Mailbag: incl. Why do companies list on the ASX? August 18, 2024

26:39Okay, okay, okay, okay. The other one - If you want to raise capital, it is quicker, easier, cheaper, and probably at a better price to do it on the ASX and try and do it privately. Oh, gosh, yeah. I mean, think about it. Yeah. And we'll just leave to the next one, which is the liquidity that you get with that. So think about, I always, as a younger man, I couldn't work out why listed companies were worth so much more than unlisted companies. Like if you had two identical businesses, same kind of earnings, profit, outlook, asset base, or like the one that's listed on the market is probably trading at a multiple that's three times higher.

27:14Like why? And then it occurred to me that liquidity matters, right? Anyone who's got their business and you go, I'm sick of this. I want to get out now. It's like, okay, I'll set the stopwatch now. How long is it going to take you to get out? Versus I'm sick of BHP. I open up my smartphone and three seconds later, I'm out. That liquidity is really valuable. Liquidity here just being the ability to easily buy and sell. That's all I mean by liquidity. Yes, sorry. It can give you some advantages too in sort of staff remuneration and that kind of stuff. So here we'll give you some options and some shares.

27:47and if you don't like it, you can sell it on market. It's a bit easier, you know, and that's kind of cool. And the third option, and this is a very narrow benefit, is for the owners. It's an exit. It's an exit. And in fact, and it's not, I mean, it's too easy to take that in a cynical way, but it's a legitimate thing. I think, you know, anyone who's spent 20 years slogging their guts out in their garage trying to finally get in and built it up is like, yeah, you know what? I want to take a little bit of money off the table. It's not an evil thing. I mean, a lot of people bring stuff to market that's absolute rubbish and they talk it up and flick it out and there's all kinds of shenanigans like that.

28:28But not always. In fact, when you read a lot of IPO prospectuses, they'll say that. It says in one of the very first pages of any prospectus, why? Well, we need to raise money to pursue this growth opportunity and give the opportunity for the founders to sell down. And it's very easy to go, oh, they want out. It's all going to fall apart. Sometimes, but not always. But I mention it because if you are a founder or owner of a private business and you want to take a little bit of money off the table, it's a really good option. It doesn't mean it's a benefit for everyone else, but it is a benefit to you.

29:05Yeah, I think I'll go with a couple of softer pros, mate. One is ego. Oh, yeah. So you get to say, I own this or I built this or I did this or my company on the ASX. That can be in itself useful. The other one, I guess, kind of goes back to indirectly your point about it being worth more on the market. If you've got a business that you can – if you don't raise capital, you can sell it privately for four times earnings or whether it's on the market and get 10 times earnings, your ownership value, your ownership stake is worth a whole lot more. So they're tangential to what you were saying, but that's kind of just additional reasons why it would make sense if you wanted to.

29:40I'll just link it to the first point because you're dead right, which is the access – that's why the cost of capital is cheaper because you are valued so much higher. So when you sell a share of your business, you get three times as much. Yeah, nice. What about the cons, man? It's a massive pain in the backside is the con. You've got all these listing rules that you've got to report. You've got idiot analysts and brokers knocking on your door and fund managers knocking on your door and picking up your phone every three seconds going, Scott, why aren't you doing this? Why aren't you doing that?

30:09It needs to deliver. It puts a lot of pressure on you. It takes a lot of resources. There's a lot of costs. I need an investor relations department. I've got to have all your... It is very honest. It's why it makes no sense. You can't go under a certain standard. You've got to put certain documentation or reports together you don't have to if you're a private company. Oh, God. Why? All of it... Anyone who's ever run a business, ask yourself, do you think your life would be easier or harder with 4 ,000 people breathing down your neck and telling you what you're doing wrong? 85 different processes and all.

30:39It's very, very annoying. and not, you know, people will say, yeah, but it brings accountability and all of that stuff to it. And it's like, yeah, maybe, but also it narrow, I think it actually brings a short-termism to management's focus because everyone wants great gains and they want them yesterday. And we need you to deliver. And if you don't deliver, you're going to get fired and we'll replace you with someone who will at least make the pretense of that being possible. And yeah, it is, the CEOs that we speak to, So, you know, before I was like, I'm so sorry. Because usually it might be around earnings and they've just come out of 15 meetings, right?

31:17And I was just like, I've got to repeat the same. And I always say, look, we're not going to ask you those questions and hopefully make it a bit more interesting conversation. But it's a pain. And I don't know because I'm not the CEO of a listed company. But I reckon if I was, I reckon someone of a decently sized company as a CEO probably spends 30 % of their time talking to investors. In other words, not running the business. Now, I pulled that number out of thin air. So maybe it's 20%, maybe it's 50%. I don't know, but it's a significant amount of time. And there is plenty of other negatives as well.

31:58But yeah, I'll let you go with one. I'm going to add another positive actually very quickly not a positive but a reason which is just we kind of catch that as founders selling a lot of time the founder will have taken on private capital at some previous point from someone venture capital fund or angel investors or something else and they simply might want an exit because they want to take that money and put it somewhere else and again you can try and sell your share to someone else in the private market you're probably going to get less in public so for a lot of startups sometimes for the founder directly Other times, just the deal with the – the founder does the deal with the devil, which is, hey, we're going to give you some money, but in X number of years, we're going to take this thing in public and get our money out.

32:39And you're going to make that deal with the devil, right? You're going to be a public company CEO if this works, and I'm out, and then it's up to you. And that's not bad necessarily, but it's another reason why they do it. In terms of the cons, oh, man, there's a million. So many. You wouldn't do it, really. Honestly, and it is – well, unless you need – Unless you need the cash. Well, all of those reasons, right? And you kind of think, if your company's worth$400 million in the market and$200 million privately, I mean,$200 million is a lot of difference. But also, if you're going to keep running it anyway, then it's really about the value or about what you're doing with it and whether you want to leave or not.

33:11So the con, yeah, having people breathe down your neck, to your point, Ram, you don't get to necessarily stay there.

33:22Effectively, I'll talk about Blackmore, it's a company I used to own shares in and work at. Marcus Blackmore was the son of the founder, Morris Blackmore, who was effectively forced off the board by shareholders. And then the company was sold. Eventually, he agreed to the sale. But kind of the whole thing just went really toxic for him. And I'm not speaking out of school. I'm talking publicly. I have no knowledge of – I shouldn't try and put words in his mouth, but just so we're really, really clear. From the outside, it just went horribly badly. He lost – he had a shareholding. He was on the board.

33:47He was the executive chairman for a while. All of a sudden, he finds himself on the outer. The board don't want to talk to him. Management don't want to talk to him. And he ends up having to sell these – choosing to sell these shares to a takeover offer. So, you know, you get pushed out, you get pushed around. Yeah, look, you know, the other thing too is, to Andrew's point about people breathing down your neck, the things you want to focus on as a private company CEO and a public company CEO are just very, very different. You've got investors to deal with. You've got regulators to deal with. You've got ASX to deal with.

34:14You've got so much stuff to do. It's a tough one.

34:20I don't know. I would go public if I wanted to get out. I wouldn't go public if I wanted to stay in. Yep. Or unless I just, the only thing stopping me from realizing my vision and I feel is I can create so much value for the world. Yes, yes, yes, yes. But I need$100 million to build my thing, my perpetual motion machine. And if I had that, it's going to be fantastic. I could be tempted if that, but that's the only exception. Fair. I think we're done with that one. Good question, Brent. Thank you. Yeah. I'm glad you mentioned ego because that is definitely, definitely a factor. It's interesting when you speak to, a few have come across just recently, randomly actually, and you run into these family run businesses and maybe it's a little bit of nepotism there, you know, started by the mum and the dad and the kids are in the senior management positions.

35:17But I tell you what, that's their baby and they have a capacity to think long-term, which is a luxury you don't have as a private company. And one of the ones without doxing them was so fascinating because we talked about growth on Friday a little bit. And it's like, oh, we haven't grown for 20 years. And they said it proudly. And the reason was is because this thing's a cash cow. It just tips millions into our – No one's ever heard of us. No one ever will. We're never going to go, no one's going to write a Wikipedia page about us. But, and we're not growing. In fact, we're probably going backwards in real terms here.

36:00But it's a lovely little business. We make very long-term decisions. We run it very conservatively. We don't see a lot of investment opportunities. If something came along, we would do that. But there's no one saying, oh, you've got to do this. You've got to go to China. You've got to do this. You know, you've got to put AI into your process. Why is your share price low? It's just like, no. and we pay out pretty much everything in dividends and we have a really high quality of life. And I just thought, bravo. Yeah, exactly right. That's what I want. I'll take that, you know, any day. I mean, it's worth very quickly to wrap this one up.

36:32Think about three iron ore companies, BHP, Rio, and Hancock Prospecting. Hancock is a private company. Obviously, Lang Hancock started it. Jenna Reinhart runs it now. She doesn't need the capital. She doesn't need people breathing in our neck. She doesn't want to be a public figure particularly. She likes to have her influence, but she's not out there trying to do it for ego for its own sake. She's very happy running, I presume, running her own company. She could take it in private a million times. I always think she's a happy person. Yeah, she exudes happiness. Don't be mean to Mrs. Reinhardt.

37:01Such a cheerful disposition. In between that is Fortescue, right? Where Twiggy basically said, I need the money. I'm going to build this massive big iron ore company and I'm going to make it one of the biggest iron ore companies in the country. But I haven't got enough money in my piggy bank. I need more money to do. I need someone else's money. Let's go and do something with this thing. and you've got BHP which I guess you don't know the history of but it's been around for such a long time that it's diversified lots of shareholders professional management ranks no founder involvement obviously by definition because it's that old but yeah they're different different contexts different you know different types of businesses different life stages all that kind of stuff and different needs for capital and roles to play so I think that's probably just by just pull out of the air as a way of kind of describing the benefits and costs in some cases of those things yep yep Motley Fool Money.

37:48For more, subscribe to the free newsletter at fool.com.au forward slash listener.

37:57Mate, question from Greg. A couple of questions from Greg. Hi, Mr. Phillips and Mr. Pagey starts with, which is lovely. About time we got some damn respect around here. I have several questions. The first and most important is, how many bottles does an online company such as Strawman actually have that they require a bottle washer? And not only that, but a chief bottle washer, which implies a team that works under them. It suggests like a rampant alcoholism or something. We've got like a homebrew operation on the side and we're just churning through it. It's an excellent question. You know what I think Greg's missed though?

38:33I appreciate it, Greg. It's fine. But Andrew's not silly, right? You don't want just a chief bottle washer because there's a lot more to do. So what Andrew's done, he's got a role, which is chief cook and bottle washer. He's diversifying into two different parts of business. Just in case, if the bottle washing business doesn't work, he's got his cooking to fall back on. And that's the important thing. No, it's more cynical than that. I get to claim two paychecks this way. That's how you got to think about it. Aye, aye. Speaking of public scrutiny. Yes. If you have time after that, says Greg, I also have some equity market questions.

39:09For context, my portfolio, which is my primary income source, is currently 95 % index ETFs with some share advisor recommendations. Thank you, mate. And some of my own foolish ideas thrown in to make life interesting. Question one. Scott expressed the opinion about 12 months ago that the level of the Australian dollar made him hesitant to send funds to US priced equities. based on the fact the long-term value of the dollar meant a reversion to the mean suggests you're investing with the likelihood of a 15 to 20 currency loss in the long term please correct me if this assertion is incorrect no i think it's i don't know if i don't want if i gave numbers but yeah that that's that was absolutely my view the dollar was and is meaningfully low the long-term average and this is tend to mean to revert over time unless you got a you know burning platform like a Venezuelan peso or something.

39:58At the time, he says, and still I agree with this analysis. However, says Greg, if the US market and the NASDAQ in particular is likely to grow faster than the rate of the Australian indices as a whole, surely the long-term investor would be better off to invest in the US even when allowing for this currency fluctuation should it prove correct. And then he says, I'm going to have to deep breath here and hide my face in shame. In the last 12 months, The beta shares NASDAQ ETF has increased in value by 31%. This is a month or so old. Whereas the Australian shares ETF has increased by 7.5%. There is a dividend scenario taking into account the total return 33.5 % for the NASDAQ versus 13.1 % for the ASX.

40:43But the difference is still more than enough to account for currency fluctuations. I understand the last 12-month figures are a snapshot in time that may or may not be representative. but surely if an investor believes there will be a moderate outperformance of the nasdaq then currency is made irrelevant over the shortish medium term so i'll go first mate because i'm just throwing it me but i'll do your thoughts as well um yeah you're right greg i was i hide my face in hindsight i should have shut up and just invested in the nasdaq so yes i do own nasdaq etf units in australia thankfully but i don't know if i've bought anyone last 12 months i can't remember um so yes you're absolutely right uh but it is also a snapshot in time as you say when you talk about the outperformance there's two running rabbits which rabbit gets there first that is does the outperformance of the NASDAQ if it is going to outperform and it probably will in my view does that rabbit run faster than the currency I'll say rebalancing or reversion to the mean and we don't know the answer to that I've got to say if you told me the NASDAQ was going to put on 31 and the ASX 7.5 % over the last 12 months, I would have said, no, ASX sounds about right.

41:57NASDAQ, wow, not great odds of that, but it's possible. So, you know, it is a question of probabilities. I would suspect that, maybe I'm doubling down on my own mistakes, now that NASDAQ has gone by that much, the chance to be doing the same again and the same variance again over the next 12 months is probably lower, only because at that point, the NASDAQ would be up 60%, the ASX up 15%. And then again for another year, well, it's 90%. And, you know, it kind of, well, it's got to compound it, so it's more than that. So was I wrong? Yes. I know you're not having a go, Greg, but I was wrong. In the event, I should have just sent money to the US and shut up.

42:32But I do think and still do think, I did think and still do think now that it's probable, well, let me be careful about how I phrase this. I still think that, well, what have I done since? Nothing. I haven't sent another dollar into the US. so i'm still making the bet implicitly if not explicitly that the dollar will appreciate faster than asdaq will outperform the asx but you're right that's exactly the maths the only i will say quickly is from here doesn't really matter because you can amend your decision at any point in time so if for example the dollar went to 72 cents or 78 or 84 or 91 at any one of those points i can change my mind and put it at that point it's not a case of investing now in the nasdaq or never so if i'm right for example maybe let's have the next let's make some numbers up over the next 12 months the nasdaq goes up 10 the dollar goes up 15 i'm still better to have waited investing at that point so the question is really just the bogey between the two uh but because you get the chance to make up that decision any point if it was now or never then you're absolutely right greg i guess what i'm saying is i will start investing in the u.s again when i feel like the dollar is attractive enough relative to the expected outperformance of the u.s markets.

43:40Did I make that clear? Yeah, yeah. Your thoughts? No, checks out. Yeah, I think, firstly, I think a year is really short term. It's a blink of the eye. And the older you get, the faster it goes by. Let me show you of that. So I actually, I think any, here's the beauty, if you want to call it that, of financial markets is that you'll find evidence for any theory that you want out there because it's so noisy and chaotic that you'll find examples to prove any point you want. So the only really valid ones for me are the ones that can sort of hold true over a meaningful period of time. And I would probably define that.

44:27I would like to sort of see something that sort of tends to hold true over at least two or three different economic cycles from boom to bust and round and round again. Like it's sort of, there's more signal in that than what just happened to happen over a three year period, you know, which may have been where a global pandemic closed the economy or something. There's always a world war or, you know, whatever it happens to sort of be. So I wouldn't take any signal in that last 12 months. And I think that mean reverting quality will mean that I just don't have a view on currency. and it's like even if even if the dollar significantly appreciated over the next couple of years or so and i'm making an investment for a five to ten year period i'll probably have regrets for a time saying oh it turns out i should have you know should have caught a wood type thing yeah yeah but it's just like the gains that i i think are more it is more put it this way Equity markets can go up forever.

45:32Currency pairs can't. Well, be careful with that too because you mentioned Argentinian pesos and the rest of it as well. But generally speaking, between developed countries, they're not going to go up forever. They're always going to mean revert. So I just don't worry about it. I just don't worry about it all. The question is which is going to be the better performing market or better performing security, and it'll all come out in the wash, is my view when it comes to currency. I could be wrong on that. And here's the thing. Even if I didn't think that and it's like, no, it's massively important.

46:05Well, now I'm left with the trouble of, all right, forecast how the currency is going to change. Like, wow, that's hard. So I don't know how to do it. So I don't worry about it. I actually agree with you. The difference I have is just when it's at, not even extremes, when it's towards the end of the distributions. Oh, you might be more likely. That's when I pay attention, right? So at$1.10, I'm selling as much money in the US as I can. And at 20 cents, I'm bringing on my US investment home. In between that, you've got to kind of work out. My view was that the current level of the exchange rate is too low.

46:33I'm not waiting for exactly the average either, by the way, just so we're really, really clear. But 65 cents, I think that's a long average, is 80-odd cents. At 72, I'm not caring anymore. And why does that matter? Well, it's actually 10%. And that's the other thing. If I knew the United States was going to outperform, I would have done it anyway. On average, I've got some opportunities in Australia, some opportunities in the US. and the currency is a risk in both directions. So even allowing for that, we'll get to other exchanges in Greg's second question, but not having the currency risk is a...

47:06We're talking about when you put money on your home line, it's a risk-free return. Yeah. Same with currency, which is not to say that the Australian dollar won't rise or fall against US dollar, just if I don't have to worry about the translation when buying and then when selling. It's one of those risk factors. So I have a lot of money invested in the US, not in dollars, but as a proportion of my portfolio. No humble bragging there. Just literally there's a portion. I think it's, well, it's more than half, including my NASDAQ Australian, NASDAQ investments. So I'm very happy having money over there.

47:32But it's just, yeah, one less thing to worry about, one less risk and or return factor is currency. So there's that as well. Question two for bonus credits is Greg. If you're an ETF and go fishing kind of guy, what role is investing inside Australia play? I understand if you're a small cap investor like Mr. Bottle Washer, then you have an advantage of knowing more about your home ground. However, if you're an index investor, is there any rationale in keeping funds in Australia or should you be betting on which economies you expect to perform best in the long term? In brackets, go team USA. Currently, I keep a certain amount of Aussie ETFs and companies because I enjoy the simplicity of frank dividends.

48:12But logically, maybe I should just be looking at the best overall after tax return. So that's a pretty good question. And what's your gut feel? Do you chase the best economy? Do you chase the companies you think are going to be best? Is there a reason to keep money in Australia versus overseas? As you say, you're not doing it personally. We know that. But if you're an ETF investor, how should – we can't give Greg advice, of course. How should you think about where your money is invested? It's such a good question because my knee-jerk reaction was to say, well, yeah, you'd still have money in Australia.

48:45Why wouldn't you? But I'm pretty sure I'm only saying that because I am an Australian. Home market bias is real. Like if you and I were based in, I don't know, Canada or the UK, and we were doing this podcast and someone wrote in and said, hey, do you think we should have exposure to the Australian market? I'm just going to do it as a passive ETF investment. I think I'd say no. Or should I just keep my money in Canada? You think, well, hang on, if that's not true, why would it be true? Yeah, exactly. Yeah, it's a really good question. um here's the other thing that's hard about it too is that let's say that you were to form a view that a particular country it's gonna say company country had better economic prospects it doesn't mean that that etf in that market will do well like china for example like china for example exactly like china has been the miracle economy it is in fact in the history of the world It is the fastest growing economy ever, I think by an order of magnitude or something.

49:45Just from a rural peasantry to a global industrial powerhouse in a generation. It melts the brain to think what the Chinese did. And yet, the ETFs have been terrible investments. I think we've sort of gone around with part of the reasons why they're nuanced and complicated and who really knows. But you could imagine going back in the time machine from today, 2024, to 2004 and saying, oh, China is just going to explode in terms of growth over the next 20 years. And this is a fact. I'm from the future. There's no if involved in this. Like this is going to happen. You'd be very sensibly putting all your money into a broad-based Chinese ETF.

50:37And you would have done really badly. So, I mean, the short answer there for anyone scratching their head is that valuations matter. And not all economic growth accrues to the companies that happen to be listed on the market. Particularly, we don't have as good social corporate governance standards around that as well. Anyway, I don't want to say too much before I start having... No, I'm just going to shut up. That's page P-A-G. That's right. I'm pretty sure everything I'm saying is being sucked into a large language model somewhere. So, yeah, man, it's a very difficult question. What you can say about, I mean, all of those places, the UK, Canada, the US, Australia, we have very good property right protections, good legal structures, investor protections.

51:32I mean, I could go on to you. We could have a few beers and I will just rant and rave all day long about how corrupt and bad it is. But, you know, relatively, you know, you do have to remind yourself that it is, compared to what the global standard is, it's incredible. And I don't think you can go too far off script in any of those jurisdictions.

51:57I still would be a little bit hesitant to go all in on the US for almost the same reasons. Like, I don't know what's going to happen. So I'm not a big fan of the broad, broad ETFs, like the world. I don't like it because I think that's just a bit too clever by half because there is a world – like Vietnam's had a very strong growing economy and there's other places as well. But a lot of the emerging market ETFs don't do that well over time. Again, there's complicated reasons for all of that. And I, but could I get behind an ETF, an Aussie ETF, Canadian ETF, a US ETF? I don't know. Pick some, you know, other places around the world, German ETF.

52:38I don't, yeah. I probably could just for the sake of diversification. I mean, the thing is, I think when you're starting off with the premise of I'm just, I'm an ETF investor. I mean, and in all of those places, I don't know. I can't read the future, but you're probably going to average somewhere between, I don't know, 7 % and 9 % over a long stretch of time. And you may look back in 30 years and go, I could have done slightly better in this particular place. But I feel as though it's all going to be much and much. It's not the kind of investment over any length of time where you're going to be like a 40 % CAGR because economies don't grow at that kind of rate.

53:18Not even China, right? So, I don't know. I'm blathering at this point. I can't add much, but I will try and provide my thoughts to just answer the question directly.

53:34Jack Bogle has said, for example, to American investors, all you need is an American ETF. Now, by the way, Vanguard provides ETFs all around the world to all sorts of things. I mean, he could have gotten spruced more than that, right? Now, I think, by the way, like you, that's home bias. I think that's your home bias, right? Yeah. Because there's no reason why the US should do better than anywhere else. The benefit the US has as a market is it is about 60 % of the world's capital markets anyway. So investing there, you get 60 % of the global return. By the way, I own the global ETF RAM and I'm happy to own it, but I also hear your criticisms or your concerns.

54:04The reality is if you own a broad US ETF, then you're getting 60 % of the world's return by market cap. Not necessarily return by size because maybe one market goes faster than the other, but you're covering most of the waterfront with one ETF, which is pretty good. And by the way, it's not like you're going to do badly out of it. you know you're not you're not going to lose your money it's just it's just probably going to be okay yeah so I think if you're doing it proportionally you'd have two thirds in the US you'd have about 2 % in Australia and you'd have the rest of the world if you wanted to right if you wanted to just Australia and the US that probably bumps up to what 80 probably 90 % 10 % something like that more than that actually probably was it 96 and 4 or something ridiculous something so you know if you want to do it in by market way you do that why wouldn't you um so a few things if you if you we talked about currency before um investing overseas you take you're taking currency i'll say risk but actually i won't i'll say you're you've got currency volatility in the way in and currency volatility in the way out if you had any need to crystallize any of that money at a time of not your choosing then having money in the u.s means you are subject to having to exchange it at whatever the prevailing rate is.

55:18Maybe it's 40 cents, maybe it's$1.50, maybe it's somewhere in between. But if you don't have, we say a lot, invest for three to five years, preferably five plus years, and that way you have the chance of cashing out at a time of your choosing, in theory, at a share price of your choosing. In this case, you've got a share price and a currency to think about. So if you wanted money in any sort of reason, I mean, you can always take the money out, to Ramon's point, you can still get US money back within a week. But if you have to do it at the prevailing rate, you may be sorry you only had US dollars to do it.

55:47So that's the first one. Second one is absolutely franking credits. If you are someone who is an investor who wants income from the portfolio, the franking credits matter. Don't invest just because of the franking credits, by the way, but if you can get them, you might as well take them. So there is tax advantage from a dividend, well, larger dividends in general in Australia, and on top of that, the franking credits that you don't get in the US. So another reason why you might want to think about having Australian investments. The other one is probably just, it kind of goes about currency actually in a different way.

56:18Diversification is smart because if I have US investments and Australia goes to hell in a handbasket, I'm talking about US investments. The reverse is also true. If you invest only in the US and for whatever reason, US equity returns are lower than we expect, you put all your eggs in that one basket. And so you just, generally speaking, particularly with ETS, but even investors in general. Why not diversify if you can is a hard one to answer. It is, as we've said before, the only free lunch in investing, maybe as Ram says, alongside dollar cost averaging. But if you can do both and you choose just one, you'd already have a pretty good reason for risking your portfolio.

56:53Now, maybe it's a low risk. Maybe the downside is not even that big, or maybe it is. If you're a Venezuelan and you want to put half your money in the US, half your money in Venezuela, you're probably, sorry to put the whole lot in the US. on the flip side you know just just be careful about what your home market does and and what your the overseas market does if you u.s invest you did half and half you'd be pretty unhappy either way you couldn't have known in advance or maybe you could with venezuela uh what's what's likely to happen next so just just be just be careful about only chasing the fastest or best of the lot um that'd be the equivalent of only investing in one company in the asx right why invest in my second best idea my single best idea because well i would know it's why i think it's returns well maybe you're wrong is the short short hand way of answering that question um the other one quickly you kind of touched on already ram so but i do want to say it again don't just choose the best economy because the economy and the market are different um it can to and ram recovered beautifully firstly valuation secondly where does the value accrue does it does it accrue to equity investors probably does in the u.s honestly but will it necessarily no not necessarily at all um could there be capital controls in terms of how much money you take out of the u.s could the US apply, taxes to foreign investors.

58:03Yeah, those things could all happen. Am I predicting it? No, absolutely not. But again, not taking the opportunity to diversify when you can is a gutsy, and I would go so far as to say a borderline irresponsible. I don't mean to sound harsh to you, Greg, decision just because you don't have to. And if you get 7 % to 9 % and it's going to be roughly the same result over multiple markets, take the multiple markets option is my general preference. Yeah. We'll see. We'll let you know in another 10 years what you should have. Well, 20 years, 30 years, 40 years, exactly. Yeah, it's really hard to know.

58:33Yeah, 10 years, we'll be asking the same question about the next 10 years, right? That's the same kind of problem. I think what we can say, though, is you won't go too wrong. Yeah. I'd like to, yeah. I mean, this is the thing. I mean, we could go into World War III and we're all living in a ditch next week. So it's very possible, right? So particularly the way the world's going. So I often think perfection is the enemy of the good in so many different ways. and we get so many great questions where it's kind of like, you've kind of got everything you need and now we're just fine tuning at this point.

59:06And at the fine tuning end, it's like, well, we can all have slightly different opinions, but no one's going to blow themselves up and no one's going to be like massively regretful down the track. They're still fun questions, right? But it's sort of like, we're so at the pointy end of things now. It's just like, it's hard to go too wrong with any of these options. And yet, Anthony has a question for you. Okay. Well, for both of us, but it's on that line greetings scott and ram to invest or not to invest that is the question i'm in my mid-40s therefore you shouldn't hate me younger than us mate a little tiny bit of hate dislike dislike and effectively paid off the mortgage well done so now i plan to live off the saying invest first and spend the rest that's a good way to do it but that got me thinking why should i invest outside super at all when i have a 20 plus year horizon and instead put it into super as a non-concessional contribution and enjoy the tax benefits that it has to offer in retirement.

1:00:03Assuming I wouldn't need the money for 15 or so years, even though I enjoy watching the movements of the market and the thrill of investing, and Scott often says not to check your portfolio, I now wonder which way I should go. I can sleep at night getting an 8 % to 10 % long-term return on my super fund, and hey, I'm not Warren Buffett, so would I beat the index anyway? But I also face capital gains tax implications along the way. I know Ram says not to let thinking about tax interfere with investing, but I'd love you to debate this thought. Regards, Anthony. To invest or not to invest, Ram? Tis nobler in the mind.

1:00:36I've got the quote. Tis nobler. No, I've got nothing. So just so I understand, to put it in super or not in super. Yeah, he's got 20 years. Why not just put it in super? Why bother investing in his own name? Just put it in super, wait 20 years, get the money out, and go fishing. Well, the main reason is you can't touch it for 20 years. and I'm not trying to be trite. You might not make it. Yeah. Right? I don't want to be too bleak. If you don't make it, it doesn't matter where the money is, dude. Yeah. Who does with most toys still dies, as I said, whether toys are in Super or not. I'm debating whether to use the Buffett quote about saving up love cuddles for old age, you know?

1:01:22And this is from a guy with very low time preference. He's very much a long-term thinker. Basically saying that you do have to enjoy the moment too. I think we all know people in our lives who are absolutely loaded but miserly and miserable. And we've got other people in our lives who money just falls through their fingers and don't have any red scent to save. For me, neither is a good option. Like I, one of the things I worry about with super, and I know I'm on the outside with this, is that it's just such a massive honeypot for a government that's increasingly growing its debt and in structural deficit.

1:02:06And it's already been touched and it'll be touched again. And there's usually, again, history is an interesting guide here. And we touched on this in a recent pod. the idea of what's called financial repression, which it's got a sort of ring to it. But it basically just means that when a government struggles to raise money through the bond market, well, they find it more difficult, which you can do if you're not on a fiscally sustainable footing, you can do things like basically saying every super fund must have a 10 % allocation to Aussie bonds because of the country. And again, it's just sort of like, well, that would never happen.

1:02:47Open a history book recently, and in a lot of places you would be surprised, right? It happens, and it's basically a forced mechanism to extract money. And again, that's not necessarily bad. Maybe it's going to be put to incredibly well, good, productive uses, but I feel as though for 20 years is a long time, things could change. I want to enjoy myself along the way. So what do I do? All I can do to tell you is what I do personally, not to say this is the right thing, but if it helps in your thinking, what I do is a bit of both. It's the diversification. Like there's a massive advantages with super.

1:03:25I'd be an idiot to ignore that. So I'm going to invest in super, but I'm going to keep a good chunk of my investments outside of super. Some of them might go well. I'm not banking on like a massive gain in the next few years, but it might. And if it did, I would like to enjoy the spoils of that before I'm 65. um could have i made more if i just left it in there and avoided a bunch of tax yeah but i don't know i'm still reasonably young and fit i want to enjoy it so you know that and i'm sure there'll be plenty of financial planners going terrible advice why would you do that for i know that that's and i know it goes against everything that everyone says and to which i say well you live your life i'm living mine and it might be i'm wrong from a pure homo financialist sort of economic, well, you know, what do they call the perfectly, the so-called perfectly rational economic actor.

1:04:20But for me, who's not a perfectly rational economic actor, who does like to spend money on silly things every now and again and enjoy life, I want to have that optionality. And that's just me. Everything is a compromise. Everything has an opportunity cost. And I think there's no wrong answer as long as you know what the cost is. So what's my cost? Well, I'm probably paying more tax than I otherwise would. And what's the cost for the person who goes only in super? I was like, well, you can't spend your money for another 20 years, 25 years in this case. Which one do you want? There's no wrong answer.

1:04:53It's up to you as to where your preferences lie. I can't add much to that, Ram. Do you? Do you put every red cent into super? I'm both. Yeah. And I think I'm trying to find a different angle. rather to say what he said, but it's effectively what he said. I don't worry about financial oppression personally. Maybe I should, but I don't. Look, I don't lose any sleep. I should be careful with that. No, no, no. It's an example of how things may, could change over a very long period of time. Correct, correct. The long period of time is the point, right? This is kind of, you're betting with super that, you know, you're going to bury it in the backyard, come back 30 years and dig it up and see what's left, right?

1:05:36Or hopefully what's been made, but you know what I mean? That kind of year of like, well. In the year 2054, the world will look like this. Will it? Okay. Now, the same with personal investments, right? So there's always investment risk, and there's always currency risk, and there's asset risk, there's economy risk, all that kind of stuff. So I think super is a great vehicle. I think the tax deductions are too generous, frankly, to the Australian taxpayer, but that's a whole different conversation. But as a super fund member, I love that, and I'm happy to take advantage of that. But I, and look, there's transition to retirement.

1:06:07The whole super thing is just so stupidly complex. I'd love to blow the thing up and start again. And if the treasurer is listening, you want some ideas, treasurer, let me know. But broadly, my general concern is Andrew's, which is simply, what if I want the money earlier? If I'm able to invest, work, save, inherit, whatever combination of things allows me, including investing my own name, to quit work earlier and I choose to do that. or frankly, I need money for whatever I want. I want to renovate the house or I want to buy a new car or I want to go on a holiday or I've got to pay a medical bill.

1:06:42I mean, you probably argue that from super. But the flexibility, the optionality of money outside super beats money inside super. But the returns inside super beat the money outside. You will never get a better return. Yeah, I'll say never. Money inside super, because you can invest in exactly the same assets, is always going to be better after-tax return than money invested outside super, which is this. I am foregoing returns to give myself the flexibility to use that money as I wish between now and whatever. And I am certain, touch wood, that if I keep working and investing, I've got too much money outside super.

1:07:16Yeah. Because I can use my salary for that and I can save money for that. I can, you know, I hope not to need that money. I hope I'm still working by the time I can access my super. I'm enjoying working. I'm hoping life has been good. And I look at my money outside super and go, oh, I could have made more if I put in super. Oh, well. The thing is, as we talked about diversification risk before, or I could get to 51 and have a massive family tragedy and go, you know what? I'm throwing the toys out of the cot. I'm out of here. I'm taking the money. I'm going to sail around the world for four years.

1:07:46And when I get back, I'll just impart some work until my super's available. I don't know which one of those is likely. I desperately hope it's not the family tragedy one. But if it happens, I'll be glad I've got money outside. And it's one of those, you mentioned Bezos before, mate. It talks about regret minimization framework, right? What am I going to regret more? not earning slightly more on my money inside super or not having the flexibility to use it if i wanted to and you can't you never have both it's gonna be one or the other but if you find yourself in all those two situations which one would you have preferred to you know which one has the greatest amount of regret attached to it and that would be locking up my money now if i if i if i could only if i my earnings were low and my super balance was small and I desperately needed the tax advantages to give me enough in retirement by using super, then I would go super.

1:08:34You know, if it's like, the only way I can have enough to retire is if I get every possible tax advantage and, you know, use all that and just get over the line to whatever value money, you know, balance I need at that point, then I could kind of make, again, regret minimization, I might do that, right? Because I just need to do that. I'm fortunate that I don't feel like I need to between my super and my personal investments. I feel like I'll be okay, touch wood. So I don't need to absolutely max out the return on super. I need to minimize my potential regret. And that's how it would work for me.

1:09:02That's what I actually, that's what I was going to say too slightly differently, which was for rightly or wrongly, I feel as though there's enough in super and enough of a runway left that whatever happens when I retire, there'll be enough there to maintain a basic standard of living. Let's be real here. It's not going to be great, but I'll be okay in retirement. And that's your base case, right? If I know that's going to be, if I know that's okay, then well, everything's gravy after that. Everything else there is outside of super. It really is just on that basis alone. And I'm still adding to super because I have to, right?

1:09:33There's a superannuation guarantee. So whatever I pay myself, you know, 10, whatever it is now, more, right? Goes to super. So I'm still forcibly contributing to that and will be for a long time. Yeah. And it should be enough that even if I completely, you know, this Bitcoin thing doesn't go too well or some other dumb thing that I decide to do. Like, okay, there's a safety. Like that is there, right? So, yeah, I think that's a good way to think about it. Very nice. Mate, with that, I reckon we are probably done for this Sunday morning. You've got to get back to your third ultramarathon of the day, and I don't want to keep you.

1:10:08It'd be unfair to do that. Mate, a lot of good fun. If you want your question answered, hit us up, info at fool.com.au. Or hit us up at tmfscottp on Twitter or Insta and threads. And I'm something on. I can't remember my Master on account anymore. I haven't used it for a million years. or you can get me on Facebook at slash Scott Phillips Money. You can grab Ram at Sage underscore Simeon or at Strawman Invest. Mate, is Strawman still open? Oh, it is actually. It's closed on Monday night. You have 36 hours-ish, roughly. If you're listening to Tuesday, you've missed out. Why would you wait till Tuesday?

1:10:47This is a Sunday morning special, goddammit. If you're listening to this before Monday night, which would be what the 7th, 8th, 9th, I think. I should know that, yeah. Jump on strawman.com and see what the site and Andrew have to offer for you. Mate, I hope it goes well and we'll talk to you next Friday. Until then, fool on. Yeah, 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. Subscribe to the free newsletter at fool.com.au forward slash listener.

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