Hello, and welcome to the Australians Money Puzzle podcast. I'm James Kirby. Welcome aboard, everybody, Welcome aboard. On a what can I say, a fairly rocky week, didn't we pick the right time to talk to my guests today? The ASEX has officially midweek entered a correction, territory down ten percent from its peak and still very weak as we speak. Tech shares of course being soughked off quite hard, and anything to do with AI interestingly, not just AI stocks, but AI related stocks of which there are many and all sorts right across two property trusts. So we've lost all the gains that we had since the day Trump was elected and just now it's it's also, of course the same week that we had the tariffs imposed upon us, which what does that do bring us back? Where does that bring us back to? Huh nineteen? So it's time to talk to someone in the market about the market. My guest is Roger Montgomery of Montgomery Fund's Management. Oh are you Roger?

Hello, and welcome to the Australians Money Puzzle podcast. I'm James Kirby. Welcome aboard, everybody, Welcome aboard. On a what can I say, a fairly rocky week, didn't we pick the right time to talk to my guests today? The ASEX has officially midweek entered a correction, territory down ten percent from its peak and still very weak as we speak. Tech shares of course being soughked off quite hard, and anything to do with AI interestingly, not just AI stocks, but AI related stocks of which there are many and all sorts right across two property trusts. So we've lost all the gains that we had since the day Trump was elected and just now it's it's also, of course the same week that we had the tariffs imposed upon us, which what does that do bring us back? Where does that bring us back to? Huh nineteen? So it's time to talk to someone in the market about the market. My guest is Roger Montgomery of Montgomery Fund's Management. Oh are you Roger?

Great to be with you again, James. It is an auspicious day to be chatting with you.

Great to be with you again, James. It is an auspicious day to be chatting with you.

Today, so it would seem but anyone who's been around knows the market can do this and it can surprise us. There's no the other thing I would say about this particular downturn, and I know that you can put your case about it. You actually are skeptical about the definition of correction. More than ten percent is many people's definition. There's no nothing legal. There's no legal definition out there, but certainly no lack of explanations for why this particular route has occurred on the share market is there.

Today, so it would seem but anyone who's been around knows the market can do this and it can surprise us. There's no the other thing I would say about this particular downturn, and I know that you can put your case about it. You actually are skeptical about the definition of correction. More than ten percent is many people's definition. There's no nothing legal. There's no legal definition out there, but certainly no lack of explanations for why this particular route has occurred on the share market is there.

I agree there's no shortage. There's always going to be opinions after the fact. You know, I'm pretty content with the columns that I wrote in Wealth earlier this year saying that I expect this year to be a positive year, but that it would be more volatile, and I doubted that we would get another twenty percent year like we had last year in the year before in the s and P. Five hundred. I think, James, to your point about corrections. I think the word correction is a euphemism for a crash, or it's been. It's been somewhere along the line, journalists and commentators like you and I stopped calling it a crash started calling it a correction, and so now correction is not twenty percent anymore. It's ten percent.

I agree there's no shortage. There's always going to be opinions after the fact. You know, I'm pretty content with the columns that I wrote in Wealth earlier this year saying that I expect this year to be a positive year, but that it would be more volatile, and I doubted that we would get another twenty percent year like we had last year in the year before in the s and P. Five hundred. I think, James, to your point about corrections. I think the word correction is a euphemism for a crash, or it's been. It's been somewhere along the line, journalists and commentators like you and I stopped calling it a crash started calling it a correction, and so now correction is not twenty percent anymore. It's ten percent.

That's right. The crash is twenty.

That's right. The crash is twenty.

A crash is twenty. But I thought a correction was a euphemism for a crash, so I didn't realize there was it was nuanced.

A crash is twenty. But I thought a correction was a euphemism for a crash, so I didn't realize there was it was nuanced.

Oh, it's nuanced. Yes, it is, whatever it is, Roger, it's sure as how going the wrong way, isn't it. We had a fabulous year in twenty twenty four, and we knew that, and as investors, we all knew that, and we knew that you don't get double digits every year. We knew that. Come, well, bank, the biggest bank in the market, cannot go up forty percent. Well, history would suggest, reality with suggest it can't go up forty percent. Another falling, and they're falling right across the board. First of all, you're still comfortable with basic premise you're working on that we will finish calendar twenty twenty five with a positive return on share markets.

Oh, it's nuanced. Yes, it is, whatever it is, Roger, it's sure as how going the wrong way, isn't it. We had a fabulous year in twenty twenty four, and we knew that, and as investors, we all knew that, and we knew that you don't get double digits every year. We knew that. Come, well, bank, the biggest bank in the market, cannot go up forty percent. Well, history would suggest, reality with suggest it can't go up forty percent. Another falling, and they're falling right across the board. First of all, you're still comfortable with basic premise you're working on that we will finish calendar twenty twenty five with a positive return on share markets.

There's there's the backdrop that supports that idea is threefold. Number One, you need disinflation, and in January and February we saw an uptick in US month to month inflation. So we're still arguably still in deflation, because we're nowhere near the eight to nine percent inflation rates that we had before. But if your starting point was November October November last year, then we've seen inflation accelerating marginally, So that's not going the right way. But we need disinflation. The other thing that we need is positive economic growth. There is now some doubt about that, particularly in the United States. And the reason I say disinflation and positive economic growth, James, is because there was some research conducted by a macroeconomic research house back and presented back in nineteen seventy eight, and it demonstrated that whenever you have disinflation and positive economic growth coalescing, then you end up with a ripe environment for innovative companies with pricing power. Now, in twenty twenty three and twenty twenty four, that's precisely what we had, positive economic growth, disinflation, and the innovative companies with pricing power, the Magnificent seven, with the exception of Tesla, let's call it the Magnificent six. They all did really well. And by the way, and the reason why a lot of the money flowed into those megacap companies is because there's a perceived safety in those larger companies, and there was still a lot of talk about recession or the risk of recession and so forth. And so the inner so Gavical Research, who published that research in nineteen seventy eight, they've been absolutely correct every time since nineteen seventy eight. So that's two requirements for a positive outlook for this year. And the third is central bank liquidity. And now in twenty twenty three and twenty twenty four, we had something in the order of five to six trillion US dollars being surreptitiously injected into financial markets. Despite all the tough talk from Jerome Powell and all of that realet Janet Yellen as well, all of that tough talk about QT or quantitative tightening and so forth, in the background, they were drawing on things like the Reverse Repurchase Agreement account that the FED holds, and they injected about two trillion dollars from that account into markets. So that was supportive. Again, liquidity is a fundamental necessity for markets to go up, you need to have liquidity. And so this year we have three challenges, and that is disinflation still in train, and at the beginning of the year, I believed that it would be, but at the moment there's a question positive economic growth that at the beginning of the year I thought that would be a consistent issue, a consistent positive influence, but there's question marks in the market about that. We're still positive, growth is still positive, but there's a question mark that's re emerged. And liquidity, well, that reverse repurchase agreement account I mentioned a moment ago, that's down to one hundred and twenty billion now from about two point four trillion a year and a half ago, So that's been exhausted. The Federal Reserve and global central banks are going to have to be very creative if they don't want markets to tank in thinking about they'll have to be very creative about how they pump more money into financial markets and into the financial system.

There's there's the backdrop that supports that idea is threefold. Number One, you need disinflation, and in January and February we saw an uptick in US month to month inflation. So we're still arguably still in deflation, because we're nowhere near the eight to nine percent inflation rates that we had before. But if your starting point was November October November last year, then we've seen inflation accelerating marginally, So that's not going the right way. But we need disinflation. The other thing that we need is positive economic growth. There is now some doubt about that, particularly in the United States. And the reason I say disinflation and positive economic growth, James, is because there was some research conducted by a macroeconomic research house back and presented back in nineteen seventy eight, and it demonstrated that whenever you have disinflation and positive economic growth coalescing, then you end up with a ripe environment for innovative companies with pricing power. Now, in twenty twenty three and twenty twenty four, that's precisely what we had, positive economic growth, disinflation, and the innovative companies with pricing power, the Magnificent seven, with the exception of Tesla, let's call it the Magnificent six. They all did really well. And by the way, and the reason why a lot of the money flowed into those megacap companies is because there's a perceived safety in those larger companies, and there was still a lot of talk about recession or the risk of recession and so forth. And so the inner so Gavical Research, who published that research in nineteen seventy eight, they've been absolutely correct every time since nineteen seventy eight. So that's two requirements for a positive outlook for this year. And the third is central bank liquidity. And now in twenty twenty three and twenty twenty four, we had something in the order of five to six trillion US dollars being surreptitiously injected into financial markets. Despite all the tough talk from Jerome Powell and all of that realet Janet Yellen as well, all of that tough talk about QT or quantitative tightening and so forth, in the background, they were drawing on things like the Reverse Repurchase Agreement account that the FED holds, and they injected about two trillion dollars from that account into markets. So that was supportive. Again, liquidity is a fundamental necessity for markets to go up, you need to have liquidity. And so this year we have three challenges, and that is disinflation still in train, and at the beginning of the year, I believed that it would be, but at the moment there's a question positive economic growth that at the beginning of the year I thought that would be a consistent issue, a consistent positive influence, but there's question marks in the market about that. We're still positive, growth is still positive, but there's a question mark that's re emerged. And liquidity, well, that reverse repurchase agreement account I mentioned a moment ago, that's down to one hundred and twenty billion now from about two point four trillion a year and a half ago, So that's been exhausted. The Federal Reserve and global central banks are going to have to be very creative if they don't want markets to tank in thinking about they'll have to be very creative about how they pump more money into financial markets and into the financial system.

To give that The critic to keep that cree variable, obviously here is Trump.

To give that The critic to keep that cree variable, obviously here is Trump.

I've only talked about one one aspect. Yes, so Trump and the tariffs and the sort of mercurial way that he imposes them withdraws that creates uncertainty not only for financial markets, but it creates uncertainty for business. James. Companies don't know whether they should spend their capital on investing in new manufacturing. They don't know whether or not they should be in advertising or marketing, should they be employing more people. That all gets pulled back in this very uncertain political regime.

I've only talked about one one aspect. Yes, so Trump and the tariffs and the sort of mercurial way that he imposes them withdraws that creates uncertainty not only for financial markets, but it creates uncertainty for business. James. Companies don't know whether they should spend their capital on investing in new manufacturing. They don't know whether or not they should be in advertising or marketing, should they be employing more people. That all gets pulled back in this very uncertain political regime.

Yes, so what we're seeing so far actually, as you said, like a capital striker, and that's being reported quite lightly, that listed companies of all at all levels are they don't know where to turn. There's always uncertainty in the market. Of course listeners and there would have been a shore ever where I would have talked to Roger and we would have said, hey, the markets are certain, but there are degrees one of the things talking about in uncertainty. So the market's down quite sharply. But the VIX, which is the uncertainty index, that's not flying high or anything like that.

Yes, so what we're seeing so far actually, as you said, like a capital striker, and that's being reported quite lightly, that listed companies of all at all levels are they don't know where to turn. There's always uncertainty in the market. Of course listeners and there would have been a shore ever where I would have talked to Roger and we would have said, hey, the markets are certain, but there are degrees one of the things talking about in uncertainty. So the market's down quite sharply. But the VIX, which is the uncertainty index, that's not flying high or anything like that.

It did spark, We did have a spark a couple of days ago, but it hasn't spiked too you know, extraordinary levels of previous crashes. The other thing that's interesting, James, I just finished that. So we talked about the economic backdrop. We then talked about the fundamental ecodrop nomic backdrop. Then we talked about or mentioned Trump and tariffs and the uncertainty there. The third one is again something that I wrote about in the column for you, and that was that was the end of the AI thematic, at the end of that boom in AI stocks fueled by the liquidity that I mentioned a moment ago.

It did spark, We did have a spark a couple of days ago, but it hasn't spiked too you know, extraordinary levels of previous crashes. The other thing that's interesting, James, I just finished that. So we talked about the economic backdrop. We then talked about the fundamental ecodrop nomic backdrop. Then we talked about or mentioned Trump and tariffs and the uncertainty there. The third one is again something that I wrote about in the column for you, and that was that was the end of the AI thematic, at the end of that boom in AI stocks fueled by the liquidity that I mentioned a moment ago.

When you said the end, you mean the end. It's not over right, It's the end of what the promise of the period of where there was no limits to the promise. Is that what you're straining it.

When you said the end, you mean the end. It's not over right, It's the end of what the promise of the period of where there was no limits to the promise. Is that what you're straining it.

I think the initial unbridled optimism where a complete disengagement between price and revenue occurs, that that's over And the hint and what I wrote about in the column a while back. The hint was that the SOPs Semiconductor Index in the United States had actually been ranged trading for nine months. In fact, it was unchanged about a month and a half ago. It was unchanged from nine months earlier. So that told me that the thematic was becoming tired. And despite all the positive news about Mannas, about Grock, about the next version of chat GPT, despite all all of the positive announcements and developments in the AI landscape, what we were seeing was no real positive price response in semiconductor stocks. And that told me that you know what, there's a lot of there's a lot of great words being said, but not a whole lot of buying happening as a result of those words. And so once once investors see a thematic becoming tired and they're not getting again, it's a little bit like when you're investing in a fund, James, and you know you've been there for five years, and you're.

I think the initial unbridled optimism where a complete disengagement between price and revenue occurs, that that's over And the hint and what I wrote about in the column a while back. The hint was that the SOPs Semiconductor Index in the United States had actually been ranged trading for nine months. In fact, it was unchanged about a month and a half ago. It was unchanged from nine months earlier. So that told me that the thematic was becoming tired. And despite all the positive news about Mannas, about Grock, about the next version of chat GPT, despite all all of the positive announcements and developments in the AI landscape, what we were seeing was no real positive price response in semiconductor stocks. And that told me that you know what, there's a lot of there's a lot of great words being said, but not a whole lot of buying happening as a result of those words. And so once once investors see a thematic becoming tired and they're not getting again, it's a little bit like when you're investing in a fund, James, and you know you've been there for five years, and you're.

Going, well, yeah, you know.

Going, well, yeah, you know.

When's it going to turn? You sort of start to become a little bit a little bit impatient. And I think that's what investors have done now, They've become impatient and they're reversed. And if I can just say one more thing about the AI thematic, and that is that again wrote a column about this last year in the Australian Wealth. The thing that needed to happen was that revenue models needed to be developed to justify father capital expenditure on AI. And you know, the most popular or the biggest use case for large language models that was commercial up until this point right now was companion bots. So you know, so chatbots that if you were lonely or feeling romantic or whatever it was, you could subscribe to a chatbot that was powered by a large language model, and it would talk to you about your needs and wants.

When's it going to turn? You sort of start to become a little bit a little bit impatient. And I think that's what investors have done now, They've become impatient and they're reversed. And if I can just say one more thing about the AI thematic, and that is that again wrote a column about this last year in the Australian Wealth. The thing that needed to happen was that revenue models needed to be developed to justify father capital expenditure on AI. And you know, the most popular or the biggest use case for large language models that was commercial up until this point right now was companion bots. So you know, so chatbots that if you were lonely or feeling romantic or whatever it was, you could subscribe to a chatbot that was powered by a large language model, and it would talk to you about your needs and wants.

And it's not exactly as commercially look at as it was in the payment system, or if it was in the This is the sort of thing that we were waiting for. I've got a very good question on this, which we'll do in a few minutes when we get to questions, because it captures what all listeners I imagine they're asking this week. Just before I do, I think we should take a break because I want to come back to you and look at this market now and the extent to which capital gains. If capital gains are not going to come through this year they were last year, and that's a logical thing to say, before we even had this correction. Where do people turn for income? We'll be back in a moment. Hello, Welcome back to The Australian's Money Puzzle podcast. James Kirby talking to Montgomery of Montgomery Investment Management. Regular contributor of course to the Australians Wealth Section, longtime contributor Roger. I wanted to just bring that up with you. For most investors, shares are just a part of their portfolio and they are faced with a real conundrum now. Saving rates are falling because official rates are falling at the same time the share market returns. Well, they've had a setback, quite a setback in this first quarter of twenty twenty five. And on top of that, we've also come to realize that the dividend payouts in any event I'm talking about the ASX now are slowing. The big miners aren't paying dividends anything like they used to. The dividend yield which people would depend on, has dropped and it's under four percent now, where it was traditionally between four and six percent. To the listeners who were looking at this scenario where the shares are falling, their wrists on risk free deposits are falling, and they know that a dividend do you listen as good as it used to be? What are the options here?

And it's not exactly as commercially look at as it was in the payment system, or if it was in the This is the sort of thing that we were waiting for. I've got a very good question on this, which we'll do in a few minutes when we get to questions, because it captures what all listeners I imagine they're asking this week. Just before I do, I think we should take a break because I want to come back to you and look at this market now and the extent to which capital gains. If capital gains are not going to come through this year they were last year, and that's a logical thing to say, before we even had this correction. Where do people turn for income? We'll be back in a moment. Hello, Welcome back to The Australian's Money Puzzle podcast. James Kirby talking to Montgomery of Montgomery Investment Management. Regular contributor of course to the Australians Wealth Section, longtime contributor Roger. I wanted to just bring that up with you. For most investors, shares are just a part of their portfolio and they are faced with a real conundrum now. Saving rates are falling because official rates are falling at the same time the share market returns. Well, they've had a setback, quite a setback in this first quarter of twenty twenty five. And on top of that, we've also come to realize that the dividend payouts in any event I'm talking about the ASX now are slowing. The big miners aren't paying dividends anything like they used to. The dividend yield which people would depend on, has dropped and it's under four percent now, where it was traditionally between four and six percent. To the listeners who were looking at this scenario where the shares are falling, their wrists on risk free deposits are falling, and they know that a dividend do you listen as good as it used to be? What are the options here?

Okay? So there's a couple of frameworks to consider, James, that help inform this discussion. Number One, if you're an investor who bought the Commonwealth Bank shares fifteen or twenty years ago, the price doesn't matter. The yield on your investment is extraordinary, and I would be very reluctant and it would be disingenuous of me to suggest that you should sell your shares because they're going down.

Okay? So there's a couple of frameworks to consider, James, that help inform this discussion. Number One, if you're an investor who bought the Commonwealth Bank shares fifteen or twenty years ago, the price doesn't matter. The yield on your investment is extraordinary, and I would be very reluctant and it would be disingenuous of me to suggest that you should sell your shares because they're going down.

Yeah, you're sent to listeners. They yield on your Combak shares if you bought them from fifty bucks exactly our twenty bucks. Yeah, of course. Yeah. When I talk about the dividend, I'm talking about the place they are.

Yeah, you're sent to listeners. They yield on your Combak shares if you bought them from fifty bucks exactly our twenty bucks. Yeah, of course. Yeah. When I talk about the dividend, I'm talking about the place they are.

So if you're investing today, if you had capital to invest today and you're thinking about where to put it because income is something that you're going to need or you need now, well, you know what, there's a growing cohort James of people who are growing very tired as they age and head towards their seventies. They're growing very tired of the volatility of the stock market, and so they're looking at other asset classes. And perhaps the asset class that is now growing the fastest is private credit. And that is a space that I've written about. It's an area that we're now distributing a couple of very successful funds. We're distributing those funds in Australia. They're Australian based and have a long track record seving and a half year track record in one case.

So if you're investing today, if you had capital to invest today and you're thinking about where to put it because income is something that you're going to need or you need now, well, you know what, there's a growing cohort James of people who are growing very tired as they age and head towards their seventies. They're growing very tired of the volatility of the stock market, and so they're looking at other asset classes. And perhaps the asset class that is now growing the fastest is private credit. And that is a space that I've written about. It's an area that we're now distributing a couple of very successful funds. We're distributing those funds in Australia. They're Australian based and have a long track record seving and a half year track record in one case.

But could I ask you if you've got confidence seeping out of the share market and if you have a share market correction, there's no way that private credit is quarantines in any fashion from the broader action on the market. I put that to you.

But could I ask you if you've got confidence seeping out of the share market and if you have a share market correction, there's no way that private credit is quarantines in any fashion from the broader action on the market. I put that to you.

Oh yes, no, because private credit is private markets. It's unlisted. And so your return is coming from lending to medium sized corporates in Australia, which the banks pulled back from after the GFC because of regulation. And so look, the fact is, fifteen years ago, James, if you'd said, Roger, I want to lend money to small and medium sized corporates, I would have said, James, don't do it. You've got rocks in your head because the banks had that market stitched up. They had it, they were dominating that space, and the only businesses you could have lent to directly or indirectly through a fund would have been the businesses the bank's rejected. But now since the GFC, so much capital is required for certain types of lending by the banks. It's no longer profitable for them, it's not efficient for them, and so the gap there is now a three hundred and fifty billion dollar gap in Australia between what small and medium sized corporates would like to borrow for growth. And I'm not talking about businesses that are on their knees and need turnaround capital. We're talking about high quality borrowers, double A, double B type borrowers.

Oh yes, no, because private credit is private markets. It's unlisted. And so your return is coming from lending to medium sized corporates in Australia, which the banks pulled back from after the GFC because of regulation. And so look, the fact is, fifteen years ago, James, if you'd said, Roger, I want to lend money to small and medium sized corporates, I would have said, James, don't do it. You've got rocks in your head because the banks had that market stitched up. They had it, they were dominating that space, and the only businesses you could have lent to directly or indirectly through a fund would have been the businesses the bank's rejected. But now since the GFC, so much capital is required for certain types of lending by the banks. It's no longer profitable for them, it's not efficient for them, and so the gap there is now a three hundred and fifty billion dollar gap in Australia between what small and medium sized corporates would like to borrow for growth. And I'm not talking about businesses that are on their knees and need turnaround capital. We're talking about high quality borrowers, double A, double B type borrowers.

We see some of these top funds having to take over things they never wanted to take all in restaurants or whatever.

We see some of these top funds having to take over things they never wanted to take all in restaurants or whatever.

Yeah, they're lending, and most of the headlines relate to loans that have been made to property development. So I would say, you know, there's a like stocks on the stock market, James, there are higher risk stocks and there are lower risk companies to invest in. And it's the same with private credit funds. There are funds that lend to property developers and construction companies and restaurants, and then there are those that don't. There are those that lend for two and three years, which I think is riskier than lending for three months or four months. And so there are different vehicles out there in that private credit spaces.

Yeah, they're lending, and most of the headlines relate to loans that have been made to property development. So I would say, you know, there's a like stocks on the stock market, James, there are higher risk stocks and there are lower risk companies to invest in. And it's the same with private credit funds. There are funds that lend to property developers and construction companies and restaurants, and then there are those that don't. There are those that lend for two and three years, which I think is riskier than lending for three months or four months. And so there are different vehicles out there in that private credit spaces.

Side of five credits, what about in more conventional areas, there's obviously some sort of a swing to fixed income. We can see that in the market, those people, as you said, tire of volatility.

Side of five credits, what about in more conventional areas, there's obviously some sort of a swing to fixed income. We can see that in the market, those people, as you said, tire of volatility.

The only thing I say, James on that is there's a very high correlation between bonds such as the US treasuries and Australian government bonds and the equity market when inflation is rising, and particularly when inflation is above four percent. So you know that traditional sixty to forty portfolio that many people have heard about. The idea is that when the stock market is going down, your bond portfolio, the sixty percent portion of your portfolio is going well. And historically that has been the case except for when inflation is accelerating. And we saw that when inflation jumped after the after COVID, the protection that the bonds were meant to provide failed to provide that protection and bonds went down simultaneously. Or can currently with equity markets, especially in twenty twenty two.

The only thing I say, James on that is there's a very high correlation between bonds such as the US treasuries and Australian government bonds and the equity market when inflation is rising, and particularly when inflation is above four percent. So you know that traditional sixty to forty portfolio that many people have heard about. The idea is that when the stock market is going down, your bond portfolio, the sixty percent portion of your portfolio is going well. And historically that has been the case except for when inflation is accelerating. And we saw that when inflation jumped after the after COVID, the protection that the bonds were meant to provide failed to provide that protection and bonds went down simultaneously. Or can currently with equity markets, especially in twenty twenty two.

What about twenty twenty five, what's the val.

What about twenty twenty five, what's the val.

Well, as long as inflation remains benign and doesn't accelerate, then bonds can provide that protection that you're looking for. So it's important to understand the yield that you're going to be generating from those bonds and understand that if you hold them to maturity, that's your maximum return. However, if interest rates fall considerably. Long bond rates fall considerably, then you could also make a capital gain from the bonds, but that should be treated as cream on top. What you should be looking at is that beginning yield and decide whether or not you're happy with that return, because by holding the bonds to maturity, that's what you're going to get.

Well, as long as inflation remains benign and doesn't accelerate, then bonds can provide that protection that you're looking for. So it's important to understand the yield that you're going to be generating from those bonds and understand that if you hold them to maturity, that's your maximum return. However, if interest rates fall considerably. Long bond rates fall considerably, then you could also make a capital gain from the bonds, but that should be treated as cream on top. What you should be looking at is that beginning yield and decide whether or not you're happy with that return, because by holding the bonds to maturity, that's what you're going to get.

In your team, what's the inflation view.

In your team, what's the inflation view.

Well, my view, and each of our managers will probably harbor a different view to each other, but my view is that we probably won't see inflation outside of the tariffs that are ultimately that ultimately are imposed. We shouldn't see dramatic inflation that is that businesses are unable to pass on to consumers.

Well, my view, and each of our managers will probably harbor a different view to each other, but my view is that we probably won't see inflation outside of the tariffs that are ultimately that ultimately are imposed. We shouldn't see dramatic inflation that is that businesses are unable to pass on to consumers.

Right, Okay, so you see it as restricted really.

Right, Okay, so you see it as restricted really.

But the risk, of course, the risk, of course is the unpredictability of what tariffs are going to be imposed and how belligerent certain people are in the United States about imposing them. And the reason I say that is because the downside of tariffs is number one, prices go up for businesses that are manufacturing in the United States but are importing the raw materials that they need for that manufacturing pro and if they can't pass those things on. Then their margin is compressed and they make less money. Then they employ fewer people, they don't grow, and the economy slows down.

But the risk, of course, the risk, of course is the unpredictability of what tariffs are going to be imposed and how belligerent certain people are in the United States about imposing them. And the reason I say that is because the downside of tariffs is number one, prices go up for businesses that are manufacturing in the United States but are importing the raw materials that they need for that manufacturing pro and if they can't pass those things on. Then their margin is compressed and they make less money. Then they employ fewer people, they don't grow, and the economy slows down.

Anyway, this is the risk, isn't it the risk that's on the table. I'm bouncing around. But I want to try one other thing with you. I don't tell you talking about moving to quality stocks, getting rid of the thrash. That's sort of saying zoning in on blue chip stocks. That's strong.

Anyway, this is the risk, isn't it the risk that's on the table. I'm bouncing around. But I want to try one other thing with you. I don't tell you talking about moving to quality stocks, getting rid of the thrash. That's sort of saying zoning in on blue chip stocks. That's strong.

Well, you know I've only ever talked about quality stocks.

Well, you know I've only ever talked about quality stocks.

Well, you should remind everybody where you come from.

Well, you should remind everybody where you come from.

Yeah, okay, So the background is and I wrote a book on this, as you might remember James back in twenty ten, called Valuable, and it was all about identifying quality and equality. Business is a business, and we'll go right back to first principles, and I'll keep it brief. A quality business is a business that can generate a high rate of return on equity. And when it generates a high rate of return on equity, it's able to retain a very large proportion of its profits and reinvest again at that high rate of return. And the most so that a business that can do that su sustainably is a business that has or harbors within it a competitive advantage. Now, the most valuable competitive advantage of all is the ability to raise price without a detrimental impact on your unit sales volume. And a business that can do that think about that, James, you and I were on the board of a company. We sell chocolate. You know, it doesn't matter what we're selling. If the only decision we had to make every year was James, how much should we raise prices by this year? And each year we say, oh, ten percent and we see no reduction in volume. Well, that is a wonderful business to own. And because there's no capital expenditure involved, there's no investment involved, nothing changes. We just put an extra ten percent into our revenue and maybe that flows through completely to the bottom line.

Yeah, okay, So the background is and I wrote a book on this, as you might remember James back in twenty ten, called Valuable, and it was all about identifying quality and equality. Business is a business, and we'll go right back to first principles, and I'll keep it brief. A quality business is a business that can generate a high rate of return on equity. And when it generates a high rate of return on equity, it's able to retain a very large proportion of its profits and reinvest again at that high rate of return. And the most so that a business that can do that su sustainably is a business that has or harbors within it a competitive advantage. Now, the most valuable competitive advantage of all is the ability to raise price without a detrimental impact on your unit sales volume. And a business that can do that think about that, James, you and I were on the board of a company. We sell chocolate. You know, it doesn't matter what we're selling. If the only decision we had to make every year was James, how much should we raise prices by this year? And each year we say, oh, ten percent and we see no reduction in volume. Well, that is a wonderful business to own. And because there's no capital expenditure involved, there's no investment involved, nothing changes. We just put an extra ten percent into our revenue and maybe that flows through completely to the bottom line.

It's in just that we see Warren Buffett this year selling when everybody was buying last year. Now cash stup and we see this correct selling going on exactly. Yes again, So I just want to ask you, yeah, because people listening are going to see give me some names. Child expect you to do that, but I can do that. Does combank fit that criterion?

It's in just that we see Warren Buffett this year selling when everybody was buying last year. Now cash stup and we see this correct selling going on exactly. Yes again, So I just want to ask you, yeah, because people listening are going to see give me some names. Child expect you to do that, but I can do that. Does combank fit that criterion?

Comback does because of the inertia in banking in Australia. Nobody thinks that the benefit of switching banks is greater than the inconvenience of doing it. The inconvenience of changing banks is enormous. Passwords, pin codes, logins, cards. You know, it's a disaster and all of those payments that are taken out automatically that you have to go and you know, reorganize it. The benefit of switching banks isn't seen to be greater than the inconvenience, and so people stay. And that allows banks to try on certain things like charging people for taking their own money out of account if they go to a branch, which by the way, was pulled back from but the CBA tried that, but.

Comback does because of the inertia in banking in Australia. Nobody thinks that the benefit of switching banks is greater than the inconvenience of doing it. The inconvenience of changing banks is enormous. Passwords, pin codes, logins, cards. You know, it's a disaster and all of those payments that are taken out automatically that you have to go and you know, reorganize it. The benefit of switching banks isn't seen to be greater than the inconvenience, and so people stay. And that allows banks to try on certain things like charging people for taking their own money out of account if they go to a branch, which by the way, was pulled back from but the CBA tried that, but.

They they have to try. If you're relaxed in doing so, would you tell the list of some stocks that you think fit that criterion.

They they have to try. If you're relaxed in doing so, would you tell the list of some stocks that you think fit that criterion.

The poster child in Australia, and I've written about it for years with you, James, is real estate, the Aria Group, which I.

The poster child in Australia, and I've written about it for years with you, James, is real estate, the Aria Group, which I.

Must see, which we've said, and disclosure is obviously a news cooperation.

Must see, which we've said, and disclosure is obviously a news cooperation.

Yes, you've got a stake, big stake in the business company, so it's listed. And think about the fact that there are something like eighty websites eight zero eighty websites in Australia where you can list your house for sale. The vast majority of them you can do for free, and yet Aria charges more than anyone else. And every year it's been raising its price either through premiumization, which is that idea that hey, I'm going to move your ad for your house from a from the silver plan to the Gold plan to the Diamond plan to the Platinum plan. And the price goes up every year. And despite that it has more houses listed than probably all the other websites combined.

Yes, you've got a stake, big stake in the business company, so it's listed. And think about the fact that there are something like eighty websites eight zero eighty websites in Australia where you can list your house for sale. The vast majority of them you can do for free, and yet Aria charges more than anyone else. And every year it's been raising its price either through premiumization, which is that idea that hey, I'm going to move your ad for your house from a from the silver plan to the Gold plan to the Diamond plan to the Platinum plan. And the price goes up every year. And despite that it has more houses listed than probably all the other websites combined.

Yes, it's ahead, isn't it. Y has that molt again, it's the spuffet idea. Yeah, so combined we just said comt you, maybe you one or two more.

Yes, it's ahead, isn't it. Y has that molt again, it's the spuffet idea. Yeah, so combined we just said comt you, maybe you one or two more.

There was another one called Altium, which was it designed software that helped people create the circuit boards if you like, that are pretty much behind every single well they are taken over that. Fortunately, that's another example of a business that could have charged pretty much whatever it wanted. Another business with a different kind of economic moat is Nick Scary. Nick Anthony Scarly invented the just in time model for furniture in Australia. So remember when you and I were young. Our parents would go to a furniture shop, point to a couch or a sofa as they're now called, and so I want that one.

There was another one called Altium, which was it designed software that helped people create the circuit boards if you like, that are pretty much behind every single well they are taken over that. Fortunately, that's another example of a business that could have charged pretty much whatever it wanted. Another business with a different kind of economic moat is Nick Scary. Nick Anthony Scarly invented the just in time model for furniture in Australia. So remember when you and I were young. Our parents would go to a furniture shop, point to a couch or a sofa as they're now called, and so I want that one.

And they would see in stock.

And they would see in stock.

Back then when we were kids, two burly men would to the roof, put it on the put on the roof racks and now it's you know, yep, we'll have it delivered to you in twelve weeks after. It's manufactured furniture.

Back then when we were kids, two burly men would to the roof, put it on the put on the roof racks and now it's you know, yep, we'll have it delivered to you in twelve weeks after. It's manufactured furniture.

When you buy it, depressed the button to actually constructed.

When you buy it, depressed the button to actually constructed.

Talk about it. No warehousing, no warehousing. The only stock that they've got is the stock that's on their floor that you decide, yeah, I want that one.

Talk about it. No warehousing, no warehousing. The only stock that they've got is the stock that's on their floor that you decide, yeah, I want that one.

You've played for a long time, haven't you. I certainly yes, So you've been on them for a long time. Okay.

You've played for a long time, haven't you. I certainly yes, So you've been on them for a long time. Okay.

They've just bought a business called fab Furniture in the United Kingdom and if you google a shop front, fab furniture storefront, google that and have a look at a really dated concept in the UK, which by the way, is a population three times bigger than Australia. But Nick Scarley has bought that business and they're rebadging and they're redesigning the stores and they're going to be pumping their furniture through and where they've already started doing that. The Nick Scarley furniture is the fastest growing or fastest moving furniture in the United Kingdom stores, so we've already got a taste of how successful that's going to be.

They've just bought a business called fab Furniture in the United Kingdom and if you google a shop front, fab furniture storefront, google that and have a look at a really dated concept in the UK, which by the way, is a population three times bigger than Australia. But Nick Scarley has bought that business and they're rebadging and they're redesigning the stores and they're going to be pumping their furniture through and where they've already started doing that. The Nick Scarley furniture is the fastest growing or fastest moving furniture in the United Kingdom stores, so we've already got a taste of how successful that's going to be.

That's very interesting, and there are three stocks we've watched for a long time. I know that. Okay, folks, we have a really good batch of questions. Often at least some of them are on what's going on this week with the listeners genuinely worried as they would be, especially if you haven't been around for a correction before. So let's get back to them in a moment we take a break. Hello, Welcome back to The Australian's Money Puzzle podcast James Kirby with Roger Montgomery. We are talking, of course, in about stocks and the outlook for the market, which I know Roger a long time and I know that his view on the market would have barely budged before this ten percent correction because he tends to have a he's a value investor, so they stick. They have a principled approach which doesn't really change other than obviously as the facts changed in front of him, and you could hear him sort of outlining that when he talked about at the start of the show the conditions he saw which were necessary for a strong year this year, and how some of them are not actually in place as we might have thought they were at the start of the year. I've got some ridio question this, Roger. I've got one here from George which actually just came in since this market set off. Here I'll read it out in full because it's really good. He says. Tech stocks in the US and Australia began to be sold off even before the tariffs were announced. This was on the basis that the Chinese app deep Seek posed a threat to Nvidia and the larger AI group, which is very true and in a way, if you think back about deep Seek, was the beginning of the tumble really in tech stocks. Now, George says, this week data center stocks such as next d C, which I know, Roger, again you have been an admirer of and Digiko hit twelve month share part slow. So is the AI trade dead or will data center stocks recover? Now? I know you've parted actually answered that where you said that investors were tired of the AI team, or at least they were tired of hearing about how it would be lucrative but little evidence of it being lucrative. The part of the market that people were conservative investors found attractive for data centers for the simple reason that there was I suppose bricks and water there next to see great favorite Digico obviously less so it went underwater from the day it floated and has never recovered. But also off market Roger we saw amazing stuff going on air trunk and that sort of thing. So a lot of people perceive real value in the data centers anyway, the AI was something of cream on the cake. How do you view them now?

That's very interesting, and there are three stocks we've watched for a long time. I know that. Okay, folks, we have a really good batch of questions. Often at least some of them are on what's going on this week with the listeners genuinely worried as they would be, especially if you haven't been around for a correction before. So let's get back to them in a moment we take a break. Hello, Welcome back to The Australian's Money Puzzle podcast James Kirby with Roger Montgomery. We are talking, of course, in about stocks and the outlook for the market, which I know Roger a long time and I know that his view on the market would have barely budged before this ten percent correction because he tends to have a he's a value investor, so they stick. They have a principled approach which doesn't really change other than obviously as the facts changed in front of him, and you could hear him sort of outlining that when he talked about at the start of the show the conditions he saw which were necessary for a strong year this year, and how some of them are not actually in place as we might have thought they were at the start of the year. I've got some ridio question this, Roger. I've got one here from George which actually just came in since this market set off. Here I'll read it out in full because it's really good. He says. Tech stocks in the US and Australia began to be sold off even before the tariffs were announced. This was on the basis that the Chinese app deep Seek posed a threat to Nvidia and the larger AI group, which is very true and in a way, if you think back about deep Seek, was the beginning of the tumble really in tech stocks. Now, George says, this week data center stocks such as next d C, which I know, Roger, again you have been an admirer of and Digiko hit twelve month share part slow. So is the AI trade dead or will data center stocks recover? Now? I know you've parted actually answered that where you said that investors were tired of the AI team, or at least they were tired of hearing about how it would be lucrative but little evidence of it being lucrative. The part of the market that people were conservative investors found attractive for data centers for the simple reason that there was I suppose bricks and water there next to see great favorite Digico obviously less so it went underwater from the day it floated and has never recovered. But also off market Roger we saw amazing stuff going on air trunk and that sort of thing. So a lot of people perceive real value in the data centers anyway, the AI was something of cream on the cake. How do you view them now?

So we've been long term investors. In fact, in the Montgomery Small Companies Fund, I think one of the day one stocks was mcquarie what was called McQuary Telecom mcquarie Technology correct. And the thesis there for that particular business is that it has very high quality clients, including the Hyperscalas, which are the Googles and the Amazons of the world. But it also has the Australian Taxation Office, I think, the Australian Defense Force, you know, the ASX, even you know the very very high quality government and semi government organizations are tenants in their centers because they are the ones that can provide the necessary security. And that's not going to change what we think. The thesis long term is that eventually, when all the centers have been built and then fully tenanted, then the exit strategy for the founders of that business, the chewed Hope brothers, David Cheered Hope being at the helm of the business, the exit strategy for them is potentially to sell to a global pension fund that is looking for a stable yield. And on that basis, look on a current on an operating basis, we think that the business could be worth about one hundred and ten dollars a share, and in this takeover scenario, which is purely hypothetical, by the way, it's a theory. In that scenario, then you know, one hundred and fifty or one hundred and sixty dollars or even one hundred and eighty dollars is possible.

So we've been long term investors. In fact, in the Montgomery Small Companies Fund, I think one of the day one stocks was mcquarie what was called McQuary Telecom mcquarie Technology correct. And the thesis there for that particular business is that it has very high quality clients, including the Hyperscalas, which are the Googles and the Amazons of the world. But it also has the Australian Taxation Office, I think, the Australian Defense Force, you know, the ASX, even you know the very very high quality government and semi government organizations are tenants in their centers because they are the ones that can provide the necessary security. And that's not going to change what we think. The thesis long term is that eventually, when all the centers have been built and then fully tenanted, then the exit strategy for the founders of that business, the chewed Hope brothers, David Cheered Hope being at the helm of the business, the exit strategy for them is potentially to sell to a global pension fund that is looking for a stable yield. And on that basis, look on a current on an operating basis, we think that the business could be worth about one hundred and ten dollars a share, and in this takeover scenario, which is purely hypothetical, by the way, it's a theory. In that scenario, then you know, one hundred and fifty or one hundred and sixty dollars or even one hundred and eighty dollars is possible.

So, and these guys are down about thirteen percent, I think, so far worse than the bolder market.

So, and these guys are down about thirteen percent, I think, so far worse than the bolder market.

Indeed selling indeed, and so we think that the as I said to you earlier, I think the AI theme was done even before Deepseek. I think the AI theme was growing tired before Christmas. And what we have to remember is that excitement about new technology eventually needs to be met with revenue models. And only Nvidia had a revenue model, you know, for selling its chips. But the downstream applicators, if you like, those who were going to apply those chips, you know, they had idea for what they were going to do. You know, we're going to enhance We're going to enhance Microsoft Office with co pilot. You know, we're going to enhance your experience on Facebook and so on. People aren't paying a lot more for that, you know that. You know, are you and I other than maybe subscribing to pet for twenty nine dollars a month? Are you and I saying, oh, I'm going to pay five thousand dollars a month for you know, having an AI version of Excel? You know, no, I'm not. It's a margin. It's an incremental improvement to revenue. It's not as transformative as the price change implied. It should be.

Indeed selling indeed, and so we think that the as I said to you earlier, I think the AI theme was done even before Deepseek. I think the AI theme was growing tired before Christmas. And what we have to remember is that excitement about new technology eventually needs to be met with revenue models. And only Nvidia had a revenue model, you know, for selling its chips. But the downstream applicators, if you like, those who were going to apply those chips, you know, they had idea for what they were going to do. You know, we're going to enhance We're going to enhance Microsoft Office with co pilot. You know, we're going to enhance your experience on Facebook and so on. People aren't paying a lot more for that, you know that. You know, are you and I other than maybe subscribing to pet for twenty nine dollars a month? Are you and I saying, oh, I'm going to pay five thousand dollars a month for you know, having an AI version of Excel? You know, no, I'm not. It's a margin. It's an incremental improvement to revenue. It's not as transformative as the price change implied. It should be.

Okay, just quickly, next you see still a supporter.

Okay, just quickly, next you see still a supporter.

It's next to you see you again. Is a business that is going for a decade or more is going to have a tailwind because in terms of enterprise, so very large businesses migrating to the cloud. We're only halfway through that journey. Where where where it's where mobile phone smartphones work ten years ago or twelve years.

It's next to you see you again. Is a business that is going for a decade or more is going to have a tailwind because in terms of enterprise, so very large businesses migrating to the cloud. We're only halfway through that journey. Where where where it's where mobile phone smartphones work ten years ago or twelve years.

Agay, one of these time, I know again listeners are asking Goodman highly regarded property trust. Forty percent of working progress is linked with data centers. Four hundred million retail raising out there right now to find more data centers. There's retail raisings that are thirty three, the stocks are thirty wants closing tomorrow. What's your view on Goodman's AI link how much as you want? Yeah? Explos Yeah.

Agay, one of these time, I know again listeners are asking Goodman highly regarded property trust. Forty percent of working progress is linked with data centers. Four hundred million retail raising out there right now to find more data centers. There's retail raisings that are thirty three, the stocks are thirty wants closing tomorrow. What's your view on Goodman's AI link how much as you want? Yeah? Explos Yeah.

So look, Goodman is one of those businesses that I would class as you know, one of the top fifteen or twenty listed companies in Australia. I think it's an extraordinary business. But there's two things to think about. There's the business and we want a good quality business. Part that for a minute, and then there's the price. And if you pay too high a price, even for a good business, you're going to end up with a low return. Remember this rule. The higher the price you pay, the lower your return. And so, you know, the time to be buying these businesses that we've been talking about, and to buy them aggressively is when everyone's running for the hills, you know, when everyone's saying get out. You know, there's it's going to be a blood bath, that's the time. And I don't think the correction that we've seen to date, you know, ten percent down on the index, you know, for many stocks, they haven't fallen that much, you know, and they're not far from their all time highs and so, and they're nowhere near a big discount to their intrinsic values. So it still isn't the time where I'd be saying load up, and if you've got new capital, dive into the stock market with both ears pin back. I want some exposure when the market corrects as it's done, because it's better to buy now than to have bought a couple of months ago. But I'd still want to have some powder dry to be buying if better value presents itself.

So look, Goodman is one of those businesses that I would class as you know, one of the top fifteen or twenty listed companies in Australia. I think it's an extraordinary business. But there's two things to think about. There's the business and we want a good quality business. Part that for a minute, and then there's the price. And if you pay too high a price, even for a good business, you're going to end up with a low return. Remember this rule. The higher the price you pay, the lower your return. And so, you know, the time to be buying these businesses that we've been talking about, and to buy them aggressively is when everyone's running for the hills, you know, when everyone's saying get out. You know, there's it's going to be a blood bath, that's the time. And I don't think the correction that we've seen to date, you know, ten percent down on the index, you know, for many stocks, they haven't fallen that much, you know, and they're not far from their all time highs and so, and they're nowhere near a big discount to their intrinsic values. So it still isn't the time where I'd be saying load up, and if you've got new capital, dive into the stock market with both ears pin back. I want some exposure when the market corrects as it's done, because it's better to buy now than to have bought a couple of months ago. But I'd still want to have some powder dry to be buying if better value presents itself.

Kay. But it's interesting your disposition towards those stocks. Next you see macro Technology, even Goodman with its AI hat on is unchanged.

Kay. But it's interesting your disposition towards those stocks. Next you see macro Technology, even Goodman with its AI hat on is unchanged.

Really, the businesses haven't changed, the price has changed. And maybe a bit of a steam has come down or a bit of a froth has come out of the price because people aren't as energized, and as you know, the optimism isn't as unbridled as it was before. And that's appropriate. That's when you start sharpening the pencil to have a look.

Really, the businesses haven't changed, the price has changed. And maybe a bit of a steam has come down or a bit of a froth has come out of the price because people aren't as energized, and as you know, the optimism isn't as unbridled as it was before. And that's appropriate. That's when you start sharpening the pencil to have a look.

Okay, we'll running out of time. I'll just jump one or two other questions. We had a question from Paul and also from Joshua that was more in the way of a complaints really, which says James, if I may say so, I think you misspoke in your discussion of the tax of Frank dividends, where you said the less tax you pay, the higher your dividend. Now this is true on an after tax basis, just like any other dollar of taxable income, the lower your tax rate, the more of your income that you get to keep. After text, Yes, Paul and Joshua and everyone else. Yes, in future, what I would say is the less tax you pay, the higher your divis end payment in your pocket, which is really what matters to most people. And that stands. But the dividend itself, it's not that you get a higher dividend than someone else if you are retired, for instance, you just get a higher payment after James ranking James.

Okay, we'll running out of time. I'll just jump one or two other questions. We had a question from Paul and also from Joshua that was more in the way of a complaints really, which says James, if I may say so, I think you misspoke in your discussion of the tax of Frank dividends, where you said the less tax you pay, the higher your dividend. Now this is true on an after tax basis, just like any other dollar of taxable income, the lower your tax rate, the more of your income that you get to keep. After text, Yes, Paul and Joshua and everyone else. Yes, in future, what I would say is the less tax you pay, the higher your divis end payment in your pocket, which is really what matters to most people. And that stands. But the dividend itself, it's not that you get a higher dividend than someone else if you are retired, for instance, you just get a higher payment after James ranking James.

I'll also say, you know, the lower the tax we pay, the higher everyone's income.

I'll also say, you know, the lower the tax we pay, the higher everyone's income.

Ha ha, Yeah, okay, you could say that if you want, as long as everyone understands the first point, all right, And finally, Susie says, markets have been falling. If you are in agreement, we can't expect the sort of higher returns again this year. If you were in a big super fund, do you need to actually change your investment choice to something more conservative? Reasonable question, It's a it's an earnest question, so people would be out.

Ha ha, Yeah, okay, you could say that if you want, as long as everyone understands the first point, all right, And finally, Susie says, markets have been falling. If you are in agreement, we can't expect the sort of higher returns again this year. If you were in a big super fund, do you need to actually change your investment choice to something more conservative? Reasonable question, It's a it's an earnest question, so people would be out.

So we used I used precisely those words in the most I think the most recent article I wrote for you, or the most recent column, and that was, don't expect the returns of whatever happens, You're not going to get those double digit returns. In fact, only once in the last one hundred years have we seen three high double digit returns in a row from the S and P five hundred, plenty of doubles, but only one triple, and that was in the nineteen eighties.

So we used I used precisely those words in the most I think the most recent article I wrote for you, or the most recent column, and that was, don't expect the returns of whatever happens, You're not going to get those double digit returns. In fact, only once in the last one hundred years have we seen three high double digit returns in a row from the S and P five hundred, plenty of doubles, but only one triple, and that was in the nineteen eighties.

And just remind people of where are we now.

And just remind people of where are we now.

We've had two doubles We've had two plus twenty percent years in the S and P five hundred. So I said, with whatever the outcome, it's going to be a lower returning year this year anyway for me. If I wasn't broadly diversified, and you know, I was younger, for example, and I was happy to switch from one asset class to another asset class, I'd be saying, well, if I thought that the stock market was going to give me nine percent this year, while I'd rather be in private credit, which gives me nine percent with zero volatility, no exposure to public markets at all, and I'm going to get nine percent. That makes perfect sense to me, and that's what's attracting so many retirees who were in the later stages of their retirement.

We've had two doubles We've had two plus twenty percent years in the S and P five hundred. So I said, with whatever the outcome, it's going to be a lower returning year this year anyway for me. If I wasn't broadly diversified, and you know, I was younger, for example, and I was happy to switch from one asset class to another asset class, I'd be saying, well, if I thought that the stock market was going to give me nine percent this year, while I'd rather be in private credit, which gives me nine percent with zero volatility, no exposure to public markets at all, and I'm going to get nine percent. That makes perfect sense to me, and that's what's attracting so many retirees who were in the later stages of their retirement.

But you put it just to as as a part of a diverse fopeus indeed, but you.

But you put it just to as as a part of a diverse fopeus indeed, but you.

Still need because we could be wrong, James, and the market could have a twenty percent year, and if it did, it would be a mistake to be exiting. And so the answer to Susie's question relates to or it comes back to why she selected that particular risk profile at the very beginning of her journey. And I'm going to presume that she assumed that there would be some bumps along the way, that there would be some volatile years. Now, ideally she's got some other sources of income or some other assets outside that she can add to as prices fall, and that's the ideal scenario. You don't sell when prices are down, you buy more. You're invested in quality. I will say that's an important exception because you've heard that phrase. It's not timing the mark. It's time in the market that matters. But in the market, time is only your friend if you're invested in good quality businesses. If you're invested in Telstra for the last twenty years, time has not been your friend. You know, the longer you're invested in a poor quality business or a lower quality business, the worse the outcome for you, because you're missing opportunities to be invested in better quality businesses and be invested elsewhere.

Still need because we could be wrong, James, and the market could have a twenty percent year, and if it did, it would be a mistake to be exiting. And so the answer to Susie's question relates to or it comes back to why she selected that particular risk profile at the very beginning of her journey. And I'm going to presume that she assumed that there would be some bumps along the way, that there would be some volatile years. Now, ideally she's got some other sources of income or some other assets outside that she can add to as prices fall, and that's the ideal scenario. You don't sell when prices are down, you buy more. You're invested in quality. I will say that's an important exception because you've heard that phrase. It's not timing the mark. It's time in the market that matters. But in the market, time is only your friend if you're invested in good quality businesses. If you're invested in Telstra for the last twenty years, time has not been your friend. You know, the longer you're invested in a poor quality business or a lower quality business, the worse the outcome for you, because you're missing opportunities to be invested in better quality businesses and be invested elsewhere.

By the way, this is never advice, it's always information only. But Susie and all the Susi's out there, I think the point I'm just making is the investment option that you choose in big super whether it was last year or five years ago, shouldn't be knocked around by a couple of bad weeks interview.

By the way, this is never advice, it's always information only. But Susie and all the Susi's out there, I think the point I'm just making is the investment option that you choose in big super whether it was last year or five years ago, shouldn't be knocked around by a couple of bad weeks interview.

You make my article sound better, James, and also make my sentences more succeptile.

You make my article sound better, James, and also make my sentences more succeptile.

Actually, folks. For what it's worth, the Roger Montgomery raw copy is very good and it's the lightest of touch. The lightest of touch, Okay, terrific. Now, one thing before we go here at the Money Puzzle. We love receiving your correspondence. You know that, and you know the address the Money Puzzle at the Australian dot com dot au. Now we have a new facility. This is worth hearing. You can send us your questions using the voice notes on your phone. We'd love to hear you you asking the questions on air. We'll publish them when we get them. All you have to do if you're on your phone, you've got a voice memo app. You just record your question and when you've finished it, you share it. You send it in like an email to our address, the Money Puzzle at the Australian dot com dot au. So let's have some questions. That is your voice on the question. And when we hear you and we get these voice memos, we will bake them into the show where you will hear yourself asking the question. I think this is a great idea. It's the producer Liah Sama Glue has come up with this. It's innovation here at the money Puzzle. Thank you very much, Roger, great show as always, love you to talk to you. We'll talk to you again soon a pleasure, and we'll talk to you in a few days. Thank you.

Actually, folks. For what it's worth, the Roger Montgomery raw copy is very good and it's the lightest of touch. The lightest of touch, Okay, terrific. Now, one thing before we go here at the Money Puzzle. We love receiving your correspondence. You know that, and you know the address the Money Puzzle at the Australian dot com dot au. Now we have a new facility. This is worth hearing. You can send us your questions using the voice notes on your phone. We'd love to hear you you asking the questions on air. We'll publish them when we get them. All you have to do if you're on your phone, you've got a voice memo app. You just record your question and when you've finished it, you share it. You send it in like an email to our address, the Money Puzzle at the Australian dot com dot au. So let's have some questions. That is your voice on the question. And when we hear you and we get these voice memos, we will bake them into the show where you will hear yourself asking the question. I think this is a great idea. It's the producer Liah Sama Glue has come up with this. It's innovation here at the money Puzzle. Thank you very much, Roger, great show as always, love you to talk to you. We'll talk to you again soon a pleasure, and we'll talk to you in a few days. Thank you.