I Trust This Strategy More Than Any Budget (or Politician)

Get it out.

Two people have misled us.

Chalmers! Booooo!

Albo! Booooo!

OK – exorcism complete…

(phew!)

Like many of you, I’m trying to screw my head back on after this budget.

And I’m making a conscious effort to move past the budget headlines and focus on the cold hard reality in front of us as investors.

Let’s not forget this ONE truth…

The budget is likely an aberration in the grand arc of ASX investing over the next 3-5 years.

There are so many permutations – from budget “carve outs,” to a near-total fold on the worst measures, and then of course, a new government taking the reins and scrapping this nonsense entirely.

But what do I do? Start
by returning to basics!

The budget’s tax measures will make many investors change tactics.

That doesn’t mean they should necessarily change strategy.

Tactics are shorter-term and flex to fit the evolving market context.

So in terms of tactics, the government has clearly launched a torpedo down the guts of risk capital on the ASX for the period between 1 July 2027 until the next election.

As a result, it has made me deeply re-think my tactics for recommendations to paid subscribers across Australian Small-Cap Investigator and Fat Tail Micro-Caps.

My strategy remains the same.

So today’s note is a return to “first principles”.

I don’t mean “first principles” in the Ray Dalio sense…

(The influential Bridgewater investment guru launched an internal investigation into misplaced fluids at the urinal in the office – you can investigate that incident if you have time)

I mean “first principles”
in a way specific to the ASX

In my view, a good position in a specific company can be either a longer-term investment or a shorter-term trade.

Timeframe is always crucial.

But good positions across BOTH timeframes are based on the SAME principles, which are:

1. Capital structure (who owns what and how much?)
2. Cash/Enterprise Value (EV) (funding + potential upside)
3. Catalyst (when’s it going to happen!?)
4. Cycle (what’s the present/future market sentiment?)
5. Credibility (is the board and management high-quality?)

That is my static way of assessing the quality of any prospective new position.

It cuts through the noise when the market and every financial outlet is screaming…

However, due to the need for new tactics — if anything, this budget makes me want to take the gloves off!

I’m thinking about that period after 1 July 2027 where it may make sense to take more aggressive trade positions.

Working on catalysts that could be just days away.

But let’s leave that to one side for now.

Instead, consider this…

What do we know about the next 3-5 years as investors?

Here’s a few macroeconomic themes to chew over (you may not completely agree):

• Energy and access to resources underpin currency valuations
• Governments ALSO manipulating currency for strategic leverage (think blockchain and/or gold)
• AND: The AI roll-out will likely require immense amounts of energy and other commodities PLUS the deployment of huge sums of currency

Those feel like three crystal clear aspects of this investment environment.

What’s more, I’m confident the ASX will remain a happy hunting ground for companies with great exposure to these macro themes.

(Despite the best efforts of the wildly inept cretins in Canberra)

So go forth! Keep investing!

You can change tactics to fit the vagaries of misguided tax regimes but ensure you stick to a strategy.

And we’ll be here to help you on that investment journey, whatever strategy you pursue.