The year that was… and what a doozy!. December 26, 2025

27:03But it's just sort of like if you can look a little bit further down the track, well, actually, people have been saying this for decades and here we are. Here we are. You know, it's like cost of living crisis, no one can afford a home, everyone has to work, you know, 80 hours a week just to get by. It's like, uh-huh, yep, called it. People have been saying this for a long time, right? And it's just like this stuff doesn't just, when you look around and you survey the landscape and go, wow, there's a lot of things that are a little less than ideal, they didn't just appear one day for no reason.

27:34Like it was a consequence of decisions that were made decades ago, really, and then we continued and those policy settings and impulses continued to this day. And, again, it's like when you find yourself in a hole, stop digging. We find ourselves in a hole, let's dig faster. That's the problem. It goes back to the Trump thing. You know, this revenue from tariffs, instead of paying down the massive debt you've got, you've just given it back out because you want to win a couple of billion. I never pay that down. They can't. Mate, so you're coming from nowhere. Something did appear to come from nowhere maybe last year, but probably this year in any meaningful way, AI.

28:13And I mean it in a physical, not physical thing, in a kind of real world sense, I mean it in an investing sense as well. NVIDIA shares are up, and I haven't got the numbers in front of me, but something like five-fold this year alone, and some stupid number over the last five years. NVIDIA, for those who don't know, world's most valuable company at the time of recording, make the chips that Power AI. Public company. Make the chips that Power AI. And have just, they sold out. They grew something stupid year on year and could have been better except they sold out of chips. It is a weird, weird, weird world.

28:54They're only up 32 % in the last 12 months. Oh, did I screw that up? Okay, my apologies. There you go. Year-to-date, 26%. Over the last five years, 1 ,218%. There you go. But it kind of, and you know what, so that's interesting in itself because we talk a lot about AI boom, right? And yet this year the shares, I'll say again only, as you said, are only up 30%. Kind of defies the general view. Now, if you take the five years, that's a hell of a boom. By the way, profits are growing phenomenally over that period of time too. Someone sent me a chart on Twitter, and I'm apologies if you're listening and I don't mention your name because I can't remember who you were and I'm not that good at talking and searching on Twitter at the same time, a chart of Nvidia's share price on one axis and the PE on the other axis.

29:39And the PE's just crashing through the floor even as the share price rises because the profit is just growing so phenomenally quickly. And so it kind of leaves me with a statement, question, comment, which is I'm sure knowing you, you're using AI a truckload more now than you were at the beginning of the year. Yes. I must be using it. It's a one-way door. Ten times a day probably. I think I'm probably using it in various ways. Sometimes just to aggregate a search. Sometimes it's to create something. Sometimes it's to finance it or something. I use it for summarising a lot. God, that's a long document.

30:11What's the TLDR? Correct. Right? Yeah. Yeah. So it's just everywhere and getting bigger and bigger. And I guess my question to you, mate, are we in an AI bubble? Yes. Or are we in an AI boom? And what's the difference? Both. Both. Howard Marks wrote on this on one of his recent newsletters, his most recent one actually, and he makes the point, yeah, it's definitely a bubble, you know. But bubbles are good in a way in the sense that so two things can be true. we can be in a bubble which infers that a lot of the companies in this space are probably not going to do well going forward on their share prices.

30:49So we look back in five years' time. So you said companies aren't going to do well. You mean the share prices aren't going to do well? Sorry, very thank you. No, only just four. No, 100%. Well, therein lies the number of the problem. There's two angles to it. There are plenty of companies out there that are just looking for the affinity grift, which is very common. It's like, oh, AI is the new thing. We're going to do AI, but we're not really doing anything with AI. I didn't know it was blockchain. Five years before that, it was.com. What were 10 years before that, it was.com. It was SaaS. It was IoT.

31:15It was whatever, right? So Infinity Grift, just to break this down, is, I know this is smart people, but basically saying we're like them, so we want the updraft of everyone else thinking we're as cool as them and they're doing well so that we'll do well because we kind of feel like we're in the same boat. I mean, AI is definitely the hot new thing on the block. And if you're a, I mean, I read a lot of company presentations and there's always a slide on AI and what we're doing with it. And so a lot of these companies may be doing it, but they're not going to offer them any competitive edge. And there are some companies that are doing it in a way which is, oh, sorry, just to fill that out.

31:47I've mentioned it before on the pod, but, you know, it's like you don't have an edge because your business has a website. It's the cost of doing business these days. You have to have a website. Yes, just to keep up. Yes. I mean, if you're doing it, absolutely. Yeah. Oh, don't get me wrong. I'd be worried if you were just saying, no, we're not going to bother with it. Right, right. But if you're trying, the affinity grift, if I can, it's a bit stronger term, but it's, It's basically to, it's trying to boost the sentiment towards your stock by using a very popular term. All they're doing AI, they must be embracing the future.

32:18That's going to help them. They're worth more. It happens every time. We're using SaaS. We're using the internet. Yeah. We're using blockchain. Yeah. Yeah. So there's that, there's that bucket. Then there's the bucket of like, no, we're actually direct players in the industry. Either we're developing models or we're, we've got products that use it or, you know, there's various different things. And within that, you will absolutely get some that businesses and their stocks go to the moon, but it's probably going to be a power law distribution, a very, very small number of huge outsized winners and a very, very long tail of just never got off the ground.

32:56And then you'll have a few sort of mega giant dominant kind of NVIDIAs and the rest of it that are just absolutely core and central to it. and they are building the, you know, the base layer of it all. So I suspect that we will see a lot of capital thrown at it. I think that a lot of capital will blow up, but I think there will, when the dust settles, we will find ourselves with, there will be some kind of payoff to society from all of this investment, I hope. That was the story of the internet. Yes. That was the story of smartphones. That was the story of electricity. That was the story of radio.

33:31That was the story of TV. That is the story of technological adoption, you know. Gartner hype cycle just captures it so well. It's the initial innovation, there's a big, you know, hype period, then there's a trough of disillusionment, it's like nothing comes of this. And then the slow, steady grind of innovation and implementation in which this goes from, you know, the theory to practice and often in very surprising kind of ways. So does that answer the question, yes and no, at the same time? I like it. I love it. You made some really good points. Think about the slow grind, right? Imagine today, so think about the dot-com boom in 1999.

34:14I know it's a million years ago, kids. Ended all around then. You may not have been. Your parents may not have been either, frankly, at this stage. But, you know, it was huge and everyone was all over it. And the internet was absolutely became a thing. Imagine today. Just click your fingers and turn off every internet-enabled device, process, action. How different is life? It is unimaginably different, right? It is so, I'll say insidious, which has a negative connotation, it's a better word. Ubiquitous is a better word. It's so ubiquitous. Or pervasive. Pervasive, thank you. It's in everything.

34:49And so was the internet a thing? You bet it was. Was it massive? You bet it was. Was it massively overhyped in terms of, and you made the point between the boom and the bubble. I love they said both because that's a really good way to do it. The boom was genuine, right? And it was – I'm going to – can I make an outlandish statement? I think it's right, but tell me it just doesn't land. I've got it horribly wrong. You said – you talked about how much money will be lost from AI. And it got me to thinking about how much money was lost on the internet boom. And I'm going to suggest that just absolutely, you know, out of my – where have I pulled these things from?

35:22I reckon Google has created, has grown its market cap by more than was lost in aggregate by every company in the dot-com bust. Oh, sure. Yeah. Is that like it? No, not market cap because prices are prices, but you're talking about wasted capital. I guess my point is I would expect that whatever amount of money is lost by all this, you know, as you say, people just trying something on. And, again, not the grift bit, just literally the whole, I want to be another company too. I want to be the next Google. I want to be the next. Sure. Don't knock yourselves out. I would suspect the winners create massive amounts of social value.

35:56I mean, think about trying to monetise the internet's social value. And once I say social, I don't just mean social sector. I mean just across our lives in total, right? The amount of value created by that, that's separate from the amount of money made or market cap gained by Google. I'm sure it's more than all the money lost in the dot-com boom. I would suspect in 26 years' time, we're still doing this podcast and no-one's listening, but we're in our nursing homes, rocking backwards and forwards and yelling at each other over the ping-pong table. Not playing, we're sitting there because we can't move at that point.

36:26But, you know, I suspect at that point we look back and the same is true. I suspect whatever blow-ups and value is lost in the next five years, I would suspect is a tiny fraction of the value created for society and even for some of those companies do embrace AI and make money from it over that quarter century. Yep. And from the investor perspective, though, of that small subset of companies that do really well out of it, you will still find plenty of investors that take a bath on that. Yes, exactly. I mean, Microsoft's a great example of that too. It's very easy to sort of say in 2025 that, you know, if you had bought in 2000, you've done very well today, but forgets a more than decade-long period where you just were sitting on a massive loss.

37:09Yeah, 15 years, was it? Well, so 5875, 1999. I'm just scrolling. This is not exactly what I'm just using the graph. $50, yeah, yeah. December 2016, I've got$56. And it looks like about the first time it was as high as it was in late 1999. Right. And think of the opportunity cost. Yeah, totally, right. So it's kind of, there'll be a lot of that as well. Now, by the way, it's 10 times the price it was back in 1999 by now. So 26 years, 10X, I don't know what the average result is there, but probably still pretty good. So, again, timing matters, right? The difference being that you bought a, it's all in the price, stupid.

37:48It's the price. I'm trying to reach for the proper Peter Lynch quote, but he was sort of saying, I came across it the other day, it was a new one, I hadn't come across it, but it was something along the lines of you can do well out of any investment. You can do well out of the worst company in the world if you pay a low enough price, you know. Yes, correct, correct, correct. There'll be accountants screaming at me saying, well, off-sheet liabilities and stuff, but, you know, Just roll with me here conceptually. And likewise, you can find the best performing business in the world and do very poorly at it.

38:16So I feel as though even of the subset of companies that will do well, I think a lot of investors buying today will probably not get the kinds of returns that they expect. I think it would be very tough for NVIDIA to replicate its 1 ,200 % return over the next five years. For$4 trillion or whatever that number ends up being, correct. Yes. And the reason Microsoft was well as good investment sort of in the last 10 years was because it was a much lower multiple then. Yeah, the business continued to do well, but it was just you got it at a far more attractive price. And this is a real dilemma for investors because there is nothing more, was that Oscar Wilde who said there's nothing more painful than watching your neighbours grow rich?

38:58It should have been. Yeah, I think it was him or someone. Anyway. JP Morgan. I haven't mentioned that for a while. JP Morgan.

39:08And, you know, sitting on the sidelines going, it doesn't make sense, it doesn't make sense, it doesn't make sense. You can just, you know, you look like that curmudgeonly old value investor who's just sort of like falling further and further behind. Exactly. While all the market bulls out there are just like minting money and it just, it will always last longer than you think. But I guess my urging would be to absolutely recognise the significance and profundity of what's sort of unfolding here, but don't get caught up in the hype and remember that, you know, not that you'll, I mean, you'd be an idiot if you're going to wait for Nvidia to get to a PE of 12 before you buy, right?

39:50Like all else being equal, nothing major, just like good luck, but you'll just basically, you'll never buy. But, you know, you do want to have an eye towards value. You want at least a reasonable price. A reasonable price. Something that's your chance of doing well would be good. You know, and the bigger the company, the harder it is to grow because it's already so super dominant, you know. It's sort of like the only way that if you've got a very, very large market share, really there's only two ways to grow. One is through efficiencies, better productivity within the business. But that will, and that's well worth pursuing, by the way.

40:28But that only carries you so far and only at a certain rate. The other one is the size of the market itself, and that can grow very strongly. But, again, like when something's already a large fraction of the economy, can it really compound at 30 % for 10 years? Like it's going to be the maths gets a bit funny at that point. Funny is generous. Yes. Can I? And I read his, well, I should save this for predictions, but I think the better performing businesses and sectors for the next 10 years will be very surprising and old-worldy. There you go. Stay tuned for that one next week. I'll unpack that a little bit more later.

41:05I love, so two things from your quote, and our listeners hope will love the second thing. First thing is I found the most famously attributed version to economic historian Charles P. Kindleberger, which frankly is one of the better names in economics history. He wrote, quote, listen, because I love what he added I don't do it, you don't do it. No, most of us don't. There is nothing so disturbing. Then he adds to one's well-being and judgment, which is the point you were making, as to see a friend get rich. There you go. I like the judgment thing in that quote. You know what my second favourite part of this is?

41:43No. JPMorgan did have a version of it. Ah, there you go. Google tells me he said, nothing so undermines your financial judgment as the sight of your neighbour getting rich. So there you go. That's it. much more pithy kind of version of it. Don't you like that? I just love wellbeing and judgment because it's kind of, it's both those things, right? It's how you feel and how well you make decisions. And we laugh at the capitulation trade all the time, right? The idea of kind of, you know, everyone's doing it. I'm not going to do it. I'm not going to do it. Okay, fine, I'll buy. Which, again, we might talk about Bitcoin a bit later.

42:12It may describe my Bitcoin purchase this year, speaking of 2025 missteps. But, yeah, I like the quote and I love the fact there's a JP Morgan version of it, which is appropriate given this podcast. Let me read the Lynch quote out because I just found it. I ran$15 billion at Fidelity, and the single biggest lesson I can give you is this. The price you pay is the only thing that determines whether you make money or lose money over time. Everything else is noise. I've seen people buy the greatest companies in the world, Coca-Cola, Disney, Gillette, at 50, 60, 70 times earnings because they were convinced the growth would never end.

42:44When the growth slowed, even a little, the stocks got destroyed. Quality didn't save them. The price killed them. I've also bought companies that were absolute dogs, companies losing money in dying industries that nobody wanted, and I made 10 or 20 times my money because they paid so little that the only direction was up. The margin of safety was in the price, not in the story. There is no such thing as a good stock at any price. There is only a good price for a stock. Pay too much and you lose. Pay little enough and you can be wrong about almost everything and still win. And it's a great, it goes on.

43:19I'll stop at that point. But it's just like that was obviously said at a very different era. But it is as relevant, it is in fact probably more relevant today given what's going on and given what we are talking about. You know me, I'm such a nerd for tech. I'm such a sucker for tech, right? There's no one more excited slash terrified of the future as I am, right? And I jump on any kind of new shiny thing that comes along. At the same time, though, it's just sort of like you've got to keep your feet on the ground with this kind of stuff. And it sounds like everyone will be going, yeah, well, of course, that makes sense.

43:58I'm not silly like everyone else. Yeah, but after the – there's a future out there. I'm not making a prediction. I'm just saying that these things are more than possible, right, where we're doing this same episode at the end of 2026 and the Nasdaq's doubled and NVIDIA's at a PE of 100, you know, and you're going, no, no, no, I'm not participating. I'm not participating. Everyone's silly and it's like, you know, Newton, one of the smartest people in history, had a bunch of shares in the South Sea company. Yes. Made, I think, five times his money and sold out and then the stock kept on rallying and he bought back in at the top and then lost everything.

44:37Yep. Newton, Isaac Newton, right? He invented calculus when he was 22. But not the madness of men, exactly. Right? And so you can't stress the point enough. And I'm largely flogging the dead horse for my own sake because I know what I can see myself going, oh, I'm not doing it, I'm not doing it. Oh, maybe. And you'll convince yourself, right? And sometimes... I can do it 48 times. Oh, you'll break out a spreadsheet if you need to. Just start plugging in some... Well, if I just tweak this assumption here, I lower the discount rate here. Maybe, maybe. And it's, yeah, it's very, very hard to avoid.

45:12Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

45:22Hey, let's move on to the next, the word of the year, I'm not sure if it's tariffs or AI. AI slop apparently was the word of the year from someone else, which I find, you mentioned about being a pessimist and sounding smart and that kind of stuff. I just think if you look at AI and go, the thing I think most important out of those AI slop, That's the key. You missed everything else it can do. And I know, again, I'm the Pollyanna and maybe we go back to, you know, there's economic parallels with the conversation we started with. But it's like if you start, if AI-slop is the thing you want to focus on, it's like everything else it can do, it's like, come on, guys.

45:55Like, I get it's cool and it's edgy. The other thing is it's kind of cool to be negative. There's a whole group of people who are just like the narcs. It's just their thing. It's like, I mean, do your own thing by all means. But when you look at AI and go, oh, yeah, but there's slop. It's like, okay, sure. You know, if that's the most important, if that's one of the 10 most important things you think about AI, you're missing the point. Is there something? Of course there is. It's imperfect. Have you tried the internet? Has, you know, horrible things on it. I'm not going to go to the categories of stuff because it's Boxing Day.

46:26Horrible things on it. Oh, the internet? Yeah, no, it's terrible for these reasons. Really? Like, is that, again, like with the economy, fix the bad stuff. Of course you should. But, man, if that's what you're focusing on. Anyway. I remember interviews with industry leaders at the time going, you know, oh, great, a bunch of nerds can debate whether Picard or Kirk was the better Star Trek captain. He's not revolutionary. Picard. Ten years later, you know, all of global finance and trade and our economies are coordinated through it. Every single business is an internet business at its core in terms of what it does.

46:59It's just, it's changed the face of the world and society, even with social media for it's good and it's bad and all the rest of it. But it's just, it's here to say, it's going to be the same with AI. Everyone's focusing on these silly videos, not realising that we can now predict the structure of protein folds and we can do drug discovery in ways unimaginable even a few years ago. But AI slop. Right? And we might even, you know, we're not potentially, again, here's me getting carried away, but I mean, there is a very real chance and one of the less discussed sort of frontiers of technology is fusion at the moment.

47:34Like it's always been 50 years away, so I am grounded on it. I'm not going to get carried away. But there is a future where in the next 10 years we crack the fusion problem, which is another way of saying we have unlimited clean energy. You know, it's like, do you reckon that'll change things? That might not. It might not happen. Can you imagine that? Can you imagine unbridled energy? Oh, yeah. And geopolitically it changes the structure of things as well. And it might be that, and what I find fascinating about technology is it's mutually reinforcing. And so you get certain breakthroughs in one area that have implications elsewhere.

48:10And I sort of get to things like fusion and synthetic bio and all this other kind of stuff because AI is a great enabler for that kind of stuff. You know, if you can help design a better tourist shape or something for containing plasma fields, I don't know, whatever it happens to kind of be. It's just sort of like there is a lot more at stake here than AI slot. But that's going to come part and parcel with it. And it's your key skill, one of your key skills as an investor is distinguishing between the signal and the noise. And there's going to be a lot of noise out there, but don't let it distract you.

48:46By the same token, don't jump on every sort of potential thing that might or could sort of happen here. but it's sort of like, again, we're very, human beings are very binary in their thinking. We love to deal in black and whites, you know. It's either AI is good or it's bad. It's like, no, it's probably both. Like the internet was, like steam power was. Like a whole kind, there's a lot of downsides, you know. You're like, was the Industrial Revolution a bad thing? It's like, no, it was a great thing. Although, you know, there was several generations of children that died early because of, you know, working in terrible conditions and factory floors.

49:19You know, there is nothing neat and clean about the way that these things sort of move forward. And you need to sort of, you need to have this ability to hold competing ideas in your head at once. Bar humbug and you miss everything. You miss everything. And I was like, no, this is going to change the world and you jump on every hype train and lose all your money that way. In between, there is a path. There is a path. The word of the year, I reckon, might be, one of the words, might be highs. Highs plural rule. because we had the ASX hit an all-time high. We had, well, that's true, but market always goes on all-time highs, frankly, because ingenuity continues and, frankly, because money keeps getting printed.

50:01So it's kind of, it's almost to some degree, I will say inevitable, nothing's inevitable, you know, realistically. But, and maybe despite everything we've talked about, because of everything we've just talked about, or some combination tariffs and AI put together and then whatever else you want to throw in there, stock market all time high S &P S &P 500 all time high gold all time high house prices all time highs now again I want to take all time back out of that because it's going to be I thought it was interesting though mate that we'll talk about house price in a second maybe to start with the market and gold and I think we've said this on the podcast before it is really really rare for both those things to be hitting highs at the same time yes and it kind of goes to what you've talked about and we've done it and we can do it again.

50:47But it's just really notable because generally speaking, gold is a safe haven, risk off, risk of recession, risk of inflation, all those things. You buy it when you're scared for the future. I don't know what's happening with the economy. I don't know what's happening with company profits, but I know that that lump of metal is still going to be there tomorrow and they're probably someone will value it, so I'm just going to go for that. And there's a bit of the emotional, it's physical and it's a thing, which is irrational but real in terms of real because it's, you know, perception is reality, as they say.

51:16But normally when that happens, share price is a seller for the reasons you've kind of just alluded to. What's happening in the economy? What's happening with company profits? I don't know if the company's going to still be there. I'm not sure about the economic growth that might have to be factored in for this company to survive, let alone thrive. And so I'm going to go to gold. And this year we had both hit highs at and around the same time. And even though I don't think either is at an all-time high as we record this, or I could be wrong, they're still very high. You're far off. Well, that's it.

51:44And again, because all time has always happened, it's not really about that. Now, so it's not so much about the all time bit for me. It's just the shape of the curve, as the boffins like to say. It's just the fact that they're both doing very well at and around the same time. And again, I kind of feel like I'm leading you back to the same point, but I think that is in this case the point as to why those things are happening. I am not sure that there is enough justification for the rise in the gold price unless you are forecasting collapse, and that's both, again, both either a very real risk in either direction, right?

52:24Because it doesn't happen. Gold hasn't got 50 % on any fundamental basis. The amount of money hasn't got 50%. the cost of, you know, we haven't stopped discovering more gold. There's no reason why it was X dollars at the beginning of the year and 50 % more at the end of the year. When I say no reason, no fundamentally justified reason based only on the inputs. You can say people are now more worried about it. That's kind of the point I'm coming to, which is, you know, if you're tracing gold's value or price, sorry, based on money printing, for example, it should have been going up over time because, you know, I'll say a slow march upwards, Andrew, you'll scoff at that, but you know what I mean?

53:03Sequentially, it goes up a bit at a time and that bit should be reflected in the gold price over time. Nothing has changed so fundamentally in the last 12 months other than one of two things. Either there is too much pessimism or there's not enough pessimism because you kind of, for me, you might disagree, but just on the gold price alone, we'll get back to the markets in a second. It must be, it's like what we said about share prices. You know, the shares go from$1 to$10 in a year. Okay, well, unless the company's profits are 10x or the future is 10x over that 12-month period, either it was too cheap then, too expensive now, or some combination of both.

53:35Because there were not enough fundamental reasons to justify the change. It was some fundamentals and lots of sentiment. I just don't think there's a mathematical justification for the increase in dollar terms. An increase, yes. If the current price is justifiable, then the price was way too cheap 12 months ago. And if the price 12 months ago was justifiable, then the pessimists have got carried away and gold's in a bubble. And I'm not saying either is true. I'm just going to be making the case that the movement over that 12-month period, to my mind, is indefensible other than if one of the – the starting point at the beginning, ending point, one or both of those were just dead wrong.

54:15I think that's all it can be. Do you agree? Am I right? Am I wrong? Yeah. No. I mean, yeah. It's either things are going to get – because markets are always forward-looking, right? So it's either thing, you're right, the sentiment is valid and things are going to deteriorate a lot faster than what perhaps the mainstream kind of view is or the price was just so fundamentally undervalued 12 to 24 months ago and now the market is just sort of correcting that imbalance. So it's one of those two or a combination of them. But I think directionally is where it's interesting. So we've seen gold go, I mean, it's not just that it's gone up 50 % this year, it's doubled in the last two years.

54:56Right, there you go. I didn't know that. Thank you. Like, it's just, it's gone up so. I'm sorry, I made a think that I should say too. I don't want people to write that one down. I was just using that as an example of the size of the game. Keep going. Yeah, but it's just a phenomenal move in the context of a right, like, again, ostensibly low unemployment, you know, ostensibly reasonable GDP growth, stock market highs properly. And I think directionally, right or wrong, They're just people are worried. And what's interesting about the gold move too is, as I understand it, is that you've actually got a lot of foreign central bank buying for reserves because what's really underpins the global financial system is that most central banks around the world hold US treasuries, but places like China, Russia.

55:40I mean, it all started when they sanctioned Russia and they said, we're not, your money's no good. We're going to seize all of your bonds. We're not going to honour them anymore. and then Russia went, well, that sucks. I guess I'll take something that no one can seize from me and that is, you know, there's no counterpart here. It's like over gold, right? China probably paid attention to that as well and lo and behold, they've been running, they haven't been dumping it on market, but they've been letting those bonds roll off and they've been acquiring gold. And it's not just those countries, the BRICS countries, it's a lot.

56:08And these aren't speculative traders. I'm not saying that their view is right, but they're looking at it beyond a trade and I think they're looking at it from a utilitarian perspective, which is just like, well, we've got to store our sovereign wealth somewhere. Let's not store it in the bits of paper that our enemies issue. That just feels like something like a very prudent, sensible kind of action that you would do. Yeah, I mean, I'm trying to think of how I can answer this without tipping my hand, so I'm just going to tip my hand. I think the money's broken. I think the money's broken. and it's not something that happens as an instant car crash.

56:46It's just something that we see it play out slowly over time and there was a bunch of sort of catalysts, but the most significant and most recent being COVID. What was it? I forget the exact number, but something like a third of all US dollars in existence didn't exist five years ago. Yeah, that's right. And so, you know, I don't think that our productive capacity has increased by that extent. So something's got to correct, right? And so everyone looks at the assets, no one looks at the denominator. I mean, why is it that literally every asset class in the world is going to the members? Well, maybe the more fundamental question is what are these things priced in and what's happening there?

57:28Yeah. And you don't even have to talk about gold or Nvidia stock. You can talk about eggs and brisket, you know, and just stuff that we consume. It's just like it's all gotten more expensive because there's a lot more money. And on top of that, you've got, as I said before, it would be one thing that's like, well, it was tough times. We had to make a rough decision. That's how it is, but we're going to course correct. And everything that led us here is now accelerating. And so I think you've got a lot of big allocators of capital who are going, it's just rational, sensible behaviour to allocate to gold.

58:05Here's the other thing. The maths are going to get you here as well. This isn't BlackRock going 100 % into gold and dumping all risk assets here. If you look, again, retail, as much as I hate that term, we're such a nothing burger here as well. Like the amount of capital that is controlled by institutions is staggering. So if they, as a collective group, say, you know, when times are good, confidence is high and trust levels are high, we probably only need 2 % gold in our portfolio. And some of these big capital allocators go, hmm, it's a bit scary. let's go to 4 % or 5%. Now, that is still a very small holding, right?

58:41It's also kind of a radical shift. It's also material, which is also weird. Like, it's a funny situation. Like, if the other 96 % to 98 % is rubbish, doubling from 2 % to 4 % makes, I mean, there's something left, so that's a thing. But it's not, I mean, it's a lot, but it's not much. It's a weird thing to get your head around, and particularly in the, I'm sure you can go here, in the value and the availability of the gold we actually have, given the limited stock and slow growing, but very slowly growing stock. Exactly. That sort of change does make a huge difference. It does make a huge difference.

59:08I mean, prices are determined on the margin, right? And there's a lot of holders of gold. It's just like it's sitting in a vault somewhere. There's no intention of sell, of selling it. So you can only buy what is available for sell. And to force more onto market, you must bid up a higher price. That's what induces more supply. It's just like, I'm not selling, aren't you? $10 ,000 US dollars an hour. No, not selling, all right? $20 ,000. There will be a point. There is a point. There is a point, yep. And even then, that's just a trade into switch into something else as well because no one wants the dollars.

59:38I'll sell it to then put it into farmland or something like that. So it's, I think that's, I think, just to finish the point, so when you go from 2 % to 5 % at a global level from many hundreds of trillions of dollars of capital under management on an asset which is supply constrained, like, it's going to happen, right? Obviously that's going to happen, I think. and I think there's signal in that. And as I say, it's more the directional part that is concerning to me because everything that's led us here is only accelerating and mathematically kind of needs to, right? And it's – so that – it takes me to – I'll skip our house prices.

1:00:20We may not go back to them. We're kind of getting to the – It's the same story with houses. I mean, it's the same thing, right? Gold or equities. Yeah. They're just less scarce than the money. Yes, correct. It's costless to produce money and press a button, make a phone call, boom, there's your more money. Like, build a house takes time. Build a company takes time. Dig gold out of the ground takes time. Energy, right? Like, whenever you have two quantities that are ever traded, even indirectly so, when one increases materially in quantity than the other, then there's only one thing that's going to correct.

1:00:50It's not rocket science, right? Quick add for an episode coming up in a couple of weeks' time. Two episodes, actually. Stay tuned. Yes. And then, well, this is a lovely segue and an interesting segue, and I don't want to spend all that much time on it, but we probably will. I single-handedly crushed Bitcoin this year. You did. So the other big event, put Trump aside, put market highs aside, put money printing aside, I single-handedly have, what, 25 at the moment, I think-ish percent off the Bitcoin price because I bought some. So my apologies to the true believers out there. This was, speaking of capitulation trades, buying at the end of the run.

1:01:31Maybe this is 1999 for Bitcoin. I don't know. I don't know. I think Andrew will say it's not, but you never know. Well, I mean, if you could go back. Yeah, right. And buy stocks at 99 levels in the techs, if you could get, you know, you would, right? The successful ones, you would, exactly. I think it's actually a great analogy. I mean, the tech boom has been very illustrative here for all kind of sort of disruptive kind of moves within an economy is that it's always scary and volatile and uncertain. It's just like, do we really think, you know, a neutral global digital reserve asset is going to bootstrap from zero in a nice linear fashion?

1:02:05Like, what world does that happen in? Of course it's going to be volatile. You just picked it like a dirty nose. You know what? You're welcome, world. That's right. I gave everyone else a chance to buy cheaper. That's what I've done. I've done you a service and you're welcome. If you're stacking sats, as Andrew might like to say, you get to stack them a little bit cheaper because I bought them and the entire world just shifted. It's a gift. It's a gift. Interestingly enough, and this goes back to your point, and this is not in any way a dig or otherwise, but it is worth remarking that while everything went up this year, Bitcoin didn't.

1:02:36And, in fact, it's probably down, I think, at the time of recording, year-to-date at least. Yeah, depending on Aussie or US dollars, anywhere between sort of 10 % and 15 % for the year-to-date. Down, yeah. Which, by the way, in Bitcoin terms, that's barely like raise an eyebrow kind of volatility. Right, exactly. That's nothing. Yeah, volatility-wise, that's a good result. This is an asset that said, like, I'm more 70 % drawdowns than you care to count. And on average, as a 20 % draw, more than 20 % drawdown twice a year on average since inception. I was like, you know, wake me up when it gets interesting.

1:03:11It strikes me that, now you tell me, it strikes me that it's an interesting, so what is, the juxtaposition is interesting, it probably just talks to gold, it talks to Bitcoin, it talks to sentiment, all things we've just kind of covered. Bitcoin kind of does a nice job of comparing because you've said, you know, money printing, everything goes up, Bitcoin's gone down. Gold's up something like 60 % this year, Bitcoin is down. And, again, I'm not – anyway, we're running on Bitcoin's parade. I suspect I bought some shares. I bought some Bitcoin. I expect it to go up over time. Again, I think I haven't bought a lot of it, so I'm not exactly all in on this one.

1:03:44But it's interesting because for all of the year that was, for all of that stuff, at the beginning of the year, if you'd kind of demonstrate or explain what's going on. Firstly, you haven't been around Remy, you would be like, well, there was probably no linkage at all because it's just volatile. That's what it does, right? And that's its own thing and you wouldn't be wrong about that either. It is interesting that, and maybe my observation is that for all of the true believers' hopes and dreams and expectations and desires for what Bitcoin might become, it is still a tech stock in terms of the way it trades.

1:04:19And it just kind of is. and that's neither good nor bad. I mean, it's good if you like the volatility and you want to take advantage of it. Bad if you've got a weak stomach and you're just hoping that the mission hurries up and gets here. But I suppose that's kind of, you know, it talks to the maturity of the asset in an acceptance kind of way. And you and I have talked a lot about it. We will talk a bit more about it. Not much. The episode coming up, by the way, is not about Bitcoin, so don't worry. It's adoption and it's acceptance and it's maturity and it's all those things. And you've made the point where, is it 16 years in or something?

1:04:49Yep. You know, for all of that, it's just worth highlighting that, I don't know what I'm trying to say. I think I'm trying to say things are volatile sometimes. I think I'm trying to say that everything is long-term. You mentioned being down, by the way, and yes, the usual moves are bigger, but remember the stock market's roughly down one year out of three as well. So people look at Bitcoin and say, ha-ha, that's the answer. I do think it is notable. That's the funny thing about it, yeah. I do think it's notable, a bit like I talked about with gold and the gain of gold over the last year. it is notable that Bitcoin hasn't risen despite those other assets rising in the sense that even allowing for the volatility, whatever fundamental value it has, and I mean fundamental here in the sense that there is a limited number of Bitcoin and there is a, at maturity, there's going to be like gold, there's a level at which it will represent, I don't know how to word it correctly, a value which demonstrates stability of supply and demand, I suppose, and it feels very wordy.

1:05:46There's no fundamentals like companies that have balance sheets and profits. But some sort of fundamental, do you think gold has fundamentals? Bitcoin has the same. In fact, probably more because there's no going to be any more of it and there'll be wallets lost and, you know, in theory, the available supply probably falls slowly over time. That hasn't risen at all, let alone as much as gold, is also just, I think, interesting. And, frankly, the juxtaposition of the two was just fascinating to me as a mental exercise. I'm sure you've got thoughts. I'm sure you've got thoughts. So I don't really have a strong view other than I just – I think it's interesting if you think about how it comes to be and what it kind of represents that for all of the rationale you just mentioned, the fact that gold is up and Bitcoin is down and not by bits.

1:06:30I mean, the delta is probably 80 percentage points between gold and Bitcoin from the beginning of the year to now. You talk about opportunity cost. If you bought an ounce of gold and a Bitcoin at the beginning of the year, you're probably happier on one side of the ledge than the other. You definitely are, at least in the short term. And so all those things apply. if it was inexpensive in the beginning of the year, it's even cheaper now because more money's been printed, measured in gold terms or housing terms, Bitcoin's got cheaper. There's a whole lot of that stuff that I think is just interesting.

1:06:55And there's no investment takeaway from me for this one at all because we don't know what it will settle at price-wise. And so in 10 years' time, we'll know whether it was stupidly overpriced at the beginning of the year, stupidly underpriced now, underpriced in both cases, overpriced at both cases, fairly valued in both cases. Those things will be proven out in time. But just kind of I wanted to raise, I think, in the context of gold. Sorry, I'll shut up for a minute. Just in the sense that we talk about gold's rise being, I wouldn't say inevitable, but kind of likely given the circumstances, yet other assets don't.

1:07:25And just a reminder that... Especially when the use case is sort of touted as a digital gold. It feels strange given everything that's happened. And so whatever we think should happen logically, or it's your point about, you know, because of this 10 years ago, we might be saying in 10 years' time still, the issues that existed then may exist now may still exist then. There's just something about the market won't conform to your desires just because you think, not you personally, Ram, obviously, but, yeah, just because we think there's some sort of rational response or issue or opportunity at play, market's like, yeah, nah.

1:07:57We're just a group of people who are just deciding things, right? And a lot of people this year went, I'm selling, I'm getting out of Dodge. And people said, well, I'll buy, but not at that price, and that's how prices get discovered, and that's where we are. So in the short term, here's my headline. In the short term, it's all sentiment. Yeah, for everything. Yes, correct. I mean, there's something to be said. It's interesting because it's sort of, it's largely a function of our tendency to value things in a 12-month window. One trip around the sun, yeah. One trip around the sun. It's a very natural kind, like that's how the seasons, we're biologically sort of wired to sort of think of things in terms of an annual kind of thing.

1:08:37But, you know, and it's just, it's funny, Like over the last five years, Bitcoin is 10xed. Yes. You know, over the last 10, so over five years, it's 10xed. Over 10 years, it's gone up 180-fold. Like it's sort of, and okay. It's the Microsoft thing as well. It's the Microsoft job we just talked about. It's the same thing. It's exactly the same thing. In the last two years, it's outperformed gold and it's outperformed everything else as well. So Bitcoin ran up earlier than everything else did. So it kind of, it's a very, I've heard people sort of describe it as it's the only true free market, right?

1:09:12Because you don't have central bankers and other sort of fiscal players in there sort of playing around with it at this kind of point. So I don't know what it is, but it's just sort of like if I put – you'll help me out here. I don't know who the best cricketer in this. Who's the best batsman that we've got? Let's go. Steve Smith, Travis Head on a tab. Steve Smith for now. Okay, let's go Smith, right? So unquestionably the world's best batsman, let's go with that, he gets out there and goes for a duck. He's obviously the worst batsman we've ever had. The bowler scores five runs and the worst batman of the team is better than Steve Smith.

1:09:48I mean, even I know Bradman went out, like his last match was a stinker, right? Yes. And it's sort of like that's kind of the criticism with Bitcoin at the moment. It's like, oh, wow, you've like left everything in the dust over any meaningful timeframe. but in the last 12 months you're down 10%. Ah-ha! Yeah, yeah. And I've even had like, you know, I'm getting to a little back and forth with various fund managers that I love to like, don't say a peep, you know, and then it's always the same characters. It's like it dips 10 % and like, ah-ha, I knew. I said at$200 it was a Ponzi. It's like, dude, it's$90 ,000 US here.

1:10:25It's like, you know, and it's just sort of, I don't know what to say. I feel as though I'm going to sort of try and bend over backwards to rationalise it, but I'd like to think that if you or I were, forget this magic internet token, if we were talking about the share market and the share market was down in the last 12 months, neither of us would be losing our minds. In fact, we'd both be here in the podcast going, don't worry about it. This is great. It's a good opportunity. Yeah, like what are you worried about? So it's not that I'm trying to be biased towards my favourite shiny new toy. It's just more that that's what markets do.

1:11:02And so you mentioned fundamentals before. It's like, well, let's go, let's look at whatever fundamentals have changed there. And it's like, whether it's wallet sizes, transaction count, whether it's hash rate, whether it's corporate adoption, whether it's institutional adoption, I mean, everything's going up, exploding up, like the fundamental regulatory landscape, like nothing has been clearer or more certain. You know, I made mention on Strongman during the weekend that Harvard has got one of the biggest private endowment funds in the world. Their latest Q3 was out not long ago. They've got a near half billion dollar stake in Bitcoin.

1:11:40It's their largest public equity holding. Just hang that there for a moment. They own Harvard, right? I know this is called the appeal to authority argument, but I'm going to use it anyway. I'm going to use it anyway. I just, it's not like, it's not some dinky little nano cap trying to like affinity grift its way in on something. It is one of the largest, most respected academic institutions in the world. And it's not like that they've got exposure, that they've got, it's their large, it's still less than 1 % of their endowment. They've got a very, very diversified endowment fund. I just think it's notable.

1:12:21Also, when they added, they added to it in the recent correction. Interesting. And they added gold as well. It's just they added twice as much Bitcoin as they added gold. Which price-wise would make sense, right? Something's up 60%, something else is flat. What are you doing? Assuming you already held it at the beginning of the year, unless you think the fundamental value has changed that dramatically, one is, I won't say objectively, because I think it's objective, but almost objectively a better investment, if your view hasn't changed on the future of the two assets in question. 100. And this is your and I's shtick.

1:12:52We talk about this ad infinitum in regard to businesses. It's just like, what do you want except something in which the fundamentals are radically improving and the price is going down? What are you not entertained? What do you want? Every other muppet out there, and this is what happens in shares and in property, it's like price falls, it bad, I get out. That's my, oh, price up, that good, me buy. That's the reaction. And if you want to But we point to any famous or successful investor you've ever known or read about or met in history, and they are always the people that have that sort of capacity to go against the trend when the data speaks for itself.

1:13:28And so I just point to Harvard as one particular data point, but there's also what Square has done. There's also what the US has done. There's a thousand different things you can point to. And we're just getting garden variety volatility here. And then except for the top 12 months in any other timeframe, it's just absolutely blasting through it. It's like if this isn't, I really thought earlier this year that that's it, the opportunity to buy below$100 ,000 US is gone forever and it turns out it's not. And for anyone out there, and I had plenty of people who said this to me, it's like, well, it's good for you because you bought a this price, but, you know, it's too expensive now.

1:14:02It's like, all right, well, now it's 25 % cheaper. You want to buy it? Oh, wait for it to go back up. You know, it's the classic meme where you see that. Or wait for it to get cheaper either way. Yeah, again, it's the same with the share market. It's the same with everything. It's that classic meme. There's two stalls. You know, whatever the asset is, there's one at a high price with everyone lined up waiting to get some and there's one at a cheaper price. No one is interested. So, yeah, anyway, yeah, I'll shut up at this point. It's a gift. Things will continue to be volatile. By the way, we are going to do some, just for fun next week, we will do some reckless predictions because why the hell not.

1:14:34but also a reminder that what else does the last 12 months tell us that you can't extrapolate from the past, right? And that's the other thing, right? So gold was up, Bitcoin's down next year. Is Bitcoin back up? I don't know. Does gold keep going up? I don't know. Maybe they do. Maybe they reverse. And your point about the one time around the sun, there was no magic. I mean, there's a bit of human psychology in the new calendar. So it's not zero, but it's not predictive. It's not deterministic is probably the better way to put it. just because we changed the calendar. We started getting it from zero on the 1st of January rather than the 31st of December.

1:15:08There was one year recently, and I can't remember. I'm going to say it was probably three years ago. It was probably eight years ago because I'm just getting old and they all feel like the same thing. Do you remember there was that massive rally between Boxing Day and New Year's Day? Yes. It was three or four years ago. And it kind of, if you move that week into or out of one of the two years, those two years look really, really, really, really different. Because it was up like 7 % or 8 % in a week, so it was something dumb. And there's nothing I can talk about. Just stuff happens because stuff's volatile, right?

1:15:36It's what markets do. But it just made the two years, the year before and the year after, look really different. If you'd time shifted, if Julius Caesar, whoever invented the calendar went, let's start the year on December 24 instead and finish it on December 23. Yeah, yes. And you've got two incredibly different sets of data. And it doesn't matter, which is kind of the point, but that's exactly the point, which is it doesn't matter just because we started at one point in the universe and ended up back at that same point went, so how was that trip? Was it a good trip? It was a thing, but over any extended length of time, 365 days is so stupidly arbitrary for almost everything.

1:16:11I mean, if you're growing trees, number of seasons matters, number of summers is great. So, you know, again, there's some historical, seasonal reality, agricultural reality to it. But for the rest of us, just picking about, even then, farm output varies so dramatically year on year. The success of a farm you're not going to measure in a given year and say, oh, therefore, especially your great farm, it's a terrible farm. Was it the Goida line in South Australia? I think it was Goida, I think it was Richard Goida's forebear, actually. Charles Goida? I'm going to say Charles. I don't know. Someone will correct me.

1:16:39Surveyed South Australia in a really, really, really, really good year for rainfall and went, this is great. Let's all go here. And then, of course, subsequently, just an absolute, you know, debacle because everyone said, everyone took the advice, went, hey, it rains a lot this time of year. Let's go and plant crops and have herds of cattle and sheep and pigs and whatever else. and all of a sudden they went, oh, never rained after that. That was one stupidly, unfortunately for everyone so could invest in it, it was just a year, right? Just these things happen. Anyway. Dude, imagine buying NVIDIA.

1:17:07You go back to the start of 2022. I say it because it was in front of me because of our earlier conversation, but you could have bought NVIDIA at less than$29 and change USD for a share and by the end of the year, the market pundits on their podcast are talking about how the share price halved. There you go. $14. at the end of the year. Yep. NVIDIA. Yep. 2022, this is not ancient history. Right. It's sort of like, and it wasn't like, oh, it was down 20%. It dropped 50%. And I'm not going to bother. I'm not going to do it live. But you look at the Wall Street Journal or any of the other, and you were there, some idiot fund manager or pundit.

1:17:46Oh, it's clearly been a bad year in the market. It's not nonsense. It's such a nonsense. And if you want to, I mean, they do it because people ask and people get obsessed about it, but it's just like, how do you expect to outperform the market if you're just going to follow the herd and the consensus? It's kind of oxymoronic to even think that that's possible. Like, definitionally, to outperform, you must do something different. Like, if you do the same, you're going to get the same results. I don't know how else to break that down, you know, and yet that's what is our strong, strong social inclination to do so.

1:18:23And, you know, the danger of that, people take that the wrong way and they go, well, everything's there, I'm buying it. I'm buying fax machine manufacturing because everyone thinks it's dead. It's like, yeah, everyone's right in this instance, dude. Like, there's a dumb investment. Not withstanding Lynch's earlier point, maybe the price is low enough and there's still four people that buy fax machines and you can make work well. For a government department somewhere that works on fax machines because they can't turn them off for some reason, yeah. Just to take your point of extrapolation, We all do it to greater or lesser degrees and we often do it unconsciously, but it's just sort of like if that was the secret to investing, we'd just all be billionaires.

1:19:02It's just like thing go up, buy, thing go down, sell. It just obviously isn't that way. And it's like the earlier point with Microsoft, when was the best time to buy? When everyone was convinced that the internets and computers were going to reshape the world at the late 90s or in 2015 when, you know, when the hype had died down and it was actually being driven by pure fundamentals. Like, you know, they're the same kind of thing. It was the price was sort of very different. There's a lesson in all of that. And there's probably a top signal in the market really when we saw everyone lining up out front of the gold exchange.

1:19:38Totally should have been. Right? That might have been a top signal. You know what? It's also the reversal. It's also like, you know, with Bitcoin, it would be hanging on this adoption to use that. It's also like here. This is going to the moon because all of a sudden everyone's in on it. So now it's going to be a bigger thing permanently. That's all what happens there. And that's always the hard part, right? It's signal and noise you said earlier in the pod. It's so important. By the way, Harry Hindsight goes was obviously going to be a – that was obviously the top because the price crashed. Or someone else was like, you know, it was obviously the bottom because look what happened after that.

1:20:07You know, as soon as people started queuing up, that thing went to the moon and stayed there. And Harry Hindsight always sounds very clever, right, because it's perfectly noble. My question to the Harry Hindsight is always like, That's brilliant. How much did you make going short? It was so obvious. You saw it, no one else did. I mean, you do know you can trade that view and you can make incredible amounts of money on being correct. So how much did you make? Oh, you didn't make anything. Oh, you just, it was too obvious and it was too easy. So you just like, you like a challenge. So you didn't bother doing it.

1:20:37Or you're reinterpreting the past, you idiot, which is always, always, always what happens. The other thing too, by the way, is, and this is, we'll shut up in a minute, but that psychological incentive or tendency to take whatever the outcome is anyway because those people will have had two separate thoughts. They're probably genuine. I thought that was going to happen. I also think at some point they probably also thought maybe it's not. Yeah. And so when it happens, which one do you remember? And it's not even sometimes you're doing it with soft serving and trying to make money or whatever. You remember the winners, you forget the losers.

1:21:07Oh, I thought that was going to happen. Yeah, yeah, yeah. No, I knew that was going to happen. And no matter which way it went, people will say that. And sometimes they only have the one thought. Sometimes it's like, I thought it might go down. And you look after that and go, oh, yeah, I knew that might happen. Yeah. Like I'm giving myself credit. Could have been heads, could have been tails. Land heads. Oh, I knew. I thought it might have been heads. You know, thought it might have been tails too. Or you don't think about it at all. And the second one that comes up, right, you go, I knew that one was right.

1:21:33It's just human nature. I don't think there's a logical fallacy specifically about it, but maybe the gambler's fallacy. Just the idea of remembering the wins, forgetting the losers, and giving yourself more credit than you deserve. Again, some are just outright dodgy bastards doing dodgy bastard stuff. But the rest of us, it's just like we just, you know, the branch falls out of the tree and they go, oh, I knew that was going to happen. I should have cut that down. I thought that might happen. I probably thought that for a year and a half or ten years, maybe it was a different tree, never fell down.

1:22:00You remember the thing that actually happens if you somehow foresaw it and completely forget everything that didn't happen that you thought might happen. What is it? It's like the curse of silent evidence or something, the thing you don't see and you don't measure. Nice. I like it. Mate, we've probably gone long enough, but I reckon I could probably teach you around and turn around and do another pot on Sunday. What do you reckon? Absolutely, mate. Yeah, dead keen. In that case, enjoy the rest of your boxing day or whatever day it is. Good luck trying to work out what day it is between now and the next episode.

1:22:25But when it lands, you'll at least know if you're paying attention. It's Sunday morning or Wednesday afternoon or Tuesday at midnight. Until then, have a great boxing day. Have a great break and full. 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. The Motley Fool operates under Financial Services License 400691.