In finance theory, volatility, the fluctuation in a stock price, is considered risk. The idea is that investors do not like it when prices rapidly rise and fall, so they consider those changes risky because they could lose money. Basically, risk is emotional, not logical.
If you visit a financial adviser, they assess risk in terms of your age. Young people should be more risk tolerant because they have a longer timeline, and over the long term volatility does not matter because compounding is king. Just keep investing and everything will be fine, so do not worry about the ups and downs.
At TMM, we focus on not losing money. The reason is simple. It sucks. That is a technical term, but the reality is that risk should be viewed as an emotion. So think of risk as your future unhappiness. Making money is a good feeling, but losing money makes you miserable.
So when you are looking at your portfolio and finding reasons to avoid selling or rebalancing, just sit and think miserable thoughts for fifteen minutes or so. Ask yourself simple questions like "would it really suck if I lost money here?"
Humans are emotional beings and investing is a place full of emotions. Statements such as "volatility is risk" or "just focus on the long term" have zero feeling to them. They are just a bunch of words. But the feeling when you are watching your portfolio crash is not exactly positive.
We said a few weeks ago to keep an eye on immigration. The era of the mass movement of goods and services is over with de-globalisation. Now the mass movement of people is ending too. Next is the restriction of capital. For the past 40 years, capital has been given access to assets in most countries, and it has caused untold harm in terms of who benefits from the ownership of local assets.
The political mood across the developed world is shifting hard toward control: of borders, of trade, and increasingly of capital. For investors, the era of frictionless global capital flows that defined the last four decades is the thing now being unwound. That has enormous implications for where you can invest, and who is allowed to own what.
Albanese is going to have to address immigration in order to appease those folks who are flocking to Pauline Hanson's One Nation. Hanson has become a lightning rod for the disaffected, and it will most likely continue until the concerns are addressed. Politics is about to get interesting.
On property, the signal is now hard to miss. Home loan enquiries are declining, and if borrowing declines, then house prices must either stagnate or decline. In other words, the party is over. Watch Sydney as the lead indicator.
Weekly home loan enquiries, trend rolling over sharply into mid-2026.
There is a need to be careful here, because the real estate industry is already trying to promote these price declines as an opportunity for investors to get into the market. In the past these "buy the dip" calls have often worked. But it is fair to say the changed conditions, and the government's clear determination to stop house prices rising, are a more important consideration than thinking a 3% nominal yield is worth the risk.
The S&P 500 Shiller CAPE sits at roughly 41, still second only to the December 1999 peak of 44.2 across more than 150 years of data. The implied future annual return from these levels remains around 1.6%. Nothing about the valuation backdrop has changed: the US market is priced for everything to go right.
Please remember: this is not a recommendation to go and buy this stock. We are showing you how to look at individual companies using the TMM framework. Always do your own research and seek personal advice.
One of our strategies is to look for cheap countries or sectors, then go in search of quality companies within them. We have been bullish on oil and energy more broadly for over a year, and we continue to believe energy and commodities are the place to be for the next decade. We have written before about Woodside, which we still see as positive long-term exposure to a growing LNG market. This week, we put another energy name through the full TMM checklist.
Number one is risk. Do not lose money. Then focus on the big three:
- Market cycles
- Asset allocation
- Rebalancing
- Large market-cap company, well established in its sector
- Maintains a dividend
- A higher than average earnings yield
- A modest to low P/E ratio
- Competitive advantage
- Modest debt exposure
- Broadly negative media
- Recent price decline
Now we run the numbers and the narrative for this week's company against every one of those criteria.
The narrative is simple. Energy, regardless of the climate debate, is growing as more people generate economic growth and earn income. Santos supplies domestic gas in Australia and LNG into Asia, with operations across Australia, PNG, Timor Leste and the USA. It is broadly hated by the media, has seen a recent price decline, pays a fully franked dividend, and sits in a sector we believe is the place to be for the next decade. That is exactly the profile our criteria are designed to surface.
Again, this is not a recommendation to buy Santos. It is a worked example of the TMM process for assessing any individual stock. The numbers are illustrative and change daily. Do your own research and seek personal financial advice before acting.
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We will continue to update the sector scorecards, momentum indicators, and macro notes as the theme unfolds. If conditions shift, you will see it reflected in the Wells calls, Signals and Noise Premium updates, and portfolio insights.
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