Why the goldilocks economy is great for small caps, and the problem with Australian housing policy

In episode 20 of Stocks Neat, Co-Portfolio Manager Gareth Brown and I sit down to explore the global economic outlook, its goldilocks nature, and its implications for investing.

Switching from ourusual whiskey, Gareth and I opted for a coffee as the conversation kicks off with a reflection on the past year’s positive investment returns, despite being a year marked by market scepticism and uncertainty. They explore the highlights and lowlights and reiterate an ongoing focus on smaller cap companies, given the potential for these to pay off in a relative sense over the next five years.

“I mean, it does feel like this Goldilocks scenario of inflation coming back down. Interest rates maybe don’t need to go up too much further, and this recession either doesn’t come in the US or is not as bad as people had feared in the US, UK, and Australia.”

We follow on with a deep dive into the enigmatic world of housing markets, interest rates, and their far-reaching economic impacts. They discuss the surprising resilience of house prices amid rising interest rates, exploring various factors influencing this phenomenon. They share their perspectives on the economic recovery and its potential impact on different industries and stocks.

We want to extend our apologies for the slight delay in recording July’s episode, which is attributed to a bustling end to the financial year and the Forager Roadshow. Watch it here in case you missed it.

Listen below

Explore previous episodes here. We’d love your feedback. If you like what you’re hearing (and what we’re drinking), be sure to follow and subscribe – we’re doing this every month.

Drink of choice:

• Coffee: Hub Australia

You can listen on:

• Spotify
• Apple
• Buzzsprout
• YouTube

Access a unique portfolio of global shares

If you share our passion for unloved bargains and have a long-term focus, Forager could be the right investment for you. Click 'FOLLOW' below for more of our insights.

For all of Forager's latest content, videos, podcasts and fund reports, register here.

Transcript

Just a quick reminder, this podcast may contain general advice, but it doesn't take into account your personal circumstances, needs, or objectives. The scenarios and stocks mentioned in this podcast are for illustrative purposes only and do not constitute a recommendation to buy, hold, or sell any financial products. Read the relevant PDS, assess whether that information is appropriate for you, and consider speaking to a financial advisor before making investment decisions. Past performance is no indicator of future performance.

[00:00:39] SJ: Hello and welcome to episode 20 of Stocks Neat. We're a bit late this month recording this podcast, so apologies for that. If you've been hanging out for it, it's been a bit of a crazy busy time here at Forager in the financial year, wrap-ups and our road show. But we're here now, Gareth, and today we are drinking coffee, not whiskey.

[00:01:01] GB: Yes. From the level 11 cafe in our building. So we'll give you some tasting notes at the end.

[00:01:06] SJ: We’re about to jump on a plane down to Melbourne so it's coffee day, not a whiskey day. G, maybe a quick wrap up of the things we've been talking about on our road show. It's been a financial year of good returns in the face, I think, of a lot of skepticism out there about markets. What have been the highlights and low lights for you, personally, over the past 12 months?

[00:01:28] GB: Well, I think putting it into context that I think we've had a really good year. We slightly underperformed the index over the year, but it was a year of significant absolute returns. In the high teens. We are happy with that. The way we've done it is we, unsurprisingly, focused on smaller cap stocks. They have not had a banner year. The larger cap businesses and the bigger businesses around the world have tended to outperform, and yet we've nearly kept up with the market, while maintaining that large weighting to smaller cap stocks that we think will pay off in a relative sense at some point in the next three to five years.

[00:02:06] SJ: Yes. Particularly pleasing for me, I think when I think back to a very successful first seven years of this business, we were getting lots of takeovers. We had some big positions in lesser-known stocks that added huge amounts of outperformance for us. It was a bit of a return to that in this past year, your largest weighting in the portfolio, Flutter (LON: FLTR), is doing very well for us. You talk about small cap underperformance, Europe's been even worse in terms of relative performance, but some small caps are delivering some great results there. So, I do feel particularly encouraged by the way those returns have come, considering.

[00:02:46] GB: Yes, absolutely. I think the main thing for us to keep in mind is some of those things have now really started paying off to refresh the portfolio. To keep buying the best risk-adjusted returns out there is very much the job for the next 12 months, as it is always, I guess.

[00:03:02] SJ: Yes. I mean, it's been a common question, as we've spoken to investors over the past few weeks. This three-year return now looks perfectly adequate, but it's come plus-80, minus-30 something, and then plus-19 again. The question has been on a few occasions, “what are you going to do to make sure that 2022 doesn't happen again?” I mean, what do you think about that question? Do you feel like there are further changes that need to be made at our end?

[00:03:37] GB: Well, I think we've made plenty. I think worth noting that 2022, I view it as a significant unforced error. I don't think there's any other way to put it. We held stocks that were too expensive, and we got caught up in the downdraft, even worse than the market because we tend to own smaller businesses and often fast-growing businesses that enjoy the upside. But then when the market decides to sell them, the floor is a long way down. We've made some unforced errors there.

The big change for me in the process over the last couple of years is the way we're looking at that universe of opportunity in terms of I want to be able to generate a 12% type return from a fairly safe big business in a market we like with a management team we like, et cetera. Then we're going up the risk curve but only when we're getting rewarded for it. I mean, obviously, that was always the plan. We have really documented how we do that a lot better – the default here is if I can't find these things that are going to generate me 20%+ returns in a relatively safe manner, then we have these default stocks that are going to give us positive long-term returns over the long term, not necessarily every year. I think that's been a fairly major change in the way we think about things.

[00:05:00] SJ: The other one, and this is probably more my role as a CIO, but our colleague, Alex Shevelev, is just really big on using index and market multiples as a gauge of the temperature of the market out there. We've been putting those slides in our presentations over the past few weeks around the relative valuation and performance of small caps here relative to large caps. It has been bad over the past 10 years. Now, they are trading at multiples that look particularly attractive.

[00:05:32] GB: Well, that haven’t been seen for 30-plus years.

[00:05:34] SJ: I think the flip side of that, though, is that I make sure I'm taking the temperature when there's been periods of good performance around where do we sit here in terms of small-cap valuation versus large-cap valuation, overall market valuation in terms of how much cash we want to hold. It's always easy I think at a micro level to be making exceptions, such as, “I'm finding this particular small cap that's cheap or that small cap that's cheap.” The lesson for us was different ones didn't save us from the ones that we should have sold out of in the buoyant times.

[00:06:03] GB: We needed to move that weighting from let's say a 60% to a 30% over that time strategically, and we failed to do that.

[00:06:11] SJ: You did touch on the uniqueness of that period. I mean, so much of that sell off at the top in 2022 happened over the last three months, right? I think June itself, we were up seven and a half or eight percent. You need to recognize when those things are moving faster. You need to move faster as well. Maybe that is going to be an increasingly common function of modern computer-driven markets that you don't have a five-year bull market here over which you gradually adjust your portfolio to the market environment. That it can happen in the space of six months.

This recovery that we've seen in terms of markets has happened very, very quickly again. I think we're sitting here a different opportunity set today even than six months ago in terms of value in the market lies. So, yes, we've touched on this on a few podcasts. But I do think things are moving quicker, and I would imagine that the rapidly increasing computer involvement in stock markets is driving some of the speed with which things happen.

In the US, we talked about that building product sector that had a bear market and a bull market and is now trading above where it was prior to interest rates going up. I think we've just had the first month of building approvals in the US turn positive.

[00:07:28] GB: Yes.

[00:07:28] SJ: So you had the bear market. You've had the full recovery, as people are looking to the other side of it. I know the market's always early, right? The market is particularly –

[00:07:37] GB: I think six months is not unreasonable. But, yes, it always sort of surprises, doesn't it?

[00:07:42] SJ: Well I would have thought six months leveling off but being back in fairly buoyant market prices that are now assumed that that market grows quite a bit, I would say, is quite different.

[00:07:52] GB: I think I agree with you on that. The computer-driven markets are going to tend towards efficiency more frequently and more effectively. Then every now and then, there's the diversity breakdown, and it gets it wrong wholesale really quickly. If you're able to take advantage of that, of your own psychology and have your own dry powder ready to go, you can take advantage of that.

I do think there are pockets of the market, though, that are not playing in that game, and you're seeing a lot of that with the value investors out there saying that things that are out of the index and out of the ETFs really aren't catching a bid still. So there are pockets to play in. Whether they revert to historic normal multiples anytime soon, I don't know.

[00:08:32] SJ: Well, I think what's interesting about what you just said is that you're assuming the computers are playing the same game in terms of them being rational or irrational. I think they are getting extremely, extremely good at the game that they are being trained to play, which is tell me where stock prices are going to go in the next three to six months. That is typically a lot of historical correlations, right? So the computers are working out that, okay, when these building approvals turn, these stocks are going to perform well. They're getting ahead of that before the humans get ahead of it. They're not sitting there saying what's the DCF of this company over a five-year period, and what's it worth because of that. They're playing a different game, if that makes any sense.

Everyone may be scratching their heads about why some of these value stocks have been left behind. But I don't think the computer's looking at it going, “Well, what's going to drive a change in that over the next 6 to 12 months?”

[00:09:22] GB: We're seeing that with ChatGPT. The power that's been able to be brought to this is growing every year. But this is not a new feature in markets. You've had players like renaissance technologies that have been doing this successfully for 30-plus years now, getting better every year, to the point where they're looking at correlations where no human can actually understand what the computer's doing. They trust it to make the decisions and pull all those correlations together. But you're right. It's a completely different game for the most part.

[00:09:49] SJ: But that's actually been my point about this whole building supplies and building companies thing in the US that if I look back to November now, there is now evidence that that was the bottom and that things had started to get better in terms of the outlook for building now is much better than it was six months ago. I look back and I say, well, the computer's actually probably got that right at a time when no human could see it. They're probably looking at data and things that –

[00:10:16] GB: I think Harvey was banging the pot back in November.

[00:10:18] SJ: Well, he was banging the pot about the valuations. But we were very clear, and we said it on the podcast. We have no idea when this cycle is going to turn.

[00:10:24] GB: But he talked about the flat – that it had been falling month to month. Then it started flatlining, I think, October. That was something we certainly discussed before Christmas. That may be something that the computers were picking up on.

[00:10:35] SJ: So Harvey and the computers. I think that point is interesting that the game is different. I think it's something that's really important for people that are trying to add excess return as human beings need to recognize that there is a game here that I think you can win at, which is looking through that cycle and not trying to focus on short-term returns. But if you're sitting there saying, “I'm going to beat these super computers at predicting when this recession in Australia is going to arrive and how bad it's going to get,” then good luck.

We've been banging on about it so much in our reports, and I guess we're self-interested, and that's why people tend to ignore it maybe. But I still talk to all of these people that are sitting there thinking the economy is going to get worse. Therefore, I don't want to buy stocks. You've missed a pretty big rally while you sit there and wait for it, particularly globally.

[00:11:25] GB: It is fact historically that the market turns before the economy does, and it often turns before the economy even hits its worse, so.

[00:11:31] SJ: Yes. I think everyone recognizes that, but they still think sit there and think, “Well, I can get a little bit more confidence here that I know where that point is.”

Just on the economic outlook, I mean, good inflation numbers are now fairly global, I would say, in terms of the number of countries.

[00:11:48] GB: When you look at the month-to-month data, right? Not the year-on-year so much.

[00:11:51] SJ: Even year-on-year now in the US is three, and that's going to be lower over the coming months as they cycle those high periods for months.

[00:11:58] GB: It's highly likely that the numbers start looking better over the next 12 months.

[00:12:02] SJ: Here in Australia, we saw some pretty encouraging data. The UK - which has been the worst and I think the most difficult to work out what's structural there from what's temporary - there are some decent sequential improvements there. I mean, it does feel like this Goldilocks scenario of inflation coming back down. Interest rates maybe don't need to go up too much further, and this recession either doesn't come in the US or is not as bad as people had feared in the US, UK, and Australia.

[00:12:39] GB: I mean, I think we've had a thesis here for a while. You're starting to see that play out, and I'm talking particularly about UK and Australia here, which is we have mortgage rates that move. But at the moment, they're not moving immediately. So the Reserve Bank jacked up interest rates. But most people that have taken out a mortgage in the last three or so years have been encouraged to take out fixed rate mortgages. So we've had this slow process of those higher rates coming through. From my point of view, my mortgage will go up in October, and it will jump about 50% my repayments.

[BREAK]

[00:13:13] ANNOUNCER: Stay tuned. We'll be back in just a sec. Are you a long-term investor with a passion for unloved bargains? So are we. Forager Funds is a contemporary value fund manager with the proven track record for finding opportunities in unlikely places. Through our Australian and International shares fund, investors have access to small and mid-sized investments not accessible to many fund managers in businesses that many investors likely haven't heard of. We have serious skin in the game too, meaning we invest right alongside our investors. For more information about our investments, visit foragerfunds.com. If you like what you're hearing and what we're drinking, please like, subscribe, and pass it on. Thanks for tuning in. Now, back to the chat.

[EPISODE RESUMED]

[00:13:55] GB: So the last year and a half or whatever, we've been watching these interest rates go up and definitely been thinking about it. But the rubber hasn't really hit the road for me personally yet, and there's a lot of people in a similar situation in Australia. The UK has something similar, so a lot of mortgages over there are sort of two to five-year fixed rate. You go through a renewal process every time they mature. As rates of recent hasn't necessarily hit people's pockets immediately, on the flip side, the people that have excess savings are getting immediately higher interest rates on their term deposits and what have you. Actually, it's been a delayed process of getting hit by those higher rates, and that's all sort of hitting the road now I think, and maybe you're seeing some evidence of that in the numbers.

[00:14:41] SJ: The USA has much less personal debt than us here in Australia. So it's a 125% debt to disposable income ratio. Here in Australia, that number's 190%. So to start with, we have a lot more leverage to rising interest rates. Then to your point, the effect of those rates rising is really starting to flow through. Now, in the US, for a lot of people, it's never going to –

[00:15:07] GB: Well, most people have 30-year.

[00:15:08] SJ: Thirty-year mortgages.

[00:15:10] GB: About 95% of them are sub 5%, I think. I can't remember exactly where or the statistic, but they're not crippling rates yet. The whole way that process works in America is you jack rates, and you kill the marginal buyer of a house rather than the whole back book of mortgages.

[00:15:27] SJ: That has some negative features as well in terms of people. No one wants to move houses because you actually have to break that mortgage. You can't take the mortgage with you.

[00:15:36] GB: That kills dynamism in the economy.

[00:15:38] SJ: Yes. So that has some problems. But I think here, we have far, far more exposure. We're recording this on Monday, the 31^st. So the RBA meeting is tomorrow here in Australia.

[00:15:49] GB: I think they – you’re going to make a call now in advance.

[00:15:52] SJ: They will hold.

[00:15:53] GB: Yes. I think so too.

[00:15:54] SJ: I think they have very, very good grounds here to hold for the next six months and just see how these rate rises that are effectively still coming impact the consumer. We're already seeing plenty of evidence that the consumer is getting absolutely smashed. Whether that's enough to offset other parts of the economy that are very strong is a different question, and it's part of the problem. Monetary policy is using a very blunt tool here to try and hit the part of the economy that you have an influence over. But there are lots of parts of the economy, and I've been harping along non-stop about the importance of fiscal policy here in terms of –

[00:16:29] GB: We’ve been trying to educate governments for 10 years that that's the way to actually get a bit of inflation. They finally tested the thesis in the COVID times. We've got it. Now, it's being left basically to monetary policy to bring it all in.

[00:16:41] SJ: But I saw a chart the other day that was country-by-country inflation, and the pattern is just remarkably similar all over the world with all sorts of different policies of interest rate rises and fiscal policies and things. It says to me that it is more related to that COVID period and the exogenous factors than it is the actual policy rate. That's why whether they put it up another 25 basis points or don’t is not going to be the key driver here.

The key moment now is really six, eight months’ time. A lot of these factors that were contributing massively positively to inflation were temporary. They now are negative, and that's really driving the headline rate of inflation down. The question is in 6- or 12-months’ time, are some of those core contributors, particularly wages, things that are going to be stubborn and sticky? Or you put through a bunch of pay rises this year, and you turn around in 12 months’ time, and people are recognizing that inflation is lower? Therefore, get less pay rises. That would be a dream scenario, but it is interesting.

I think it's important around this whole. I think small-cap stocks have underperformed so much because of the recession that was coming. Now, we sit here, and we're not even sure if it is going to be a recession in the US. I don't know what that means for that part of the market, but it's certainly positive for earnings over the near term.

[00:17:58] GB: Yes. I don't have anything to add other than that data we've pulled out from prior economic downturns. That small caps tend to feel the heat before the announcement of the recession and then are the first to bounce up on the recession actually happening. So they tend to move first. It's sort of not been the case the last few months in this rally. It's been broader. But we think it's a very good risk-adjusted investment. Whether a recession comes or not, it's not going to change that. There's some chance you get very good news on the economic side as well.

[00:18:31] SJ: Yes. I think, bizarrely, for stock price performance, it might have been better to have a fairly shallow recession than if we get confident it was going the other way but –

[00:18:38] GB: Yes, good point.

[00:18:38] SJ: I've said this at the end of the roadshow. But this is a much, much better environment for us to add returns year after year. If everything goes back to being expensive, it goes back to causing the old problems that we have faced in the past, and we need to do a better job of managing that. But I'd almost rather stay cheap, idiosyncratic returns, takeovers, recycle that capital into things that are still cheap is a much better world for us.

[00:19:02] GB: Yes. I don't think there's an “almost” caveat to that I would straight up prefer.

[00:19:06] SJ: Okay. Explain to me Australian house prices. We have gone from zero interest rates, people being able to borrow crazy amounts of money at – I don't know – what's your mortgage at the moment?

[00:19:17] GB: Very low twos.

[00:19:18] SJ: Mine is 2.15%. We're all rolling over to massively higher interest rates. We've put through the fastest and biggest rate increase ever in terms of the speed and magnitude of which rates have gone up. House prices were down, I think, eight percent, something like that, peak to trough, and have recovered quite a bit of that over the past six months. I don't understand who is buying the marginal house and how they're paying for it.

[00:19:44] GB: I mean, one explanation that I think is important, that you don’t think is as relevant as perhaps I do, is just the immense immigration into this country. That's both coming in expected to continue to be elevated for quite some time. Yes, the market is clear where the current demand and supply is multiplied by how much mortgage people can access. But I think the markets aren't stupid. I think they can see that wave coming. They can see the potential impact on rents. I think it's probably a relevant part of the decision-making process for some people. I think it underpins perhaps more importantly the banker's willingness to continue writing loans. If the history of this country holds in any way, we'll borrow whatever the banks let us borrow. I think that's part of the explanation.

[00:20:32] SJ: Yes. That's the bit that I just – if you run the maths, though, at a six percent mortgage rate versus where it was at two, in terms of what the average median salary here can afford to pay for in a house. I live in a city, Sydney and Darlinghurst, and there have been three-bedroom terraces selling one after the other in our little area that are going for three million bucks each. I just run the maths, I think “okay, that's let's say a 20% deposit. You've got to borrow 2.4 million. You're paying more than $200,000 a year of post-tax income to service your mortgage.” I mean, surely, there are not that many people that have that much disposable income to –

[00:21:12] GB: I think, if I have to posit a guess of what you're missing, it's the inbound of very rich people that are maybe not in that area so much. But it starts off at Point Piper, and it filters out from there. Their cash buyers, they've moved into the country. They want to own something, and that sets the tone for the next level down a property which probably fits the Darlinghurst area. Then it filled us out from there. I think it's part of the explanation here.

[00:21:39] SJ: Yes. Maybe the other thing is people that have participated in this massive run-up in property prices that are sitting on huge amounts of equity in their existing place as well, right? You're selling something for two million maybe that you bought for one. You've paid the mortgage down from 800 grand to 400,000. You've got 1.6 million of equity in this new place, and then you can borrow 1.4. Not the sorts of numbers that I'm talking about to roll it into something new.

But I feel like, marginally, it has been very, very perplexing to me because there's been a very strong correlation historically, whether we had immigration, didn't have immigration between. The capacity here is the amount of money that the average person can borrow, and here's what the average house is trading for. That link has broken quite strongly over the past 12 months.

[00:22:24] GB: I mean, just to put it into context, the inbound immigration into this country is maybe not 10 times, but it's probably 8 times the flow of people in this country in the mid-nineties, like the annual inflow.

[00:22:35] SJ: At the moment. Yes.

[00:22:36] GB: Yes.

[00:22:36] SJ: But with three years of nothing, right?

[00:22:39] GB: Sure. I mean, but just to put that, like that's a big magnitude. In our whole system, we don't import in underclass. We want highly skilled. We want people with deep pockets. They're actually some of the richest cash buyers you can imagine. Now, we have more inbound millionaires in our country than the US. Now, I'm a little skeptical of that data, but that's the data out there. So this country that's a 15th the size of the US has more inbound millionaires than the US according to The Economist or wherever it was I read that. It is quite profound.

[00:23:13] SJ: Okay, that's high-end property. But, I mean, the market has been surprisingly strong across this.

[00:23:18] GB: Yes, I agree. That’s all the way through this bull market. I would tell you that the incremental house at Marsden Park in outer Western Sydney - to pick a suburb because my brother lives there - is more overpriced than the Bondi three-bedroom pad. But I'm too old and scarred to call a top in the Australian property market nowadays. It does perplex.

[00:23:41] SJ: It used to be bearish.

[00:23:42] GB: Oh, yes. Now, I own.

[00:23:44] SJ: Now, you bought a house.

[00:23:46] GB: But, yes, that's normal human nature. Part of the reason I bought a house is that COVID came, there was a bit of a lull, I went to an auction, and no one else turned up, and I thought “this is Australia. I am concerned that we're going to be up back to the races the first opportunity we can get. So that is probably why I bit the bullet in 2020.”

[00:24:11] SJ: Like inflation, this has been another global phenomenon that house prices have held up around the world surprisingly well into a rising interest rate environment. You mentioned The Economist earlier. There was a big piece a country-by-country comparison, and it's actually been surprisingly consistent. Some of those immigration-related factors that you talk about have been consistent as well. The UK is importing a lot of people, as is the US, catching up for a number of years. But, yes, across the board, house prices have held up surprisingly well. That is for now, I would say, a positive for the wider economy as well in terms of the impact that a meltdown would have on near-term economic activity.

[00:24:49] GB: I'm not concerned about Point Piper houses selling 50 million bucks. I just don't think that's relevant to the average person. But the price of a dwelling in outer Western Sydney or Suburban Melbourne versus what I think it should cost. Now, maybe I'm wrong, but this is a major cost to people's wages. It means that wages in this country like need to be higher than they otherwise would be. I think it hurts our competitiveness as a nation and our potential competitiveness. I do worry about that long term more than I do worry about whether the price is moving over the next 12 months.

[00:25:29] SJ: Yes. I would agree with that completely, and the policy response is –

[00:25:33] GB: Just to boost it further. That's what it is. It's bullshit.

[00:25:36] SJ: Well, it's that and just things that are quite obviously not going to work, like “we're going to cap rents”. I mean, that is probably the stupidest policy that you could ever come up with, and it's been tried in a whole bunch of countries around the world and didn't work. There are a lot of people living in New York that have a rent-controlled lease. They don't live in the apartment and they are subleasing it out for a massive premium over the rate that they're paying. It is not going to fix the supply.

So I think there's a couple of elements to it. We need concerted government policy at state, federal, local. Probably not going to happen, so I don't even know. Why bothering talking about it? But you need more construction is the only answer here.

Then I think for a lot of people that are our generation and younger, it's also just accepting that I think the prime suburbs and the places where people want to live, to your point earlier, they are pretty special places globally. When my parents bought their first property, it is a tiny, tiny little house in Wellington, New South Wales. They've got them started on this, and they lived a pretty difficult life for a good 10 to 15-year period, while they paid that mortgage off and then were able to move into something bigger. I don't think it is impossible with the wages we get paid in this country for people to buy a house if they're prepared to go somewhere that's not Darlinghurst.

[00:26:58] GB: No. Agreed with that but I really am thinking of the suburbs where my brothers live or where my parents live, rather than where I currently live. Versus what – I think it's a failure of policy if we can't provide reasonably affordable housing in every city in this country. So the people that want to stay in the city they were born in can do so. So they can be around the corner or 40 minutes drive from their parents and their school mates.

I think you're right. No one has a right to expect Bondi or Potts Point. I think people can expect on just off the floodplains out near Penrith and Richmond to have a reasonably affordable house. Even in some of the smaller regional centers. I look at prices in Dubbo and Bathurst and Wagga Wagga in New South Wales. They don't look slightly affordable. They don't look particularly affordable let's say. I think that's a failure of imagination and probably policy as well.

Just getting to your point about the three tiers of government, it is – the immigration lever is controlled by federal government, the infrastructure lever is controlled by state government, and the local planning is controlled by local government. And they are so at odds. Like when we let an immigrant into this country, the federal government should be thinking, how do I find the incremental additional piece of infrastructure that's needed for that immigrant? Whoever's got to fit the bill is getting the money to make that happen, rather than just like waiting in every 10 years, having a big dig to try and correct the errors of the past.

[00:28:31] SJ: I mean, they collect the income taxes, right? So it's a net benefit at the federal level to doing that.

[00:28:35] GB: That's my two cents.

[00:28:36] SJ: Well, G, we've got an airplane to catch. So on that wonderful topic that I'm sure everyone's got an opinion in, send us your thoughts. Email us at admin@foragerfunds.com. Always welcome to your feedback and any ideas you've got for future topics. Send them through as well. I hope you've enjoyed listening in today, and we'll be back in another time. Thank you.