Mailbag: incl. Intend your puns! April 27, 2025

26:02But with ETFs, yeah, I take the point. It's probably – in your strategy and style, it is probably another tick in the column of pro, SMSF. Yep. I think that's a really good summary. Yeah, I can't add much to that, really. I don't know if hundreds of thousands of dollars worth of tax. You've done the numbers, Simon. I haven't, so I take your word for it. But I think just because it's capped for just the pension phase, There's only so much you could have done. And the pulled funds will sell a little bit but not a lot, particularly, by the way, if you're choosing your index options, ETF only, for example.

26:42So I don't actually – I haven't done the numbers. I don't disagree with you, but I don't suspect it to be that big. $100 ,000 of benefit for a$1.9 million fund at maximum. It seems too big to be right. But again, mate, you've done the work. So if you've done the work, I'm happy to bow to your better judgment. judgment i yeah it's it's difficult right so um i can't yeah i can't i can't fault it i think that's a perfectly fine thing to do the only yeah and again mate as you said with etfs it's hard to even criticize that it depends is always the answer um and as i've said with margin the other thing is just that idea of do you get it right and do you stay the course and so i'm sure you will because you've got that background and you you i even time to say you wouldn't recommend to everyone that's absolutely true um the upside of doing things well uh and the doubts of doing things badly are just two things you need to consider almost a little bit like the uh the put the put option kind of idea is you know someone who's i'm gonna do that what simon's gonna do and then three years later they start buying you know lithium miners and four years after that they sell them all and they you know the the best laid plans um the one of the great things about superannuation is it's passive and it's also pooled super so industry or retail funds is it's passive and it's over there and you choose your choice and you let it kind of happen.

27:56So that's probably my approach. I'm also not sure, Simon, I don't know the answer to this. I will say just, I'll acknowledge my own ignorance. I don't know whether it applies if you make your own choices. So if you have a member direct option, for example, with Australian Stroom, you're buying individual shares or individual ETFs within that. Whether you still cop a share of the pooled CGT? I don't know the answer. So, but Simon, I agree with you. I love it. I think if you can do it, if you want to do it, there's no reason not to and there is probably meaningful benefits in going down that path.

28:24Yeah. Yep. Marcus sends us an email. It says, Dear Scram, which is his portmanteau for Scott and Rand, which I like. He says, Feel free to use my name or don't. I don't really care either way. So there you go, Marcus. You know, I should have called you Frank. I think I'm going to call you Frank. There you go. I have some thoughts I would like to plug into the pod machine, if I may. For some reason, the late Kerry Packer's famous line about governments not spending our money wisely enough that we should give them extra popped into my mind today. And it got me thinking. Imagine if there was some kind of system, like the share market, where throughout the year an individual or business's tax obligations are collected.

29:03Then once a year, the individual or business decides where they want to invest those funds, based on their own values and life priorities. Obviously, there'd have to be compulsory contributions to certain areas. The bucket for politicians' pay packets would most likely be underrepresented, he says. but money would flow to the areas and issues that are most important to the people. Take the suburban rail loop in Melbourne, for example. That will be an item where those that have a strong interest could invest their tax dollars. I live in the country, so I don't give a stuff about the suburban rail loop, but I do care about not splashing coffee everywhere while I'm bouncing along our crappy roads.

29:34So that's where some of my money would go. It would also save governments spending billions on consultants to work out what issues they should care about, as all they need to do is look at where the money is going or not going and ask why. Anyway, text form will never happen and I've just wasted everyone's time with this thought bubble. Further to this pointless idea, each department or spending item available to invest your money could be traded like a public company where once a year the bigwigs have to front the shareholders and be held accountable for their actions. I imagine this would be quite a shock for our public servants.

30:05Goodbye, Marcus. I do love a bit of reverence, Marcus. That's lovely. Thank you. What do you reckon, mate? Are we investing our tax dollars by vote, by ballot? I think it's dangerous. I like the general thrust. I like where you're coming from there. But, I mean, I do wonder if you just, you get a bit of, all the momentum goes to where the population density is. So you're going to find that the eastern seaboard is really developed and everywhere else gets forgotten because the 2 % of people that don't live there, you know, they're just not going to have much say. You wouldn't get a dollar, would you?

30:46Yeah. I mean, to your point, it's like, why do I need to build a community centre in Alice Springs? You know, but then I think, well, actually, it's not just about me. It's about the country and, you know, there's bigger considerations. Not to suggest that everyone would vote purely on their own self-interest, but everyone would vote purely on their own self-interest. and I would too. Like the temptation would be too hard to resist, I think. So it's, yeah, I think it's tricky in implementation. Like it's like, think about, well, this is topical. Think about defence. Like, I don't know. There'd be plenty of people who don't want to spend money on defence and would probably be reasonable in that view right up until the point a warship sails under the harbour.

31:34And it's like, oh, actually, now I do want to. It's like, well, it takes 30 years to build up the capacity and we don't have it. And I'm not saying that to suggest that we should spend huge amounts of money on these most unproductive of areas, but it's hard is what I'm saying. So I love where you're coming from and I'm shooting from the hip here, so I don't know, but if I sat down and thought about it, I do suspect there'd be a lot of unintended consequences. Yeah, I agree with you. I 100 % agree. There are orphan drug programs in the US to fund drugs that otherwise don't simply have enough constituency for the R &D cost, for example.

32:14There might be one person, 10 people, 40 people who suffer a particular condition or particular issue and they're never, ever, ever going to buy enough drugs or be able to afford those drugs to deal with the health consequences. And so we say to, as a society, we say, hey, all right, we'll put some of the public money aside to do it. Now, who's going to vote for a drug development for a disease for 40 people? Nobody. right those people will but then proportionally they're just not gonna have enough money even to your point about right any point about roads marcus i mean i've i've driven some some fantastic outback roads that frankly wouldn't be there without you know who's gonna who's gonna vote to upgrade the gun barrel highway in the northern territory right or wi nobody because you know the truckies use it and by the way we all have a value we all have we all get value from it because uh you know wheat and oil goes along that stuff and we use it and sell it and get tax from it but would you would you choose to fund it probably not and so i think that's i i get government's a hard time and i'm an optimist but i i even i've been weighed down in the recent stuff but that's kind of why we have them right it's kind of why we have those extra things so that we can actually do all that sort of stuff if you don't do that you end up with the ramps you're just kind of rampant populism and you know the mob the mob ends up ruling and you know yes democracy means that 50 percent of the vote does something but our poll is at least thus far maybe they're less responsible than they used to be but they're still pretty responsible to say hey most people don't want, I don't know, I can't have a good example, a thing, an art installation or a road being fixed or drug development on that particular thing or to Ram's point, you know, the reality, the reason we have a Senate, the structure the way it is, was to protect states' rights.

33:44Why? Because Tassie knew they'd get screwed by the mainland if New South Wales had votes per person. I was just going to bring up Tasmania as a perfect example, right? It can't stand on its own feet. Relative to the state's spending, it can't stand on its own feet. So we as a fellow Australian, that's right, isn't it? Yeah, yeah. Yeah. So we as a fellow Australians, it's like, well, you guys just don't deserve the same kind of infrastructure and hospitals and that as everyone else because, you know, you've got to find your own way. Again, it's a slippery slope, you know, and I don't have any plans.

34:17I love Tasmania, by the way. I actually was very seriously considering it for a while, moving down there. But at this stage, it's not going to happen. But I'm happy with – I'm happy that we – because it's one country, You know, one team, one dream. You mentioned, Tassian, that the carcassers have turned two feet. That's the other thing for me. And it's kind of what I've already said, but it's a different way. Scale matters, right? And so the reality is that if you have a really super dense CBD or even just in an urban area, you can afford a truckload of service in that area because it happens that way.

34:47Once you move further out, the country would never, as in the bush, would never ever get anything, right? You couldn't pay for those things. Already struggling to get doctors and everything, you know? Yeah. But also, Marcus, I get where you're coming from. I get the accountability thing. I get the public interest thing. I think there's just a line between the things we consider to be universal. And this is, it's a function of our electoral system. We could always change this. But we kind of figure, hey, as, I'll say fellow Australians, they're like a bloody politician. As Australians, we kind of go, well, actually, we think everyone, every kid should have education.

35:21In the US, for example, if you've been there, their school education is funded by district. And they're funded largely by land taxes. So if you live in an expensive area, your school gets more money. If you live in a poor area, your school gets less money. I'm not talking about public schools. You're not talking about private schools, right? Just because the districts don't raise enough revenue, so they have to make some of those decisions that we just talked about now. Now, we could do that, but I'm not sure. Well, it's all the values, Marcus, at the end of the day. My personal view is I think we should have certain what they call public goods.

35:51I'm going to start talking about university, by the way. things that you know i think i think we should have quality primary and secondary education available any kid who wants it at us at the same level across the country i don't think it should depend on who is in their area who votes for who doesn't i think we just you know and again that we could change that if enough people vote for a party that doesn't want to do that we can change it but i just think in this context that sort of stuff is important i think there's there's a level of universal universality around what we want to provide decent roads decent infrastructure for health and sewerage and water and all that kind of stuff.

36:21Now, by the way, you live in the bush markets, you don't feel well. There's not town water everywhere. So it's not universal in that sense either. But yeah, it's a very good question. I think the accountability thing is the issue, mate. I don't know if we've spoken on the podcast. I think we have. Yeah, we have. I am very much in favor of a government efficiency drive. And not Doge, because Doge is stupid and Elon Musk is a knucklehead. And it's all very ideological. They're targeting things they don't like rather than genuine waste. And that's, you know, I've had this argument on Twitter over the last couple of weeks.

36:49People say, well, if you don't like it, then it's by definition of waste. I'm like, no, that's not what efficiency is. That's just choice of program. I absolutely would love to see some more accountability in the public service. And I don't mean – I'm not doing the public servant bashing, right? There's some great people who work in the public service, work really hard. Absolutely. I've got some friends who are in that space in different areas. But also the incentive and the ability and just the drive to improve stuff. Companies are really lucky. They've got a profit motive. And that means you're always trying to find the best way to do something.

37:17Now, public service is hard because you're providing healthcare. I can make it much more efficient and have one nurse for every 25 patients, but people would die. So I'm not going to do that. But do we have the right computer systems? Is the administration done correctly? Are we bargaining? Apparently, one of the Doge things, I'm told, I don't know if it's true, was that they tended out. It must have been cloud, I think. But Google won some sort of whole-of-government contract, which saved the government some money because they just said, well, we're tending for the whole thing you wanted, don't you?

37:41And it brought the prices down. Now, again, I don't know what we do in Australia. We may already do that. But I suspect that a well-meaning, intelligent, thoughtful, caring person, probably an ex-public servant, a Ken Henry or somebody, would be able to go in and go, right, let's go through this and I'm going to sit down with the Department of Aging. And I'm going to find out what computers they're using and see if I can get some benefits by using the same one as the Department of Social Security users. Or I'm going to go and look at the real estate, bloody work from home. They're trying to make people go back to the office.

38:12You want to work from home? Work from home or save the rent. procurement the numbers the layers of management the things that need or don't need to be done the processes there's a great example Jack Welch is now a persona non grata in much of the business world but there's a great piece in his book where he writes about the fact that he used to have this 13 column report prepared and it was some number eight people or something took five days to do it and he kind of went this is a stupid it was sent to head office and it was a stupid report and so he sort of started taking columns of the report off and waiting for someone to complain and no one ever did and eventually they just been in the entire report and no one noticed it wasn't being sent anymore.

38:46Now, it's a nice, you know, maybe it's true, it probably is, but it may not be. Either way, that idea of just what are we doing and why and where's the benefit, we all, even in private companies, you institutionalize. I've worked for some, one in particular I won't name, really awful public company that was just so calcified when I got there. Every time I'd said, well, no, we don't do that or yeah, we tried that a few years ago and it's just that kind of, they're stuck in a massive blast. There's nothing more infuriating than when you say, why do we do it that way? And the answer is just because we always have.

39:15Exactly. I hate, and it comes, how often is that the case? We should do it that way. Yeah, we don't. Why not? We just never have, but we could. Nah. And it just, it makes sense. Think of the incentives. Because there is no profit motive there. You know, it's just sort of like, all you're proposing is more work and hassle and something could go wrong and I'm going to get one or I can just like mail it in and just be perfectly happy with a little bit of inefficiency or a lot of inefficiency depending on the situation because either way it makes no difference to me. Yeah. I've talked about the 10 % of the workforce being cancelled in this pod, haven't I, before?

39:55Yeah, I think so, yeah. That's the other example. I just – I suspect – I don't think anyone's – It's a hard problem. People make work and they don't make work – even to your point, mate, most people don't even just mail it in. They think they're doing the right thing. They think they're doing their job well and they think their job is useful and necessary. And it's not only when you kind of go, maybe that doesn't need to be done. It's like, yeah, of course it does. You don't do it. It's like, oh, yeah, it turns out nothing went wrong. No problems. And it's just very – just yesterday my wife caught up with a friend and they've got a little girl who's got some really difficult health conditions and she's in a wheelchair.

40:29She needs special transport and stuff. Anyway, the school zone that they're in the area for doesn't have proper facilities for someone in that situation. So they go to the school in the next locality. But the bus that goes around for kids in that situation, someone at some point drew a line on a map and they're literally a block past it. It's like, no, we can't pick her up. It's like, yeah, but it's not in our zone. Yeah, but I have to go to this school. Yeah, but no. And the trouble with it is, I mean, that's a very specific example, but you know, it's sort of like there is nowhere to go. There is no higher up.

41:08There is just sort of like computer says no. Yeah. But, and there's no, well, here's why. The reason is that that's the rule. And I am here to enforce the rule. I am not here to question the rule. I'm not here to suggest a better rule. The rule is the rule. It is black and white. We can't do it. Now in the real world, particularly in a small dynamic business, it'd be like, oh yeah, absolutely. We can do that. Our raison d 'etre is to exactly ferry these kids around because they need some extra help. And that's what we do. Not someone arbitrarily drew a line on a map like 18 years ago. And therefore, it just is, you know.

41:46And it's like the mum was like at a wit's end with this stuff. And because there is nowhere to go with that kind of stuff. And there's no accountability. And it's just it's so maddening in those kinds of situations. And people will all have that experience. when whatever department you've dealt with, and you rightly say, you've got to be very careful to do this. This isn't a government thing. This is a large institution thing. And there's plenty of, like, I've railed before about being in an Optus call centre like hell. You know, they are driven by the profit motive and that is an absolute nightmare of inefficiency and ridiculousness.

42:20So it's just how things get at a certain scale. And I don't know. It's also the, I made this point before, but Aussie Broadband versus Telstra, right? I am a Telstra shareholder and a few shares, not many. They built the thing from the ground up. Telstra is still trying to wrangle what was, I'm pretty sure, multiple hundreds, I think it was a thousand, of computer systems that were built around stuff. And then someone goes, well, I'm going to start from scratch with all the new technology. I don't have to retrofit an old green screen MS-DOS program. The innovator's dilemma. Right, it is. And so you kind of, that's how I think government-wise, someone who said, well, actually, we could just do it differently.

42:59And with the autonomy and authority, and it's going to cost some money, by the way, to do some of this stuff. But say, hey, I get that's how it's done. What if we just do it this way? Okay, let's just do that. And it's not that simple. I get it. I absolutely get it. And I get that, by the way, the hardest part is people's day jobs. The government has got day jobs to do their thing. They haven't got – it's not like you've got an army of consultants doing nothing sitting in a boardroom waiting to be called in to solve a problem for them. So it's that problem of trying to do business as usual, build the plane while you're flying it type stuff that really is some of what the help is needed.

43:29And again, it's help. It's not saying public service are terrible, we should sack them all. It's just like, hey, they want to do the right thing. They want to do the best they can. Let's help them, give them the tools to actually give us a better outcome, better ROI for our tax plan. You've got to focus more on the ends and not the means, right? These departments exist because they were built to fulfil a role. And it's so glacial and things just slowly change and the cultures build up. It's why I said at the start of the pod, in all seriousness, burn it down. Like a lot of the time, the best solution is just to rip it off like a Band-Aid, start from scratch.

44:04It made sense in 1962 when this department was built. And it made sense in 1973 when this new system was introduced. And things just change so slowly that at a point you look around and go, oh, this makes no sense. But there's just so, as I say, institutional inertia. or there's no willingness to change. And so we're left doing these things in these very inefficient ways that don't actually fulfil the role that they're designed to fill. It's kind of mad. Yeah, it is. But also I get the inertia of just trying to build it from the inside. Ripping down starting again requires someone to go and do the rebuilding while the other thing is still.

44:44It's just hard, right? And that's why you need someone whose job it is to say, let's go and fix this with a very specific mandate. And again, I'm not trying to put people out of work. Look, I'm just – there's just got to be better ways of doing it. We should talk about universal basic income one day, by the way, because speaking of efficiency – That's a fascinating concept. You could rip up the entire departments of Social Security and probably part of the aging whatever and just go, you know, no pension, no welfare, no qualification, no bloody job. Just get the money. The saving – if you haven't been a loaner, you'd probably pay for it, let alone anything else.

45:12Anyway. In a lot – I think about that with the tax system in general. Like, just get rid of deductions. Get rid of all – just make it so super – But like I know the accountant industry would not be happy with this. Which way doesn't change, by the way. Yeah, like there's always going to be like perfect is the enemy of the good. There's always going to be certain loopholes and there'll be some people under a certain system who are slightly better off than others. But that already is the case today. And we just waste such God, you know, insane amounts of money trying to administer this thing when it's just like it's just better to accept imperfection and just do it far more simply and more straightforward.

45:50Yeah, anyway. Back to reality. I don't know anything going to happen. Speaking of reality, speaking of wastage, speaking of tax deductions, I tweeted yesterday, I think it was, what was it now, Sunday, so it's Wednesday, about innovated leases. Do you know of any good tax policy reason for an innovated lease? No. So the idea of an innovated lease is it's paid out of pre-tax income. So it reduces my taxable income if I go and spend some money on a car lease. right and it's just stupid it's more body welfare deductions I would what's the purported reason for that I don't even know that's what I'm saying someone asked me that on Twitter I was like I don't know I suspect it was a tax deduction boondoggle to buy some votes maybe they said oh it'll help the car industry I'm sure there was stupid reasons advance for it oh it's kind of work related so I guess you can maybe honestly it's there because it's there because it's there there's absolutely zero justification for it as a policy decision I never, the companies, you'll think of the names, I can't remember them.

46:52There were a couple of companies on the ASX that were pretty much their entire business model. And they had some decent financials, at least for a time. I haven't looked at it for a while. But I was always reticent to go anywhere near it, only because I was always, and still am to this day, uncomfortable investing in anything where they face an existential threat from the from the swipe of a politician's pen like is it like yeah and you're gone like what but but but high return on equity and earnings per share growth and good dividends is like yeah nah it's gone or you spend the roulette wheel you get a zero and the whole thing goes away it's just gone you know and it's like i like every business face risk but anything that that is just that exists purely by the good grace of legislators.

47:37Easy come, easy go. And it's like, nah, I can't do it. Ironically, I don't think they ever did that well, ultimately, anyway. Yeah. Are there still some listed? I'm going blank. Yeah, Macmillan Shakespeare. That's the one I'm thinking. Smart Group does tellery packaging. And what's the other one? I don't remember. Anyway, there's a few out there. I'll give you half a second long. I'll say Macmillan Shakespeare. It's the same share price as it was 10 years ago. There you go. There you go. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

48:18Let's go to a question from Joe. It says, Hi, Sir Ramrod and Dr. Scott, which sounds like a bad 1970s Dr. Hook. Was it a medicine machine? Dr. Hook and the something. Thank you both for the quality and diverse content you provide via the radio pod machine. Thank you, Joe. As a long-term, quotes, retail, unquote, investor, thank you, both directly and via my super, which is with Australian Retirement Trust. And yes, Scott, I listened to the Good Oil podcast interview you had with Andrew Fisher last year. Good chat, by the way. Andrew Fisher, like yourself, spoke about diversification. There's no need to labour the point regarding the importance and value of taking growth or high-growth equity options in order to maximise our nest egg.

48:57However, I suppose however, one thing has grated on me for a number of years, the lack of a gold asset class option within my super i mean gold as a hard asset not equities such as miners contrary to cash says joe gold has maintained its relative purchasing power since nixon went off the gold standard in 1971 and outs of gold can buy in 2025 what it could in 1971 if not more central banks around the world have been stocking up on hard gold recently which has only bolstered its value in price don't get me wrong i love diversifying inequities says joe listed unlisted property plus infrastructure but i'm getting to an age where taking five percent of my super balance and placing it into gold as a hedge against inflation doesn't sound like a bad idea so why don't super funds offer this option why have they not commodity created a commoditized gold option within super funds is it because banks want us partially in cash to keep them liquid and afloat surely our financial arena is big and brave enough to cater for gold as an option as well as cash if customers want to take a slightly more conservative approach may have opened up a Pandora's box, but I think it's worth asking.

50:03Thanks again for your informative and entertaining format. It's gold, Jerry. Brackets. Seinfeld. Cheers, Joe. Who then says, please don't mention my surname for privacy reasons. And Joe, you've been listening long enough to know not to put that at the end. I didn't mention your surname, but put it at the top. I don't think we ever would. But yes, as everyone well knows, please put that at the top. Because I scroll to the bottom, I get your name, I scroll back to the top and read the email, and then I get to the bottom where you say, please don't use my name, and then I get myself caught out. But no, very good quote.

50:32You can ram gold as an asset class within super. I'm surprised. I was too. I thought, what? It's not an option? Oh, there's so much to say about gold. Like it is having its moment right now. Yeah. Like we could do a whole podcast on this because my evolution with gold has evolved. And Buffett is always very negative on it, which I think I took my cues from. And he really makes a good point in that it's just entirely unproductive. It's a lump of, you know, it's a lump of metal. People will say, oh, but jewelry and dentistry and circuitry, and that is all true. But if you draw a pie chart of what we use it for, like is most like vast, vast majority of the stuff we dig up, we polish it, we put it in a bar form and we shove it underground again into a vault and just all it does is exist.

51:28and it really exists as a physical ledger is all it does. It's why the world gravitated towards gold because we just tried lots of other things and it's just like this was the hardest thing to play silly buggers with. So we used gold, right? And despite that, we still played silly buggers where the US like absolutely wrote more checks than it could cash. Was it Charles de Gaulle who sent some warships into New York Harbor? Yes, that's right. Got a lot of greenbacks here. This is in like when Bretton Woods was like, oh, there's so much to say here. I've got to be quick here. But like the idea was like we'll be the reserve currency.

52:07You will peg your currencies to us and we'll peg our currency to gold. So that'll stop us like making too much money out of thin air. And by the way, if ever you want the gold back, just bring us the receipts and we'll cash it in for you. So the French went, I'm going to call that bluff. and Nixon went, uh, and like, no one knows, right? Even Trump, more recently, the administration saying, we should really do an order on Ford Knox. And then you're going, what, you don't know? I assumed, what, I thought someone's counted it like in the last couple of decades, like, turns out no, or they just don't want to say it.

52:45It's like, which is even more strange. Like, what do you mean? You know, but you don't want to say, like, this is extremely concerning. And anyway, so Nixon went, speculators, it's always speculators' fault. Speculators have been, you know, hurting America. So we're going to temporarily, if you watch the YouTube clip, we're going to temporarily suspend the conversion of US dollars into gold. And 54 years later, it's a very long temporary. Anyway, so it's so fascinating what's happening at the moment. And I think the one thing, it's not just some weird gold bugs that are doing this, right? Like, look at the Chinese Central Bank and the Russian Central Bank and most of the central banks, all of their gold reserves have been going up.

53:33In fact, even in the Federal Reserve, theirs have been going up. And even in a lot of the gold is held in London at the metals exchange there. And a lot of that has been put on boats and shipped back to New York because they're saying, you know what, I know that we've technically got it. But what do we, though? What do we really have? We've got a piece of paper that says we've got it. Actually, we just want it. So you've seen all of this movement behind the scenes. And I don't want to over put too much weight on it, but it is just an incredibly fascinating point in time in the year 2025 that we are seeing this shift back to gold, knowing full well it doesn't actually do anything except exist.

54:11And I would now argue, as I said, my view on change is it's like that's kind of all it needs to do. It's kind of silly in a world where it's sort of like you've got a very fiscally responsible US system, where it's like, I don't need this shiny metal. I'm just going to use US Treasuries because that's far better because that's really just a buy-in on a monetary network for the world's superpower and biggest economic power. So, like, yeah, I'll definitely take that. Plus I can transport it at the speed of light over a telecommunications network. It's just vastly superior, except when you start to see loss of faith in that currency, which is why gold is doing what it's doing.

54:50Anyway, this is way off the question, but it's like, I can see why you might want to win some. I can totally see it. And you're not alone. Some of the biggest financial players in the world are doing that as well right now. And I am flabbergasted that the super fund doesn't allow you to do that, at least to run ETF or something. Well, that's what I wasn't sure, because there are ETFs for gold, physical gold. In fact, the gold ETF, GOLD, holds gold. It's backed by physical gold in the London vault. So that you are... Allegedly. That one would be audited. Don't worry about that. That's definitely audited.

55:24The US government doesn't have to audit itself, but if you offer an ETF, you better believe it's audited. So I would... Yeah, I don't know why it doesn't either. It seems very reasonable that it should make it available to us. Like it's not Bitcoin, right? Bitcoin you can understand because it's so new, right? but gold it's like he's got a 10 ,000 year track record like the Lindy effect on gold is I just thought that would be like number like one of the first things that they threw into the pot I wonder though if Joe's looking for physical gold as opposed to an ETF maybe he wants the actual physical like I want to be able to have a block of gold in the Perth Mint and have it sit there for me maybe that's what he's maybe that's what he's talking about in which case I wouldn't do it if I was a super fund I don't want to deal with physical gold like it's not I want to deal with something that I can price and transact and trade, and ideally with no custody risk or bloody security costs and stuff.

56:18If only there was something like that. Anyway, go on. Yes, I'll move on. I will say, for what it's worth, I wouldn't hold gold as a... Here's the problem, right? We're equities guys. And I guess if you... The price of gold has also fluctuated over time. Yeah. So I kind of think it depends on what you're trying to do with that inflation hedge, Joe, honestly. And I suspect over time, the best inflation hedge is actually going to be equities or assets that appreciate in value that have some sort of use rather than the metal itself. And if you're saying, well, an ounce of gold is always worth an ounce of gold, that's true.

56:57Again, echoes of one Bitcoin is worth one Bitcoin. But it's kind of like what you can change it for does matter because nothing's priced in gold. So if I have an ounce of gold today and I have an ounce of gold tomorrow and I want to use that ounce of gold tomorrow to buy a car, what's an ounce of gold worth? Five grand. Buy a used motorbike.

57:19In a week's time, if the dollar has risen against that gold price, you can't buy the motorbike anymore because no one's going to say to you, an ounce of gold is worth a motorbike. They're going to say an ounce of gold is worth$4 ,000 and$4 ,000 is going to buy a$5 ,000 motorbike anymore. So that's the challenge in terms of the hedge against inflation. If you're talking longer term, I kind of still go back to shares because I'm kind of thinking holding value is important if that's what you're trying to do. Shares are volatile too, though. Well, that's kind of my point, but you're likely to better long-term return.

57:47That's specifically my point. I think gold is... Until we go back to our gold standard, gold is not a store of value in the short to medium term because it's volatile, and so are shares. In the long term, though, I think you've got to do better with shares than gold. That's correct. So again, if you want to, Joe, to ransom it, fill your boots, we talked about with, I think, Marcus's question. Fill your boots, but I don't know that if I was trying to hedge against inflation, I would use, I'd rather have gold than cash, that's true, but they're not your only two options. And so if it's a short-term hedge, I don't think it's going to necessarily, well, it may or may not pay off because it's volatile.

58:26And if it's a long-term hedge, then I think there's better options to hedge with. I don't know. Am I wrong? No, no, no. Yeah, in a well-functioning financial system, gold really is not required. It is there to keep the bastards honest in a way, you could probably argue from a financial sense. That is the beauty of a hard money asset. I think it is the very fact that I can't snap my fingers and create more gold. I can dig more up, but it costs a lot of money. It takes a lot of time. And even when all the miners around the world are going full tilt, they'll probably inflate the global supply by 2 % or 3 % per year.

59:00so it's it it definitely has a role in that context i do think that people get the inflation hedge i think they get too hung up on that because yeah you'll see it all the time on twitter it's like oh the latest cpi figure came out and gold you know it was up you know x and gold was down ergo it's not an inflation hedge and it's silly i think people like joe sorry to put words in your mouth, Joe, but I think this is what you're saying, and I'd agree with this point, which is there's no such thing as a perfect one-to-one inflation hedge. Yes, exactly. What people are saying is an inflation hedge is over very long stretches of time, it will generally maintain its purchasing power give or take, which is the best you can hope for, right?

59:47Even inflation as a metric is an entirely situational specific measure. We've talked about before, your inflation is different to my inflation because we buy different things, even if we buy very similar things, right? It's going to be different for everyone. So the old comparison was always with a finely tailored men's suit. It's got the same in gold terms over a very, very long period of time. And so I think if your concern, and it's not an unreasonable concern, we'll try to avoid a too slippery slope here, of pretty severe monetary debasement from the US, I don't know all of a sudden gold looks a little bit more attractive oh real estate cash but I'm just not sure over any length of time I mean Joe makes the point as gold buys the same and now that it did in 1971 that's true yeah what shares up over that 50 year period of time yeah yeah true astronomer I get the concern I get the versus cash and forget again I would I don't know whether gold's fairly valued right now because it's been a massive run so it's a difficult time in history to be, you know, what's the gain in gold?

1:00:56It's stupid, super big, right? It's had one of its biggest historical moves ever. And bigger than even the debasement of money supply. So this is not even, this is not purchasing power retention. This is, I'm going to say speculation slash flight for safety. I think it's flight to safety. Right, there you go. But either way, that goes the other way then. Because if it's not, if it's over, I hate overboard, if people buy it because of this perceived risk, even if the risk is real, at some point the risk goes away and then you just send your gold and go back to assets when the coast is clear which means the price comes down so even if you're doing it as some sort of hedge you'd almost have to dollar cost average into it by definition for that benefit because at some point it's going to be too cheap sometimes it's going to be too expensive I'd hate to be buying it at the current price I mean maybe I'll look back on this in five years time and look like a deal but I don't think I'd want to buy at today's price at H4 inflation even if that was my goal I've actually been thinking about buying some at today's prices yeah why not just shares though what's okay that was That was my question, my challenge.

1:01:53So you're thinking about doing it. Why would you not just say, I'll buy shares instead? Because I think longer term, they're a better return. Most of it is shares. But at a bigger scale, when you look at markets, so there's two things that's interesting. I'll use the US because, again, it's just sort of like when the US sneezes, the rest of the world catches a cold. So it's kind of like where all the action is. And when you look at, there's measures of concentration. So let's talk about the S &P 500, which is what we call the market. There's more stocks out there, but that's how we measure it.

1:02:25That's what ETFs tend to track, you know, the main index tracking ones. It has never been more concentrated than it is now. Like, in other words, you take away the Magnificent Seven or whatever it is, you know, the top ten, and it's like that accounts for a very, very significant share of the total market cap. So it's very concentrated and it's very high relative to its cyclically adjusted earnings, like on the CAPE ratio. Now, there's no law of the universe that says those things must mean revert very quickly. But as an observation, they do tend to mean revert over time. The distortions and perturbations can last longer than you think, and they can go further than you think.

1:03:01So it's not something you would have a time on. But just in answer to your question, when it comes to a broad-based ETF, what I feel is I'm getting huge diversification. And I am, but not as much as it seems. and yes, I'm getting exposed to a lot of companies. Some will ebb, some will go really well, but of all that we've talked about this before, all the really good businesses, everyone knows they're really good business and they're really bit up. Even with some of the corrections we've seen, it's sort of like NVIDIA just has to shoot the lights out. Tesla has to like just do better than anyone can possibly imagine and get a decent return.

1:03:37So I've got all my money hyper-concentrated in stocks that I think are objectively overvalued. And so it's sort of like, and I'm in a situation where there's a massive debt cycle that's having trouble rolling over and there's all kinds of deficit issues. It's just gold has never looked more attractive. Let's go to the market as a whole. You're a stock picker. Why wouldn't you try and pick the stocks that aren't Nvidia or, you know, I do. I do, yeah. But there is, in terms of, it's only more that it's more of a clear and present danger than it ever has. I love not making it about Bitcoin, but there was always people say, what's your biggest bear case?

1:04:21And it is like a fiscally and monetarily responsible US government is the biggest risk because all of a sudden it doesn't solve a problem anymore, right? And it's the same with gold. And I just, given the current shape of the world and the administration and what's happening. It's like, I just, it could very easily go up. Just pure supply demand dynamics. And not that I would buy it as a speculative play on where I think it's going short term, but I think we're on the full menu of options that are available out there. I could park some of my capital there, knowing that I'm probably leaving money on the table in terms of what I could identify.

1:04:58Because there's going to be companies out there that absolutely shoot the lights out. It has to be, just law of large numbers. but maybe I can't find them all and in the meantime it's good to have it parked there and worst case scenario the whole world blows up it's like I've got something right there's something to be said for that um but I know and I will just say this too I the the risk I think is is because of all of the when you want to get very academic and and and articulate the case for gold it's kind of like there's a new kid on the block there and I do wonder it's sort of like when you have all of the things that make gold gold and then make it 10 times better you know the only limitation is one of social acceptance and and that's fast changing as well i don't know if you saw what canter fitzgerald did overnight no tether and stuff and howard lutnik everyone would know he's very high up in the administration they're basically they're just they're they're doing a micro strategy play they're going all in on bitcoin it's like follow the big money right like they they have basically for all of these reasons is their investment thesis and they're doing it here and they know that you know in a game like this generally the only losing move is not to play.

1:06:03And if you are going to play, the best move is to play early. And some very big, you know, BlackRock, Cantor Fitzgerald, like people very close to the administration and the source of power, that's what they're doing with their money. I don't know, might pay attention, I think. And gold and Bitcoin all fall under that hard money. That's their value proposition. Purely and simply that they just can't be buggered, they can't be stuffed around with. One just can be stored freely, can be assayed perfectly, and can be sent over telecommunication network. So it's kind of like it's got everything and then some.

1:06:40It's also true, though, to your point you've made before, that the difference for the Bitcoin investment case and the gold investment case are very different. Gold has arrived as a mature asset. Bitcoin is a mature ring, and so the returns you're going to get from Bitcoin, if you're right, are simply phenomenally larger than the returns from gold from this point. just because it's going to get to that point and then stay, well, say stabilise, mature is a better word, like gold has, right? The first person to say, hey, we might use this one day as some sort of currency. We might buy some, that's the early Bitcoin equivalent, right?

1:07:12By the time you get to this point of gold, it's not that gold and Bitcoin may serve the same function, but I just want to make the point clear, you're not saying the returns will be the same for those asset classes. In fact, if you're right about Bitcoin, the returns will be massive, but also when Bitcoin matures, that upside goes away. In fact, I mean, if you're still, if you're going to pay more money, Bitcoin will become valuable, but the real returns are the adoption curve rather than at maturity or from maturity. Yes, 100%. That's just got that added dynamic. It's got the adoption on top of the hard money characteristics.

1:07:43Yeah, it's so much to say with all of it. I might just leave it there because it's too slippery a slope. Yeah. very interesting though right it just strikes me as something that it has people, the charge that is leveled with both gold and Bitcoin is it's unproductive and it's like yeah it is except, and it's got no utility it's like well it doesn't in every way except one and it's only utility is to exist and to be immutable it's like that has a huge amount of utility right, like You're telling me whether it's done on the physical plane of existence or it's done in the digital realm, it's just like to have something that can only be and not be changed.

1:08:33I can account with that. I can transact. I can store in that. I've got an abacus that the entire world can use. It's kind of like it seems like a big deal. It seems like a really big deal to me. And particularly in an environment of very fast and easy fiscal and monetary issues. You've got to remember that everything is priced relative to everything else. So there's also the situation of gold has gone up. We say it's gone up in value. It's like, well, has it? It's gone up in price. Yes. So I can price my house in bananas if I want. There is an exchange rate between – there is an amount of bananas that I could pay to get a house.

1:09:14it's a lot of bananas and it'd have to be someone who's willing to get so many bananas that they can account for the spoilage and the transport and the eventual sale you know to do it but if i offered let's say your house worth a million dollars and i said i'll pay for it in bananas you might say well i need more than a million right give me two million dollars worth but there's a price you will accept and just as there is a price for i can price my my car in um uh interpretive dances I can I can I can anything is that that is what money does it is the most saleable good it is just the thing that acts as a bridge between everything else and so that's why it's such a mind melt when you start worrying about some of these things that the world is clearly where and I'm talking to big financial institutions and central banks look at what they're doing they're buying this unproductive thing not because they think it's going to be worth more but they just think that the thing that it is measured in will be worth less which sounds like i'm playing in semantics so that is like i don't know whatever token number is going to have on this thing but i know if i have this block of metal that it will probably get me the same in terms of material goods and services that i might want in the future however nominally they are described and and as i say it only makes sense when when you start to lose faith in the money That's true.

1:10:36I think that's true. I still think it's a – it depends what you're comparing against. Yeah. Is gold better than cash? Yes. Is gold better than shares? In my opinion, no. And I think that's where – and this is kind of – and that's what I think we're separating out the differences in terms of is it useful. I think the idea of does it produce anything? Can it grow? You think about a business, right? The business, if it had the same number of customers, the same amount of costs, the same employees, make the same amount of money, it's like gold. the good business that you invest in is the one that is going to grow and in theory faster because you know by the way you're selling the same things with more money so you put your prices up probably anyway which is the inflation problem so you're probably covering that anyway and then you're getting some sort of productivity or competition or share of mind you're actually just creating value and you're getting a more share of that like the value that's what gold can't do gold can't create more value it can hold value and that's where that's where my kind of difference is there I think it's where the Buffett and the Munger stuff of, his point isn't that it's useless, i.e.

1:11:39there's no intrinsic utility in it, but as an investment asset rather than a store of value, when they are different. I think that's the difference I think he was trying to come to when it came to showing this. And Buffett, when he wrote a famous article about gold, he compared it with farmland. And that's the comparison. He's not saying versus cash. And this is where I think, even with the Bitcoin conversation, it gets kind of caught up. It's like, what are you comparing against? Is Bitcoin worth buying? well for what purpose and again because we're about because it does have the adoption growth but gold's a better one is it worth earning gold?

1:12:11It depends. What are you comparing against? Is it better than what? Is it good? Yes. Is it better than cash? Probably. Is it better than productive assets that are going to create additional value? I would argue probably not and that's why I wouldn't use it as a hedge against inflation and because you can't have a guaranteed conversion in the short to medium term so you've got to be long term by definition with both gold and shares in which case you ask yourself which is going to go better. I think that for me is the kind of critical difference. Yeah, and the only thing I would tease apart there, I don't disagree, honestly.

1:12:40I think you make a good point. It's just that subtlety. But if you're talking about individual investments and as a stock picker, yeah, right? Yep, yep, yep. Thanks. I think that's a pretty strong case to be made. It's just at the aggregate level of the market. Yes. You know, it's just not every company in the market can grow at 10 % indefinitely, you know? Yes, yes, yes. And that's where, and that's where, and we, you know, to our earlier conversation, the entire, the entire world is increasingly, is investing not because they believe in the future of the business or they've, you know, that they feel as though there's a market inefficiency.

1:13:16I just need someone to save my money. And this is just the easiest way to do it. But it's just because so many people have been doing it for so long and the fund flows are so significant. And it's kind of like we have these markets that are hyper-concentrated and overvalued just relative to even reasonable expectations of cash flow. So that for me is where I just, as I say, it's just things are lining up for the more traditional store of value, hard money narrative to be a little bit more different at this point in time. Like the last time it was really useful was Weimar, Germany. Oh, actually, much more recently than that in other places of the world.

1:13:54It's like all of a sudden gold is like the thing to have. And that's why I think it's a little bit interesting today. Here's the... So I don't want to drag it out for the sake of it, but gold, I've just looked up goldprice.org. Gold is up 47 % in the past year. It's amazing. But I don't... You do, you mate. I'm not going to... I still couldn't... Even looking at the market and looking at gold side by side, something's gone up 47 % in value over that period of time. The markets were up 20%. I'm like, yes, it's concentrated. Yes, it looks expensive. I could buy gold at a reasonable value, fair value, relative to a growing market.

1:14:30If you ask me to bet on the delta between the two, I'm kind of there. But on that, I don't know. Can I reframe it for you? Yeah, go ahead. So you're right. You're right. I mean, well, you are anchoring. Yeah, totally. Which, you know, that's fine. But let's do a play chart, right? And let's look. remember, hairless apes wandering the world, you know, it's all made up, right? It's always my starting point. And when you draw a pie chart of global wealth, by far is IOUs from governments, right? So that's where we saw most of our wealth. Then we've got real estate, which is a very, very big chunk.

1:15:09Then we've got equities. Then you've got art, collectibles, gold, and this kind of thing. So gold actually has probably changed. So this figure might be a little bit out of date, but the total market cap of gold is 20 trillion, 25 trillion. Now there's 900 trillion. If you add up every bond, every house, every stock, it's something like, I mean, it's a guess, right? But the best guesses are somewhere around 900 trillion, almost a quadrillion. Is that right? Anyway, a thousand trillion. And so in that context, 25 trillion, it's tiny. It's tight. Could gold go up more? It could go up significantly more if there is a flight away from traditional store of assets.

1:15:55Now, house is always going to be appealing. Productive business is always going to be appealing. And I know this is so the antithesis of the orthodoxy of the time. So I know how I sound like a crazy person. But when you think about it when 450 trillion is stored in ious from a government that's going to pay you back with things that they can print out of thin air i just it it look at but we talked about buffett um i think it might have been off air it was just sort of like the dude sitting on a pile of treasuries a pile of them right and it's sort of like they were the best bet in his lifetime in the era in which he was you know in his salad days that yeah it's a really smart way to park your money why Why would you park it in gold?

1:16:40Treasury is backed by the biggest superpower in the world and pays you interest, unlike gold. That's a no-brainer. But, and if, this is the gorilla in the room. If, if the US financial system continues to come under increasing strain and Japan and China, who own all of your bonds, go, you know, I just don't know if I like it as much. It's like, I will look for alternatives. And it's not even theory at this point. It's fact. Like right now, this stuff is reported. You can independently verify this yourself. The Japanese, everyone, the RBA has increased its gold purchasing. Like why? Why would they, why have they, someone has very deliberately, even if it's a just-in-case and even at the margin, has said, you know what, hey, Ted, slow down on the UST purchases and let's buy some of the shiny yellow stuff instead.

1:17:35and if that you might disagree with this and this is what would be the thrust of it but if you thought as though the US administration is going to get rid of Powell is going to adopt an extraordinarily dovish central banker if they are going to QE infinity if they are going to do all of this kind of stuff the worst possible place in the world is gold and if you want to get out of gold you've got to sell it right what else are you going to do? Yes, to your point, equities will be very appealing, but they're already kind of overvalued. Property, pretty overvalued as well. Gold, overvalued? Yeah, but relatively, and it's such a small component.

1:18:16There is a very strong case to be made. I hope I'm wrong because the bull case relies on a continued deterioration of the system. And if that happens, no one's happy, right? Yeah, I think it's right. I think though in the in the qe well yeah anything could happen from here i think the the problem i have with the with the everyone's gonna keep buying it is at some point people didn't stop buying it and then rebalance out of it because they don't want to hold it forever so you kind of yes that there's a timing element of i'm buying it now because i think everything's going to hell and when it all goes to hell goals be worth more much more and like with like it's like with losing coal shares right like when we had the market it was a couple of weeks ago now uh the top i do a radio thing i I'd do the top and bottom five ASX stocks just because that's what they want to do of the day.

1:19:04And at one point, Coles, Woolies, and Endeavor group, the three of the top five. And that was the proverbial flight to safety, right? I mean, like, so the stock's equivalent to your, and you could be entirely right, mate. The stock's equivalent to your point was like, everyone's worried. They're buying Woolies, Coles, and Endeavor because we're going to eat, drink, and be merry. Yeah, I agree. That's why Woolies is overvalued. Right, but at some point, at some point, the reverse then happens where people go, oh, coast is clear. And we've seen, by the way, speaking of the gold price, It was only on Wednesday afternoon, Tuesday and Wednesday.

1:19:32I mentioned on Friday the big jump and then the big falls. The gold stocks were whipsawed like 15 % either direction each of those two days, right? Because it was exactly that. And again, we're not talking about gold miners, but it was because the gold price was whipped around. I guess what would concern me with that strategy is, okay, I've got to get in at the right price. I've got to hope what I see happening happens and people keep rushing into gold and it becomes a larger proportion of assets held. And then at some point everyone goes, but I'm getting nothing out of this. so I'm going to get out at some point.

1:19:59I'm going to get back into productive assets at some point to get a better return. And so there is an end to that, which is peak pessimism gets thrown around a lot. I don't want to go there necessarily, but it would be in hindsight, at least, that idea of gold goes from X to Y and then at some point goes back from Y down somewhere towards X because X was the equilibrium price before people freaked out. And that's my challenge with gold relative to those other companies. And I'm not saying we should buy them at all, the overvalued ones, but you can at least objectively discern a multiple of earnings you're prepared to pay, which is no guarantee because share prices can be mad, as we know.

1:20:34That's a bit for me. You're kind of timing the crowd a little bit. You might still do it and be right, by the way. That's why I'm not kind of as keen. Ironically, to Joe's - You have to be macro bearish. And be right. And be right. But also then get out of the right time, right? So when's the sell? You've got to turn macro bullish at some point before the gold price falls or as it falls or something. Anyway, I don't know. That's why I mentioned the B word as well, not to shift the conversation to that, but it is against gold because for the first time there's an alternative, right? And so that actually makes it even a bit more challenging for gold because it's sort of like even if that is your thesis, there is now another way to prosecute it with the advantage of an adoption growth curve behind it as well.

1:21:22So it's sort of like, yeah, you know me. Gradually and suddenly, I feel as though it was where we talked about ETFs before, was it on Friday, right? It was sort of like an obscure unknown thing. Yeah, that's right. And now the dominant, now Macquarie's not even doing it, doing active management anymore. It's sort of like, you know, and wow, the world changed pretty quickly on that front. And it's just sort of like, again, I don't want to get into the debate because it's aside from what we're talking about, but there is a future. Because the only thing stopping Bitcoin to plant in gold is just social acceptance.

1:21:57The only thing. So in other words, the monkeys just decide that that's better. And if, maybe it doesn't, but if that happens, like gold's in trouble. Because then it just falls to its utility value of jewelry and circuitry and dentistry and that kind of stuff, which is like 10 % of its current valuation. So that's another reason to be a little bit cautious of it. Not even Tim's in its current valuation. If everyone stopped storing it, you'd have years and years of supply sitting around with no fundamental value other than being used. The price would fall down 99%. Absolutely, it would. So it's a challenge.

1:22:33Mate, let's finish. We're almost at the end, but I want to finish with this one because it's fun. Stoney sent us an email. It said, Dear Podmachine Pilots, Stoney here. I bow at the feet of the Podmachine ranters. Keep up the good work. There is no question here, just a comment. please intend your puns it makes everyone look impressive and makes you guys even punnier I look forward to the thousandth episode regards Stoney I love it every now and again you catch yourself do I say that all the time and I'm assuming that Stoney's picked up that we must say no pun intended I'm sure I may have said this before or not but one of my favourite t-shirts I don't own but I may at some point is intend your puns, you bastards, which I think is a great T-shirt.

1:23:21It's probably slightly offensive. There might be a way to say that, but it's exactly that point, Sonny. I absolutely agree with you. Intending your puns is a sign of eloquence and intelligence and good looks and all that sort of good thing. If I was quick enough, I would think of a pun and then say I intended that, but I can't. No, I'm not that clever either. And now I'm trying to think at the same time, which is definitely not going to help. It's hard to do. So we will try to intend some puns next Friday. Until then, Matt O'Shea, you'll have a good week and come back in a few days' time? Well, a week is a long time in the current world, so anything is possible next time we catch up again, but yes, I hope so too.

1:23:54Plus, it's quite the next week's going to be the first full work week in about three weeks, so we may have to drag ourselves into Friday afternoon, but we'll do our level best to make sure we're back with you this time. Not this time. On Friday afternoon, about 4.30 Sydney time with a brand new edition of Motley Fool Monday. Until then, thanks for listening and for a long time. Nice one. 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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