AI Bubble, Waymo Ditches Uber, Jacinta Allan’s Disaster, KPMG Scandal and Jim Chalmers’ Crashes Housing in All the Wrong Places

The two biggest surprises I've got from this list. Number one, how long we've spent on it? (laughter) - I'm Chwap. - I'm a deer shiftman. - And this is the Contrarians with Adam and Adir. (upbeat music) - And we are back episode two, two, five, Adir. We're in person first time in five weeks, 'cause of me, and then you, Galavant, off-servantly? - Well, in person in cold weather. It's not terrible, but we both know. - But we both know, but we were both enjoying warmer weather. - Oh, you were in the cold coast. - Yeah. - I was actually, I was used in the cold coast as a base. - Yeah. - And commuting around a bit, which was very nice, but yeah, we're back in person, back in Melbourne. - We love being back in person. - Got a guy in Joel in the room. - A great. - Joel has had a massive haircut, which you just pointed that out. - Yeah, he's definitely a little. - I used to love the floppy locks he used to have. - I see he's floating around the internet. If people want to, as your haircut on the internet, you know what I mean? - No, yeah, it's all to be revealed. - The old view is still on the internet. - You guys are breaking the news right now. - The news break is this podcast. - No one knows, yeah, because scoop we've ever had. - Literally. - 'Cause no other, I was driving through the tunnel to get here this morning, Burnley Tunnel. I noticed, you know, the moving lights that they went for in the tunnel. - Yeah. - Yeah. - Which, well, you don't like those, mate. - That is the biggest reaction to your relationship. - You're the biggest reaction to the money. - If you ever feel like it's really even Victoria, right? - Yeah. - This is like the home of waste of money. That's like the least waste of money. - Every time I'm in that tunnel, nobody is driving to the lights. - We're gonna work, I can't just go. - I have to disagree with you. - Because it is well proven to work that it gets people to drive approximately that speed. And today, the lights were off. Probably 'cause in Victoria, you can only run things periodically. 'Cause there's no memory to pay for. - And it's like Gorbachev's Russia this place now. - Worse. And at least Gorbachev did it by accident. These guys are doing it on purpose. And so what I did notice is this, Mike, you should be paying attention to this. Is that when the lights are on people drive 80, seven are 80, just speed, and the lights off this morning, people are driving 55. - Really? - Definitely it was much slower. - Yeah. - So there you go. I think those lights do work. - Yeah, I guess that's all the thing. There's a 15 billion dollars of waste corruption fraud. And you're worried about a lie, haven't you? - I hate that. - I hate that it's lying. - I've got that he cost a lot of money to put in. Talking about it. So since we're on this topic. - That's pretty much a change. That was pretty much a change. Everything, not a state government thing though, right? No, I think this state government, we paid for it. - Of course we did. - Yeah, we paid for it. Since we're talking about this, we just got to touch on this for a couple of minutes at the beginning. Have you followed this Labor Party conference? - I've reached following the news stories. - I mean, is it the one in Adelaide? Like that, yeah, I think so. - Have you had any music running for Palestine? - That's the least of it. So we'll talk about it in music. But basically, all they want is every three years. And the main focus of it is to keep it calm. That is the whole focus of this thing. Keep it calm. Control a narrative that comes out into the media. Look like when you've got, it's basically a room full of people that predominantly hate each other. Like with a passion, right? And the trick is make it look like we're all friends and because we're all in the same party, we're all in this together. Nothing could be further from the truth. I mean, the Liberal Party's got its problems without a doubt, but nothing compares to the factionalism of the Labor Party. They hate each other. - They've built into that. It's built into the beauty of the party. - That's the system, right? - What you really want, like the ideal thing for the spectator would be put an octagon in there and let them go bananas, right? But that's what they're trying to avoid. In roles, Ed Hewzik. The guy, he's pretty close to a human octagon I'd call him. And so I don't know if you know the backstory of Ed Hewzik. - No, no, no. - Ed Hewzik, in my experiences with him previously, he was a really good guy. Fought hard for the tech industry. - The tech industry. - Yeah, but also very reasonable and did the homework. And I felt very positively about him. And then the guards are war started. And he just went bananas. And people say that, and he's obviously Muslim. - He's Muslim. - And he makes this statement. - Very, which country you'd be talking about? - I'll tell you, but I want to refute something. So he made this statement today, or yesterday, on the, what media outlet do you think he went to to tell his story? - That is correct. - And he said, Hewzik said that as Australia's first now former minister of Muslim faith, and coming from a Bosnian Muslim background, we'll get back to that. It was only fair that he'd be able to express his views. And my answer to that is, don't tell me about your religion. I don't care. It's Australia. You get no special privileges, and you should get no racism. Irrespective of what your religion is, why are you bringing Islam into debate in a Western liberal democracy? And I will say, a lot of people say, it's because it's a Muslim, that's why he's getting worked up. But there are people that aren't Muslims to get worked up. Like Tony Burke, he gets very worked up for this. - We know, but he does, but also, there's a Bosnian Muslim. I've had lots of interactions with Bosnian Muslims. There are Bosnian Muslims, I know that work in Jewish businesses, where we all talk about how we go to Israel. I've never experienced this kind of, you just have to call it anti-Semitism, from a Bosnian Muslim in my entire life. And like, I know enough of them, like this is not, this is ad-husic going bananas. Eventually, he gets thrown out of being a minister. I'll say this back, sorry, 'cause he gets thrown out of being a minister. - Yeah, it was a lot. I've lost, actually, he got thrown. - After the last election, together with Mark Dreyfus, one Muslim, one Jew, I will say, I'll say, I'll say, it may or may not be connected to their religion. I'm sure it didn't hurt that it balanced. So to speak. I mean, the fact that we call it balanced is not a good sign for Western democracy. And he just decided to go bananas against Elbanese. And especially Richard Miles, he hates Richard Miles. - Is Qsik left a right of labor? - Qsik, I mean, he feels like he would have been from the right. I don't know. - Yeah. - And Miles was right, obviously. - Yeah, but he goes bananas. And now his entire focus is to try and damage the Elbanese government as much as is humanly possible. - And it's hard. - And it's interesting, fair, that Elbanese government, doing a pretty good job of doing that without any extra help. - Yeah, that's true. Well, but he would like to bring them, I think he would like to bring Elbanese down. And it's, he is prepared to spend his political career in purgatory for as long as Elbanese is the prime minister. And his views, I mean, his views are apparent. Like, anyone that says to me, this genocide in Gaza, I just say what do you mean by genocide? No one can ever answer that question. - He feels like, obviously we think it's horrific to say that, but there's lots of people. Like, if he's time to be able to say that. - Yeah, but that's why I say, like, I mean, I'll just get anyone on the show and when they say that, I just say, what do you mean by genocide? They argue it falls down instantly at that point in time. But not only that, like, this guy, my bigger issue is this. He, this country has got a lot of problems you might have noticed. It might be able, about to achieve the impossible, which is going into a recession when the rest of the world is not in recession. So we've got big problems in this country, housing problems, et cetera. And Ed Hewzik at a Labor Conference is trying to make the entire debate in Australia about a war in the Middle East that most people couldn't care less about. - Well, the technically is kind of finished as well. I don't, I don't think the conditions and cars are amazing, but it's largely back to what it was pre-composed. - Yeah, and the government. - So we just started, of course, by her mass in the first place. - Yeah, that's right. Like, we all know this truth about that war. And we know the Israeli government's terrible, but it doesn't change the truth about the facts. And so the bottom line is, this guy cares about nothing else, it seems, nothing. Like, all this stuff he used to care about with industry and tech, he doesn't care about, no other war in the world, doesn't care about any other war in the world. - Doesn't seem to care about the people in Iran who are being murdered by the brutal war. - They can't care less, right? Or it doesn't care about the Labor Party. All he cares about is this one issue in vengeance. And so I would just want to say, I could not have been happier that he got shut down. Notwithstanding the fact that the resolution Labor Party passed was appalling. - Yeah, appalling. But it is kind of interesting and fun to watch a political party get shredded by a virus from the inside, which is what's going on here. - Speaking of which, the same time that was happening, and we're calling this on Monday, sort of. - I'll call him and say one thing, sorry. And we can say, more redeeming is doing a pretty good job of shredding a party from the inside. - I think she's now irrelevant. - Well, she's now, she was for a while. - For a while. - I mean, she was pulling that party apart from the inside. It's the same thing as just the Labor Party's more, like the Labor Party has got better training and had a destroy each other. And so when they want to shred from the inside, like they call some real damage, you know. - That was pretty good. You took down Turnbull in 2008. So the Liberals have done a lot. - Scott Morris and we took down Turnbull again. - Yeah. - Only in, it's definitely not, Labor has them and I'll play on that. But while that was all happening at the conference, something else was happening. So it looks like the damn fall of Jacinta Allen is imminent. - Do you think it is? - Well, we're feeling, we're recording this on Monday. The papers are saying that's going to happen next 24 hours. So this will drop, this episode will drop 18 hours after we record this or less than that. But it's not looking great, which is interesting. But I actually, in two minds, as much as I despise both Alan and Dan Andrews, I'm not sure. I kind of want her to be massacred. - I totally agree. - Someone needs to pay a price. - Absolutely. I quite like Ben Carroll. So I don't want this government gone, like whoever's leaning it. And I like Steve and there's lots of people in the government actually quite like. But this government needs to go. 'Cause there's too much bad, called bad laggy, just as shit. - Totally agree. - You've got an SRL, which is 35 billion. Forget that 15 billion, why? This is literally burning 35 billion for a train line nobody, literally nobody wants as an excuse for a housing policy. And you're, during the conference, you had multiple facts, so, since Alan's part of the left faction in the Labour Party. - I don't think anybody would have found that hard to guess. But you had even people from the left faction sort of having gone, basically said, "Albotora Ramsoff basically metaphorically speaking apparently." Well, Chris Means and obviously Melly, Peter Melascus, the South Australian, who apparently was walking around like a rock star, they were saying, they're Mel and Asus walking around like he's coming of Jesus, he's got. Why? Because he's a labour leader that has moved to Central leaf. He's a classic centrist. Yeah. And then you got Chris Means, who's very popular. And you got Jacinta Allen, who's like the devil re-incarnate coming out of the Victorian. You say as much as I think Dan Andrews should be in prison for the rest of his life for crimes against humanity, he was a singular politician. Like, how the tragedy of Dan Andrews, like as much as we love Melly and South Australia, he's actually selling good policies. So it's actually pretty easy to sell smart policies. But Dan Andrews is able to sell the longest lockdowns in Australia, he was able to sell locking up people in their housing commission like a jail for a while. You imagine that, imagine being in a time in the housing business and being in prison for a while. What do you mean, it wasn't him alone? It still is a democracy and it still is a party. No, but he ran like a. I know, but he. Autocracy. People in the party still went along with it. But they didn't block it. As Hitler's henchmen went along with him. Well, I've done a great comparison. Like, basically, this guy, like we agree, he did terrible things and the party should not have gone along with it and someone. A lot of people disagreed, no, they were cast aside. And you would say. We know were cast aside, like from that party. So he was. But point is, and this is somewhat of a back end of the government to Dan Andrews, he was a singly brilliant politician to be able to do all that stuff so horrifically and get reelected on the landslide in 2022. That was. And just into Alan's just like. Call on average politician. I don't think she's the worst. She's average as well. And she couldn't. The fact that she's being so massacred in the polls to show she's had good Andrews was at what a gig. He was just. I said, like, he was. He was the worst person at the worst time for Victorian people, but an incredibly effective communicator and probably the best politician, in terms of retail politics, and you had a cinema life. And you had a manipulative social media and so built a fan club, basically, a social media. I would say this. I mean, again, who knows what's going to happen if it's tomorrow or whatever it is. But my advice to Ben Carol is some chances listening to the podcast is, don't go down with this ship. Like, this was not really your mess that was created. It's hard to see how the Labour Party ends up in power after the Victorian election, hopefully, but it's. Well, the one nation thing is really uncertain. Well, those are. Well, I do. They're not going to the Labour Party. Like, they're not going to the Labour Party, and like, I thought about this quite carefully. I don't know if you followed what happened in the Netherlands a few years ago, but. If I wrote this one. and it, yeah, Gert Vilders, he received the greatest number of votes. And I think seats. But he ended up forming a coalition government with the right-wing party in power. Because I think everyone. As in further right than him or. No, as right than him. Because I think that everyone knew if he was going to take the. Yeah. primingistership, there was no chance of re-election. Yeah. And my view is, even if one nation gets more votes and seats than the Liberal and the Coalition of Liberal Party, it'll still be a Liberal Premier because everyone kind of understands. Yeah. if they have candidates in Victoria, the elections. I've thought once. even federally, the Liberal Party cannot support government where they're letting one nation govern as Prime Minister or Premier. They can't. They'll be the end of their party, right? It would be like the Labour Party supporting a Green Premier. It's the end of the Labour Party. So that's why I think, like, basically, it seems that. The right. Victoria's not very right, but the right is going to get votes. Yeah. And it would be a shame for Ben Carroll to incinerate his chances of future leadership and future premiership by going down now. Would be my. The challenge with. I don't think he's going to do it. I'd say he's a Ben Carroll. I'd say that he's a Ben Carroll. The real challenge is, like, you've got to. disavow so much of the core policies of what. These two predecessors have done. Yeah. And in his face of two months, I just don't know how anybody can do it. Just speaking of how bad Victoria's going, I'm sure you saw last week, the Australian unemployment rate held steady at 4.4% last month, which is pretty incredible. And that happened while participation rocketed by 76,000, which is, I think, the share of the adult population looking for workers after 67%, which is. He's rocked very high. I've usually hovers around the 64, 65. So we've got record low unemployment, basically, record high participation. And that's pretty. It's a massively good news story for everywhere about where do you reckon was the exception to this? Well, my recollection is that the Victorian unemployment rate rose to 5.1%. Your recollection is very accurate. So, while the unemployment rate, obviously, in the rest of the country is dropping, the Victoria has been an absolute disaster. So this is clearly the Dan Andrews, just into our own governments. This is what happens when you run. People think a state into the ground. Or maybe the end of that sentence. There's a state into the ground. But there's the fact that you've got masquerading as worker-friendly polls. The work from home ones are a classic example about to come in. But they're 10, I'm going to be good for workers when you work at home. That's the most anti-worker polls you can ever have. Because people stop hiring in Victoria. I'm not hiring in Victoria. I'm going to hire over New South Wales Victoria. If this comes in, because it's just a better place to employ people. We can't just say this. No one, no one, without a single exception, who works in a high-vis outfit, can work from home. Yeah. So it can't be the party of those people, because they can't work from home. Or can't even hold nurses or doxies or taxi drivers. Not just builders, it's a drive. It's the contingency that I'm going to hold the stop-slow sign from home. And I'm going to hold that from home, like there is. Yeah, so you can't do that from. I'll tell you something interesting about unemployment. Well, the jump in employment. I looked into this a bit. So, you know, there's a difference between supply, lead and demand-led employment growth. And so, demand-led employment growth means employers really want to employ need more workers, and they're fighting to get more workers to work. And generally, they get wage inflation with demand-led employment growth. But the consensus seems to be this is supply-led employment growth, which just means there actually are more open jobs. Essentially. Yeah, and there are just more people looking for work. And they just got vacuumed up by the system because there was demand for them. But that shouldn't drive inflation. Yeah. And so, if we see continued inflation growth, it would be really wrong to blame. Immigration. Yeah, immigration for that. Or this part of the economy, like the increasing number of jobs, because this is basically jobs that are being filled without having to pay more for workers. I think that's an important point. It's like often missed about. We talk about it a lot. Immigration essentially is disinflationary, because increases the supply of labour. So, we can understand why many in the labour party don't want this, because they want to be paid more. But ultimately, as it certainly is business owners, and as anyone who cares about inflation, you want immigration to a point. Which is. Good immigration. Yeah, skilled immigration essentially. People who will contribute to labour force and push the economy forward. And believe in the values of your country. Absolutely. I would add to that. I just want to read this headline from the. I should finish it. I should finish it. I should go. I'll finish it. I'll send to Ellen. Okay, so go on. Let me just read. So, the financial review, not exactly your far right paper, their headline and subhead on this, Ellen's latest policy alienates despairing business community, but the subhead is even more powerful. A senior government source, a senior government source, said, "Premier just into Ellen and her advisors have concluded that conflict with business wins them electoral support." I mean, can you imagine something more cynical than a politician seeking to win votes by destroying the economy of her own state? Which is how they're used. This has been the Labor policy for five years. It's just terrible. And by the way, the fact that the senior government advises that that means they're trying to bring down just into Ellen. Absolutely. Well, then there's a lot of people who realize that the Labor part, that the Alan Andrews government, especially Alan, it's just jumped the shark completely. Yeah. I can be look at EY Conmer, Shantel Murphy, also said, the Victoria has the highest under employment rate as well at 7.3%. So not only have we got the highest unemployment rate, there's also a lot of people who want jobs right now, even in the Labor market anymore, because I'm just giving up. So it's pain on pain here. And this is what happens when you have a government, you see what Mandarmi in New York as well. You see the policy that's got these emasquerading as renter friendly policies. We basically are making, so if you're a landlord in New York, you can't do background checks on renters so you don't know the quality of renters. You can't basically can't boot them out when they're in. So it's basically, so what a lot of landlords are doing in New York, simply just leaving their properties empty. And what does that do? That skyrocket is the price of rent, because they're like, it takes out and extra part of the market. So it's exactly the same. So you've got these far left governments pretending masquerading as having policies that help the people in verticombers, but actually just make it worse for people. Yeah, but I completely am with you on that. Do you want to quiz? Yes. So I've got a, I've just asked that idea. I said, do you want to quiz? This is off camera. And Mike's on, yeah, I want to quiz. So I thought, I saw this on Twitter. I thought this was a pretty fun quiz. Mike might actually struggle a bit, because this is a quiz from highest earning celebrities in 1998. And I'm not sure you're even born then, Mike. Yes, I was. I was. I was. I think you're being. Highest earning celebrities in 1998. So like, as in what the celebrities in 1998 earn that, yeah. I'm just trying to figure out if I accidentally wanted into a time machine. Like, No, was that quiz? Obviously, that quiz is not going to, I can't even remember who was a Sylvester. I'm confident. I'm confident. I'm confident. Funny enough, a lot of these celebrities are still relatively well, still, I was like, current now. Not all of them, but there's how many on this list? There's 50 on the list. Across any genre of time. It's basically sport and entertainment. And music. So sport music and entertainment. Yeah. So what I've just brought to you. Do you think that sport or entertainment is going to be higher? be higher. As in sporting sports, you're saying to say, I'd say entertain movies, movies, you think. Yeah, like Tom Cruise or something like that? Top, I wouldn't say Tom Cruise in '98. Can you please tell us this is what I think? This is what I think involved in this conversation. (laughing) I think, well, can I put someone out there? I'll give you a clue. I'd put Michael Jordan probably, top five. Very, where do you reckon Michael Jordan is? That's a really good guess. I don't think players will pay that much in 1998. That could be wrong, but the last 20 years has been massive player inflation, but he probably is top 10. So this would, I suspect this includes endorsements. Oh, well, that's a different story. He was number seven. So he's really OK. Interestingly, obviously he's retired now, but the top, I said top 10. (laughing) The top five, the top five, certainly four of the top five, are still active in their fields as they were back then. Number one is kind of, actually, number one is active as well. Can I put it out there as well? I think Leo DeCaprio was hot off Titanic. Titanic? And he's still very active today. That's a great call. He wouldn't have been paid. He was still, 'cause he was still young. He was young. I don't see Leo on the year. The top five actors, all actors. The top five are all involved in the entertainment industry, but I wouldn't say they're all actors. And if that's not an exact, you're not talking about executives or something. No, none of them are actors. And none of them got, none of them, which is Cameron? Yes. So he'd be number one? I give Joel a bit of credit on that to get. Is he number one? He's number five. James Cameron's 100th and 50th and 50th and 50th. I'm gonna throw out. I'm gonna throw out. No, he's the winner. I'm gonna throw out. No, he's the winner. I'm gonna throw out. He's the winner. I'm gonna throw out. I'm gonna throw out. I'm gonna throw out. I'm gonna throw out. I'm gonna throw out. No, he's the winner. I'm gonna throw out. No, he's the winner. I'm gonna throw out. So that was the first which is why Jerry was clearly number one. He's earning to be like 30 or 40. That is a great car. Jerry was 267. So like way above. So you said Michael Jordan was seven, which was right. Right. It was 69 million. So Jerry is like, because of the other three, Jason Alexander, Julia Lewy, Drifers and Michael Richards, they did not see a cent of syndication from what I understand. So Leonardo Caprio was number 36 by the way. I've said I'll find him in here. So he's definitely up there. You're right. The other three, Simonville guys aren't on there. No, why have you said though? Larry David. Yeah. It's a honor. Larry David number two. Because he gets a syndication money. He was a very serious man. He was actually a very serious man. So Larry was, effectively the same 242. So those two are clearly one and two. Hang on. Is that how much they made in that year? Because they syndicated for a billion dollars that year. So they got big years. They still get that kind of money. But that was that was the big year for those two. Which is why I was different. You went back to Larry David's like high school class and looked at what they wrote in his year book when they graduated. It would not have been most likely to succeed. I would have thought. It would have been most likely to end up to be a loser. I think like it is amazing that he's whole personality is just built for the right era of entertainment. Interestingly, most of these people, I'm going through it, like a big chunk of them are still active. I'm surprised. This is 20 years ago in this quiz. I thought we were going to be in this quiz. It was also interesting that it was a TV star, not a movie star. Yeah. In fact, then there's a lot of movie people on here. So who do you think number three is? I've given you a clue entertainment. Movie star? I can't give you any more clues. I've done this entertainment. And I did say these top five, none of them are really actors. You say Jerry and Larry went wealthy because they're acting. They were wealthy because of the producing. Oh, wow. Okay. It would be a producer. That's an after-be-ducers. When did the matrix say? Mark, that was a big idea. Matrix that era. It was a big. I think Jerry Brookheim was a producer earlier. Brookheim was number 48. He's very low on the list. Because I think he was. He was definitely a. That's already late for him. He was a six top guy in. Don't you always have to say Spielberg? You always have to say Spielberg. Oh, yeah. Spielberg number three. Oh, wow. He was one of those domestic park. Wasn't that domestic park? That was nice. It was a nice park. It was a big. Spielberg was had that SD arm with Geffen and Keffen. Yes, right. I can't see. I'm surprised Geffen's not on here, actually, because I would have thought he absolutely would have should have been. But I can't see him here. So number four. We just kept track. So you got number one, but I got two, three and seven. I'm going to. Well, no, no, no, no. I said it was top five. That was votes to me. No, I've got. I've got. I've got. I've got. I've got. steam was probably coming up. He was between Neesha Rekker and he's not on here. Can I throw in just a curveball? Yep. Elton John. Er. He's English, so. Oh, no, he's an American. No, he's not on there. He should have been on here, I agree. I don't. I don't see any non-American on here. My projects are still alive in 1999. Yeah, he died in 1999. Oh, he should be. Where is he? He's, I don't know, nine. Yeah, he does, that's nine. I don't see much. This. Somebody's marked that's nine. And the list. The crane of two. Yeah, I don't know why he's not on here. Lower the flag. Yeah, he's not. Anyway, but the other one seemed pretty legit. Number four. Can you get number four? Can I have a. Is it entertainment still? It's entertainment. I already thought who I said. Speel, bird. I can be a bird. I said it's "speel, bird." Not an act. Actually, it was an actress early in the year. An actress early in the career. Yeah. But isn't known for being an actress. Hmm, interesting. They didn't want an Academy Award. Certainly nominated for an Academy Award. Oh. And is unique in two different ways, actually, for being successful. Okay, it's way too early to be Oprah. Is it? Is it Oprah? Oprah. He's not Oprah. In 1990. Yeah, she was big in 1990. She was big in 1990. She was big. Well, I was actually an interview in 1990. Wow. She said color purple was the. Maybe she thinks she got nominated for a best support actress role. So she's number four. So then he's. Doctor Phil on there? Because he was in the lead. No, he was in number five. He was in number five. He was number five. He hadn't got number five. Oh, no, he got a five. James Cameron, someone got that. Oh, so we got that. Because, you know, I don't really do entertainment. But now I think about this top five list. So one and two, definitely. I was very exposed to that entertainment. That's comedy. I'm always in for comedy. Yeah, yeah. Three Spielberg, you can't avoid it, basically. Yep. Also, he was making Michael Crighten books into movies. Yep. I'm gonna watch those. And then four, I don't think I really had. I probably ever knew. I never knew. I didn't consume her. Like I was. Yeah. And then five, James Cameron, I think, is another one you kind of void, right? Yeah. Like, I feel. Yeah, this is unusual, 'cause like usually. And I'm like a Jordan, obviously. Yeah. So number. So six. Number six. Number six is still active. And was recently active. But hadn't. But you wouldn't think of. And it was big back then. I think people who were big back then across multiple mediums. Still entertainment. Absolutely entertainment. And across TV and movies. Hmm. Okay. You can't Google that. And seeing when someone died. And the. He's not dead. And the clue. There's still a lot. There's only. There's very few dead people here. And I do have mentioned one of the dead people recently. Really? Yep. Recently, there are. Recently, today. Or on the podcast. He hasn't died 17 years ago. 16 years ago. But I do very recently mentioned them as part of this conversation. Is it number six person? No, this is number eight. This is number eight you just mentioned. Number six is the one who was very popular back then across TV and movies. There is nothing I remember less than content I've spoken about on this podcast. In the last 10 years. 45 seconds ago, which you've forgotten. I'm asking you from 28 years ago. You can't get 48 seconds to go. Come on. My brain has switched. Which means this person's saying 45 seconds ago. Who was big in the 90s across? This person was big across. Tom Cruise. Movies. Yeah. TV. Yeah. And books. Who was big across all through? Oh, I see. I see. I should have given me that. I have to say twice. What was. And you know who was big at in all through eight. You know, obviously the book is pretty obvious. It was not a number of books. But what was the big book he written? He wrote Jurassic Park. The Jurassic Park. The disclosure. Yeah. Obviously, what was TV show? By the way, even an. Even an Andromeda Stren was made into a movie. He was amazing. Yeah. In fact, I don't want to bore people because it's not an entertainment podcast. But you should look at his views on Jurassic Park. He's got authors complained bitterly about what is done to their movies. He just had this amazing attitude, which is, once you buy this to make a movie, that's yours to do what you want with the script. I thought he had a good job with Jurassic Park, actually. Well, Jurassic Park was like this seminal movie because it was the first CGI movie where people's minds were blown. So. I still love it. So that was number eight. That was a very good one. So can you get number six? Number six. Number six. It's a male? Male across TV. He had the number one TV show and he had. Jerry Springer. Oh, sorry. I mean, Jerry Springer. I would have been. I think it was earlier than 98. Jerry Springer. No, it was around there, but it. Jerry Springer's on the list. What a male that had the number one TV show. Yes. And then like. Or something? Not only shows number one TV. Oh! Hang on, hang on. It's true. Yeah. Matt Graning. Simpsons. Simpsons number one. Ah, okay. I was going to say friends, but it's too many. Too many, I think. Too many, I think. Really, really. Well, I think. Right. Like, Coffman and Crane, who produced friends, they're on there at number 32. Friends was only four years old then, so I hadn't syndicated yet. Who is this number six? He's big on syndicated. I don't really like him. He was in a movie. His voice was in a movie in the last month. Tom Hanks. Tom Hanks is on there, but that's not what I'm saying. Tom Hanks' number. His voice was in a movie. Oh! No. Tom Hanks' number 27 at 44 million. John, this is all filled to the rock. Big TV show? Not the rock. His 2010s, right? Yeah, he's wrestling. It wasn't ever wrestling that. Big TV show, big movie, "Restling in a Movie." I can't understand why you're going. It's a voice in a movie. Is it really that? It's really for. I know, I'll give you another clue. He was. He had a criminal conviction, a low-level criminal conviction. Oh, God. That can be lots of celebrities. Low-level. Okay. I'm going to say one, but it's not Matthew. Brotteric, right? That's what he convicted for. I thought he was. He just didn't just do you know? It's what a great man of hope. Pretty sure he. No, someone can Google this. Matthew Broderick never had a conviction for Master Broderick. He put my ex-legal details in the show. If I'm for the law. If Matthew Broderick people want to contact us, we'll give him a say. What is it come out of? Ten Alan. I went Tom Hatton. You're so close. You're knocking on the door. Can you get number nine? I'm going to go through out there, obviously. Number nine. God, who is it? Big time Hollywood celebrity. Probably he's had. I think this guy's had billion dollar movies in the 80s, 90s and not nots and probably teens as the star of the movie. That I think possibly the highest grossing star of all time. If you had, I'd have always movies. Really. Probably my favorite actor. Adam Sandler. Adam Sandler. No, but Adam Sandler has made a lot of money. He's long. That's true. He has made a lot of money. He wasn't in ever Thai. - It was big, his- - He was impossible at Adam Sandler's ability and air. - I'm not sure. - This is producer as well, but he's not, he's movies. - Why is he not on your list? - Oh, funny, funny. - He's on your list. - Why is he just- - I'm not on the list. - I'm not waiting for it. - And then it came around the big- - I don't want to make the answer. - Right, so this is the explanation. - Yeah, why is he on your list? - He's not on the list. - It wasn't that good. - He was, it doesn't matter how good you think his, his, - No, I like him, but he wasn't that big, he's more my point. - I think he was big. - Can you get, what do I say, Jack Nicholson is the wrong guy? He's saying he was on here. - No, he's on here. - I mean, he doesn't get paid that much. This is a massive actor who was in top movies in all things. - He's massive, like he's probably the biggest movie star of our generations. - James L Jones? - I love James L Jones, but no, it's not. - Yeah, he's a ridiculous guy. - Sorry, he's being a- - He's being a- - What was this fortune from being the voice of sitting in and- - Don't stop that. - Come on. - That's not much money. - And he was also coming to America, was that seminal? - I don't know, but he's looking paid a billion dollars for that. - You're not talking about like a Marley Brando. - It was amazing. - It was amazing. - It's not brand new. - No, brand that was screwed by then. - Yeah. - No, I've, Harrison Ford. - Is he people here who are just still day-to-day names? - Yeah, Harrison Ford? - Harrison Ford. - Well, that's what I do. - I'm a- - I'm a- - I do, I do, I do, I do. - I'm a- - This is a problem with these quizzes. - Even when I get a- - Right. - We sneak- - It doesn't even, - It doesn't even, - I'm definitely my left ear, it's kind of what I do, so I- - I don't know, I was. - But that was the biggest movie. And there was a bunch of back here, there's a few bands on here. Can you name the bands? - Nirvana? - Would be around there? - No, he was dead, but Kurt K. - I don't know, but- - Even the Michael Jackson's on on this list, I got no confidence in these bands. - There's one guy who's had a few issues lately. Can you go, I think the guy's had a few issues of light. - Donald Trump? - Much worse than that. Donald Trump's president. He's not all right. Is he on the list? - He wasn't a talent electent. - I suspect he was. - Who's a musician? - Musician's had a few issues of light. - A musician that's had a few issues. - Yeah, he's a lot of issues. - Not with Jewish people, I'm generally as issues. - He's currently in jail. - They all have issues. - In jail? - Solo artists? - Periodically. - Pretty much. - Producer originally? - He was in here as a producer. I mean, I shocked you as this high back then, 'cause he was really young at this point. - I have no idea. - No, no idea. - Off Daddy. - Oh. - Well, he's so rich. - Who's a producer back then? You've got Garth Brooks, number 15. - Garth Brooks, he's been around for a while. - He's the guy who wrote, who did cartoons? Who's, you say Matt Greening? Well, not right, there's another guy. - Who did cartoons? - Can I cartoonist? Like, is he-- - No, everything I say, I feel like I'm gonna-- - You're not stupid. - You're not the only one who's serious. - I'm sorry, Phil, that was cool. - That was cool. - That was the cool of the scene. - Yeah, that was a big one. - You did family guy in order to Seth McFar. - No, it wouldn't be him if Matt Gray-- - Very close, you're really close. - South Park wasn't big back then. - What's South Park guys on a hit? - It can't be like the P-NOT sky. - I don't know. - Charles, I don't know what that is. - Charles Schulz, Charles Schulz. - Charles Schulz on a hit. - 30 years too late. - Yeah, yeah. - Oh, we ain't much judge. - Oh, he does King of the Hill and stuff, yeah. - King of the Hill was that beat? - Sparske goes around here, 49 million. Paul Reiner was in hell with Hunt. We're both on here for Matt about you. - Charles Schulz on Travolta, Drew Carey, Ted Turner. - Wow. - So no, that's not right. It's Bonnie Turner. Who, Bonnie and Terry Turner over there, that is. Brad Pitt's on here, Kevin Coston's on here. Nicholas Cage's on here, Michael Schumacher on here. Second sportsman, Tyga Woods way back down in '44. So he's just getting going. - Biggest surprise. (laughing) Number two, then it's heavily-- - I thought athletes was the mother of law. But I just kept remembering like 98 was before, athletes became kind of the centerpiece of society. - Social media, they didn't know their own. - Yes, you're right. - I'm IP. - And I tell you what, doesn't surprise me. It's all men. - Grant Hill was on there as well. - There's Oprah Winfrey. But apart from that, it's all men. - Yeah, always a few actresses, but yeah, it was very. I think now you see much more balance as well. Partly because of social media. - Absolutely. If you look at all the Kendall Jenners and they've been incredibly adapted using social media to build brands and build IP. And this just wasn't, you weren't able to then. So social media for all its fault has been the great democratization of celebrity wealth has come from social media. - Yeah, well, maybe what you'd say is that people now that have a personal brand are able to monetize it themselves as the owner versus renting it to someone else to monetize. That's the big difference. So I'm gonna cut back to AI. We haven't spoken about that a bit and something very introspective. - Interesting. - Very introspective or something different. - No, well, that's kind of last week. - Yeah, and a bit boring in my opinion. Like, this is just one of these moments where there's an announcement that gets made. Typically something comes out of China and people don't really understand it, but they panic. Do you see, there were two, so there was a whole like festival in China where that announcement came out of. And the end of the festival was Chinese robots fighting. Did you see that? - No, I keep it boring with that. 'Cause they always fall over at some point. - Yeah, so what's interesting about it is that mostly the way they go down is falling over themselves. - Yes. - Like they basically managed it in vent this round, flying roundhouse and they try it pretty frequently and mostly miss. - It's pretty cool. - What's interesting is when they punch each other or kick each other, they're too stable to go down. Like they won't go down from a kick. They'll mostly fall over themselves, but the scariest thing is, oh, no, I tell you, if you're gonna watch something on this video, don't worry about what they do when they knock each other down. Look at how they get back up again. That is terrifying. Like they basically just permeate back up. They can never stay down. That's a terrifying part. So there's a company that raised $300 million last week in the US, it's called etched, ETCHED, ever heard of it. Probably Val might be three-bill. Just came out of stealth mode. I'm gonna tell you what they do, 'cause it is a very amazing insight. - Oh, it's a guy who etched onto the GPU or something like that. - No. - But the insight in this is, how different AI is gonna be in five years' time from a commercial point of view, compared to where it is today and how hard it is to predict how it's gonna play. So I'll just tell you, this is a company where I'm just gonna say what, you'll never have heard of the people involved in it. I'm just gonna tell you one or two things that each of them has done or a few of them have done. So one of the founders, he was a few of them are Harvard teal fellows, which means Peter Teal paid them to leave Harvard. - Or leave any university. - No, if you have it. - Yep, correct. A few of them were maths 55 alumni, which is like the hardest maths course at Harvard where everyone basically drops out. - MIT or Harvard? - You could be right, it could be MIT. I thought it was Harvard, but like, and so the world, maths champions, et cetera, et cetera. So there's a lot of that stuff going on. - Smart. - Yeah, very smart. Okay, this is more interesting. One of them was the co-founder of a business that went to $100 billion and another business that was bought by Crimson Education. - Oh, really? - Bit of a dodgy. - I know, that guy, that guy. Well, that's not dodgy. We just questioned the valuation. One of them was the XCTO of another business that was acquired for $10 billion and has shipped five systems, generating greater than a billion dollars in revenue. Now, see if you know what this means, all on A zero silicon. Do you know what A zero silicon means? - Oh, it is. - You know what A zero is? So this is something to look at for. So when you make silicon chips, the first one you make is called A zero and then it's called A one, A two, maybe B one. A zero is the first one you ship and generally people will expect that it will have some flaws in the architecture and you'll have to make an A one. And so if you say I shipped A zero silicon, that means you're so good at chip architecture. You didn't have to make an A one. You could ship the A zero. This guy says I've shipped five systems generating more than a bill revenue. All on A zero silicon. That's impressive. Another guy led platform engineering teams across Nvidia and built the A and a system. - And the A and a system have. - This is the VP of platform. Is I'm just reading you some of the background of these guys. Built the HGX and DGX systems from scratch at Nvidia. Just know this call platforms. Another guy led zero to one production and supply chain ramps. So that's the first stage. For 24 products, including the original iPhone, MacBook Air, Pixel and Chromebook, that's impressive. Another one was on the architecture team at Nvidia of the H100, A100, V100 and one Qualcomm Research Award, they're pretty good these guys. - Yeah. - One, built the TPU software team version one to five at Google. So that's the TPU, chips at Google, and they'd researched for Project Estra at DeepMind. So this is the kind of nature of these people. What they are building and the reason they got so much money is this, and this is why I say, God knows where this is gonna all go. And they have built, so the way that AI works is it uses a software architectural transformers. And when Nvidia builds one of their chips, the chip is a multi-purpose chip. It can do stuff that uses transformers, but it can do other stuff as well like make images, which a lot of that is not transformer based, or do computer vision. And as you know, it has this software called CUDA, which basically helps the chip know how it should be used. But because the chip is trying to work out what it should be doing at all times, like there's some latency, some time that it takes to figure that out. And then you've got like Google is releasing chips like the TPU, which are much better for inference, so that is like answering questions. - Use the AI, not trying to. - But even that can do lots of different things, so there is some latency. - And Amazon is doing that as well. - And Amazon has an inference chip, and a, they've got training. - For training? - And I forget what the inference chip called, that's probably a similar kind of name. But what these guys have done is something, a next step, which is pretty crazy. They've basically said, it's possible to encode the transformological onto the chip itself. - Yeah, so sorry about it. - It's not what you were made of. - Yeah, they're okay. - All right, so yes, basically that. But what they're doing is, what it means is, all this chip can do is transform a based calculations, which is a lot of, maybe what we'd call it is, anything where you have one token at a time, following, which is mostly text-based stuff, this thing can maybe be 200 times faster, than an Nvidia chip. It can only do that one thing. And one of the challenges is, that you have to rewrite the code. Like the main code base that it's in. - The code is just Nvidia, so. - Well, it's not CUDA, it's called. - Well, it can't be CUDA, it's called a Nvidia. - It's called TensorRT. It's something that sits alongside that, but it's what you program in, yeah, it's what like you program TPU chips in, so you can't use that, you have to rewrite. So they've just come out of stealth. I think they've raised hundreds of millions of dollars. They have a $1 billion order book already done. What's interesting about them, and you remember this from AI discussion, there's obviously who are they gonna use to make their chips? There's only one company you can use to make chips, really? - Not Nvidia. - Well, Nvidia uses the Ms. Tal. - Well, I'm saying, so Ms. M.C., but what's interesting is, you know, all of the, so you have to think about, where's the backlog in AI? So the backlog is in two places, you know, one in a place. - Memory, right? - Yeah, memory, so it's hard to get memory. And another backlog is getting access to TSMC. It's especially hard to get access to their three nanometer. - Oh, that's true, that's true, that's true, that's true, that's true. Well, most of the Nvidia chips and the advantage of three nanometer, which of course are not three nanometers. It's just a marketing night. So this is actually made on four nanometers. So less bottleneck, guess who two of the investors in this etched company are? If you wanted to get access to TSMC, that's one of them. - ASMR. - No, 'cause that's upstream, they don't need them. What's the other bottleneck? - Oh, it's carhionics. - Yeah. - So they've got a memory investor. And they've got, so they're gonna be able to get access to chips and the thing is this, if they start, well, they always become like a subsidiary of those two businesses in some ways. - Yeah, I think that guarantees them supply chain, right? And so you have to think about it. No one knows how this is gonna play out, but what you now have, so I don't know if you have seen this, but Nvidia's current share of inference, that means their chips are being used in data centers to actually run AI. Do you know what their current share is estimated to be? - I'm actually not really much in China, 'cause they got blocked recently. That's still amazingly high. - 85. - 90%. - Yeah. - And so do you know what the forecast is where they'll drop in the next 10 years? - And they got 80. - So I think it's down to kind of 30. - Oh, is that all I've ever been? - Yeah, that's what they think. - That's 'cause Amazon and Grigou and all that stuff. And so all of these NeoClouds and all of these data centers that are being filled with Nvidia chips, and so the way you should think about this is that the entire industry is basically sitting on the shoulders of a few hyperscalers. All of the money's coming from these hyperscalers who are under pressure to get returns. And so the hyperscalers pay, and then Nvidia gives them some money that these data centers or NeoClouds, and then they use that money to buy Nvidia stuff and Dell stuff. It's all built on this kind of view that this is what the ecosystem is gonna look like and the hyperscalers are gonna keep spending. No one knows what the world would look like. If all of a sudden these chips became 200 times more efficient for doing the bulk of the workload, and how that filters through the system on the plus side. - We speak about Jurassic Park. - We talked about Jurassic Park a few minutes ago. And my favorite line of Jurassic Park, I'm talking about on pop before, but Jeff Goldblum, who's, who's not like 35, or something, the time I thought was really old. He had this immortal library goes, I'm talking about how could these dinosaurs come back to look, how could they do it? And he goes, life finds a way. And I was like, technology finds a way. When something's so high, and Jeff Bezos talks about with your margins my opportunity, it's the same thing. Nvidia's making so much money that ultimately, which is why the share prices under control on the PA is $3,000,000, is because tech finds a way. That margin is everybody else's opportunity. And interestingly, TSMC, who has a bigger monopoly and more robust monopoly, you know, they don't price to the marginal customer. They basically say, we're gonna have a fixed margin, they gross margin is 50%, not Nvidia's semi-something. And that is one of the ways they keep competitors out of the market. They just don't provide enough margin. - And long-term grading, not short-term grading of the guy. - Exactly. And so you have to think about, you know, if let's say these chips rolled out, like an edge chip, and it became so much more efficient, number one, everyone who stack their data centers with Nvidia chips, they got problems. - Got the pickpockets. - Number two, it might actually be really good for the models because all of a sudden, you know, but effectively anthropic is struggling to make money because nobody wants to pay the cost of tokens. But all of a sudden, if this was like so much more efficient, suddenly tokens can get a lot cheaper than luck. - That's right, on these things is the duck. Unless something like that happens, like open-air and anthropic are dead. So like this losing even anthropic, which is a much better way to position an open-air, almost certainly dies, open-air eyes are dead. If there's something like that happens, so that it feels like all the bets on these court-to-foundational models are basically, of these two frontier models, are based on something like that, like the cost input cost dropping. And let's say the edge is trying a lot and he's fantastic and he's constantly saying how these guys are basically insolvent. The whole AI boom was rests on, effectively on open-air, with that open-air AI, there would have been no AI boom. Because this member open-air started really cranking in, well, GPT was 2023, even before that. And that's what drove him video. So everything really hinged on this one company that essentially has no business being in business based on current financial issues. - And then but then all the hyper scalars. I think the first GPT model was 2020 and then the hyper scalars jumped on. The thing is, people don't think about. So there's now, I don't know if you know this, you might know this, there's something like, it's not very big, there's $40 billion or something, but still small, the syndicated asset-based finance on chips. And but it's gonna grow dramatically, right? And I suspect we take on chips in data centers? - Yeah. - I think there'll be a lot more than that. - Yeah, it's still pretty small. - That doesn't sound right. What about all the private credit? - I think it's just starting to grow now. - 100 billion dollars in private credit, paying fees, data centers. - So this is specifically, maybe this is specifically Nvidia's. - Maybe. - Even for both the Nvidia. - Oh, very internal, yeah. - It's still quite small, okay? - No, this doesn't include, two hours and all that garbage. - Well, this is not including bonds issued by companies. So, Oracle issues against themselves, but it's always this, this is just these TVs as well. - That's it, that's fine. - There are balance sheet stuff as well. - There are. - It's literally enrod again, this stuff. - Well, the difference, the main difference is, 'cause I thought about this relative to the subprime crisis. And the difference is the marginal borrower in the subprime crisis was the person least able to pay. It was like the subprime borrower. And then they cdoded all up, right? So they basically packaged it. - Packaged it. - And it made it look like it was diversified. But it wasn't, 'cause it was all junk. If you go and get lots of junk and put it together, it doesn't become less junk just 'cause it's diversified. Whereas this is a good borrower. This is mostly hyperscalers, ultimately borrowering. And by the way, I'm not sure if you know this, but Nvidia has contractually backstopped a minimum final sale price of their chips with a lot of these. That means you can lend money to a, to a neocloud based on what the final price of the chip is gonna be when you sell it on the second hand market. And Nvidia says if it's below X, we will buy it for X. So Nvidia is effectively using their balance sheets to prop out the whole AI into the whole AI. But you know, if I put AI guys broke, probably a whole lot of neoclouds collapse. - That's the high-speed. - And they say, what you think about, then the neoclouds collapse, what happens to all of these chips? So they're gonna flood into the market. - Now there might be enough demand to absorb. - There's not just the chips, what happens to the future chips that aren't needed anymore? - No, it's current chips. - That's right. And so maybe at the moment, there's more and much more demand for chips than supply. But then you have things like H'd come along and TPUs, like I just think five years time is so unknowable. There's so many, the previous time is unknowable. - Yeah, five years time. - It's so hard to pick what's gonna happen. And I think this, little glimpse into itch, whether they're the winners or not, it just shows how yeah the assumptions that people are making about this industry, like they're changing every week. So we've talked a lot about the Michael Barry notion, the off-balance sheet stuff. Well he's massively short on this stuff. Yeah, I don't like Michael Barry, but all the off-balance sheet stuff, so all the hyperscal essentially put all that spending, the capitalise, they're spending essentially, it was on balance sheet off-balance. So all off-balance stuff we talked about. We talked about this all the time. And I said this in a slightly different way than you continue. So investors seem to be able to stomach capital expenditure, capex on AI, that measures the free cash flow of a hyperscaler, but they can't stomach capex that's more than the free cash flow. And so the problem is how do you do capex, but it's not capex. And the answer is you go and go to a neocloud and you say we're going to buy all of this stuff off your one on an ongoing basis and up front a chunk of the money. And that is operating expenditure. Opex, it's really capex that you're just shifting to Opex so that it doesn't look too bad in your own financial status. And that's kind of what you're talking about. We talked about how we talked about the whole capex thing, how people say, oh, if you look at the overall market, the P, it's only the P multiples only 22 for the market, over not that expensive because I could see it in 40 and that and we've said, well, that's not right because a lot of the expense has actually been capitalized. So it's on the bell, it's been on the panel. So we've talked about a lot. This is everybody knows this. The winning come up with it. But there's actually something I hadn't thought of that is we know that if I was reading Bill Bonner, who's one of my favorite writers, he quoted a guy called Charlie Bilello, who basically said, not only is that there's something else I didn't even think about, but there's also a, and this Charlie guy said in the first quarter, just three companies, Google, Nvidia, and Amazon, saw massive gains in other income category from their private investments in companies like SpaceX and Anthropic. The total of 69 billion in other income was 10% of their S&P's overall net income for the quarter. I believe this boosts S&P year on year ending growth would have been 15% well above the 28%. So talking about, oh, we're not expensive because 28, huge earnings growth, 28%, not only has this capex stuff, it's also got the investments, the benefit of the capex stuff. So they, so they're marking that up. Yeah, so the investments in Anthropic and SpaceX, and SpaceX essentially was, and now it's come back down, but the time was up. That's based on XARI, which was the whole front-end model. I'm surprised they can mark that up because the general accounting standard is, unless you're an investment business. Well, they do in the US. You hold the investment at cost. They're marking it up. Well, that's ridiculous. So it's double. So you guys, two reasons why these earnings is just a fraud. It reminds me of two things. One was the depression when all these earnings was vague, but we talked about this before, but AOL in 2009, 2009, 2000, at the time, time, one of the, AOL had real revenue. And time, one of the deal based on real revenue. From this day, revenue was all coming from dodgy startups and you found it by VCs. And the revenue just in 2001, gone. It feels like this could be the same thing again. This is fake. It's real revenue in the comments, but it's really fake revenues. It's not actually, it's much, and it's much more, the capital stack in this boom is much more concentrated than it was in the dot com. It's basically three or four hyperscalers and then like some Saudis. Yeah. A few others like, and a few big American banks, which they have in the, yeah, if you're a bank's lending debt, private credit, we do that. That feels like another whole subprime mortgage thing. But every time someone comes to the market and says, we need to raise $100 billion from AI. There are not many places that you can get there. From it to much more concentrated than the dot com. Because the dollars are so massive. I mean, I think what you've just described with the markups is like the two of us owning a property. And let's say you own 70% and I own 30% and you want to be worth more. So you say to me, I'll pay three times the value for another five percent from you. And you mark up your whole 75% now to that three times the value. Yeah. I mean, nobody would have told me that. And not only that, I'll, the money I'm going to pay you, I'm going to take off my pay and I'll go, I'm going to put anything on the pay. So nothing's going to want through anybody's pay and now. So the question is, you know, I've thought a lot about this. Like, how do you financially position for this moment? And the other complication, which I won't go into a lot of detail now, but at some point we'll talk about this is like quantum computing is coming. Yeah. And probably the high, the high viscosity, especially Google, there'll be a beneficiary of that. They're building hard on that. And so, um, and how do you position for all of this? And I think, like, you can't short AI because you're going to go broke waiting like it's unknowable when this thing is going to crash. And there are so many vested interests determined to keep this up. And they're rich. And a whole lot of them are the most valuable companies in the world. So you probably go, we can't. I mean, you can't show it in video because there's plenty of places that are cool, short, or, uh, well, the basics are short, or there's lots of stuff that short. So Vivia is going to survive a crash. It's hard to see how they wouldn't survive. Even if they've survived a few of these, a few 80% draw downs consistently over the last time, profit and free cash flow. It's like a hundred billion dollars or 200 billion dollars. Like, it's all based on this fraud though. I mean, actually, they could be very quickly unwind. And so, but even if they're cash, even if they started running at a free operating cash pretty quickly, they've got so much cash. Like, it's, I don't think I go past. It's hard to imagine. They could drop 80% of the habitable. They could drop 80%. But, um, it's like back to 20, 24. They're vulnerable, but there are much more vulnerable things. So, you know, you could try to pick individual disasters. Some of them I blew out. Like, the private credit, the private credit, oh, the core waves, the iron, there's lots of options. You think about the stack, right? So you've got the chip. Well, they're probably not going to go broke, okay? That's a lot of, and Vivia is the last thing I'll be sure to. Even though I think I might go down 80%. And then you've got data centers. And so the more robust data centers are the ones that actually own something, like power access to power and water and a physical premises. But the neo-clad, as you said, that really own nothing. Warren is more the first category. Warren has a, a, and so they could still go to zero. It just means that data center would be an asset. They could sell. It doesn't justify their, their valuation. Um, and but core wave has no assets. Yeah. And lots of debts heavily leveraged. And so you could try to pick them off. You could try to pick off the people that lent to them, which is kind of what you're all means. The more of this one. Yeah. And so you say oracle, but what you really mean is the private credit, blue hours listed private credit. So that's the really easy one. You could go and try to short oracles credit, like their bonds. Yeah. If you think they're going to collapse, I think Oracle will find a way to survive. Of course, really good businesses. Oracle itself is a great business. They've got some actually really good businesses in that business. But my main issue is this. Um, these are, it's also volatile. The volatility, I was having a look at this on some options. Like the volatility on iron is 30 something percent. Like, I mean, the thing felt 25% in a month. And, yeah, these are so volatile. And like this might stay, I mean, I thought this was going to fall to pieces pretty soon. Yeah. But it might last another three years. Yeah. And so it's kind of hard to know what to do about this. It's an interesting problem to try to figure out economically of what, or what, in from an investment point of view of what to do about this and how to protect yourself while taking advantage of the upside. That's what I talked quickly on the KPM's G saga, which talked about it a few weeks ago. Somehow, this got worse over the weekend with a disgraced big four firm sacking recently demoted CEO, I lean hoggit from the firm's partnership after fighting. She had stored printed copies of confidential lend lease board documents in her locker. She had them with her colleagues to win audit contracts and they're repeatedly lied about it. Apparently, uh, Alon's uncovered an email from a hoggit who bears an uncanny resemblance to someone from an evil villainess from a Disney movie, where she responded to a request from a colleague to say lend lease documents by asking her a to get material out of their locker and share it. The scandal was already claimed the scalps of former CEO and G a former chairman, Martin Shepherd, senior auditors, Paul Rogers Kimlory, and Julie McPherson. Amazingly, and this is probably the worst part of all. Hacker was able to remain at the firm as a senior audit partner for the past two months, despite being specifically named in parliament as hiding stolen audit documents in her locker and being demoted to the CEO. The KPMG board actually overruled their legal and HR bosses in allowing hoggit to remain chairman of the board of the former's Martin Shepherd here since Quitton disgrace. And he could it be any worse for these guys? It looks pretty bad. I mean, the thing is this, we look at this and say, how could anybody have ever thought they would get away with this? And I'm going to tell you my view on that. Most people that do terrible things to other people, super dodgy, they get away with it. I've had personal experience on the receiving end of this, right? Like, mostly, you can get away with doing terrible stuff. And I just think their view of this was, no one is ever going to catch us this stuff. And I think that is pervasive in the corporate world. That's my view on this. And every now and again, you hook one of these big fish, and it looks terrible. But what you don't realise is there's tons of this stuff going on below the surface that you'd never even know about. That's the truth of it. Yeah. This theme, especially, I think entire every auditor with this brush, this seems to be, yeah, I'm not even within the same firm. I've got to listen to picking most people in KPMG, a good people. And this is just these people at the top who you expect to be the sort of wider than white, whether with the worst actors and them all. So I am not specifically targeting auditors in this comments at all. I think they're increasingly over the last 50 years, maybe let's just even go longer and say post the post war period. Like what we've seen is that you can get away with more and more. And like regulators or the law, it's always, you know, it's a few kicks behind play. Yeah. So I think across the business, like you and you know, a chunk of what goes on, I know a chunk of what goes on, we mostly don't know what goes on. There is a lot of very nefarious stuff that goes on in the corporate world and how did they get caught? I mean, how would they, they were, we saw blah. Oh, we saw blah. That's right. They tried to, they tried to, they tried to press the whistleblower. Yeah. And so what you see by this pattern of behaviour in my view is this terrible stuff happened. There will be some people that didn't know that this was going on. The first instinct is to say, we'll be able to get away with this. That's the general disposition. I think people are, there's a lot of naive energy that goes on when you look at business and you look at markets and you think it's largely clean. That's not my view of it at all. So I'm happy that this was exposed. Yeah. And hopefully it will make some people scared to try to do bad things themselves. I only want the FTA report this week that Waymo is reporting looking for Way out of its deal with Uber. We talked about this a few months ago. It's so predictable. Which has been, which has made the alphabet owned Robo Taxis available on the raid on the ride, Hayling Giants Network in Austin, Atlanta. You say it's predictable, but remember the time when we argued about it, one of the things I was worried about with Uber was the fact that at, at rely on Waymo, when you said, "Ah, Waymo needs Uber for its distribution." Clearly Waymo doesn't feel that way anymore. I thought they would need them for longer than this. But we did both say it's Google. So one is they're okay. It's soft. Pretty good customer acquisition as well. And two, yeah, they've got some good customer relations. It felt like everything that Uber had to offer them was going to be transient. I'm just shocked by hell. I'm not shocked. I'm surprised at how quickly, or haven't done it yet. Well, but it was always obvious they were going to try and get onto it. Well, I have done it because Waymo is very told Uber that it tends to stop its using, it's app in January, 2028. It's never ready to put in Phoenix. So Phoenix has happened and these other cities are going to happen. So it's just-- It's why I have to download a Waymo app in Phoenix if I wanted to order it. Yep. That's same. Well, I guess it's not, it's going to be integrated into the Google switch, right? Absolutely. Totally. So I've got single sign on. So it's going to be pretty easy. This actually is happening in the backdrop. I'm not sure if you saw this in TechCrunch, but Waymo and Uber are having a huge policy fight in DC. How much have you saw that? I don't know. Waymo is backing a bill to allow for the safe deployment of autonomous vehicles, which was happening in LA and San Fran and all these places. Uber is arguing that the proposed laws would displace human for higher drivers and hand Waymo de facto monopoly, which is strange given there's a bunch of other companies doing it. They're not about the first bit. Yeah. Uber is lobbying for a system that would require robot taxis to operate on a ride, hailing network that also uses human drivers. I wonder who that would help. Yeah. This would of course make Waymo business unable to operate. I don't have human drivers and Uber would have an monopoly of themselves. So this sounds pretty self-serving. Uber meanwhile, this is not for this is the interesting part. So we talk about a lot about Uber because it's such a fascinating business. But Uber meanwhile, I was in its share price slump down 34% since September. Its recent valuation is only $134 billion. Interestingly, when Derek, Kozhe Shahari, took over Uber in 2017, what do you reckon was worth back then? I mean, presumably he's ridden it up pretty heavily because I thought it was like the whole Travis debat. Obviously that was pushing the Travis down aggressively, right? Like, it was a gone up. Was last round with 68 billion when Travis was there and then now it's $134. So in 10 years, it's not, it's a bit under. That's a seven percent a year. Which is pretty bad for people. That's a toll road. Yeah, people say how good is Dari? Such great incredible CEO. It presents for a real, for sure. You're picking a point after which it's fallen 34%. I have, but we are at this point now. Sorry, we have to shift market efficient. But we're going to do a stream of the market's efficient. Well, in a degree, still doing that sales pitch. What this kind of does prove is that Travis Kalaniyik and Emil Michael's claims that Dari Kozhe Shahari was doing a pretty bad job, but kind of being proven right in the headlines on this. This really revolves around, I mean, what Travis was really critical of was the whole shutting down the self-driving unit because a lot of Uber's problems hauls around this way. My question, remember our discussion was which side is going to be commoditised? Maybe both. The network. I always watch all the time. And you're more fortunate on the way. Well, I think maybe this is, I mean, I remember we had talked about this, but maybe this is, how my view was kind of evolved with this. Uber's big opportunity and why they were so successful is they were a marketplace where both sides were fragmented. I know we had this discussion. And now it feels like it may not remain the case because like they're dealing with, you know, hyper-scaler on one side of the market, definitely not fragmented and the resources to do it themselves. But this is the big question. Again, I just say we're still early in this self-driving stuff. You've got what five players at the moment. Yep. If there are 25 players or 50 players, then that will still be a fragmented market and yeah, maybe they won't get waymo. But unless waymo goes and gets 60% of the market, it won't really matter. And the big question to me is, what's going to happen with all these Chinese self-driving cars being deployed around the world? Whose networks are they going to use? I think that's going to be a big determined. So Chinese EVs? Yeah. Chinese self-driving. Chinese EVs. Well, Chinese self-driving EVs, who are you being used by? Yeah, because presumably like, you know, there are all these Chinese players, okay, we know BYD, but there are tons of them. They're all going to be doing self-driving, the probably EVs. And so how, they're going to want to deploy into the West. So how are they going to deploy into the West? They're probably not going to do it all through their own apps. They'll be too fragmented. And so I think that's the unknown for you. But how fragmented is that side of the market going to be? Yeah. Waymo is there worst nightmare. Yeah. But there could be other things that are not nightmares. But why if I was a Shunabanker's Uber could have had their own competitive waymo. Obviously, they poached the guy out of waymo. That controversial guy went to jail briefly. But do you think that Uber should have ended up being a hardware provider? I think they should have been doing their own stuff. How would they have defeated all of these other much more deeply funded? How did BYD become, for going from battery manufactured to the world's best EV? You can do it because you can do it. Then what Uber would be saying ultimately is we're only going to connect you to cars. Elon Musk, it has cars. I know. But all of those, that seems like a terrible system. That's like a system. But waymo, aren't the car man? The waymo just puts the lighter on the Jaguar's in the moment and now they're. I know, but just like Tesla used to put their engine, their motor inside a Lotus. No, but now there's the whole car. It is the Lotus Tesla. This is much more Jaguar waymo analogy, I think. But like, let's even talk about the automated part. The automated part of this is not just software, but a lot of it's software. How many of those providers are there going to be? It could be 100. So do you want every one of them to have their own app for hailing a car? They'll be waiting at a train station and. No, that's the train that you're waiting for. They definitely won't be. You can't get on the train. Uber controlled their destiny and wouldn't be beholden to the waymo's or to the Chinese manufacturer. Well, I think Uber should just make deals with Chinese companies. Because that's going to dominate the market. It's just interesting, leave. If you look at waymo, it's all about Uber's valuation went from 68 billion in to 17 to 134. What do you reckon waymo's mostly about your app? Is it separate to. It's alphabet. In 2017, 18 or whatever, it was a 2020, it started raising separate funds for it. So it's. It's. It's been. 400 billion. It's first external funding round was 2020, I should say. Now, raised early this year, a 126 billion valuation. That's okay. But we think Uber's 134. So, we think about all Uber's. Uber's 15 years old was massive network and all its customers, UberEat, and. So, if you look at waymo. But a lot of that waymo money is people betting on Google. Yep. Look, what do you reckon waymo wasn't 2020 when it first raised? Well, that's what. I don't know the answer, but 20 billion. Yeah, 30 billion. Waymo's Forexed and Uber's. When it was. When it was. When it was a bit of a. Waymo's clearly. It was an external valuation. This wasn't. Well, it's a semi. Saying, "I'm going to invest in waymo and even if it's expensive, it's alphabet." Like, I've got all of. No, my goodness. their resources to make it work. It's a bit of an artificial valuation. I'm not sure it's artificial. Because this is a genuine. It's run as a standalone entity, I think, within alphabet. So, I don't think it's. I think it's a fake value. I think Uber can still succeed as the ride hailing app for autonomous vehicles, even if they don't have waymo. And my guess is, if they succeed excluding waymo, Waymo will actually give them the ability to hail waymo. So, the fight's not over. I think where the positive is, is. I've specced in five years' time, we're all taking these self-driving cars everywhere, or certainly in ten years' time. So, the market. Is this all happening with Uber's and Samfram? When they. They talked about a tam being one of a hundred million. Suddenly, the tam in Samfram was a billion, because people who weren't taking Uber's. Yeah. sometimes, who weren't taking rides here, something like that. Right, right, right, right, right, right, right, right, right. We do want to take taxi, prefer to Uber. I think we get the same situation with self-driving, the market becomes just so. Totally agree. But that's why I think it's. Again, we come back to the same discussion we just had with AI. It's very hard to know what this market looks like in five years' time. Not just. Not 'cause, like, we're dumb. Because there's too many. The way you work out what. What the likelihood of something succeeding is you take all of the probabilities and you multiply them through. And there are just too many nodes that you have to multiply at the moment to work out what the likely outcome is going to be. Yeah. And then, we'll go super quick back in no time at all. [Music] (upbeat music) - And we're back. And last week, APRA allowed UK FinTech giant Revolut to become an authorized deposit taking institution in Australia. Customers can now get interest on their funds, which are now backstopped as well by the federal government in event of a crisis. Did you know Revolut generates most of its profitability? - No. - I had no idea. - Every bank that I've ever heard of generates most of their profitability by lending out the interest rate spread. - Right, yeah. - Not how Revolut makes its money, if it was, I wouldn't have asked you the question. So Revolut essentially subscription business, which I had no idea about. So it had subscription revenue of almost $1 billion, up 67%. - That's what I'm saying. You call it, I feel like everything all this new again. You call this a subscription. - You call it fees, right? - I call it bank fees. - Like banks have spent 25 years getting rid of bank fees. And now you just got a new name to it. - Bring it back. - Yeah, you're right. And this is what was said in the article. There is a slight nuance on that. So there's Revolut has four plans, $6, $12, $29, $100 a month. The higher cost plans come up with benefits like fee free trading, insurance, credit for gym visits, free withdrawals, access to kids accounts, airport lounges. That's a bit more like a savings. - I am completely unconvinced. I have a used to cry about $2 a month bank fees. And Revolut has said, I can get $100 a month. And people are gonna be happy to pay a massive base. - Unbelievable. Everything that you just said was totally unpersuasive. That's a bank fee. - So Revolut Australia boss Matt Blackspeak said, we have a diversified business model that is different to other banks. He discrees with the idea. We're not sorry. - No, I agree with him. No other bank can charge bank fees. You can. - Yes, different to other banks. - We're not sorry we're not learning. It's pretty leverage to activity. We have diverse income streams and descriptions are an element of that. Last year, 16 million customers joined Revolut globally. And they got 75 million customers. - I'm with NAB, predominantly. And you know what my fees are? Zero. And do you know how many transactions I can do for free in that account? - A lot. - Infinite. - So there you go. Do you get your membership? - Do I get your membership? No, you know what? They don't pay for my gym membership. So, and my gym membership does cost more than $100 a month. - Me, yeah. - So, but I doubt they'd be paying for that because they probably would be losing money. - Getting you in a tank top on their avatar, it's not gonna be incredible. - No tank tops permitted in the gym that I go to. - Oh yeah, Kesar of course, which doesn't. That tank tops. Meanwhile, last week A&Z scaled back the sign-up perks on its popular frequent fly cards. Well, NAB, overhauled its white label cards with high interest rates, annual fees and reducing earn and burn. Other big landers are rethinking their awards and card offerings as the appalling RBA prepares a slash merchant fees. - So, basically we're entering an era where bank fees are coming back because revolutes called them subscription and every other bank has been forced now to charge bank fees by these - On the cracker. - and necessarily RBA changes. And so, it's the return of the bank fee era. - So, well done, well done RBA for putting bank fees back on everybody. - It's just crazy. - Revolute is actually one of the world's most-- - And high interest rates. So, the RBA change has given us these three benefits. If you were points, high interest rates and bank fees. And probably higher, higher annual costs as well on top of the fees. - Amazing. - Revolute is one of the world's most valuable tech unicorns. It was valued 115 billion US last week up from 75 last year. This is on fire this thing. It's Europe's most valuable startup. Revolute's founder and CEO Nick Steronsky has a 29% stake in the business giving him a net worth of US $33 billion make him Britain's fifth richest person who knows there are that many rich people in UK. So, the business had unbelievable metrics. It's just as high level. Number of business customers increased to a 3% last year. Revenue was up 46% and profit was up 57% to 1.7 billion. - Well, there's no pitch deck. - We're going to become $100 billion business by charging bank fees. - Unbelievable. - It's actually incredible. As you said, the taken model that was hated made it sexy and built a $116 billion business. - And obviously the great UX and great UI. - And all they must to land. I mean, they're thinking the market is absolutely land. - Yeah, Julie and I are a lender as well. I've never used it. But it's like they're just a really, and we saw a bank in much smaller version in Australia. They sold them in New York eventually. - But that was mostly a tech. - Yeah, I think Revolute's just a bigger version of that. I think it's really great UI. - Well, but if they're this big, they know how to run a bank. Like their opera, whereas I think Uppers just bend to go in Adelaide, partnership was in it. They were running the bank and Uppers the tech layer was. - Uppers the tech UX layer. - Yeah, but whereas this is a whole bank. - They got a lot of stuff. - Absolutely, yeah. - So this is impressive. And what it goes to show is, like it doesn't matter what exists in the world. Ultimately, there are just some ways to make money. And one of them is banking, retail banking. It's just one of the ways to make money in the world. And they've just figured out it's good to charge bank fees. And I don't know why all these idiot other banks didn't charge bank fees and just call them subscription fees. - Well, I think that's what you talk about as well as the best place to make money is get go narrow really big torrent of cash. - And just stand next to it. And just like getting a little bit of it. - Take a thimble or a bucket if you're greedy. - Yeah. So I think that's a really interesting point. Revolute, I wasn't saying that revolutionary. They're just, they're charging effectively a different model for effect. - So the flip side would be. - So one of the things they provide unlimited is some kind of trading you said, right? - Yeah, and I'll never use them. - So this is the actual fee. They might be also a run hood. - Costco model. - Yeah, absolutely Costco model. We're gonna make the transactions really, really cheap. Maybe they're spreads on foreign exchange are super tight. - Yep. - In return, you pay the $100. We're not really trying to make money if you want to spread. - If you want to spread from wise, like why transfer, why don't you have anything for bank fee, for international transfers? - No, but the spread of the, no, no, but. - And they're not exchange. - The foreign exchange. - Not a wise. - Why does it have no, virtually no spread? - Well, there's always a price of a foreign currency. - There's a little bit, but it's virtually zero. Like a few bips. - So what do they make their money out of volume? - Right. - Yeah. - And they got the beauty, then why is it, you dump a bunch of money and why is they got the flow? So they, they feel like an interest. - They pay interest or no interest. - No interest, it's just giving the money. - I say, okay. - And I've got like $1,000 in there, 'cause when I'm traveling, I don't wanna keep putting money in there, so. - So there's a great amount of alternative models. What, do you think APRA, obviously is the bank regulator? And do you think they were happy that there was another bank competitor that came in from the UK and got a license or not? - Like APRA gave them all. - Well, you can't knock you, but if you tick the boxes, you get a license. But do you think, 'cause this country is very focused on protecting the oligopoly of the four major banks? - Oh, every oligopoly we have oligopolys across the world. - But there is a, there is a policy reason that they're trying to predict. You can agree or disagree, but it's these four pillars, which means we're gonna have a more stable banking system than other countries. Is there, how do you think they feel today? Do you think they feel, yeah, it's good. It looks like competition, but they'll actually never be like as big as the big four. Do you think, oh, I'm not sure they haven't. - Yeah, I think they're gonna be there for you, really. Like, we've had lots of banks come and go through the years. And they're at the go-bit is not good for customers in any way. So I'm not sure APRA were overly droid, but I've got to think they were overly, I think that of you. - Yeah. - Yeah. - I think as a customer, having more options is great. Whether you use this $100 per month, or just a little bit of chance that Revolut could get to the size of a big four in Australia. - The issue I've had with the big four, I've always had with the big four, and I'm actually speaking at CB8 tomorrow. So I probably won't mention it when I'm there, but they've practically been lending on this massive property Ponzi scale. There's now been unwound. We hated the gym charmers budget, but-- - That's weird. - But I don't think it should be, man. I saw a great video, I sent you guys that was on Instagram. It was just a really smart, real estate agent who said six options he had on the weekend didn't have a single, not only didn't sell any, that's not great, but whatever. Not only did not sell any, he didn't have a single register bit up. - You can't have a, not even a bit up. - You can't say, not only did he not sell any, not only did he get no bids, but he couldn't have gotten any bids, 'cause nobody registered to bid. - This is crazy, and he made the really good point, where the biggest falls have come as the high end of the market and the mid end of the market, which clearly were over price, but where the whole gym charmer's insinurational, theft budget, where the benefit was meant to come was, we're gonna make first homes cheaper for people. What's the only place in the policy market has gone up? First homes, as we said they would at the time, like you need to be a rocket science to work this out. So this country, 'cause just to deviate to that slightly, I thought that video was great. I know why you liked that video, 'cause it was an 11 minute intelligent rant. That's right up your alley. - Love a rant. - And so, but it was, - Well, we were checking the show notes. - It was just smart rant. The guy was smart. - Very smart. - I thought it one of his, one of the funniest comments I've heard about this budget, is he said, "Gym Charmer City's PhD on Paul Keat. "I don't know what Marky got, "but he managed to create a housing system "where every part of the market's fallen, "and it's the one that he was trying to move down." - So, which is true, right? - Everything is, everything is, - Everything is, - Has a move. - It's true. - But we have to say this, the big thought, this country now is far more exposed to a rise in unemployment, because if there's a rise in unemployment, people can't service their loans. The value of the property, the asset that the bank holds, is now diminished. And so, that's a problematic situation. The biggest point this guy made is a point we made on this podcast, two months ago, which is 15% of the country's economy is linked to property transactions, and it's throttled property transactions. But if unemployment rises and people can't service their loans, and banks say, well, we need to get our money back. So we're going to flood your property. Number one, it's a waste. - We'll lose the risk. - And yeah, number two, there's no buyers. There's no buyers. And so this country has just massively increased its risk exposure to rising unemployment. - It's made matters worse. The worst area is the first home, these in terms of the people who are most exposed are the least amount of equity, the most amount of debt is these first home buyers. And yes, they haven't dropped yet, but they may eventually drop. And when they do start dropping, then you've got this 5% deposit scheme. So people have very little equity. They're going to be being sued by the government potentially. So these idiots who believe the government come roll up to the first 5% road, but they've written their own death row. - So there is a mechanic that exists in Australia that doesn't exist in the US. That would be the single greatest mechanic to have a government voted out of power. And that is, if you own. - Well, if you own. - Yes, if you own bank money and the bank sells for less than the amount you owe them, you have no asset and you still owe the money in the US, you know it, right? - And so. - And so. - The jingle mail thing comes from. - Yeah, and so can you imagine a better way to get someone to vote against a government? - It'd been bankrupted. - Then we've sold your home out from under you and by the way, you still owe $50,000 to the bank. That is instantly voting against a government. - We actually owe $50,000 to us. The banks been paid, you know, the equity is negative. - So the government money as well? - The problem is, what if the bank, no, but it's worse? Like what if you bought a $1,000,000 and you had $950,000 of debt and you only got $900,000 for the property? So yeah, you incinerated your own equity. - That's gone. - $700,000 for the property, potentially. - And so you're gonna have to go bankrupt. - Because you're the government. Where the bank, the government's guaranteeing that is part of this bypass. - The whole gap. - The 15% gap. So if it goes down 600,000, then the bank will sue you. But let's use your account. - Well, you should talk about that more clearly. So you go and buy a million dollar property. - We talk about this. - Forget about stamp duty. You go and buy a million dollar property and the bank, you know, you need a $50,000. - You put 50k now. - So you put 50k. So you've had to work for that 50k. And then the government and the bank will lend you $950. What is the government guarantee? - The government guaranteed $150,000, which is the gap between $80,000 and $95,000, which is what the mortgage insurers would otherwise do and usually pay this mortgage insurance. - Okay. - So if you sell for $800,000, - Yep. - Well the bank sells $800,000. - Yeah, because the bank will take your property. This is what happens. $800,000, okay. The bank gets back their full $950. - Yep. - 'Cause they get the $800,000 they sold the property for and the $150,000 that the government promised to pay them. - The government promised to pay them. - I'm gonna take Mark and Joel's hard-fought taxpayer dollars that they made on their CGT. There's now been taxed at 47%. - I'll take these young people's CGT at 47. And I can give it to the bank. - Give it to the bank. - Bank's okay, banks got their money. - Bank's fine. You lost your $50,000 deposit. Good night. - Now let's imagine it sells for $7,000. - No, no. And I owe the government $150,000 now. 'Cause the government's giving me this, this guarantee. - Payment? - I've got the government tax cash. - Is that real? - Is that right? - Yes. - So you know, is that right? - Apparently. - So you think that the home owner has a $150,000 debt to the government. - That's my understanding of it. - Well, that would be ridiculous. - So I don't think the government wants to be on the hook for this. - Well, they are. Well, I've got news for you. No one can afford to pay back that $150,000. So the taxpayer is on the hook for it. And what will happen is either the government has to write that off on behalf of taxpayers or first bankrupt the voter, not popular for votes. - But I think, and then write it off. - Otherwise, you create this massive moral hazard where the people just get this very money and it just burnt it off. - So I think realistically that moral hazard exists and I think there's a second bigger problem. - But I don't think anybody realizes moral hazard exists till whatever is pointed at. - What's the chance of a government that needs votes going to a voter and saying, "Oh, it's $150,000." - There aren't that many. - It's not going to happen to a million people. It might happen to 10,000 people. - There's not that many. - 10,000 young people. - There's 10,000 people. - Those votes swing seats. - But they're disparate over Australia. - Maybe or maybe not. - It's a lot of cost that the government's bearing if they don't go up. - But they can't get that money back. - Eventually get it back. - What, like, over 20 years. - People have other assets and other staff like this. - So now you sell that house for 700K. So now there's been a 30% drop. - Yeah. - Very plausible. - Then you've got the banks. - Okay, so now 700K, the bank is owed $950. They get 700. The bank gives them the extra 150. Now they're up to $850. They're still $100,000 owing. So now you owe the bank a 100K. - Absolutely. - And the $150. Well that is a great outcome. Thank you very much, Elbow. - Jim Charmonds. - Jim Charmonds for giving. I mean, this is where we're sitting at the moment. With this risk. - And then when that happens, all the bank share prices suddenly get smashed because they've got always a read. That's something they've got. He's bad debt. This way I'm in $9. All these bad debts that appear. And what have always other people got as their biggest investment when you got an index fund, for example. It's in the four big banks, which are four of the top five largest Australian businesses. So you've got leverage built on, we talk about this in the Alive. So there's no leverage built on leverage built on leverage. The government has not simply stood by and allowed. It's actually encouraged. So what's the bank gonna do? 'Cause who's first in line? That's the next question. So you owe the government $150 and the bank $100. Who's first in line? That's a great question. So who knows? I probably say the government. I probably say the bank because the bank has security over the property. I'd guess the government. I think you're right. We're the government's, I don't know. And so the government might be a bit lenient on the taxpayer because they want votes. But the bank will be, the bank is sending you into bankruptcy. Yeah, that's what's gonna happen. They'll take whatever you've got. They'll take the knives and forks out of your top draw. So those. What banks will probably do with a lot of people? 'Cause they don't want to be bankrupting people. 'Cause it's costly and they get less. They'll probably enter into a scheme with the person where they say, why don't you give him back $5,000 a year next one? Whatever it is, it's not great either way, but it's banks don't want to bankrupt people anymore. So I'm gonna tell you how this ends, okay? When, if this happens, I don't know, it's gonna happen. It's in the moon with the panic. I'm worried. But we're in a dangerous moment of falling prices and like unemployment's not rising as we just discussed, but it will. It will. We're gonna have a recession, right? And so basically, you've got this situation where, I predict this would happen if such a circumstance arose. The opposition, whoever they were, one of their pictures to get into power would be a hex like wipeout, like the government wiped out a whole of hex net. They would say anyone that owes money to the government based on this idiotic 5% scheme, we're gonna write off that debt on behalf of the taxpayer. That's what's gonna happen. It is absolutely moral hazard. Like what the government is currently doing, not doing, they've done it. Like where we sit today is that a young person using the 5% scheme is potentially setting themselves up. Absolutely. We should have this. As soon as we heard it. I know, so obviously, next step on the rule. We need to make Jim to completely damn enjoy it. That's right, the next step on the rule to destruction has been taken. Yeah. With the property price. We should have one more victim of this is the state government is already late and with debt. But you know, and what happens when there's no properties transacting. That's the way we come from. It's the absurdity. Absolutely. The Victoria is already basically bankrupt. And then basically, Jim's just cost them half their revenue. It was all that got us a bit of gambling and payroll taxes. So imagine how bad Victoria's gonna be in three years time with no properties transacting. Well, you say Victoria's bankrupt, but we can actually say something slightly different to that in more kind of precise financial terms. Victoria, the only reason Victoria is not insolvent is because lenders are still prepared to give Victoria money. By by bonds, essentially. That's right. But Victoria has no ability to raise enough tax to-- Three pay it. Yeah, to repay it. To work our way out of it, let's call it. Like, we can pay the interest from taxes. Because one of every $10 of revenues going to the interest now. That's like, this is like $991 sort of stuff. So Victoria is very close to insolvent. And you know when people say we exist at the grace of our bankers. Yes, absolutely. That's Victoria right now without a doubt. We see the grace of the Australian government that bankers know that-- As you said, the Australian government-- The Australian government won't let Victoria go broke. Because too much sovereign risk. Absolutely. Yeah. It's crazy stuff going on in this country. Yeah, crazy stuff. I'm that very summer note. We'll end it there. They're a great episode, as always. We're going to do another business episode on Saturday. We had a huge response to last week's business episode. Maybe we talked about a bunch of really cool business stories. So kind of the couple of really good ones this week as well. So don't miss out. Can't wait to see Big Tech everybody on Saturday. Absolutely. [MUSIC PLAYING]