Mailbag: incl. The right recipe for Smashed Avo on Toast? January 12, 2025

24:15Whether we should have capital gains tax, different question. Whether it should be the case, different question. If you live your life in Bitcoin, if you buy and sell everything in Bitcoin, you get paid in Bitcoin, you buy something in Bitcoin, I mean, fair maybe to argue that there's no capital gain. But as soon as you have it for any length of time, any amount of money, and you're only changing a small amount of what you have for those personal uses, the ATO will, according to their own website anyway, suggest it's more likely to be considered an investment and therefore taxable. So just be careful.

24:42My general rule is if you're not sure where the line is, you're too close to it. So I wouldn't assume that's right. But again, it's up to you. Yes, my interpretation was I had to pay tax on it. Yeah. And that's fair. Yeah. Look, to be fair, mate, you've got$84 million of Bitcoin. So you're probably hard to argue that the pizza is going to be... $164 million these days. Now? Oh, I asked for that. You did ask for that. A friend of mine got a coffee mug for Christmas and it said, told you so. With a big Bitcoin down like, get me one of those. Yeah. Look, I won't. I think you nailed the answer and I'm not going to go into a tirade of what it should be.

25:26But I would say what really, and this isn't just a Bitcoin thing. And I do appreciate you using that word and not crypto too much because crypto is a different thing. Well, I mean, the answer is about crypto assets in general. Yes. But obviously you've made the point before and you're right that not all crypto is. They're very different. Yeah. Yeah. Look, whatever it's. Look, I'll have my preferences. as to what that should be done, but whatever it's going to be, make it clear. And this is well beyond crypto, right? This is just, as someone who's run a business, as someone who's got a trust, as someone who's got various sort of tax, and it is so, the amount of times where I've had a conversation with the accountant and they go, well, it's kind of open to interpretation.

26:09It's just like, I just, I don't want to have to have a legal argument as to how I interpret it, whether just black and white, black and white. So what it is, it's either 100 % capital gains or it's zero, or you can do it under a year or be below a 10 % capital gain. Whatever it is, make it clear because all you do by making it so vague is that you cause confusion. You almost trick people into doing the wrong thing unintentionally. Sorry, was it Nick who wrote in? Yep. So Nick's like, well, what a sensible thing to do when asking them. I wonder what the situation is. He's gone and looked up the ATO website and he's found that, and very extraordinarily reasonably gone, yeah, looks like I can do that.

26:57Now, everyone who's been to the ATO website knows it's a dog's breakfast, like every government website. And by the way, not the ATO's responsibility, right? Larger the legislation rather than regulation or interpretation, to be fair. But it's so vague and it's so confusing and it's just like people are going to do the wrong thing. Some people are always going to do the wrong thing because they're just dodgy buggers, right? But just because 2 % of people don't, that doesn't mean that 98 % of people are going to be tarred by the same brush. And I would imagine a lot of people are doing the wrong thing, not deliberately, but because there's a misinterpretation of the rules and it's not, they're an idiot misinterpreting the rules.

27:31It's like, you know, the rules are just very, very murky and I don't know how to understand it. And so now I have to pay this really expensive accountant to figure it all out. And then if that's ever deemed to be wrong, I now have to engage a lawyer and it's like and and here the whole time everyone's going oh we need to improve productivity it's a madness it's a madness absolutely true deep breath yes okay let's go to paul's question then to help you can i can i just say one more thing very quickly i do love i do love how every every sort of branch and agency of government it's not money it's for criminals it's this oh we're going to tax you on it so it's not real money okay we're going to tax So it is real.

28:08It is real? No, it's not real. Okay, so then I shouldn't have to pay tax? No, no, no, for that you do. It's like, well, pick a lane, guys. Pick a lane. To be fair, you could speculate on Dogecoin. You would suggest that's not real crypto. You should have to pay tax on that too. Oh, it's real crypto. It's big crypto, Dogecoin. It is absolutely. All right. Let's move on. About a company. Can I just say, first podcast back, property and Bitcoin. This is the way to start 2025. Let's go. It's your year, mate. It's your year. Let's go. Okay, Paul's question. Hi, Scott and Rampage. I have a question for the pod machine, if I may.

28:45You can, Paul. Thank you for mentioning it by name. I am sure I've heard you both mention at some stage to run away when a business begins to deviate from its mission or previous path. Oh, we talked about that on Friday. Yeah, we talked about Aaron Williams. By the way, super clever. I did have a look at those leather moccasins on the website and literally 10 years after I logged off, they sent me an email saying, hey, don't forget you looked at this. It's like, that's clever. Just clever kind of win back marketing. Anyway, Paul says, I'm curious for your thoughts on Adore Beauty, the, quote, pure play online retailer, end quote, and their approach to opening bricks and mortar stores.

29:22Could you lay out a process for assessing results under a company that is changing their whole market approach? Or is it easier just to run for the hills and consider it again in the future if they don't blow up? Regards, Paul. I will say up front, Ram, I own shares in Adore Beauty, so your listeners should keep that in mind as we talk about this. Yeah, yeah. Your thoughts, mate? I mean, we have kind of talked about it on Friday, and unwittingly late on Friday's podcast if you missed that. By the way, Friday's podcast was also the one, if you haven't heard it, where Andrew explained reverse charge calling.

29:51So listen for that, if not for the business model questions. It's a good one, right? Diversification or diversification, does it grow the market? You know, omni-channel was the future, but they try to be pure play. Maybe it's not enough or maybe there's an opportunity. how do you assess a business that makes those sorts of changes? Do you run for the hills? Do you? I would say it's largely impossible at the beginning. Yeah. I mean, when the company, at some point, someone's presented this to the board and the board, hopefully doing their job, has gone through some pretty effective due diligence and decided, yes.

30:22I mean, even they're not going to know, right? That's business, right? I assume this will work. Hopefully it's backed with a bit of experience, logic, and reason. And I try and make a go of it, right? So you don't know and they don't know. And so there's a leap of faith there in backing the idea of management and their execution. And all you can really go on there is track record, and even that's not a guarantee. But certainly someone who's like Solomon Liu was to sort of be behind this, I'd back that a lot more than I would if it was me, right? Right. And then it's still hard to because companies are legally obliged to release certain types of financial data.

31:08They don't have to break it down for you by division. A lot of good companies will and should. But what's really if unless they overtly split it out for you, you can't know. right? And this is what makes it very hard because you're looking at aggregate figures. And let's say a year or two into the strategy, profits have risen. And let's say they're not disclosing sort of the underlying drivers of that. Well, was the online business continuing to do well while brick and mortar was struggling? Was brick and mortar being accretive and adding to that? It's hard to know. And then there's the other trouble, which is usually, even if it is ultimately a success, generally speaking, there's a big lag between money going out the door, making the investment, the investment ripening, and then the money coming back in.

31:57Like year one, I'm building, I'm finding store locations, I'm fitting them out. It takes time for people to sort of know that they're there and to build habits. And so even ultimately successful forays might look really bad early on. I know a lot of the retailers that I've looked at in the past will say it takes 18 to 24 months for a site to mature. In other words, here's the sales per square meters that we typically get from our network. Here's the foot traffic. Here's all the metrics that all good retailers sort of track. And when they do track it for new stores, like you don't open the store on, there are exceptions, I suppose, but you don't generally open the store on day one.

32:38and it's doing the same as a mature store with well-trained, experienced staff, with a community that's aware of its presence and what it offers and all the rest of it. So I guess what I'm saying is it's very, very, very difficult. So if you wanted, in the case of Adore, and I haven't looked at this for a while, but I would say look at the rationale that management giving you. The fact that they've gone this decision, gone with it, they obviously think it's a good idea And they're obviously going to present it as a good idea. They're not going to go, fingers crossed. We'll see. So, and even when it, even if it doesn't go well, you know, they're not going to admit it until it's impossible to deny, which is the case of humans for all of our mistakes.

33:24Individually, right up to the government level, right? Like it's, no one admits defeat. And there'll be people who will deny defeat even when it's like obvious to everyone else. So management will be the last to capitulate and acknowledge failure. So I would look at their history. How have their growth initiatives gone in the past? That would give you some signal. If they've had a good eye for identifying opportunity and exploiting it, again, no guarantee, but okay, that makes me feel good about it. And then as it unfolds, if they hopefully break it out and give you a lot of good information, you'll be able to sort of see it working.

34:04see it working. In fact, I would be a little bit cynical in the sense that if they're not breaking it out, everyone loves to tell a good story. And you've got to wonder, if this is such a roaring success, you know, management will be tripping over themselves to have a couple of slides in their presentation deck to tell you how well it's going. Look at what we've done. Look at this. New stalls have done this and done this. But if it's sort of hidden within the aggregate, it's, I mean, it's not a smoking gun by far from it, but it's a bit of a worry. So this is actually writ large, this is the investor's dilemma always.

34:40All you've got really is an idea and will it continue to be a good idea? And I don't know, time will tell. That's investing, right? If you wait for it to be proven beyond all shadow of a doubt that it's successful, you're too late. If you jump too early, will you take on huge risk? And somewhere between those points is a sensible way to get in. I don't pretend to have the right answer, but me personally, I am usually happy to forego early gains at the compromise being I have lower risk, but still plenty of upside if it goes well. So in the case of a door, I might really regret it. I could get in it now before it's even happened.

35:22And then as the market wakes up to the genius of the plan, I'll make a squillion. if I wait I'm going to lose on some of that early upside but at the same time I got well at least I know the model works at least I at least I've got good sign that the management does have a good plan and is executing well and hopefully there's a little bit of a runway there for them to continue doing it I'll get on board at that point um but that's just me and then even then things things can go wrong god that was a waffly answer does that make sense no it's a good answer really really good thoughts i so i own shares as i've said before i as a general rule um what you and i've talked about before there are things that companies should be trying because kind of what they're there to do you know bartings try to go to the uk will he's trying to open masters um should they have given that a go yeah i think so i think as long as the as long as the analysis is done correctly and thoughtfully and they are reasonably close to a good idea then you kind of want them to to have a go to try and build the business grow the business to create value.

36:19We talked about Godfrey's on Friday and the fact they did nothing to move into the future almost certainly cost them, in my view anyway, their entire existence. Should they have tried stick facts? Yeah, they should have probably tried that out. Should they have tested online? Probably that might have made sense. Would it have been successful in both cases? I don't know. But should they have given it a go? Yeah, I think reasonably risk evaluated, if I can say that, decisions that are made with a reasonable evaluation of the risk and return are always worth doing. That's what we do when we invest.

36:49We don't invest in businesses that are 100 % chance of succeeding. It'd be hypocritical horribly for us to say we only buy shares that are guaranteed to go up and businesses only do things that are guaranteed to work. I mean, we don't, right? Andrew, I, everyone listening, if you're buying shares, you're saying on balance I think this is probably a good price, knowing that I'll be wrong about the business or the price, frankly, more often than we'd all like. That's investing. And I think running a business is kind of the same. You want your – here's the other thing. If you bought the shares, you hopefully believe in the business and the management.

37:18If you don't, don't buy them in the first place. And if you do, you're at least prepared to say, these people are worthy of my risk capital, and I hope they use it well. Or, you know, they don't use my money. I've bought them off someone else. But I hope they run the business well. That's kind of what you're hoping in the first place. So second-guessing management can be a little bit tough in terms of the decision itself. If there's a record of bad decisions, second-guessing their track record or their results, that's fair. But second-guessing the minute ahead of the idea is tough. I am not hopeful that – well, sorry.

37:47I'm not optimistic this deal works or this idea works, but I'm supportive of them giving it a go as a shareholder. The other thing that probably matters to me, mate, of the top things you've talked about, is the size of the risk. Yes. And how much money you're paying for that. Nick Scully is going to the UK. They bought a business in the UK for peanuts because they had a lot of debt. They assumed the debt. They've got to pay a lot for fitting out the stores. It'll cost them somewhere more than$10 million, but not a whole lot more than that to give it a go. Well, that's the thing, right? So if they give it a go and it sucks, like Bunnings going to the UK, they go, that was stupid.

38:17Okay, we're out. Made a mistake, but we learned from it. Let's move on. I want them. That's exactly what you want to do. If I had employees, I'd be saying to them, go and try some stuff. Dude, if you're not failing occasionally, you're not trying hard enough. Exactly. In life and in business. Right, yeah, in life as well. That's right. So am I in favour of them giving it a go? Yeah, because maybe it works and maybe it doesn't. If it doesn't work, it'll cost them a little bit. And if it works and works properly, it could be worth meaningful amounts of money. The biggest sin is trying it, seeing it not work, and continuing to make it work through pride and ego, which, by the way, is extraordinarily common, right?

38:51Yeah. That's unforgivable. It's the default. So I'm with you just to double down on that point. And this is true for all of us, whether it's property, investing, crypto, whatever, right? It's like what's the reward? Risk versus reward. How much risk am I taking? What's the reward? No guarantees in life, but if management think that they can try, that there's a little bit of money and there's a big enough upside, hell yeah, do it. But if it's not working, you must have the ability to go, eh, we tried, we're walking away. And I would actually see that as even though the market would hate it, even though the share price would come down, I would actually see that as an incredibly positive sign of management capability.

39:33Yeah, and as shells, we should be not only tolerant but actively accepting of that. and wanting our teams to do that and not to show them that it goes badly, right? The CEO who does this, whether it works or doesn't work, it is the question, and this is what we, you have to look at outcomes eventually at some point. In an aggregate, you have to. Of course you do. But the question really shouldn't be, did this work or did it not work? The question should be, in a perfect world, was this risk well-sized? Was it well taken and evaluated? And was it a, to your point, did they minimise the losses once it wasn't working.

40:10That should be the – and I want more of that, right? I want more failures. We tried this during the year and it didn't work is what I want in every single company I own in their ASX release at the end of the year. We tried these things and they didn't work, so we stopped them. We didn't try things because they mightn't have worked. If you're in business, you need to believe you're going to be – well, with the exception of the Burning Platform investment fund you wanted to start on Friday, Ram, most of us are investing because we want the business to be bigger. And if part of being bigger is trying some new things, Woolworths started as a general merchandise store in Town Hall.

40:44If they'd never gotten to supermarkets, would they have been what they are today? Should they have not tried that? Easy to do. I think we've followed that. Just on that too, I'm keen on your thoughts as a shareholder. But look, there's a bunch of heuristics which are only that. They're just heuristics. But I just looked at the announcement in November last, late November last year, 2024, they said we're doing a strategy refresh. And whenever I see those two words, I'm always a little bit – and I'm not trying to be negative on a dog side. No, go for it. Full disclosure, I just haven't looked at it for a long, long time.

41:17Yeah. But – well, again, I haven't done them – I haven't collated the data to use the word statistically. but at least anecdotally, it feels that more often than not, companies that do a strategic refocus, refresh, or whatever it does, A, you only do that when things aren't going well, okay? And B, more often than not, it doesn't work out. So I'm always a little bit nervous when they go, well, that didn't work, but this will work. Here's the other thing too, something positive. So I did – I said to you the other – was it on Friday's pod that I really stepped away from the market. I didn't do any research.

41:58I actually did a bunch of research. I realized afterwards because I was in shops – against my will, by the way. I hate going shopping. But for Christmas, you find yourself in various malls. And I've got a young daughter. And so we found ourselves – anyone who's got a young daughter will be nodding along with me here. Mecca was pumping, pumping. Now, Mecca do makeup. The cheapest thing in that store is$30 or$40 for a bit of lip gloss. It's tiny. It's just like, how are people paying so much for that? But I do wonder if Adora sort of looked at that and gone, we're missing a trick here because there is clearly a market for makeup and people will happily spend a fortune on it.

42:42But as we were speaking on Friday, there's this X factor that's really hard to pin down. Why is everyone wearing a white fox jumper and not a, what did I say? Brown donkey jumper. Brown donkey. There is absolutely a future where you go to your local Westfield, Mecca's pumping a door as a ghost town. There's another one where they're both pumping and Mecca finds that it loses a bunch of market share. What's that X factor? I mean, Peter Lynch talked a lot about US investor, a very successful one, investing what you know. And I think that there is, this is what I sort of say. I did do research over the holidays.

43:19I think if you're someone – it's such an edge. If you're someone who is close to this space for whatever reason and you've got a bit of a read on the kind of consumer that they're targeting, the kind of spending habits that they have, the kind of brands that they like, the thing that they look – you're going to be able to read the tea leaves far better than someone like me who just looks at all of this stuff and goes, seems like very expensive haste to me. Yeah, yeah. Yeah, but what are your thoughts on that? When that announcement came out, did you think, oh, my role or are they going in a good direction?

43:56Or are you just waiting to see, I suppose? Yeah, pretty wait and see. A door for me is a bet on the growth of e-commerce. We talked about this again on Friday. I fully expect, and I don't know how long it takes, but two-thirds of retail sales will be online. I just think we're buying everything online. not all of us are buying everything online um but godfrey's didn't go broke because people love buying vacuums in store right and and i think that is going to be the future whether and you know inside inside baseball here uh between recording friday's pod and this one i went up to the house and uh there was five five different packages on the on the table that had been delivered this morning right and and here's the thing right so it's i'm not i'm not saying i'm typical but But it wasn't just five, you know, whatever, whatever's.

44:45We buy our coffee and dog treats and a subscribe and save thing for Amazon. Right. I own shares on Amazon. They'd turn up. Once in a while, they just drop on. It's like, good, there, there. Okay, that's done. You should say with Coke, they've taken Coke off. But, you know, that kind of idea. I'd bought something from Bunnings. It's a drainage hose for the camper trailer, right? And it arrived because I ordered it online because I didn't want – I'm not going to go to the shop. I'm there. Super cheap auto. It was another third parcel. I bought, again, a couple of trailer plugs, you know, the car to trailer plug thing and some cable to fix a trailer plug, right?

45:17Could I have bought that at Supercheap in person or Repco? Yeah, but I wanted it yesterday. So I ordered it yesterday when I was having lunch and kind of went, I need to get that. I'll just do it now. And so multiply that out. Think about Amazon Prime and the free delivery. Kogan has their own shares in Kogan. Kogan first. Adore, when you deliver it, you get a Tim Tam with the thing. It kind of feels good and special. I think e-commerce is going to be massive, mate. I think it's going to be. and this, I don't think it's a controversial statement. People will disagree about how big it's going to be.

45:41But if you think that's true, then kind of play that forward. Who's winning those races or going to be successful? Not even winning, you have to be number one, but who are going to be the players that are successful in that space? And my suspicion is that if Adore continues to be a place people like shopping, a brand people associate with, their social media and podcast stuff apparently is great, people rave about their customer service, I suspect Adore has a role in that future. so that's why I own it in the first place I'm not saying other people should own it you're always very clear to say that, I'll say the same thing lots of people should rush out and buy it because it's an open question as to whether they succeed what I am worried about with Adore I don't mean worried as in I'm going to sell but I'm mindful of it, it might be a better way to put it is how quickly they get to scale and that is the challenge with any of these pre-oplay online guys will they get to scale before enough other people do can they get big enough to pay for their costs Can they find a way to make this work?

46:37Now, they're not there yet. And so that's why Adore is a riscier investment than the average. Because if they do, there's massive upside. Because these things, once you pass the point of loss to profit, operating leverage can do really wonderful things for your numbers. And all of a sudden, this business that looks break-even-ish, all of a sudden profit goes to$1 million, then$2 million, then$5 million, then$10 million, then$20 million. It's like, wow, that happened quickly. I'll say that'll happen for Adore, by the way. But if and when they do, that's the potential. So that's why I own the shares.

47:02I think they can get to scale, but they may not. And that's my biggest concern is will they get to scale either quickly enough to justify my investment? Because if it takes 15 years, then eventually when they get there, I'll still have lost to the market almost certainly. And can they get there for their other – I don't know if Mecca is online or not. If it goes online or if it is online, is there enough alternatives that it all never really gets critical mass? That's a really, really big question I've got. In terms of physical stores, I don't mind them trying, as I kind of said before. and the reason is for the reason you've talked about is two things one is makeup experiential both in terms of the product and the brand so do people create an affinity with the door because they shop there um that then translates to online sales because you know you go to a door once you try the makeup next time you just gotta buy it online so i get that trial and and buy kind of idea um it's almost the reverse showroom thing you create your own showroom people will use your your online site.

47:58Also to what degree is make up a, I'll say a social purchase or maybe an experience, not experiential, but you go out for the day shopping and you go to a lip gloss while you're there, as you just said, mate. So if people are doing that predominantly and Adore can do that profitably as well as, again, creating that brand affinity and experiential try it on so it looks like, touch, feel, taste, whatever, maybe there's some value there. So I don't love, instinctively, I don't love they feel like they've got to do this because, you know, my investment was, to the question from Paul, it was an online expectation, right?

48:32But if it's smarter to say, well, we could be a better online retail by having some stores, then, of course, they should, by definition. Amazon in the US bought Whole Foods. They own an entire chain of grocery outlets for reasons that, you know, they wanted to diversify, have pickup locations. They wanted to try doing it in that omni-channel, in other words, all channels. So I'm not unhappy Adora's doing it. I am a little bit disappointed they haven't got to scale before now and they see this is the right time for that. At this point in their evolution, the other thing is, we talked about this is one of your favourite terms, mate.

49:06We talked about should they do it if it's a good risk? Yes. But also it's opportunity cost. Is capital and management time best spent on that or growing their online business? I would have hoped in advance of that that there's more than enough stuff to do online to really grow the business. They've decided it's one of their strategic priorities. We're going to focus on this thing. not just growing the online stuff. And that probably says they're searching for growth that otherwise may not be coming. So I don't mind them doing it. I don't love they felt like they had to. I would like them to get to scale more quickly.

49:36So it probably does this, and you've said this already, the fact they're doing it and talking about it tells us that they're trying to find other ways to grow. They're outside what their core wheelhouse, and that's something of a concern. I still like the business. Their repeat customers' numbers are really good. Their customer experience is really good. People seem to love them when they use them. People seem to be repeat purchases once they get in the door. That's an attractive business model to have. I'd rather have them online than just offline. So, you know, people are in Mecca, but also, again, like I did yesterday, if you want to buy some – I did buy makeup, obviously.

50:08But if you want to buy something at lunchtime on a Wednesday, then, you know, jump online and do it rather than have to go to the shopping center next time I go because I might buy from Mecca or I might buy from Priceline. But if I jump onto AdoreBeauty or Adore.com.au, whatever it is, then I'm getting it then and there from the place I know I want to get it from. That's always going to be a benefit and an advantage to have a strong, robust online business. And that's still what I'm hoping they make their money out of. Okay, cool. Yeah, as I say, I'm not across it, but just always interesting to get below the surface a little bit.

50:38So yeah, time will tell, as they say. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener. Hey mate, question from Robbie. Hello to you both. I totally love the pod. Thank you, mate. I've got a short, sharp question. Today, I received my financial statement from Rural Funds Management, the Retail Investment Trust. Within the statement, it discloses the fees that were deducted from my earnings before the dividends were paid. Can I use these fees as a tax deduction? Thanks for the laughs, says Robbie, and rants, in brackets, Mr Page, Have a Merry Christmas and a safe and very happy New Year's.

51:20Thank you, Robbie. That's from Robbie. The fund paid some fees, mate. Can Robbie use them? I don't know. I don't think so. I don't think so either. Robbie, we're not tax accountants. Companies and trusts are discrete individual entities. And just as I can't claim a deduction for the cost of the tea that went into the tea room at Adore Beauty, a head office there off my tax, I can only, as an entity, so half a step back. Separately, there's two things. There's the company and there's the shareholder. They are two separate and unique groups. Unless you own more than 20 % and certainly more than 50 % of a company, you can't consolidate the financial statements.

52:00In other words, your financial responsibility and obligations and upside come only from what you get from the company, not what the company itself does. So the company will pay its taxes based on its own costs, including those fees and the trust will do the same. When the trust distributes earnings to you, that is the only financial component of the trust's experience that you are responsible for and benefit from. So I'm not a tax accountant. Someone's welcome to write in and please don't take this tax advice ever. But the fact that you get a distribution, if I'm a more worth shareholder, I can't claim any of their costs on my tax, right?

52:38Why? Because I get the distribution of the dividend. That's the bit that goes on my financial statement. that's the bit that drives my tax obligations. Yeah, I really don't have anything to add to that. I don't know. But I didn't think it sounded right. Now, having heard your answer, I'm almost convinced it's - I would be. Yeah. I'd be remarkably surprised because you're getting the net result after those costs have been already taken out and taxes remitted to the ATO accordingly. Yep. Sam has a question, mate. Hello, Scott and Ram. Long-time listener, first-time writer. And he puts in brackets, LTL-FTW.

53:12Better than WTF, I suppose. I have a two-part question for the pod machines. Thank you, Sam. First, I found that underlying much of Ram's opinions or rants regarding housing, man, is the assumption that owning one's home is a reasonable and valuable goal. I'm a lifelong renter, says Sam. And while I can relate to all the complaints common to renters, shoddy maintenance, thin walls, rising rents, I am curious why Ram thinks owning one's home should be such a valuable ambition. Yeah. I've personally waffled between the merits of owning versus buying, and as a single person, have decided the freedom that renting allows me is worth it.

53:48However, most of my friends now own, and it seems a favourite topic of theirs is the next thing that needs fixing and how expensive it will be. Yes, so true. I understand the pros of having equity in your own home, but it seems to me that owning has its own share of continuous costs. Yeah, sure does. What do you think, mate? Well, apologies if I've not been clear, Sam. Well, I don't agree with you, but I do. I did for the longest of time religiously agree with you. You did. You know, I felt as though on paper everything you say is true. And I reframe, I think everyone talks about home ownership as super desirable and I just reframe it as like, no, I think what is desirable is security, is what's desirable.

54:36Whether I'm paying a mortgage interest to the bank or rent to a landlord, I kind of don't care as long as I've got security. And where my logic – and so we're on the same page, right? So if I lived in a world where I couldn't be evicted – unless I damaged the property or didn't pay rent, I couldn't be evicted, which I think would make a lot of sense and be good for landlords as well, but that's a whole other topic. Then, yeah, I'd be with you. through bitter experience. And I've, I'll, I'll challenge you on this. I bet you I've rented more properties than you've had cold hot dinners. We just kept on getting kicked out.

55:17You know, we just constantly had, we had zero security. So, so in the world, in the Australian system where good luck getting anything longer than a 12 month lease, good luck. If you want to, God forbid, put a poster on your kid's wall or have a dishwasher that works that doesn't stink You lack agency. You're always moving. And when you do move, you don't have much choice in terms of the timing and the location because, like, you're going to get three seconds notice and good luck to you. See you later. And you'll probably be charged a break fee if you move before any nominal. Like all of the nonsense that goes around with it.

56:01So on paper and financially, yes, you're 100 % right. In reality, you just – and having been someone who's rented for many, many, many, many, many years and just recently bought. So in terms of my cash flows, actually, they've gotten worse, right, because of the size of the mortgage, I suppose. But in terms of the mental health, oh, my goodness. You know, like we're here. like no one's going to kick us out i can i can put a i can paint the wall black i can i can do whatever i want you know and it's there is something to be said it's the non-numeric it's the sort of the non easily quantifiable components of it to your mental health that that have that do not fit into a spreadsheet they did not fit into my spreadsheet i didn't account for them which is why i was like no renting makes much more sense why would i have all my money tied up in this unproductive asset that most places in the world over most points in time only typically grows at three to four percent per year when I could take that money and start a business or I could invest in equities or I could do all these productive things with it like it's madness so obviously you've got to rent oh I turned out I'm treated like a second-class citizens I've got no security my kids don't know what school they're going to next year like all of that nonsense so if we actually had proper rental protections.

57:23Yeah, but we don't. So if you can, own, I guess. I guess. Which is such a tragedy. Such a tragedy because it does lock up a lot of capital. It could otherwise be put to much more productive uses. That's true, although that's a function of rents to some degree as well. Yeah, true. If houses were less – in this instance, it's absolutely true because you can rent at less than the cost of the capital. But in a situation where rents – There's something to be said about that too, right? Right, exactly. But when rental yields approximated the cost of borrowing, it'd be a wash from that. Yes, that's true.

57:54That's true. I agree with you, mate. I've owned my own home. I've rented. I've owned my own home. There's two things for me. One is individual. One is societal, I suppose. Individually, Ram's absolutely right about security of tenure and the ability to do whatever you want. And, you know, I punch a hole in the wall. I can move a wall. I can do it, not just putting a poster is a very obvious easy one, right? But those things you - You don't have some idiot in a cheap suit coming along with a white glove, rubbing their finger along the mantelpiece saying, oh, it's a bit dusty. Yeah. Would you have that happen to me, by the way?

58:30I can imagine. I can imagine. Yeah. But, you know, you can modify it to your own desires. That's super useful, I think. And I think for me - Now, and to me, family, you're a single person, Sam, which is very different to a family where you've got, you know, a sort of detritus and other things. And there's just things like schooling, like changing schools, changing areas and stuff. It's just hard. So there's security and tenure and kind of roots, putting roots down kind of reasons, I think, which makes sense. Societally, I'm a big fan of home ownership for a couple of reasons, Sam. One is in retirement, most people won't have amassed sufficient savings to pay the rent.

59:11and our entire pension system is frankly, you know, driven around the assumption that people own their own homes. The pension payments effectively, you know, and people aren't, by the way, so they're not enough for those people. But the whole retirement system assumes you own your own home by the time you retired. And so having that means you've effectively capitalised the rent to the point where you now no longer have to pay it. And there's some, you know, mathematically, you're still better off to rent and invest than to pay the mortgage. Mathematically, Ram's made that point a lot. And it's mathematically true.

59:41The problem is most people don't rent and invest. They rent and spend. And then turn 67 and then keep renting and go, oh, bugger, I didn't put aside enough money so that my rental fees can be covered by my assets that I built during my life of working. And so once you – and this is a societal benefit and it's a bit of a – it's a bit nanny stage or a bit kind of big brother. No, not even that. Maybe it's a bit – I don't know. Something. You can choose the word. Paternal. Paternal. That's the word. Because we're kind of saving people – We're saving a lot of people from themselves. Now, it's not paternal.

1:00:13I'm not making anyone do it. So I'm not saying you should be stopped from doing it. You must own a home because you can't be trusted. It sounds like you've got your head screwed on. You know exactly what you're doing, and that's great. But for most people, having got to the point almost – it's a bit like super. You kind of hate it until you go, oh, wow, hang on. I've now got a home and super, and I didn't like the fact that it took money away from me. I didn't like paying interest, but all of a sudden I've got a home, and I don't have to pay any more on it, and I'm done. No one can kick me out.

1:00:39We've got to pay rates, I suppose. But no one can kick me out. It's mine now. I don't have to move unless I want to. I can get by on whatever I'm earning from my pension or from my investments. So there's just something very beneficial as a society about having a great number of people with their own homes just because it takes away one of those ongoing costs. And again, you will say, Sam, probably, I'm sure, yelling at the pod machine right now saying, but I'm going to invest the difference and I like the flexibility. I love it. That's great. I'm really, really happy for you. I'm not saying you should have to do anything.

1:01:07But I will say for me, I reckon we'll have far fewer regrets in retirement, the higher the percentage of home ownership, just kind of almost by definition for those reasons we know. And if you don't believe me, look around, and you are, by the way, American, which gets to your next question. You look around the world, Australia has more super than we used to have and than the rest of the world has in voluntary savings for retirement. Why? Because we just never quite get around to it. We're being saved from ourselves a little bit with some of these things. Don't always love it. and you can argue about what we should be made to do or not do or enticed to or not do, but we also know the results kind of speak for themselves.

1:01:44Those nudges of opt-out rather than opt-in or compulsory super or the assumption that you should probably own your own home, I think will do people overall more good than it will do them bad. But that's just my take. Yeah. I mean, it just depends. Yeah. Yeah. So I'll give you an anecdote. Go on. So since moving into our house, I've mentioned on the pod before, I'm so old. I'm embarrassed to say this, but I've only gotten into gardening and things like that. Me too. Don't worry. You're not on your own there. Although I'm getting old too. That's no support. It's so, anyway, it is what it is. It happens to all of us at some point.

1:02:19It really does. And my folks have always been big gardeners. They're like, oh, why didn't you ever do this before? Because I had no incentive to do it before. Well, that's true. I never had an incentive because when I did sort of start tinkering, I was like, oh, I'll do that in the garden. And again, you get the brain dead real estate agent goes, oh, we didn't get permission to do that. What improved the property? I didn't get permission and spend all that money and make it better. So I didn't, is that a problem? Terribly so. Apparently it's a problem. And more than that, even if you didn't get any grief from someone who's just looking to be difficult, you would put all this time and energy and money into something.

1:02:58And then you get the eviction notice. It's like, oh, so guess what? I didn't do any, zero care about any house that we had that we were renting. It's like, why am I going to look after it? And, you know, people go, oh, but tenants don't look after the property. You don't give them a reason to look after the property. Why would you spend any money on this thing when it's going to be snatched away from you very quickly? So, again, the comparison that's usually given, and it's a good one, is Germany, but there's thousands of others where you get these like 10-year leases. is guess what? People put kitchens in.

1:03:33People put new roofs on their rental. This will blow your brains out for someone in Australia. Why would I do that? Because they get to use it. They get to enjoy the utility of that. The landlord goes, Fent, what do you want? Again, I'm going to break a few brains here, but any sensible landlord, what do you want? I'll tell you what you want because you don't know. It's very helpful for me to point it out. This is gaslight you and whatever. But do you not want a really high quality tenant who's going to pay the rent on time and look after your property? I mean, call me crazy, but if I was a landlord, I'd be like, yes, please.

1:04:16And when you've got someone who is like that, why would you turf them out? Why would you disincentivize them to make capital additions to the property, to do things, to paint a wall, to look after it, to put in a garden, to, you know, all of these kinds of things where it's sort of like I've said a thousand times and I can say it until I'm blue in the face, show me the incentive and I will show you the outcome. And the way that we've set it up at the moment is just, frankly, it's just entirely just been financialized to the point where people are actively losing money on a cash flow basis for some notional tax benefit.

1:04:54You know, it's sort of like the whole thing is so ridiculously broken. And that is why if you can't beat them, you join them, you capitulate. And if you can, you buy a house. Unfortunately, it's also I'm very caught myself in saying that because I had a lot of people say that to me in the past. It's like, you should just buy a house. You should buy a house. I was like, I can't. You know, like the bank won't lend me any money because of my situation. And I'm very mindful of saying that to others here on a podcast. Yeah. Oh, it's brilliant. You should buy a house. Like there's a 20-year-old listening to this right now going, well, thanks, Captain Obvious.

1:05:30You know, because I love being treated like a, you know, whatever. And it's not possible. The average age of a first home buyer now is 36 or something like that in this goddamn country. and it's 40-year mortgages and stuff. It's like it's very easy to sort of say you should or you shouldn't. What really fires me up, obviously, is that it's all completely academic as a discussion at this point. Unless you are an investment banker or a brain surgeon or someone on an extraordinarily high salary or mum and dad have a bunch of extra cash. Yeah, that's it. There's no debate. It's not like, yeah, should I do this or should I?

1:06:07Sunshine, you have no choice. You are renting and you're going to take these very, very low – and there'll be people out there screaming, saying, no, no, no, I look after my tenants really well and my house – and thank you. Like, you are the exception to the rule, but thank you. And obviously, there are very good people out there. But you must recognize that that is not a common experience as well. Anyway, I'll shut up at this point. I like it. I have nothing to add. Sam has a second question, mate, that finishes up on, which is lovely. My second question is hopefully easier to answer. Sam didn't know this, but also, so hopefully shorter.

1:06:40I am an American listener, and I find the Australian culture and accent to be quite charming, despite us, which is obviously positive. So well done, Sam, looking past Andrew and I and still finding charm in Australians. Specifically, I am quite fond of Australians' pride in high-quality coffee and their avocado toast, two things I quite often enjoy when crafted properly. My question is this. This is for you, Ram. Besides the titular avocado and toast, What additional ingredients make your ideal Avvo toast? For me, that's garden fresh tomatoes, cracked red pepper flakes, and, of course, a perfectly poached egg or two.

1:07:17Thanks for a weekly dose of level-headed financial talk, which helps give me perspective when I get a bit too sucked down the rabbit hole of daily market news here in the US. Sam. Sam, thank you for listening from the US, mate. Very kind of you, by the way. That's cool. Hey, we got a shout-out in David Gardner's Rule Breaker Investing podcast. David Gardner, one of the Motley Fool co-founders. Recently? I'm going to mention this to you, Ram. Yeah, a couple of weeks ago. Oh, cool. Which is very, very, very kind of him. What did he say? It was actually a listener who actually wrote in and said they liked the podcast, which is very nice.

1:07:45I'm not sure if it was Sam. I don't know that it was. I don't think it was. But, yeah, so we got maybe a couple of extra American listeners recently as a result. Sam, thank you for listening. You know what? The American listeners, let's be real, they clicked on the wrong podcast, right? They thought they were going to the US. What the hell is this? Why are they talking about the ASX for? Who are these two knuckleheads? Weird accent. I'll give you a very Aussie answer, but it's a genuine answer. A bit of Vegemite. Oh, here you go. Vegemite and avocado is a match. It's strawberries and cream kind of stuff.

1:08:14Yeah. You know? A bit of saltiness, a bit of - Yeah, and let me just correct our American listeners here. I think too often - There they go. There they go. Let me tell you all your problems, America. Let me fix it for you. Americans and some of my best friends are American. That was a bit Trumpier though. It was. Best friends are American. Whenever that's the preface, you know, like, oh, something's going to be said. But, you know, it is very much a – when your American's friends come around and you're a mean American, you know, it's a Vegemite thing, right? Yeah. And there's something really sick about Australians.

1:08:49We love to, like, give them some Vegemite on toast and watch their reaction. And they hate it. Americans hate it. And we even did it – remember when Rudd was PM and was it Obama came across and you gave him some Vegemites? Oh, did he really? Yeah, and Obama, classic Obama fashion, oh, that's god-awful, you know, or something. I think Chris Rock was giving someone on a media interview thing too. It's like, here, try this. Chris Rock was one of the actors. Like, oh, yeah. I'll tell you what you're doing wrong is you're viewing Vegemite in the same way that you might view peanut butter. And what you do is you don't, it's not something you, I know you're the exception to this, Scott.

1:09:28You're a bit like Kenny, and I'll let you talk for yourself. but what you don't, it's not an inch thick. So what you want is a nice bit of toast. You want lots of butter, lots and lots of, like an unhealthy amount of butter. You want pools of butter on the top. And then you just want, you want a hint of it, of Vegemite smeared through it. And I think if you were to try it that way, I think you'll just find that there's a new taste sensation out there. If you spread it like an inch thick, yeah, it's not going to be great. Unless you're Scott. Well, yeah. On an avo toast, I'm actually with you. I don't think you want to overpower the avocado with an inch of Vegemite.

1:10:05But I will happily lather the Vegemite on so the toast is not quite entirely. So the other thing you must do with Vegemite toast is lots and lots of butter. Yeah, 100%. Yeah, butter. Really hot toast, like straight out of the toast, I'll whack it down, butter over the top, Vegemite on top of that. Melted. Yes. It is mother's milk. I even cook with Vegemite in some things as well. Like, there's a really nice edamame kind of flavour to it. Yes, it does. A little bit, just a bit. Again, I know how it sounds, but... Casseroles and stews. Campfire. I'll be doing a campfire stew, but a bit of Vegemite in there for a bit of flavour, a bit of salt.

1:10:42Yes, very much. So how do you zhuzh up your avo on toast? So speaking of things we don't agree with, I am going to reject the premise of your question. I have never in my entire life had a piece of avocado toast. What? Do you like avocado? I know. Am I even Australian? No. Oh, well, okay. Well, that's fair enough. Yeah. If you don't like it. Sorry, Sam. You'll have to get a rant for your avocado toast. I will happily just give you the proper stuff. Vegemite on toast. Funny, quick aside, by the way. This is probably an urban myth, though. I don't think it is. Well, possibly an urban myth. I don't think it is.

1:11:11Sam might not know this. Australian prisoners of war during World War II were routinely healthier than many of the captives from other countries, and it's actually put down in part to Vegemite in the rations they received from the Red Cross because it's high in vitamin B, and apparently the vitamins and minerals in Vegemite, I'm not saying it's a health food, don't get me wrong, but they reckon had some part to play in having those soldiers who were captured by the enemy actually healthier during their internment than some others. I love – this is so off topic, but I love Australians. We're now into the podcast.

1:11:45We're here for us now. Yeah, exactly. Australians' pride in Vegemite is – and I say this as an Australian, right, is I feel it's a little misplaced. if you really want to get under a Brit skin, talk about how we invented Vegemite. Because we did in terms of that brand. But in terms of a yeast extract, the poms will go, no, we had Marmite. Like we did it first. You just did it slightly differently, right? Have I told you about the Vegemite was called Parwill for a while? Yes, yeah, I remember that. They changed the name and it was if Marmite, Parwill. That was mother, Mar, father, Par. So it was Marmite and Parwill.

1:12:23And then, of course, that was short-lived. And there are several countries that have variations of it. So, you know, we didn't really invent it. We kind of developed our own particular recipe. The other interesting thing, correct me if I'm wrong, I need to fact check this, but this is a great – bring this back to some notional business kind of insight. It's a great example of a waste product being turned into a value added good. Yeah, yeah. Because it is a yeast extract. So I believe it was brewer's yeast, something like that, as a waste product. And someone said, well, we've got to be able to, look at all, we've got to make something.

1:13:01And then they made Vegemite with it. Like brilliant, right? Yeah, very cool. I love it. Take a waste product and make money out of it. Like if you can do that as a business, like you're doing something special. It's a nice way to defray those costs too, right? you think about it. And sawdust used for animal bedding or there's a whole lot of different examples of exactly that. It makes you more money or it lets you lower your costs. If you can sell multiple parts of your production process in different parts. There's examples that are like you on Friday. It's on the tip of my tongue. But there's examples of exactly that where you do what you're doing.

1:13:37You break off the pieces. That can go there. Oil is actually the classic. Oil? Yeah, the different variants of oil quality. So diesel and petrol, for example, are just extracted or distillated from – that's why diesel was originally called distillate. They're different fractionalisations. I'm not a chemist. You would know this better than me. The different parts of the oil carbon stack, effectively, are extracted, used for different amounts of refinement or quality or whatever. And so the different types of fuels that are carbon-based fuels are largely the same kind of thing. Not exactly a by-product or waste product, but that idea of we use this bit for that and this bit for that and this bit for that.

1:14:14That is interesting. Very interesting. Anyway. Anyway. Try some Vegemite, Sam. You will love it. Whack it on your elbow, coast. Really, yeah, it's an acquired test. By the way, I'm a failed Australian, Ram. My young bloke will not eat Vegemite. Oh, dear. I know. As a father, I've completely failed. I don't know where I can go from there. I've got no words. I don't know what to say. I know. I'll be shown the door. I'll be invited to leave. I'm just going to search up docks and find out. Send child services around, I think. This podcast is officially over on that basis. It's been a lot of fun again, mate.

1:14:47I'd love chatting with you again in 2025. We'll do it all year and hopefully for many, many years to come. But this week is in the can. Thank you for listening. I will, by the way, remember to ask Graham next week what he's been up to and how he's been up to. Oh, I thought we touched that. Tip top. I'm not going to ask you today. We've done this one. I'm just letting you know. It's coming back. I may even resurrect the what is straw man. I feel like I need to do something different, so leave it with me. Then maybe a moustache update. We may have to have a regular weekly. I know we measure the length of it.

1:15:15Maybe we make you post on social media. I don't know yet. We'll come up with something. Until it's like equivalent to Tom Selleck kind of level moustache. Yeah. Maybe that's the benchmark. Or the Murfews handlebar. I have actually got it going down. I don't know if you've noticed there. You can see that. A little bit more ago. I will say that I love you, but if it went down like that, it's going to always be a bit more choppery than Murfews. Just be a little bit careful, is all I'm saying. Be a little bit careful. Yeah, yeah, very good. It's a slippery slope. We're well and truly done here. Until next Friday, have a great week and full on.

1:15:46Cheers.