2023 wrapped: the 6 biggest business stories

Sascha: [00:00:02] Welcome to the Dive, the podcast that asks who said business news needs to be all business. I'm your host, Sascha Kelly. We've reached our final episode of 2023. And what a year it was. Inflation and interest rates. Miracle drugs. Two record breaking sports contracts to Sisi. There was so much that happened. Today we're recapping the year that was. And to do that, we're bringing in the whole team at Equity Mates to share what they think were the biggest business stories of the year. It's Friday, the 8th of December. And today I want to know what were the most important stories of the past 12 months. Kicking it off today, we have the co-founder of Equity Mates. It's Bryce Leske. Bryce, what story are you pitching to me today? 

Bryce: [00:00:48] Well, Sascha, I don't think there was any bigger story in 2023 than inflation and interest rates. 

Audio Clip: [00:00:54] This afternoon, the Reserve Bank lifted the nation's cash rate by 25 basis points. We acknowledge that today's decision is incredibly difficult for a lot of people. 

Sascha: [00:01:05] What do we need to know? 

Bryce: [00:01:07] So at the start of the year, inflation was high across the world. We had Australia at 7.8%, the USA was at 6.5% and the UK were at a staggering 10.5%. As a result of these high levels of inflation. We had seen interest rates increased by central banks around the world. Take Australia between May 2022 and June 2023, we had 12 interest rate rises in 13 months, taking us from 0.1% to 4.1%, a historic rise. The good news is that by the end of the year we've seen these interest rates have an effect and inflation is coming down. Australia is now at 4.9% in the 12 months to October, the USA back down to 3.2% in the 12 months to October and the UK down from there 10.5 at the start of the year to 4.6% in the 12 months to October. However, we are not out of the woods yet. Central banks around the world target 2 to 3% inflation, so we may see some further interest rate rises to get us down to that target range. 

Sascha: [00:02:13] It's tough to hear for many mortgage holders like yourself. Yes. And speaking of mortgage holders, our second story is all about those people here in Australia. So next up, it's co-founder of Equity Mates, Alec Renehan, to talk about our favourite topic, Australian house prices. I don't really need to ask this, but still sell me. Why is this such a big story?

Alec: [00:02:38] I think it's a big story because everyone cares about it and it's the big dividing line in Australian society at the moment. You own a house and you love the fact that house prices are getting higher and higher or you want to own a house and you don't, and it's just misery after misery. So I think that's the first reason why it's such a big story. But the second reason is because it has moved so quickly. So for context, house prices peaked in February 2022, but then it fell by about 5.5% across Australia by the end of 2022 and down about 8% in both Sydney and Melbourne. And that's how asset prices should move when interest rates rise. But despite interest rates continuing to rise at the start of 2023, house prices rebounded in a big way, according to demand in Sydney in the first half of 2023. The median house price was rising by $500 a day. They called it, quote, hyper growth. And also according to domain, in their end of year wrap published last week, the median house price across all capital cities has reached a new all time high. Over $1 million and 1.084 million. So despite interest rates rising further this year, house prices rebounded all the way and then some.

Sascha: [00:03:58] Alec, how does that keep happening? I mean, it defies like basic economic principles, right? 

Alec: [00:04:04] Yeah, I mean, that's a number of reasons. At its core, it's supply and demand. Australia had a big influx of migrants this year. The other reason is because house prices are rising so much, but rents are also rising so much, 6.6% in the past 12 months. Many renters are deciding to stretch themselves further and buy as the gap between renting and buying closes. More renters decide to stretch themselves and jump that gap. Currently, it takes the average Australian earning the median wage for ten years to save for the median house deposit. And rising rents just make that harder. 

Sascha: [00:04:41] Well, I'm not in the business of predictions, Alec, but I can safely say I think we're going to be talking about housing again in 2024. Next up, we have Alf, who's here to talk about one of my favourite stories of this year, and that's artificial intelligence. Alf what do we need? To know about this story. 

Alec: [00:05:01] Yes. So AI has taken centre stage in 2023, obviously. I'm sure everyone's on board the hype train. So it really started late last year with OpenAI launching ChatGPT. From there we saw Google respond with Google Bard. 

Sascha: [00:05:16] And interestingly, though, because you've just mentioned, you know, chatter about Microsoft, Google, Bard. But the biggest company tied to AI has actually been Nvidia. 

Alec: [00:05:25] That's right. So Nvidia is the designer of chips that are critical to A.I.. They're in demand. H 100 chips cost up to $40,000. And according to reports, the wait list is up to six months long. Invidious share price is up more than 200% this year.

Audio Clip: [00:05:42] Shares end of the day in the green, marking a nine day win streak.

Sascha: [00:05:46] Oh, nice. If you bought it right at the beginning. Aside from writing me shopping lists and you know recipes of what's left in my fridge, what are some of the practical applications we've seen for A.I. this year?

Alec: [00:05:58] So people are incorporating chatbots and bot into their working lives. Microsoft has also launched their A.I. Co-pilot, which will see open eyes A.I. being used by more than 1 billion Microsoft Office users. And of course, Equity Mates’s Biznerdle puzzle game was also built by ChatGPT. 

Sascha: [00:06:18] And we'll make sure that we put a link in the show notes for that just in case anyone hasn't got around the business delight drain yet. But also what made headlines in November was OpenAI embroiled in controversy after the board fired the co-founder and CEO, Sam Altman. It was a pretty dramatic weekend.

Audio Clip: [00:06:36] The company that gave us ChatGPT, fired its CEO, Sam Altman, who has drawn comparisons to tech giants like Steve Jobs, was dismissed by the OpenAI Board Friday. The move came as a complete surprise to everyone, including Open AI's biggest investor, Microsoft. And it's all raising big questions about the future and safety of artificial intelligence. 

Alec: [00:06:58] Yeah, so he was fired on Friday and then rehired by Tuesday. It was a massive story for a weekend, and then the world sort of moved On since then. One thing we haven't moved on from is a report around that time. Reuters reported that in the lead up to Sam Altman sackings, quote, several staff researchers sent the board of directors a letter warning of a powerful artificial intelligence discovery that they said could threaten humanity. So that's pretty ominous.

Sascha: [00:07:28] Yeah. Questions still out about that one at the moment. Pretty worrying stuff. Sounds like this plot of a sci-fi thriller, to be honest. I'm sure there's going to be plenty more about that story in the coming year. Three stories down, three to go. Let's take a break and then I'll be talking about miracle weight loss, drugs, the business of sport, and the biggest corporate controversies of 2023. Stay with me. Welcome back to the dive. We're in our final episode of 2023. And recapping the biggest stories that we heard about this year. So far, we've covered interest rates and inflation, house prices, of course, and artificial intelligence. Next up, I've got Simon who's back, and he's going to be talking to me about miracle weight loss drugs. This one made a splash this year, didn't it, Simon? 

Simon: [00:08:17] Hey, Sascha. Yes. In 2023, a little known Danish pharmaceutical company, Novo Nordisk, has become one of the most celebrated companies in the world with their diabetes cam weight loss drug as mpic. In October this year, the drug maker overtook LVMH as Europe's most valuable listed company. Yes, the most valuable company in Europe. It's valued at over $400 billion now. And it means actually more valuable than the whole GDP of Denmark and really has taken off in such a big way for one simple reason it actually works. 

Audio Clip: [00:08:54] This is ozempic. It's a drug approved by the FDA to manage type two diabetes. Maybe you've heard the jingle. Oh. Mozambique. Or maybe you've seen Mozambique in the news recently for another reason. Weight loss. Weight loss. Easy weight loss. Miracle Diet. Drug. Miracle. Weight loss Drop. 

Simon: [00:09:12] In a trial published in a New England Journal of Medicine, users lost around 15% of their body weight over 68 weeks, compared to just 2.4% for the placebo control group.

Sascha: [00:09:23] And that's a secret, isn't it? Simon The fact that this works has sparked what could be called a frenzy. The drug is hard to get. All around the world.

Simon: [00:09:31] That's right. And in Australia, the TGA, they've reported that they expect shortages to last well into next year.

Sascha: [00:09:39] Well, any other pharmaceutical companies looking to fill the void? Because it seems like the natural next step, right?

Simon: [00:09:47] Absolutely they are. They want a piece of this pie. Eli Lilly, Pfizer, they're both got their own versions in various stages of clinical trials. And in fact, just this week, Eli Lilly, they announced their weight loss drug. It's called Zap Band that was approved for patient use in the U.S.

Sascha: [00:10:04] Meanwhile, there's lots of companies as varied from medical devices to fast food that are now suffering a bit of a sell off from investors who are worried about what's being called the Zen pick effect. 

Simon: [00:10:18] Indeed. And listeners of the Equity Mates Investing podcast, they would have been hearing all about this. Companies in seemingly unrelated sectors have felt this ripple effect of this epic success. So in Australia probably the most publicised one is ResMed. They make sleep apnoea devices. They saw its share price tumble by around a third amid concerns that the weight loss could reduce the need for their products. And in the US, companies like Krispy Kreme, Coca-Cola have also felt the heat. Investors are worried that these weight loss drugs actually lead to lower demand for treats and beverages. 

Sascha: [00:10:52] And Simon, As they say, the shortage is expected to continue well into 2024. So this is a story that I don't think is going anywhere fast. Let's turn to the business of sport now. And I've got James who's going to be taking me through the biggest story in sports this year. It's Saudi Arabia. Now, James, this isn't a country that's synonymous with Olympic gold. Why are they suddenly the biggest name in sports? 

James: [00:11:23] No, Sascha, certainly not Olympic gold, but maybe gold. Now, Saudi Arabia possesses the world's second largest oil reserves and is the largest exporter of crude oil. And the kingdom is now using its vast oil wealth to dominate world sport. Mm hmm. Since 2021, Saudi Arabia has spent at least $6.3 billion in sports deals, more than quadruple the previous amount spent over a six year period.

Sascha: [00:11:47] And this year, James, it completed its takeover of World Golf after merging its breakaway professional golf league live golf with the PGA. 

James: [00:11:55] It did, Sascha. Now, it's also made a number of moves in professional soccer. This year, it bought the EPL team, Newcastle United, for 409 million USD. It's also importing some of the biggest names in world football to the Saudi domestic league, including Neymar and Cristiano Ronaldo. And they're spending huge amounts. For example, Ronaldo signed a two and a half year deal and will earn 315 million AUD per season. 

Audio Clip: [00:12:23] Ronaldo salary is the highest in football history, around $206 million a year, which boils down to $25,000 an hour, $7 every second.

Sascha: [00:12:35] Nice work if you can get it. 

James: [00:12:37] Indeed, indeed. Now, finally, Saudi Arabian Club Al-hilal submitted a world record bid to the French captain. Kylian Mbappé understood to be worth €300 million. Almost 500 million Aussie dollars. Now, beyond high profile acquisitions, Saudi Arabia has also hosted a suite of major sporting events like the Formula One Grand Prix and the Dakar Rally, as well as a mega bout between Tyson Fury and Francis in Ghana.

Sascha: [00:13:06] So, James, why do you think Saudi Arabia has decided to put so much investment into sports? 

James: [00:13:13] Yeah, great question, Sascha. Saudi Arabia is explaining these investments as part of their broader vision to diversify its economy away from oil. Mm hmm. However, these moves have sparked controversy and debate around the world over the potential for sports fishing and human rights concerns. 

Sascha: [00:13:29] What next, then? What's next for Saudi Arabia? 

James: [00:13:33] Well, such reports are setting their sights on cricket next. And they've already been speaking to the Indian Cricket Board of Control about partnering up alongside this. They also recently won the hosting rights to the 2034 FIFA World Football Cup and apparently also have their sights set on tennis. So keep an eye out for that session. 

Sascha: [00:13:51] Well, their pocketbook is certainly still open, so let's see whether that money rolls in in 2024. Thanks, James. Oh, look. Closing out this episode with some of the biggest corporate scandals or missteps of the year to take me through the top three. Making her annual appearance on the dive, It's Em and welcome. Tell me who we're watching. 

Emily: [00:14:14] Hello. Yes, there were three companies that topped the list this year: Qantas, WeWork and X, formerly known as Twitter. 

Sascha: [00:14:22] You know, you have to say that, don't you? Let's start with Qantas. 

Emily: [00:14:26] Australia's national airline took misstep after misstep this year from mishandling Covid era refunds to say accusations that the airline sold tickets for flights it had actually already cancelled to claims of government protectionism. After Qatar Airways had their request to put on more domestic flights blocked. It was a very bad year for the airline. 

Sascha: [00:14:49] Yeah, it really was. 

Emily: [00:14:51] And it all culminated in some heated parliamentary hearings and ultimately the early resignation of CEO Alan Joyce.

Audio Clip: [00:14:59] Qantas Group CEO Alan Joyce has advised the airline's board he will bring forward his retirement by two months. His retirement will take effect immediately. The public pressure has become so much that he's actually finishing up today. Vanessa Hudson takes over as chief executive effectively tomorrow. So Alan Joyce is definitely not going out the way that he wanted after a 15 year career as Qantas chief executive. 

Sascha: [00:15:25] Let's turn next to what became one of my favourite podcasts. We Crashed but We Work finally saw its demise this year as well, didn't it? 

Emily: [00:15:34] Yeah, this one's been coming for a while. The co-working space company, which was once valued at $47 billion, saw its share price collapse as it struggled to keep its offices full and pay its losses. The share price at the start of the year was $56, but today it is $0.38. The company is bankrupt. So painful. I know. At its peak, it raised money at 47 billion valuation. But today the market values it at 20 million. 

Sascha: [00:16:04] Now that's pretty painful. Finally, speaking of painful, the continued unravelling and the never ending story of Elon Musk. What's happened there? 

Emily: [00:16:13] Yes, Whether you love him or hate him, it was November last year that Elon walked into Twitter's offices holding a sink, which may have been a metaphor in more ways than a law meant. 

Sascha: [00:16:24] Yeah, hindsight's a wonderful thing, isn't it? 

Emily: [00:16:26] It is. Fast forward a year and he is renamed to X. He's fired more than 80% of the staff and saved revenue by more than half. He even told the Disney CEO Bob Iger to go f himself in a public interview. Yeah. Not smooth. But the most important metric is uses and reports are that excess uses a down about 15%. That will be the metric to watch out for as we enter 2024. 

Sascha: [00:17:00] Yeah, it certainly will. It's been like watching a slow motion car crash, if you ask me. But there we go. Thanks so much for that wrap up. 

Emily: [00:17:08] And no worries, Sascha. I'll wait to be on the podcast again this time next year. 

Sascha: [00:17:12] Yeah. And a huge thank you to you for choosing to listen to us in 2023. It's been an absolute joy to have your company. If you're stuck for listening over the break while the dive goes on hiatus, do make sure that you check out the rest of the Equity Mates stable. We've a summer series on Equity Mates kicking off on the eighth of Jan, and it's going to be one of deep dives on all these different stocks. And over on Get Started Investing. If your New Year's resolution is to fix up your finances. We have the perfect six part series to see you into the new Year. New year, new me. No excuses. We'll be there holding your hand the whole way through. Thank you so much for listening.