WEBVTT 00:00:10.029 --> 00:00:11.929 Welcome back to The Rate of Change with York 00:00:11.929 --> 00:00:14.189 Wealth Management. As advisors to some of the 00:00:14.189 --> 00:00:15.890 wealthiest families in the country, The Rate 00:00:15.890 --> 00:00:17.969 of Change is a podcast designed to help you in 00:00:17.969 --> 00:00:19.789 the pursuit of building long -term wealth through 00:00:19.789 --> 00:00:21.449 the insights of some of the brightest minds in 00:00:21.449 --> 00:00:24.789 asset management. Today, we are joined by someone 00:00:24.789 --> 00:00:28.030 who's been on the podcast before, Jason Coggins. 00:00:28.629 --> 00:00:31.530 He has been ahead of the curve for years and 00:00:31.530 --> 00:00:33.909 essentially in asset management and private credit. 00:00:34.559 --> 00:00:37.560 Jason has advised many institutions and currently 00:00:37.560 --> 00:00:39.380 works with some institutions, family offices, 00:00:39.399 --> 00:00:41.700 and fund managers, and has helped them manage 00:00:41.700 --> 00:00:44.659 multiple cycles and consistently identify turning 00:00:44.659 --> 00:00:47.640 points in credit quality, liquidity, market structure, 00:00:47.740 --> 00:00:51.259 well before they're obvious. Bit of fun. Many 00:00:51.259 --> 00:00:55.439 listeners will remember 2020 when the markets 00:00:55.439 --> 00:01:00.700 were a bit rattled. Jason said private credit 00:01:00.700 --> 00:01:04.510 would hold, and he was right. In today's podcast, 00:01:04.829 --> 00:01:07.569 we're looking at the real state of, you know, 00:01:07.609 --> 00:01:10.150 AI, large language models and the dramatically 00:01:10.150 --> 00:01:12.930 accelerating business creation that's happening 00:01:12.930 --> 00:01:14.609 and what's happening with the legacy that's come 00:01:14.609 --> 00:01:16.890 before it. And more importantly, the debt, the 00:01:16.890 --> 00:01:19.170 private credit, you know, which has been one 00:01:19.170 --> 00:01:20.950 of the largest booming sectors in the States, 00:01:20.950 --> 00:01:22.769 but it's also underpinning, you know, what's 00:01:22.769 --> 00:01:25.329 going to happen essentially with that debt. So 00:01:25.329 --> 00:01:28.409 in saying that, Jason. Great to have you back 00:01:28.409 --> 00:01:31.489 on. I always love chatting to you on the air 00:01:31.489 --> 00:01:35.150 and off the air. But for many listeners who are 00:01:35.150 --> 00:01:37.549 familiar with your work and those who are not, 00:01:37.730 --> 00:01:39.670 I do just want to give a bit of an overview of 00:01:39.670 --> 00:01:43.090 who you are, what you do, and the types of groups 00:01:43.090 --> 00:01:45.090 that you're currently working with. And, mate, 00:01:45.170 --> 00:01:46.890 feel free to plug them away because there's some 00:01:46.890 --> 00:01:49.769 pretty credible institutions and family offices 00:01:49.769 --> 00:01:54.390 you're currently working with. yeah thanks man 00:01:54.390 --> 00:01:56.129 i really appreciate being given the opportunity 00:01:56.129 --> 00:01:59.049 to come back on and absolutely echo the the uh 00:01:59.049 --> 00:02:01.709 i enjoy speaking to you uh it's great debating 00:02:01.709 --> 00:02:04.670 ideas uh this industry is all about sharing information 00:02:04.670 --> 00:02:07.969 right so uh i spent probably the longest part 00:02:07.969 --> 00:02:10.629 of my career in private wealth and so providing 00:02:10.629 --> 00:02:14.409 advice to advisors and their their clients uh 00:02:14.409 --> 00:02:18.610 both families individuals and charities uh before 00:02:18.610 --> 00:02:21.909 that uh i worked at big banks and zed i worked 00:02:21.909 --> 00:02:25.789 at consultancy firms After my decade at Coda 00:02:25.789 --> 00:02:28.490 Capital, I decided I wanted to take different, 00:02:28.610 --> 00:02:31.270 right? I thought there has to be something different 00:02:31.270 --> 00:02:33.569 that still leverages my skills. I love investing. 00:02:33.710 --> 00:02:38.110 I love markets. I'm an economist. I want to be 00:02:38.110 --> 00:02:39.270 involved in that, but I wanted to do it from 00:02:39.270 --> 00:02:42.370 a different angle. And what was so fortunate 00:02:42.370 --> 00:02:44.770 is that I didn't really know what I wanted to 00:02:44.770 --> 00:02:49.229 do. So I stuck around Coda for a little while 00:02:49.229 --> 00:02:52.020 and then people kind of offered. consultancy 00:02:52.020 --> 00:02:54.180 gigs to me and i thought this is interesting 00:02:54.180 --> 00:02:55.599 maybe i don't need to go to a full -time role 00:02:55.599 --> 00:02:57.560 i can just work with a bunch of different people 00:02:57.560 --> 00:03:01.259 who don't compete necessarily but where i can 00:03:01.259 --> 00:03:03.680 almost have one plus one plus one equals six 00:03:03.680 --> 00:03:06.340 right uh because i can share the insights from 00:03:06.340 --> 00:03:09.319 different organizations uh today what i'm working 00:03:09.319 --> 00:03:10.699 on and i'm gonna do an alphabetical order because 00:03:10.699 --> 00:03:14.360 i don't want to pick favorites but i work with 00:03:14.360 --> 00:03:17.240 a group called aura So Calvin and Eric's business, 00:03:17.439 --> 00:03:19.819 private markets based in Singapore and Sydney. 00:03:20.199 --> 00:03:22.699 I love those boys. I think they've done an amazing 00:03:22.699 --> 00:03:26.219 job and super intelligent. The industry only 00:03:26.219 --> 00:03:28.479 produces great investors every decade, and I 00:03:28.479 --> 00:03:31.300 definitely think they're one of them. I also 00:03:31.300 --> 00:03:34.280 do strategy and I manage their balance sheet 00:03:34.280 --> 00:03:37.800 for Aura. Elliston Capital, very long legacy, 00:03:37.939 --> 00:03:42.419 huge intellectual capital in this business. Elliston, 00:03:42.599 --> 00:03:46.159 you know. long legacy of the Packer family office, 00:03:46.460 --> 00:03:49.379 Ashok Jacob, who is one of the best, if not the 00:03:49.379 --> 00:03:52.020 best investors in the marketplace. I help those 00:03:52.020 --> 00:03:54.800 guys on strategy and also distribution on how 00:03:54.800 --> 00:03:56.620 they should message what is probably the best 00:03:56.620 --> 00:03:59.719 small cap team in the market and an amazing private 00:03:59.719 --> 00:04:03.020 markets platform. I also work with a group in 00:04:03.020 --> 00:04:07.580 the US, IBEX Investors, which is a technology 00:04:07.580 --> 00:04:11.620 hybrid fund, public and private. And then I'm 00:04:11.620 --> 00:04:14.080 very fortunate to have been invited by Chris 00:04:14.080 --> 00:04:16.279 Cuff, who's one of the godfathers of the finance 00:04:16.279 --> 00:04:19.579 industry. I help on the investment committee 00:04:19.579 --> 00:04:22.540 for Australian Philanthropic Services and also 00:04:22.540 --> 00:04:25.540 ThirdLink. So there's a few things going on, 00:04:25.620 --> 00:04:30.180 but they all kind of work together in a strange 00:04:30.180 --> 00:04:33.750 way. Love it. The other interesting thing we 00:04:33.750 --> 00:04:35.810 should discuss is very interesting in our industry 00:04:35.810 --> 00:04:38.769 is I've found when I was in the industry, you 00:04:38.769 --> 00:04:41.350 know, people think as employees a little bit. 00:04:41.910 --> 00:04:44.449 So, and I found a lot of advisors historically 00:04:44.449 --> 00:04:46.649 just recommend things, but then you look at their 00:04:46.649 --> 00:04:49.230 own portfolio, it's completely different to what 00:04:49.230 --> 00:04:51.370 they're telling their clients, right? We've discussed 00:04:51.370 --> 00:04:53.949 this, you know, at length. And what I quite like 00:04:53.949 --> 00:04:55.829 what you do, Jason, is a lot of those firms which 00:04:55.829 --> 00:04:57.589 you mentioned, would you agree that, you know, 00:04:58.000 --> 00:04:59.980 It speaks to, you know, how you feel about markets 00:04:59.980 --> 00:05:01.620 and how you're investing in your own cash. So 00:05:01.620 --> 00:05:03.160 essentially your money is where your mouth is. 00:05:03.300 --> 00:05:07.540 Would you say that's a fair statement? Yep. A 00:05:07.540 --> 00:05:09.139 hundred percent. And look, I didn't want to bring 00:05:09.139 --> 00:05:11.259 up some of the advice firms that I said on investment 00:05:11.259 --> 00:05:12.779 committees, because obviously you're an advisor. 00:05:12.839 --> 00:05:15.060 So I didn't want to plug those guys, but I still 00:05:15.060 --> 00:05:18.740 enjoy, I still enjoy working with great advisors. 00:05:18.879 --> 00:05:20.639 And if you look on my LinkedIn, you can see who 00:05:20.639 --> 00:05:24.480 I work with. And yeah, like I think there's a, 00:05:24.540 --> 00:05:26.360 there's this huge issue in the marketplace, right? 00:05:26.939 --> 00:05:29.740 And, you know i think paul heath the coder really 00:05:29.740 --> 00:05:33.040 drummed this into me quite well is if you're 00:05:33.040 --> 00:05:36.100 recommending product if you're recommending strategies 00:05:36.100 --> 00:05:39.740 to families and to individuals then you should 00:05:39.740 --> 00:05:43.000 probably invest in those yourself and i think 00:05:43.000 --> 00:05:44.720 there is an inherent conflict in the industry 00:05:44.720 --> 00:05:46.300 that there's a lot of people who recommend stuff 00:05:46.300 --> 00:05:48.639 don't put their their own money in a product 00:05:48.639 --> 00:05:52.639 so um every one of those firms i work for i invest 00:05:52.639 --> 00:05:54.519 in their strategies because i believe in them 00:05:54.519 --> 00:05:58.029 and i would probably you know you know, say if 00:05:58.029 --> 00:06:00.129 you have an advisor, you want to ask them, where's 00:06:00.129 --> 00:06:02.009 your money? Like when I look at a fund manager, 00:06:02.189 --> 00:06:04.069 the first thing I ask is, well, how much money 00:06:04.069 --> 00:06:06.949 do you have in your own fund? I also ask them, 00:06:07.009 --> 00:06:09.449 another good question is, if you weren't putting 00:06:09.449 --> 00:06:11.569 more money in your own fund, what's another fund 00:06:11.569 --> 00:06:13.050 that you would put money in? And it's amazing 00:06:13.050 --> 00:06:16.470 the kind of good ideas you get from that. So 00:06:16.470 --> 00:06:18.750 true. Couldn't have said it better myself. Well, 00:06:18.829 --> 00:06:23.230 why don't we get into the guts of it today? There 00:06:23.230 --> 00:06:25.550 is a lot to cover here. Where should we start? 00:06:26.040 --> 00:06:27.579 We always start with private credit. So why don't 00:06:27.579 --> 00:06:29.959 we start with the fun stuff, right? There is 00:06:29.959 --> 00:06:35.079 a lot moving with the acceleration in AI, these 00:06:35.079 --> 00:06:39.079 large language models. There's the boom, I think, 00:06:39.079 --> 00:06:41.899 that's happening in the crypto space, right? 00:06:42.279 --> 00:06:45.860 And what's happening with this space? Because 00:06:45.860 --> 00:06:47.879 I think some of the friends that you've been 00:06:47.879 --> 00:06:51.920 talking to, what was it? Sorry, I won't steal 00:06:51.920 --> 00:06:53.800 the thunder, but one of your mates was saying 00:06:53.800 --> 00:06:55.720 that a software as a service business, how long 00:06:55.720 --> 00:06:58.759 did it take for him to build it? And now these 00:06:58.759 --> 00:07:01.339 AI models are here and what they built in three 00:07:01.339 --> 00:07:04.199 months or something crazy. So what's happening 00:07:04.199 --> 00:07:08.360 with this space? There's so many parts to that 00:07:08.360 --> 00:07:10.740 question. So let's think about just the basic 00:07:10.740 --> 00:07:13.519 macro around private credit. There's a lot of 00:07:13.519 --> 00:07:15.220 noise around private credit and some of it's 00:07:15.220 --> 00:07:18.160 justified, but so long as there's two massive 00:07:18.160 --> 00:07:20.509 tailwinds supporting that sector, you know, the 00:07:20.509 --> 00:07:23.069 desire for people to have income, you know, as 00:07:23.069 --> 00:07:26.110 we move from accumulation in superannuation to 00:07:26.110 --> 00:07:28.529 deaccumulation, people will want more income, 00:07:28.730 --> 00:07:31.470 right? The second other aspect is that banks 00:07:31.470 --> 00:07:34.230 are not lending as much in non -traditional areas. 00:07:34.629 --> 00:07:36.230 They're too powerful tailwinders that are not 00:07:36.230 --> 00:07:38.050 going to change. Now, absolutely, ASIC has a 00:07:38.050 --> 00:07:40.829 role and regulators around the world to stress 00:07:40.829 --> 00:07:43.949 test this as a class, but I'd debate anybody 00:07:43.949 --> 00:07:46.810 who says there's a systemic event occurring where 00:07:46.810 --> 00:07:49.560 there's broad brush defaults. Yes, we've had 00:07:49.560 --> 00:07:53.019 some fraudulent activity. Yes, we've had some 00:07:53.019 --> 00:07:55.720 highly aggressive funds blow up. But by and large, 00:07:55.920 --> 00:07:59.959 this is not a systemic event, right? So I think 00:07:59.959 --> 00:08:02.279 the private credit thematic is still playing 00:08:02.279 --> 00:08:05.399 out and it will continue. The real question is... 00:08:06.589 --> 00:08:08.649 You know, it's very easy to write a loan. How 00:08:08.649 --> 00:08:10.509 do you enforce a loan? How do you protect capital? 00:08:10.610 --> 00:08:13.449 How do you get your money back? That will differentiate 00:08:13.449 --> 00:08:15.889 good managers from bad managers. But anybody, 00:08:16.110 --> 00:08:18.589 you know, journalists love writing about this 00:08:18.589 --> 00:08:22.430 stuff, but I would say the risks are valid, but 00:08:22.430 --> 00:08:24.589 I think they're definitely overplayed. Now, to 00:08:24.589 --> 00:08:26.449 your question where I'm spending a lot of time 00:08:26.449 --> 00:08:28.550 trying to understand and speaking to way smarter 00:08:28.550 --> 00:08:32.460 people than me, like in tech, right? you know, 00:08:32.500 --> 00:08:34.820 that's our role as researchers, right? Associate 00:08:34.820 --> 00:08:36.679 ourselves with smarter people and ask for insights 00:08:36.679 --> 00:08:39.419 from them. I am getting deeply concerned that 00:08:39.419 --> 00:08:41.039 there's large parts and it's not just private 00:08:41.039 --> 00:08:46.139 credit, it's private equity, particularly in 00:08:46.139 --> 00:08:48.179 the US, right? You've got a lot of these legacy 00:08:48.179 --> 00:08:52.659 SaaS businesses. You've got a lot of legacy business 00:08:52.659 --> 00:08:54.600 service businesses. You made that point about 00:08:54.600 --> 00:08:57.879 months, right? To create a business, you know, 00:08:57.899 --> 00:09:00.769 a SaaS business. I don't know what the metric 00:09:00.769 --> 00:09:03.409 is, but maybe to get to a million dollars or 00:09:03.409 --> 00:09:05.649 a billion dollars of annual recurring revenue, 00:09:05.789 --> 00:09:09.710 it would take 33 months, right? So just nearly 00:09:09.710 --> 00:09:13.090 three years. To do that now with AI -enabled 00:09:13.090 --> 00:09:15.870 companies, it's like one quarter of that time. 00:09:16.509 --> 00:09:18.889 Now, I asked the private equity manager, what 00:09:18.889 --> 00:09:19.690 does that mean? They're like, oh, no, it's fine, 00:09:19.750 --> 00:09:21.029 that's fine. All of our companies are going to 00:09:21.029 --> 00:09:23.370 start using AI. So I said, well, that's not the 00:09:23.370 --> 00:09:26.029 question I really asked. If you can rebuild these 00:09:26.029 --> 00:09:30.200 businesses, at one -tenth of the cost, they outcompete 00:09:30.200 --> 00:09:32.700 you. And these legacy companies that are held 00:09:32.700 --> 00:09:35.259 by large private equity firms and some private 00:09:35.259 --> 00:09:39.659 debt firms, these are legacy SaaS businesses. 00:09:39.779 --> 00:09:42.019 These are legacy business services businesses 00:09:42.019 --> 00:09:43.940 that are going to be disrupted. Now, I'm not 00:09:43.940 --> 00:09:47.059 saying that's a systemic event for private equity 00:09:47.059 --> 00:09:49.440 or private credit, but the pace of change that 00:09:49.440 --> 00:09:51.460 you will see from a sector perspective is going 00:09:51.460 --> 00:09:53.970 to be nothing like we've seen. in the past. And 00:09:53.970 --> 00:09:56.669 so that has to shape how you invest. That has 00:09:56.669 --> 00:09:59.649 to shape where you invest. And you've got to 00:09:59.649 --> 00:10:04.190 be cognizant. AI is going to fundamentally change 00:10:04.190 --> 00:10:07.470 industries. And if you're not prepared for it, 00:10:07.570 --> 00:10:12.210 your portfolio is going to be at risk. It's just 00:10:12.210 --> 00:10:15.690 so vast, this AI space. Elon Musk discussed it 00:10:15.690 --> 00:10:18.669 as well. It's like a black box. No one actually 00:10:18.669 --> 00:10:20.860 knows. And who was it, one of your mates was 00:10:20.860 --> 00:10:22.460 saying as well, he reckons like, what is it, 00:10:22.539 --> 00:10:24.559 nearly 80 % or 85 % of growth, all growth in 00:10:24.559 --> 00:10:26.340 the next 10 years. Like more millionaires and 00:10:26.340 --> 00:10:27.720 billionaires are going to be made in the next 00:10:27.720 --> 00:10:31.460 10 years than ever before. Like, you know. Yep. 00:10:31.919 --> 00:10:34.320 So there's always, yeah, what I really want to 00:10:34.320 --> 00:10:36.240 get into, yes, there's the opportunity. Everyone's 00:10:36.240 --> 00:10:38.159 excited. Let's go bang, bang, bang. But there's 00:10:38.159 --> 00:10:39.899 also the dirty underbelly as well. That's what's 00:10:39.899 --> 00:10:42.350 going to get left behind. like if look at like 00:10:42.350 --> 00:10:44.049 we're chatting with eric right eric's been on 00:10:44.049 --> 00:10:46.610 the podcast great guy right and he was even discussing 00:10:46.610 --> 00:10:48.549 it you know they've got the fun you know which 00:10:48.549 --> 00:10:51.429 is going after you know uh finding ai legitimate 00:10:51.429 --> 00:10:54.009 you know ai businesses that actually provide 00:10:54.009 --> 00:10:56.950 a solution to a problem meanwhile he's you know 00:10:56.950 --> 00:10:59.870 he's fending off all these other pitch decks 00:10:59.870 --> 00:11:02.669 where their legacy business is trying to add 00:11:02.669 --> 00:11:05.009 on something that is ai then coming across as 00:11:05.009 --> 00:11:07.639 ai like I don't know where to start with this, 00:11:07.679 --> 00:11:09.379 mate. You're better at this than I am, but this 00:11:09.379 --> 00:11:11.980 entire space is so interesting. The opportunity, 00:11:12.080 --> 00:11:13.480 but then everyone's trying to catch up at the 00:11:13.480 --> 00:11:18.220 same time. Yeah. I think there's two parts to 00:11:18.220 --> 00:11:22.720 that. So if you think about AI and the importance 00:11:22.720 --> 00:11:26.059 that that has for an economy, I honestly think 00:11:26.059 --> 00:11:30.059 when Trump came in in the second term, he realized 00:11:30.059 --> 00:11:33.879 with the tech bros that they were behind China, 00:11:34.019 --> 00:11:36.570 right? So China spent a lot of time. building 00:11:36.570 --> 00:11:39.149 cheap energy, which feeds data centers and feeds 00:11:39.149 --> 00:11:43.149 this new industrial complex, right? And so I 00:11:43.149 --> 00:11:45.370 think there's a collusion between the private 00:11:45.370 --> 00:11:48.330 and public sector where the public sector has 00:11:48.330 --> 00:11:50.009 said, we'll back you, but you got to spend the 00:11:50.009 --> 00:11:52.490 money and you got to win, right? And it's similar 00:11:52.490 --> 00:11:56.730 to the 1980s with chips and Japan, right? There 00:11:56.730 --> 00:11:58.330 was a collusion between the private and public 00:11:58.330 --> 00:12:02.399 sector in the US to out -compete. japan and they'll 00:12:02.399 --> 00:12:05.080 explain one and ai is really this winner takes 00:12:05.080 --> 00:12:07.480 all market in my views so i think the us saw 00:12:07.480 --> 00:12:09.759 that they're behind uh eighty percent of the 00:12:09.759 --> 00:12:12.919 sixty to eighty percent of their gdp now is linked 00:12:12.919 --> 00:12:16.820 to capex related activity in digital enablement 00:12:16.820 --> 00:12:20.039 and data centers right so they this is the thing 00:12:20.039 --> 00:12:21.940 like you go well should i be overweight the us 00:12:21.940 --> 00:12:24.340 well you know this this thematic is going to 00:12:24.340 --> 00:12:26.080 play out over another two to three years right 00:12:26.080 --> 00:12:28.700 and i think the us is is looking at this and 00:12:28.700 --> 00:12:31.080 going we may blow up the economy in the short 00:12:31.080 --> 00:12:36.100 term uh over invest uh inflation but we want 00:12:36.100 --> 00:12:39.039 to win the ai war for the next 30 years right 00:12:39.039 --> 00:12:41.840 so again that throws up how the hell do you invest 00:12:41.840 --> 00:12:45.259 now to your other question on seed right seed 00:12:45.259 --> 00:12:50.049 investments i do think that ai uh and the changes 00:12:50.049 --> 00:12:53.009 it's it's it's a winner takes all market right 00:12:53.009 --> 00:12:55.450 uh like a lot of sectors uh i don't know if that's 00:12:55.450 --> 00:12:58.090 regionally like i think china us separate systems 00:12:58.090 --> 00:13:00.429 but you know within a lot of these these markets 00:13:00.429 --> 00:13:03.070 will be a winner takes all market for ai and 00:13:03.070 --> 00:13:06.370 so the only way you can get exposure efficiently 00:13:07.200 --> 00:13:10.879 uh to to to this change is actually in seed investments 00:13:10.879 --> 00:13:14.159 in my opinion uh if you're in later stage you 00:13:14.159 --> 00:13:16.799 know really later stage ai tech then you're you're 00:13:16.799 --> 00:13:17.919 probably going to be overpaying and competing 00:13:17.919 --> 00:13:20.620 against really big gps who can pay you know at 00:13:20.620 --> 00:13:22.919 any price the great thing about seed is that 00:13:22.919 --> 00:13:25.899 you they're really early right um and you know 00:13:25.899 --> 00:13:28.100 you only need a couple of winners so again the 00:13:28.100 --> 00:13:30.299 changes here are you know there's a winner takes 00:13:30.299 --> 00:13:33.379 all market i think in this whole thematic The 00:13:33.379 --> 00:13:36.100 US wants to win AI. I'm not sure they can. I 00:13:36.100 --> 00:13:39.480 think China's as good, if not better. And they're 00:13:39.480 --> 00:13:43.139 definitely further ahead in feeding this. And 00:13:43.139 --> 00:13:45.259 then seed. I think if you want to be part of 00:13:45.259 --> 00:13:48.460 this investment thematic, it's really the best 00:13:48.460 --> 00:13:52.240 way to get exposure to it. Let's unpack the seed 00:13:52.240 --> 00:13:55.000 part. right? Because remember everyone loved 00:13:55.000 --> 00:13:57.100 an IPO back in the days. Mate, I was a stockbroker 00:13:57.100 --> 00:14:00.080 15, 20 years ago. It's all the rage. But these 00:14:00.080 --> 00:14:02.179 days, what, past three, four years, it looks 00:14:02.179 --> 00:14:03.980 like nearly every single IPO that's come out 00:14:03.980 --> 00:14:06.679 has pretty much lost money to an extent, right? 00:14:06.700 --> 00:14:08.159 Don't quote me on that. Go check the boards. 00:14:08.259 --> 00:14:10.059 But I think a very, very high percentage, you 00:14:10.059 --> 00:14:11.460 know, has been down the other side. Do you think 00:14:11.460 --> 00:14:13.299 that's predominantly because the markets have 00:14:13.299 --> 00:14:15.759 just been, you know, it's a hard market? Or do 00:14:15.759 --> 00:14:18.720 you think the... the comment we've heard thousands 00:14:18.720 --> 00:14:21.379 of times which is you know stay private for longer 00:14:21.379 --> 00:14:23.340 the good businesses are trying to stay private 00:14:23.340 --> 00:14:26.580 for longer and then they just get bought out 00:14:26.580 --> 00:14:28.500 by an absolute major is that what you're referring 00:14:28.500 --> 00:14:30.720 to by you know if you want to get into these 00:14:30.720 --> 00:14:32.480 ai businesses no one knows which one is going 00:14:32.480 --> 00:14:34.500 to be like you remember like after pay and zip 00:14:34.500 --> 00:14:36.179 and who the hell is going to be the next one 00:14:36.179 --> 00:14:38.039 nobody knows right it's russian you know there's 00:14:38.039 --> 00:14:40.759 20 companies you know fighting for a piece of 00:14:40.759 --> 00:14:42.820 the pie that it may only take three businesses 00:14:42.820 --> 00:14:44.769 you know what i mean so like Is that what you're 00:14:44.769 --> 00:14:46.309 saying? Like, you know, how the hell do you know 00:14:46.309 --> 00:14:48.309 you're better off kind of buying up, getting 00:14:48.309 --> 00:14:50.250 in early with seed, getting a basket and see 00:14:50.250 --> 00:14:55.610 what happens? So, yeah, look, when I say seed 00:14:55.610 --> 00:14:57.970 is potentially the option to get exposure to 00:14:57.970 --> 00:15:00.029 the sector, I'm not saying go put 50 % of your 00:15:00.029 --> 00:15:01.710 portfolio in seed, right? I just think it's, 00:15:01.710 --> 00:15:05.789 you know, a famous investor, he started a tech 00:15:05.789 --> 00:15:08.799 business in Australia. He's probably one of the 00:15:08.799 --> 00:15:13.480 older tech guys. He's not in his 30s or 20s. 00:15:14.059 --> 00:15:17.860 He increasingly is using seed funds to hedge 00:15:17.860 --> 00:15:21.360 the risk on his later stage SaaS businesses, 00:15:21.419 --> 00:15:23.779 right? And he said, Jason, I just don't understand 00:15:23.779 --> 00:15:27.059 if these businesses will be around. his later 00:15:27.059 --> 00:15:29.279 stage SaaS businesses, he says they're going 00:15:29.279 --> 00:15:31.980 to be out -competed by new companies. They're 00:15:31.980 --> 00:15:33.779 going to be out -competed by, and I use this 00:15:33.779 --> 00:15:36.279 example, but I get sued for defamation, but like 00:15:36.279 --> 00:15:40.279 Grammarly, right? Or Grammarly? The last raise 00:15:40.279 --> 00:15:42.360 they did two to three years ago was $19 billion, 00:15:42.580 --> 00:15:45.899 right? USD. There's private equity firms in there. 00:15:45.980 --> 00:15:48.279 I'm sure there's private debt in there as well 00:15:48.279 --> 00:15:50.700 to fund these businesses. Does Grammarly have 00:15:50.700 --> 00:15:53.149 a future? when chat gpt can do that for free 00:15:53.149 --> 00:15:55.070 like this is the kind of pace change that's a 00:15:55.070 --> 00:15:57.710 19 billion dollar company right uh you see all 00:15:57.710 --> 00:15:59.669 their advertising on youtube all the time um 00:15:59.669 --> 00:16:02.409 but 19 billion dollars with chat gpt and claude 00:16:02.409 --> 00:16:06.370 and all the others uh the the ai tools do that 00:16:06.370 --> 00:16:10.850 now for free um so it's the pace of change right 00:16:10.850 --> 00:16:13.250 it's so fast in terms of the ipo market i think 00:16:13.250 --> 00:16:16.480 there's still an indigestion problem uh If you 00:16:16.480 --> 00:16:19.679 look at the US market, the number of private 00:16:19.679 --> 00:16:23.120 companies that need to be IPO'd is extreme. Australia 00:16:23.120 --> 00:16:25.720 should be the best IPO market. We have the lowest 00:16:25.720 --> 00:16:28.200 cost of capital in the world. What I mean by 00:16:28.200 --> 00:16:29.860 that is there is a huge amount of superannuation 00:16:29.860 --> 00:16:32.539 money that just feeds into the system every month. 00:16:34.770 --> 00:16:36.990 companies should trade on higher multiples here 00:16:36.990 --> 00:16:38.769 smaller companies not bigger companies but smaller 00:16:38.769 --> 00:16:40.509 companies because the market is so starved for 00:16:40.509 --> 00:16:43.110 growth uh but i still think the quality of companies 00:16:43.110 --> 00:16:46.090 have been listed has not been that great uh and 00:16:46.090 --> 00:16:48.769 so you know we you know small caps have performed 00:16:48.769 --> 00:16:51.350 extremely well like up until this week there's 00:16:51.350 --> 00:16:52.769 been a bit of a sell -off but small caps are 00:16:52.769 --> 00:16:54.549 the best part of the market you know 10 earnings 00:16:54.549 --> 00:16:57.370 growth gold was shooting the lights out uh but 00:16:57.370 --> 00:17:00.460 we still haven't had that big ipo push Lower 00:17:00.460 --> 00:17:03.240 interest rates should support that. Obviously, 00:17:03.240 --> 00:17:05.240 we have a huge inflation problem in this country. 00:17:06.880 --> 00:17:10.500 Inflation is diabolical in this country. Our 00:17:10.500 --> 00:17:13.839 maximum growth before inflation kicks in is not 00:17:13.839 --> 00:17:16.220 high, and so we need to address some of those 00:17:16.220 --> 00:17:18.279 productivity improvements. I know I'm going around 00:17:18.279 --> 00:17:20.880 in circles, but if you're in a low -growth economy 00:17:20.880 --> 00:17:25.380 with terrible productivity... and high inflation, 00:17:25.579 --> 00:17:28.460 I think the only way to make money is smaller 00:17:28.460 --> 00:17:32.180 companies. They're less linked to what I call 00:17:32.180 --> 00:17:35.619 macro beta, right? So banks or the insurers or 00:17:35.619 --> 00:17:37.920 the supermarkets, all they've got going for them 00:17:37.920 --> 00:17:39.740 is cutting costs, right? That's the only way 00:17:39.740 --> 00:17:41.720 to grow earnings per share. And I think you'd 00:17:41.720 --> 00:17:43.539 be surprised if you look at the top 50 companies, 00:17:43.720 --> 00:17:46.279 how many from an earnings per share basis are 00:17:46.279 --> 00:17:49.019 still behind 2007 levels, right? Before the financial 00:17:49.019 --> 00:17:52.339 crisis. I think the only way to generate growth. 00:17:52.859 --> 00:17:55.740 It is, number one, thinking about AI and its 00:17:55.740 --> 00:17:58.299 implications, and two, investing in small companies 00:17:58.299 --> 00:18:00.980 that are capital light or labor light and are 00:18:00.980 --> 00:18:04.519 not GDP linked. It's easier said than done, right? 00:18:04.640 --> 00:18:06.839 Like, to your point, you know, Grammarly is huge. 00:18:07.119 --> 00:18:09.319 Like, how many businesses have the same scenario 00:18:09.319 --> 00:18:12.740 like Grammarly? Like, you know what I mean? How 00:18:12.740 --> 00:18:14.799 many are out there, you know, with this potential 00:18:14.799 --> 00:18:17.960 debt overhang and then potentially are all in 00:18:17.960 --> 00:18:21.130 these... manage funds that people are investing 00:18:21.130 --> 00:18:23.150 in you know across the masses and then people 00:18:23.150 --> 00:18:26.269 aren't like how do you know essentially and how 00:18:26.269 --> 00:18:29.349 can you you know risk manage and you know try 00:18:29.349 --> 00:18:32.009 to defend against the potential you know debt 00:18:32.009 --> 00:18:33.990 cliff and you know all of a sudden you wake up 00:18:33.990 --> 00:18:35.730 in the morning and someone's created a copycat 00:18:35.730 --> 00:18:38.269 or you know improved upon your thing at the fraction 00:18:38.269 --> 00:18:42.089 of a price and then your business is now now 00:18:42.089 --> 00:18:44.210 defunct so you know if people are like they're 00:18:44.210 --> 00:18:46.250 listening to you you're going yes now is probably 00:18:46.250 --> 00:18:48.210 the one of the most exciting times to hit small 00:18:48.210 --> 00:18:50.609 cat companies they're going to go but you know 00:18:50.609 --> 00:18:53.549 like how do you pick which one because it's just 00:18:53.549 --> 00:18:59.089 just just changing so fast it's changing so fast 00:18:59.089 --> 00:19:01.269 and i think the companies like you know i'm going 00:19:01.269 --> 00:19:03.630 to use an example and show like myob or zero 00:19:03.630 --> 00:19:07.289 right very sticky very sticky it's too hard uh 00:19:07.289 --> 00:19:11.380 to to change services right um i could Thinking 00:19:11.380 --> 00:19:12.980 nothing worse than trying to understand how I 00:19:12.980 --> 00:19:15.299 would untangle my business from my upright. So 00:19:15.299 --> 00:19:17.180 I think those businesses are fine, but there's 00:19:17.180 --> 00:19:19.779 a whole bunch of other businesses, you know, 00:19:19.779 --> 00:19:23.920 in business services and SaaS that can be replicated, 00:19:23.960 --> 00:19:28.000 like you said. And so I think my role is to stress 00:19:28.000 --> 00:19:31.359 test the managers and ask them about this. And, 00:19:31.460 --> 00:19:33.619 you know, there was a manager that I saw a couple 00:19:33.619 --> 00:19:35.099 of weeks ago and I just said, like, what are 00:19:35.099 --> 00:19:37.180 you thinking about this? And it's, again, they 00:19:37.180 --> 00:19:39.329 hadn't even thought about it. Now, I think the 00:19:39.329 --> 00:19:40.769 next 10 years is going to be some of the most 00:19:40.769 --> 00:19:43.809 significant change we've ever seen. And if your 00:19:43.809 --> 00:19:46.410 managers aren't on top of it, you're going to 00:19:46.410 --> 00:19:50.029 have some problems. Like, I don't know how, like, 00:19:50.049 --> 00:19:53.690 I use, you know, yeah. Sorry. No, that's all 00:19:53.690 --> 00:19:55.970 right. Let's stay on the AI side. So from what 00:19:55.970 --> 00:19:59.109 you've heard, you know, what, like, people listening 00:19:59.109 --> 00:20:00.970 are going, AI, it sounds great, but what the 00:20:00.970 --> 00:20:03.509 hell is AI? You know, how does a business incorporate 00:20:03.509 --> 00:20:07.349 it? Because Eric discussed it as well, right? 00:20:07.490 --> 00:20:12.049 What is a very good example of using AI to essentially 00:20:12.049 --> 00:20:14.410 create a service, to essentially create one of 00:20:14.410 --> 00:20:17.490 these businesses? Yeah. What's a good example? 00:20:17.849 --> 00:20:22.490 Yeah, I think a very good example is the initial 00:20:22.490 --> 00:20:27.309 work in accounting, in legal, in all these repetitive 00:20:27.309 --> 00:20:30.289 kind of tasks, right? If you can automate that. 00:20:31.160 --> 00:20:33.099 you know i think that's going to change a business 00:20:33.099 --> 00:20:36.079 now i was speaking to a business in canberra 00:20:36.079 --> 00:20:39.380 a consultancy business and you know ai and consulting 00:20:39.380 --> 00:20:42.259 is not a great i think with the the delight issue 00:20:42.259 --> 00:20:45.880 but what they said was ai will be great because 00:20:45.880 --> 00:20:49.339 it's not ready to displace our consultants but 00:20:49.339 --> 00:20:52.339 we'll definitely know the the consultants who 00:20:52.339 --> 00:20:55.599 are using ai to improve their productivity versus 00:20:55.599 --> 00:20:57.480 those who do not use it to improve their productivity 00:20:57.480 --> 00:21:01.029 so i think the industries Most at risk are definitely 00:21:01.029 --> 00:21:05.190 those repeat industries, accounting, legal, even 00:21:05.190 --> 00:21:06.710 to some degree investment management, right? 00:21:06.829 --> 00:21:08.309 Like there's a lot of that can be automated. 00:21:09.789 --> 00:21:14.009 But, you know, if I was a kid now, I would be 00:21:14.009 --> 00:21:16.750 wanting to understand how I use AI to get ahead 00:21:16.750 --> 00:21:18.230 because a traditional, like an analyst, right? 00:21:18.349 --> 00:21:21.089 I was working with one of the advice groups I 00:21:21.089 --> 00:21:22.529 work on the investment community, right? And, 00:21:22.529 --> 00:21:26.859 you know, investing is art. and science right 00:21:26.859 --> 00:21:29.619 the science aspect is just collating the information 00:21:29.619 --> 00:21:31.900 and putting a table and looking at the metrics 00:21:31.900 --> 00:21:35.880 right that can be all automated uh the art is 00:21:35.880 --> 00:21:37.559 the experience of investing right and looking 00:21:37.559 --> 00:21:38.900 at that and going well the ai actually went a 00:21:38.900 --> 00:21:41.559 bit crazy that's not right right the the science 00:21:41.559 --> 00:21:44.319 aspect will be completely automated the art will 00:21:44.319 --> 00:21:46.039 still be required now the problem is that if 00:21:46.039 --> 00:21:48.319 you don't train people to do the science how 00:21:48.319 --> 00:21:51.099 can they get to know the art So, again, that 00:21:51.099 --> 00:21:52.740 transition period for the next 10 years is going 00:21:52.740 --> 00:21:54.859 to be fascinating because the traditional path 00:21:54.859 --> 00:21:56.440 to be an analyst or the traditional path to be 00:21:56.440 --> 00:21:57.980 an accountant or the traditional path to be a 00:21:57.980 --> 00:22:00.960 legal professional is going to fundamentally 00:22:00.960 --> 00:22:02.779 change, right? It's not going to be the same 00:22:02.779 --> 00:22:05.140 path of experience, grunt work, because the grunt 00:22:05.140 --> 00:22:08.059 work will be done by AI. That's so true. Like, 00:22:08.059 --> 00:22:09.420 think about the schools. It's all essentially, 00:22:09.599 --> 00:22:11.880 you know, ticker box, questionnaires, you know, 00:22:11.920 --> 00:22:14.579 wrote, learn, you know, punch it out. But these 00:22:14.579 --> 00:22:18.059 days... You know, if you use ChatGPT, I use ChatGPT 00:22:18.059 --> 00:22:19.900 all the time or Grok or some equivalent. Everyone 00:22:19.900 --> 00:22:22.519 does, right? The art of using these things is 00:22:22.519 --> 00:22:24.480 how do you code? How do you feed information 00:22:24.480 --> 00:22:26.559 in that's accurate so it doesn't spit out nonsense, 00:22:26.839 --> 00:22:28.519 right? And then it's practically a comprehension 00:22:28.519 --> 00:22:32.099 exam, right? The ability to inject, understand, 00:22:32.400 --> 00:22:34.700 interpret, and ensure that it's actually achieved 00:22:34.700 --> 00:22:36.920 the right outcome. And then in doing so, instead 00:22:36.920 --> 00:22:38.579 of taking eight hours, you can punch the thing 00:22:38.579 --> 00:22:41.900 out in 30 minutes or an hour. Yeah, it's just 00:22:41.900 --> 00:22:44.519 mind -boggling about, you know, how much this 00:22:44.519 --> 00:22:45.779 is going to boom. And the other thing, actually, 00:22:45.859 --> 00:22:48.960 we went to the oral conference, was it on Tuesday 00:22:48.960 --> 00:22:50.920 night, which was great. That was brilliant, down 00:22:50.920 --> 00:22:53.599 in Botanic Gardens. And I think one of the main 00:22:53.599 --> 00:22:57.119 things they were discussing there was how this 00:22:57.119 --> 00:23:00.549 COVID generation. All these young people, they 00:23:00.549 --> 00:23:02.750 don't necessarily, you know, like the idea of, 00:23:02.789 --> 00:23:04.329 you know, working for a major anymore, you know, 00:23:04.349 --> 00:23:06.470 being an employee. They're all about the job 00:23:06.470 --> 00:23:08.690 economy, you know, being an entrepreneur. You 00:23:08.690 --> 00:23:11.750 know, do you think that the boom in this essentially, 00:23:11.970 --> 00:23:15.230 you know, so it's called AI or tech space is 00:23:15.230 --> 00:23:17.569 really driven by the underbelly and essentially 00:23:17.569 --> 00:23:20.230 the kids getting into the workforce because they're 00:23:20.230 --> 00:23:22.309 not getting into the workforce. They're like 00:23:22.309 --> 00:23:25.029 carving out their own little part of in their 00:23:25.029 --> 00:23:27.009 room or a bunch of friends and kind of having 00:23:27.009 --> 00:23:31.309 a crack. And companies like, you know, Squarespace, 00:23:31.750 --> 00:23:33.789 you know, what's it called, Stripe, all these 00:23:33.789 --> 00:23:35.970 companies, you know, are really benefiting from 00:23:35.970 --> 00:23:39.069 this. Do you think there's a massive, you know, 00:23:39.109 --> 00:23:42.809 wave of, you know, academic, you know, powerhouse 00:23:42.809 --> 00:23:44.650 punching into these markets that will essentially 00:23:44.650 --> 00:23:48.029 support this, you know, push that we're seeing 00:23:48.029 --> 00:23:54.109 in this part of the market? I think there's different 00:23:54.109 --> 00:23:55.750 ways to look at that. I think there's definitely 00:23:55.750 --> 00:23:58.059 the risk of displacement, right? but I'm quite 00:23:58.059 --> 00:24:00.220 optimistic that the world changes and changes 00:24:00.220 --> 00:24:02.539 for the better, right? But if a kid's sitting 00:24:02.539 --> 00:24:04.180 there thinking that the traditional path of what 00:24:04.180 --> 00:24:08.059 their parents did to get ahead, it's just not 00:24:08.059 --> 00:24:11.180 going to work, right? And so we, again, I go 00:24:11.180 --> 00:24:12.579 back to that point, the next 10 years is going 00:24:12.579 --> 00:24:15.059 to be extremely challenging, but there's going 00:24:15.059 --> 00:24:17.099 to be huge opportunities. You know, there's plenty 00:24:17.099 --> 00:24:20.079 of pathways that this AI and adoption of AI can 00:24:20.079 --> 00:24:22.000 go, right? It can improve productivity around 00:24:22.000 --> 00:24:23.660 the economy, you know, the global economy by 00:24:23.660 --> 00:24:26.910 a massive factor, but it can also cut. large 00:24:26.910 --> 00:24:29.009 parts of the labor market out. And you are starting 00:24:29.009 --> 00:24:31.309 to see wobbling. And the data in the US is not 00:24:31.309 --> 00:24:33.990 great because of the shutdown. But you are starting 00:24:33.990 --> 00:24:38.109 to see some kind of commentary around job losses, 00:24:38.390 --> 00:24:40.789 particularly in that early part of someone's 00:24:40.789 --> 00:24:43.650 career. I think it was JP Morgan or Goldman Sachs. 00:24:43.650 --> 00:24:47.049 They have a ratio of senior managing directors 00:24:47.049 --> 00:24:52.109 to junior staff. And they're going to halve that. 00:24:52.410 --> 00:24:54.210 so that's half the number of jobs for junior 00:24:54.210 --> 00:24:56.089 analysts in those in that business i think it 00:24:56.089 --> 00:24:57.349 was jp morgan it could have been goldman sachs 00:24:57.349 --> 00:24:59.849 but i think it's jp morgan so you're starting 00:24:59.849 --> 00:25:02.829 to see ai's impact on the employment market uh 00:25:02.829 --> 00:25:05.849 and that's an accelerator i mean i saw you know 00:25:05.849 --> 00:25:09.190 there was an article like it was an article that 00:25:09.190 --> 00:25:12.690 i read and i thought you know it was like written 00:25:12.690 --> 00:25:14.309 like a month ago and it was actually written 00:25:14.309 --> 00:25:17.950 two years ago and it just like a completely underestimated 00:25:18.240 --> 00:25:20.759 the impact even two years ago on what was going 00:25:20.759 --> 00:25:23.380 on. And this article was talking about that 25 00:25:23.380 --> 00:25:26.559 % of jobs could be lost, existing jobs. Now, 00:25:26.559 --> 00:25:28.339 obviously, there'll be new jobs created, but 00:25:28.339 --> 00:25:31.539 25 % of all jobs in the US economy are at risk 00:25:31.539 --> 00:25:35.200 of being out -competed or replaced by artificial 00:25:35.200 --> 00:25:39.779 intelligence. That's crazy. But if you think 00:25:39.779 --> 00:25:41.200 about historically, right, everyone said the 00:25:41.200 --> 00:25:43.059 same thing after the Industrial Revolution, you 00:25:43.059 --> 00:25:45.559 know, the internet came along, you know, Nokia 00:25:45.559 --> 00:25:49.210 was, you know. Nokia existed, now it doesn't. 00:25:49.230 --> 00:25:54.690 There are numerous industries that come and go, 00:25:54.849 --> 00:25:57.369 but essentially people still manage to survive. 00:25:57.750 --> 00:26:00.809 But I suppose this really gets into cycles, right? 00:26:00.950 --> 00:26:03.009 And let's get into the fun part. You and I love 00:26:03.009 --> 00:26:05.329 discussing strategy, the cycles, the whole point 00:26:05.329 --> 00:26:08.900 of the... My podcast name, The Rate of Change, 00:26:09.059 --> 00:26:11.160 is essentially identifying the cycles because 00:26:11.160 --> 00:26:12.980 essentially money doesn't vanish. It just kind 00:26:12.980 --> 00:26:15.559 of cycles up. Everyone makes a lot of capital. 00:26:15.599 --> 00:26:18.240 Then it leaves one asset class and then essentially 00:26:18.240 --> 00:26:21.119 one door closes, another one opens, and then 00:26:21.119 --> 00:26:23.140 essentially enters into another part of the asset 00:26:23.140 --> 00:26:27.900 class. So right now with the cycle, where in 00:26:27.900 --> 00:26:34.819 that cycle do you think we are? Yeah, I think 00:26:34.819 --> 00:26:38.279 there's debating this with one of my close friends 00:26:38.279 --> 00:26:41.599 who I worked with at Coda, Bridget Leckie. And, 00:26:41.680 --> 00:26:44.660 you know, we kind of probably started October 00:26:44.660 --> 00:26:47.900 thinking there'd be another melt up. Obviously, 00:26:47.940 --> 00:26:50.019 there's been some wobbles and the market's not 00:26:50.019 --> 00:26:52.819 really pushing ahead higher and higher. It's 00:26:52.819 --> 00:26:55.440 going, you know, kind of bubbling around. I think 00:26:55.440 --> 00:26:56.940 people are starting to look at valuations and 00:26:56.940 --> 00:26:59.400 going there's a lot of good news priced into 00:26:59.400 --> 00:27:02.819 markets. But I go back to that point, like the 00:27:02.819 --> 00:27:06.599 CapEx boom in the US, which is on the basis that 00:27:06.599 --> 00:27:10.039 the US wants to win the AI war or come close 00:27:10.039 --> 00:27:13.099 to winning it, that's going to help the market. 00:27:13.680 --> 00:27:16.420 That spending is not going away. So I think we're 00:27:16.420 --> 00:27:19.960 in the cycle. I think, you know, it's hard. Like 00:27:19.960 --> 00:27:22.539 on any fundamental basis, markets, particularly 00:27:22.539 --> 00:27:25.950 in the US, are not cheap. uh they're going to 00:27:25.950 --> 00:27:27.970 be funded for growth through this capex boom 00:27:27.970 --> 00:27:32.430 and ai boom and so i wouldn't discount there's 00:27:32.430 --> 00:27:36.410 still potential for a melt up in markets uh you 00:27:36.410 --> 00:27:38.769 know large caps in australia like these these 00:27:38.769 --> 00:27:42.490 are really really awful organizations right they're 00:27:42.490 --> 00:27:45.109 not growing the top line uh they are at the front 00:27:45.109 --> 00:27:47.430 and center of the productivity issues in these 00:27:47.430 --> 00:27:49.750 economy in this economy and the only way these 00:27:49.750 --> 00:27:54.079 large companies can grow earnings is uh by kind 00:27:54.079 --> 00:27:57.119 of costs so look the cycle is an interesting 00:27:57.119 --> 00:28:00.000 one but every cycle is different you know my 00:28:00.000 --> 00:28:03.539 approach to investing is you know just keep searching 00:28:03.539 --> 00:28:07.599 for new ideas find fund managers that are in 00:28:07.599 --> 00:28:10.440 a very niche part of the market where they have 00:28:10.440 --> 00:28:14.180 some type of repeatable competitive edge in sourcing 00:28:14.180 --> 00:28:17.740 in originating in managing you know i would probably 00:28:17.740 --> 00:28:20.680 be cautious on kind of a broad index based approach 00:28:20.680 --> 00:28:23.900 at the moment Yeah, so we need to be digging 00:28:23.900 --> 00:28:25.680 this. I want to get into the private credit side, 00:28:25.839 --> 00:28:27.980 of course, but just whilst we're on the growth 00:28:27.980 --> 00:28:33.519 topic, everyone's been reading the news, essentially. 00:28:33.539 --> 00:28:35.920 People that aren't X, you kind of can't see it. 00:28:36.279 --> 00:28:39.019 The States is an interesting one, right? You 00:28:39.019 --> 00:28:41.200 know, it's funny. Love him or hate him, Trump 00:28:41.200 --> 00:28:43.140 essentially said he was going to do a thing and 00:28:43.140 --> 00:28:44.940 then did a thing, right? So the tariffs have 00:28:44.940 --> 00:28:48.059 come through. right so i'm just curious in your 00:28:48.059 --> 00:28:50.039 opinion what's been the main impact of the tariffs 00:28:50.039 --> 00:28:53.220 uh the doge team has identified all the fraud 00:28:53.220 --> 00:28:55.299 and essentially stopped a whole bunch of money 00:28:55.299 --> 00:28:56.819 coming through it was one of the main reasons 00:28:56.819 --> 00:28:59.059 for the government shutdown trying to stop the 00:28:59.059 --> 00:29:01.039 funding of the you know in those blue states 00:29:01.039 --> 00:29:03.420 you know have the means to essentially give you 00:29:03.420 --> 00:29:05.099 know illegal immigrants you know 10 000 gift 00:29:05.099 --> 00:29:07.559 cards and put them up at the best hotels they're 00:29:07.559 --> 00:29:09.079 trying to kill all that you know love it i hate 00:29:09.079 --> 00:29:12.099 it so that's happening but meanwhile you also 00:29:12.099 --> 00:29:16.069 have you know money coming back into you know, 00:29:16.069 --> 00:29:19.009 over in the US, like trying to feed and build 00:29:19.009 --> 00:29:20.650 up the middle class, which is what the Chinese 00:29:20.650 --> 00:29:22.490 have done phenomenally well for the past 30, 00:29:22.569 --> 00:29:23.930 40 years, right? They've built up their middle 00:29:23.930 --> 00:29:26.430 class. And then you can see the benefits of that. 00:29:26.490 --> 00:29:27.990 You know, that's all come through to Australia. 00:29:28.069 --> 00:29:30.549 That's not really happening in Australia. And 00:29:30.549 --> 00:29:32.170 then the other thing as well, which is very interesting, 00:29:32.289 --> 00:29:36.329 you know, even his son, Barron Trump, they are, 00:29:36.430 --> 00:29:39.349 you know, their entire network, they're really 00:29:39.349 --> 00:29:42.089 building out this digital asset space. right 00:29:42.089 --> 00:29:44.269 but meanwhile if you look over in the uk and 00:29:44.269 --> 00:29:45.990 other areas they're trying to do it to control 00:29:45.990 --> 00:29:49.410 people meanwhile the in the u .s market they're 00:29:49.410 --> 00:29:50.910 trying to build out the digital space because 00:29:50.910 --> 00:29:52.630 they know there's so much debt there they're 00:29:52.630 --> 00:29:54.589 discussing potentially paying it back with digital 00:29:54.589 --> 00:29:57.089 assets you know what i mean so i'm just it's 00:29:57.089 --> 00:30:00.000 very interesting that we have Many different 00:30:00.000 --> 00:30:03.579 thematics happening on a global scale. So I suppose 00:30:03.579 --> 00:30:06.200 why I'm asking the cycle question is some people, 00:30:06.279 --> 00:30:08.299 like one advisor is running a lot of money, like 00:30:08.299 --> 00:30:10.759 $800 million, great bloke. He's sitting half 00:30:10.759 --> 00:30:13.220 in cash because we know that this market runs 00:30:13.220 --> 00:30:15.819 up and comes off. You know what I mean? So he's 00:30:15.819 --> 00:30:17.799 sitting in cash because he's looking at one particular 00:30:17.799 --> 00:30:20.819 part of the market. Meanwhile, a very large part 00:30:20.819 --> 00:30:22.880 of the market is doing incredibly well. Other 00:30:22.880 --> 00:30:25.339 parts are suffering. You know what I mean? Some 00:30:25.339 --> 00:30:28.529 are mid -stage. I don't know how to answer this 00:30:28.529 --> 00:30:31.269 question or where to dig into it because it's 00:30:31.269 --> 00:30:34.750 not just two speeds. It's like a five -speed 00:30:34.750 --> 00:30:39.529 economy happening on a global scale. I think 00:30:39.529 --> 00:30:44.009 always be sceptical, be a contrarian. If everybody's 00:30:44.009 --> 00:30:47.509 chasing flashing new lights and the new thing, 00:30:47.589 --> 00:30:50.369 that's probably a risk. I think it's dangerous 00:30:50.369 --> 00:30:52.490 sitting in cash, right? It can be very dangerous. 00:30:52.609 --> 00:30:55.589 Markets, on average, go a lot over the long term. 00:30:57.309 --> 00:30:58.950 Also recognise that the drawdown can be pretty 00:30:58.950 --> 00:31:02.329 severe, but you've got to constantly learn. What 00:31:02.329 --> 00:31:04.789 I love about my roles now is I'm involved in 00:31:04.789 --> 00:31:08.109 different organisations. You know, the Aura guys 00:31:08.109 --> 00:31:11.009 are so integrated into Asia and the local VC 00:31:11.009 --> 00:31:15.089 sector here and also private credit. Elliston 00:31:15.089 --> 00:31:18.190 has got their fingers everywhere, right? They 00:31:18.190 --> 00:31:20.269 see a lot. They've been in markets, you know, 00:31:20.289 --> 00:31:24.009 for 40, 50 years. The IBEX guys see technology. 00:31:24.569 --> 00:31:28.109 uh both in the us and israel um so i see a bunch 00:31:28.109 --> 00:31:29.549 of different things right and you just gotta 00:31:29.549 --> 00:31:32.869 keep stress testing and keep learning and um 00:31:32.869 --> 00:31:36.190 don't get too caught in some of the biases that 00:31:36.190 --> 00:31:42.329 some investors have right um and just be be like 00:31:42.329 --> 00:31:44.930 accept that you can be different right you don't 00:31:44.930 --> 00:31:47.329 have to follow what everybody else is doing and 00:31:47.329 --> 00:31:49.880 also challenge like you know this We spoke about 00:31:49.880 --> 00:31:52.200 private credit before. Again, you know, and I 00:31:52.200 --> 00:31:54.259 say this, I know the journalists who write these 00:31:54.259 --> 00:31:55.799 articles. Tell me where the systemic risk is 00:31:55.799 --> 00:31:58.299 and don't point to me to outright fraud like 00:31:58.299 --> 00:32:00.599 Shield or, you know, some really, really risky 00:32:00.599 --> 00:32:02.599 funds. Tell me where the risk is. Like, I don't 00:32:02.599 --> 00:32:04.539 care what the paper says. Where is the actual 00:32:04.539 --> 00:32:07.180 risk? There definitely needs to be more transparency 00:32:07.180 --> 00:32:09.859 on that sector and there needs to be, you know, 00:32:09.859 --> 00:32:12.319 a lot more information provided to clients. But 00:32:12.319 --> 00:32:14.720 tell me where the systemic risk is. I mean, I'll 00:32:14.720 --> 00:32:16.599 be honest, like 35 % to 40 % of my portfolio 00:32:16.599 --> 00:32:18.839 is in private credit. I'm not seeing it. Now, 00:32:19.339 --> 00:32:21.680 of course, when you're earning 9 % to 10%, of 00:32:21.680 --> 00:32:23.000 course, there's going to be individual loans 00:32:23.000 --> 00:32:25.900 that don't go so well. That's why I'm earning 00:32:25.900 --> 00:32:29.440 9 % to 10%. But I'm not seeing broad systemic 00:32:29.440 --> 00:32:32.799 risk. And just remember, 2007 and 2008 and 2009 00:32:32.799 --> 00:32:35.039 was very different. That was leverage credit. 00:32:35.339 --> 00:32:38.140 That was, you know, collateralized debt obligations 00:32:38.140 --> 00:32:42.059 with 2 % to 3 % subordination, but very heavy 00:32:42.059 --> 00:32:44.400 industry concentration in home builders, in second 00:32:44.400 --> 00:32:47.559 tier banks, in Icelandic banks, right? You know, 00:32:47.579 --> 00:32:49.519 you had 20 times leverage. That's not what you 00:32:49.519 --> 00:32:51.799 see now. I think what's also important, and I'm 00:32:51.799 --> 00:32:54.140 not going to say what I think is better or worse, 00:32:54.220 --> 00:32:56.539 but, you know, the Australian private debt market 00:32:56.539 --> 00:32:59.079 is very different to the US private debt market, 00:32:59.220 --> 00:33:00.940 despite what the media is saying. I mean, the 00:33:00.940 --> 00:33:02.720 media is saying, oh, Aussie is worse, Aussie 00:33:02.720 --> 00:33:04.420 is worse. Well, actually, we have better creditor 00:33:04.420 --> 00:33:06.779 rights. Way better creditor rights. We don't 00:33:06.779 --> 00:33:09.019 need to go to courts to enforce a loan, right? 00:33:09.259 --> 00:33:11.839 In the US, you have to go to a court to enforce 00:33:11.839 --> 00:33:14.200 a loan. That results in extremely low recovery 00:33:14.200 --> 00:33:17.640 rates, right? The Australian market is also very 00:33:17.640 --> 00:33:22.130 short duration. It is a bridge. uh financing 00:33:22.130 --> 00:33:24.849 market right so the average loaner is six to 00:33:24.849 --> 00:33:27.609 twelve months uh the us market is to typically 00:33:27.609 --> 00:33:30.730 direct lending cash flow lending right to corporates 00:33:30.730 --> 00:33:32.549 to corporates that are highly leveraged and owned 00:33:32.549 --> 00:33:37.589 by uh uh private equity firms uh what also is 00:33:37.589 --> 00:33:39.529 a very different characteristic is a lot of the 00:33:39.529 --> 00:33:42.369 funds in australia for global private credit 00:33:42.369 --> 00:33:44.740 had leverage in them Like we're talking about 00:33:44.740 --> 00:33:47.319 fund leverage one -to -one, right? So not only 00:33:47.319 --> 00:33:49.519 are you buying private equity companies with, 00:33:49.559 --> 00:33:52.220 you know, a lot of leverage, the fund has leverage. 00:33:52.380 --> 00:33:53.880 Now I'm not saying it's bad or good, but it's 00:33:53.880 --> 00:33:56.160 not apples and apples. So, you know, stress test 00:33:56.160 --> 00:33:58.299 what you're hearing in the marketplace, constantly 00:33:58.299 --> 00:34:00.180 trying to learn about these asset classes and 00:34:00.180 --> 00:34:04.420 be prepared to be different. Let's get really 00:34:04.420 --> 00:34:06.339 into that because I love this private credit 00:34:06.339 --> 00:34:09.820 stuff. Well, in my background, currency, I was 00:34:09.820 --> 00:34:11.719 always taught from an early age, follow the money. 00:34:11.820 --> 00:34:13.199 If you follow the money, then essentially you 00:34:13.199 --> 00:34:14.900 can see the outcome before it potentially happens, 00:34:15.079 --> 00:34:18.239 right? So with private credit, what's actually 00:34:18.239 --> 00:34:20.860 happening in Australia now? There's been change 00:34:20.860 --> 00:34:25.380 to regulation. Some people say that you don't 00:34:25.380 --> 00:34:28.420 even need a license to do it. But the other thing 00:34:28.420 --> 00:34:30.519 is, it's just patterns. It's the same thing over 00:34:30.519 --> 00:34:32.719 and over again, right? You know, you have a new 00:34:32.719 --> 00:34:34.659 industry that opens up. When I was in foreign 00:34:34.659 --> 00:34:36.440 currency, I was 20 years too late. You know, 00:34:36.480 --> 00:34:38.719 it began with the spreads of 2%. You know, it 00:34:38.719 --> 00:34:41.019 all began, same thing with private credit, like 00:34:41.019 --> 00:34:43.260 foreign currency. It was a bank -based product, 00:34:43.679 --> 00:34:46.260 you know, only. And then essentially said the 00:34:46.260 --> 00:34:48.159 banks didn't want to do it anymore or they opened 00:34:48.159 --> 00:34:50.730 the door to private markets. Then you see the 00:34:50.730 --> 00:34:52.789 first wave, which is predominantly the people 00:34:52.789 --> 00:34:55.030 who left the banks, set up the things, then off 00:34:55.030 --> 00:34:57.150 they go. Then you get the middleman brokers realizing 00:34:57.150 --> 00:34:59.690 how much money is it. And then, you know, it 00:34:59.690 --> 00:35:01.849 keeps going and going. But as that happens, just 00:35:01.849 --> 00:35:03.670 naturally with every single business, competition 00:35:03.670 --> 00:35:09.130 increases, margins compress, right? The boom 00:35:09.130 --> 00:35:12.090 explodes. Then you have less supply in the market 00:35:12.090 --> 00:35:15.150 of quality loans. And then people start chasing 00:35:15.150 --> 00:35:16.849 things. And the other thing... What's interesting 00:35:16.849 --> 00:35:19.369 from the GFC, people aren't familiar with this 00:35:19.369 --> 00:35:21.809 and we discuss it at length. The thing that nearly 00:35:21.809 --> 00:35:23.789 killed everyone in the GFC wasn't necessarily 00:35:23.789 --> 00:35:26.369 the banks going under. It was the insurance company 00:35:26.369 --> 00:35:28.309 AIG, which nearly had, don't quote me on this, 00:35:28.389 --> 00:35:31.110 was 80 or 85 % of the entire market's paper. 00:35:31.289 --> 00:35:34.730 If they went under, every single loan. that was 00:35:34.730 --> 00:35:36.530 written on isn't worth the paper that it's written 00:35:36.530 --> 00:35:38.949 on and then meanwhile you had the blatant fraud 00:35:38.949 --> 00:35:40.949 with moody's which is potentially happening now 00:35:40.949 --> 00:35:43.050 not saying it is but in the afr they're discussing 00:35:43.050 --> 00:35:44.469 it with you know asking they're having a big 00:35:44.469 --> 00:35:46.750 look at it where these um not ratings agencies 00:35:46.750 --> 00:35:49.849 but these valuation agencies right you know what's 00:35:49.849 --> 00:35:52.090 happening with the conflict of interest yeah 00:35:52.090 --> 00:35:54.730 christ it's just a rabbit hole it's just in it's 00:35:54.730 --> 00:35:57.630 it's interesting what you're discussing at one 00:35:57.630 --> 00:36:00.309 point you have you know ai growth markets are 00:36:00.309 --> 00:36:04.460 hammering you would say that it's This credit 00:36:04.460 --> 00:36:08.300 space is really matured, right? But people are 00:36:08.300 --> 00:36:10.900 discussing now that there is some form of an 00:36:10.900 --> 00:36:13.679 underbelly like reminiscent of 05, 06 starting 00:36:13.679 --> 00:36:16.579 to poke its head out. What's currently happening 00:36:16.579 --> 00:36:21.420 with the Australian market? Here's one for you, 00:36:21.460 --> 00:36:24.219 right? Now, I'm a believer in technology and 00:36:24.219 --> 00:36:28.340 I'm a believer that AI will change. the entire 00:36:28.340 --> 00:36:31.460 world for the better in most parts, assuming 00:36:31.460 --> 00:36:35.360 that employment market isn't destroyed in the 00:36:35.360 --> 00:36:37.699 meantime. But, you know, let's just say I'm wrong, 00:36:37.760 --> 00:36:40.780 right? Let's say I'm wrong. And let's say that 00:36:40.780 --> 00:36:44.639 the trillions of dollars that the Mag7 are investing 00:36:44.639 --> 00:36:50.059 in AI ends up worthless, right? We're talking 00:36:50.059 --> 00:36:53.000 about, you know, seven of the largest companies 00:36:53.000 --> 00:36:56.650 in the world potentially throwing. money down 00:36:56.650 --> 00:37:00.050 the drain right they're now raising debt so i'm 00:37:00.050 --> 00:37:02.570 not saying that that's the base case but there 00:37:02.570 --> 00:37:05.809 is a plausible scenario that in 10 years time 00:37:05.809 --> 00:37:08.449 we look back and go holy hell that was like the 00:37:08.449 --> 00:37:11.110 biggest scam ever like you don't know the next 00:37:11.110 --> 00:37:13.530 crisis right we didn't know what 2008 would look 00:37:13.530 --> 00:37:16.469 like yeah debt was going up um there was some 00:37:16.469 --> 00:37:20.070 sexy creative structures, there was a lot more 00:37:20.070 --> 00:37:22.250 leverage in the system. But leverage is increasing. 00:37:22.329 --> 00:37:24.570 Now, again, I believe in AI and I believe in 00:37:24.570 --> 00:37:27.210 the technology change that will occur. But let's 00:37:27.210 --> 00:37:28.889 say, you know, there was a great chart that says, 00:37:28.949 --> 00:37:30.570 you know, for every billion dollars of revenue, 00:37:30.650 --> 00:37:33.889 how much does Meta need to spend? And it's like 00:37:33.889 --> 00:37:37.210 literally going like that now. So I think like 00:37:37.210 --> 00:37:41.949 an economist, right, decision trees and probability 00:37:41.949 --> 00:37:45.090 tables, right? It's not a 0 % probability that 00:37:45.090 --> 00:37:48.559 this is all worthless, right? So I think we need 00:37:48.559 --> 00:37:51.599 to consider that as a potential risk that the 00:37:51.599 --> 00:37:54.460 amount of money that's being spent is not efficient. 00:37:54.739 --> 00:37:56.900 But then I got to that point about having to 00:37:56.900 --> 00:37:58.880 win. I think the US, when Trump came in and said, 00:37:58.940 --> 00:38:00.579 we have to win, it was like the railways, right? 00:38:00.679 --> 00:38:02.360 Just spend as much money as you can. I don't 00:38:02.360 --> 00:38:03.940 care if the economy goes into recession for two 00:38:03.940 --> 00:38:06.559 to three years. We are playing a 30 to 50 year 00:38:06.559 --> 00:38:10.260 game and we want to beat China. And so I think 00:38:10.260 --> 00:38:12.519 that they will pump and dump this CapEx boom 00:38:12.519 --> 00:38:14.639 and there'll be some point where it definitely 00:38:14.639 --> 00:38:17.780 blows up. The US is not worried about having 00:38:17.780 --> 00:38:20.119 a recession for a year or two. They want to win 00:38:20.119 --> 00:38:25.539 the 30 -year game that is AI. So how does that 00:38:25.539 --> 00:38:27.539 – yeah, I understand the growth side, but on 00:38:27.539 --> 00:38:29.980 the private credit front with where we are right 00:38:29.980 --> 00:38:32.760 now, how does that – because, okay, we're discussing 00:38:32.760 --> 00:38:34.400 off -air, right? You know, you were saying essentially 00:38:34.400 --> 00:38:38.360 private credit bridging lines, the Australian 00:38:38.360 --> 00:38:41.690 method. happy days as long as they're asset -backed, 00:38:41.690 --> 00:38:43.070 right? But essentially, you're just starting 00:38:43.070 --> 00:38:45.269 to question, even though there's fantastic lenders 00:38:45.269 --> 00:38:47.090 out in the market, we know them very well, you 00:38:47.090 --> 00:38:49.469 know, that work directly with businesses. But, 00:38:49.510 --> 00:38:52.309 you know, if that pop does happen, which one 00:38:52.309 --> 00:38:54.030 will potentially get hit first, you know, an 00:38:54.030 --> 00:38:55.989 asset -backed loan or essentially a business 00:38:55.989 --> 00:39:00.989 loan? So for me, and I'm going to ignore the 00:39:00.989 --> 00:39:04.670 domestic versus global, everything's in the capital 00:39:04.670 --> 00:39:08.239 stack, right? So if there is uncertainty... in 00:39:08.239 --> 00:39:11.360 markets, then I'd rather be higher up the capital 00:39:11.360 --> 00:39:14.519 stack. So again, I go back to that point before 00:39:14.519 --> 00:39:18.400 the two tailwinds for private credit, people 00:39:18.400 --> 00:39:21.019 want it, the banks aren't doing it and the economy 00:39:21.019 --> 00:39:24.400 needs it. But also in a period of high valuations 00:39:24.400 --> 00:39:28.139 in markets, being higher up the cap stack is 00:39:28.139 --> 00:39:30.619 actually quite attractive. But in saying that, 00:39:30.659 --> 00:39:32.199 of course, there's going to be some segments 00:39:32.199 --> 00:39:34.219 of private credit that don't do so well, right? 00:39:34.280 --> 00:39:35.739 We're going to have instances of fund managers 00:39:35.739 --> 00:39:37.670 that don't do so well. And we're going to have 00:39:37.670 --> 00:39:40.010 instances of individual loans not doing well. 00:39:40.130 --> 00:39:42.630 But, you know, by and large, I think private 00:39:42.630 --> 00:39:46.050 credit still remains a nice place to sit, you 00:39:46.050 --> 00:39:47.769 know, for a large part of the portfolio. Like 00:39:47.769 --> 00:39:50.969 getting your 8 % to 9 % to 10%, maybe 10 % is 00:39:50.969 --> 00:39:52.369 a little bit more aggressive, but your 8 % to 00:39:52.369 --> 00:39:55.989 9%. And, you know, I've been criticized time 00:39:55.989 --> 00:39:59.269 and time again in 2021, 2022, Jason, why don't 00:39:59.269 --> 00:40:00.590 you have government bonds? You need government 00:40:00.590 --> 00:40:02.190 bonds. It's like, why would I buy government 00:40:02.190 --> 00:40:04.210 bonds when the duration is like seven to eight 00:40:04.210 --> 00:40:06.940 years, interest rates are 1%. There's no upside 00:40:06.940 --> 00:40:09.579 there. What have government bonds done over the 00:40:09.579 --> 00:40:12.599 last decade? Like zero, nothing. And on an inflation 00:40:12.599 --> 00:40:14.820 adjusted basis, that's terrible. So, you know, 00:40:14.820 --> 00:40:17.380 yeah, we were early in private credit. We have 00:40:17.380 --> 00:40:22.300 received a lot of criticism. Thank you. Hybrid 00:40:22.300 --> 00:40:25.019 notes gone. Everyone like, Jesus Christ, you're 00:40:25.019 --> 00:40:26.940 at a stockbroking house. They used to pump the 00:40:26.940 --> 00:40:29.800 CBO pearls and all that type of stuff. You know 00:40:29.800 --> 00:40:31.809 what I mean? They're gone. So the question, I 00:40:31.809 --> 00:40:33.190 suppose this is actually a very important question. 00:40:33.329 --> 00:40:34.670 Like, you know, there are investors out there. 00:40:34.690 --> 00:40:36.610 I can't remember how many billions of dollars 00:40:36.610 --> 00:40:38.650 are now in private credit, right? And how many 00:40:38.650 --> 00:40:42.329 billions of dollars are in superannuation? How 00:40:42.329 --> 00:40:45.269 much, sorry? I think it's 220 billion. I think 00:40:45.269 --> 00:40:48.369 the media talks about local market being about 00:40:48.369 --> 00:40:55.349 $220 billion, which is not super. Private credit, 00:40:55.469 --> 00:40:57.570 private credit, and maybe three or four trillion 00:40:57.570 --> 00:41:01.460 super. Well, let's get down to real home economics. 00:41:01.659 --> 00:41:03.500 Like real home economics, right? Everyone says, 00:41:03.539 --> 00:41:05.079 what's the inflation rate now in the threes? 00:41:05.460 --> 00:41:08.360 But if you look at true inflation, like what 00:41:08.360 --> 00:41:11.860 it costs you for fuel, food, like the real stuff, 00:41:11.880 --> 00:41:14.000 electricity, wouldn't you agree? And so you've 00:41:14.000 --> 00:41:16.360 told me this, that it's actually property inflation. 00:41:17.619 --> 00:41:19.519 And what's property inflation for the past 20 00:41:19.519 --> 00:41:23.840 years as an average? Unfortunately, it's not 00:41:23.840 --> 00:41:26.860 just property inflation now. You know, our governments 00:41:26.860 --> 00:41:29.800 are spending way too much money. We don't have 00:41:29.800 --> 00:41:33.059 productivity growth. You know, we had a 1 % increase 00:41:33.059 --> 00:41:35.619 in the Tremaine measure, which is the preferred 00:41:35.619 --> 00:41:37.340 measure of inflation, takes away the volatile 00:41:37.340 --> 00:41:40.760 aspects, 1%. So it's like, you know, you're talking 00:41:40.760 --> 00:41:43.440 about a 4 % core inflation rate. Like that is, 00:41:43.460 --> 00:41:45.980 that's probably something that keeps me up most 00:41:45.980 --> 00:41:49.659 at night because, you know, our governments are 00:41:49.659 --> 00:41:52.820 not, and, you know, a big part of that is infrastructure. 00:41:53.440 --> 00:41:55.760 spending uh probably the last decade in new south 00:41:55.760 --> 00:41:59.000 wales uh now a bit of you know queensland and 00:41:59.000 --> 00:42:02.420 victoria uh but inflation's pretty bad and that's 00:42:02.420 --> 00:42:04.659 just remember like inflation impacts inflation 00:42:04.659 --> 00:42:07.699 is regressive right it hurts the the bottom half 00:42:07.699 --> 00:42:09.360 of the people more than the top half of the people 00:42:09.360 --> 00:42:13.039 right so yeah but the mainstream is the thing 00:42:13.039 --> 00:42:15.340 right inflation formula they're saying is you 00:42:15.340 --> 00:42:18.129 know four right but when you're looking at with 00:42:18.129 --> 00:42:19.530 houses, all that type of stuff. Like, you know, 00:42:19.530 --> 00:42:21.349 this has been, zone changing happens, right? 00:42:21.610 --> 00:42:23.230 You know, we've discussed it before and other 00:42:23.230 --> 00:42:25.050 people, you know, think that essentially it's 00:42:25.050 --> 00:42:26.510 property inflation. And where I'm going with 00:42:26.510 --> 00:42:29.570 this, right, is that if you're a retiree with 00:42:29.570 --> 00:42:31.969 2 million, 3 million, you go to home, you know, 00:42:32.030 --> 00:42:34.650 you just need a plan for the next 20 years, you're 00:42:34.650 --> 00:42:38.789 75 years old, you may live to 95, right? Well, 00:42:38.929 --> 00:42:44.010 simple math. If property inflation is hypothetically, 00:42:44.010 --> 00:42:48.150 say, 8 % over 20 years, right? You can't make 00:42:48.150 --> 00:42:51.130 four because you're 4 % behind every year compounding. 00:42:51.630 --> 00:42:53.809 So theoretically, you need to find an asset class 00:42:53.809 --> 00:42:56.190 where you can generate, you know, after fees, 00:42:56.449 --> 00:42:59.849 8 % just to be standing still. Is that an accurate, 00:43:00.090 --> 00:43:04.309 you know, just, you know, simple man test, reasonable 00:43:04.309 --> 00:43:06.289 man test, you know, observation? Because this 00:43:06.289 --> 00:43:09.110 is how a lot of these families are feeling. Like, 00:43:09.110 --> 00:43:10.630 you know, and the other thing as well is that, 00:43:10.650 --> 00:43:12.929 to your point, government bonds don't work anymore. 00:43:13.050 --> 00:43:15.630 They're good old, you know. The old way of doing 00:43:15.630 --> 00:43:17.550 it, you stick money in a turned deposit, doesn't 00:43:17.550 --> 00:43:19.489 really work anymore in order for them to essentially 00:43:19.489 --> 00:43:22.250 sustain their lifestyles. This is not personal 00:43:22.250 --> 00:43:23.869 advice, by the way. We're just discussing the 00:43:23.869 --> 00:43:29.349 thematics. Yeah. This is going to change tack, 00:43:29.429 --> 00:43:30.809 but kind of answer the question in a different 00:43:30.809 --> 00:43:32.889 way. Again, I was just off a phone call, right? 00:43:33.010 --> 00:43:37.869 And I sit on an investment committee for a credit 00:43:37.869 --> 00:43:41.750 fund, right? And one of the stress tests that 00:43:41.750 --> 00:43:43.130 I want to talk about, like we're talking about... 00:43:43.449 --> 00:43:47.590 you know the the you know the expensive and uh 00:43:47.590 --> 00:43:50.530 prohibitively expensive cost of living and houses 00:43:50.530 --> 00:43:52.909 in australia right but don't underestimate change 00:43:52.909 --> 00:43:56.429 right like you know auckland uh property prices 00:43:56.429 --> 00:43:59.190 you know felt nearly a quarter right 25 percent 00:43:59.190 --> 00:44:04.449 uh toronto 18 percent and new zealand she banned 00:44:04.449 --> 00:44:09.070 foreign money coming in though no auckland was 00:44:09.070 --> 00:44:12.550 all about supply Toronto and Vancouver, population 00:44:12.550 --> 00:44:15.030 growth was stronger than Australia post -COVID, 00:44:15.090 --> 00:44:17.610 and they still had property prices decline. One 00:44:17.610 --> 00:44:19.889 of the concerns that I think you'll see, particularly, 00:44:20.110 --> 00:44:22.429 it's probably the only piece of reform this country's 00:44:22.429 --> 00:44:25.030 had, is the transport -orientated development 00:44:25.030 --> 00:44:28.409 legislation in, I don't think it's actually called 00:44:28.409 --> 00:44:31.710 that, but TOD sites in New South Wales, where 00:44:31.710 --> 00:44:33.730 you can effectively bypass councils, right? If 00:44:33.730 --> 00:44:37.079 you're within 800 metres... of of a transport 00:44:37.079 --> 00:44:40.000 hub uh you can build like duplexes without without 00:44:40.000 --> 00:44:43.840 uh any council approval and if you're 400 meters 00:44:43.840 --> 00:44:47.079 near these these these tods uh you can build 00:44:47.079 --> 00:44:50.360 towers right now that kind of is what happened 00:44:50.360 --> 00:44:53.039 in new zealand uh where you know you're allowed 00:44:53.039 --> 00:44:56.059 to just increase supply massively so the one 00:44:56.059 --> 00:44:58.019 outlier risk that i think in australia is that 00:44:58.019 --> 00:45:00.199 house prices particularly in new south wales 00:45:00.199 --> 00:45:01.599 where you're seeing this massive amount of supply 00:45:01.599 --> 00:45:03.650 like you go around like all the eastern suburbs, 00:45:03.889 --> 00:45:06.110 Mossman, all these areas, they're consolidating 00:45:06.110 --> 00:45:09.769 these houses and putting 100 apartments in. So 00:45:09.769 --> 00:45:11.929 I think the supply aspect could really throw 00:45:11.929 --> 00:45:13.429 a spanner in the works around property prices. 00:45:13.750 --> 00:45:16.329 I don't think property prices will always remain 00:45:16.329 --> 00:45:18.769 expensive because we've seen three very similar 00:45:18.769 --> 00:45:22.710 markets, Auckland, Toronto, and Vancouver, all 00:45:22.710 --> 00:45:27.650 fall by up to a quarter, right? So again, like... 00:45:27.949 --> 00:45:30.510 Being an investor is thinking about the future 00:45:30.510 --> 00:45:33.389 and how it may change, not what has happened 00:45:33.389 --> 00:45:35.789 and what we're biased to believe in will continue 00:45:35.789 --> 00:45:39.030 to happen. Stay flexible. Stay frosty, everyone. 00:45:40.050 --> 00:45:45.070 Stay frosty. I don't understand the Vancouver 00:45:45.070 --> 00:45:48.809 and Toronto. That was policy and some macroprudential 00:45:48.809 --> 00:45:51.590 policy, but that's a big drop, right? That's 00:45:51.590 --> 00:45:54.079 a big drop for a country that... You know, you 00:45:54.079 --> 00:45:56.260 think that, you know, population growth was strong 00:45:56.260 --> 00:45:58.099 in Australia over the last three years. Like 00:45:58.099 --> 00:46:01.619 Canada was on another level. And still house 00:46:01.619 --> 00:46:07.860 prices fell a lot. Yeah. So with the Australian 00:46:07.860 --> 00:46:10.280 market as well, you do have Brisbane's booming, 00:46:10.400 --> 00:46:12.400 hot. Like they keep expanding out east which 00:46:12.400 --> 00:46:14.420 way, soaking up all that farmland, expand, expand, 00:46:14.500 --> 00:46:18.099 expand. But to your point, the Sydney market 00:46:18.099 --> 00:46:22.070 with the LMR. you know the family offices i'm 00:46:22.070 --> 00:46:24.309 with like i've even you know disclosed as well 00:46:24.309 --> 00:46:25.909 personally invested in one of these things the 00:46:25.909 --> 00:46:27.889 numbers are nuts like we was literally like 10 00:46:27.889 --> 00:46:30.650 days before it's worth x and then on the next 00:46:30.650 --> 00:46:33.510 day you know the uplift was insane just on paper 00:46:33.510 --> 00:46:35.650 right you know people are cashing in but the 00:46:35.650 --> 00:46:37.769 people where people were speaking with it's almost 00:46:37.769 --> 00:46:40.969 as if the booms happened People sold for the 00:46:40.969 --> 00:46:43.429 prices that they wanted. Now, true numbers are 00:46:43.429 --> 00:46:45.469 starting to go, okay, does the valuation make 00:46:45.469 --> 00:46:48.250 sense? Just like probably with Nvidia, do the 00:46:48.250 --> 00:46:50.449 numbers make sense? Valuations start to soften 00:46:50.449 --> 00:46:52.650 and supply hits the market and then everyone 00:46:52.650 --> 00:46:55.130 looks and goes again. It's the same cycle for 00:46:55.130 --> 00:46:57.650 every single asset class. It's just understanding 00:46:57.650 --> 00:47:02.650 where we are in each particular cycle and where 00:47:02.650 --> 00:47:06.309 we should be allocating. Absolutely. And I think 00:47:06.309 --> 00:47:09.719 there's no shortage of good ideas, right? Again, 00:47:09.960 --> 00:47:11.539 I'm very fortunate to work with some amazing 00:47:11.539 --> 00:47:15.320 people. And, you know, while markets are high 00:47:15.320 --> 00:47:17.320 and, you know, there's a lot of concerns around 00:47:17.320 --> 00:47:19.380 valuations, there's still an extraordinary number 00:47:19.380 --> 00:47:21.719 of ideas that are coming across our desk, right? 00:47:21.780 --> 00:47:25.159 Like the Aura Boys, they bought this payments 00:47:25.159 --> 00:47:28.519 business, this HR payments business in the Philippines 00:47:28.519 --> 00:47:31.239 and cash generated growing at 40 % per annum, 00:47:31.300 --> 00:47:34.440 paid a tiny multiple for it. Great asset. You 00:47:34.440 --> 00:47:36.019 know, the Ellison guys, you know, they obviously 00:47:36.019 --> 00:47:39.630 did the big Firmus cap raise. What was that one 00:47:39.630 --> 00:47:42.769 doing? Do you want to walk through that deal? 00:47:43.130 --> 00:47:47.670 Yeah. Data center. So it's a data center in Tasmania 00:47:47.670 --> 00:47:50.750 that has very, it's like a core weave technology 00:47:50.750 --> 00:47:54.389 where it's much cheaper in terms of power costs 00:47:54.389 --> 00:48:00.530 and also energy costs, right? Contracted revenue 00:48:00.530 --> 00:48:03.630 with NVIDIA. So, you know, it's almost de -risked. 00:48:04.969 --> 00:48:06.469 You know, these are the managers I like working 00:48:06.469 --> 00:48:08.610 with, and both Aura and Elliston get access to 00:48:08.610 --> 00:48:11.550 deal flow that's quite interesting. The industrial 00:48:11.550 --> 00:48:14.349 growth side of the business in Elliston, they 00:48:14.349 --> 00:48:16.289 just bought infrastructure. We talked about Brisbane, 00:48:16.369 --> 00:48:18.130 right? They bought an infrastructure service 00:48:18.130 --> 00:48:23.469 business, CSEE. Tiny multiple, right? But growing 00:48:23.469 --> 00:48:26.469 fast, obviously the Olympic boom. And so there's 00:48:26.469 --> 00:48:28.030 still ideas out there, right? There's still ideas 00:48:28.030 --> 00:48:30.449 out there. You know, the risk for single asset 00:48:30.449 --> 00:48:34.409 deals is obviously, you know. it's easy to get 00:48:34.409 --> 00:48:36.809 in but how do you sell them right at the end 00:48:36.809 --> 00:48:38.809 that's what's the exit if you think exits are 00:48:38.809 --> 00:48:43.369 hard on um on private equity funds when you've 00:48:43.369 --> 00:48:45.670 got a single asset it's even harder But when 00:48:45.670 --> 00:48:47.690 I look at those three deals, like they're all 00:48:47.690 --> 00:48:50.349 super interesting and they're all leveraging 00:48:50.349 --> 00:48:52.590 not just the great business that we're investing 00:48:52.590 --> 00:48:55.570 in, but the people, right? The people. So the 00:48:55.570 --> 00:48:58.170 Ellison people, the Aura people, they're great 00:48:58.170 --> 00:49:00.389 originators. They're great. They've got a lot 00:49:00.389 --> 00:49:03.050 of structural protections in there. And, you 00:49:03.050 --> 00:49:05.030 know, particularly for the C asset, S -E -E, 00:49:05.210 --> 00:49:10.070 and Giftaway, which is the Filipino HR Giftaway 00:49:10.070 --> 00:49:13.099 technology, they're cash generative. So that's 00:49:13.099 --> 00:49:15.260 great. Like owning cash, I'm not so worried, 00:49:15.360 --> 00:49:17.500 right? So there's definitely still ideas out 00:49:17.500 --> 00:49:19.659 there. This is the type of places that family 00:49:19.659 --> 00:49:22.179 offices want to invest in. So despite markets 00:49:22.179 --> 00:49:24.340 being at record highs, my approach to investing 00:49:24.340 --> 00:49:26.780 is I love buying stuff that's cheap, right? I 00:49:26.780 --> 00:49:28.239 love buying that stuff that's cheap and can go 00:49:28.239 --> 00:49:30.619 up a lot. And I'm also willing to go against 00:49:30.619 --> 00:49:33.559 the herd. So it takes a while to be proven right, 00:49:33.679 --> 00:49:36.099 but, you know, I don't need to follow the greatest 00:49:36.099 --> 00:49:38.360 fad at the moment. Like there's so many ideas 00:49:38.360 --> 00:49:41.000 out there. And, you know, my idea is that, you 00:49:41.000 --> 00:49:44.300 know, slightly off topic but you know alpha is 00:49:44.300 --> 00:49:47.239 available but if it was truly easy then you know 00:49:47.239 --> 00:49:49.699 you wouldn't be there so you know to actually 00:49:49.699 --> 00:49:51.440 generate alpha you've got to be different and 00:49:51.440 --> 00:49:52.639 you've got to be looking at things when other 00:49:52.639 --> 00:49:54.800 people are not looking at them and if everybody's 00:49:54.800 --> 00:49:57.400 talking about you know a similar thing then it's 00:49:57.400 --> 00:49:59.719 probably not the place you want to be in and 00:49:59.719 --> 00:50:02.039 that's why i look you know i think you know again 00:50:02.039 --> 00:50:03.699 i'm going to plug one of the groups i work for 00:50:03.699 --> 00:50:07.639 but like VC in Australia, for example, I've had 00:50:07.639 --> 00:50:09.239 limited exposure in the past, but I think this 00:50:09.239 --> 00:50:11.679 cycle at the moment for VC spending back to that 00:50:11.679 --> 00:50:14.739 seed kind of focus and being able to harness 00:50:14.739 --> 00:50:18.260 AI, Australia also produces some fantastic... 00:50:19.210 --> 00:50:22.909 you know uh companies per dollar are spent so 00:50:22.909 --> 00:50:25.530 i think uh bc in the australian market is actually 00:50:25.530 --> 00:50:26.809 gonna be an attractive investment over the next 00:50:26.809 --> 00:50:28.369 five to ten years and there's some fantastic 00:50:28.369 --> 00:50:31.090 tax benefits as well like there's not many free 00:50:31.090 --> 00:50:34.210 lunches in terms of tax in australia but um australian 00:50:34.210 --> 00:50:36.550 bc funds are generally uh if they meet certain 00:50:36.550 --> 00:50:39.170 criteria are tax -free both from capital and 00:50:39.170 --> 00:50:42.360 income So I think you got to be different. You 00:50:42.360 --> 00:50:44.699 can't, you know, the best investors can change 00:50:44.699 --> 00:50:47.659 tact and, and just, you know, do things differently 00:50:47.659 --> 00:50:51.960 and recognize when the market's changed. Yeah. 00:50:53.280 --> 00:50:55.440 It's like, I feel like if we don't touch resources, 00:50:55.500 --> 00:50:57.679 then we haven't hit every single Australian asset 00:50:57.679 --> 00:51:03.340 class. That means it is. One of the interesting 00:51:03.340 --> 00:51:06.809 things at the Aura event was, you know, One of 00:51:06.809 --> 00:51:08.510 the questions came up and one of the guys goes, 00:51:08.610 --> 00:51:10.190 there's no way in the world it's ever going to 00:51:10.190 --> 00:51:12.389 hit net zero, right? You know, so climate change, 00:51:12.510 --> 00:51:14.809 you know, is real, but essentially this whole 00:51:14.809 --> 00:51:16.869 net zero business and they're charging us for 00:51:16.869 --> 00:51:20.710 it is a bit of a joke. So in saying that, while 00:51:20.710 --> 00:51:22.449 I'm bringing this up, we're talking about, you 00:51:22.449 --> 00:51:25.969 know, cycles of markets, you know, like what's 00:51:25.969 --> 00:51:27.730 happening with essentially the resource space 00:51:27.730 --> 00:51:29.690 here? Like we look at a lot of the investment 00:51:29.690 --> 00:51:31.710 managers we use and you like them as well. We 00:51:31.710 --> 00:51:33.409 are heavily in the renewable stuff, which is 00:51:33.409 --> 00:51:36.809 great, but it's just kind of, hurts australia 00:51:36.809 --> 00:51:38.389 where you have like the fourth largest deposit 00:51:38.389 --> 00:51:40.969 of natural gas in the world and greenies are 00:51:40.969 --> 00:51:42.670 kind of giving you a hard time for it like do 00:51:42.670 --> 00:51:46.329 you think that you know the resources space is 00:51:46.329 --> 00:51:48.550 also going to hold up quite nicely in australia 00:51:48.550 --> 00:51:53.110 which also supports everything else yeah i'm 00:51:53.110 --> 00:51:57.050 horrified that uh our country uh openly wants 00:51:57.050 --> 00:52:03.750 to uh to to hurt or uh disadvantage uh one kind 00:52:03.750 --> 00:52:06.769 of competitive edge that we have right uh it's 00:52:06.769 --> 00:52:09.369 like an own goal right we're letting uh africa 00:52:09.369 --> 00:52:11.630 and latin america compete against what you know 00:52:11.630 --> 00:52:14.130 we have a more stable jurisdiction uh better 00:52:14.130 --> 00:52:16.969 legal rights but we still feel the need to attack 00:52:16.969 --> 00:52:18.929 uh something that we're globally competitive 00:52:18.929 --> 00:52:23.329 in so um you know there's a huge new this huge 00:52:23.329 --> 00:52:26.050 new idol of our minds being opened in africa 00:52:26.050 --> 00:52:30.269 and guinea like you know it it's horrifying um 00:52:30.989 --> 00:52:35.530 You know, the net zero thing, look, this is going 00:52:35.530 --> 00:52:37.510 to be controversial, but, you know, we do. That's 00:52:37.510 --> 00:52:39.989 why we're here, Jason. Controversial is our friend, 00:52:40.030 --> 00:52:42.429 right? We think we go against the grain without 00:52:42.429 --> 00:52:46.090 pissing anyone off, of course. We, you know, 00:52:46.130 --> 00:52:49.730 of course, we, God, this is, it's been a long 00:52:49.730 --> 00:52:53.250 process, but we, I won't say where it is, because 00:52:53.250 --> 00:52:55.250 then it will be highlighting the manager who's 00:52:55.250 --> 00:52:57.110 actually done an exceptional job to recover value, 00:52:57.230 --> 00:53:00.309 right? But this power plant, you know, part solar, 00:53:00.960 --> 00:53:04.059 uh part gas uh it's in an area where it rains 00:53:04.059 --> 00:53:07.199 a lot so you can't just have solar um it's also 00:53:07.199 --> 00:53:09.900 not in the like kind of the main energy grid 00:53:09.900 --> 00:53:12.420 of you know queensland new south wales victoria 00:53:12.420 --> 00:53:14.860 and south australia which is actually one energy 00:53:14.860 --> 00:53:16.460 grid and the power price goes up a lot it goes 00:53:16.460 --> 00:53:19.000 down a lot you know it can be negative and that's 00:53:19.000 --> 00:53:20.659 horrible to invest so we're actually in a really 00:53:20.659 --> 00:53:24.320 stable jurisdiction um but we haven't been able 00:53:24.320 --> 00:53:27.480 to connect it for 10 years because the intermittent 00:53:27.480 --> 00:53:32.889 nature of power uh the grid stability um the 00:53:32.889 --> 00:53:35.969 idea that we can just open renewables and connect 00:53:35.969 --> 00:53:39.389 it to the grid is is yeah it just it's not realistic 00:53:39.389 --> 00:53:42.789 um you know and a lot of people say oh look you 00:53:42.789 --> 00:53:44.409 know my power price is going down because i've 00:53:44.409 --> 00:53:46.469 got solar and it's like it's not about the household 00:53:46.469 --> 00:53:49.829 it's about the widget maker or the the industrial 00:53:49.829 --> 00:53:53.630 company um and the wholesale cost of power uh 00:53:53.630 --> 00:53:55.510 if you're in a low margin industry competing 00:53:55.510 --> 00:53:58.170 globally it is a massive competitive disadvantage 00:53:58.860 --> 00:54:02.619 energy prices in this country um and you know 00:54:02.619 --> 00:54:05.599 we've spent a trillion dollars on on renewables 00:54:05.599 --> 00:54:10.820 uh our grid is less stable uh energy prices particularly 00:54:10.820 --> 00:54:14.559 for wholesale are at their highest so there needs 00:54:14.559 --> 00:54:17.340 to be an honest debate around how much more money 00:54:17.340 --> 00:54:21.360 is required um and you know is net zero possible 00:54:21.360 --> 00:54:24.679 with renewables you know the wind is not blowing 00:54:24.679 --> 00:54:27.409 and the sun is not shining We need to actually 00:54:27.409 --> 00:54:29.610 really get into this because this is actually 00:54:29.610 --> 00:54:31.909 a very, very important and interesting part. 00:54:32.090 --> 00:54:35.630 You have all this growth and demand and money 00:54:35.630 --> 00:54:37.769 back, which starts the finance side, the growth 00:54:37.769 --> 00:54:40.570 of essentially the AI, but it's picks and shovels, 00:54:40.570 --> 00:54:43.469 just like we're mining. Nvidia, these companies, 00:54:43.849 --> 00:54:47.829 they take so much energy, right? And even Elon 00:54:47.829 --> 00:54:50.349 Musk on the Joe Rogan podcast came out and said 00:54:50.349 --> 00:54:55.409 that the... in the states is the the structure 00:54:55.409 --> 00:54:59.070 um it can't sustain it it can you know california's 00:54:59.070 --> 00:55:01.030 having brownouts you know to your point you have 00:55:01.030 --> 00:55:02.989 this fantastic asset in australia you can't even 00:55:02.989 --> 00:55:05.949 plug the damn thing in right meanwhile was it 00:55:05.949 --> 00:55:08.329 last year you know we hear stories of essentially 00:55:08.329 --> 00:55:10.889 a major was it apple like i remember who it was 00:55:10.889 --> 00:55:15.010 purchased a data center right next door to a 00:55:15.010 --> 00:55:17.530 nuclear power station. So it's completely socially 00:55:17.530 --> 00:55:21.090 acceptable for these big institutions with huge 00:55:21.090 --> 00:55:24.150 demands for energy to essentially get access 00:55:24.150 --> 00:55:26.730 to the only nuclear power stations that are allowed. 00:55:26.989 --> 00:55:30.510 But we can't build a nuclear power station with 00:55:30.510 --> 00:55:32.909 the technology so much better than what it was. 00:55:33.929 --> 00:55:36.230 in order to sustain the ever -growing demand. 00:55:36.530 --> 00:55:39.210 What the hell is happening with energy and the 00:55:39.210 --> 00:55:41.650 actual support of the critical infrastructure 00:55:41.650 --> 00:55:45.530 we need to sustain this level of growth? What 00:55:45.530 --> 00:55:49.289 the hell is happening, Jason? It's no coincidence 00:55:49.289 --> 00:55:54.349 that our productive capacity to grow, our economy 00:55:54.349 --> 00:55:56.650 used to grow at 3%, 4%, right? We're one of the 00:55:56.650 --> 00:55:59.389 fastest developed growing countries in the world. 00:55:59.809 --> 00:56:02.519 We can barely grow at about 1 % now. right and 00:56:02.519 --> 00:56:04.659 that's with you know strong population growth 00:56:04.659 --> 00:56:07.679 so you know we've had consecutive quarter on 00:56:07.679 --> 00:56:10.639 quarter declines in per capita income so there 00:56:10.639 --> 00:56:12.480 is a fundamental problem with how the economy 00:56:12.480 --> 00:56:14.119 is operating and a big part of that is energy 00:56:14.119 --> 00:56:17.960 right it's also the crowding out of the the private 00:56:17.960 --> 00:56:20.579 sector the government has become bigger and bigger 00:56:20.579 --> 00:56:24.039 where almost all of the jobs created have been 00:56:24.039 --> 00:56:26.800 in quasi -government roles like the ndis and 00:56:26.800 --> 00:56:29.480 that kind of thing like the economy you know 00:56:31.500 --> 00:56:33.320 I don't want to be too negative because, you 00:56:33.320 --> 00:56:37.320 know, we have fantastic kids who come out of 00:56:37.320 --> 00:56:40.659 university. We have a fantastic migrant contribution 00:56:40.659 --> 00:56:44.039 to the economy. But to run a business here is 00:56:44.039 --> 00:56:46.460 hard. And so, again, I go back to that point 00:56:46.460 --> 00:56:49.320 and I look at my own portfolio. I have no large 00:56:49.320 --> 00:56:51.360 cap exposure. I just think they're a beta proxy 00:56:51.360 --> 00:56:53.980 to those issues. They're a beta proxy to weak 00:56:53.980 --> 00:56:56.219 economic growth and poor government policy and 00:56:56.219 --> 00:56:58.579 the crowding out of the private sector. But I 00:56:58.579 --> 00:57:02.260 definitely still believe that our... kids, particularly 00:57:02.260 --> 00:57:05.719 our migrant population and our early stage kind 00:57:05.719 --> 00:57:09.860 of small cap, VC, smaller company side, they 00:57:09.860 --> 00:57:12.900 can grow because they're less, they're labour 00:57:12.900 --> 00:57:15.159 light, they're capital light. And they can also, 00:57:15.219 --> 00:57:17.559 like the great thing about, and again, plugging 00:57:17.559 --> 00:57:20.400 some of the groups, you know, there's a real 00:57:20.400 --> 00:57:21.980 opportunity to take an Australian company that's 00:57:21.980 --> 00:57:24.170 really good in a field. take it to the market 00:57:24.170 --> 00:57:26.909 like the us and grow rapidly right and that's 00:57:26.909 --> 00:57:29.610 one of the theses that really uh the vc team 00:57:29.610 --> 00:57:33.070 at aura uh and uh focus on so you know perfect 00:57:33.070 --> 00:57:34.889 example was there you know they were the first 00:57:34.889 --> 00:57:37.610 investor in catapults before it was listed right 00:57:37.610 --> 00:57:41.789 and so i still am optimistic about our economy 00:57:41.789 --> 00:57:45.030 at that kind of small company and that that that 00:57:45.030 --> 00:57:48.829 that kind of early stage but in terms of the 00:57:48.829 --> 00:57:53.340 big you know macro For Australia, it's pretty 00:57:53.340 --> 00:57:55.760 depressing. Yeah, but it's hard. It's so hard 00:57:55.760 --> 00:57:58.139 to start a business. Yeah, but it's hard. Who 00:57:58.139 --> 00:58:00.559 was at Aura? Who was the lady there from the 00:58:00.559 --> 00:58:04.559 – who was the minister that was presenting at 00:58:04.559 --> 00:58:10.260 Aura? What was her name? She was the – yeah, 00:58:10.380 --> 00:58:12.000 from the Liberal Party. So she was the nighttime 00:58:12.000 --> 00:58:15.079 economy minister. Yeah, so she was even discussing 00:58:15.079 --> 00:58:18.429 – you know, that they definitely want the growth 00:58:18.429 --> 00:58:19.670 and all that type of stuff. But then another 00:58:19.670 --> 00:58:21.590 gentleman there even mentioned that Australia 00:58:21.590 --> 00:58:23.789 is one of the hardest parts to essentially do 00:58:23.789 --> 00:58:26.230 these startups. And I'm actually just wondering, 00:58:26.349 --> 00:58:29.429 you know, whether or not energy is one of the 00:58:29.429 --> 00:58:33.110 main problems. I'll challenge you on that. No, 00:58:33.150 --> 00:58:35.110 startups is actually very good in this country. 00:58:35.550 --> 00:58:38.710 There's grants, the science and the universities 00:58:38.710 --> 00:58:42.550 is very strong. No, the startup ecosystem and, 00:58:42.550 --> 00:58:45.000 you know, they hate using the statistic but australia 00:58:45.000 --> 00:58:47.559 actually has the most number of unicorns per 00:58:47.559 --> 00:58:50.239 dollar spent right really so i would say the 00:58:50.239 --> 00:58:53.219 one thing that yeah what the one thing that australia 00:58:53.219 --> 00:58:55.480 does very well is that early stage right we always 00:58:55.480 --> 00:58:57.000 heard about it like we'd be very good at science 00:58:57.000 --> 00:58:59.380 right but we could never commercialize it um 00:58:59.380 --> 00:59:00.980 i still think that's okay so we're really good 00:59:00.980 --> 00:59:04.679 at that early stage scientific discovery uh you 00:59:04.679 --> 00:59:08.440 know backing winners or picking winners um My 00:59:08.440 --> 00:59:10.260 fear is not around that part of the economy. 00:59:10.400 --> 00:59:11.800 That's a small part of the economy. Remember 00:59:11.800 --> 00:59:14.099 that. My fear is that we're now in this kind 00:59:14.099 --> 00:59:17.039 of low growth rut of one and a half percent, 00:59:17.119 --> 00:59:21.099 you know, maximum GDP growth and living standards 00:59:21.099 --> 00:59:25.480 going down. You know, GDP per capita or GDI, 00:59:25.780 --> 00:59:28.860 gross domestic income per capita has gone backwards. 00:59:29.760 --> 00:59:31.960 I don't know what it is up to now, but it's probably 00:59:31.960 --> 00:59:33.780 approaching nine out of ten quarters, right? 00:59:34.239 --> 00:59:38.880 It's abysmal. And what policies do we have to 00:59:38.880 --> 00:59:41.780 address that? We don't. Like, you know, we were 00:59:41.780 --> 00:59:43.960 going to tax unrealized gains, for God's sake. 00:59:43.980 --> 00:59:45.940 So that's not a way to encourage investment. 00:59:46.440 --> 00:59:48.219 Like, we need to make it easier to set up a business. 00:59:48.360 --> 00:59:51.420 We need to make it easier to grow. We need, you 00:59:51.420 --> 00:59:55.030 know, less impediments. And we need the... public 00:59:55.030 --> 00:59:58.389 sector to be less of the overall economic pie 00:59:58.389 --> 01:00:02.690 because it is crowding out genuine growth by 01:00:02.690 --> 01:00:07.070 the private sector. So the crowding out, it's 01:00:07.070 --> 01:00:10.329 not spoken about a lot, but the government policies 01:00:10.329 --> 01:00:13.510 over the last decade have increasingly crowded 01:00:13.510 --> 01:00:17.530 out entrepreneurial activity in the larger companies, 01:00:17.630 --> 01:00:21.289 right? Larger companies can't grow. They can't 01:00:21.289 --> 01:00:26.880 hire people. So from my allocation, I'm entirely 01:00:26.880 --> 01:00:29.260 weighted. I think the private debt markets here 01:00:29.260 --> 01:00:31.980 around the circle are really good because of 01:00:31.980 --> 01:00:35.480 the credit rights. You control everything. I 01:00:35.480 --> 01:00:37.099 definitely, and I know I keep stressing this 01:00:37.099 --> 01:00:40.099 point, I back entrepreneurs and small companies 01:00:40.099 --> 01:00:42.900 and the VC landscape and our universities and 01:00:42.900 --> 01:00:46.360 our kids and our migrants. They just have a disproportionate 01:00:46.360 --> 01:00:50.739 positive impact to that ecosystem. I'm a very 01:00:50.739 --> 01:00:55.559 macro thinker. I love macro. When I studied economics, 01:00:55.719 --> 01:00:58.400 I love the macro and I love investing. I don't 01:00:58.400 --> 01:01:00.059 think you need to take an overly macro approach 01:01:00.059 --> 01:01:01.340 to everything, but you need to understand the 01:01:01.340 --> 01:01:03.860 big trends. You need to understand the big trends 01:01:03.860 --> 01:01:06.420 before going to an asset class. What I love doing 01:01:06.420 --> 01:01:09.920 is mixing that macro view of the world and where 01:01:09.920 --> 01:01:12.300 I invest with the opportunities that result from 01:01:12.300 --> 01:01:17.599 that. Yeah, macro is the best. One thing we haven't 01:01:17.599 --> 01:01:20.960 touched on, Yeah, what are the big macro things? 01:01:21.039 --> 01:01:22.679 I suppose where I'm going with this is that we 01:01:22.679 --> 01:01:24.119 had a conversation a while ago. It's funny, as 01:01:24.119 --> 01:01:26.059 a financial planner, you know, there's a ticker 01:01:26.059 --> 01:01:27.659 box exercise when you're looking at a retail 01:01:27.659 --> 01:01:29.780 client where it says you must allocate, if they 01:01:29.780 --> 01:01:32.000 say they're high risk or medium of growth, you 01:01:32.000 --> 01:01:33.980 must allocate a percentage based on the textbook 01:01:33.980 --> 01:01:37.239 into Australia, right? We actually, you know, 01:01:37.260 --> 01:01:38.659 verbally challenged that. I still have to do 01:01:38.659 --> 01:01:41.500 it, you know, legally. What's the point in investing 01:01:41.500 --> 01:01:43.159 in Australia, to your point, where essentially 01:01:43.159 --> 01:01:45.500 it's returned half the amount that essentially 01:01:45.500 --> 01:01:47.659 the state has? Meanwhile, there are very good 01:01:47.659 --> 01:01:49.679 fund managers out there that still have a mandate 01:01:49.679 --> 01:01:51.980 to invest anywhere in the world where it's a 01:01:51.980 --> 01:01:53.800 good company, but it appears the only decent 01:01:53.800 --> 01:01:55.539 company they see that's in Australia has been 01:01:55.539 --> 01:01:58.039 CSL for years, right? So it's like one of the 01:01:58.039 --> 01:01:59.559 only companies which they actually hold in these 01:01:59.559 --> 01:02:02.820 portfolios. Doesn't that speak volumes for what 01:02:02.820 --> 01:02:08.710 people perceive to be good businesses? Look, 01:02:08.750 --> 01:02:12.210 I mean, the ASX20 is never really, it's hard 01:02:12.210 --> 01:02:14.250 to get too excited. It's boring. Like if I want 01:02:14.250 --> 01:02:17.429 to buy the ASX20, I'll buy an ETF, right? But 01:02:17.429 --> 01:02:19.130 when I look at, you know, my small cap managers, 01:02:19.349 --> 01:02:20.829 and you know my small cap managers, and obviously 01:02:20.829 --> 01:02:24.309 one of them is Elliston, I like the companies 01:02:24.309 --> 01:02:28.289 I see there. They're growing. They're expanding. 01:02:28.570 --> 01:02:32.170 They're run by founders. They're aligned, right? 01:02:32.309 --> 01:02:35.469 There's all these characteristics. So, you know. 01:02:37.309 --> 01:02:39.389 The US market is obviously a very entrepreneurial 01:02:39.389 --> 01:02:43.130 market. And again, horrifies me and it makes 01:02:43.130 --> 01:02:45.190 me very sad that, you know, Australia is going 01:02:45.190 --> 01:02:47.789 one way, making it harder to grow large businesses. 01:02:48.610 --> 01:02:50.670 And the US is going the other way, which is making 01:02:50.670 --> 01:02:53.570 it much easier, cutting regulation, you know, 01:02:53.570 --> 01:02:57.869 lower energy costs, you know, government getting 01:02:57.869 --> 01:03:01.409 out of people's business. It's good, right? That's 01:03:01.409 --> 01:03:04.070 how companies grow. So, you know, I think we 01:03:04.070 --> 01:03:06.010 need to... a real discussion. I mean, we had 01:03:06.010 --> 01:03:08.070 a productivity, like government had a productivity 01:03:08.070 --> 01:03:10.630 discussion, right? Like a year ago, two years 01:03:10.630 --> 01:03:12.809 ago, nothing came from that. Nothing came from 01:03:12.809 --> 01:03:14.889 that at all. And I'm not saying it's this government's 01:03:14.889 --> 01:03:17.889 fault, like multiple succession of governments 01:03:17.889 --> 01:03:20.570 that have not improved the productivity challenge 01:03:20.570 --> 01:03:24.550 in this economy. Well, lastly, finish with Europe 01:03:24.550 --> 01:03:26.949 because we haven't touched on there and find 01:03:26.949 --> 01:03:28.889 Europe very interesting. Look, personally, this 01:03:28.889 --> 01:03:30.670 guy's using a fund manager where he allocated 01:03:30.670 --> 01:03:32.409 quite a lot. He's been doing incredibly well 01:03:32.409 --> 01:03:34.349 the past two, three years. But like Lloyds Bank, 01:03:34.510 --> 01:03:38.130 Barclays, you know, the UK has just been hammering 01:03:38.130 --> 01:03:40.110 in the banking space. You know, meanwhile, Australia 01:03:40.110 --> 01:03:42.110 has been, you know, Australia. Then you're also 01:03:42.110 --> 01:03:45.429 seeing, you know, fast -changing GDPs. Well, 01:03:45.510 --> 01:03:47.210 Greece fixed up the property in the black money 01:03:47.210 --> 01:03:48.989 problem, right? You know, you've got Hungary 01:03:48.989 --> 01:03:51.110 and Poland. Everything's exploding. So what's 01:03:51.110 --> 01:03:53.070 currently happening, you know, in the European 01:03:53.070 --> 01:03:54.710 market if, you know, listeners, you know, have 01:03:54.710 --> 01:03:58.099 exposure to some of these? On the European side, 01:03:58.159 --> 01:04:00.300 like Spotify, what's happening over in Europe 01:04:00.300 --> 01:04:05.480 right now? Look, I don't follow Europe massively. 01:04:05.719 --> 01:04:08.059 Like the Greece story is phenomenal, right? What 01:04:08.059 --> 01:04:12.420 a fantastic change, right? From the weakest member 01:04:12.420 --> 01:04:15.199 to now being one of the strongest, right? So 01:04:15.199 --> 01:04:17.139 the reforms, the difficult reforms, being in 01:04:17.139 --> 01:04:20.260 almost depression is impressive. Look, I think 01:04:20.260 --> 01:04:22.460 personally, Germany and France are structurally 01:04:22.460 --> 01:04:27.940 screwed. The French will never change. The German 01:04:27.940 --> 01:04:29.500 situation is a little bit different. They're 01:04:29.500 --> 01:04:33.159 obviously, you know, new government, spending 01:04:33.159 --> 01:04:36.539 a lot of money on defence, you know, really re 01:04:36.539 --> 01:04:39.380 -leveraging that economy. But still, what are 01:04:39.380 --> 01:04:41.139 they really good at, right? Like, you've got 01:04:41.139 --> 01:04:42.559 to be good at something. And I'm not sure what 01:04:42.559 --> 01:04:44.139 the competitive edge, apart from being nice places 01:04:44.139 --> 01:04:47.840 to visit and scenic, I don't think a lot of these 01:04:47.840 --> 01:04:50.769 countries are good at many things. um look i'll 01:04:50.769 --> 01:04:53.409 be honest i'm i'm more excited by asia to be 01:04:53.409 --> 01:04:56.170 honest i see you know young population i see 01:04:56.170 --> 01:04:59.829 you know that digital enablement of of uh progression 01:04:59.829 --> 01:05:03.010 like just think about like look at africa asia 01:05:03.010 --> 01:05:06.670 but look at africa the i think we spoke about 01:05:06.670 --> 01:05:08.550 this last time and this is why i like frontier 01:05:08.550 --> 01:05:10.809 countries i think frontier and asia are really 01:05:10.809 --> 01:05:13.480 interesting places to invest you know digital 01:05:13.480 --> 01:05:16.900 enablement through bank accounts and phones like 01:05:16.900 --> 01:05:19.500 if you think about the industrial uh industrialization 01:05:19.500 --> 01:05:22.260 process the path that these countries are taking 01:05:22.260 --> 01:05:25.400 is is much shorter so where a typical country 01:05:25.400 --> 01:05:28.199 would build some factories build this it would 01:05:28.199 --> 01:05:30.340 take like 30 years to industrialize these countries 01:05:30.340 --> 01:05:33.559 in asia and these countries in in in in africa 01:05:33.559 --> 01:05:37.059 can leapfrog that technological kind of that 01:05:37.059 --> 01:05:40.219 process and so You know, yeah, Asia is getting 01:05:40.219 --> 01:05:42.539 old, but there's so many opportunities there, 01:05:42.639 --> 01:05:46.099 you know, particularly in a market like the Philippines 01:05:46.099 --> 01:05:51.260 and, you know, valuations are cheaper. You know, 01:05:51.280 --> 01:05:53.340 Africa is interesting as well. Very young population. 01:05:53.760 --> 01:05:57.159 India is very interesting. And then even China, 01:05:57.219 --> 01:06:01.199 despite all its problems, you know, aging population, 01:06:01.639 --> 01:06:04.719 debt levels, property market, China is still. 01:06:05.260 --> 01:06:08.260 uh an innovation hub that i think you know everybody 01:06:08.260 --> 01:06:13.179 underestimated and you know it would be a hard 01:06:13.179 --> 01:06:18.099 uh a hard bet to make to say is it the us or 01:06:18.099 --> 01:06:19.960 is china going to win this wall because i don't 01:06:19.960 --> 01:06:22.760 think it's clear -cut and i think right at this 01:06:22.760 --> 01:06:25.780 point i think that china is ahead um and that's 01:06:25.780 --> 01:06:29.440 why we're seeing 80 of gdp in the us being linked 01:06:29.440 --> 01:06:31.820 to capex in data centers and digital infrastructure 01:06:31.820 --> 01:06:35.269 because they know that they're behind so a lot 01:06:35.269 --> 01:06:36.769 of interesting markets out there but when i look 01:06:36.769 --> 01:06:42.230 at europe just not much right not much um way 01:06:42.230 --> 01:06:44.750 better opportunities in asia um and obviously 01:06:44.750 --> 01:06:47.230 i still like that kind of small cap space and 01:06:47.230 --> 01:06:50.190 that that bc space in australia and then obviously 01:06:50.190 --> 01:06:52.789 you can't ignore the us it's still a you know 01:06:52.789 --> 01:06:56.260 economic powerhouse With Asia, Asia is a very 01:06:56.260 --> 01:06:57.900 interesting one. There's a couple of fund managers 01:06:57.900 --> 01:07:00.400 we know to get access, but not many people know 01:07:00.400 --> 01:07:04.380 how to safely access the Asian growth story. 01:07:05.380 --> 01:07:08.139 I don't know if you want to make any comments 01:07:08.139 --> 01:07:10.619 around that, but I suppose from a risk management 01:07:10.619 --> 01:07:13.239 perspective, how do you access the growth without 01:07:13.239 --> 01:07:17.659 potentially blowing yourself up? Yeah. So I was 01:07:17.659 --> 01:07:20.539 on a panel for Aura Group, so their private equity 01:07:20.539 --> 01:07:24.300 business is based in Singapore, right? It's kind 01:07:24.300 --> 01:07:27.000 of awkward because, you know, someone asked, 01:07:27.139 --> 01:07:30.059 you know, what's the allocation to Asia PE by 01:07:30.059 --> 01:07:33.559 Australian super funds? And I'm like, it's negligible. 01:07:33.639 --> 01:07:35.699 Like, it's virtually nothing. They all gravitate 01:07:35.699 --> 01:07:38.119 towards the bright lights of the New York or 01:07:38.119 --> 01:07:40.880 London -based managers, right? And they said, 01:07:40.940 --> 01:07:45.280 well, what has to change for that kind of, for 01:07:45.280 --> 01:07:48.000 super funds to look at Asia? I think, you know, 01:07:48.000 --> 01:07:51.349 the return profile, you know. I think the vintages 01:07:51.349 --> 01:07:54.750 in the US and Europe are probably not going to 01:07:54.750 --> 01:07:56.489 do as well as anybody expects. It's like this 01:07:56.489 --> 01:07:59.969 kind of digestion issue of companies. So I think 01:07:59.969 --> 01:08:01.489 there'll be a resetting of expectations around 01:08:01.489 --> 01:08:04.369 returns at the US market and what Europe have 01:08:04.369 --> 01:08:05.489 offered. Because remember, a lot of these companies 01:08:05.489 --> 01:08:07.030 were bought in zero interest rate environment. 01:08:07.469 --> 01:08:09.250 That will force people to look where the growth 01:08:09.250 --> 01:08:12.510 is. And I think even if economic growth in Asia 01:08:12.510 --> 01:08:15.349 is lower than what it was 10 years ago, I want 01:08:15.349 --> 01:08:18.199 to be involved in a manager that... has less 01:08:18.199 --> 01:08:20.819 competition for assets, has feet on the ground. 01:08:21.020 --> 01:08:24.100 You know, you can't invest in the Philippines. 01:08:24.239 --> 01:08:27.159 You can't invest in Taiwan. You can't invest 01:08:27.159 --> 01:08:32.220 in Vietnam or Indonesia or Malaysia based in 01:08:32.220 --> 01:08:35.720 New York, right? You need people who are in those 01:08:35.720 --> 01:08:39.399 locations. India as well, right? You've got to 01:08:39.399 --> 01:08:41.600 be in these locations. Now, for me around risk, 01:08:41.720 --> 01:08:44.359 it's risk in my head. Like when I go into an 01:08:44.359 --> 01:08:46.869 investment, I know that it can go down. But the 01:08:46.869 --> 01:08:49.930 one risk I feel that I can manage is valuation 01:08:49.930 --> 01:08:53.630 risk, right? Now, you know, unless I'm selling 01:08:53.630 --> 01:08:57.210 an asset, I don't want to know that my PE fund 01:08:57.210 --> 01:09:00.130 bought an asset and there was four people in 01:09:00.130 --> 01:09:02.750 the room and my PE fund got it because they paid 01:09:02.750 --> 01:09:06.229 the higher price, right? So a seller absolutely 01:09:06.229 --> 01:09:08.590 pay, you know, get the highest price possible. 01:09:09.010 --> 01:09:10.949 What you see in Asia is there's just less competition 01:09:10.949 --> 01:09:13.409 for assets. So the valuation and the entry multiple 01:09:13.409 --> 01:09:16.090 you're getting in is... you're stronger. Other 01:09:16.090 --> 01:09:19.729 ways to mitigate risk is structuring. When you've 01:09:19.729 --> 01:09:21.250 got less competition, you've got more control 01:09:21.250 --> 01:09:24.069 around structuring, put protections in, get preferential 01:09:24.069 --> 01:09:28.310 rights. Also, the group I work with, I mean, 01:09:28.329 --> 01:09:31.529 a lot of their assets in Asia, all of them, Anytime 01:09:31.529 --> 01:09:34.949 Fitness, Gift Away, they're all cash generative, 01:09:34.989 --> 01:09:38.989 right? They're generating cash as well. So you 01:09:38.989 --> 01:09:42.149 can call it a less stable region, but that also 01:09:42.149 --> 01:09:44.189 creates opportunities, right? If there wasn't 01:09:44.189 --> 01:09:46.369 instability, uh there wouldn't be opportunities 01:09:46.369 --> 01:09:50.029 so when we had uh the thai border situation you 01:09:50.029 --> 01:09:51.430 know the thai market sold off pretty heavily 01:09:51.430 --> 01:09:54.090 but you know if you can look through that noise 01:09:54.090 --> 01:09:55.789 these countries always have been a little bit 01:09:55.789 --> 01:09:59.810 less stable um that instability Number one, keeps 01:09:59.810 --> 01:10:01.850 some investors away because they're too scared. 01:10:02.270 --> 01:10:06.130 And two, it keeps valuations in, you know, you 01:10:06.130 --> 01:10:09.590 can get a nice attractive entry point. So I think 01:10:09.590 --> 01:10:11.310 investors have to look at Asia. I think investors 01:10:11.310 --> 01:10:13.789 have to go back to China. I think investors have 01:10:13.789 --> 01:10:16.569 to look at India. And I think that's going to 01:10:16.569 --> 01:10:18.949 be the great rotation, I think, the next decade. 01:10:19.470 --> 01:10:22.210 And I remember back in my early stage of my career 01:10:22.210 --> 01:10:24.109 when emerging markets were flying. Well, emerging 01:10:24.109 --> 01:10:26.899 markets had a really good year this year. But 01:10:26.899 --> 01:10:29.199 still, over the last decade, they're significantly 01:10:29.199 --> 01:10:33.159 under developed markets. Mark my words, the next 01:10:33.159 --> 01:10:36.060 five to 10 years, we'll see a rotation out of 01:10:36.060 --> 01:10:40.420 very expensive US large caps and out of the ASX 01:10:40.420 --> 01:10:43.300 20. And institutional investors and family offices 01:10:43.300 --> 01:10:46.539 will increasingly look at emerging markets, at 01:10:46.539 --> 01:10:50.909 frontier economies, and also China. Fascinating. 01:10:50.989 --> 01:10:52.649 Thanks for bringing up Asia. I nearly forgot 01:10:52.649 --> 01:10:55.229 about it, but it's so true. And now my favourite 01:10:55.229 --> 01:10:57.869 question always to ask you is, look, you speak 01:10:57.869 --> 01:10:59.850 with these family officers, you speak with these 01:10:59.850 --> 01:11:03.210 big families on a regular basis. What are they 01:11:03.210 --> 01:11:06.010 thinking about the risks and where to allocate? 01:11:06.750 --> 01:11:08.649 What's on their mind and how are they dealing 01:11:08.649 --> 01:11:13.810 with their investments? I think everybody's, 01:11:13.829 --> 01:11:15.850 you know, family officers have a natural competitive 01:11:15.850 --> 01:11:17.609 advantage, right? They've got time on their side. 01:11:18.300 --> 01:11:22.340 And they've often seen a lot of cycles. There's 01:11:22.340 --> 01:11:26.640 a few thematics. You know, I think families like 01:11:26.640 --> 01:11:30.380 to do what they know. So, you know, you all know 01:11:30.380 --> 01:11:31.779 this very well, property, then they're probably 01:11:31.779 --> 01:11:33.680 going to do a lot of property. Technology, then 01:11:33.680 --> 01:11:35.739 they're going to do a lot of technology. I would 01:11:35.739 --> 01:11:37.560 say one of the most interesting, and I saw this 01:11:37.560 --> 01:11:40.619 at Coda, but I didn't appreciate it, but I appreciate 01:11:40.619 --> 01:11:43.079 it a lot more, is the idea of having a legacy 01:11:43.079 --> 01:11:49.699 and giving back is a very strong theme. um very 01:11:49.699 --> 01:11:53.960 very strong theme uh private markets uh it is 01:11:53.960 --> 01:11:56.939 a big theme uh succession planning um you know 01:11:56.939 --> 01:11:59.119 australia is the you know one of the youngest 01:11:59.119 --> 01:12:02.420 uh you know billionaire population in the world 01:12:02.420 --> 01:12:05.439 right i reckon it's probably uh you know second 01:12:05.439 --> 01:12:07.720 to silicon valley right the average age of a 01:12:07.720 --> 01:12:11.659 billionaire in sydney is very young right and 01:12:11.659 --> 01:12:14.659 so succession hasn't been a huge issue how do 01:12:14.659 --> 01:12:16.460 you get kids involved how do you get them trained 01:12:16.460 --> 01:12:19.699 up uh i actually work with an amazing uh individual 01:12:19.699 --> 01:12:22.739 on and off uh joanna sun and she does a lot of 01:12:22.739 --> 01:12:24.159 the succession planning right and while bringing 01:12:24.159 --> 01:12:27.239 kids uh into the business training them up uh 01:12:27.239 --> 01:12:28.819 giving them giving them a small balance sheet 01:12:28.819 --> 01:12:33.000 uh to take risks um that transfer of wealth uh 01:12:33.000 --> 01:12:36.229 is gonna be massive right and i don't think the 01:12:36.229 --> 01:12:37.750 country's ever gone through that i mean we obviously 01:12:37.750 --> 01:12:40.250 have some uh second or third generation families 01:12:40.250 --> 01:12:42.229 particularly in melbourne but by and large it's 01:12:42.229 --> 01:12:45.789 a very young population uh for wealth um and 01:12:45.789 --> 01:12:47.609 so outside of everybody just trying to find good 01:12:47.609 --> 01:12:50.430 ideas it's that giving aspect it's a succession 01:12:50.430 --> 01:12:55.630 planning um yeah it's a lot of things going on 01:12:56.840 --> 01:13:00.260 Look, comment about Joanna's son. If anyone's 01:13:00.260 --> 01:13:02.619 got a family office or looking at legacy planning 01:13:02.619 --> 01:13:04.279 and how it's bringing the family together and 01:13:04.279 --> 01:13:05.899 you've got issues within the family, which we 01:13:05.899 --> 01:13:08.520 all do, right? Look, please reach out to Jason 01:13:08.520 --> 01:13:10.520 or myself for an introduction because, you know, 01:13:10.520 --> 01:13:11.960 Joanna, if you're out there, you're amazing. 01:13:12.100 --> 01:13:13.699 Love what you do. You've been great for all our 01:13:13.699 --> 01:13:16.500 clients and friends. But on that note, Jason, 01:13:16.699 --> 01:13:18.760 is there any other thoughts you want to leave, 01:13:18.800 --> 01:13:21.899 you know, listeners with? Anything that comes 01:13:21.899 --> 01:13:27.760 to mind? Be flexible. Talk to as many people 01:13:27.760 --> 01:13:32.279 as possible. There's always ideas. And, look, 01:13:32.300 --> 01:13:34.720 I'm just very, very fortunate to be involved 01:13:34.720 --> 01:13:38.020 in this industry. It's like a privilege. You 01:13:38.020 --> 01:13:39.920 know, I've had some great mentors and some great 01:13:39.920 --> 01:13:46.920 people involved in stuff. So, yeah, it's a great 01:13:46.920 --> 01:13:50.520 industry. It's a fantastic industry. And, you 01:13:50.520 --> 01:13:52.380 know, I guess the next 10 years is going to be 01:13:52.380 --> 01:13:56.180 phenomenal. It's going to be challenging. The 01:13:56.180 --> 01:13:58.279 pace of change is going to be like nothing we've 01:13:58.279 --> 01:14:00.239 ever seen. That will come with opportunities. 01:14:00.399 --> 01:14:03.479 It will come with challenges. But it's going 01:14:03.479 --> 01:14:06.439 to happen whether or not we like it or not. Thank 01:14:06.439 --> 01:14:08.159 you very much, Jason, coming on the Road to Change 01:14:08.159 --> 01:14:09.880 with York Wealth Management. I'll catch up with 01:14:09.880 --> 01:14:12.000 you soon. Definitely going to have you on again 01:14:12.000 --> 01:14:15.439 because I love chatting to you, Jason. Always 01:14:15.439 --> 01:14:19.000 interesting. Awesome. A lot of fun. Thanks for 01:14:19.000 --> 01:14:31.130 having me. Bye. Good to see you. The Rate of 01:14:31.130 --> 01:14:33.010 Change podcast is presented by its speakers. 01:14:33.210 --> 01:14:35.090 The views and opinions expressed in this podcast 01:14:35.090 --> 01:14:37.109 are those of the speaker in their personal capacity 01:14:37.109 --> 01:14:39.090 and do not represent the views of York Wealth 01:14:39.090 --> 01:14:41.189 Management Pty Ltd, its shareholders, directors 01:14:41.189 --> 01:14:44.550 or any other third party. 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