Mailbag: incl. How important is company management?  July 2, 2023

32:12Now, if the numbers are big enough, like really, really big, maybe there's a conversation there. But again, because you can't utilize those losses for multiple years into the future, and frankly, we've done nothing if not rant about inflation over the past month or so. The dollar value of that lost opportunity for X period of time, again, maybe June 30, July 1, maybe there's something there. Again, Phil, I don't think you're necessarily wrong. I just wanted to look at the bigger picture because if the thesis is broken, sell them anyway and if you get to offset against some gains, even better. I just think holding, imagine holding AMP for years, just waiting for the right gain to offset it against as the shares fall further and further and further.

32:50remember you've got to have lost money to use it it's kind of like negative gearing there's no there's no there's no there's no free money there it's like well you can have a bit of a less of a loss that's kind of the way i see the capital loss offset uh when it comes to taxation but do you have a thought mate yeah i mean i i wouldn't i clarify the language a little bit more you still get the 50 discount i mean absolutely you do you've just got to apply as you say as you rightly say you apply the losses in in that order um so it's more about looking not at individual positions but your entire investment performance over a given financial year how much of the capital gains i'm on the hook for subtract any of that from you know any losses i've made against that so this is on on in aggregate how i ended up and and then i'll get to apply a 50 discount on on the gains where that where that's applicable um yeah so oh gosh people do some really wild things in the name of tax it's just crazy i mean you you mentioned negative gearing which is exactly where I was going to go.

33:49I mean, the idea that I intentionally lose money will be seen in future as the most bizarre thing. I know it's worked very well. I know it has, but it only works when the capital gains are sufficient. It's not just about property. It's about any kind of investment. It's just, you've said it before really well, which is a smart investor looks to maximize their after-tax returns. Yeah. No question. Yes, obviously. I want to minimize the tax. I don't want to start – I mean, what's – if I have to – let's say I buy something today and tomorrow it goes up 1 ,000x and it's just a complete bubble or whatever.

34:33Am I really not going to sell that because it might mean I'm going to have to pay a bunch of tax? I've said before, if the ATO says to me this financial year, oh, you owe us$10 million in tax, I'm going to be the happiest person on the planet. Not because I love paying heaps of tax, but because the only way that scenario is true is because I've made an absolute killing that is out there. So you might be able, someone else might be able to say, oh, I paid much less tax than you. I was like, yeah, but you made much less money than me after tax. Who pays less tax doesn't necessarily win. Exactly.

35:06That's right. What do you want? you know so anyway so yes no i think you've i think you've answered it well uh i wouldn't use it just it's a nice silver lining to a loss that you get that you get to do this but but always always just just focus on the quality of the things that you're holding and then do what you can to minimize tax around that but but don't don't let the don't put the cart before the horse now i'm going to do something uh i'm going to take on a challenge here because i'm going to try and read something from the ATO's website and make it interesting on the podcast. I'll get my pillow.

35:39If your eyes are going to glaze over exactly, just watch me car crash this one if that's of any interest to keep you entertained and involved. Because there is, Phil, the ATO actually has a slightly different take on the way the tax losses can be applied. So let me run through this for you. So calculating CGT yourself. So by the way, go to, it's the calculating your CGT page in the ATO. I'm not going to read out the URL, you'll find it. but it's calculating your CGT. Step one, work out what you received. I'm summarizing clearly. Step two, work out your costs. Step three, subtract the cost from what you received.

36:13Okay, got that. If it's more than zero, you got a gain. If it's less than zero, you got a loss. Cool, we're good so far. Step five, and this is why it doesn't matter, Phil, to your point. If you have a net capital loss carried from previous years, subtract this first, then subtract your capital losses from the current year but here's the key one and this is the ato we're not tax advisors the ato's own text i'll read it and i'll read this one literally word for word quote you can choose which capital gains to subtract your losses from if you have any capital gains that are not eligible for the cgt discount subtract your losses from these gains first.

36:55This will give you the best result, brackets, the lowest CGT, close bracket, end quote. So that's very, very clear to my mind. You can choose which gains you want to offset your losses against. In other words, if you have a gain which is not attracting the CGT discount, you can at least apply the losses to that first. And that would actually mean you pay less capital gains tax. Now, the rest of it, you apply a 50 % discount and go on from there. But I just wanted to highlight that upfront. You do it by asset by asset, but then apply the losses to a given asset and you can pay the lowest possible CGT on that basis.

37:37So again, I'm not going to give any more thoughts on that. Ask your tax accountant as always. Check the OTO's website as always. I just want to read that out because it was a bit clearer than I think Phil may have suggested, or at least than I took from Phil's comment. And either way, better that we try and make it as clear as we possibly can. Anything to add to that, mate? No, no. Tick. I'm disappointed, mate, that we've got some time left on this podcast because I've got a question from Jonathan that I'd really rather than ask. Jonathan, you have my eternal disdain. You have my eternal... I think I know where this is going.

38:11Let's just say, Jonathan, I hope your chooks turn into emus and kick your dunny down, mate. Hi, Scott and Andrew, he says, I'm a long-time listener, occasional heckler. Love it. I've been listening from the start when Andrew was the pod boss, through the days of Scott's promotion of pod boss when Andrew wasn't there, and now back to Rambo as guest. At this juncture of the email, I'm aware you'd like very positive comments about the pod. So here you go. You have. You've trained people. You really have. So you keep implying, but I don't get that. Anyway, one of the many things you do really well, says Jonathan, is that you genuinely love everyone's questions.

38:48Not a question goes by without comments from both of you like, great question. This is a really good question. I love this question, etc. This is very affirming for the questioner, says Jonathan. Jonathan, after that, you know I'm not going to say great question because I know what's coming and you know what's coming and Andrew can assume what's coming and the listeners are dreading what's coming, but here we go. Perhaps with only yourselves to talk to for hours, any question from outside is wonderful. It's also probably true. anyway to my question which is not a very good question i've been very much enjoying your podcasts especially the april 2 podcast that was a while ago where both though mainly andrew talk about bitcoin so i don't even know why jonathan's asking this question seriously you went to the question i jonathan must have been asleep i think at the end of that thing ever since so he says do either of you have any interest in other coins major or minor he mentions bnb which i thought was a hotel accommodation.

39:44Ethereum. Solana, which sounds like a terrible 1980s Toyota. Cardano, which also sounds like a 1980s Toyota. I suspect I know Scott's answer, but Andrew's not so much. Is having Bitcoin adequate exposure to crypto? Asked Jonathan. Or are we better having some diversity of coins? Pot on, Jonathan. I'm still sure Jonathan is taking the mickey here. I don't know. If I planted this myself just to rile you, I'd have a rile smile. I'm not entirely sure Jonathan's kidding, but I very, very, very, very much already know your answer, Andrew, unless you want to surprise me. Do we need exposure to other cryptos, Andrew?

40:22No. No. Bitcoin. There is no second best. Diversification. Diversification. No. Surely you wouldn't preach concentration. Surely. Surely. No. This is the big problem that we have, is that it's this false equivalence. It's like saying the little reactor we have out at Lucas Heights is the equivalent to a nuclear warhead. You know, they have something in common. They both use nuclear vision technology. But that's where the similarity begins and ends. You know, a banana has sugar in it and a Twinkie has sugar in it. So bananas and Twinkies are the same thing. And it's very frustrating. I take it back, Jonathan.

41:06I really, really do love this question. I appreciate it very much. I mean, you and me, I could not be. This is the thing, whether it's Elizabeth Warren or Scott Phillips, I'm in 100 % agreement that, you know, that this is something that is an absolute blight on society and needs to be. What it is, someone just figured out that there's a lot of money to be made here by trying to sort of say, oh, we're Bitcoin, but better. And it's very understandable because most technologies, something came along and then something better came along. And then, you know, Bitcoin transactions are slow. The box size is not big enough.

41:40Or this one does this and this one does that. And this is better. We really don't have time to get into all of that kind of stuff. I mean, sorry. That was just me. But there is. It is. And it also comes across as very ideological. Because if you were to get, I don't know, a Cardano or a Monero person, they would say, no, no, no. this is better and then you know so there's a lot of this kind of stuff here but the short answer is yeah they both use cryptographic techniques they both use quote unquote blockchain technology um but where they are really qualitatively different is that one is issued by a security by a company by a corporate entity there are people that have is have pre-mined so they've they've kicked things off and they've given themselves and their mates a bunch of coins They have absolute control, so they can get in there and they can change the code whenever they want.

42:33It has very little adoption relative to Bitcoin, so that you don't have the same kind of network effects. You don't have the same kind of security elements. You don't have any of this kind of stuff. If I can change something, I mean, here's an analogy. Gold is a commodity, right? Because no one can create gold. Well, actually, that's not true. We can actually. We can't create anything. We can't create meaningful quantities of gold in the lab. Kind of the only way to make gold is through a supernova of any reasonable quantity. And there's no boss. There's no CEO of gold, right? There's nothing that the SEC or ASIC or anyone can do to change the amount of gold in the world.

43:19It is a commodity. Now, it's very hard for people to wrap their head around it, and it's why it just does take a very long sort of journey of discovery and research to sort of get to it. But I will say with the straightest of straight faces that Bitcoin is a commodity. And if you want to, there's actually precedent for this long before this stuff came along called the Howey test. When regulators started to wrestle with, well, what is something that is a, what's called a security and what is something that we might call a commodity like oil or wheat or soybeans or gold or silver or platinum or these other kinds of things.

43:52Bitcoin is a commodity. And it's the only one that is a commodity. and that's why it's special. There's no boss there. China banned Bitcoin mining, and it's the second biggest Bitcoin miner. It's the jurisdiction in which the second highest amount of Bitcoin mining occurs. You just can't stop it, right? No more than China can ban gold. Okay, you don't want to get caught with it, but if I've got a block under the ground, you can't do or know anything about that kind of stuff. And it's a very, very profound idea that there can be something that is digital and not physical and yet be and have these properties.

44:36That's the big deal here. That's the big deal. I've got everything that gold has except I can transmit it over the internet. Like, wow. And, you know, I can assay it. I can prove it. I can break it up into 100 million satoshis. I can do all. I can program it. I can do all kinds of things. And there's nothing that you or anyone on the face of the planet can do about it. And that is not true for Ethereum. It is not true for Cardano. It's not true for all of it. That's why they're called, pardon the language, shit coins. They are. And the people who do this are making money off you. Money. And they're getting it and they're dumping it.

45:14They're either buying Bitcoin with it or they're dumping it into US dollars or something like that. And everyone has got rugged on this again and again. What blows my mind is that it's a very understandable equivalence that people drew. And then in 2022, we saw what happened. Everything kind of blew up. And it all blew up because people were trading unregistered securities, right? And we've got very good securities laws here in Australia and over in the US to prevent this kind of thing. And guess what has been the response? The response is we're cracking down on this. We're regulating this. We're shutting this exchange.

45:48We're doing that as they should, right? I'm 100 % in agreement with that. But just because something has a cryptographic process on it doesn't mean that anything that has a cryptographic process is the same kind of thing. And I don't have time to go into detail. And no one wants to hear me crap out about it. I do the time was going a while ago. And I'm not saying this as an ideologue. I'm saying this after hours and hours and hours and hours and hours of research and having that epiphany of that this is a legitimate, it is a legitimate breakthrough in computer science. It is something that the world has never had before and the world is now different that we've got this.

46:31And this is the other crazy thing, right? Despite all of the nonsense and grift and scam and everything, if you want to look at, put this on Thrawman actually the other day, number of wallets with more than a million, sorry, with more than one Bitcoin just hit a million recently. It's something up and to the left. Number of hashrate on the network has been going up. Number of Bitcoin wallets with any kind of given volume has been going. Every metric that you care to look at shows that the adoption is growing, not just a little bit, but strongly through a bear market. Now, when Ponzi's collapsed, but you mentioned Bernie Madoff before.

47:03When he got found out, that was it. Party's out. When a Ponzi breaks, it breaks. It's over, you know? Yeah, yeah. This is not a Ponzi, right? No, it doesn't mean that you have to adopt it or anyone has to adopt it. Do what you like. It's a free market. The fact is that people, some increasingly large number of people do like it. I don't play Fortnite. I'm pretty sure you don't play Fortnite. I don't play Fortnite. But to a lot of people, V-Bucks are real. And they are real. I can say, oh, it's all stupid. Well, it's not to them. A lot of people collect baseball cards. That's a medium of exchange.

47:36Exactly, totally. It's stupid. I don't know. It's a piece of paper. What's the point? No, it's not. Humans, so much in our world is made up, right? And it's valuable because we think it's valuable, right? Diamonds are a really great example of this. We can now make diamonds much better than what nature can make. And yeah, we've got the technology. And again, like with lithium or with water, it's carbon, right? It's just an arrangement of carbon atoms. And yet people still value this thing through some very clever marketing. and this whole actually fascinating story behind De Beers and all the rest of it.

48:18But it is nonsense. Does that mean that if you gave me a bag of diamonds, I wouldn't be happy? No, because I know that there's someone out there who will see value in that and exchange it for me. So it's all, we're all just slightly less hairy, slightly smarter monkeys. And we've decided what we think is of value. And this is something that is untouched by humans and can't be touched by humans in the same way that gold, you know, so we, oh man, it's just such a profound idea. I'm going to shut up now because I'll just keep on going. But it's, all I will say is this, I'm not saying this because it doesn't benefit me in any way, right?

48:57Because I'm not the CEO or the boss or anything of Bitcoin. So you will get rugged, guaranteed. And I would say virtually 99.999 % of all crypto are going to zero. And in fact, if you look at those charts priced in Bitcoin, they are all going down, right? We've got it. Money always tends to the best form of value, always has throughout history. And there was a point in time where I could exchange seashells for value. I can't do that anymore. Everything collapsed into gold and then everything collapsed into fiat. My thesis is over the next hundred years, everything will collapse into Bitcoin. And all I'll say is do the work.

49:42Don't be succumbed by the get rich quick or the promises for slightly better technical attributes and the rest of it. It's just there's only one that has the ethical component to it, the one that is beyond human control, and that's Bitcoin. I'll die on this hill, mate. I will die on this hill. I will die listening to it. No, I'm kidding. I know. So I'm going to add my investors, advisors, portfolio kind of thoughts to this one, mate, because you've done a wonderful job of describing the assets themselves. And I want to take that to the next point when it comes to Jonathan's question about portfolios, because I'm a massive, massive, massive fan of diversification.

50:22Really, really important. But I'm also, I've been known to say, I've probably said this podcast more than once, don't be like Noah. You don't need two of everything. Don't buy two airline stocks just because they're there. don't buy two lithium miners just because they're there if you want to buy them for the right reason buy them don't buy them just because they're there and when it comes to diversification it's one thing to say hey maybe i should have more than one cryptocurrency i would it sounds smart right it's hard to argue against from the periphery it's like yeah well that just seems prudent correct except that if the diversification option now i'm not a big bitcoin fan everyone knows that nor am i i must be bare but generally speaking only the only point only reason to diversify if you've got one great airline and one airline's about to go broke don't buy two just for diversification if there's one great supermarket another terrible supermarket don't buy two just so it's and jonathan i know you know this but i just i guess i want to make that point that if if there were and maybe there are andrew might be wrong uh for all we know but he's probably not if there were two or three or four cryptocurrencies that were worth owning for their own sake that gave that diversification benefit then i would probably say if you're going to play in this space it'd be diversified in that space i think that's a perfectly good point to make if you believe that you can choose from and collate a portfolio of quality assets, whatever they are, metals, cryptocurrencies, shares, houses.

51:39You know, don't buy a great house and a terrible house, just so you've got two, right? So, and I know that you didn't say that, Jonathan, I'm not trying to paint too direct a picture, but Andrew's point, you know, given someone who's in the space, who's done all the work, who used to own, I'm almost 100 % certain, Ethereum back in the day, mate, before you said it. Yeah, I did. Yeah, I got sucked it in. Yep. All of us do, right? All of the bitcoin it's a funny thing when you talk to all we all we all shit coin at some point okay you know until you see the light yeah and so that's you know and so my point is that you know in that circumstance at one point andrew thought a couple of great cryptos a couple of good options maybe one or both do well i'll buy the boat because it's a good idea at some point when you say actually that asset's not worth owning anymore this is broken i think this is broken exactly exactly and by the way i reserve the right to in a couple years i might change my mind on this too and I'm sure I'll get a lot of grief for it but that's the best you can do as a human in this mad crazy universe right here's the facts as I see them here's my reasoning as I see them the person who goes that's it that's set in stone now forever that was the case we'd still be worshipping Zeus and you know it's just there are there are there are there is none some people probably do right Right.

52:52But, but, but the true believers, mate. Yeah. But it's, it's like there's, there's, there's,

53:03there's an element of trust in that. And there's an element that this, I mean, my thesis is basically it will continue. The network will continue to operate as designed. And that's a very big statement, but it's one that when you, when you dig into it, you go, Oh my gosh, yes. That's actually extraordinarily likely. and that adoption will increase. If those two things are true, it's my thesis that they are, that this thing only increases in value. I don't know, drop down 50 % 100 times between then and now and it'll take years, years and years and years and years. On the weekend, Indonesia, the fourth largest, which is one of the biggest countries and economies in the world, are now going into Bitcoin mining.

53:46It's sort of, it's pretty interesting, right? Like there's of all of this, everyone just looks at the price and everyone just loves it. Like with the dot-com era, right? I mean, at dot-com, oh, we're using the internet. Wow, but we're doing it this way. And everyone gets in. Everyone wants a bit of a halo effect of this thing. But there's one legitimate invention. It was the internet. And the rest was Ponzi and Grift. And we're seeing it play out again. And it will die. But we just have to go through this process. And unfortunately, a lot of people are going to and already have absolutely done their dough by speculating on things that people made up and control.

54:25Why would you have any kind of currency where a small group of people can change tomorrow? What am I buying? I'm buying on the hope that you guys over there do the right thing, not just now and next year, but 10 years and 100 years from now. No way would I put my money into anything that's like that. But something that is immutable and immortal, that's starting to sound a lot more like gold and with none of the baggage of gold and none of the difficulties with gold. All the advantages of digital technology combined with all the advantages of a hard money asset and you have a discovery that is a once in a civilization discovery.

55:10It's like the wheel of fire. Big, big bowl call. people rolling their eyes right now i can feel you rolling your eyes just just do the work right don't don't take my word for it don't trust verify is the meme sometimes if uh people roll their eyes mate you should also pay attention to that anyway uh let's jonathan as i said i i love that i didn't i hated that question i love the question and then at the end of this i'm just wishing i hadn't asked the question so you know you could make your own judgment from that i don't get why you're so against it i just all i would say i don't get it it's all i mean it's all it was It was mentioned before, too, back in the day when you and I were first doing this podcast.

55:47You were the one who bought Bitcoin and I was the one laughing at you, right? Yeah. I'm really proud of that, actually. You should be. You absolutely should be. Other than the fact you should listen to me in the first place, obviously. But, you know, you came around eventually. If I'd listened to you, mate, I'd have a lot more value right now. Well, if you put that much money, exactly. Yeah, yeah, yeah. Yeah. Change your mind. Be open to it. And I think too often the problem is people see something, they go, oh, it's stupid. And that's it. That's where the research begins and ends. Charlie Munger, and this is because Munger hates Bitcoin, right?

56:23You know, he says, take a wild idea and take it seriously. And that's where I started with all of this. Because just as I said to you before, just the damn thing wouldn't die. It kept on coming. Right. Okay. I'm going to look at it so I can, when it comes up, I can really put a stake into the heart of this thing and move on to more interesting things. and I just orange peeled myself in the process. I just couldn't find a flaw in it. And then I've gone deeper and deeper and deeper down the rabbit hole. It's like, huh, all these crazy laser-eyed people on Twitter actually have a point. It's really fascinating.

56:53Maybe not the reason they think, but yes. Yeah, it's a wild idea, man. It really is. It really is. Yeah, yeah. Man, let's move on. I want to just say a fun question. I was asked on Twitter. Hi, this is Lisa. My bestie happens to be single at present. She's seeking someone nice and sweet and mostly matured. If you're a gentleman over the age of 30, I think you two might be matched at her on WhatsApp. Thank you, Lisa, but I assume you're not listening to the podcast. And while I appreciate that, I'm going to give it a miss. Just a bit of comedy. Mate, last one for today. Whoa, whoa, whoa. Let's not be so quick to dismiss it.

57:34Maybe we should explain it. That's right. Send it to my back details just in case. Because, you know, you could come with it. Speaking of fraudulent coins. Anyway, Max says, G'day, Scott Kogan Drink Phillips and Andrew It Depends page. I have one for the pod. I'm a 30-ish year old. Yes, Scott, I know, bastard. And have a modest allocation in the S &P 500 using my SMSF. Being fairly open with risk at this age, I've heard of a new AFC Uzbekistan fund. Absolutely no one is talking about this yet. Has a few red flags. Sorry? Pass. Pass? No, the answer's no. Should I finish the question? Yeah, please.

58:19Okay. No one is talking about this yet. Has a few red flags. Minimal investment is 10 grand. Located in the Cayman Islands. Okay, huge red flags. Pass. It sounds like a Ponzi scheme like FTX. Quote, calm down, Andrew. This is not an invitation for a crypto rant. End quote. It is a current example. my question is how do i get exposure to countries like uzbekistan or kizik kurzikistan without going through dodgy companies i'd like to swing at the fences with my personal investing and leave their heavy lifting for my smsf also loving the good oil insert plug thank you max all the best full on so i love i love the fact max has gone yeah i started with the idea of like this thing sounds terrible i don't know the afc uzbekistan fund i'm not going to invite uh legal action by being too personally critical of it other than to say as andrew says pass and i do like the fact max goes yeah huge red flags but his question is actually not a silly one mate which is if he's looking for emerging markets in this case he's talking about uzbekistan and kurzikistan for reasons he doesn't go into so i don't know why um but if you're looking for emerging market stuff you're looking to swing for the fences take a bit more risk a is it a good idea b if it is how do you do it well, it might be a good idea, but what's underpinning that notion that Uzbekistan is going to generate a bunch of value for the world?

59:44And it sounds really nasty against anyone from there or against the country in general. It's not that. But gosh, it's a very competitive cut-and-thrust global market against huge silverback gorillas with massive incumbency advantages, huge advantages in rule of law and regulation and tax regimes and the rest of it. So for a country like that, can anything of value come out of it? Yeah, of course it can. Absolutely it can. Has it to date at a large enough scale where it's actually meaningfully moving the dial in aggregate? No. probably because there's the institutions there aren't as robust as we would, we are very privileged to enjoy here.

1:00:31So I just think, no, why? Why is there, there'll be a point maybe in the future where there's just zero interesting value opportunities in my own backyard. And when that comes, I'll be forced to look elsewhere. but until that day comes it's just sort of like i i'm i'm not only getting into i'm getting into all kinds of sovereign risk i'm getting into all kinds of currency risk i'm getting into all i'm i'm investing in an area that i personally have never been a no next to nothing about and and now to be fair the response might be well actually i know the country intimately well right 20 years i think and that different story that fantastic you've got an edge over me and that That's one that you might want to prosecute.

1:01:20But going emerging for the sake of emerging. I mean, these economies have been emerging for as long as I can remember. When have they emerged yet? They are too often, choose my words here, crippled by corruption, cronyism, and the rest of it. And will that always be true? I don't know. Do I want that risk? Probably not. Is the next Apple, Google, you know, choose your massive success story likely to come out of that jurisdiction? Yeah. I would say extraordinarily unlikely. So, yeah, it's a hard pass. It is. It's an interesting one, mate. It's funny, you know, like if people had said, if you're American, how can I get access to Australia?

1:02:05We'd say, well, it's totally perfectly reasonable. It's a good market and we're here and it all makes sense. And there is a bit of that kind of like it's over there, not here. And so I think you're absolutely right in the sense that taking unmeasured risks, because I'm not sure that Max doesn't necessarily measure the risk. Just, I think, thinking about the risks you're taking and whether those risks are well-judged risks based on what you know or what you think. Do you know what I mean? I think there's something on that around how we plan that out.

1:02:40if you if you said hey New Zealand's a great market well how can I invest in New Zealand I'd say to you well what do you know about New Zealand as you've already said what do you know about New Zealand why is it going to beat the market what does the exposure give you there have been absolutely times in the past where emerging markets have done extraordinarily well and advice that said at the time don't invest in emerging markets there's plenty here at home and you know the I don't know Brazilian market or Argentinian market or Vietnamese market goes up 30 % a year and you're like Like, man, you just told me not to do that.

1:03:08So there are, you know, at one point, Australia was an emerging market in that context and around and around we go. I don't think you necessarily, I wouldn't suggest those aren't markets potentially worth investing in, but I think you have a responsibility, I'll say, I don't think that's too heavy a term, to look at your investing and say, right, what do we know about this thing? How does it come together? what analysis have I done to give me a sense that I think it's going to be a good market at a good price. The other thing too I've got to say is when you start making those kind of macro-y calls, and we've talked a lot about that so far already in this episode, you know, airlines and other things, maybe Uzbekistan's economy is going to grow.

1:03:49Yeah, maybe it is, but maybe the market's already overheated. Or maybe the market is not representative of the country because it has a couple of companies that are just massively overweighted. And so the success of two or three businesses in Uzbekistan will tell you, will dictate the results far more than the actual economy growth itself or the reverse. And those things, I just think any investment you're going to make, I would take the same approach to this one, sorry, Max, as I would for those thematic ETFs that I rant about regularly, right? Buying a crypto ETF or a cybersecurity ETF or a gold ETF or a cannabis ETF or whatever, people are looking at that going, I think that might be a thing.

1:04:25I might buy it just in case it is. But if you don't know what you're buying, who's in there, what value they have, what growth prospects they have, all that sort of stuff, it's a very, very, very, very, very blind bet. Doesn't mean it can't come off. Bets come off all the time. But is it a sensible, smart, well-considered, well-judged bet? Max, only you can answer that. To his question, if you were going to do it, I would only do it using an ETF that was listed on one of the world's major stock exchanges run by a reputable provider so if you've got despite hearing us if your question is i hear like guys i just asked how i didn't ask whether i should fair enough um a vanguard blackrock i shares one of those um because those people will have done the most work in my own not necessarily most more than anybody else but again thinking about reputation how much you know about a market if i was in america i want access to the australian market maybe there's page and phillips etfs and maybe that's fine maybe it's not but if i was in the us i'd say well i'll go the vanguard or the blackrock or the iShares or the something else one because i know that i know those fund managers are at least on the level and legitimate and believe in the methodology of how they do these things and so if i was going to that's how i do it if i couldn't get exposure through one of those guys i would probably go back and say i wouldn't do it then as a result but that's just uh that's just the way these things go just having a quick just a quick look at wikipedia right so um the imf calls it basically an extremely corrupt regime, terrible human rights violation.

1:05:55The economy is based on gold mining and cotton. They've got a lot of gold reserves there. They've had several periods of hyperinflation, 1000 % per year. I mean this is former Soviet Union country and there's a whole bunch of historical and political reasons as to why they've sort of been under the poor people of these I just feel for them just under the thumb of tyrants that feather their own bed and it's sort of like that here's the thing right in these jurisdictions we we are in such a bubble here that we we take our rights for granted but someone in the in izbekistan creates the next apple government's just going to take it yeah or or there's just going to be a bunch of people that just milk that thing dry for their own personal gain i just i can't see for the life of me why you would do it there are someone might be oh look I'll make uppercase here.

1:06:44There's a mine over there with the best gold deposits in the world. Price of gold is expected to go higher, et cetera, et cetera, et cetera. What a great play. Well, look at all of the – there's a lot of African countries that are exactly like that. None of that money trickles down to anyone else, least of all minority shareholders. I just think it is so hyper risky that it is something that I wouldn't go for. Swing for the fences by all means, But there's a lot of legitimate small cap companies here that have got much better prospects. And you've got all the regulatory sort of protections that you don't have over there.

1:07:23So too often, I mean, I've heard fundmen just say, oh, you want exposure to emerging markets? Why? Why do I want exposure to that? It's just absolute nonsense. So anyway, I think I've made my point. I think you probably have. But it's a good point. it's a good point you make and one worth uh one worth thinking about i look i i think you know here i found that here you go sorry i lost it on the page here before and i thought this is this is the um uh uh uh imf no sorry the the uh where is it an authoritarian state with limited civil rights have and they have expressed profound concern about wide-scaled violation of virtually all basic human rights widespread torture arbitrary arrests restrictions of freedom of religion of speech and of the press you know it's just it you know unbelievable no way yeah i think that's probably right i think we need to i i would i would suggest it's worth being mindful of being mindful of the outsider's view um there's you know things that people would say about australia and our treatment of different groups for example uh now i'm not saying where it was because i'm in kyrgyzstan anytime soon i just think it's worth thinking that through so i i'm a little less absolutist about that i think because we don't know we can maybe think or assume the worst uh maybe there's money to be made there maybe there's not maybe as you say they take it all, maybe they don't.

1:08:57Money has been created in some dodgy places in the past for investors who've gone in. There's a whole lot of money being lost by the same group. So again, I would just probably maybe not even disagree with you, mate, other than to say, understand the risk, understand the potential reward. The other thing is don't swing for the fence of your own personal account unless you really, really, really want to, because that money is still every bit as good as the money in your SMSF. And if they both grow at a reasonable rate over a long, long period of time. It's very often the case that putting that money to work in, it quotes, boring ways can be remarkably profitable.

1:09:32You don't have to swing for the fences in your personal portfolio just for the sake of it. You don't need a 101 or nothing. A really nice market-ish compound return for a long period of time is just better, frankly, because the mispricings don't normally exist in any meaningful way permanently. They're probably cheap because, to Andrew's point, you maybe can't trust the government. So apologies to those listening from those two countries. I'm sure they're wonderful places. Please feel free to let us know if you disagree. But on first blush, taking unreasonable risks for the hope slash gambling vibe of maybe I might get rich is probably not the best way to treat your investments.

1:10:11And look, it's very important to delineate between the government and the people, right? Exactly. Million percent. I have nothing but love for the people of Uzbekistan. Nothing but loathing from what I've just read for the people in power. You know, very different things. Andrew, our crypto correspondent and our geopolitics correspondent. So when it comes to Kazakhstan and Uzbekistan. We talk a bit about first level, second level thinking here. So here's a really good example. 10 years ago, you say, I want exposure to China because China is growing very fast. It is on track to be, in fact, actually, maybe it's already just recently passed this on some measures, the world's largest economy.

1:10:52I want exposure to China. It's hard to fault that line of reasoning. And China's got its own issues on human rights and the rest of it, but it probably makes Uzbekistan look, it probably looks fantastic next to Uzbekistan. Here's the thing, though. So I look up ETFs. I find that BlackRock have an iShares China large cap ETF. So it's not even the small stuff, right? It's all the big solid quote unquote companies in China. Well, over the last three years, I've lost 8.5 % per annum. Over the last five years, I've lost 5.5 % per annum. I go way back to the inception more over 10 years ago, and I made about 4 % or 5 % per annum.

1:11:32How do you square that circle? How do you square that? Well, the economy is not the share market. Repeat that again and again and again and again. They are two separate things. And you can have companies that get very, very, very large but create absolutely no value for shareholders, right? So it is just a great example. And we're not even talking about what might happen in the next 10 years in China. That's going to be wild given the state of the world and where things are going. But I mean, I suspect China will be a bigger economy. Am I going to put money in China? Not on your nelly. That's where money – a number of companies I've seen in Australia is we're going to go to China.

1:12:14And the argument is usually, you know, if we only get 1 % penetration of that market, you know, it's a billion people, you know, look how much money we're going to make. It doesn't happen. Business is done in a very different way there. And you can be right on China's general trajectory in very large aggregate sort of numbers and be completely wrong on the investment. on the investment potential. And I just, I mean, it comes back again and again and again and again is trust is at the core of everything we do as humans, right? And call me wrong, you know, maybe I am, but I just trust the institution.

1:12:56I've got a lot of bad things to say about our institutions and regulations in Australia. But give me a choice between that. Less bad is enough sometimes. Yeah, exactly. Yeah, give me the choice between that and the Chinese equivalent. that i'm like i'm gonna go australia on this one or the us or europe or something there's a spectrum here and this is not at the right end of that spectrum i don't think it's too controversial a thing to say so uh i think that's you you do you but i'm i'm and this is not advice because we can't give advice but i wouldn't yeah that's right very good on that geopolitical note uh mate thank you for joining me will you come back on friday yeah you know what you know i will i will look forward to it um i wonder can you give us something on maybe tunisia or uh congo that can you kind of just you know what maybe one one one country episode something like that they've they all fall under the same umbrella unfortunately and that's the generalization that's going to get you in trouble mr page corruption is just such a pernicious problem and yeah not easily solved Yeah.

1:13:54Very good. Until next week's journey in geopolitics, I'm Scott Phillips. He's Andrew Page. Fool on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.