finance
This podcast gives you a smart, cool headed and down to earth wrap on the latest finance and investing news from Australia & around the world. Investing legends Scott Phillips and Andrew Page walk you through what’s really going on and what you need to know to make great financial decisions. Subscribe to get your regular fix of BS-free money advice. Sign up for the newsletter at fool.com.au/LiSTNR For more episodes download the free LiSTNR app
Scott Phillips notes that Reserve Bank of Australia data from 2019 indicates labor income as a share of total output fell from about 62% in 1970 to 53%, while capital income's share grew from 24% to approximately 38%. He points out that this historical shift demonstrates how capital has captured a larger portion of output over nearly five decades.
Andrew Page discusses the historical success rates of business acquisitions, noting that roughly a third of acquisitions work out, a third remain a wash, and a third lose value. He cautions that because two-thirds of the time an acquisition is not beneficial, investors should approach transformational deals with healthy skepticism.
Scott Phillips uses RBA data to examine wealth inequality trends, arguing that returns on capital outstripping economic growth drive structural concentration. He cites Thomas Piketty's observations on capital return rates exceeding economic growth to explain growing wealth gaps.
Speakers Scott and Andrew discuss the impressive advancements in AI voice interfaces, particularly noting how conversational and interruptible they have become. They observe that while users know they are interacting with an AI, their brains still process it as a human conversation, which is both 'scary' and 'cool'.
Scott notes that voice input for AI, like with ChatGPT, is increasingly useful because it handles disjointed or 'messy' prompts effectively. He finds this particularly valuable for coding tasks, as the AI can piece together even poorly structured requests, unlike human developers who might require clearer instructions.
Andrew believes that the technology for voice interaction with machines has finally passed a critical inflection point in the last year or two. He describes it as a 'solved problem' where the AI not only understands speech but also correctly incorporates grammar, punctuation, and sentence structure into text.
Tim questions why US petrol prices are affected by global crude oil supply reductions, given that the US is a net oil exporter. The hosts explain that it's a global market, and producers sell to the highest bidder. Additionally, refinery setups and the global demand for specific oil inputs play a role, suggesting that price increases are not necessarily 'price gouging' beyond normal market fluctuations.
Political leaders and social commentators are expressing concern that the rapid advancement of AI is happening too quickly. Some are calling for efforts to intentionally slow down the pace of AI development.
The future trajectory of AI development is described as uncertain, with the potential for both wonderful and horrifying outcomes. There's a recognition that AI development is a long process that might eventually hit a plateau.
The speaker expresses frustration with AI's current limitations, acknowledging that this expectation is unreasonable given the technology's rapid progress. The current state of AI is referred to as a 'miracle in a box.'
The discussion highlights the extraordinary pace at which AI technology is developing and changing the world. New AI models are constantly emerging, each being more impressive than the last.
Scott Phillips and Andrew Page engage in a discussion about the concept of self-regulation, particularly within financial or investment contexts. They humorously question its effectiveness and the lack of robust oversight from governing bodies, suggesting potential motivations behind such lenient approaches.
A listener inquired about the recent Cold Card exploit and its implications for Bitcoin self-custody. Andrew discussed the vulnerability, emphasizing that it was a hardware wallet issue unrelated to the Bitcoin protocol itself, and offered advice on maintaining security.
A listener shared Howard Marks' observation that when the S&P 500 hits a P/E of 23, the subsequent 10 years yield minimal returns. This led to the idea of treating Berkshire Hathaway as a diversified, fair-valued alternative to the index, a sentiment echoed by Scott Phillips.
A listener asked about inflation hedging strategies beyond the common choices of gold, Bitcoin, and real estate. Scott Phillips discussed commodities, infrastructure, inflation-linked bonds, and dividend-paying stocks, while Andrew highlighted companies with strong moats and alternative investments like private equity.
A new investor sought clarification on the differences between dividend and growth stocks. Scott explained that dividend stocks offer regular income from mature companies, while growth stocks focus on capital appreciation from companies reinvesting profits. Both have pros and cons for beginners depending on risk tolerance and goals.
Addressing a listener's request for beginner-friendly ETF recommendations, Andrew suggested S&P 500 ETFs like VOO or SPY for US exposure, VT for global coverage, and QQQ for Nasdaq 100/tech exposure. Scott emphasized the benefits of broad market index ETFs for diversification and low costs.
The podcast discussed the ongoing debate between active and passive investing, especially with rising inflation and market volatility. Andrew and Scott concluded that while active management might offer opportunities in certain environments, passive investing generally remains the more sensible and data-supported approach for most investors due to lower fees and long-term performance.
The podcast discusses the dual nature of AI, with Scott Phillips and Andrew Page debating whether AI will be an accelerant for existing businesses or a disruptive force. They ponder if AI's accessibility democratizes innovation or creates new barriers for competition.
Scott Phillips and Andrew Page identify data and network effects as the most crucial competitive advantages for companies navigating the AI-driven landscape. They argue that businesses possessing these advantages are better positioned to adapt and thrive.
The discussion touches on whether brand loyalty will diminish as AI-powered recommendation engines become more sophisticated. The hosts question if consumers will prioritize AI-driven efficiency over established brand names when making purchasing decisions.
Andrew Page asserts that the success of Strawman, an online investment club, is built on non-replicable elements like his personal approach and the fostered community, rather than just the underlying technology. This personal touch is highlighted as a key differentiator against potential AI-driven competitors.
The hosts discuss how AI is removing the historical 'mote' of difficulty in creating businesses and services, such as online investment clubs. While this increases accessibility for new entrants, it also intensifies competition, forcing established players to focus on unique, non-replicable strengths.
A listener named Devin questioned whether Australia's Future Fund qualifies as a sovereign wealth fund, prompting a discussion on the show. The hosts clarified that while the Future Fund is a government investment fund designed to grow national wealth, its purpose differs from the commonly cited Norwegian model, focusing on specific obligations like public service superannuation rather than broad national savings.
Andrew points out that Australia's various Future Funds have underperformed market benchmarks since their inception. He acknowledges this might be unfair due to the funds' liquidity requirements and conservative benchmarking, but notes the distinction between maximizing returns and managing volatility.
The discussion delved into the origins of the Future Fund, with Mark explaining it was established to cover liabilities from defined benefit public service superannuation schemes. He noted that Peter Costello transferred the third tranche of Telstra shares into the fund, a move that was politically expedient but also served the practical purpose of managing future government budget pressures.
Scott Phillips and Andrew Page discuss the concept of compounding, using the grain of rice on a chessboard analogy. They highlight how even small, consistent growth can lead to astronomical numbers over time, emphasizing the importance of starting early and letting investments grow.
Andrew Page shares a statistic suggesting that 98% of Warren Buffett's wealth was accumulated after he turned 55. This highlights the significant impact of long-term compounding and continued investing throughout one's career, providing hope for later starters.
The discussion delves into the concept of the 'last double' in investing, where a significant portion of wealth accumulation occurs in the final years. Scott Phillips explains that while a prediction of tripling wealth in 5 years sounds good, the psychological impact of being half as rich the year before can be disorienting.
Andrew Page states that in his experience, no retiree has ever expressed regret about saving for superannuation. He contrasts this with individuals who initially dislike mandatory contributions, emphasizing that the long-term benefit of a secure retirement generally outweighs any short-term dissatisfaction.
Scott Phillips points out that the steady, predictable growth shown on an investment spreadsheet often doesn't reflect the volatile reality of market fluctuations. He notes that compounding, while powerful, doesn't occur in a straight line, and the latter years of investing can involve rapid gains coupled with significant year-on-year drops.
Andrew Page mentions being a guest on Australia's second-highest-ranked finance podcast, giving a shout-out to hosts Alex and Bryce of the Equity Mates podcast. The discussion on that platform touched upon small caps and Bitcoin, and the nature of investment realities versus spreadsheet projections.
A listener named Michael expresses frustration with the Australian political system, citing a pattern of parties proposing acceptable policies then contradicting them with 'ridiculous' vote-buying tactics. He laments that competent individuals are often in the private sector rather than politics.
The podcast hosts discuss the listener Michael's question about fixing the Australian political system, touching on the need for incentives and economic realities. One host suggests that government spending, especially borrowed money, creates detached political classes.
In response to Michael's query about improving Australian politics, the hosts propose concrete changes. One key suggestion is to limit large political donations and remove money from the political process, arguing that it grants access to power and influences policy.
The discussion on fixing Australia's political system emphasizes the role of the voter. The hosts suggest that while systemic changes like removing political donations are important, ultimately, electing individuals committed to these changes is necessary.
The podcast promotes the investment analysis tool 'Strawman', co-founded by Andrew Page, encouraging listeners to join. A discount code 'MINGA' is offered for new members, with the current membership drive closing on Sunday at midnight.
Scott Phillips discusses his book, 'The One-Page Investing Plan', noting that books narrated by their authors tend to be in high demand. He encourages listeners to purchase the book online, specifically mentioning Amazon, to support its visibility with retailers.
Andrew Rampage discusses the evolution of economic terminology, noting the shift away from terms like 'unicorns' and 'green shoots' to more contemporary concepts. He observes that the term 'cost of living crisis' has become prevalent, leading to a potential dilution of its meaning.
Andrew Rampage shares a list of 18 investment and tech buzzwords generated by Chat GPT, including SPACs, memes stocks, NFTs, and the metaverse. He notes that while some terms like 'diamond hands' and 'tendies' (profits) are related to meme stocks, others like NFTs and the metaverse are broader investment concepts.
The discussion touches on the performance of Australian tech companies, specifically mentioning WiseTech and Afterpay. Andrew Rampage notes that WiseTech is down 60%, and expresses doubt about the success of Afterpay's acquisition by Block, suggesting it has not gone well.
Andrew Rampage reflects on an AI training model, noting that while it was initially successful, it later experienced a significant fall. He posits that the thesis for its importance in training was sound, but the method of execution may have been flawed.
Andrew Page's investment journaling platform, Strawman.com, is celebrating its fifth anniversary as a serious outfit. Scott Phillips noted that while an early free version launched in late 2017, the company considers 2021 its official start date.
Strawman.com is reopening its doors to new members, with an announcement made during the Motley Fool Money podcast. Listeners can receive a 10% discount by using the code "Munga".
The initial concept for Strawman.com, according to Andrew Page, was to create a platform where individuals could journal and share their investment ideas. This core idea has remained central to the business's development.
An anonymous listener shared their challenging start in investing, including a significant loss during the GFC after using leverage. After restarting in 2012 without borrowed funds and living frugally, they have achieved over 20% annual returns for 14 years.
A 50-year-old doctor who has achieved significant investment returns questions whether their practice of providing free or low-cost healthcare is distorting the market. They are seeking advice on investment strategies to preserve purchasing power while maintaining their fulfilling medical career.
Andrew Page and the host discuss the psychological impact of market downturns, emphasizing the difference between a 'paper drawdown' and a permanent loss of capital. Page advises listeners to understand what they own and why, as market fluctuations are a normal part of investing.
Andrew Page shared his recent accomplishment of coding a new website using AI, a feat he initially doubted he could achieve. He transitioned from not knowing basic IT terminology to successfully building and implementing the website, highlighting the accessibility of AI tools for personal projects.
Mark recounted his recent four-week holiday exploring Cape York Peninsula in Queensland, Australia. He described the trip as "brilliant" due to the warm weather and the opportunity to see diverse landscapes, from rainforests to station country.
Andrew Page advocates for a "Peter Lynch approach" to investing by encouraging listeners to get hands-on experience with technologies like AI. He believes this direct engagement provides a more nuanced understanding than relying on external hot takes, even suggesting a small investment in AI tools for personal experimentation.
Andrew Page cautioned against dismissing AI as merely a bubble, comparing its revolutionary potential to the early internet. He advised listeners to avoid blindly buying into all AI-related stocks based on hype, suggesting that while some AI companies may be overvalued, the underlying technology is a fundamental shift with long-term implications.
Andrew Page urged listeners not to let skepticism or fears about AI's implications cloud their judgment about its inevitable impact. He acknowledged valid concerns about job displacement and creative industries but stressed that the technology is already here and advancing regardless of individual desires or opinions.
Listener James is holding significant profits in Nvidia shares acquired in 2018 based on a thesis about GPU demand in cloud computing. He is now uncomfortable with the large weighting in his self-managed super fund and seeks advice on whether to sell some or hold, considering Nvidia's growth potential versus past experiences with volatile stocks like Redflow and Pointerra.
The podcast hosts discuss the concept of Universal Basic Income (UBI), exploring its policy implications and its connection to economic prosperity. They differentiate between focusing on GDP growth and focusing on individual well-being as the primary goal of economic policy.
The hosts delve into the definition of 'the economy,' arguing that it should be understood as a means to improve people's lives rather than a focus on abstract metrics like GDP. They suggest that economic policy should prioritize individual well-being and comfort.
The conversation touches on the potential impact of robots and AI on employment, questioning what humans will do if machines perform most tasks. One host suggests that new careers like 'podcasting' and 'influencing' have emerged unexpectedly, challenging the premise that automation will eliminate all jobs.
One host suggests trialing Universal Basic Income (UBI) in Tasmania due to its geographic isolation and manageable population. This proposal aims to test the effectiveness of UBI with reasonable rules and gather data to determine its viability.
The discussion contrasts the differing views on UBI from the political left and right. Conservatives fear it disincentivizes work, while progressives argue it's an excuse to avoid job guarantees. The hosts aim to move beyond knee-jerk reactions to understand UBI's potential mechanisms.
The fundamental concept of economics is presented as the study of scarcity versus unlimited human wants and desires, involving trade-offs and opportunity costs. The hosts explain that economics deals with how to obtain desired goods and services, who performs the work, and how the benefits are distributed.
The hosts define Universal Basic Income (UBI) as a welfare concept where every person receives a fixed amount of money regularly, without means testing. This approach aims to simplify welfare distribution.
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