investor, then there is absolutely a place for, I'm not going to say bonds, I'm going to say fixed interest in your portfolio. Now, for what it's worth, I agree with Ram, particularly right now. A government guaranteed deposit in a bank is as good as a government bond. It just is because the reality is they're going to make good on either or they're going to default on both. So if the interest rate is no different, you might as well have cash in the bank. But if you want that volatility protection, if you want to know the money is there, if you want to know that at redemption, you can redeem a fixed amount of Australian dollars.

36:23Don't mention inflation. I don't want to talk about that right now. Then there's some value. There's some value in that. I think that's really valuable and important. I mean, it sticks in my craw, the branding that they've somehow gotten of being risk-free. Yeah. I know they basically came this close to collapsing the entire US regional banking system at the beginning of last year. And the only reason they didn't is because of the BTFP program from the Federal Reserve. And the reason that happened is because all their bonds went down, like massively as interest rates went from zero to 5%. Risk-free government bonds, nearly wiped in fact would have wiped out the u.s the u.s banking system had the federal reserve not stepped in and they stepped in and they said let's just pretend that that didn't happen literally and we'll you can keep it on your books at path uh and everything will be okay literally what happened i know i'm everyone's looking at me like i'm crazy that happened.

37:23Oh, we know. That still is happening today. And they're not so risk-free, it turns out. Yeah, I think that's true. There'll be times when bonds yield more than shares, largely when higher yield bonds issued now at 5%. If interest rates are to fall, those bonds go both ways. To Ram's point, when rates fall all of a sudden, those previously valuable bonds... Sorry, you're right. Thank you. And just give me the up symbol for those listening at home. Don't be correcting me. When rates go up, those previously issued bonds get less valuable. And it makes perfect sense, right? Why hold a 2 % instrument if you buy a 5 % one?

38:00The flip side is when they go down, the reverse will also be true. That gives you some, and this was the second point I was going to make, this counter-cyclical, sorry, not counter-cyclical, they are negatively correlated to share prices, generally speaking, more often than not. Now, for all of that said, and I wanted to, there are reasons, so why would you is the question. Those are the reasons in my view. Would I do it? No, I wouldn't. Now, that is because I'm prepared to accept the volatility. I don't need the cash right now. I've been doing this long enough. Now, as I said before about the ETF thing, if you're someone who wants that, take it.

38:32Please take it. Please buy underperforming bonds if it keeps you invested in general and with the rest of your portfolio and shares specifically. If that is the price of equity investing, then pay that price. If you've got 50, 60, 70 % of your portfolio and shares and you need 20, 30, 40 % of your portfolio of bonds to make that work, please do it because it's better than not doing it at all. But know that it's going to be more volatile than people pretend, by the way, in terms of price. You've heard the podcast before. You've heard anyone disagree on this. The mark-to-market prices fluctuate all over the joint.

39:05If you hold a bond to maturity, you get your money. The real price. Oh, dear. We had a listener writing about the deep breaths I take. This is a real example of that. But there is, if you hold it to maturity, you get your money back and you get the coupon. That's going to happen, right? I mean, if term deposits were market traded, they would move like bonds. And we don't say, gee, my term deposit is worth less. I'm going to sell that term deposit for$0.60 on the dollar because interest rates have changed. We could, and it wouldn't be unreasonable. Ram's point is 100 % right. If you marked your term deposit to market, you'd be showing a loss of 20%, 30%, 40 % sometimes.

39:40And we'd freak out about it. It's not necessarily even wrong. It's just like saying I'm not going to mark my EnviroSuite shares to market because I think they're worth that. And the market's going, no, it's worth that. Do you buy undervalued shares to pay? I refuse to do that. Do you buy undervalued shares? I try to. Shouldn't you mark them to market and say there's no upside because they're already… No, I take the market price on my books, on my share site account, on my Excel spreadsheet. That's the price because it doesn't matter what I think. That's the price that I can get for it. So to say…

40:10So the market's efficient? Yeah, it is actually. They're usually pretty reasonably efficient. So we won't bother us picking stocks. No, no, no, no. We're marking everything in the market, therefore. No, you're gaslighting me. No, it's not true. No, no, no. It's just like when there is something special with these institutions that can do something that the rest of us can't do, which is say, I will not recognize this impairment on my balance sheet just because. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

40:48This is in beautiful handwriting and unfortunately I can't, if there's a name at the bottom, I can't read it. So my apologies. Dear Scott and Ram. It's beautiful handwriting. Lovely. I have a number of, oh dear. What's my handwriting? European stocks? I can read it for you if necessary. Forgive me. No, no. Thank you. I have a number. Is it European stocks? Yes. Like Siemens, ABB, etc. Okay, I have a number of European stocks, Siemens, ABB, etc. I cannot find the equivalent for computer share. Are you a doctor? No. Okay.

41:25Okay, I cannot find the equivalent of computer share, link, etc. I love to phone Comsec. I have to phone Comsec to enter my dividend reinvestment plan every payment. What am I missing? It's a very good question. What was your name, sir? Rowan. Rowan. Thank you, Rowan. I'm sorry, mate. It is beautiful handwriting. I couldn't quite read all the words. It's hard, right? So the Australian system of share registries is pretty unique. I'm not entirely sure it's entirely – you can't say pretty unique. I know that's – for the English pens out there, my apologies are the unique or it's not. I get it. It's pretty special and pretty rare.

42:01We are really lucky to have chess. Chess tells everybody else which shares I own, which shares you own. And that is largely, it's not entirely 100 % legally protected, but it's about as close as it gets. Overseas, if you own shares, I own shares in Berkshire Hathaway. Got a treat for you in a minute. Charge your glasses, by the way. That's a tip. I own shares in Berkshire Hathaway. And when I own them, they are held by my broker. Now, I am the beneficial owner, but if the broker goes bust, I have to rely on the US insurance scheme to get the value for those shares because the broker officially owns those shares.

42:41I'm the beneficial owner. In other words, they are held on my account. Chess is not entirely protected, but almost. There is no alternative that I'm aware of anywhere else in the world that does the same sort of thing. Depending on the country, you can still in some jurisdictions I believe, but I'm getting way outside my bailiwick here, get the physical share certificates. That has its own risk, by the way. They get burnt, they're lost in a fire, you'll get the safe combination, you're in all sorts of trouble. So there is no, there is no, equivalents are very, very rare.

43:16The paperwork is harder, but I'm not saying you shouldn't do it because the benefits of international diversification, we've talked about lots of times in the pod are really, really, really, really important. So I wouldn't say don't do it at all. But unfortunately, the registry system we have here is – Australia has some really great things about it and some really not great things about it. We can all argue about that sort of stuff. The chess system of electronic registration of our share ownership is one of the very, very best things. I've said a million times I would absolutely pay up for what I consider insurance.

43:50If I got to pay an extra two bucks a trade to get chess sponsorship, I'd do it every time, with one exception, which is if you have a really small balance. But other than that. So, yeah, I wish I could tell you there was an easy answer. There is really not. If you're on international shares, I wouldn't say you're on your own. The only thing I would say, I don't know well enough what the European insurance schemes are. So, the one thing why I like investing in the US specifically, not as opposed to anything else, but they have that broker insurance scheme, which gives me not as high a level of confidence as chess, but a level of confidence that should the worst happen to a single broker, I would probably, not definitely, but probably be made whole because the insurance is going to have in place.

44:28Anything else to add on that, Ray? No, I really wasn't just texting friends when you were talking. I was looking stuff up. And there's a couple of share registries that are listed on the stock exchange. Yep. and I know ComputerShare has done very well over the years, and Link hasn't, which is odd, right? It should be a really profitable duopoly. It should be extremely well protected. The ASX is listed on itself. I know, which is still weird. and it's gone okay um but it's kind of like how do you not as a monopoly literally do like so much better and that's how you can throw 90 million dollars at some blockchain project and not be scratched by it it's not a segue to where you think it is but i mean this is how badly run that they those kinds of things are so he's got nothing i think we all agree that blockchain is bad i know But it is interesting, I think, when you've, I mean, there is something to be said for, monopolies are bad, generally speaking, but if you're an investor, if you can find a monopoly-like company, it's pretty special.

45:50Because then you can even get really dumb management and still do okay, which EG, ASX and CPU have done some pretty dumb things as well, I think. You say CPU? Computer share, sorry. Thank you. We don't use ticket codes at Motley Fool or on this Motley Fool Money podcast. My apologies. You're welcome. Mate, you know what's interesting about that too is I think there is a really, one of my favorite quotes I've said so many times on the podcast, I'm going to do it again because I love it, is Yogi Berra's quote. In theory, there's no difference between theory and practice, but in practice there is.

46:27And what I love about that is when we say the word monopoly, we assume certain things. we assume the fact they have ultimate pricing power, that they can achieve the sort of returns that are otherwise unavailable to businesses in competitive markets, that there must be some sort of protection, some sort of license to print money. And that's not a bad approach to take. It's not a bad starting point. But the ASX, yes, there's SIBO, used to be called CHI-X. Yeah, they're out there, but they're really small in the edge. How can ASX not make a squillion dollars out of this? So sometimes the monopoly is just a cigar, to use a very vague reference.

47:09Other times it is genuinely a profit-making machine. But it's really important not to just look at the fundamentals. I'll throw myself under a bus here. We sold shares for ShareAdvisor in a company called Hum Group. Does everyone know Hum Group? It used to be called Flexi Group. It has been an awful business for about four years, five years, maybe longer. I'll assume four so I don't seem so stupid. I looked at that business and went, hang on, it invented Buy Now, Pay Later in Australia. It was profitable. It has people who know what they're doing. It has contacts in many of the largest retailers in the country.

47:44If you had all that stuff, it has cash, staff, track record, credit worthiness histories. If you had all that stuff and I said, can you make a successful finance company out of that? versus they start up businesses in the buy now, pay later space who have nothing but a good idea on an app versus a bank who's got limitations on what they can and will lend. Isn't there space in the market for Humgrew? The answer is no. It's been horrible. I have, unfortunately, I laugh about it because I'm laughing at myself, but I'm not laughing because it's cost our members money. I looked at this business and went, well, in theory, how could it not find a way out of its own hole?

48:21It was trading on single digit PEs. it's like three or four times right this thing is like how can i knock it a positive and they do a mediocre job and i make money and i couldn't even do that so sometimes the the you've got to give way to reality as analysts sometimes we can we can give in or or succumb to the fiction of i can work this out i'm better than the market this company shouldn't be successful because what i know about it is this and this and this and yet it is this company's going to be successful because it has these attributes and yet it's not you can shake your fist at the sky you try and push the water back but you're not going to be able to do it sometimes you got to say i don't know why this is true but it is true and work on that base and there's an intellectual humility about that that i failed that for the last four years i'll put my hand up on that one finally got religion a couple of months ago and sold it for our members or told our members to sell it but those sort of things the difference between to your point about the monopoly power is like if it should be there but it's not it's there in the numbers or it's not is asx making money or is it not is it growing or is it not is it able to execute that pricing power is it not with one exception the only thing i will say is we often look at the company share price and say therefore asx has been a bad investment that's different from it's necessarily a bad company now it may have been a bad company i'm not suggesting it's not my point is when you look back microsoft did terribly for 15 years after the dot-com crash.

49:45Woefully. You didn't break even for 15 years. Was it a bad company? Did we sit here and say, look at Microsoft, it's been terrible for 15 years. What a terrible business. No, people paid way too much for it in 1999. 15 years later, they finally, the company caught up with those lofty expectations of 15 years earlier. Don't mistake the company for the stock. We mentioned this in the last podcast. Don't mistake the company for the stock. Don't mistake the story for the business. If the business is successful, don't be sure you buy it at any price either, by the way. Buying Microsoft in the 99 was a stupid idea.

50:16I'll say that in hindsight. I don't know if I would have said it at the time. I hope I would, but I don't know. Actually, you've done pretty well since then. Yeah. If you look from there to now, I mean, it really was bad for a while. Quadruple, I think, sticks. Yeah. But that's the voting weighing thing again. Let me ask you this very quickly. Have you ever - I asked the questions around here. Sorry, but well, I'll ask and answer it myself. have you ever done well buying a single digit PE company I don't think I have I mean I've bought a bunch but I I've got to think about it but I don't think it's ever worked out and the rationale for me has always been yeah it's got some hairs on it that's cheap and as soon as that's my investment thesis I'm starting to like for many years like the penny's starting to drop It's like, no, it's – I'm learning to – I would much rather have a PE of 100 in Constellation than a PE of 60 in Hum.

51:17I think that's pretty true. I have. We recommended Pacific Brands when it was kind of a turnaround. Back Brands. I owned Bonds at the time. The market had completely ignored it and it was super cheap. McMillan Shakespeare also in the kind of Kevin Rudd, we're going to ban salary packaging back in 2007. Remember. No, it can't be 7. When was it? Kevin 07, yeah. No, it was when he was coming back. Anyway. See, a couple of times, but you're absolutely right. The thing I've learned more since then is the compounding machines compound by themselves. If you buy cheap stuff and try and sell that when it's kind of roughly fairly valued, you got to know when to sell.

51:53And then when you got the money, you got to go and do it again and find another one and find another one and find another one. It's too hard. If you can find a compounding machine, the compounds for years and years and years, you just leave it alone. That is so much easier to do. Not easy, but easier Well, Microsoft's a great example of that, right? Yeah. I mean, it's hard. I mean, that's an extreme example of it. But it is usually better to overpay a high-quality company than get a really bad company cheap. Good advice. Let's keep going, Max. We're running out of time. Two quick questions. The first one, I'm not sure if it's a business opportunity or not.

52:25Are you considering releasing the Motley Fool slash Strawman ETF similar to the Motley Fool in the US? We actually had a company approach us last year where they wanted to build an ETF off the straw man index. Nice. Well, I thought, oh, that's really cool. And then I thought, wait a second. These guys will package up anything, anything as it happens as a new product. That is also true. And so it didn't happen. But, yeah, no, the answer is no. It is no. What options do you consider when you think about cash in your portfolio when markets are at all-time highs. Is there a role for cash ETFs or pure income ETFs like the PL8 income maximizer, which I don't know.

53:11So we won't talk about that one in particular as you know it. But is there a role for cash when markets are at all-time highs? No. Nope, absolutely not. There's room for cash when you need to spend money. That's what cash is for. So if you don't need to spend it or anticipate to spend it in the near future, are why would you sell it yep i mean i'm i'm i'm effectively converting from an asset that is productive and compounding hopefully to something that is a melting ice cube i no and and and and the the yeah but to that is well what if i did that in you know the start of 2020 or in early 2007 it's like well yes yeah if you can see the future well then pick this week's powerball numbers.

53:57I'll give you that good. But you can't. And it's we all think we can, but you can't. So you can't. So don't do it. Here's a quiz for you. I hope we've worked long enough together for you to get this one right. So it sounds really impressive for the audience both here and at home. What comes after all-time highs? More all-time highs. There we go. More all-time highs. Come on, round of applause, please. I just... That's about as close to magic as we get here. If you sell as soon as you get to an all-time high, you just, all you, I mean, think about it. For it to be an all-time high, it's just had to have passed the previous all-time high.

54:36So all you're doing is just going up to that same level and then selling. And we know that markets go up long-term. So you're just basically waiting till it's getting to that next threshold to pass and selling at that point. It's almost, you could flip it on its head and say, that's the point. Well, it's just as dumb really but it's it's it's maybe less dumb i don't know share prices tend to set new all-time highs here's the thing a mess of your brain right so when when you look at it when statistically if you just pick a day from a from a company's trading history or an index's trading history or anything it spends most of its time below a previous high it does now you can pick rea group you can pick amazon you can pick the best like to the moon stock in the world and it It spends statistically, you look at most of the time, it's below a recent all-time high.

55:25And that's what the average stock, these are the companies that have gone to the move. These are the most brilliant ones, right? Yeah. And so that's point one. I know I make this point all the time, but it's just, you've got to own this. The second one is it will, over its 10-year period of multi-bagging, three, five, X, 10X, it will drop 20, 30, 40, 50%, three, four, five, six times. That is normal for these kinds of assets. so as soon as you get cute with going well i want all of that i want my cake and i want to eat it i want all of that but i'm just going to like flip to cash every time it's at a top and it just it just the the only proof you need is that no one has ever done it that's it like that that's it because why wouldn't you do it if you could do it no one's ever done it so you can't do it so stop trying it's like time travel right it's a it's a pipe dream if time probably would happen people would have already gone back in time and we know about would have done it think about that Lie home.

56:19Really, really good point, mate. I like that a lot. I mean, it's such an alluring thought. Yes. And the industry is, when the duck, the saying is, when the ducks quack, feed them, right? So, we want this product. Okay, here you go, right? BlackRock's just launched a Bitcoin ETF, right? Case in point. We got to this point in the podcast, you didn't mention Bitcoin. How could that? I did it. But it's a very cynical play. They're not laser-eyed, maxi-Bitcoiners. They just money to be made. Actually, a big part of my thesis is never get between Wall Street and potential profit. They will flog that thing.

56:56But, yeah, that is kind of the point is that when you sort of look at the buffet of options, that there will be something that we've got like a hedged ETF that will do this and do this and blah, blah, blah. And it sounds really good, but it's not. And the more that you try and get rid of the scary stuff, the more you will experience scary stuff, which is really ironic. But those that have the best returns without fail are those that just, again, lean into that volatility. You get the returns because of the volatility. And as soon as you try and get away from it, it's counterproductive. of productive so again with the only thing i'll add which is kind of again we're going back to a regular theme which is the the role for cash is as volatility protection if you need it yeah if you need to accept lower returns to sleep at night if you need to accept lower returns to stay in the game please do it hold some cash if you can feel like okay my 90 of my portfolio is down 15 but at least my cash is still worth you know 100 cents in the dollar then that's great if that is or 80 cents in the dollar as it turns out over the last four years I knew you would do that 80 cents in the dollar yeah but if that's what you need to do this is this is behavioural management this is not rational maths right the rational maths is really straightforward no one should own bonds no one should own gold no one should own property would I say this because I'm a shares guy sure but I'm a shares guy because I believe this not I don't believe this because I'm a shares guy right I've said a million times I left the job took a 25 % pay cut to join the fool why because I believed in what the fool was doing.

58:29I wanted to help other people find it. So for my entire superannuation is in shares. Why? Because I'm okay with having a year or two years or three years of negative returns because I have 50 years. I hope to live that long, by the way, not till retirement, but until I finally roll off this mortal coil. I believe that is going to give me the best returns. Now, easy for me to say, easy for me to do. Because why? Because I've done this before. I've been around the block a few times. I've been through the ringer. I know what it feels like. It sucks, but I can stick with it. If you can't stick with it, if you're not sure if you can stick with it, if you don't want to stick with it, and you want to have some opportunity to say, well, at least this stuff is okay.

59:07At least this is above water while the rest of it's below water. That's 100 % okay. That's the role of cash. But to Ram's point, that is the only role of cash. I don't believe personally, I can't predict the future, there is a role for cash in maximizing your returns. There is only a role for cash in keeping you in the game if you need that to stay in the game. And again, let me be really clear. That's not a backhanded compliment. It's not a criticism. It's not a pejorative. It's a genuine, if you need to hold the cash, please hold the cash. Do it for me. Do it for yourselves. Hold the cash so you stay in the game.

59:40Don't hold the cash. We're running out of time, dude. All right. This is a great question from Georgia. Oh, love questions for our female listeners. Thank you, Georgia, wherever you are. You mentioned on Friday. I love the fact that you said on Friday. It was like 15 minutes ago, I love the time travel that we're engaging in here. This is great. Theatre of the mind here at the Bedock Beer Brewing Company. You mentioned on Friday that the ASX might list on other markets in the future. What would that do to broad-based ETFs like the Vanguard Australian Index ETF? So I assume this is in relation to my comment about at some point if the ASX was to get too small and become a subsidiary of the Singapore Stock Exchange or something else.

1:00:16What would it do to that index? Ram? What would you say? I don't know. I would ask you. I'm kidding. I'm kidding. I don't know. Yeah, there is. I don't suspect the ASX would cease to exist. I suspect the ETF would still track what was the ASX. If the ASX was going to merge with Singapore Exchange, was the government poo-pooed, was it 10 years ago? Maybe longer now. The ASX would have still existed. It would have been a subsidiary of the Singapore Stock Exchange and the market would have still existed and investors would have still existed and we would have had the ASX. I can't imagine a future, though it's absolutely possible.

1:00:53Again, we're not in prediction mode here. The ASX would cease to exist. Whether companies would choose to dual list, whether the Singapore Stock Exchange in this example, by the single example, it may not happen, became the senior market and we became the junior market. That's probable, I suppose. By the way, companies list on the Australian Stock Exchange who have no business being here. One of the buy now, pay later mobs did. Virgin Money is being taken over as dualistic. Quite a few Israeli companies on the ASX. Yeah. Which is a very long way away to list. By the way, don't take that as a compliment.

1:01:24They're doing it because they think they're wearing an easier mark than their markets are. So just be mindful of that. But there will still be companies to list here because Australian investors like them. So I wouldn't suspect there's a big issue on that index. My big concern would be whether or not it's taken over if the index continued to get narrower. If we end up having fewer and fewer businesses outside mining and resources, mining of banks, for example, it's late in the day, then maybe at some point you'd say, well, hang on, the index is getting so narrow, but the current market weight gets even bigger in those indices.

1:01:55What I would say is don't worry about that answer in itself, which sounds silly and ridiculous. For one reason, which is, again, I'm going to tell you something else. Please be invested internationally. Please diversify internationally. Different currencies, different geographies, different industries. I would really encourage people you can do it in the ASX you don't have to have an international brokerage you can if you don't want to I'm not saying buy international shares you can buy the Vanguard total market ETF you can buy I think I own some of those you can buy the NASDAQ ETF I own some of those you can buy a iShares S &P 500 ETF on the ASX without having to go overseas worrying about trading markets currency or anything else please be diversified not because Australia is a terrible place to live not because it's a terrible economy not because it's a terrible market because why wouldn't you If you have the opportunity to diversify your – we've had diversification before.

1:02:46You're giving up nothing having exposure to the US market. So I don't know what would happen if the ASX was taken over. What I do know is even if it isn't, I would strongly encourage you to invest internationally. Can I just come at a different angle there? No, please. I think don't do it because. Like if you're doing it because, I think that's – no. That's fair. Do it because there's a really great company that just doesn't happen to be listed here. I think when you look at again we're Aussie centric but if you look at a lot of even G20 markets they're not setting the world on fire they're really not name a big European company that's you know they do luxury brands well there's some other things in there but it's not the Nasdaq for me the Nasdaq's a no brainer because the future is being made there for better or worse, right?

1:03:42And it's just got a very long history, a very well-regulated, very deep capital markets. The US, despite its problems, is special. But I wouldn't go out of your way to invest in Africa or Asia. And it's got nothing to do with the people, the continents, or anything like that. It's just a history of opaque, lackluster, disappointing markets. And I know you're not saying that, But don't be the person who goes, I'm going to invest in Europe because I want European exposure. Yes, that's true. Why do you want it? If you say to me, oh, there's this company on the Frankfurt Stock Exchange and they do this.

1:04:18And like Gareth and Steve at Forager do, they've got a European fund. They go to these places, right? Because they go, oh, there's a really interesting value company here and I want to take advantage of that. That's fine. But just like, I need exposure to Brazil. Do you? I don't know. Or by the way, miners or airlines or anything just because it exists. I love talking about the Noah's Arkham. Don't be Noah. I'm not Noah. You're not Noah. You don't need to have everything. You can be picky. Leave the unicorns. Well, maybe don't leave the unicorns. Wouldn't it be cool if we had the unicorns still?

1:04:49We don't have unicorns. Yeah, make sure you do. Go and be diversified, but don't be over-diversified or anything. Yeah, just for the sake. Don't buy stuff just because it's there. I was on Ozbiz, the new online business channel that replaced Sky News Business. and i i said at one point um are you doing mining stocks or was lithium either or both same thing and the other guest honestly replied well what else would you buy as if you had to own them because they existed and it just blew my mind and i kind of just said well that's up to you but i wouldn't um and that's sensible it's there and so of course i should because it's like having a view and everything, right?

1:05:31Our two, the thing we share in common a lot actually, our two hard piles are this big for the people at home my hands above my head. Right? Massive because you don't need to know. What do you think about the value of arcadium lithium? I don't know. I don't need to know. And so on and so forth through the market. Make the effort to understand some companies. Make the effort to understand their valuations. We'll help you if you want. You can get a straw man if you want, if you want some extra help. But make the effort or buy an ETF. Either way, don't buy stuff just because your brother owns it or just because you heard it out in the news just because it's supposed to be the next big thing i've said a million times i would have mortgaged my house and sold my kid to buy airline socks in 1970 if you'd have told me what the next 54 years of airline travel look like i would have said i guarantee at the time oh my god this is amazing i've been given this i've been granted this special insight into air travel it's going to go to the moon amazing i'm going to buy shares in quantus and pan am and klm and every other airline doesn't exist anymore.

1:06:29And I would have lost a fortune because that's not enough. Ryan, can we finish with a couple of questions? I just have very quickly add on that. There is incredible value that's been created by the industry. The major captures of value have been in the IT systems, the companies that provide the booking systems and catering companies. And airports. And the airports themselves, the infrastructure. So it's actually, it's a broader very quick segue but it's always i think a useful exercise as an investor when you're looking at a company a company will operate in some kind of sector but there'll be other companies upstream and and sometimes unless they're directly consumer facing other companies downstream of that and it's always a worthwhile question to ask is where is the value captured now ask that question about the banana that you ate this morning did the dude in coffs harbour make bank from that or did Coles make bank from that banana purchase?

1:07:28Or the wholesaler or the freight company or the - Coles made the margin, right? Like the others - I'm not in a nefarious way. I'm explaining the supply chain. Yeah, but there are people in that supply chain who will tell you how tough it is. And there are others that are making an easy 7 % operating margin. and you find that dynamic in anything that lands on your, in front of you that you consume. It's not generally speaking one company. There's awesome beer here, but these guys didn't make the glasses or the equipment out the back. There is a chain of value. And once you understand an industry and if you can get to that point, like these are the people that extract the value In delivering XYZ to my door, there's 100 steps in it, but it's almost always one or two links in that chain where the value is really captured, and that's where you want to be.

1:08:30Mate, let's finish with a couple of questions that are kind of related. We'll kind of try to wrap it up reasonably quickly. They're very big questions, so we'll see how we go. Georgia asks, the prevailing sentiment from central banks around the world is they will be likely to cut rates in June or July. Given Australia's inflation, Bullock's recent press conferences, it sounds like we won't cut around that time. Compound that with tax cuts on the 1st of July and sticky-ish inflation. What is your opinion on rates not being cut in Australia until next year? They'll be cut. I'm in the school of thought that falling rates overseas equals lower imports equals lower imported inflation.

1:09:08Is it likely the RBA might use this to their benefit? I mean, the RBA doesn't know what's coming. I mean, they don't. And that's not to be critical because no one does. And just go back to all of their statements and then fast forward six months down the track and see how right they were. They're wrong every time. I don't know why I'm the one who has to bang the table here. Stop listening to them. If I every single time I say something to you, I'm wrong. I mean, after a while, you go, that guy's not worth listening to. The RBA doesn't know, right? No one knows. So that's the first point. Sorry to make it so aggressively.

1:09:41He's not sorry at all. We've got to stop giving oxygen to these people, right? Like they use big words. Even in the press, not generally. They don't know, right? So they will react. And again, the analogy is they're driving a Titanic, looking through the rear vision mirror. And when they turn the wheel, it'll take 15 miles for it to go around. So they don't know. But as we've long said, and I won't go into it deeply, but it's a devil's bargain. There's a choice here. Do you want high inflation or a collapsing economy? And they will always choose the former. And they will cut. I don't know when.

1:10:23I don't know specifically how. But math and math. And don't forget, we are 2 % of the global economy. We're nothing. And that's actually punching above our weight, given the population, right? Yeah. It's actually surprising that we're 2%, given how tiny we are people-wise. But we're still tiny. in whatever way you want to look at it. We're 2 % of China, let alone the whole world. Like it's just, there are cities in China that are bigger than Australia, right? Like just cities, multiple cities. So it's the old saying was the US would sneeze and the rest of the world would catch a cold. And the US is in a diabolical situation where they, and even Jerome admitted it himself last week, right?

1:11:03We're going to cut. This is the short answer, yeah? Yeah, they're going to cut. They're going to cut. I don't know, again, it's a mathematical argument and they kind of have to the debt's too big I don't know what will happen cop out hey last question is there anything the government the RBI or indeed anybody can do that can help reduce the inflation cycle get the hell out of the way that's how you get the inflation problem I mean I'll ask a serious question here because i i think it's worth asking like the dumb questions and taking them seriously but i think it all starts from a premise a proposition of we want you to get two to three percent poorer each year they do i mean that's not i'm saying the loud part out loud not even the quiet part like that's what they want so it's hard to take anyone seriously when they start off with that proposition, right?

1:12:09Yes, there are things the government can do. Whether you think they should is a different question. Andrew has a view on that, apparently. Who here likes being 2 % to 3 % poorer each year? Thought so. Who here loves the standard of living increases over the last century despite that? That's got nothing to do with inflation, though. That's entirely a technological productivity boost. I can do so much more now with my technology. It's got nothing to do with that. The bank, yeah. Look, it sounds a bit crazy. But again, if you've got an answer, I'm open. Hit me with it. Bonus question for you after we finish this.

1:12:46I want you to give me one investing idea. I'll give you one. No, investing idea. Okay. I will answer the question. I have something else too. The government can do a heap to deal with inflation. If you are of the view, now RAM is of view, they should have stayed the hell away, and that's fair. If you're of the view that government should at least try, which is my view, which is, again, Remus - Because they've been so good at it through till now. So let's give them another go. I live in a world where there are counterfactuals. Okay. Where it could have been worse or better, potentially. It is really, really easy to influence demand.

1:13:26And we know that you mentioned before about demand and supply being effectively the only real physics-type law we have in economics. if you lower demand at the same relative level of supply you lower prices or at least you put downward pressure on prices so if you're a government or a regulatory body or somebody and you want to lower inflation you want to put downward pressure on prices what do you do? you address the supply demand imbalance it's really really really really simple what do you mean by that? do you mean put people out of work? will you either increase supply or you reduce demand?

1:13:58yeah totally I'm just making sure we're on the same page So here's the thing. We know. Who wants to lose their job for the economy? Anyone? Who wants to live in an economy that doesn't grow because we all pretend we can all have full employment? Ah, this is the counterfactual again.

1:14:15There are trade-offs. There are absolutely trade-offs. I completely agree, man. We can't solve inflation with 3.5 % employment. It's not possible. 100 % impossible. So we can choose either of them. my personal view is we are better and more prosperous as an economy as a society, more importantly, scratch economy, society. If we unlock those things that allow productivity to grow and we keep purchasing power around, talked about the 20 % reduction in purchasing power, he's dead right. So let's do that. Now, it kind of puts people out of work, not because they want to, but because they recognize that's the side effect.

1:14:51We're talking about side effects and choices. That's the side effect of dealing with inflation. It just is. If you slow the economy down, you will mean more people lose their jobs. It's just the reality of what's going to happen. It's not people working too much that has caused the inflation problem. I know, but that's the - It is the squillions of extra monetary units flooded into the economy that is - And when you take those units back out. And then it's like, well, you're working too hard. No. You've got too much of it. You've got too much. You're too employed. When you take those units back out.

1:15:17That's why we have inflation. It's BS. When you take the units back out, you go back to where we put the units in. That's the point. When do the units ever get taken? Look at the long-term M2 money supply. Those charts go up and to the right. Bitcoiners, hey? I didn't even mention Bitcoin. It all goes back to Bitcoin, let's be honest. I'm simply saying the reality of reversing course back to – let's say we could go back to where you were. We would go back to a 4 % employment world. Okay. The growth in employment, the reduction in unemployment is a result of – talk about choices and side effects.

1:15:48We only have 3.5%, 3.7 % unemployment because we flooded the market with stimulus. That's how we get here. that's why 3.7 % unemployment is not full employment. It is excess employment. And again, I get that feels like I'm saying I want people out of work. I don't. But here's the thing. Do you want a prosperous economy with 4.5 % of people unemployed or a broken economy with 3.7 % of people unemployed? I think it's a really simple choice. Now, I think we should do a lot more to look after those people who are getting absolutely messed about by the economic system we choose. But I also defy anybody to find a better system because there isn't one.

1:16:22We've tried for the hundreds and hundreds of years. This is as good as it gets. Now, could it be better with Bitcoin? No. But Andrew might think so, and that's okay. The reality is that's the market that we're in. We make those trade-offs all the time. Now, we are multiples better off than we were 100 years ago with 4 % unemployment. That sucks, but I'll take it. You can't we're better off than we were ergo central banks? We can thank them for that. Central banks are reducing demand more broadly by the central bank mechanism. No, no, no. The question was about governments and other things people can do.

1:16:57Oh, okay. I said very specifically, governments can reduce demand. Not central banks can reduce demand. Governments can reduce demand. We always get in this quagmire. Let's finish with two things. Firstly, if I say Kogan, what do you people say? Drink. Thank you. Let's get that out of the way. Secondly, give us an investment idea that's not Bitcoin. Go. I had the pleasure. I mentioned this to someone before. Does anyone remember BAPCOR? Well, they're still around. Yes. Daryl Obotomy ran that, and I just rate him as one of the best operators on the ASX. He's now a non-executive director of a company called Adrad.

1:17:36It's fairly small. They make radiators. Boring. Yep. But boring can be beautiful. Actually, it's more advanced than that. They do radiators for data centers. Anything that requires heat to be taken away, once you think about that, industrial bespoke applications for that, there's actually quite a lot. So there's this company, Adrad. It was formed in 1985. It's a family-run business. Did really well. Listed a few years ago. Ostensibly, it was an exit for the founders and the owners. And now you've got someone with the operational chops of Daryl coming in. And this just doesn't fit in a spreadsheet, a lot of this stuff.

1:18:18But when we spoke to him, it was, well, nothing has been done through the lens of return on invested capital without going too far down the rabbit hole. It's just like that's pretty much the main job of management. And they've gone from this family operation, which wasn't a bad operation. It was a very successful operation. The business grew very well. But now you're getting someone like Daryl who is going to make this a lean, mean machine. And even with the 6%, 7 % sort of top-line growth that they're enjoying, and there's reason to expect that I think that sort of more or less will continue, you will see the profit line grow much faster than the top-line.

1:18:56And in fact, in the most recent half-year results, it did. And I think what the market misses at this point is that they look at a company that, again, is growing at that sort of top-line level, feels appropriate that it would probably have a PE of sort of around where it's sort of at the moment. they're missing the profit growth potential that can come through over the next three to four to five years and um not too dissimilar from that what i pitched a little while ago stealth and i only mentioned it because it's going well uh but it's 28 cents a share now same thing boring company and mike arnold and the team just they just ran it better and more efficiently and beyond that it was it was beyond beyond just saying oh we're going to do this because every company says they're going to do that.

1:19:38They said that and then they did that and then they delivered on those results and then nothing happened because you tend to think markets like onto this and they're not. And anyway, AdRad to me feels like it's in that space where it's completely under the radar and probably won't be forever. Fascinating. What's the code? We don't do codes on this podcast. Someone told me. We give codes as well as company names. You should have described them that way. I don't. I think AHH. You can look it up while I talk. Okay. I'm going to mention the company I've mentioned a million times. AHL from the crowd.

1:20:09Thank you very much. AHL is ad read. I'm going to mention a company I mentioned a million times, but I think it's really good value right now, which is corporate travel management. I own the shares. It is not a small company. It is not an undiscovered company. It is a big business. The last set of earnings, the market hated, absolutely hated shares. We're down 20%, I think, because the company was, I like Jamie Ferris. He was stupid enough to give guidance and forecasts, which the market took to heart that when it didn't happen, the market hated it. and I wish they would just, companies in general would stop giving guidance because it's just dumb.

1:20:39It's just asking for trouble. They had a contract with the UK to do asylum seeker housing. It hasn't been utilized particularly well. The contract's probably going to fall over. It's worth nothing to them. The market had assumed it was going to come. They'd bid the price up. Everything goes badly. The share price falls. We find ourselves where we are now, except that if you take all that away, that was never going to be worth the proportion of the share price fall the market is assuming. A 20 % share price fall on a single contract that was probably already going to be a fixed end contract at relatively low value.

1:21:11Maybe it went well. That's great if it does. What I love is, I've said before, I love being the optimist in a room full of pessimists. That's my favorite thing as an investor because I'm an optimist, right? If everyone else hates it, I'm like, oh, this is great. I get to look long term and say, in three or five years time, this is going to be where... We've done reasonably well in the last six months on retail in Formatly Full Share Advisor. Why? Because we did exactly that. We went into last year. What's wrong with these people? The future is going to be bright, right? The fact they miss it in the meantime, that's okay.

1:21:37I can wait. Again, we talked about volatility before. Corporate travel manager, super cheap right now. Shares have fallen. The core business is incredibly strong. The growth in the core business is incredibly strong. Frankly, having this contract out of the way is actually really good because it made the numbers bumpy and harder to understand. The market got to be excited and carried away. Great business. CTD is the code. I like it a lot. I think it's a great business. I own a lot of it. It's my single largest Australian shareholder. No, second largest, I think. So I'm horribly, horribly biased, but I own it for that reason.

1:22:05If I didn't own so much of it, I would buy some more. At some point, you've got to say enough's enough so I'm not going to but we've recommended it to our members. I like the company. I own it. I think it's got a really bright long-term future. Jamie Ferris is a great CEO. If we just stop giving guidance, Jamie, please stop giving guidance. It's just made for disappointment. So CTD, corporate travel is the code. Andrew, you've just looked something up. Do you have something to say? I was just looking at corporate travel management actually. There you go. Yeah, it's somewhat. Very good. We've gone way over time which is unusual for us.

1:22:32So surprising. People have got jobs. I normally feel slightly guilty about going over time because on a Sunday morning, who wants extra time? I feel even more guilty because right now, look behind the curtain, it's quarter past nine in Queensland and our attendees, our audience at the Medoc Beer Brewing Company have been very, very patient, very kind with their time. We very much appreciate you. So I will simply stop and say thank you and fool on. Thank you. 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.

1:23:12Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under financial services license 400691.