Mailbag, incl: How long should I stay in cash? November 9, 2025

25:16Namely, that if there's a big demand spike, there'll be a supply side response. Right? And a million other things as well. Oh, by the way, you can find a bunch of lithium under the ground, but you've actually got to build a bunch of stuff to get it out. That might take five years and maybe the project costs, et cetera, et cetera, et cetera. So what I would say to you, Kiri, is if you don't know, then that's cool. Just wait until it becomes more clear to you. And don't be too broad in your analysis. Zero in on a specific company because Meta's role in this is extremely different to NVIDIA's role in this, is extremely different to Anthropik's role in this, is extremely different from et cetera, et cetera, et cetera, et cetera.

25:58So focus on the specifics. Yep. Find somewhere where you can have a reasonable – you'll never have certainty. Certainty does not exist, but a reasonable degree of conviction and go there or otherwise wait until that happens and then go there. Love it. Yep. I think that's my take, Kiri, is don't get excited because other people are excited. That's the first thing, right? but that's how bubbles do form. Whenever I'm making money, the share price is popping. Maybe I should be in on this thing. There's nothing worse than your neighbor getting rich. So try and keep the kind of jealous green-eyed monster at bay a little bit and make sure you're not just jumping in because other people are making money.

26:35And by the way, it can work. I mean, I've used the example before. Amazon, I own shares, got through the roof for years and plenty of people made money and avoiding it would have been terrible. But equally, jumping in the middle of the dot-com boom in 1999 and losing 80 % of your money would have been terrible. So there are ways to think about it. My general approach, I don't know what Ram's already said, Kerry, which I think you nailed it, but the key for me is simply what do the current prices require the company to do? Oh, great point. I wish I knew that one. And if you work, we call something a reverse DCF.

27:03It doesn't have to be a DCF, discounted cash flow analysis for those who wonder what DCF means. Start your stuff from reverse. Okay, this company is now on a PE of 50 times. So that means it's going to have to grow. It's going to triple before the PE comes down to 16. And that's just to get a normal market level PE. Now, maybe it does. And I'm not saying it won't. I don't mean this to be a - And if those two things happen, the share price stays the same. Right, exactly. Now, if the future after that is still bright, maybe it's a PE of 16, maybe it's 35, in which case you've got different maths.

27:29Yeah, the PE doesn't compress as much, but earnings quadruple. Correct, exactly. So what do you need to consider, Kerry? The starting point would just be, what does this imply about the business's future and how likely do I think that is? And around this point, if you don't know, you don't know. I don't own Avidia shares. I don't own any AI shares. I'm interested in Goodman Group, which is building data centers at a massive rate. know it's got like a 17 billion dollar pipeline something not a recommendation by the way just telling you um also by the way distribution is for amazon and deutsche post and a lot of other stuff um you know i don't know whether they win or not i don't know whether the chip makers win or not uh by the way i say what have they got to do think about not just the first level so if i said and i should have been clearer okay triple profit at a p of 16 to get to make just by the current price that's true but how do you triple profit well you've got to grow sales obviously But think about the margins.

28:18NVIDIA's margins are stupidly large right now. And they're stupidly large because they're the only game in town. And maybe that's forever, right? I don't know. Or maybe in a year, a week, a month, 10 years, five years, two years' time, there is a less successful, less powerful chip, but it sells for a third of the price. So what do consumers do then? Or maybe it's the same chip. Maybe NVIDIA has to drop its price to maintain market share or maintain sales volume. Or maybe there's an entire paradigm shift in computing. They're just like – I mean, not that you'd bet on this stuff, but it happens, right?

28:51It's like, oh, these chips are irrelevant now. So not only do you have to grow, but you have to grow and the rest of the business dynamics, the business model, the P &L shape, as the cook would say, things like the sales and margins and costs and your competitive position, they have to stay the same. And you've got a triple profit, in theory, by growing sales by some volume. And again, I'm not saying they won't. I don't know the future. So I'm not long nor short, as I say. I don't own the shares. I wouldn't short media because I don't know what happens next. Open AI, I don't know what happens next.

29:21I have no idea. So I'm just simply sitting on the sidelines like Ram is. But yeah, that's what I would consider. So what does it need to do to justify the current price? Not only in a positive sense, but avoiding the negatives. So what if there's more competition? What if margins fall? What if there's, as Ram says, a brand new computing paradigm? What if we're all minting Bitcoin? Yeah, all those things are true. And so that's something to have a think about. That was always my argument with brain chip. Do you remember brain chip? Yeah. It's still listed, right? Oh, man. So, I mean, honestly. Don't mention brain chip in a public forum.

29:52The brain chip diehards are brutal. Oh, they're gone now. They're very quiet now. Well, because the share price is 20 cents, right? Yeah. And it was, look, I interviewed the CEO back in the day. It was very popular. Everyone wanted to know about it. And like, credit where it's true. Like, it was an interesting technology. It wasn't vaporware. There's something that's potential. Again, we have to run the experiment to sort of find out. But the reason I stood away from it was just for the exact rationale that you did. It was like, okay, if this price makes sense, what needs to happen? Yes. And how confident can I be that those things will happen?

30:30And how confident can I be? And it got to the point where it's like, well, you will get a good return if profit 10Xs and the PE stays above 100. I can't remember what it was. And it's like, well, that's not impossible. but it's kind of like there's a tiny narrow that of all the future potential futures out there there's a tiny subset where it works out and there's a very long tail of where it doesn't so i don't know which one it's going to be but probabilistically it was like that was always a difficult bet where people buying at a dollar 60 was like yes that is definitely going to happen it's like well you know not obviously but i think well somewhat obviously that that is okay i should mention as well you when you were speaking there with goodman actually i do have aoy exposure um I own a small amount of a company called Adrad Holdings, and they produce radiators.

31:16I love it, right? It's like, what? That sounds really boring. It's like, I love it. Boring industrial company. Anyway, I won't go into the thesis, but when you think radiators, you think, what? The things in cars and trucks? Data centers kick out a huge amount of heat. And I'm talking about a radiator that's the size of the side of your house. Like huge, huge bits of, and guess what? there's increasing demand for it. Please don't buy it on that basis. In fact, now that I've said that, share price will crash. It's hyper, hyper illiquid. You know, the chairman just quit. There's a whole bunch of hairs on it.

31:49So don't, please, please, please, please do not buy it. There you go. Let's go to a question from Jackson who says, hey guys, could you please talk through the CBOE, or CBO as the cool kids call it, Greenlight to list ASX companies? Could this make it easier for companies to list? I know I'd like more opportunities to invest in good Aussie businesses. I love the pod machine and all things foolish. I'm a ShareAdvisor subscriber and appreciate it as an idea generator. Thanks, Jackson. Thank you, Jackson. Much appreciated, mate. Make sure you check out strawman.com as well. Andrew makes me say that.

32:20I don't actually know. I'll throw it to you, mate. All I know is this is the old Chai X. There was the – look, this is hard, right, because sometimes there are just natural monopolies. Yes. And, like, the share market is kind of one of those things. There is an exchange in New Zealand. New Zealand. Sorry, Newcastle. Both start with an N. What's that one called again? Oh, it's a little tight. Newcastle Stock Exchange. NSX. Newcastle Stock Exchange. Yes. Yeah, it's the NSX. Yeah, yeah, yeah. Like, what? I didn't know about it. No, no one does. Tiny, tiny, tiny, tiny little companies. And so, and no one lists there unless you've got no other option, but you want to list and you do it.

32:59And so ChaiX and now CBOE was sort of framed as, well, we need competition, which, you know, me, I'm all about competition. Yes. But it's never, as I understand it, it's never really done much to encroach on the very, very dominant market share of the ASX. I do like it in principle. In terms of the technicalities of the question, I've got no clue, other than the observation that from afar, at least, and I haven't dug into it, the introduction of this secondary market where companies can be listed on both exchange hasn't really done much. Maybe there's a broker out there who will say it helps with liquidity and considerations like that.

33:36But I don't know if it makes the path to listing any easier. And I'll go out on a limb here and say, I don't know if necessarily making it easier is necessarily a good thing. Correct. I was going to say that too. Yeah, I don't want. In principle it is, but humans are going to human and it could just be a really easy exit mechanism for a bunch of really subpar businesses. Correct. It sounds like an excuse to sell rubbish. Not CBA particularly, by the way. If you'd make it easier, that's what would happen. Yes. So I'm with you, mate. The ASX is way too profitable.

34:14It was always a private business. The stockbrokers had so-called seats and they publicly listed IPO and they were shareholders. So it's always about a private business. But to your point, it's kind of a natural monopoly. By the way, if you make too much profit, your margin is my opportunity. You're attracting other competitors. So the CBO response is exactly what you would expect if someone's making up some levels of profitability. And I'm not going to defend that on the ASX. I suspect that investors as a group aren't served by a second set of exchanges that duplicate all the same stuff that can already be done.

34:48I used the example before of the bad old days, good old days when I was younger. Foxtel and Optus Vision ran cables down the same streets on the same telegraph poles about a foot apart, right? So do you need that? No. Was it good there was competition pay TV? Maybe. Maybe we paid a little bit less. Was there a truckload of money wasted or was it necessary? I'm not a massive – I don't mind good regulation. I'd rather probably have a better regulated single market provider rather than have this pretend competition where it duplicates everything just for the sake of it. To your point, Ram, does it make it easier?

35:19Yeah. You know, I've talked about ease of listing before and crowdfunding and other things, and you changed my mind on that one. I think a reasonable level of disclosure is important. I don't think we need to make it easier for companies to list. You know, if you make it easier, why do they need it to be easier would be the question. And, of course, the obvious answer is because they don't meet the current standards. If they don't meet the current standards, what does that tell you? Maybe it tells you the current standards are too high, and that's a reasonable conversation to have. Dude, have you seen – there's a long tail at the end of the ASX, which is just full of garbage.

35:50Right. So, yeah. I don't know what's the answer. And that's with the standards as they are, right? Make it easier. There's 2 ,200 companies, like, out there, and you look at some of them, and you just think, how are you listed? Oh, yeah. Listing fees have cost more than the bloody annual profit. Yeah. It's either ego, hubris, or a rent-seeking middleman looking to sort of arbitrage, you know, retail investor hope with the wishes of an insider to get the hell out and dump on retail. Yeah, right. Sadly. Yeah. Sadly. Speaking of the ASX, man, I can't let it go unremarked about how woefully run as an organization this is.

36:31Yeah. Despite everything. That's why Sibo turns up, by the way, because they've got fat and lazy and make a squillion dollars of profit because they're a natural monopoly. Their net margins are close to 50%. That's mad, isn't it, for an exchange provider? For an exchange provider? What? And you go, well, I guess shareholders are at least doing well. It's like, well, they're making$226 in 2017 and they're making$259 today. You look at the earnings per share chart. It's virtually flat, right? And you just think, what? How does that? I don't understand. I go, well, I guess maybe the shares have gone up because of whatever.

37:03is like, no, the last five years, the shares are down on where they were five years ago, right? And they're not up by that much. In fact, where are they? Over 10 years, you know, on a compound basis, it's like single digit. It's just like, the thing you want, there was a very, very quick detour here. There was a really good bit of analysis published, I want to say actually in 2020 or something. On the bottom line of it, I wrote about it recently, I'll put it on the blog, that most listed investments destroy value. And we've talked about this before, It's commented a bit more. It's come to the surface more recently because it's like all the techs, the Magnificent Seven are carrying the NASDAQ and the S &P.

37:41Take that away and actually share market returns have been really woeful. Isn't that interesting? It's like actually, yeah, it is, but it's kind of always been the way. And in the article that I was reading on it, the really interesting point was, well, you've got to be careful to say here that they didn't create value for shareholders is very different to say they didn't create value. I'm like, well, what the hell are you talking about, Andrew? Unpack that. That's a great point. That's a great point. You know, and it's like, think, so think about, again, it's all people. It's just people. There is.

38:11And then human-made arrangements, right? Within the ASX, however many thousands of people there are, there are a lot of people who have paid off their mortgage, who have put their kids through school, who have gone on holidays, who have built lives, who have interacted in the economy because it's a viable operation. You know, the people at the top have been making out like bandits. They've got probably 10 yachts and 400 different investment property. Like, they just have. So it's not that value hasn't been created. And what this study showed is it's just that there are very few businesses where the value created is enough to sustain the operation internally, to reward those at the top who tend to, you know, do pretty well at extracting what value is created.

38:55and then have enough left over that the mug punter common shareholder also does really well. So that's what you see when you see these really exceptional, the Amazons and the Apples and that. It's just that, yeah, all the inside. And I'm not even saying in a conspiratorial sense. It's like, well, obviously, I would hope that the employees who are actually making this thing come to life get rewarded adequately. Obviously. Otherwise, if they're not doing it, we don't have it. No one's better off. So that's important. And yeah, you can get some of the executive pay is a little bit of greed, not a little bit, extremely egregious.

39:28And yes, that's a conversation as well. But to be that profitable to cover all of that and have enough where you're just like spewing out free cash flow that even the ordinary punters as well, that is an exceptionally rare beast. And I put ASX into that category. It's like, it's not that there hasn't value been created. It's just it's been captured. There's not a lot that's spilled over to the ordinary shareholder. There's a lesson in that. There's a lesson in that. And by the way, that's kind of capitalism working reasonably well. There shouldn't be that much opportunity for surplus profits because competition comes in.

39:59They get competed away is the phrase. And that's, again, a sample of capitalism working. That's why, again, that's why CBO has turned up, which makes perfect sense. And it's why when you speak to certain CEOs, particularly, not always, but there's plenty of them out there that I wish I didn't list. My incentive structure has changed. I've now got to make decisions. It's all about the shareholder and not about the internal culture and the value that we're creating. And don't forget there's value outside of the organization in terms of the services provided. I think it's one of the things that people miss here.

40:30It's bastardized because of all the crony capitalism and all the nonsense that goes on. But generally speaking, in a perfect world, the only way a business can do well is because a lot of people love what they do. Apple is one of the biggest companies in the world because everyone loves iPhones. Yeah. No surprise. That's why. Yeah, that's why. And like, I mean, are you angry with the magic bit of glass in your hand at the moment? Did someone put a gun to your head and said, you must buy this? No, I want it. I would trip over my grandmother to get one of these things. And it's sort of like, it is a net positive game here.

41:04You've just got to have something where it's so positive that like, you know, even the silent shareholders are going to do well. I like it. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

41:23Mate, let's go to a question from Max, which is a perennial question. But obviously, Max is asking it at a particular point in time because he starts that way. He says, hi, Scott and Andrew. At times, I think it means now, it feels as though the market does not present any value. With this in mind, how long is it appropriate to stay in cash? before considering other investment vehicles? Thanks so much, Max. Yeah, great question. Everyone's saying it. You know what? The fact that everyone is saying it is the main reason why I'm more skeptical of it. Yeah, exactly. You know, it's just, I know that it's simple and I don't seriously wholeheartedly mean that.

42:06When everyone's super negative, I'm kind, like there's just that inner contrarian. I made the point on Friday that a contrarian for the sake of contrarian, And being a contrarian for the sake of it is dumb. But I am more nervous when everyone is like, nothing can go wrong. And I'm more scared. Sorry, and I'm more greedy and vice versa. So the fact everyone is telling me that the market is overheated is something just at least to give me pause for thought. Yeah, right, right, right. Now, that being said, against any kind of traditional metric, yeah, there's some like insanely stupid valuations that are out there.

42:41I agree. But the one thing I have learned and observed is that the market is an agglomeration of, as I just said, thousands of businesses. Within any market, there are opportunities always. Let's say, let's run out an experiment. Let's say that the market crashes 50 % tomorrow and it stays there for 10 years. I bet you a million dollars you will still find, maybe with the benefit of hindsight, But you will find at least a dozen companies who, over that period, delivered you multi-bagger, life-changing returns. And during periods of extreme excitement and the market going to the moon, you'll find all kinds of companies that absolutely wipe you out.

43:24And so this is less relevant for passive index investors, providing much solace here on that ground. But if you're a stock picker, I think it's, I'm not having a go here, but I think it is lazy, not lazy, more irrelevant. I don't care what the market is. I don't invest in the market. The market is a mechanism where I will connect me as a buyer with people who are sellers. That's what it does. It provides a service to me. That's what I understand as the market. And it's only relevant to me when there is something I've decided that I want to buy. And whatever is happening with all the other companies out there, I couldn't care less.

44:02doesn't make any difference to me, right? I mean, yeah, there's general market mood and there's general market sentiment and that is a thing, but there are great businesses on the ASX right now that are single digit PE, right? Like, I'm not going to tell you where they are. I'm not even going to tell you where that's justified. It might be that they're still going to get lower, right? Yep. But they're there. And if it goes, yeah, but that sounds like really hard work, it's like, yeah, welcome to the party, bro. Like this is what it's all about. That's why we're not all Warren Buffett. Like it is, you have to be absolutely fussy.

44:33You have to be, you have to do a lot of work. You have to turn over a lot of rocks and you have to be willing to accept that a lot of the things that you think are good aren't going to be good, you know? But opportunity always exists. And it's not that one in a million needle in a haystack. It's, you know, it's the exception. It's the minority, but it's not a vanishingly small minority. So don't worry. If you're a stock picker, don't worry about it. But yes, don't do anything until you find something that has conviction. Just don't let the general market sentiment guide your thinking too much.

45:04Love that. Really important. You asked me how long is it appropriate to stay in cash, Max. We all know in perfect hindsight when market tops and bottoms were and when you shouldn't have any cash and all that kind of stuff. Here's the thing. My general approach, and I try to be roughly right rather than precisely wrong, it's a phrase we haven't used for a while, is that if the market goes up on average about 9 % a year, give or take, then every year you're in cash, you're risking that 9 % average return. Now, some here is the market will fall 20 % and you're a genius for being in cash. I just go up 20 % and you're an idiot for being in cash and most likely somewhere in between.

45:41But statistically, holding cash is a bad bet. Now, if you can time the market - Particularly Australian dollars, right? Let's not go there. No, let's go. Continue. But no, well, honestly, yes, that's absolutely true, right? So you're not only forgoing – well, I mean, it's probably captured – I'm talking about nominal returns, so maybe it's the same thing. But anyway, let's not go there. I only care about real returns like any same person. But in that case, it's the same. Anyway, you could maybe get 10 % returns and inflation is 4 % rather than 3%. Sure, sure. But yes, I do take the point. So generally, at a market level, I hate being in cash because over a hopefully multi-decade investing career left, the times when I'm in cash and I'm delayed because the market falls will probably be less smaller in both size and regularity than the times I'm in cash and wish I wasn't because the market went up.

46:35And so it's a really, you know, you're saying basically, Max, you know, when should I try and time the market? When should I stop trying to time the market? When do I give up on trying to time the market? And my standing point would be stop now, give up now, don't try and time the market because it's really hard to do. But to Ram's point, when I say the market, I could say time investing because Ram's also saying if you're picking stocks, then look for where there is opportunity. So if you're an index investor, if you're an ETF investor, I would dollar cost average no matter what because sometimes you're going to win, sometimes you're going to lose.

47:03That's the nature of investing, but just investing for the long term tends to win. Always has. Maybe it won't in the future, but it always has thus far. And trying to play funny buggers with when, how much, how long. It's probably just an unnecessary complication you don't need from a long-term investing perspective. From an individual company perspective, which is a random point about stock picking, yeah, find the opportunities that make sense. If you can find absolutely nothing, if every company in the ASX is overvalued, first, I'd be surprised. Secondly, I don't... I guess it's probably the same thing as the first one.

47:36I don't think it's likely, right? So there's opportunity there somewhere. The other for me though, Max, is still that question of, but what you asked about other investment vehicles, that's the key, right? Because at the end of the day, What we're really chasing is an overall average relative return. So you shouldn't be investing in your best possible position at any point in time. I guess if you know they're going to fall, you wouldn't do it. That would make sense. Yeah, I can't help you out. I'm not clever enough and smart enough and don't have a good enough crystal ball to know when certain markets are too expensive and not expensive enough and when I should buy and when I should sell.

48:09I would say dollar-cost average. I would say I hate the phrase stock pickers market because it always is, but it's also self-aggrandizing. Oh, I'm a stock because it's always my market. Just put your head out of your backside Phillips. But when the market crashed in COVID, it was at 38%, you could buy almost anything and make money. You might not have beaten the market, but you probably made money, right? When the market's at an all-time high, you probably can't buy anything and make money on anything. So the odds are different at that point. But if you pick stocks during COVID, you did even better than the average.

48:43You pick stocks now, you do even better than the average, I suspect by definition, that's what I'd be focused on rather than trying to time the market itself. It's also, I mean, we mentioned this on Friday, but it's a question of remember too, that there is value in the thing itself. In other words, the value isn't predicated on the ability to flip it to someone else. That helps, liquidity helps. But if that's your bet, if your gamble is I'll buy it now at this price and I reckon someone will buy it off me for a higher price. I mean, And I'm not denigrating it too much, but it's just outright sort of speculation.

49:17And whereas with the insight of Graham and Buffett and other great long-term investors, it's really just the question of, well, no, I actually want to be a part owner in this business because this is a good business. And value will always be subjectively defined. So let's just say for this nice, simple, neat example, I'm someone who's built up a bit of money over my life. I'm really just looking for something that's pretty safe and secure. It's going to generate for me a good income. Now, I can put it in the bank and get, you know, two-fifths of bugger all in interest. Or I can buy this company, which is super defensive, very reliable cash flows, and is committed to paying at 80%.

49:53So I'm probably going to get very realistically going to get 5 % frank dividend yield, which is 7 point something percent grossed up, you know, just to account for those franking credits. Now, that might be too low for Scott. It might be brilliant for me. and might be brilliant for me, even with the usual adding a little bit of uncertainty and margin of safety. I don't know, maybe things get tough and they can't pay it. But the question for me is, regardless of what Mr. Market does, it's like, will this company give me a 7 % return on investment? And if the answer is, yeah, that's attractive to me, then do it.

50:27And who cares what the market does? I mean, I say this to property investors all the time. Oh, my house is up, my house is up. No, it's not. No, the house that sold three doors down is up or down. You don't know what your price is until you sell it. And who cares, right? Absolutely true. Who gives this stuff? If you've bought, I mean, no one does this anymore. So I know I'm going to sound like someone from a different era. If you're a sane person who's actually buying a property based on the potential for it to generate cash flows, and you're not just flipping it on pure speculation because it always goes up.

50:58I mean, let's say that I've got friends who have done this, right? And I'm being a little cheeky here just because it always gets a nice reaction. I got friends and they bought investment properties and they're good quality. They're very reliable tenants. They get a really attractive yield out of that. And they'll say to me, it's like, I'm probably going to drop 20%. Why do I care? Correct. I did not buy this with the express purpose of flipping it in two years time and claiming a tax loss along the way. I mean, I don't, most people do. I know I'm sounding like a crazy person right now, but who's laughing?

51:34They're kind of like, well, if the market goes crazy, then okay, cool. I make a capital gain. If it doesn't, as long as there is demand for a place to live, and let's face it, the rental vacancy is nothing. It's like you have all the cards, right? And you've got a good tenant. And they've committed to paying. You're like, you have a wonderful cash flow machine here. Who cares what the market does? And take that mindset to the share market. and great, great if the balls are running. And yes, that is wonderful. But if they're not, the thing you own is intrinsically valuable in and of itself, right?

52:12And that way you become bulletproof to the whims of the market and it's a superpower. Does that make sense? It does make perfect sense. I pause only because in some exquisite timing, literally as I'm sitting in front of my computer, a little email popped up. It's from realestate.com.au. and the email, the email says, I kid you not, property update for, and insert my address here. Here's a snapshot of the latest insights for your address. Your real estimate has been updated. Click here to see your real estimate of what my house is apparently worth. I just, I made this point before, I'm going to do it again.

52:45It's not, that estimate is complete fantasy. Correct. Because anyone can say anything. It's until you test. Again, another friend I caught up with recently, finally sold the house. It'd be on the market for four months because they just couldn't get the price that they wanted. And they're going, oh, the price was wrong. No one would pay the right price. It's like, dude, the price is whatever. Wherever you and the buyer overlap, that's the price. Not by my preferred way of looking at the world, but definitionally speaking, everything is an opinion until it is tested in an exchange. And that's why I said before, it's a tax on BS, right?

53:24It's like any person can rock up and go, suck their thumb and go, I think it's worked this much. I don't pay for it then. No, no, no. Well, then it's a useless opinion. I think that's true. I want to hold out, though, the difference between price and value still. Sure. Because we would say you might like shares in strawman.com, it's listed on the ASX under code A page, and someone says the shares are trading hands for$35 a piece. That value is the business at half a billion dollars. And you're like, well, no, it's worth more than – I think it's worth a billion. And so just because you are talking about the price at which it was traded, that's very real because it's the only option you get right now.

53:59If you want to cash out or cash in, you have to pay the market price. And you're not saying anything different, but I just wanted to hold out that bit of the price is paid now is the price. And you're right. If someone wants to make the call, well, let's do the deal. It's the old story of, you know, you cut the cake, I'll choose the slice. You know, and it's super useful as a decision-making tool. But I just want to hold out that idea that, you know, just because the price is transacted, that is the current market price, it's possible the business is worth half or double, the house is worth half or double in any meaningful underlying way.

54:28And you're not saying anything different, but I just want to add that to the conversation. Let me elaborate on that because I think you just struck on a profound truth, which I think is so important to understand as a market participant. And we've been doing this podcast for seven or eight years. Eventually I had to find something. I mean, they're not that easy to find out. Even a broken clock, right? Right, exactly. Yeah, finally, after eight years. Go on. So the market will tell you with complete precision and objective truth what people are prepared to pay now. Yes. Love it. It's inarguable.

55:01It's not is it right, is it wrong? It is. You can jump up and down and scream, oh, it's not fair. It's not like, well, you know what? Two people entered into a voluntary exchange and they're the only ones that matter here. It's none of your effing business, right? They did it and that's the price that – And both of them had to stump up and they had to put something real on the line, right, to make this transit. I gave up some asset that I owned. Another person exchanged the other asset of cash and they exchanged. What you're getting at is saying, well, that doesn't – now, this is where it's a bit more tricky.

55:38But you should absolutely have your own view of value. And your view of value might fundamentally disagree with those people. And therein lies, I guess, how you tease apart that dichotomy there. It's sort of like the market is always right in terms of those active participants at that momentary point in time. They might be wrong. Well, it's not even that they're wrong. It actually says nothing about what that market will be tomorrow or the next day and certainly in 10 years time. And what you're doing there as an investor is you are going to have to take all the information available to you and come up with a value that you think is appropriate.

56:18And you're not right or wrong. Well, actually, you're not wrong. According to your appraisal, right now, you may change your mind and history may, the future may prove you to have been wrong. But in this moment, your view is your view. And if you find someone else who agrees with you and is like, yeah, it is worth that and I'm happy to swap it for you, then it's like, okay, great, we'll do a trade. And if not, we won't do a trade. And that's the art of investing. It's not trying to say whether the market is right or wrong relative to the participants in the moment. Is it right or wrong for you?

56:55And if it's right for you, you should act. And if it's not right for you, you should sit on your hands and not do a damn thing. And then hopefully over time, it will come a point where it's actually right for you to transact again and get out of the trade. Not for any other reason. It's just like, gosh, this thing's got value, to my earlier point, it's got value just to hold it because it's a really good asset. But gosh, the price is so great relative to what I expect to happen. I mean, a person on the other end of the trade obviously expects a better future, but I disagree. But at this point, we can agree and we can switch and we can swap assets and we can both walk away, both of us happy.

57:31And I'm not explaining it well, I realize, but I made a little – are we quoting ourselves on Twitter? Let's do that again. Yes, why not? Let's do that. I'm not a fool. I used to stop you to do it. I did a little meme who just said, he who liveth by the market's momentary judgment will perish by it too. And it's really trying to make that point, is that if you think that the market is always going to tell you exactly what is right, and that you can't have a view that's independent of that, I mean, you're screwed before you even start. And I hope that all makes sense in that you just, and this is why markets are so brilliant at what they do, is it just allows us through mutual voluntary interaction to both walk away from an exchange and both feel as though we got the better deal.

58:18And that is a wonderful thing. It is a wonderful thing. And then we as observers on the outside can look at that and go, wow, at this point in time, people are buying magic internet tokens for whatever it is, you know, 160 ,000. Oh, that's stupid. I guess I'm not going to do anything. Or maybe if I'm really confident of my conviction, I'll short it. Otherwise, I'm not doing a damn thing. Or I might think it's the bargain of the century and I'll buy. And that thus precedes the process of price discovery, which is a bit of a stupid term that investment bankers like to throw around. But there is something real to it.

58:51And that is what the market is. It is by a dynamic, evolving, continually adjusting, continually changing process. It is discovering what prices people are willing to pay. And it's better than any spreadsheet or any bureaucrat or anything because it's the only thing where people have had to make sacrifice and stake something of real value to arrive at a conclusion. And it's elegant, it's beautiful, it's profound. I'm probably drawing a long bow here, but I genuinely think all of that, right? I mean it's true it's true what happens without that it's a visible hand of Adam Smith that was talked about 200 and how many years ago it is literally that you know it's how you go to the shop bananas are a dollar a bunch I'll buy some okay they're$25 a bunch but I'm not going to buy any some are going to buy them some will buy those bananas but they won't sell many of them other times everyone will buy the bananas and by the way you go well I love bananas I'll pay five bucks I'm like well I don't mind them but I'll only buy them they're cheap right exactly or am I right no I'm perfectly right in my own subjective judgment of it and more importantly than that my very interaction actually is signaling to all the banana producers, it turns out there's people out there happy to pay five bucks.

1:00:03Great. Like that is useful information. That might actually help me, you know, manage my inventory, grow my crops and all the relevant things. And this is where we can go off into tangent here, but this is where things get in problem. When you have a central authority go, no, this is the price. We didn't talk about it on Friday, but the new New York mayor is talking about rent control, which has just empirically been, again, man, it's such a wonderful, wonderful place that it comes from. And there is definitely massive problems as there is here with the market. But a central decree on what you can pay, what does it do?

1:00:35It just takes supply away from the market because what? I have to charge? I can only charge that? Well, it doesn't make sense. Economically, I'm either just I'm giving money away as an active charity and some people will do that, but most people won't, In which case, the people that you're trying to help have actually been disadvantaged because there's now no rational economic incentive for me to add supply to the market. Like it's just, there's so much to unpack in all of that. There's black markets as well. There's a whole lot of stuff. People get the original lease and then sublet it for a higher price to someone else because they just want the place.

1:01:13Distortions on distortions on distortion. And an irony of ironies is that the very people that you try to help are the very people who get disadvantaged. And the people that actually do win out of this are the rent-seeking middlemen who are able to sort of play both sides off against each other. Exactly the people you don't want to help. And it's why I'm so passionate about all of this. As much as I think helping people find a, have, you know, that, you know, dignity and somewhere to live is the most important thing in the world. The way that it's been going about it is wrong. And it's beyond reasonable to think that any one human being has the ability to know what the right price is.

1:01:53Because by definition, to know what the right price is, you need to know what the shifting dynamic individual preferences are of 20 million people in New York. how do you even start with that you can't and even if you somehow figured out what all these 20 million people think, what are they going to think tomorrow and the day after that? It's like, ah. And this is why markets are so, so, so, so wonderful at what they do in that price discovery process. Sorry, rant over. Love it, love it, love it. Do I have anything to add? No, I don't. Last question from Bishow. Hi, fools. Morning or is it afternoon or evening?

1:02:31We never really know what time it is when you two join forces for good or evil. Now, I'm not one to bend the knee for an audience with your excellencies. But I reckon the value of my question should be enough to earn me the privilege. No, it's not, Bishar. Thank you for sending me messages. Let's move on. I'm kidding. Following the merger... Well, let's hear the question before we throw it out the window. Following the merger between Solpats and Brickworks, I've been wondering how to correctly treat the shares that I held before and after the transaction. Specifically, I'm unsure how to handle the old shares that were acquired and the new shares that were issued in the merged entity.

1:03:06Do the new shares effectively take on the cost base of the old ones? or should I be treating them as a fresh acquisition at the market value on the merger date? And in case it was a mix of cash and shares issues, as sometimes happens in other takeovers, what's the best way to calculate the adjusted cost base for tax and future capital gains purposes? Thanks again for the great content each week. Your insights have helped me both be informed and entertained. P.S. No rush to knight me for the question. A mention on the pod will do nicely. Regards, Bishow. Arise, Sir Bishow. night of the frilly garter.

1:03:41I'm going to let you take this one, Duke, because you are in that situation personally. I will take that. Yeah, we can go there. The second one about a mix of cash and shares we can do. So, Bisho, here's the thing. There's two, I mean, so Solpads was complex. I'm not going to do a lot of detail, Bisho, because it does apply to a whole lot of our listeners, but the idea was useful. Solpads made this transaction happen by creating a new company called Topco, and TopCo acquired the shares in both businesses. So it's not a usual merger or acquisition where one acquires the other directly. If Solpads had bought Brickworks shares or bought Brickworks and issued shares for it, it'd be slightly different, but not much.

1:04:18So there is a bit of a wrinkle. In the reality of the tax situation, it doesn't make any difference, by the way, but I'm just being clear about why it's a little bit different. Effectively, you now own shares in TopCo, which then got rebranded as Solpads, back where you started. it um the the cost base of your solpac shares remains unchanged why because you now own one share in topco for every share you own in solpac and there was no tax event for that to happen so the cost base gets transferred if you pay 20 bucks for your solpac shares you know the solpac shares it could was simply acquired by topco the cost base is the same as 20 bucks the brickwork shares you get a um they they so effectively what happened was there was a um you got 0.82 shares in solpats for every brickwork share you previously had okay because brickworks was cheaper than solpats so you got 0.82 solpats shares your cost base per solpats share is just the maths that goes into that one so effectively if you paid 20 bucks for brickwork shares uh you got 0.82 two Solpats shares that had a cost base of 20 bucks.

1:05:28Or you do the maths and reverse it into one share and work out what that looks like. So it'd be 0.82 divided by 20, which is whatever that number ends up being. So that's basically how it works. There is no tax event at the transaction of the merger when you sell it. And here's the easiest way to do it, by the way, unless you're selling small amounts, which I guess is up to you. Let's say you bought a thousand bucks worth of Brickwork shares and you sell$2 ,000 worth of Solpats shares. The difference is just the$1 ,000 profit you made. The number of shares you bought and sold is less relevant in this context.

1:05:54So that's the easiest way to think about it. It's a little bit messy because of the way they did it. But in any merger, to your broader question, it works exactly the same way. The cost base of your shares in the acquired company simply gets transferred across to that cost base prorated on the ratio of shares you get in the new company. I hope that's hard to do on audio, but I hope that makes some degree of sense. You did better than I would have done, mate. When there's cash and shares, Bishow, again, it depends on the individual company. Generally speaking, if you take cash, either voluntarily or compulsorily, the cash is as a sale.

1:06:31So if you were to get, I don't know, a dollar in cash and one share in strawman.com, the dollar cash you get is considered a sale and you have pay capital gains tax on that benefit. And the share you get rolls forward at the acquired cost base for some sort of future sale. So I hope that makes sense as well. Anything to add, mate? How have I done? I got nothing to add. I'm going to Charlie Munger this one. I have nothing to add. There you go. In that case, we have finished this particular podcast. And can I say again? What? It's only an hour and six minutes in. I was thinking three more questions at least.

1:07:04Do you want another question? I've got to back it up now. I don't know. I was being a little tough. Yeah, go on. Let's do another one. All right, here we go. Here you go. It depends what it is. Central banking? Bitcoin? If that's the case, it'd be a two-hour podcast. James gets his question answered because Raymond's feeling generous at a minute and seven seconds. and segments. And I'm trying to procrastinate on some work that I've got to do. In that case, it might be a two-hour podcast. G'day, Scott and Ram. Feel free to use my name or not. The power is in your hands. That's a dangerous thing, James.

1:07:32It goes straight to my head so I have disclosed your name because why not? I can't. First, to ensure the question is read, this Ram news was coming, I reckon, I want to throw myself on the altar of the pod machine to praise the omnipotent masters of the investing universe. This is how it's done. Thank you for your level-headed wisdom, great advice and rants that put the old man shakes fist at the sky to shame i love how easy your advice is to understand for us quote retail investors and how you challenge people to think more about the longer term and the second and third order effects of our decisions to hopefully make the world a better place we are blessed to have the rage filled tirades and commentary to tide us over until we're all replaced by ai robots that's a pretty good start james well I mean, I love it.

1:08:19It was worth going on. I love it. This is why we hang around. Kind of, Ram. Because James says, to my question, first, what's straw man again? I think we haven't had that throwback in a while. We haven't had that for a while. Yeah, yeah. What is straw man, Ram? It's a vibe. It's a way of life. Straw man is a way of life. If it was a way of life, what would the straw man way of life be? Oh, gosh. Don't let me... I don't know. Don't pull on that thread. This is where I'm curious about how where Andrew starts and straw man stops or vice versa. This is where you stare into the abyss and the abyss stares back into your soul.

1:09:00I don't know. I will get Andrew out of his fetal position later today, James. But to my more real question, I've been a more long-term focused investor and I've started out investing in low-cost ETFs. After listening to your podcast, I got bitten by the bug of investing in individual companies. My question comes around dollar cost averaging into those specific companies. At the time of writing, I have only, I've positioned only a few companies and I'm trying to put aside money to regularly contribute to them as I go. However, I become a bit stuck between two of them when looking to add funds. One of them is down in the short term and seems to be a more attractive price and one is up but has some decent growth potential.

1:09:42Assuming I have equal confidence in both companies over the long term. If you're in my position, would you be more likely to prioritize the company that is down to get more shares at a better price or prioritize the company that is up over the short term, knowing that you might have a bit of runway before the other one gets back to the purchase price? I appreciate you can't give personal advice, but would love to hear how you approach the situation. Thanks again for a great podcast and looking forward to hearing your thoughts. Cheers, James. I'm going to reject the premise of the question. Well done.

1:10:14A career in politics awaits. Yes. I mean, you see, how do I do this? You've got to come up with a valuation, right, of what you, I guess back to my little rant on like subjective value here. What do you think it's worth? I mean, what would you pay for that company? Well, it would probably depend on what you think the company is going to do. Now, to your point, one company probably has a more attractive new term future. and if the market's being half reasonable that's probably factored into the price and so the one that is down is cheaper narrowly defined by the share price was previously higher then that's not the right way to look at it if it's cheaper by virtue of the fact that the current offered market price is at a steeper discount to your estimate of value then that's the one you should go for.

1:11:10In other words, it actually doesn't matter what the proposition, what each company is going to do in your estimation. It's like, well, what, regardless of, Scott's got a business that's growing at 10 % per year, right? I've got a business that's just steady state. We're just not growing. We're just going sideways here. Scott's business is on a PE multiple of, to make it stupid, 100. And I'm on a PE of three. Now, you can work out which is the better proposition there, and it's mine, even though the business is not performing as well. And you'll notice that I didn't even mention what our businesses were worth yesterday or the day before or three weeks or a year before that because it's irrelevant.

1:11:56That actually doesn't make any difference whatsoever, which is really – I'm not trying to be condescending or derogatory in any way because it's very hard to remove yourself from that framing. That's the framing that we all get sucked into. It's cheap. Why is it cheap? Because the share price has gone down. No, it's actually entirely possible and happens all the time where stocks go down on market price and the value deteriorates even further. Because as the share price is falling, more news is coming to light that this thing is an absolute basket. You're going to complete dog's breakfast. It's quickly going to zero far faster than anyone thought.

1:12:32So the share price is lower, but the value is worse. And the one that we mentioned occasionally, at least on the pod, where you get a company whose share price has doubled, but the value has improved dramatically because the prospects of the business have improved tenfold. It's like, oh, what? Oh, it turns out this new thing that you've invented is the greatest thing since sliced bread, and you're the only one who can make it, and everyone's lining up the door. And I didn't know that three weeks ago. And again, no one knew that three weeks because they only announced it the other day. And it's got nothing to do with what the share price has done.

1:13:06So I'm a bit all over the place here, but I just, again, don't frame these words of cheap and expensive relative to what the market has done. The market might be absolutely on point or completely, you know, losing its bananas here. What really matters is look at each of those companies separately, forget the market. What would I buy? Again, your subjective preference based on your subjective views, hopefully as objectively arrived at as possible, what would you pay? If you were a gazillionaire and you had billions and billions of dollars, what would you buy that company for? And if you can't answer that question, well, that answers your question automatically.

1:13:42Don't do anything. If you can't figure out even a rough, rough estimate of basically what it should be more or less worth, then you've got no business in buying it. Because by definition, you don't know if it's cheap or expensive. But if you can do that, then do it. And then once you've done that, compare that to what Mr. Market's offering you. And if Mr. Market is offering you a discount to what you think it's worth, and it's an attractive discount, and it's more attractive than the alternative, then buy it. Regardless if the company's going up, you know, the company's prospects are up and down.

1:14:17Because you can factor in. In fact, you can. You should. The whole point of the valuation is to factor in what you think the company is going to do. Even if my business is going to die, I'm just going to, Strongman is going to make a million dollars a year for the next five years, and then it's going to go to zero. It's like, well, what's that worth? It's actually really easy to work out. It's like, well, I reckon the cost of capital for me, it's about 10 % per annum. So I'm going to get a million this year. Let's call that a million. I'm going to discount the next million by 10%, the next million by 10 % squared, et cetera.

1:14:46It's hard to do the math verbally. But I'll work out that's what it's worth. and here is a business that I have said as the owner I'm just going to close shop and I'm going to sell it, I'm going to give everything away for free at the end of it, right? It's going to be completely worthless after five years it's still worth something in the meantime. So don't worry too much about growth don't worry at all about previous market reactions worry only on what do you think this independent valuation is and how does it compare to the market? I'm flogging a dead horse at this point. That's a great summary I 100 % agree with Andrew James but I'm going to make it more specific for you assuming massive assumption I can't give you personal advice obviously James you know that if I had bought two companies and I thought they were both attractive prices and so I think these two companies are both worth$100 each and I bought them both for$90 so that was my rationale if nothing else changed but one is all of a sudden cheaper and the other one is more expensive then it's an easy decision because they're both worth$100 and one falls to$80, one goes to$110, that's an easy decision because I know they're both worth$100.

1:15:54I think they're both worth$100. One's now cheaper than it was, so of course I should buy more of that. That would make logical sense. So all things being equal, compared to your purchase price, if nothing else has changed in the businesses, and it probably hasn't, by the way, but if it hadn't, as a thought experiment, you buy the ones down because it's cheaper relative to what you thought it was worth previously. And that's an easy decision. What gets harder is why the shares have fallen or risen? Is it sentiment? In which case, you're back where you started. Is it actually business fundamentals?

1:16:22So the growing business has grown because it released a half-year profit that was up 58 % and the one that's down is down because profit fell 80%. Which one do you add to? Well, again, I can't tell you because I don't know what the circumstances are, but broadly speaking, adding to the one whose profit's caved may not be a good idea. On the flip side, you may have the reverse where it's fallen despite the market because the market just got a bit... The market stopped liking lithium companies for a while and so it's cheap. Is it attractive? Probably not. we talked about lithium before but you know if it's sentiment only you think no the future's as bright as it was well great there's your opportunity so and that's back to ram's point is simply ask yourself what do i think it's worth what discount am i getting to that price i think it's worth in both cases and you buy the one with the biggest discount now there's portfolio waiting decisions to be had and lots of other considerations when you're building a portfolio rather than just picking a stock but broadly speaking that's that's the that's the approach I would think about taking.

1:17:14I will say too that I'm not a growth investor or a value investor, but I have a bias to businesses that can compound their profits for a long time. Why? Because the business does the heavy lifting for you. So given the choice between the two, I generally would, as a long-term investor, choose a growing business because if you're trying to be a value investor and say I'm going to buy 80 cents for a dollar, so a dollar for 80 cents, I want to get back to a dollar, I'll sell it. That's okay, perfectly. why would you not there's money that takes off the table if I buy something that's worth a dollar for 80 cents but then next year it's worth a dollar 10 year after$1.20 year after it's worth $1.25 after that's worth $1.38 well I don't have to sell if the price doesn't go up as quickly as the value or as quickly as the value I'm compounding that money by letting it do its thing so you don't always get that opportunity it's easier said than done but it's a matter of course if I buy something just you know dollar coin give me a dollar coin for 80 cents okay when you offer me a dollar for I'm going to sell it because the dollar coin I'm going to be worth$1.20 anytime soon.

1:18:11But you give me a business worth of dollars, it's going to be worth$1.20 in future. Well, now I'm happy to hold that for a bit longer and let the business do the job. So, Rams nailed it, but that's how I think about it. Look for, as we both said, what do you think it's worth? What's the price available for now? Which one's the biggest discount? That's kind of the maths of investing 101. That's how I would do it. Please ignore whether you're up or down. Please ignore whether it's made or lost money recently, other than if nothing, if it was yesterday. I mean, you bought them yesterday, and today one's halved and one's doubled, and nothing else has changed, well, that's an easy decision.

1:18:41It's unfortunately rarely that easy. I mean, you've said growth covers a lot of sins and it does. So I think that is super important. And the trouble with deep value players on very ordinary businesses that may be objectively cheap is it's just you've got to be so accurate. It's very easy to sort of say, oh, you've got to value the business and then that makes your decision. It's just the degree of difficulty and the precision required to accurately value a dying, declining, or even subpar business is just much more difficult. Now, if you've got a business where it's sort of like you're trying to work out whether it's going to compound its earnings per share at 15 % or 12%, it's kind of like, well, you know, it's both good, man.

1:19:30It's both really good. Like we can argue. And yes, I know how the math goes. Yes, that's going to compound out to be a meaningful difference. I know, you know, but, but it is, it is, yes. Conceptually it's a lot easier, you know, and the thing you get with growing companies is you get that sentiment, that sentiment kick along with it as well. Cause people like to be associated with success. You know, it's sort of, you may be accurate with your valuation on a down and out stock, but the market's never going to come around to it in any way that you're going to get that irrational great bid. I was like, Oh, this is too good to be true.

1:20:05I'm going to sell it. Like you might, it's more, You use the example of if it's$0.80, if it's$1 but I can buy it for$0.80, I'll sell it at$1. Realistically, it's like I'll sell it at$0.90, right? Yeah, right. You know, because maybe it'll never get there. And it's like it's only going to be the other hardcore sort of value bros that are really going to like be interested in this. And he's going to buy it at absolutely fair value off you. I mean, again, you get like a sentiment to sentiment, right? Sure. But, you know, someone else is trying to make a margin as well. If they think it's worth$1 as well, they're not going to pay$1 because why buy$1 for$1?

1:20:37you might as well get the dollar you got. So you want some upside, which is the nice thing you talk about. I think you'll find too when you go through the exercise, you'll answer your own question because, I mean, it's never easy and it's always a guess and it's entirely subjective. But, you know, there are some things I can never know the future. But if you were to ask me, Andrew, what do you think is more likely? That over the next 10 years, Coles grows its earnings somewhere in the low to mid single digit range or speculative mining company X manages to become cash flow positive and grow its earnings to X value over five.

1:21:15He's like, well, both are possible. Yes, yeah. And I can have a view on both. But, I mean, one's just a layup and the other is kind of like, I can be right in my forecast, but, gosh, a lot of stuff has to go right. But, again, here's another Buffett quote for you. You know, he's looking for one foot bars to step over. He's not looking for six foot bars to hurdle over, you know, pole vault over. It's just like, keep it easy. And that's why I say you'll answer your own question. You'll start hopefully going through the process. And you go, okay, well, the guy sort of said, you know, try and figure out what I think it's worth.

1:21:48It's like, you'll just get a vibe. Back to the vibe investing. You'll get a vibe, right? Like, this feels like an easier thing to predict. And there's your answer. And again, it's all about the forward race. ignore the past ignore the past ask you from scratch right now I own shares in I don't have I own shares in if I was going to buy shares in Woolworth today how much would I pay for them do the work the answer is$35 okay well they're $28 well great I get a deal I would pay$20 well they're$28 well okay I'm not going to do that do that for both those companies whichever one has the biggest gap and again it's all rough and it's all whatever by the way if you can't split them do both why not both as a cool kid say right if you're that close and you can't decide but yeah we flogged it and flogged it but the starting point James was one's down one's up what should I do it's entirely to Rand's point you reject the premise of the question it's entirely the wrong approach I'm sorry to sound like I'm being harsh it's only what happens from here so you've got to put that out of your mind one of the best piece of advice I've ever heard is when you buy shares particularly if your brokerage carries the history just zero out the cost column you lose the gains you've made I made this much I lost that much but zero out so that you're not saying I'm down or I'm up, what should I do next?

1:23:02Like, well, here's the price. So much money has been lost that way. If I run into another boomer investor who tells me it doesn't matter if Commonwealth Bank falls because I paid$4 for it, I just want to slap you for your own good. It's like, well done. Plus it makes you feel better. It does. No one's taking away the achievement. It's just that it's entirely irrelevant to what happens from here. And to say I will hold something that I have very little confidence going forward but only because for me it doesn't matter because i'm only playing with play money it's like well if it's play money can i have it like it's money it's like it's very real i catch myself doing it sometimes so it's like well i only paid this so it doesn't matter no no it doesn't it is worth this much today according to the market in other words you will find people out there that will pay this for it more or less give or take you know a few percent is it good enough for you?

1:23:57Is it not good enough for you? I don't know. It's certainly got nothing to do with what you paid for it. And it's the hardest thing in the world to get past. But it is that way misery lies. I can guarantee you. You'll find yourself holding onto things you shouldn't and you'll find yourself avoiding things that you shouldn't. You know, where it's sort of like some of the best investments I've made were things that like crumbled after I bought them. but eventually came good right because because yeah yeah yeah it's like well the general thesis was right and i mean i okay i got the timing wrong but i always get the timing wrong and so does everyone so that's kind of irrelevant and if i'm right then history will will prove me right and if not then okay so be it but but but it's certainly got nothing to do with i'm up or down or what happens after the fact it's just it's it's it's the market messing with you and it's it's very good at doing that only because i need to flog the dead horse a little bit longer i want to go back to your point about the cba shares i think this is a real your play money this is a real house money some people call it really really really important conversation right so here's here's the scenario i want to paint you you paid four bucks for your cba shares to ram's point they're now worth 177 dollars congratulations you've done really really well good for you in 10 years time let's say they're still worth 177 dollars i'm saying they will i'm just this is an example right so should you sell them you're already up you made a lot of money so why sell them in the scenario I just painted maybe higher or lower doesn't matter it's not the point still worth$177 meanwhile Woolies again you're just a big well known company goes from$28 to$48 yeah now did you lose money owning Commonwealth Bank shares no did you keep money you already had yes was it was it was it was it was it was it was it was it was it was it was it was it whatever the heck you want so if you want to keep them and just sit on that's fine yeah but the only question really is not how much have you made thus far It's what return do you get from today?

1:25:50So the next 10 years, do you want to make no extra money or do you want to make some extra money? Now, maybe Commonwealth Bank goes to$400 and Molly goes to$200. I've made enough money. I've made enough money from my earlier gains, so it doesn't matter from here. Who cares? Really? Yeah, right, exactly. Are you seriously saying that? Like, no. And it's tempting. You know what I think people are actually saying, mate, is I don't know. It feels hard and I'm comfortable with the familiar. And I'm in a position of strength. So I feel confident. I mean, it's easier to make – I've done well. It is easier to be a hodler when you're up.

1:26:16Correct. Definitely. And that's, again, it's a very reasonable sentiment. Back to the temperament we talked about the last two podcasts. That is just you saying, I don't know, but I've done here. I feel comfortable. I've done well. I don't have to make a decision. Maybe it goes well. Maybe it goes badly. If I just ignore it and let it go away, at least I can convince myself I only paid$4. If it drops from here, it goes from$170 to$150. I say, that's okay. I only paid$4. And it's true. It's 100 % true. And if you're comfortable with that, by all means do it. But if you're in the market to maximize your returns or at least get a decent return, you owe it to yourself and your portfolio and frankly, your kids or your charity or whatever you want to do with your money to say, I've gone from$4.177.

1:26:53That's great. If I went to cash tomorrow, would I buy these shares or would I buy something else? That's the question. It should rely not on how much you've made, but on where you expect share prices to go from here. And that's how you should decide whether or not sell your CBA and buy Woolies or keep your Commonwealth Bank shares. There's a little bit of horse flesh on the ground, so I'm just going to make sure it's completely turned to Paul here. Please do. The phrase I was waiting for you to utter there was opportunity cost. Nice, thank you. Which is what you said, essentially, but just to make it more formal, it's probably one of the more profound slash important concepts in investing, and in fact, in economics.

1:27:32Economics is the study of scarcity, and scarcity is all about opportunity cost. You cannot get past that fundamental core truth of it. and so I get into not debates or arguments but like someone will say, what do you think of this coming? Oh, I don't like it. Well, why? But this and this and that. It's like, well, it's not that I own. Actually, it's a perfectly good business. I've got no notes, right? Like, great. I wish them well. You mistake my lack of interest for the assumption that I must dislike it and it's not quite accurate. It's more accurate to say, I like other things more. Correct.

1:28:10Right? And that's what matters. So it's like, why don't you like this company? I think it's a great, look, if there were no other companies, if it was choice between that and Westpac, okay, sure. Pick on poor old the bank again. But yeah, I mean, I'll do it. But actually there's another company over here, which I think has got a better risk return proposition. We always make the point, you only need 10 or 15 stocks in a portfolio to get almost the full benefits of diversification. so it isn't about owning 10 or 15 good stocks it's about owning 10 or 15 of the very best risk-adjusted stocks that you can possibly find otherwise you're leaving money on the table you're saying i am going to deliberately go for this company knowing that there is a better use for my money yes but it's still a good company so i'm going to do it what no but yeah but there is it's not a loss that you will see on your brokerage statement, but it is a very real loss.

1:29:11Opportunity. Yep. Cost you in the opportunity. Yep. This is completely off the track and not even slightly relevant, except we're talking about Woolworths. And it's the end of the podcast. And Andrew has added 23 minutes to your podcast. Love. So there you go. You're welcome, listeners. So I typed in Woolies to get the share price, and a little fact box popped up. and the fact box told me the five so this is Woolworths was founded in 1924 this is fun right so the five gentlemen who started Woolworths who founded the company I'm gonna share their names Ernest Williams George Creed Cecil Scott Wayne Stanley Chatterton and Percy and Percy Christmas and I just think that was brilliant did they tell me they all had handlebar moustaches and they rode penny farthings if not they absolutely should have because that is just I just love the fact that's it.

1:29:59And they're wearing a bowler hat or something like that. Just chef kiss. Stanley Chan and Percy Christmas. They're my favourite. Cecil Scott Wayne is also pretty good too. That is just like, if there was ever a vision of an early 20th century capitalist, you know, right there. Oh, that's so good. Anyway, we should try and find a photo. I'm sure it won't exist somewhere. I think I just painted the perfect image. You bring it up and it's going to be exactly that. Or don't because the word picture is better than what the reality could possibly be anyway. Yes. There you go. A complete non sequitur, but it's the end of the podcast and we got there.

1:30:30Thanks for listening. Thanks for being part of it, Ram. Thank you for sharing your rants and your extra love, your extra time with our listeners. One more question answered, one more in the hopper. If you're still here by now, you probably know info at fool.com.au is how to get your questions answered. And until next Friday, enjoy the rest of the weekend and your week at 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.

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