Time for a rate cut? August 16, 2024

24:48So I don't want to create the expectation that all you need to do every time is just wait for a drop and then buy the shares because we've talked so many times about, you know, shares go up 10 % then fall five and you go, I'll wait for the fall. Now, sometimes they go up five then fall 10. So, yes, there is an opportunity to buy at a lower price sometimes. But because shares go up over time mathematically, you're actually more likely to pay a higher price the longer you wait. It's so dumb anyway. I mean, look, it depends on the type of investor you are. It feels so likely though is my point, right?

25:15If you're saying, well, it drops 10 % every year, it's like, well, I'll wait for the drop then. Why wouldn't I? I'm mad to invest now. Why would I not have to wait for the drop? And it's because, well, the drop might have already happened or it might not happen at all, or it might go up 10 % before it falls 5%, or it's that seductive first order thinking that's, well, I'll wait for it to fall because why would I not if I get it cheaper? And I think too that the quantities that are being discussed here are just so irrelevant. Like honestly, the difference between you making a good return and a bad return in your portfolio of any meaningful length of time has got zero to do with whether you buy it now or 10 % lower.

25:49Like if I buy a company X at a dollar, my hope is is that you know i want to get a decent i'd like to think just on average that would double every seven years kind of thing you know and and let's say i buy it at 90 cents let's say it turns out to be true in seven years time it's two bucks now i look back at that point in time in the year 2031 and i bought it at a dollar 10 instead of 90 cents now who's got the better attempt obviously obviously the person who bought 90 who's upset no one's losing sleep here like The things that you regret are the ones that went to zero or went to 50 % and never recovered, right?

26:27And the gains in your portfolio will be underpinned by one or two outperformers. I've talked about it before. The rule of five, it's just statistics, right? Like no matter who you are, you could be Buffett or anyone. For every five stocks you buy, three are just going to pretty much do the market average. One's going to be an absolute basket case and one's going to go to the moon. Like it's kind of how it's likely to sort of be. So, you know what I mean? Like just for the ones that in any one of those scenarios, and just to stick to the nice round, whether I bought it at$1,$0.90,$1.10, it makes zero difference.

27:02It makes zero difference. Well, you know, one person will look back and go, oh, I got a compound average annual growth rate of 9.73. And someone will say, aha, I got 10.49. I'm like, well, okay. Good on you. Who cares? The point here is the bigger question is, did you buy or did you not? Yes. Not at what price did you buy it? And that's where we've said many times, growth covers a multitude of valuations. Yes. Now, if you're not going to get a growing company, then you've got to be really careful at how much you pay because if a company is going to be worth$1.20 in three years' time, paying$90 or$1 or$1.10, I mean, that kind of matters, right?

27:36That does, yeah. If you're a company that's going to be worth$10 in 10 years' time, it kind of doesn't matter. You can buy any price up to about$8 and still get a market-beating return. Now, you buy it early if you can if you get the opportunity to but it's it's not going to be most of the time most of the time and again unless you're investing in a basket of really slow growing fully valued companies with modest you know kind of futures and cash flows okay that's a different story so it does matter but to your point statistically if you think about any most people buying portfolios if they're reasonably diversified or if they're looking for growth in particular it's going to be whether you bought the right company not what not did you pay the right price not exclusively and We don't want to be too broad brush here.

28:14It matters what you pay, but far less than buying the right business. Yep. There's a thousand examples we could give there as well. Yep. Yep. Mate, let's go back to, speaking of buying the right companies, Commonwealth Bank,$9.84 billion in profit. Really interesting. I'm going to just quickly nut out some of the key headlines and ask you your thoughts. Alex, as we know, you're a big bank fan, so I'm sure you're lots of other things to say. Oh, I love the banks. They're such, yeah, stand-up characters. So$9.84 billion, a lot of money. That was down 2 % on the previous year. So it's getting harder for banks to find ways to grow.

28:49Think about what they're doing on costs. Think about what they're doing with branches. Think about doing with new products, new loans, new fees, all everything they can find to do. They still couldn't grow that profits. That's meaningful and worthwhile. By the way, CBAT better than most of the other banks. They were declining fast. We've talked about that before. So$9.84 billion down 2%. Their net interest margin, which is effectively the return they make on their investable assets. The specific definition is a little arcane for this purpose, but kind of that's a pretty good summary. 1.99%. So they made 2 % or 2 cents for every dollar of assets they've got.

29:21That's a pretty skinny margin, I've got to say. I had someone on Twitter hit me up. I think it was a DM or whether it was a reply, but basically saying that they got a saying at their bank that they wouldn't invest in their own bank. If the bank came and said, can I have some money, please? What? 1.99%. So it's a really, really interesting story. Now, the shares were up on the day. Of course, they are because the dividend was boosted. The final dividend,$2.50 per share. So, you know, as Australia's biggest bank, as Australia's most profitable bank, probably the one that's in best financial shape relative to the others, which may or may not be saying much given the profit did decline.

29:57By the way, other profits declined over the last 12 months, including retailers and other stuff. So, they're not on their Pat Malone there. But the market was pretty comfortable, got kind of what it thought. $10 billion, a lot of money, a lot of people, including some of the usual suspects, politics and otherwise, looking at the big numbers. Oh, big number, bad, which I will happily rant about in a minute if I have the time and opportunity. Other than that, mate, what did you make of the CBA result? Anything stand out to you and your bank loving ways?

30:29I hate read the annual report. So it's so I know what I'm doing, right? Everyone knows my view. I'm not touching this thing with a barge pole, which by the way, that's why it's gone from a hundred bucks to 134. Mate, it's up over the last year. 50 or 60 bucks in the COVID crash. Yeah. 233 bucks. I don't know if it's market beating at that time. Probably not because the market's up as well, but it's had a pretty good last four and a half years. I was saying to a mate the other day that the market is the great humbler. It really is. If ever you have a moment of pride, it will sort that out for you pretty quickly, right?

31:05So I'm happy to point it out. I mean, look, I will sort of say that the – well, let's stand back. Let's look at the business here. So, one, it's a big number, but it kind of should be a big number. It's a very, very large company. So, it's not whether – if this was a corner shop making$10 billion, you'd be asking some very hard questions. But as a return on equity or as a return on capital, whatever benchmark you want to use, it's okay, right? We should say two, mate. This is my quick rant. 100 banks making$100 million each, and we're not talking about it. One bank making$10 billion, also it's a big deal.

31:41The financial sector profit wouldn't be any different. It just so happens because it's under one roof, one virtual roof, we somehow think a big number, or not we, a lot of people think a big number is somehow bad, that they're somehow profiteering. And by the way, I'm not defending the banks, they're doing a lot of bad things. But making$10 billion of profit is not the disaster or the horrible outcome it might seem relative to its size, as you say. And if it was many, many smaller businesses in total making the same amount of money, wouldn't be talking about it. It's one of those kind of human, again, behavioral finance, right?

32:07Just big number seems big. I'm struggling. They're making$10 billion. That's a lot. I'm struggling. That guy's making$100 million. Oh, it's a bit, but I guess it's okay. They're actually the same thing. Yeah. So let's not just focus on the share price. Let's look at the business itself, right? And CBA - You're about to hate analyze this company, aren't you? It's what I do. It's what I do. Go on. I eagerly anticipate the results. I just, and I am the classic dude shaking his fist at the sky, you know? And I was reminded, I think it was Paul Tudor Jones, US investor, who said, do you want to be right or do you want to make money?

32:46He's like, no, I want to be right. I just want to be right at this point. And anyway, so let's, one thing that is really good signal when it comes to a bank, I think is dividends. Because you can't make things up with dividends. They either arrive or they don't, and it is in cold, hard cash. So back in 2014, they were paying$4 a share. Today, they're paying – well, the trailing 12 months, I think, was$465, something like that. So over that 10-year period, dividends have grown at 1.5 % per year. It's like half the rate of inflation, less than half the rate of inflation. So in real terms, their dividends have gone backwards.

33:27And again, I'm not saying this is a bad thing, but it's just sort of like where it's interesting, you kind of think, well, why is the share price done so well when their earnings haven't done that? This is a highly mature business. It's post-growth, you know, beyond system growth. It kind of has to be. It owns 30%. One in three Australians are banked by the Commonwealth Bank. And growing, by the way, in terms of thinking about the market share over time. We just talked about the fact that CBA has done less worse than the rest of them. And these guys, they're taking more share. And almost by definition, the upside is smaller because the pie is only so big.

34:00I mean, the pie is growing very, very slowly. But you can only grow at the rate of the pie. You can take a bit of their slice. But other than that, what else do you do? On average out across the cycle, it's almost mathematically impossible for them to grow at much more than 3%. Right, exactly. You know? I mean, oh, my gosh. I'm going to get some ats with that comment. Yes, okay, they could start up a new thing or go to the UK and have some success there. Although I think history is so replete with examples of that that we don't even need to entertain it. But the facts are the facts are the facts, right?

34:32So, okay. Now, we've talked a lot about how actually low modest growth is not a problem if you pay for it. Here's the thing. Commonwealth Bank is on a price to earnings multiple of 23 times. Yeah. Now, that's a lot for a business that's not in the year just reported, their profit dropped 6%. $10 billion is a lot of money, but it's 6 % less than what they made last year. It's not even growing. It's shrinking in an environment where it's winning more market share. The reason being is it's much more competitive and they're copying it on the margin side. So a bit more volume, but worse margin. And okay, it's got, again, not necessarily a bad thing, but you ask yourself, would you pay 23 times earnings?

35:12Now, before I even finish my breath, I know that people are going to go, ah, but it's the dividends. I'm like, yes, you are right. It is the dividends. The current yield is 3.5%. And again, ah-ha. But franking credits, okay? Let's gross it up for franking credits. It's 5%. You're getting a 5 % yield in the Commonwealth Bank. Which, by the way, means you have to pay tax on that 5%. So it's not a net 5%. It's 5 % before tax. Pre-tax, 5%. Now, I can get 5 % near enough by buying one of their term deposits. Risk-free, as risk-free as anything kind of gets, right? And you think, so that's not an argument in an environment, the rate environment that we're at at the moment.

35:55It's like, that's actually not that great. Let's talk about book value. So book value is just the net assets of a company. Now, we use price to earnings. People use price to sales. You can use all kinds of things. Price to book is something that people tend to use for banks. And the reason that they do is that balance sheets are really important when it comes to banks. Well, balance sheets are always important, right? But super important for banks. And it tends to be – book value tends to be much less volatile than earnings. And banks, again, it's not going to land for an Australian audience. But trust me, typically banks have rather cyclical earnings.

36:35Not in this country, but they do tend to. So it's a good measure, right? Historically, any sort of liberal Western democracy in a modern economy, they're usually around 1.2, 1.5. It tends to be the long-term average. Jamie Dimon, the top dog at JP Morgan, said very recently, because in the US, they like to return cash to shareholders via what they call buybacks. So different tax settings, so buybacks tend to be the big thing. When a company has a lot of extra cash, they buy back shares. We've talked about it before. It's a deep rabbit hole, but you get where I'm coming from. And he said, buying back stock as a financial company greatly in excess of two times tangible book value is a mistake.

37:19We're not going to do it. Which is basically the CEO of one of the biggest, most powerful banks in the world sort of saying, our stock's really expensive at two times. And he's right. Historically, he's absolutely right. Now, Commonwealth Bank, you'll be asking, well, Andrew, what's the price to book value of Commonwealth Bank? It's 3.1 times. It's double. It is double the long-term average without any yield. So, again, you kind of think, what is going on here? In the AFR, they say, well, yeah, it is. Everyone knows it's expensive, but it's a really high-quality bank. I was like, yeah, I agree.

37:54I actually agree. It is a really high-quality bank. It's much better than the others. One of the best banks in the world. But no company is worth an infinite amount. And if you want to go back in time and say, when was the best time to – you can almost build a strategy on I buy banks when they're at one-time book and I sell them at two-time book. Now, please don't do that because life's not that simple. But it's not a bad rule of thumb, right? It's really not a bad rule of thumb. And so I have no idea. Now I've said all of this. It's going to triple again from here. But it's very expensive. It is, and everyone seems to unanimously agree, and yet the price goes up.

38:31So I've got no clue. I'll throw it to you as to what's going on here. Nothing you've said is wrong. I know. Tell me something I don't know. Straw man is open.

38:51What you do regularly is really important, which is talk about PE as an earnings yield. because I'm not exactly sure why price earnings multiples became a thing. We don't really think about multiples in any other aspect of life. It's true. It might have been easier to calculate at some point or I don't know why, but it is what it is. So the earnings yield, if you're getting 23 times earnings, the earnings yields what, 4 point something? I'm going to say 4 point. Calculator has come out 4.34. Oh, there you go. 4 point, I'll take that. Very good. So when you buy the shares, assuming you can have all the profits back, you get a return of 4.3%.

39:30Now, that's not great. And I think what I think is really important - By the way, it'd be fantastic if interest rates were zero. Yes, correct. Well, so fantastic. Well, well. Yeah, but very good. Yeah, yeah, yeah. I don't think an option of interest is zero, but yeah, you're right. But what's the current cash setting? 4.35. There you go. by the way none of us can borrow that either so it's uh it's it's yeah it's a moot point yeah still so look you know so so that's not 4.3 percent earnings yield is not great i think it helps people particularly if you're not having done pees for a while or you don't do regularly it's easy to think of earnings yield terms you don't get all that money but but what you're getting for your cash the money you're paying cobbled banks some money for their shares and they're earning with the money you've paid your return your your share of the return of cba is 4.34%.

40:17This is how I, just to sorry to interrupt, this is how I think about it. I just, I like to, for multiple reasons, pretend that I'm, you know, a mega billionaire. And I think if I was to buy this company and take it private, I could expect a 4.3 % return. I get to keep all, it's my business. I own the whole damn thing. I've done a Musk and I've bought Twitter, right? It's mine. And I get to keep all of the net profit. What's the net profit? It's 4.3 % on the money I just paid for. Yeah, right, exactly. That's right. And you could reinvest some of that money in the business. you can take some cash out.

40:45Sure. But if I owned the business, that's what I'd get. So that's very low. I actually sent you a direct message during the week. Talking about Commonwealth Bank's profit, actually, and thinking about, you know, I was going to bring this up, I'll bring it up now. We go massive off script, as we always do. Yes, we do. You know what? Share prices are funny things. There is no rule that says a discounted cash flow must be applied or that it's even the right way to think about share prices. It's just intellectually and academically kind of where most of the industries arrived at as the right way to think about how much something is worth.

41:19And so we kind of go, okay, well, if I had to work out how much to pay for shares in this company, Commonwealth Bank, how would I do that? What would I think about? How would I kind of work out what a fair price was or the so-called reverse DCF? What sort of return am I going to get based on the current price? You kind of go, well, how would I work that out? Well, if I take all the earnings and I take the current interest rates and I take some sort of risk premium or discount rate, and again, I'm not going to go into this in detail, just trust me when I say that's the algebra that goes into a discounted cash flow analysis.

41:46And we've kind of gone, well, maybe roughly that. And we all kind of agreed and assumed and accepted. That's the price. Which gets me to my point when I was talking to you about, like, you know, if I had to, if I was an income investor and I could buy an annuity, which is basically where you give a financial service company all your money and they give you an amount back every year for the rest of your life. So sometimes term annuities, we go for a certain amount of time, but now there's a lifetime annuity. So you can buy an annuity. You can go to a broker and say, I would like to take my million dollars and give you that money.

42:16How much a year will you give me if I do that? And they might say, I'll give you 40 grand a year for the rest of your life, no matter how long you live. Whatever the number is. I haven't done it recently. I don't know what the yields are currently. Or you could say, I can invest in Commonwealth Bank. I said to Andrew, I'm not sure that I wouldn't buy that instead of an annuity. Now, you disagreed, mate, which we'll get to in a sec if you want to. But the reason I raise all that is, is 23 times earnings a good price to pay for Commonwealth Bank? No, not if you want to beat the market. I think it's probably a terrible price to pay or multiple to pay because I don't think you're going to beat the market because of what you just said.

42:47The growth is not going to be big. The average market multiple is kind of close to 15 or 16. So you're paying literally 50 % more than the average for a business that's growing slower than the average. That's a pretty dud deal. If I offered you that, if I said to you, you and your owner listening, I've got a deal for you. What I'd love you to do is pay me one and a half times as much as my house actually worth. Okay. and you get rent that's less than that the average why would i do that and so that's kind of what's happening with commonwealth bank now for all of that said for all that said the only thing i can come up with maybe is that i wonder whether the financial markets have stopped thinking about cba as a company as as a as a business and have just considered it as a as an annuity you know we kind of have this classification of shares go there bonds go there property goes there art goes there wine goes there uh cryptos for example go there uh and in the bin is where they go and we all have our own view of them right we all think okay well i think shares of this and so shares capitalized shares in other words the whole market is this and we kind of sometimes i can fall into the trap of thinking well compared to i don't know i'll pick an example um i'll say kogan just for a laugh compared to kogan combo bank looks expensive i'd rather buy kogan than conwell bank that's that's absolutely true given my frame of reference which i want to which is i want to beat the market i don't think you can justify the price of commonwealth bank because you can get better investments elsewhere buying the second third tenth eighty fifth hundred eighty one hundred eighty third best return business when you can buy something better is crazy to me but there are people out there who are like i don't i really don't care about the commonwealth bank share price anymore what i want is a rising dividend over time that pays my bills and i'm not saying they're right because i don't think that's the best strategy but i'm not sure they're wrong and so when we look at commonwealth bank and say gee it looks overpriced it is on our framework but if we misunderstand i'm not again i'm not saying we this is not this is not a statement there's not a a proposition it's a it's a theory it's an idea it's a hypothesis um if if it is the case that people see commonwealth bank effectively as a bond with some frankie credits uh you know are they silly i won't say silly i think there are better ways to make money there's ways to make better money there's ways to take less risk so would i would i encourage people to do this no absolutely not but if if they do and they always do and they always do and they always do then who's to say the shares aren't fairly priced if i want a five percent grossed up yield or sorry if I want 5 % on my money where do I put it?

45:25Now you're right at the moment again there's many other places you could put it including term deposits but there is I think a group of people who say I'll put it in Commonwealth Bank and as long as they do as long as that's the view who's to say the share price can't stay at the current level can't go higher on pure supply and demand and different ways of thinking about shares and asset Commonwealth Bank it is a share by definition it's a share but if the market treats it differently considers it differently I don't know maybe maybe yeah You don't know if that view will change and it could change rapidly.

45:53By the way, so good views about DCFs, right? This is why it's hard. There is no iron law that says every investor must use a DCF. A DCF is the only way you could fairly value a company. I mean, I think it is the way to do it. I've said many, many times that is what a share price should be. But I'm relying on everyone else thinking the same thing. There's no reason. If the rest of the market says, that's fine, Scott, but we're using star signs now. And we're always using star signs. But mine is right. Mine is academically provable. and it's like i don't care do you want to be right or do you want to make money yeah right there you go talks back beautifully yeah yeah i i just think it i've got to get back to your point of choice here i i just i think that the there is an illusion of safety here from a very unusual historically very unusual run that we've had in australia and again we could spend a whole podcast on this, but besides a sort of, let's call it the anomaly of COVID, we haven't had a recession since the mid-90s.

46:52That is odd. And I would love to sort of attribute that to the genius of our political and economic masters, but we just happened to have a whole bunch of really important rocks when China decided to develop, basically. And okay, great. And then what we did with our riches was we just chucked it all into house prices and it turns out that CBA is going to benefit from it. So, again, I don't want to – all I'm saying is that there is – it's the turkey analogy, right? Always comes back to the turkey. Comes back to – and just for those that haven't heard, I have to mention it again. From a turkey's perspective, they're born into a farm.

47:37The fox is kept away. The farmer feeds them every day. He sweeps out the pen. He's a good guy. You know, any animal that's been in the farmyard for more than a season will go, he doesn't have your best interest. And I was like, what are you talking about? My entire life, he has done nothing but care for me. And of course, it's an American analogy, but on Thanksgiving, he comes and gets his head cut off. And this is, again, not to be doom and gloom. I'm not doing the dude who's like, it's going to drop 40 % this year. I don't know. Again, literally it could double from here. but we are taking an unusual period of time and we are extrapolating it forward and say it will always be thus and maybe it will i hope it is because if it's not there's only one thing left to correct and it's i'm not here's again the other thing i i i i can we just don't have the perspective here in australia but banks are highly cyclical entities by nature they always are and And again, it's not a bad thing.

48:31It's just they are, right? And the maths is, so let me try and do this. They've got, their assets are loans, are our loans, right? Their liabilities are our deposits. So it's a bit backwards as to how we normally sort of think about things. We're entitled to get our money back from them. Yep. And they're entitled to get our mortgage payments from us. Yep, absolutely. We have a promise. Yes. Please, Mr. Bankman, can you create money out of thin air and use it to pay for my house and I will pay you back over the next 30 years. And they have the collateral of the house. Or 50 years if the government has its way.

49:10Yeah. Right. Okay. That's the deal. Now, when you – I had to tweet this out too. I'm sorry. I'm sorry. I'm sorry. But there's one thing that caught my eye when I was reading the report. Matt Common, the CBA chief executive officer, says – this is a direct quote from the statement. We will play our part in simulating economic growth by lending to the productive parts of the economy. So, cue me taking a sip of my coffee and then going all over the computer monitor and then laughing hysterically on the floor for the next five minutes before eventually crying. Because when you look at their assets, 70 % of their loans are home loans.

49:52So, where's this productive part? I would say business is the - That's why they've done so well, by the way, as a bank. Yeah. They are heavier into mortgages than the other banks. And that's been the boom sector profit-wise. That's been the place to be. So keep going. 17 % of their lending, 17 % is for business. So explain to me again how you're investing in the productive parts. And again, I'm not trying to put the boot into property for fun, but it's not a productive asset. It's not. It's a fact. Full stop, period. It has utility, but not productivity. It has utility. It doesn't have productivity, all right?

50:25Yes, you can charge rent. Oh my God, there's a whole economic discussion on this kind of stuff. Anyway, back to my point. And it's a very long bow here. My point being is that forget all of their other loans. Forget the consumer credit loans. Forget their business loans. Forget all the other business loans that they might do, funds, money, anything like that. If just the value of their loan book dropped to 10%, and even a property bear like me will admit that's very unlikely to happen because a lot of people have paid off a lot of their loans. But it shows you the sensitivity that if the value of that loan was to drop, that loan book in aggregate was to drop 10%, they would be technically insolvent.

51:02Now, what that says is, well, what if it dropped 2 % or 3 %? Well, they're fine, but earnings are going to like – you think a 6 % drop in earnings is bad this year? Like, it's nothing compared to what it will be. So again, not forecasting, not predicting, not saying it's going to happen, just trying to make the point that if there is any slight wobble anywhere here, you've got a business trading on double the historical average for a bank. And again, it is very cyclical by nature. I will bet my firstborn that at some stage over the next 10 years, there will be some kind of wobble. I don't know what it will be.

51:38This is a terrible, terrible risk reward trade off. And to your point, maybe the whole world decides that it's now a bond and go, okay, so my upside is my 5 % pre-tax yield, maybe a little bit of system growth on top of that. Okay, it's not bad. I mean, I don't know about you, I'm not getting out of bed for let's call even a 7 % return. But if it goes bad, I could lose 30%, 40%, 50%. Call me crazy. Call me crazy, it just makes zero sense to me. And anyway, what do I know? It just keeps going to the moon. Let me ask you this. One of the phenomena may be, and I've not yet had my head fully around this, is that we have huge amounts of passive fund flows from super and indexing.

52:27And so you get a very significant volume of money that just goes into Commonwealth Bank. Why? Because it's there and it's a major part of it. It's like the top one or two stock in the index. so we buy it because we have to buy it because that's the strategy. How much of a factor do you think that is? Almost zero, actually, having thought about it a little bit in the past. And I could be entirely wrong, right? So this is rampant speculation because it's not provable in any way, shape or form. There's no double blind trial. Circumstances change every time money's added to the market. It's a different price, different circumstances, different opportunity cost.

53:02So it's completely unsolvable. I think a couple of things, mate. My thinking is that – a couple of ways to think about it. Firstly, there's been no sustained increase in PE across the market for a while. Cyclically, yes, absolutely. I love the joint, right? But no sense that we're all paying more for CBA and it's ilk because we just are. We did for a period when interest rates are really low because the comparison was better. And that's what's hard to do because you kind of extrapolate and say, well, in that one circumstance for that month when nothing else changed, this happened, right? So there's no sense that our companies as a group are particularly more expensive on a PE basis than they would have otherwise been.

53:48There's no, as far as I'm aware, evidence to suggest our market is more expensive than the US. That's probably the biggest one for me is we've got the fourth biggest super fund or pension fund pool in the world. So per capita, which would be the 20th or 25th, that should, if that was the case, meaningfully increase Australian share price relative to international markets. Because we've got so much money chasing so few things, it all goes up, bubble, bubble, bubble, up it goes, up it goes. So I think there's that. I do think it's possible that the big end of town gets more money than they otherwise would if we were investing our money independently rather than through super because they tend to be at the top end of town for logical reasons.

54:30If you're running an$8 billion super fund, you're not buying 13 shares in some$25 million company. You're not, you can't, you don't want to. So there's a bit of that. That being said, most of those funds for most of those people either wouldn't have existed anyway or they probably would have run the broker and the broker would have put in blue chip shares anyway. So I'm not even sure there's a significant intra-market, as in within the market, move because of those fund flows. A couple of things quickly. The super funds have the opportunity to find their own opportunity costs. They're not just made to invest in shares.

55:05Yes, if you choose just Australian shares in your super fund, that's where it's got to go. So that's true. But the balance, the mix, the whatevers, they can go most places. if they want to, both across asset class and within asset classes. So I'm not saying it hasn't had an impact, mate. I just don't see any evidence that it has. And it's kind of one of those Occam's razor things of like, well, there's no evidence that it has. Probably best odds are that it probably hasn't, rather than maybe it hasn't. If I dig deep enough, I can find it. So that'd be my supposition. I have no data to prove or disprove it.

55:37I wouldn't trust anyone who'd say they could do it because I don't think you can. But I think for me, the international comparison is probably the strongest one. And again, even there, you're comparing an Australian market with banks and miners against the US market full of tech companies and saying, how do those two markets compare? It's just stupidly difficult. So I just don't know the answer. I would say, though, by the way, it almost doesn't matter because the trend is not going to change anytime soon. We're going to have, you know, when Super started in the 90s, about 38 years ago, people who were 18 and starting work then are still only 48 now.

56:10So you've got, they're going to keep adding money for another X years. the percentage has gone up over that time as well so the kind of the kind of structural flows into super i suspect for a very long amount of time and even with those who retired you don't take your money out as a lump sum and go and blow it all on a ferrari right you you keep it in commonwealth bank or you sell down or whatever so kind of i don't know i don't know i don't know there's evidence for it and i don't know that it matters even if there is other than maybe in 30 years time maybe we had this conversation of actually now we've had you know 30 the last 30 30 years time we'll say hey the last 30 years we've had everyone for their entire working life had super and the last 30 years we've had it at 11 plus percent and so now as things change that if there was a 60 year tailwind maybe that tailwind abates uh i don't know that's consequential what do you think i i don't know what to think um i'll give a shout out to steve he's one of our members on straw man um because he he made an interesting point that 38 percent uh of the asx 200 market cap is owned by retail and industry super oh wow there you go that's wow yeah that's a big that's a big number yeah i don't i don't want to dox steve but he's he's in the industry so he knows his stuff cool um most working adults have 10 of their wages he says i'm reading from his post going to super every month and you know of my of that my guess is you know at least half is sort of allocated to the ASX 200.

57:32Yeah, it's probably fair. Yeah. You know? Yep. So it's just, it's hard to argue against the flows of money that are going in. Oh, yeah. They're absolutely happening. It's indiscriminate price insensitive money. So I kind of take his point and go, yeah, that's got to be something of a factor. But I don't know. Price, as we often say, is determined on the margin. Yes. So - That's right. Once it's there, it's there exactly. Yeah. Yeah. These people might not ever sell, but there might be enough people who do sell for unrelated reasons for whatever that'll still drive the share price. A week and a half ago, we saw a panic when probably 1 % of market participants, if that sold their shares and pushed share prices down 5 % or 8 % over the course of two or three days.

58:11Yep. But I mean, look, this is all academic. My point being is that you can choose to participate in folly or you can ignore it. And I really, people hear what they want to hear. Let me state for the record, I think Commonwealth Bank is probably one of the better run banks in the world, right? It is. the evidence is in, right? Like maybe the future changes, but it's incredibly well run. My point being is that it's just the return potential is awful. The valuation is sky high and there's a massive asymmetry in your return. Does that mean it can't go up from, nah, could anything could happen from here.

58:46But I ain't playing a coin flip game with you where if I lose, I give you a million dollars. If I win, you give me a thousand bucks. I'm not playing that game. Even the loaded coin where it was 90 % chance you'd still win. You still wouldn't do it. And like, look, there's some other person might go, I'll play with you, Scott, and then win three times in a while and walk away for$3 ,000 and go, ha ha, why didn't you play Scott? It's like, well, you got lucky, bro. I'm not doing it. So anyway, that's my point and yeah, let's stop pretending that the Commonwealth Bank is stimulating productive economic growth as well.

59:22Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

59:32Let's finish off speaking of earnings. I want to do Seek, the employment website. We, sorry, well, let me go back. We talk about the.com kind of the big three. Seek, realestate.com now called REA Group and Car Sales now called Car Group. By the way, a popular house is using their tickers as company names. Yes, classified businesses. The rivers of gold that were once on newspapers. One of the biggest revelations of the dot-com era, other than online e-commerce specifically. I think about the Amazons, which I own shares in and others. I own shares in Kogod. I should say that before. I don't know why I didn't, but everyone knows just for the sake of...

1:00:14They know. They know. But if you're just starting to listen, it's important that I say it. Yeah, yeah, no, no. Those three were probably the kind of proof of concept for the internet. It was like, look at this. This is disruptive. this is taking and journalism still by the way 30 plus years later speaking of super and internet kind of hit around the same time um still haven't sorted themselves out journalism in australia is still you know struggling with the business model so these guys were the rivers of gold right they took the classifieds business off the big guys they they made it their own they made out like bandits for years and yet this year uh in numbers released this week seek actually had a loss they lost money.

1:00:53We're not saying profit went down. They literally lost money. They paid out more expenses than they took in revenues. This was a negative. It's a bit of valuation adjustment. I should be a little bit careful. But basically, on the accounting books, they lost money. Now, a couple of questions. Firstly, how the heck does an employment website lose money if they're structuring themselves half decently? And the answer comes back a little bit to what I just said about valuation of other things. It is though, mate, what I found fascinating about part of their challenge as well is trying to go overseas and replicate the model they have got japan in china which is a different type of worth a squinting dollars and not much uh they've got other assets around the rest of the world and it's fascinating to me because this is the you mentioned banks going overseas right we didn't vet classifieds but you look at those three companies and say my goodness these guys are doing an amazing job they have revolutionized classifieds Given the know-how, given the experience, given the platforms, given the technology, given the incumbency, given the balance sheets, surely they could take these business models to other countries, replicate them, and make a fortune.

1:02:02And what's really interesting is car sales result this week, that's also out, was actually a really good result because they have been successful over there. REA kind of fed a middling overseas, and Seek has absolutely struggled. And it's just, I don't even know that I have a so what other than a cautionary tale of just because it works here. And again, your point about banks, just because you can do it, just because... And there's nothing kind of parochial about the success of these companies, right? It's not like they found some weird, well, maybe I'll give it Australia's house price fascination, obsession, call it what you want.

1:02:34But, you know, you think... Religion. Right, yeah, an employment website, you kind of get it right. You make money doing it. You know what network effects are. You get it all right. There is something remarkable about their inability to actually succeed. And in fact, the company's kind of admitted as much. They said, look, we're going to double down now on the Australian New Zealand business. Yeah. And they probably should. Yeah. But I just got a really, really, really interesting kind of example of just being careful what you assume, I guess. And again, I'm not saying it can't be done because Cars has done it brilliantly.

1:03:05Now, could we have known in advance which one of those are going to be successful? I don't know. I mean, it's possible that employment processes are different overseas, but car purchases are the same. it's possible that cars are just because they are known items i don't i don't know i don't if i was going to force a hypothesis it would be that that car selling and buying is reasonably similar around the world and employment can be different but i'm kind of monday morning quarterbacking it right i'm looking and saying well how can i explain this rather than i knew in advance what would happen what are your thoughts i've i've a good rule of thumb which is very close to an ironclad law of nature is any australian company that says we're expanding into china run run it is not a level playing because people go oh there's a billion people and you know it's it's just a different beast for a whole bunch of different reasons it's where money goes to die right like someone's making some money but it ain't shareholders i can guarantee you that So that's the first thing.

1:04:10I mean, look, Seek is the perfect business. I've mentioned before, any network effect business is brilliant. There are certain businesses where it's a winner take all, like real estate and domain, which is sort of falling away. There's maybe two. There's maybe two. There's car sales and there's Facebook. I don't know. Car sales and there's nothing. there's Seek and there's, what's it called? What's the other one? Oh, there's Summer has Employment Hero. LinkedIn's trying to do it. They've come and gone. Right. Do you remember Monster? Do you remember Monster Board back in the day? Monster. Monster.

1:04:51That's my point because all of the people who are advertising jobs are on Seek. So anyone who's looking for a job is on Seek. So anyone who's going to put a job ad out there is going to put it on Seek. It is a mutually reinforcing flywheel that is incredibly, incredibly difficult to disrupt. And your customers do all the work for you. That's the other thing I love about it. It's like the customer is creating the value by firstly, obviously posting the content being there, but the customers turn up. So the suppliers turn up. So the customers turn up. So the suppliers turn up. You're sitting there at the head of the table going, these are all these people kind of coming because they're not coming for me.

1:05:27They're coming for each other. And I get to make the money off it. This is brilliant. And what do I do? I've got a website. You know? I've got a website. There's not a factory here. No one needs to drive a tractor and get a crane and whatever. So in 2001, right, their first year as a listed company, they made$11 million in revenue. That's crazy, eh? Right? Three years later, get this. Three years later,$40 million. Three years after that,$160 million. Three years after that,$280 million. dollars three years after that half a bill more than half a billion dollars right so it's just like this was a license to print money and and they and and you will always find the bit you we often talk about amazon we've talked about rea group before whenever you have a structural change in an industry where the world goes from one way of doing things to another yeah zero my God, who out here listening uses a desktop-based accounting software?

1:06:27Like with all the ages, maybe three 70-year-olds who are listening, right? No one else in the world is doing it. And those three 70-year-olds are the bane of their accountant's existence, right? Because everyone uses Xero, right? Yeah. And so how do you go wrong with this? And you've touched, you've hit the nail on the head. And I wrote an article about this recently called The Growth Dilemma, is that you kind of need growth. You grow or if you're not growing, you're dying, is the saying in business. But in the pursuit of growth, more money has been blown up than anywhere else. Yeah, that's paradox, right?

1:07:03Because we are masters of the universe. We have more money than we know what to do with. Look how successful we are. Let's go and do it in Brazil. And we're told to find some way to grow, so we're looking for some way to grow. People expect us to grow. We convince ourselves that maybe probably it's a good idea because if I want to believe it, then I can believe it. Yep. Now, what have they done with their money? They've gone on these overseas adventures, misadventures, blown up a bunch of money. They started a venture fund. Now, credit where it's due, it didn't have a great year, but overall it's done reasonably well.

1:07:38But my point is, why is a classified business running a venture fund for? It's like Harvey Norman and his dairy farm. Or Screw Turner and Flight Center's bike shop. What? What are you going to do? If there is one thing that is important, and Buffett talks a lot about this, which is each year he doesn't really care what his businesses do. The question is, did you strengthen your moat this year? Because business cycles will come and go, have good years, bad years, but you need to know what your moat is. Where is your competitive edge? What did you do to strengthen it this year? Because if you do that, everything just looks after itself in the long run.

1:08:12And these guys have misunderstood where their edge is and they've gone, they've taken a domestic massive edge and they've tried to replicate it elsewhere. I would guarantee you of this, if they did, if they had, and we'll talk about why they didn't do this in a moment, because we talked about it a bit off air, you had a really good response. But if all they had done is gone, okay, we've now matured, we've hit the point where we've got all the market share we're ever going to get in Australia, which, you know, what is it, 90 % or whatever it is. We're just going to run lean and we're going to run for cash and we're just going to pay out massive dividends each year.

1:08:47Shareholders would have made a fortune, an absolute – I mean, look, long-term shareholders have already made a fortune, but you would have made an insane amount of money had that come out. Well, you do both, right? If you're a long-term shareholder, you've got the capital growth and then you've got the benefit of that growth being spun out to you every single year and there's beautiful cash flows and dividends. Beautiful, beautiful. And so what's happened recently is it's like, well, actually, I stopped reading out the numbers because that's when the story changed. Back in 2017, they were doing a billion dollars in revenue.

1:09:15And they're doing about the same seven years later. And by the way, I mean, COVID was an anomaly, but it halved almost. And then it came back. But it's hovering around there and they're losing money. Like, how? How is that possible? The hubris of management is frankly what it is. And again, we're all being kept in hindsight here. But the more I've thought about this is that the more nervous I get whenever you have a management team that is believing its own brilliance and they're good on them, they've pulled a rabbit out of the hat and they're going to do it another five times in a row. It's just like the world is not that kind and you are not that brilliant to do it.

1:09:59but it is at the same time almost unheard of for a management team to go, yeah, I don't think we've got any edge anywhere else, so we're just going to do this. Now, it is the smartest move. And I think the problem is just the lack of courage to articulate that to Shell and say, guys, we're not going to grow. But hey, hey, hey, calm down. Everyone sit down. Before you get too worked up, this is why we're going to do it because we want to put more money in your pocket. Now, we can. We can chase growth, but growth's not certain. It might come. In Carl Sale's case, it did, but it might not. So what do you want here?

1:10:39And it's different when you're talking – we were talking about certainty earlier on in the pod. It gets to a point with Seek, their Australian domestic business, it is a certainty. It is a dead set certainty, right, at this point. It's very difficult to see them being disrupted. There are edge cases where it's unparalleled universe in the future. They do lose that lead, but they've got to try really hard to lose it, right? Because if they can't adapt to whatever comes with that market share, that size, that heft, that balance sheet, they shouldn't be in business. I'll say one more thing and then I'll throw it to you.

1:11:08The other thing that was interesting was that, well, they charged more for their ads. Again, you can't do that unless you've got immense price and power, right? It's good to be the king. It's good to be the king, as Mel Brooks would say. but the number of job ads have fallen off a cliff now i don't want to i don't want to let my personal bearish bias the sort of into it but is that like a little bit of a forward indicator yeah i totally do is that a bit of a forward indicator like like feels as though that's not a great economic sign so anyway i've given you two very different points there but i'll let you run with it um my first thought is that human behavior is human behavior and think where where does the house price question and the run for cash question overlap.

1:11:54It overlaps in the interests of those who currently own the assets. I don't mean this in any, there's nothing conspiratorial about it. Here's the thing. Let's say you own shares in, I'll make it car sales because they're doing well. Car sales are priced for growth right now. Now, they might be a year away from Seek. Oh, that was my other point. Sorry. Yes, go ahead. So Seek has done seven years and not growing much. There is a little bit of divestment with Seek, so we've got to be a little bit careful where we interpret those numbers. But back to car sales. They've been growing really well. They're still growing, right?

1:12:28People are just like, oh, it's amazing. We're going to get lots more growth. And so it's priced for growth. It's priced at a multiple of earnings that suggest the future is going to grow. Now, if it's not going to, that's shareholders' fault for having it priced so high, right? So let's put that on the... And this is not a defense at all. It's a description. So shareholders say, you know what? I think car sales is worth... What is it? Let me pull it up. doing this live we'll keep this reasonably short not too many numbers but car sales currently 36 dollars a share and the shares are 52 times earnings now you're not going to pay for two times earnings for business not growing anymore so car sales put that into earnings yield just for your earlier point yeah nine percent yeah so so car sales come out tomorrow say so guys um look here's the thing we tried to grow uh we reckon we probably tapped that out we're gonna to run for cash now we're not going to grow anymore yeah and the share price will fall by two thirds yep it just will right why because you're not going to pay 15 times earnings for a business it's not growing anymore now maybe it's maybe maybe it doesn't fall by two thirds maybe it falls by a third because you're going to pay 15 times earnings but all that money that was used to invest in growth now gets paid in cash earnings drop jump up yeah because like you know you take some of those costs and you pay that we're going to get rid of the mergers acquisitions team we're They're going to cut back on our marketing and developing countries.

1:13:46So we're going to, you know, profit will grow for a year, but then flatline. So it's going to go from 52 times earnings to 20 times a high level of earnings, but the share price still halves. Okay, well, that kind of sucks. So now we've got an$18 share price. Every car sale shareholder is banging on the door of every director, chair, and the CEO and saying, what the hell have you done? I'm losing money. You've got to find a way to grow this business now. I want the share price to go back up. And so - What did we say last week? Never ever be thinking about anything else except the incentives at play.

1:14:17Right. And it's not even wrong because the shareholders in that company are the owners. They want the manager to go and find growth. The CEO is duty-bound, in fact, legally bound to go and do exactly what he's told, which is do what the directors say. Directors as responsible entities or the responsible managers for the shareholders. Say to the CEO, your boss has just, my owners, the owners I represent have told you to go and get growth. Now, we also know that's likely, in a lot of cases, to blow up the money. So you end up with an even worse situation you started with. But the folly of, I don't like the share price falling, is the issue.

1:14:53Now, again, let's take it back a step. Could management have said three years ago, look, guys, we expect the growth rate to kind of slowly fall to a reasonable level over the next four or five years. When we get there, here's what we're going to do. Yeah, absolutely. Could have or should have. But at that point, do Shells want that? Well, maybe not, because they want the share price to stay high. And you've got these conflicting incentives, right? If I owned a business, I would be saying, I'm not going to buy shares at$36 if I think growth's over. Yeah. But that's not me. And so who are the shareholders?

1:15:20Now, Andrew and I will say regularly, if management was smart, they would do this. If shareholders were smart, they would do that. And that would be true if you owned the whole company. Buffett for years has said, yeah, you know what? The future's not going to look as good as the past. Our return's going to fall. Yeah. And I'm a Berkshire shareholder. They're like, well, we trust you, Uncle Warren, if that's what's going to happen, cool. We're going to do this thing. If you're a CEO trying to build a career as a 40-something-year-old running car sales and being, you know, whatever, whatever, you haven't got the cachet, personal or professional, to say, so here's the thing, guys.

1:15:52We're kind of, the story's over. We're done here. And it's also true when we talk, and by the way, at some point in the future, someone, if that was to happen, someone will say, oh, man, car sales have been a terrible investment. Shares have fallen from 36 to 20. Oh, what an awful company. What a terrible job. And the answer, the problem won't be the company did badly. it would be the company exactly what i wanted to do the shareholders expected too much of it and so this is kind of the you know it's it's and there is no easy answer there is no moral to the story there is no here's how to avoid this stuff i will say if you own a company you're paying a growth multiple comfort yourself if you can that there is a reason to believe that growth will continue if car sales grows strongly it probably will for the next 10 years today's price is cheap if car sales stops growing next year today's price is probably about double at least what you should be paying yeah and you need to know that because that's going to happen right the market will be will be fierce it will respond to whatever happens with the business um but if you own a growth company particularly and so many people have done this they've maintained a growth multiple long past it should have been in place g8 education is a great example right um child care was it badly run maybe a little bit um did investors just expect that it could keep growing forever beyond expectation yes okay well whose fault is it is it the company's fault because the shareholder's paid too much, maybe if it led them to believe it could pay, they could justify that.

1:17:09Maybe you blame management or a manager or the board or something else. But more often than not, it's like, well, you guys pay it up if you didn't kind of judge the growth trajectory properly. Don't come looking at the company. You only bought the shares. No one had a gun to your head and said, you must pay this price for those shares. That's a long rambling rant, mate. What do you think? No, I don't disagree. I do think that management often make their own bed. Oh, yeah. Or, you know, what's the better saying? Hoisted by their own petard. Exactly. Which I love those. I don't even know what it means really, but it sounds cool.

1:17:43So back in 2016, if ComSec is accurate, the average annual PE of C was 28. So, I mean, that was, you know, above average, but management have come out at that time and said, we're going to do this. So there's a chicken and the egg scenario here where it was like, did the share price go up and then management tried to rationalize that by then promising growth? Or did they promise growth that pushes the share price? And there's a little, it's not an easy answer actually for that. But I've always thought the best managers, and they're very rare, and the CEO also needs to be a pretty major shareholder and have a lot of power on the board to sort of do this kind of stuff, which is why it's rare.

1:18:31But they just be like Buffett, consistent in their messaging. Expect this. And those who want the massive growth will go, oh, that's not for me. Cool. I've always thought this in our industry. You get the customers you deserve and CEOs and enlisted companies get the shareholders they deserve. And maybe shareholders get the CEOs they deserve too, by the way. Yes. Yes. And we get the politicians we deserve. That's right. It's all of this is true. And so, as you know, I mentioned at the start, we do a lot of CEO interviews. And every now and again, you get one that will just sort of say, well, we're doing this and we're consistent on it.

1:19:09Yeah. But more often than is comfortable, you'll get one who goes, well, we did this because the market told us they wanted to do this. And it's like, no, no, no, no. So? The market's an idiot. Don't listen. Stop listening to them. Investors will tell you. What do investors want? They want the share price to triple and they want no risk to do it. That's what they're going to tell you. Your job is to deliver the best you can, but to also, without fear or favor, give them the hard truth. I'm not doing that. I'm not doing that. And not because I'm difficult, because you're unrealistic. but instead i'm going to do this and let me convince you that this is actually going to be in your best interest now again it takes a very rare courageous person who's got the you know position of privilege to be able to do that but they tend to be like incredible value creators for their shareholders and they get the shareholders who get the mission get the get the value proposition and buy accordingly think about and i know this better than anyone in small cap land You know, whether it's, oh my gosh, you know, what's it, BrainChip, Webit Nano, DroneShield, you know, these kinds of companies.

1:20:14Look, there's a lot of nuance here and I've owned DroneShield in the past. So like I'm not, there's a lot more to sort of unpack with all of these things. But they go to the moon because they attract the hot money, the fair weather friends, people who are all your biggest supporters when the share price is going up. but will turn on you quicker than you can say, you know, earnings downgrade the second anything goes wrong. They are not the shareholders you want. Now, look at Rob Milner and Soulpats. Yeah. You know, they've got the most boring presentation you'll ever see. But I tell you what, no one – and I say that with love, Rob.

1:20:51Yeah, totally. Yeah, exactly. You know, but none of their shareholders, and I know you're one of them, is upset with that. That's right. Right? And yet he could come out at the next earnings call and say, this is what we're going to do. We're going to go for it. We're going to do this. It's going to be brilliant. Earnings are going to triple. And the share price will go up in response to that. That'll attract the momentum traders. And they'll just paint themselves into a corner where it's very difficult for anyone to kind of win. So I don't know what the point is of that. Know the circumstances you're getting into.

1:21:25Understand the different incentives. Understand the different ways these things play out. think through the business that you're buying don't rely on management or shareholders other shareholders expectations or commentary in terms of the future which is kind of where we started right with the RBA and forecasts there's no reason to believe a company forecast is any more reliable than an RBA forecast quite honestly because they all know what tools they've got they all know where they've been they all know where they are what's coming I don't know neither do you and that's kind of the challenge I'm going to finish mate with one thing for you hoist with his own petard is a line from Hamlet.

1:22:01And the phrase is meaning, I'm half reading, half paraphrasing Wikipedia. The phrase is meaning is that a bomb maker is blown off the ground or hoist by his own petard, which is a bomb. So to be hoist with your own petard, it's to be blown off the ground by your own bomb. Oh. I always thought a petard was like, I've always conjured up an image of a wedgie or something. It's like a, I don't know, an undie. I didn't have bomb in my guess. Hoist with his own batard is the quote from Hamlet. Such a good line. Act three, scene four. Yeah. So there you go. That's a good line. Can I just say one more thing on Seek, right?

1:22:40Yes. So the pivot that they're doing now to focus more on domestic might be the right move, but they're still on seven times sales. I was going to say, this is still a kind of a version of that lower growth, right? I mean, there's some growth in Australia, I'm sure, but it's not the explosive green field, blue ocean growth of somewhere where Seek doesn't exist at the moment. So in dollar terms, maybe it's easier to get for a little bit because if you grow a very, very big business a little bit or grow a very, very small business a lot, you're probably getting more growth in dollar terms from the big business.

1:23:09But the sheer headroom has got to be less here. It's just, I mean, I love to do lots of what if scenarios rather than trying to guess exactly what the intrinsic value is. And you can sort of say, well, okay, they're going to steer away from growth, focus on cash flow. They're doing about a billion at the top line now. That'll change as the employment market goes up and down. But business like that, gosh, they should be doing a 20 % net margin at least, right? If they were running, maybe higher. Let's say it's 25 % net margin. This is after taxes, after absolutely everything. So$250 million in profit.

1:23:44What are they, analysis on the run? $355 million shares on issue. That'll give them a$0.70 earnings per share. And again, this company that's probably going to have a pretty decent yield at that point in time. I don't know. Again, they're not investing for growth. They might be able to pay 85 % of that out. Let's chuck that in. There's a 60 cent dividend year enough each year. I don't know. What would you pay for a company, a very reliable dividend payer? It's going to be largely fully franked if an Australian business. You know, gosh, CBA is getting 5%. Maybe that's a reasonable number. You do the maths and that gives you a share price of$12.

1:24:24They're$20 at the moment. Now, you could easily and maybe rightly pull apart any one of those assumptions and that radically changes it. But it's a worthwhile exercise to go through and sort of say, well, what is the net margin look like? Where does the growth sort of plateau off-add-out? What will the market pay or demand in terms of a yield or a multiple for that? And I just look at it all and I go, this is, again, the Australian business, absolutely bulletproof. I think it's fantastic. I still think it's overpriced. So again, there you go. If you're listening and you're smart, buy with leverage because it's going to triple from you now that I've said that.

1:24:57And you're welcome. The ultimate reverse indicator has spoken. Oh, dear. Oh, dear. We will see. I will disclose. We used to have it as a recommendation for Motley Fool Share Advisor, and we told our members to sell it on Wednesday morning. Wednesday morning. Yeah, I can see why. There you go. That's been a fun tour de force across a very large amount of territory. Everything from Sikh to Shakespeare to the RBA and a little bit of bank bashing in the meantime, which always makes Andrew happy. And we may have gone through. Yeah, it's always fun. Always a good time to bash the banks. And we probably got through 60 % of our agenda too, so that's a win.

1:25:30Exactly 60%. We did miss a couple of items. But hopefully it was still entertaining, educational, and informative. I hope we've spent a fun hour and a half odd with you. On the assumption, mate, that you're not finished bashing the banks and you have got a little bit more fire in the belly, will you reserve some for Sunday morning? You know I will. I know I will. I know you will. Until then, have a great first half of your weekend and full on. Cheers.