QAV 105 Steve Sammartino

[00:00:00] Cameron: Welcome back to the QAV Podcast. My name is Cameron Reilly. This is episode five and today on the podcast, Tony and I are joined by very special guest, our first guest on the QAV Podcast, another old mate of mine and terrific bloke, one of the smartest guys I know. Steve Sammartino. Hey, yeah. Let me do a quick intro.

[00:00:26] Cameron: Sammo, Kyno, Sammo.

[00:00:28] Tony: Hi, Steve.

[00:00:29] Steve: Hello, Tony. How are you?

[00:00:30] Tony: I’m good. And you?

[00:00:32] Steve: Mate? I’m wonderful here speaking to the smartest bloke I know.

[00:00:35] Cameron: Well, you don’t know Kyno yet, but you will.

[00:00:38] Steve: I knew you’d say that.

[00:00:39] Cameron: Now, like Tony, Steve is a very successful investor with a very long track record of investing.

[00:00:47] Cameron: He’s gonna tell us his story as we get into this very different approach to Tony’s though both investing in the stock market, but coming at it from a slightly different angle. But he also does lots of other things. He’s a, he’s an author. He’s a very successful speaker and consultant. He’s a futurist.

[00:01:05] Cameron: I’ll get him later on in the show to talk about some of those things that he’s doing as well. Always a terrific guy to hang around. I don’t get to see him often because he’s in Melbourne. I’m in Brisbane, but whenever we are in the same city, we’ll have lunch and it’s one of the, always one of the most inspiring hours of my year. So without further ado, let me get into chatting with Samo and Kyno. Steve, I think you and I go back, I’m guessing 14 years. 13, 14 years.

[00:01:37] Steve: Yeah. I reckon it was mid two thousands, wasn’t it?

[00:01:39] Cameron: I think I saw a sticker on a telegraph pole, a light pole, or it might have been something in my letter box in my neighborhood Yarraville that I lived in, in Melbourne, Do you remember which one it was?.

[00:01:52] Steve: That was old school business bootstrapping. I think it, it could have been either of those, cuz both of those things happened where you lived,

[00:01:58] Cameron: I think it was the sticker or something plastered on a wall. It was the mid two thousands. I was podcasting, working from home and there was this thing, it was pitching a new startup called …

[00:02:11] Steve: rentoid.com

[00:02:13] Cameron: rentoid.com. And what was that about?

[00:02:16] Steve: So that was a rental marketplace where people could rent things. To and from each other.

[00:02:21] Cameron: So for example, if I had a lawnmower sitting in my shed doing nothing on Saturday, you needed a lawnmower, I would be able to post it up on rentoid, a bit like eBay. You’d be able to search for a lawnmower.

[00:02:33] Cameron: Yep. See lawnmower in your suburb. Go click, Hey, can I rent this for an hour? Yes you can. Boom.

[00:02:39] Steve: Yeah, exactly that. Exactly that. And, oh,

[00:02:41] Cameron: great idea.

[00:02:42] Steve: Well, it did, it went really well for a few years. And then one of the things, a really interesting thing happened is a lot of the market sort of opened up where some of those goods dropped radically in price that, you know, might have been a few hundred dollars, $500, a little bit too expensive to buy.

[00:03:00] Steve: Even when I launched it, I can remember a flat screen TV then was $5,000. How Quick times change, right? Like the entry level flat screen TV people would even rent big TVs for sporting events and stuff on the website. Mm. Then you had that kind of Ali barbarism happen and Yeah, things became so cheap.

[00:03:16] Steve: The friction of renting in most realms for goods was just too expensive.

[00:03:20] Cameron: Ali Barbarism. Really? That’s great.

[00:03:23] Cameron: Did you coin that? That’s great. See, that’s why you get paid the big bucks.

[00:03:27] Steve: Yeah, mate. Sound bite culture served up to the fast food masses, baby.

[00:03:32] Cameron: So I saw this ad and thought, oh, that’s interesting.

[00:03:34] Cameron: Looked it up. Happened to see that it was being run out of my neighborhood. So we caught up, we had a coffee and got to know each other a little bit. And this is where you started to tell me about your story now from memory at the time you were in your mid thirties, I think you were like 34. That’s about it.

[00:03:51] Cameron: Bit bit. We’re about the same age. Yeah. Early thirties. Yeah. Early thirties. Yeah. And we, you, you introduced me to the Sammartino method, how you had been investing since you were very young.

Steve: Yeah, in, very young in uni. Straight outta uni. Maybe still in uni when I started it.

Cameron: Brilliant. And so you about the age My boys are now, my, my twins, hunter and Taylor now are 18 second year of uni.

[00:04:17] Cameron: And so you would’ve been around about that age. And consequently, by the time you were in your early thirties, you had generated enough of investment portfolio that you were able to leave your day job, which I seem to recall was marketing. Maybe you’d worked for a big FMCG manufacturer.

[00:04:42] Steve: Kraft. I have the, I have, I have the, I have the smell of baked beans in my nose as I talk to you. Yeah. It wasn’t visceral memory. I did the rounds at all of them. Proctor and Gamble craft all of the evil companies serving up plastic food, destroying the earth simultaneously.

[00:04:58] Cameron: Yes.

[00:05:00] Tony: You worked for craft Jesus like, like the Romans who worked for Christ Jesus.

[00:05:05] Steve: Yeah. Kraft, Jesus. Kraft Jesus. Yeah, that’s right. Craft Proctor and Gamble, Kimberley Clark. Foster’s group Gillette yeah, I did, I did the rounds.

[00:05:15] Cameron: So the thing that impressed me then, and, and impresses me now about how you did this is different to Tony’s method.

[00:05:23] Cameron: You, you had a method that was pretty hands off and just seem so obvious that everyone could and should have been doing it. But, but let’s go back and get you to walk through the Sammartino method. So go back, you’re in uni, how did you get started and we’ll, we’ll step it forward. 

[00:05:40] Steve:I really wanna, I, you know, I started studying economics and I wanted to understand how to make money and invest in shares and do all of that.

[00:05:50] Steve: And I really got interested in reading about how to do it cuz I wanted to buy a share portfolio. And I happened upon a couple of books that sort of set me up with the thinking of doing it this way. And I messed up a couple of ideas across these books. So the books were The Intelligent Investor, a Random Walk Down Wall Street, and another one was by a local guy, was anyone Can Get Rich or something like that.

[00:06:17] Steve: I think it was a Melbourne person. And basically I came to the conclusion that unless you Warren Buffett, and it was fair for me to assume that I wasn’t, that no one beats the stock market. And when I say no one, you know, I’m saying 99% of people don’t. And then I sort of thought to myself, well, no one beats the stock market.

[00:06:35] Steve: The random walk down Wall Street talked about the idea of buying index funds and the listeners may or may not know. And Index Fund is something which is buying all of the shares in a particular market. You know, the s and p 500, the ASX 300 or the m CSI World Index or something like that. And it basically buys them in the same proportions that they represent the market.

[00:06:57] Steve: You know, if. Apple is 2.3% of the market, then 2.3% of your portfolio is Apple. If Proctor and Gamble is 0.8% of the market, then you know your portfolio is 0.8% of the market and basically just buying those. But the things that I added in was some simple tools like dollar cost averaging rather than buying your portfolio once you put in small amounts frequently, which enables you to buy, this is a Warren Buffet to buy more hamburgers when they’re cheaper and less hamburgers when they’re more expensive because you’re putting in the same amount each year and the same amount each month.

[00:07:31] Steve: You don’t get cooked by buying when the market’s high, buying when the market’s low because you’re putting in the same amount. And then I did a 50% leverage ratio, which they’ll give you more on an index cuz it never goes down by as much as a single stock. And then I just did that and you know, put in a certain percentage of my income each year and then kept the percentage the same as my income grew and actually even increased it because I didn’t spend as much as I earned more.

[00:07:56] Steve: That’s until I had like a really big portfolio. Now I’m gonna buy, buy my first house cash, like all good Italians should and have enough money to kind of live on and not have a lot of expenses just by doing that. So that’s the method and it’s really straight up. And there’s one other thing that few people talk about with investing.

[00:08:12] Steve: The first is that 90% of people never invest. Okay? So straight away, if you’re an investor, you’re above 90% of the world. The second part is of the 10% of people that do invest, 90% of them are gamblers and they end up behind the market. So to become a one percenter, all you need to do is have a rational form of investment and do it consistently over time.

[00:08:31] Steve: And you’ll be a one percenter just by default.

[00:08:33] Tony: Yeah. That’s a great, great method. So many questions I wanna ask you, Steve, about your process and about your history and how it’s worked for you and what hasn’t worked and those kinds of things. But let me, let me start where you started. If you are a, if you are a student listening to this podcast and you hear that you started investing at uni, how much did it take you to invest and, and how did you go about doing

[00:08:56] Steve: that exactly.

[00:08:58] Steve: So I invested 5,000 in my first one, which is the minimum to get into a, an index fund because it’s something you can’t do yourself because it’s quite complex to you. You wouldn’t be able to afford to even get in with your brokerage fees on you know, buying into the stock. So the minimum was 5,000.

[00:09:15] Steve: I went through Vanguard and I bought the ASX 300 was the first one that I did. I reckon it would’ve been the early nineties. And then and basically that was a 5,000 minimum down, and then after that you can put in amounts as low as a hundred dollars. Back then you had to mail it in. With a check now you can just do it online and it’ll be bought for you the very next day at whatever the market price for that index is.

[00:09:36] Steve: And that’s all you need to get started is $5,000. And I saved up the $5,000. I was working the night shift, the graveyard shift in a petrol station.

[00:09:44] Tony: So that’s, so that’s vanguard. Are there any other people like Vanguard that people can investigate

[00:09:49] Steve: today? Most of them have it. I think most of them now have it.

[00:09:52] Steve: The, the ironic thing about it is that most of the mutual funds, let’s call them or fund managers and mostly call ’em fund managers in Australia, most of them. It’s, it’s a classic one here. It’s like an Upton Sinclair. People don’t want to understand something if their job depends on not understanding it.

[00:10:13] Steve: And so, and so what happens here is that any investment fund, whether it’s Colonial or Commonwealth Bank or any of the big banks, they don’t want to understand that indexes are better. Because they have business models based around the idea of taking money away from people with the fees.

[00:10:31] Tony: Yeah. And the fees are the, the more complex a investment is, the higher the fees you can charge because you’re more reliant on the person giving you advice.

[00:10:39] Steve: Yeah. But the, the weird thing is that very rarely can someone beat the market over the long term. And here’s the thing that is really clear, and it’s been clear for more than 50 years, is that while people do beat the market, no one, there’s about five people in the history of humanity have beat the market over a long period of time in terms of funds, rather than, there might be individuals out there that we don’t know about who beat the market with their investing methods.

[00:11:06] Steve: But no one really beats the market. They might have a couple of times, so they beat the market this year and that year, but, you know, to, to get you 10%, which is what the share market’s pretty much return over the last a hundred years, somewhere near there. No one really does that over the long period of time.

[00:11:20] Steve: And, and then you get the tax advantages as well because you’re not trading the stocks, which reduces the efficacy of the investments and the return on investments. And also your fees are much lower. And so a really interesting example, I think Vanguard comes in at about 1.5 for most people, depends on how much you’ve got invested, but then you, you might be anywhere between three and 4% on an actively managed investment.

[00:11:46] Steve: This is really interesting because they’ll say to you it’s only 1% versus 2%, but it isn’t, it’s actually, it’s actually 10% versus 40 because 1% on a 10% return investment is a 10% cost, whereas three or 4% is a 30 to 40% cost. So you’re already 30 or 40% down the moment you invest with most fund managers.

[00:12:08] Steve: So it takes four years on an average market turn to get it

[00:12:11] Cameron: back. All right. I’m gonna jump in here as Mr. Editor because I had to listen to that a couple of times before I understood or even think I understand what Steve and Tony are talking about here. Tony obviously gets it straight away, but these guys are smarter than I am quite obviously.

[00:12:27] Cameron: So I think what Steve’s saying here is when you look at the costs for these sorts of funds, You shouldn’t think of them as a percentage of the amount you are investing, you should think of them as a percentage of the return that you are likely to get back from that investment. So if you invest, let’s say a thousand dollars to keep it, keep the maths easy into a fund, and you are expecting to get a 10% annual return, 10% of a thousand is a hundred dollars.

[00:12:58] Cameron: But if you are paying 1% of the amount you invested as fees, 1% of a thousand is 10. But it’s not 1% of the return, it’s actually 10% of the return. So again, you invest a thousand, you’re expecting to get a hundred back, but they’re gonna take $10. Out of that 100, you’re losing 10% of your return. If the fees go up to 4% you’re gonna, instead of getting a hundred dollars back on as a return that year, you’re gonna lose $40.

[00:13:30] Cameron: You’re only gonna get $60 back. So what he’s saying is the smart way to look at these fees, and one of the reasons you want to keep them as low as possible is not to think of them as a percentage. Cuz it doesn’t seem like a lot, like 1%, 3% when you’re looking at the, if you’re investing a thousand dollars or $10,000 they, they appear like tiny numbers.

[00:13:52] Cameron: But when you think about it as a percentage of the return that you are getting back, then all of a sudden they look a lot bigger. And the

[00:14:00] Tony: compounding effect of that difference is huge too. It could lead to you having half the funds you’d have over 20 or 30 years with a high fee fund versus a low fee fund.

[00:14:11] Tony: Yeah. But the next thing that’s important to note, I think is, I don’t know what, what you do, Is to note whether you’re buying a, a listed fund or an unlisted fund. So a managed fund and if you’re buying a listed fund, whether it’s a ETF or a listed investment company. So, so do you have any preferences for any of those, Steve?

[00:14:28] Tony: I don’t and

[00:14:28] Steve: I, I gonna be honest, and so I don’t know a huge

[00:14:30] Cameron: amount about, could you maybe explain those in English for us, Tony? Yeah, of course.

[00:14:34] Tony: So, so basically there are listed and unlisted managed funds. An unlisted one is, you do what Steve was saying, you, you apply on a piece of paper and attach a check or I guess online these days.

[00:14:46] Tony: And you buy units in the, in the trust. And the trust goes off and takes your money and invests it in the index and you get the returns over time for that. That’s kind of the stock standard way of doing it for many, many years. Then that’s evolved into listed funds. So you can look up the share price of your index fund at any time cause it’s listed on the share market and those.

[00:15:08] Tony: Four broadly into two categories. The what’s called exchange traded funds and what’s called listed investment companies. The difference between those two is that a listed investment company is what’s called a closed end fund and an exchange. Exchange traded fund is what’s called an open ended fund. And so an exchange traded fund is a bit like the unlisted managed fund.

[00:15:32] Tony: Whenever I buy a share on an exchange traded fund, the manager of the fund gets more money and goes off and buys more shares. And the converse is true. If I want to sell my shares they have to go and sell the underlying shares to pay out my. My shareholding a, a closed ended fund, like a listed investment company, like Australian Foundation Investments, for example.

[00:15:54] Tony: They raise money, like they might issue a prospectus and prospectus and raise a hundred million dollars. They never accept any more money in the fund, but they list it. And if I wanted to buy shares in that fund, I’d buy them off somebody else who’s prepared to sell them. The big, the big difference between those two funds is there’s always a hundred million dollars in the closed ended fund.

[00:16:17] Tony: But if everybody tries to sell the exchange traded fund, they’ve gotta sell the underlying assets and that can drop right back to zero. And that’s something that people don’t really focus on. And it’s actually what I think is a big risk in the market. These days, I, I did some research preparing for this podcast.

[00:16:33] Tony: And let me ask you a question. What do you think the top share is on the asx? What’s the biggest share by market cap? Well, I

[00:16:41] Steve: Commonwealth Bank at the moment.

[00:16:42] Tony: Okay. It’s actually not, so the biggest, the biggest share on the ASX at the moment is the Vanguard Ms. C I Index, international Shares Exchange traded Fund, and that’s 429 billion.

[00:16:57] Tony: The next three are also exchange traded funds roughly similar sizes. Then you get BHP at 190 billion. So these exchange traded funds are twice as well. The biggest ones are twice as big as bhp, and there’s four of them. Which account for something like 33% of the, of the share market at the moment.

[00:17:18] Tony: Now the why why I see these as potentially being a risk is next time there’s a correction in the share market. The only way they can people can sell their shares is to redeem the underlying shares that are in the fund. Which means that they magnify the downturn because if, if people see BHP and the banks going down by 50%, they decide they don’t wanna be in the share market anymore, and they ring up Vanguard and say, sell my shares.

[00:17:43] Tony: Vanguard has to go out and sell shares and BHP and the banks to pay the person out. So it’s like a, an amplification feedback loop on the, on the market. It hasn’t been a problem in the past because these index funds haven’t grown that big.

[00:17:57] Steve: That’s true for all index. Is it? Oh, that’s true for all funds. It doesn’t matter whether the fund is actively managed or whether it’s an index or whether it’s whatever.

[00:18:04] Steve: That’s true for all funds. If people get scared and they say, sell my. Which is the opposite of what they should do in any case. But if they say that, then that’s true for all funds. That, or, or aggregations of people who are buying shares on behalf of people in some sort of a fund. True.

[00:18:18] Tony: No, except for the closed end funds listed investment companies.

[00:18:22] Tony: So it’s true for the exchange traded funds and the unlisted funds, but if you’re a listed investment company, your, your, the amount you have in the pool is closed. If people are trading the shares, they’re selling between themselves. They’re not, they’re not telling the fund manager to buy more shares or sell more shares.

[00:18:37] Tony: And that’s where the benefit comes in because the market can be going down and people can be trading in their shares furiously, but the fund manager still has their funds and they can decide to buy more shares when the market’s low.

[00:18:48] Steve: Yeah, right. I

[00:18:50] Tony: understand what you’re saying. And they can decide when the market’s high, they can go the cash and put that aside until the market crops again.

[00:18:55] Steve: Yeah. Which is still risky. Right, because that’s the whole premise of what they shouldn’t be doing because they’re, they’re making net assumptions that they know the market will go higher or lower. Based on unsystematic risk, but, but but the truth is no one can predict unsystematic risk.

[00:19:10] Tony: Yeah. Look, you’re right Steve.

[00:19:11] Tony: I, I was talking about a listed investment company that was actively managed. Yeah. But if you’re buy list investment company, that’s an index fund. No. They stay fully invested the whole time. Yeah, exactly. Yeah, yeah,

[00:19:21] Steve: yeah. And so those two different types of risk are really important, the systematic risk and the unsystematic risk.

[00:19:26] Cameron: Guys, can I interrupt and ask one of you to define systematic and unsystematic risk?

[00:19:32] Steve: I’ll have a crack if you don’t mind, Tony. Is that all right? Yeah, go ahead. Sure. So, so systematic risk is the idea that we invest in the share market and that there’s certain amount of risk, which is un unavoidable. So you have crisis that happen, economic crisis, or you know, pandemics in health or nine 11, and no one can avoid that.

[00:19:51] Steve: That doesn’t matter how good you are, best you are, whether you’re Warren Buffett or you know Joe Smith from from Brisbane. You can’t avoid that risk. It’s. It’s a function of the system and you have upturns and downturns in the market based on socioeconomic and political events that cause people to panic and share prices to come down.

[00:20:08] Steve: So that’s systematic risk. And that’s unavoidable no matter what. Unsystematic risk is when you take investments in things thinking that you know better than the market and you don’t have a breadth within your portfolio. So the market might well be going up, but you’ve chosen company X, Y, and Z to invest in, and they might go down even though the market’s flying.

[00:20:30] Steve: So when you have a portfolio that is thin in the number of stocks that it has, you’re more exposed to unsystematic risk, which is the performance of a singular company or a handful of companies, as opposed to buying the entire system, in which case they all offset each other. Those that are growing and going down,

[00:20:47] Tony: it’s sometimes called alpha and beta.

[00:20:49] Tony: So beta. Alpha’s systematic risk and beater is the the additional risk, which can also be additional upside of

[00:20:56] Steve: course, too. Yeah, that’s right. That’s right. You could beat the market through in a downturn. Let’s say you bought, you know, I don’t know, Google in 2004 and the market had a downturn across, you know, 2008, but Google just continued to fly.

[00:21:09] Steve: Hmm.

[00:21:11] Cameron: Steve, can can we go back a bit? I’m, I’m trying to get into the mindset of a 18, 19, 20 year old who started on this journey. I know you, you referenced being Italian before. Was there a, was there a background in your family of this kind of approach to wealth building or were you the, the first, not

[00:21:32] Steve: that I know of.

[00:21:33] Steve: I don’t know anyone in my family who owned a share before I did. Out of all my cousins or anything or whatever, they’d all had property cuz they’re good Italian people. But you know what I got curious about? I got a curious about why are some people richer than others? And I started reading a lot of those kind of.

[00:21:48] Steve: You know, and they’re almost cringeworthy, right? You know, they’re at the back section of the bookstore, those self, how to Get Rich books, because I was like, why are some people so rich? Some, so much more financially successful than others? And then I’d sometimes see people who, they weren’t doctors or lawyers and they had money.

[00:22:03] Steve: I’m like, this, this just isn’t making sense yet. There’s a whole lot of stuff that school just ain’t teach ’em with this stuff. Where is this? And I just got really curious about it. And I just read zillions of books on investing until I kind of worked out that, you know, there’s two ways to earn money.

[00:22:15] Steve: There’s money you can earn when you’re in the room and then there’s money you can earn by making money.

[00:22:20] Cameron: Work seems like a good, a good opportunity for you to plug your recent book.

[00:22:25] Steve: It’s called The Lesson School Forgot. And it’s really broken down into three sections. It’s broken down into the revolution that gives us new information and knowledge where we can teach ourselves anything, you know, all the change that we’re all hearing about.

[00:22:36] Steve: The second bit is about revenue. What’s your personal revenue model, you know, and how, how to invest across the different. Types of investment. And then the third part is how to reinvent yourself and get a new career where you can go to where there’s a, there’s abundance as opposed to kind of staying in your old sort of career where there might be drying up or there’s not as much money as there was there.

[00:22:59] Steve: So it’s about those three things. And they’re basically things that they just don’t teach you in school because schools a system and the system of school is to teach you how to get a job. And that’s because school was designed during the peak of the industrial revolution and they needed workers to work in factories.

[00:23:14] Steve: And so school is a factory and you are the product that comes out of it, and then you go work in one. And this is the stuff that they didn’t teach you. That might be a pretty good value that I’ve sort of worked out just myself. Yeah, it’s

[00:23:25] Tony: a, it’s a good book too. I read it last year. The, the title reminds me of That famous book what They Don’t Teach You at Harvard Business School.

[00:23:33] Steve: Oh, there you go. Yeah.

[00:23:35] Tony: By the guy who set up img International Management Group. That’s a good read for anyone in corporate life with who wants to know how it really works. So,

[00:23:44] Cameron: getting back to you, you, as a young lad, Steve, you just became interested and you just seem to have discipline to follow a plan, the confidence to come up with a plan in the first place, and then the discipline to follow it through for the next 15 years.

[00:24:01] Cameron: Where did that come from? Just code it into your brain or did it did somebody sit you down and, and give you a plan at some stage? No one, I,

[00:24:09] Steve: no one gave me a plan or anything. I was just, I just didn’t want to be poor and didn’t wanna struggle and, and, and didn’t wanna rely on anyone else. I’ve got this real, I just hate people telling me what to do.

[00:24:22] Steve: And so that I thought that it’s probably not gonna work out well for me if my income and my career and my future is based on me working for other people. So I just wanted to have fiercely independent and, and that’s kind of why I reckon the last five or six years have been the best in my career. Cause I haven’t really been working for anyone.

[00:24:39] Steve: And even when I did rent Toyotas that that independence is something that I like. And so I just wanted to be independent and I just wanted to, and I hated my corporate job. I worked in corporate for 30 years and I hated it. Hated it so much. It made me more inspired to invest. And I really, I was really lean on, on what?

[00:24:56] Steve: Yeah, I lived below. Most people would’ve lived on, on the income I was on. I was on a good corporate income, but I was pretty conservative. I mean, I didn’t go without, I don’t think. But, you know, I wouldn’t waste money on things or whatever. I, I got really, I almost turned into a game, you know, like where you, I guess people these days, they want to accumulate likes.

[00:25:15] Steve: Well, I just wanted to accumulate, you know, shares in my portfolio. I just wanted to, you know, I just accumulated a different thing. That’s

[00:25:23] Tony: a really, that’s a really good point, isn’t it? So you, you drive the cheapest car, you can stand, you live in the smallest house you can stand Believe that. Yeah.

[00:25:30] Steve: Everyone was like, why don’t you come live in the eastern suburbs?

[00:25:32] Steve: You know, you come there, it’s better out there. And I lived in, you know, I lived in Ville and I lived at home longer than most people did. And you know, I didn’t, yeah, I did exactly those things. It don’t go without, just don’t get ahead of yourself and, you know, I’ll be driving home and go, geez, I’m hungry.

[00:25:48] Steve: I could go, I could go some KFC here, you know, 21 year old boy just hungry all the time and go, no, I’ll go home and have a sandwich, mate. That’s, that’s another, that’s another 10 units in Vanguard. Hmm.

[00:25:57] Tony: And, and certainly don’t borrow to buy a car or something else like that. No, I never did

[00:26:01] Steve: that. I’ve, I’ve got a rule with debt and it’s a really, really simple rule.

[00:26:04] Steve: I only ever go into debt for anything that’ll go up and value. That’s the rule at the end. That rule has never been broken in my entire life. No,

[00:26:11] Tony: I think it’s amazing that you learnt all these rules almost intuitively and you weren’t taught them. Yeah, I

[00:26:15] Steve: don’t know. I dunno. My dad was really good with that stuff.

[00:26:17] Steve: He was a farmer and he used to like have all these farm analogies. Where, you know, he’d be just, just all these good farm analogies. And and I just took those and then applied ’em into different places. It was, so my dad taught me a lot about this stuff. He, he really had an intuitive understanding of investment and work and, you know, he had the formula for happiness.

[00:26:38] Steve: He said the formula for happiness. He said, you want to know? Step said, yeah, tell me. He said, you’ve gotta spend less than you were. And he said, if you stick to that formula, I said, I promise you you’ll be happy. That was his formula for happiness.

[00:26:48] Tony: Sounds like Paul Richards Almanac, one of the books that Charlie Munger always

[00:26:52] Steve: refers to.

[00:26:53] Steve: Yeah, my, my dad used to always have those kind of things, you know, he said, and he used to always say, now a lot of people, they get a chook. You know what they do? He says, they have a couple of eggs, he said, and then one day they go, oh, it’s Christmas. Let’s eat the chook. He said, no, no, you never eat the chook.

[00:27:06] Steve: Just live on the eggs. And then he said, but also what you gotta do, Steve, is every now and again, you gotta bring in a rooster and you gotta hatch a few of those eggs as well, and let ’em hatch. He says, you don’t even eat all the eggs. Right. And so, and so there’s like, that’s really similar to the way money works.

[00:27:21] Steve: So you don’t, that’s your chook. You are the chook, you lay eggs and you just live on what, what you earn there. Don’t go and eat the, don’t eat the thing that creates the revenue. And then with the revenue, it’s the same with like lemon trees. He’d say, you don’t eat all the lemons, you’ve gotta plant some.

[00:27:33] Steve: And he said, not all the seeds will grow, but you gotta plant more than enough. And then it’s abundance and it just has a multiplier effect. He used to gimme all these farming analogies, and I actually reckon that business and industry and farming are really, they’re, they’re the same thing. Right. And if you look business in investing, right?

[00:27:47] Steve: Well, all the words are farming words, growth, yield, you know, it’s all, it’s all the same stuff.

[00:27:52] Tony: Yeah. Right. Yeah. I hadn’t noticed that, but you’re right. Yeah. Now, Steve,

[00:27:56] Cameron: you, you were in marketing. Marketing is an industry that’s designed to convince people to buy shit that they don’t need with money they don’t have.

[00:28:05] Cameron: How did you How did you, and you know, on one hand be part of the problem, on the other hand, go, yeah, but I’m not buying into all that bullshit.

[00:28:14] Steve: Well, you know, it’s, I reckon in some ways it is probably a lot about, like, you know, Zuckerberg, he’s the man with the camera on his the, the piece of black tape on his camera.

[00:28:22] Steve: But he wants everyone to have a more open and connected society, which is a total hoax. You know, it’s, it’s weird, man. And I’ve gotta be honest. And even now being an investor, you know, I know, I mean, there’s, there’s all these ironies in this modern world that I, I don’t know if they’re avoidable. I’m just not sure.

[00:28:36] Steve: And I, and sometimes if you think about it too deep, you won’t be comfortable because even now, if I’m investing, I’m investing in what people producing more plastic and buying more shit that people don’t need, even though I’m passive and I’m, yeah, a few layers removed, I’m still part of the problem, I guess.

[00:28:51] Steve: Right.

[00:28:51] Tony: And all, all the, all the problems that people have with ethical investing in an index fund, they’re all there.

[00:28:57] Steve: Yeah, exactly. Right. So I imagine there’s companies in the van, I don’t imagine. I know, I know that. Cause I’ve looked, that I don’t agree with. And, and, and I just wonder, I mean, it’s really a stark reminder of how gray the world is.

[00:29:09] Steve: You know, nothing is black and white and I just want to put my hand up high and say I’m a fraud mate, because a lot of things I believe, I, I don’t believe in. I’ve probably got investments in and, and I’ve worked in marketing. Again, selling plastic cheese and, you know, shampoo that’s in a different bottle with a different shape.

[00:29:26] Steve: It’s got the same shit inside it. The washes your hair the same as a bar of fricking soap does, but you charge people $5, $5 more cuz they get the emotional satisfaction from the beautiful, you know, model on the, on the tvc. I mean, dude, I know, I’m aware of it and thanks for reminding me Cameron. I just thought wolf

[00:29:44] Cameron: mate you know, I’ve spent a good, good chunk of my life doing exactly the same thing, but no, I’m fascinated that you were able to avoid that. You know, a lot of the reason Tony and I are making our show is I, in my mind, the audience for it are kids. My twins age 18, 19. I want them to. Get this stuff right.

[00:30:04] Cameron: Whereas so many of us, including me, got it wrong. You two got it right. Which is why I want you to be able to take what you’ve learned and, and transmit it to those that are willing to listen. But you did a, such a great job of discipline in that area, I think is impressive. But let’s get back to the, the basics of what you did.

[00:30:20] Cameron: So you started throwing money into one of these index funds. When you were a young fella, you just said that you lived at home longer than most people. And today you’d get called a lazy millennial for doing that, but it turns out it was a good, good idea. Yeah, I did that. And so what else did you do? Is it was, did you alter your investment plan at any stage?

[00:30:41] Cameron: No,

[00:30:41] Steve: never once actually. No. No. I actually, the first investment I made was with Colonial Mutual Fund and it was a 4% fee. And I remember I did that for about six months and I’m like, this is a hoax, man. I’m losing money. And I was halfway through reading books and I pulled it all, pulled it all out, and then went into indexes.

[00:30:58] Steve: So I think the first six months was that. And then after that I just did it. And what I used to do was set and forget. And so the, the 15th of the month, whenever I got paid and when I was working at the petrol station, I used to get paid every Saturday. I’d do it then, like I would take out a percentage, you know, 30% or whatever the number was and, and just put it straight into there.

[00:31:20] Steve: It was like it didn’t exist. And so I never missed it cuz I just wanted to set myself up, you know, I wanted to, you know, I had these dreams. I wanted to have a beach house. I wanted to this, I wanted to, that I wanted all this stuff. And I just, and then it just became a habit where I didn’t even think about it.

[00:31:33] Steve: You know, like when you’re, get in a habit of going to the gym or doing certain things or reading a newspaper, you’ve gotta turn those. I just turned it into a habit. And then once it’s a habit, you just don’t even, you don’t even think about it. It’s just easy.

[00:31:47] Tony: And, sorry, Steven, why 30% and not 50 or 10?

[00:31:51] Steve: Oh, I think it varied bits of time.

[00:31:53] Steve: At the time it was 30. Cuz I thought that was a, that was a good amount. I don’t know. I think I start, I think the first salary I was on was about 25,000 when I started at work. But I always kept it, it actually went up at one point, at one point when I, cuz I ended up back at my parents’ house after a while, which is another weird story.

[00:32:10] Steve: When I was about 28 until I was about 32. And at that point, at one point it was about 80% cuz I was living at home cheap. Yeah. But it was always at least 30. I think I heard a Jim Roh thing many years ago. There’s this old business coach called Jim Roone and he said, let me give you the best economics lesson I know.

[00:32:29] Steve: 70 10 10 and 10 70% to live on. 10% for church or charity. 10% in active capital, 10% in passive capital. That’s what he said. But I’ll just put it all into passive capital.

[00:32:44] Cameron: I read one of his books seasons. Something about the seasons of life when I was a young fella. Great book. One of the great

[00:32:50] Steve: books of all time.

[00:32:50] Steve: Jim roh. Him as well. Him and my dad, Jim Ro, taught me more about life and business. And because he’s got philosophies which are timeless cuz tactics are kind of disposable, right? There might be a new tactic in business or whatever this year and next year and whatever, but if you have a philosophy, right, what happens is you just say, is this a line to my philosophy?

[00:33:10] Steve: And it’s really easy to know what to do tactically. And people get those two things confused all the time. People don’t have a guidance philosophy and so they’re always wondering about what the ladders tactic is. But if you have a philosophy, you just have to ask if that tactic is aligned to your philosophy.

[00:33:23] Steve: And it gets it really easy. It makes it really easy. Mm-hmm.

[00:33:26] Tony: Yeah, I always, it’s a really good point. I always tell people to build a framework and then have something new that comes on against the framework. So the framework is the philosophy

[00:33:34] Steve: and, and, yeah, that’s right. Exactly. And, and, and, and that’s what’s interesting too.

[00:33:38] Steve: And so understanding tactics, strategy and objectives is something very few people understand. I studied three years of marketing in economics, that Australia’s premier learning institution, I can’t remember once. Having someone delineate those three things and, and just understanding that in life, and all too often people come to me and say, can you gimme some startup advice or investing advice?

[00:33:58] Steve: I just go back to those three questions and they’re like, enamored with it. I’m like, it’s not that hard. It’s like, objective, what do you want to do? Where do you want to go? All right. You know, what’s your strategy and what are your tactics? So the simple thing is I want to go to Sydney. That’s my objective.

[00:34:10] Steve: Okay? The tactics are you can drive, ride a bike, walk, swim, catch an airplane or sorry, the, the strategies you can do and the tactics you choose, which one you go, all right, airplane suits me and my tactics are, book the flight, get up at 6:00 AM get to the airport an hour and a half before the flight, boom, boom, boom.

[00:34:24] Steve: It’s really easy, but people just can’t delineate between those three things.

[00:34:29] Cameron: Steve I, I know in the previous years when we’ve talked about the Santino method, we’ve talked a little bit about the ups and downs of the market and how your investment portfolio survived those, but it’s been a while since we’ve had that conversation.

[00:34:42] Cameron: So you’ve been doing this since the early nineties which makes it 20, let’s say 25 years. You’ve seen a few downturns in the market in that time. How, how did your portfolio fare through downturns?

[00:34:55] Steve: Yeah, it, it, well for me it fares better than everyone cuz I never sell and I certainly never sell a downturn.

[00:35:00] Steve: I did do a liquidation event about a year and a half ago. It was nearly two years ago. I bought a farm in Geelong, like a hundred acre farm. So I had a liquidation event where I took out a big chunk then and put it, put it in. But basically if you stick to your, this is where dollar cost average and becomes really, really important.

[00:35:19] Steve: The first rule in index investing is this sentence is when someone says to you what happens to the market, you say, I don’t care. I don’t have to, and I don’t care. I don’t have to means that you explain it. Yeah. So I don’t care. I don’t have to means I’m investing not for what happened today. I’m investing in five years from now.

[00:35:39] Steve: Right. And the reason I don’t have to care, the only thing I have to worry about is nuclear war orli, catastrophic climate change, which might be a reality, but they’re the only things I need to care about. Because no matter what, the economy always grows. It’s in, it’s in a perpetual growth cycle. Yes, it breathes, but it always gets bigger.

[00:35:57] Steve: And the reason that the, the economy always gets bigger is we bring things into the economy that used to not be there, and that’s how it gets bigger. And so it’s always gonna get bigger over time. And so I wonder if there’s this like force of nature, the 10% force of nature that everything grows on average by 10%.

[00:36:12] Steve: Like, I’m wondering whether it’s, you know, something to do with the photovoltaics of how leaves on plants grow and, and you know, the energy of the sum penetrating the earth. But it seems as though if you look at the share markets over a hundred years, if you look at the London property market over a thousand years, it’s had about 10% growth per annum.

[00:36:31] Steve: It just always happens. Certainly,

[00:36:33] Cameron: certainly true of my waistline over the last

[00:36:35] Steve: 30 years, Steve as Well’s a very good gag. But I don’t care. I don’t have to means that because you’re not selling your stock, you don’t need to worry about it. I’m just putting in money in, every month comes in, I’m gonna put a hundred dollars, a hundred dollars, a hundred dollars.

[00:36:47] Steve: And I know that five years from now, people still be buying groceries. I know that five years from now, people still be buying fashion. I know that people will still be buying things, certain things will drop out. Like no one’s buying CDs anymore. And that person who had a CD making factory, it didn’t end well.

[00:37:01] Steve: But now that money goes to Spotify and you know, data downloads and optic cable, right? The money doesn’t exit the market. It just changes places. And once the money’s in the market, it’ll still be spent somewhere. Cuz it’s impossible for money not to be spent. It’s either gets okay things or it stays in the bank, which then it gets spent because someone else borrows it out or borrows against it.

[00:37:27] Cameron: So, help people understand though, Steve, what’s the point of the investment portfolio? If you’ve, if you never sell, what, what is the

[00:37:34] Steve: value of it? The value is if you don’t sell, then you still have access to it cuz you can borrow against it. And so it becomes a tool that gives you access to money in the same way that education gives you access to being in a room to get paid a certain amount.

[00:37:47] Cameron: Explain that you can, you can borrow against it. How does that work? Yeah,

[00:37:51] Steve: so if you’ve got assets just the way, the same way people buy a house with a deposit and the bank gives them the money. If you’ve got an portfolio of assets, you don’t have to sell it to get the money out of it, you’d borrow against it.

[00:38:08] Steve: And so I’m not really selling, I, I do have some liquidation events every now and again when I need a big chunk to buy something. But the point of saying I don’t care, I don’t have to, we’re selling it, is that I’m not watching the market at some point, yeah, I’ll sell and I’ll take some out or I’ll borrow against it.

[00:38:22] Steve: But the point is, is that I’m not watching what the price is today for hamburgers, cuz the market is a manic depressive person who comes and knocks on your door and says, I’ll give you a dollar for it today. And tomorrow they say, I’ll give you a dollar 50. No, I’ll give you 70 cents. If you, if you’re listening to that person knocking on your door and telling you what particular share prices are, or the all ordinary index went up by this amount or that amount, or the s and p, but well then don’t understand investing.

[00:38:45] Steve: You just understand gambling and trading and all of the bullshit that goes around it. So you gotta ignore that. It’s just noise. It’s white noise. Would you, Steve,

[00:38:53] Tony: if now you’ve bought a farm, would you ever consider gearing some all that farm and then putting it back into an index fund and letting the dividends pay off the mortgage?

[00:39:01] Steve: I could, but I didn’t for other reasons, tax reasons and stuff. Mm-hmm. Yeah.

[00:39:05] Tony: So

[00:39:05] Cameron: Steve as we wrap up tell us about what, hang on, I’m

[00:39:09] Tony: wrapping up. I’ve got a list of questions here. Yeah.

[00:39:11] Steve: Why go through the questions too. You know what, cam, Tony’s gonna teach me some stuff because I’ve only got one method, and this is, it comes back to the objectives and strategy.

[00:39:19] Steve: I know one way to get to Sydney if that’s the objective. I’ve got a method. It doesn’t make it the only method. This is one that’s worked for me, that, that works. And it’s, it’s probably imperfect in many ways. But it’s a method that’s worked for me. And, you know, it’s like anything, there’s a hundred different ways to build a house or, you know, different forms of transport you can take.

[00:39:39] Steve: So I’ll be really, really curious to see these questions cuz then I can

[00:39:43] Cameron: learn some more. Knock, knock yourself guys. Alright,

[00:39:47] Tony: so first question is, do you invest in a superannuation fund or not? No, I don’t,

[00:39:52] Steve: and I’ll tell you why I don’t, I know that there’s tax benefits in doing it, but I am really against the idea of having investments locked up where it’s difficult to get access to it and pull money out.

[00:40:04] Steve: And the rules change too frequently for my liking. Yeah, I’m, I’m of a like mine

[00:40:08] Tony: there as well.

[00:40:09] Steve: Yeah, I’ve, I’ve got, I’ve got a small amount in and geez, I, I don’t know what the number is, it might be 150 or something from my corporate days. It just sits there and bubbles along. It’s with uni, but when I used to lecture at Melbourne Uni.

[00:40:22] Steve: Mm-hmm.

[00:40:23] Tony: And so one of the other things too is your, your dividends can’t be taken out of a superfund. So are you living off your dividends from the index funds?

[00:40:30] Steve: No, I’ve got other income, so I just reinvest them.

[00:40:33] Tony: They’re reinvested. Okay. Yeah. Okay. Or reinvested. But they, they could in fact be servicing some debt somewhere, couldn’t they?

[00:40:40] Tony: They could be, yeah. Which would leverage that reinvestment process, either, either borrowed against the fund or borrowed against your property. Certainly being something that I’ve done along the way is when I haven’t needed to live off the dividends, I’ve looked to, to borrow and invest those funds to grow the capital base.

[00:40:55] Tony: And then over time the mortgage doesn’t increase, but the, the asset does. And you sell part of the asset and pay off the mortgage, you’ll keep doing it. Keep

[00:41:02] Steve: recycling it. I’m writing this down by the way. Thank you.

[00:41:06] Tony: That’s okay. Well, I’m not giving you financial advice. We, that’s illegal without all advice.

[00:41:12] Steve: All advice here is general nature. Please seek general financial advice before making any decisions.

[00:41:18] Tony: Exactly. Yeah. Have you ever been tempted to chase a higher return by investing in an actively managed fund?

[00:41:25] Steve: No, but I’ll tell you where I do chase higher returns, actively investing in property.

[00:41:31] Steve: Cuz I think I can beat the market with property

[00:41:33] Tony: by, sorry, houses or

[00:41:35] Steve: farms or what? Yeah, both. I’ve got a few houses and now I’ve got the farm. The truth here, here, here’s, I’ll tell you why. I invested in this farm, this farm’s in Geelong, bit over an hour’s drive from Melbourne on the highway in non peak hour.

[00:41:47] Steve: And my investment in there, it’s situated between the bay and the beach, ocean Grove Beach and the Bay Drysdale. It’s in Cur Lewis. It’s a nice little winery kind of area. And my investment in there is because I believe that exurbs, which I define as places of great beauty, you know, one to two hours away from a major city center.

[00:42:08] Steve: Will be, we’ll have inordinate economic growth in the next 10 to 20 years because of technology’s advances in both the work from home revolution and transportation. And so transport has always defined where and how we live, and technology’s always defined where and how we live. And I think we’re about to go through a revolution where good companies realize, having Taj Mahals full of people in the city is really expensive and pointless, especially when we’re talking to our

[00:42:31] Tony: jobs at home.

[00:42:32] Tony: It’s the old market garden strategy. Go and open a market garden on the outskirt of big town, that’s your superfund. As the town grows out, it’ll eventually be bought by developer and subdivided.

[00:42:41] Steve: Yeah, exactly. So that’s the strategy down. I believe I’ll beat the market, like I’m, I’m very confident. And, but also I think it’ll be expediated by what’s about to happen with autonomous transport.

[00:42:51] Steve: You know, drones flying humans work from home revolution, virtual reality meeting goggles where you have haptic suits and it’s like you’re in Sydney when you’re in wherever. So I, I’m like a firm believer that that future’s gonna happen. And that’s gonna expediate people saying, well, I’m gonna live somewhere further out.

[00:43:07] Steve: That’s beautiful. They’ve still got funky restaurants and cafes and I’ve got this beach or this mountain side of this lake or what have you. You know, for me, I think there’s gonna be a regional renaissance facilitated by technology. And so that’s my investment strategy there. And so, and you also can do a higher leverage in property than you can in shares.

[00:43:25] Steve: So that’s where I chase my above market average returns. That’s your beater, you’re right. Yeah. Investing in places that are having demographic shifts. I mean, Campbell would know this. Well, I bought in Arab and people laughed at me. You could, they were given away a house there for $2 and a marba and and cuz no one wanted to live there.

[00:43:41] Steve: But I’d seen the pattern. And the pattern was, it used to be east versus west, then it was a proximity game, proximity to the city. And then I bought in Vu and then I did the same thing in foots grade six years ago. And everyone said, Footsgrave, what do you wanna live there for? And now everyone’s like, oh, foots great.

[00:43:55] Steve: Now I understand. So I think that you can beat the market in certain realms, especially when they come to demographic shifts and property because it moves slower and you can actually see the patterns by visually, almost visually. It sounds crazy. I know it’s not, doesn’t sound very spreadsheet esque, but you can see the patterns visually and what’s gonna happen.

[00:44:15] Steve: I love to invest in the things that you can’t change when it comes to property. Well, this is not gonna get further away from the city and that little shopping thing can get better. So it’s, it’s understanding those parts of it. Like people go, oh, this house is a bit cheaper and it’s on the main road.

[00:44:30] Steve: Well wait a minute, that’s a bad investment cuz you can’t change that, but you can change. That’s right. Yeah. It’s, it’s just really simple philosophy. Oh, it

[00:44:37] Tony: becomes a scarcity argument too. If you’re living in a nice weatherboard terrace in Yarraville you can’t replace those cuz they’re a hundred years old and if you try and replace them, they don’t look like a, a nice old federation weather board in Yarraville

[00:44:48] Steve: anymore.

[00:44:49] Steve: Yeah. Well that’s it. Scarcity and value. So long as there’s demand scarcity

[00:44:52] Tony: wins. Exactly. Well, lemme get back to the funds. I think you said before you were, you were investing locally and offshore. Is that the, is that the case? Yes. So, and why is that? Why not just on the

[00:45:02] Steve: asx? Because you, you get a currency hedge and one of the things that’s interesting is that a lot of the really dominant companies aren’t, aren’t Australian based.

[00:45:11] Steve: And so a lot of companies that might have historically done well here on the A S X in an increasingly globalized market where things are being dematerialized by technology, then some of that revenue will leak overseas. So I wanna make sure I have it full exposure. Okay. To, to the global market. So I do a 50 50.

[00:45:30] Tony: Are there any downsides in investing overseas? Do you have to worry about different tax laws currency risk?

[00:45:36] Steve: Look, I think there is, there’s definitely currency risk, but for me that risk is something I wanna embrace on purpose.

[00:45:42] Tony: So would you, would you be investing overseas right now where our dollars lower exchange rates at 70 cents in the US dollar?

[00:45:48] Steve: Yeah, yeah, I do the same because I don’t look, I just put the same in amount each month and I don’t care. Right.

[00:45:53] Tony: So it’s a

[00:45:53] Steve: dollar cost averaging. Okay. Yeah. Dollar cost averaging, same thing again against the currency when it’s up and when it’s down. Same thing. So that’s exactly how I do it. But the overseas funds, yeah, at the moment they’re doing better.

[00:46:03] Steve: The last couple of years they’ve done better than Australia, but then in 2008 and nine we did a bit better. So they all, it all just evens out. But I definitely want to be exposed to the big companies that are doing really well globally.

[00:46:14] Tony: I, I must admit, I’m, I’m more on that all evens out camp and I only invest on the ASX because an index fund gives you plenty of exposure to overseas comp companies like BHP sell their iron ore overseas.

[00:46:26] Tony: And CSL is pretty much an overseas company now, and it’s a big part of the asx. So you’re getting a fair bit of geographical diversity just from the, the current share market. And it seems like over time, as you said before, the magic 10% rule applies. It might be in different phases, but everything goes up on average and 10%

[00:46:45] Steve: over time.

[00:46:45] Steve: Yeah. Something, it’s crazy when you look at it, you go, wow, it’s almost like, it seems like some sort of a rule of physics or something, doesn’t it? It does. I know it’s not, but it feels like it. The one thing that I’m is, is interesting for me is that I think that Australia now has less exposure the ASX than it would’ve done say 10 or 20 years ago.

[00:47:06] Steve: And I’ll tell you why. If we look at the top 10 companies, On the US stock exchange, they have a market capitalization, which is over 3 trillion now. Something like 3.8 trillion, and that’s 15% of the entire share market in the US It’s between 13 and 15, depending on the day. And those companies, we almost have zero exposure to that type of product typology because they’re digital and software companies that we’re very poor at here.

[00:47:34] Steve: So it’s, it’s Google, it’s Amazon, it’s Facebook, it’s all these companies. It’s Apple. And we don’t have that, we don’t have any manufacturing of software or hardware or code that is creating new revenue streams. And so

[00:47:44] Tony: that’s the, you haven’t heard, you haven’t heard of the wax stocks. It’s the Wise tax app and z what’s the other one?

[00:47:51] Tony: There’s another A and Zero and they’ve been going up, you know, quite handsomely and they’re basically tech stocks and it’s beginning to feel a bit like 2009 again with the, the, the over the top valuations for, for tech stocks both here and in the us. I

feel.

[00:48:08] Steve: Oh yeah, the, the valuations are incredible inordinate.

[00:48:11] Steve: And actually, you know, I wonder what would happen if there was a antitrust movement against big technology. And I actually think that’s inevitable. I think we’re gonna see what happened to the railways and what happened with Standard Oil because there’s just too many disenfranchised people and, and that’ll happen.

[00:48:25] Steve: But I wonder if they might actually be worth more money split up. Yeah. It depends

[00:48:29] Tony: how they get split up, I guess It doesn’t, it and how they divest and all the rest of it. For sure. Yeah. I mean there were winners and losers out of the Seven Sisters being split up and their winners and losers out of Mar Bell being split up in the states in the past.

[00:48:40] Steve: Yeah, exactly. So, yeah, I dunno, it’s gonna be really interesting anyway. But yeah, look, I I, I just do the 50 50, but I didn’t know about, I mean, I knew that we had a few tech companies. I guess if you’re investing in them, you get the upside. So have

[00:48:51] Tony: a look at the wax stock. One thing I, I think we should draw out on for the listeners is, is dividend yield.

[00:48:56] Tony: So, You would’ve invested a long time ago and, and kept those index funds for a long time, what kind of yield are you getting now based on your initial investment, if that makes sense? Yeah, it

[00:49:07] Steve: absolutely does make sense. Geez, I reckon because I’m still buying more sockets, it’s still hidden inside it, so it still looks like I’m getting the 2%.

[00:49:15] Steve: But on some of those you get, I’m getting yields at a close to 50%. Like, I’ll give you an example. You know, you look at stocks like Woolworths, when I came in, I think it was three 20, and that’s a $30 stock now. So you’re getting a dollar 50 a share, but I’m getting a dollar 50 a share on the $3 20 that I paid on the original amount on that.

[00:49:36] Steve: So I think on that portion of the stocks that I invested, the yields or anywhere between 20 and 50%.

[00:49:42] Tony: Yeah, I think that’s a, a point that’s lost on people when they started, started investing is that I’ve had, I’ve had shares where, yeah, the dividend I’m getting now is more than what I bought the share for.

[00:49:53] Tony: 10, 15, 20 years

[00:49:55] Steve: ago. Yeah, exactly. And this is never gets spoken about Tony, and it’s a really important investment lesson because they’ll say, oh, this stock’s a low yielding stock. Well, it depends, man, because it’s the same with renting a house. If you bought a house in Yarraville in 1990 for $80,000, you could be getting a hundred percent return on investment every year.

[00:50:14] Steve: Now, if you kept it, you’d be getting, you know, you might be getting that in rent. This is what people don’t understand about stocks, isn’t it? If you bought that stock at $5 and then it’s 50, well your yield could be $5 a year. That’s a hundred percent return on investment every freaking year. Exactly on your investment, not the value of the investment, because your yield is based on what you paid, not what they pay or not what it’s worth today, or they’re quoting today.

[00:50:38] Tony: And that’s a, that’s a message to, for long-term buy and hold, which you can do particularly with an index fund. So that if it’s, you know, ASX is yielding, say four and a half percent, I at the moment, if you hold that index fund for 20 something years you’re getting back every year what you paid out originally.

[00:50:55] Steve: Yeah, exactly. I, I really like that idea of what’s, yeah. Long-term yield effects. I don’t, I don’t know, even if there’s a term for it. Cause we don’t hear about it much, do we? No,

[00:51:04] Tony: no. It’s, talk about it all. Yeah. Go and ask your father. He, we did a good farming term for it.

[00:51:10] Steve: He probably, you know, they probably would have venture capital.

[00:51:17] Steve: Talks more about this than most other industries. When you invest in someone who’s a true investor isn’t inamed by whatever they say on cnbc, they’re like, well, how long will it take me to get my money back? Mm-hmm. Turn out the noise, then get your money back then, then the investment starts happening. I

[00:51:34] Cameron: did wanna, Steve, give you a chance to talk about what you do now a little bit more.

[00:51:40] Cameron: Can you wrap up just by giving us a bit of a overview of a day in the life of a santino?

[00:51:46] Steve: Yeah, sure. So I think write and speak about technology and big companies pay me to do that, and that involves a lot of keynote speeches at conferences and for companies. And they’ll pay me to come and talk.

[00:52:01] Steve: And that’s based on the fact that I’ve done a few interesting things and written some books and had some startups and worked at big companies. And so I do a lot of study and writing about how technology changes the way companies make money and then they’ll pay me to. Help them with their strategy.

[00:52:16] Steve: So, you know, boardrooms and that type of stuff. Yeah, like consulting basically, and a lot of speeches. And then I do a little bit of media on radio and ABC and three a w and some TV stuff. And they pay you to give punditry, I guess, and insight on what’s happening and I make a living doing that. So it’s really, I guess, a form of consulting, but it’s not everyday consulting.

[00:52:39] Steve: It’s kind of like being a football player. You do your homework and you study and your training all week and you get one or two events a week that you go out and play football. So that’s how I earn, earn my living. They call me a futurist, which is little bit of one of those titles, weirdo kind of whatever, but it’s just basically economics, technology, and human behavior mashed up and just telling stories about how things change and how to take advantage of the change.

[00:53:03] Cameron: And you kind of just invented this role for yourself, right? Yeah, just invented

[00:53:06] Steve: him. I just went, I’m doing this, I’m good at this, this, and this. And I did it. But you know what happened, Cameron, remember you had the modem thing years ago and you invited me to share a few ideas with Ren? Toy

[00:53:14] Cameron: modem was spelled M O D M and it was just a monthly piss up that I ran in Melbourne for a couple of years.

[00:53:22] Cameron: Melbourne Online Digital Meetup, I think it was, or Melbourne Online Digital Marketing or something like that. Just an opportunity for all of the digital people in the mid two thousands to get together and share ideas. I

[00:53:37] Steve: used to mm-hmm. Do that a lot. I used to always just turn up to startup events and share what we were doing, and I kind of learned the art of communicating change.

[00:53:45] Steve: And so now I just communicate that change. But then it became, the more and more I studied the tech, the more I got into the tech as well and just got really excited by what that was doing and learn more and more about that, and then just share those ideas.

[00:53:59] Cameron: Now, something you don’t know about yourself, Steve, is that you’re actually featured in a book that Tony and I have spent the last six years writing called The Psychopath Economy.

[00:54:09] Cameron: Oh, book. Oh, what yeah not knowing that

[00:54:13] Steve: I bought three copies, I

[00:54:14] Cameron: think. Oh yeah, that’s right. You were, you did back that. Well, you’re in it. I don’t what is You don’t know that you are in it. Oh,

[00:54:21] Steve: no. Oh my God. I thought we were friends.

[00:54:25] Cameron: But you’re in the good part of the book, the last chapter, not the, not the first 11 chapters, which are the chapters you don’t want to appear in.

[00:54:32] Cameron: Right. Okay. You’re in the last chapter, which is you know, one of the things that we talk about at the end is, okay, well now that we’ve completely depressed you and you realize the world is run by psychopaths, what can you do about it? And one of the things that I I actually transcribed one of our conversations, one of our podcasts or something.

[00:54:47] Cameron: Well, one of the things I, I, I, I remember from what I wrote about you is you said that at one point you looked at all of the things that you had done in your jobs over the years that you liked the best, and you just took those and invented a new job for yourself based on the things you like and cut out all the things you didn’t like.

[00:55:05] Cameron: Yeah,

[00:55:05] Steve: exactly. That’s exactly what I did.

[00:55:07] Cameron: And I’m not sure people realize that that’s actually an option in life, but you could just didn’t look at all the stuff that you like ago. I think I’ll figure out a way out to make a living outta doing the stuff that I like and just not do the stuff I

[00:55:18] Steve: don’t like.

[00:55:19] Steve: It’s like a 10% rule. Here comes that number again. I reckon there’s in every job, even if you hate your job, right, there’s 10% of it that you just, you just got this natural proclivity, you just like it and you, your people go, ah, cam coming up with that thing. Oh, I’m doing one of these. Or there’s always that and it’s different for different people.

[00:55:39] Steve: What you gotta do is double down on that skill, triple down, quadruple down on that one skill. And for me it was communicating the ideas. For me it was like taking the complex and being able to share that in a simple way that people understand. And that’s what I do for a living. And

[00:55:54] Cameron: it, and it helped obviously that you had a investment portfolio to fall back on if things went right.

[00:56:00] Cameron: Well, that’s you, you’d set yourself up to be able to go and do the things that you enjoyed and do the not have to worry about it. Yeah, that’s

[00:56:06] Steve: it. And if you can just live within your means and give yourself the option. I mean, I mean, the other thing is too, you know, one of the great hacks. Is that if you can learn to live on 50% of what you earn, right?

[00:56:17] Steve: Then you give yourself one year and two to see if you can make a new career. So let’s say I earn a hundred dollars this year. If I can live on 50, well then next year I can quit my job and spend a whole year trying to make that other thing work. Yeah. And it can work. Go back and get a job. It sounds really stupid and boring and simple, but it’s a really simple idea.

[00:56:34] Cameron: Now another thing Tony and I have spent the last few years doing is working on a documentary that is nearly finished. And I, and I’ve noticed from your social media feeds that you are also working on a documentary. Ours is about early Christianity. Yours is not as far as I can tell. What’s yours

[00:56:53] Steve: about?

[00:56:53] Steve: So I’m doing one on a, I’m building a house on said farm that we already spoke about, and it’s gonna be a house of the future. So it’s gonna be a 3D printed house with a whole lot of modern features built into it, fully off grid, drone landing pad on the roof that I can fly to the city in. Virtual reality meeting room AI in the wall.

[00:57:12] Steve: So you speak to it and there’s no buttons experimental house, and I’m gonna turn it into a documentary, which could be turn into a comedy of all the disasters of all the things I’m trying to do. Yeah. 3D printed house, me leaning on the wall as it’s collapses, you know?

[00:57:29] Cameron: How do you build a 3D printed house?

[00:57:31] Cameron: Well, they’ve got,

[00:57:32] Steve: there’s a few companies doing it. The one that I’m might be teaming up with is called Apus Corp. And it’s like, imagine like a big swing arm with like a concrete composite inside it, and it moves around almost like a, I don’t know, like a giant dinosaur and spits out the concrete in the pattern that you want it to, and then builds the walls and, and does it in a complex pattern to get the tensile strength you need.

[00:57:57] Steve: And it has a, you know, competence within the concrete. So you like print the walls basically, and you can build a house in a day. And that’s done

[00:58:06] Tony: in a factory and you take the walls to the no, do it on site. Really?

[00:58:10] Steve: Okay. Yeah, singular. And so and then that’s already been done at a small scale. Actually it’s done been a big scale in China.

[00:58:17] Steve: They’ve done a five story house in China. They’ve done, they’re doing something in Dubai. And and that, and the 3D printing is really, I, I guess the calling card of it. But there’s a whole lot of other tech inside it. But I just want it to be an experimental house, just to push the boundaries on.

[00:58:30] Steve: Possibility is like a hacker project, and I’m hoping it’ll bring some new content and lessons and everything that then perpetuates. The way I earn my money, which is sharing ideas with companies and people and keynote speaking and that type of thing.

[00:58:43] Cameron: Very cool. Good luck, mate. Yeah. Very cool. So people want to k you know, keep abreast of your 3D House project and other stuff.

[00:58:51] Cameron: Where do they go? What do they do? How do they hook up? How do they

[00:58:54] Steve: connect? Yeah, so steve santino.com is where all of my stuff gets published, and you should sign up to my email. I put a, I put a blog post out every Friday morning, which will be, you know, on the depth of a topic. And you know, I tell people if you sign up to that at the end of the year, you’ll know everything you need to know about technology just by reading that thing once a week.

[00:59:14] Steve: Excellent. That’s

[00:59:14] Cameron: a great email. All right, Steve, well thanks again for coming on and sharing your insights, mate. You’re, you’re one of the most impressive people I know, mate.

[00:59:23] Steve: That’s an honor coming from you brother.

[00:59:26] Cameron: I think having the two of you on this show, I’m sort of been a little bit concerned that a black hole would form in time and space somewhere.

[00:59:33] Cameron: Two of the smartest guys I know. But so far we have survived. Thanks. Thanks again, mate. Much

[00:59:39] Steve: appreciate it. Pleasure, pleasure. Thank you.

[00:59:42] Cameron: Well, I hope you enjoyed that chat with Steve Santino. And don’t forget, as we always say this is not in a, not a financial advice podcast. You shouldn’t be taking anything.

[00:59:54] Cameron: That we say on this and applying it to your own situation without sitting down with a proper financial advisor first and asking them whether or not it makes sense for your particular circumstances. These are just ideas that these guys have implemented in their own lives. If you want to get future episodes of this, you can find us on Apple Podcasts Spotify, Google Podcasts, or any other podcast app that you’d like to use.

[01:00:20] Cameron: Can join our mailing list on our website, QAV podcast.com au. Send us any questions that you might have or ideas for future topics, anything like that, and we’ll give it a good consideration. Be good to each other and have a good week.