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Australian house prices and the economy stand at an important crossroads. On the one hand, we have the return of the Liberal-National coalition, the softening of APRA regulations, and rate cuts from the RBA, which all stand to stimulate. On the other hand, we have housing starts down by over 25% over the last year and showing no signs of turning, combined with anaemic retail sales, with the potential to push the economy into a dark place. One rarely discussed dynamic, however, is what Roger Montgomery, Chief Investment Officer at Montgomery Investment Management, calls 'the economics of enough'.

“People have borrowed enough, they’ve bought enough stuff, and eventually growth slows, and that’s where you get deleveraging occurring in the economy, where credit growth is slower than economic growth. I think there’s a risk that we’re now in that deleveraging phase.”

In this week's episode of The Rules of Investing, Roger shares what "quality" really means to him, some lessons on late cycle investing from Buffett himself, and we discuss two outwardly-similar companies with very different long term prospects.

Content discussed:

Time stamps

  • 1:50 - Investing in bank shares and goat carcasses
  • 3:23 - What "quality" really means
  • 7:00 - Why stick with value given momentum's run?
  • 10:43 - Lessons on late-cycle FOMO from Buffett
  • 12:55 - High-quality industrials vs the miners
  • 14:25 - Is it possible for miners to have moats?
  • 15:45 - Why the RBA needs to cut ... and aggressively
  • 22:05 - "The economics of enough"
  • 23:37 - On the prospects for AMP and Challenger
  • 28:48 - Roger answers our three favourite questions

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Comments

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David Hannell

Great interview, thank you Patrick

Ruth Alvarado

Did Roger mentioned ARB as one of the companies he will held if the market closed down for five years? as well as Reece Cochlear and CSL???

Julie Christianson

I like Roger Montgomery very much. He always is considerate of the listener and speaks in laymen’s terms. Thank you Roger. Really appreciate how you try to educate us.

Adam Easter

A great interview, thanks Patrick and Roger.

Duncan Owen

Look, Roger talks the talk but it's hard to take bearish advice from someone whose fund has underperformed the index over 7 years of a bull market. Does Roger only do well in bear markets, because he is always bearish?

Dean Morris

What an impressive interviewer Patrick is. Really enjoy his style of interview/questioning. Roger is one of the smartest investment guys in the country. Great speaker with great info.