Why markets should be like soccer. April 28, 2023

32:39Yeah. Reminkable. Yeah. So that's interesting. Boston down cut in half, Chicago, even New York is 25 % below pre-pandemic levels. And you don't need me to tell you this, right? Anyone who works in the city. Oh, I mean, sorry, that's why I literally thought, I thought it was the other way around. I thought you were saying it was off by a third, which I'd get. I wouldn't have, half in Boston, mate, is much, much, much, much worse than I thought it was. Yeah, me too. Me too, right? So look, you can argue the numbers, but this is where it pays to understand the operating leverage of these businesses.

33:16I think those who study the childcare sector know it very well. So the reality is that these operations break even. It's something, I'll use the childcare example because I used to know it a bit, which was I think it's about 80 % capacity you break even. And everything after that is your profit. So when you go from 90 % occupancy to 78 % occupancy, again, it doesn't, oh, it's down. That sucks. We make a little less money. No, you're wiped out. Your profit, not you're wiped out. Your profit is gone. So now you've got these organizations where, again, we can debate the quantum of this and maybe this data isn't particularly accurate.

33:54Maybe it's not entirely relevant here. But these highly leveraged assets, and they kind of are by design. We learned that in 2008 and then we all forgot it again. And now maybe we're going to remember it. But now your costs have gone through the roof and your incomes have been absolutely decimated. as these organizations refinance, I think they're going to find it very, very, very, very difficult. And there's going to be a lot of write downs in this space. And there's going to be a lot of reluctance to land in this space. And it just, it feels like, like, yeah, could be a big deal for a lot of investors in this, in the commercial real estate sector.

34:33Or am I being too doom and gloom? I don't know, is the honest answer. I absolutely share your concerns. and I have voiced exactly those concerns on Ausbiz and other places. I don't know if we talk about it here necessarily, but I 100 % agree with those concerns. I've said lots and lots of times, if I was going to invest in real estate, which I tend not to, this is listed real estate, so I think about REITs as they call them or listed property trusts, we used to call them. REIT stands for Real Estate Investment Trust, by the way, if you're wondering.

35:04I would go industrial kind of warehousing and bulky goods kind of stuff. so the big you know homemaker centers or an amazon distribution center and amazon shares app so that's i mentioned the company uh uh you know then i would go neighborhood shopping centers so you know i think that eventually gets disrupted by delivery and stuff but you go out for you grab your groceries you get a coffee you look at a dress you grab a muffin you know that's okay-ish i then go to the big center group those guys that are in westfield australia new zealand because they're kind of your day outs you kind of you know um i'm not saying they're attractive by the but just in relative, relative, relative times.

35:41They're probably, you know, if you own a big multinational brand, you want to be in a Westfield. If you, you know, have a cinema, you're probably going to be in a Westfield. If you, you know, these, these things are going to be in Westfield for the foreseeable future. But then you get the last two, which I don't know I can, I can split. The first of the two, I'll leave the yacht one to last, but the first of the two in no order is the kind of semi-regional shopping center. You're not Westfield, but you're not around the corner. It's like, I've got to drive five suburbs to get to a shopping center where I might get a Best and Less and a Lowe's and a David Jones.

36:10Like, well, if there's not one next door or I'm not going to Westfield, I'm probably not going to you. I think one of the, by the way, different conversation, we'll talk about retail in a minute, so I'll leave that. And then it's office space for exactly the reason you highlight. I don't know. In one version of the world, mate, the future is exactly like the past. And we all go back to working from the office because the working from home thing was fun for a while, but bosses hated it. And we wanted socialization and we wanted to be there and we might be like three days a week but if we're there three days a week we still have our own desk and the boss still lives in office then you know it's less used but it's still there and they can't not have the office so it's there um those things there's there's actually a case where things are back to normal ish or normal enough and companies still pay the rent and it's all okay but i've got to say to you i don't see massive upside to that case and there is only downside i think i think if you if your job is to let's use the word asymmetric again because now you've maybe contractually obliged to mention it at least 15 times a podcast um the upside is like meh and the downside is whoa and those you know how sound effects by the way yeah love it love it uh you can't do that in piece of paper uh you know but i think that's right i think you're absolutely right that even if we're wrong you know you know you can you can make a bad bet and still get right still be right you're back 101 nag at the melbourne cup and every 25 years it comes in like see i told you i was right sure but you know you got lucky it wasn't a good bet you just got lucky yeah um you know office could do well from here and frankly price alone i looked at i looked at dexas for example um it's at p of 11 i mean not much probably has to happen maybe it's already priced in so investment wise if the worst doesn't happen they might even be cheap there is an upside potential here but yeah no i completely agree with you in fact i've only ever recommended one reit to a chair advisor it's um i'll give it away it's goodman group the um industrial bulky goods warehousing business.

37:55And I think that business was cheap and I think it's a good business. But you couldn't make me recommend or invest in office property for exactly the reason you've highlighted. There'll be exceptions to the rule even within that subcategory, I'm sure. So, I mean, it's unavoidable to sort of speak in general terms. But I think there's potentially enough organisations with enough problems that it makes things hard. It's not a good bet. There'll be all kinds of stories around, well we'll convert it into no one wants to work in the city but it's a very appealing place to live so we'll just convert it into units and rah rah rah and yeah you sure you can possible that that could happen i mean a bunch of capex needs to happen to to to make that um uh possible but yeah i mean nothing is certain but it just it seems it seems like a precarious situation i think the other thing with with this look again who knows but my guess is that we don't go back to normal i i my position has always been this work from home trend was already happening without it was happening right um it was just happening pretty slow and then this this just forced everyone to do it and i think for a lot of organizations the lesson was huh oh apologies my phone is not on silent um that's what we could hear uh uh was huh the wheels kept spinning People can work from home.

39:17How about that? We can find a way, exactly. Oh, and not only that, but you're telling me I can save all this money on rent? And now it's a situation too. You see it in the media all the time where it's actually part of the core enterprise bargaining agreement. It's like, well, we want to work from home three days a week or whatever it is. It is accepted from and increasingly so from all parties. So to think that we go back to quote unquote normal, I feel as though, yeah, anything's possible, but I feel as though it's a spurious bet. And these projects, which take years and hundreds of millions of dollars to build, they're just, you can't pivot quickly on this.

39:58You're not a small agile tech startup. We can say, okay, well, now we're going to do this. And so it's like, no, the money is invested in this thing. It is there. There are bills that now need to be paid back. That's the cash flow basis. Squillions go out the door on day one, and then hopefully you recoup it over the next 30 years. That's how it works. and 30 years is a long time for things to change. So, yeah, no, it's not for me. Not for me. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

40:32Let's pivot quickly to retail because that was the other bit I was going to go into, mate. I just want to make the case, and I'm sure I've said before, and this is not about our favourite, my favourite online only e-commerce play, but it is it is a it is about just your commerce generally i've said this recently i just i online growth online sales growth continues your commerce growth continues and i think we're not talking about it right now because it's gone to reverse because we had a covid bump and so we're getting back to some sort of normal and the underlying growth though is still still really really really really strong and i'm not again think about woolworth's home don't forget the forget the online only guys woolworth's home delivery or you know harvey norman's final i don't have an on my chest uh i've got to mention an example i don't know so i have to keep disclosing um then you know jerry's finally begrudgingly been dragged kicking and screaming to embrace e-commerce um this is going to be a larger and larger share i gotta say i i don't know if i'm more scared of office or or that second tier retail because you speak you mentioned unit economics of child care companies unit economics i.e per store or per center or per location economics of retailers is even worse yeah you know you get you get a sales decline of five or six percent in a given year, those stores are almost certainly borderline unprofitable.

41:42You do that for a couple of years in a row. Premier Investments, a business I don't own shares in, thankfully, run by Solomon Liu, a great retailer. I was going to say, why do you say thankfully for? They've gone all right, haven't they? No, I'm just trying to disclose it. Oh, okay. I thought you were like, oh, thank God I don't own them. I was like, oh. Oh, no, I wish I'd owned them, mate. They've gone very, very well. We recommend to them, thankfully, for our members. They have gone very well, so I'm happy about that. But I'm trying to avoid mentioning stuff I own. I've got to keep saying, oh, I own those shares.

42:10All right. No, so yeah, I wish I did own them. But they've gone really well, but they're closing stores. You know, Shiloh was having those really big fights with the end of saying, you better cut our rent or we're out of here. Yeah. And the reason is because they're getting sales growth of 20%, 30%, 40 % a year on average, not in the last 12 months, on average, over time, online sales growth. You know, Meijer now does a third of its sales-ish online. Meijer. And so you kind of think about, you know, how long does it take? and I think it's, again, let's use a pageism, a ramism. Was it suddenly, then all of a sudden?

42:42Gradually, then suddenly. There we go, gradually, suddenly. You know I'd screw it up. It's not mine, by the way, but I'm going to own it. I think we're going to see a wave of retail store closures that happen suddenly because they're kind of borderline profitable and they're kind of unprofitable, but they're trying really hard. And then the retail store owners go, okay, yeah, we're done. this thing's not my yeah they'll keep it for showroom sites for a while for a bit of brand exposure for whatever and then eventually they just go no we're done we're out yep and i've got to say though i reckon those landlords if i i put them on even footing before i'm going to go one further i actually think worse than office is potentially um those those second tier retail landlords when the the shops just close up go we don't need to be here yeah we're not making any money you're not adding anything of a business we can have half the number of stores and make more money more profit frankly because we're at lower cost but more revenues because Because at some point, it won't be, I don't know how many years it'll be, at some point, premier investment sales are going to be more than 50 % online.

43:40It's going to be an online retailer with some stores. Agreed. And when that happens, that is, you know, you want some cheap real estate? Go and buy some secondhand shopping centers when they're closing down. I'm not being doom and gloom, by the way. It's not a bad thing overall. Speaking of freeing up some sites for homes and units and whatever else we want to build, I think that's going to be a pretty prime opportunity. in I don't know how many years, maybe it's 25 years, maybe it's three years, but it's probably somewhere in between there. Let's say we're doing this in 2030. We will have seen the first wave of, large-scale wave of retail store closures, my best guess.

44:15So I'll give the retort here, and I do this more as a devil's advocate, would be I've heard that before. People have been saying that, Scott, for ages. Not going to happen. And I think what we don't appreciate, I mean, time is a funny thing when you're going through it you know it's i think in the great arc of history you look at these things and they happen very quickly but the you know it's like i always reminded of the fact that the yellow pages was delivered up until 2016 or 2017 that's right 2017 i mean this is like 10 years after the iphone for goodness sakes you know it's like things change very slowly so i i can imagine people saying yeah that people have been saying at for ages, there'll always be a place for physical.

45:03And I actually think, actually both are true. You know, one, people tend to assume things will happen faster than they will, and they don't. There's a huge amount of sort of inertia that's there. I think there will always be a place for physical stores. People still want to go out and see and touch and all of that kind of stuff, but your point is the right one, which is it's the change in balance between those two. And frankly, from the company's point of view, the economics tend to be much better as well because now I can have like a warehouse out near the airport, whatever, and, you know, it's just sort of like I don't need all the floor staff there.

45:38I don't need the expensive store fit outs. I mean, there are other challenges and the rest of it, but people, we are increasingly demanding the convenience that comes with all of that. Business models, infrastructures are all building up. So I agree. I 100 % agree with all of that. Here's another wrinkle if you want to sort of think longer term is the increasing rise of digital goods. So I look at my young fella and the things he values most in life are not real things. Well, they're real to him, but they're things you can't touch. A skin on Fortnite or a magic sword of whatever, you know. But I mean, it sounds funny, but we value these things, you know.

46:19They're real to us. And I suspect over longer terms that we will increase the things that we want to spend our money and time on. will be virtual. Not, you know, not Ready Player One kind of, we're in sort of the metaverse kind of thing. But it's, yeah. We're already here though, right? We are already here. And the less tangible the goods that we're buying are, the more that it just accelerates the trend that you're talking about. So yeah, it's going to be interesting. It's going to be very interesting. Yeah, I don't know. Mate, let's change gears a little bit. Though, still staying with property for a second, because we had the Australian Greens out this week saying they would only support the federal government's, I think it's called the Housing Australia Fund, whatever fancy politician's name they came up with, this thing to make it sound good, if the government agreed to a rental freeze.

47:16Now, you're a renter. I'm going to figure you would love to have your rent frozen for extended periods of time, but I'm wondering if you think that is a good economic policy. there's difference between what i personally would want for my own self-interest and what i think is good policy well you know what there should be mate i'm glad there is for you because it's not not for a whole lot of people i've been on twitter long enough that people don't care much past self-interest most of the time so thank you for suggesting there is a difference i'd love it if my rent was frozen right like i won't lie to you i don't think it's a good solution i don't I think it's a good sign.

47:49Centrally planned economies don't generally work well. I mean, you so radically – what you have to worry about are the unintended consequences. And so while it sounds like a good idea, you've already got – and I've ranted on this so much that I don't even barely need to repeat it, but the economics are already marginal at best for residential property investors. In other words, for a very significant chunk, they're actually actively losing money on a cash flow basis, right? So, okay, people are happy with that if they get a big enough capital gain. But when you introduce something like that, it's really going to pull the rug out from a lot of investment in that space.

48:35And one of the big, big issues that there's a whole bunch of ways that we could go about solving this horrible housing problem that we have. but one of the big longer-term goals is obviously more supply. And so I wonder if – I'm shooting a bit from the hip here, but I'm wondering if it actually is counterproductive in the grand scheme of things. Now, I know that this is the exact argument that the Property Council is going to go with, so I'm already starting to look myself in the mirror. I mean, but it's like there are elements of truth to that, I think. Frankly, if I was in control of things, people often – you know, because I'm ranting about property all the time, they think, oh, you know, it's about the rent.

49:16And it's kind of not. I actually feel as though, well, the rent is the rent and the market's going to charge with the market. I get it. I get it. It's just that if we are going to form a contract, you know, can you at least fulfill your end of the bargain? That for me is the far bigger deal. You know, okay, the rent is high. Okay, that sucks. I'll deal with it. But at least if, you know, the very least you can do is fulfill your end of the bloody bargain, right? You actually have doors that close and exactly, yeah. Yeah, if that's not too much, can I have an oven? please you know so it's sort of it's sort of hypotheticals andrew it's very close to the bone there i could could but won't tell you big long stories on that because we did go to ncat by the way so anyway anyway it's fun it's a fun story um yeah but i what do you think mate i i i get the intention but yeah does it does it mess things up more than than it fixes things yeah i think it does mate i are you right because whenever you're trying to the opposite view or the alternate view to what's being proposed does make you sound like a raving you know um hardcore free market tier and plenty of people listening to me like yeah do it i'm like no that's not me i said before i'm a well-regulated markets guy not a free markets guy uh and but i think markets are right i think markets are real and i think markets give us the best outcomes because they do very very imperfectly provide the best allocation of productive capacity.

50:38That's actually what markets do, right? Can I just say the phrase, the invisible hand here, right? Right, exactly. Which is exactly what you're talking about. Right. And so, you know, the market decides what it values things at and where it wants to put its money. And it's not a single it, as you've said many times before, but the collective decision-making of the parts of people. Give us a sum total at an economic level. We say X number of people did this thing for this price, so that's the total value of it over time. The allocation of productive capacity is important. That's labor, it's capital, it's goods, it's all that sort of stuff.

51:14Why is there enough bread in the shops? Because we all pay a high enough price to justify the flour maker's decision to sell his flour to the baker and the baker's decision to make the bread and the transport guy's decision to send it to the shop. Without that, you end up with Russian bread lines. If there's not enough incentive to do the thing, so between product allocative efficiency to use a horrible economics term and and very basic very very basic human incentive which is i want to do this thing because it's worth it that's how the market works i mean i've said before democratic capitalism is the worst system in the world ever except for every other one that's been tried right so that that's that's the reality is it's imperfect horribly imperfect we should fix that's why i'm not a you know a card-carrying defender of free market capitalism it's not you know it's someone saying how somehow it's perfect and no no involvement or interaction is important government should do a lot of stuff to fix up the imperfections of capitalism but it is still the least worst option by a very long way yeah so specifically when it comes to rent mate you would know this i think i'm not going to ask you to talk yourself but the the reality is you got to be careful right because the the rent freeze idea is if rents were frozen then more renters could afford to buy property i'm like if you look at the rental yields on some of these places compared to the mortgage repayment some of these places yeah the economics are much better for a rental right you know exactly except for the wrinkle that i've often pointed out with the lack of security okay putting that small issue aside which is very big issue but yeah absolutely but it's not but for many people it's not in that mate because it's not even a choice do i want to pay 500 bucks a week in rent or 1300 bucks a week in repayments yep then i you know i don't know if those numbers absolutely stuck up but they wouldn't be far away because some rental yields are one and a half two two and a half percent Well, interest rates are 4.5%, 5%, 5.5%, 6%.

52:56Ours is less than a – I worked it out because I know what he paid for it. Ours is less than a 1 % gross yield. In other words, just to draw that out from the point, the house that we live in today is far more affordable for me to rent than it is to buy. Yes, yes. So that's exactly my concern is – and by the way, the only way that stops is if house prices crash by two-thirds, in which case and you could be someone who says i've seen i've trusted me i've talked to them on twitter one of those people say oh yeah well they deserve it that'd be better for everybody it's like you really really really don't want to live in the australia the day after house prices crash by two-thirds because you know what everything goes to hell in a handbasket probably for three or four years because the the flow-on effects from that in the economy it's not like well those greedy bastard corporate landlords lose and let's all eat the rich ha ha ha we're all very funny and by the way i'm still employed and i've got a job and the government's got enough tax revenue to pay my doll and and and it's like that stuff that stuff stops working you want to be careful what you choose to break because this is all interconnected yeah the best scenario the best scenario is we go sideways for 15 years right because and which is no bad thing either by the way but if you if we create inadvertently or deliberately some sort of eat the rich screw who cares outcome it wrecks the economy and that's not just that doesn't wreck the fortunes of twiggy and gina it pushes people out of homes it sends them out of jobs that you know people can't afford there's so much stuff that goes with that i think there's a there's a lot of well-meaning just incredible haivety out there which is we can just change this one thing leave everything else the same and look i've magically created a different nirvana and i'd love i wish it was true i'd love to believe it was true it's just not and so that's you know when when you want to freeze rents again first order impact hey let's lower rent increases fantastic yeah second third fourth order impacts are oh my god what did we do somebody please put the genie back in the bottle It just doesn't work.

54:49It really doesn't. I mean, this is, I mean, it's so, I've been so drawn into this lately, but the money is a global coordination mechanism. This is what it does. And don't tinker with it, right? It's like getting into a telecommunications network and making sure half the lines aren't transmitting our voice calls accurately. The thing breaks down. I mean, we might do it. Oh, there's people here talking about how to make bombs and there's people doing it. So we need to control that. And you just, these often come from very well-intentioned people doing well-intentioned things, but it kind of breaks down.

55:27So unfortunately, people can only tend to think, Ian, I'm a full-on communist or I'm a full-on ultra-capitalist, as if like that's the only two choices. But yeah, I think we recognize the things that markets can do. They're really good at T-shirts and baked beans. It's brilliant at that kind of stuff. I don't know if capitalism is the best model for jails or schools or hospitals. There are other natural or power lines. When outcomes can't be measured in dollars and cents. Capitalism doesn't work quite anywhere near as well. It doesn't. Or whenever there's a natural monopoly, that's another one as well.

56:05So for example, you might sort of say, I'm a free market capitalist. Anyone should be able to build electricity transmission lines. And can you imagine what the landscape would look like? like your local street would have 15 different poles running down and you get to choose this doesn't make sense like do you remember for a while telstra and optus put separate yes pay tv cables up across most streets in the country it was just stupid yeah i know it very well from living in a million rental houses because it depends it's a bit of luck of the drawers which which is which is the nbn is branded as or whatever but yeah yeah you you in those situations like well it only makes sense to have one player but it with great power comes great responsibility and we're going to make sure that you you you are regulated on that that's a great regulation exactly yeah you need it you need to have it because if you didn't have it then they say we're going to triple your electricity cost and if you don't like it you can freeze to death right you know so it's just sort of you you there are exceptions but yeah generally speaking when it comes to things like housing people are making economic calculations not really great a good all in our self-interest and things kind of tend to when left to their own devices that's right that's the key thing Things tend to work out.

57:12Let's take this from the other angle. I would say a great deal of the problems we have had have been exactly for the same effect. So we have had government after government after government doing what we've got a housing problem. Young people can't buy houses. Let's give them a first homeowner's grant. Great idea in theory, right? So they've pushed it the other way. Everyone gets 15 extra grand, which doesn't do anyone any favours except people who happen to be selling at that point in time. So it's just they're stupid. But we have the problem we have now because I think a lot of policymakers have gotten in the way and made it this way.

57:48And now we're going to try and fix the problem that we created by introducing other things. There is a lot of sense in just not a laissez-faire capitalism, but allowing markets to do what markets to do well and just setting out the framework and the environment. We want fair rules. We want clear rules. We want all of that. and then markets can get on and do what they do. Because in an environment where it's more an open and fair market, I would suspect that particularly when there are good yields to be made, potentially at certain, but you don't need to encourage people to invest where there is money to be made.

58:29People will do it anyway. It's just there. And they will arbitrage away that opportunity to some extent. But at the end of the day, it will deliver what you want. just don't centrally plan it it doesn't work i think that's absolutely true mate i think the the only thing i'd add to that where the other place markets break down we've talked about a couple uh is when the externalities aren't priced in yes and that's externalities is a fancy economics word for saying the side effects that don't have a direct dollar cost so pollution is a fantastic example of an externality where i can i can put a you know remember the old incinerators every back of an incinerator.

59:09It was one of those big Besser block things where you'd burn all your household rubbish. I can have an incinerator in the backyard. It cost me five bucks with the Besser blocks and a lid and I could burn everything I want. It cost me nothing. And it costs society nothing directly, but the externality, the outcome that isn't measured in the transaction is the amount of pollution produced and degradation of air quality. And that gets bigger when you go to coal-fired power stations and cars and other things, right? Oh, yeah. Just imagine how much more profitable I would be. Well, and if I can just dump all my waste into the river and I don't have to pay for remediation or proper disposal, I mean, my profit's much, much, much better.

59:46Is there a cost somewhere? Yes. I just don't, I don't bear it directly. Correct. So it's fine. So you're 100 % right. So that external is important. And I think where I would add that one, mate, is just, the market could work really, really well and end up with a million people on the streets. Because, yeah, there's only five properties and the five richest people get them. and it works perfectly. The price is set between the buyers and the sellers and it's all good and that market works because there's only five properties. If there's a million people out of home, homeless, living on the streets, then the market hasn't worked because for whatever reason, either it's caused the externalities or been caused by the externalities, there are too few houses to go around, for example, or too many people or whatever combination of that.

1:00:28So I'm thinking here about, you know, I've talked about big Australia versus not big Australia in the past, but the immigration numbers are a non-market driver, right the planning rules on the other side how many houses can you build where can you build how big can they be how high can they be how small can they be uh if not direct externalities that they are external to the transaction that influence how well the market operates and so there's all those things that i think the other thing is you know the market will find its own level but over a longer period of time that is maybe useful from a societal perspective so if the property market works its way at finds its level over the next 23 years then great by 2055 we're all okay except that in the meantime we've caused xyz misery and you know whatever else on the way through and so there's there's a there's a speaking of the invisible hand there's a helping hand role to be played by governments on the way through there too that also makes some degree of sense hopefully look if you want to fix it right i mean i think our starting point in australia is just so wrong and the starting point is everyone has to own a home that's the goal and you're a failure if you don't and just like no no no no it's not about owning what you want is safe affordable shelter that's what i want whether i have a document that says i own it or like that that is beyond the point so if you want affordable stable housing you know what i would do i would just i would just tighten up the rules basically just sort of say you can charge whatever the hell you like but you have to you can't turf someone out on a moment's notice because you've had a change of heart you can't elect to not fulfill your end of the budget basic things i don't think they're i don't think they should be controversial because it's not a controversial thing right charge whatever you can get look i'm an investor i get it right i would if i was a landlord i were going to get as much as i can out of my asset full respect for that you're doing the right thing but I think at the moment you kind of the rules make it such that I get an unfair economic advantage at the expense of people's lives in there.

1:02:32Tighten that up. And guess what would – you know what had happened? I mean, let's take an extreme example. So I come into power. The whole country is going to hell in a handbasket if this ever happens. But I come into power and I say – Either because or, yeah, as a result of it. We're not sure which. Yeah, yeah. I mean, exactly. Exactly. So there's no cause evictions. You just can't evict anyone. The only reason you can evict someone is if they damage your property or they don't pay your rent. Other than that, they can stay for as long as they like. And you can't increase rent beyond some certain benchmark, whether that's inflation or property, something like that.

1:03:05I would imagine, I mean, there'd be a lot of landlords going, well, that would suck. Exactly, right? Not exactly, and ha-ha, that's what I'm out to do. But no, it makes the proposition less attractive, which means there's less demand for rental properties, which means housing becomes more affordable for those that do want to get into it and those that don't have alternate scenarios. So you can – there's different ways to fix it. It's just very first-order thinking. I would just cap rent. So I'm like, no, let the market do it, but just set up a better framework and the market will fix itself. And on the other side too, stop giving all these – this is my prediction.

1:03:45of the future because, as you say, we're kind of – we have really hitched our wagon to property in Australia. So we're just like – it's the thing that no one can afford to collapse because it's become too big a problem. But for the love of God, stop giving incentives away. You know, we're trying to fix the problem and all you're doing is making it more and more and more attractive for only one party to the equation. And that – so I don't think anyone – wherever you stand on the debate, I think if you're someone who says it's wrong for governments to step in and set rents. I think it's also wrong from the other end to set incentives and schemes and that distort it in the other direction.

1:04:23I think that's fair. I think that's fair. Yes, it's a longer conversation. We probably have enough time for this particular episode. But yeah, well-regulated markets, I think we can both agree is the right approach. So you set the rules and then you let the market work. You let the market work it out regardless of the rules and regardless of who gets hurt. that you say, as a healthy, caring society, we think it's important that these things are true or observed or looked after or done. Now, now you guys all know the rules. Now go and knock yourselves out. And that's when it starts to work. I think I've used this analogy before, but imagine the game of soccer, football if you're European, and you say the goal, well, the goal, the aim, I didn't mean that, the aim is to get the ball in the net, the other end.

1:05:08No rules. Now, the game of soccer, you now have people with AK-47s and bazookas, whatever it takes. But we've got rules. You can't use your hands. You can't punch people in the face. You can't, you know, all of these other kinds of things. And then we have this really wonderful, elegant game that plays amongst that sort of rule set that we agree is all sort of fair. You know what I mean? And there's a very good parallel there, I think, with sort of capitalism. Let capitalism, let markets do its things, but we just want a fair set of rules which are clear and clarified for everyone. They're not going to change every three years depending who's in power.

1:05:43That's the best thing that you can do. And then, yeah, it kind of feels a bit laissez-faire but kind of things will figure themselves out. That's what markets do. Very good. Mate, with a well-meaning Liverpool kiss, should we end this particular podcast? Yeah, I think so. Of course. Off to the finals. For any of our listeners who don't know what that is, Liverpool kiss is a headbutt. So there you go. I'm not offering Andrew any additional affection that anyone else has. Oh, sorry, Stephen, I missed what you're saying. It's all okay. On that slightly uncomfortable note. Sorry, mate. I'm not a sporting guy.

1:06:17You're going to miss me on those ones. My apologies. Full on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.