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Speaker 2: But every company is, you know, going to survive and thrive.
Speaker 2: But shares in general are very likely in my opinion,
Speaker 2: because history tells us to go much higher from here
Speaker 2: over the long term, and that's the only timeframe that
Speaker 2: people should be worried about. Half of my brain is like,
Speaker 2: I'm losing money. This sucks so much red. The other
Speaker 2: part of my brain, and this is the important bit,
Speaker 2: is the bit that says, but hang on, you knew
Speaker 2: this was going to happen. You know what's happened before
Speaker 2: you know it's going to happen again. Dollar cost averaging
Speaker 2: for the winds. Buying shares on sales is what we
Speaker 2: all think we want to do, except when they're on sale.
Speaker 2: We pain.
Speaker 3: Welcome to shared Lunch, brought to you by Chas's. At Cheza's,
Speaker 3: we're on a mission to create financial empowerment for everyone,
Speaker 3: which is why we have these conversations. They're a big
Speaker 3: part of being able to dig in to the different
Speaker 3: topics that are affecting at vistas and to get experts
Speaker 3: along to share their view on it. So I'm Sonya,
Speaker 3: the co founders and co CEOs at Chairs Ease, and
Speaker 3: today we're joined by Chief Investing Officer at the Montley
Speaker 3: Full Scott Phillips. We're going to chat about all things
Speaker 3: US tariffs and the upcoming election and how this is
Speaker 3: impacting Australia.
Speaker 4: Before we get.
Speaker 3: Started, I want to acknowledge the Getigul people of the
Speaker 3: or nation, the traditional custodians of the land when we're
Speaker 3: coming to you from today and pay respects to elders, past,
Speaker 3: present and emerging.
Speaker 5: Investing involves the risk you might lose the money you
Speaker 5: start with. We recommend talking to a licensed financial advisor.
Speaker 5: We also recommend reading product disclosure documents before deciding to invest.
Speaker 5: Everything you're about to see and here is current at
Speaker 5: the time of recording.
Speaker 4: Hi Scott, welcome to the show, Sonya, Thank you and
Speaker 4: thank you for having me. Yeah, great to have you back.
Speaker 3: So I'm just going to jump straight into it is
Speaker 3: now a good time to invest?
Speaker 2: Yes, absolutely a great time to invest, but with a
Speaker 2: massive asteriskmote. The asterisk is I have no idea what
Speaker 2: happens next. So I maybe the market force twenty percent,
Speaker 2: maybe it rises twenty percent, maybe it goes nowhere for
Speaker 2: a year. I have absolutely no idea. So how can
Speaker 2: I say it's a great time to invest. That's a
Speaker 2: really really simple one. Here's what history tells us, and
Speaker 2: this is really important. The ASX, the US markets, developed
Speaker 2: markets around the world have never yet failed to regain
Speaker 2: then surpass a previous high. So here's the thing. If
Speaker 2: that holds true, now it may not. I can't give
Speaker 2: a promise or a guarantee. If it does hold true,
Speaker 2: that means it upside from here to get back to
Speaker 2: the last high and then more upside again. Shares, relatively
Speaker 2: where they have been, are on special. So do I
Speaker 2: know what's going to happen next? No? Do I know
Speaker 2: which companies know. And by the way, when I say shares,
Speaker 2: when you ask the question, shares, I'm talking about generically
Speaker 2: generally across the market. Not every company will go up,
Speaker 2: not every company is worth buying, not every company is
Speaker 2: going to survive and thrive, But shares in general are
Speaker 2: very likely in my opinion, because history tells us to
Speaker 2: go much higher from here over the long term, and
Speaker 2: that's the only timeframe that people should be worried about.
Speaker 3: You mentioned that you know things have been dropping over
Speaker 3: the last week, while largely know one of the things
Speaker 3: that's driving this is the tariffs that have been put
Speaker 3: in place by the US. And so we're looking at
Speaker 3: ten percent for Australia as a baseline. What impact are
Speaker 3: these tariffs having on Australian companies.
Speaker 2: Let's work out what's going on. So the tariffs that
Speaker 2: have been put in place. I'm going to be going
Speaker 2: to be pretty honest here and I'm gonna be pretty upfront.
Speaker 2: I'm going to ask your listeners to trust me on
Speaker 2: the process here. I don't have a political dog in
Speaker 2: this fight. Democrat, Republican, liberal, labor, I don't care. What
Speaker 2: I will say to you is economically, these tariffs are
Speaker 2: a terrible idea and a terrible solution to a reasonable problem.
Speaker 2: And just because if identified a problem correctly, which is hoy,
Speaker 2: there's some problems with the US manufacturing, doesn't mean the answer,
Speaker 2: any answer is always going to be necessarily correct. I'm
Speaker 2: sorry for the hardcore Trump finds that fans out that
Speaker 2: it's not true. Again, it's not a personal view it's
Speaker 2: not even a political view, it's just an economic view.
Speaker 2: So what's happening is Donald Trumps announced tariffs on much
Speaker 2: of the rest of the world. And I'll get back
Speaker 2: to Australia and New Zealand by extension a minute. But
Speaker 2: the impact of those tariffs are going to be almost
Speaker 2: certainly higher prices for US consumers. Why because when we
Speaker 2: say we're putting tariffs on Chinese products, we're not really
Speaker 2: say we're paying putting traffs on tarifts on China. We're
Speaker 2: saying American consumers or Donald Trump saying American consumer is
Speaker 2: going to pay more for Chinese imports. Or by the way,
Speaker 2: the newly competitive US made stuff that's more expensive than
Speaker 2: it used to be but can now compete at those
Speaker 2: higher prices. In other words, no matter which way you
Speaker 2: cut the sausage, you're paying a higher price for those goods.
Speaker 2: Higher prices mean inflation. Now, I don't have to explain
Speaker 2: that we've been through five years of it over the
Speaker 2: last half decade right around the world. High inflation is bad.
Speaker 2: High inflation may also lead to and most economists, and frankly,
Speaker 2: even the Atlanta branch of the US Federal Reserve are
Speaker 2: expecting the US to enter a recession this year. If
Speaker 2: the US enters a recession, the other world's largest economy
Speaker 2: are the world's largest consumer economy by miles. If the
Speaker 2: US has a recession, it's going to put meaningful downward
Speaker 2: pressure on economic growth right around the rest of the world,
Speaker 2: including down here at the bottom end of the globe
Speaker 2: in Australia, in New Zealand. So that's the setup. But
Speaker 2: it's important set up because when you say, what's going
Speaker 2: to happen to companies here in Australia, Yeah, there's three
Speaker 2: ways to think about it. The first is that global story,
Speaker 2: the global recession risk. If the US demands less, Australian
Speaker 2: companies may produce less. If Australian's companies produced less, their
Speaker 2: profits are probably going to fall. Now that's a modest outcome.
Speaker 2: It is a lot less. We may well see companies far,
Speaker 2: we may well see job losses. And I'm an optimist
Speaker 2: by the way, but I would also want to tell
Speaker 2: it straight. So that is the possible outcome. That is
Speaker 2: the worst case scenario probably if this does get to
Speaker 2: that intergre So that's the first order impact. The second
Speaker 2: order impact is, of course the impact on Australian companies directly.
Speaker 2: We know there's twenty five percent on Australian aluminium and steel.
Speaker 2: There is ten percent now and everything else going to
Speaker 2: the US. If you have a meaningful proportion of your
Speaker 2: sales that go to the US, they are going to
Speaker 2: be harder sales to make. Maybe you absorb the increase
Speaker 2: and make lower margins. Maybe you pass on the increase
Speaker 2: and have lower sales. There'll be a few companies that
Speaker 2: can pass on the increase and still sell the same amount.
Speaker 2: That's the best case scenario, but it's probably a small group.
Speaker 2: Because price elasticity matters. If you put prices up, people
Speaker 2: buy less. So that's the second order for all those
Speaker 2: businesses that are exporting to the US. And by the way,
Speaker 2: those companies reliant on those other companies. If you're supplying
Speaker 2: a company that's exporting to the US and they buy less,
Speaker 2: are going to buy less from you, so that matters.
Speaker 2: Further impact really quickly is China. Australia is China's so
Speaker 2: China's Astralia's largest trading partner by heaps. There are ongoing
Speaker 2: tit for tat reciprocal tariffs of the bullies, Bass each
Speaker 2: other over the head. Trump said overnight recently a couple
Speaker 2: of days ago, they are going to maybe put fifty
Speaker 2: percent tariffs on Chinese goods on top or they've already
Speaker 2: announced why because China had the too ready to basically
Speaker 2: bash back at the US putting tariffs on at the
Speaker 2: first place. And this is the silliness of what's going on.
Speaker 2: But if China's economy slows and Chinese steel production slows,
Speaker 2: guess what that's going to hurt austrain and own or
Speaker 2: exports meaningfully. That's not a big economic impact, by the way,
Speaker 2: because iron or impact. It doesn't employ a whole lot
Speaker 2: of people, but big impact for share prices for those
Speaker 2: iron or exporters they own shares and four descu for
Speaker 2: full disclosure, bad news for those miners, bad news for
Speaker 2: government revenues, and for gross domestic economic output. So there's
Speaker 2: three kind of concentric circles, if you like, of potential
Speaker 2: outcomes from the tariff or when it comes to what's
Speaker 2: going to hit us here at home, are there.
Speaker 4: Any particular areas that benefit from the change?
Speaker 5: No.
Speaker 2: I mean, if you stretch and you squint really significantly,
Speaker 2: you might find an opportunity to find one or two.
Speaker 2: What you might see happen is Australian companies find other
Speaker 2: markets for their products. For example, we saw when China
Speaker 2: put massive tariffs on Australian wine. Australia wine makers found
Speaker 2: other markets. It wasn't easy and found some something didn't
Speaker 2: find any at all, by the way, I was going
Speaker 2: to a massive wine glut in Australia. So is there upside
Speaker 2: from that? No, If you are in an ASX listed
Speaker 2: company that happens to a business only in the US
Speaker 2: and somehow it is able to make more money because
Speaker 2: it could prices up because inputs are more expensive, maybe
Speaker 2: it's a little bit somewhere there in the nooks and crannies.
Speaker 2: It's a really really small sliver of potential upside. And frankly,
Speaker 2: even then, those companies are more likely to be hit
Speaker 2: by US economic pain more broadly rather than tariffs. Particularly,
Speaker 2: that is, if inflation goes up, if economic growth falls,
Speaker 2: if unemployment rises, those companies that are based there are
Speaker 2: probably going to hurt. And by the way, that's why
Speaker 2: we're seeing US share markets fall. You kind of think
Speaker 2: in the way that the simplistic version that Trump and
Speaker 2: others like to present this tariffs go up, US business
Speaker 2: gets better. US companies make a lot of money, US
Speaker 2: people get employed. Therefore, it's all wine and roses. The
Speaker 2: reality is the US market is absolutely tanked for a
Speaker 2: couple of straight days late last week, earlier this week.
Speaker 2: Why because those investor are worried about the profits of
Speaker 2: those companies because of the economic harm that these tarifts
Speaker 2: will do domestically. I'm looking long term, which, by the way,
Speaker 2: is still why you go back to your first question.
Speaker 2: Why I'm still massively optimistic. So if I think five,
Speaker 2: if I investment prises five years plus out it is
Speaker 2: that's post Trump's term. So again, thinking about what's happening now,
Speaker 2: this week, this month, that's scary. It hurts your portfolio falls,
Speaker 2: It just sucks because no one likes the uncertainty. But
Speaker 2: if I'm a long term investor, and I am, I'm
Speaker 2: looking at five years and going ah, if companies are
Speaker 2: bigger and better than five years than they are now,
Speaker 2: despite what they go through in the meantime, they're worth buying.
Speaker 2: And so that's the lens I really want to impress
Speaker 2: on people. Think about what's happening in those number of
Speaker 2: years out there. Don'try about just the short term stuff between.
Speaker 3: Now and then, we track and sentiment through the quarters,
Speaker 3: and over the last quarter we've seen it move from
Speaker 3: what was pretty balanced into cautious territory. What are you
Speaker 3: noticing from Invista sentiment and long term planning?
Speaker 5: Now?
Speaker 2: When we went through COVID almost exactly five years ago.
Speaker 2: Weirdly enough, we've looked about the market fellow in Australia thirty
Speaker 2: eight percent from top to bottom in a month and
Speaker 2: four days. Now, that felt scary as heck. Right, that's
Speaker 2: just really really scary. And I don't blame people feeling
Speaker 2: scared because what if COVID was bigger than ended up being.
Speaker 2: What if the death toll was massively higher, and that
Speaker 2: would be obviously far more tragic than the financial impacts.
Speaker 2: What if the economy's ground or hopeful longer? What if?
Speaker 2: What if I get all those concerns right? Except in
Speaker 2: hindsight we know it was the fastest bear market in
Speaker 2: history and then the fastest recovery in history. So when
Speaker 2: you think about people cautious, yes, absolutely, I'm seeing exactly
Speaker 2: the same thing, mate, Just like I got to get
Speaker 2: out of here. This is scary. One thing I want
Speaker 2: to remind people is remember for every seller, for every
Speaker 2: so called panic seller, there's a buyer. You can't sell
Speaker 2: shares unless someone buys them from you. And so while
Speaker 2: we say, oh, everyone's selling, well, it can't be because
Speaker 2: everyone's also buying. There's always two sides to a trade.
Speaker 2: So while we focus on the declines, and yes, there's
Speaker 2: more panic in the sellers than there is excitement in
Speaker 2: the buyers, otherwise the prices go back up. That's why
Speaker 2: we get it with price falls, right, that the sellers
Speaker 2: are keener than the buyers are. Everything finds its market,
Speaker 2: finds its price, and someone ever a lot, millions and
Speaker 2: minuses and millions of shares are changing hands, being bought
Speaker 2: by people who are saying, hey, this is okay. So, yes,
Speaker 2: there's cautiousness out there. There is fear out there is uncertainly.
Speaker 2: I get why people are worried about it. So I
Speaker 2: want to validate that because it's really really important, the
Speaker 2: active investing through COVID. This is what I've told this
Speaker 2: story before, son, you and I may have told anything
Speaker 2: to you, guys, I hope I didn't. During COVID, there's
Speaker 2: two sides of the investor's brain, right, there's a bit
Speaker 2: that says, oh my god, what's happening out there? This
Speaker 2: is ridiculous. And a policy perspective, I have very strong views,
Speaker 2: as you've already heard, from an investment perspective, though, I've
Speaker 2: got to have two parts of my brain. Half of
Speaker 2: my brain is like, I'm losing money. This sucks so much,
Speaker 2: red I'm down again. Maybe the market's right. What if
Speaker 2: this is the time that it's different freaking out here?
Speaker 2: What if it keeps falling? Maybe now is not the time.
Speaker 2: Maybe I should wait till the coast is cleared. All
Speaker 2: those fear emotions, all those uncertainty, all those worries they're
Speaker 2: going to be there. What if I'm investing too early?
Speaker 2: What if I'm wasting money? All that things through my head.
Speaker 2: The other part of my brain, and this is the
Speaker 2: important bit, is the bit that says, but hang on,
Speaker 2: you knew this was going to happen. You know what's
Speaker 2: happened before, you know what's going to happen again. Dollar
Speaker 2: cost averaging for the wind. If you've got some money
Speaker 2: to invest, if you can find great companies you think
Speaker 2: they're going to better in five years time, then now
Speaker 2: what that is a great thing to be able to do.
Speaker 2: Buying shares on sale is what we all think we
Speaker 2: want to do, except when they're on sale, we panic.
Speaker 2: And so two parts of your brain acknowledge the fear,
Speaker 2: acknowledge the uncertain, acknowledge the concern, and then say, but
Speaker 2: I'm investing anyway, because I just have to confront it,
Speaker 2: ignore it, do what if you need to do with
Speaker 2: the fear, But invest anyway, because long term that's proven
Speaker 2: over and over and over and over again to be
Speaker 2: the right approach. Again, not in any company. Quality companies,
Speaker 2: diversified companies, across currencies, across exchanges, across the industries, businesses
Speaker 2: with good balance sheets, all the good things that we've
Speaker 2: talked about before about good investing, keep doing that stuff.
Speaker 2: Don't buy indiscriminately, but keep buying anyway.
Speaker 3: What are the key metrics that people should be keeping
Speaker 3: an eye on to see how things are going?
Speaker 2: So I've got to say this is where there are
Speaker 2: really easy bit wrong answers to that question.
Speaker 3: Right.
Speaker 2: And if you speak to short term trades, if you
Speaker 2: speak to people who are going to try and sell
Speaker 2: you a thing rather than hopefully educate you about an approach,
Speaker 2: they'll give you lots of great metrics. I have exactly
Speaker 2: zero metrics in the short term. Why because think about
Speaker 2: think about think about every recession we've ever lived through,
Speaker 2: and I've lived through a few. The market goes down,
Speaker 2: share prices go down, say I always go down, profits
Speaker 2: go down. If you're looking for the recovery to happen,
Speaker 2: by the time of the recovery happens, that's too late.
Speaker 2: I've told the story before about some really really smart,
Speaker 2: wealthy investors who sold everything at the beginning of COVID
Speaker 2: and said, I'm not going to buy back in until
Speaker 2: the pandemic is over. Now, the pandemic took two years
Speaker 2: to be over, and in fact got worse before it
Speaker 2: got better. But as lockdowns happened, one tomy shrank. As
Speaker 2: that happened, the stock market recovered. So if you're looking
Speaker 2: out the rest of the world, this is way the
Speaker 2: economy in the stock market up. The same thing. If
Speaker 2: you're looking around the world, you're saying, well, tragically, deaths
Speaker 2: have increased, illnesses have increased, hospitalizations have increased, lockdowns have happened.
Speaker 2: People are barred from entering and leaving countries. Economic activity
Speaker 2: has stalled. Governments are keeping US afloat with welfare money.
Speaker 2: This feel it's getting worse, and yet the market recovered
Speaker 2: and recovered and recovered up into the right. Not in
Speaker 2: a straight line and not without doubts and concerns, but
Speaker 2: it did. If you waited until a vaccine, you missed out.
Speaker 2: If you waited until a pandemic was declared over, you
Speaker 2: missed out even more. So I'm going to politely not
Speaker 2: answer your question, because honestly, the only metrics you need
Speaker 2: to be thinking about are I guess there are, but
Speaker 2: they're not really metrics in terms of what data I'm
Speaker 2: seeing happen. I'm trying to, as an investor, look forward
Speaker 2: and say, in a pick a year in twenty thirty,
Speaker 2: I'm going to pick a business in twenty thirty. Are
Speaker 2: they going to have more stores? Are they going to
Speaker 2: sell to more people? Are they going to find new
Speaker 2: ways to add categories? They're going to keep their costs
Speaker 2: under control? Probably yes, And if that's the case, they're
Speaker 2: going to be mostly more profitable in twenty thirty than
Speaker 2: they were. I'll say last year. Let's not include this
Speaker 2: year because what happened the last year. Yeah, probably they will. Okay, Well,
Speaker 2: if that's true, how much should I pay for that business?
Speaker 2: And I can no matter what you've preached to evaluation
Speaker 2: is you can pick a rough price or rough multiple
Speaker 2: or rough whatever you want to base your evaluation one
Speaker 2: to say worth buying or not buying now based on
Speaker 2: where I think it'll be in twenty thirty. Let's say
Speaker 2: think a year long recession that's says really bad year long,
Speaker 2: and it goes from middle of twenty twenty five to
Speaker 2: middle of twenty twenty six and sales four by fifty percent.
Speaker 2: Now is the company going to survive that? If it's
Speaker 2: got a good enough balance sheet, Yes, it's got good
Speaker 2: enough cash flows. Yes, okay, if I'm comfortable they will,
Speaker 2: And you shouldn't assume, by the way, do do the
Speaker 2: work for yourself. In the middle of twenty twenty six,
Speaker 2: they come out of recession and sales suck and they're
Speaker 2: losing money, but they start to improve over time, and
Speaker 2: over that period of time from twenty to twenty seven,
Speaker 2: twenty eight, twenty nine, things get back to normal. And
Speaker 2: again I look at it and go roight well by
Speaker 2: twenty thirty, even if they've gone through a recession, even
Speaker 2: if sales and profits did get really ugly for a while,
Speaker 2: but they survived and then come out the other d
Speaker 2: I think going to be bigger and better. Okay, what's
Speaker 2: a fair price to pay for those businesses now? So
Speaker 2: don't wait? Is my opinion? My us for the metrics
Speaker 2: to come through start by saying, what do I think
Speaker 2: about the business? Do I like it has got a
Speaker 2: good brand, has got a good future? Will it have
Speaker 2: those in five years time? Yes? Okay, what's it worth
Speaker 2: paying today to get that benefit of five years time?
Speaker 2: That's the entire lens I use for my investing.
Speaker 3: Yeah. Great. So alongside all of this, there's an election
Speaker 3: coming up in Australia, so's what's again another moment of
Speaker 3: uncertainty that does ripple through into the markets. What's been
Speaker 3: most interesting to you so far and the lead out.
Speaker 2: Australia still has a very large budget deficit and it's
Speaker 2: projected to get worse based on the most recent budget
Speaker 2: handed down by the current incumbent government. And that's not
Speaker 2: good for Australia. That's worse than the US by the way.
Speaker 2: They've got massive foreign dead issues, massive government debt issues,
Speaker 2: so fiscal kind of fiscal being tax and spend right,
Speaker 2: the fancy where the economists use for government spending and taxation.
Speaker 2: The tax and spend settings are misaligned, and how that
Speaker 2: nets out does actually have an impact on the economy.
Speaker 2: We're supposed to run service in the good times definit
Speaker 2: at the bad time is supposed to offset each other.
Speaker 2: The taxes, spen serting is actually really matter for long
Speaker 2: term prosperity. So I'm keeping an eye on how much
Speaker 2: they're spending. Really honestly, what is interesting too is the
Speaker 2: focus on the short term. So we've got one side,
Speaker 2: the incumbent government putting cost of living relief through extension
Speaker 2: of energy subsidies. Electricity subsidies effectively a discount on your
Speaker 2: energy bill. The oppositions promising a reduction of fuel excise
Speaker 2: for six months twelve months. Sorry, these are really short
Speaker 2: term solutions. So I got to say, from an economic perspective,
Speaker 2: my view has always been that as an investor, I
Speaker 2: care far more about the long term settings of the
Speaker 2: country than about the short term opportunities or risks to
Speaker 2: the individual businesses. Now I want to say risks, I
Speaker 2: don't mean existential risks. If something's going to go broke,
Speaker 2: I really care if it's like well, tax rates for
Speaker 2: companies are slightly higher a lower, or tax rates to
Speaker 2: individuals slightly hire a lower. But if I'm a long
Speaker 2: term investor, what I care most about is my companies
Speaker 2: had the opportunity to operate in a really really solid, healthy,
Speaker 2: growing economy, and so I honestly want to look at
Speaker 2: the election. I'm not looking at who's going to give
Speaker 2: more money to this industry five bucks for that, ten
Speaker 2: bucks for that. By the way, I'm not top that investor.
Speaker 2: I do' a macro investor at all. But policy wise,
Speaker 2: I would like to think the government that comes into
Speaker 2: power post election is going to fix the budget bottom line.
Speaker 2: They probably won't, but I'd like to think that, and
Speaker 2: they're really genuinely thinking long term about setting the country
Speaker 2: up for the best long term success so that we
Speaker 2: can all thrive. And if we all do, companies have
Speaker 2: well people to sell goods too, they have richer people
Speaker 2: to sell goods to, and people on low incomes have
Speaker 2: more money to spend on. I mean, it's a really
Speaker 2: beautiful virtual circle if they get it right. The sugar
Speaker 2: hit is exactly what it sounds like. It's good for
Speaker 2: a little while and then goes away. So those are
Speaker 2: kind of things I've been kind of focusing on. There's
Speaker 2: not a lot specifically for individual companies or industries. I'll
Speaker 2: have to wait and see kind of what comes from that.
Speaker 2: What is interesting at the moment is both sides have
Speaker 2: been reasonably restrained in terms of new spending announcements. I
Speaker 2: think because they realize where the budget is. But there
Speaker 2: also a lot of cost of living pre sure as
Speaker 2: they call it, and the Polley's a laser focus on
Speaker 2: make us feel better about ourselves so we'll vote for them.
Speaker 3: Yeah, on there.
Speaker 4: What do you think is top of mind for Australians
Speaker 4: going in I'm not.
Speaker 2: Election aunt lost either, but it's been meaningfully different over
Speaker 2: the past six months to the last two months. Even
Speaker 2: the last month the government was on the nose, the
Speaker 2: opposition was in the descendency. Government was getting tagged with
Speaker 2: cost of living pressures. I have to say in the
Speaker 2: last kind of couple of weeks, and again I make
Speaker 2: no predictions, I no election analysts, but it's been what's
Speaker 2: been really interesting is the government's clawed back some ground,
Speaker 2: whether it's because the RBA started cutting rates, whether it's
Speaker 2: because we've got used to inflation, frankly, whether it's because
Speaker 2: the Trump stuff is so scary, we just want the
Speaker 2: better the devil we know, I don't really know. And
Speaker 2: again this could change between now and the election date.
Speaker 2: But we've seen some meaningful swings back to the government
Speaker 2: on a bit of a. It's gone from pure cost
Speaker 2: of living to yes cost of living with a bit
Speaker 2: of a. This feels a bit scary. Is it time
Speaker 2: for a change? So if you asked people, I suspect
Speaker 2: they would still say it's all about cost of living.
Speaker 2: We know Australian real waves are actually really really poor.
Speaker 2: They've they've fallen more than I think any other OECD country,
Speaker 2: certainly much lower than the US, the UK and the
Speaker 2: average for the OECD. I don't know the New Zealand
Speaker 2: numbers that the moment I have to say, I should
Speaker 2: know them, but I don't. So we've seen that kind
Speaker 2: of happen, and the cost of living press are probably
Speaker 2: worse in terms of real incomes, real being what you get.
Speaker 2: Les's the increase for inflation. If I pay rose a
Speaker 2: five percent flashes up six I've gone back as by
Speaker 2: one percent of my real wages fallen one percent. That's
Speaker 2: what that term means I know, you know that sony
Speaker 2: bitch just fear listeners of yours. So yeah, we've gone
Speaker 2: backwards in real terms more than almost any other country.
Speaker 2: And that was really I think playing in the opposition's
Speaker 2: hands cost of living, fix it for me, make it better,
Speaker 2: I have say. In the last couple of weeks we've
Speaker 2: also seen Peter Dutton the Opposition Letter, reverse his view
Speaker 2: on working from home, for example, and sucking public servants.
Speaker 2: They are two things that ordinarily would have played really
Speaker 2: strongly to a right wing conservative voter base rightly wrong.
Speaker 2: I make no value judgment, just an observation they've reversed
Speaker 2: course on those because they're losing votes on them. And
Speaker 2: I do wonder whether there's a bit more of a
Speaker 2: band together in the circums sense we find ourselves is
Speaker 2: kind of tough economic and geopolitical circumstances, rather than the
Speaker 2: divide on partying policy lines. Again, I don't mean the
Speaker 2: lymp's being devisive, both groups just kind of you know,
Speaker 2: the tribes reverting to their corners. It does feel like
Speaker 2: there's more of a considered middle to be won by
Speaker 2: the major parties. And I suspect cost of living is
Speaker 2: first and foremost, but also that idea of who is
Speaker 2: best place to whether the storm that's coming from the US.
Speaker 3: As a result, what can retail the visitors expect or
Speaker 3: you know, how do elections impact to the markets, So.
Speaker 2: What markets tend to respond to. We've seen this in
Speaker 2: the last couple of weeks is markets respond to uncertainty,
Speaker 2: but more importantly to the unexpected. And I guess what
Speaker 2: I mean by that is this horrible phrash. Cool things
Speaker 2: are priced in. Well, if the market knows there's going
Speaker 2: to be tax cuts in a month time, just pick
Speaker 2: an example, the market will say, we think people spend
Speaker 2: more money then, and so the taxcat gets priced in.
Speaker 2: People foresee that increase, and the price goes up in anticipation.
Speaker 2: So the things that we know are already priced in,
Speaker 2: at least in theory. The tar that were surprise announcements
Speaker 2: are why the market fell because we all kind of thought, well,
Speaker 2: Trump might do some cares. Maybe possibly, we'll see and
Speaker 2: that's why we've seen it. At four. The election will
Speaker 2: move markets only when either a party wins who is
Speaker 2: expected to win, or a party unveils a policy or
Speaker 2: set of policies the market's not expecting and so generally speaking,
Speaker 2: we don't tend to see much movement in markets or
Speaker 2: even individual industries most of the time if there is
Speaker 2: either a change of government or a return of the
Speaker 2: incumbent government because the things that differentiate those two parties.
Speaker 2: There's also numbers from one of the big economists, Christ
Speaker 2: original Shanelevel or can't remember who was, I think it
Speaker 2: was Chris said ninety some of the ninety nine percent
Speaker 2: of the spending of both parties exactly the same, ether
Speaker 2: as they differ only a one percent of the government budget. Now,
Speaker 2: those differences a matter if you a company is going
Speaker 2: to get some money or you know individual is going
Speaker 2: to get a tax cut or something, so it matters.
Speaker 2: But most of the spending is the same across the board.
Speaker 2: So unless you're in an industry specific or a company
Speaker 2: that's going to benefit or be hurt by a policy
Speaker 2: that's announced, and even then it's already probably priced in
Speaker 2: unless the party is not expected to win and they
Speaker 2: do so not much. The last thing I'll leave you with,
Speaker 2: Sony is in the US have worked done by Morgan
Speaker 2: House or like a great writer and expotly full employee
Speaker 2: for the record is basically the over the life of
Speaker 2: the US stock market nineteen hundred or so onwards, there's
Speaker 2: been literally no significant difference between the party in power
Speaker 2: and the average returns of the stock market during that
Speaker 2: period in power. And so that's really important to think
Speaker 2: of because we have plenty of if Trump's elected, he'll
Speaker 2: do this. If doesn't selected, he'll do that. If Albo's liketed,
Speaker 2: he'll do this. They'll do those things. But statistically, at
Speaker 2: least the odds that the party in power make a
Speaker 2: meaningful difference to the stock market subsequently, it's yeah, it's
Speaker 2: lie ball. There is no meaningful difference. There's a lot
Speaker 2: of people who have this view of if Party X wins,
Speaker 2: then the market marke will do well, so I'll buy,
Speaker 2: or they're going to wreck the party. Why I was
Speaker 2: going to wrect the economy, so I'll sell everything. It
Speaker 2: just isn't the case very often, and so I really
Speaker 2: would encourage people separate your politics and your your you're
Speaker 2: investing anything else.
Speaker 4: That we want to that we haven't covered about the
Speaker 4: election or tariffs, really, I.
Speaker 2: Think so a couple of things. The people who are
Speaker 2: the supportive of Trump's tariffs say, well, other countries have
Speaker 2: done on the country's done it before. You know, Yes,
Speaker 2: they've always been around, and I guess I kind of
Speaker 2: hap him back a little bit on what I said
Speaker 2: about the tariffs. But if you kind of go back
Speaker 2: and say, so what you know? And then what and
Speaker 2: then what? The best way to inoculate yourself, by the way,
Speaker 2: against the stuff is learn some history. And I don't
Speaker 2: mean boring history. I've ever mean economic history. I just
Speaker 2: mean history history. Things improve over time despite stuff. So
Speaker 2: the Australians share market's gone up nine percent a year
Speaker 2: on average, eight nine percent since about nineteen oh six.
Speaker 2: Credit Squiz put some numbers out. By the way, the
Speaker 2: ASEX was the best performing stock market over that period
Speaker 2: of time, which is pretty good, but only by a
Speaker 2: hairsbreadth against the US now roughly nine percent a year.
Speaker 2: They say six pp in a year, six point something
Speaker 2: six point four. I think it was before inflation, so
Speaker 2: you aduflation back, you're roughly nine, give or take. And
Speaker 2: that happened despite all these things. Two World wars, the
Speaker 2: Korean War, the Vietnam War, two Iraq War was the
Speaker 2: war in Afghanistan, the Great Depression, recessions before the Great Depressions,
Speaker 2: right after the Great Depression before the Baby Boom, and
Speaker 2: then for every seven or ten years after oil shocks
Speaker 2: in the seventies, the GFC, the dot com crash, the
Speaker 2: eighty seven stock market crash, stagflation in the early eighties.
Speaker 2: If I feel like I'm giving a laundry list, I
Speaker 2: haven't bet a live that long. But I've done the history.
Speaker 2: My point is that over time things go on to
Speaker 2: do better and big at Why because human ingenuity you
Speaker 2: mentioned this before, Sonya. Unless we've hit peak ingenuity, unless
Speaker 2: we've hit peak human development, human capacity, human potential. I
Speaker 2: haven't even talked about AI. We won't. But man, I mean,
Speaker 2: think about the opportunities that are coming for companies and
Speaker 2: for people in a world where computer power is just
Speaker 2: phenomenally large than it ever has been. If you're a
Speaker 2: brave person to say, yeah, we hit peak capitalists, we
Speaker 2: hit peak ingenuity, we hit peak development in twenty twenty four,
Speaker 2: it's gonna be rubbish ever after. I mean, maybe it
Speaker 2: will be, but jeers, there's a much chance of that
Speaker 2: not really, So really, please please please look through the tariffs,
Speaker 2: invest well, investing quality business. We talked about that, but
Speaker 2: please do that. That's the point of the biggest takeaway
Speaker 2: of the TARFFS. I hope so all the time we
Speaker 2: spent on it is in hindsight they will think not
Speaker 2: be as consequential to your wealth as you might think
Speaker 2: fear looking forward because you can't see through them yet right,
Speaker 2: so dot com crash, natact like eighty five percent. It
Speaker 2: was an enormous wipeout right huge, and yet NAS it
Speaker 2: went on a new Hives. The now the es people
Speaker 2: in New Highs Yx went on New Hives. It wasn't
Speaker 2: the Bill and end all. Now don't I don't like them,
Speaker 2: I don't want them. I'm not saying we shouldn't have them.
Speaker 2: If we didn't could avoid them, of course we shouldn't.
Speaker 2: But if you can't avoid them, the nextperst thing is
Speaker 2: to say they're here. What's the best way to make
Speaker 2: the best of them? And there's likely to invest anyway.
Speaker 2: I think on the lecture, I've probably cover enough of that. Mate.
Speaker 2: The best thing, as I said, is to separate your
Speaker 2: policy or your political brain from your investing brain. Don't
Speaker 2: overthink it, don't extrapolate too much. I've seen plenty of
Speaker 2: commentary on Twitter. Ah, this this, this party will kill
Speaker 2: the economy, this party will kill it, and that, by
Speaker 2: the way, both say about each other, because that's just
Speaker 2: what we do. It's not going to happen. Right. Are
Speaker 2: some better or worse than the economy? Maybe? Probably? Do
Speaker 2: we know that yet? I don't even know if we
Speaker 2: know that yet. But you know, more more broadly, despite governments,
Speaker 2: despite crashes, despite tariffs, despite all this stuff, human engineering
Speaker 2: works right. Churchill said, democracy is the worst system except
Speaker 2: for every other system that's been tried. My versionay, is
Speaker 2: democratic capitalism right for all of its flaws, for all
Speaker 2: of its problems, and I would fix them if I
Speaker 2: had the choice. Maybe treasurer for six months is all
Speaker 2: they'd need. But despite all those things, it still goes
Speaker 2: on to create enormous wealth for people if you are
Speaker 2: part of the system. Why, because it harnesses all that
Speaker 2: human capacity and potential.
Speaker 4: I think that people are really you know, the wealth
Speaker 4: of experience.
Speaker 3: Now that we have been through a few of these things,
Speaker 3: I mean, we've caught up over the years about the
Speaker 3: different periods of market volatility. So I mean, is there
Speaker 3: anything you want to want to leave people with before
Speaker 3: we wrap today?
Speaker 2: The future is bright. The future is bright, and wins
Speaker 2: for all the doom say. It's for all the doom
Speaker 2: and gloomers, for all the perma bears, for all the
Speaker 2: people who are Oh it's raining, it's raining. The skies falling,
Speaker 2: Chicken little style, you know what. Bits of the sky
Speaker 2: fall all the time, but the sky hasn't falling. The
Speaker 2: future is bright. We will go on to bigger and
Speaker 2: better and brighter things. You and I be talking in
Speaker 2: five years time, Sonya and I we bet a reasonal
Speaker 2: amount of money. The A six has hit another high,
Speaker 2: probably another two or three on the way through. Maybe
Speaker 2: it's even fallen out of ten percent on that journey
Speaker 2: and come back up again. Vanguard have a great chart.
Speaker 2: I've banged on about it before. It's called their thirty
Speaker 2: year Index chart. Ten thousand dollars invested in nineteen ninety
Speaker 2: four was one hundred and thirty thousand dollars. Hypothetical amount
Speaker 2: ten grand became one hundred and thirty thousand dollars. Despite
Speaker 2: all these things I talked about, it happened over that
Speaker 2: thirty year period, right, a thirty fold increase. It's about
Speaker 2: the wars and the terrorisms and the recessions and the
Speaker 2: Covids and the all this stuff. Now, if you're added
Speaker 2: money regularly, you're going to have even more than that.
Speaker 2: Now I'm not saying that'll be the next thirty years,
Speaker 2: who knows. But also that average radar of that thirty
Speaker 2: year period not dis similar to thirty years and the
Speaker 2: thirties and thirty years before that. So the future is bright.
Speaker 2: Optimism wins. Look through the clouds and make sure you
Speaker 2: can see the long term value being built by companies
Speaker 2: and people right across the world and particularly on our
Speaker 2: stock exchanges.
Speaker 3: So one thing that did stand out from the data
Speaker 3: was around optimism for Australians and a group that felt
Speaker 3: least optimistic, we're younger Australians. Do you have anything to
Speaker 3: kind of share on that or what might be factoring
Speaker 3: in the air.
Speaker 2: I honestly, I started investing relatively early, but not as
Speaker 2: early as I should have. And I hate you because
Speaker 2: we have our own podcast. I regularly abuse and when
Speaker 2: they very very good naturedly when they ride in because
Speaker 2: they've got things. I want their time right. I want
Speaker 2: to go back thirty years. I want to go and
Speaker 2: invest more. I want to. I want to. I want
Speaker 2: to set myself up even better because I know what
Speaker 2: not because I know what the future did. Hat did bring,
Speaker 2: but I know what the future can bring. If you're
Speaker 2: a young person, I get By the way, why do
Speaker 2: you feel Why do you feel bad? Housing is ridiculously expensive?
Speaker 2: You've just seen the superannuation of fall. You haven't been
Speaker 2: through these market cycles before, and you're like, oh my god,
Speaker 2: this is investing. What are you people mad? Why would
Speaker 2: I do this thing right? Why would I feel good
Speaker 2: about this? So I get that. I absolutely get it,
Speaker 2: because you know, again, the one benefit of age other
Speaker 2: than dodgy knees and less hair is is you kind
Speaker 2: of have been there before and you see it saying
Speaker 2: to happen. So yeah, I'm incredibly envious with young people
Speaker 2: because they've got all the time in the world, whether
Speaker 2: it's through superannuational, compulsory savings, whether I said, their ownly investing,
Speaker 2: just the passing of time, right, I am. I am
Speaker 2: so optimistic. I've got a twenty nine year old, an
Speaker 2: eleven year old, twelve year old now, and I am
Speaker 2: so jealous of their future because they have got an
Speaker 2: amazing future ahead. And think about the technological changes. What's
Speaker 2: going to happen in the world. Man, can you imagine it,
Speaker 2: and yet they've got the time to actually enjoy that
Speaker 2: and invest now. So what I want to say to
Speaker 2: young people is retirement feels a very long time away.
Speaker 2: That's why super is so great, because it makes you say,
Speaker 2: when you're nineteen, you don't want to And I'm yet
Speaker 2: to hear someone who's retired who hates superannuation. Please, people
Speaker 2: working new, I want to have to put this money away.
Speaker 2: If this is terrible, as horrible, I don't. I would
Speaker 2: rather spend it. They get the hirement and go, oh man,
Speaker 2: I am so glad there's superannuation. So if you're a
Speaker 2: young person listening, please say the course. Please believe that
Speaker 2: the future is bright. Please believe that we have a
Speaker 2: system of democratic capitalism for all its failings, and we're
Speaker 2: failing you on house prices right now, and change that
Speaker 2: if I was in the Treasurer's chair for a while.
Speaker 2: But investing will work for you. It will build wealth
Speaker 2: over time. I can't give your carriage and allowed to
Speaker 2: give you promises because otherwise the regulator will yell at me.
Speaker 2: Let me just say, in my very very very very
Speaker 2: very strong opinion, the future is very bright. You have
Speaker 2: so much time on your hands. The last message is
Speaker 2: please keep contributing, whether it's adding to your own super
Speaker 2: or tributing, investing in your own name through chases or otherwise.
Speaker 2: Please keep investing because the compound returns you get over time.
Speaker 2: If you're listening to your twenty five now, you're probably
Speaker 2: gonna live to your ninety five. And no retirement's at
Speaker 2: the end. The retirement date is not the end of
Speaker 2: your investing, right, it's about two thirds of the way
Speaker 2: through your life. So you've got seventy five years to compound.
Speaker 2: That is, do the mats on that, by the way,
Speaker 2: it will blow your mind. And so yes, please be positive,
Speaker 2: Please be optimistic. I know it feels like it sucks.
Speaker 2: Take it for an old person. Things will get better.
Speaker 2: They will deliver plenty of returns. Your compound returns will
Speaker 2: be spectacular. Stay the course, keep investing. It'd be absolutely
Speaker 2: worth it. Your retired self, well, thank you, and maybe
Speaker 2: you might have been think of me when I'm long
Speaker 2: dead and in the grove.
Speaker 3: I love that, and it gives me a chance to
Speaker 3: slip in my favorite or on buffet quote, which is
Speaker 3: someone sitting in the shade because they've planted a tree
Speaker 3: many years ago.
Speaker 2: So I get a T shirt with that on it, Sonia,
Speaker 2: I wear a T shirt with that quote. I love
Speaker 2: that quote.
Speaker 1: It's so good but just.
Speaker 3: Exactly what you're talking about, right, Like you don't know
Speaker 3: it at the time, but you know over time it plays.
Speaker 2: Off plant the tree, baby, plant the thure, you know.
Speaker 4: Thanks Scott, and thanks everyone for tuning in.
Speaker 3: You can watch the episode on YouTube or listen in
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Speaker 3: comment about what you'd like to hear in future episodes.