Mailbag: incl. The hardest question about housing. April 30, 2023

0:10Welcome to Motley Fool Money, a very special Sunday Mailbag edition. I am Scott Phillips from The Motley Fool. He is Andrew Page, Esquire, as I like to call him, from Strawman. No, from Strawman. He founded the business. He runs the business. He cooks, cleans, and washes the bottles. He is, of course, Andrew Page from Strawman.com. How are you, mate? I'm good, mate. I love the build-up you give me. It makes me feel very special. Mate, you're an entrepreneur extraordinaire. You have built a multi-billion dollar business from nothing. It is, at least I can do. I mean, I have to. It's in the contract.

0:44but least i could do is actually say nice things thanks mate i'll take it take take the victories where you can right you've got it right if you fool some of the people some of the time you're ahead um i uh mate lovely to talk to you as as always for sunday morning i'm gonna i'm gonna invert the entire idea of this podcast because you and i were chatting between podcast recordings and you said to me that the degree to which you own your own home changes how comfortable you our own life i think i'm i don't think i'm uh speaking out of school by sharing that that sentiment no i have a difficult question for you because we talked a lot of a little bit actually at the end of the friday's podcast about the realities of home ownership and affordability and interest rates and rental and that kind of stuff and i am on record as saying up until i haven't just haven't seen the numbers last 18 months i have no idea how they've changed but probably not for the better up until then affordability measured as the proportion of your income that went towards repaying a house was not much changed over 15 20 years had bumped up and around the place where prices were i assume it you know goes up after uh the 21 increase in house prices then down and then back up again with interest rates also so it's kind of bounced around but you know over over an extended period of time the the line isn't much different and i stick to that as a as a measure of affordability as an average measure of affordability when you consider household incomes and repayments right you can afford to repay based on diverting a certain proportion of income to repayments that's the that's the relationship in my mind that matters now i know you don't necessarily agree 100 with that but i am gonna i'm gonna i'm gonna disagree with myself um in one important way one of the things i've said often i don't know how many times on the podcast but often in different places is what matters um is not averages but distributions yes there is a there is a spread of you can have quartiles which is one quarter of the population each thing you have deciles you have quintiles you can have percentiles which are literally one or one hundredth of the of the population and if you were to draw a line and talk about how affordable housing is for each of the people on that list the hundred the hundredth percentile the one percent literally the one percent and the bottom one percent everyone in between it's a very very different story and my problem isn't so much i'm going to assume you agree with that i'm going to assume that's taken as read yep because my issue is actually about the realities of trying to own a home because household income is the combination of how many people are working in your house added together divided by the house you buy or the repayments you're paying and i think that is dramatically lengthened extended stretched the distribution because if you have one person working in your home the average household income is implies two people 1.8 people are ever working you're already miles behind the eight ball and there's every combination then from one low paid income to then one modest income to then two low paid incomes and we as we go up we go to two modest incomes and then eventually the upper and we end up with two very high incomes and so whatever combination permutation of those the average is still the average and the affordability still the affordability but it does strike me and again i'm going to assume you you think i'm right about this because my real question is what the hell do you do given the reality of two income households to have stretched let's put aside housing policy entirely right just for the fun of it my my question i haven't yet come to an answer on because it's only really been playing my mind this week is what do you do simply when if you're a single person by by just because not again government policy aside there are just two incomes in most households these days so the The demographics alone have made your life obscenely more difficult because you're competing against people with two incomes.

4:34Just assume no tax difference, assume no policy difference, assume nothing else other than you're a single person trying to buy a home or you're two lower income people trying to buy a home. Because of the addition of that second income and because of the reality that that second income adds meaningfully, depending on whether they're low, middle or high second incomes to a to a household income i don't know what structurally you do to fix the problem for a single income household again let's assume you try to make every policy change in the world in terms of taxes and whatever whatever's how do you how do you unscramble the egg of giving a single income person access to home ownership oh gosh you're coming coming uh out of the gates with the with the big questions here i just i i don't i haven't been you know i'm i've got opinions on everything you know that and i've got reasonably well-formed opinions on most things this one is one i'm just meaningfully stumped on like i can you might say well you should only let people qualify for loans based on one income so well whose income do you use and you say it's the blokes they're the woman's or the highest or lowest or some sort of average or i mean you can imply you can apply a whole lot of arbitrary regulation on top of that try and you know put a little bit then what do you do if someone's buying for cash you know if i own my own home outright i sell it and buy another home do you say well you can't buy that home because you if you if you had to borrow you'd only have one income and then you have this and then i actually i genuinely made it i should have been really really super dictatorial i can't unscramble this one i really can't find the solution i and i wonder i worry structurally that that perpetually puts singles lower income couples because of the that the stretched distribution there puts them meaningfully outside the access to the housing market.

6:19Yeah. I mean, I guess a single person doesn't need a four bedroom home, you know, if you don't, you're not partnered up with, you know, a bunch of little runs running around and it's easier to, you know, but it's, it's a tough one, mate. I don't, I honestly don't know. I mean, I've commented before the irony of ironies is, is that dad always says that when he and mom got a home loan, and mum wasn't even looked at. I mean, you're not a factor. Yeah, exactly. You're just going to get pregnant. Yeah, that's right, right, exactly. You know, like the bank would laugh at you. Teachers had to live the workforce.

6:51You weren't allowed to be a teacher if you were married or over 26 or something and you were female. Yeah, I mean, it's laughable now, right? And so we had this real under-participated. We had basically half of our population, all the talent and skills and, you know, everything, just completely wasted. And it's not about money and economics. I mean, generally people find value in their work. You know, there's something intrinsic to it in terms of purpose and agency and all of these really valuable, important things. And I'm the biggest supporter of all to say that it's great that there is more female participation.

7:27Yeah, yeah. Probably should pay them the same. Maybe that'd be a good move, you know, for the same amount. Radical, but maybe it might actually be justified, I think. Going out on a limb here, but I think that's probably a good idea. Do the same work, maybe you pay the same amount, that's probably a good start. But here's the irony, and I know I've mentioned it on a previous pod, but it's not a choice anymore. I'm going to go off the stereotypical gender roles here, just because it's easier and it's more generally true, but the mum that wants to go into the workforce was just such a great option to have.

8:06It's not an option anymore. It's not an option. If you're a young couple you can't he's like i'm gonna stay home look up because well you want to hope the other person's paid really well because you're up against everyone else who's done so it's and now we're both chained to it and now we have that's why child care has been such a big phenomena uh and and there it's sort of it's i don't know what i don't know what point is it's just it's just kind of it's unfortunate that we've taken something that was a great inequality and that we felt as though and we and i do stand by this but i didn't get myself in a hot water i absolutely think that you know that that should that should be absolutely the option but i i would i reckon most people listening to this uh who are in a couple relationship they'll be going well it's not a choice i don't there's i i know that um uh i would have been pretty happy as a stay-at-home dad honestly i wasn't wasn't an option it just wasn't an option because there are bills to pay so that's that's the great tragedy in in all of this and this is what i find really disappointing too is that so much of our economic energy and effort is just is is is put into this thing that has zero productive use we we we allowed allowed sounds like we're being generous we made sure women could have equal access or equal issues not completely equal as you say to the workforce and then literally almost overnight we capitalized on the house price and made it where it went from it went from you have the freedom to choose to you have an obligation because that's the cost of housing got no choice yeah and again the other thing and again i want to say back to my original question it wasn't the government or policy or anybody else this was the workings of the market because what happened was you had your income i had my income then your wife started working and so you could bid a little bit more than i could for the house a lot more than you could right so if i want to compete with that then my wife has to start working and so she when she starts working then someone also wife and again they should be allowed to right but you know if we weren't mad like humans are mad right if we weren't mad we would have said hey cool let's both work part-time and the house will be the same price and we'll all be sweet and we'd all be working 20 hour weeks literally like adding a second income to a household like oh thank god we can all work less spend more time with the family have a better work-life balance that'd be really really cool and we went oh no actually you know what we should do we'll take all of my income and now all of your income and we'll all pay more for exactly the same house that's a really really smart things to do yeah we're dead slaves we always were but we literally and again this is not this is not policy this is not you know policies suck and we should fix them right this is not policy this was just the interaction of a very slow moving auction market where i can beat a bit more so you can beat a bit more so i can beat a bit more so you can beat a bit more that's how and we and that's on one hand perfectly appropriate as a market mechanism on the other hand we're just all freaking nuts because that's literally what we did we said I'm going to take all this second income which by definition at the point it arrived in the household after tax is 100 % disposable because it wasn't used for anything else at all until it arrived so we bought a second car and a colour TV and then a bigger house and an extension and a renovation and a boat and whatever else people did I don't have a boat for the record whatever else people did and we literally capitalised that wonderful, wonderful completely unencumbered disposable income and we turned it into a house price and it's just mad it's absolutely mad anyway can I sign up to your newsletter I'm on board man but I don't know how the thing is I don't know how to fix that back to my original question is some people are screaming at the radio oh the radio how am I going the podcast is now saying well what do you want to fix it's a free market people chose it's what they chose it's perfectly fine I just think we talked on Friday about markets distorting things I think to speak of externalities leisure time i don't know what i don't know what a good externality is called right when you make those trade-offs of standard of living type things it's not externality it's not external but it's there's something about the non non-dollar denominated you know we chose to instead of having twice as much leisure time or working half as much at income so we push prices of things up and yes we could afford a holiday overseas as well it wasn't just on housing but you know those things changed the way we lived in our standards of living and that's again in and of itself not terrible i just don't know how to i don't know how to yeah i'll make a value judgment right so free market is free marketeers will say the market side of the markets are always right what are you complaining about i will simply say i don't think any sort of rational normal sensible and rational not economically rational but rational rational normal group people would have got together and said you know what we all should do we should all do this thing which gives us more money but we should actually have a meaningfully increased standard of living in fact we should lock in the requirement for both people to work 50 hours a week so we can pay for the same square meterage and number of rooms that we had before this whole thing started it it just makes no sense to me it's it's the money is the is is the short answer to to all of that it really is i mean property uh is is really a uh wealth creation vehicle it's just been so divorced from its underlying economic utility that it's just, it's been financialized.

13:13It's the money is my view on it. So, I mean, you know. We say it's been financialized though. Like that, that implies to some degree that's investors doing it. It literally wasn't. Sans, we can take every investor out tomorrow and house prices would still end up being a slow moving auction based on how badly you want it, how badly I wanted it, how much of our income we're prepared to put towards it. Like that's what worries me. I would change negative gear in tomorrow. Don't get me wrong. And again, I'm saying, I'm not excusing any policy changes but the simple reality is I don't think like we talk about first home earnings grants on Friday what happened?

13:47got capitalized on the price it's just what we do I don't I don't know we don't we don't have a good definition of wealth and I think when it comes to wealth we look at our asset values our incomes and it is very poor I'll say this with a dead straight face very poor measure of wealth I mean who's wealthier? the investment banker on half a million dollars a year with three different investment properties who has no choice but to work 60 hours a week, six days, age 10 years faster than everyone else. Or someone who's living a very chill lifestyle, regional New South Wales, maybe on 50 grand a year, but owns their property.

14:27Wealth, my best definition of wealth is having agency over your time. That when you can wake up each and every day and do whatever you want, in terms of how you, I mean, I don't want to say everyone, you know, I'm going to, you know, bungee jump out of a seven, four, seven, you know, there's certainly, but when you've got, when you've got the choice to do that, that is, that is, that is true wealth to me. And, and that's the kind of wealth I personally strive for. I don't really care. I've heard the Bucks on Finance podcast, by the way. Well, well, it's, I'm, you, you do. I know, but my choice of wealth, I will have made it when I can just do whatever I, when I want to say whatever, I've got very modest sort of means, but I've got control over my time.

15:10I'm the wealthiest person on the planet, as far as I'm concerned. You're an entrepreneur, so you're in a different boat. I've got an income the same way that wage earners have an income. But for me, yeah, wealth is bound to replace my income. When I can literally go, you know, tick the box. Okay, I'm done. I can replace my income. Why bother having more? I'm going to read you something, mate, which I will get on our listeners' questions because that's what this is supposed to be about. But I couldn't help but ask you that question because I genuinely wanted an answer. You didn't answer it, but thank you very much.

15:36It's like, that's a big question. It is, sorry. And I'm just going to, I'm going to give you a very unsatisfying answer as well. If we really want to get into it, which we don't have time to. It's not Bitcoin. I'm just going to read something I'm pretty sure I've read before. It's the beginning remarks from John Bogle, who gave a speech. And he's just, here's the quote. Here's how I recall the wonderful story that sets the theme for my remarks today. At a party given by a billionaire on Shelter Island, the late Kurt Vonnegut informs his pal. Oh, I love Kurt Vonnegut. he informs his pal the author joseph heller that their host a hedge fund manager had made more money in a single day than heller had earned from his wildly popular novel catch 22 over its whole history heller responds yes but i have something he will never have enough yeah end quote beautiful by the way manager go on uh kurt vonnegut books read them breakfast of champions champion slaughterhouse five just just incredible bits of literature very easy reads just i love him i think he's i just another bit of trivia i heard during the week as it turns out i don't know if this is true but i'm gonna go with it apparently the book was entitled catch 16 or something and the editor said nah catch 22 has got a better ring to it and and uh yeah i don't know if that's true but i was like i liked it on such things history swings man i'm sure it is true that's fascinating But it's a great quote though.

16:57And it is, that's exactly my point. Exactly my point. And this is, this is the tragedy. I think of so many people today who absolutely absolutely geared to the eyeballs, both part, both people working their fingers to the bone just to pay the mortgage, just to support the, the, the investment property. I just like, I know you can add all that up and put it on a piece of paper, but you are, you are, you are not truly wealthy to my, to my way of thinking. And let's say it's not even about investing. It's just like your home. I mean, this is the most transient or illusion, illusory. How do you say that?

17:33Illusory. Illusory. Thank you. Wealth that there is. Because I buy a house, 100 grand. It goes up to$10 million. And I was like, whoa, okay, rich I am. I was like, okay, access your money. What are you going to do, right? Well, I sell my house. Okay, no, I know you don't have anywhere to live. I'll buy somewhere else. The market's gone up. So the only way to get access to that money is to a very serious downsize or move to a far less. And there are trade-offs with all of that kind of stuff. It's not real money. And yeah, I know there's the other option of all you could just draw down against it.

18:07It's like, it's just borrowing money. You know, it's not the wealth that people really think it is to my mind. Not in all cases. I think that's right. Should we move on to actual questions? Put up half our audience right there. No, no, it's good, mate. I could keep doing this for hours, but we're not going to because we put people off. Hey, mate, here's a message I got from Elizabeth. She says, Dear Scott and Andrew, I've been listening to the podcast since 2019, and I really enjoy your entertaining discourse on a diverse range of topics, not just stock picking, which is just as well. We do diverse and discourse very, very well.

18:44Your recent episode on the RBA and its skill mix was excellent, but it skirted around the elephant in the room. On one hand, a relatively independent but technically capable RBA is trying to control monetary policy while on the other hand a bunch of politicians and ministers with no economic management skills have the objective of spending as much as they can in their first year in office in their areas of interest to remain popular and keep their jobs. In particular there is no requirement for the treasurer to have any economic or accounting qualifications. I think our current treasurer has a PhD in politics only says Elizabeth.

19:19It seems easy to bag the RBA but what hope is there when the other side who created this inflationary mess in the first place are relatively self-centered and unconstrained is there a better way forward yours in foolishness elizabeth yeah great great comment what's the answer i don't know i mean we didn't mention it on friday but i think we do often make the point that it's it's too we are all too myopic in our focus it's all the rba the rba the rba and it's just sort of like fiscal policy to my mind is is is much more of a nuanced and important instrument. And I agree, Elizabeth, I a hundred percent agree.

19:56And the incentives there are spent. I mean, the person who goes, who runs on the platform of, listen, we've got to, we've got to make some tough decisions for the longterm. And that is like, you're going to lose to the person who's over there promising free money, right? You just are. And so it is a tragedy. I don't know how to fix it, but, but I, I 100 % concur. As for the qualifications, I'll be a little bit more generous here. In theory, what you would say of the treasurer is more that they have access to all of the boffins within treasury and expertise and advisors who will give them a range of options, trade-offs, ups and downs.

20:40So you're a decision maker, and hopefully you're being informed by people who are very well credentialed. So that's fine. I spoke to, of all things, there's a whole other topic, which we won't get into, but I spoke to the CEO of Weebit Nano recently, right? Right. And this is a company that's developing a new type of computer chip, rah, rah, rah, rah, rah. And he said, honestly, when the tech guys start talking, I'm lost. Now, you would think, wait a second, you're the CEO. How do you not understand silicon chip technology? It's like, well, he doesn't have to, really. Like he's making – you kind of need to have a basic sort of understanding of it, but you are – what is it?

21:23No one rules alone or something. I forget the exact phrase, but there is – yeah. There is in theory at least, and I grant you that this isn't – there's a whole other conversation to be said about the competency of various bureaucracies and the rest of it. But that would be the theory is that they don't need to be the experts themselves as long as they've got access to expert advice. Yeah, I, so I'll go back to Elizabeth's first question, come back to your point, mate. Yes, I don't know how we fix politics other than, I guess my way of trying to do it is with this podcast and on Twitter and other places, trying to raise policy issues.

22:04um and i'm a tiny voice right but i think the more of us who care about politics the more of us who care about pot sorry not policy more of care about policy the more likely we are to ask our elected representatives to govern appropriately and in a perfect world they would be responsible enough to not need this but that's the reality of the world we're in so the honest answer elizabeth is that we each individually and collectively do our best to ask our elected representatives to be better and to vote accordingly and that might be pollyanna and maybe it is but short of revolution that's the best we can hope for in a westminster system to andrew's point though speaking of westminster systems i think there are again let me pollyanna for a second you want reasonable people who are determined to run their ministries in the best possible way with the best possible advice in fact i actually think it's more dangerous to have a know everything treasurer or minister for the arts or minister for education who says i know let's go education i know the three r's i know what's best for kids i was a kid once i've had kids i should be you know i'd rather them say actually why don't i ask the secretary of the department of education and then take representations from teachers groups from principals from you know parents from whoever and try and mash all that up and come up with the best uh policies i can find based on the best evidence and the best theories we have in front of us i would far far rather that than someone who comes in with their own air quotes expertise because it also it often brings with it its own ideology so i i will take I'm with Andrew a little bit.

23:32I will say, Elizabeth, to your point, though, you want someone with a regional aptitude and interest in the area, right? If you made me minister for, I don't know, science tomorrow, I'd like to think I'm kind of open to it, but it's not my kind of core passion, right, or an interest, and I'd be on a really steep learning curve. If you made me department minister for finance or treasury, I can't have enough of the base workings that when I had representations from those parties, I could put them in some sort of context. So some applications, some interest, is super useful. There are some great ministers in different portfolios over the years.

24:05Kim Beasley comes to mind as a great defence minister. Julie Bishop is a great foreign minister, one from each side of politics for you. You know, there are some really good people who just turn their attentions and their minds to doing a really, really good job and become really quite well-versed. I want to say expert, because again, I want to separate that from genuine expertise, but become really well-versed and could have really good, honest conversations and try and get through the rubbish and weed out the self-interest. so i think some interest is oh look i would take someone with a bachelor of economics rather than bachelor of arts for example in treasury if we had to choose but i'd rather have someone who was and i think to be fair jim chalmers and for him josh fridenberg i don't know fridenberg's qualifications i haven't looked him up but they were they were genuinely interested in them in the machinery of treasury and using fiscal policy now do i think they did it well enough no do i think they got pushed by politics yes all the stuff that goes with it but i think they were reasonable men who weren't out of their depth in those positions.

24:58Whether they make good decisions or bad decisions, partly policy, partly politics. But I think they were serious men who wanted to do the right thing. I think, you know, we can say that for most treasurers. I'm not sure I would say that if Scott Morrison is treasurer without being political. I'm going to annoy some people here. I don't think he was necessarily born for the role in the same way that others were. Costello, I think, made the portfolio his own as did Keating before him. Ralph Willis at one point, and I think it was Bob Hawke, did a pretty good job. So, you know, there are different ministers with different abilities.

25:26But, yeah, I... Plus we get the politicians we deserve, right? Well, there's that too. You know, there is something to be said of being an informed, engaged citizen. I mean, this is a challenge, though, because I was speaking to someone the other day, and you could go back a couple hundred years, and you could be really well-versed in all of the major disciplines. I could know most things there was to know about biology and chemistry, and physics and economics. It's just that these bodies of intellectual pursuit, weren't that broad, it's impossible now. Even if you wanna get a sub domain, like biology is the example I used, right?

26:07Even with biology, there's microbiology, there's genetics, there's biotechnology, there's, you know, it's just like, and it is so, as we continue to accelerate as we are in terms of the vastness of human knowledge, it's just beyond any one person. maybe there's a bit of hope with ai in that i think they yeah you know the base stuff yeah good point that's what it's good at right you can just sort of you can synthesize and you can cross-pollinate through domains which i think where the big discoveries and innovations are really made is when learnings from you know a certain quirky mathematic mathematic uh theorem developed in 1692 as purely an intellectual pursuit turns out to be something that can you know make computers run far more efficiently or something like that like there is that is generally the story of science is when when certain ways of thinking are employed in a different area and it's just it is i don't know what i'm saying is it's like yeah it's a problem but i don't know how to fix it god we're tackling the big ones here today aren't we though aren't we though let's um let's move on though because we have other questions to get to mate including one from simon who says hey scott and ram been enjoying the podcast since before covid great commentary banter and surprisingly wise insights for a couple of young blokes surprising yeah i like simon of course young blokes that's his point he's saying we're so young he's surprised with that wise andrew i'm i'm going with it uh he says i found myself holding a number of duds such as appin magellan block and a2 milk they all seem like a good idea at the time he says each now have a significant loss on paper but my strategy of avoiding looking at them and hoping that would come good just hasn't worked sigh i need your wisdom on how to deal with shares that are going down rapidly or have tanked do you just bite the bullet and sell them all do you sell in chunks hoping they might go back up or think you've lost so much you might as well just keep them i'm sure you've never suffered this problem nudge nudge wink fools forever simon yeah thanks i really appreciate the kind words especially thinking we're young we are of course each both barely out of short pants.

28:15But we will put the collective wisdom of that limited history to work, Andrew, as we try and answer Simon's question. I will disguise up front I own A2 Milk, but none of the others. What do you do with some big losers, mate? Yeah, so excellent question. Yeah, everyone has. And anytime you meet someone who doesn't have that experience, they're a liar, right? So run a liar. It's enormous. Or they haven't been through it yet, in which case they really aren't going to make good decisions. like either line to you or they genuinely haven't lost any money yet and the yet is important because when it happens they're going to learn real fast and you don't want to be following the words the worst thing that can happen to you is to have vast and immediate success on the market I got a friend this is pre-GFC he didn't know what the hell he was doing but anything he bought went to the moon and then you start thinking well if I can do that with a thousand dollars maybe I can double it down and double it down I don't want to tell you what happened but you know the broad story here is he took a pretty small amount of money and made millions and then blew it all up and then went into debt.

29:15It was a tragic story, like absolutely tragic. That's awful. And the reason was is that I think the best lesson you can have as an investor is failure in the early – like you want to make the big mistakes when you're dealing with relatively small amounts of money and you want that lesson of it's not easy. I think the pride before fall always happens. So I'm not trying – I'm trying to sort of put a silver lining around that cloud for you. Don't feel as though you're on an island there. We've all been to that island. And secondly, it's a teacher. It really is. On my bio on Strawman, I've got hope is not an investment strategy.

29:54And that word was used a couple times there. I love it. Hoping for it to come back. And that's bad. All of the companies you mentioned, they weren't meme stocks, but there was very powerful narratives around all of them back in the day. And this is a point I often make is that you can do really badly even if a company performs well. And they were all trading at ridiculous prices. We can say it more easily in hindsight, but I think plenty of us were saying it at the time. You know, it's just like Block is a classic example. I had a big debate on Ausbiz with a fund manager. It's just sort of like, and they wanted a bull versus bear segment.

30:35I think they're expecting me to say, oh, it's a terrible company. It's like, no, it's a perfectly decent company. I mean, we can get into the ethics of what they do, but in terms of the business model, it's fine. But it was ridiculous, the price. And people, not putting the listener in this category, but I think a very significant amount of people were buying it because it was going up. Like that's why, why am I buying this? Really cool, exciting story. And look how much the share price has gone up. I'll buy it because that will keep happening. And I think that was an error. and so there's there's two types of mistake there's the mistake of timing and it's not really a mistake because you're always going to get the timing wrong and then there's the mistake of just the actual fundamental underpinnings of the investment just weren't there so if a share price for me as i'm i've had i'm in the situation right now with you man it's been a been a tough year plenty of big losses on there but maybe this is me protecting my ego more than anything else So again, take me the grain of salt.

31:31But I think on a good number of them, I wasn't wrong. And I say that because, well, actually, I was mentioning to you off air, a company that I own just had a quarterly out today, and their sales were up 50%. Share price went nuts, and it's still miles below where it was. Like, what do you have to do? That's not a mistake. I mean, I can't predict when and how the market will recognize that. But in terms of my investment thesis is on track. I kind of thought that they could grow by that amount. I kind of thought that that would translate to a certain amount of cash flows, and I kind of continue to think at some point the market will recognize that.

32:03So that still sucks that the share price has gone down, but I'm not yet classifying that as a mistake. When you buy a company because you think it's going to triple its earnings next year and then earnings drop by 50%, well, then the share price has obviously gone down, but that is a mistake. The underpinnings of that are a mistake. So differentiate. The market isn't there to inform you. The market is there to serve you. and just because the share price has gone down doesn't mean you were wrong. You look at any of those, I've made this point again before too, look at any of the best performing shares in history and they all spend, they all have multiple drawdowns of 20, 30, 40, 50 % along their journey.

32:44They spend most of their time below a previous high. That is absolutely normal and if you're going to be psyched out every time there's a wobble in the share price, you're never going to make any of these big gains. So I don't know. I'm rambling at this point, but don't say I made a mistake because the share price is down. Ask, why is the share price down? And does that undermine my core investment thesis? And hopefully your investment thesis was based on what the business was going to do. Yeah, love it. I can't add much more, mate. Other than a different spin on your last answer, which is why the share price is down can be partly a question of trying to guess what the market has been doing and that's interesting but not always the only way to think about it um the other way is just start from first principles and say how much is this business worth and so if it's what you might find is you might have paid too much for these businesses before because you just got a bit carried away or because you thought they were good value because everyone else was saying it was good value and realistically maybe they're never worth that price and so maybe the share price is down just because it was too high in the past and that's you know you don't expect to get that back by the same token where you are now may still be too expensive and may go further because sometimes these things happen or conversely it may go exactly the other way maybe this is cheap because the market's got carried away and price might go back up yeah in terms of working out what and you can't know what's going to happen next but in terms of whether you want to hold them or not my challenge to you would be to say right i know she doesn't happen what do i think they're worth and come up with a number and if it's five dollars okay well is the share price higher or lower than five dollars is a2 milk worth more or less than six dollars well you know whatever that whatever that math is give yourself some margin of error as we like to say regularly um but yeah i would so i'm going to say very nicely as as uh some of our politicians would i can't remember which one i used the wrong one i think i got in trouble for mentioning it was gillard rather than morrison or vice versa right i don't know twitter doesn't like me when i do this thing so you know i shouldn't um i disagree with the premise of your question uh which is just simply to say, what do you do with stocks that are down?

34:48Well, the same thing you do with stocks that are up, which is work out whether they're still worth holding. And the question isn't different. Here's the other thing. It may be the biggest sin, potentially. Well, you would have owned Appen. You probably bought it at a cheaper price. It probably went up after that. You didn't write in saying, these stocks are up. What should I do with stocks that are up? Because we always think the stocks are up as good, so we don't worry, but we don't ask ourselves the hard questions. When they're down, we say, oh, now they're down. What should I do with them now?

35:10It's like, well, the same question you should have asked yourself when they were up, which is what do I think they're worth and how is this trading relative to that valuation? And whether you do it as kind of cash flow or a PE or a price-to-free cash flow or a total addressable market or whatever way you want to approach investing, I think there's better and worse options in that list. But, you know, however you want to evaluate the value of a company, that's the job. Do that job and then work out from there where you go. So ignore the fact they're down is the short answer. Yeah, yep, yep. And if you can't answer that question, and by the way, I can't answer it for most companies on the ASX.

35:45It's too hard. I don't understand there's industries or those. I mean, they're just, you know, 2 ,000 companies. Are you serious? I mean, I'm always skeptical of someone who's got an opinion on every single stock as well. How can you possibly know that many businesses properly? And that's okay, but I mean, be honest with yourself. And I don't want to presume anything here, but if when you look yourself in the mirror, you go, actually, I didn't have a well-formed thesis and I can't now formulate one, my answer would be sell. Because again, hope is not an investment strategy. Dust yourself off and then come back at it.

36:19And if you find that it's just too difficult to question, then move on to something that's easy. It's a whole buffet, don't jump over 10-foot hurdles, step over one-foot hurdles. Appen I'll use as an example, right? So the story here is that they basically curated big data sets for companies, big tech companies, to train their AI models and stuff on. and wow talk about exciting uh talk about a growth industry i mean just thing went to the moon because this were they were they were the dominant global player in this space they had customers in the big company never disclosed their customers but one was expected assumed to be microsoft i think at one point a couple of others facebook and all of yeah you read between the lines right they're all the big ones you're gonna super easy to get excited about they were facebook using must they must be great yeah yeah great now now so what do i think now actually my my i i don't know is what is what i think because the the existential risk here is that you've got the state of ai is such that these things are able to sort of train themselves increasingly now so these annotated data sets now by the way ai is a very broad term they'll be absolute i know there'll be people in the industry screaming at the machine right they go no no no that will never that that requirement for training data will never go away oh yeah probably some truth to that but it's but but But my point is I, Andrew Page, with my experience and education and the rest of it, I just don't know.

37:40I don't know. Can AI trade itself? Does it still need this? Are they going to be the people to use it? Will it always? Will it always? I don't know. Is that reflected? I don't know. And that's cool. I mean, that's the most honest answer I can give. And if the answer is I don't know, it's like I'll move on to something that I can wrap my tiny little brain around. So don't force it, right? And there'll be someone out there who goes, look, I work in the industry. I know this well. I know this well. The market got too excited, but now it's too pessimistic. They will be making less money than the market thought, but they will be making money.

38:13And the price on the market today relative to that future cash flow is actually quite attractive. I mean, just as a hypothetical, right? Point is, answer that question, then make a decision. And if you can't, move on, dust yourself off. Don't do what so many people do, which is, oh, I'm not happy. I don't like it. I'll wait for it to go up 10 % and then I'll sell. Because while you wait for that 10 % up, it could drop another 50%. I'm not saying it will, but it could. And you turn from an investing stance to a speculative stance very quickly and unintentionally, but it's a slippery slope. Motley Fool Money.

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