Future Me Problems

Going back a few weeks, I was talking with my 23-year-old son Will about something he was intending to do. I laid out the more sensible case for what might be a better choice for the longer term. I punctuated my parenting masterclass by highlighting the problems that lay ahead with his preferred option.

He replied instantly, “that sounds like a future me problem” and proceeded to ignore all my advice.

It made me laugh in the moment, but it was a great insight into the mindset of not only young people but everyone these days in a world of getting what you want now and worrying about the ramifications later.

The world seems to be accumulating a lot of “future me problems”.

The more I thought about it, the more I realised Will had tapped into something deeper than he probably intended. He had perfectly captured one of the defining characteristics of human nature. We all have an incredible ability to separate today's decisions from tomorrow's consequences. We naturally overvalue immediate rewards and undervalue future costs. Behavioural economists have studied this tendency for decades, but sometimes a 23-year-old can explain it in five words.

The evidence is everywhere. We promise ourselves we'll start exercising next week because our health is a future me problem. We put off difficult conversations because repairing relationships is a future me problem. We delay saving and investing because retirement belongs to someone we'll meet decades from now. Unfortunately, future me eventually becomes present me, and the bill always arrives.

Businesses aren't immune either. Underinvestment in technology, neglected maintenance, weak cultures and postponed strategic decisions rarely cause immediate pain. In fact, delaying them can often make this quarter's numbers look better. The consequences belong to a future management team. Until one day they don't. Many corporate crises are not unexpected events at all. They are simply years of future me problems finally demanding attention.

The same pattern plays out across society. Governments can borrow and spend more because servicing the debt is a future taxpayer problem. Infrastructure can be delayed because congestion is a future commuter problem. Housing shortages, energy security and countless other long-term challenges often begin with decisions that were easier to postpone than confront. The temptation is always the same. Enjoy today's comfort and let tomorrow deal with the consequences.

The trouble with putting off problems is that they rarely stay the same size. Left unattended, they have a habit of compounding. A missed opportunity becomes regret. A small issue becomes a crisis. One poor decision is manageable, but a series of deferred decisions changes the direction of a career, a business or even a life. The longer we convince ourselves that tomorrow will deal with it, the fewer options we are left with.

That might be one of the most overlooked characteristics of successful people. They don't necessarily make fewer mistakes than everyone else. They are just more willing to accept a little discomfort today to avoid much greater discomfort tomorrow. They make the difficult phone call. They invest before they spend. They exercise even when they don’t feel like it. They address small problems before they become big problems.

We end up spending much of our lives trying to solve problems our younger selves created. The quality of our future often depends less on intelligence than on our willingness to do difficult things before they become urgent.

Every decision is ultimately a negotiation between today's comfort and tomorrow's freedom.

The most successful people, businesses and societies aren't those who don't have many problems or don't have big problems. They're the ones who tackle them front on and refuse to leave them for future me.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions. 

Mining for AI Gold

I've spoken before about the stages of the AI revolution. The first stage is the infrastructure build-out. The second is the rise of agentic AI, where systems begin acting independently rather than simply responding to prompts. The third is what I call "everything AI", where artificial intelligence becomes embedded in almost every product, service and industry. We are still firmly in the first stage. 

In my opinion, AI will prove to be the most significant technological advancement in human history. It will likely surpass even the Industrial Revolution in both its scale and its impact. Like every transformational technology before it, however, the path forward will not be a straight line. Investors should expect periods of extraordinary optimism followed by equally painful corrections. The innovation may be exponential, but investment cycles are not. 

The first phase is the easiest to understand because it involves building the foundations. Think of it like constructing a new mine. It may take a thousand workers to build the roads, install the equipment, connect the power and prepare the site. Once the mine is operational, only a fraction of those workers are needed to keep it running. The same principle applies to AI. Today we are pouring huge amounts of capital into chips, data centres, networking equipment, cooling systems and electricity generation because that infrastructure is needed before the next phase of AI can prosper. 

That has created an enormous investment opportunity, but investors also need to exercise caution. Every major technological revolution has experienced a period where investors assume today's shortages will last forever. Railways required steel. Electricity required power stations. The internet required fibre optic cables. AI requires computing infrastructure. These periods often lead to extraordinary investment returns, but they also result in overbuilding and excess capacity as companies race to meet seemingly insatiable demand. 

Throughout history, technology has advanced at an exponential pace. Every generation of computing becomes more powerful and more efficient than the last. AI models continue to improve, software extracts more performance from existing hardware, and specialised chips deliver greater computing power in smaller and more efficient packages. Over time, demand for AI infrastructure will change. The market tends to extrapolate current conditions indefinitely. That doesn’t always hold up, especially with regards to technology.    

None of this changes my long-term optimism. AI will transform businesses, industries and society over the coming decades. Productivity gains will be massive, entirely new business models will emerge and many of today's largest companies will look very different in ten or twenty years' time. The opportunity is real. 

The challenge for investors is recognising that a technological revolution and an investment boom are not the same thing. The AI revolution is real. Parts of the infrastructure build-out may also prove to be overvalued over time. Understanding the difference will likely be one of the most important investment decisions of the next decade. Investors cannot blindly invest in AI. It is critical to understand the technology, the pace of change and consider the future revenue and profit that will ultimately justify and drive company valuations.  

Deal or No Deal

US President Donald Trump and Iran have announced they have agreed on a deal. Markets have welcomed the news, and oil prices have responded positively. But before declaring the crisis over, it's worth asking a simple question. Have the issues that brought both sides to the brink of conflict actually been resolved?

I'm not convinced.

Since the early days of the war my thesis has been that Iran will use the Strait of Hormuz to teach the US and the rest of the world a lesson. They want to send a message: if you attack us, we will choke off the oil and gas supply and create a global recession. They want to make the outcome severe enough that no one ever attempts this again.

There's an argument that Iran's economy is in such a bad state that they need a deal more than the USA. I think that's a very western assumption. Firstly, their economy has been bad for decades. Secondly, they are facing what many in the regime would view as an existential threat. Economics becomes a secondary concern. The hardliners in Iran will do whatever they believe is necessary to survive.

There is another angle here, too. After decades of trying to draw the US into a conflict, Israel has little incentive to see America disengage before its objectives have been achieved.

The US appears to have underestimated both Iran's ability to influence events in the Strait of Hormuz and its ability to control the broader outcome of the conflict. Since then, Trump has appeared increasingly keen to find an off-ramp.

To his credit, he has done a good job of jawboning the economic fallout to date. The memes on the internet declaring that Trump has won this war more times than anyone else has won a war humorously allude to his many declarations of victory and repeated assurances that a deal was imminent. Does anyone believe him now? Oil markets seem to. Share markets too. 

That has been a major win for him. It has helped keep oil prices below $100 a barrel and supported the share market.

The price of oil matters even more as the US midterm elections approach. Higher fuel prices are a lightning rod for the US consumer, including many of his most ardent supporters. So a deal, or at least the perception of progress towards one, is politically valuable.

But this is not really a deal. It's a deal to do a deal. It's actually just a headline.

The most difficult matters have been deferred for 60 days. Iran is still insisting that it will place a toll on the Strait of Hormuz. That is unpalatable to both the US and many nations in the region. Both sides appear to have red lines that remain fundamentally incompatible.

How much oil and gas is actually getting through the Strait of Hormuz is all that really matters. Countries around the world have been drawing down strategic reserves. In the weeks and months ahead, as those reserves deplete, that is when shortages become critical. At that point, only physical supply matters. The key variable is the volume of oil and gas moving through the strait.

I think the hardliners in Iran will ultimately get their way. I also doubt Israel will be enthusiastic about seeing the US withdraw its military support before the conflict's objectives are achieved.

Those forces are the weakest link in this agreement.

That is why I remain very sceptical. This may prove to be a successful deal. But for now it looks more like a temporary pause than a lasting settlement.

Precariously Placed

I had a conversation with a client yesterday who asked a simple question; why are we raising interest rates? It wasn’t rhetorical. It was genuine curiosity. They said all I see is people dealing with cost-of-living pressures and businesses struggling to get by. Won’t raising rates make everything worse?

That question gets to the heart of the real problem for the RBA and the Federal Government right now. Financial conditions are already tight for both consumers and business, yet interest rates are rising again. The short answer is because inflation is back, but before deciding whether the response is right, it's worth stepping back and understanding why.  

Before the war with Iran, annual inflation in the US was about 2.4% compared to roughly 3.7% for Australia and trending higher. We already had an inflation problem brewing. Interest rates were already being raised here while other countries were holding or were cutting them.

Now overlay an energy shock poised to push headline inflation beyond 5%, and it has given the Albanese Government and Treasurer Jim Chalmers a convenient explanation. The narrative shifts quickly. Instead of being held to accountable for reckless government spending, the focus turns outward to the war and the surge in energy prices.

Without accountability there’s little pressure to change their ways. Government spending is still far too high and a big contributor to inflation. Increasing interest rates will slow consumer spending. But if the government doesn’t reign in its spending, we might not be solving the inflation problem.

So, we enter the Iran war with consumers and businesses already under pressure from rising costs. Now we layer on an energy shock. Higher petrol and diesel prices don’t just hit households at the pump, they flow through transport, retail, construction and mining. This touches almost every part of the economy.

Headline inflation will rise quickly, but this isn’t being driven by demand. It’s a supply shock. Costs are increasing and are being felt almost immediately. Raising interest rates into that environment doesn’t fix the problem. It doesn’t create more supply. It simply adds another layer of pressure by hitting profitability and reducing consumer spending.

The move to increase interest rates is logical but the RBA risks reacting the wrong way at the wrong time in this case. Usually, inflation reflects too much demand in the system. Government spending has played a role, but this supply shock is different. Responding to it in the same way risks amplifying the downturn rather than stabilising it.

The real problem is that Australia entered this shock without having its house in order. Inflation was already elevated, spending was already high, and the economy was already under pressure. Leaving us in a far more fragile position as the energy shock unfolds.

A Small Cut, A Big Shock.

One of the most useful ways to understand what’s unfolding today is to look at how similar shocks have played out before. The 1979 oil shock is as close as we get to a reference point for what’s now building in the Middle East.

As part of that research, I went back through the dates, the figures, and the sequence of events. The first is that the 1979 shock was, at its core, a production shock. Supply fell and that reduction was held for around eight months. It wasn’t temporary. It was a sustained loss of supply that the global economy had to absorb over time, and the consequences were severe.

The second point is the one that should make people pay attention now. The amount of global oil supply lost in 1979 was around 4 per cent. Later, with the Iran-Iraq war, total global disruption rose to roughly 7 per cent. On paper, that doesn’t look like much, but it was enough to create a very damaging period for the world economy. Inflation surged, growth slowed, and the effects spread far beyond the countries directly involved.

That is why the current situation is more serious than markets seem to be taking it. We are only around two months into this disruption, but the scale of supply at risk through the Strait of Hormuz is enormous. This isn’t about production being switched off. It’s about whether supply can move at all. And in this case, we’re talking about roughly 20% of the world's oil and LNG supply. That changes the equation. In many ways, the current situation is even more fragile and precarious than in 1979.

The uncomfortable reality is that the Strait of Hormuz remains at the mercy of Iran. They do not need to permanently shut it in the traditional sense. They only need the ability to occasionally strike a vessel with a relatively cheap drone or missile, and insurers step away. Once that happens, trade can grind to a halt without the need for a formal blockade. Fear and uncertainty can be just as disruptive as physical destruction.

I expect some degree of partial reopening is possible through heavy military escorts, but that should not be mistaken for a real solution. Escorting ships through a danger zone may restore some movement, but it does not restore confidence, normal insurance markets, or stable energy flows. Markets are still not pricing a sustained disruption.

History shows that it does not take the loss of all supply to do serious damage. It only takes enough disruption, held for long enough, for the system to start breaking under the strain. The scale of supply at risk today is far greater than 1979; it just hasn’t been offline for as long. Unless there is a definitive resolution soon, it is only a matter of time before share markets realise this and respond to the economic crisis unfolding.

The Window to Act is Closing

The human body is made up of 60% water. You don’t need to lose all of it to die. Lose around 20%, and the system starts to fail. The global economy isn’t that different. You don’t need to lose all the oil supply to break it. You just need to lose enough, and that’s what we may be about to find out.

There is an energy shock building beneath the surface. It hasn’t fully hit yet, which is why markets appear to be calm. For weeks, shipments that left the Strait of Hormuz before the disruption have continued to arrive. On the surface, it looks like business as usual. But that’s changing as those final shipments clear, and countries move from incoming supply to drawing down reserves. That is when the real effects begin to show. As supply shortages emerge, pricing pressure hits, and ultimately economic activity slows down.

In that sense, the event has already happened. We just haven't felt it yet. That disconnect creates a kind of cognitive dissonance. Investors can see the risk, but they can’t yet feel the impact, so they hesitate. They wait. They look around at each other for confirmation. This is the phase I think of as the window of opportunity. It’s a short, finite period where a serious problem is visible but not yet fully reflected in markets. Everyone knows something could go very wrong, but investors tend to simply wait. After all, that's what long-term investors are meant to do.

In early 2007, cracks were already forming in the U.S. housing market. Subprime lenders were failing and credit conditions were tightening. It was clear to those watching closely that something was wrong, yet the S&P 500 continued to push higher, ultimately peaking in October 2007. The prevailing narrative at the time was that the problem was contained. It wasn’t. By the time losses spread through the system and that view was proven wrong, markets had already begun to reprice.

A similar pattern played out during the COVID-19 pandemic. By January 2020, the data coming out of China was already concerning. Case numbers were accelerating and the implications for global supply chains and economic activity were obvious. Yet markets continued higher into February. It wasn’t until the reality became undeniable that the sharp sell-off began. The pattern is consistent. First comes the signal. Then the debate. Then the recognition, and finally the repricing.

We are somewhere between the first and second stages now. Part of the delay comes down to how the financial system processes information. Large institutions don’t react to instinct, they react to data. So, economic forecasts need to be revised; company earnings need to be updated, and guidance needs to be cut. That takes time. By the time the data confirms the problem, the market has usually already moved.

In the meantime, narratives fill the gap and optimism persists. Analysts perform all sorts of mental gymnastics to explain why this time might be different. A ceasefire. A deal. A quick resolution. It’s possible, and I hope it happens. But with each passing week, it becomes less probable that we see a real long-term solution. So markets hold up, partly because they want to, and partly because until the impact is tangible, it’s easy to assume it won’t be as bad as feared.

But there are moments where you don’t need a model. You can apply simple logic. You cannot remove around 20% of global energy supply and expect the system to function as it did before. The modern economy runs on energy. Disrupt the flow, and everything downstream is affected.

This has the hallmarks of one of those moments. A situation where the risk is visible, the implications are significant, and the response is delayed. Where investors of all types look at the market not falling and conclude that maybe it won’t. Until it does. When the window of opportunity closes, it usually closes quickly, and decisions become reactive instead of proactive.

In many of our client portfolios, we’ve been using this period to gradually reduce exposure in areas most sensitive to a global economic slowdown and build a cash buffer. Not wholesale changes, but recognising that when the balance of risk shifts, positioning should too. Should the problems materialise, we have funds to deploy. Because by the time everyone agrees there’s a problem, the window to act has already closed.

Risk On, Risk Off

“Risk on, risk off” sounds like something wise Mr Miyagi would tell Daniel-san before a karate tournament. But right now, global markets aren’t following a disciplined strategy. They’re swinging between risk on and risk off depending on the latest headline. One day risk on. The next day risk off. Driven by escalations, ultimatums, ceasefires, and political signaling.

As I write this, the USA share market has just had a risk-on day. A two-week ceasefire has been agreed following the latest escalation, after President Trump issued another ultimatum to Iran. Markets have rallied accordingly. This volatility feels largely manufactured. Equity markets appear increasingly disconnected from energy markets. When Trump escalates, markets barely react. When he de-escalates the very threat he created, markets celebrate. None of it makes a great deal of sense. Prices are swinging between hope and fear.

But a ceasefire is not the end of a war. In fact, there is every chance one or both sides breach the terms. If that happens, we return to the cold, hard reality that Iran sits in a position of control over the Strait of Hormuz. Everything else is noise layered on top of that reality. This is the market today. Not driven by earnings or valuations but by headlines.

It is very easy to get caught up in the drama. It's very serious and lives are at stake but from an investor perspective, much of it is drama. The escalation, the de-escalation, the ultimatums, the negotiations. It creates movement, but not necessarily value. For long-term investors, there is very little benefit in reacting to this carry-on. The more markets swing day to day, the more tempting it becomes to do something. But activity is not the same as progress.

So who benefits from volatility? Traders and hedge funds thrive on it. Volatility creates opportunity for short-term positioning, leverage and rapid capital rotation. It also rewards those who somehow know the direction ahead of time. When markets swing on political announcements, the advantage naturally shifts toward speed and information. For long-term investors, however, volatility is mostly noise unless it creates genuine mispricing. Short term movements are not where serious long-term investors sit.

This is where perspective matters. In a recent interview, Warren Buffett described the current market decline as “nothing.” He noted that a five or six percent fall is not meaningful and reminded investors that markets have dropped more than 50 percent several times during his career. He indicated Berkshire would only deploy significant capital after a much larger dislocation. In other words, while small moves create headlines, large moves create opportunities.

That patience is reflected in Berkshire Hathaway’s balance sheet. The company currently holds roughly US$370 billion in cash and Treasury bills, around 30 percent of total assets. Buffett is not reacting to volatility. He is waiting for opportunity. That patience stands in contrast to current market optimism. Despite risks at every turn, markets continue to lean toward best-case outcomes. Yet the conflict itself is far from resolved.

The war is not over.

It is entirely possible that Iran consolidates control over shipping through the Strait of Hormuz. If, hypothetically, a toll of around US$2 million per ship were imposed on roughly 100 to 140 vessels per day, that equates to approximately US$70 billion to US$100 billion per year. In the context of the global economy, that is actually a relatively small price to avoid a full-scale energy shock or global recession. But the toll itself is not the real issue. The real risk is control. The longer Iran effectively controls global energy flows, the more likely volatility turns into a genuine economic shock.

The longer the Strait of Hormuz stays disrupted, the more permanent damage to the global economy and the more likely a serious recession becomes. Markets continue treating this like temporary noise. But if the structure of energy supply changes, it isn’t noise. It’s repricing. For long-term investors, the real advantage comes from patience, discipline, and perspective. Being ready for an economic shock that creates genuine mispricing is when the real opportunity occurs.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions. 

When the World Feels Unstable

Consumers and businesses are only just starting to feel the impact of the current global turmoil. The squeeze is coming through fuel, interest rates, and now food and groceries. That alone is enough to put pressure on household budgets and business margins. But there’s something deeper going on.

Beyond the cost of living, there’s a growing psychological weight. People are trying to navigate a constant stream of bad news, and it’s starting to show. It’s not just that prices are rising. It’s that the backdrop feels less stable, less predictable. Conversations that once sat on the fringe now feel mainstream. World War III. AI taking jobs. What the future even looks like.

So, what do you do when things feel like this?

You start by controlling what you can control. That sounds simple, but it’s not easy, because the modern world is designed to pull your attention in the opposite direction.

Noise is everywhere. Not just the news, but the endless stream of content competing for your focus. What used to be “sex sells” has evolved into outrage and fear. These platforms are engineered to provoke emotional responses, because the stronger the reaction, the longer you stay. Once you understand that, it becomes easier to step back from it. Turn off notifications, reduce the firehose of daily information, and protect your attention. Block out the noise and decide deliberately what you feed your mind.

From there, come back to the basics. The things that are almost too obvious to take seriously, but matter more than anything else. Eat well, move your body, sleep properly, and stay hydrated. There’s nothing revolutionary in that, but during periods like this, the basics become your foundation. Most people let them slip at exactly the wrong time. You don’t need to be obsessive about these things. Just doing them better makes a huge difference.

The same principle applies financially. Don’t wait for a recession to be declared before you act like conditions are tightening. By the time it shows up in the data, behaviour has already changed. Spending slows, risk appetite fades, and businesses start to delay hiring and investment. That shift doesn’t just reflect a slowdown. It helps create it. From an individual perspective, it’s far better to prepare early while you still have flexibility than to react late when options are limited.

What makes all of this harder is uncertainty. People can handle bad outcomes. What they struggle with is not knowing what the outcome will be. Uncertainty lingers. It drains energy and creates anxiety that has nowhere to go. In many cases, it feels worse than the thing you’re actually worried about. Recognising that doesn’t remove the uncertainty, but it changes how you sit with it. You stop trying to eliminate it and start learning how to operate within it.

Perspective matters here as well. Things are rarely as bad as they feel in the moment, and they’re rarely as good as they seem at the top. There’s value in remembering that, especially when emotions are running high or you feel overwhelmed. I’ve been reading Viktor Frankl’s Man’s Search for Meaning, and it’s a powerful reminder that even in the worst imaginable conditions, your response remains within your control.

Finally, don’t forget to actually live and have fun. When things feel uncertain, people tend to narrow their world. Work, family, responsibilities, it’s easy to go into survival mode. The things that bring enjoyment are often the first to go. So, be deliberate in making sure you schedule time for fun and life's simple pleasures. For me, it’s an espresso to start the day and thirty minutes of reading at night. It’s not much, but I really enjoy that process each day.

In times like this, small anchors matter more than you think. You can’t control global events or financial markets. You can’t control how this plays out. But you can control how you respond. Over time, that’s what separates those who drift from those who move forward.


General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions. 

Markets Are Priced for the Best Case

While markets remain optimistic that President Trump will find a way to get Iran to reopen the Strait of Hormuz, the longer this goes on the more concerning this becomes a global economic catastrophe.

In the past, such as the introduction of tariffs in April last year, Trump has managed to push and pull the information flow to address problems as they escalate. This time he is trying to do the same, but he is learning the hard way that Iran was in a stronger position than he realised.

From an investors perspective this situation needs to be fixed quickly. The global economy needs the Strait of Hormuz to be reopened urgently. For Trump to do this it will require either massive concessions from the US via negotiations, regime change or a significant escalation.

The military might of the US is not in question. But Iran is clearly in control of the Strait of Hormuz. Trumps rhetoric around winning the war and ongoing negotiations with Iran seems to have placated investment markets so far. Markets are down slightly. But there is a general expectation that Trump will get a deal done, the Strait reopens and away we go. The concerns for markets will be if they stop believing Trump and realise that if he could have reopened the Strait by now, he would have.

If the Strait of Hormuz takes weeks or even months to reopen, then we are in for a severe 1970’s style energy shock that will reverberate through the global economy. In that situation you get rising prices across energy and food, interest rates rising, slowing global growth, falling company profits and rising unemployment.

In the late 1970s and early 1980s in the United States, oil prices more than doubled, inflation pushed above 13%, interest rates peaked near 20% under Paul Volcker, unemployment rose from around 6% to over 10%, and equity markets delivered negative real returns of roughly 50% over the broader period. In Australia, and across much of the world, the pattern was the same, high inflation, rising unemployment and weak real returns.

There is so much more downside risk than upside opportunity in the share market right now. The S&P500 and ASX200 are both down a little over –7% from their highs. So, if everything is reopened tomorrow that’s about the extent of your upside. But if this drags on the downside is significant, easily another –10% to –20% or even more. A global recession would wreak havoc with the economy and the share market. And the longer this goes the more likely that is.

Markets are underestimating the level of control the US has over this situation. But they are also underestimating the supply chain and second order effects. Investors have become so conditioned to the market recovering quickly after a crisis and buying the dip that they underestimate the potential of something deeper.

I usually describe myself as cautiously optimistic. However, as more time passes my approach is becoming increasingly cautious and far less optimistic. If Trump somehow conjures a deal, the US facilitates regime change or Iran willingly reopens the Strait of Hormuz, then markets will celebrate and away we go. But in the absence of the Strait reopening then markets will quickly adjust for what is ahead. As we’ve seen repeatedly in recent years, markets don’t price risk like they once did, they move once an event occurs. From here, outcomes for markets diverge sharply depending on what happens next. That’s the gap investors should be thinking about.


General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions. 

Strait Talk

If the world is to avoid a global recession, it will come down to one thing. The reopening of the Strait of Hormuz. Around 20% of the world’s oil and roughly a quarter of global LNG flows through that narrow passage. It is not just a geopolitical pressure point. It is one of the most important economic arteries in the world.

The problem is that the ball is well and truly in Iran's court, and it is effectively the only meaningful card they have left to play. They have absorbed significant economic and military pressure and have not capitulated. Having endured that level of strain and still holding its position, it is unlikely to give up the one lever that genuinely shifts the balance of power. The Strait is that lever.

So why would Iran reopen it? Not out of goodwill, and not simply because of pressure. They will only do so if the incentives are compelling enough. That likely means some combination of sanctions relief, de-escalation, or at the very least recognition of the strategic leverage they have demonstrated. Without that, reopening the Strait voluntarily makes little sense from their perspective.

How it plays out it from here might simply come down to who blinks first. At first glance this looks like a contest of military strength, but it isn’t. It is a contest of endurance and the longer this drags on, the more the economic consequences compound. Energy prices rise, supply chains tighten, and confidence falls. What started as a geopolitical conflict has already morphed into an economic one.

Iran can withstand pain and has done so for decades under sanctions. The United States faces different constraints. Political pressure, market pressure, and voter pressure. Trump may have overestimated the brute strength of the US military as a strategic advantage. Consequently, Iran is now using their position to drag this out and create chaos for the global economy.

There are few topics that generate as much concern globally as the price of fuel. A spike is a cause for concern. A sustained spike will quickly morph into outrage. In the middle of a cost of living crisis, an energy shock hits discretionary spending hard. Making matters worse, as the prospect of higher prices and inflation leads to central banks increasing interest rates. That's the double hit and we are already seeing that play out here in Australia.

The second-order effects are where this becomes more dangerous. It’s not just oil. Fertiliser markets begin to tighten, pushing up agricultural costs and ultimately food prices. Industrial inputs like helium, critical for medical and semiconductor industries, become constrained. Shipping costs rise as routes are disrupted and insurance premiums spike. The longer the Strait remains compromised, the more these pressures ripple through the global economy. This is how a shock turns into something more systemic, slowing global growth and the possibility of recession.

Allies are reluctant to join Trump in this conflict. It appears many are happy to keep their distance, ensuring that at the end of this it is clear where the blame rests. This is a USA decision. This is a Trump decision. His problem right now is that there is no obvious solution and not one that he can easily control.

From here it may well be Trump who is more desperate for this to end. He can declare victory and manage the narrative but unless the Strait reopens and the supply of commodities is restored then he has a problem. One that the world knows he has created and one that he needs to fix. He knows this.

Iran knows this too.

They want the world to understand the strength of their position and their ability to inflict economic pain on the world if they so choose. The question is how deeply they want the world to feel that pain. Push too hard and they risk uniting the world against them. The most likely path is controlled pressure. Enough to make the point but not enough to become the clear villain. They will want Trump to be seen as the problem, not move so aggressively that they are seen as the problem.

That said, Trump is nothing if not a creative problem solver. He is also unpredictable. So, it would be unwise for Iran to push Trump too hard or for markets to underestimate his ability to manoeuvre out of difficult situations. Push too far and his response may not be linear.

From an investor’s perspective, this is much less about the war itself and far more about the reopening of the Strait. Markets have shown they can absorb conflict. What they struggle with is sustained disruption to critical supply chains, particularly energy. The key variables to watch are simple. The duration of the disruption, the trajectory of oil prices, and any credible signals that shipping flows are normalising.

I still think this is resolved in a reasonable timeframe. There will be economic consequences, and some of them will linger. But as is often the case, it won’t be the conflict itself that does the real damage. It will be the bottleneck. Right now, markets are underestimating just how powerful that bottleneck is.


General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions. 

Positioning For War

For much of modern history, war and markets moved together in predictable ways. Conflict meant panic. Panic meant falling markets.

Yet the past few years have challenged that assumption.

Investors have lived through a remarkable sequence of shocks. The global shutdown of the COVID-19 Pandemic. Russia’s invasion of Ukraine in 2022. Rising trade tensions and tariffs between the United States and China. Each episode initially rattled markets. Each one, in time, faded into the background.

The pattern has been strikingly similar. Markets fall sharply on the news. Investors assess the damage. Then, almost inevitably, the recovery begins. Within months the narrative shifts from fear to opportunity, and markets move on to new highs.

Against that backdrop, the emerging confrontation between Iran and the alliance of United States and Israel has so far been treated in much the same way. Investors appear to be assuming that this will be another geopolitical shock that ultimately proves temporary.

That may well prove correct.

But there are a few caveats this time.

The first is escalation. War has a habit of taking on a life of its own. Once events begin to move quickly, the range of possible outcomes expands dramatically. Supply chains can be disrupted, alliances can shift, and energy markets can react violently. In those circumstances forecasting becomes far more difficult. Markets dislike nothing more than uncertainty.

The second risk is duration.

For markets and the global economy to remain resilient, this conflict likely needs to be short and sharp. A drawn-out war lasting many months would create a very different economic backdrop.

Energy sits at the centre of the issue.

Roughly a quarter of the world’s oil and gas supply moves through the narrow shipping corridor known as the Strait of Hormuz. Any disruption there would ripple through the global economy almost immediately. Oil prices will quickly push well beyond US$100 per barrel.

But the real problem is not just price. Energy is a physical commodity. When supply is disrupted, it is not simply a matter of paying more and carrying on as normal. There is literally less energy available to power factories, move goods and fuel transport networks.

That scarcity feeds directly into inflation.

Higher energy prices raise the cost of almost everything. Businesses pass those costs through where they can. Consumers feel it in fuel, food, and transport. Central banks, already wary after the inflation surge of recent years, are forced to keep interest rates higher for longer.

Growth slows. Confidence weakens.

In short, a prolonged disruption to global energy supply would materially change the economic outlook.

Yet there is also a counterbalance to this pessimism.

If the past few years have shown us anything, it is that the global economy has developed a surprising level of resilience. The shock delivered by the COVID shutdowns was arguably the most severe economic interruption since the Second World War. Entire industries stopped overnight. Borders closed. Global travel collapsed.

Yet the system adapted.

Supply chains reorganised. Governments deployed unprecedented fiscal support. Central banks flooded markets with liquidity. Within a remarkably short period the global economy found its footing again.

That experience has reshaped investor psychology. Markets now tend to assume disruption is temporary unless proven otherwise.

There is also a political dimension to consider.

Much of the timing and trajectory of this conflict ultimately rests with Donald Trump. If history offers any guide, markets play an important role in that calculation. Trump has long treated financial markets as a barometer of political success. When markets are strong, the narrative is working. When markets fall sharply, the pressure to change course increases.

For that reason, it is difficult to see a scenario where a prolonged conflict that significantly damages markets is allowed to continue indefinitely. At some point a declaration of victory, however loosely defined, becomes politically convenient.

This may not be conventional diplomacy. But Trump has rarely followed conventional scripts.

In that sense markets may already be assuming an implicit floor. A conflict that escalates too far risks undermining the economic backdrop heading into an election cycle. That is not a position any administration would welcome.

For investors, the implication is relatively clear.

The base case remains that this conflict proves short lived. Markets will wobble, volatility will increase and then attention will gradually shift back to the underlying drivers of the next cycle. Chief among those remains the extraordinary investment wave unfolding in artificial intelligence and advanced technology.

If that scenario plays out, periods of weakness are opportunities.

However, prudent investing always requires acknowledging the alternative paths. If the war escalates or drags on for months rather than weeks, markets could experience a more meaningful correction as energy prices rise and growth expectations fall.

That is why positioning matters.

We are selectively adding to our preferred companies, particularly those aligned with the long-term technology and AI themes that continue to reshape the global economy. At the same time we remain mindful that volatility may create even better opportunities ahead.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions. 

Historical Performance Disclaimer: Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions 

Father-Son Trek to Mt Kosciusko Summit

There is nothing quite like a father-son adventure. The youngest of our four kids, Will, is 22 and earlier in the year he went for a trek through the mountains of New Zealand. When he returned, we started talking about doing something together. A father-son trek to the summit of Mt. Kosciuszko seemed like the perfect place to start. We’re new to mountain trekking, so this felt like a challenging but achievable entry point. We decided on a date and booked it in.

One thing I’ve learned over the years is that taking action the moment you decide something is critical. Too many people talk about trips, adventures, or goals but never follow through. There’s always “later”, and later never comes. If we discuss something and we both say yes, my next step is to book it immediately. Not tomorrow. Not next week. Right now. I want to live life, not just dream about it. And I want my kids to think the same way too.

So, we set the date, made the plan, and last weekend we arrived at Charlottes Pass ready for the 18.4km round trip to the summit and back.

When we arrived early in the morning, the weather was shocking; strong winds, cold rain and an unfriendly sky. No one else was around. Then, out of nowhere, a man appeared and approached us. He told us he’d trekked the mountain many times and this weather was going to get nasty. Wind strong enough to blow you over. Hail the size of golf balls. He pointed to the dark clouds building across the range and said they are going to get worse this afternoon.

We already knew thunderstorms were expected but they were forecast to be late in the afternoon.

So, before our first step, we were faced with a decision to make.

Play it safe, turn back, drive 40km to Jindabyne, and accept that the summit wasn’t happening. Then five hours back to Sydney the next day.

Or press on and see how the conditions felt in the first couple of kilometres, ready to turn back at any point.

We definitely didn’t want to be the people on the news who ignored warnings. But we also didn’t want to walk away from something we’d been planning and looking forward to. So, we decided to start, stay alert, and pull the pin if things deteriorated.

We progressed well and the storms seemed to be holding off. We crossed the Snowy River (4.5km mark), past Seaman’s Hut (6km) before reaching Rawson Pass (8km). There we met a hiker who had been camping overnight in brutal conditions. As we talked to him, he had clearly spent a little bit too much time alone, but he did give us some critical information for the last 1.7km to the summit.

He told us the trail ahead had been snowed-in, but only one section. If we could get past that, the rest of the climb to the summit was straightforward. It was an incredibly fortunate and timely conversation.

We assumed the track would be covered in some light snow. But when we reached it, we realised the mountain had completely reclaimed the trail. A steep 100-200 metre stretch was buried under solid, icy snow. Only a faint, narrow line of footsteps showed where others had crossed. Without that, we would have turned back on the spot.

We stepped cautiously onto the snow. It was extremely slippery, and a stumble would mean sliding fast down the icy slope into rocks below. But knowing it was just one section, and that others had crossed it, gave us the confidence to continue. It was a slow, nerve-wracking traverse that felt like it would never end.

Once we got to solid ground, we were only one kilometre from the summit.

We charged ahead through the strongest winds I’ve ever experienced and eventually reached the peak. We took a few photos and sat for a moment to celebrate. But almost immediately, we felt the weather shift. We got up and it started to move quickly as the rain hit, within seconds we realised we were getting hit by hail.

We needed to get back across the snowed-in section fast in case conditions worsened and we found ourselves on the wrong side of the mountain and were blocked in. We jogged down the next kilometre bombarded by wind and hail until we reached the snow. Crossing it a second time was just as scary, but once we were across, we were safe.

From there, it was a wet and windy but straightforward descent back to Charlottes Pass.

There were 2 times we could have turned back: right at the start, and at the snowed-in section. Twice we listened to the warnings, weighed the risks, and ultimately made our own decisions. And we’re glad we did.

It was an incredible experience. The scenery was stunning, the adventure unforgettable, and the time together priceless. These are the moments that stay with you as a parent, the shared challenges, decisions made together, the doubt, the trust, the laughs, the uncomfortable parts and the moments you both know you will talk about for years.

We’re already planning our next father-son adventure: Mt Fuji, Japan, in 2026.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

The Scale Game

There is an uncomfortable paradox that plays out every time technology takes a leap forward. The companies that end up shaping the future rarely look sensible in the moment. Their valuations seem to be inflated. Their cash burn looks reckless, and their ambitions appear unrealistic. But history tells us that the biggest and best tech companies succeed because they win the scale game.

In the age of artificial intelligence, this dynamic becomes even more pronounced. Elevated valuations will feel normal because we are trying to price something that has not fully arrived. Much of the future value is bound to technologies and applications that do not yet exist. Productivity gains that have not yet been created let alone measured. Industries that have not yet been created. The market is being asked to look ten years forward even though most people struggle to see ten months ahead.

AI is a multi-year tailwind. It will be volatile. It will overshoot. It will disappoint at times. But over the course of the journey, it will lift both growth and productivity across the global economy. In that type of cycle, buying the dips will matter more than trying to call the top because the structural direction is up. The growth is exponential.

This is also why OpenAI, even as an unlisted company, keeps dominating headlines. People are fascinated by the numbers. A valuation in the hundreds of billions simultaneously burning billions of dollars in cash annually. The debate tends to stop right there. But the real question to ask is what those numbers actually mean.

A big number without context means nothing. Most people cannot conceptualise the difference between a million and a billion, let alone a billion and a trillion. One million seconds is around twelve days. One billion seconds is more than thirty-one years. One trillion seconds is more than thirty-one thousand years. The mind boggles. Investors backing OpenAI are not confused by this. They are not funding short-term profits. They are funding the race to scale.

We have seen the exact same story before.

Amazon lost money for more than a decade. For years investors rolled their eyes at the billions pouring into data centres, fulfilment networks, and cloud infrastructure. But Amazon understood what others did not appreciate. First you scale. Then you monetise. Profit is the final step, not the first. The benefit became obvious when AWS emerged as one of the most profitable business models in the world.

Meta followed a similar path. Heavy spending on data infrastructure, algorithm development, machine learning, and global distribution. Huge amounts of cash that looked irresponsible from the outside, some of it probably was. But from the inside it was the only way to win. The company that scales first becomes the company that sets the rules and controls the market. Monetisation becomes a strategic choice rather than a desperate scramble. Now Meta’s ad engine is a global monopoly.

OpenAI is not profitable because profit is irrelevant at this stage of the journey. They are building foundational infrastructure for a technology that will power the next decade of economic expansion. They are racing to scale because scale determines who survives. When the market shakes its head at the losses or scoffs at the valuation, what they are reacting to is discomfort because the future is difficult to value.

When the market cannot value something clearly, the instinct is to assume it is overpriced. But the early stages of a platform shift work differently. The pricing is not about current earnings. It is about capturing the optionality of every future application that can be built on top of the technology. That is why the smartest investors focus on the direction of scale rather than the quarterly burn rate.

This does not mean every AI company wins. Far from it because many will not. But the ones that do will define the next generation of productivity and wealth creation. They will pull forward years of economic efficiency, and they will reshape entire industries. That is why valuations look high today and why they may look cheap in hindsight.

If the next decade belongs to AI, then the next decade belongs to the companies that can scale faster than anyone else. That is the game right now. It is why buying the dips during a structural tailwind becomes one of the more rational decisions an investor can make.

Profit comes later. Scale comes first.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Do The Hard Yards

There are moments in life that remind you that time isn’t slowing down for any of us. Watching my youngest daughter, Rachel, and her partner of five years, Danny, buy their first home this week was one of them. Anyone with adult kids or grandkids knows the feeling. That first property isn’t just a financial decision; it carries their hopes and dreams for the future. It’s exciting, but it can also be overwhelming and emotional. As a parent, your role shifts. You’re no longer steering the wheel; you’re there to guide them along the way.

What made me proud was how Rachel really owned the process. Paula and I were there for advice when they needed it, but they drove everything. They saved their deposit. They liaised with the mortgage broker and negotiated with the real estate agents. They worked with the conveyancer on the details and reviewed and signed the contracts.

There are always government incentives and schemes in the background, but none of them replace the need for discipline and a genuine deposit. Banks still assess serviceability the same way. You still need stable income. You still need to budget. Anything happening on the policy front might help around the edges, but it doesn’t replace the habits that build long-term financial confidence.

The journey really starts with saving the deposit. My parents always told me, “We won’t give you money, but you’ll always have a roof over your head if you need it.” I passed the same message on to my kids. You make your own way. For Rachel and Danny, that meant moving out of their rental and moving in with Danny’s mum for almost a year so they could save more quickly. Over 12 months they were able to save a sizeable deposit.

That’s what building wealth for the future looks like. It’s a collection of decisions and even sacrifices that might not be very “Instagrammable” but really matter for your future. Whether you’re saving 5% or 20%, the behaviour is the same. Live below your means and build through saving and investing.

As they saved over the 12 months they started to become familiar with the property market in the areas they liked. It’s critical to understand what fair prices are. During this time they met with a mortgage broker to understand their borrowing capacity and obtain pre-approval. Pre-approval is one of the most underrated parts of the process. It gives you clarity around what you can borrow, what your real price range is, and what bank policies apply to you. Without it, everything else is guesswork. With it, every home open inspection and negotiation becomes real. This was an important process for Rachel and Danny to go through. Once they had pre-approval they went from dreamers to serious buyers.

Understanding the market is important because the more you inspect, the clearer the patterns become. Recent comparable sales. How long properties sit on the market. The gap between guide price and reality. The more time you spend listening and watching, the easier it is to understand what an agent says, what they don’t say, and what they really mean.

Understanding the process is just as important. Once it’s explained clearly, it isn’t complicated: save the deposit, get pre-approval, inspect properties, request the contract and strata, engage a conveyancer, negotiate or bid, exchange, and settle. The overwhelm comes from not knowing what's next. A good mortgage broker and a good conveyancer turn that uncertainty into structure.

Negotiation is where most first-home buyers feel out of their depth. It’s emotional for them and methodical for agents. That imbalance is where people overpay. The rules are simple: know your walk-away number, don’t negotiate against yourself, ignore noise you can’t verify, and move quickly when the right property appears. Rachel and Danny negotiated on multiple occasions and did walk away from properties when it would have been easy to let emotion take over.

Watching them navigate the whole process reinforced something important for me. Buying your first home teaches you discipline and sacrifice in a way nothing else does. It is great to see kids today doing the hard yards. Working hard. Saving consistently. Going without. Rachel and Danny did all of that, and the lessons they learnt along the way might be more valuable than the keys they’ll collect on settlement day.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Take the emotion out of it

Over the years, I’ve learned that some of the most costly investment mistakes aren’t caused by economic forces; they’re caused by emotional ones. The subtle emotion that shows up in the hesitation to sell, the urge to chase, or the fear of making the wrong call. Markets are indifferent to all of it, but your portfolio isn’t.

I see this most clearly with clients who become attached to the stocks that have treated them well. On 27 June 2025 I wrote that CBA was massively overpriced. Objectively overpriced. It had nothing to do with the quality of the company, just the valuation sitting way above where it made sense. While clients trimmed their holdings, very few cut as much as they should have. The emotional history was too powerful. When a stock has delivered for more than a decade, people expect it will deliver forever. With CBA falling to $158.38 on Tuesday, it’s obvious in hindsight. Bias feels safe, but it doesn't help the outcome.

Wesfarmers is another good example. Being from WA, I’ve had many conversations over the years with farmers who held outsized positions in WES for generations. Their families built their livelihoods alongside the company long before they had portfolios. When a stock becomes part of your life, taking profit starts to become a question of loyalty. Sometimes people just couldn’t bring themselves to sell it even when the price was stretched beyond logic, or the concentration risk was too high.

This emotional pull isn’t limited to financial markets. My daughter is in the process of buying her first property, and while she has handled the transaction herself, it's been great talking through the negotiation process with her along the way. There’s always a point where you fall in love with a place, but you need to stay detached enough to keep your power in the negotiation. I emphasised to her that the ability to walk away from a deal is everything. If you can’t walk away, you lose your leverage and end up paying whatever it costs. She took that onboard, and it clearly helped her as she progressed.

A different challenge emerges when founders decide to sell their company. The real tension isn’t just the valuation, it’s the shift in control. A founder spends years calling every shot, setting the pace, shaping the culture. Then suddenly a buyer or investor enters the picture, and the power dynamic changes. I’ve seen founders hesitate not because the offer was wrong, but because they weren’t ready for what came after: stepping back, letting someone else steer, or adjusting to being part of a larger machine. It’s not a financial obstacle, it’s a psychological one.

High stakes situations amplify this. In sport, the champions aren’t the ones who feel the most; they’re the ones who manage their emotions best. Final-quarter plays, last second shots and penalty shootouts aren’t won with adrenaline. They are won with calm under pressure. Politics is no different. Leaders who react emotionally get swallowed by the moment. Those who stay outcome-focused shape events rather than being shaped by them.

Investing requires the same discipline. Biases like the endowment effect, familiarity bias, loss aversion, and recency bias work against you precisely because they feel so natural. They offer emotional comfort, but not financial clarity. If they influence too many decisions they can gradually steer your choices away from what’s best for your long-term wealth.

Emotion is part of being human, so you’ll never remove it entirely. But in important moments like selling a stock, buying a property, negotiating a deal, exiting a business, you need to separate feeling from judgment. You can feel the emotion. You just can’t let it make the decision.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Pest Control

Jamie Dimon, CEO of JPMorgan Chase, raised eyebrows recently with a warning about cracks emerging in the private credit market. After the collapse of a few sub-prime car-loan lenders linked to private credit funds, he said: “My antenna goes up when things like that happen. And I probably shouldn’t say this, but when you see one cockroach, there are probably more. Everyone should be forewarned on this.”

Dimon’s point was deliberate, it was about awareness. When isolated failures appear in a system built on confidence, it’s rarely an isolated problem. Private credit has expanded at a breathtaking pace globally as investors chase yield in a low-rate world. In Australia, it’s now a $224 billion market. That includes $132 billion in corporate and business lending and $92 billion in commercial real estate. The sector’s rapid growth has now drawn the attention of regulators.

ASIC chair Joe Longo warned this week that private credit faces major problems if complacency continues. The regulator’s surveillance report found opaque fees, aggressive marketing, and inconsistent valuation practices, with some behaviour “close to illegal.” I’ve downloaded the report and read it today and it reinforces all the concerns I have about the sector. As Longo put it, “In times of prosperity when money flows freely, no one worries about liquidity. However, it’s the first thing everyone will miss in a crisis.”

The problem isn’t that private credit is inherently flawed. Done well, it fills a legitimate gap between banks and borrowers, supporting business investment and economic growth. But when the focus shifts from quality to scale, risk management becomes an afterthought. In too many cases, loans are made because they can be sold, not because they should be made. No one is incentivised to say no.

The real test comes when the repayments stop. That’s when investors discover what these portfolios are truly backed by. Some loans are secured by property, but many rely on looser definitions of “assets”, anything from invoices and raw materials to plant or machinery. They look great on a spreadsheet, but in a downturn, those assets can be difficult to value or sell. A theoretical asset is not the same as a liquid one.

Defaults are a normal part of credit markets, but in this corner of finance, the safeguards vary widely. ASIC’s findings revealed that some funds even define “default” differently, making true comparisons impossible. In a benign environment, that inconsistency is overlooked; in a stressed one, it magnifies contagion risk.

History tells us these cycles rarely end neatly. A few isolated losses are rationalised, confidence holds, until it doesn’t. Then the feedback loop between leverage and liquidity tightens. The pattern may not mirror 2008, but the psychology is familiar.

At some point, private credit will face its reckoning. It will separate lenders built on discipline from those built on momentum. That’s why I’ve avoided the sector despite its popularity. In too many cases, investors are taking equity-like risk for bond-like returns, a trade-off that only looks good in fair weather. The bigger concern is the systemic risk presents to the broader economy. When growth outpaces governance, and confidence replaces caution, risk hides in plain sight.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Are we in an AI Bubble?

I first read about the singularity and Ray Kurzweil's predictions back in 2010. He spoke about a point in the future where artificial intelligence surpasses human intelligence leading to rapid technological advancement. I remember being fascinated by the concepts and how it would change the world. But I thought he was crazy, not so much because of what he predicted, which was mind blowing but plausible, but because of the time frame he outlined.

At the time there was no AI and nothing close to it. For Kurzweil’s predictions to come true, AI itself would have to be invented within a decade or so. Well obviously, that happened, and in line with his predicted timing. So, if his timeline is right then the AI revolution has only just begun. This is critical to understand because the scale of this is unlike anything we have seen before.

Now, as the boom gathers pace, we are hearing more talk of an “AI bubble”. Commentators are drawing comparisons to the dot-com era boom of the late 1990s where wild optimism ended in a spectacular collapse. But there are some crucial differences this time.

This is not a once in generation boom. Those were the personal computers, internet, mobile phones. This is an AI industrial revolution. A once in a lifetime shift that will reshape the course of human history in the same way the first industrial revolution transformed the world. This is not hyperbole. This is real.

What we are seeing now is an explosion in demand for semiconductors, data centres, and energy. We are in the foundational infrastructure phase of AI. We are building the roads, powerlines and factories of the digital age. Companies like NVIDIA, AMD, TSMC, and ASML are the new industrial giants. They are equivalent to the steelmakers and rail companies in the 1800s. What they produce isn’t visible to the naked eye, but it powers everything else. Billions are being spent not on end products but on the capability to create them.

Then come the architects, the platforms building on top of that foundation. Alphabet, Amazon, Apple, Meta, and Microsoft are spending tens of billions to construct the superstructure of the AI economy. Their investments in chips, data centres, cloud networks, and proprietary models aren’t just a corporate arms race, they are laying the digital plumbing the next century will run on.

When Mark Zuckerberg tells investors Meta will spend $70 billion in a single year, or when Microsoft and Amazon pour capital into global data infrastructure, they’re building for the long term. Investors are impatient, especially when they see large capital investment, they want to see returns. But this is critical infrastructure and those companies that don't invest will be left behind in the future.

The same applies to energy. Data centres are already account for 4.4% of all electricity consumption in the US and that share will rise sharply (within a range of 6.7% to 12.0% by 2028 according to the 2024 United States Data Centre Energy Usage Report). Nations and corporations are racing to secure the energy and cooling capacity needed to support AI infrastructure. It's not glamorous but it’s essential to power what’s to come.

If this were a skyscraper, we’re still pouring the concrete slab. The real transformation comes when applications begin to rise from that base. Today the market is being driven by infrastructure investment, but the next wave will be powered by what people build on top of it. It will be the Agentic AI systems that don’t just respond to instructions but carry them out. We’re entering an era where AI can complete tasks end-to-end. Scheduling meetings, building software, managing portfolios, designing products, all autonomously. That’s when productivity leaps, and entire industries are reshaped.

Innovation will expand to fill any excess capacity that’s created. Even if companies overbuild data centres today, history shows that technology quickly catches up. The same happened with railways, telegraphs, and broadband. Supply precedes demand, and demand then explodes.

The software revolution will soon meet its physical counterpart. Anything that needs to be moved will eventually be moved by a machine directed by AI. The distinction between digital and physical will blur. Companies across the world are now developing robots capable of performing manual and repetitive work. It sounds like science fiction, but the prototypes already walk, grasp, and learn. Amazon recently announced plans to replace 500,000 warehouse roles with robots which equates to half its current workforce. That’s not a headline about layoffs it’s a glimpse into the new labour economy.

This convergence of software and hardware, when intelligence and motion combine, is where the true scale of AI’s impact will be felt. The long-term economic gains will dwarf anything seen in previous tech cycles.

For long term investors, the question isn’t whether AI is overhyped, it’s whether the market is mispricing how deep and long this cycle runs. Valuations for major tech companies may look stretched in the short term, but the structural trend remains intact. The capital being spent today is building the operating system of the future. There will be market setbacks and pullbacks along the way. Some projects will fail. But these will be moments to add to core holdings, not reasons to exit. Each correction will likely prove a buying opportunity in hindsight.

The scale of change ahead is hard to comprehend. Kurzweil’s timeline may have sounded crazy fifteen years ago, but it’s starting to look prophetic. If he was even close to right, what we’re seeing today is not the peak of an AI bubble; it’s the first chapter of a story that will define the century.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Does the US Government Shutdown Matter?

Every few years the US government runs out of money. It’s not that America is broke, it’s that Congress has again reached the debt ceiling, the legal cap on how much the government can borrow. Both sides know it will eventually be lifted, but they use the process as leverage. The result is political theatre with real-world consequences.

The US spends far more than it earns. The budget deficit this year is roughly $2 trillion, with $5 trillion of income and $7 trillion of expenses. That shortfall adds to a national debt now above $36 trillion. Before the country can even start paying that back, it would need to balance the budget through higher taxes or lower spending. Neither is politically possible. Instead, the debt ceiling has been raised or suspended more than a hundred times since 1960.

Shutdowns happen when negotiations stall, and funding expires. Workers are stood down, services freeze, and government departments grind to a halt until a deal is reached. Economically, the damage is limited. Each week of shutdown shaves about 0.1% off GDP, but growth usually rebounds once back pay and spending resume. Markets barely react because they’ve seen it all before. The real risk isn’t the short-term disruption, it’s the erosion of confidence in the system itself.

That confidence used to be rock solid. US Treasuries are considered the safest asset in the world. But the world is changing. Governments everywhere are now competing for capital as debt levels rise and interest costs bite. When too many borrowers chase too little capital, not everyone will be funded on favourable terms. Although Fitch downgraded the US last year over fiscal governance concerns, many other nations face a similar problem. Bond yields show investors are quietly recalibrating the idea of “risk-free.”

What’s different this time is the intent behind the shutdown. Trump and his team have reportedly seen it not just as a negotiating tactic, but as a way to reshape the federal workforce itself. By letting agencies go unfunded and contracts lapse, they could use fiscal gridlock to force structural change across government. To his supporters it’s long-overdue discipline after years of bureaucratic expansion. To critics it hollows out the machinery that keeps the world’s largest economy running. Either way, it introduces a new kind of uncertainty: weaponising dysfunction for reform.

Viewed in isolation, a government shutdown doesn’t matter much. Viewed as a pattern, it matters a lot. It reflects a system where short-term politics consistently override long-term responsibility. America can still borrow easily because of its size, its credibility, and the dollar’s dominance. But every cycle of brinkmanship chips away at that credibility.

The rest of the world is watching. Many advanced economies now face the same problem of too much debt, too little discipline, and no political will to fix it. For now, markets still reward inertia because no one wants to believe the system could crack. The question isn’t whether the US can keep borrowing, but how markets will price that privilege in the years ahead.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

A Super Bad Idea

The government’s recent backdown on the $3 million superannuation cap tax was as inevitable as it was overdue. From the start, the proposal to tax unrealised gains and to leave the $3 million threshold unindexed was unworkable, unfair, and destructive to investor confidence. Yet it still made it this far. That should concern everyone.

The idea of taxing unrealised gains is one of those concepts that makes sense to someone who has never built anything, but it falls apart in practice. It would have forced Australians to pay tax on increases in asset values they haven’t realised, money they don’t actually have. Imagine being forced to sell assets in a falling market just to fund a tax bill on a paper gain from the year before. It would have distorted investment behaviour, punished long-term savers, and turned a retirement vehicle into a speculative guessing game.

The failure to index the $3 million threshold compounded the problem. Inflation and compounding returns would have dragged more and more Australians into the net over time, not because they were super-rich, but because they had been prudent. The policy would have quietly shifted the goalposts every year, punishing success and eroding the principle of fairness on which the super system was built.

These were never minor oversights. They were red flags. Yet they were allowed to progress, right up until this week. Which raises a deeper issue. Increasingly, I see these extreme policy ideas being floated, almost as sacrificial pawns. Governments know the public will push back against overreach. By inserting unworkable elements, such as taxing unrealised gains, they create something to “give up” later, allowing the core legislation to pass with less resistance. There ends up being no opposition to the 15% additional tax because everyone has been distracted by smoke and mirrors.

This kind of political theatre might make sense in Canberra, but it undermines the integrity of the entire super system. Superannuation works because people can plan with confidence. Every time the rules change, that confidence is shaken. Investors begin to wonder not just what’s next, but whether they can trust the system at all. Constant tinkering turns a long-term savings framework into a short-term political tool.

It’s worth remembering that effective caps on super aren’t new. We’ve been here before. Back in the 1990s, the system had Reasonable Benefit Limits (RBLs) that capped how much individuals could hold in tax-advantaged super. The principle was clear. The limits were transparent, predictable, and indexed, so people could plan accordingly. The new proposals ignored that history and instead created confusion, inequity, and distrust.

The governments retreat is welcome, but the damage is done. The very act of proposing such measures sends a message that no rule is safe, no commitment permanent. It was a mean-spirited and opportunistic grab at retirement savings after years of government incentives to contribute to super. That’s a dangerous precedent for a system built on trust and time horizons that stretch decades into the future. Super is supposed to be the one part of the financial landscape Australians can count on. It deserves better than to be used as a bargaining chip.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Is Gold a Good Investment?

Gold has always had a unique place in the investment world. It’s tangible, timeless, and symbolic of wealth and security. In uncertain times, it often performs well. In 2025, when markets are volatile, central banks are recalibrating, and inflation and interest rates are moving in unpredictable ways, gold has been a great performer. The question for me though is whether gold still has a place in a modern portfolio.

The case for gold begins with its role as a store of value. When inflation erodes the purchasing power of paper currencies, gold tends to hold its worth. It has a long track record of protecting investors during periods of high inflation or when confidence in fiat money weakens. Beyond that, gold provides what investors want when uncertainty rises; diversification. It doesn’t move in lockstep with equities or bonds, and that lack of correlation can smooth the bumps in a portfolio during turbulent times.

Another key argument in favour of gold today is the strong demand from central banks and institutional investors. Around the world, central banks are buying record amounts of gold to diversify away from the US dollar and strengthen their reserves. That steady demand provides a floor under prices and signals a deeper structural confidence in gold as a reserve asset. There’s also the appeal of owning something real. Physical gold doesn’t rely on a promise to pay or a balance sheet behind it. It’s not someone else’s liability. For some investors, the ability to hold value in their hands is its own reassurance, especially when trust in financial systems is being tested.

The case against gold, however, is just as strong. Gold doesn’t pay interest, rent or dividends. It doesn’t compound. When interest rates are higher the opportunity cost of holding a non-yielding asset becomes more obvious. Investors could instead be earning 4 or 5 percent in bonds or term deposits while gold simply earns no income. There are also practical downsides. Physical gold needs to be stored safely, which means costs for vaulting, insurance, and security. While gold is often seen as stable, its price can be highly volatile. It can fall sharply after strong runs just as quickly as it climbs.

Then there’s the macro dynamic. When real interest rates rise, gold tends to struggle. Rising real yields increase the appeal of income-producing assets and reduce the relative attraction of gold. While real rates will likely come down in the short term, if central banks are forced to keep rates higher for longer, that could completely change the thesis for gold.

Another consideration is speculative behaviour. When prices surge, investors rush in, often late, which can inflate bubbles that eventually burst. The same fear and greed cycles that move stocks also exist in gold markets. There are many assets and areas that have been incredibly popular and delivered great returns but don’t meet the requirements to be included in our portfolios. We don't invest in crypto currencies or bitcoin, I consider Chinese stocks uninvestible, art and collectibles, most private credit and private equity are too high risk in my opinion. Gold’s appeal lies more in emotion than economics. It reflects fear, not fundamentals.

Gold may well continue to rise, just as other speculative assets might, but that doesn't make it a sound investment. Price movements alone don’t justify inclusion in a disciplined portfolio. Part of the core investment criteria for our portfolios is that the assets must create value and pay or earn income. Businesses, infrastructure and real assets that generate income and growth. It's not about chasing trends or what feels safe in the moment. Gold offers no earnings, no compounding and no productivity. It may have a place as a diversifier for some, but for me, investing with conviction means having clarity on what you own and staying disciplined throughout.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.