May 13, 2025 • 19 mins
Market jitters got you worried?
Tune into the Friends With Money podcast as Money's Michelle Baltazar and Money magazine founder Paul Clitheroe unpack recession-proof investing strategies.
Discover how to safeguard your savings and investments, the power of diversification, and why a cool head can be your best asset.
Paul also shares his expert perspective on historical market cycles and actionable tips for weathering economic storms.
00:20 Recession proof investing: can we protect our savings?
00:41 Market volatility and historical perspectives
02:57 The importance of common sense in investing
05:51 Global population growth and economic demand
07:42 Recession proof strategies and personal experiences
14:17 Final thoughts and practical advice
Link: https://www.worldometers.info/
#friendswithmoney #michellebaltazar #paulclitheroe #recession
Email Us: podcast@moneymag.com.au
Get stories like this in our newsletter: bit.ly/3GDirbR
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Welcome to the Friends with Money podcast, brought to you
by Money Magazine, creating financial freedom for Australians since nineteen
ninety nine.
Speaker 2 (00:13):
Hello, you're listening to Friends with Money. I'm Michelle Baltasar,
editor in chief at Money Magazine. Thank you for joining us.
Today's episode is about recession proof investing. Can we really
protect our savings from the ups and downs of the
market or are there guiding principles that we need to
stick with through thick and thin. Joining us today is
(00:33):
Money Magazine founder and editorial advisor Paul Clitherow. Paul, it's
a pleasure to have you back on Friends with Money.
Speaker 3 (00:39):
That's always my pleasure for show.
Speaker 2 (00:42):
Last year on Valentine's Day, the ASX two hundred was
sitting on a record high of eighty five hundred forty
points and then it went down to seven three hundred
points after the Trump's tariff announcements. I hit the panic
button and I said, I need to talk to Paul
and tell me give me perspective around this. And by
(01:03):
the time we're doing this episode, the a SX two
hundred is back up to eighty one hundred points. So
tell me, what do we tell our readers about this
volatility in the market.
Speaker 4 (01:16):
Well, look, it's.
Speaker 3 (01:16):
Probably a good time to be doing it, isn't it.
Speaker 4 (01:18):
I mean, look, with hindsight, I would have rather told
you at seven three hundred points, which you know, I
would have done what I've been think for forty years now.
At seven thy three hundred, I would have been saying, look,
what we know from history is we know that this
global tariff and trade issues is something.
Speaker 3 (01:37):
Sort of new.
Speaker 4 (01:37):
We've always had trade wars going on back into the
fifteen hundreds, by the way. But the reality is is
that the only thing I know backed up by many, many,
many hundreds of years of history. The only thing that
I know is each time we're in one of these events,
our flight fear comes into play, and that we fear
that the sky is falling, and we do the chicken
(01:59):
little thing. We run around circles, cluck cluck, clucking, the
clever the sky is falling, the sky is falling. But interestingly,
over the long run, the sky has never falled.
Speaker 3 (02:08):
And here we can use the really.
Speaker 4 (02:10):
Probly the worst of all the downtterms, the Great Depression
of the eighteen eighties. You know, we can go into
the Great Depression of the twenty nine ninety thirty where
markets fell eighty six percent. Now that would get your
little feathers ruffled, Michelle, Wow, yeah, eighty six percent. That's
that's pretty something, right. And by the way, the one
nasty piece of evidence in panicking selling and not doing
(02:33):
that or doing or panicking and sewing, it's interesting, is
really only the Great Depression of twenty nine thirty because
they're because the falls were so enormous and the global
economy was so devastated. It took literally nearly to World
War nearly nearly, you know, right through to World War
II the markets to gain full recovery. So that's an
example that's an awfully long time to wait to get
(02:54):
your money back. Are they you divid and still flow?
By the way, But so basically the thing I've always
said it is that we know the rule. The rule
says we sell in that we know we sell in
the highs, we buy in the lows. Great advice, but
none of us have got the first clue where the
highs and loose are, despite all the other stuff you
read in social media and heavens knows where else. It's
(03:15):
why Money magazine doesn't run headlines saying sell everything now,
or sell your house and buy shares, because look a
sensible people, we know it's probbit showre we you know,
we know, we don't know. And so this concept if
you're of a personality where anytime a market fell, you're
going to start losing sleep and go into the cell mode, bluntly,
(03:37):
you actually shouldn't own things like shares. An advantage of
property is, by the way, usually in these cycles your
property is falling in value just as quickly, but you
don't know about it.
Speaker 3 (03:49):
Properties.
Speaker 4 (03:50):
Michelle's house is not listed on the share market, and
so if Michelle has covered a house had fall them
a value two hundred thousand dollars today or yesterday, Michelle
Shell doesn't know. What I find really funny about people
is that they go, it's okay, Paul, I'm not worried
about my property. If you're lucky enough to own a property,
I'm not worried about my property falling in value. It's
(04:12):
going to recover. And I say why is it going
to recover? And they say, well, Paul, the population of
Australia in the world is growing, and more people means
more houses. And I go, spot on, you've nailed the
property argument, but why does that argument not work for
Woolworths or the Commonwealth Bank or CSL or BHP or
(04:35):
whatever else, Because it really is exactly the same process
in our economy. Wooly sells food Fairven's sake, so I
own Wooly shares. The only thing that's eavi going to
threaten me and threaten my view on the value of
property is if our population shrank due to some crisis.
(04:56):
Now take Mubonic plague in the thirteen thirty forty nine
Take there. So there we do know for a fact
that extra records in Venice a bit over half the
population died. That is not good for Woolworths or property.
But basically what we do know is we people, us
little people running around buying a lay of bread as
I did this morning, buying the leader of milk. We
(05:17):
are sixty eight percent of the economy, just us trotting
around doing our thing. And it is one of the
reasons why Australia has done okay the last but twenty
odd years. Is I know there are all sorts of
views on immigration.
Speaker 3 (05:28):
I'm an immigrato. I came up from England as.
Speaker 4 (05:30):
A ten quid pomp when I was eight years older,
Mum and Dad and my sister. So I'm one of those.
But funnily enough, in my own little way, I've added
to the economy as well. Built a business, employed people,
pay tax, bought a lay of bread. So a great
part of the economy is just us pottering around. The
reason I call back to common sense about not selling
is it makes sense to have common sense. The world
(05:52):
population is growing austraight. As population is growing, demand for
housing is growing. We'll come to that later. Demand for
loaves of bread is growing, Demand fruit and vegetables, banking services, insureance,
you name it. Demand is growing, right, It's just more people.
It's pretty simple really, So basically, when a market falls,
I also feel like selling, but every fiver in me
(06:14):
knows it's wrong based on history. The history of property
goes back seven thousand years, history of shares goes back hundreds.
Businesses have been in the economy for seven thousand years.
As long as we've been alive, we've either made bread
or done something. We are a business based economy, so
it's really important just to sort of You've got to
(06:35):
get that little person in you telling you, oh my god,
this is different. This is different. The end of the
world is coming. I must sell and laree.
Speaker 3 (06:42):
That's what I was.
Speaker 4 (06:43):
I thought I would have said to you a few
weeks ago at seventy three hundred, and it's kind of
nice today it is back at eight thousand, because you know,
this is no great surprise. In particular, at the moment,
you have an unusual situation where one person basically is
pulling triggers that can impact them traumatically. But that person
pulling those economic levers around tariffs and stuff.
Speaker 3 (07:05):
He's not having the population, he's not.
Speaker 4 (07:06):
Doubling the population. We've still got fundamental economic growth in
the global clan.
Speaker 2 (07:12):
It's so comforting to hear all that, because sometimes it
feels like we're a nation with a memory of a
goldfish about how markets work. Right, And now we have
JP Morgan saying the chances of a recession has gone
up from thirty percent to sixty percent to now ninety percent.
(07:34):
So yes, the markets have bounced back, but if there
is a global recession around the corner, it's never too
late to save, it's never too late to not be
wasteful of your money, and certainly you want to stay
in the market because it's about time, not timing in
(07:55):
terms of your shares and property. Is that a fair
recap of what to do when there is uncertainty still
and as you've rightly pointed out, some people are going
through really tough times.
Speaker 3 (08:09):
Oh absolutely, in simply in the economy.
Speaker 4 (08:13):
The reality is in the biggest boom where you know,
some years you will make thirty or forty percent of chairs,
just the way that some years you'll lose. Thet's the
way it over time, history says you go to average
around that ten or eleven percent including giveness. So basically
that doesn't really do much for people who don't own
any shares and don't have any super The reality is
(08:35):
we're always going to have for a whole bunch of reasons,
from family breakdowns, ill health, mental health, cancer. You know,
there is always going to be even the best of
biggest of booms, there are always going to be people
doing it tough and it could well be one of us.
And your points are right if you've got a bit
of a buffer and savings and so on. But these
are all these are lovely things to have. And I
(08:56):
mentioned already the pressure of the human sulfur under in
ninety ninety one inustrated a mortgage eight at seven percent,
had to sell both cars and so on. But the
big thing was that I actually didn't lose my job
in that procession. And if I'd lost my job in
that procession, because Vick was home with the kids, luckily
she could have gone back to teaching because she's on
maternity leave. That was a real safety factor for us.
(09:19):
If I lost my job, it's another diversification, diversification plan,
I guess in a relationship. And so we said, well,
Paul lose his job in that particular time, which is
not impossible, and the employment got up towards nine percent.
Then we thought, well, I'll be coming at home dad,
And we were in that we were lucky, lucky of
the many. But Vicky could go off portunity to leave
them back into teaching. So but that's purely to us.
(09:40):
But you know, we'd like to sell both cars and stuff. Look,
it's not particularly pleasant, but I think the younger generation
had been through. We're now talking about those who are
not doing it really tough today. But we are going
to see, no matter, how will we manage the economy
with the amounts of debt we're racking up at federal
levels and so on, and everyone's seeing the deficits going forward.
(10:02):
It's always risky for an economy to carry lots of debt,
so sooner or later something we don't predict, And the
only thing I can predict is we won't predict what happened.
Is the Trump thing something we've never been through before, Yes,
it is. We've had trade wars before, we had tariffs
being Yet this is going off thousands of years charging
people to bring goods into your country. That's back to borders.
But this is unique, But it's no more unique than
(10:25):
the failure of Lehman's It's no more unique than the
nineteen ninety dot com bust. Why did pick a single
one of that is? I didn't pick this Trump stuff,
even though it was failure. The tariffyed was pretty He
spoke about it a lot, but I had no idea
if it was bluff or bluster, and I figured it
had hurt Americans more than anyone else, which is the
likely outcome. By the way it may affect all it
(10:46):
will affect all this that this continues. So one reason
another we're going to see recessions come and go but
I can't get I can't say to you that this
Trump stuff is It is totally unique in the sense
it's the US president, but it is not unique. Downturns
are not unique. World wars happen, a dot com bus happened,
(11:08):
a banking collapse happens, are Lilliams. So stuff happens, and
we're incredibly intelligent as we look back at it. But
the fundamental thing I keep pointing to is where the
demand for property and goods and services comes from is
human beings. And this year the world is going to
grow by approximately ninety three million people. Now that's three
in a bit times the population of Australia are going
(11:29):
to be born this year. The world population is exploding.
If readers are really interested, you to think called world
O meter, World oh meter, and just just it actually
shows you births and deaths.
Speaker 3 (11:41):
By the second.
Speaker 4 (11:42):
It is quite alarming clock actually, but it shows you
basically that this year, and it's looked plus or artist,
it's pretty much right, ninety plus million new people on
the planet. Now, that becomes a billion new people on
the planet in ten years. And guess what, Michelle, these
people eat. They want to buy a car they want electricity,
(12:02):
they want to be warm in winter, they prefer to
be cool in summer. And basically primary demand driver in
the global economy is we little people like you and
I running around and repeating myself, running around and buying
our lafe of bread, and paying our rent, paying off
a borgage, whatever we're doing, buying a car, selling a car,
panicking and selling our shares.
Speaker 3 (12:23):
Please don't do that.
Speaker 4 (12:24):
The reality is is that we are the engine room
of economic growth. And I simply sixty eight percent of
the world's economic just comes from us wandering around the
place doing stuff. And so look, I just can't get
to if we go into a recession, we will recover
from a recession, and bluntly, and I'm repeating myself again,
the recession. You talk about nature's cleansing cycle. If we
(12:45):
get too many predators, well, stuff gets eaten and the
predator has got nothing to eat.
Speaker 3 (12:49):
They die out. Now it's awful. Okay, nature can be
really tough. It can be really really tough on over
numbers of predators, whatever it may be.
Speaker 4 (12:58):
But the reality is is that a recession is a
bit of an economic cleansing cycle.
Speaker 3 (13:02):
As the wonderful Warren Buffett says, which I do adore.
Speaker 4 (13:07):
You know, the only time you find out when people
are swimming naked is when the tide goes out, and
you know, when things boom, we get a lot of
stuff going on that really is you know you're going
to get caught out sooner or later, and as the
tide goes out. So what Buffett is saying, the tide
going out is like recession. When the recession comes, a
lot of poor practices get on earthed and bluntly it is.
(13:29):
It is one of the economy's cleansing parts of the cycle.
Easy for me to say, if I lose my job
in that cycle, it's really painful. Right, there is pain
if we go into one. We are going to recover
because the world population and Australia's population, regardless of this
current political debate, is going to great growth in people
means growth in demark So basically, do what you can
(13:50):
to hang in there. If you need to, you cancel
the fox door subscription. If you need to, you sell
the car if you need to. Bluntly, I've had a
few people, you know, move out of the homes they
are and they're not that kid on living with mum
and dad, or maybe they can't. It's like me, my
parents lived in the country, very hard to live with
Mamma dad. But people are taking some pretty strong action
to save those primary assets. So it is really I
(14:11):
think it is about not panicking and selling any shares and.
Speaker 3 (14:13):
Super in a bit of a downturn. You know, you
always end up regretting that.
Speaker 2 (14:17):
Now you've kind of covered this before, but I was
enjoying our conversation that I forgot to ask the obvious,
which is the topic of this episode, recession proof investing.
So for a bonus round, can you give our listeners
three tips on recession proofing their shares or property portfolio?
Speaker 4 (14:38):
Right now, I think it's really more a broader comment.
I mean, the obvious recession proof strategy is that we
do know that cash, for example, it is always over
any ten year period, the worst performing asset class will
ever hold no protection against inflation. You pay tax on
your interest, and let's say at the moment, even if
you're getting five some of the turn to positive strip
(14:59):
out about three percent inflation. Let's say only five percent
your pain forty percent.
Speaker 3 (15:05):
Tax there as two, so you're five percent.
Speaker 4 (15:07):
Three percent inflation is about three, so at best, just
standing still even with relatively high rates of return to
deposit and rates. By the way, I support the other experts,
rates will go down. And by the way, one of
the joys if you caught that of a recession is
obviously rates go down strongly during a recession because that's
how the reserve bank allows us to helps us to
(15:27):
recover again. So you know, rates have certainly got a
drop if things slowed down. So basically the wonderful thing
would be is that as you go into a recession,
you one hundred percent in cash earning five percent. Recession
comes along, both property and chair values will tend to fall,
and of course you buy in at the bottom. Stupid strategy.
So my feeling is in terms of being recession proof.
It is actually also where you are in a boom
(15:48):
to be quite blunt for shell and where we are
is I particularly.
Speaker 3 (15:53):
It's it's easy.
Speaker 4 (15:55):
At my age when Vicki and myself had three kids,
we had absolutely doff all savings. Now we were struggling
to pay our mortgage each month, let alone savings. So
the perfect world doesn't really exist, but obviously a recept
we're now talking about investing I do not change my
asset allocation across cash, shares and property in booms or busts.
(16:17):
So my recession proof strategy for me is maintaining my
diversified portfolio. If I got a bit over excited during
a boom, I got a bit too excited and found
most of my super and shares. We shouldn't be doing
that in a boom or bus to be quite plucked.
So for me, it's about maintaining sensible mix of assets.
And if you're younger, I would be sticking with my
(16:37):
growth strategy bluntly. At my age seventy this year, I'm
only working a few days a week, mainly for Human
Shop at a couple of boards I chair. But basically
for me at the moment is that I am earning
less than we spend, and so for me to have
say a couple of years of our spending money put
aside in either cash and superannuation or outside superannuations makes
(16:59):
a lot of sense because as my earnings decline, I
need to rely on assets, and what I don't want
to be doing is I don't want to be forced
to sell assets in a downturn. So a recession procession
proof strategy for a younger person is bluntly to maintain
the sort of superannuation so on you should be in,
which is really great strategy. You have made thirty or
forty years to go visit smart to have a little
(17:22):
bit of a pot of savings if you can't look obviously,
it's smart if you can, because what you don't want
to be forced to do is the last thing you
need is and that's why Vick and myself, you know,
cancel whatever you need to cancel, Fox or whatever, get
rid of that stuff on a recession if you're looking
at losing your.
Speaker 3 (17:37):
Job or whatever.
Speaker 4 (17:37):
Cars may need to go, whatever. But basically it's maintaining
the primary asset if you own a home, and it's
doing whatever you need to do to maintain they have.
So for me, really, I think in a way i'd
probably throughout my life being prepared for recession simply by
holding a mix of assets and not punting on one
asset with lots of debt. Well said Paul.
Speaker 2 (17:58):
Always a pleasure to have you on the podcas Thanks
for your time, my.
Speaker 4 (18:02):
Pleasure, and I'll look forward to see what happens to
your stuper innuation in the ear of Donald Trump, Michelle,
and we could well get a really decent downturn and
at some point in the next thirty years history says,
we guarantee to get another monster down to it.
Speaker 3 (18:17):
We will recover and I've got no idea what's going
to cause it.
Speaker 2 (18:20):
Yes, I think what I got from this from our
conversation is keep calm and carry on.
Speaker 3 (18:27):
Yeah, you need that British too shirt. Thanks Michelle.
Speaker 2 (18:29):
Before we go, If you enjoyed listening to the Friends
with Money podcast or this episode, please share it with
your friends and family. Do you have a finance question
that you'd like Paul to cover in his Ask Paul column?
Drop us a line on podcast at moneymag dot com
dot au. Until next I'm Michelle Baltazar. Bye for now.
Speaker 1 (18:51):
Thanks for listening to the Friends with Money podcast. For credible,
independent and easy to understand financial commentary, visit moneymag dot
com dot au. Please remember that the views and opinions
expressed in this podcast are general in nature, and further
independent advice and research based on your personal circumstances should
(19:11):
be sought before making an investment decision.
Welcome to the Friends with Money podcast, brought to you
by Money Magazine, creating financial freedom for Australians since nineteen
ninety nine.
Speaker 2 (00:13):
Hello, you're listening to Friends with Money. I'm Michelle Baltasar,
editor in chief at Money Magazine. Thank you for joining us.
Today's episode is about recession proof investing. Can we really
protect our savings from the ups and downs of the
market or are there guiding principles that we need to
stick with through thick and thin. Joining us today is
(00:33):
Money Magazine founder and editorial advisor Paul Clitherow. Paul, it's
a pleasure to have you back on Friends with Money.
Speaker 3 (00:39):
That's always my pleasure for show.
Speaker 2 (00:42):
Last year on Valentine's Day, the ASX two hundred was
sitting on a record high of eighty five hundred forty
points and then it went down to seven three hundred
points after the Trump's tariff announcements. I hit the panic
button and I said, I need to talk to Paul
and tell me give me perspective around this. And by
(01:03):
the time we're doing this episode, the a SX two
hundred is back up to eighty one hundred points. So
tell me, what do we tell our readers about this
volatility in the market.
Speaker 4 (01:16):
Well, look, it's.
Speaker 3 (01:16):
Probably a good time to be doing it, isn't it.
Speaker 4 (01:18):
I mean, look, with hindsight, I would have rather told
you at seven three hundred points, which you know, I
would have done what I've been think for forty years now.
At seven thy three hundred, I would have been saying, look,
what we know from history is we know that this
global tariff and trade issues is something.
Speaker 3 (01:37):
Sort of new.
Speaker 4 (01:37):
We've always had trade wars going on back into the
fifteen hundreds, by the way. But the reality is is
that the only thing I know backed up by many, many,
many hundreds of years of history. The only thing that
I know is each time we're in one of these events,
our flight fear comes into play, and that we fear
that the sky is falling, and we do the chicken
(01:59):
little thing. We run around circles, cluck cluck, clucking, the
clever the sky is falling, the sky is falling. But interestingly,
over the long run, the sky has never falled.
Speaker 3 (02:08):
And here we can use the really.
Speaker 4 (02:10):
Probly the worst of all the downtterms, the Great Depression
of the eighteen eighties. You know, we can go into
the Great Depression of the twenty nine ninety thirty where
markets fell eighty six percent. Now that would get your
little feathers ruffled, Michelle, Wow, yeah, eighty six percent. That's
that's pretty something, right. And by the way, the one
nasty piece of evidence in panicking selling and not doing
(02:33):
that or doing or panicking and sewing, it's interesting, is
really only the Great Depression of twenty nine thirty because
they're because the falls were so enormous and the global
economy was so devastated. It took literally nearly to World
War nearly nearly, you know, right through to World War
II the markets to gain full recovery. So that's an
example that's an awfully long time to wait to get
(02:54):
your money back. Are they you divid and still flow?
By the way, But so basically the thing I've always
said it is that we know the rule. The rule
says we sell in that we know we sell in
the highs, we buy in the lows. Great advice, but
none of us have got the first clue where the
highs and loose are, despite all the other stuff you
read in social media and heavens knows where else. It's
(03:15):
why Money magazine doesn't run headlines saying sell everything now,
or sell your house and buy shares, because look a
sensible people, we know it's probbit showre we you know,
we know, we don't know. And so this concept if
you're of a personality where anytime a market fell, you're
going to start losing sleep and go into the cell mode, bluntly,
(03:37):
you actually shouldn't own things like shares. An advantage of
property is, by the way, usually in these cycles your
property is falling in value just as quickly, but you
don't know about it.
Speaker 3 (03:49):
Properties.
Speaker 4 (03:50):
Michelle's house is not listed on the share market, and
so if Michelle has covered a house had fall them
a value two hundred thousand dollars today or yesterday, Michelle
Shell doesn't know. What I find really funny about people
is that they go, it's okay, Paul, I'm not worried
about my property. If you're lucky enough to own a property,
I'm not worried about my property falling in value. It's
(04:12):
going to recover. And I say why is it going
to recover? And they say, well, Paul, the population of
Australia in the world is growing, and more people means
more houses. And I go, spot on, you've nailed the
property argument, but why does that argument not work for
Woolworths or the Commonwealth Bank or CSL or BHP or
(04:35):
whatever else, Because it really is exactly the same process
in our economy. Wooly sells food Fairven's sake, so I
own Wooly shares. The only thing that's eavi going to
threaten me and threaten my view on the value of
property is if our population shrank due to some crisis.
(04:56):
Now take Mubonic plague in the thirteen thirty forty nine
Take there. So there we do know for a fact
that extra records in Venice a bit over half the
population died. That is not good for Woolworths or property.
But basically what we do know is we people, us
little people running around buying a lay of bread as
I did this morning, buying the leader of milk. We
(05:17):
are sixty eight percent of the economy, just us trotting
around doing our thing. And it is one of the
reasons why Australia has done okay the last but twenty
odd years. Is I know there are all sorts of
views on immigration.
Speaker 3 (05:28):
I'm an immigrato. I came up from England as.
Speaker 4 (05:30):
A ten quid pomp when I was eight years older,
Mum and Dad and my sister. So I'm one of those.
But funnily enough, in my own little way, I've added
to the economy as well. Built a business, employed people,
pay tax, bought a lay of bread. So a great
part of the economy is just us pottering around. The
reason I call back to common sense about not selling
is it makes sense to have common sense. The world
(05:52):
population is growing austraight. As population is growing, demand for
housing is growing. We'll come to that later. Demand for
loaves of bread is growing, Demand fruit and vegetables, banking services, insureance,
you name it. Demand is growing, right, It's just more people.
It's pretty simple really, So basically, when a market falls,
I also feel like selling, but every fiver in me
(06:14):
knows it's wrong based on history. The history of property
goes back seven thousand years, history of shares goes back hundreds.
Businesses have been in the economy for seven thousand years.
As long as we've been alive, we've either made bread
or done something. We are a business based economy, so
it's really important just to sort of You've got to
(06:35):
get that little person in you telling you, oh my god,
this is different. This is different. The end of the
world is coming. I must sell and laree.
Speaker 3 (06:42):
That's what I was.
Speaker 4 (06:43):
I thought I would have said to you a few
weeks ago at seventy three hundred, and it's kind of
nice today it is back at eight thousand, because you know,
this is no great surprise. In particular, at the moment,
you have an unusual situation where one person basically is
pulling triggers that can impact them traumatically. But that person
pulling those economic levers around tariffs and stuff.
Speaker 3 (07:05):
He's not having the population, he's not.
Speaker 4 (07:06):
Doubling the population. We've still got fundamental economic growth in
the global clan.
Speaker 2 (07:12):
It's so comforting to hear all that, because sometimes it
feels like we're a nation with a memory of a
goldfish about how markets work. Right, And now we have
JP Morgan saying the chances of a recession has gone
up from thirty percent to sixty percent to now ninety percent.
(07:34):
So yes, the markets have bounced back, but if there
is a global recession around the corner, it's never too
late to save, it's never too late to not be
wasteful of your money, and certainly you want to stay
in the market because it's about time, not timing in
(07:55):
terms of your shares and property. Is that a fair
recap of what to do when there is uncertainty still
and as you've rightly pointed out, some people are going
through really tough times.
Speaker 3 (08:09):
Oh absolutely, in simply in the economy.
Speaker 4 (08:13):
The reality is in the biggest boom where you know,
some years you will make thirty or forty percent of chairs,
just the way that some years you'll lose. Thet's the
way it over time, history says you go to average
around that ten or eleven percent including giveness. So basically
that doesn't really do much for people who don't own
any shares and don't have any super The reality is
(08:35):
we're always going to have for a whole bunch of reasons,
from family breakdowns, ill health, mental health, cancer. You know,
there is always going to be even the best of
biggest of booms, there are always going to be people
doing it tough and it could well be one of us.
And your points are right if you've got a bit
of a buffer and savings and so on. But these
are all these are lovely things to have. And I
(08:56):
mentioned already the pressure of the human sulfur under in
ninety ninety one inustrated a mortgage eight at seven percent,
had to sell both cars and so on. But the
big thing was that I actually didn't lose my job
in that procession. And if I'd lost my job in
that procession, because Vick was home with the kids, luckily
she could have gone back to teaching because she's on
maternity leave. That was a real safety factor for us.
(09:19):
If I lost my job, it's another diversification, diversification plan,
I guess in a relationship. And so we said, well,
Paul lose his job in that particular time, which is
not impossible, and the employment got up towards nine percent.
Then we thought, well, I'll be coming at home dad,
And we were in that we were lucky, lucky of
the many. But Vicky could go off portunity to leave
them back into teaching. So but that's purely to us.
(09:40):
But you know, we'd like to sell both cars and stuff. Look,
it's not particularly pleasant, but I think the younger generation
had been through. We're now talking about those who are
not doing it really tough today. But we are going
to see, no matter, how will we manage the economy
with the amounts of debt we're racking up at federal
levels and so on, and everyone's seeing the deficits going forward.
(10:02):
It's always risky for an economy to carry lots of debt,
so sooner or later something we don't predict, And the
only thing I can predict is we won't predict what happened.
Is the Trump thing something we've never been through before, Yes,
it is. We've had trade wars before, we had tariffs
being Yet this is going off thousands of years charging
people to bring goods into your country. That's back to borders.
But this is unique, But it's no more unique than
(10:25):
the failure of Lehman's It's no more unique than the
nineteen ninety dot com bust. Why did pick a single
one of that is? I didn't pick this Trump stuff,
even though it was failure. The tariffyed was pretty He
spoke about it a lot, but I had no idea
if it was bluff or bluster, and I figured it
had hurt Americans more than anyone else, which is the
likely outcome. By the way it may affect all it
(10:46):
will affect all this that this continues. So one reason
another we're going to see recessions come and go but
I can't get I can't say to you that this
Trump stuff is It is totally unique in the sense
it's the US president, but it is not unique. Downturns
are not unique. World wars happen, a dot com bus happened,
(11:08):
a banking collapse happens, are Lilliams. So stuff happens, and
we're incredibly intelligent as we look back at it. But
the fundamental thing I keep pointing to is where the
demand for property and goods and services comes from is
human beings. And this year the world is going to
grow by approximately ninety three million people. Now that's three
in a bit times the population of Australia are going
(11:29):
to be born this year. The world population is exploding.
If readers are really interested, you to think called world
O meter, World oh meter, and just just it actually
shows you births and deaths.
Speaker 3 (11:41):
By the second.
Speaker 4 (11:42):
It is quite alarming clock actually, but it shows you
basically that this year, and it's looked plus or artist,
it's pretty much right, ninety plus million new people on
the planet. Now, that becomes a billion new people on
the planet in ten years. And guess what, Michelle, these
people eat. They want to buy a car they want electricity,
(12:02):
they want to be warm in winter, they prefer to
be cool in summer. And basically primary demand driver in
the global economy is we little people like you and
I running around and repeating myself, running around and buying
our lafe of bread, and paying our rent, paying off
a borgage, whatever we're doing, buying a car, selling a car,
panicking and selling our shares.
Speaker 3 (12:23):
Please don't do that.
Speaker 4 (12:24):
The reality is is that we are the engine room
of economic growth. And I simply sixty eight percent of
the world's economic just comes from us wandering around the
place doing stuff. And so look, I just can't get
to if we go into a recession, we will recover
from a recession, and bluntly, and I'm repeating myself again,
the recession. You talk about nature's cleansing cycle. If we
(12:45):
get too many predators, well, stuff gets eaten and the
predator has got nothing to eat.
Speaker 3 (12:49):
They die out. Now it's awful. Okay, nature can be
really tough. It can be really really tough on over
numbers of predators, whatever it may be.
Speaker 4 (12:58):
But the reality is is that a recession is a
bit of an economic cleansing cycle.
Speaker 3 (13:02):
As the wonderful Warren Buffett says, which I do adore.
Speaker 4 (13:07):
You know, the only time you find out when people
are swimming naked is when the tide goes out, and
you know, when things boom, we get a lot of
stuff going on that really is you know you're going
to get caught out sooner or later, and as the
tide goes out. So what Buffett is saying, the tide
going out is like recession. When the recession comes, a
lot of poor practices get on earthed and bluntly it is.
(13:29):
It is one of the economy's cleansing parts of the cycle.
Easy for me to say, if I lose my job
in that cycle, it's really painful. Right, there is pain
if we go into one. We are going to recover
because the world population and Australia's population, regardless of this
current political debate, is going to great growth in people
means growth in demark So basically, do what you can
(13:50):
to hang in there. If you need to, you cancel
the fox door subscription. If you need to, you sell
the car if you need to. Bluntly, I've had a
few people, you know, move out of the homes they
are and they're not that kid on living with mum
and dad, or maybe they can't. It's like me, my
parents lived in the country, very hard to live with
Mamma dad. But people are taking some pretty strong action
to save those primary assets. So it is really I
(14:11):
think it is about not panicking and selling any shares and.
Speaker 3 (14:13):
Super in a bit of a downturn. You know, you
always end up regretting that.
Speaker 2 (14:17):
Now you've kind of covered this before, but I was
enjoying our conversation that I forgot to ask the obvious,
which is the topic of this episode, recession proof investing.
So for a bonus round, can you give our listeners
three tips on recession proofing their shares or property portfolio?
Speaker 4 (14:38):
Right now, I think it's really more a broader comment.
I mean, the obvious recession proof strategy is that we
do know that cash, for example, it is always over
any ten year period, the worst performing asset class will
ever hold no protection against inflation. You pay tax on
your interest, and let's say at the moment, even if
you're getting five some of the turn to positive strip
(14:59):
out about three percent inflation. Let's say only five percent
your pain forty percent.
Speaker 3 (15:05):
Tax there as two, so you're five percent.
Speaker 4 (15:07):
Three percent inflation is about three, so at best, just
standing still even with relatively high rates of return to
deposit and rates. By the way, I support the other experts,
rates will go down. And by the way, one of
the joys if you caught that of a recession is
obviously rates go down strongly during a recession because that's
how the reserve bank allows us to helps us to
(15:27):
recover again. So you know, rates have certainly got a
drop if things slowed down. So basically the wonderful thing
would be is that as you go into a recession,
you one hundred percent in cash earning five percent. Recession
comes along, both property and chair values will tend to fall,
and of course you buy in at the bottom. Stupid strategy.
So my feeling is in terms of being recession proof.
It is actually also where you are in a boom
(15:48):
to be quite blunt for shell and where we are
is I particularly.
Speaker 3 (15:53):
It's it's easy.
Speaker 4 (15:55):
At my age when Vicki and myself had three kids,
we had absolutely doff all savings. Now we were struggling
to pay our mortgage each month, let alone savings. So
the perfect world doesn't really exist, but obviously a recept
we're now talking about investing I do not change my
asset allocation across cash, shares and property in booms or busts.
(16:17):
So my recession proof strategy for me is maintaining my
diversified portfolio. If I got a bit over excited during
a boom, I got a bit too excited and found
most of my super and shares. We shouldn't be doing
that in a boom or bus to be quite plucked.
So for me, it's about maintaining sensible mix of assets.
And if you're younger, I would be sticking with my
(16:37):
growth strategy bluntly. At my age seventy this year, I'm
only working a few days a week, mainly for Human
Shop at a couple of boards I chair. But basically
for me at the moment is that I am earning
less than we spend, and so for me to have
say a couple of years of our spending money put
aside in either cash and superannuation or outside superannuations makes
(16:59):
a lot of sense because as my earnings decline, I
need to rely on assets, and what I don't want
to be doing is I don't want to be forced
to sell assets in a downturn. So a recession procession
proof strategy for a younger person is bluntly to maintain
the sort of superannuation so on you should be in,
which is really great strategy. You have made thirty or
forty years to go visit smart to have a little
(17:22):
bit of a pot of savings if you can't look obviously,
it's smart if you can, because what you don't want
to be forced to do is the last thing you
need is and that's why Vick and myself, you know,
cancel whatever you need to cancel, Fox or whatever, get
rid of that stuff on a recession if you're looking
at losing your.
Speaker 3 (17:37):
Job or whatever.
Speaker 4 (17:37):
Cars may need to go, whatever. But basically it's maintaining
the primary asset if you own a home, and it's
doing whatever you need to do to maintain they have.
So for me, really, I think in a way i'd
probably throughout my life being prepared for recession simply by
holding a mix of assets and not punting on one
asset with lots of debt. Well said Paul.
Speaker 2 (17:58):
Always a pleasure to have you on the podcas Thanks
for your time, my.
Speaker 4 (18:02):
Pleasure, and I'll look forward to see what happens to
your stuper innuation in the ear of Donald Trump, Michelle,
and we could well get a really decent downturn and
at some point in the next thirty years history says,
we guarantee to get another monster down to it.
Speaker 3 (18:17):
We will recover and I've got no idea what's going
to cause it.
Speaker 2 (18:20):
Yes, I think what I got from this from our
conversation is keep calm and carry on.
Speaker 3 (18:27):
Yeah, you need that British too shirt. Thanks Michelle.
Speaker 2 (18:29):
Before we go, If you enjoyed listening to the Friends
with Money podcast or this episode, please share it with
your friends and family. Do you have a finance question
that you'd like Paul to cover in his Ask Paul column?
Drop us a line on podcast at moneymag dot com
dot au. Until next I'm Michelle Baltazar. Bye for now.
Speaker 1 (18:51):
Thanks for listening to the Friends with Money podcast. For credible,
independent and easy to understand financial commentary, visit moneymag dot
com dot au. Please remember that the views and opinions
expressed in this podcast are general in nature, and further
independent advice and research based on your personal circumstances should
(19:11):
be sought before making an investment decision.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!