Counting the cost of the war in Ukraine

Adam: [00:00:25] Hello and welcome to comedian versus economist, we demystify the world of money and help you get a handle on the bigger picture. My name is Adam, and we're joined, as always, by my little older brother and real life economist Thomas. Hi Thomas.

Thomas: [00:00:40] G'day Adam, how are you going? 

Adam: [00:00:41] I'm doing well. Thank you. We're recording on Friday night, which is which is a bit of a different experience. So this is a few days before we release next Wednesday, but that's because we're going to be catching up in in real life early next week. Thomas for a bit of a holiday. So I'm looking forward to seeing you tomorrow, in fact. So that'll be fun, but lots to get through today. And don't forget the sharemarket trading game. The ASX share market trading game starts tomorrow, so there's still time to register. In fact, you can register right up until the 28th of April. But why would you want to wait and miss out on all those gains that you're going to get early on in the game? So don't delay going to register right now and join in the fun with us how the ASX share market trading game. But Thomas on with the show. Lots to get through and starting with war. Whoa. Whoa, whoa. What is it good for? Also, wages data is out, so we're going to find out how much extra you'll be getting in your pay packet now. That's how it works, isn't it? We'll take a look at AGL, who find themselves in the proverbial crap sandwich. It doesn't know what to do, but it also doesn't want anyone else to tell it what to do. And I didn't really care about inflation, but now I hear it's going to push the price of beer up. I have a renewed zest to find out more, so I'll ask you a bit more about that later on. But Thomas, first of all, turns out there's more to the Lark Distillery story that we talked about last week than meets the eye. And Thomas, I think it's fair to say you're the closest thing that we have to a lawyer. So I'm just going to give you a bit of an update, and you just let me know if we need to issue any sort of retraction or any sort of apology or anything like that. But there is some more information that's come to hand since we recorded last week. So. So if you did miss the episode last week, we talked about the the managing director, a former managing director of Lark Distilling, Jeff Bainbridge, who was seemingly caught in a drug scandal in South East Asia in 2015. Well, it turns out that he made it up. That's the best, the best way I can put it. He misled some reporters from the age which published the story. I've got to. I've got to be honest. Our flimsy research failed to turn up any contradictions to the story of through, you know, minutes and minutes of Googling to clarify the story. We couldn't get to. We couldn't get to the bottom of it. So it turns out he's misled the age and everyone else. So he said it was a shakedown in a foreign city and they used it to try and extort money out of him. He was at a party in South East Asia somewhere woke up in the morning and they showed him some video footage and it was in trouble. But it turns out there wasn't. This has come to light the last few days that the video was actually shot sometime after 2020. Mm-Hmm. In his own bedroom in an exclusive Melbourne suburb. So I don't know if that makes it better or worse. It's much less interesting story to send it so much more exotic when he was in Southeast Asia. You know, six years ago, 

Thomas: [00:03:58] break down the London Threat Assessment Agency. 

Adam: [00:04:02] I know so I don't know what to believe anymore. I don't know whether there's going to be more that'll come out. The story was written in the was was published in The Australian. I don't know if the Australian is just trying to really just take it as an opportunity to lay the boot into the age. There's maybe some kind of some some war going on there. It's not clear at all why he concocted this story in the first place, because it doesn't seem like it makes it a better story. 

Thomas: [00:04:32] No, I think I think it's a much better story that, yeah, you think about. He's he's lost his job, right? So he's now in the job market. Luckily, wages are up. Labour markets thought 

Adam: [00:04:42] good times, but he's so he's in the 

Thomas: [00:04:45] job market again. He's going to be replaced. Prospective employer But the question is, why did you leave your last job? Well, I was a victim of a shakedown in Asia back in 2015. Sounds a lot better than I got busted in my bedroom. Smoking ice. True assault. I think he's I certainly think his play is, but is also kind of amazing. He's managed to because he had he sent screenshots of a supposed conversation with the blackmailers to the age. I think so. They kind of went, Oh, you write this, this looks legit. But apparently they were just made up as well. 

Adam: [00:05:20] So it's just, I mean, maybe these are the things you do when you hire you to sit around making up. Amazing stories about your past. Oh, it's just a picture in Sydney, it is being at an editorial or something for the idea. This will be great. It was where I 

Thomas: [00:05:35] was in Asia and there were ninjas coming in the 

Adam: [00:05:38] window anyway. So that's just a bit of an update. I thought we'd better clarify that because, yeah, a few people have had mentioned that to me over the course of the last week, so I thought we better clear it up. But of course, stand by any jokes I made on the matter last week, whatever they were waiting. All right, Thomas. The ASX share market game kicks off tomorrow. As we've mentioned, there's still time to register. In fact, you can register right up until the 28th of April, so make sure you get on board. Sign up, join in the fun. But of course, the big news this week and I think this is really important as we head into the ASX share market game, is that Russia has invited the Ukraine. It's all kicked off over there and I think we should just take a look at what that means, I guess, globally across economies all over the world. I'm really keen also to understand what kind of impact a global conflict like that might have in in our local share market. So so as we're getting ready to play the game and where we're thinking about stocks that might do well in stocks that might not do well, this kind of changes the whole landscape. So, you know, a conflict, albeit a long way away, has obviously has far reaching ramifications for the globe, but also for a share market here. And we saw a fairly significant impact in the ASX share market this week. So just keen to get your macro lens, Thomas on on what what I guess that particular war means, but also what what we said at what trends we might see from wars in general that come out of a conflict like that? 

Thomas: [00:07:12] Mm, yeah, that's good. Thanks that intro, I want to steer well, clear of geopolitics as I'm way out of my depth there, but I'll have a crack at the macro. 

Adam: [00:07:21] Yeah, I'll tell, you're going to have a crack at geopolitics. We're casting aspersions on former managing director. Well, one or two presidents and prime ministers while we're at it. 

Thomas: [00:07:35] Yeah, and it's it's an interesting one. Economically, yeah, obviously, war is pretty tragic. It's yeah, it's pretty brutal, but interesting. One like markets reacted pretty badly to it. ASX is down three percent over the week. Definitely got the wobbles. To me, it's I think it's interesting because Russia's Russia's a heavy hitter on in the geopolitical sense, it's got a population of 146 million. It's got a lot of natural resources and gas. It's historically been a very powerful nation. But while it's a heavy hitter geopolitically, it's kind of a welterweight in the in an economic sense. So, you know, like Italy has half the population and fewer natural resources and has an economy twice the size of Russia. Wow. Yeah. And Poland exports more goods to the European Union, and Russia does. And so, yeah, and like, unlike China, there's probably the, you know, the interesting counterpoint right now. But like the Russian manufacturing sector isn't isn't all that much to speak of this, you know, turn over anything in your house. And it's not going to say made in Russia because it's probably going to say made in China. 

Adam: [00:08:38] We have some. We have a set of Russian Babushka Dolls, which are made in Russia. They were made fun facts. Yeah, I bought them when she was back to holidaying in wherever Russia like, yeah, right. Mm hmm. 

Thomas: [00:08:53] So so the point is like economically, it's not. It's not that significant. Where it is significant is with oil and gas and natural resources. Love it quite a bit during the week, Jason Furman, who's a Harvard economist and a former adviser to Barack Obama. He said it's basically just a big gas station, right? Russia is incredibly unimportant in the global economy, except for oil and gas. Right. And so that's sort of where it gets interesting. Oil prices are up, but not all that much. It's sort of more of an issue for Europe, but Europe doesn't have a lot of oil risk. Europe has more gas risk. Europe gets 40 percent of its natural gas resources from Russia. Mm hmm. And we talked about this a little bit last year. There's a bit of a gas crisis. The last year in Europe, the winter turned out to be not as bad as people feared. And so European reserves are about 30 percent, and most people seem to think that that will get Europe through the winter as long as there isn't another cold snap or 

Adam: [00:09:50] a war, or now that seems to be priced in already. Right, OK. Because they've got a big gas pipeline, something running through Russia, don't they? 

Thomas: [00:10:00] Well, not anymore. There was the Nord two gas pipeline to to Europe that Germany's pulled the plug on that, saying That's not happening now. Oh yes, it probably means Europe's 

Adam: [00:10:10] going to have is funny. Definitely. I was watching the news last night and talking about all these countries that have chipped in defensive weaponry. So, you know, they can't they can't go and fight for Ukraine directly because they're not part of NATO's talking about all these kind of. Chipped in defensive weaponry, apparently Germany sent some helmets as it helmets, puts out things might be falling from the Sky February helmet. Yeah, yeah. 

Thomas: [00:10:38] So Russia is not all that, all that sort of heavy. I mean, it's interesting in the sense that its energy has an impact on energy in the whole energy market because it's interconnected, it's proper can have an impact on the wheat market because the Ukraine and Russia together account for 25 percent of global wheat exports. Yeah. And B think about that. So if that drives energy prices higher and that drives wheat prices higher, they're both good news stories for Australia to an extent that our exporters can capitalise on those higher prices. So in that sense, like it was interesting that markets got the wobbles this week because it's not clear to me directly what the impact on Australian shares is or the impact on the Australian corporate sector. Obviously, no one likes volatility and there's sort of uncertainty and that probably the big thing is no real way of knowing how this is all going to play out. But in terms of direct impact is not a lot of direct negatives and then some potential direct positives in terms of like, yeah, revenue and profits 

Adam: [00:11:35] and tell you what was a direct negative was Mark. My crypto portfolio took a hit. Yeah 

Thomas: [00:11:41] Not such a safe haven.

Adam: [00:11:42] Not a good, safe haven. Yeah. Digital gold. I believe it was being sold as at one point. Yeah, the gold was up. Crypto not so much out. Very much down. I think it's a it's an interesting point. So I'm looking at a fair bit of this this week and I reckon one of the plays might be here cybersecurity. So I mean this this war is has already seen. So we're Friday, you know, at the end of the week, we've already seen three significant cyber attacks from, well, we can't say for sure that it was Russia, but against the Ukraine, which, you know, if you look at the timelines and you read between the lines, it's pretty. It's almost definitely Russia. So. So there's been three major cyber attacks already. There's bound to be more. They're shutting down banks and targeting government agencies. So they're trying Russia as part of their war on Ukraine, are really trying to cripple the Ukraine's ability to mobilise, you know, their resources against Russia so that by shutting down their computer systems and networks then and the government's agencies, they're removing their kind of agility to respond and and fight the war. And I think to me this this is like potentially a really good time to look at some cyber security kind of stocks and look at things like the hack ETF and things like that in Australia because Russia has a history here. Russia's got a history of not being overly in control of their cyber warfare, so they can be a bit reckless when they're firing off their cyber weapons. They're not. They're not so careful about who they're hitting. So we saw it where there was an attack called not Petya, which was in 2017, I think. So that was that was Russia targeting Ukraine. And the idea was that this kind of malware, this virus would spread through computer systems and disable Ukraine's computer systems. Unfortunately, they write it really well and it spread, but it spread far too well. And it just it wreaked havoc across the entire world. So, you know, there's this kind of track record here. There's a lot of things that are lining up to me that kind of go, You know what? Getting involved in some cybersecurity companies at the moment might be a good player. And if we looked at, I had a quick look before and that that hack ETF that I mentioned, that's up for the week. You know, that's up 

Thomas: [00:14:11] a seven per cent a day, 

Adam: [00:14:13] seven per cent. Yeah. So seven per cent today. But a lot of that was bounced back, but it's up two per cent for the week. It's not sort of I don't know. I mean, it's generally trends up anyway. But and of course, not financial advice. This is just me being, you know, speculating. 

Thomas: [00:14:28] I think it's had a question about this also on this as well. But like if if there's more cyber attacks in the world, does that translate to more revenue for cyber security firms or do people like just buy?

Adam: [00:14:41] Oh yeah, I would think so. 

Thomas: [00:14:42] Well, I imagine this like buffet, like the old days of antivirus when I used to have a PC, I'd buy the antivirus protection and then they, the company that I buy it from within, then deal with the viruses in the background and just send me updates. So like if there's more, if there's more viruses, that means there's more work for them. But I'm not paying more to protect myself from more viruses, right? Or has the world moved on from this?

Adam: [00:15:06] Oh oh, oh, the sweet tooth. Oh oh, you're so naive. So we're not really talking. We're already talking about viruses anymore. We're talking about malware and kind of targeted attacks. And the viruses were. We're very much I don't know. Mostly signature based, so. So you would you your virus software that you bought had a bunch of signatures, you know that it would look to detect. Now it's much more targeted towards, you know, detecting behaviours. So it's it's it's kind of looking at looking for malicious behaviours that that are taking place on your computer system. But your scope is far too narrow for most people who are invest who are going to be going to a cyber company, you talking about, they're really talking about defensive weapons against cyber attacks, and these attacks are not, you know, not typically just a virus that gets in there. They're malware that spreads or in worst cases, that kind of direct, you know, targeted attacks. And so, yeah, I think the more prevalent it becomes and the more cyber threats that are out there, then yeah. Absolutely revenue-generating for cyber companies. And that's and you've seen it, you know, the last year or two years, you know, ransomware is on the rise, malware is on the rise. And the the value of these cyber companies who can defend against those things has kind of gone up as well. And my feeling is that this war potentially just takes that to another level, just kind of kicks it up a gear. So and yeah, I guess we'll see. But I think this war in particular, it could be the sort of, you know, a really very, very cyber heavy. You know, it's it's not it's not exactly a bold prediction. Well, they're going to use computers in this war. Yeah. But I think yeah, wouldn't it wouldn't. It wouldn't surprise me to see a bit of a halo effect from it where people just go, Wow, that happened. And because as soon as as soon as someone gets hacked, everyone looks at how it happened, what happened and they go, right, what do we need to do to protect ourselves against that? What do we need to do to make sure that we don't, we don't, you know, suffer the same fate? So yeah, I think that potentially is is a big winner out of go long cyber war by tanks. So yeah, if you if you do think that there's going to be a massive impact from cybersecurity companies like me, then perhaps if you are playing the ASX game this week, some of the some of the companies on the ASX is obviously a lot of them. A lot of international companies. But some of the ones you might want to look out for on the ASX, Tesseract Limited, ASX, TNT, White Hawk Ltd, Okay. And Arctic Limited a nine. So there's a few of those that you might want to keep an eye on. Certainly not a buy, hold or sell recommendation for my portfolio. I'll be going far more speculative than that. But yeah, if you are playing along then and you think cybersecurity might do well in the next few weeks, then they would certainly be ones to look out for. Right? Thomas wages data was out this week. What have we learnt from our wages? 

Thomas: [00:18:09] Yeah, came in a bit softer than most people are expecting 0.6 five in the December quarter, 2.3 per cent over the year. This is up a lot from where it was one point thirty six per cent in the year to September 2020. So just like around Covid times when that was hitting, that was the all time low and this bounced up since then. But it's pretty soft number overall, 2.3 per cent. So remember RBA saying they want to see wages in the three to four per cent band before they're confident that we've got sustained inflation on the cards. So they're looking for, you know, strong threes and two point three per cent is a long way from that. So, yeah, so the wages is definitely not strong enough yet to trigger rate hikes on the on the RBA's logic that they've been talking about recently. 

Adam: [00:18:54] Can they can the RBA, can they control or can the government control wages growth? Like is that something that anyone can? Kind of, because we're talking about the two per cent is how much their wages are. How do they even measure that? I just yeah, 

Thomas: [00:19:09] I mean, job, 

Adam: [00:19:10] yeah, 

Thomas: [00:19:10] I don't I I don't know. That's a statistical question, I guess. I mean, anything about the wage price index. 

Adam: [00:19:16] Even economists get bored. Yeah. No. 

Thomas: [00:19:19] I mean, this is the wage price index WPI that's that measures like for like jobs. So they track the same job and then track how much it's going up over time. So it's kind of it's kind of interesting because we also in the week got the average weekly earnings, which is another series that the ABS publishes, but that doesn't measure like for like jobs that measures just what the average person's earning. And so if people say, like if you can have a theoretical situation where like for like jobs are flat, they're not changing, but people are graduating into higher paying roles and wages go up as a result because they're because the mix of jobs is changing. There's a composition effects. There's no composition effect in the wage price index, but there is an average weekly earnings. An average weekly earnings came out much stronger. They were up like 3.8 percent. And remember, we were talking about like the great reshuffle. So there was Treasury analysis that showed that in the December quarter, 300000 people had moved on to a better job. They found that those people. On average, got an eight to 10 per cent pay rise when they changed jobs. So that might be why this might be a little bit of a mismatch here that, yeah, people are finding better paying jobs, but the jobs themselves aren't changing, so it's not showing up in the wage price index. 

Adam: [00:20:39] Yeah. Okay, so that is a bit of a softer number. So then everyone's happy with that number. Then like that we weren't wanting. If inflation's rising, then we want higher wages. 

Thomas: [00:20:47] People do. Economists, don't

Adam: [00:20:52] you? Economists flank it. All right. Just let us have some money with you. Yeah, I mean, this is this is sort of the thing in the labour force. Yeah. 

Thomas: [00:21:05] Well, I think, you know, people could potentially be a bit like there's a there's an argument to be a bit angry about the way the system is set up. So real wages are now falling because inflation is growing faster than wages. The ACTU came out and said that a person earning $68000 a year had suffered an 832 dollar pay cut in real terms over the past year, thanks to inflation. So not massive, but they're going backwards. Yeah, but they're saying like, there's inflation. But if you follow saying, I'm waiting for wages inflation before I raise interest rates, so kind of the other way of framing that is like, I'm waiting for people to start catching up to inflation and then I'm going to jump on them with with rate hikes, right? 

Adam: [00:21:47] It's not. Yeah, not very nice. No, no, no. When you frame it like that, yeah, it gives us nothing to look forward to. Yeah, right. Like it erodes 

Thomas: [00:21:58] you. It erodes your purchasing power. And then once you start to catch up through wage hikes, then you get interest rate hikes, which 

Adam: [00:22:04] yeah, because most people would be celebrating retiring. You got a pay rise. Hmm. Yeah. And then but suddenly, ever so slightly. There's fuel load list in the background gang rubbing his hands together, you know, increasing the 

Thomas: [00:22:16] nice wage gains you've 

Adam: [00:22:17] got there. No shame if someone hiked it. Oh, okay. Yeah. But yeah, but I thought 

Thomas: [00:22:27] it put paid to the idea. Like you remember, like a few months at the start of the year, people markets were looking for thought there was a 100 percent probability of a rate hike by June. Hmm. That's now seems totally off the cards. So you're going to have to see strong wage prints in May and then follow that up in August. I think both of those are going to have to print above three per cent, which would be quite phenomenal from here before the way for the RBA hiked rates. So it's looking to me like there's no case for the RBA to hike rates, particularly with the Ukraine and all the uncertainty that's created around there. There's no pressure here for the RBA to to hike. And so I think end of the year at the earliest, probably as they're saying in 2023 and on the current data. 

Adam: [00:23:10] So I fixed my home loan a couple of years ago and it's coming out like a fixed for two years and ends in June this year. But I was having a look around today at some rights, and they're all 

Thomas: [00:23:24] they're all well up. Oh yeah, fixed rates. Oh yeah, yeah, yeah, yeah. 

Adam: [00:23:28] But even but even the variable rates, you know, like so so they're all going up. Mm hmm. Even though you know the money's not going, even though the RBA rate's not going up. 

Thomas: [00:23:38] Yeah. Yeah, that's right. 

Adam: [00:23:39] That's right. Working on a different programme there already after my wage rise, which hasn't come yet, 

Thomas: [00:23:45] was one of the things the RBA did. They dropped rates to the floor and then the like, Okay, we've hit rock bottom. How do we what else can we do? I'm one of the things I would do is I just fed banks money directly through the term funding facility, so long as they lend on mortgages, which push mortgage rates even lower, particularly for fixed rates, so that that term funding facilities wound up. So that's why fixed rates have popped, variable rates are rising as well. Yeah, but and there's quite a there's a substantial amount because fixed rates went so low, a lot of people went to fixed rates. And there's a real substantial amount of those fixed rates reverting to variables over the next 12 months. So the economy is effectively already having a rate hike effect, particularly for the housing market, 

Adam: [00:24:27] because no one, no one believed Phil.. Hmm. All right. Let's take a break here. We got a word from this week's sponsor and be back with more comedian versus economist right after this. All right, if you have been living under a rock, of course, the ASX share market game kicks off this week. We've been talking about it, we're excited about it. And maybe you're thinking about some energy stocks, maybe you're thinking about, I don't know. Perhaps you're looking at AGL as a potential buy in the ASX share market game. You think that's going to do well? Well, they've been in the news this week. Atlassian founder Mike Cannon-Brookes decided to make a play. He said, Look, AGL, you guys are struggling. You need some help. You're not going to get your coal plants shut down. I think I can do it. And he offered to buy them for a fairly significant sum of money. So perhaps people are looking to buy them during the sharemarket game. Thomas, what did you make of the news this week?

Thomas: [00:25:18] Yeah, so he Cannon-Brookes, in a partnership with Brookfield, put in a $5 million bid for AGL Ideals, Australia's largest power company does generation and retail. Yeah, and it was a bit of bit of a low bid, apparently. So, yeah, you look at they were offering seven point fifty a share year two years ago. As the pandemic was breaking, AGL was trading above $20 a share. It's traded mostly above $13 a share for the past decade, so 7.50 would be a bargain. The AGL board rejected the bid, said not that's way too cheap. We're knocking it back, which they did is their current 

Adam: [00:25:58] share price, though. Yeah, yeah, yeah. Yeah, it's OK. I'm insulted. Where did you come up with that number? The carrot Chevron over there. I'll just go to. Yeah, but you know, 

Thomas: [00:26:15] normally you have what's called a control premium. So when you buy out a company because you've got to buy all the shares at once, effectively you need to, you know, there's a premium could be and it could be like 30, 40, 50 per cent. So but they didn't offered that. So the idea energy boss Graeme Hunt say it was kind of ridiculous, underpriced and unrealistic because what he said, because it is, it's just too cheap. But that said, that is currently what they're trading with, and AGL has some serious issues that they've got to deal with, like they've got the two arms at the retail in the generation, the retail strong, they've got four million customers. They're the biggest retailer in the country.

Adam: [00:26:54] What does that mean? What does that mean, the retail side of AGL? So like, there are other retailers, only people who just sell the energy that don't make it, whereas AGL do both is, 

Thomas: [00:27:03] Oh, that's right. That's right.

Adam: [00:27:05] That's right. Right. Yeah. Okay. I couldn't work because I know they're in. I know they're in broadband and mobile now. And I was like, Surely they have broadband and mobile business isn't worth that many billions of dollars? 

Thomas: [00:27:18] No, no, no. But their retail, their retail is. Yeah, the retail is. But but the generation business is in trouble. So they've got two to coal fired power stations Bayswater and Loy Loy Yang A, and they're both due to be decommissioned. But yeah, Bayswater between 2030 and 2033, and then Loy Yang, A between 2040 and 2045, so still in the distance. But but coal generation is struggling right now because renewables is just coming in so much cheaper, particularly in the day when when Solar's online coal's really struggling and you had Origin Energy announced the early retirement of Iran in the same week. They're going to bring that forward seven years earlier than expected and kind of saying at current market prices, they're just losing money on it. And so they're going to wind it up and right.

Adam: [00:28:09] And that was that was Cannon-Brookes. Brooks's approach wasn't as like, I'll wrap it all up for you, like, I'll buy it and I'll accelerate it. Yeah, I think he said 2035. He's like, We'll have it all done 20, 

Thomas: [00:28:18] 30, 20, 30. He's going to be very, very ambitious. Yes, it's ambitious, but he's saying there's no new tech, it's all existing tech. So he's not relying on some magical tech being invented. In the meantime, it's just all right. Yes. Or with that or with the current tech. But there's sort of so AGL's current plan is to split off the generation and the retail businesses and create separate businesses rather than the retail business, become AGL Australia and the generation arm becomes ISO. But markets don't really love this idea, or a lot of big investors don't really love this idea. And part of sort of the criticism of it is you just sort of hiving off this bad business ISO to dyas low carbon intensive death. Well, the retail arm goes on and does great things. 

Adam: [00:29:08] Go over there and shake on your own call, do you, dad? Yeah, yeah. 

Thomas: [00:29:16] And but then an ISO without the like, as in its current form, AGL, because it has the retail business, has all the cash flow that comes with that. It has the has the capacity to decarbonise those assets, to move out, to shut down the coal plants and move into renewables. But if you split them off, ICL alone doesn't have that ability. And that's what Cannon-Brookes is saying is saying like you. If you merge it, it's impossible for ISO to to pivot into renewables, its only option is to just sit with these coal assets and coal plants until they become redundant, but will hang onto them as long as possible. And this and this. 

Adam: [00:29:53] I read something similar. There was a big there's a UK investor snow capped that said they said the same thing like it would that they're going to destroy like $11 billion of value in five years by failing, you know, if they went ahead with the demerger, with the with the split? Yeah. So no one's no one's in favour on this. Just one investor or investment 

Thomas: [00:30:14] firm hunt in favour of it. He's keen, but is he? He's going to see a high rise? Yeah, I mean, it's adios plan. But yeah, it's got it's it's got. 

Adam: [00:30:24] Critics wouldn't be any bonuses attached to a successful managed by any chance. 

Thomas: [00:30:31] You bet he's not going to end up as the CEO

Adam: [00:30:33] of AISO, that's for sure. Look, if he doesn't doesn't end up in a party in Southeast Asia, two things in. Yeah, well, that's no cap. They said the idea was in denial about the situation. They have called out agile, big time. They're like, you guys are in denial about the underperformance of the company, which is not surprising because AGL is 185 years old. And right now, if you remember trying to get grandpa to agree to going into a nursing home, but there was no way he was a guarantee that he could, he couldn't even tempting with decarbonisation. It was just it just wasn't having a demerger from the House granddad. When he's dealing with this kind of vintage United, just you might need a different and different approach. 

Thomas: [00:31:23] The other thing I like about what what Brookfield is saying and that they're doing this, they're doing projects like this all over the world and their, their philosophy is saying, is not good enough for companies to meet environmental objectives by just hiving off their bad assets and making it someone else's problem. And that's effectively what AGL does it like in the demerger story. Like you have a retail arm that goes, Yeah, we're great, we're green, we're doing awesome things. But then you've got this, you've left. The market still has this, you know, high carbon intensive asset just sitting around waiting to die. And so not actually making, you're not transitioning, you're just making it someone else's problem. 

Adam: [00:32:01] And so just giving yourself a plausible excuse when someone comes out, that's not as anyone we gave it always thought it. It's not it's not up to him. Yeah, it's like, Yeah, yeah, beer. 

Thomas: [00:32:13] But that's what they're saying. They they can make this transition happen. Cannon-Brookes is saying that the proposal was to buy it with five billion and then they invest another 20 billion. So four times as much as they're buying it for in in that transition and creating those renewable assets. So, yeah, so they've knocked it back for now, but it's definitely on the table and it's definitely front and centre in the election, which which might have been one of their agendas as well, but 

Adam: [00:32:38] we'll see what puts it on the table. Obviously, everyone's everyone's all over it. But AGL have already forgot it happened. Yeah, I certainly food for thought, though. If you are considering putting any energy stocks into your portfolio, maybe have a look at AGL. See what they're doing. Say whether the demerger might make sense, then that could all kick off soon. Who knows? Maybe someone will buy the company, and that's the kind of thing that could send the share price pretty quickly one way or the other. So have a think about that. If you are playing along in the ASX share market game this week and we hope that you are, don't forget the still time to register right up until the 28th of April, so hopefully you'll join us. Alright, Thomas, in case the news today isn't bad enough already, we've got wars. We've got inflation. The price of beer is going to go up. 

Thomas: [00:33:22] The fifth horsemen of the apocalypse, 

Adam: [00:33:24] rising beer Bryce, this is how it ends. This is how it ends. War, famine and no one can get a cold one. What's what's what's this? Just an inflation story? 

Thomas: [00:33:36] Heineken Yeah, it's a Heineken had their results. Their profit jumped in 2021 from one point one five billion euros to two billion euros, almost double their profits in 2021. Good story there, but the CEO, Dolf van den Brink, is warning of this hikes to beer prices and possible shortage. He says cost inflation is off the charts. I was going to share a chart to the Instagram but didn't 

Adam: [00:34:01] fit the fit. That's the the worst excuse in technological history for not sharing something to Instagram. I couldn't. It was off the charts. This on my social page saying this stuff. People share those. It's not a high benchmark. It's not. It's not a high bar for quality on Instagram. I'm not sure whether you use it much, but just feel free to share if people shout you down, obviously. But you know, I wish I didn't see a Heineken 

Thomas: [00:34:39] saying the input costs are up in the mid-teens percentage this year. So, yeah, it's substantial. I guess in my 24 years in the business, I've never seen anything like it, not even close across the board. We are faced with crazy increases. And not only is that there might be shortages, it's like the whole notion of can you actually get it at any price? You've got shortages of truck drivers, everybody scrambling to get their products moved. Ocean freight is completely out of sync. So far, there's only been pockets of shortages, but risks are going up daily because of this global supply supply chain disruptions. And this is all before the Ukraine story started playing out. 

Adam: [00:35:15] So, yeah, well, I was going to say I'm going to be going up. Maybe it's time to switch to something heavy, like like something hot or vodka, but that's not going to work out. Is it any vodka, either? Yeah.

Thomas: [00:35:27] What I found interesting about this story is saying, like because when companies report they've they normally give some forward guidance and say, this is where we think the company is going. This is where we expect profits to be next year. This is where we expect revenue. And he's saying, Look, it's really hard right now because there's no model that can handle this kind of inflation. It's anybody's guess what the impact is going to be on the volumes due to all these price increases. So normally there's this idea of in economics called elasticity. And so when price goes up, when the price of something goes up, people generally buy less. But how much less they buy is what you call elasticity. And so these big companies would have very sophisticated models. It would model this very closely. They would know that if they increased the price per teni of 10 by 10 cents, they'd that have clear, pretty clear idea of how much less people are going to buy. But he's saying right now, we've got no idea. It's just such a different environment with everything's changing. There's people like we've got costs are on the rise, but then people have more savings, so maybe that balances out. We just don't know, and it's a really hard time to see through see through the fog of this right now. 

Adam: [00:36:38] You could take some confidence, though, because like when we had all the lockdowns, like, you know, bottles were still open can pretty much considered an essential service. So. So, you know, like at one point in there, I'm pretty sure there was early hospitals, supermarkets and follows open Mike. Yeah, I think I think people will probably be pretty forgiving for a fair while about a price increase in beer. They're not going to be happy about it. But, but I mean, I don't I maybe they back it off a bit

Thomas: [00:37:07] and maybe they switch. Maybe they go to Strongbow Heineken on Strongbow, by the way. But Mike 

Adam: [00:37:12] Strongbow? Yeah, they will still drink Strongbow. No, that was the transition from soft drink to beer for most, most teenagers. Yeah. Start with if you start to be strong bars, maybe chugging a couple of West Coast coolers and before you know it, drinking beer. Um yeah, right? I didn't know that. Yeah, yeah. I didn't even think that were still around. 

Thomas: [00:37:35] But yeah, so maybe if maybe if beer prices go up, maybe people switch. Maybe they go, go to Strongbow, maybe they go to vodka, maybe they go something else.

Adam: [00:37:42] We talked last week and we I learnt that Australia's food sovereign right is like, is there a like do we check for beer sovereignty or alcohol sovereignty? 

Thomas: [00:37:52] Yeah, I think I think Canberra has a stockpile in central deserts, 

Adam: [00:37:59] days of emergency thanks to the fireworks factory. 

Thomas: [00:38:03] Really, I don't know because we don't 

Adam: [00:38:04] have a massive stockpile of beer. 

Thomas: [00:38:06] Well, I don't think so, but we make it. 

Adam: [00:38:08] Yeah, making it. Yeah, like we we don't need to import Heineken. We've got plenty of good base here. Coopers in South Australia is one of the best players in the world. 

Thomas: [00:38:16] Yeah, Coopers. Very forever. I mean, I guess I guess we grow all the things that go into. You're right, there's nothing got sugar. We've got hops, we got yeah, yeah. Be a sovereign sugar base. 

Adam: [00:38:26] Well, I think we should. There should be if there's not an economic model or whatever you call it for that, then there's an opportunity here. Thomas, you could reassure the people of Australia with one if your other chart won't fit. Maybe you could raise your people with something around sovereignty. Yeah. All right. That that does it for this week. Our community investors economists. Thank you so much for tuning in. Don't forget to join us for the sharemarket trading game from tomorrow. If you're listening to this on Wednesday, the 2nd, it all starts tomorrow. Don't forget, of course, lots of other great shows across Equity Mates Media Get Started Investing feed Equity Mates Investing Podcast You're in good company. Talk Money to me. Crypto Curious So much to listen to. Spoilt for choice. We hope you've enjoyed this show. We look forward to company again next week. Until then, it's bye for now.