A listener, production, market. Yes, clearly, I can stop. This is Motley Fool Money. Welcome to Motley Fool Money. The podcast is only weeks away, I'm short, from a $2.5 billion bailout by the federal government.
I feel it's from the Motley Fool. Here's Andrew Ram Page, the man for whom... Well, that's anonymous with strawman.com. So, it's Premier Online Investment Club. What else do you say about a business, clearly?
It's the next ASX unicorn. There's not much other than... If you're not already on the inside, why are you waiting for? You are missing out. It's the page.
Can I, mate? We don't hear much about unicorns these days. No, it was a real thing. One of those kind of phrases we use for is the kind of fellow byficated economy. Two species, three green shoots.
What else? Unicorns. After we log off, I'll think of 20. I'm reaching into that barrel and nothing's coming up. You're always trying to keep up with it all.
There's always some new... That's kind of my point. And that's media consumption generally, but particularly in our space. It's like, at Brains, we haven't got room for more than a couple of key big concepts. I always say everywhere.
It's crowding out of everything else. But it's like, you know, you don't know about unicorns though. They're literally not real. Oh, even the unicorns. They're not a thing.
I know it's rare. I get the idea of rare. You're telling something that's actually rare, you know, like that's really rare when there's literally zero. I built a unicorn. So you built a fake thing that doesn't use it?
No, no, no, no. I'm not even going to go out. Oh, I got one for you. I got one for you. I used to round about it back in the day, but it's a little bit...
It's actually one of those terms that really used to get under my collar and then it just stuck and actually still used today, which is cost of living. And I was just... That's why it's called... Yes, it's in place. I remember.
No, no, no, it's cost of living. Like, OK. LAUGHTER But now, I catch myself saying it's too. I'm not doing stuck, yeah. I think by the way, it's cost of living crisis.
It's got to be a crisis. If there's an unprecedented use of the word unprecedented, then there's a crisis of crisis. Everything's a crisis. No, it's not a crisis. Right? Exactly.
It's a lot of, you know, a lot of crisis to follow. House crisis is the property crisis. The challenge right now, it's a funny old world. Which, by the way, that's not too for a second, gloss over the very real challenges in that space. Well, that's right.
It's sort of... Words lose meaning when you throw them around a bit too loosely, you know? Yeah. I mean, these are very... I think these are extraordinarily very serious kind of issues.
And probably crisis does work for some of them. But it just when it gets applied to everything, the meaning gets dead into it. No, probably crisis, some attention. You end up... The more hyperbolic term you use, the more you end up arguing the term rather than the issue.
Yes. So if I've said it written on radar, I try not to use it because it is that sort of thing. I want to do. I've never yet said it's not really a crisis. And then even this conversation about is it actually a crisis rather than...
Is it a semantic debate? Right? And it becomes a term not about the issue. I kind of try to use it because it is that... I probably, if it works, can be super effective.
It's also super polarising. It can kind of demean the... demean the whole conversation. Hey, what... Well, I can actually ask you this with you.
I just asked ChetC for what we do in research. Here's a list. It's given me a list of 18 so far. I just run through just a fun route. And all of the specs.
The session for the session for the session for the session was issued in companies in the US. So our cash box is set up to buy things. So we haven't talked about it for a while. Diamond hands. Oh, yeah.
It's kind of a... It's the counter party to... You've got diamond hands and you've got paper hands. Nice. Stocks.
We don't see much about them all. I still throw out stones. Tindes. It's a fine-ever use, but it was Wall Street death. Which you can tell us.
It was a lot of blame. Just a second. Okay. NFT is not so much a buzz phrase. A buzz investment slash speculation slash stupidly.
It's nonsense. Yeah. The reverse. I still think that's a sleeper. I think that...
I'm long-term bullish. Not necessarily the meta, meta-verse, but as a concept, I think it's time. It's time will come. I like your... They're all from the review.
It's like one of those. ChetC? Yes. Yes. Yes.
That's a whole lot of... I couldn't... I'm very, very, very rich hunting ground. Why don't they have a call on which I never heard before but I did like from Chantivity. Tara, there are reasonable alternatives.
As a kind of a team. Oh, I like it. I'm kind of standing in catch on because it's coming on. The great rotation we haven't had for a while. Oh, yes.
That's a while. I think obviously Facebook and Apple Netflix Google was around for a while. Do you remember when we got the E-version of that? That's wax. Now let's go through that.
Let's go to the Wise tech, like 60% down. Afterpay or Guaid by Block but I don't think that's gone that well. At least from the purchase price. You got it out. Yes.
Happen the AI training. You would think would have just been a ticket to heaven but and was for a little bit and then my goodness did that fall from grace. Can I say that? Yeah. Yeah, yeah, yeah.
Well, I was just going to say, look, I don't want to sort of Monday morning quarterback as they say. Everything's obvious in hindsight. But I, again, given what has happened with AI and given what they did, it was it didn't seem an implausible kind of thesis to back that. It was just like, yeah, training is fundamentally important but we just don't do it that way anymore. Exactly.
No, no, I don't know. Very few people outside of the bleeding edge of AI research, I think we'll call that. At least if they did call it, I think a lot of them even then wouldn't have guessed at the speed of that transition. So, OK, so can I take a picture up on that one? I hate picture laps.
I'm not going to say I knew what's going to happen. When it was the hottest thing in the world, I avoided it like the plague. Specifically because, not only valuation, but stupid. I did it on valuation. Basically because it's like, you are teaching, you are teaching a computer to do something, you are a roosterter stone, right?
But as soon as I was a roosterter, it's a sort of found, which ended up being AI, but it didn't do AI. So it was just like Google would just eventually, it would relationally work this stuff out. Once you have, you know, because the whole computer training, the search engine is what it was like, when someone looked up, grand final, if they're in Australia, they want the end of a grand final. If they've got World Cup, now it's soccer, but last week it was revenue, next week it's going to be swimming, swimming, whatever else is right. So, suppose to be giving AI context, and it was like, it was a necessary work, but it didn't take a huge stretch.
Look at that for me anyway, I'll get a bit wrong. Look at that, man. That feels like what the computer's going to do for themselves. Not AI, I did not have any AI, because it's not at all. It's not like I didn't show it, obviously, if I was that conference, I would have showed it as we've talked about before.
This was just one of those ones, it was like, this just feels like something you could do for themselves at some point. And if that's the case, I happen to be business disappears. And kind of the end is kind of what it's done. And I think it's, I would say, when I was writing in the event, I could have been wrong, and Laura just picked one example, you could have one, so you can take a bit of anything. I guess maybe the broader point here was, if you're not sure, don't, you're not sure.
I'm not sure. That's a bit less than this. I'm not claiming massive pressure. It's other than it was like, I mean, I could, but this feels like it could be risky. I'm just not going to.
And that was that sometimes as much as you need, because you're looking for, and this is strong enough, you're looking for high conviction ideas rather than just having everything and making better everything, I didn't know that. I could have come out of it. Killing it. This thing might be $35 in 2020 to $1.37 to down. I did the math, so that's 96% drawdown.
And that's the other thing, right? Like it's like, I think even the bears, and would have been, I think, well, this was, I'll put myself here. I was, I wasn't as sure as you in terms of the fundamental value prop of the business. Although that was definitely a question mark, but it was just like, and I say this repeatedly again and again and again and again, because I've worked the hard way. I don't know if any other people will know by my experience, just frankly of just investor after investor, just when you pay for perfection, it's just, it's so hard to get a good return out of that, even when the business goes well.
You know? And this is what happens. I mean, it's still on the market. It's still going concerned, you know? But it's sort of like, it's absolutely got business, but it was just like, you were at a point there, it's like, I needed the most eye-watering and long sustained growth in real cash flows to make that worthwhile.
And it's like, okay, all right. I'm gonna say people probably, and this is gonna say, by the way, if you're a long stuff happened, I'm not dancing you grave, I promise. No. I think there was one a million year in sales just to put that out there. Right?
And so you kind of look at it and go, what was needed to be true in 2020 for them? Share price to be justified. No, I can't reverse it. I can't reverse it to the message. I said, no, I need 6% of the market's $400 million.
So I'm not wrong, that makes a $10 billion market cap. Let's pick that up. I think that sounds about right. You were there. Keep talking all magic.
And at that point, the things that it needed to do consistently and continually, we just don't possible. But the conference you had to have that those if statements compounded without one of them falling over, we're just really hard to justify. So I kind of, in some other version of the universe, this is the biggest company in the country and I look like I'm an idiot. That's all fun too. But it's just interesting that they try to put people in to help computers and things that could be better at.
And everything you do, right? And nothing you do, wrong. Yeah. And that's a really dicey investment position. Dude, this is my whole thing.
I mean, it's like the answer to your question about 5 billion at its peak is a market. OK. Thank you. My favorite word, it's asymmetry, right? It's just like, hence, I win a little bit.
Tales I get wiped out. Yeah, just frankly, we'll talk about this at a moment. This is my whole rail against Como Bank or the other banks at the moment. I'm like, oh, no, this will happen. I'm out.
It'll be fine. And I'm like, yeah, OK. He's going to treat us in yields under that scenario. So one scenario is that to deliver a long term sustainable market-beating return that doesn't just rely on great vibes in the market. And my point is not that something is definitely going to go wrong and it's going to go wrong next year.
It's just that if something does, if they hit a speed bump, then they're trading at textile valuations. Anyway, not to make it, ooh, to be continued. We will return to that to that point. But it's just sort of like, you want something where, because you're just going to be wrong so often in this game. I just want to be the, OK, I got it wrong.
I lost 30%, but when I get it right, I 10x my money. That seems to me. That's the side of Ace of entry I want to be on. Not the happens of the world. The value, I was like, I just, I don't lose much money.
That was a lot of money. That's not a great bet. Even with companies that, I'm sorry to bring it up. It's overused, but it's just such a good way. Even with companies that are just unquestionably objectively just absolute superstars like primedicas, just like keep repeating this thing.
One of the best businesses that the ISX ever birthed, right? And it's still down 50% from its peak, right? And then just like, why? People say, well, why? They just announced another contract.
And revenue is growing at this. And that's like, yeah, because the trees don't go to the sky. It doesn't matter how good it is. It's not worth an infinite amount. You must have a price that is relative to at least the potential of the business.
Not one in a million shot. They might do this. It's just so easy. It's so easy when the bulls are running, sentiment is high. The business is delivering.
You will find yourself rationalizing the whole way up. We talk a lot about rationalizing on the way down. No, it's OK. Well, now it's in the price. It's OK, that'll turn around.
But we do it on the way up as well. It looks a bit expensive. No, I'm sure they could do this. So we're not factoring in that. We curve fit valuation, even if valuation is a thump-suck and it's thrown up in the air.
But it's the hardest thing. It's the hardest thing in the world to do. Actually, I know firsthand with primedicas. I'm not. This is ridiculous.
I've taken some profit here. And it's like a minute goes up. Five X after you take some profit. It's brutally hard. But the thing is, is that the old saying in market is that markets go upstairs and they go down the elevator shaft.
And it's so true. It's just sort of like, I feel like with these kinds of situations, these price for perfection situations, it's a game of chicken. It's like really fine. There's no problem with it. So just hope that the other cast works.
Because if it doesn't, things are going to stop very, very suddenly. So I think it's round off. We get to our agenda eventually, at some point, maybe. No promises. But just to put the wax on.
So you went through all of it. The last one was... We have one I left and then another X. Oh, it was the other A. That's three A's. Do you remember?
I had looked it up. So I'm not going to have to have a good idea. I've been after pay. And? Altium.
Altium. Well done. Well done. Now that went private, right? We bought it out.
I bought it out. I think it was a trade start from me. Yeah. Yeah. I had some shares back in the day.
And well, it's not a boast. Because this is the one I've got a lot of these. Stocks I did very well on. But should have done incredibly well on. Right.
Because you can look at it too. We could just reach here. And that was one of them. It was like, I did really well. And it's like, OK, it can't go up higher than this.
Like, damn it. OK, so why is tech 60% down? After pay we can't say? Because it's not listed. But block squares.
If you took the money when it was sold, you made a fortune. Yes. You converted to your block squares and that's not called squashes. I've got to buy a swag. I swear that can block.
I'm pretty sure it's the meaning for the transaction. But I have to check that. I reckon. I bet a lot of money on that. Appen, that was the worst of the worst on that front there.
OK, LTM. OK, exception to the rule. And zero. Just around it all off. Is he quickly?
Type C is compute. I'm sorry, blocked down by a third since the CDR was listed on the ISO. Yeah. Yeah. I really, I'm dawsy some of my favorite billionaires, just quietly.
So I do have a soft spot for what they're doing. Anyway, zero was 180 bucks this time last year. You know, they're 70 bucks. Something, 77 bucks at the moment as well. And again, this is not to dunk on it or in any other way, shape or form.
But I guess it's a thing that we just, we and the market just keeps returning to as well. It's an idea of you arrive in the market. You look around. What are the biggest, best, most highly regarded stocks with the biggest, brightest features? I'm going to buy them.
It's hard to sort of fault anyone on that. And yet, across the board, except with one exception, that was not a good. Not just like, well, it was an idea like underperformed a little bit. It's like, no, you've got taken to the cleaners on that. And so it's just, you know, a reminder number of 4,387, like just presses what you pay value is what you get.
I guess is the short piffy buffer way of saying it. It's a good point to my. It's a really good point. Speaking of what we're here, speaking of straw man, I believe straw man is still open to you. Thank you.
OK, someone's on the ball. Yes, we are. Yeah, yeah. So it's been great to welcome a bunch of new members. We will be open to some of them.
I mean, using the code you gave them to. Oh, yeah. So, yeah, I should. Oh, gosh, I really need to bring you one more on my brain. OK, I'm not a natural market.
I'll do the marketing for you. So we close on the 16th Sunday evening. Sunday evening. If you use the code manga, M-U-N-G-E-R, I think I don't think it's case sensitive, but I'll do all OK. So that'll give you 10% off.
And I'm really proud of the new site mate. Yeah, I know. So I'm actually more than anyone. I'm like, I just secretly expecting it to just break. Still working.
OK, so yeah. And the other thing I'll just say to and then we'll shut up about it is that it's not just about the show. I think you haven't used the free site for a while. Go back and check it out. I'd encourage you, regardless of whether or not you want to be a premium member, be a better investor.
Just use it as an investment diary. It's a lot more polished now as well. So if you want some sort of many jol of your notes, put valuations, set alerts, that kind of stuff. Like, if you don't want to set further, even if you don't do that for love, I've got to open up a Google Doc and start doing this kind of stuff. Because vibe investing might be a thing, but vibe investing is a thing too, which is not a very good thing.
So add a bit of discipline to your game. Nice. And again, because I have to because you won't have not didn't, how people actually join strongly.com. Oh, you just go to the website. And join up straight away.
Yeah, it's open up. Yeah, yeah, yeah. Come check it out. Come check it out. Tell your friends.
Tell your friends. Use the code manga for 10% off. And then there's a lovely, lovely, lovely, lovely, very much appreciated. So good luck with the open Sunday night. Don't wait till Sunday night.
Just pause the podcast. Go and join up straight away. And then come back and keep listening. And that way, as we talk about other things, including some stocks, you might want to make some on the premium side. So have a go.
Why? Because plenty of other people are. They love it. I'm not going to give you any away. And other than to say, I know from talking to you, you'll members love what you do and what they are part of.
They are staying in stupidly high numbers because they are getting so much value out of it. So you're so shaprib is anything. And sometimes it's not how to think about make where the strong end of comments right for you. I think it might be for Christmas. You are good.
Thank you. You're welcome. I don't know. We'll talk about it. But you know what?
No, no, no, no. I'm sorry, listen. You didn't come here to hear us by the shill and fling our wares. But while we're here, while we're here, I hear that there's a book in the works as we haven't mentioned that for a little while. This is fabulous.
The one page of investing play, this is a video you'll see it behind me on my book shelf. Yes, the funny thing about that, just to not make it out of the book other than just going to get people inside and stuff. It's been Friday last week. We recorded podcast on Thursday. I spent Friday actually writing the audio book, which is really...
I'm a little bit upset you didn't ask me, but upset, but like, I understand. Yeah. Can I sign a Facebook account to it? I'm all the few people who said, you're really getting a render write, or is it a render write for you? Or is it too shabby to render write for you?
Which I'll probably pick with. It's like, it's like, it's like, anyway, by Bitcoin. That's right. I would never say such just to make sure that I was looking at it. It was just fun.
It was kind of confronting and weird and just a fascinating experience to be part of. I was saying this, I'm going to do a desk. It's really nondescript room in Sydney. And I had other audio panels that you kind of see around the place. They actually do the desk in front of me.
I've got a tea towel on the desk and the microphone on the computer. I'm not saying that. You expect something like specialty may foam kind of sound, something's been injured here. They're like, no, I'm not going to tea towel. And then it ends up a little bit on top of that, the audio panels in front of the desk.
Little desk must be four feet wide, I suppose. In front of me. I have two audio panels that are at kind of on a triangle shape. So I'm the desk. And I'm left and right, don't go point in front of me.
I'm using my hand and scared because there's no other one. And there's no other one on top of the triangle. So I'm literally speaking as a photo on social media. I'm speaking in this kind of really weird, red colored. With a kind of silence.
Yes. For hours and hours and hours. It was fun to do. It was just a cool experience for something new. That's fun to do.
But it was really, really good. A huge box of the audio engineer to the bloke had to listen to me talk for that long. And watch the script, make sure to screw it up on the way through. Like, oh, you can set up, you can say that. Or that's a word, we can just rerecord that.
And it's really, you did a fantastic job. I know he knows how to invest too. So he's a win for fun, right? He's a win. He's a win.
Correct. So yeah, it was lots of fun. So that's good. Again, chilling stuff. You want to be able to have Alfor Priore now?
Okay. You can't do that. Don't do that today. Join strommy.com today. Then I go to the game, maybe next week.
Honestly, the book goes physically on the 26th of August. It's a very good chance that next week I'll be chilling pretty hard. So we'll leave it here now. We'll be back on today. Next week.
You've got to hustle. You've got to hustle. You've got to hustle. Yes, it's a bit of fun. Can we get back to the agenda?
Should we do that? Well, I don't know how far are we into the point. I'll say this though, because we got together this morning and we're going to talk about it. And you said we are the AI had its decision on Tuesday. And we both went, no.
So everyone, I just heard a massive collective sigh of relief from the audience. Oh, thank God. Oh, thank God. On the flip side, as you said regularly, if they're still here, listen to our podcast after that. Maybe I can just point at least a few people who are like, but that's what I'm here for.
That's you, we apologize for everybody else. The other 99.4% of you, you get the week off. Only because it was like, I've got anything to say in the harm. It's just like a random episode from the back catalog and press play and you'll get my thoughts. Except I did that and we would never have to preach on the new episode ever.
Oh, yes, I don't. Don't do that. I'm just saying, unfortunately, thank you. That's my marketing skills and work once again. Oh, can I say very quickly about the book, but listening to myself, just talk to it.
And now I had a slow write down. That was a good answer. That was a good answer. That was such a punish. The best thing was, at least I had something to read.
And you kind of because you're focused on it, I can put it over here myself. So I was speaking of the head to the other guy down and speak. Was this an engineer sort of like doing the hand signals? I'd be covering it up. The last thing I was literally said, have a great day.
You'll be great. Just remember to talk slowly. Go, go, go. I'm going to love you. Goodbye.
Apparently turns out my sister also speaks quickly, which I had realized because I spoke with you. Sometimes when I'm with you too, I only get every word out of what you're saying. Sorry. All that over. Back to the podcast.
We're not going to talk about the RBA. But speaking of Rant, I know you're talking about your topic. The brand you use on Thursday morning on the 3rd day, we're recording this one. I'll go live on the 4th. The time we go.
Aluminium smelter. We're going to let that one slide where we are. No, no, no. All the banks. Sorry.
It's going to work this one out. Sorry. Let's quickly come somewhere else and use it. We haven't watched it. 2.5 billion dollars.
I'm going to have half a mini slide right and we'll get back to the main proper rant. The news about Rijkels reads something on the lines of the urbanity federal government. The minestake government. We're going to bail out the time we go. Aluminium smelter.
And I'm not an anti-government guy as everyone knows. But how about when it means that, bailing out the time we go to the same, I am. And you are. And everybody else listening and not listening is bailing out the time we go. Aluminium smelter.
Yes, the government's giving them the money. And I'm not trying to get any for the sake of it. Other than, if the government's bailing out, that's okay. No, no, no. Your tax money.
And the debt they're incurring, the debt they're incurring, the debt they're incurring, the debt they're incurring, the debt they're incurring, the debt they're incurring. The time we go to the same, even before you get to how much there is and whether it's justified. Let's call us by the bloody shovel and start there. I've done that. I've mentioned it before.
What we've said is, one of those things that just irks me every single time. Someone's offering a solution to a prop, which we all do. We all love to. It's what I would do. But it always just comes back to the government, surely.
They are. So they're just, you know, it's not, like, I don't know what you think that where that money is coming from. Like, it's just, okay, maybe they are the right party to tackle that particular issue. But let's just, we stop the fantasy that it's just a free, you know, no consequence. No tradeoff type of fair.
So 100%. Yeah, and the reason I say that, and part of it's not around this one. The pandemic, my sons are a massive panthers fan regularly. really, the Panthers sent a press release to their member email. Right? So this is people who paid me members for Panthers fans.
And I'm absolutely sure I know the background of why this was done. But the press release was about the new, the new per stadium being built in, the pen of four, the Panthers, they're not going to see one building the new one. And here's how the press release starts. The men's Labour government is today announcing another major milestone as a new roof at Penrith Stadium is now complete. Now, firstly, it's not the men's Labour government, it's the South Wales government.
So yes, they will do it presently, yes, they won't party at the credit, but let's actually, you know, very, very annoying. But secondly, the Panthers sent this out. As a PR stunt for the state government, now, I'm sure they probably have to. I'm sure part of the agreement was we'll build your stadium if you do these things for us. And I'm sure it's all hand in glove, by the way, Panthers League Club, biggest pokey den in the country, as far as I know.
And the government's absolutely captured by pokeys across the board in yourself, whilst most of the Eastern States. So, you know, massive amounts of conflict and whatever. Just when it went up to sports team, saying that's something A, that's perfectly appreciated from the government. But B, not the new South Wales government is saying, the means Labour government is saying that it was just the unwillingness and the, I don't even necessarily blame the journalists at sports clubs. They said the sports clubs are sure we're told what to do.
The journalist recurge that we've ever sent out. But can we just get off to the thing? If Sean got a big government check, I'd be singing their praise. He who's bread I eat, his son I sing, right? That's exactly the oldest thing ever.
We get it, but just a little bit of it, we get back to the snails about, just the idea of kind of the government's inserting themselves, the name of the premier or the prime minister, the name of the party. You know what the mean is, Labour government is, you know what the Albanese government is, you know what the Australian federal government is. And now they do it, and do I expect them to be any different? No, because I just like that, who they are, they do what they do. But also we shouldn't just, OK, I'll let's OK then.
You know, let's call that what happens, because it is, and again, it's not Labour or Liberal, the example I gave for the both of the Labor, because that's what we've got currently. The Morrison government used to do that, the Peritaille government used to do that, and Christopher Lee government in Queensland does that. It's just, if you want to spend someone else's money, you want to get credit for it, right? You're exactly, absolutely. Mading. Anyway, that's so bad enough.
Even more mading. Two and a half billion dollars being paid by the Australian neutralist taxpayers, let's not say the government's, the Australian neutralist taxpayers. And by the way, if you're neutralist, I'll end you, and you're paid twice, you pay for your taxes at the state and, meshally, if you're not, if you're a tax nine-year-old, you're paying a part of the two and a half billion dollar bill per year. I'm about to say that. I'm about to say that.
Thousand jobs. That's two and a half million dollars per job. Now, over ten years, two hundred fifty thousand dollars per job per year to keep this thing open. We would have been better off to pay them not to go to work. There's 150 grand second.
Yeah. It is just... Yeah, but then, which is absolutely a hundred percent spot on, but then the follow up from that is just to put it out there so you can absolutely destroy it. Well, it's again. But, you know, sovereign capacity is the other one.
It's like, yeah, that might be true. I can maybe see some ground on that, but I have to, we have to do that because otherwise, Australia is not a real country or something. And I would say... You should have a chest of red tape this on too because I know you hated it as I do. There is a very, very real conversation about national sovereignty.
One of the things that we think we should do, as long as you then say, because you will have this impact. Right? So, there's four elements in Australia. One closes down. Do we lose any sovereign capability?
No. Let's have the whole close down. We can't make money. We can't just add one more thing. We don't just close them down and then bulldoze it to the ground.
Like, we just put a white tea towel over it and it's still there. Oh, gosh, there's a warrant for some reason. We need to produce it and we've also got the other downstream manufacturing capacity to do something with the metal and comes out, etc, etc, etc. I was like, all right, fire it up again. Here's the thing about it.
If you don't have that conversation, have the conversation and do all the things. Okay, let's say God love. Everyone wants to put a China as a big bogeyman. Let's say they're right. Let's say they're right.
The Chinese follow up, you're going to get together and go. You know what goes on, we should fight Australia. And some of the back room goes, fellas, we shouldn't do that. They can spell on any of them. Oh, no.
They can do. Not economically mind you in like, theoretically small volumes, but they can. They can do it with it. Nothing. We could have invaded the country, but I'm sorry.
I'm sorry. I want to get. I'm just going to get the instinctive. So firstly, I'm sure that I'm making things just feels good. I'm sitting in the audience doing this a million times.
The thing I get on this is the most disagreeable feedback I get on any topic. I'm like, I love you, but you're wrong on this one. And so generally, I said it's just deep down. We feel like we should make a thing. I think that's really good to do.
I think it's deep down. I think it's definitely a revolutionary frankly. But even on top of that, the idea of that it will make a difference. The interoperability is important. Yes, it is.
Okay. So explain to me the material difference in our national sovereignty capability. We all that talking about it. I think about it. I think about it.
And no one's ever been able to, because you can't. It's a rhetorical question, not deliberately. But if you're going to make that case, explain to me how this changes the outcomes, not just tick a box, chances I can press out, I mean, we better not go there. Literally, how is it going to make us wealthier or safer or more resilient or any of those things. Prosperous.
Right. By producing aluminium, as opposed to not. We do all the things we have that conversation. When you say case by case, we need to smoke aluminium because unless that answer is, there is a material difference in the outcomes for the country, it is a really well meaning view, but hugely, hugely, economically mistaken. And just ease.
And people are still listening. So we have people writing. So I'm going to write it. Please write it. I'm not trying to stop it from doing it.
But people will write it and say, yeah, but we don't understand this. We need to solve a capability because I know, I know. You're missing the point. You're missing the point. You're missing the point.
You're missing the point. You're missing the point. You're missing the point. You're missing the point. You're missing the point.
You're missing the point. But people arrive at the point of view and like, oh Paris.
So come on. Oh my God. Oh, my God, it's so. So the alternative is if you're unprofitable, you are consuming more resources, energy, manpower, commodities, whatever it happens to be, then what you are delivering. And it's like, by definition, if you keep doing the unprofitable thing, you'll just burn through all of your resources.
It's not a, I just wanna make that point, because I think it's very easily missed, where it feels like you're just trying, you're a finance bro, making an argument because we all need to have money and be rich. And it's like, no, it's just, money is just an accounting system. And it's trying to let us know what is worth doing and what is not worth doing. And if I can't do something, if I deliver the thing that I need people want, I have to consume so much more than what I'm actually outputting, I'm just gonna burn through everything. It's just like, I'm tying myself up in knots in a pit of rage, isn't right?
It's a good idea, clearly. So I would make that very good point too. The other one is as well, which you've said, no, just a double down on his, and we learned this in COVID. It doesn't matter what your capacity is because your own supply chain is only as strong as the weakest link. Let's say hypothetically, I wave a magic wand and a magic 12 different time it goes into existence and I make them more profitable and we're spitting out more anime than you can poke a stick at.
It's like, great. Into anime chips, into the computer chips, is there a component tree that is neat? It's like, yeah, there is. And the US military is finding this out in real time right now. So you can have the biggest, baddest, nasty sort of military in the world.
It's just like, but if all your chips come from one spot that's in a very strategically sensitive area, you're screwed. The rest doesn't count for anything. And so it's kind of like, to your exact point, it's sort of like, okay, I guess it plugs a hole on that one thing, but without everything else, it's mute. It doesn't make any difference. Another point I will make on this one.
Do you have other points like on your chips? Thinking you hold it, I'm just like, I'll just wanna close that. Yeah, absolutely. You're just finding this out right now. Some of these are really like, exactly, they should make their own chips.
It sounds like you're making the argument for from the bottom. The reality is, I can't say they make their own chips and you made the other one. What about their own clothing? I guess I should do that. What about their own ballpoint pens?
I guess I should do that. What about their own computer screens? I guess I should do that. And you finish that logic to the point where you literally need to produce absolutely everything, or functionally everything, not even everything. So you can do this thing.
It's not just the counter to the chips because you're making the broader point. But as you're saying, you're right. Yeah, yeah, yeah. Yeah, yeah. So you can do that.
What's the next critical file? And the next critical file. And you can choose to plug them all. Other than, oh, you can't actually, because you've got all the raw materials in the ground, right? So if we say tomorrow, we're gonna put a massive barbed by a friend's around Australia.
We're gonna do our own things here. Nothing's gonna go out. We're gonna be completely self-sufficient. We're gonna make it all here. Firstly, you wouldn't have all the original need.
Just you wouldn't, right? Secondly, if you did, the cost of doing all those things are so as is bearable. We're living in 1820s. Oh, we're all much poorer. Yeah, yeah.
And so we can choose to do that. We want to. But that's, this is the point of- Can I just buy some of the raw- Can I buy some of it? I'm gonna buy some of it. He's got it.
He wants to sell it to me. He wants to buy it. I want to buy it. He makes really good stuff. And it's really cheap.
But you make it better than I can. Cheaper than I can. I just buy it like we have boats. We've got the technology. We've had boats for thousands of years.
We should use the boats. Internation came in from the house of sea cucumbers from Northern Territory in 16th up there. You can look it. So, and again, put it on a boat. On a plane if you must, you know?
If you're, if you're, we should do it all. And let me know. I didn't 20 seconds. That's cool. Might make my aim to agree.
But that's a fair case to try to make, right? Or you say, we will trade. Anywhere in between there is literally the chasm between the two cliffs. There is no, almost everything. No good.
Some of the things, not enough. None of the things, we can still trade for them. You can't, you're on the social, you're not. You can't be half-bring it. You can't be half-self sufficient, right?
We can do 95% of the stuff we need. The other 5% are that critical? Do we do it? No. So what's the point of the other 95?
If a sea block is a problem? It's a problem. Unless you're absolutely literally everything here. You can't, you can't solve for that. So you don't choose one or the other, extreme, literally.
And it's really extreme. But you're either going to say, we will trade. We'll do everything. There is no, there is no room in between. Here's the other thing.
Here's the other thing. We've got shipping lanes and clothes. And this one, again, we're all, we're all apparently on the cusp of World War Three. This is, everything's just going to be growing to a halt. Now, look, if we were talking about a military stockpile of prawns, I can't.
We've got a problem. Because we can't, but they don't last forever. I tell, look, I don't know if this is news to anyone, but chunks of aluminium just sits there forever. Like, we can stop part of this. Yes, yes, yes.
With the exception of all of a sudden, China just launches World War Three tomorrow. And he's completely like, just stop pilot. Put a massive pile there. The better the worse comes to the worst. Take $2.5 billion.
Go build a massive warehouse and fill it full of aluminium. And then it's like, that'll last us for years and years. And after that, like, it's just because it's like, it's a siege warfare type scenario. Like, things are so dark at this point, that this ain't the same factor that you can give. That's exactly the point.
I've said to people, tell me the material difference outcomes. Yeah. Okay. And one more of this time we go. Literally explain to me materially, what is the different outcome for us?
Motley Fool May. For more, subscribe to The Free News Letter at full.com.au forward slash listener. I'll cut you off, folks. I want to go on that cheap thing. Go back to what you were talking about.
I've got several points. The first one is when you look at the issue with time ago, there's a lot of issues. It's not, I don't think it's too controversial, so it hasn't been incredibly well run. But even that's a little bit unfair, because they are dealing with cost pressures that doesn't matter. You'd be the most genius operator in the world.
And you're not going to solve for these things. And the biggest cost pressure is electricity. Yeah. And so with that $2.5 billion, we're just on a large-scale solar. We can have a 1.8 gigawatt plan.
You know, that's enough to sort of power $650,000, or a very large and several aluminium smelters. So it's like, why, hey, any engineer would sort of say, hey, there's a problem. Oh, what's the problem? We can't buy, we produce aluminium. Okay.
Well, what's causing the issue? Let's look at the whole process here and identify the root cause. We go, oh, I guess we should just throw a bunch of money at it. And pay people to stay open. And it's like, that's the dumbest thing in the world.
Take it, even if you're going to outlay this money, go build a massive power plant with it, right? And then we'll have a whole other bunch of downstream points because I don't want to, let's do data centers next week or something because I've got lots to say on that too. Because that's getting a lot of coverage at the moment. But then we come down to power, like, we as a nation, the root of all prosperity is energy. And we feel as though in this country, that the weight of prosperity is just a ration ourselves to wealth.
You know, it's a stupid square that you will never, a square, you won't ever square. And then people get, no, it becomes a climate debate. And it's like, no, do it's renewables, right? Like, there's so many, why we aren't just doing everything we can to expand electricity capacity. Do you know what also solves the manufacturing hurdle?
Everyone loves to say, this is an outdated thinking, is that people go, well, China's got such an advantage because of all the sweatshops. It's not true, it was true. They had a huge population of people who are prepared or forced to work very, very poor conditions and very, very low pay. And I don't want to pretend for a second that that stuff doesn't happen, right? But China is a story of automation.
It is a, you think all these BYDs are being made in sweatshops, they are being made in state-of-the-art facilities with state-of-the-art sort of robots. And I tell you what robots need, any power, right? And it's sort of like, again, if I was to wave my magic wand and do one kind of, oh gosh, it'd be hard actually, but certainly in the top three would be making an abundance of energy because all of a sudden, the things that people worry about, oh, it's not made in Australia, well, it could be if we had really, really cheap power. You know, it's like, oh, we can't do aluminium, it's like, yeah, we could have had power, you know. Oh, we can't do data centers because of this and that.
So what we could have, in fact, power, cheap power, enables so much downstream. And let's do it in an environmentally friendly way. I'm not saying that we don't do that stuff. It's just that the narrow-mindedness and the myopic sort of view of this, here's a problem, throw money at it. And it's like, well, at least can we direct the money to the root core to an area that is going to have much more flow on effects, much more multiplier effects, then just let's just keep this unviable operation afloat by subsidizing the taxpayer's money, 100%.
You know, so there's that issue as well. Two more, this is the classic, Friedman always talked about this. It's beautiful for a politician because the people who benefit really benefit and the people who had impacts and it cost barely notice it, because you've got a very concentrated group of beneficiaries and a very, very, very large pool of people who are footing the bill. So it's like we can rage about it, but you and me and anyone missing here like on a per person basis, it's not a lot, right? So it's very politically easy to get away with because even though it's like us who are a bit annoyed with it, it's not like it's radically changing it, which some might actually say, well, that's the point, why wouldn't we do it?
If it's a little bit, but we can do all of this other stuff. The trouble is that once you start going, it's a slippery slope argument as well. It's like, it actually does matter. And there is a thing called opportunity cost. And this is $2.5 billion.
That's not a hospital. That's not a power plane. That's not a thousand other things that we could need. What is consumer spending that grows that you can't because not because of integrity? Yeah, absolutely.
And I did, I said to you, I normally, as everyone knows, I like to, if you ever see someone in the car shouting to the extent that there's spits all over the inside of the windscreen. Oh, that was Andrew. It's been coming to me. So you have to beaten down all this and female. And the minister, Tim, what's his name?
Just one of those, you know, one of those, like they're all this way, this political interview is where it's, I'm not just saying in fact, it's like, don't answer the question. And just keep reciting talking points. And the poor old journalist, he said it's something like, oh, we get profit share on this. And she goes, oh, we've time goes. Well, what's that?
It's a complex sort of thing. Like, well, and she did, she did, tried to dig a little bit more. And basically it came out and I looked it up afterwards. So I was like, there is a profit share range with it, but only at the point of where it's a super profits. So here's the other thing I hate with government handouts.
Is it's like, at least if you're going to do it, right? And like this, like this, the one that was the one that was just the cherry on the top of all of this. So it is the prime example of just stupidity with failouts. In the sense of at least say, okay, okay, we're going to do this thing. It doesn't make any sense.
It's completely stupid. But we're going to go to anyway. However, we're going to take a massive equity stake in the business. We are going to, we're going to demand a certain payback. So at least that way the Australian taxpayer can go, okay, I guess we're spending $2.5 billion, but there is actually a return on that for us.
So we can sort of have the capacity, keep the jobs and we can make money. Now, of course, it doesn't go that way because it's not a magic pudding that nobody had to be had at the end of that actually completes the circle while we're in this place in the first place. But the way it was being sold was like, no, it's great for all of these reasons. And don't worry, we will get to sharing the upside. Only if there is sustained unusual excessive profits.
It's like, that's beyond a very, very high point, mind you. So it's just, you can always imagine when these negotiations are happening. Let's not forget, we don't want to, they're like, no, we don't want you to. Honestly, you really don't want this. And the government force fed it down their throat.
And that point you kind of go, you know, only strategizing before the media is like, listen, we're playing a game. We're thinking in decade plus, right? These guys are thinking to the next election. And as a consequence, it's so easy to get the better part of the deal. If you kind of go, they're gonna force this down this deal down our throat.
Let's make it as advantageous as possible for it. Oh, of course they would. You know, before any of them, well, you're gonna even corporate pass, maybe, but wouldn't you, who else does it look after their own interest in a negotiation? And I'm just saying the government, which is our representative, if you look after our interest, we're in the negotiation. I'm like, I'm gonna do it.
But we're gonna make sure that the Australian taxpayer at least gets something out of it. And it's just, it's a bad deal, tops of bottom, and that's, I've run out of puff. I don't know what else there is to say. Well, and it's, it's ever we doing more of this. And we've already done more of it.
And again, I've tasted things to come. Sorry number this morning, 7.6 billion someone else to make has been committed for these random bailouts around the country. And I was thinking about the thing for us to be more than, more and more, maybe probably, is the politics of this. And again, Chris Felizan and Queensland is an Olympic premier. This is not a party political view at all.
But it's all about the votes. And why is it about the votes? Because they labor know, for example, the citizens in Queensland, I started in South Wales and the Libs and Labor knew in Queensland. one notion is bringing down the next answer, right? The populism of, if we do this, we will give us, although it's quoted in the paper this morning, you're saying something's going to be put us pressure or something, saying, a year ago, I stood in the rain and told the workers we have their backs and we've delivered on that promise.
And it's so many nonsense politics. I'm not easy on spending someone else's money. I'll buy things like that. It's terrible economics and it's just craving politics. And I don't know what proportion of each directly is involved, but there are three bad areas in order to put them in.
But let's just be really honest. Yes, they're appealing to some of these reasons. Oh, well, we have to do this because everybody's going to cover it. Yes, capability. Yes. Do you reckon, do you really think
that the state government or the federal government believe we need our financial sovereignty? Do you really think that there's any way who thinks that I just gave the question before and I'm back on this one, but do you really think that's what that's a point to do? Do they really think it's worth $2.5 million per job of a decent economic return? Of course they don't. This is purely unfair.
I get you in mind, this thing is a million experts going, you know, you're telling me to look at it as this bus? Well, I get into it. And it's a bad idea. I'm going to do it anyway. Right. It's not going to set you off another ramp, mate,
but I think every expert, including those on both sides of the political spectrum, go, well, that's stupid. Yeah, we can do it anyway. And not stupid in a really highly technical, complicated way, but only an expert with 4 PhDs could possibly comprehend. No, we could shake down a chip and explain it. Get it in like three seconds.
Can you put the square peg through the square hole? Yes, OK, then you can understand how dumb this is. Just anyway, we'll move on. But just get angry at it and, you know, I'm looking again, I'm a little angry at us now because they're still disagreeing us and that's fine. But it's important and we need to talk about it.
That's the level versus second level thinking. It's all it is. And I'll sympathise with those that look because emotionally it does make sense. Like, it's just the first time you hear it, you go, yeah, that's good, good on you. Like, I really do sympathise with that view.
We're just saying, just dig a little bit deeper and think about the, you've got to think about the costs, benefit type things in the aggregate. Not in the point in time, particular group of people. Like, it's just, does that make sense? So, you know, just thinking about it. Yeah, no, fair, fair, fair.
Yeah, maybe you can, yeah, I'll just use your back. So, I'll try to move on halfway through now. We'll go another 50 minutes. Probably maybe. So, some really interesting stuff we're on the banks of the month, mate.
I think we're going to have a major couple of cities. I think we have a third party. Can we move on? Very quickly, right though. Yeah, go.
Man, the hand-ringing and pill-clutching over what we're talking about is crashing. Yeah. Like, that's a Thursday. Yeah. Even if you're...
I just, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I,
I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, good faith didn't kind of have a social proof saying, I made money by property, I thought I built my wealth, you should leverage up, you should go on the property ladder, your favorite phrase. And you know, and should I mention that one at this point? Property ladder. Yes, yes. But the other Nerster Fire, the factory worker, the taxi driver shouldn't have to work this stuff out.
And that's my, so I don't think we should win the matter. Just hang on right, see if we have those people. Me too. So, brush it down. We've seen massive falls in option clearances.
And this week we heard, oh this week I'm not sorry, we heard from three of the big four banks, that they actually have all fallen out of it. Two, come all bank and now I'm pretty sure I'm right in saying, say they're loan applications without 15% in volume terms, since the budget, CBA was down for 20%. No, they go to 30, which was 20, I mean it's down 12, but I mean it's a number of value not volume. So there's a bit of, no, these aren't necessarily clear. Yes, so there was a massive, massive change.
Come on, thanks, on Wednesday, they're invested in them is down 28%, for example, because you're not getting negative gear benefits, you got to come up with a lot of money to cover the gap between the rent and the reflament. So, that's right, it's not larger, but it is what it is. So, those are the numbers we've seen. So we've got property market, they're probably prices falling. We've got option clearances falling, and we've got loan applications falling.
So that's the property backdrop. Same time, bank profits roughly flat, but CBA, I got to say mate, you're also at the share price of CBA a lot, but full credit to the bank for its operational performance. You don't have to buy the business from the investment, you don't have to give an investment credit because it's a good business at a bad investment. As a business analyst, which should be first and foremost, we'll look to price. CBA grew their profit 7%.
They grew their loan book and their deposit price by more than their competitors. They are just getting done. And like, I wrote it all post-day, 2023 saying, they can't sustain 7% profit growth forever. Right? Well, bloody important.
Well, and the thing is, the only way you can do it is take a share, right? So the system you write about, but individual companies, if they take share from others, absolutely can. I think we sell the pod, I've got some data out. Oh, I was going to say two months ago, maybe? Macquarie grips loan book, it's a mortgage book.
It's so fast. If the rate of growth continues to be bigger than A and Z, on a mortgage book based in like four or five years. So you can absolutely take share in A's, and this is the other thing, by the way, companies, right? Don't, well, when I've got that investors. I would say to you, the banking industry is a low growth future by definition, because the industry is already mature, it's captured the entire Australian market by definition.
Where are they going to expand to? As a group, they can't. Doesn't mean individual businesses can't do remarkably well by taking some from others. It's a hard thing to do. It's usually a growing market, but if you've got a market that's pretty flat and you are doing something better than the other guy, you're only gussing in a vegetable, it'll continue forever, because at some point, you know, it's a great little slope, but they're doing an amazing, amazing, amazing job.
So with those numbers on top of that, I'll drop and then you can jump in and suggest some thoughts. Commlebank boss Matt Common said, as a cookie said, quite a bit out loud in comments that he gave this week. Now, I don't know whether he is genuinely believing it. I'll give the credit and assume he does. There is some value in sucking up to the government of the day, not liberal, I'm just of the day.
You might want to put a split. Right? You might want to put a split on what's otherwise bad news or something like that. But Common basically came out and said, it's really house price at all. Isn't that what they wanted in the budget?
Like, is that part of the solution to the house prices? Is the argument right? Common? The bank CEO, the capital bank CEO, comes out and says, it's probably good for the country. Albow and two charters cannot bring themselves to say house price down.
They just will not, so we got to point out avoiding the question. No one in the government will say, we want to pass more affordable. So what price to come down? No, no, no, no. And that's political, right?
Because I know that too, that's what I'm going to do. Or pay more. It's politics, but it's a hell of a world where the banks are and the banks make more money by lending more cash out. He's saying, yeah, it's probably because of the price of the falling and the government won't can't say it. Even though it's their policy, as you said, mate, of course it was I could do that.
Of course it was, what was, did they really got to sort of spread the needle and have growth just slowly for a while? I mean, it was... Maybe there was a part of that. We should all think... I'm probably wrong if that. Yeah, exactly.
Anyway, but for Common Fraction, I mean, he could have shut up and said nothing but he believes it or not. And I just came out and said, it's probably good. I think again, that's a critical for him. And maybe I'll be too generous. Maybe it's all just me and PR.
He also came out and said, actually, business should be campaign for more changes. And we might have to deal with a bit more paying before things get better. But that's the right thing to do. And I was like, you know what? Focret, absolute, absolute.
You know, Jessica, you might say around, he said, again, let's give him the presumption of current saying he actually believes it and saying it's the right thing. He's doing what he's doing. And it's, I think of worthwhile addition to public debate, whatever else is particularly business community, is kind of basically talking to their own wallet. They are talking to the book. Comms by idea is what is.
Yeah. Yeah. No, you've got to struggle to get a compliment from me, mate. But, oh, you can do it. You can do it.
He's no idiot. I mean, I think it's actually a very smart kind of thing to do. You put the positive spin on it. I mean, what else do you want to say, right? I'm like, oh, no, I'm going down.
And actually, that's the main engine of our profit growth. And that doesn't bode well. No, you put the positive spin on it. Okay, he said it. And a lot of others wouldn't have.
So, okay, I'll give him some credit there. He also gets a nice reward in terms of his remuneration. So I think he needs my praise or anyone else's to feel good just to put that in the mix. Look, I think you're right to point out. I actually, be surprised.
I actually made a quick late night post on Strongman last night, just sort of saying, actually, the numbers aren't terrible. You know, you can cherry pick and I saw plenty of that. You know, oh, look at this. And look at that. And you can, right?
I'm guilty of that. I haven't done that in the past. But the numbers are pretty good. I think where two sides of the debate talk past each other is that one side talks income statement, the other side talks down on cheap. So the income statement just tells you over the last 12 months, how much money did you make?
And what we revenues, what were your costs, what was left over? And that's always a phenomenal good number. When the music's playing, that's a great number for a bank, right? And I've got no qualms of that and I expect that to be, generally, the case. More often than not, for an industry that has incredible regulatory modes and a literal license to free money.
Yeah, yeah, I get it. It's good business. It's good business to have. What people miss though is the balance sheet. And the balance sheet just tells you what you own and what you own.
And when you scrutinize it, when you glance at the balance sheet, you will find that you have something like the CBO's case. What is it? Two thirds of their loan book is exposed to one asset class, namely residential property. They are by definition leveraged to that themselves. Their own balance sheet is leveraged to a far higher degree than is, I think, accepted or recognized outside of Australia.
It's more people and more cognizant. Here we forget the degree of leverage. In the sense that I did the maths at one stage and I forget off the top of my head, but something in the order of, and these are big numbers, but if 10% of their loan book was, you know, they, what's the word I'm looking for, failed, they'd be insolvent, right? Because of the leverage that's involved in inherent in their business model and I could spend a long time on picking that, but there's been another time. So you're leveraged to one particular asset class overwhelmingly.
That asset class itself is leveraged up to the eyeballs. On global standards and historical standards, you really have to look hard to find examples of where that leverage has been more excessive. And not just that, the actual trading value is not withstanding, hey, 2% fall in prices. You know, we're still looking, whether you want to talk about it in real yields or price to income or service, you know, any of these kind of things is like, let's just agree that it's on the more dangerous end of the spectrum. And that doesn't, that doesn't, is not important to anything necessarily, but we don't, we can now cast, we don't have to forecast.
We can just say that, wow, I've had three bottles of tequila, probably a little bit tipsy, right? Like it says, regardless of how what happens tomorrow, I can say now. No, yeah. So again, very narrow exposure to a very, in a very leveraged way, to an asset class, it's very leveraged itself, and it is trading at very, very high multiples. Okay, now that is not a robust, there's not a lot of fortitude in that balance sheet, I would say.
But the cherry on the top here is that to gain exposure to this incredible deal, you have to pay textile growth multiples. So you say that 7% growth is an outstanding result. I agree, it's an outstanding result for a hyper hyper mature business. You know, but that's it. This is as good, I'll eat these words, I'm sure in a few years, but this is as good as it gets.
There is no way on God's Green Earth, the company of this magnitude, domestically, given the economy it operates in, he's gonna grow with 10% sustained on it, in any enduring capacity, right? And yet they're trading at 27 times earnings, like these are very, very high multiples. People love their franking credits and their dividends, it's always the thing that people point to. It's 2.9%, fully frank. You do the maths on that, you normalise it to account for the franking credits, 4.1%.
I will literally get a better deal by buying a term deposit from the Commonwealth Bank than by buying in its shares. And by the way, as a bond holder, they're fixed interest investors in their bonds, I'm actually at the top of the capital stack, which is the fancy way of saying things get really pear shaped and I get paid up before everyone else. Yeah, yeah. Right? So, so no, just be fair though, you don't get the capital appreciation potential either.
You don't get that, yes. Just to support it clearly, because I want the dividends and I think that's the upside. You might be talking about that. Current valuation, current growth rates. That might be a likely or at least, you know, you're gonna be careful, but don't just want to add that for the conversation.
It's a really great point. I'm just going to do this very quickly on the floor. No, no, no, no. Okay, so we're getting about three and a half, odd percent average, 4%. Let's get started up, 4% sort of sustained dividend growth rate over the years.
It's an old model called the Gordon Growth Model, which is kind of handy one for your income investors. You just sort of add your starting yield to your expected growth in the yield. To exactly account for your point. So if we sort of start, gross it up, go 4%, add in another 4%, I'm looking at an 8% return. Now, to say symmetry again, it's sort of like, maybe things just go swimmingly, absolutely fantastically, I get 10%, I get the market average return.
But my point has always been, it's just like we are on a knife edge here. It's just like, not that we'll go wrong, and it will go wrong at this point, and it will go wrong to that extent. I learned as a young man that's amongst game, and I learned that hard way. Don't make those specific bets. But I said a few weeks ago, and I forget the person who said it, but something that can't go on forever will eventually stop.
Right, and when it does, when that leverage, or if that leverage being a double edged sword, when that goes against you, it's like you could absolutely lose half of your capital and then some. So heads high win, maybe 8%, 9%, 10% per annum, with everything thrown in income, drinking credits, capital gains, or maybe I lose half my money or more. It just makes no sense. It makes absolutely no sense. And we happen to be going into, well, seemingly going into a bit of a tough patch for the market.
I can't rationalise it. All I can do is yell and shake my finger, shake my fist at the sky. But I guess I would say, can't give advice, but I would say anyone out there holding bang sheds, and I'm, please bear in mind my track record on this front before I have. But, man, just, just, the Polly and I, it'll be fine. Your capital, your savings is too important to hand wave that away as that would be all right.
I just think it is an awful bet. And here's the other thing too. When you read all the announcements, I went and hunted for the self-sar and I saw all the masters of the universe and the fancy Armani suits and the big glass towers are sort of saying. And it's like, the funny thing, the really bizarre thing about all of this is like, I ain't giving you a hot take. Like, everyone is in a grip.
I'm on CommSec right now, looking at their consensus forecast. It's scrolled out. Strong sell, overvalued. Right? Even though the Morningstar quantitative team, which I think has been pretty generous to come up, this stuff, we value it at $138.
It's $170. You know, it's just like, make it make sense to me do. I think it makes sense. Exactly, exactly. Yeah.
Okay. So, I guess the question too much is for all of that, everything you just said, I'm not as bearish in the banks as you are, but overlay everything you just said with the possibilities like probability that house price falls on your shit. Mm. Okay. And so, and even in a, it doesn't be a disaster.
Even if you say it's a 50% chance, a 30% chance. Right, right, right. Yeah. But even if it's a complete, even if it is, that's why I'm just sorry, disastrous outcome for anybody. Goodby.
My bad. But it might not be. You are still very unlikely to get a particularly good return because what banks, what what banks, what what banks, you mean, it's money. Now sometimes it's in credit money, it's a rental teller, so that's a whole different conversation. But boy, it is.
If you can't, if you've got fuel people wanting a loan, and the loans are taking out a lower because prices have fallen, that's, that's a thing, right? And so the growth that you're expecting, even if CPA managed to meet the other banks, even if it's the best bank in the country for a long time, the question would still be, what might happen in a world where their loan volumes fall, they probably, I suspect almost always, but probably make a bit of money, but probably don't make as much of that now. And so whatever price or ratio you're looking at, in that world, if things fall, please get larger. The price has to go up for a period of time, right? If the loan is just falling, now if they bounce back, it's okay, so we have, I know lots of companies have volatile earnings, so that's okay.
But just think about what assumptions you're including. That doesn't mean it's just a flaky wipeout, it doesn't mean that stuff. It can literally just be, huh, if this happened, what would that look like? And in that circumstance, I suspect profits are at best, probably not going to grow. Now, probably that might take more shape than others, maybe come up next time, maybe I'll get tittles, whatever it is.
But if the system can't grow or isn't going to grow, then someone's carrying that can't. And just be mindful of what that might look like. Okay, no, it's not a prediction, it's not anything else other than, as you said, mate, just be mindful of the assumptions you are baking in, deliberately, consciously or otherwise, to what that might need to look like and what happens from there. Such a great point. Can I, can I, can I, I'll give you an example?
It's easy to do, right? So it's a really nice point because what you're saying is, okay, maybe things aren't as good as they were in the past, but they're still okay, right? And I'm always, I say this a lot on the plot, and I just, I find it so helpful is, is just do some scenario analysis. Don't, I think in this is, we always feel like I have to have a vision of a specific vision of the future and then everything's on that. And it's like, well, just throw some numbers at a calculator and just, just get a feel for the spread of, of likely or at least plausibly reasonable kind of outcomes here.
And I think it's probably, you know, if you wanted to be unnecessarily bullish, but like far from a bear, you would sort of say, all right, CBA made $6.57 per share this, this year. I reckon we're going to avoid all of these things that the bears keep talking about. And in fact, actually, they're going to keep growing their own. And I think they're going to do it without a single speed mum. I think they're actually probably going to grow about 4% per year in an economy that's growing at half that rate.
Which is, again, you know, so they're going to take market share, they're going to be more efficient, and they're going to get a lot of these kinds of things. Okay. I'm going to do that for the next three years, brilliant. Oh, and at that point in time, they're still going to trade at a PE multiple of 20, which is, you know, the average long term PE on the market is 16. Before recent money printing sort of times, that was kind of where the banks tended to trade out.
So, all I'm trying to say is, who knows what the PE is going to be, but I don't think anyone would accuse me of being bearish by calling it a PE of 20, right? Now, if I know what the earnings are, if I've got an estimate for the earnings, and I've got an estimate for the PE, I can do a bit of mass and figure out actually what the target price is. And that actually comes out at $147.80. I can buy today for $170. I can see 4% consistent profit growth for the next three years and the market maintain a very above average multiple, and they lose money on a capital basis.
You know, and it's just sort of like, as I said, this is the asymmetry that comes back at you. It's sort of like, you don't have to be negative or bearish on the basis. It's not a good deal, you know? I'll pick on strongmen, right? It's like, oh, I'm, it's okay. It's a nice little business, right? Fine.
It's not worth a billion dollars. Would you buy for a billion? I wouldn't, right? You know, is your book good? Yeah.
I love you, man, but I'm not spending $10,000 to buy your book. Like, everything has a price. And people go, oh, yeah, but it's a great business. Yeah, okay. We just spent the first half of the part talking about Apple and, you know, and, you know, and why I said a lot of these things, you know?
And these are good businesses, like, I give them for the most part, you know, these are businesses that have done well, but this is what happens when you overpay. And it's like, we tend to focus on space exit 90 times sales or this or that or the other. And it's like, yeah, the biggest, most blue chip stock in the land, which basically lifts, does most of the lifting for the wider market here. And it's trading at these valuations. It just makes no sense.
It makes no sense. Anyway, the gods will now send this one. It will run like a witch. None of us have ever seen. So my advice, I can't give advice, but if I could, I would say, do the exact opposite of whatever I am saying.
Because I have no credibility on this road. That's a funny one. That's a funny one. I don't know. I'm probably not buying any shares.
You're not buying any shares. You're not buying any. That's right. That's kind of the, that's kind of the, it's kind of the, it's kind of the, it's kind of the circle. It's a comfortable circle, right?
Because back we started, which is effectively, I don't know. You don't have to bet on everything. Yeah, right. So, so, you know, do you have to buy bank shares? No.
Do you have to hold your bank shares? No. Do you have to short them? No. You can just let it go. I'm not sure I know what happens here.
I'm with one. Yeah. And I, but you don't go perfect knowledge, otherwise I'm not saying that. But just think about what that looks like. I don't know. I don't know.
That's okay. So I'm going to step aside. And that's perfectly perfectly reasonable. I just, but I do know this though, is, and this is where I think forecasts, we, we've got to be humble with our forecasts, but also remember there are two types of four, multiple types of forecasts. There are two broadly types of forecasts. There is the hyper specific forecasts.
And there is the general vibe sort of forecast. So what's Commonwealth Banks percher in? It's going to be in the year 2029, but I don't think it's, I don't think it's heroic to kind of say, well, in every period, any longstanding period in history, PE is tend to be a mean, reverting quantity. So, so it's, so I don't know when or how or what the catalyst will be, but at some point it's probably likely to head closer to the mean to the average than the average. It's far more likely in three years time that the PE of CBA is 16 instead of 42.
It's probably a pretty good bet. It's also a pretty good bet too, that given the, given the nature of its business and its position and the rest of it, that it's, that it is going to fight very hard for any sustained above average kind of profit growth. So you can, you can, you can tell yourself in knots with silly specific forecasts, but you can also be a generalist and just go, look, it's not about, I absolutely agree with your point. If you don't know, you don't know, that's the most, three most important words that can absolutely be out of. But I think I can know, this maybe, maybe you need to slap me down a bit here.
This is a bit futuristic, but, but I think it's like I can know that, that PE's will mean revert and that excessive super-type profit rates of growth cannot be sustained forever. And if those are the only two things that you sort of base it on, it's just, it's really hard to put together a, a bite thesis for me. Right. I think, sorry, I, I, I agree with you. I will for this, like a fun, just kind of put some dressing around the edges of that.
I think, so, please, I'll say it's like high for decades. Yes. So, so your point about this. Could be a new normal sense. Right. That's a logical sense. No. Is it, is it likely probable, is it good idea that PE stays this high?
Can I make a case for it? No. Doesn't mean it won't happen. No. They all, you're quite the market could be rational, and you can remain solvent. Right?
So, so to your point, mate, I think any rational assessment says the range of assumptions you have to believe are true for this to be worth buying are not particularly likely. And so on a probabilistic basis, you are a mere percent right. I will say, again, just put your point at the track record earlier is, you know, it looks like couldn't do this for years and it has. The property market itself has been unreasonably. So, so, so, so, so, you can make money buy and come up like shares if it was to go from unreasonably expensive to more unreasonably expensive in two, three, four, five years, and you go, so you go, I bought it on 170, I sold it to 250, I was running a fuel rock.
And that doesn't, and this is where we're talking about resulting, any due to the personal poker player and all that, I'm just resulting, which is run the same, did I make a good bet? You look at the result and go, it must be a good bet because I won. Now, we all know deep down, it's not right. I mean, yes, yes, the result is all that matters. You know, you've got cash, you have it, right? So, one of that matters. But if you're analyzing your decision, you say, did I make a good decision or did I get lucky?
And so, if the Commonwealth thinks your price stays high, you might have a thesis, which is, I think people always pay stupid prices. And if that's the thesis that happens, I guess you're right for the right reasons, I guess. But being right, I say, like, um, take, take, I'm a great example, right? It went from $1 to $35 back to $2. Now, if your thesis was, I think this was 30X in value over the next five years, and it did, and you sold, like, that's why I said, right?
If you hold it to the right reasons. Correct. So, so, so, I only, I would say not to disagree, but just kind of paint it for instance. There is a scenario where Commonwealth is still in reasonably highly valued in five years. Oh, absolutely. There's, yes.
And you might make, so, so, it's not necessarily bad investment. It's probably bad bet in probabilistic terms, but you may still do well. You might have a profit. You might have a profit. It's the other one. Good Commonwealth, I've a profit at 17, if it's 15 years.
Yes. Yes. I think it could. Because it may well be much, much, much bigger than its competitors who say no, go backwards. So, you know, you know, you're from a probabilistic, which is why I want to make a point, which is you're saying, is it likely?
Do I feel like impossible or right? You know, you're not going to invest on that basis. Well, the odds aren't very high, so no. But you aren't saying you can't possibly happen. You're not saying I would have to believe that to happen.
Absolutely. Thank you. It's not very likely. I know you're trying to wrap it up. I'll take this one in.
This is why you've got to, I'm, there are some people doing some victory laps on the bank. Well, in the last three years, I've got 15, forget the dividends. I made 15% per annum on this thing. And it's like, yeah, but I said before, right for the right reasons, one of the things that are really wrong for you in this game is when you are right for the wrong reasons. In other words, you make money on an investment.
Yes. Yes. Not because your thesis played out was something else that happened. You know, and it was kind of like the result was, it was resulting, right? The result was good, but not for the reasons that you thought.
So the person who bought in 2023 and has enjoyed those returns, if you turn around and said, yeah, but I thought that the PE was going to expand to a level in which the bank has never ever traded at history. And it was going to enjoy a rate of earnings per share growth that's probably 60, 70% above its long-term average, then for credit to you, you know, you called it and it actually happened. But I would also call BS on it, most of it, because like that, that's a very weak argument, statistically, it's sort of like you can be right, but you can also be extremely lucky. You know, it's sort of like, I went into the casino, I put it all on the number 13 and it won. It's like, yeah, but that doesn't mean it was a good decision, right? Like, I don't know.
I feel as though now where we are at. And you are, you have to again make that argument. You have to say, well, now we're at 28, we're at, we'll either stay there or we'll go to 38, right? And we're going to do this. And it's like, again, your point is on point, like it could happen. It absolutely could happen.
But it could also not happen. And if it doesn't happen, again, look at the spread of like, okay, scenario, this all happens. Hey, I made a little bit of a return. Or even if it seems to be a parabola, which isn't an exceptional rate of return, by the way, there's nothing wrong with that. Okay, but let's call that the absolute best that you are reasonably likely to do unless we go to six-signal type, it's statistical events.
Or I can lose up my money without getting, and it just, anyway, I made the point. I made the point. I just don't get it at all. Let's live down the road. I broke the clock. I will be right.
When the price was $1,900, you're going to lose your lives. I told you. Let's really not flog it here. But just summarise basically the conversation, which is just the idea of you don't have to have over you on everything. Your money is fine up. Your capital deserves to be put in the place where you have the highest conviction of a positive result.
And the highest possible result. Again, not as high as it is in tax-specific and leave a lot of tickets. But you've got $1,000 of money. And your job is to make that extra next. And so, yes, consider the risk of the business.
Consider the valuation. Consider the business quality. All the things. We don't have to buy everything. If you look at this and go, Andrew might be right. I'm not sure. That's probably enough for you to go unless I'm sure.
I think I really think Andrew is wrong for these specific reasons. You have to know for sure. I want to take a shot at the future. But if you're like, well, I think the point is, you don't feel vested in everything. And not just about banks.
It's about the whole thing we talked about. It makes sense. For me, to use a portion of my fine up capital in this company rather than the others given the potential up and downsides of each investment. And if you're interested in looking at the whole thing, just don't do the whole, well, it's been good in the past. Or I'm not going to think about it. I just hope you can think, believe, guess.
Make sure you really do the work and put your capital to work. It's been hard to get, right? Put your capital to work in the places you think you have the best chance of generating good long-term returns. If that's the idea, knock yourself out. It's not. Maybe it gives you an opportunity to look and go. I think I might do something else.
Well said, Mike. Well said. Thank you, Mike. Hey, I'm Ghost Drawmeade.com. I hear if you use the code MUNGA. You can say 10%. But only until Sunday at midnight.
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