1 00:00:03,160 --> 00:00:06,520 Speaker 1: Juno Koto. Welcome to Shared Lunch. I'm Garth Bray. With 2 00:00:06,640 --> 00:00:10,160 Speaker 1: all of the hype around AI and tech stocks, with 3 00:00:10,320 --> 00:00:13,440 Speaker 1: all of that building up, maybe now is a perfect 4 00:00:13,440 --> 00:00:16,320 Speaker 1: time to get a realistic take from someone who's been 5 00:00:16,360 --> 00:00:19,400 Speaker 1: in the market long enough to remember other times when 6 00:00:19,400 --> 00:00:21,919 Speaker 1: it was a little frotty to know the difference between 7 00:00:21,920 --> 00:00:25,960 Speaker 1: a bargain and a bubble. That person is Scott Phillips 8 00:00:26,000 --> 00:00:30,200 Speaker 1: from the Motley Fall in Australia legendary stockpicker. But before 9 00:00:30,240 --> 00:00:32,760 Speaker 1: we hear from Scott has some important information that you 10 00:00:32,800 --> 00:00:34,839 Speaker 1: should always consider an investing. 11 00:00:38,159 --> 00:00:40,760 Speaker 2: Investing involves the risk you might lose the money you 12 00:00:40,800 --> 00:00:44,080 Speaker 2: start with. We recommend talking to a licensed financial advisor. 13 00:00:44,840 --> 00:00:48,640 Speaker 2: We also recommend reading product disclosure documents before deciding to invest. 14 00:00:48,920 --> 00:00:51,320 Speaker 2: Everything you're about to see and here is current at 15 00:00:51,320 --> 00:00:52,159 Speaker 2: the time of recording. 16 00:00:52,240 --> 00:00:55,120 Speaker 1: Hi, Scott good A, thanks for having me on Shared Lunch. Look, 17 00:00:55,120 --> 00:00:58,520 Speaker 1: we've just had a US federal reserve rate cuts, first 18 00:00:58,520 --> 00:01:01,240 Speaker 1: one in nine months, like waiting for baby to be born, 19 00:01:01,520 --> 00:01:03,920 Speaker 1: as true would tell us that after that length of 20 00:01:03,960 --> 00:01:06,800 Speaker 1: time between changes and the policy rate in the U 21 00:01:06,959 --> 00:01:10,040 Speaker 1: is the price of money that will typically see a 22 00:01:10,080 --> 00:01:12,480 Speaker 1: bit of a bounce in this in the s and 23 00:01:12,480 --> 00:01:15,040 Speaker 1: P five hundred the market and so on, and that's 24 00:01:15,040 --> 00:01:18,000 Speaker 1: already to record a high, right, So how is this 25 00:01:18,200 --> 00:01:19,200 Speaker 1: not a bubble? 26 00:01:20,200 --> 00:01:22,240 Speaker 3: How have you got? Look, let's go with the rate 27 00:01:22,280 --> 00:01:24,479 Speaker 3: cuts first, to come back to the bubble. The thing 28 00:01:24,480 --> 00:01:27,520 Speaker 3: about rate cuts are any economic indicators, is the market 29 00:01:27,600 --> 00:01:31,520 Speaker 3: tends to only react when it doesn't expect what happens. 30 00:01:31,640 --> 00:01:34,280 Speaker 3: Jerome Power, the US Federal Reserve Chair, had written this 31 00:01:34,280 --> 00:01:37,000 Speaker 3: almost in blood, and so we will cut rates, and 32 00:01:37,040 --> 00:01:39,240 Speaker 3: so it was no surprise to the market that had happened. 33 00:01:39,480 --> 00:01:42,000 Speaker 3: So part of what you're talking about about that increase 34 00:01:42,040 --> 00:01:44,240 Speaker 3: on the back of rates is true. But I think 35 00:01:44,280 --> 00:01:47,920 Speaker 3: someone's already happened. That idea of market anticipating the announcement, 36 00:01:48,080 --> 00:01:50,400 Speaker 3: and that's why we saw almost no move on the day, 37 00:01:50,800 --> 00:01:53,280 Speaker 3: was because it was already built into share prices. That 38 00:01:53,440 --> 00:01:55,800 Speaker 3: being said, your question about the bubble is a really 39 00:01:55,840 --> 00:01:58,040 Speaker 3: good one, and I'm going to try and separate out 40 00:01:58,320 --> 00:02:02,400 Speaker 3: a record high from a bubble, because the market always 41 00:02:02,640 --> 00:02:06,600 Speaker 3: hits record highs. It's the story of the last century plus. 42 00:02:06,960 --> 00:02:09,880 Speaker 3: On the ASX, the New Zealand stocking chains, the US markets, 43 00:02:10,120 --> 00:02:14,680 Speaker 3: we hit new highs all the time, because capitalism finds 44 00:02:14,680 --> 00:02:18,760 Speaker 3: ways to solve new and old problems. And so that process, 45 00:02:18,840 --> 00:02:21,480 Speaker 3: that literally the creative destruction that we talk about all 46 00:02:21,520 --> 00:02:24,359 Speaker 3: the time, is what happens, whether that's a new way 47 00:02:24,400 --> 00:02:27,080 Speaker 3: of doing something or a brand new thing. Think about 48 00:02:27,080 --> 00:02:30,040 Speaker 3: the iPhone that's now not even still twenty years old. Now, 49 00:02:30,120 --> 00:02:32,920 Speaker 3: think about any technology before or after that period of 50 00:02:32,919 --> 00:02:35,520 Speaker 3: time that makes us more productive, makes us happier, makes 51 00:02:35,560 --> 00:02:38,760 Speaker 3: us smarter, makes us richer. Those things happen anyway, and 52 00:02:38,760 --> 00:02:42,120 Speaker 3: so what's really really important to know upfront is a 53 00:02:42,120 --> 00:02:45,040 Speaker 3: bubble is sometimes absolutely a bubble. More often than not, 54 00:02:45,200 --> 00:02:48,120 Speaker 3: a record high is simply the last high when we 55 00:02:48,160 --> 00:02:50,239 Speaker 3: get to the next one. And we have set record 56 00:02:50,320 --> 00:02:53,160 Speaker 3: highs for as I said, literally decades, more than a century. 57 00:02:53,240 --> 00:02:54,800 Speaker 3: We've gone to new highs and new highs, and new 58 00:02:54,880 --> 00:02:58,280 Speaker 3: highs and new highs because of that credit destruction, because 59 00:02:58,560 --> 00:03:04,040 Speaker 3: human ingenuity, human activity continues to advance. So differentiating between 60 00:03:04,200 --> 00:03:06,800 Speaker 3: a record high and a bubble not easy, but that 61 00:03:06,960 --> 00:03:09,480 Speaker 3: is the job of the investor, particularly right now when 62 00:03:09,520 --> 00:03:12,120 Speaker 3: we are, as you say, at those record highs. 63 00:03:12,200 --> 00:03:15,040 Speaker 4: So I guess I think I read somewhere else that 64 00:03:15,040 --> 00:03:17,680 Speaker 4: there've been studies of when there are these rate cuts, 65 00:03:17,680 --> 00:03:19,600 Speaker 4: when there's been some time, and one of them sort 66 00:03:19,600 --> 00:03:21,600 Speaker 4: of said, look, you know the last twenty two times 67 00:03:21,639 --> 00:03:22,240 Speaker 4: has happened. 68 00:03:22,440 --> 00:03:26,119 Speaker 1: The market was high twelve months later. Well, you're sort 69 00:03:26,120 --> 00:03:28,760 Speaker 1: of saying, duh, it would have been higher twelve months 70 00:03:28,840 --> 00:03:31,079 Speaker 1: later probably in any case, because it just keeps going up. 71 00:03:31,800 --> 00:03:33,840 Speaker 3: Well, we're both right, it would have gone up anyway probably. 72 00:03:33,880 --> 00:03:35,960 Speaker 3: I mean, twelve months is too short to say absolutely, 73 00:03:36,000 --> 00:03:39,240 Speaker 3: but over any five year period, very very very rare. 74 00:03:39,560 --> 00:03:41,000 Speaker 3: You don't have a higher point at the end of 75 00:03:41,040 --> 00:03:43,840 Speaker 3: the five years than before it. So yeah, to your point, 76 00:03:44,040 --> 00:03:46,800 Speaker 3: would have gone up there in a bubble and exuberance. 77 00:03:46,800 --> 00:03:50,080 Speaker 3: By the way, so markets always overshoot, over shooting the upside, 78 00:03:50,080 --> 00:03:52,560 Speaker 3: they overshooting the downside. Just what they do because humans 79 00:03:52,560 --> 00:03:55,560 Speaker 3: a human And for your viewers, remembering that is so 80 00:03:55,680 --> 00:03:58,840 Speaker 3: incredibly important. I wrote to our readers literally only today 81 00:03:58,880 --> 00:04:00,880 Speaker 3: as we're recording this, I wrote to them and said, 82 00:04:01,520 --> 00:04:04,120 Speaker 3: be mindful of the fact that sometimes the market is 83 00:04:04,240 --> 00:04:06,600 Speaker 3: just irrational and you've just got to deal with it. 84 00:04:07,000 --> 00:04:11,000 Speaker 3: You can't time the market. Now you can see potentially bubbles, 85 00:04:11,160 --> 00:04:13,960 Speaker 3: you can potentially see the overreactions on the downside, I've 86 00:04:13,960 --> 00:04:17,000 Speaker 3: spoken before on Shared Lunch about the COVID crash. Thirty 87 00:04:17,000 --> 00:04:19,840 Speaker 3: eight percent in a month and four days now, I 88 00:04:19,920 --> 00:04:22,760 Speaker 3: was buying right through, and I actually think I bought 89 00:04:22,880 --> 00:04:24,520 Speaker 3: roughly at the bottom because I knew it was the bottom. 90 00:04:24,560 --> 00:04:25,960 Speaker 3: By the way, I'm not that smart and I'm not 91 00:04:26,000 --> 00:04:29,000 Speaker 3: that clever, But I bought at the bottom. Why Because 92 00:04:29,040 --> 00:04:30,680 Speaker 3: I kept buying because I looked at it and thought, 93 00:04:30,720 --> 00:04:34,000 Speaker 3: hang on, it is the future of our planet. Really, 94 00:04:34,000 --> 00:04:37,520 Speaker 3: thirty eight percent worse than it was thirty five days ago, 95 00:04:37,839 --> 00:04:41,039 Speaker 3: of course not, it was a massive overreaction. So, yes, 96 00:04:41,160 --> 00:04:44,440 Speaker 3: markets go higher over time. Yes, rate cuts make assets 97 00:04:44,480 --> 00:04:47,960 Speaker 3: worth more. The maths of asset pricing we won't go in, 98 00:04:48,240 --> 00:04:51,080 Speaker 3: I promise, but your viewers will have discounted cash flows 99 00:04:51,320 --> 00:04:55,000 Speaker 3: or net present values. We love three letter acronyms, right tla's. 100 00:04:55,880 --> 00:05:00,400 Speaker 3: So the reality is, when intro it's go down, assets 101 00:05:00,400 --> 00:05:02,680 Speaker 3: are worth more. They just are. So you should see 102 00:05:02,720 --> 00:05:05,400 Speaker 3: prices increase. By the way, then when rates go up, 103 00:05:05,720 --> 00:05:09,360 Speaker 3: assets are worthless. That's also true. But be careful about 104 00:05:09,480 --> 00:05:13,760 Speaker 3: cycles within that longer time story. At what point in 105 00:05:13,800 --> 00:05:16,760 Speaker 3: the last one hundred and seven ten years has been 106 00:05:16,760 --> 00:05:19,360 Speaker 3: a bad time to buy shares well. Between then and now, 107 00:05:19,440 --> 00:05:22,240 Speaker 3: the price has never been higher. Almost by definition, it's 108 00:05:22,240 --> 00:05:23,920 Speaker 3: never been a bad time to buy shares. If you've 109 00:05:23,920 --> 00:05:25,800 Speaker 3: got to sell them and own them today, you've done. 110 00:05:25,839 --> 00:05:27,920 Speaker 3: You've bought up a cheaper prices, at least in terms 111 00:05:27,920 --> 00:05:31,680 Speaker 3: of the market indexes. So that's the long term story. 112 00:05:31,880 --> 00:05:33,680 Speaker 3: It doesn't mean they don't fluctuate in the meantime. 113 00:05:33,680 --> 00:05:35,320 Speaker 1: It might have been a bad time to sell them though. 114 00:05:35,400 --> 00:05:39,400 Speaker 3: Yeah, yes, absolutely, buying when things are too high, be really, 115 00:05:39,400 --> 00:05:41,200 Speaker 3: really careful. I'm an optimist. I'm a diet in the 116 00:05:41,200 --> 00:05:43,560 Speaker 3: will optimist, but i have to say I'm very I'm 117 00:05:43,600 --> 00:05:46,880 Speaker 3: much happier being an optimistic wheneveryonel is a pessimistic middle 118 00:05:46,920 --> 00:05:49,200 Speaker 3: of April twenty twenty, I am like, you know what, 119 00:05:49,400 --> 00:05:51,600 Speaker 3: this feels awful, but I know things will get better 120 00:05:51,640 --> 00:05:54,000 Speaker 3: because that always does. So I'm happy to be the optis. 121 00:05:54,080 --> 00:05:56,279 Speaker 3: But everyone else is running around like chicken little when 122 00:05:56,279 --> 00:05:58,480 Speaker 3: everybody else saying, come in, the water's fine, come in, 123 00:05:58,560 --> 00:06:00,479 Speaker 3: fill your boots. You know this will let stop. This 124 00:06:00,560 --> 00:06:02,919 Speaker 3: goes on forever, this is the new normal, all that 125 00:06:03,000 --> 00:06:06,120 Speaker 3: kind of stuff. I'm still optimistic, but I'm less key 126 00:06:06,240 --> 00:06:08,920 Speaker 3: to sort of throw my lodding with everybody else, I'm like, oh, 127 00:06:09,200 --> 00:06:11,159 Speaker 3: I think the future is better than it is now, 128 00:06:11,720 --> 00:06:13,560 Speaker 3: But I reckon you guys getting a bit carried away. 129 00:06:14,000 --> 00:06:16,160 Speaker 3: That's kind of the That's the skill of the art 130 00:06:16,279 --> 00:06:19,440 Speaker 3: over time, is trying to delineate between those two ideas. 131 00:06:19,560 --> 00:06:22,200 Speaker 1: It's hard, though, right because I mean so much coverage 132 00:06:22,240 --> 00:06:24,919 Speaker 1: around just a couple of key stocks that sort of 133 00:06:24,920 --> 00:06:27,359 Speaker 1: spring to mind here for me, like a video obviously. 134 00:06:27,440 --> 00:06:30,919 Speaker 1: But I think this week they the Chinese said to 135 00:06:31,080 --> 00:06:34,080 Speaker 1: some of their companies, you can't buy their chips anymore. Boom, 136 00:06:34,120 --> 00:06:36,520 Speaker 1: three percent drop on the sheer value. Oh we're buying 137 00:06:36,600 --> 00:06:40,159 Speaker 1: some intel. Boom, We're back up again. This is a 138 00:06:40,320 --> 00:06:44,440 Speaker 1: stop that's training it more than a fifty times multiple, right, 139 00:06:44,560 --> 00:06:46,920 Speaker 1: you know you're saying that it's you know, you're gonna 140 00:06:46,920 --> 00:06:49,680 Speaker 1: pay fifty times its earnings pretty much to have a 141 00:06:49,680 --> 00:06:53,120 Speaker 1: piece of this action that seems like an astonishing valuation. 142 00:06:53,960 --> 00:06:55,760 Speaker 1: Yet people are going for it. 143 00:06:55,880 --> 00:06:57,600 Speaker 3: Yeah. So, and that's why I wanted to. I want 144 00:06:57,600 --> 00:07:01,000 Speaker 3: to ditinguish point the market and individual companies. Right when 145 00:07:01,040 --> 00:07:03,280 Speaker 3: the markets sky high, there's still stuff to buy. When 146 00:07:03,279 --> 00:07:06,000 Speaker 3: the market's bombed out. Not everything's going to recover. Right, 147 00:07:06,160 --> 00:07:08,400 Speaker 3: the remmons are bombed out during the bottom of COVID 148 00:07:08,520 --> 00:07:11,560 Speaker 3: and then we broke an Australian company called Mosaic Brands, 149 00:07:11,600 --> 00:07:13,720 Speaker 3: great example of that. Right we had the shutdowns, the 150 00:07:13,720 --> 00:07:16,280 Speaker 3: lockdowns and all that kind of stuff. When the lockdown stop, 151 00:07:16,320 --> 00:07:19,440 Speaker 3: everything else recovered. Mosaic Brands has died. Absolutely was just 152 00:07:19,640 --> 00:07:22,440 Speaker 3: literally died as a company went bankrupt. So just because 153 00:07:22,480 --> 00:07:25,040 Speaker 3: the market's low and everything will go up, just because 154 00:07:25,080 --> 00:07:27,720 Speaker 3: some companies are in arguably bubble territory, I'll get doing 155 00:07:27,800 --> 00:07:30,720 Speaker 3: VideA in a second. Don I'm not saying everything's worth buying. 156 00:07:30,840 --> 00:07:33,680 Speaker 3: As that exuberance, has that optimism. As that confidence continues 157 00:07:33,720 --> 00:07:35,960 Speaker 3: to flow through, it's pushed some companies up to a 158 00:07:35,960 --> 00:07:38,240 Speaker 3: price or I'm like, all right, well I like the company, 159 00:07:38,280 --> 00:07:40,960 Speaker 3: but dude, no, I'm not paying that price. I'm not 160 00:07:40,960 --> 00:07:42,840 Speaker 3: trying to time the market. I'm not saying, oh, well, 161 00:07:42,840 --> 00:07:45,040 Speaker 3: I know what's happening, this is the top, and I 162 00:07:45,040 --> 00:07:46,280 Speaker 3: know that in months time's going to be lower, a 163 00:07:46,360 --> 00:07:48,280 Speaker 3: year soon's going to be I have no idea, absolutely 164 00:07:48,280 --> 00:07:50,560 Speaker 3: no idea. All I can do is try and objectively 165 00:07:50,680 --> 00:07:52,720 Speaker 3: value the companies that I want to buy or that 166 00:07:52,720 --> 00:07:55,400 Speaker 3: I own and then workout of that which ones do 167 00:07:55,440 --> 00:07:57,520 Speaker 3: I buy? What do I own that I should sell. 168 00:07:57,640 --> 00:08:00,000 Speaker 3: There is absolutely a future in which we look back, 169 00:08:00,080 --> 00:08:02,080 Speaker 3: can go, oh man, a video is cheap than twenty 170 00:08:02,120 --> 00:08:04,760 Speaker 3: twenty five, and before people scoff at that, I'm gonna 171 00:08:04,760 --> 00:08:07,160 Speaker 3: go back ironshirs An Amazon doesn't matter, but I should 172 00:08:07,200 --> 00:08:10,800 Speaker 3: disclose it so your viewers. No. Back in two thousand 173 00:08:10,840 --> 00:08:13,120 Speaker 3: and two, two thousand and eight, Back in ninety nine, 174 00:08:13,160 --> 00:08:15,440 Speaker 3: by the way, barrens the I Think was well Fortune, 175 00:08:15,480 --> 00:08:18,120 Speaker 3: one of the US business magazines led with Amazon dot Bomb. 176 00:08:18,440 --> 00:08:21,480 Speaker 3: Right Think had Amazon today versus twenty six years ago 177 00:08:21,480 --> 00:08:24,280 Speaker 3: when it was Amazon dot bomb allegedly was it No, 178 00:08:24,960 --> 00:08:27,240 Speaker 3: it'll doesn't look expensive yet you bet a thousand times 179 00:08:27,320 --> 00:08:30,520 Speaker 3: earnings at one point, Like, seriously, who pays that? Now. 180 00:08:30,560 --> 00:08:32,720 Speaker 3: I'm not saying video is Amazon. I'm not saying Amazon's video. 181 00:08:32,880 --> 00:08:34,840 Speaker 3: What I'm saying is there were times when stuff looked 182 00:08:34,880 --> 00:08:38,079 Speaker 3: really expensive and it's absolutely worth paying. If you'd have 183 00:08:38,120 --> 00:08:40,440 Speaker 3: paid a thousand times earnings on Amazon at ten bucks 184 00:08:40,559 --> 00:08:42,400 Speaker 3: then out three hundred bucks a share. So you know, 185 00:08:42,440 --> 00:08:44,920 Speaker 3: I'm not saying no by stuff that looks expensive. But 186 00:08:45,000 --> 00:08:47,839 Speaker 3: to your point, when stuff is that expensive in video 187 00:08:47,880 --> 00:08:49,360 Speaker 3: is the most and by the way, Amazon was still 188 00:08:49,360 --> 00:08:51,560 Speaker 3: tiny at that point, right, thousand times earnings, but small 189 00:08:51,920 --> 00:08:55,600 Speaker 3: in video is fifty times earnings and huge, Probably the 190 00:08:55,720 --> 00:08:57,439 Speaker 3: most available company in the US stock market, if not 191 00:08:57,520 --> 00:09:00,640 Speaker 3: pretty close at the moment at that point. Fifty times 192 00:09:00,679 --> 00:09:03,320 Speaker 3: earnings for the most valuable company in the world. That's 193 00:09:03,360 --> 00:09:06,000 Speaker 3: asking a lot. That's all of a sudden saying, hang on, guys, 194 00:09:06,160 --> 00:09:09,560 Speaker 3: this thing's got to grow at massive rates just to 195 00:09:09,679 --> 00:09:13,400 Speaker 3: justify the current price. Let alone get gains from this price. Right, 196 00:09:13,559 --> 00:09:15,200 Speaker 3: I'll shot up at a second. Let's tusk another question, 197 00:09:15,200 --> 00:09:18,440 Speaker 3: but really quickly. The job of the investor is not 198 00:09:18,520 --> 00:09:21,640 Speaker 3: to be right or wrong. Sounds silly, right, The job 199 00:09:21,679 --> 00:09:23,440 Speaker 3: of the investor is not to be right. Why Because 200 00:09:23,440 --> 00:09:26,000 Speaker 3: you can't know in advance. My crystal ball's broken. Your 201 00:09:26,000 --> 00:09:28,439 Speaker 3: crystal ball's broken. Everybody watching. If you think your crystal 202 00:09:28,440 --> 00:09:31,280 Speaker 3: ball's working, go and check yourself in somewhere. It's not. 203 00:09:31,400 --> 00:09:33,200 Speaker 3: I promise you. You don't know what the future holds. 204 00:09:33,520 --> 00:09:35,000 Speaker 3: What you can do, what you should do as an 205 00:09:35,000 --> 00:09:38,880 Speaker 3: investor is work on probabilities. Right, In other words, what 206 00:09:39,000 --> 00:09:40,920 Speaker 3: is the risk of a downside? What is the chance 207 00:09:41,000 --> 00:09:44,040 Speaker 3: of the upside. And when you do that, you're looking 208 00:09:44,080 --> 00:09:46,440 Speaker 3: at MEDEO at fifty times earnings to say, well, is 209 00:09:46,440 --> 00:09:50,000 Speaker 3: there some circumstances in which it's worth today's price? Yes? Absolutely? 210 00:09:50,600 --> 00:09:54,600 Speaker 3: How probable is that outcome? Relative too, maybe it's not 211 00:09:54,640 --> 00:09:57,439 Speaker 3: worth today's price. How probable is that outcome? I look 212 00:09:57,480 --> 00:09:59,319 Speaker 3: at that and go I can absolutely make a case 213 00:09:59,320 --> 00:10:03,160 Speaker 3: for it being worth today. AI becomes massively, massively bigger. 214 00:10:03,320 --> 00:10:05,000 Speaker 3: No one ever comes up with a chip that rivals 215 00:10:05,000 --> 00:10:07,400 Speaker 3: in video. There's a chip shortage for the next twenty 216 00:10:07,400 --> 00:10:10,120 Speaker 3: five years. In video can set its own prices and 217 00:10:10,160 --> 00:10:12,640 Speaker 3: it goes to the moon. That's very very very possible, 218 00:10:12,760 --> 00:10:15,280 Speaker 3: very possible. Right, Maybe the hour of revolution doesn't grow 219 00:10:15,360 --> 00:10:17,800 Speaker 3: quite as quickly as we think. Maybe venture capitalists run 220 00:10:17,800 --> 00:10:19,680 Speaker 3: out of money. Maybe we talked about rates they go 221 00:10:19,760 --> 00:10:21,600 Speaker 3: back up. We saw when rates started to go back 222 00:10:21,679 --> 00:10:23,760 Speaker 3: up after COVID a whole lot of Australian businesses went broke. 223 00:10:23,840 --> 00:10:26,000 Speaker 3: The one hour grocery delivery mobs, that was four or 224 00:10:26,000 --> 00:10:27,600 Speaker 3: five of them at one point. They all went broke 225 00:10:27,600 --> 00:10:29,319 Speaker 3: because the venture capital money dried up. Because all of 226 00:10:29,360 --> 00:10:31,679 Speaker 3: a sudden money was worth something again. And you've got 227 00:10:31,679 --> 00:10:34,040 Speaker 3: as an investor say, what are the odds that I'm right? 228 00:10:34,360 --> 00:10:35,920 Speaker 3: And if I am right, what am I going to get? 229 00:10:36,360 --> 00:10:37,600 Speaker 3: What are the odds that I'm wrong? And if I 230 00:10:37,600 --> 00:10:40,120 Speaker 3: am wrong, how much do I lose? Put those together 231 00:10:40,160 --> 00:10:42,320 Speaker 3: and say, now do I really want to buy in video? 232 00:10:42,360 --> 00:10:43,679 Speaker 3: Or if I own it, do I want to hold it? 233 00:10:43,720 --> 00:10:46,959 Speaker 3: And probability is the investor's friend if you really think 234 00:10:47,000 --> 00:10:48,800 Speaker 3: it through and try and be as rational as you 235 00:10:48,880 --> 00:10:50,960 Speaker 3: can to work out what you should buy and what 236 00:10:50,960 --> 00:10:51,480 Speaker 3: you should pay. 237 00:10:51,840 --> 00:10:54,839 Speaker 1: Do you when you're working that out, can you give 238 00:10:54,880 --> 00:10:57,440 Speaker 1: us some insight into what level is enough for you? 239 00:10:57,520 --> 00:10:59,679 Speaker 1: Like I've heard there are some people that say, I'll 240 00:10:59,679 --> 00:11:03,440 Speaker 1: work valuation and when it gets to about ninety percent 241 00:11:03,520 --> 00:11:06,000 Speaker 1: or eighty percent or ninety five, that's when I'm out. 242 00:11:06,040 --> 00:11:08,600 Speaker 1: I'll happily that money on the table and be wrong, 243 00:11:08,679 --> 00:11:10,600 Speaker 1: because more often than not, I'll be out in time. 244 00:11:10,679 --> 00:11:12,840 Speaker 1: Do you I mean, does it vary from case case 245 00:11:12,920 --> 00:11:14,600 Speaker 1: or do you have a rule you follow? 246 00:11:14,880 --> 00:11:18,800 Speaker 3: So I'm an investor who value is quality first and foremost, 247 00:11:19,320 --> 00:11:20,880 Speaker 3: And one of the rules I try and live by 248 00:11:21,040 --> 00:11:24,560 Speaker 3: is I'm slow to buy, but even slower to sell. 249 00:11:24,920 --> 00:11:27,000 Speaker 3: Right now, what does that mean? Slow to buy means 250 00:11:27,240 --> 00:11:29,440 Speaker 3: I want to make sure that I feel really, really 251 00:11:29,480 --> 00:11:32,200 Speaker 3: really good about what I'm buying, both from a quality 252 00:11:32,200 --> 00:11:35,800 Speaker 3: and a price perspective. And if I've done that work properly, 253 00:11:36,480 --> 00:11:38,920 Speaker 3: then i want to be even slower to sell, because 254 00:11:39,440 --> 00:11:41,440 Speaker 3: if I've analyzed them and I took about when I 255 00:11:41,440 --> 00:11:43,760 Speaker 3: sell at different prices, if I've got a quality business, 256 00:11:43,800 --> 00:11:46,520 Speaker 3: I'm going to let that go really, really, really reluctantly. 257 00:11:46,760 --> 00:11:48,600 Speaker 3: Right war On Buffet says, it's better to pay a 258 00:11:48,640 --> 00:11:51,560 Speaker 3: fair price for a wonderful business than a wonderful price 259 00:11:51,600 --> 00:11:54,320 Speaker 3: for our fair business. So if I've got a wonderful 260 00:11:54,320 --> 00:11:57,040 Speaker 3: business in my back pocket, in my portfolio, I'm going 261 00:11:57,120 --> 00:11:59,679 Speaker 3: to let that go really reluctantly. I'll say one of 262 00:11:59,679 --> 00:12:01,200 Speaker 3: the business this is two of the businesses we sold 263 00:12:01,240 --> 00:12:03,400 Speaker 3: from out for our members or recommended they sell, got 264 00:12:03,440 --> 00:12:06,240 Speaker 3: to price earnings ratios of eighty and ninety times before 265 00:12:06,240 --> 00:12:09,600 Speaker 3: we recommended they sell right now, which is extraordinarily high. 266 00:12:09,840 --> 00:12:11,880 Speaker 3: Why do we not pull the trigger earlier? Because we 267 00:12:12,000 --> 00:12:14,199 Speaker 3: kind of went, well, the great business, I really really 268 00:12:14,200 --> 00:12:16,040 Speaker 3: don't want to sell us I have to, and then 269 00:12:16,040 --> 00:12:18,040 Speaker 3: we went well, okay, now I'm out. So do we 270 00:12:18,080 --> 00:12:19,840 Speaker 3: answer your question. I'm not a value I'm not a 271 00:12:19,840 --> 00:12:22,280 Speaker 3: capital V value investor, nor am I a capital G 272 00:12:22,280 --> 00:12:25,600 Speaker 3: growth investor. I think the distinction is really unhelpful. Frankly, 273 00:12:25,800 --> 00:12:27,360 Speaker 3: people out there can do their own thing, but for me, 274 00:12:27,400 --> 00:12:29,959 Speaker 3: it's not very helpful. So you asked the question. For me, 275 00:12:30,000 --> 00:12:31,600 Speaker 3: it's probably one hundred and twenty one hundred and thirty 276 00:12:31,559 --> 00:12:34,120 Speaker 3: percent of the value is where I sell. And someone said, well, 277 00:12:34,280 --> 00:12:35,679 Speaker 3: why would you sell? Why would you wait for more 278 00:12:35,679 --> 00:12:39,080 Speaker 3: than it's worth to sell? Two things. One back quality, 279 00:12:39,280 --> 00:12:42,720 Speaker 3: and that's competitive advantage of the business, the quality of management, 280 00:12:43,080 --> 00:12:44,880 Speaker 3: all the things that we talked about that another day, 281 00:12:44,880 --> 00:12:48,440 Speaker 3: about what quality investing looks like. So back quality. Secondly, 282 00:12:48,679 --> 00:12:50,440 Speaker 3: I don't want to be so arrogant as to believe 283 00:12:50,520 --> 00:12:53,840 Speaker 3: my calculation of value is so incredibly precise that I 284 00:12:53,880 --> 00:12:57,400 Speaker 3: know for sure arrogance and ego is the investor's absolute enemy, right, 285 00:12:57,480 --> 00:12:59,320 Speaker 3: So the humility I try to bring to it is 286 00:12:59,800 --> 00:13:02,319 Speaker 3: I think this is roughly right. But all of the 287 00:13:02,360 --> 00:13:04,320 Speaker 3: sumps I have to put in the discount rate, the 288 00:13:04,360 --> 00:13:07,280 Speaker 3: growth rates, the terminal values. Again we're talking about discount 289 00:13:07,280 --> 00:13:09,480 Speaker 3: of cash flows here, really boring on video format. But 290 00:13:09,920 --> 00:13:12,280 Speaker 3: all of that stuff is assumption laid on assumption. If 291 00:13:12,280 --> 00:13:14,000 Speaker 3: I change a couple those numbers a little bit, I 292 00:13:14,000 --> 00:13:16,199 Speaker 3: can justify paying fifty percent more or fifty percent less 293 00:13:16,240 --> 00:13:18,720 Speaker 3: for the same company. Right, So that should tell you 294 00:13:19,160 --> 00:13:21,679 Speaker 3: that this is a really, really really inexact science. It's 295 00:13:21,679 --> 00:13:24,240 Speaker 3: an inexact art. It's a it's a guess, it's a 296 00:13:24,240 --> 00:13:28,000 Speaker 3: it's a rough yardstick. So for me, I buy hopefully well, 297 00:13:28,200 --> 00:13:30,000 Speaker 3: if I've bought well, I want to be slow to sell, 298 00:13:30,240 --> 00:13:32,080 Speaker 3: and I want to be really really humble about how 299 00:13:32,200 --> 00:13:34,920 Speaker 3: likely I am to be exactly right, and then intrinsic value. 300 00:13:35,240 --> 00:13:37,720 Speaker 3: And if that's the case, let it have some rope, 301 00:13:37,800 --> 00:13:40,640 Speaker 3: and then yes, sell. Now have I held stuff too 302 00:13:40,640 --> 00:13:44,840 Speaker 3: long in hindsight, absolutely yes. But if I added up 303 00:13:44,880 --> 00:13:47,520 Speaker 3: every company I've held for too long and compare that 304 00:13:47,559 --> 00:13:51,080 Speaker 3: against every company I sold too early, I'm still behind. Right. 305 00:13:52,080 --> 00:13:54,880 Speaker 3: Great example, I'll rub my nose my own problems. Domino's 306 00:13:54,920 --> 00:13:57,400 Speaker 3: way back in the day went from we bought recommended, 307 00:13:57,440 --> 00:13:59,080 Speaker 3: don't members that eight bucks? I think I went about 308 00:13:59,080 --> 00:14:02,000 Speaker 3: thirteen bucks, right, I thought, oh may at sixty percent gain. 309 00:14:02,000 --> 00:14:04,000 Speaker 3: It was a couple of years. I'm a genius, but yess, 310 00:14:04,040 --> 00:14:06,160 Speaker 3: looking expense, how I better get out? It went from 311 00:14:06,200 --> 00:14:11,040 Speaker 3: thirteen two Hold your breath one hundred and forty dollars. Right, 312 00:14:11,240 --> 00:14:14,719 Speaker 3: I missed a tenfold gain. I could have ten other 313 00:14:14,760 --> 00:14:16,800 Speaker 3: companies go to zero, and I still would have been 314 00:14:16,800 --> 00:14:19,800 Speaker 3: ahead if I'd held Dominoes. Don't be too quick to sell. 315 00:14:20,160 --> 00:14:22,600 Speaker 3: But if you own quality and don't get caught up 316 00:14:22,640 --> 00:14:23,960 Speaker 3: with your own hubis and your own kind of you. 317 00:14:24,360 --> 00:14:25,800 Speaker 3: I've picked the stock and it's gone up, so I'm 318 00:14:25,800 --> 00:14:28,280 Speaker 3: a genius. I'm gonnalet it keep going up. Be real 319 00:14:28,320 --> 00:14:31,720 Speaker 3: with yourself, but don't don't don't. There's a great thought 320 00:14:31,760 --> 00:14:33,680 Speaker 3: saying about watering your weeds and cutting your flowers right, 321 00:14:33,680 --> 00:14:36,280 Speaker 3: don't cut your flowers to a let a bloom at 322 00:14:36,320 --> 00:14:38,200 Speaker 3: a time. Cut them and put them into ours, for sure, 323 00:14:38,400 --> 00:14:39,640 Speaker 3: but give it a little bit of time. 324 00:14:39,840 --> 00:14:42,040 Speaker 1: So this sounds to me a wee bit like it's 325 00:14:42,040 --> 00:14:44,560 Speaker 1: also bubble protection, getting back to what we were starting 326 00:14:44,600 --> 00:14:47,240 Speaker 1: to talk about there. If you're following that kind of 327 00:14:47,240 --> 00:14:50,480 Speaker 1: a strategy, you'd feel pretty confident that you're you're going 328 00:14:50,560 --> 00:14:52,000 Speaker 1: to miss the bubble. You're not going to get caught 329 00:14:52,080 --> 00:14:55,040 Speaker 1: up in the exuberance you Anything that's rising is rising 330 00:14:55,080 --> 00:14:57,800 Speaker 1: because you can see a fundamental reason for it rather 331 00:14:57,880 --> 00:14:58,880 Speaker 1: than just the exuberance. 332 00:14:59,120 --> 00:15:01,440 Speaker 3: Am I getting close hundred percent? The other thing I 333 00:15:01,480 --> 00:15:03,320 Speaker 3: will say for what it's worth is I think the 334 00:15:03,320 --> 00:15:05,760 Speaker 3: bubble label it's worth being aware of. But it can 335 00:15:05,800 --> 00:15:07,360 Speaker 3: be a little bit unhelpful because then we argue about 336 00:15:07,360 --> 00:15:09,120 Speaker 3: is it isn't a bubble? I don't know. All I 337 00:15:09,160 --> 00:15:10,680 Speaker 3: know is it's worth more than I think it should be. 338 00:15:10,840 --> 00:15:12,440 Speaker 3: And that's enough to me. I don't have to say 339 00:15:12,800 --> 00:15:16,000 Speaker 3: bubble tick. I just say, would I pay that price now? No? 340 00:15:16,040 --> 00:15:17,600 Speaker 3: Where in the world do I really want to hold 341 00:15:17,640 --> 00:15:18,240 Speaker 3: it at this price? 342 00:15:18,640 --> 00:15:18,680 Speaker 1: No? 343 00:15:18,960 --> 00:15:20,440 Speaker 3: Maybe it goes up, maybe goes out. I don't know. 344 00:15:20,520 --> 00:15:22,760 Speaker 3: What I do know is probabilistically, we started talking about 345 00:15:23,240 --> 00:15:25,640 Speaker 3: a lot's got to go right and nothing can go wrong. 346 00:15:26,080 --> 00:15:28,040 Speaker 3: That's not a good bet. So at that point you 347 00:15:28,080 --> 00:15:30,040 Speaker 3: take some money off the table. That is bubble protection, 348 00:15:30,120 --> 00:15:32,200 Speaker 3: as you say, because I'm not saying, well, ever, it's 349 00:15:32,240 --> 00:15:34,440 Speaker 3: going up, I'll keep holding it. Or the crowd must 350 00:15:34,480 --> 00:15:36,480 Speaker 3: be right, so I guess I should keep holding the shares. 351 00:15:36,600 --> 00:15:38,600 Speaker 3: Or you know, everyone's excited about it. I guess they 352 00:15:38,640 --> 00:15:40,720 Speaker 3: must know something I don't. Don't try and keep up 353 00:15:40,760 --> 00:15:42,880 Speaker 3: with the Joneses. Don't take money from your don't take 354 00:15:42,920 --> 00:15:45,800 Speaker 3: tips for your taxi driver, don't list your brother in 355 00:15:45,880 --> 00:15:47,680 Speaker 3: law who's getting rich owning something that no one else 356 00:15:47,680 --> 00:15:49,640 Speaker 3: wants to own. Because, as you say, we've been through it. 357 00:15:49,880 --> 00:15:52,480 Speaker 3: The dot com boom and bust was a great, great, 358 00:15:52,560 --> 00:15:57,160 Speaker 3: great example. Another quick example Warren Buffett that the patron 359 00:15:57,200 --> 00:16:00,440 Speaker 3: saying of investors way back in ninety nine, spoke about 360 00:16:00,440 --> 00:16:02,760 Speaker 3: magazine articles. A great article you can still find on 361 00:16:02,800 --> 00:16:05,720 Speaker 3: the internet called What's Wrong Warren? And the idea was 362 00:16:05,720 --> 00:16:07,800 Speaker 3: Warren Buffets missing out on this boom, and everyone saying, oh, 363 00:16:07,800 --> 00:16:10,240 Speaker 3: Buffet's lost and it's all over. What does he know? 364 00:16:10,560 --> 00:16:13,520 Speaker 3: His old fashioned twenty six years later, still on top, 365 00:16:13,600 --> 00:16:16,480 Speaker 3: still doing his thing, still a very very very good investor. 366 00:16:16,840 --> 00:16:19,560 Speaker 3: What was wrong? He saw the bubble, he saw the 367 00:16:19,600 --> 00:16:22,160 Speaker 3: fact that nothing was wasn't worth buying. Everyone was saying, 368 00:16:22,200 --> 00:16:23,840 Speaker 3: you're missing a Warren, Look all the price are going up. 369 00:16:23,840 --> 00:16:26,400 Speaker 3: Why'd you're playing our game? He said, Well, I buy 370 00:16:26,400 --> 00:16:28,520 Speaker 3: stuff where it's worth buying. I sell it when I 371 00:16:28,640 --> 00:16:31,280 Speaker 3: want to sell. Its nothing to buy off, stay in cash. 372 00:16:31,640 --> 00:16:33,960 Speaker 3: It's not difficult, it's not sexy, it's not fun. You 373 00:16:33,960 --> 00:16:35,920 Speaker 3: don't get the headlines, you don't feel excited because I 374 00:16:35,920 --> 00:16:38,240 Speaker 3: owned the new cool thing. But it's a nice way 375 00:16:38,240 --> 00:16:38,800 Speaker 3: to make money. 376 00:16:39,000 --> 00:16:40,600 Speaker 1: I guess people might have said the same thing about 377 00:16:40,680 --> 00:16:43,080 Speaker 1: Larry Allison until about two weeks ago. Gosh, here's a 378 00:16:43,080 --> 00:16:45,800 Speaker 1: guy who had a pretty successful company, and he tried 379 00:16:45,800 --> 00:16:48,240 Speaker 1: to run a few America's Cup defenses as well. But 380 00:16:48,320 --> 00:16:52,320 Speaker 1: so long, see you lad off the basis of one 381 00:16:52,360 --> 00:16:56,120 Speaker 1: innings report basically saying, you know, we I think to 382 00:16:56,160 --> 00:16:59,960 Speaker 1: read the priest. That's most of it supplying capacity to open. 383 00:17:00,400 --> 00:17:02,800 Speaker 1: So that's a pretty strong one way bit. The market 384 00:17:02,840 --> 00:17:06,200 Speaker 1: seems to love it. That seems to be pretty out 385 00:17:06,200 --> 00:17:08,720 Speaker 1: of whack. Surely if a stock can leap and deadly 386 00:17:08,800 --> 00:17:11,200 Speaker 1: forty percent on one innings report. 387 00:17:11,680 --> 00:17:13,720 Speaker 3: Great example, By the way, it was already up forty 388 00:17:13,720 --> 00:17:15,800 Speaker 3: percent for the year to date, so up forty percent 389 00:17:15,840 --> 00:17:17,959 Speaker 3: over the previous nine months eight months, and then up 390 00:17:17,960 --> 00:17:21,639 Speaker 3: a another forty percent top of that on one earnings report. 391 00:17:21,680 --> 00:17:24,600 Speaker 3: What a share price means, it's the value of every 392 00:17:24,640 --> 00:17:27,560 Speaker 3: dollar worth of cash flow from now to eternity, discounted 393 00:17:27,560 --> 00:17:29,280 Speaker 3: back to allow for the time value of money. And 394 00:17:29,320 --> 00:17:30,840 Speaker 3: I know that's complex. I'm going to live it there. 395 00:17:30,880 --> 00:17:34,000 Speaker 3: Other than to say, which has got forty percent. What 396 00:17:34,040 --> 00:17:37,000 Speaker 3: you're actually saying is the value of all of the 397 00:17:37,000 --> 00:17:39,119 Speaker 3: future cash list from now to eternity, and they were 398 00:17:39,119 --> 00:17:43,280 Speaker 3: an aggregate forty percent higher. Not this month, not this half, 399 00:17:43,359 --> 00:17:44,960 Speaker 3: not this year, not the last five years, over the 400 00:17:45,000 --> 00:17:48,720 Speaker 3: next five years, but from here to eternity, everything in 401 00:17:48,760 --> 00:17:50,760 Speaker 3: total is gonna be forty percent more. And so if 402 00:17:50,800 --> 00:17:53,680 Speaker 3: you don't do that, and that's not saying the the 403 00:17:53,720 --> 00:17:56,760 Speaker 3: ownsults were great, very good earning, result, great announcement. All 404 00:17:56,760 --> 00:17:59,520 Speaker 3: things were good. But to imagine that is now permanently 405 00:17:59,560 --> 00:18:04,400 Speaker 3: and to quivocally be higher forever from here can't be Again. 406 00:18:04,440 --> 00:18:06,760 Speaker 3: I mentioned I mentioned a video. What if someone else 407 00:18:07,000 --> 00:18:10,200 Speaker 3: enters that that cloud, you know, cloud race, whereas I'll 408 00:18:10,240 --> 00:18:12,480 Speaker 3: take some share off Oracle, what happens to the share price? 409 00:18:12,520 --> 00:18:16,879 Speaker 3: Then let's take Microsoft. Microsoft in two thousand fell in 410 00:18:16,920 --> 00:18:21,080 Speaker 3: the dot com crash. It took fifteen years for the 411 00:18:21,119 --> 00:18:22,760 Speaker 3: share price to get back to where it was pre 412 00:18:22,880 --> 00:18:25,239 Speaker 3: dot com. It was a great business. It it went 413 00:18:25,240 --> 00:18:27,280 Speaker 3: on to even bigger and better things. It was a 414 00:18:27,320 --> 00:18:31,040 Speaker 3: fantastic success story. But you can't pay just any price. 415 00:18:31,240 --> 00:18:32,720 Speaker 3: There is such a thing as too high a price 416 00:18:32,720 --> 00:18:34,760 Speaker 3: for even the very best business in the world, So 417 00:18:35,040 --> 00:18:37,120 Speaker 3: making sure you're paying a good price for the company, 418 00:18:37,359 --> 00:18:39,159 Speaker 3: even if you know the future is bright. If Oracle 419 00:18:39,200 --> 00:18:41,879 Speaker 3: is much bigger in ten years time, is it forty 420 00:18:41,880 --> 00:18:45,760 Speaker 3: percent bigger permanently, I don't know. Is that really worth 421 00:18:45,760 --> 00:18:47,320 Speaker 3: paying for? And do you want to take that bet 422 00:18:47,480 --> 00:18:50,119 Speaker 3: given there is risk that maybe it's not back to probability. 423 00:18:50,240 --> 00:18:52,720 Speaker 3: So be very very very careful getting caught up in 424 00:18:52,720 --> 00:18:55,040 Speaker 3: the euphoria. That's the thing about bubbles. You ask about bubbles, 425 00:18:55,040 --> 00:18:57,240 Speaker 3: I suppose the kiding to look out for is actually 426 00:18:57,280 --> 00:18:59,680 Speaker 3: not so much the companies or the share price or 427 00:18:59,680 --> 00:19:03,480 Speaker 3: the result. It's the sentiment of the crowd when everybody 428 00:19:03,520 --> 00:19:05,600 Speaker 3: else is excited about it, when you know the time 429 00:19:05,680 --> 00:19:07,879 Speaker 3: is as I say, that a great story of the 430 00:19:08,080 --> 00:19:11,000 Speaker 3: Great Depression, and I can't remember who it's told of, 431 00:19:11,040 --> 00:19:14,119 Speaker 3: and apparently it's apocryphal anyway, But the idea was basically 432 00:19:14,200 --> 00:19:18,080 Speaker 3: this particular you know, Titan of Wall Street, when you 433 00:19:18,080 --> 00:19:19,679 Speaker 3: had the taxi driver pull him asides, I think you 434 00:19:19,680 --> 00:19:22,239 Speaker 3: should buy these shares. He's like, oh, this feels bad. 435 00:19:22,280 --> 00:19:23,920 Speaker 3: I'm going to sell now. I'm not saying you should 436 00:19:24,000 --> 00:19:25,560 Speaker 3: use that as the test you go with. Everyone's a 437 00:19:25,600 --> 00:19:28,199 Speaker 3: shareholder these as everyone's an investor, but to be very 438 00:19:28,280 --> 00:19:31,679 Speaker 3: careful when everyone's excited, when the tides all the way in, 439 00:19:32,000 --> 00:19:35,720 Speaker 3: when euphoria is at its peak, what could possibly go wrong. Well, 440 00:19:35,800 --> 00:19:37,720 Speaker 3: that's the time we'll be a little bit concerned. Now 441 00:19:37,840 --> 00:19:40,240 Speaker 3: I will say, don't sell anything just because don't try 442 00:19:40,240 --> 00:19:42,480 Speaker 3: and time the market. A bubble can go on much 443 00:19:42,480 --> 00:19:44,119 Speaker 3: longer than you think it can. Even if it is 444 00:19:44,119 --> 00:19:46,640 Speaker 3: a bubble now, it could have got fifty percent down 445 00:19:46,680 --> 00:19:49,040 Speaker 3: twenty percent, in which case it'll should be thirty percent 446 00:19:49,119 --> 00:19:51,719 Speaker 3: higher than it is now. So don't try and trade 447 00:19:51,760 --> 00:19:54,359 Speaker 3: the bubble. Don't try and time the market. But when 448 00:19:54,400 --> 00:19:57,240 Speaker 3: you're buying and selling, think about what you own, think 449 00:19:57,240 --> 00:20:00,080 Speaker 3: about how good the future is probabilistically, think about and 450 00:20:00,080 --> 00:20:02,439 Speaker 3: how much you're paying for that future. And we're going 451 00:20:02,440 --> 00:20:04,440 Speaker 3: if it's a reasonable price. I mention we've sold half 452 00:20:04,440 --> 00:20:07,440 Speaker 3: a dozen companies we have. We've kept a heap more 453 00:20:07,760 --> 00:20:10,119 Speaker 3: because we actually think, despite some of the excitement in 454 00:20:10,160 --> 00:20:12,800 Speaker 3: the market, these businesses are likely to go on beating 455 00:20:12,800 --> 00:20:15,960 Speaker 3: the market over the long term, despite what's going on 456 00:20:16,080 --> 00:20:18,080 Speaker 3: right now. So got to kind of keep both those 457 00:20:18,080 --> 00:20:20,000 Speaker 3: things in mind at the same time. It's not easy, 458 00:20:20,200 --> 00:20:22,240 Speaker 3: but that's the skill you need to develop as an investor. 459 00:20:22,359 --> 00:20:24,920 Speaker 1: It sounds like you and the Motley Full community either 460 00:20:25,040 --> 00:20:28,560 Speaker 1: classic active investors. You are really getting in there into 461 00:20:28,600 --> 00:20:31,920 Speaker 1: the weeds. You're looking closely at what each company's performing. 462 00:20:32,240 --> 00:20:36,879 Speaker 1: We've seen obviously a trend towards automatic diversity. Is the 463 00:20:36,880 --> 00:20:39,760 Speaker 1: word I'm looking for here products like ETFs. I mean, 464 00:20:39,840 --> 00:20:42,399 Speaker 1: is that is that reducing the risk or would you 465 00:20:42,440 --> 00:20:45,119 Speaker 1: say there's some sort of concentration risk building up there 466 00:20:45,160 --> 00:20:47,760 Speaker 1: that people need to be careful of there when they're 467 00:20:47,760 --> 00:20:48,960 Speaker 1: buying those kinds of products. 468 00:20:49,560 --> 00:20:52,280 Speaker 3: Now, I love passive ETFs. I'm an active investor, JUSTYB 469 00:20:52,320 --> 00:20:54,160 Speaker 3: a stockpicker. I don't mean active, by the way. It's actively. 470 00:20:54,160 --> 00:20:56,360 Speaker 3: There's active, right, I'm not an active trader. I don't 471 00:20:56,359 --> 00:20:58,320 Speaker 3: buy sol By cell by Cell. I'm active in the 472 00:20:58,359 --> 00:21:00,479 Speaker 3: sense that I'm trying to find companies I think we'll 473 00:21:00,480 --> 00:21:02,320 Speaker 3: beat the index if I buy company X. I buy 474 00:21:02,359 --> 00:21:04,199 Speaker 3: it so I think in five years time it'll be 475 00:21:04,200 --> 00:21:06,880 Speaker 3: worth more and hopefully grow faster than the market. That's 476 00:21:06,920 --> 00:21:09,600 Speaker 3: my version of active. But I love passive investing. You 477 00:21:09,600 --> 00:21:10,959 Speaker 3: see the fund man is out there, by the way, 478 00:21:10,960 --> 00:21:14,320 Speaker 3: who say the ETFs are destroying the market, absolute rubbish, 479 00:21:14,480 --> 00:21:18,680 Speaker 3: complete and other nonsense. Passive ETFs are wonderful, wonderful, wonderful things. 480 00:21:19,520 --> 00:21:22,040 Speaker 3: Just they are right mean less business for me, so 481 00:21:22,160 --> 00:21:24,600 Speaker 3: be it. Investors are much better off than they were 482 00:21:24,880 --> 00:21:27,720 Speaker 3: because a massive range of passive ETFs are available. A 483 00:21:27,760 --> 00:21:31,000 Speaker 3: couple things to answer your question. Firstly, not all ETFs 484 00:21:31,000 --> 00:21:33,919 Speaker 3: are the same. Now your viewers know that I really 485 00:21:33,960 --> 00:21:37,600 Speaker 3: really really dislike thematic ETFs, not because individually some of 486 00:21:37,600 --> 00:21:40,680 Speaker 3: them can't do well, but because they're sold as panaceas 487 00:21:41,600 --> 00:21:43,800 Speaker 3: AI is going to be huge. Here's my AIETF. 488 00:21:44,359 --> 00:21:46,840 Speaker 1: Even with the concentration that you're getting from Meg seven, 489 00:21:46,880 --> 00:21:48,720 Speaker 1: I mean the Meg seven companies. Some of those companies 490 00:21:48,720 --> 00:21:52,320 Speaker 1: are bigger than entire sectors. Now you know, I'm pretty 491 00:21:52,320 --> 00:21:54,480 Speaker 1: sure if you edit up with the healthcare sector is 492 00:21:54,640 --> 00:21:56,520 Speaker 1: or the you know, some parts of the industrials and 493 00:21:56,560 --> 00:21:58,399 Speaker 1: you go to the see kind of are. 494 00:21:58,600 --> 00:22:01,640 Speaker 3: So yes, absolutely when you ask about diversification in concentration. 495 00:22:01,720 --> 00:22:03,880 Speaker 3: So I'm not saying don't pick individual socks. What I'm 496 00:22:03,880 --> 00:22:06,760 Speaker 3: saying is ETFs are a great based reportfolio. And anyone 497 00:22:06,800 --> 00:22:09,080 Speaker 3: who said to me is this enough? I say yes, absolutely? 498 00:22:09,320 --> 00:22:10,480 Speaker 3: Do you think do I think you do? Better by 499 00:22:10,520 --> 00:22:13,440 Speaker 3: picking stocks. Yes, absolutely, But is that enough if you're 500 00:22:13,480 --> 00:22:17,000 Speaker 3: young enough, if you had regularly to a handful of 501 00:22:17,000 --> 00:22:20,640 Speaker 3: diversified in next based ETFs, you'll retire very, very very 502 00:22:20,680 --> 00:22:22,880 Speaker 3: comfortably and be very happy you did. I have no doubt. 503 00:22:22,880 --> 00:22:24,479 Speaker 3: If I can't make promise, I'm not allowed to, But 504 00:22:24,640 --> 00:22:26,760 Speaker 3: I have no doubt you'll be very happy with what 505 00:22:26,800 --> 00:22:29,680 Speaker 3: you did. Right. So back to your point about concentration. 506 00:22:30,600 --> 00:22:33,520 Speaker 3: I wouldn't just own a US ETF, same as I 507 00:22:33,520 --> 00:22:36,840 Speaker 3: wouldn't just own ASXTF, because we've got index floor banks 508 00:22:36,840 --> 00:22:40,040 Speaker 3: and minors. But if I had a global ETF or 509 00:22:40,080 --> 00:22:42,560 Speaker 3: a range of ETFs, you might an a SX three hundred, 510 00:22:42,600 --> 00:22:44,239 Speaker 3: you might have a developing markets, you might have an 511 00:22:44,240 --> 00:22:48,720 Speaker 3: emerging developed markets. If you got that diversification by currency, 512 00:22:48,760 --> 00:22:51,840 Speaker 3: by geography, by industry, then yeah, you start to put 513 00:22:51,840 --> 00:22:54,560 Speaker 3: together a portfolio that it is diversified. Here's the other thing. 514 00:22:55,040 --> 00:22:56,960 Speaker 3: When you buy an ETF, don't just put money in 515 00:22:57,000 --> 00:22:58,639 Speaker 3: a ETF once and be done with it. If your 516 00:22:58,720 --> 00:23:02,880 Speaker 3: dollar cost averaging adding regularly, maybe in hindsight we say, 517 00:23:02,920 --> 00:23:05,480 Speaker 3: you know what, September twenty twenty five was a massive bubble. 518 00:23:05,520 --> 00:23:08,680 Speaker 3: But if you've been adding monthly over the last year, 519 00:23:08,960 --> 00:23:11,960 Speaker 3: two years, five years, ten years. Add all that up. 520 00:23:12,440 --> 00:23:14,800 Speaker 3: People say to me sometimes, oh, the mike hasn't recovered 521 00:23:14,800 --> 00:23:16,680 Speaker 3: from the highs of twenty two thousand and seven, or 522 00:23:16,760 --> 00:23:18,760 Speaker 3: it's not as high as it was in whatever. If 523 00:23:18,760 --> 00:23:21,440 Speaker 3: you'd only bought chairs on that day, maybe I'll talk 524 00:23:21,440 --> 00:23:23,800 Speaker 3: to you about it. But if you did, you are 525 00:23:23,840 --> 00:23:25,640 Speaker 3: the unluckiest person in the world. If you'd have been 526 00:23:25,640 --> 00:23:28,639 Speaker 3: buying every month for the three years before and the 527 00:23:28,680 --> 00:23:32,360 Speaker 3: three years after, you are up massively on that point. 528 00:23:32,600 --> 00:23:34,720 Speaker 3: So is it diverse fied? Yes, If you buy one 529 00:23:34,760 --> 00:23:37,360 Speaker 3: ETF for one index and you buy it once, you're 530 00:23:37,359 --> 00:23:39,359 Speaker 3: absolutely rolling the dice. I still think you'll do very well, 531 00:23:39,359 --> 00:23:41,119 Speaker 3: by the way, but maybe not as well if the 532 00:23:41,119 --> 00:23:44,919 Speaker 3: market was lower. If you're adding regularly to a range 533 00:23:44,920 --> 00:23:48,280 Speaker 3: of ETFs and you're adding to that regularly every payday 534 00:23:48,359 --> 00:23:51,960 Speaker 3: or every month or every quarter over five, ten, fifteen years, 535 00:23:52,200 --> 00:23:53,360 Speaker 3: I mean, think about it. If you do it every 536 00:23:53,359 --> 00:23:55,800 Speaker 3: month fifteen years, what's that If you've made one hundred 537 00:23:55,840 --> 00:23:59,159 Speaker 3: and eighty different transactions over that period of time, have 538 00:23:59,240 --> 00:24:01,119 Speaker 3: you bought one of the is going to be at 539 00:24:01,119 --> 00:24:03,359 Speaker 3: a bubble? Probably one of those is probably going to 540 00:24:03,400 --> 00:24:06,119 Speaker 3: be at an absolute low low, most somewhere in between. 541 00:24:06,160 --> 00:24:08,640 Speaker 3: But overall, I go back to the Vanguard index chart. 542 00:24:08,640 --> 00:24:10,399 Speaker 3: I know your viewers have seen it a million times. 543 00:24:10,720 --> 00:24:12,400 Speaker 3: Google Vanguard indext chart. If you do know what I'm 544 00:24:12,400 --> 00:24:14,680 Speaker 3: talking about. Yes, you might have brought it two thousand 545 00:24:14,680 --> 00:24:16,159 Speaker 3: and seven at the peak, then you're brought in two 546 00:24:16,160 --> 00:24:18,080 Speaker 3: thousand and nine at the trough. You might have brought 547 00:24:18,119 --> 00:24:19,679 Speaker 3: it ninety ninety nine at the peak, and then at 548 00:24:19,680 --> 00:24:21,680 Speaker 3: two thousand and one in the trough. You're probably bought 549 00:24:21,760 --> 00:24:24,119 Speaker 3: in twenty twenty March twenty twenty at the peak, and 550 00:24:24,160 --> 00:24:26,119 Speaker 3: then again in April twenty twenty in the trough. And 551 00:24:26,160 --> 00:24:28,119 Speaker 3: where are we at record highs? Sometimes you'll buy at 552 00:24:28,160 --> 00:24:31,080 Speaker 3: high prices, sometimes at low prices. I'd love to know 553 00:24:31,119 --> 00:24:33,040 Speaker 3: which ones will which side can not do it, But 554 00:24:33,080 --> 00:24:35,080 Speaker 3: you can only do that in hindsight. And in hindsight, 555 00:24:35,119 --> 00:24:37,399 Speaker 3: by the way, where a record highs every point before 556 00:24:37,400 --> 00:24:38,840 Speaker 3: that was worth buying shares. 557 00:24:38,560 --> 00:24:42,080 Speaker 1: That you touch on an important point about regularity, And 558 00:24:42,119 --> 00:24:44,119 Speaker 1: I think I know the people are always looking for 559 00:24:44,160 --> 00:24:46,640 Speaker 1: a comparison or a meter four, and people talk about it, 560 00:24:46,840 --> 00:24:50,520 Speaker 1: the Marathione approach. You know you're trying to. But if 561 00:24:50,520 --> 00:24:52,280 Speaker 1: you've ever actually done any I don't know if you've 562 00:24:52,320 --> 00:24:54,359 Speaker 1: done any running. I've done a little bit in my time. 563 00:24:54,640 --> 00:24:56,720 Speaker 1: The hardest thing is just pulling on the shoes and 564 00:24:56,720 --> 00:24:58,760 Speaker 1: getting up and doing it three or four or five 565 00:24:58,840 --> 00:25:02,000 Speaker 1: times a week and sticking with that. And that's the 566 00:25:02,000 --> 00:25:04,399 Speaker 1: bit that pays off almost more than anything else. So 567 00:25:04,720 --> 00:25:07,119 Speaker 1: that is quite a crucial part, isn't it. It's just 568 00:25:07,160 --> 00:25:09,919 Speaker 1: getting that kind of regular habit built in so that 569 00:25:09,960 --> 00:25:10,920 Speaker 1: you're in that market. 570 00:25:11,280 --> 00:25:14,440 Speaker 3: Can I go one step before above that? Actually putting 571 00:25:14,480 --> 00:25:16,480 Speaker 3: the shoes on five times a week is really really hard. 572 00:25:16,840 --> 00:25:20,720 Speaker 3: I absolutely feel that pain. Investing regular is even easier 573 00:25:20,720 --> 00:25:22,359 Speaker 3: than that. I can decide to invest to put the shoes on, 574 00:25:22,359 --> 00:25:24,520 Speaker 3: I've still got to put the shoes on. If I 575 00:25:24,680 --> 00:25:28,320 Speaker 3: decide I want to invest regularly, and I tell my payoffice, 576 00:25:28,359 --> 00:25:32,359 Speaker 3: my payroll manager, or my bank please do this for 577 00:25:32,520 --> 00:25:34,560 Speaker 3: me on this date, I don't have to pull on 578 00:25:34,560 --> 00:25:36,199 Speaker 3: the shoes. Someone else puts the shoes on for me. 579 00:25:36,560 --> 00:25:39,000 Speaker 3: And that is what's beautiful about pre commitment and automation. 580 00:25:39,359 --> 00:25:42,760 Speaker 3: You automate that process so that if you've got to 581 00:25:42,960 --> 00:25:45,120 Speaker 3: company and allows it, you tell you payroll manager, please 582 00:25:45,119 --> 00:25:47,320 Speaker 3: put nine percent of my pay into my savings account. 583 00:25:47,440 --> 00:25:49,640 Speaker 3: Please put ten percent of my pay in my investing account, 584 00:25:49,960 --> 00:25:51,760 Speaker 3: and then on payday just happens. You don't have to 585 00:25:51,800 --> 00:25:54,879 Speaker 3: pull metaphorical shoes on. But that's the beauty of pre 586 00:25:54,960 --> 00:25:58,399 Speaker 3: commitment automation is you're a million percent right. You can 587 00:25:58,400 --> 00:26:00,919 Speaker 3: actually get out of your own way. And now if 588 00:26:00,960 --> 00:26:03,680 Speaker 3: you pay all office won't do it. Tell you bank on, 589 00:26:03,920 --> 00:26:05,480 Speaker 3: I get paid on the fifteenth of the month, or 590 00:26:05,520 --> 00:26:07,520 Speaker 3: every two weeks or every week or whatever it is. 591 00:26:08,280 --> 00:26:11,080 Speaker 3: On those days, please take X dollars out of my 592 00:26:11,119 --> 00:26:13,560 Speaker 3: savings account and move it to my investing account. And 593 00:26:13,640 --> 00:26:15,320 Speaker 3: as long as you do that, and let it happen, 594 00:26:15,880 --> 00:26:17,400 Speaker 3: by the way, you don't miss it because it's never there. 595 00:26:17,760 --> 00:26:20,119 Speaker 3: It happens automatically every time you get paid. Go well, 596 00:26:20,119 --> 00:26:22,160 Speaker 3: I really want to go and buy a pair of jeans, 597 00:26:22,200 --> 00:26:23,679 Speaker 3: or go out for dinner, or buy address or buy 598 00:26:23,680 --> 00:26:26,959 Speaker 3: a computer or do whatever your thing is. You've got 599 00:26:27,000 --> 00:26:28,680 Speaker 3: to choose to take that money out, put over there 600 00:26:28,720 --> 00:26:30,520 Speaker 3: and IDENTI if I want to next, I'll do it 601 00:26:30,560 --> 00:26:32,680 Speaker 3: next month, next month. If it does it automatically before 602 00:26:32,680 --> 00:26:34,920 Speaker 3: you even get to it, that's just beautiful. And you 603 00:26:34,920 --> 00:26:37,760 Speaker 3: can absolutely make it happen. It's why superannuation for Australians 604 00:26:37,760 --> 00:26:40,080 Speaker 3: particularly is important because that happens to us. Literally the 605 00:26:40,160 --> 00:26:42,359 Speaker 3: government says you can't have it, bad luck, twelve cent 606 00:26:42,400 --> 00:26:44,800 Speaker 3: of your payer go straight over there. So those kind 607 00:26:44,840 --> 00:26:48,159 Speaker 3: of forced savings or automated savings, it might suck at 608 00:26:48,160 --> 00:26:49,680 Speaker 3: the time you might want the money to buy X, 609 00:26:49,800 --> 00:26:52,359 Speaker 3: Y and Z. I have not heard a single person 610 00:26:52,359 --> 00:26:55,440 Speaker 3: in Australia say, gee, unhappy the government, maybe save my superannuation. 611 00:26:55,680 --> 00:26:58,040 Speaker 3: Never ever, ever have I heard anyone say that. They're 612 00:26:58,040 --> 00:26:59,800 Speaker 3: always like, I hate it at the time, but cheum 613 00:27:00,160 --> 00:27:01,520 Speaker 3: And that's a really nice lesson. 614 00:27:02,000 --> 00:27:04,159 Speaker 1: It sounds like a great place to leave it, especially 615 00:27:04,200 --> 00:27:05,520 Speaker 1: if you want to go and pull your sues on 616 00:27:05,600 --> 00:27:07,680 Speaker 1: now Scott and being out there and yet I really 617 00:27:07,680 --> 00:27:10,040 Speaker 1: should do that, Scott, vertus from them not befoul. Thank 618 00:27:10,080 --> 00:27:12,920 Speaker 1: you so much for giving us so much your time 619 00:27:13,000 --> 00:27:15,680 Speaker 1: and your wisdom time in the market and you've shared 620 00:27:15,720 --> 00:27:18,800 Speaker 1: it with us today. And thanks everybody else for listening 621 00:27:18,800 --> 00:27:20,960 Speaker 1: and watching along with us. We'd love to know what 622 00:27:21,000 --> 00:27:22,920 Speaker 1: you thought of that and who we should be talking 623 00:27:22,960 --> 00:27:25,520 Speaker 1: to next for us Kuma to that shared lunch for 624 00:27:25,600 --> 00:27:26,000 Speaker 1: this week