Mailbag, incl: What is going on in Japan? January 25, 2026

23:48Whether I own New Hope coal shares or not doesn't change whether Australia chooses to ban or not ban coal and burning coal and contributing to fossil fuel. So it's not so much that I'm small. I don't believe I'm making any impact at all. If I had a million New Hope call shares or no New Hope call shares, millions is probably a lot, I don't think it would change for a second the company's trajectory because they don't need to raise capital. They're not going to raise capital. It's just not going to... You're right. In those circumstances where they have to raise capital, that's absolutely the exception to the rule.

24:22I 100 % agree with you. So I'm not disagreeing in the slightest. I just think the reality is for 99 % of companies on the ASX, if you take a view of, will you not be able to raise capital anymore, Woolies and CBA and Telstra and News Corp and CSL and Cochlear and say, I'm never going to raise capital. It doesn't matter to me. Why would I care? And in fact, more to the point, the vagaries of share price movements, I mentioned CSL. They were going to do a spinoff, now they're not going to. The share price has been super volatile over the last 12 months. That just natural volatility is going to be bigger than any impact the ethical investing has on that.

24:59Maybe the share price is 10 % higher or lower, but if it's 30 % lower than it was this time last year or 40 % higher, the incremental. Again, is it incrementally impactful? Yes. They've got to raise capital at a slightly higher price. Does it change for a second the operations? Higher cost of capital, okay, they pay a high interest bill, okay. They can raise. If they actually can't raise equity to get to that point, again, this is where the edge case matters, and you're right. If it's a point of, well, bugger, the equity markets are closed to us because our share price is too low, then absolutely the ethical investors have won.

25:27And I have no issue with that. I think if you can do that and achieve that and want to do that, go for it. Knock yourself out. I think to believe that any other of the edge cases, it's going to be a fraction of 1 % of the ASX that's in that can I raise equity. If it's a little bit more expensive to raise equity, well, the bankers win or the shareholders win or something else. Even then, the company doesn't do less of what it's going to do. It only does less if it's going to do if it can't raise the money. And so that is the edge of edge cases where I just think it's not meaningfully impactful enough to make it worth doing for it.

25:57Again, I'm just saying don't do it. I'm just saying don't think you're making a difference unless you're investing in that one company where your shareholding is, or even collectively, your shareholdings are the deciding factor, the kind of tipping point. Yeah. Yeah, fair enough. Yeah. Cool. Should we go through a question from Lisa? Oh, this is great. Hi, Scott and Ram. I don't have a question. However, I would like to claim the title of the most avid woman listener. Rather than simply bend the knee with gratuitous platitudes, I'd like to show your other 13 regular listeners how it's done with tangible evidence.

26:37It's good to know we've got some extra regular listeners this year because it wouldn't have been that high this time last year. As a novice share investor, says Lisa, I originally started listing to the pod machine in early 2024 whilst renovating a house. Tell you what, if renovating is not bad enough, you threw a podcast from us on top of that. That's glutton for punishment stuff, Lisa. And I was very quickly hooked on the wealth of information I was learning and the counterbalanced views on many topics. Andrew's enlightening yet entertaining rants helped me while away hours of tedious sanding and painting.

27:06I'm glad you didn't say tedious hours. Very soon, the two weekly podcasts, and later three when Stock of the Week is published, were simply not enough. So while waiting for new episodes to come out, I started listening in reverse to previous episodes. I don't know how that... That must feel weird going backwards. Yeah. That's like the world going backwards, like a Superman flying around the earth and making your time go backwards. That's kind of cool. I love listening to the undertones of the changing economy that seep through your discussions, through COVID, market dips, RBA decisions, Andrew never wanting to buy property and later buying a house, Scott buying, selling and rebuying Bitcoin, the many timestamp views on stocks and don't at me's.

27:46It's a bit of a mind twist, jumping from the current time to 2021 and back again, listening in two distinct points in time. It's also fun checking in on those timestamped comments. Oh, don't do that. Anyway. TLDR, says Lisa, this brings me to my empirical evidence of being your most loyal follower. Check this, dude. According to this year's Spotify wrapped, in 2025, I listened to 18 ,025 minutes. That's over 300 hours of Motley Fool, putting in the top 0.05 % of all listeners. which says, as at the 12th of the 12th 25, the year wasn't over when this was released. Yeah. I also love the subtle trolling from Spotify calling you out.

28:30And there's a graphic she includes. Thankfully, podcasters love to talk. I'm going to share the story just about us, Lisa, but I can't prove it's not. I've since sold the house I was renovating in early 2025 and converted much of the profit from the sale to shares with a small holding in Bitcoin after doing my own research. For any new listeners that are not as familiar as me, you haven't mentioned what straw man is for several weeks now. What does it do? Fool on Lisa, crowned holder of Motley Fool, most prolific woman listener, back to 2024-25. That's the question then, Ray. What does Australia do?

29:02Well, thank you, Lisa. That is really humbling and nice. We're an online investment club, as you well know, Lisa. Just online investment club. Australia's premier online investment club. I would have thought so. I would have imagined that to be true. Do you know, I was thinking about that, I don't need to go through the exercise and I very rarely listen back to any of our episodes. And if I do, it's just to see how much I put my foot in my mind. Did I say, was that right? How did that come out? But I'm almost certain that over the time that we've been doing it, I'm not talking about going back way back to the beginning.

29:36I'm even sure you could only go back a year or two. And there'll be things that I've fundamentally changed my view on. But I guess I'd call that out. You know, who was it? The world is way too complex for you not to change your mind very often. So I guess I'm sandbagging here, Lisa, if you're coming across some old episodes where we were saying something, I was like, well, you didn't say that before. I was like, I'd like to wrap that up into a narrative that says I've just evolved and my thinking has deepened. We're better versions of ourselves, let's be honest. Better versions of myself. I do genuinely hope, though, that there are not too many things, but I hope there are certain things that I look back on in another 10 years time of what we're saying right now that I do cringe a bit.

30:20Because I don't think you're growing otherwise, right? I don't know if you're learning or, you know, the world itself is changing and your understanding of the world is, hopefully, if you're a lifelong learner, is always changing as well. So I think one, it's just a better way of living, but two, from an investment lens, I think that, I know I harp on about this a bit, but I think it's just one of those core skills that you need because dogged stubbornness is a killer in investing. You're going to get it wrong and you've got to recognize that you're wrong and you've got to learn from that mistake, learn the right mistakes and then apply it again.

30:59And so if I can sort of frame any pivots and you know what do they call it? Flip flops. Backflips? Backflips. I'll put it in that context if possible. And yet another three or four years later and there'll be more of them to come. So that's for sure. You're right mate. Six months maybe. Yeah. That's kind of you're absolutely right though not to give myself a rat but the idea of holding somebody I hope I've changed my views over that period of time for exactly the same reasons. It's madness to and frankly that's you know when you when you stop considering alternatives when you're so sure you're right That's where danger comes.

31:34That's where we're with political teams rather than contests of ideas and that kind of garbage. So, yeah, I hope I was wrong a lot in the past based on hopefully me changing, being more right now. If I was just wrong then or wrong now, I'm not helping anybody. But, yeah, I hope I've improved and changed my mind over time as well. I'll tell you a funny story. I mentioned you off air. I've sort of – I changed my cloud storage provider over the break and I was sort of uploading a bunch of stuff there. and I came across some old TV crosses like a million years ago that I'd say. Oh, that's awesome.

32:05I couldn't make it 30 seconds in. Oh, no. No, because it's always a bit cringy to watch yourself, but just the rubbish coming out of my mouth. Like what? It actually, with a little bit of age and hopefully wisdom, it's reminded me to be a little bit gentler and understanding of people, you know, particularly when you see younger people, because everyone's younger now, right? More and more people are younger, I put it that way. You know, and I hear some journo or some financial, you know, some funder saying something, and I think, well, they're 32. Like, I mean, cut them some slack. But let he, without sin, you know, cast the first rock, or in this case, you know, let he who has never said something really stupid, you know, cast the first insult.

32:51So, but yeah, God, I had some bad takes. Is this where you apologize for bagging the 24-year-old RBA researcher who wrote that paper you ranted about last year? I'm still happy with that, actually.

33:04No, I mean, actually, hopefully, I don't think I mentioned any names or anything there because, you know, they'll recognize. Hopefully, themselves, they'll recognize. They'll do what I did and they'll look back as an older person and go, yeah, bad take. Tell you what, mate, I'm so glad we grew up without social media. Yeah. The first 30 years of my life aren't recorded on social media. I'm very happy about that. Thank goodness. Right? Yes. Dear, dear. I feel sorry for kids these days. The internet is forever, as they say, and God knows you and I at least are old enough and stupid enough that if we've said something dumb on the podcast, we'll have to own it.

33:39But the kids deserve a bit of a break. I don't know. Social media law aside, I reckon every social media account should be deleted at 25 and start again, just for the sake of this. I don't have to carry stupid things around after them. I mean, it was one point you could at least rely on the sheer volume of data to bury it. Now you've got AI. I was like, hey, AI, find everything that Scott said that was dumb from 10 years ago. Two minutes later, he's timestamped, you know, like transcripts. Mate, AI is good, but it'll take more than three minutes. It's a lot of dumb things to get through. Yeah, right.

34:15Hey, I'm hesitant to ask you Joel's question. Thanks, Lisa, by the way. It was very, very generous of you, and thanks for listening and spending time with us. Yes, thank you. I'm hesitant to ask you Joel's question because we've talked a little about this topic off air, and you kind of said, there's so much to say, but I don't know really what it means. So let's do this. Hi, Scott and Andrew, says Joel. First time bending the knee, long time bending the knee. May the knee always be bent, Joel. Much respect to you both for what you do. Thanks, mate. My question is a little bit left field, but I believe you'll both have some interesting takes.

34:45I'm an Australian writing to you from Japan, where I have lived for many years. I would love to hear both your takes on the state of this country, given its fiscal challenges. You both obviously specialize in a pining about all things Australia, but I believe your perspectives on the future of Japan's economy, given its fairly unique challenges related to demographics, debt, currency devaluation and markets, would be very informative. I own a house with a mortgage. I invest in the Japanese, US and Australian markets and own some Bitcoin. I find myself increasingly concerned about what the future holds for my two kids if they choose to stay here.

35:21and would love to hear your expert economic opinions on how to navigate the future in this country. Many thanks, Joel. Wow. So just this morning... Just quickly, Andrew says so and lens back in his chair, which means settle in, people settle in. Let me limber up. So just this morning, this is the first time you and I have spoken in the new year after the pre-records, and you said, hey, what's been on your radar? What do you want to talk about? And I said to you, the Japanese bond market's actually been on my radar. However, let's not talk about it because I'm really struggling to wrap my head around it in a way where I feel confident to opine on it, other than to observe that it feels significant.

36:07So for those that aren't paying attention, and it's a pretty niche kind of, well, it probably shouldn't be, but it's a pretty niche thing. It's only dry if it's not niche. It's kind of dry, but it's kind of like really important. Fascinating, too, when you get into it. So Japan is the third largest economy in the world. It's massive, right? But it's in this really weird situation where they've been running debts, massive deficits forever. They've got this situation where the Japanese central bank has been buying, they've been doing what's called yield curve controls. Let's just call it what it is, money printing.

36:39They basically print up money and then they buy their own bonds. Half of all Japanese bonds are owned by their own central bank. Now, I'll let that hang there for a minute. You just think, so what does that mean? Well, it just means that the government is printing money to finance its deficit. What's fascinating about Japan is that more recently, it's starting to sort of rear its head. But for the longest time, it didn't result in heaps of inflation, which is exactly what you would think it would do. Why is that? Well, I don't know. This is the thing I'm not sure on, but it's not going to stop me from opining.

37:21You've got a demographic challenge there as well, which is naturally deflationary. Older people sort of spend less. You've got a very strong savings culture that's there. You've got a very, for the longest time, a very strong industrial base there as well. These are all deflationary forces, and I'm very much on the record, unlike sort of most mainstream economy, And I think deflation is a wonderful thing. Not fast, extreme deflation as a result of economic collapse. That's a different thing. The natural deflation that results from productivity enhancements and the rest of it I think is a good thing.

37:57And a journey through a deflationary environment with a new economic system would probably be very painful on the way. But the concept of the idea of things becoming cheaper because we're getting better at doing it is self-evidently a good idea in theory at least and should we be in practice if we got there. Refer to a hard money two-parter episode we did recently, which sort of talks to all of that kind of stuff. Nevertheless, what Joel's probably noticing here is that you have seen the Japanese yields just spike really significantly. And the reason is that people who own the debt are selling it and no one's buying it.

38:33Why would you? Why would you? I mean, it's always been the most bizarre thing to me is because any traditional accepted wisdom is that bonds are the lowest risk form of investment. It's really an IRU from a government that is spending far more than it receives, is functionally bankrupt. But it's okay because I'll just print up the difference, all right? And if you think that fixes it, then, you know, you just need to think about it a bit harder. What's so difficult about it all is that this isn't a hot take. People have been talking about this for, God, 20 years, you know? And so to me, I don't – where do I go with this?

39:12The mass is the mass is the mass, right? Like something's got to give at some point, right? It just has to because if you pull on that thread for long enough and it just gets to the point where it's just sort of like everything is being paid for with things that were just poofed into existence, right? Like it breaks the way that we allocate and manage resources and the whole economy collapses at a point. But the lesson, I think, in this one, it's always to keep in mind, is that the market can remain irrational far longer than you can remain solvent, is the old saying, and that these things can, you can kick the can down the road for a long time.

39:51So you can be absolutely right. Plenty of people called the, we forget, the big short makes it sound like Michael Burry was the only person on the planet that saw the problem. Heaves of people, heaves of people saw it. But some of them saw it three, four, five years out and just got dusted in waiting for the inevitable to happen. And then when the inevitable did happen and uncorrected to a level they were at the first place. So it just sort of didn't have any impact. So I think what I'm trying to say here is that, Joel, I think Japan is facing some very, very significant challenges. And I think that there will be a comeuppance at some point.

40:23That doesn't mean that it's left as a smouldering wreck. It's just going to be more difficult for people that are there. But I don't know how imminent any of that kind of stuff is. But for the longest time, the JCB, the Japanese central bank, was able to suppress yields and manage all of this. And it feels as though like that is starting to unwind a little bit. And then you get what's really interesting is you get the second and third order consequences. So with all of the savings in Japan and no interest rate to speak of, the official interest rate was virtually zero. What do you do as a Japanese investor?

41:01You invest overseas. In fact, what did Warren Buffett do? He borrowed money in Japan to invest overseas. Why wouldn't you? Why wouldn't you do that, right? It's called a carry trade. It's just like I'm borrowing it next to nothing. I can go put it over here in an index and get 9%. It's free money. As yields rise over there, there's less of a drive to do it. That doesn't make much sense. It might be one thing if we were talking about South Africa or Spain, but you're talking about the world's third largest economy repatriating literally trillions in capital, it has implications far and wide. I'm not smart enough to piece it all together, but it feels like it's very much a sign of the times, I feel, right?

41:45Because when I said to you off air, we equity guys, we live in our own little bubble, but when you draw a pie chart of global assets, the bond market is the gorilla in the room. It It dwarfs property, dwarfs equities, like bonds, fixed interest, sovereign debt, corporate debt. These things are, this is where most of the world stores their wealth in these IRU promises. So when you get even things on the fringes that are impacting this, you know, there are consequences to that. We spent a lot of time on Friday talking about, you know, the ills of market manipulation and the rest of it. It's like, well, the world's largest, in fact, not just the world, all of the world's economies have been playing a massive game of manipulation at the very base layer of the financial system forever.

42:31Like it feels as though it's a big deal. And I'm very conscious of that and it fascinates me, but I also hold the view in my head that, yeah, but you don't want to be right. You don't want to wait until 2043 before you're proven right because. That's right, exactly. You know, I'm living in a bunker with a bar of gold and, you know, my hard drive, my Bitcoin hard wall, gold wall. You know, it's sort of like, that seems like a real hollow victory to me. So there's a lot to unpack there. We could spend weeks talking about the Japanese situation, Joel, other than to say, yes, I think it is very notable.

43:09I just, I don't know what to do about it other than stay the hell away from fixed interest. There's no touching it with a barge pole. That's just me. It's hard too because I think it's a great summary, mate. Thank you. And really, really thoughtful. No, scratch the surface. That's always the problem, isn't it? Yeah. The challenge, Joel, for the kids, and this is where there's different perspectives, right? People tell me all the time, talk about the Australian stock market. Oh, that's no good in Australian US dollars. I'm like, well, I don't invest in the Australian stock market and US dollars.

43:41Why would I care what the US dollar value of the Australian stock market? It makes no difference to me. I raise that as an example because I'm about to say when your kids are in Japan, staying in Japan, investing in Japan, all that sort of stuff, you don't have – the impact will be different. You're not going to have the direct currency impact if the currency is to move meaningfully in either direction. You do have the impact of that in terms of import prices and export prices and stuff, so you're not going to be immune to it, but it's just a different lens. So if you're saying for an Australian investor, how do I think about Japan versus if I was a Japanese salaryman working in Japan, they are different.

44:16They're just different things. Not divorced, but the impact of different running different directions and have different severities for those reasons. One quick example on that. Did you know? I didn't until recently. I'd known that the yen had been devaluing against the USD, but I wasn't aware of the quantum of it. The yen buys half as many US dollars as it did 20 years ago. So between 2013 and today, it's halved. The currency has halved. And so where does that impact the local worker? It was like anything that Japan imports. That's very much where it hurts, right? So it's sort of like - But also makes the Japanese exporter's job easier.

44:53I guess I'm saying there's real world consequences to it. Yeah. What makes the Japanese exporter's job easier though? So it goes both ways. This is where it depends on where you are. And it's one of those, I will say outright, there are some things that absolutely whack everybody in an economy completely and entirely and permanently. And that stuff is, you know, there's other things which is like, well, if I'm a Japanese exporter, I'm probably not happy about that. If I'm living in Japan and own, to your point, US dollar-dominated assets, not only has my shares gone up over that 20-year period, but they also then doubled again in purchasing power terms.

45:25So I've actually done really, really well. So not only is it uncertain, and that's the biggest problem, but the effects depend entirely on where you sit in that chain. I'll just very quickly on that, though. It removes any incentive to invest locally on that front, which again has I'm sure you think it's going to keep falling but yes that's so here's the other problem is you look at the US and say well who's in more trouble and by when and because currencies are relative if the US dollar is worth less and the other US dollar is worth yen's worth less and they're both worth less together then they're worth the same amount which is also a complete mind blow when you think about that it's like well I'm pretty money you're pretty money we're both pretty money together so you know it's the it's the I can't give you an answer Joel What would I say?

46:14I would say that I am always in favour of international diversification wherever you live. And so whether you're a Japanese person investing in Australia or a Australian person investing in Japan, you know, I wouldn't say necessarily either of those two directions are the right directions necessarily, that might be, but just be diversified, holding assets outside. This is the reason we've talked about before. We're not Japan and Australia, but hold US dollar assets, sorry, US denominated assets, not US dollars specifically, but partly for diversification, partly because it's a great investment idea and partly because I'm doing that.

46:44So those are things that are well worth doing to my mind because it allows me to naturally hedge against that risk in a way that actually creates value anyway. So if the share's going to go up anyway and I get some diversification on top of that, that's why they call it the free lunch, right? As long as you're picking well, you're in a good place. So I would have the kids investing outside Japan, in Japan as well if you want to, but definitely outside Japan for those reasons. Be diversified internationally. I talked about the US versus the Japanese. At some point, careful where you think you want to get your diversification if you're only going in one direction if they're both having the same issues.

47:21I also suspect...

47:26I want to be really careful here because no one knows what the future will bring. I suspect that over their lifetime, the concerns realm has probably come to fruition at some point because kicking the can to the road for 20 years, 30 years, 40 years, 50 years, at some point you go, well, 60 years, 70s, 80s, 90s, the longer the timeframe, the more likely it is that there is some reckoning at some point. That being said, the question really is a relative question of where else would you rather be? And I'm going to have some home country bias here, and I'm going to pretend to myself, because I think it's true, that I'm being as unbiased as I can be, which is I hate Australia's debt problems, but we've got a tri-colour of less debt problems than most of the other developed world.

48:04So realistically, I feel really, really good about being in Australia, investing in Australia, as well as overseas, because we've all got problems. I've said a million times, we might be the least sick bloke in the hospital. It doesn't mean I should be in the hospital. I'd rather be out altogether. But in a relative sense, you know, if there is a reckoning, the size of our reckoning related to most other countries' reckonings is going to be lower almost by definition, assuming we don't let Decade out of control, which we may still, but for now. So I kind of feel good to – okay to good about that.

48:38I'm sure that other individual countries are in similar situations, probably some of the naughty countries or something. So I'm not saying we're the best place, just that I'd rather be Australia than – and in Australia – than the US, the UK, Europe, Japan. So I would probably look at that. Do I think someone – I don't know how old your kids are, mate. Let's say they're 10. Over the next 100 years in Japan, is life good? probably I would suspect um doesn't mean they can't be I mean look think about last hundred years right we had a great depression uh we had wars I mean things will happen over over a century I think trying to prognosticate a it's probably hard it's as hard to do 100 years as it is to six months it's probably easy to do 10 or 15 years uh or easier right and so you kind of go well I don't know I I wouldn't be I wouldn't be I wouldn't be too worried I think there are worries that arise in every country and every domain for every reason and most of the worries don't come to fruition and it's those that do.

49:33Some are worse than we expect and most aren't and things we don't worry about are things that end up getting us. I don't want to say negligent or Pollyanna. I suspect live a good life. Enjoy what you're doing. Invest and save sensibly. Kind of the best I can do for you, mate. I don't think me trying to predict what Japan's future might look like is useful. A, because I'm probably going to be wrong and B, if I wasn't, if I was right, But would I suggest you change anything? No, I don't think so. Ram, am I too, Pollyanna? No, I mean, no, I mean, that's the most boring advice in the world, but it's always the best advice.

50:10No, no, I didn't mean it as an insult. No, no, no. You know, live well, spend less than what you earn, invest sensibly. It's like, oh, they should not be rotating into commodities and while hedging again. It's just all rubbish. So, yeah, I can't argue that. But it is just an interesting topic to me. I mean, the other thing that I always find fascinating in thinking of Japan is that maybe younger people don't know this, but they had a bit of a property bubble in the 90s. Yeah. Yeah, right. And it got to the point where the Imperial Palace was worth more than California. The state that individually is like one of the top 10 largest economies in the world.

50:50Like it was insane. You know that the total value of Japanese property to GDP hit 460%. That's crazy. Now, before you laugh. What's Australia going? 450%. I knew you'd know that. But we're different. We're different. Laws of economics don't apply here. Couldn't happen here. Totally different. By the way, level of household debt to income reached 100%. Oh, my gosh. The height of their property bubble. We're only at 197%. 47%. These aggregate averages figures, there's plenty of people going, my debt to income is more than 20 times. So it's sort of like, I just, as I say all the time, I'm just such a big student of history.

51:35And I just feel as though when you're trying to grapple with economic ideas and that the world just offers you so many examples of things, you know, and whenever I hear things like this time, it's different or, you know, it just makes you cringe a little bit here and then japan is just it off we were talking about it a lot on friday it's got so many lessons to teach us good and bad they've done some incredible things over there and they've made mistakes over there as well um they're veering towards more populism as i understand it as well a new election's being called it's a global problem and and get this right i mean this is not surprising at all right so because because of various sort of pressures that are out there And largely with some of the things that they do need to import, they're going to be cutting various taxes.

52:20It's like, oh, I'm all for that. But again, I put that in the context of you'll have a massive unfunded deficit that the world is no longer funding and that can only be met through money printing. So it's like what is fascinating is that you can be in this, you can paint yourself into a corner, or maybe a better analogy is you can dig a hole for yourself and then the deeper you get, the faster you start to dig, which is also the US, right? Exactly. And it's just like watching a car crash in real time, you know, in slow motion. But very much at the forefront of my mind, just to repeat myself, is, yeah, but this is a slow motion car crash.

53:06So I don't know if I'm going into the bunker just yet. but I think it's I think it's I think it's definitely worth paying attention to it's interesting the hardest thing is let's say you're in the car you know the car's gonna crash you're in the car the car's gonna crash yeah that's kind of one of those parts and you can leave Japan and yeah we're playing a game of chicken but you're still a kilometer down the road so I'm just gonna stay on it for a little bit longer I'm still 100 meters away I'll stay on it for a bit longer I mean the reverse I mean the kind of it's gonna happen so you're gonna live through it anyway and I guess I'm I'm just kind of playing the other side of that of kind of like should you stop it happening yes for a policy perspective if you've got the ear of the Japanese PM you're like dude can we just have a quick chat because this is not going well yeah if you're if you're living in Japan you're like what do I do I think that's where I kind of come back to I don't know how many kids are they maybe aren't investing yet uh Joel you're investing outside the Japan which I think is really really smart um again the US may have the same issues right so so I'm not I'm not silly enough to think that I'm saving myself with investing in the US necessarily depends on of currency from here.

54:04But yeah, only just to say, if your kids are still in Japan in 80 years' time, they will live through whatever comes next and it will probably be fine. I think Japan's going back to a subsistence feudal economy. Could it suck for a while? Yes. Would you avoid it if you could? Of course. But if you can't know if it's going to happen, when it's going to happen, how bad it's going to be, what the impact's going to be, whether you get through it.

54:27Rami and I have said this so many times and I feel always both guilty and responsible to say it, which is the best you can do is set yourself up. You can't change the country's outcomes, so set yourself up. And that means owning assets. It means probably owning foreign dollar, denominated foreign currency, denominated assets, just in case companies that operate outside the Japanese economy, for exactly the same reasons, do the things, own the assets that give you personally as much protection, resilience as you can. Not to the point of baked beans and shotguns, because there's a limit. I'm not saying lose money to make some left, but I am saying just think about how you're setting your financial life up to make yourself as anti-fragile or at least as invulnerable as you possibly can.

55:11And for your kids, that means the same thing, right? And I'm not saying you decide what you want to do with them and how you want them to help them invest in all that kind of stuff. But the best thing you can do for them to the extent you can is give them the resources to weather the storm. And that's not fixing the Japanese problem. And it sucks to be Japanese having no assets. I'm not saying it's okay. and it's a very selfish answer, which is, you know, look after yourself and whatever happens, happens. The thing is, if it's going to happen anyway, you've got the choice now to either be ready for it or not ready for it.

55:38And I think it's incumbent on all of us to do what we can to set our financial lives up so that we are not at the mercy of those events to the extent we can do it. I strongly agree. You definitely advocate for the world that you want to see, but the same, like, you know, if the captain is still steering towards that iceberg. Just staying closer to the life raft, you know? And this is why, I'm sorry to bang on about it, but this is just why you've got to go absolutely 180 from traditional wisdom, which is when things get scary, buy bonds. Don't buy bonds. And I don't even have to talk about the future, right?

56:17In the last five years, anyone who had saved their money in Japanese bonds has been wiped, not wiped out, but they have lost huge amounts of money. It's like, whoa, but wait a second, that's a safe haven asset. No, I only lose if I sell, you know, if I hold to maturity. It's like nonsense, absolutely nonsense. You bought an asset and in the last, like really since COVID, maybe about 21, 22, things really started to explode. You've got the chart at the moment. So back in, let's wait, almost exactly four years ago today, it was yielding 0.167. Now it's at 2.27. So you have what? You're more than halved.

57:00How much is that? Is that COVID impacted though? Or is it long enough term to be? Obviously, all the bond yields fell COVID times. No, I'm going back over a 25-year chart. So it's flat because of all the intervention and management. And then, boosh. Right. And it just explodes. So I guess without getting all too overly technical, my point is I'm an ordinary quote unquote mom and dad investor. I'm a little bit nervous about the future. Financial advisor is telling me I need to have some fixed interest because that's the lowest form. That's the lowest risk that I can do. It's a prudent, known way to protect myself.

57:35And it gives me some, you know, diversity away from equity markets. Like, great. But anyone who has followed that advice over the last three years has lost huge amounts of money. Like you have. If you need to sell your bonds out, you're gone, right? And even if you don't, you're only being paid back and printed money. So it is a, this isn't a collapsed, you know, Latin American dictatorship that we're talking about. This is the world's third largest economy. You know, it is a G20 nation and their sovereign debt has collapsed right in front of our face. It never gets remarked on. And it's like, whoa, that's the safest investment I can make.

58:13No, it's not. And again, to your point, look, I don't think the political will there is to do any change, but just whatever you do, Joel, I can't give advice. Yeah. But if I could, I would say, do not buy bonds. Do not buy them. They are not the safety that they are purported to be. Yes. Diversified portfolio assets. Not even diversified. Yeah, but you're right. But that's where some of these nonsense go. I go, oh, diversity means I should have some of this and I should have some of that. So I'm just having it as a – I would just say don't touch it at all. I don't mean – I don't have bonds at all.

58:50When I say diversity, I'm talking about shares, property. Right, sure, sure, sure. If that's your thing, whatever. Just having assets that are, in theory, growth assets that are not correlated ideally to the Japanese economy and currency, which is where bonds come out. So I'm not saying be diversified as have – I love saying, you're not – no, you don't need two of everything. So diversified doesn't mean some of everything. that's not what you can do. It's usually how it's taken to mean that, right? That's how much people do to it. Because the conventional wisdom is, I'll have some of everything because then you'll protect it.

59:17It's like, it's nonsense. Dude, the conventional wisdom is 60-40. I know, right. The 60-40 portfolio, 60 % equity is 40 % bond. And it worked for a while. Again, this is actually really great advice in a world of monetary and fiscal restraint and responsibility. So it makes perfect sense. But we don't live in that world. We haven't lived in that world for decades now. Anyway, I won't kick off another rant. Okay. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

59:52Let's finish off with a question from Gab. Hi, Scott and Ram. I feel encouraged by you answering my previous question, so I'd like to add another one to the list. I love it when you smart gentlemen, or you and I, Ram, discuss monetary policy, and I do hope some of the people in power pay attention as you have had some awesome ideas and debates on this topic. My idea, says Gab, now get your pen out, is to replace all current social benefits programs, so unemployment, pension, child support, NDIS, with a different program based on GST dividends. How it would work is we would double the GST from the current 10 to 20%, but all the extra 10 % would go back to the population as dividends.

1:00:34This would apply across all entities with a tax file number. Gama would collect the 10 % and distribute it equally every month to every TFN. What this would do is collect GST from those who consume more and give it back to those who consume less. I would also remove all GST exemptions while I'm at it. Can you get your thoughts, Gab?

1:00:56I'm really careful not to do a knee-jerk on this because there's a lot in that. I've got to think about it. I do like the idea of the dividend. I was very unsure until Gab said, collect 10 % and distribute equally every month through every TFN. So those who consume more, pay more, and give back to those who consume less, which is kind of the welfare system now, right? Those who earn more, pay more in tax. And those who get welfare payments, you know, effectively are consuming less because they've got the money to do it. So I like the reframing of kind of what the – I'm not sure I like the execution.

1:01:31I'll make you talk first so I can think. But what I like is that kind of reframing of what is effectively tax and welfare just done using the GSE mechanism and kind of letting the spending or lack thereof be the balancing item. Yes. Here's my hesitation. Go. Is that the implication in the framing there is that all spending is not bad. And now don't forget that investing for growth is investing, like is spending. There's a lot of spending that happens in the economy where people who are buying stuff to make other stuff. In other words, they're not directly just consuming. They're not just taking from the pie that we collectively bake together.

1:02:19And so I don't know if I would want to disincentivize that. I know you with GST, you can write that. See, I'm thinking in real time here, so this is complex, right? Do you want to jump in or are you happy to - I'll say this because I'm not going to, even if you speak for 10 minutes, I'm not going to have a high conviction view on it. I'm very much in favor of anything of a simpler system. Definitely start with that. It is way too unnecessarily complex. I was whinging to you off air about I've got to do my taxes. I've left at the last minute. I hate it. It's the most painful thing in the world.

1:02:52And it's just like it just gets in the way of me doing other more productive stuff, right? And I think that's true of all of us. So anything that makes things simpler and fairer, I think is a good idea. So, yeah, but I'd have to think through it. Sorry, Gav. It's a non-answer. So what I like, I said before we should try a universal basic income. And those who object to the trial don't really object to the trial. They object to the idea because they ideologically don't like it and said, I want to try it just in case it works. We just got your point about the safe injecting rooms, right? It's like, I hate it.

1:03:25So if it worked, then I'd just be unhappy. so I don't want to do it. It's like, yeah, if it works, it works. It might not work, by the way. Correct. You're just saying, let's find out. Yeah, do a trial. What's to lose? Like literally, why would you not? Beats every other policy we just whack in place and go, let's just do it. It's like, no, this one, we just try it. Pick a state. Tasmania is great, right? It's an island. I do it in Tassie. Do it in Tassie for a year. See how it goes. If it sucks, you go, well, thank God we didn't do it. More broadly, we waste a little bit of money, at least we know.

1:03:52Or you go, my God, this is amazing. we should do more of this. So I think the GST payback is kind of a universal basic income effective is what you're saying. You're saying payback equally to each entity. So that kind of does it. I don't think I'd be paying GST back to tax file numbers generally. I don't hate it, but it kind of doesn't make any sense to me that you kind of pay a 10 % dividend to companies or other structures for their own sake. By the way, Gabe, you'd end up with – and maybe you mean personal TFN rather than company. I don't know if you do, and I don't want to assume you do. If it was to every tax file number, I'd roll out 15 brand new companies tomorrow morning and collect 15 lots of money.

1:04:29So I think it would probably, I assume you mean, no, you say entities. I don't know what you mean. I wouldn't do it to TFNs in general because you incentivise people screwing around with the tax file system. You can have a tax file number for any company you start up. If the GST dividend was larger than the cost of registering a company, you'd have 84 million companies listed in Australia tomorrow morning. So I think you can do it that way. You might be able to put some sort of operational rules or cash flow rules around it. I don't know. Maybe. If it was under personal level, I mean, you really try to UBI, which I'm completely fine with.

1:05:00Would I do it with the GST, though? I keep your point about consuming more and less. It's kind of a little bit aligned with your point around about wealth tax or land taxes of, you know, you can't avoid it. You're consuming, so you're consuming it rather than trying to hide income or claim deductions. So is a consumption tax the better way to raise it? Probably, yeah. it also does mean if you are going to increase the GST giving the increase back directly means it's not a regressive tax where those are lower incomes who can't afford the increment because they're just buying the necessities and haven't got the ability to make out the difference, that would kind of work so I don't hate it from that perspective the one thing I would say probably, and it depends on how we structure this stuff, but you mentioned unemployment, pension, child support, NDIS even just those four areas have different needs and different things for different people.

1:05:52And I don't really know the overlap between, for example, a pension in the NDIS or unemployment and child support or any of those combinations. And so at some level, if you say I'm going to get a single payment, if that payment was less than the payment currently being received by a welfare recipient who needed the money, they may be worse off. And that might mean we need to rejig it a little bit. I've said before I'd rather go universal basic income collected however. I don't really care how it's collected. Not that I don't care, but the income bit doesn't need to be offset directly by a – it doesn't need to come from the same place as the payment.

1:06:27So I would honestly just go UBI trial and largely by self-funding, by removing and replacing a lot of those payments, removing and replacing the administration and collection compliance functions. We've got a lot of paperwork and that would be an easy way to fix that, I suspect. or at least try and fix it again, man, it won't work, in which case we stopped doing it. But I think I'd start there. But I don't mind doing the GST if that's how we did it, as long as we just made sure the UBI allowed for that increase. GST might be the best way to do it. With an offset, yeah, I think probably.

1:07:07Would I do it any other way? How would I fund the UBI? No, I think – I mean, I change the tax system a lot just because it sucks anyway and needs to be fixed and simplified to Ram's point. So I don't – it'll never happen because it requires complexity and it requires honest conversations and long conversations and stuff. But you wouldn't do just any of this stuff. Yours might be easier, Gab, because it's just simple. It's like two changes. Maybe that gets through, whereas my idea of tweaking 85 things may not work because it's just too complex. So, yeah, I don't hate it. I want to do the numbers on what it actually meant for those on welfare.

1:07:39I wouldn't do it to all TFNs. I don't think you can. I think it's reasonable to do it. But I think personal CFNs, individual taxpayers, probably makes sense. You mentioned replacing child support. Obviously, that's kind of number of kids related. So there is, again, there's some wrinkles there and there'll be winners and losers. We should be okay with that, by the way, but there's political climate, I'm not sure we are. So I don't hate it. I don't hate it at all. It's such a big topic. It's such a big... Here's the thing with all of this is that there's plenty of people far more focused and specialised and smarter than us who have talked about this for forever.

1:08:10and just, you know, talk to Ken Henry what he thinks about it, right? Yeah, yeah, yeah. Not even paid him to give him his opinion and ignored it all. That's still on the shelf, exactly. You know, so just like when that happens, it's sort of like it feels, it's easy to be cynical in terms of these things. So, yeah, I see nothing but added complexity for the tax system. Yeah, yeah. The thing about Henry too is it was done, it was initiated by a Labor government. It was then set on by a Labor government, set on by a Liberal government, set on again by a Labor government. It's not even a political thing of the government didn't like the report they got.

1:08:41I mean, they didn't, but it was just too politically difficult to contemplate so they didn't bother trying. So, like, every time they have the tax – I mean, speaking of GST, Gab, every time they have a tax example, let's review all taxes, but the GST is off the table. You just said – and there's no good reason for it. All they're doing is political cover. And, again, this is where the adversarial politics sucks because the party in power is worried they're going to get tagged with it. So they don't want to do it because they're scared of that. And the reason they're going to get tagged with it is because the opposition of the day is going to absolutely tag them with it because it's just easy political meat.

1:09:13So it's like, you know, it should be, when the government says, we look at the government and say, oh, you so-and-sos, you should have done it. Why wouldn't you do it? You're gutless. The answer is because those lot over there are going to make merry hell. And if the situation was worse, we would do the same to them. And while that's the reality, to your point about, you know, proper conversations around, that's exactly why we're not talking about it. They take it off the table because they had to have the guts to do it. And they know, they're not just worried about the population. They don't worry about the electorate.

1:09:38They worry about the opposition who will happily torch good policy just to win a couple of extra votes and, you know, screw things in the meantime. Think about the GST itself. King was in favour of government and against it in opposition. You know, the very idea of that sort of stuff is, you know, unfortunately it's holding us back as a functioning democracy to be better than we are currently. Things are pretty good, but they'd be a heap better. And it's largely the inability and willingness to actually do difficult things that makes it harder. Yeah, they can't even do it when they've got very distant and politically unconnected organizations.

1:10:09Yeah, that's right. So I just this morning read in the paper the OECD has sort of said, hey, Australia, you might want to do something about that deficit. You know, it's causing problems. And what's this thing where charmless can overwrite RBA decisions? You know, maybe you want to think about that kind of stuff. I'm like, no, I'm not going to. So I was like, it's like the Japanese conversation, right? Like, it's just sort of like, gosh, you know, be vocal in your thoughts, but be careful with what you own. Know what you own and why you own it, because, I mean, these self-interested muppets aren't thinking beyond the next election cycle.

1:10:46No, and again, on both sides, you know, they'd sell their own mothers for a vote. And so they're never going to let a government's never going to let an opposition have good policy on challenge and vice versa, because all I can see is the vote rather than what's good for the country. Well, I said to you again off air, it's just like the, I don't know if it's irony, but it's, I don't think that any of these concepts are beyond the average person to understand. Like you don't need four PhDs in economics to sort of, you know, it's just like, it just takes someone with a bit of guts and probably a bit of charisma to just sort of say, hey, we're doing this.

1:11:20Don't buy into the nonsense that the other side is talking, whoever the other side happens to be in that particular instance. It's just because it doesn't, it doesn't make sense. We're doing this because it's going to make you better off. It doesn't feel that. I get it. It's very counterintuitive, but it's going to make you better off. Do you want to be better off? Yeah. Well, that's why we're doing this. But they're going to do that. Yeah. And it's going to make you worse off. It's going to make you feel like you're better off and it's going to make you worse off. And turn it around. But they're not.

1:11:47Unfortunately, they just preach to the lowest common denominator. They assume that everyone's dumb and incapable of understanding it. So we're just going to pitch to those. It's lazy and it's cynical and it's depressing. It's gutless. I mean, gutless actually in the absolute sense. Yeah, absolutely gutless. I mean, gutless is in – there's no effort to say, hey, I've got three years in the electoral cycle. I'll release a range of policies now and I'll spend three years arguing for them so they'll vote for me and elect me back in or elect me from opposition because I've got a better set of policies than that person does.

1:12:17What they look at is, oh, hang on, there's a poll in three weeks' time and if I get bad polling for a couple of months and someone's going to roll me inside of my party, which frankly might also equally be true. It's why it's, you know, success has many fathers and fathers and orphans. No one wants to be responsible for it, and they're so busy trying to avoid the bad stuff. And frankly, not to get political about it, but the major policies, major parties are losing primary votes hand over fist to the left and the right at the moment because we're looking at it and going, well, you guys are just feathering your nest and you're not doing anything to help me, and at least that person over there, whichever your preferred angle or direction is from the middle, they are at least saying a thing.

1:12:53And part of the populist, that's, Trump's populism is not, because he has solutions, or not, well, they're not solutions. He's got, you know, Christmas cracker answers to the grievances that people have rightly have or reasonably have or perceive they rightly have. And so he just says, I'm with you. You're right. This sucks. Vote for me. Yeah. And I'll do a thing you think is good. Back to tariffs, right? Made in America, bring them back American jobs. They've sold you out. I'll look after you. Well, they have sold me out. He'll look after me. And that's how populism rises. Because the sensible middle does nothing, it stands for nothing, says nothing, does nothing.

1:13:29And that's why you end up with the extremes on both sides. And at the end of the day, the extremes on both sides kind of start looking like each other at some point. That's where we end up. We're going there. We're going there. I don't want to mention certain names because it just puts people off politically. But there's – Is this where you're announcing your candidacy for the next election? Oh, I don't care. I'll mention those. Like One Nation is massively on the rise, right? And only because it's been gifted to them from the major parties. You just don't have anything to stand for and don't even recognise the very legitimate problems that people have.

1:14:02People are right that there's something wrong. Like we all see it. We all notice it, right? And everyone's just jacked up. You just naturally gravitate towards the easy answer. It's really, really, really scary, this kind of stuff. And I know just we woke up this morning to find out that the coalition's dissolved. Yeah. Right. So if Labor doesn't do something now, like. Right. What are you waiting for? Yeah, exactly. You have the political. Yes. If there was ever a moment to stand up with a grand vision and a plan, even if it was going to be challenging to push through and to convince people, now is the chance to do it.

1:14:42Yeah. They won't. They won't. We're spending all our time on stupid issues that just completely miss the more broader point. And I'll just make the final point as well. All of political disunity and what's the word for it? When the electorate becomes very disenfranchised, there's always an economic underpinning for it. Comfortable, prosperous people with lots of opportunities just don't go towards populism. Hey, we're always in the podcast, but I want to unpick that because I've been talking about that on Twitter this week. And what I think is fascinating – you're 100 % right. What I think is fascinating as the human condition is that for all of the truth of what you just said, it's remarkable how well off we can be but still perceive that as the economic calamity or the whatever.

1:15:33Oh, yeah. In the sense of anyone else in the world would kill to be in our position. Yes. And yet we are slightly less well off than either we were or slightly well off than we thought we would otherwise be. Yes. And we're ready to throw the toys out of the cot. And it's just – there's a lot of – and again, back to real politic of this, there's a lot in that because it's not like – in any reasonable perspective, you look around and go, so we're better than all of the – six and a half of the world's seven billion people are worse off than we are. And you're telling me I've got to absorb a little bit of pain just to kind of make sure that the future is pretty good.

1:16:05No, go to hell. I'm out. Or, you know, house prices are too expensive. Yes, they are. Inflation is a bit high. Yes, it is. They are bad. We should fix those things. But equally, would you rather have that situation in Australia than the situation in the other 6.5 billion people living within the world? No, I'd rather have that situation. And you're ready to throw the toys out of the car. And again, you and I have this conversation a lot, and it's keeping both ideas in your head at the same time, recognising we should fix the things that are broken, but also finding a way to make sure that we don't miss the stuff that's actually working.

1:16:35And just that – I just find that really fascinating that the – everything's relative, right? And particularly economically, it's relative. And you just kind of – you know, it's the economy, Stu. You have a recession where the Australian economy falls by a fraction of a percentage point and, you know, governments get turfed. It's like, man, so little in any relative sense changed. Yeah. And yet it's just fascinating. I mean, to me, it just underscores the power of the free market system. I mean, I've ranted many a time we have more of a crony capitalistic system. It's all kinds of, you know, tomfoolery that goes on there.

1:17:15But underneath it all, it's sort of like we have created immense wealth in this country, you know, in spite of all of the wrong moves that we have made. Because it's not a binary thing, right? Like, it's not just black or white. It's just that we're the wrong shade of grey and we could aspire to more of an ideal. I just find it fascinating, that relative sense of, if you have anyone around the world, Australia's problems, they're taking it with a heartbeat. And we're sitting there going, well, the pitch walk's in the street then because this is awful. It's like, no, just, again, a bit of perspective I think helps.

1:17:46Yeah, I think it is really important for anyone to travel. Yes, yes, yes, yes. I know as a younger person, I did some backpacking around Southeast Asia and other places. Like it just, if you want to be patriotic or you want to at least be patriotic, you've got to be careful with that word too. But, yeah, appreciative and recognising how good we've got it is to travel and to remember that there are, when you look at a lot of the lot that people have, people's lot around the world, it's like it's only, there's only some seemingly small changes at the very top of structures that lead to such massive differences in outcome again back to the Singapore conversation right from Friday you know and it was I said 50 it was actually less it was like 30 35 years they went from the bottom of the pack to the top of the pops just by making some changes like these things are powerful when you get them right and it you're right I mean we shouldn't complain but I still feel as though it It doesn't – things could be better, right?

1:18:53I'm not saying we shouldn't complain. So I want to hold both those ideas, but hold them both really, really, really strongly and loudly, even though they feel like they contradict because they're both true. Yes. And, like, I think that's both – one doesn't say it's this, so that doesn't matter, or it's that, so this doesn't matter. It's like they are both 100 % true, 100 % important, 100 % reasonable, and we should absolutely hold them both, even though they kind of, you know, hold the North Pole of the magnets together and kind of go, I get it, and there's natural tension, but one doesn't invalidate the other.

1:19:21I just think that is just a fascinating observation. Again, well, say it as if my own observation is fascinating. I find that idea fascinating. Yeah, me too. Me too, man. And just, look, for whatever small way we can sort of push the conversation, some of the thoughts out there, because it is, as I say, they're not that difficult concepts to get your head around. At the very least, I think, with so many things, just the very act of contemplation and thinking through them. You might not change your mind at the end of it, but it's still a very valuable process, right? And I just wish we would, as a nation, you know, spend more time on some of these more fundamental kind of considerations rather than just faffing at the edges, which, you know, it's just a circus, which is what makes it all so depressing.

1:20:05Anyway. Let's call it. Enjoy the rest of your weekend, listeners. Thank you for spending a bit of time with us. If you're still here, info at fool.com.au is the email address. I've got to do it at the beginning of the pod next week. Can you remind me, Graham? Yes. And hit us up at sage underscore simian or at strawmaninvest on Twitter. You get me on Twitter and Instagram at tmfscottp and Scott Phillips money on Facebook. Have a great weekend. Fool on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation.

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