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Welcome to Firstlinks Edition 629 with weekend update

  •   18 September 2025
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The Weekend Edition includes a market update plus Morningstar adds links to two additional articles.

Firstly, I'd like to ask a favour of you. Firstlinks has been nomianted for a People’s Choice, Industry Media of the Year award at the Australian Financial Industry Awards. If our insights and reporting have helped your decision-making, please consider voting.

Cast your vote: https://ifpa.com.au/peoples-choice-australian-financial-industry-awards-2025/

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How to make the right decisions isn’t taught at school. It’s not taught at university. And it’s certainly not taught in workplaces. Yet, decision making is central to everything we do, from investing and work to life more generally.

Through reading and experimenting, here are the five decision making tools that I’ve found most useful:

1. Stick with something you could do for life.

I made a New Year’s resolution to go to pilates and yoga classes to keep in shape. Nearly nine months on, things haven’t gone to plan. There have been the usual interruptions such as holidays. I’ve also had some injuries that I’ve been battling with. Also, life stuff has got in the way. The result: the resolution has been a failure.

My mistake is one many people make – looking at what you’d like to do in the short-term instead of thinking about what is sustainable in the long run.

That’s why I like author Morgan Housel’s suggestion: pursue things that you could do for the rest of your life.

Do you want to take up yoga? Can you see yourself doing it for the next 30 years, or however long you’ve got?

Do you want to switch to a new job? Could you see yourself working at that firm and in that role for the long term?

Do you want to buy a stock, or invest a certain amount in a variety of equities? Would you be comfortable with that decision for the next 30 years?

If nothing else, this rule eliminates a lot of the frivolous and emotive decisions that we make, including half-heartedly acting on New Year’s resolutions.

2. If you’re not saying, “HELL YEAH!” about something, say no.

This comes from author Derek Sivers and is a good rule for those who are often over-committed.

When making a decision, if you're not saying, “This is amazing and I’d be crazy not to do it”, then it’s a no.

If your friend offers a part-share in his business, it’s either a “HELL YEAH!”, or a pass.

Are you thinking about learning a new language? You’re either all in, or it’s a no.

Like rule number 1, what this rule does is eliminate a lot of frivolous decisions so you can focus on what really matters.

3. List pros and cons, with a twist.

This rule comes from Canadian billionaire, Seymour Schulich, who was one of the men behind the creation of Franco Nevada, the world’s largest resource royalty company.

We’ve all made a list of pros and cons for decisions in our lives. Which university to go to, whether to accept a job offer, and so on. Schulich adds a twist to the concept.

Here’s how it works. On one sheet of paper or word document, list all the positive things you can about the issue in question, then give each one a score from zero to 10. The higher the score, the more important it is to you.

One another sheet or document, list the negative points, and score them from zero to 10. This time, though, 10 means it’s a major drawback.

Then add up the scores on each sheet. If the positive score is 2x or more than that of the negative, you should do it. If not, you should leave it.

I used this rule when making one of the larger decisions of my life – whether to invest in a motel:

Should I invest in motel X?

The positives:

1. It could give me a decent income and return over both the short and long term. Rating: 10.
2. I could oversee it with relatively minimal work given two managers are already in place. Rating: 9.
3. It’s in Sydney and not many hotel/motel businesses go up for sale in the metropolitan area. Means less travel. Rating: 8.
4. It’s in a great area that should grow over time. Rating: 7.
5. I’d gain direct business experience and knowledge. Rating: 6.
6. The business sellers and our future landlord are experienced and helpful, and hopefully that would continue. Rating: 3.

Positive score = 43.

The negatives:

1. It’s a big outlay of cash and is higher risk than many other assets. Rating: 7.
2. It’s a big leap given I haven’t been directly involved in motel operations before. Rating 5.
3. Though not directly involved, I’d take on managing more than a dozen employees. Rating: 5.
4. I’d have to travel an hour to get to the motel, likely once a week. Rating: 3.

Negative score = 20.

As you can see, there are more than twice the positive to negative points. I took Schulich’s advice and invested in the motel, and it turned out satisfactorily.

4. Probability-weight outcomes

This rule comes from investor Mohnish Pabrai and is most applicable to business and investing.

One of my pet peeves are the notions of fair value, intrinsic value, or a price target. I don’t think any of these things exist.

There is no such thing as Commonwealth Bank is worth X amount. Or its price target is this amount.

In my experience, it’s much more useful to think in probability-weighted terms. So if I’m thinking of buying CBA, I’ll do some estimates of what they may earn over the next five years. I’ll do pessimistic, moderate and aggressive scenarios for these earnings. Then at the end of five years, I’d put a P/E multiple on the stock under the three different scenarios. Then, I’ll weigh up the probabilities of each scenario happening.

If there’s an 80% chance of a +10% annual return, then it could be a good buy. If there’s an 80% probability of a sub-5% return, it might be a pass.

I often do five different scenarios and probability-weight each of them.

The benefit of this rule is that it’s a more realistic way to look at future outcomes. Nothing, especially in investing, is certain. This caters to that.

I’ve also found this rule makes you think more about the assumptions that go into your earning forecasts, and whether they are realistic or not.

5. Invert, always invert.

Charlie Munger once said, “All I want to know is where I’m going to die, so I’ll never go there.” This thinking was inspired by the German mathematician Carl Gustav Jacob Jacobi, who often solved difficult problems by pursuing a simple strategy: invert, always invert.

“[Jacobi] knew that it is in the nature of things that many hard problems are best solved when they are addressed backward,” Munger said.

For example, let’s say that you want to be happier. Thinking forwards, you could run through all the things that you could do to foster happiness. Inverting the problem, you could investigate all the ways to make yourself miserable. In an ideal world, you’d want to avoid these things.

Inverting a problem won’t always solve a problem, but it may save you from making a silly decision.

****

In my article this week, I explore how Australia’s housing and superannuation markets have grown to unprecedented sizes, far outpacing the real economy and challenging traditional economic assumptions. What happens if these asset classes keep expanding - can the system sustain it, or are we heading for a reckoning?

****

I'd like to bid farewell to Joseph Taylor, who has helped out with Firstlinks over the past 18 months or so. It's been a pleasure to work with him and I wish him all the best back in his homeland of Scotland.

James Gruber

Also in this week's edition...

Clime's John Abernethy says recent disclosures reveal Australian politicians hold investment property portfolios far larger than the average household, raising serious questions about conflicts of interest amid the nation’s housing affordability crisis.

What if retiring debt-free isn’t always the smartest move? Tony Dillon says keeping a mortgage with a redraw facility can offer retirees flexible access to home equity, helping manage cash flow without the pitfalls of a traditional reverse mortgage.

Dimitri Burshtein and Peter Swan think the ASX’s obsession with 'independent' directors may be undermining its own markets, as David Gonski highlights the simple yet overlooked need for directors to truly understand their business. Private equity’s savvy governance model is quietly pulling the best companies out of public view - at ordinary investors’ expense.

"Dotcom on steroids" is how GQG describes the current state of US big tech companies. After years of outsized gains, it says these businesses now confront a turning point as growth slows, competition intensifies, and capital spending soars - raising questions about the sustainability of their lofty valuations. They advise investors to be cautious, as today’s AI-driven hype may mask deteriorating fundamentals and the risk of structural disruption.

Trade wars and tariffs are rewriting the rules of global investing, turning sudden policy shifts into a new source of risk, and opportunity. The real winners? Capital's Matt Reynolds says it will be companies with pricing power, agile supply chains, and resilient business models that not only survive disruption but thrive through it.

Lawrence Lam believes the next generation of wealth creation is likely to emerge from founder influenced firms that combine scalable models with long-term alignment. And he says four signs can alert investors to these companies before the crowds.

Two extra articles from Morningstar this weekend. Adrian Atkins highlights a moaty ASX stock with solid long-term prospects, while Joseph Taylor looks at three global 'buy the dip' candidates.

Lastly, in this week's whitepaper, Yarra Capital looks at future winners from the structural shifts in AI, energy and defence.

****

Weekend market update

On Friday in the US, stocks enjoyed another 0.5% rise in the S&P 500 with notably disparate results elsewhere, as the small-cap Russell 2000 dropped 0.8% while Goldman Sachs’ basket of heavily-shorted names jumped 1.4%. Treasurys saw some bear steepening with the long bond ticking to 4.75% from 4.72% Thursday, WTI crude fell to US$62 a barrel, gold advanced to US$3,682 per ounce, bitcoin hovered above US$115,000 and the VIX finished at 15 and change, up slightly on the week.

From AAP:

A late bounce for Australia's share market on Friday was not enough to break September's pullback as the bourse notched a third-straight losing week. The benchmark S&P/ASX200 rose 28.3 points on Friday, or 0.32% to 8,773.5.

The Commonwealth Bank led three of the big four banks and the wider financials sector higher, as nine of 11 investment groupings finished in the green.

For the week, eight local segments ended lower, led by a 3.6% tumble in energy stocks largely due to Santos tanking on Thursday after it was jilted by a takeover suitor.

The technology, consumer discretionary and utilities sectors carved out gains across the five sessions.

Raw materials faded on Friday and gave up 1.8% for the week as group heavyweight BHP tumbled more than 3% after it cut hundreds of jobs and mothballed a Queensland coal mine. 

Gold miners finished the week on a high note, with Evolution Mining rallying 3.2% and Northern Star up 1.2%, as the precious metal hovered about $US3,650 ($A5,535) an ounce.

Health care's 0.9% bounce indicated some interest from dip-buyers as the sector clocked five straight weeks of losses, which have wiped 15% of its value. Telix Pharmaceuticals was among the top 200's best performers on Friday, surging 6.4% to $14.53 after Citi gave it a "buy" rating and touted its prostate cancer treatment's potential.

Consumer discretionary stocks performed well over the week, buoyed by a 4.1% rally in JB Hi-Fi to $118.94. At the other end of the table was Rebel Sport owner Super Retail, which has tumbled 3.9% since it sacked chief executive Anthony Heraghty for denying an alleged relationship with the company's former human resources head.

From Shane Oliver, AMP: 

Global shares mostly rose over the last week as the Fed resumed cutting rates. For the week US shares rose 1.2% and Eurozone and Japanese shares both rose 0.6%, but Chinese shares fell 0.4%. However, despite a bounce on Friday the Australian share market fell for the third week in a row with a 1% decline as the market continued to correct after the record highs reached last month, with the fall led by energy, consumer stable, health and telco shares. 10-year bond yields rose slightly. Gold prices made another record high and iron ore price also rose, but oil prices were flat and metal prices fell. The $A fell back to just below $US0.66 as the $US rose slightly.

Fed cuts by 0.25% as expected taking the Fed Funds rate to the range of 4-4.25% as expected and signalled more cuts ahead. While the Fed revised up slightly its growth and inflation forecasts for next year and remains concerned about the impact of the tariffs on inflation, in resuming rate cuts it cited a shift in the balance of risks towards higher unemployment with job gains slowing and unemployment edging up. In fact, Chair Powell said labour demand had slowed sharply and by more than labour supply. Given the rise in downside risks the Fed is moving back towards a neutral rate. While Powell described the decision as “risk management” and said the Fed would assess things “meeting by meeting” this is against a dovish trend with the so-called “dot plot” of Fed officials’ interest rate expectations showing another two rate cuts this year and another one next year. Out of interest while Trump’s Fed appointee Stephen Miran made it to the meeting and voted for a 0.5% cut it was academic as the Fed has turned dovish again anyway. And his move against Governor Cook is continuing to work through the courts, but looks a bit dodgy. More generally, Trump’s moves to set up a more dovish Fed may not be of much consequence in the short term as the Fed is easing anyway but could impact longer term to the extent that it leads to less faith in Fed inflation fighting resolve and higher inflation expectations.   

For the RBA, the Fed’s resumption of rate cuts does not mean that it will automatically follow suit, but it may add some pressure to cut by more than it otherwise would have. Just because the Fed is easing doesn’t mean the RBA will blindly follow. However, right now the Fed and the RBA’s interest rate cycles are in alignment and the main way the Fed’s moves could impact the RBA is via a stronger $A. Money markets now see the Fed cutting by more than the RBA which will push US short term rates below the RBA’s cash rate. Historically, a rising gap between Australian and US rates has tended to see a rising trend in the $A. So far the rise in the $A is trivial but if it heads significantly higher it may add pressure on the RBA to cut by more than the market is expecting because a rising $A will dampen growth and inflation. And if the Fed continues to cut because of a weakening US jobs market it may also add to pressure for more rate cuts here as weaker US growth will impact global and Australian growth. Our base case remains for 0.25% RBA rate cuts in November, February and May.

Source: Bloomberg, AMP

Curated by James Gruber, Joseph Taylor, and Leisa Bell

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ASX Listed Bond and Hybrid rate sheet from NAB/nabtrade

Listed Investment Company (LIC) Indicative NTA Report from Bell Potter

Plus updates and announcements on the Sponsor Noticeboard on our website

 

11 Comments
Tony Dillon
September 22, 2025

James, I love the “Invert, always invert” point. It reminded me of a podcast I heard once on anti-ageing research. The scientist was asked, if everyone lived longer, say to 150 or beyond, wouldn’t we have an over-population problem in the world? His reply was an approach he says he often applies to moral and ethical challenges, and that’s to imagine reversing the question. He said, imagine if we were an ageless society and we had an over-population problem. Would we invent ageing as we have it today to solve over-population, and the drawn out downhill process that typically goes with ageing? Not sure what the solution would be, but the ‘invert the question’ stayed with me, and it was thought provoking.

Trinity
September 22, 2025

Possibly of interest to you, I build an AI that has 8 different decision making frameworks embedded into it. When I ask it about a decision it:
- runs out through 5 of the frameworks,
- tells me the results for each of the frameworks, and
- makes a recommendation based the 'average' of the results from the different frameworks.

It's not something I follow blindly but I enjoy the clarity/validation it sometimes brings.

Lyn
September 21, 2025

James, vote cast, not just for range & quality of articles with interesting commenters sharing their experience which are often thought-provoking, but also as you settled into role of Editor very quickly after sudden circumstances which must have been daunting for you yet here you are. Good Luck with the nomination. L.

P.S. waiting to hear if you got the watch which tempted you as an eg. in an artcle you wrote!

James Gruber
September 21, 2025

Hi Lyn,

Thanks for the vote.

As for the watch, yes I did get one. But I found the anticipation of getting a watch was better than the experience of having one. Probably underlines how people matter more than things.

Best,
James

Martin Mulcare
September 20, 2025

Thanks James. Really interesting to prompt people to reflect on how they make decisions. Another framework for making decisions may be, where relevant, to apply an ethical lens. In simple terms, three different ethical perspectives might shine helpful light on a scenario:
1. Principles, rules or laws that might be relevant
2. Outcomes for the stakeholders involved
3. Virtues or values that relate to the desired character of the person making the decision

James Gruber
September 21, 2025

Hi Martin,

You're right - an ethical lense can help with decision making too. With personal decisions especially.

On financial decisons, can ethics cloud good decision making? Maybe. Though in my case, I often use it as a negative filter.

For example, I used to be ok investing in tobacco stocks. There were logical reasons for doing so. Now, though, I wouldn't for ethical reasons. It's a line that I've drawn. Funnily enough, Buffett and Munger didn't invest in tobacco companies for the same reason. It went against their principles, so they found opportunities elsehwere.

JimG
September 19, 2025

Yes decision making and judgement is very important and deserves more attention. I suggest starting with learning about the biases in human thinking that often cause us to make poor decisions. The book Thinking, Fast and Slow by Daniel Kahneman is a good place to start.

DougC
September 18, 2025

Unless you are very unfortunate, you will frequently have opportunities in life. One way to decide, when faced with a big opportunity, is to imagine the last day of your life – when no more opportunities exist but there is a lifetime of opportunities and decisions to look back on.
If you would then think “I never did try to < be . . . / do . . . / go . . . / learn . . ./ change . . ./ etc > when I had the opportunity, and now I never will.” and if your present opportunity is on that list; take it.
I don’t recall that I ever decided for financial gain or added up any score; and what decision-making I did was primarily “will it be interesting to do (and will I regret not doing it)”.
I’ve been fortunate to have had several big opportunities that I had taken on this basis and they have all turned out to be the best ‘decisions’ of my life. They all had risks and some involved hardships but, if you want a life with no risks and can’t accept hardships then, on the last day of your life, the list of regrets will probably be long.

James Gruber
September 18, 2025

DougC,

I think Jeff Bezos had a similar thought process when deciding on whether to create Amazon.

Cheers,
James

Cam
September 18, 2025

Live as if you may die tomorrow, but also you may live to 100.
An opportunity to catch up with friends on a wet winter night then becomes a yes. You end up missing way less opportunities. On the other side spending money on something you don't really need is avoided as you'll likely need the money if you live to 100. This advice is for all ages.
If you're young, do everything now that you think you make wake up at age 45 and have a mid life crisis over. Travel to Europe, run a marathon, become the CEO - make sure you pick your own list though. You keep the mindset so continue to achieve all your dreams.

James Gruber
September 18, 2025

Nice thoughts, Cam.

 

Leave a Comment:

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