Mailbag: incl. Is this what it feels like before a big fall?? August 25, 2024

30:38You mentioned on Friday, Buffett's quote about being a better business and because he's an investor and vice versa. I mean, that's honestly, I miss still, I love my job. I wouldn't change it. But I miss those parts of my job where I got to go and look at the pricing strategy or the promotion strategy or I got to understand the cost base of our business and how we can improve it or whatever I was doing at the time. Those things where you kind of get to be part of that. that's actually frankly more enjoyable than most of what the finance industry is you know i get to do a podcast i get to do some media stuff i get to work with our team of really smart people i get to do it kind of our way i was a member or customer of the business before i joined the business so i kind of knew what i was getting into i don't reckon i would have lasted what's it 13 years now um three and a half years if i was working for one of the other where it's just i was just a you know spreadsheet jockey in a cubicle um again some people do and love it and i'm not saying again you choose your own path but i just will double that on your your point let's get to trump um I've got one very quick point to make, which is just that in the fullness of time, I think, Ethan, you will see the unlucky timing as a gift.

31:39I've long thought that the worst start that you can have to investing is to just hit the ground running. So you're the kind of – and it's just – you're a function. What does Gandalf say? You can't choose in what time you're born. You can only choose to do the time is given to you. There's something, he says it much better for the Lord of the Rings fans out there. But in my, again, all anecdotal, those friends of mine that started investing at the start of a bull market, not because they timed it, it was just like, I'm ready to invest. And then everything went up and aggressively. It's great in a lot of ways, but it teaches you all the wrong lessons.

32:17When you start investing and then you have a, you really have a bad early experience. It sucks, but it teaches you valuable lessons. Like it's sort of, you know, I heard the other saying the other day, always look down before you look up when you're looking at a stock, right? And it's just sort of like, it makes you more guarded. It makes you more cautious with what's happening. You know that you need to be a little bit more diligent. And also generally speaking, when you're eight, well, almost always speaking, when you're 18 and you're starting off, you just don't have much money relative to what you will likely have as a 30 year old, as a 40 year old, as a 50 year old, right?

32:56So if you're going to make a big mistake and have a, start investing in an environment where things all blow up, do it when you're 18, right? Like not, don't, don't do it when you're, when you're five years from retirement, right? Like there's, I know what you want, I would prefer. So anyway, I just, I just want to make, I know it's, it would have been a sucky experience at the point in time, but it is the best experience to have. Okay. On to Trump. um yeah uh complete economic illiterate and that's that's not just that directed at trump that's i think directed at most politicians i would say directed at our like look at look at our leading parties they've got no clues albanese out there sort of doing this made in australia thing which has no bearing on how the world works and you've got the libs going back to the world to tap super for housing like just like ridiculous policies that and that's just the two that come to mine like they're all illiterate what what would a tariff do it makes everything more expensive america imports all its stuff so does it in fact inflate affect inflation yeah uh-huh it does it absolutely it does and it just has it has ripple effects through the global economy and you know you trade the tight trade ties between china and the west have been the best force for peace that you could ever construct yeah right and we're going and it's already pretty tentative and we're going to wind that back it's like i i just i think it's it's a terrible mistake no one's better off as a concept there'll be there'll be interest groups that are better off don't get me wrong absolutely that is true but in aggregate the american citizenry will not be better off with with high levels of of of tariffs correct um generally speaking no one is is is better off This isn't laissez-faire, no rules, capitalism run mad.

34:43I'm not saying there aren't good times to have guardrails and the rest of it. But we're at a point in time in 2024 where we have so much evidence and examples from around the world and throughout history that it doesn't work. Sounds good. It doesn't work. It's like Kamala now says you talk about Trump. So I'll be balanced here. Talking about price controls. Yeah. Price control. What are you? that is not and don't get me wrong people go hey that's expensive someone should do something about it so let's say i i become president right it's too much everyone's sick of paying too much for petrol all right you can't charge more than a dollar a liter now let's let's play this through every single person out there is gonna i'm gonna do it i'm gonna buy a lot more petrol like it's so cheap i'm not gonna be i'm gonna drive to perth tomorrow and back again like who cares Yes.

35:33And so demand will go up. Now, the people who actually supply this are going, well, most of us, most of them were like, I don't make money. I'm unviable. I'm going out of business at that price. So I'm not going to do it. So you have a massive surge in demand. You have a massive contraction in supply with only the very lowest cost producers able to do it. And while you might think, well, that's good for me. I don't really care. But eventually it means that there's not enough there to meet demand and the whole thing breaks. And you can do that with bananas. You can do it with sausage rolls. You can do it with petrol.

36:09You create massive unemployment. You create black markets because someone's going to pay you a dollar if you say get the petrol you otherwise can't get. Yep. You know, it's just – it's across the aisle. It is madness. And I just think there are easy answers that sound good or can sound good, but they just don't bear scrutiny. So, you know, Trump or the Dems win, doesn't matter. They're both going to continue spending like drunken sailors. They'll have their different pet projects and their different priorities. But, yeah, this is not heading in a good direction. It's just not. No, it's not. You've done the tariff thing beautifully, mate.

36:46The thing about tariffs and trade generally is you end up with concentrated costs and diffused benefits. Yep. Or they're around concentrated benefits and diffused costs. Sorry, yes. So what you will have with, so what will happen with tariffs, you'll have concentrated benefits. That is the bloke working in the uneconomic car factory gets to keep his job. Cool. So that's the line, right? I care about American jobs. I will put this person's job. The diffuse cost is everybody pays more for cars. Now, you can decide if you want to that it's worth everybody paying 15 grand more for a car so that they can keep a thousand jobs in Detroit.

37:25but at some point the maths to endrew's point don't add up and that's why at the end of the day capitalism is is horrible and it's the worst system except for every other system we've tried yeah and so that's kind of the point so what does capitalism do it it allocates resources most effectively so we can all have as much as we possibly can for the given dollar we've got once you start putting tariffs in place you actually work against that you you misallocate capital and living standards will fall so cars become more expensive everyone pays more for a car the one guy gets to keep his job in detroit or the thousand guys or whatever but everyone else pays more for cars and overall we're worse off as a country or they are worse off as a country that's why tariffs don't work and that's that's exactly subsidies that do the same in reverse um they fund the local production but again what does it do puts prices up it means you can you charge higher prices because you're being subsidized which makes all of us worse off now the reverse is also true when there is free trade you want to diffuse benefits or freer trade there's nothing because there's absolute free trade the diffuse benefits in other words we all pay a little bit less for a car or a banana to enter your point and there's a concentrated cost the guy in detroit loses his job yeah and that's horrible no one wants that person to lose their job but the math simply at an economic level and this is the problem right at an economy-wide level you have to make decisions that are the best is for the most number of people that maximizes national happiness national standard of living national whatever measurement you want to use you can't save every individual job well you could but we'll be watching black and white tvs and riding bikes to school yep and that's cool go to cuba see what cars are on the road literally it that's literally it so anyway um yeah i will agree with ram now that said ethan the last thing i'll say what am i doing about it absolutely nothing why i don't suspect that trump's tariff plan firstly if he is going to be elected so that's the first if second he's got to enact the tariffs that's the second if third i have to be right about the impact that's the fourth if i'm about four in the game fifth he's going to be gone in four years unless he manages to you know take over the whole bunch of stuff um so at that point someone else does something else differently and you add all the ifs together and then say how certain i have to be about that okay so that's the first thing then you say what about all the every single other if that could happen there could be a war or no war there could be a recession or no recession there could be a dramatic step change in technology or not and you add all those ifs together and say now what do you do with all of that and the answer frankly most of the time should be unless the policy is so dramatically deleterious to your investment you look at it i don't know maybe it happens maybe it doesn't and if it does happen and everything else happens it could be better or worse it could be that trump makes tariffs worse but at the same time uh i don't know the u.s economy picks up and the the growth in the economy outstrips the negative impact on tariffs it doesn't make it okay the tariffs are in place but it might mean you still can actually invest and do well or maybe kamala harris wins and there's price caps and that's that has different impacts so i guess i'm i'm just saying mate your question is is a really really really great question fantastically great question the problem is that taking any individual item in isolation unless it is going to be overwhelmingly impactful and so deleterious as to make investing either not worthwhile or to change what you would invest in, most of the time you kind of got to go, huh, that sucks.

40:45I wouldn't do that. I hope they don't, but I'm investing anyway. It always comes back to, I guess I'll just stick with the idea of trying to buy a good business at a decent price. It's so disappointing because it's an evergreen kind of thing. It's like, if you always say that. I'll do it now. Yeah, give me something edgy. And I was like, yeah, it's kind of, yeah. And I just want to say one more thing on that. But I think there is, I feel as though there is a real pushback against capitalism at the moment. And I think it comes from a really good place. But I think people confuse, I've said it before on the pod, but why not?

41:21I'll say it again. I think people confuse capitalism with crony capitalism is probably best defined, which is kind of like a fake capitalism where it's like, you know, the insiders have unfair advantage. It's not true free and open markets. There are people who are structurally advantaged because of political connection or they have captured the regulator. And by the way, it's rife in Australia, I would say. Regulatory capture is a real thing. If you don't believe me, just look at the hot water that ASIC's in at the moment, which has basically been found to like you're just a really terrible cop on the beat.

42:00And anyway, I won't go down all of that stuff. But it is very tempting when you see such egregious corporate players and such disgusting greed and all of this stuff. And you go, well, it's capitalism. And I just hesitate people to say it's more nuanced than that. And while you're right to be angry and while there is a lot of injustice out there, it's not, quote, unquote, just a terrible term. It's like a lot of broad terms, right? We've got democracy in Australia. They've also got democracy in other not-so-great parts of the world. Correct. There's different extremes and instantiations. The gerrymandering of the electric system in the US doesn't mean democracy doesn't work.

42:46It means that version of democracy as implemented and allowed to continue should be improved. You don't throw out democracy because the US gerrymanders their electoral system. Yep. The problem that a lot of people are falsely diagnosing is actually solved by more capitalism, I would say. But I say that in a way of more pure capitalism, where if you do dumb things, then you go out of business. If you disrupt and create greater value, you succeed. It is in a true capitalist system. The only way to get ahead is to create better value for your fellow human. That's a good system. That is a really, really, really good system.

43:26It's a merit-based kind of system. It feels harsh because if you're not successful, you fail. But it's kind of like we just live in a world where it's not that therefore you're on the street and you'll be like eating out of a garbage bin. There needs to be effective mechanisms in place to protect all of that kind of stuff. But think about the alternative. What, so the person is making really, really, really bad cars that no one wants. We need to support them because why? And versus someone over here is offering to make something that's twice as safe, twice as fuel efficient, looks cooler, goes faster.

43:59It's cheaper. It's cheaper. You know, it's just we have no other way of coordinating this nebulous, chaotic thing called the economy better than just letting the individual preferences of consumers dictate the Adam Smith invisible hand. I'm such a passionate advocate for all of this kind of stuff. I just understand that what you're angry at a lot of the time is something that I am just as equally angry at. But just don't point the finger at this broad, nebulous term called capitalism and say, therefore, we need price controls. Therefore, we need socialism. Therefore, we need this. Because, again, we've tried it.

44:33It doesn't work. Yeah. No, I love that point. It's really, really important to make. I will take a slightly different perspective than yours, which is more capitalism, yes, also better regulated capitalism where capitalism doesn't achieve the outcomes we would like. Like, for example, competition policy or product safety or, you know, you don't get safer food just by having more people provide the food, right? Eventually people just keep dying and dying and dying. You just go, yeah, maybe that's probably a problem. So there are things that capitalism doesn't do and shouldn't do or shouldn't try to do.

45:02By the way, a quick mini rant on the NDIS. I've said this before, but the government tried to create an artificial market because they thought markets were the answer to everything markets are not the answer to everything they're the answer to a whole lot of things yeah more markets are probably less markets fuel markets um but just because markets work doesn't mean everything should be a market the nds should never have been a market it's structurally broken and and so that is that that's that's and i will say only that people we've talked a lot last couple of days about responses to excesses and that's kind of where we're at right is people are saying this capitalism thing seems a bit broken and they're not wrong so you fix it you don't throw it away yes and that's that's kind of what you're getting at that's what i'm getting at which is that idea of are there problems with our version of capitalism absolutely should we fix them yeah let's actually do that yeah but don't don't fall into the trap of thinking just because capitalism is broken in some big and small ways that therefore it's irredeemable or that there are other better solutions because we've tried them all we've literally tried them all it doesn't work this is and by the way capitalism is also the farmer's market yeah you know we think about capitalism as big capital c you know grand poo bars living in working glass buildings in the city cbds i mean that might be capital c capitalism if you like but capitalism is just the idea that love those markets having having a right what's it's so pure it's so pure someone says i think i can i'm pretty good at growing tomatoes yep and And you think, I'd like some fresh tomatoes.

46:31And they say, well, I'd like to sell it for this much because that's what I think they're worth and it kind of deals with my costs. And I say, that seems like a pretty good price for pretty good tomatoes. I'll have them. Are we saying we don't want that to happen? Of course, everyone says, no, no, I don't mean that bit of capital. I mean, the other bit. And that's kind of the point. Yep. All right, we've smashed that one. I'm so glad you made that because people wouldn't go into, I'm up in the mountains, right? We've got plenty of hippie markets up here, right? And you're like, oh, you don't know.

46:57This is capitalism. in its purest form. Let's love it for what it is, right? It might not be Walmart and Amazon that are here, but it's still the same thing. Anyway, we've made the point. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

47:17Hey, this is a really interesting question from Brian. A question for the pod. Why do Australian index ETFs have such a high weighting in a high growth index fund? For example, the Vanguard High Growth Index, VDHG. I'm a member of ShareAdvisor, and I remember seeing the ETF investor and had similar weightings with around 30 % to 40 % in the ASX 300. I can't make sense as to why it would have such high weighting compared to, say, the US market's S &P 500, for example. The return there is 15.3 % over the last 10 years, where the ASX 300 has returned to 7.7%. Should the weightings be skewed more towards the US markets, given the ASX only has 2 % of the global share market?

48:03You go first. I think that's a really good question, Brian. Thank you, mate.

48:10The answer is always in the asking, right? So you say, why do they have a high weighting and a high growth index? There is the investment. Well, let's go back to what ETF is. an ETF is a product created by somebody who thinks they can sell you something. They are not something that they are creating for your wealth. Now, every ETF provider will take exception to that. Possibly, in some cases, they might be right. More often than not, they're not right. Why? There's a demand they think they can fill and make some money doing it. And I say that because the why might be about the investor who put this together, the fund manager chooses these options they think they're best for the investor, or they think if I created an ETF that had 90 % US shares, I could probably sell less of that than if I offered an ASX 300 ETF.

48:59And that doesn't, it sounds more cynical than it's supposed to be. The reality is if you did that, you wouldn't sell any. So again, the market kind of tells you what you want. Yes, the market could be offered more things. Yes, I don't disagree with you, Brian. People should be more invested in the US proportionally compared to Australia. Not even necessarily because of the returns. I'll get back to that in a second. but it's kind of you get you know you sell what you can sell and you buy what you can buy and where the two overlap so your capitalism that's kind of where we find ourselves um in terms of weightings mate you talked about we have a product called etf investor at the monthly full which is what brian's referring to he talked about the weighting um we talked on was it friday about the home market thing was that earlier this podcast they're all blending together um the home market bias is real and it's real for real reasons and i guess i again for the same reasons

49:52members want to invest in the ASX because the home market there are also franking credits you can take advantage of in Australia you can't get from overseas listed companies and when you're providing a single index or single portfolio you kind of do a separate on for every individual person they can make their own changes my recommendations by the way they're very very welcome to um but yeah the the waiting i can't remember the exact waiting now and i won't give away too much of the uh the member i intellectual property but uh yeah it was it's a it's a large minority stake in the asx 300 the reason largely um is that most australian investors would feel uncomfortable with less than that in australia even that number most people have 90 asx and 10 overseas right you're not wrong about the two percent number so i think people should have more invested in the US.

50:40We talked about international investing already and US investing in particular. We talked about the Vanguard chart on Friday. So yes, I think people should have more invested in the US than they do. And I think that's a perfectly good question to ask. The other one, the last one quickly is just currency. So the timing and the impact of currency impacts your returns and the timing when you want to take the money is massively influenced, or sorry, the returns you get at those points are massively influenced by any currency movements. So if I don't know actually where I need to take the money out, but I decide in a month and a half's time I do the money right now, I've got the prevailing share price plus the prevailing currency, which might be wonderful or might be terrible.

51:19So there's reasons why a home market bias is just the reality of what people want and a reason why you might want a greater proportion than the share of the world market, that 2%, in the ASX or in your home country, in your home currency in particular. In terms of the returns, mate, I just bristle a little bit, not a bad way. Don't just look backwards and assume that you can necessarily extrapolate that forwards. You know, why should I do something? Banks are a great example. They had a fantastic 30 years up until about, was it 10 odd years ago around, something like that? Maybe five years ago, some sort of number.

51:55Brilliant, really, really great. And you could have said at that time, and I'm saying you would have, Brian, why wouldn't I invest all my money in the banks? Look at the last 30 years of returns. Now, the subsequent 10 years, I'm cherry picking deliberately here. the subsequent returns over the next five or 10 years were awful so what you know and again i'm not saying the u.s will be awful at all but i am saying just be a little bit careful comparing any investments particularly over and 10 years is long enough period of time but you'd ask yourself do i have reason to believe those returns that gap will continue over the next 10 or 15 years if the answer is yes there's your answer by the way but don't just look backwards at the number and say it was higher over the last 10 years therefore that's what i should buy that we know In fact, mean reversion, if you buy the best performing fund in any given year, there's a very, very, very good chance you'll do poorly the year after that just because averages tend to mean revert.

52:42So just keep that in mind as well. Ram? Yeah, I've got nothing to add to that. Yeah, nothing to add. Perfect. There you go. That was easy. You obviously weren't paying attention. I feel like sometimes I should say something for the sake of it, but I'm just be waffling. There you go. A question from Andrew. There you go. You'll like this. G'day, guys. Insert customary bootlicking here. There we go. Bend the knee, kiss the ring. Thank you. And then he says, love the pod and genuinely very appreciative of your continued time and effort invested in us to help us invest in ourselves. Thank you. This is going to be a serious one.

53:21Apologies if I ramble. It must be an Andrew thing. Sorry, ram. Is this how it feels? He says, I'm 29. I've been fortunate in the timing of my life. I was in year seven during the GFC. and luckily I was largely shielded from the uncertainty of that time by the government stimulus and my parents not letting us know how tough it probably was. In 2020, I was working as a paramedic. It was an interesting time, but again, I was fortunate to have a rather in-demand job and I was financially unaffected compared to some people who lost everything. I was shielded from a lot of the uncertainty and benefited from the government stimulus.

53:56That's when I started investing. Now, 2024, and everyone is talking about recession, rates, the RBA, the cost of living and the housing crisis, a war, an election and so on and so forth. Is this how it feels before a big fall? Are these same winds picking up and the storm coming? Or is this somehow different to the other pre-economic disasters that have come before? And how do we best navigate that thanks again andrew great question isn't it it always feels like this i mean always the the old saying is the market climbs a wall of worry and there's always uh like a dozen things to worry about and not and not to dismiss them as like silly things that you know the market's just an idiot and doesn't know what no like things that any any you know well-informed person would rightly worry about, you know.

54:55But the funny thing is, is that there are companies that continue to thrive and prosper despite all of that kind of stuff. And so unfortunately, when you wait for clear skies, the reality of that positioning is that you never invest because there's usually the skies are the clearest at like on the on the eve of the collapse is usually you know think about how markets were roaring in 2006 right like and then what happened in subsequent years it's sort of if anything and that's it's not true but if if anything i i would almost say it's it's it's the it's the opposite so it's just it's really it's really difficult especially for someone who is rather cynical and doomish as i've sort of found myself increasingly being so um that is that is just the the nature of it um and the other thing is this the other observation from history and i really think that more investors and economists should study history more than anything else because it's a great teacher and what you usually find is that it's not the thing that you've got your eye on that gets you it's it's do you remember that scene from Jurassic Park where the, is it the Australian dude or the South African dude?

56:23He's out there and he's like the raptors are hunting him and he's, he's caught and he's, he's got his eye on the raptor. Right. And then he realizes that it's the one that's behind him that he needs to worry about. It's, it's always, it's always the raptor. You don't see coming that gets you. So, so who saw COVID? No one. Who saw the GFC? Virtually no one. I want to say no one. There's always one or two people have been calling the end of the world that just happened to be the broken clock that gets it right. Who called the tech wreck? Who called the European debt crisis? Who called this? Who called that?

56:56The next time that we have a big market route, it'll be like, huh, oh, was that something I needed to be aware of? Oh, last week, literally last week, the Japanese market had one of its biggest corrections in history, right? It started a global equity market route, which we talked about on Friday. It turns out that that was just nothing. But at the time, we didn't know that. At the time, we were seeing precipitous significant falls on currency markets, commodity markets, bond markets, equity markets. It very easily could have been the tinderbox that just sparked off another global recession. Now, it didn't or not yet or whatever.

57:40But my point being is who was talking about that in the months in the lead up to that? No one was. So I don't know what the next calamity is going to be, but I'd be pretty confident in saying it'll be the one thing that no one's talking about. And not what I'm talking about either, by the way. It'll just be like, oh, gosh, that's come out of left field. It just always does. So it's sort of you kind of have to invest in spite of all of that. I'll only say this to set you up and to pass the ball away but you mentioned on Friday the Vanguard chart day and yeah I'll punt the ball to you what does that chart tell you?

58:23You know exactly what that chart tells you and the listeners who were listening on the Friday know exactly that too this is what it feels like before a fall this is what it also feels like before there's no fall which is Andrew's point before of it's always feels like this right So in hindsight, and this is, you know, if I could make economists study two things, and investors, it would be history and psychology. Yeah. Right? Because the more, and I know I bang on about psychology, I honestly believe the difference between the average investor and the great investor is not financial skill in his temperament and understanding of their own and other psychology.

58:58I'm firmly of that view. I'm firmly of the view that Buffett would have been brilliant without his insights into temperament, largely from Charlie Munger, actually. but probably nowhere near as good as he is at the moment because he would have made those mistakes that he's avoided by knowing himself and knowing others a whole lot better he famously left new york went back to omaha why because he said everyone was saying what are you doing swing your bum don't just sit there do something the the urge to be active to do you know that that kind of stuff is all part of it um the reason i say that reason i raise that is because we will look back after the next recession whenever it is and say oh i should have seen that coming See, these things happened.

59:36And what we're doing - There'll be some expert dining out on their one lucky prediction too, by the way. And we'll therefore think that just because those things happened, we should have been able to see it coming. Except those things have happened already in the last five or seven years and nothing else happened. And so just because - It's literally the false positive, right? If we worry - And you talk about the things that have happened, Ram. The things that haven't happened. I mentioned before, China was going to run out of foreign currency was one of the worries that we worried about three or four years ago.

1:00:09Yeah, yeah. China's ghost cities. I'm just keeping it in China for the fun of it. China's ghost cities. We've got to bring the economy to its knees in 2013 or 14, I think, from memory. Not only these weren't real issues or real problems, or even real risks. They're just ones that didn't happen. The people who said that the early August route was going to be the start of the next thing. Maybe it still is, but it hasn't been so far. In fact, the US has recovered all and more. Australia's almost recovered all of it. Again, I don't jinx anything. It may fall over still. That idea, though, is just what happens next.

1:00:42We don't know. You can't know. Sometimes the very same circumstances will lead to a benign outcome. Sometimes they'll lead to a disastrous crash. You can't know. Here's the other point on that, too. Again, we're talking about the markets crashing, right? So in every market crash, there'll be those that hold up really well and those that recover really quickly. so it's sort of like that there'll be those that never come back as well there's a difference between holding you know i'm trying to think of an example now like hih or something that's just never recovered versus holding something you just had it yeah yeah amp right um or something that's just had a bad year and and then is back off to the races again so yeah yeah sorry cut you off no it's good exactly the right point i probably i probably just only rolling over the stuff you've talked about so essentially um here's the other thing make your peace with it anyway invest anyway as ram says um you will invest you're a young bloke you will invest through many more recessions the problem if i may say politely with the question is it implies there is something we can do about it it implies you can time the market you can get out of the high you can wait for the crash you get back into the low uh you can and that again speaking of psychology right that's again i don't mean this in a harsh way and slow that that is human ego i don't mean ego is in your you've got to we all have it's what we do right we all want to believe we're the masters of our own universes and we're the masters of our own destinies and we can somehow take an action to do a thing to avoid a thing to make a thing happen and why because we kind of tell we get through life you know it's why we why we have religion it's why we like certainly rame you talked to on friday about we hate volatility yeah we absolutely we we would do anything to avoid volatility why because we don't deal well with discomfort it just sucks and that's fair right it's not that's not wrong discomfort is by definition sucky because it's discomfort if it wasn't discomfort to be comfortable and if it's if covered then it's not comfortable that's that's the point so we don't deal well with that stuff and i've said before many times successful investing or investing is literally the successful overcoming of our evolutionary biology that that's it's i can't have a better description than that because it is to to to be a successful investor you must stop your brain making you do the things that you otherwise would want to do that are the very things that would stop you being successful you have to be able to park your biology and and somehow quarantine it and make the rational decisions anyway so buffett's been spectacularly good at he didn't chase the dot-com boom he therefore didn't get caught in the bust he was lagging to the market he was being you know insulted by everybody what's wrong warren was the famous baron's headline uh somehow he'd missed the boat and he wasn't keeping up and he was too old he was past it and then you know it's staying the course is the answer and stay the course when there's a boom stay the course when there's a recession stay in the course when there's a chance of a recession stay in the course when the recession is 12 months old and still really painful the gfc falls went on for about 16 months that was just grindingly awful absolutely grindingly awful but staying the course meant you were there when the recovery came and we talked about vanguard on friday and you asked me you threw it to me this question the market the asx delivered 13 and a half times your money over 30 years despite not in the absence of these horrible horrible horrible events sometimes financial sometimes human that happened to our society our economy just because we're human animals and we don't do things perfectly um so i don't i don't I want to somehow wrap it up, but I don't have much more to say.

1:04:11I think it's a case of you have to learn to ride the wave. Don't try and avoid it. Don't try to jump out of the water. Learn to ride the wave. And it's more that be alert, not alarmed kind of thing. So it's not to say the wrong interpretation of what we're saying is, oh, don't worry about any of it. It's like, no. I mean, keep your eye on certain things that you might find concerning. but but things things always happen much slower than you think uh is is a very important lesson and the other one is is that let's play it through let's say there's a crippling recession one of the worst that we've had now i'll pick a random example um is woolly still around yeah they'll be around does their share price go down yep do their profits go down yep does it go down as much well do the do the earnings drop as much as the share price probably not um does the recession last forever no and what comes out the other side you get you get the companies that survive go on they've got a lot of clear air a lot of their competitors have hit the wall you know i mean they've they've they've taken the opportunity to rationalize some of their expense they come out much stronger it's just sort of these these experiences actually make for more resilient stronger businesses you know it's just just like the warrior that's been in a a dozen battles is that's the one to the back than the person who's stepping into the arena for the first time.

1:05:32You know, these, these are, these are formative kinds of experiences. And so again, you can't avoid them, but you can choose, you can choose the boat that you're sailing in as the storm approaches. If you think the storm is approaching, you know, and this is my, this is always my thing. It's like, I hate it. I hate it with a passion when financial experts get on quote unquote, get on TV and say, you need to position for that and position for this. And it's just like, no, I don't, whatever's going to happen. I want to make sure that I'm invested in good companies, whether it's going to be great economic conditions or terrible economic conditions.

1:06:07What do I want? You know? And for some idiot to say, Oh, it's looking very dark. Now's the time to focus on quality. What you're saying? So up to now you weren't focused on quality. I don't, it doesn't make any sense. Like it gets back to what we, yeah. Well, Well, look, there's a thousand different ways to play in the market and there'll be some, I'd like to use the word advanced, but that's not appropriate, complicated strategies that certainly have more merit maybe at more points in time and the rest of it. So if that's your style and you're that very macro trader type focus and fill your boots if that's who you are.

1:06:52I've long passed the point of telling people how they need to invest, but in a way. I was going to say, if you've listened to this podcast. Well, I mean, I'll tell you all day long how I do it now. I think it's all right. But at the end of the day, you've got to do it with a thing that resonates with you. But I think, what am I trying to say here? What I'm trying to say is that the person who just does the boring thing and is able to do it consistently when the bombs are falling and when the skies are clear and in all times, they just inevitably push ahead. It's almost a hare and the tortoise kind of thing, right?

1:07:32It's just sort of like it's almost impossible to do badly under that approach. So I don't know. I think we've flogged that horse to death. Yeah, no, I think we probably have. I think you have, I have not yet given up on telling people how to invest. So I am going to say that you do you, but do you with a rational reason for believing that you can do it well. And that done well, it can actually give you a result that you're looking for. And that sounds obvious, right? People are like, no, I think I'm going to be a macro trader because I think I know this and that. I'm going to have money doing that.

1:08:17It's like, well, okay, firstly, are you better than everybody else doing that? Or enough people, better than enough people doing that? Can you do it successfully? And even if you can, does that strategy tend to deliver positive results? Because those are the two things people, you know, I'm a day trader because I think I'm going to trade this. Why do you think you should, will be successful doing that? What is it about you or the markets or your system that makes you think that's most likely to give you a success? And I say that only because I know you do you, I know exactly where you're coming from, Ram.

1:08:45I guess I just want to say to people who hear that and think, yeah, I'm going to do me. I'm going to be a macro trader. I mean, the chance of you doing that well is really small. And the chance of actually working out is also really small. And again, to Ram's point, if that's what you want to do, go knock yourself out. But I would seriously discourage you from doing it because, you know, me deciding to be an Olympic skier is probably not smart. And I can think I want to be. Hopefully someone's going to tap me on the shoulder and say, so here's the thing, dude. You're fat and old and not very flexible anymore.

1:09:10how about you don't try and be an Olympic skier? And I'll go, yeah, good point. I'll do something that I'm probably going to be good at instead. And that's all I want to kind of leave this with, is just that idea of just because you want to do it, just because it's there, doesn't mean it can be done well enough to suggest you should keep trying. Sometimes, you know, we hear people talk about stock. I'm going to buy this stock because of this. Okay. Is that likely to happen? you know you don't get to make your own factors as we like to say have your own opinion um but it has to kind of work anyway that that's that's a a slight tangent to your point man only because as i said i haven't given up yet on trying to um trying to win people back to the to the uh the bright side uh trying to to help them work i don't know a better way to invest in the way we do it and i think we have plenty of reason to believe that you know people on this journey tend to do very well.

1:10:05I don't know a single investor who successfully times market cycles. So, you know, you can say you do you, but equally, I, you know. It's never worked before, but I'm feeling lucky. Life's too short to make your own mistakes, right? Learn from other people's mistakes and successes. Anyway. I'll give a shout out to a guy called Ian Castle. He runs Microcap Club over in the US. He's a nice guy. Anyway, he did a presentation at a summit recently. If you just Google, all the skills of stock picking. And the reason I raised it because I only just watched it last night, but also it gets to what we're talking about here where he sort of says there's a lot of different ways to sort of skin the cat, but there are skills that are ubiquitous and across all styles.

1:10:48And it kind of squares the circle a bit with what we're sort of talking about and sort of like, we'll have very strong opinions on certain things, but other than that, you do you kind of thing. I think that can be true. I mean, you and I are here sort of nodding in furious agreement, spouting our own wisdom here that we happen to think is right. But you and I invest differently, right? Yeah. But we both think that sort of having some notion of value is important. We both think that there is a skill in holding. We both think that there is, you know, skills in buying and selling. He just goes through these sort of six characters.

1:11:20Yeah. You know, and I just, it's a half hour video. It's a, it's a, it's a, it's, yeah. I give that a shout out, but also just to sort of try and tie all this together because it feels like we're sort of contradicting ourselves where it's sort of like, actually I see it on Strongman a lot too, of all our movies. We've got very different styles there, but you're not going to get anyone or not too many people out there who will make a statement like, you know, it doesn't matter what price you pay or, you know, there are certain things that are just sort of true regardless of style. And it's those grand truths that I think you want to zero in on and be very firm with.

1:11:54And then outside of that, there's a lot of flexibility to be had that needs to marry with your temperament, your style, your predilections, your experiences, you know, I mean, who am I to sort of say someone who's worked in medical research for 20 years with three PhDs shouldn't invest in biotech? As long as maybe you should invest in biotech, right? Like, no, I shouldn't, but maybe you've got an edge there. So anyway, point made. Point made and hopefully well received by our listeners. Mate, we've banged on for long enough. It's time for you to get back on the running track and bash out another couple of marathons before lunch.

1:12:27Sure. If you have enjoyed this podcast, please send us some questions if you have them. info at fool.com.au is the best email address. Frankly, the best way to get the questions to us in general. You can hit us up on the socials. Andrew is on Twitter at sage underscore simeon and at straw man invest. You get me on Insta threads and Twitter at at TMF Scott P or the Motley Fool is at the Motley Fool AU. I'm on Facebook at Scott Phillips money. So check all those out if you can. Hopefully some good stuff you'll learn and find out. And we always love chatting with you there as well. But yeah, the email address is probably the best place for questions.

1:13:01Enjoy the rest of your Sunday until next time. It's Friday. Fool on. See you then. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services License 400691.