In short
Podcast Summary: Motley Fool Money - When the Market Hates You (September 22, 2023)
Overview Motley Fool Money is a finance and investing podcast hosted by Scott Phillips and Andrew Page. In this episode, they discuss recent developments in monetary policy, the new leadership at the Reserve Bank of Australia (RBA), and the importance of maintaining a long-term investment mindset during challenging market conditions.
Key Topics Discussed
- European Central Bank (ECB) Interest Rates
- The ECB has indicated that interest rate hikes are likely over, which reflects their struggles with economic recovery since the Global Financial Crisis (GFC).
- Discussion about the relative stagnation of the European economy compared to others, emphasizing past crises like the GFC and the sovereign debt crisis in the Eurozone.
- New RBA Governor
- Michelle Bullock has taken over as the RBA Governor, sparking discussions about potential changes in monetary policy direction.
- The hosts debate whether her appointment will lead to meaningful changes or simply continuation of existing policies.
- The Nature of Money and Central Planning
- A detailed examination of the nature of money as a social construct and its implications in economic management.
- The hosts argue against central planning of monetary policy, using metaphors to emphasize the complexity of economic systems and the unpredictability of markets.
- Long-term Investing Amidst Market Volatility
- The conversation shifts to the challenges investors face when the market is unfavorable.
- The hosts remind listeners of the importance of focusing on business fundamentals rather than short-term price fluctuations.
- They highlight the tendency of market participants to act irrationally, emphasizing the need for patience and a long-term perspective in investing.
- Personal Investment Experiences
- Andrew shares personal insights on investing in companies that the market might currently undervalue.
- The discussion touches on strategies like dollar-cost averaging and the importance of maintaining conviction in one's investment thesis despite market pressures.
Key Takeaways
- Market Psychology: Investors often chase prices upward and panic during downturns. Understanding this behavior is critical for long-term success.
- Economic Complexity: Economic systems are dynamic and complex. Central planning often fails because it cannot account for every variable in a fluid market.
- Investment Mindset: Successful investing requires a long-term perspective, resilience against market sentiment, and a focus on the intrinsic value of businesses.
- Preparation vs. Prediction: Instead of trying to predict market movements, investors should focus on building resilience in their portfolios to withstand volatility.
Conclusion The episode concludes with a reminder that while markets are unpredictable, a solid understanding of the underlying business and a disciplined approach to investing can yield positive long-term outcomes. The hosts encourage listeners to maintain their focus on fundamental analysis and to be patient during market turbulence.
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Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.0:10Welcome to Motley Fool Money, the podcast that despite our best endeavours, wasn't appointed as the most recent Reserve Bank Governor. He wasn't appointed Reserve Bank Governor. He is Andrew Page. I wasn't. And I'm Scott Phillips. Unfortunately, someone else pipped us both at the post. Mr. Page, there was a time when we might have imagined this podcast was unfortunately into abeyance because we had more important things to do running the monetary policy of the country. Turns out we're still here. We are still here. And as you know, if that ever was, if I was ever appointed in a position of power at the RBA, I'd be shaking some stuff up.
0:44Let me tell you right now. There was no surprise you weren't chosen, mate. So as a result, of course, you now have to remain running strawman.com, which is an online private investment club. Of course it is. That's right. There you go. How are you, mate? I'm so much better than I was last week. I realized after we finished off. You really picked up until the end? Yeah, I did. That was the turning point, actually. Real-time turning point happened on air. I just want to apologize to everyone because I did think afterwards, it's, gosh, it can be pretty not nice to listen to someone that's stuffy and sick and coughing and spluttering and sniffing in the background.
1:21So if people who had their earphones in and walking around, I really do apologize. That mustn't have, it couldn't have been too nice. No, but you did a remarkably good job, actually, I've got to say. And you did come good towards the end, which was great. I'm glad just for you that you were feeling better. I know you're still not 100%, but you're back again to share your wit and wisdom with our listeners. And I really appreciate well you you found the unlock which was get get me talking about property as like i i dug deep and i had yeah that really perked me up so if only i if i recorded the podcast three days earlier you could cut this whole covert thing absolutely now now we know there's no force of will like ram on a rant about property absolutely i could uh we should be we should bottling that yeah what's the uh permanent electricity generation in a generation uh anyway perpetual motion Petrol is what I'm thinking of.
2:07There you go. Powered by property rants. I love it. Plug me into the national grid. You know, green energy. Yeah, solar. Just ram ranting. Oh, mate. Hey, let's get into this week's topics. Interesting things happening overseas, actually. And look, we've talked about rates before. And I know you have a different view on what rates should be used for and how they should be used and all that kind of stuff. But in the current orthodoxy, well, before you are appointed governor to really shake things up at the RBA.
2:41Actually, I've got this picture of you on my head now, mate, of you channeling Ronald Reagan. Reserve banks aren't the answer. Reserve banks are the problem. I would absolutely use that line too. Hey, but, but, but, but, all of that said, until that happens, The European Central Bank this week pretty much calling the top for interest rates over there, which I thought was just a really fascinating thing for them to do. The last increase in US Fed funds rate was only a month or two ago. The RBI is now three months without one. I don't know it's a particularly outlandish thing for the ECB to say, given where we're at.
3:19I am a little bit surprised. the well actually i was gonna say i'm actually not surprised because the european economy never really recovered from covid i mean for all of we spent a lot of time talking about australia obviously and then a lot of time talking about the u.s for kind of historical and cultural and market size reasons the european economy has just been kind of never really made it out of the gfc just kind of just kind of rolled forward in a really mediocre nothing kind of state they had to increase rates because they've got the same inflation problems we've had but they kind of missed out on the economic growth that's supposed to come with it.
3:53Yeah. I mean, there are consequences to certain monetary settings, you know? So let's roll it back, which I know it feels like an eternity ago. It does, doesn't it? But we had this thing called the GFC, which marked a bit of a culmination. Well, actually, no, I shouldn't say culmination because the poo show continues to roll on. But it was a massive impact. And then do you remember the sovereign debt crisis of the pigs? Portugal, Italy, Greece, Spain. You throw Ireland there too and they had the double I in the pigs. Sorry, Ireland as well. So we had this profligate government spending, completely unsustainable.
4:37And that had real consequences. So a whole bunch of money was printed. A whole bunch of stimulus was done. People trying to centrally control something that is complex, dynamic, and adaptive, such as an economy. And lo and behold, lo and behold, it didn't work so well. And so we struggle through, we muddle on down the road, we kick various cans. And it's just completely the most unsurprising thing in the world that that, to me, would happen. And the fact that, you know, it feels like success in the same way that it feels like success if I avoid my hangover by just continuing to drink. But, you know, the reality is that chickens will eventually come home to roost, you know.
5:25And I think this is where the Europeans find themselves in. with a... The Eurozone is a great concept, terribly orchestrated and executed. You know, you've got a monetary union, but not a fiscal union, which dooms it to failure from the get-go. Yeah. Absolutely dooms it to failure. Do you know, were people saying that at the time? Yes. Because at scale, like responsible, respectable people, because I've got to say, we don't... I mean, I wasn't a huge student of the Eurozone at the time, right? so i can't claim to be particularly across this stuff wasn't paying a lot of attention to it it's obvious in hindsight it should have been obvious at the time i don't remember being raised at least in you know in the respectable classes in the newspapers and other things i don't remember reading about this whole this is a disaster waiting to happen depends who you read mate if you read the quote-unquote respectable then we know what i mean but it wasn't it wasn't it wasn't in the popular discourse it wasn't i don't remember i don't remember hearing i'm i'm not saying i there might have been out there i just i don't remember being conscious of that conversation being had, that's all.
6:30Yeah, it wasn't in the mainstream. No, it wasn't. But, you know, it just comes back again. That's our fundamental misunderstanding of what money is, I think, and how it all works. And we just sort of, you know, of all of the nonsense that happened in crypto and how demonstrably dumb that all was, it's the same kind of thing that happened over there. It was just the token in question was the euro, right? But it was still completely made up, like all money is. And it was centrally managed, which is, you know, here's the thing that makes my brain explode. We all have acknowledged, most of us at least, that like centrally planned economies don't work.
7:06And yet we centrally plan the most central component of our economy, which is money, you know, and we are surprised. And it's not, again, there's no conspiracy here, I don't think. But again, three words, you know, dynamic, complex, adaptive. No one would take me seriously if I said that, if I gave a weather forecast for, you know, the 22nd of December this year, because it's impossible. Like a supercomputer or every single supercomputer, quantum computer, whatever in the world can't do that because it's just too complex a system. You know, it's exactly what we do with the economy, which is, you open up the mathematics textbooks.
7:47That's, it's like, you know, the stock market, the economy and the weather are the three archetypal examples of these kinds of systems. Yes, yeah. And we fundamentally misunderstand what that means. You can't predict it. It's not like, oh, that person just wasn't smart enough. Oh, if only we knew that. You can't know. You can't know. And yet we have the hubris to believe that we can. And when we tinker with the best of intentions, we tend to make things far, far, far worse. And, you know, we are, who was it who said that history is just one damn thing after another? and you can't understand the year 2023 without understanding what 2022 and 2021, you've got to go back.
8:31Everything leads on from something else. We're dealing with stuff now that are results of COVID. Before that, we were dealing with stuff that resulted from the Eurozone crisis. We're dealing with stuff that happened in the GFC. We're dealing with stuff that goes all the way back, frankly, to the dot-com bust. Sorry. And then before that, you know, there are there. Do you remember when who was it? The exchequer of the UK was saying that was a Gordon Brown said that we've now solved the economic cycle. Probably. Do you remember that? Inflation was supposed to be dead, too. We're honest. Inflation's dead.
9:05We've conquered the economic cycle. Yeah. Yeah. Now, that is the height of hubris. To be fair, I may not have heard about the Eurozone criticisms. That was always stupidity. as soon as you say something cyclical is is not sickly anymore that they that should be that should have warning signs on the front and back they should be blaring you know sirens the whole the whole thing yeah absolutely it's and it's where i cut low some slack you know everyone's loved to put the boot into him he's he's only his only flaw was probably a big flaw was was the hubris to think you can actually do anything and get it get it right you know and and we all forecasting yeah how did you get it wrong it's like well you've given the guy an impossible task he can't do it no one can do it and anyone who does do it gets lucky you know it's like day trading right like okay show me someone who's successful and i'll show you someone who got very lucky and someone who won't be able to repeat it you know what i think it's worse than that mate i think because i think it's worse than that because it's not so much that he got they get lucky when they're right it's they're right only when circumstances do what they normally do yep You know, if you're a forecaster, your best bet, we talked about forecasting the stock market before, your best bet is to forecast the average.
10:15Because generally speaking, you're going to be pretty close most of the time. And when you're out, so is everybody else going to be. Yep. That's what we do. Right. So when I'm roughly right, we're all roughly like, look, I'm a genius. When I'm wrong, yeah, but everyone else was wrong. We couldn't have foreseen that. It's like, well, if you can't foresee something, that makes the folly of trying to forecast on the first. That's exactly the point, right? But you get away with it by saying, you know, oh, I can't be going to be between 2 % and 3%. Okay. And it will be. Most of the time, it will be exactly that.
10:40So if you're unlucky enough to be Reserve Bank governor when circumstances go, not know your actions, but circumstances that's different, it would have been Bernie Fraser or Ian McFarlane or Glenn Stevens before him. In the same situation, they would have made exactly the same, I'm pretty confident saying they'll make exactly the same mistakes, not because they're idiots. Because as you say, things are by definition unforecastable. They're unknowable. So you only are, quotes, right when circumstances don't make you look silly rather than the other way around. There's a really good, this goes back a while, but there was a study done in terms of if you want to be the most accurate weather forecaster, just repeat what happened today.
11:16That's brilliant. Because there's a bit of momentum in things, you know? So it's just like if it was sunny and 32 today, go with sunny and 32 tomorrow. You'll be more accurate than some of the more accurate models. You're not all the time, but more accurate sort of overall. This is the nonsense of giving low the boot, right? Because the government needed to scapegoat someone. They needed to point the finger and blame. And guess what? They've replaced him with someone who is cut from exactly the same cloth. A career bureaucrat who spent her entire career within the RBA, who would have made the exact same decisions and is going to do exactly what Lowe would have done more or less, you know, and to think that, okay, now we're okay.
11:55We've got someone new. And then she'll inevitably make mistakes because how do you not? And then everyone will point the finger and get angry. and then we'll replace them. And it's a circus. It's an absolute circus. It's just why I'm really hardcore on some of these things. I just, we, it is, the Polly's love it, right? They love it because otherwise we would have, they would be wearing the blame for absolutely very poor fiscal decisions, very poor structural conditions within the budget and stuff. And, you know, which guess what? It has a consequence. And it's just so much better to sort of point to someone else and say, ah, look at that.
12:35It's all right. We'll fire them and we'll put someone else on the board and we'll do this and we'll do that. And we all feel a bit better about ourselves and it continues to roll on. So it is such a difficult argument to make because it feels as though it has always been thus. And the answer, the next scenario is, well, what would you do? Is if there is some solution, there are some things that we feel, I think, as humans, well, if we just did this, we could solve all of the world's problems. And I think that there are some things that are just unsolvable and will always be unsolvable. In other words, there will always be unknown unknowns.
13:14There will always be the black swans. And that is just how it is. So my stance would be is, you know, preparation over prediction, right? Like that is, I would build anti-fragility into the system, robustness. We were chatting off air about, you know, the just-in-time delivery and all the things that happen with supply chain disruptions and how people manage their inventories. It was just optimized within an inch of its life, which was brilliant, as long as nothing, there was no hiccups or speed bumps. And, you know, it was like, guess what? There was. And, okay, did we know it was going to be in 2020 and that it was going to be in the form of a global pandemic?
13:55No. But it was always going to be something that happened. And, you know, resiliency is what we need. and resiliency comes at the cost of a small degree of inefficiency. And that's okay. That's okay, right? And so anyway, no one has this conversation, I don't think, in the mainstream. And we just can't get beyond the, oh, what this means for my home loan. That's as deep as we get in this country and around the world. And it's myopic. It's shallow. It's frustrating. I wonder if you have any thoughts on that, Andrew. i'm so so serious can i can i take a slight tangent from that mate i um you talk about you talk about the fragility of of the systems where just in time is right i think that's i think this is where i want to come back to this is the investing takeaway honestly from all of this is that we i wonder whether i wonder whether our countries our systems our companies are getting a little bit too big um i remember reading good to great i'm sure you have too when there's about 3M, the business that's kind of this massive now conglomerate of just lots of cool things.
15:06Oh, yes. It was usually Minnesota Mining and Manufacturing or something. Now it's, you know, Scotch tape and post notes and all that kind of stuff and everything else. Yeah, exactly. They actually, when the company, or they used to anyway, when the book was written, when a company gets to 300 people or so in size, they devolve it, they hive it off. Love it. And their idea is, look, you know, yes, there are efficiencies from centralizing HR or payroll or finance or whatever, but there are massive economies because you get bureaucracy and you get stealthifying kind of processes and that kind of thing and they to their view 300 people least at the time was the right number and i say that for a couple of reasons firstly i don't know if i said last week or not i certainly said on twitter during the week that i'm dealing with an insurance company right now who is doing an absolutely terrible job of dealing with my insurance claim and it's actually nobody's fault and so and here's what i mean about size right so So is it efficient?
15:57Yes. Why is it efficient? Because when I call, I don't have to speak to one person. My details are on the system everywhere. And so as long as everything works perfectly, which is to your point, this thing works perfectly. Because I lodge a claim. It's all there for everyone. Anyone who accesses the computer can open it and see what's going on. They can answer my question. They can organize a trade. It gets done. Except when things go wrong and you have a conversation with someone that doesn't get resolved, the next time you speak, it's to somebody else. Next time you speak, it's to somebody else.
16:19And as I said, in 99 % of cases, this is probably fantastically efficient for the company and for policyholders and it probably gets premiums lower than they would otherwise be if it doesn't work then it all goes completely belly up because you can't resolve it and so then taking that to as you said just in time or the pandemic we only had so much ppe because we kind of went well it's surely how much we probably will need and someone some bean counter somewhere years ago said let's have a little bit less and it costs too much to keep it we've got to replace it if it degrades or deteriorates or whatever else happens and so you kind of roll that forward and you end up with exactly this sort of situation and i think again so then back to investors if you were a farmer and you were you were you were growing wheat right you're growing wheat to cover yourself for a year till the next crop was due you wouldn't say oh you know what i probably have the silo just a little bit smaller because normally most of the time it's okay i mean one year in 10 or one year in 100 we'll starve but the other rest of the time we'll be fine you just there was no there's no circumstance in which you would take that deal and i think the disconnection of decision from consequence both in terms of the people the time the systems the processes i'm all for efficiency don't get me wrong but that lack of redundancy you know i i've got an example of sorry it's a bit of a rant but it's going in a direction it's relatively yeah relatively methodical um you know when you take that out you lose the ability to really understand that's what the insurance company the people in the insurance company probably think they're doing a great job there's no one to see my problems and deal with them because the system isn't isn't created i don't think it's that cynical someone in some office somewhere has said hey we can deal with this stuff yeah there might be some problems but it'd be okay we'll be fine you know and there's no one to refer this to or to solve the problem if they solve the problem they'll fix my issue but the system doesn't ever get resolved because there's nothing there's no systemic kind of overview of the system so it's one of those things where the disparate parts tend to roughly work together now take it back to to you know investing this is where the you know the silo for winter thing really comes to the fore do you want to be just probably okay if everything just works out well at a human level we all say no that'd be crazy of course i wouldn't just assume this is gonna be okay never bother taking any actions just in case things don't work out as well as i want but systemically i think the further we get away from each part of the system the more people the bigger the larger the more interactive whatever there's real benefits from that but losing redundancy is a problem so here's my here's my last anecdote i'll let you get in in queensland during the during the uh during the pandemic or the worst of it they they built some more quarantine facilities right and now the pending is over people say how what a waste it was they're selling off the quarantine facilities and i just think there is no more you know and it was politically unpopular because politicians are idiots and and you know nutbags and nutbags but the idea that just so there wasn't any quarantine we used to have one in in sydney right it was on north head we literally had a quarantine station they flogged it off because who knows a quarantine station queensland says oh we should build quarantine station they do it the pandemic finishes oh thank god we can sell that thing i fully ever did that again and you just think have we literally this is during the pandemic they're selling it off have we learned absolutely nothing from this entire exercise it just drove me bananas anyway that was a lot of a lot of me talking mate no we haven't we haven't learned a thing um here here's a here's a um i think is an interesting juxtaposition so let's look at coca-cola the u.s coke yeah um ko is the ticker yes 100 year old company plus you know gush is cash flow honestly actually gush is cash flow like you wouldn't believe right yep even even with all like the rising sugar epidemic and the rest of it they're in pretty rude good health yeah this company has 40 billion dollars of debt on the balance sheet what why why does a company that old need debt for yeah yeah actually why does a company like that even need to be listed for think about it and and what you do it is a consequence and a symptom of the financial engineering and the rent seeking middlemen getting involved and so i'll be more efficient if you did this and we can optimize for that And it's sort of like there's a logic to it, but it's very much trying to juice and optimize for short-term perception rather than long-term resilience.
20:35A company like that should have a huge treasury that makes them incredibly bulletproof. Let me contrast that with Harvard to pick an example here. An incredibly huge endowment. Right. So universities, do they get hit by COVID? Yep. Did they jump up and down and demand handouts? Yeah. Of course they did. Did they need to? Nope. Because they've got literally, gosh knows how big the endowment is, billions surely. And it's incredibly inefficient. But that is an institution that will outlast all others. They are subject to different incentives, different expectations from the market. and as an academic institution, it's just seen different to a corporate institution.
21:29But I would argue in any kind of sane, rational world, you look at a lot of the big family dynasties and businesses that are private and look at how they manage their treasury strategy and how they manage things. There is a huge amount of quote-unquote inefficiency in these businesses. Because why? Because they're building things that they want to last for the next 100 years plus, right? They're not trying, you know, they could juice earnings and cash flows with all this clever financial engineering, but at the cost of making things hyper-fragile, where you're only one trip away from something terrible going wrong, right?
22:13And it is something that I feel as though it's like with politicians. You get the politicians you deserve. You get the companies you deserve. we're the market demand to these kinds of things because we feel as though it makes a lot of sense and, and companies, you know, when the ducks quack feed them. So companies, okay, that's what you want. Now we'll, we'll, we'll give you that, but it, it is, it is, it, there is a cost. Right. And again, we saw this when no one could get toilet paper, right. Or inefficient. It's not, it's just the word inefficient. Isn't the right word here. It's more resilient robustness and these kinds of things.
22:49And, you know, I don't know what the answer is other than an awareness of the situation and a leadership team that's able to sort of articulate and argue for these structures, which will see you in much, much better condition. And you know what happens, by the way? When the next disaster comes along, it'll come along because we're just hurtling through space on a rock. Again, the hairless apes and everyone's making it up. Things are going to go wrong, right? I guarantee you that things are going to go. Some will be awful and some will be less awful. But when they do, the companies that have been very inefficient, not only do they find that they are able to weather the storm, but when the storm passes, all the other boats have sunk.
23:41They're there by, oh, I've got clear water all around me. Actually, I'm going to buy my former competitor for cents in the dollar. And it's just like that is when you go, ah, you weren't really that stupid and inefficient to run that way. But again, any cash flow you get, pay it out. Buy back shares. Lever up the balance sheet because that's more optimal. And it is a madness. And again, follow the money. Follow the money. Who's benefiting from this? The bloody investment bankers, the VCs who rock up there in their expensive suit and their crazy education. As I said, no, it's the CEOs and the boards who get to say there's a better share price because the market loves what we're doing.
24:28I mean, you're right. Until it isn't a better share price. Well, that's the thing, right? But that doesn't matter because that's not what we're trying to do now. We're here for two years, three years, five years. And so if we can just use the share price by doing this, you're right. The bankers get to make the money. You're right about the way the family offices run two relatives of companies. It tells you almost everything you need to know. Doesn't it? I'm going to be devil's advocate for one second. One second. I'm genuinely interested in your view. I don't really share this thought really particularly strongly, but I'm really curious.
24:57I'm always mindful. So we say for companies, right, don't diversify. Stick to your knee and do your thing. Let me diversify my portfolio. You don't do it for me. Is it possible that for everything you've just said, which I think is 100 % right at a company by company level, is it possible, though, that by having a diversified portfolio, each taking on moderate diversified risks that is the best thing for us if i had coke with a 40 billion dollar you know debt and companies xyz and abc and i diversified myself thoughtfully if all of them had a bit of debt rather than none of them having debt am i genuinely worse off i mean is there is there an argument to say that on a portfolio level that is a better solution as long as the portfolio is diversified because i do get a better result overall uh yeah that's interesting I don't know the answer either, by the way.
25:43I was just thinking about the devil's advocate what we try to do on this podcast. By the way, listeners love it, which I appreciate. Thanks, guys, for letting us know when you're enjoying this back and forth. But I'm 100 % with you. I'd rather have no debt. So I'm not disagreeing with you. But I do actually wonder at some level, at a portfolio level, whether there is some justification for it. So I actually probably run my portfolio that way to some extent. I've talked before. I'm very small cap. I'm very much earlier on the corporate journey. it's more quote unquote riskier than a big established blue chip.
26:12And I fully expect my strike rate to be lower than if I was only focusing on the top 50 companies, you know, with only, only, you know, established dividend pay income, I'm sure that I would have far less failure rate, but absolutely take it because of that diversification approach. Cause I know that, you know, the ones that win will really win and plenty will lose, but overall it'll actually be very attractive. So I sort of take that knowing that there is within the greater whole things that i mean i would never god my goodness i look at some of the stuff in my portfolio i would not be putting 100 of my money and i am you know yeah and so you're i get i get the point here's the best example actually i can't believe i didn't mention it berkshire yeah berkshire is a conglomerate of how many businesses i don't know uh 80 i think it lasts 80 different business lines dozens and dozens and dozens and dozens of businesses yep and and a cash balance that would put many small nations to shame literally yeah you know and and and what happens every seven to ten years on average when there's a financial crisis yeah politicians pick up the phone to warren and they say help isn't that by the way an absolute i mean of all of all of the demonstrations of the failures of modern governance when a sovereign government calls a businessman for help yes you just try to get that through your head.
27:37And people are saying, oh, well, of course, business people know better than politicians. It's not even that. It's just literally the state of the relative. Fort Knox is called Fort Knox. When some people say Fort Knox like balance sheet, they mean the gold reserves of the US Federal Government. That's what they're talking about. Like, this is not, this should be, you know, the Federal Government should be beyond reproach with this sort of stuff. It should be businesses calling them for help. And yet they're calling Warren. It is. Well, and because he's so inefficient. It's because he's, you know.
28:02Quite inefficient, yes. He's so inefficient. The silly old man, he doesn't get it. It's why in the good times everyone writes the article, he's lost it, he doesn't get it, shares underperform, massive cash drag, why aren't you paying this out, why aren't you doing that? That's his superpower, one of his superpowers, just ignore all that nonsense. He'll drop off the perch at some stage, but the legacy he has created and the culture he has created, that thing will persevere for decades, if not longer. and it's because of that antifragility that he is built into the system and it's just no one does it.
28:43No one does it, which is so frustrating. But by the way, I won't go down that rabbit hole, but you can't make the mention of the US Federal Reserve and Fort Knox and gold balancing without me saying that there is no gold. There is no gold. It's not backed by anything. I'm just going to clarify that because it is a common misconception that there is this big vault of gold that supports the US government. That ended in 71. In fact, earlier, depending on how you want to look at it, when Nixon took us off. I don't want you to drag me down this one. You mentioned it. No, the gold is there. No, it's not.
29:20Not enough. If you try to redeem all of you. So that's a different thing. That's the point I'm trying to make. The gold is absolutely there. as much as the US government says there is no conspiracy where the gold actually doesn't exist, right? The gold is there. The currency is no longer backed by physical gold is what you're saying, which is absolutely true. And there's not, like for the amount of dollars in circulation versus the number of gold, it's like, you know, it's 100 to one, if not more. All right, I'm going there. There is no need for money to be gold backed. The fact it was, and then it no longer is, is worthy of comment.
29:47It doesn't need to be for any reasonable sake. Well, it doesn't need, there is no need for money to be backed by gold. You're talking about, You know, I made up artifacts. There was no reason why it needs to be. We've said before, it's exchange. It's a medium of exchange between goods and services and labor. That's what it is. Whether or not there's as much gold backing it or not is completely irrelevant in my view. No, I agree. It's almost as if something doesn't have anything backing it. It can still have value like... Yeah, nothing. Good point. Yeah. But you're right. No, you're 100 % right.
30:19But the caveat to that is that what it is backed by is the full faith and trust in the US government. I'm pretty sure that's true, is it? I mean, in a sense - Well, okay. Okay, put all your money in the Zimbabwean currency. Go for the Argentinian peso. But here's the thing, though. But that also requires international - If you're living in Argentina, Argentina, Argentina, my God. Watch my mouth there. But it doesn't need to matter that much. If you and I agree that I can swap your watermelon for my pumpkin, it doesn't matter whether it's dominated, what currency it's not. It's literally just that medium of exchange, right?
30:58It actually just doesn't need to be as relevant. It's a relative measure. Yes, it's a store to some degree, but it's a relative measure of just the exchangeability, which is not a word, but I've just made it up, of that stuff. Yeah, it is. And that's perfectly fine and sensible. If we all agree that we're going to use whatever. There's 160 fiat currencies around the world. Choose one, whatever you like. Provided there's enough liquidity there, it's fine. And a joint understanding and acceptance. Yeah, absolutely. Except we also know from history that the vast, vast, like 90 % of them don't last more than 30 years.
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31:34And the reason that what undoes them is that people create more of it. So we understand very well in our game, the equity market game, that dilution is a real problem for investors because companies run out of cash, they print up more shares and they get more cash in. And Muggins over there who's holding his original share. That's right. Yeah, diluted, diluted, diluted. Even if they eventually make it, it's like, gosh, I had 10%. Now I own 0.001%. It's the same thing with currency. So you are right as long as there's no one there in a privileged position to print money. And there's never been a politician in the history of the world that has been able to resist that temptation for any length of time.
32:20Even the US. Even the US is like – the US's third largest line item is interest. There you go. Like, you know? Amazing. And so that is the – you don't need gold to back it. But the good thing about the gold standard was that it enforced a natural scarcity on things. You just had to dig up more gold. Yeah, that's true. So it kept us honest. It kept us honest. And then, so do we really need this gold? Because we're just swapping claims amongst each other and no one actually ever settles. That's totally cool. Okay, cool. Let's do that. But can we just like, imagine if you gave me the power to issue new US dollars.
33:03Now I'm holier than thou, you know, I'm better than everyone else. There's only a matter of time before I think, might just create a little bit more just for me. Who's going to notice? I'm going to dilute the entire currency base by 0.001 % and buy myself a nice house. My mate probably deserves a nice house too. I'm not going to do it. Humans are humans are humans, and it is no one ever, ever, has been able to resist that temptation, and therein lies the problem. That's the one advantage of gold or something else that has a mathematically enforced scarcity, which I won't mention. You wanted to go there.
33:44You wanted to go there. Well, no, you said the gold didn't exist. That's where this started. I'm not taking the blame for this one. Okay. I felt - Let's just move on. Let's move on. Only a little bit because Michelle Bullock, new RBA governor, takes over. I took over on Monday this week. and i i don't i don't i'm gonna say i don't think it matters but i don't think that we know and i guess i just i think there's a great there's a long there's a long line of orthodoxy in the reserve bank but i'm also mindful of every you know every ceo who comes to prominence and does wonderful things who've been promoted into jack welcher g for all of the all of the horrible after effects of that thing he was kind of this cog in the machine until he literally revolutionized and you people have said oh he's at 25 year g man he'll run g the way g has always been run but now that ended badly i'm not suggesting michelle book will end badly i'm sure there's other examples of the reverse right where someone comes in they spend their career doing this thing all of a sudden they get the top job like oh now after being a yes man living other people's shadows for years i'm now going to go and put my stamp on things so i i guess i'm just i i'm almost just want to flag i suppose the possibility that all of those who believe nothing will change because she's always been at the bank ignores every other time where people who've been in organization for a while and then get the top job and change things you know there's no guarantee she's going to follow the exact same orthodoxy of phil low and then seven or ten months or so when the new rate setting board takes over uh then she'll have not necessarily less power but it changes a whole lot of stuff so between now and 12 months time uh with with one change to the governor and then again the entire change to the rate setting board which may or may not include current members of the of the reserve bank board i mean you know this is probably i'm not going to over-egg it because i don't think it's a big deal or a big risk but i just want to flag that you know there's some some meaningfully significant changes to the bank over the next 10 months not by the way at least the fact that jim chalmers pointedly chose not to replace philip lowe or appoint re-appoint him and replace him for in in theory views of his inability or some sort of uh ideological or philosophical difference i just need to be a brave person to say put the cue in the rack just extrapolate forward the reserve is the reserve is the reserve and nothing will ever be different i just think there's enough reason to believe that not that we should expect big change or fear be change even just that i think it would be foolish to believe nothing will change because of the expectation of who she is and what she's done yeah i mean i feel i'm just going to repeat myself she there will be change will it be better or for the worse i don't know if it's for the better that probably a bit of this is going to be so much luck and uncertainty in in in all of it we are centrally planning the money again i'll just repeat that we are centrally planning the money full stop you know let's let's let's have a uh a reserve weather bureau of australia and let's let's let's get various butterflies from different parts of the world to flap their wings and let's plan the global weather system like that is how insane the whole thing is and i know you've agreed with me in the past maybe just out of courtesy and maybe i'll I predict it, but their decisions do influence what happens.
36:59Oh, it absolutely influences it, but in the way that they expect, then no. Yes, yes. You know? But all I'm saying is Michelle Bullock's decisions or lack thereof in the next, well, the rest of her term, but certainly in the next 12 months while these things change, will have an impact, for better or worse, justifiably or not. Oh, it'll have an impact. Absolutely it'll have an impact. Yeah, absolutely it will. And that, you know, we're tied to the mast of the good ship Australia. And, well, the good ship US too, for what that's worth. I mean, these things are entirely, this is the other part with currency and exchange rates, right?
37:31It's like the exchange rate, you know, as the dollar falls, as it has recently pushed oil up. We'll talk about that in a minute. You know, that's a meaningful impact. The RBA can only do so much, but imported inflation, relative terms of trade, these things matter a whole lot as well as. And so you are, even if you did nothing, you'd still be impacted. You know, on one hand, while I agree in part to your point, there is no scenario in which Australia does something different on the price of money and not be impacted by what the rest of the world's doing anyway. Yeah, yeah, absolutely. I mean, but I guess you've got to step back a few.
38:06You've got to go from first principles up. Again, I know I've said this before, money is a global coordination mechanism. It's what it does. It is the most saleable good. Without money, we don't have civilization, period. We have a barter economy and societies don't get larger than a few thousand people like that that is how significant it is yeah absolutely despite our language despite our opposable thumbs despite our intelligence and technology too mate like the component parts of a a pencil let alone a computer oh we can't like it's it's not just not just society it's just we're back in the stone age right so so actually you raise a good point money is a technology as much as the wheel and fire we invented it it's a technology and probably a higher probably a technology of the style we didn't really see again for maybe millennia I'm reaching here but the things you just talked about we invented we invented physical things we made a wheels a machine but we made a thing that allowed us to do something a physical thing that allowed us to do this thing we literally invented a I'll say mythology I don't mean that in a conspiratorial kind of it's an idea it's like democracy they're probably the three big ones democracy they're all man made right sorry to offend anyone yeah exactly oh man so let's try and sidestep for that but you know it's all made up right but that makes it feel like oh it's not important no no it's vitally important it's a social contract that enables me to interact with someone i have never seen who doesn't speak my language on the other side of the world we can we can trade with each other we can make promises to each other and we can all do it because we have faith in the money right that is so vitally important and and and so there's that so it's why it's why you don't mess with it right because it's really important and and and the other thing that money does is people get upset when prices changes prices should change right if i've if i'm selling umbrellas and there's a sunny day, right?
40:11No one's going to buy it. And then guess what? It rains. And then all of a sudden demand exceeds supply and I'm able to put my prices up and everyone shakes their fist at the sky and, oh, it's corporate profiteering. No, it's so, because what does that higher price do? That higher price incentivizes others to manufacture umbrellas, which increases the supply which brings the price down that that's what it does right you you tinker with the money you tinker with that coordination mechanism with that transmission mechanism of information yeah this isn't it sounds like a thing i mean adam smith was banging on about this way back in the day right before it became this ideological war of different names for different schools of it It is so hard to see because we just grow up with it.
41:06From a very early age, we have an experience with money and we just don't question. It's like trying to explain what it's like to be wet to a fish. You know, like what? You know, it's all pervasive there. But when you step back and you look at it and you go, no, no, no, no. This is almost everything. You can't understand society and politics without understanding economics. And you can't understand economics without understanding money. It's that kind of important. And I know I'm really flogging the horse here, but this is absolutely the point. So we need to expect prices to change in relation to the way that we, as a collective group, demand things and the available supply that's out there because that price stimulates us.
41:56Adam Smith called it the invisible hand, right? And that's what it is. And it was an invisible hand. It wasn't a bureau of the hand of the government that decided to do this. The reserve hand of Australia to use your favourite working word. Guess what? Cuba's tried it. Russia's tried it. You know, China sort of tried it until they've gotten this weird sort of chimera of sort of half, you know, communism, half capital. It doesn't work. And it doesn't work for a bunch of reasons, but it doesn't work mainly because no one is smart enough to see every single piece of the economy at once and forecast exactly what every individual person out there demands once and how that changes and evolves over time.
42:35So we use this ledger system or money that coordinates it all for us. And it's a thing of beauty. And when you look at – there's another – The Wealth of Nations, a great classic book. It's free, right? It's in the public domain now. You don't even have to pay for it. We'll talk about that. Why are some nations wealthier than others? Well, the obvious one is there's certain natural endowments that we as Australians should recognize that. We've got lots of great, valuable things that nature has blessed us with. Yes. But if you were to put some middling dictator in charge and we had some terrible political system and some awful monetary system, we would be all in grass huts.
43:23A massive corruption and kleptocracy. I mean, look at poor old Africa. Look at South America. What's the difference there? They're blessed. They're blessed. I mean, Russia's got all of these beautiful – I shouldn't be careful how I choose my words – but a lot of oil and natural resources that they are very gifted on. But the average Russian is very poor and impoverished. And it's because of the system. So we take it for granted and it's sort of like everyone goes, oh, yes, but it's our democracy and, you know, or there's some certain racial exceptionalism or some other like stupid nonsense that's out there.
43:58No, it's a good monetary system. Sorry, mate. I'm really leaning into it. I think if you ask the monetary system, it's the systems of governance in general and community kind of organization that work. I mean, India, Canada, New Zealand, Australia are all ex-British colonies to some degree or another with very different... Frankly, India hasn't as much time as other things going on. But yeah, it is worth saying India is massive population-wise hasn't hit the same heights of modernization as Australia. So nothing explains it outright, but you're absolutely right that some of those commonalities are too correlated to be ignored.
44:36And combine nothing together, you don't have to be able to do the exact recipe to know that flour, water and sugar to make some pretty good bread. Absolutely. You get it roughly right. Let's move off that for a second. It's such my favorite topic at the moment, so I do apologize. Really? Sure. So enlightening. Just be glad I didn't throw property in there, otherwise it could be a very long time. No, it's a fascinating conversation. I love the conversation. I know our listeners do too. It's intellectually stimulating, and I think anything that helps us think better and more about the assumptions that we take for granted, that I think are really, really useful conversations.
45:11Yep. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.
45:21You mentioned Berkshire. I was going to mention Berkshire as well. I am re - I'm not re - I'm listening to it at the moment, but re-absorbing, re-consuming The Essays of Warren Buffett, which is about the most boring, nerdy, whatever investment book you can read. And it is just spectacularly great. Robert Cunningham? is that no Lawrence A. Cunningham Lawrence sorry yeah at least I didn't say Richie Cunningham Robert Kiyosaki for a sec very very different very different person Lawrence Cunningham spectacularly good so Cunningham basically puts a forward to Buffett's essays and then puts them in takes the annual letters in snow in 78 uh kind of shakes them up puts them back in topical order we've talked about it before yeah it is just so good mate it's so so so so good yeah and read it It's funny, I'll bridge two topics.
46:07You were talking before about how much debt you should hold. And Buffett talks a whole, it's just, I swear to God, there's 85 different things we could talk about now. I'm not going to because it's boring and takes a long time. And, you know, we can't go into different places. He talks about a few things. He talks about executive pay, which is just fascinating in the context of conversations recently. He also, but he does talk about things like, for example, the way he wants his managers to run their businesses. Now he is a conglomerate company. So he has the portfolio level opportunities, but he says run these things as if it was the only asset you owned and you couldn't sell it or merge it for a century that's the way he wants his managers to build their businesses and i think there's something really really important about that approach well i know there is obviously buffett said it right me saying oh buffett might be have a point is almost redundant because it's buffett but i just i liked that idea of you know him just saying look this is what i want you to do you're now in charge of this business don't worry about the market don't have the share price um he talks a lot about the fact that some of the bets they make at berkshire say bet some in that in air quotes but you know buying these businesses because they want to own them not because they hope the market might pay them more in a little while and just that that that simple reality of you know the market can be erratic and if it is you're welcome to take advantage of it to sell at high prices or buy low prices or just simply ignore it and say well i owned the business because there is a long-term story here.
47:27I think this is going to go from X to Y. And Buffett says, we're not going to sell unless we think the intrinsic value of the business isn't going to grow fast enough. That's his criteria for selling. Now, he did say that if they want money for something else, you might sell or there's a really big insurance year. So he puts some caveats, which are just sensible caveats. But his idea is, what can I fret about the price? We're going to buy it at a good price, which allows for, and he talks about buying at a good price relative to the bottom end of their range of expectations, which is fascinating.
47:51So we think company A can do between this and this. and if it's a good price if it hits the bottom end of that range then maybe it's worth buying so that's interesting um by the way he's looking for profitable businesses so it's a different style of investing than many people um but just just the really really thoughtful approach he takes and i just you and i were chatting we're talking about sort of some of your experiences as an investor over the last 12 18 months and some of the companies that you own that you're saying these are great companies but the market still hates it or or maybe it's coming around but man what am i missing here and i just thought it was a really i've kind of in a little agenda notes i've written down here i've sort of said staying long term when the market hates you and i just thought it was worth we talked a little bit about this in from time to time and frankly the market hates is all a little bit less recently than it has in in recent months but you know it's it's a long journey back um by the way berkshire shares are about 37 of the last 12 months or something which is just phenomenal i own shares as everyone knows um but it's it's that idea of you know at one point in time, you know, you buy from the market based on a certain assumption and then you wonder why, and it's just tough, right?
48:54But tell us about your experiences recently and kind of how you've been kind of working your way through that idea of, I think I like it. I think I've done my analysis. I think I'm right. But man, the market still seems to be amusing. How have you kind of worked through that in the past couple of months? It's very hard. I mean, if you pull yourself away from the market and any money you've got invested and say, well, what do I want here? What am I looking for? Well, I'm looking for a business with some really interesting potential. Basically, I'm looking for something that will be bigger and better in three, five and 10 years.
49:28That's a good place to start. I don't want a business that's going to be smaller and less profitable or doesn't exist in three years. So that's very logical. And once I find that business, well, I want to get it for a really attractive price, you know? So, you know, I would much rather buy Berkshire Hathaway at a dollar a share than at$100 ,000 a share. Like it's just logic. Fair. So that's all very good. Now, the trouble is, is there's a couple of things, is that when you get that set up, you don't act, generally speaking, and you don't act because the social influence of the market creeps into your thinking.
50:06It's like, why isn't anyone else buying? What am I missing? Oh, I must be missing something no one else is doing. We've often joked about that great joke about two economists walking down the street. One of them sees a$100 note on the ground, and the other one says, don't bother. If it was really there, someone would have picked it up already. Yeah, yeah. And that's what we do. It's so true. It's what we do. And I said to you off air, it's like I feel as though some of my companies are – having gone through the recent reporting season, if I didn't have an anchoring of a purchase price or an average purchase price, if I didn't have the distraction of a daily quoted market price, and all I had was the CEO come to me every quarter or every six months and say, Andrew, here's how we're going.
50:52Keep up the good work, chaps. That's fantastic. Everything's going to plan. No complaints. Doing our job. Correct, correct. See you again in six months. Yep. Brilliant. you know gold gold star for you and and and yet and you go brilliant and then you look at the price go huh there's a couple i don't want to mention names because people people take it the wrong way and it just becomes like a tip and i just don't want to do that but you but you but you go huh the price is down like what but i i find it a superpower and i want to pretend for a second that it's easy or that i that i always do it the right way i usually don't because i'm human like everyone else but but i'm trying to sort of force myself to go no no no this is what you want this is good buy buy it's cheaper it's cheaper now and and then you get this other thing oh but what if it gets even cheaper i was like well it's going like i i've resigned myself to the fact whenever i buy things are going to get cheaper and whenever i sell it's going to go i just does right i don't know what i say i'm not trying to time them i'm not trying to trade here it's like is it a good price yeah buy it okay wow it's a better price in a few months time if i saved up some money great buy some more and so this is going to sound um boastful i don't mean it to be because i could have and should have done a lot better but i'll use i'll use my straw man portfolio because that's public and as opposed to the real portfolio um but i started straw man in 2017 it's a very early alpha version so i've been running a public portfolio just you know strawman.com forward slash straw man you can see you won't be able to see the holdings um but you'll be able to see the the performance it's 12.3 per annum over that time i'm really happy with that right like i should have should have i look at some of the mistakes and it should have been a lot better but you know we've mentioned before it's been a pretty ordinary year a base effect is kicking in so i'm down about 14 over the last 12 months um but that's normal and buffett's a good example here we we we when i say we you and i unintentionally but the market in general unintentionally will often say things like the market tends to grow at about 10 give or take per annum and and people take from that that oh okay i just i just that that's what i i'll do i invest in the market i'll get 10 this year and 10 like no no no you never happens that way one year you're up 60 you're a genius the next year you're down 30 then you're down 15 then you're up 20 then you're flat The average is very different from the year-to-year lived experience.
53:31And the reality is that this is always going to be the case. So there's two superpowers, I think, when you're investing. If you're going to play this game, even if you're doing the passive index approach, it's going to be up and down and all over the place. But that over time will trend towards the mean. Like it will trend toward, especially if you're doing an index ETF, it'll probably get somewhere up a single digit kind of area. It's just that it won't be that. The first year will be terrible or great and it'll slowly get better. But so you need to acknowledge that. You also need to acknowledge that when things are scary, and you mentioned Cunningham before and Buffett in the letters.
54:16I mean, that is not one of the key takeaways is the great lament of, I am greedy when others are fearful and I am fearful when others are greedy. Rolls off the tongue so easily. I'm going to do that. No, you're not. No, you're not. You're not. No, I'm not. You're not. None of us. We might, you know, try and get there. You know, I was buying during COVID. I know you were buying during COVID. Yeah, I was. Yeah. Did we back up the truck? No. no you know i should have i should have i you know i even talked about using the mortgage and redrawing the mortgage and putting you know a large amount of money like you know what i'm gonna put all this in the market when the market's down because why wouldn't you you're just like oh i could but what if things do get worse and then i'd have to pay the mortgage back and the money might just appear and that'd be you know and look i don't like margin the best of times but i was like exactly that idea was like you know i said to my wife well put some leave some money in the offset won't pay the mortgage if we ever want to use it for that so yeah you can use that good idea okay yeah and then you get to like well do i really want to pull that trigger on that much money and hope that i could have bought an etf and made a school in like just it's yes did i know it's madness it's it's and it's and it just so so acknowledge it right this is why this is why the the dollar cost averaging approach is really smart and this is it'll be different for if you're retired it's different but if you're earning an income and you're saving regularly you're going to force the dollar cost averages because you know you have you don't have all your future earnings right now so oh save a bit of money this month i'm gonna buy markets up i'm still gonna buy Market's still going to buy.
55:45What am I going to buy? Well, I'm going to buy the one that gives me the best, that lovely mix of I have high conviction and the price is attractive. Even if it feels as though I'm missing something, what does everyone else? And here's the other thing is that when the market does cotton on, sometimes it'll be you that needs to cotton on because your thesis was wrong. Okay, right? You just need to accept that as well. But assuming that, again, I won't mention the company, And it was one that I really like and have for ages. Gosh, it's done nothing for like a year and a half. Nothing. And then lately it's like, whoa.
56:21And that's also how it tends to happen, right? It's gradually and suddenly when all of a sudden something changes in the market zeitgeist where it's kind of like, huh, everyone else sees it too, which caused the price to go up, which makes other people more enthusiastic, which makes the price go up. And then the pendulum swings too far the other way more often than not. Things just get stupid on the upside. But most people will get excited when the company is the company is the company. It is the only realm of human endeavor where the higher price gets, the more interested I am. In every other economic interaction we have, if I'm buying socks or I'm buying a TV or buying a car, I want the price to go down because that's a perfectly rational thing to do.
57:10No, not when it comes to shares. I'm not interested, not interested. Oh, you know, and then you start getting into all this trend following nonsense and the rest of it. And we will literally wait for prices to go up and then we'll get interested. But you're doing it. You're doing it backwards. You're doing it backwards, right? And so just to hit the points here, you're going to buy and then it's going to keep going down. And then it's going to stay down. And then it's going to feel like forever, like forever, where everything is screaming at you. You're an idiot. You're an idiot. You're an idiot.
57:44You're wrong. And that's because you're looking at the price. But look at the business, you know. I've given the example before. I forget who first – oh, I stole this from a U.S. fund manager. I've gone blank on the name. But he talks about walking the dog, you know. I'll localize it. A man is in Central Station walking to Circular Quay in Sydney. He's got a really – he's got, you know, a 50-meter-long dog leash on. He's got a hyperactive kelpie at the end of it, right. And he's walking six Ks an hour at a steady pace from central to circular key. That's the business. The dog is the share price.
58:17So he's ducking up every single alleyway and chasing after every possum. And everyone's focusing on the dog. And sometimes the dog will run backwards. Sometimes they're running sideways. Watch the dude. The dude's going to tell you where things are going, right? And when you get a situation where the dogs run back towards Central Station, and this guy's just, he's actually plotted an extra 50 meters along the way. Yeah, that's right, that's right. Now, you know, at some point that leash is going to get very tight and the dog is going to get dragged at a point. And then he'll run over, and then he'll run past the guy and he'll run way off into the future.
58:54That is the best analogy I can kind of give as to what the share market is about. I think me explaining, I'm not the first to explain this. God knows I'm not. and everyone's probably heard these kinds of things before. The difference is that you get someone like a Buffett. We lean on him because he's so well-known, but there's so many great value investors out there. They all have slightly different styles, but that's what they share in common, that ability to block out what the crowd is doing, to think independently, to act independently, to delay gratification, to understand that things don't immediately, you know, the arrogance, the arrogance to think that the moment you buy a share is the second that everyone else is going to realize that there's a bargain in plain sight and active.
59:37It's just not going to happen. It's absolutely not going to happen. So if you don't have the patience, if you don't have the fortitude, but what does Munger say? If you don't have the fortitude to wear a 50 % drawdown in your portfolio every few years, you don't deserve to be an investor and you deserve the mediocre returns that you're going to get. So Munger is really blunt about it. Yeah, it's a little bit blunt, but yes, the point is - But it's true. But it's true. If you're going to try, you need to know the rules of the game. You need to be prepared to play by those rules. Yeah, absolutely.
1:00:04Jump running on a football field and then being offended you were tackled is not going to get you. You're not going to win the game. And that's my horribly simplistic way of trying to take Mungo's point, which is just the game is played this way. And you will not make it to the end of the game if you're not going to understand the way the game is played. Not only the rules of the game per se, but the interactions of the game, right? No one sets rules that the shares must fall or can fall X percent. But the reality is that's going to be how the game is going to be played. And so if you're saying, well, I will only play if this isn't true.
1:00:35It's like, well, that's fine. But in your pretend world, knock yourself out. In the real world, you can't have that version of things. If you haven't made your peace with it, which is effectively Munger's point. If you haven't made your peace with it and can act accordingly, then be careful, right? Because if you don't want to get tackled, then you get tackled. You're going to get up and say, what the hell is going on here? I'm out of here. I'm not going to play this game anymore, which is fine. But after that, you've already been tackled. you don't get to take it back you don't get to say oh i didn't realize it's gonna be that bad well after i'm after i'm hurt i'm gonna leave it's it's it's that or nothing that's that's the way the game gets played i'll give you a shout out here not just because it's something that we talked about a lot about a year ago um not advice not recommendation d y o r all that kind of stuff but um a good old kogan drink right so so kogan is um uh it's up 48 percent in the last 12 months there you go now think oh i bet you there's people are more encouraged to buy now than when i was sitting when it was sitting at three actually what was it got to 275 at one point yeah it was like below three dollars right yeah and so there's there's idiot phillips going oh i actually think it's a bit crazy.
1:01:45Now, again, I don't have a dog in this fight. I'm not trying to suggest it or any, I'm not. I still own the shares for full disclosure while we're talking about it, but yep. But you know, what a great example of that. It's sort of like, it is at those times when you need to be aggressive. And again, frankly, it's at 5.14 today. You could have bought it at$4. Actually, this is more realistic. You bought it at$4 and then it went down to like 275, right? Good, you idiot. What an idiot you look like, right? How painful is that? And yet, actually, you've still got a 25 % gain since having bought it at$4 in early April-ish 2022 or something.
1:02:27And that is, I guess my point is, is that that's normal. That's what happens. And so I think 90 % of this game is, forewarned is forearmed. If you don't, people don't expect it. So people expect the gains. They don't expect the volatility. They don't really internalize it. They don't expect the emotional challenges. And they don't expect what it feels like to have those lessons being experienced over months and years. Yeah, very, very true. Mate, I reckon that is a wonderful way. Welcome to my TED Talk. We'll pass that hours ago. That's a wonderful way to finish off. I think that's a very, very good lesson.
1:03:09And yeah, we'll finish with the drink with a mention of Kogan and some ranting about monetary policy. It wouldn't be a podcast. It wouldn't be a Motley Fool Monday podcast if we didn't do exactly that. Will you join me again on Sunday? Oh, try and stop me. Well, try and stop me talking about property, sure. But other than that, and Bitcoin and monetary policy. There's a lot of things I'll try and stop you, but I won't stop you joining us for the podcast, mate. I will look forward to it. I always enjoy our conversation. I know our listeners do too. Until Sunday. Fool on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned.
1:03:40General 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 Licence 400691.
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