WEBVTT - Investor guide to tariffs and the Aussie election 0:00:00.320 --> 0:00:03.199 Join over seven hundred and fifty thousand people using Chezy's 0:00:03.240 --> 0:00:06.320 to build long term wealth. Invest with no minimum across 0:00:06.360 --> 0:00:09.840 the US, Australian and New Zealand share markets. Download the 0:00:09.920 --> 0:00:11.440 cheeseas app to get started. 0:00:11.680 --> 0:00:14.360 But every company is, you know, going to survive and thrive. 0:00:14.640 --> 0:00:17.319 But shares in general are very likely in my opinion, 0:00:17.360 --> 0:00:20.160 because history tells us to go much higher from here 0:00:20.280 --> 0:00:22.239 over the long term, and that's the only timeframe that 0:00:22.239 --> 0:00:24.239 people should be worried about. Half of my brain is like, 0:00:24.440 --> 0:00:27.120 I'm losing money. This sucks so much red. The other 0:00:27.120 --> 0:00:28.720 part of my brain, and this is the important bit, 0:00:29.400 --> 0:00:31.560 is the bit that says, but hang on, you knew 0:00:31.560 --> 0:00:33.840 this was going to happen. You know what's happened before 0:00:34.080 --> 0:00:36.680 you know it's going to happen again. Dollar cost averaging 0:00:36.680 --> 0:00:38.800 for the winds. Buying shares on sales is what we 0:00:38.840 --> 0:00:40.720 all think we want to do, except when they're on sale. 0:00:40.720 --> 0:00:41.120 We pain. 0:00:43.760 --> 0:00:47.239 Welcome to shared Lunch, brought to you by Chas's. At Cheza's, 0:00:47.320 --> 0:00:49.760 we're on a mission to create financial empowerment for everyone, 0:00:50.080 --> 0:00:52.440 which is why we have these conversations. They're a big 0:00:52.479 --> 0:00:54.640 part of being able to dig in to the different 0:00:54.680 --> 0:00:57.160 topics that are affecting at vistas and to get experts 0:00:57.160 --> 0:00:59.560 along to share their view on it. So I'm Sonya, 0:01:00.040 --> 0:01:02.520 the co founders and co CEOs at Chairs Ease, and 0:01:02.600 --> 0:01:05.440 today we're joined by Chief Investing Officer at the Montley 0:01:05.440 --> 0:01:08.320 Full Scott Phillips. We're going to chat about all things 0:01:08.400 --> 0:01:11.200 US tariffs and the upcoming election and how this is 0:01:11.240 --> 0:01:12.560 impacting Australia. 0:01:12.640 --> 0:01:13.400 Before we get. 0:01:13.200 --> 0:01:15.679 Started, I want to acknowledge the Getigul people of the 0:01:15.880 --> 0:01:18.440 or nation, the traditional custodians of the land when we're 0:01:18.440 --> 0:01:21.520 coming to you from today and pay respects to elders, past, 0:01:21.520 --> 0:01:22.560 present and emerging. 0:01:23.000 --> 0:01:25.600 Investing involves the risk you might lose the money you 0:01:25.640 --> 0:01:28.920 start with. We recommend talking to a licensed financial advisor. 0:01:29.640 --> 0:01:33.480 We also recommend reading product disclosure documents before deciding to invest. 0:01:33.720 --> 0:01:36.080 Everything you're about to see and here is current at 0:01:36.120 --> 0:01:37.000 the time of recording. 0:01:37.160 --> 0:01:39.760 Hi Scott, welcome to the show, Sonya, Thank you and 0:01:39.760 --> 0:01:41.959 thank you for having me. Yeah, great to have you back. 0:01:42.480 --> 0:01:44.560 So I'm just going to jump straight into it is 0:01:44.760 --> 0:01:46.120 now a good time to invest? 0:01:47.680 --> 0:01:51.120 Yes, absolutely a great time to invest, but with a 0:01:51.200 --> 0:01:54.640 massive asteriskmote. The asterisk is I have no idea what 0:01:54.760 --> 0:01:58.160 happens next. So I maybe the market force twenty percent, 0:01:58.160 --> 0:02:00.120 maybe it rises twenty percent, maybe it goes nowhere for 0:02:00.160 --> 0:02:02.640 a year. I have absolutely no idea. So how can 0:02:02.680 --> 0:02:04.640 I say it's a great time to invest. That's a 0:02:04.720 --> 0:02:07.480 really really simple one. Here's what history tells us, and 0:02:07.520 --> 0:02:11.360 this is really important. The ASX, the US markets, developed 0:02:11.360 --> 0:02:15.160 markets around the world have never yet failed to regain 0:02:15.760 --> 0:02:19.519 then surpass a previous high. So here's the thing. If 0:02:19.560 --> 0:02:21.040 that holds true, now it may not. I can't give 0:02:21.080 --> 0:02:23.840 a promise or a guarantee. If it does hold true, 0:02:24.240 --> 0:02:26.359 that means it upside from here to get back to 0:02:26.400 --> 0:02:29.680 the last high and then more upside again. Shares, relatively 0:02:29.680 --> 0:02:32.600 where they have been, are on special. So do I 0:02:32.639 --> 0:02:34.160 know what's going to happen next? No? Do I know 0:02:34.200 --> 0:02:36.240 which companies know. And by the way, when I say shares, 0:02:36.240 --> 0:02:38.079 when you ask the question, shares, I'm talking about generically 0:02:38.120 --> 0:02:40.360 generally across the market. Not every company will go up, 0:02:40.400 --> 0:02:42.640 not every company is worth buying, not every company is 0:02:43.360 --> 0:02:46.400 going to survive and thrive, But shares in general are 0:02:46.520 --> 0:02:48.680 very likely in my opinion, because history tells us to 0:02:48.880 --> 0:02:51.240 go much higher from here over the long term, and 0:02:51.240 --> 0:02:53.440 that's the only timeframe that people should be worried about. 0:02:53.840 --> 0:02:57.960 You mentioned that you know things have been dropping over 0:02:58.000 --> 0:03:00.800 the last week, while largely know one of the things 0:03:00.840 --> 0:03:03.760 that's driving this is the tariffs that have been put 0:03:03.800 --> 0:03:06.200 in place by the US. And so we're looking at 0:03:06.200 --> 0:03:09.200 ten percent for Australia as a baseline. What impact are 0:03:09.200 --> 0:03:11.560 these tariffs having on Australian companies. 0:03:12.680 --> 0:03:14.640 Let's work out what's going on. So the tariffs that 0:03:14.639 --> 0:03:17.480 have been put in place. I'm going to be going 0:03:17.520 --> 0:03:19.080 to be pretty honest here and I'm gonna be pretty upfront. 0:03:19.080 --> 0:03:20.840 I'm going to ask your listeners to trust me on 0:03:21.680 --> 0:03:24.480 the process here. I don't have a political dog in 0:03:24.480 --> 0:03:27.560 this fight. Democrat, Republican, liberal, labor, I don't care. What 0:03:27.639 --> 0:03:29.720 I will say to you is economically, these tariffs are 0:03:29.720 --> 0:03:33.360 a terrible idea and a terrible solution to a reasonable problem. 0:03:33.480 --> 0:03:35.560 And just because if identified a problem correctly, which is hoy, 0:03:35.560 --> 0:03:38.440 there's some problems with the US manufacturing, doesn't mean the answer, 0:03:38.440 --> 0:03:40.800 any answer is always going to be necessarily correct. I'm 0:03:40.800 --> 0:03:43.080 sorry for the hardcore Trump finds that fans out that 0:03:43.080 --> 0:03:46.040 it's not true. Again, it's not a personal view it's 0:03:46.040 --> 0:03:48.040 not even a political view, it's just an economic view. 0:03:48.440 --> 0:03:51.000 So what's happening is Donald Trumps announced tariffs on much 0:03:51.040 --> 0:03:52.280 of the rest of the world. And I'll get back 0:03:52.280 --> 0:03:55.320 to Australia and New Zealand by extension a minute. But 0:03:55.800 --> 0:03:59.480 the impact of those tariffs are going to be almost 0:03:59.480 --> 0:04:02.520 certainly higher prices for US consumers. Why because when we 0:04:02.520 --> 0:04:05.080 say we're putting tariffs on Chinese products, we're not really 0:04:05.080 --> 0:04:07.800 say we're paying putting traffs on tarifts on China. We're 0:04:07.840 --> 0:04:10.520 saying American consumers or Donald Trump saying American consumer is 0:04:10.560 --> 0:04:13.680 going to pay more for Chinese imports. Or by the way, 0:04:14.080 --> 0:04:17.159 the newly competitive US made stuff that's more expensive than 0:04:17.160 --> 0:04:18.880 it used to be but can now compete at those 0:04:18.960 --> 0:04:20.640 higher prices. In other words, no matter which way you 0:04:20.640 --> 0:04:23.880 cut the sausage, you're paying a higher price for those goods. 0:04:24.120 --> 0:04:26.839 Higher prices mean inflation. Now, I don't have to explain 0:04:26.880 --> 0:04:28.360 that we've been through five years of it over the 0:04:28.440 --> 0:04:31.880 last half decade right around the world. High inflation is bad. 0:04:31.960 --> 0:04:35.680 High inflation may also lead to and most economists, and frankly, 0:04:35.720 --> 0:04:38.479 even the Atlanta branch of the US Federal Reserve are 0:04:38.520 --> 0:04:41.320 expecting the US to enter a recession this year. If 0:04:41.360 --> 0:04:44.080 the US enters a recession, the other world's largest economy 0:04:44.200 --> 0:04:46.880 are the world's largest consumer economy by miles. If the 0:04:46.920 --> 0:04:48.799 US has a recession, it's going to put meaningful downward 0:04:48.839 --> 0:04:51.200 pressure on economic growth right around the rest of the world, 0:04:51.520 --> 0:04:53.720 including down here at the bottom end of the globe 0:04:53.720 --> 0:04:56.480 in Australia, in New Zealand. So that's the setup. But 0:04:56.520 --> 0:04:58.600 it's important set up because when you say, what's going 0:04:58.600 --> 0:05:00.920 to happen to companies here in Australia, Yeah, there's three 0:05:00.960 --> 0:05:03.719 ways to think about it. The first is that global story, 0:05:03.760 --> 0:05:07.400 the global recession risk. If the US demands less, Australian 0:05:07.440 --> 0:05:10.240 companies may produce less. If Australian's companies produced less, their 0:05:10.240 --> 0:05:14.640 profits are probably going to fall. Now that's a modest outcome. 0:05:14.920 --> 0:05:16.920 It is a lot less. We may well see companies far, 0:05:16.960 --> 0:05:19.359 we may well see job losses. And I'm an optimist 0:05:19.400 --> 0:05:20.840 by the way, but I would also want to tell 0:05:20.839 --> 0:05:23.640 it straight. So that is the possible outcome. That is 0:05:23.680 --> 0:05:26.600 the worst case scenario probably if this does get to 0:05:26.800 --> 0:05:29.159 that intergre So that's the first order impact. The second 0:05:29.240 --> 0:05:33.520 order impact is, of course the impact on Australian companies directly. 0:05:33.839 --> 0:05:36.680 We know there's twenty five percent on Australian aluminium and steel. 0:05:36.880 --> 0:05:39.039 There is ten percent now and everything else going to 0:05:39.080 --> 0:05:41.320 the US. If you have a meaningful proportion of your 0:05:41.440 --> 0:05:43.640 sales that go to the US, they are going to 0:05:43.640 --> 0:05:46.440 be harder sales to make. Maybe you absorb the increase 0:05:46.480 --> 0:05:48.800 and make lower margins. Maybe you pass on the increase 0:05:48.800 --> 0:05:50.839 and have lower sales. There'll be a few companies that 0:05:50.839 --> 0:05:52.880 can pass on the increase and still sell the same amount. 0:05:52.960 --> 0:05:54.960 That's the best case scenario, but it's probably a small group. 0:05:55.000 --> 0:05:57.800 Because price elasticity matters. If you put prices up, people 0:05:57.800 --> 0:06:00.600 buy less. So that's the second order for all those 0:06:00.640 --> 0:06:03.120 businesses that are exporting to the US. And by the way, 0:06:03.160 --> 0:06:05.719 those companies reliant on those other companies. If you're supplying 0:06:05.720 --> 0:06:08.280 a company that's exporting to the US and they buy less, 0:06:08.279 --> 0:06:10.360 are going to buy less from you, so that matters. 0:06:10.640 --> 0:06:14.240 Further impact really quickly is China. Australia is China's so 0:06:14.320 --> 0:06:18.440 China's Astralia's largest trading partner by heaps. There are ongoing 0:06:18.440 --> 0:06:20.600 tit for tat reciprocal tariffs of the bullies, Bass each 0:06:20.600 --> 0:06:25.000 other over the head. Trump said overnight recently a couple 0:06:25.040 --> 0:06:27.480 of days ago, they are going to maybe put fifty 0:06:27.480 --> 0:06:29.680 percent tariffs on Chinese goods on top or they've already 0:06:29.680 --> 0:06:33.280 announced why because China had the too ready to basically 0:06:33.360 --> 0:06:34.920 bash back at the US putting tariffs on at the 0:06:34.960 --> 0:06:37.320 first place. And this is the silliness of what's going on. 0:06:37.440 --> 0:06:42.440 But if China's economy slows and Chinese steel production slows, 0:06:42.720 --> 0:06:44.440 guess what that's going to hurt austrain and own or 0:06:44.520 --> 0:06:47.320 exports meaningfully. That's not a big economic impact, by the way, 0:06:47.360 --> 0:06:50.000 because iron or impact. It doesn't employ a whole lot 0:06:50.000 --> 0:06:52.320 of people, but big impact for share prices for those 0:06:52.360 --> 0:06:54.280 iron or exporters they own shares and four descu for 0:06:54.279 --> 0:06:57.560 full disclosure, bad news for those miners, bad news for 0:06:57.600 --> 0:07:01.640 government revenues, and for gross domestic economic output. So there's 0:07:01.760 --> 0:07:05.080 three kind of concentric circles, if you like, of potential 0:07:05.560 --> 0:07:07.880 outcomes from the tariff or when it comes to what's 0:07:07.920 --> 0:07:09.960 going to hit us here at home, are there. 0:07:09.880 --> 0:07:12.600 Any particular areas that benefit from the change? 0:07:13.320 --> 0:07:13.520 No. 0:07:15.160 --> 0:07:18.760 I mean, if you stretch and you squint really significantly, 0:07:18.800 --> 0:07:20.920 you might find an opportunity to find one or two. 0:07:21.280 --> 0:07:24.040 What you might see happen is Australian companies find other 0:07:24.080 --> 0:07:27.320 markets for their products. For example, we saw when China 0:07:27.360 --> 0:07:30.080 put massive tariffs on Australian wine. Australia wine makers found 0:07:30.120 --> 0:07:31.880 other markets. It wasn't easy and found some something didn't 0:07:31.880 --> 0:07:33.240 find any at all, by the way, I was going 0:07:33.280 --> 0:07:35.720 to a massive wine glut in Australia. So is there upside 0:07:35.760 --> 0:07:40.200 from that? No, If you are in an ASX listed 0:07:40.240 --> 0:07:42.920 company that happens to a business only in the US 0:07:43.040 --> 0:07:44.800 and somehow it is able to make more money because 0:07:44.840 --> 0:07:47.800 it could prices up because inputs are more expensive, maybe 0:07:47.800 --> 0:07:50.120 it's a little bit somewhere there in the nooks and crannies. 0:07:51.080 --> 0:07:54.480 It's a really really small sliver of potential upside. And frankly, 0:07:54.520 --> 0:07:56.760 even then, those companies are more likely to be hit 0:07:56.800 --> 0:07:59.840 by US economic pain more broadly rather than tariffs. Particularly, 0:07:59.840 --> 0:08:02.520 that is, if inflation goes up, if economic growth falls, 0:08:02.520 --> 0:08:05.800 if unemployment rises, those companies that are based there are 0:08:05.800 --> 0:08:07.680 probably going to hurt. And by the way, that's why 0:08:07.680 --> 0:08:11.040 we're seeing US share markets fall. You kind of think 0:08:11.080 --> 0:08:13.840 in the way that the simplistic version that Trump and 0:08:13.880 --> 0:08:17.080 others like to present this tariffs go up, US business 0:08:17.120 --> 0:08:19.040 gets better. US companies make a lot of money, US 0:08:19.040 --> 0:08:22.280 people get employed. Therefore, it's all wine and roses. The 0:08:22.360 --> 0:08:24.480 reality is the US market is absolutely tanked for a 0:08:24.520 --> 0:08:26.680 couple of straight days late last week, earlier this week. 0:08:26.680 --> 0:08:29.800 Why because those investor are worried about the profits of 0:08:29.800 --> 0:08:32.520 those companies because of the economic harm that these tarifts 0:08:32.559 --> 0:08:35.120 will do domestically. I'm looking long term, which, by the way, 0:08:35.160 --> 0:08:36.640 is still why you go back to your first question. 0:08:36.679 --> 0:08:38.880 Why I'm still massively optimistic. So if I think five, 0:08:38.920 --> 0:08:40.880 if I investment prises five years plus out it is 0:08:41.400 --> 0:08:44.960 that's post Trump's term. So again, thinking about what's happening now, 0:08:45.000 --> 0:08:47.520 this week, this month, that's scary. It hurts your portfolio falls, 0:08:47.520 --> 0:08:50.080 It just sucks because no one likes the uncertainty. But 0:08:50.120 --> 0:08:51.560 if I'm a long term investor, and I am, I'm 0:08:51.600 --> 0:08:53.880 looking at five years and going ah, if companies are 0:08:53.880 --> 0:08:55.600 bigger and better than five years than they are now, 0:08:55.840 --> 0:08:58.319 despite what they go through in the meantime, they're worth buying. 0:08:58.520 --> 0:09:01.280 And so that's the lens I really want to impress 0:09:01.280 --> 0:09:03.880 on people. Think about what's happening in those number of 0:09:03.960 --> 0:09:06.679 years out there. Don'try about just the short term stuff between. 0:09:06.400 --> 0:09:10.840 Now and then, we track and sentiment through the quarters, 0:09:10.880 --> 0:09:13.240 and over the last quarter we've seen it move from 0:09:13.280 --> 0:09:17.280 what was pretty balanced into cautious territory. What are you 0:09:17.360 --> 0:09:21.440 noticing from Invista sentiment and long term planning? 0:09:21.880 --> 0:09:21.960 Now? 0:09:22.040 --> 0:09:24.320 When we went through COVID almost exactly five years ago. 0:09:24.320 --> 0:09:27.520 Weirdly enough, we've looked about the market fellow in Australia thirty 0:09:27.559 --> 0:09:29.800 eight percent from top to bottom in a month and 0:09:29.880 --> 0:09:32.599 four days. Now, that felt scary as heck. Right, that's 0:09:32.640 --> 0:09:36.120 just really really scary. And I don't blame people feeling 0:09:36.120 --> 0:09:39.000 scared because what if COVID was bigger than ended up being. 0:09:39.000 --> 0:09:41.079 What if the death toll was massively higher, and that 0:09:41.120 --> 0:09:43.320 would be obviously far more tragic than the financial impacts. 0:09:43.480 --> 0:09:46.079 What if the economy's ground or hopeful longer? What if? 0:09:46.120 --> 0:09:48.360 What if I get all those concerns right? Except in 0:09:48.400 --> 0:09:50.400 hindsight we know it was the fastest bear market in 0:09:50.480 --> 0:09:53.680 history and then the fastest recovery in history. So when 0:09:53.679 --> 0:09:56.000 you think about people cautious, yes, absolutely, I'm seeing exactly 0:09:56.080 --> 0:09:57.400 the same thing, mate, Just like I got to get 0:09:57.440 --> 0:09:59.160 out of here. This is scary. One thing I want 0:09:59.200 --> 0:10:01.800 to remind people is remember for every seller, for every 0:10:01.880 --> 0:10:04.800 so called panic seller, there's a buyer. You can't sell 0:10:04.800 --> 0:10:06.760 shares unless someone buys them from you. And so while 0:10:06.760 --> 0:10:08.920 we say, oh, everyone's selling, well, it can't be because 0:10:08.920 --> 0:10:11.240 everyone's also buying. There's always two sides to a trade. 0:10:11.280 --> 0:10:13.680 So while we focus on the declines, and yes, there's 0:10:13.720 --> 0:10:15.480 more panic in the sellers than there is excitement in 0:10:15.520 --> 0:10:17.960 the buyers, otherwise the prices go back up. That's why 0:10:18.000 --> 0:10:19.600 we get it with price falls, right, that the sellers 0:10:19.600 --> 0:10:21.880 are keener than the buyers are. Everything finds its market, 0:10:21.920 --> 0:10:24.839 finds its price, and someone ever a lot, millions and 0:10:24.840 --> 0:10:27.000 minuses and millions of shares are changing hands, being bought 0:10:27.000 --> 0:10:30.000 by people who are saying, hey, this is okay. So, yes, 0:10:30.040 --> 0:10:33.280 there's cautiousness out there. There is fear out there is uncertainly. 0:10:33.320 --> 0:10:35.240 I get why people are worried about it. So I 0:10:35.280 --> 0:10:37.839 want to validate that because it's really really important, the 0:10:38.160 --> 0:10:40.080 active investing through COVID. This is what I've told this 0:10:40.080 --> 0:10:41.720 story before, son, you and I may have told anything 0:10:41.760 --> 0:10:44.320 to you, guys, I hope I didn't. During COVID, there's 0:10:44.679 --> 0:10:46.920 two sides of the investor's brain, right, there's a bit 0:10:46.960 --> 0:10:48.680 that says, oh my god, what's happening out there? This 0:10:48.720 --> 0:10:51.360 is ridiculous. And a policy perspective, I have very strong views, 0:10:51.400 --> 0:10:54.080 as you've already heard, from an investment perspective, though, I've 0:10:54.080 --> 0:10:55.640 got to have two parts of my brain. Half of 0:10:55.640 --> 0:10:58.520 my brain is like, I'm losing money. This sucks so much, 0:10:58.559 --> 0:11:01.360 red I'm down again. Maybe the market's right. What if 0:11:01.360 --> 0:11:04.679 this is the time that it's different freaking out here? 0:11:04.720 --> 0:11:06.800 What if it keeps falling? Maybe now is not the time. 0:11:07.000 --> 0:11:08.800 Maybe I should wait till the coast is cleared. All 0:11:08.840 --> 0:11:12.880 those fear emotions, all those uncertainty, all those worries they're 0:11:12.920 --> 0:11:14.760 going to be there. What if I'm investing too early? 0:11:14.760 --> 0:11:16.960 What if I'm wasting money? All that things through my head. 0:11:17.360 --> 0:11:18.599 The other part of my brain, and this is the 0:11:18.640 --> 0:11:21.440 important bit, is the bit that says, but hang on, 0:11:21.760 --> 0:11:23.760 you knew this was going to happen. You know what's 0:11:23.760 --> 0:11:26.559 happened before, you know what's going to happen again. Dollar 0:11:26.559 --> 0:11:28.680 cost averaging for the wind. If you've got some money 0:11:28.679 --> 0:11:30.320 to invest, if you can find great companies you think 0:11:30.320 --> 0:11:32.520 they're going to better in five years time, then now 0:11:32.559 --> 0:11:34.679 what that is a great thing to be able to do. 0:11:34.840 --> 0:11:36.760 Buying shares on sale is what we all think we 0:11:36.800 --> 0:11:38.720 want to do, except when they're on sale, we panic. 0:11:39.040 --> 0:11:41.040 And so two parts of your brain acknowledge the fear, 0:11:41.040 --> 0:11:44.080 acknowledge the uncertain, acknowledge the concern, and then say, but 0:11:44.200 --> 0:11:47.600 I'm investing anyway, because I just have to confront it, 0:11:47.640 --> 0:11:48.920 ignore it, do what if you need to do with 0:11:48.920 --> 0:11:52.160 the fear, But invest anyway, because long term that's proven 0:11:52.280 --> 0:11:54.560 over and over and over and over again to be 0:11:54.600 --> 0:11:58.079 the right approach. Again, not in any company. Quality companies, 0:11:58.080 --> 0:12:02.360 diversified companies, across currencies, across exchanges, across the industries, businesses 0:12:02.360 --> 0:12:04.160 with good balance sheets, all the good things that we've 0:12:04.160 --> 0:12:06.480 talked about before about good investing, keep doing that stuff. 0:12:06.520 --> 0:12:09.280 Don't buy indiscriminately, but keep buying anyway. 0:12:09.760 --> 0:12:11.920 What are the key metrics that people should be keeping 0:12:11.920 --> 0:12:14.720 an eye on to see how things are going? 0:12:15.640 --> 0:12:18.839 So I've got to say this is where there are 0:12:18.880 --> 0:12:20.640 really easy bit wrong answers to that question. 0:12:20.760 --> 0:12:20.960 Right. 0:12:21.200 --> 0:12:22.960 And if you speak to short term trades, if you 0:12:22.960 --> 0:12:24.560 speak to people who are going to try and sell 0:12:24.559 --> 0:12:27.880 you a thing rather than hopefully educate you about an approach, 0:12:27.880 --> 0:12:29.920 they'll give you lots of great metrics. I have exactly 0:12:30.080 --> 0:12:32.760 zero metrics in the short term. Why because think about 0:12:32.840 --> 0:12:34.960 think about think about every recession we've ever lived through, 0:12:35.040 --> 0:12:38.000 and I've lived through a few. The market goes down, 0:12:38.200 --> 0:12:40.280 share prices go down, say I always go down, profits 0:12:40.320 --> 0:12:43.120 go down. If you're looking for the recovery to happen, 0:12:43.480 --> 0:12:45.160 by the time of the recovery happens, that's too late. 0:12:45.440 --> 0:12:48.400 I've told the story before about some really really smart, 0:12:48.600 --> 0:12:51.559 wealthy investors who sold everything at the beginning of COVID 0:12:51.559 --> 0:12:53.080 and said, I'm not going to buy back in until 0:12:53.080 --> 0:12:56.080 the pandemic is over. Now, the pandemic took two years 0:12:56.160 --> 0:12:57.640 to be over, and in fact got worse before it 0:12:57.679 --> 0:13:01.319 got better. But as lockdowns happened, one tomy shrank. As 0:13:01.360 --> 0:13:04.640 that happened, the stock market recovered. So if you're looking 0:13:04.640 --> 0:13:05.520 out the rest of the world, this is way the 0:13:05.559 --> 0:13:07.040 economy in the stock market up. The same thing. If 0:13:07.040 --> 0:13:11.439 you're looking around the world, you're saying, well, tragically, deaths 0:13:11.440 --> 0:13:15.760 have increased, illnesses have increased, hospitalizations have increased, lockdowns have happened. 0:13:16.440 --> 0:13:20.319 People are barred from entering and leaving countries. Economic activity 0:13:20.520 --> 0:13:23.760 has stalled. Governments are keeping US afloat with welfare money. 0:13:24.400 --> 0:13:27.440 This feel it's getting worse, and yet the market recovered 0:13:27.440 --> 0:13:29.400 and recovered and recovered up into the right. Not in 0:13:29.440 --> 0:13:31.640 a straight line and not without doubts and concerns, but 0:13:31.679 --> 0:13:34.000 it did. If you waited until a vaccine, you missed out. 0:13:34.000 --> 0:13:35.679 If you waited until a pandemic was declared over, you 0:13:35.720 --> 0:13:40.240 missed out even more. So I'm going to politely not 0:13:40.320 --> 0:13:44.320 answer your question, because honestly, the only metrics you need 0:13:44.360 --> 0:13:45.960 to be thinking about are I guess there are, but 0:13:45.960 --> 0:13:47.720 they're not really metrics in terms of what data I'm 0:13:47.920 --> 0:13:50.920 seeing happen. I'm trying to, as an investor, look forward 0:13:50.960 --> 0:13:54.280 and say, in a pick a year in twenty thirty, 0:13:54.679 --> 0:13:56.560 I'm going to pick a business in twenty thirty. Are 0:13:56.600 --> 0:13:58.080 they going to have more stores? Are they going to 0:13:58.080 --> 0:13:59.880 sell to more people? Are they going to find new 0:14:00.040 --> 0:14:01.840 ways to add categories? They're going to keep their costs 0:14:01.880 --> 0:14:05.440 under control? Probably yes, And if that's the case, they're 0:14:05.480 --> 0:14:07.280 going to be mostly more profitable in twenty thirty than 0:14:07.280 --> 0:14:09.000 they were. I'll say last year. Let's not include this 0:14:09.080 --> 0:14:12.600 year because what happened the last year. Yeah, probably they will. Okay, Well, 0:14:12.600 --> 0:14:14.839 if that's true, how much should I pay for that business? 0:14:14.840 --> 0:14:16.880 And I can no matter what you've preached to evaluation 0:14:17.000 --> 0:14:18.840 is you can pick a rough price or rough multiple 0:14:18.880 --> 0:14:21.120 or rough whatever you want to base your evaluation one 0:14:21.440 --> 0:14:23.560 to say worth buying or not buying now based on 0:14:23.600 --> 0:14:25.160 where I think it'll be in twenty thirty. Let's say 0:14:25.160 --> 0:14:27.080 think a year long recession that's says really bad year long, 0:14:27.680 --> 0:14:29.280 and it goes from middle of twenty twenty five to 0:14:29.280 --> 0:14:32.080 middle of twenty twenty six and sales four by fifty percent. 0:14:32.760 --> 0:14:34.920 Now is the company going to survive that? If it's 0:14:34.920 --> 0:14:36.840 got a good enough balance sheet, Yes, it's got good 0:14:36.880 --> 0:14:39.080 enough cash flows. Yes, okay, if I'm comfortable they will, 0:14:39.080 --> 0:14:40.520 And you shouldn't assume, by the way, do do the 0:14:40.560 --> 0:14:42.840 work for yourself. In the middle of twenty twenty six, 0:14:42.880 --> 0:14:45.880 they come out of recession and sales suck and they're 0:14:45.880 --> 0:14:48.880 losing money, but they start to improve over time, and 0:14:48.960 --> 0:14:50.720 over that period of time from twenty to twenty seven, 0:14:50.760 --> 0:14:52.920 twenty eight, twenty nine, things get back to normal. And 0:14:52.920 --> 0:14:54.040 again I look at it and go roight well by 0:14:54.080 --> 0:14:56.000 twenty thirty, even if they've gone through a recession, even 0:14:56.000 --> 0:14:58.440 if sales and profits did get really ugly for a while, 0:14:58.480 --> 0:15:00.240 but they survived and then come out the other d 0:15:00.480 --> 0:15:02.040 I think going to be bigger and better. Okay, what's 0:15:02.080 --> 0:15:04.440 a fair price to pay for those businesses now? So 0:15:04.720 --> 0:15:07.800 don't wait? Is my opinion? My us for the metrics 0:15:08.160 --> 0:15:10.720 to come through start by saying, what do I think 0:15:10.760 --> 0:15:12.320 about the business? Do I like it has got a 0:15:12.320 --> 0:15:14.120 good brand, has got a good future? Will it have 0:15:14.200 --> 0:15:16.920 those in five years time? Yes? Okay, what's it worth 0:15:17.120 --> 0:15:19.800 paying today to get that benefit of five years time? 0:15:19.840 --> 0:15:22.160 That's the entire lens I use for my investing. 0:15:22.920 --> 0:15:26.240 Yeah. Great. So alongside all of this, there's an election 0:15:26.320 --> 0:15:32.320 coming up in Australia, so's what's again another moment of 0:15:32.400 --> 0:15:36.840 uncertainty that does ripple through into the markets. What's been 0:15:36.880 --> 0:15:38.800 most interesting to you so far and the lead out. 0:15:39.680 --> 0:15:42.440 Australia still has a very large budget deficit and it's 0:15:42.560 --> 0:15:44.880 projected to get worse based on the most recent budget 0:15:44.880 --> 0:15:48.960 handed down by the current incumbent government. And that's not 0:15:49.040 --> 0:15:51.120 good for Australia. That's worse than the US by the way. 0:15:51.120 --> 0:15:53.560 They've got massive foreign dead issues, massive government debt issues, 0:15:53.720 --> 0:15:56.560 so fiscal kind of fiscal being tax and spend right, 0:15:56.600 --> 0:15:59.040 the fancy where the economists use for government spending and taxation. 0:16:00.360 --> 0:16:03.840 The tax and spend settings are misaligned, and how that 0:16:03.840 --> 0:16:05.720 nets out does actually have an impact on the economy. 0:16:06.440 --> 0:16:08.320 We're supposed to run service in the good times definit 0:16:08.320 --> 0:16:09.800 at the bad time is supposed to offset each other. 0:16:09.960 --> 0:16:11.600 The taxes, spen serting is actually really matter for long 0:16:11.680 --> 0:16:14.040 term prosperity. So I'm keeping an eye on how much 0:16:14.080 --> 0:16:17.560 they're spending. Really honestly, what is interesting too is the 0:16:18.240 --> 0:16:21.040 focus on the short term. So we've got one side, 0:16:21.120 --> 0:16:25.520 the incumbent government putting cost of living relief through extension 0:16:25.520 --> 0:16:29.120 of energy subsidies. Electricity subsidies effectively a discount on your 0:16:29.200 --> 0:16:32.200 energy bill. The oppositions promising a reduction of fuel excise 0:16:32.240 --> 0:16:35.560 for six months twelve months. Sorry, these are really short 0:16:35.640 --> 0:16:38.840 term solutions. So I got to say, from an economic perspective, 0:16:38.840 --> 0:16:41.120 my view has always been that as an investor, I 0:16:41.200 --> 0:16:43.080 care far more about the long term settings of the 0:16:43.120 --> 0:16:46.200 country than about the short term opportunities or risks to 0:16:46.200 --> 0:16:47.840 the individual businesses. Now I want to say risks, I 0:16:47.840 --> 0:16:50.240 don't mean existential risks. If something's going to go broke, 0:16:50.280 --> 0:16:52.640 I really care if it's like well, tax rates for 0:16:52.640 --> 0:16:54.640 companies are slightly higher a lower, or tax rates to 0:16:54.680 --> 0:16:56.520 individuals slightly hire a lower. But if I'm a long 0:16:56.600 --> 0:16:58.760 term investor, what I care most about is my companies 0:16:58.800 --> 0:17:02.400 had the opportunity to operate in a really really solid, healthy, 0:17:02.760 --> 0:17:05.879 growing economy, and so I honestly want to look at 0:17:05.880 --> 0:17:07.679 the election. I'm not looking at who's going to give 0:17:07.720 --> 0:17:09.359 more money to this industry five bucks for that, ten 0:17:09.400 --> 0:17:11.320 bucks for that. By the way, I'm not top that investor. 0:17:11.359 --> 0:17:13.639 I do' a macro investor at all. But policy wise, 0:17:13.880 --> 0:17:16.720 I would like to think the government that comes into 0:17:16.760 --> 0:17:20.600 power post election is going to fix the budget bottom line. 0:17:20.600 --> 0:17:22.600 They probably won't, but I'd like to think that, and 0:17:22.800 --> 0:17:25.119 they're really genuinely thinking long term about setting the country 0:17:25.200 --> 0:17:27.359 up for the best long term success so that we 0:17:27.400 --> 0:17:29.639 can all thrive. And if we all do, companies have 0:17:30.000 --> 0:17:32.080 well people to sell goods too, they have richer people 0:17:32.040 --> 0:17:34.040