Mailbag, incl: What would you do with seven figures? December 21, 2025

23:48Do you know much more about it, mate? Because that's about all I've got to offer in this specific investment. Yeah, that's a good one. Gab, I don't know where your 8 % comes from, but it's not supported by the company's own comments and data. If I'm wrong and you've got different data or different whatever, then please, please, please let me know. What I will tell you is according to BetaShare's own website, over the last 12 months they've paid a dividend of 2.21%. The previous 12-month period was 2.69%, before that was 6.7%. They had a great year in 2022 and 2023 where they paid a truckload out.

24:19Here's the problem with distributions from trusts. Because the ETF is a trust, it has to pay out all of its income in distributions to its trust holders. So it's not a dividend yield in the same way. Now, you might be talking about internal gearing. Maybe the fund itself gets the benefit of the 8%, and maybe that's true if that's what they're investing in, but you're not getting it as a dividend because only the fund's proceeds get paid out. Now, what that means is if there's a lot of change to either the market or, most importantly, the ETF makes a lot of transactions and recognizes a lot of capital gains, they have to be paid out.

24:52And so that's why some years, I mean, in July 2022, they paid a$2.07 distribution. In July 2024, they paid$8.1 distribution. So it's really different. So if you're talking like that - One was a 2.6 annualised yield. The other was over 11%. Right. Now, if you're talking about the fund internally getting that return, I'll get to that in a second. But if you were talking about you getting it, it's simply not the case. The average yield over the past five years, I'm going to say, is probably about, I don't know, 3-ish percent, something like that. I'm speculating, I'm just trying to make numbers up on the fly.

25:28So if you're talking about the internal yield, that's true in terms of the dividends. The companies get paid, pay to the ETF. It's completely true. The problem is the management fee, and this is important, is not, as far as I'm aware, and if someone wants to correct me from beta shares or somewhere else, and this is not a dig at beta shares, by the way, it's a perfectly fine product if that's what you want. The cost of the gearing is internal. The 0.7A is the management fee you pay for the fund to be managed and on top of that, I believe, and if I'm wrong again, I will apologise happily in advance and after the fact, the cost of managing the fund, the gearing comes before that return is applied.

26:04So it comes out of the fund returns before the management fee is taken out. So you're not paying 0.78 % for an 8 % yield in terms of the, that's not the only cost of the borrowing. And it's true in fact. It's also true if you think about it. Who's going to lend beta shares money to take a 50 % to 65 % exposure and only get paid 0.8 % interest? They're not going to. They're just not going to, right? So the cost of the borrowing, the internal management, the internal gearing, I should say, is borne by the fund's returns and the management fee is on top of that again. Now, they don't disclose, as far as I'm aware, the strategy or the cost of the gearing internally.

26:45They may do it. If they have, I haven't seen it. And it's not bad if they don't. They're not obliged to. but it won't be 0.78 % to borrow an extra$100 for every$100 worth of equity. So just kind of keep that in your head at the same time. Last thing I want to throw at you, mate, this is not a reason necessarily not to invest, but it is worth being mindful of. I've picked up the graph. The fund started, if you look at this, in 2013 or so. No, early 2014. Between then and early 2025, the fund's return and the ASX's return were almost identical, having been up and down and all over the place over that period of time.

27:28So the fund actually was behind the ASX right through 2015. Right through 2016, it was roughly online. 17 was online. It gets above it in 18, below it in 19, above it again in 20, below it by miles in March 2020 when COVID hits, right? No surprise there. Absolutely smashed. In fact, the return quoted, I don't know what period they're quoting, so it should be a little bit careful. It looks like return to date. So they launched in 2014. By 24th of March 2020, the ASX had gained 11.98%. Now, that's after a massive fall, so bear that in mind. But the ETF was down 24 % over that period of time. And then by now, I said by early 2025, it's basically a lion ball.

28:10By late 2025, because the market is on a tear, the geared ETF is massively ahead. What am I saying? I'm saying that this is likely not a free lunch in terms of yield or returns. If you, after literally 10 and a half years, had gone and been exactly flat with the market after all of that, you're taking the risk of internal gearing, which is not the same as risk as a margin call. For 11 years and getting exactly the market return, you could have just got the plain vanilla market return in the first place. And so for me, I'm like, mathematically, gearing sounds good. By the time you paid the fees, you've paid the management fee, you've paid to gear and you're getting exactly the same result as the market.

28:46I don't know. We just mentioned doing the common things uncommonly well. I'm taking the base money. Now, if the market keeps going up from here and if the ETF keeps rising, then maybe it will eventually outperform and outperform on a compound basis. And right now as it is, let's not show you, it's doing much better right now, but it was doing exactly the same earlier this year. And so it's in periods of, from periods of falls to periods of recovery, you get a much, much better return. But just be mindful that the internal gearing still does absolutely hurt your returns in down markets. Will hurt your returns in flat markets relative to not being geared because you're paying the interest cost.

29:27So it's only in periods of meaningful compound growth for the market that you get better than normal. And historically, during the fund's time, they've been entirely wiped out or more after big falls. So if you want to time it, maybe you can make some money. If I was going to be clever, Gab, and say I would probably, if when the market crashes, you might buy it then and you might sell it when the outperformance is massive after a six, 12-month bull run and you might get lucky and you might make a lot of money. But you're timing your entry, you're timing your exit and that gets really messy and really difficult.

30:02In hindsight, it's easy. I can show you exactly on the graph where to do it. But yes, so, and by the way, even that yield we mentioned at the beginning, you mentioned, You don't get it. And to the extent it does go back to the ETF, there is no evidence that over an average cycle it leads to outperformance and probably because of the cost of borrowing, but I can't say for sure because as far as I know, it isn't disclosure. If it is disclosure, I haven't seen it. Yeah. I mean, there is a cost of borrowing. Yeah. There always is. Yes. Unless you're a government or a central bank. No, the other thing is that the point I would emphasise here is it's not just in a down market that you'll underperform.

30:40It's in a sideways market you'll underperform. Yes, correct. You know? Because of the cost of – like the carrier, we talked a short saying a couple of weeks ago, but the cost of the debt is going to take you underwater. Again, versus zero, it might be a wish worth taking, but you don't have to get zero. You get the market return without taking on the debt. So the debt, when you add the risk, add the cost, you're hoping for a better return. I just – I don't know if you've seen the graph around. As I said, right now it looks really impressive. Right now it's really impressive. Yeah. But for most of the time, it's hovered around the same level.

31:07And for more than a decade, hovered around the same level as the index itself. And by the way, the internal gearing thing, just quickly, no margin call. But do you know who's providing the funding? Do you know what terms they're providing the funding? Do you know what terms they can actually call the fund itself? Not you personally, but the fund? How far would the market have to drop before that happens? Or what would the cost be if that was to happen? I know you and I disagree. I'm dead a little bit, Ram. but I'm a big fan of Buffett's quote about leverage being the only way a smart guy can go broke, the Buffett line, which is basically just if you control all the circumstances, that's cool.

31:43I bet she has a good people, right? They're not trying to screw anybody. This is not designed to do anything other than say exactly what it says on the tin, which is when things go up, they go up faster. When things go down, they go faster. It's a leverage DTO. It's exactly what it is. So there's nothing improper about it at all. I don't even say that as a weasel way. Like genuinely, it's fine. but the returns themselves suggest that it probably seems like a play thing for someone to try to time the market and they're going to say, good luck doing that. Yeah. I mean, each to their own. It's just understand the trade-offs that are at play here.

32:16Yes, that's right. When the market is moving up, it's going to be a wonderful thing. So, you know, that's fine. No problem there. Yeah. I mean, would I consider doing it? No, probably not. I mean, I look back at 2020 and go, could I, if they happen again, would I buy the geared ETF and really ride the upside? I'd like to say yes at one level because I'm arrogant and all that sort of stuff, but as well, I think about, well, at what point would I have felt so good? My portfolio's fallen to 38%. Am I really leveraging into something else at that point going, this hurts like hell. Hey, let's take on some debt, really, really make it hurt properly.

32:49If I'd done it earlier, I mentioned I bought shares in February 2020. I bought Webjet because I'm an idiot, right? If I'd gone, oh, the market's down to February, this COVID thing's not going to be a thing. I'll buy this. Shares down, the market's down. I'm going to buy some, you know, this ETF. And then it falls another 30 % and I'm down 60 % on my purchase. How long does it take me to get that money back, right? So I don't know. Again, I'm not going to tell you what you should do. Part of me thinks I should be clever enough to try and do that. The rest of me thinks, don't be an idiot, Phillips.

33:15Just, yeah, tortoise and the hare, right? Just be the tortoise. Everyone got COVID wrong. Yeah. Every single person I can think of, myself included, got COVID wrong. Because the very natural reaction was, okay, we're closing the global economy. Probably not great for business profits. You know, like you don't have to be a gigabrain 4D chess playing mastermind to put that together. Yeah. And, yeah, markets fell. They were scared. So there was the emotional side of it and there was a very rational sort of fundamental lens on it all. And yet it was one of the shortest, sharpest crashes in history and in a very short space of time we're back at record highs.

33:52You know, so I remember the same in the wake of the GFC. It was like, wow, we're printing money and throwing it out of helicopter windows. is going to be a massive inflation impulse. Never happened. Stayed within asset markets, never entered the real economy. And again, it's sort of like I can explain it now with the benefit of hindsight. I can tell you exactly why and what happened. But as it's happening, and don't forget, you're not just sitting in an armchair somehow distant, removed from this. Like you're panicking as much as everyone else. And the very rational, obvious thing that everyone thought was going to happen didn't happen.

34:27And even those that kind of thought that there would be inevitable problems with it, as there have been with a lot of this kind of stuff, the timing around that was really, really, really, really hard. Fastest bull market and fastest, sorry, fastest bear market and fastest recovery bear market in history. In history. There you go. The pure V-shaped recovery. I was like, crash, and then it worked. Back we go again. Yep. And it was a fake recovery anyway. We can get into that as well. It's just like, well, it turns out you print a bunch of money and you can make asset prices go up. I mean, whether in real terms or, you know, you're like, I mean, investing is hard, man.

35:01Like, it is hard. There's why there's only, you know, it's why people go on, us included, more than anyone else, go on and on about Buffett and the outliers because they are outliers. I mean, it's just very, very tricky to do. So, again, none of this is to be too paternal. I don't get it. And you might be sitting there going, yeah, I hear all of that, guys, but this is just in the bottom drawer for the next 20 years. And even then I go, yeah. I mean, it has outperformed the market since inception. If I bought that when it launched in 2014, despite everything that's happened, I've got an 11 point something percent annualized return versus whatever it is, 8 % from the markets.

35:33And that's fine. But it's just going to be hyper. I mean, the market's already volatile. It's going to be even more hyper volatile. And if we go through a 10-year period of sideways market, I'm not saying we will, but I'm just, just be aware of the downsides. Whenever we're looking at any investment, we all do it. We look at everything that can go right. And sometimes you've just got to also just balance that off as best you can with what can go wrong. And if you're going in eyes wide open, I'll have no criticisms for you at all. And just a reminder, just to really nail this point, the management fee is just the cost of the fund managers moving the bits of paper, not the internal costs of the fund, which include any and all gearing costs that are required to get that leverage return.

36:12So just it feels like you're getting 8 % yield with a 0.78 % cost. Who wouldn't do that? Everyone would do that. As I said, it's not the way it works, unfortunately. We got a question. Well, an anonymous question, but three anonymous questions. They're all big areas. I haven't got enough time to do it, but let's see how we go. Our anonymous questioner says, Dear Scott and Ram, sovereigns of the pod machine. I'm going to assume he means lords rather than sovereign citizens because that can go two ways these days. There's a loaded time, isn't there? I come before you, he or she says, metaphorically kneeling, paying homage to the biweekly wisdom you dispense upon the masses.

36:50This is an anonymous three-parter. From a humble 37-year-old soon-to-be father of three. Cue Scott's ridicule. I wouldn't do that, you bastard. Though with a third child inbound, I feel I'm inching ever closer to the crossover point where you bastard isn't mudded. No, too late. Finally, none of the blow obviously is personal advice. Yes, thank you. Here we go, Ram. One, the housing gods have kissed... I've been nice to me. I went, yeah. Recently, the housing gods bestowed upon me, says our questioner, a generous smooch on the proverbial, granting me a seven-figure windfall. Rather than buying yet another modest dwelling and continuing my participation in the great Australian property Ponzi, I think this was written by Ram, that's why it's anonymous, I've taken the money and run, choosing instead to rent a very plush apartment with all the trimmings.

37:41In many ways, I feel like I'm living Ram's 2018-era lifestyle. So. It wasn't a plush apartment, I can tell you that. It really wasn't, I've seen the plush. Blackmold was my bedfellow. That flooring was special the last place you were at too. Oh, gosh. I was there after you just moved in. I love going to the rental tribunal and having ridiculous arguments and fighting for basic rights. It was great. In that context, our question says, so if you suddenly had seven figures to deploy for your family's future, what would your play be? One. I'm sorry. He's giving me a current plan. Current plan. and drip feed 10 grand a month into the Vanguard Australian shares and Vanguard World X Australia ETF 50-50.

38:27Then with tactical lump sums when the market tanks, 100 grand at 10 % down, 200 grand at 20 % down, 300 grand when the market falls 30%. Plus, invest 3 grand a month into individual stocks because I am admittedly too soft to back myself hard in stock picking. Despite the fact my entire existing portfolio is individual stocks, the fear of loss blooms large. Yes, I know the math screams, invest it all immediately, you coward. But 5 % in the bank and record valuations and PE ratios that look like they've been on the same supplements as Lance Armstrong have lured me toward this slower approach.

39:08Yes. So, I mean, again, I won't rehash the story, but just very quickly, I think on paper, renting makes a huge amount of sense in reality. And I learned this the hard way. If you get a great landlord, then yeah, it's brilliant. If you get a sensible landlord who understands the value of someone who's looking after their property and paying a regular income and is happy for that relationship to continue for a long period of time, I think renting makes an incredible amount of sense. And you've got three kids too, by the way. Right. And we were particularly unlucky and we just, and I'm not going to besmirch the entire landlord class because I know there are some really good landlords out there, but we had a terrible run, you know, just complete.

39:48You had an awful run, mate. The stories you could tell are painful. Yeah, we were on the ABC at one point, right? Like it was just so stressful for us. It was hard for the kids. We had to constantly move, constantly being lied to and blamed. It was just all this crazy, crazy stuff, you know, and it was just sort of like. You missed it with your peace of mind more than anything, right? Oh, it aged me and it made really, you know, something inside me died, right? And it's sort of like we... I mean, you're kind of joking about it, but it was, I mean, it's a real thing, right? It's not... It was horrible.

40:25Yeah. You know, I've had a lot of people go, oh, you must be really glad now you've got your own house. And it's like, you know, but, and it's like, yes, but I really do feel for one third of the population, this isn't like a rounding, there's a lot of people out there who are under incredibly difficult situations. And it's, there's a lot of sort of easy sort of answers that are put out there. And I don't have any particularly easy answers other than to sort of say, I think the pendulum's too far in terms of looking after the rights of landlords are not enough in terms of the rights of tenants.

40:56And I would actually step back even further from that and say, why is it even an adversarial thing? Like most mutual economic exchange, it should be beneficial to both parties. Wow, I get income, I get to monetize my asset on one hand. On the other hand, wow, I get a place to live. Isn't that a thing of beauty? Like why is that? Why should that be a difficult thing? And there's very deep structural factors as to why it is. There's very poor incentives. And pretty much if you're going to make money in housing, you don't do it through rent because there's no money to be made through rent. So you just got to flip, flip, flip, flip.

41:30And anyway, so I would just, I do hear what you're saying. It's great that you found a good place. I just hope that you can stay there for a meaningful length of time and not have to go through the journey that I did because it's just how it is and the rules aren't going to change anytime soon. And that's little comfort for those who don't have a choice and most people don't have a choice. And particularly if you're young, you don't have a choice. So again, it's an absolute blight on our society. All of which is to say, yeah, chuck it all in the market. You're 37, right like it'd be different at different stages of life uh it'd be different if there were different and more immediate expense requirements at this point in time with at least 30 years to go before retirement you know i just feel as though the idea of strategically deploying capital in an opportunistic fashion sounds good but what if the market doubles between now and the crash i'm not if the crash happens and you think, ooh, I might just wait until it drops a bit further, which is what you're going to do, which is what we all do, right?

42:45So like I'm going to, when the market drops 20%, I will redeploy the rest. But you won't because when something's gone very, something bad is happening if that is the situation and it's like and you will very, your mind will then shift to I'll just wait for it to bottom and then as if you're going like someone's going to ring a bell at the bottom and then I'll buy back in. And then you'll probably mistime it and then, you know, it's just look at it this way. If you went back, where are we now? We're 2025. Let's go back to 2009, 2008, sorry. So 2007, let's give it even better, right? So almost 20 years ago, 18 years ago, and you put it all into the top of the market.

43:27Now that's incredibly unlucky. So statistically speaking, you're very unlikely to time the exact top. I'm not saying it would have been great. It wouldn't have been great. But you didn't lose any money. Even in inflation-adjusted terms with dividends accounted and reinvested, you're ahead. You're ahead. And that's after 18 years. And we're talking about, you know, what, another 30 years to sort of go. So it's not to sort of say, oh, don't worry about it. That's still okay. Like plenty of people will rightly point out, no, that will still suck. It would have been better had you done this, that, and the other.

43:58But I'm just saying even when you have the biggest stock market crash since the Great Depression. And even when you peak the absolute pico top, it's not a disaster. And I suspect we live in a world now where the powers that be will do anything they can to avoid that kind of stuff. And they will throw all kinds of money at it to prevent it from happening. And none of it will make sense. And a lot of it will create even more problems down the track. But waiting for a big crash that may not ever come or may not play out in the way that you expect it to, and you may not act in the way that you expect it to, So check it all in.

44:29Or if you want to have a little bit each way, dribble it in, but just commit to doing it over, say, a 12-month period. It's just like a third every quarter, sorry, a quarter every quarter. Get the maths right. And just do it that way. But don't do it over 10 years because the opportunity cost over that period of time is going to be huge. Massive. We don't know for sure, right, but probably. And that's you need to invest. I know I've said it all the time, you need to invest probabilistically, right? Which is on average, am I likely to be right doing this or not? And that's the only way you can do it because each individual circumstance is its own twin toss.

45:07And as I've said a million times, you toss a coin once, 50-50 chance of heads or tails, but you get 100 % heads or 100 % tails in that one toss. Do it five times, you're probably going to get somewhere between five and none, four and one, three and two, two and three, four and one. It's the way it works, right? So just think through how that probabilistically works. works. The market goes up over time. It goes up about 9 % a year on average over time. So I frank and credit's on top of that over time. Ram's already talked about it. My favourite thing, 90 % of us say we're above average drivers.

45:37Guess what? We all think we're going to be the ones who use this correctly. I know we talk about it with debt, but I'm talking about it here in terms of lump sums. Same thing. Ram's exactly right. I kept investing during COVID, right? That's no humble brag. I just did it because I knew I should have. Did I though take out a massive extra home loan redraw on my house and go, you know what, honey, we're leveraging up to 95 % and throwing it all in shares because this thing is super cheap. No, I didn't. If I had$100 ,000, would I have used it all at that point? I'd like to say yes. I'm far from certain.

46:08I had it for a quid and I've been through a dozen of these. Well, maybe not a dozen, but I've been through a lot of these small and large dips and all that kind of stuff. I never play it right. I never play it right. Just very quickly. I mean, I play it right in the sense that I don't panic and that I buy more. I didn't do that straight away. I learned the lesson the hard way like everyone did. But I always look back on regret. Yes. And the regret is always why didn't you go harder? Yep. Again, not from hindsight is 20-20, I should have known that the bottom was in it. No, I can never know that and I acknowledge that.

46:41But I tend to be very conservative and it's like forget the bottom. This is a great company. It's incredibly cheap. You've got more dry powder that you can deploy. deploy it. Do it right now. If it goes down another 30%, so what? It's still by your own analysis, a good company at a good price. Do it, right? Because if it is a good company at a good price, you won't regret it given enough time. You might have wished that you got an even better of that price. Yeah, that's right. But just do it. And that's what I try and tell myself when these things happen is just don't be, fortune favours the bold.

47:16Being too timid is going to leads to regret. Yep. Yes, agreed. $10 ,000 a month is eight years' worth of, you know, even if you never get the dips, if the other thing is you may never get the dips you're looking for. That's a ramp's point. Or you get them in 10 years' time after the market's doubled or tripled or quadrupled, then you get a 30 % reduction. I mean, you're paying three times as much as you would have paid when it was a quarter of the value. So, by the way. You sell all of this and then you put it all in and the market will drop 50%. Or you won't do it and you'll ignore us and then it'll drop 30 % tomorrow.

47:48You're like, see, I told you guys I was right. That's what I did. That's what I mean about probabilistic thinking. It's all you can do. You've got to make your peace with it. You've got to make your peace with it. All you can do is act probabilistically because you can't control the outcomes. There is no crystal ball. There is no perfect foresight. There is no, you know, for all the patterns that people think they see in hindsight, there is zero ability to do it in advance. Here's the other thing I suppose to, and it's the other way to think about it, and I don't know if it's helpful or not. I'm fully invested right now.

48:16Okay. I could take all that out, go to cash, and do what you're doing, Anonymous, and drip it in over 10 years. So everyone that's invested doesn't have cash. Everything you think you have some cash but most of it's invested, every other person invested in the equity market has all that money 100 % invested from today and forever. And so if I gave you a million-dollar portfolio tomorrow, would you sell it all and then re-put it back in a bit by bit? I don't think you would. And again, I'm not saying that's right or wrong. The endowment effect is real in both those contexts. Now, the endowment effect keeps you invested.

48:45Maybe it shouldn't. But also the endowment effect of having cash keeps you in cash because you've got the cash. We all prefer instinctively the state we're currently in. It's just a human condition thing. So, yeah, you do you. I've said before, my mother-in-law is super. I invested it all in one day for her because it was long-term and it was income-based and I didn't really care. On the property thing, I'll add to yours around very quickly and we'll move on. I don't – as much as you're more bearish on the property market than I am, your rubber band analogy is, though, completely apt, you can only stretch it so far.

49:20There is only so long that property prices can keep growing faster than incomes by definition. It's just – when do we stop? 80 % of incomes on mortgages? 90%, 95%, 99 %? At some point – 100 % is the limit, right? Right, exactly. We know that. And that's assuming you don't ever eat or clothe yourself or never need medical attention either. Now, maybe we stop today, okay, in which case the future is probably going to be ordinary. Maybe it goes for five years, maybe it goes for three years, maybe it goes for seven years, ten years. I don't know the number. Here's my take on property. I've said before in this pod, I've asked you the question around out loud.

49:52I've never really kind of answered it for myself. To the extent I can, should I be buying now a house for my 12-year-old on his behalf? Because if it keeps going up faster than wages, by the time he's earning money, let alone doing something like trade or union, then saving enough deposit. So let's say it's 18 years away. Asymmetrically, if property doesn't increase massive return now and then, that's fine. If it does, he's locked out. So if you have a million dollars done, you could buy, and you say seven figures, we don't know how many, how big the seven figures is, but we'll use a million bucks.

50:25If I buy a Tram property today for a million bucks, it goes absolutely nowhere. I've got somewhere to live and I'm happy and I'm there for 30 years or 40 or 50 years or I sell it by somebody else. But either way, I'm in the market, to use Ram's phrase, or I own property for the rest of us. On the ladder. On the ladder. So if I bought today and I don't get a great return from it, I still have shelter and I've paid amount of money for shelter and I might wish I hadn't, but I've got the money. shelter so regret minimization says i got a house if i don't and let's say for the fun of it property goes up 10 percent a year for the next five years before plateauing i've got to pay 50 percent more attempts on average i won't do the compound because it's just easier and fun to do it this way i've got a your million dollar house you sold now got a million and a half dollars get back into now you may be happy renting for the rest of your life but if you were to change your mind about whether you are rented rented it turned out you know what Ram was right, this sucks.

51:13I want to buy back in. The million dollar house you sold now with a million and a half dollars. Now, maybe your share portfolio has done well in the meantime, so I'm not saying you kind of shouldn't do it. I'm just making the point that investment properties, I'm not talking about at all here. My best thought, no advice, as Ram said the other week, we can give advice on property because it's not licensed. But my best thought about property is if I was a young person, and I will say you're young even though you're 37-year-old, our anonymous questioner, I would buy. because the cost of missing out possibly permanently, to my mind, is not worth the, oh, it's too expensive anyway, I might make money if it falls, maybe I can buy back in later at a cheaper price because that's timing the market.

51:53We just talked about that. So I don't know what will happen. I hope it doesn't happen. I hope I'm wrong. I hope property prevents at 3 % a year at max from here. I hope that it prevents alongside wages. I hope the property becomes more affordable for our young people rather than less. But do I want to bet on that? Because it's a bet. Whether you do or don't make a purchase now, you are making a bet. I have many that could buy a house. There is no way it becomes more affordable for younger people while at the same time delivering above average returns for investors. By definition. Those two things are incompatible.

52:21By definition. And that doesn't mean, who do you want to look after here? And I very cynically suspect that it's the gentry landowning class that will be more pandered to from the powers that be and young people can go stuff themselves if they're not working hard enough and eating too much avocado on toast. If that's true, it means that every passing day, the market gets further away from you. If your wage goes up 3 % a year and properties go up, let's say 5 % a year for the fun of it, they get 2 % further out of your reach every single year and that compounds over time. And for me, and that's what I'm saying for my young bloke, I'm not having the money to go and buy a whole house debt-free or anything, but part of me is like, am I going to wish in, Ram just says buy some Bitcoin instead, and you're probably right there too, but am I going to look back and go, I could have put a deposit down or I could have bought an investment property he can move into or I could have done something in 2025 and I didn't and so in 2040 he's like dad the million dollar house now costs four million dollars and I'm earning an average wage and I'm renting for the rest of my life here would you mind dying soon so I can have the inheritance please it's about the best I can offer him or the bank of mum dad or other stuff and look it doesn't matter what I actually do for him my broad point is I think it's asymmetric I just think at best you well best best is you buy a price it goes a million percent you're happy to learn, you're part of the gentrified landed class as Ram talks about, gentrified landed class.

53:46In real terms, the worst case would be having the market run up. You have a chance to buy now and that chance evaporates because prices grow too quickly. And I would avoid that because I don't want to have that option taken away from me. But that's just me. Part of the problem, I think, with the mindset we've all fallen into in this country is that we've just seen it all as a ticket to easy, riskless wealth creation. It has been. Which it has been. That's, like, it kind of has, right? So it's sort of, it's hard to sort of argue against that. But there is a very implicit extrapolation there that requires the, let's call it the bending of various and rather, I would argue, immutable economic rules over a long enough period of time.

54:33And so it might all come to naught because by the time any reckoning was had, it's 20 years out and you'll be fine either way.

54:42but I'll not even make it about property, like make it about my business, right? Like often people, it's funny, friends in that will say, oh, what do you think it's worth? And it's like, well, I don't know. And the only way for me to know is to try and sell it and then it will depend on whatever the person is happy to pay for it and whether or not I agree. So I don't know. And it's interesting with my house. I actually don't know until I sell it. And more to the point, what I need to measure that against is the current return that I'm getting. And there's a return that you might look at from property in terms of the rental yield.

55:16But from our own occupied standpoint, there is a very real non-financial return that's very hard to diminish. Oh, 100%. Security, peace of mind, the ability to raise a family and to put a picture on the wall without some idiot real estate agent, you know, giving you some grief for it. those things are very real same with the business I'm not even trying to sell it and I'm like okay someone rocks up with 10 million dollars let's sign where do I sign right yeah but in the meantime this is this is where I think with uh entrepreneurship and business things have got so wrong it's because like every single person who starts a business today it's always done with the exit in mind why am I building a business so I can flip it to some other sucker in five, 10 years time.

56:03And then I'm going to make bank and I'm going to sail off into the sunset. Now, it's kind of old fashioned to sort of say, but it's like, I'm going to put this out here as a wild notion. It's like, what if the very thing that you create generates an income, gives you some agency, allows you to pursue something that you're interested in? You know, it's like, that's the return. That's the return, right? Like, why does it need to be anything else? Buffett talks about, you should be happy to own a business even if the share market shut for 10 years. And people really struggle to get that. And he's getting at the same point here.

56:38It's because, no, the thing you hold doesn't have value by virtue of what you might be able to convince someone else to buy it off you for, although that is a component of it and a nice bit of optionality if it's there and there's a market for it. But more fundamentally, the value is in the thing itself. The business itself has an intrinsic value because it takes in more than it puts out. And, like, that's a cool thing. And let's say that you gave me the keys to NVIDIA and you own 100 % of it right now on condition that you will never, ever, ever allowed to sell it and your descendants must hold it until the end of days.

57:16Like, yes, please. No, no, think about that for a picosecond. Yep, yep, yep. Why? Because of the amount of cash flow that comes into that thing. That's, do I, someone might be able to give me a price that will tempt me into letting go of it. But unless the price is like really out of whack with what a sensible notion of the future cash flows of that business, I will hang on to that. Thank you very much. And I used to have a friend of the family, he's not with us anymore, but he just, he had this really boring import export business for years. and like when especially when I was starting straw man it was that whole vc startup nonsense I didn't realize it at the time and he never could understand it right it's just like why not who cares why not just make money and why don't you just like if you deliver value for people they'll like it and they'll pay you and that's it that's that there is no next step that's the step and it's heretical to say right yeah and I'll bring it back to property it's the same thing You know my views on property.

58:18If I could buy a good quality investment property, in other words, it wasn't full of concrete cancer and full of white ants and stuff like that, and that I could get a, oh, jeez, I'd have to think about this, but, you know, probably a 6 % rental yield, ooh, I'm very interested. Because guess what? If the market goes to poo, I don't care. Because I still own the asset and the asset is still generating an income stream. and that is the basis. People love to dig, you know, people love to poke fun at Bitcoin. Oh, where's the yield? There's no yield, there's no cash flows. Well, they sit on 18 negatively geared investment properties who not only doesn't have a, well, it has a cash flow, it has a negative cash flow.

59:02You know, it's like how is that any different, right? That is the foundation of all valuation when it comes to productive assets. Am I making any sense here? Yep, no, no. Buy it because it's worth it in and of itself. Yeah. And then if you get an opportunity to sell it at a ludicrous price, yeah, you're not an idiot. Of course do it. But that's not the point. The point is the owning of the thing, not the selling, not the flipping of the thing. Yeah. And this is you go onto YouTube or Twitter or TikTok, there's all these sort of juiced up, you know, roid enabled like idiots. We're talking about what you want to do is you do this and then you do that and then you flip it and then it's all brilliant.

59:47It's all brilliant until it's not because it's all built on sand and it's all built on a blind religious faith that things always go up at 7%. And credit to them, it has so far. But my God, there is no recognition of the risk that is at play. And they exist purely on the good grace of market sentiment. Because if that turns at any point in time, it's not just like, oh, that's disappointing. It's like you're gone. You are gone and then some. Like you're in a worse off position. You buy an investment property that's yielding 6%, the market crashes, you're still getting your 6%, right? It's an incredibly different, you're in a position of, you're an anti-fragile position that makes you bulletproof, right?

1:00:30And anyway, I made the point. I'm just rambling at this point. Ranting more than rambling. So you have to rant because it's sort of like, this is the fringe view. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener. Mate, let's move on to another investment opportunity because the second question comes from, I've been reading about companies offering retail access to private credit, roughly a 6.7 % return over one year. Would either of you consider this or is it the investing equivalent of taking candy from a stranger in a white van who promises free puppies?

1:01:13I mean, the way of the world is I would be very, very, very cautious. That being said, as a concept, I'm not against it. I mentioned to you all fair. Actually, the idea of private credit really appeals to me structurally because with private credit you're lending out money that exists as opposed to bank lending, which conjures money into thin air and has a lot of downstream consequences. Let's not go there. But in principle, this is a wonderful... um, enabler for society. I've got excess savings, which I don't need at this point in time. I wouldn't mind getting a return on it. You need some money.

1:01:57You've got a good business idea, a good investment opportunity, and you're going to borrow it off me and pay me some interest and eventually pay it back. The person that can facilitate that, originally a banker, and back in the days of free banking, bankers were good people. They were part of the community. They took in people's savings and they very prudently lent that out. Everyone won. The borrower won, the lender won, and for providing the service, the banker won. It's actually a pretty nice thing. Where it goes horribly wrong is if the person who is in charge of allocating the capital is bad at it.

1:02:39And the history of private credit, particularly in Australia but in many parts of the world, is that they're run by cowboys who have no, they just lend it out to anyone, chasing high yields in recognition of the extreme risk that they are taking. And these things are always very much turkey kind of moments where everything's great right up until the eve of Thanksgiving and then, whoa, it's not like a gradual decline. It's like, this is brilliant. 8 % yield, virtually risk-free, and it's gone. It's a South Park meme. And so I'm kind of going answering the question in a roundabout way I'm going to give the very frustrating answer of it depends.

1:03:17If this organisation in question are very prudent allocators of your capital, then yeah, why not? And I'll put the concept of opportunity cost aside here because you also need to measure, well, maybe you could get 6 % just putting it in Woolies, you can't. But, you know, as an example, there might be a really robust company that gives you the same kind of yield, which even less risk. So you have to fold all of that into it. But in and of itself, absolutely, what an incredible series of relationships and steps that is a positive sum game for all involved. But as soon as you're lending it to people who are very reckless and don't deserve to be lent to.

1:04:04And by the way, the banks are not lending to them for a reason. Yeah, exactly. These are the people that can create money out of it and they're not doing it. Yes. So almost from the get-go you're in a higher risk bucket, which is why the yield is higher. And this will anger people, but that's actually what economics would suggest. Like if you don't think that's true, who would you rather lend money to? Would you rather lend$1 ,000 to Scott or$1 ,000 to some poor fellow down on his luck living under a bridge? Can we assume that the answer is me? Just so we're clear. Okay, thank you. You know, and it's just like, you know, it's not, there's no.

1:04:43And not only who would you prefer to, but if you were going to lend to the bloke under the bridge, what rate would you require to justify the risk you'd be taking, which in theory at least is higher risk than lending me some money, or maybe not. But either way, you've got to decide if you're going, A, are you going to do it, and B, if you are, what return do you want? And again, remember, this is not just one person under the bridge, it's 100 people under bridges. What return would you need, given the higher level of risk in theory, people who haven't got any jobs or assets, relative to someone who's got a million-dollar house and wants to borrow 15 bucks until next Tuesday, you've got to charge them a different rate.

1:05:17I mean, this is the very uncomfortable truth with payday lending. Yeah. That's a whole other conversation and I'm going to say stuff here with very serious risks of being misunderstood.

1:05:30However, the interest rate should be higher. Yeah. It should be higher. Now, should it be usurious to the point of taking advantage of people? As I say, it's a very nuanced and complex topic. But as a general starting point, you're not going to get the same interest rate as Gina Reinhart. Yeah. Because Gina Reinhart has as many assets as you care to mention to act as collateral. And all these viable businesses that provide cash flow, she's just a lower credit risk. And it's a very easy thing to sort of snipe from the sidelines. But again, I would put it to anyone listening. It's like, who do you want to lend it to?

1:06:10You want to lend it to Scott or the guy under the bridge? And there's not a moral dimension to it. There's just a rational economic calculus that one is higher risk. Why is it they want to buy an Argentinian bond, it's going to offer me a 20 % yield and the US is going to offer me 4 %? Because the Argentinians are going to pay you back in funny money and people will do it. If at all, yeah. Because they will owe only because the interest rate is so high that I feel as though it tempts me to take that kind of risk. So I've gone a little bit off tangent here, but private credit should offer you a higher yield.

1:06:43Just recognise that the reason that there's a higher yield is because there is higher risk, and even that is fine, as long as the people allocating it are bearing that in mind in a proper accounting of the risk. I would put it to you, and this is a horrible slur against the private credit market, but I would say that there are a very high proportion... No, let's not use very. There is a high proportion of cowboys and poor capital allocation in that space that makes it far, far more risky than what it appears to be. Sorry, mate. I think you've got a perfect job. I'm going to simply say that private credit is a very, very, very, very big term and it covers a lot of stuff.

1:07:19Yeah. Now, Sol Pats, we talked about them before, are in the private credit business now. What does that mean? That means that Rob Milner and Todd Barlow, the chair and CEO, are taking some of the shareholders' money and funding other people's borrowing using that cash. Now, Todd and Rob are pretty good guys. They've been around the block half a dozen times. They know their stuff. They won't always get it right, but they are evaluating risk and lending effectively their own money, shareholders' money, but in this case, the Miller family are meaningful shareholders. They're lending the company's money to private borrowers.

1:07:50That's private credit. Other private credit is, and here's the, you mentioned some of the people in the industry, Ram. There's other private credit, which is I'm going to stand up a website and I'm going to call it scottsprivatecredit.com and I'm going to say, I'm in the private credit business. Send me some of your money and I'll find someone to lend it to. Now, what's in it for me? Commissions, fees, funds, cut, margin, all those good things. So what's my incentive? Which you would deserve, in fact, if you did a good job of it. If I don't do it properly, I'm still getting the same money. Yeah.

1:08:19Because I'm like, hey, private credit's a thing. Everyone's talking about private credit. It's on the front page of the AFR. So Pat's doing private credit. Therefore, it must be responsible and legitimate. I'm going to do private credit too, but my private credit is, so I'm going to lend it to reasonable people. scottsprivatecredit.com decides to go and lend it to, to your real point, Ram, the bloke under the bridge and offers you 6.7%, I think was the question, number of the question, for that purpose. Now, they're both private credit. Am I lending it responsibly? Am I lending it judiciously?

1:08:49Am I lending it with a proper assessment of the risk? Don't know. Here's the last thing quickly for me. private credit target an interest rate. They don't promise it. It's not a term deposit. It's a target. Now, they will, in theory, offer you 6.7. They'll probably lend it out at 8.7 or 9, and they'll take their card of the difference which what banking is. And that's fine. I mean, private credit, public credit, they're not the same thing as you can create money, but effectively, a bank manager who, let's say they're lending their own money just for the sake of the exercise, and a private, it's the same thing.

1:09:18It should be the same thing. You've got some cash, you are assessing the risk, and you are pricing that risk. And if the two match up and you can make a margin, you're lending the money. But when you've got people who are coming, Johnny come lately, turn up, hey, private equity is huge. How about I do it for you? How much risk are they taking? How reasonable is their underwriting? How reasonable is their risk assessment? Where are their incentives? And make of it what you want. I'm not saying it's bad. I'm just saying if Rob Milner is investing in Solpac shareholders' money to earn a return versus some other bloke saying, I'll be the matchmaker between some suckers who are after a high rate and some poor schmuck who's never going to pay it back.

1:09:57Now, I'm deliberately paying a horrible picture of the kind of the incentive-driven private credit. It's not all like that in the slightest. I'm making the point, unless you can answer those questions for yourself, think about incentives. Well, my point was going to be, that is the natural follow-up question. It's like, okay, well, how do I evaluate it? And here's the thing, you can't. So don't. What do I mean by that? Because they will have all kinds of attestations and documents that will show the value of the loan book. Now think about that. I mean, just forget about even private credit. Go to the Commonwealth Bank and look at their annual report.

1:10:33They'll tell you the value of their loan book. They'll tell you the value of the collateral. It's like, well, or even just any just listed company, you open up their balance sheet and you look at that, you know, We're carrying all this plant and equipment at a certain value and it looks solvent. And most of the time it is solvent. But it's only, again, you don't know until you sell. That's what markets do. They discover price. Other than that, it's just an opinion of some random person with no skin in the game. I always bash the property valuers because they can't know, right? I mean, you can get into the weeds here.

1:11:08But anyway, my point being is that let's say you did walk up to their office and say, show me your balance sheet. Well, here's all the loans we've got. Everyone's repaying them and we've got this collateral. It's like, yeah, well, okay, but the number that you've got next to that collateral, is it really worth that? Like in a fire sale process, could you sell it quickly? What's the liquidity like? Could you sell it for the price that your auditors reckon that you could sell? Is it going to someone with good faith and good judgement and good experience sucking their thumb and sticking it in the air going, yeah, probably worth about that.

1:11:38Is it? I mean, look at the REITs out there. Speaking of the GFC, why is it that the REITs It's all gone. They shouldn't, on paper, it shouldn't have happened because look at the assets versus our debt. Well, the debt was very real and accurately measured to the last cent. The value of the asset was just some feel-good number that was put on there and maybe it actually turned out was completely not true because you can't sell it, particularly in a fire sale process. The other thing is, you know, you talk about arrears. Oh, the loan book is only so much in arrears. Again, I remember the GFC. It was like all of a sudden, overnight, you can't see it happening because all of these statements are backward looking.

1:12:17And it may be absolutely true that over the last three years, not a single one of your customers missed a payment. And then tomorrow, every single one of them miss a payment. Whoa, where did that come from? I thought that you had enough coverage and it's like, well, you did, but then the world changed. And again, I'm not trying to, I'm painting very dramatic pictures here, but this is how people get in trouble. even very sophisticated investors going, well, we did our due diligence. We looked at the collateral. We looked at the repayment and just like, yeah, but it also turned out that there was a massive earthquake.

1:12:48Half the population in the economy got wiped out and no one could repay it and it's gone and it's gone. But it's gone. Dude, it was a piece of paper with some numbers written. That's all it was, right? And, again, it's a very bleak picture. Now, where in a perfect world, in the world that I would conceive of, you would have institutions that operate in private credit and in a hard money standard it would all be private credit really, who would over time earn the social licence to lend, incredibly so because reputation is really their moat. Because in this kind of industry that's all you've got, right?

1:13:32So someone sets up shop tomorrow, offers you a better yield. It's like, yeah, I don't know. Here's a custodian with massive skin, personal skin in the game, who's been at this business for 30 years over various economic cycles and has always held their head above water. That doesn't guarantee anything, but I tell you which one I'm going to choose, right? In a heartbeat, even though the yield is probably not going to be as good. So it's just a long rant. Don't do it. I don't think. It might be different if there was a world where it's like you can scale the ASX and the best you can do is a 1.3 % fully franked yield.

1:14:10Okay, maybe private credit at 6-7%, 6-7%, but it looks pretty good. You know, that's the death knell of the 6-7 thing. When we start doing it on the podcast, we're all dead. Oh, it's over. Oh, it's all over, yeah. That's how I stopped it in our house by taking ownership of it and kids roll their eyes. But you can get right now, I don't want to name names, but you'll do that. You'll find perfectly decent. They might not be in a total return capacity, be fantastic, whatever, but I would suggest that you're getting very, very close to those returns without anywhere near that. You'll probably find an ING high interest maximizer account out there that's going to give you 4%.

1:14:46You're not going to be miles away, which is effectively as close to zero risk as you can get. So, you know, a couple extra percent for what is ostensibly very high risk that the banks who aren't shy of making money have said, no, we don't want to do that. to an industry that is very poorly regulated and full of cowboys? Nah, a hard pass for me. Let's go to the third question. I'll say this, we'll do this quickly. We'll try and do this quickly. We're around 17 minutes into the podcast. But the third question for our anonymous question, just to get the email out of the way, about corporate travel management.

1:15:19And it's a topic we might have talked about a couple of weeks ago we didn't get to. Now, we're pre-recording this podcast. These episodes are being recorded a couple of weeks in advance, so it's possible we've talked about the company in the meantime on the Friday episodes. I don't know if we have or not, or will or not, but it's a very specific question about what to do. He says, I hold a reasonably chunky position in corporate travel management for the record I own shares. When the trading halt finally lifts, probably after this podcast goes to air, how would you play it? The numbers, well, let's just say any trust I once had is now gone, evaporated like the European revenue promises.

1:15:52Would you sell and take the pain like a responsible adult? Or is there still enough juice left in the tank to justify holding on? Cheers, Anonymous. I'll go to this one first, Matt, because I don't share so much about it. So we don't, at the time of recording, we don't know the full details of what's going on. And I also want to be a little bit careful because I suspect there'll be legal actions that come from this particular palaver. The company basically delayed handing out its 2025 financial results in August of this year because it said there was a new auditor who had been appointed, which is true, after the previous auditor had been there for 14 years, and the new auditor had refused to sign off.

1:16:30I think that's right. I want to be really careful in that language here. Either had refused to sign off the account or had raised issues with the board or management, whatever, in whatever form. The new auditor's appointment and review caused corporate travel to not issue its statements in time. Now, we've said lots of times if you don't issue your statements within two months of the end of a financial period, half year or full year, your shares are suspended from trading until such time as you do. So that was what we first knew. The company then said it was about revenue recognition. In other words, accounting detail, but effectively, if you get paid a lot of money up front for something, and let's say, just for fun, let's say the Motley Fool sells two-year subscriptions sometimes.

1:17:06So let's use that as an example. If we sold a two-year subscription to Motley Fool Share Advisor, we could recognise that, so you get the cash, that's the asset, right? But the revenue, the actual sales revenue, only gets counted when the service is performed. And again, rather than using in part years, let's just say you signed up on July 1, 2025 for two years, and you gave us the money for two years. We would have to recognise the revenue as the jargon for the first year in the year one, and we'd hold the next lot of revenue until the next year. So we get the cash. Let's say it's$200 for fun.

1:17:35We'd reckon either$100 of revenue in year one and$100 of revenue in the second year. In the meantime, it's a prepayment. It's an asset called a prepayment, and eventually it becomes revenue when we provide the service, which is your membership of the service. We send you the emails, all the stuff we do. But that's what it looks like. One more little accounting quote there too. There's the income statement side of things. On the balance sheet side of things, the cash is the cash is the cash. It's on the balance sheet. Yep. However, if you ever come across in the liability sections called unearned income, there's another name for it as well, I believe.

1:18:03I've gone blank. But it's just like, how is that a liability? You're telling me that there's money that's coming to me? It's just to make, it's double entry bookkeeping. It's to make the accounts balance there because while that cash is in your bank account, it is still unearned. And there is a potential you might have to pay it back or there's a refund component. So anyway, I just make that mention if anyone's diving through financial statements and they see that. I'm going to add to that just quickly, mate. The reason they do that is because in year one, if I get$200 and I say, look how great my company is, I made$200 revenue in that year.

1:18:34It's like, okay. And then next year I earn$0, unless there was one customer, right? In year one, I look like I'm a genius. In year two, my profits fall, my sales fall by 100%. How's that possible? Instead, what the accountants make you say, well, okay, I took$200 in cash to Ram's point. On day one, I have$200 worth of un-earned revenue because I haven't provided a single day's worth of service yet. By the end of the first year, I've got$100 of revenue, $100 left of un-earned revenue. by year two, have another extra hundred bucks worth of revenue and the unowned revenue falls to zero. That's how it works.

1:19:00So they said that was what was going on. The subsequent reporting, and the company has been very, very sparse in its commentary and probably should, frankly, while they're still trying to work out what the hell is going on from the sound of it because if you don't know anything, don't say anything, generally speaking, is good advice. They have stood aside the head of their UK and European business. There is talk they may have overcharged customers, including the UK government. and, frankly, the Australian government is now saying, well, what about us? And so this thing - Well, fortunately, PwC signed off on it.

1:19:30So I, for one, sleep very well at night with that stamp of approval. See, I was worried about being sued just by corporate travel. Now we might get sued by corporate travel and PwC. Oh, those bastions of moral integrity. Yes. Anyway, so that's where we sit as we're recording. It's early December for the record. This will go out. I think it's the last one we'll go before Christmas. Merry Christmas, by the way. I completely forgot to do that at the beginning of the podcast. Yeah, so what we know at the moment, we think we know, is the reports are that revenue was effectively charged without services being provided, either because services weren't provided at all or people were charged more than had been quoted for the services provided.

1:20:09Now, what does that mean? At best, probably some sloppy bookkeeping. At worst, maybe possibly allegedly, if someone's literally fraudulently charged a customer for services not provided or rates higher than provided, then there may be some civil or criminal action. There may be, or most certainly will be, some money needed to be paid back by corporate travel to the customers involved. At the moment, corporate travel, I've only said, it impacts the European business, and the European includes the UK. Is it just the UK government? Is it all UK customers? Is it all European customers? Does this go further than just Europe?

1:20:42We don't know. That's the asset that's been impaired. More than anything else, what the bean counters will focus on, Buffett talks about reputation as a lifetime to build and an instant to destroy. And so there is, and I'm not going to cast allegations unfounded here, there is absolutely a world in which this was one bad actor, the rest of the business is in rude good health and it's fine. But is it surprising that the market will shoot first and ask questions later? I mean, it just creates doubt. Yes. and again, these are not on the balance sheet, but your reputation, management and board integrity, rightly or wrongly, maybe it's wrongly, but it's just sort of like, I don't trust you guys anymore.

1:21:28I don't trust you. And that's not an unreasonable thing to think, even if it's unfounded. And remember, don't trust isn't, I know you're dodgy. It's just, I don't have faith that I can trust you. I don't know either way. I don't, so I distrust you, or they might. She's like, I don't know what to think. So we're out. Now, so, and that goes to - You've betrayed my trust. Right. Now, between the recording and the publication of this particular episode, we may know more. So please, please, please, please, please. This is based on what we know on the 4th of December, right? So I don't know what happens from now and then.

1:22:01I don't know what happens after this. There's talk that the accounts might not be released till January. So I suspect by now it's still suspended and we still don't know. Maybe we do. So again, please take this as it was at the time. I may well have a very different view in real time on the 21st of December than I do today. So please, please, please bear that in mind. The question, though, anonymous of what do you do is really, really hard because we don't know what price the shares open at on that day and we don't know the details of what happened. Now, there are ranges of potential outcomes here.

1:22:29It's going to be brutal. Let's put that out. But even before that, at a company level, there is a decent chance they have to raise capital. Why? Because the refunds may be in excess of the cash the company has on hand. So you have to issue capital at a stupidly discounted price to get money in the door so you pay the refunds and then keep going, right? And of your existing cash flows, maybe a number of big clients go, actually, we don't want to do business with you anymore as well, so future cash flows might be impaired too. Shareholder class actions, lots of things can happen from this point here, right?

1:22:58So this is an absolute mess. Now, as you ask, would you sell and take the panel like a responsible adult? that's a very justifiable decision to make. I don't know what I will do. By the way, it's a monthly share advisor recommendation. I don't know what we'll advise our members to do. The reason is because if you said, would you like to sell for the price it was before the shares were suspended? Absolutely, yes. Yes, please. Yes, yes. I would. Please take my money. Make this go away. Let's say shares were probably$15,$18, maybe they last traded for. I'll look it up very quickly, unless you can do it for me while I do this.

1:23:32Yeah, I can tell you it was$16. There you go. Let's say they opened at$3. right? We don't know the health, you mentioned balance sheet, we don't know the health of the balance sheet. If it's got to raise capital and we get massively diluted and the payments are five times the current level of cash, that's one outcome. If the deal is, turns out we don't have to raise any more capital, we can pay it from cash flows. By the way, the company since then, we've ordered everything because the orders have been through this thing like a dose of salts. Turns out future earnings are completely fine. It impacted three contracts, if maybe possible, I'm not saying this is the case.

1:24:04Three contracts with one single customer of the UK government. We did the wrong thing. We fired the person. We reverted it to police and everything else has been fine. Since then, here's what our financials look like. And we are on a PE of three times earnings, three times lower earnings after adjusting for all this stuff. Okay, is it worth buying then? Yeah, probably. I own shares. I'm not selling it if that's the outcome. So what's really important in Anonymous, we say this all the time, but it's never more real than when you have something like this. The past doesn't matter, only the future.

1:24:32Right. The fact the shares fall from 16 to whatever, probably three, four, five bucks, I would suspect at this point. I was hoping it was going to be much less, but when it was only revenue recognition, and by the way, that would have just been, oh, we put it in the 2023, it should have been a 2024 year, but didn't, in fact, the cash, which is what they thought at the time. It's like, well, that's fine. I don't care. I mean, it's just what year was the money in. It doesn't really matter. If it is we overcharge, then past profits were genuinely lower than they were reported as. And future profits are probably going to be lower for, A, not overcharging anymore, and B, as Ram says, the customers will walk away and say, nah, I'm going.

1:25:03So I'll go to Flight Center. Thanks very much. I'm not dealing with you guys anymore. You guys suck. So I don't know. We don't know. The problem is, Anonymous, we have to make a decision based on the value proposition at that point in time. And without knowing what the – selling at$3 if the shares go on to be worth$10 would be a stupid idea. Not selling at$12 if the shares go on to be worth$1 or a company goes completely broke, terrible idea. It's possible, and I don't want to scare anybody. It's possible this thing isn't able to survive in its current form. It finds itself a buyer at a fireside price.

1:25:37Shareholders get a couple of cents on the dollar and we all walk away. It's not very likely. But again, because we don't know how big this is. So I understand you want an answer. I would love an answer. I would love this not to be happening to me right now. It's one of my larger holdings. It's one of our more recommended companies as ShareAdvisor. It is an absolute pain in the backside. We just don't know who was involved, who knew what, how bad it is, and how permanent the damage is. We just don't know. And if everything's got a price, I can't tell you what the right price is to buy or sell corporate travel shares at until we know all those details.

1:26:04So is there enough juice left in the tank? The answer to that will be for me, assuming the order has done all the work, assuming they restate last year's 2025's earnings, those earnings in theory will have a lower revenue and a liability for monies owed to the UK government or whoever else is deemed, if it is the case, to have been overcharged. and we will know what business use will look like. And then we can say, let's start with that. Let's assume it's probably legitimate. Let's assume some customers walk away. Maybe ongoing profits are 25 % lower than they were because people walk away and it's all rubbish.

1:26:40Okay, what would I pay for that business? And that's what I'm going to have to do at some point between now and whenever the shares start trading again. So I wish I knew. It's a long answer to say I don't know, but that's the way to think about any of these types of situations. Think about what do I know? How much will I pay for it? If you want to say, I don't know, I don't care, I'm walking away because it's still too bad, that's fine. Just be careful, in my view, not to sell at any old price because if you're just, I want the pain to go away, that's the capitulation trade. That's the worst time and price to sell for.

1:27:09Now, it might help you sleep at night. Maybe it's still worth doing, but just be mindful that if I'm going to sell at any price, no matter what, you may well be throwing the baby out with the bathwater or not. Maybe it's all bathwater, right? That's what I'm, I don't know the answer yet. So I'm not saying don't sell. I'm not saying sell. I am saying check the details of the announcement, Check the price it trades at. By the way, you'll have no advance notice of the price. It'll be$10.01 on the morning it starts again. You can't front on it too. $1,$3,$5,$7. People will make, well, I'll just get out quick before everyone else and then I'll buy back in if the dust settles and it looks good.

1:27:40I wish. You're not getting out. You're not getting out. You're not getting out ahead of anyone. No one doesn't know this is happening. If they earn the shares, they are preparing either to sell at the very first minute they possibly can or not, and the price will reflect that. I mean, this is a sucky situation for all involved. But I said to you off air, mate, it's, well, look, there are most of the mistakes you will make as an investor, you can look back and beat yourself up, and justifiably so. I was like, why did I think that? I should have known that. I could have looked at that. There were signs.

1:28:17And I could spend the next four hours just listing all of the things that I got wrong and how I should have not got them wrong. Because if I only, not if I knew secret information, but if I had just had a better analysis of the known facts and any kind of rational, capacity for rational thought, I probably should have not made that mistake. When you are a victim of corporate fraud, allegedly, maybe, we'll see, I don't know, I don't get to put all those words around it, which somehow magically make the allegation not really real. But anyway, you couldn't have seen it. You couldn't have seen it.

1:28:53PwC and their infinite wisdom didn't see it, right? So that's the other thing too. That is another lesson as well. When people go, oh, but they've been audited. It's like, mm-hmm, okay. So is HIH, so is Enron, you know? And of course you can go way too far with that as well because I've often, not often, but often enough, you run into investors who will point to those examples and go, it's all made up. And it's like, no, that's going way too far. Most of the time, it's mostly accurate. And if you take a view that nothing is true, it's like, okay, but it's like I don't know how you practically handle a world in which everything you see is misinformation.

1:29:28Yeah, right. Maybe we'll find out because the world seems to be going that way. But anyway, all I'm trying to say is for the person who's written in and other people in that situation, and for you as well, mate, it's like these are one of those situations where you can sort of say, well, I couldn't have known. Because how could have you known? The company didn't know. The auditors didn't know. So it is another reason as to regardless of degree of conviction, overconcentration can be a bad thing. Exactly. And it's also another, it's also where the real tragedy is, and I remember this going way back to the HIH days where people have this bad experience and they walk away with the wrong lesson, the lesson being it's all rigged, the share markets and mugs game, and they talk themselves out of many decades of incredible compounding because they were just unlucky and they had a bad experience And it's just sort of like, don't let the fringe case, as heinous as it may be, inform your view of what investing and what the share market represents.

1:30:28And that sounds exactly like the kind of thing a dude like me would say. But I still think it's true. And, you know, it'll happen again. There will be all kinds of corporate fraud that happens. Just know that it is very likely, in fact, almost always going to be a very, very, very small minority. and if you allow that to get in the way of the incredible opportunity you have in this space, you're only going to do yourself a disservice. So it sucks, but don't take the wrong lesson from it, I guess. Yep, great point. I think that's the key one. All right, that's going to do us, mate, for this particular episode.

1:31:06As I said, this is the last one for Christmas. So if you've made it this far, maybe listening over the Christmas break, Merry Christmas. I hope you have a wonderful time with friends and family if you get the chance. I might throw a pre-Christmas Friday one in because I forgot this one. I might do it early on Friday. So hopefully I've already done something before you've listened to this one. But to those who are working over the Christmas period, thank you for spending your time looking after us, whether you're a retail worker, emergency services, essential services, whatever you're doing out there.

1:31:31Thank you for doing what you're doing, nurses, doctors, all of you. If you're at work, thanks for doing that so we can have some time off. Really much, very much appreciated. Thank you for listening this year. We've got another end of year, a couple of episodes to come before we do. But just, yeah, look, we appreciate you. We thank you for God knows why you listen. What's wrong with you? You've got to have better things to do with your time. I swear to God. We had someone post a couple of weeks ago now in real time. It was yesterday. No, this morning. They were in the top 0.1 % of listeners for Motley Fool Money.

1:31:59And I said, I'm not sure whether to thank you or send help. But either way, for all of you who listen, thank you for doing that. Enjoy the Christmas break. I hope you get some time off. I hope you spend time with family and friends. And until we chat, very soon. Full on. Yeah, well said. Merry Christmas. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under financial services license 400691.