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Does a Budget Lockup beat a Covid Lockdown?

HOSTS Adam & Thomas|12 May, 2021

All eyes are on the budget this week, but Adam still finds it hard to care. Markets moved on big undershoots on US employment and Australian inflation, the nation’s 9th largest lending is under-investing in marketing, and oil prices spiked on market-focused cyber terrorism. A broad view of events on this weeks Comedian v Economist.

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Adam Keily: [00:00:52] 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 I'm joined, as always by my little older brother and real life economist, Thomas Thomas. [00:01:05][13.4]

Thomas Keily: [00:01:05] Yeah, G'day Adam. Little Aggressive on you this week I thought. [00:01:08][2.7]

Adam Keily: [00:01:09] Well, I've been flying around with different inflections on different words, so I thought you were probably making a bit more about the listener out there and less about the handle, which I've done in the past, or really emphasizing the word And. I feel like that was that was not really delivering the impact I was after. [00:01:33][24.1]

Thomas Keily: [00:01:34] You don't go. Yeah, I'm good. I'm good. And had a big weekend at home, but did you, well organized the festival. [00:01:40][5.8]

Adam Keily: [00:01:40] So our economics festival has [00:01:43][3.2]

Thomas Keily: [00:01:44] Yeah, it has a lot of economics, actually. Yeah. [00:01:45][1.4]

Thomas Keily: [00:01:47] Well, we're really having an economics festival of sorts that we the budget coming up. So we're recording this on Monday night, the 10th of May, with the budget to be released, the federal budget to be released tomorrow, Tuesday, the 11th of May. So by the time you hear this, it'll be Wednesday, the twelfth of May, if you're listening to it as soon as it comes out. And we appreciate that if you are. So any predictions that we make tonight around the budget may not be true. And if you hear it on Wednesday and you go, these guys are idiots that they're talking like they haven't even read the budget, then that's because we haven't had the opportunity yet. But I for one, timers will be snapping it up as soon as I can get my hands. I don't know if you've seen it. I don't know if you've seen it. But the government does have if you go to and you won't be able to see it unfortunately now. But they have budget.gov.au the home page. They have the world's least impressive countdown timer to the budget. It's like they've really gone. You know what, we need to just go full economist on this countdown. It's like the text on a gray background. There are no images at all. They're just going it's literally twenty three hours till the budget. [00:03:02][75.2]

Thomas Keily: [00:03:03] It's pretty budget website because it is a very budget countdown. [00:03:09][6.0]

Adam Keily: [00:03:09] So I have a big show coming up. We do want to just quickly talk about the budget, although I don't want to talk about for too long, I haven't been paying any attention. We'll talk about the budget. We're going to talk about we're going to actually try a bit of a different format this week because there is so much going on. And we figured rather than kind of, dare I say, laboring Thomas, through a lot of your economic mumbo jumbo for a whole episode about and only realizing at the very end that we only cover off one topic, I thought we'd try and get through a few different few different things this week. So we've got the budget. We're going to talk about the bank of mum and dad and which is one of the biggest banks in the country. Would you believe we've got some inflation data that came out as well as some US employment data? That was a big mess, from what I understand, as well as a bit later on, we can talk about a pipeline in the US which has been shut down, the gasoline pipeline, fuel pipeline been shut down by ransomware attack. And so that's going to create a bit of a supply shortage. But before we get to all that, it's the grand final of economics. It's the big show. It's the budget. Are you excited about the budget? First and foremost, [00:04:17][67.9]

Thomas Keily: [00:04:19] I'm a bit of a veteran now. It's like, you know, your first couple of budgets. You get the nerves, the jitters, sweaty palms, this old hat. Now for me. [00:04:28][9.2]

Adam Keily: [00:04:29] Yeah, just take it as it comes one spreadsheet at that time. [00:04:33][3.9]

Thomas Keily: [00:04:34] I wonder if we can get into the budget, lock up next year. [00:04:36][2.3]

Adam Keily: [00:04:37] The budget lock up. I read about the budget lock. Um, that's horrific. Yes. [00:04:42][5.1]

Thomas Keily: [00:04:43] And punishing, doesn't it? [00:04:45][1.1]

Adam Keily: [00:04:46] For those who don't know the budget lock out is when all the journalists, they get locked in a room for several hours so they can read the budget just like is that. So that's obviously before it's released to the general public. They give it first to the journos in the budget lockup. [00:05:04][17.7]

Thomas Keily: [00:05:04] Yeah, yeah. I mean, it's a very staged media event. And the timing is particular. Like it's like the Treasurer makes the speech at seven-thirty on a Tuesday night. So it's after the news cycle, like it's right on the news cycle. So he sort of releasing it there. So there's not really much scope to sort of say too much about it at the time. And so the government really controls the message on the first day. So the first day is they really locked down. The message is all about their spin on it and what they want to do. And then you have people going through it. And then that starts to come through on the Wednesday and the opposition gets a budget reply. But by that stage, it's kind of old news and the headlines of. I've already been written, and so the government has control of the message in that first day, and so that's really what it's about and it's why. So it's not just journalists that go into the lock up, but anyone who wants to comment on it. So you also get, say, the unions or the various think tanks that so they can go through and come up with their angles, they get to that. They get to come up with their their media grabs. So the unions might have their say, like, oh, we're disappointed that there was only this much for such and such or whatever, or the green groups might say, we're disappointed we didn't see this. They all get there grabs. So they're there in the lock up finding what's what's our angle here, coming up with their talking points to try and get into the media cycle, as well [00:06:32][87.6]

Adam Keily: [00:06:33] as other work group study session all the time. Just like I can't think of anything worse than being locked up with the budget. It's like The Hunger Games [00:06:42][9.8]

Thomas Keily: [00:06:43] without the bow and arrow. If you survive the budget lockout, you get to report on the budget there. [00:06:49][5.9]

Adam Keily: [00:06:51] But instead of weapons, it's just calculators and pens and well, [00:06:55][4.1]

Thomas Keily: [00:06:55] this is going on. The government also has [00:06:58][3.3]

Thomas Keily: [00:06:58] a lot of people are outside enjoying themselves and having a good time smoking cigars. Mhm. [00:07:03][5.1]

Thomas Keily: [00:07:04] Yeah. Um, the government, if they've got a lot of good news in the budget, if it's a good news budget, then they're leaking that in the weeks leading up to it because they want each good news item to have its own, its own run in the media cycle. So you're getting a lot of the juice coming out. [00:07:20][16.4]

Adam Keily: [00:07:21] Yeah, of course. [00:07:21][0.3]

Thomas Keily: [00:07:21] Yeah, yeah. And we've seen that already. There's been a lot of leaks around infrastructure spending, around support for first home buyers, stuff like that. It's already well known that. So none of that's going to be a surprise. [00:07:31][9.2]

Adam Keily: [00:07:32] It's like when like footy players and sports stars, they announce they're having a press conference later on to announce their retirement. And you think you've just told us you've literally sucked all of the impetus out of the press conference where you were going to announce your retirement by sending out the message to the media because you're going to announce here it's just the media just arrives to just get footage of people crying, like thanking their families and stuff, which, you know, you don't even get that in the budget. [00:08:06][34.4]

Thomas Keily: [00:08:07] No. Well, maybe maybe [00:08:08][1.0]

Thomas Keily: [00:08:09] Josh Frydenberg is going to resign, retire [00:08:10][1.6]

Thomas Keily: [00:08:11] his farewell budget. You've got to [00:08:14][2.5]

Adam Keily: [00:08:15] be got some inside scoop. [00:08:15][0.8]

Thomas Keily: [00:08:17] Yeah, well, budget [00:08:17][0.5]

Thomas Keily: [00:08:18] director Wayne Swan's last budget [00:08:20][1.5]

Thomas Keily: [00:08:20] was his swan song. Oh, that's terrible. I want another one economics joke for you. [00:08:25][5.3]

Thomas Keily: [00:08:26] What's the heaviest document in politics? [00:08:29][3.1]

Thomas Keily: [00:08:30] I don't know. [00:08:30][0.4]

Thomas Keily: [00:08:31] The federal statement of account because you can't budget. [00:08:34][2.5]

Adam Keily: [00:08:35] Oh, my God. [00:08:35][0.6]

Thomas Keily: [00:08:36] It's terrible that bitcoin gold because it's nothing. What is it? Committee Bitcoin. That's funny. I hear that. [00:08:47][10.5]

Adam Keily: [00:08:48] Um, right. Okay. Well, yeah. So would that we aren't getting too much. The budget's out tomorrow or yesterday. If you're listening to this on Wednesday, hopefully, it's delivered you everything you could have dreamed for in the budget. Um, Thomas and a bunch of other you having a budget party. That's the thing. People budget parties. Yeah. No they don't do. They do [00:09:07][19.3]

Thomas Keily: [00:09:08] right now. [00:09:09][0.3]

Adam Keily: [00:09:09] Oh yeah. You can probably you know, in that feature on like Facebook to share my feature on Facebook where you can watch with a friend. Oh yeah. Right. No sense to me that feature at all. I don't come up on my TV the other day I could watch something with a friend although who. I'm going to watch it. Why would you maybe you can watch the budget with a friend online through a social platform. [00:09:33][23.5]

Thomas Keily: [00:09:34] Maybe that's what we should do. Do a comedian versus economist leave room or something around just on budget night watching the numbers come out. [00:09:42][7.6]

Adam Keily: [00:09:45] Yeah, or we could stick pins in our eyes. [00:09:47][1.8]

Thomas Keily: [00:09:50] Either way, I'm easy. All right, [00:09:53][3.5]

Adam Keily: [00:09:54] let's move on. Well, so obviously house prices are going gangbusters still, albeit I did read there were some cooling off. [00:10:01][6.8]

Thomas Keily: [00:10:01] Well, the pace of growth is is is slowing, but, um. Yeah, but I mean, it's still got not it's like we're down. I think it was like one point eight percent in April, down from two-point eight percent in March, which would be one point eight is still some of the biggest monthly gains on record. That's a big number. [00:10:21][20.3]

Adam Keily: [00:10:22] Yeah. If you looked at one point eight percent in isolation, you would say that's healthy. That's why it's off the charts. [00:10:27][4.8]

Thomas Keily: [00:10:27] It's thumping. Yeah. Yeah. No, it's very strong. [00:10:29][1.9]

Adam Keily: [00:10:30] So I read one article the other day that said that analysts are saying that 60 per cent of first home buyers, 60 per cent of them are getting financial help from their parents to get into the market like they're saying. The reason is it's because the market is so hot, so hot right now. They're getting the money they need from their parents, which is just to get into. The average borrowing is eighty nine thousand six hundred thirty seven. Hmm. And now there are concerns that the bank of mum and dad is fueling house prices. Is that spot on? [00:11:01][31.4]

Thomas Keily: [00:11:01] Yeah, no, that's banging on. Yeah, that is definitely a thing. It's I think now what they're talking about, it being like the sixth-largest lender in Australia. [00:11:09][7.4]

Adam Keily: [00:11:10] I think it's the ninth. [00:11:10][0.5]

Thomas Keily: [00:11:11] But there wasn't that long ago. I remember the first time that I sort of clocked the bank of mum and dad or we saw figures on it that it was the fifth-largest lender in the country. Really? Yeah. So I think Bank of Mum and Dad's been, you know, hasn't been investing in marketing as much as it as some of its competitors [00:11:26][14.6]

Thomas Keily: [00:11:27] flying under the radar with their products, their offerings. [00:11:30][2.9]

Adam Keily: [00:11:31] Yeah, they seem very specialized towards house prices, towards the housing market, I should say. Mm hmm. Um, well, I guess they do smaller loans. [00:11:39][8.7]

Thomas Keily: [00:11:40] Yeah, maybe business loans. [00:11:42][1.6]

Adam Keily: [00:11:42] Maybe you've got your university degree through the bank of mom and dad. Yeah, that's true. Yeah. But that was a personal loan repayments work out for you. [00:11:50][7.5]

Thomas Keily: [00:11:52] Yeah. Non tangible [00:11:53][1.1]

Thomas Keily: [00:11:55] nonmonetary return. They get to listen to me do an economics podcast and they're [00:12:01][6.0]

Adam Keily: [00:12:01] listening to it thinking we can well and truly not expect to see any value ever again. Well, the regulatory thing's a big thing though, isn't it? Like the you know, they're saying that there's a big, um, in terms of regulation. Obviously, if you or the lenders are regulated and they're protected and whatever, one of the things the articles I'm talking about, how there's absolutely no regulatory oversight, [00:12:20][19.7]

Thomas Keily: [00:12:23] the bank of is not doing his due diligence. No. Really lending to anyone, not really crunching the numbers on the serviceability ability. I mean, if you [00:12:35][11.5]

Adam Keily: [00:12:36] if you go to your mum and dad in the first place, that's a red flag right there. [00:12:40][3.6]

Thomas Keily: [00:12:40] If you. [00:12:41][0.2]

Adam Keily: [00:12:42] So if you are the bank of mum and dad, then maybe you should be having maybe some questions around your kids as to whether they can service this loan. [00:12:49][7.5]

Thomas Keily: [00:12:50] Yeah, if not the banks, the banks know this. The banks the banks are interested in where you get your deposit from and we'll know if it's coming from Bank of Mum and Dad. So your ability to save a deposit speaks volumes to your ability to repay a mortgage in the bank's eyes. Yeah. Yeah. So it definitely puts you at a disadvantage if you're borrowing a large sum from the bank of mum and dad, but it's much better than borrowing it on a personal loan or something like that. Then this would have to be seen as a gift. I think you can't [00:13:18][28.7]

Adam Keily: [00:13:20] you can't borrow a personal you can't take out a personal loan to use as a deposit for a home loan, can you? [00:13:24][4.8]

Thomas Keily: [00:13:25] No, no, no. That's a bit to say. Like, I'm going to give you 90 grand and you pay me back at some point that you will pay me back at some point means that you've got a debt to me at paying zero percent interest. Yeah, yeah. Which is a liability that the bank says, okay, you've got this existing liability so that that factors in. [00:13:43][18.7]

Adam Keily: [00:13:44] Is that the same as going guarantor? I remember when I was starting at first look at buying a house and I can never get the deposit together. When I was initially thinking about there was this concept that mum and dad could go guarantor. I remember talking about that, about how do I go guarantor now that there's no chance that you can't demonstrate that you can save anything at all. We going guarantor. Is it the same thing or is guarantor a separate sort of deal [00:14:09][24.7]

Thomas Keily: [00:14:10] guarantor as a separate sort of deal. Yeah, yeah. So it sort of means that your parents are on the hook for any shortfall if you default on your loan. So it's not the whole loan, you know. So you, you borrow at say 80 per cent SVR, so you've got you've come up with the deposit. And so if you, if you default immediately and the guy and the bank sells the property, it's going to be in the money because you've got 20 percent in the deal. So it's going to get 100 percent of the sales price, which is going to be more than the 80 per cent that they've lent you. That makes sense. Yeah. Yeah. If if for some reason there's a shortfall, then they can and your parents a guarantor. I think this is right that then they can go to the your parents and go, you know, we sold the property and we still, you know, 50 grand short. So you always, you always 50 grand [00:15:00][49.5]

Adam Keily: [00:15:00] and just hope the bank of mum dad hasn't gone out and bought a convertible in the meantime. [00:15:03][3.1]

Thomas Keily: [00:15:07] Well, but I mean, I think yeah. But, you know, Bank of Mum and Dad's probably got assets that they're true. They can to live. I don't know if he can be forced to liquidate. They could get messy, but it's very unlikely, it's very unlikely that property prices are going to fall more than 20 per cent in the short time frame. [00:15:22][15.1]

Adam Keily: [00:15:23] Yeah, although that would have said it's unlikely they were going to go up whatever it was, eight percent in the last. [00:15:27][4.7]

Thomas Keily: [00:15:28] That's true. There's no guarantee, no guarantees and economic [00:15:31][3.2]

Thomas Keily: [00:15:31] guarantors in this case. But it's an [00:15:36][4.4]

Thomas Keily: [00:15:36] it's an interesting one because almost 60 per cent of the market know. So it's like it's the norm now. And we're talking in large sums of money. Ninety thousand is the average. Yeah. Which means that there's must be, you know, people getting one hundred two hundred grand. To get into the market and for in a market like Sydney and, you know, you've got to save, you know, up to one hundred, the two hundred at least to get into anything. Yeah. So then that is that becomes the norm. It means that if you don't have parents that you can they can stump up the money for you. You're not able to get a house or you've got to wait much later in life to get to get into a house. So it becomes a there's a sort of an equity dimension to this where you're entrenching inequality, that the people who don't have parents with assets and with wealth to be able to to give to them get into the market much later. That's not a great outcome, I don't think. [00:16:30][53.7]

Adam Keily: [00:16:31] And think of some of the like the baby boomer parents who, you know, they might have to sell one of their six investment properties, maybe the beach [00:16:40][8.7]

Thomas Keily: [00:16:40] house, although, you know, it's tough for everyone. [00:16:46][5.5]

Thomas Keily: [00:16:47] But I mean, it's interesting and it's rising quickly, like, I think it was only like 10000 thousand back in 2010 and whenever wherever this dollar is coming from. [00:16:54][6.7]

Adam Keily: [00:16:54] But what, the average parent. [00:16:55][1.0]

Thomas Keily: [00:16:56] Yeah. Yeah. So it's sort of it's lifted very quickly in a very short time. [00:16:59][2.9]

Adam Keily: [00:16:59] Why don't we just take a quick break here and we're going to come back and talk inflation data and what's happening in the US. So we'll be right back after these messages. [00:17:08][8.4]

Thomas Keily: [00:17:10] Banking with virgin money has never been more rewarding. Earn rewards on your everyday spending and pay zero monthly fees with the Virgin Money Go transaction account and with points, perks and epic experiences tailored to you, you can manage your money easily on the go smash savings goals, get money for it and be rewarded for it. Back to your own beat virgin money terms and conditions and monthly criteria apply. Now let's get into the show. [00:17:35][25.9]

Adam Keily: [00:17:37] Welcome back here on comedian versus economist, and don't forget, you can, of course, always send us your email c.v at equity markets, dot com or head over to the website equity markets, dot com forward slash CBA. And thanks once again to our good friends, our equity mates, for their support on the podcast. You guys are awesome. If you haven't heard their podcast get started investing or equity markets investing podcast couldn't be simpler, right, Thomas? We're talking inflation. Yeah, we are. What's happening in [00:18:06][28.9]

Thomas Keily: [00:18:06] inflation now is another miss we missed. [00:18:08][1.6]

Adam Keily: [00:18:09] We missed [00:18:09][0.2]

Thomas Keily: [00:18:10] came in. That's good. Yeah. Yeah, it is good. It was surprising. We can't inflation came in under expectations. It was soft in the March quarter. Yeah. Right. Yeah. Running soft software. The headline CPI at one point one percent. So that's very soft. Remember outside of the RBA target band is two to three percent. That's what they're gunning for. So headline CPI at one point one trimmed mean I think was one point one as well [00:18:33][23.3]

Adam Keily: [00:18:34] trimmed mean some of our listeners time is not made. Some of our listeners might be wondering what you're talking about when you say, Trymaine, to this sort [00:18:42][8.5]

Thomas Keily: [00:18:42] of these lumpy items in the CPI. They tend to jump around a lot or, um, are a bit messy like energy prices. So the RBA, when they're looking at their target band, they try to look through the noisy items and just look at what they call underlying inflation, like kind of like the core inflation. Um, and the ABS measure we get is trimmed mean or weighted. Mean weighted median. Sorry, they just have different ways of cutting up the numbers are weighted median. [00:19:12][29.3]

Adam Keily: [00:19:12] Right. [00:19:12][0.0]

Thomas Keily: [00:19:15] You just said sorry if you said [00:19:20][5.4]

Thomas Keily: [00:19:20] weighted mean meant our weighted median. [00:19:22][1.8]

Adam Keily: [00:19:23] Yeah. Yeah. So apologies [00:19:24][1.1]

Thomas Keily: [00:19:24] everyone. Anyway so one [00:19:30][5.6]

Thomas Keily: [00:19:30] point one percent Trymaine. So Yeah. Soft, much lower. I'm a member of the RBA is now saying that they're not, they're not going to even think about raising interest rates until they see actual inflation in the two to three percent target band. That's previously. They're saying once the outlook for the forecasted inflation was heading back to the target band, that's when they'd start raising rates and raise rates in anticipation of getting back there. Now they're saying we're going to wait until they see actual inflation in the target band. But at one point one percent, where we're still way undershooting that target. And that means any interest rates are going nowhere in the near future. Right. [00:20:08][38.1]

Adam Keily: [00:20:09] That's interesting. So because there was a lot of talk of fixing and kind of, you know, the fixed interest rates being low and lower than the variable and a lot of people thinking about fixing at the moment, um, you know, myself included. And so you're saying then potentially there's that opportunity hasn't passed us by, you know, because some lenders started putting their interest rates up already, haven't they? [00:20:33][24.1]

Thomas Keily: [00:20:33] Have they have you seen a few fixed rates? Much higher. I mean, you remember that fixed rates have been so cheap recently because of the RBA term funding facility, which is sort of. Yep, yep. You remember that [00:20:44][11.5]

Adam Keily: [00:20:45] one? I do remember that one. [00:20:46][1.1]

Thomas Keily: [00:20:46] So that's been pushing money into the market for fixed rates and that's why rates have been low. So we still we're still waiting for a guide from the RBA on what they're going to do with the term funding facility. But most people are reading we're expecting it to wind up in June. Now, that's some I'm seeing a few more voices saying that they might continue. But if it does wind up in June, then I would expect fixed rates to come back in line with variable rates. So, you know, there's such a wide differential right now between the two, like it's never normally that big. So that's sort of that's should be in our thinking around fixed rates. But yeah, but in terms of, like the official cash rate, that's not that's not going anywhere anytime soon. [00:21:24][38.2]

Adam Keily: [00:21:25] And so is that we probably have covered this in the past. But so that's then in turn a bit bullish for shares. If money is still so cheap, confidence is high. Everything everyone's feeling good. [00:21:36][11.5]

Thomas Keily: [00:21:37] Yeah. I mean, yeah, definitely. Definitely is sort of your growth stocks to typically interest rate sensitive, more so than value stocks. Remember the bond quake that happened a few months ago? [00:21:48][11.6]

Adam Keily: [00:21:50] We didn't give it a name way. [00:21:51][1.3]

Thomas Keily: [00:21:52] Yeah, well, it was that really what I called it. Yeah, yeah, yeah, yeah, yeah. [00:21:56][4.2]

Thomas Keily: [00:21:56] Sent tremors through the market. [00:21:58][1.3]

Adam Keily: [00:21:59] We don't in names for everything. Yeah. We do [00:22:01][2.5]

Thomas Keily: [00:22:01] need, we need names because otherwise [00:22:03][1.1]

Thomas Keily: [00:22:03] it's just it's boring. We get even economists get bored talking about it. So we've got to come up with names for [00:22:10][7.0]

Adam Keily: [00:22:11] like a bond. Quite, very good. Okay. [00:22:14][3.1]

Thomas Keily: [00:22:15] Yeah. So that was all triggered by fears that inflation was coming in higher than expected and interest rates would go would normalize quicker than expected. Um, so that's why it is interesting that we're not seeing this in the headline data yet. It's also interesting because we're getting a lot of, um, signals that there is price pressure in the system. Commodity prices are super high. Freight and shipping rates are high. Semiconductors are in short supply. Wages costs seem to be building. So we you know, we're sort of hearing we're hearing a lot of noise, but there just wasn't anything in the data in the March quarter. So whether it's just hasn't it's just not there yet, I don't know. But so it was surprising. Like, it did come in under what? Under what economists were expecting. [00:22:58][43.3]

Adam Keily: [00:22:59] Interesting. And what in your opinion, what do you think it means for Dogecoin? [00:23:04][4.6]

Thomas Keily: [00:23:05] Mm hmm. [00:23:05][0.4]

Thomas Keily: [00:23:06] Oh, it's really difficult. It is hard to know. It depends on when you think dogecoin is a medium of exchange or whether you think it's a store of value. [00:23:15][8.9]

Thomas Keily: [00:23:16] So I look, [00:23:19][3.1]

Adam Keily: [00:23:20] I think, though, Elon Musk is going to pay for his next rocket ship with Dogecoin, apparently. Yeah. Yeah. Um, those one is going to the moon. All right. So that's Australian inflation data in the US. We were looking at employment data and they missed their target again. So there's the misses [00:23:39][19.3]

Thomas Keily: [00:23:39] around, missed the big misses. We're talking about expectations here. So we get these sort of, um, Bloomberg and this is the new news aggregators will go round and survey economists and say, what do you think it's going to happen with employment? And they all report. And then the average of that gets is then called expectation. So then the data comes in under or over expectations. So just based on what you really like is like 50 or 60 economists in the US case, what they reckon it's going to happen with employment. But expectations were for a one million gain, one million jobs to be added in the month. In the end, we got just two hundred thousand. Well, so it was a huge miss. Yeah, there's a big miss. Big Miss. Big miss. Yeah. And one million would have been very strong. And but that was, that was the feeling like he had the job shedding during the recovery is fully underway. So they were expecting a big jobs number and yet massive miss. So yeah. Well undershot on that one. [00:24:37][57.6]

Adam Keily: [00:24:37] What do they what are they thinking? Back to our introductory series on economics. If you haven't listened to it, go back and tune into season one. What do they consider full unemployment of sorry, full employment in the US is different to sort of what they consider full employment here? [00:24:53][15.7]

Thomas Keily: [00:24:53] Yeah, I don't know. That's an interesting question. I'm not sure what they were. Yeah. When they say and I think it's also shifting as well, like I think they're talking about lower as well, but yeah. I don't know, I [00:25:04][10.2]

Adam Keily: [00:25:04] don't know because I've got I like where they got like 400 million people in the US. If they got a million new jobs then yeah. [00:25:11][7.3]

Thomas Keily: [00:25:11] But we're talking like full employment is really an unemployment rate story. So if we think about full employment being typically five percent unemployment, the sort of how we measure, that's historically how we've done it, we're now saying it might be more like four and a half to four percent in The Australian I [00:25:26][14.6]

Adam Keily: [00:25:26] how you do it. I like to count [00:25:27][1.2]

Thomas Keily: [00:25:29] just the number of people. [00:25:30][0.8]

Adam Keily: [00:25:30] How many number of people. [00:25:32][1.9]

Thomas Keily: [00:25:34] The interesting story with this jobs data is that while employment came in way under expectations and the unemployment rate was flat and which was on the back of a lower participation rate. So when you're participating, you're either working or looking for work. Um, yeah. So it's not including people who are just not looking and just not interested in the jobs market at all. The participation rate fell. And so that and that was an interesting story. And people aren't wondering why. That is one of the theories I've heard and I don't know how much weight to give this, but the reason is that right now people are much more interested in playing the markets with basically playing crypto with their stimulus checks rather than getting into a job which is paying, you know, almost nothing. They can get into Dogecoin and go to the moon. And then I well, I could. [00:26:28][54.2]

Thomas Keily: [00:26:29] Why work is for suckers. Yeah. [00:26:32][3.2]

Adam Keily: [00:26:34] And that's hard to argue with. With what you know, if you got in early enough. Yeah. [00:26:38][4.2]

Thomas Keily: [00:26:38] Well yeah. [00:26:39][0.4]

Adam Keily: [00:26:39] I mean but not definitely not. Definitely not. Financial advice. Quit your job and stick it in Dogecoin because there are some horror stories out there. You and you sent me a link the other day with someone who was like, I don't know what to tell my wife. we've invested our life savings in Dogecoin when it was that whatever it was. Fifty cents an hour, it's a ten cent. So I don't know. But the great irony in that was that that was in a Reddit forum at the same place you got the advice to put it all in Dogecoin. He was now back seeking, seeking advice on what to do about his dire financial situation. [00:27:16][37.0]

Thomas Keily: [00:27:16] Yeah, I talked to my financial planner about it. And you just said, [00:27:19][3.0]

Thomas Keily: [00:27:20] bro, it's you're your about the [00:27:24][3.8]

Adam Keily: [00:27:25] well, finally still in the US. And there is a bit of a can I call it a supply shock going through the US at the moment with gas prices rise. About one and a half percent. And the reason is that there was a massive cyber attack on one of the shipping the gas pipeline companies in the US and it's pretty much taken out just looking at a map like this, this huge stretch of the east coast of the states and that's pushing gas prices through the roof. So Colonial Pipeline was hit by a ransomware attack. And the details are pretty, pretty light on because that's kind of the nature of ransomware attacks. I think they don't really talk about exactly what's going on until it's kind of fixed. So they're now saying, [00:28:13][48.1]

Thomas Keily: [00:28:15] yeah, they kind [00:28:15][0.8]

Adam Keily: [00:28:16] of just giving days to recover sort of thing. But already they're starting to talk about how else they can shift gasoline around the country. And so really, yeah, they're like looking at [00:28:27][11.9]

Thomas Keily: [00:28:28] days to recovery. What are we talking like? [00:28:29][1.7]

Adam Keily: [00:28:31] Oh, I like up to 10. [00:28:31][0.9]

Thomas Keily: [00:28:32] Wow, they obviously just not going to pay the ransom that the strategy. [00:28:36][3.6]

Adam Keily: [00:28:36] Well, who knows? They're in they're in negotiation. So there are three current possible scenarios. One is fewer than five days. One is six to ten days and one is more than ten days. [00:28:46][10.4]

Thomas Keily: [00:28:49] So all those covid [00:28:51][2.0]

Adam Keily: [00:28:52] pretty, pretty full-on. So, yeah. I mean, that's obviously going to push up the price of gas in America. They're talking of now about bringing in ships to, to, you know, tankers to move the fuel around because it's kind of, you know, around the coast or whatever. Okay. But the problem they've got now is they don't have enough US own ships and they've got these I don't know what you call them, like laws or whatever they are that you're only allowed to ship between US ports using US own ships. Wow. Sorry if I got that wrong. I'm sure I read that somewhere. So there's a lot of complexity anyway around using ships to move it, move the oil around. Yeah. There are more and more of these ransomware attacks going on. Like, I don't know if you read the article about the holes that Washington, D.C. Police Department know. So they got ransomware. And like all the files got locked as well as the ransomware gang stole the files. They started saying, we're going to send this information to your informants, like to the gangs or. Right. Who were the gangs that where the informants had infiltrated. Well, and so they were like deep undercover in like these gangs. So and the ransomware dudes were like, we're going to tell the gangs, who are your informants? Are will unless you give us the money, just crazy scene. So where it seems to be happening more and more now, where they're not just about kind of used to be ransomware was like we'd encrypt your files so they'd break in and they'd kind of lock your files in a box, so to speak, in a digital box. And then I'd say, if you want the key for the box to get all your files, you're going to give you get to give us some money and we'll give you the key. But that wasn't always foolproof because the people that wrote the data wrote the the ransomware software, you know, quality control wasn't high on the agenda. And so companies would go, all right, we'll pay for the cages, give us the key. They're given the key and they got all kinds and work arounds. And we're going to like, though, this is bad for business, because these ransomware gangs are like they're full on businesses now. They've got like call centers. They've got support staff. Yeah, yeah. Like twenty four, seven support any time of the day or night. They'll, they'll take it, they'll support you in getting your getting your files and ransom [00:31:09][137.5]

Thomas Keily: [00:31:11] but like they're offshore or something like. Oh totally. Yeah we're they where they work but where are they operating. [00:31:14][3.8]

Adam Keily: [00:31:15] Out of through the dark web. We don't know, we don't know the exact location. Wow. So you, you have they provide you with a means to interact with them, to negotiate with them. So they did that, but now they're kind of shifting their business model to more stealing information. So rather than locking at they're stealing info like informant data or like I don't know, there was one on Apple recently where they stole, like, a bunch of their schematic diagrams or whatever it is for the latest Apple devices. And they're like, if you don't give us the money, then we'll release this information. In fact, there was another one I read where we kind of off topic here, but there was another one where apparently one of the tactics that are now being employed by these ransomware gangs is it's not really a tactic in terms of ransom, but you can sign up to service through them and they'll tell you the company that they've attacked before it becomes public so that you can short the share price. [00:32:16][60.7]

Thomas Keily: [00:32:16] Wow. [00:32:16][0.0]

Adam Keily: [00:32:20] Which is just insane, what's happening and the different, but, yeah, I mean, so it's an evolving space, obviously, you know, it's still pretty new, but I'm like, yeah, I don't know. Yeah, it kind of is. I mean that the DC one was interesting, the Washington one because they the red and white guys had like this change of heart as well. They were just like, we're out. They kind of they announced this thing afterward, kind of going, yeah, we didn't mean because when you krypto the police, you bring a lot of attention for a star. Obviously, you know, the FBI gets involved pretty quickly, CIA, whoever else. But I think also they were like, oh, we actually did some pretty we cause some pretty serious, like life-threatening situations. And we don't really feel great about that. Like, I think they had, you know, an epiphany almost. And so they published some stuff shortly after going, that's it, we're out of the game. Wow. We're out of the game of the encrypting file. We're just going to focus on extortion and like [00:33:18][58.1]

Thomas Keily: [00:33:19] all those and they're not out of print. And we're all together [00:33:21][1.8]

Adam Keily: [00:33:21] just like none of the rest of the encrypting files go, because they realized that that that actually that can take systems offline, whereas they can just they can steal people's data and just go next door at them over time. [00:33:33][11.9]

Thomas Keily: [00:33:34] Wow. So they're running an ethical screen on the ethics of [00:33:40][5.8]

Adam Keily: [00:33:40] where we went off and on a bit of a tangent there, but yeah. So yeah. Gas pipeline get gas prices are going to shoot up. I don't know whether that's going on. Is that going to affect Australia? I don't. I feel like it isn't because it's not oil prices. [00:33:52][11.7]

Thomas Keily: [00:33:52] Yeah. I mean it's an interconnected global economy, energy prices rising anywhere pushes them up everywhere. I think to some degree, energy prices were only one of the only things that were strong in the March quarter CPI here. Transport costs were up on the back of energy prices. So maybe that keeps rolling on, but I wouldn't expect it to be huge. Just I mean, ten days like you'd like to slide the Suez Canal story, like you get things to jump up for a bit, but soon as it gets resolved, it sort of readjusts pretty quickly. You'd have to think Brazil ten days, a significant. [00:34:26][33.1]

Adam Keily: [00:34:26] Well, there are three options. There are fewer than five days, six to ten days or more than ten days or so. More than ten days could be an issue if more than ten days is three hundred and ninety. All right, cool. Well, let's leave it there. I think we might have gone over time, um, but thankfully, we don't actually have a fixed time. So, uh, thank you once again for tuning in. I really appreciate it. As I mentioned, you can email us cve@equitymates.com Or head up the website, equitymates.com/cve. Don't forget to check out all the other great podcasts from equity mates media. This get started investing, as I mentioned, equity mates investing podcast, meet pay love. You're in good company, Thomas. You've been good company again tonight. [00:35:09][42.8]

Thomas Keily: [00:35:10] Thank you. I'm happy. Budget, everyone. [00:35:11][0.8]

Adam Keily: [00:35:12] Happy budget. [00:35:13][0.5]

Thomas Keily: [00:35:14] Yes. Let's never speak of it again. [00:35:15][1.7]

Adam Keily: [00:35:18] All right. We'll see you next time. [00:35:18][0.0]

[1935.5]

More About

Meet your hosts

  • Adam

    Adam

    Adam is the funniest and most successful comedian in his family. He broke onto the comedy scene as a RAW comedy national finalist before selling out solo shows at two Adelaide Fringe festivals. He’s performed stand-up to crowds all over Australia as well as enjoying stints on radio with SAFM and most recently as a host of the Ice Bath on Triple M. Father of two and owner of pets, he may finally be an adult… almost.
  • Thomas

    Thomas

    Thomas, the economist, is the brains of the outfit. He studied economics and game-theory at the University of Queensland and cut his teeth as an economist at the Reserve Bank of Australia. He now runs his own economics consultancy, with a particular focus on the property market. He lives with his wife and two kids in the hills outside Byron Bay.

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