‘Dude, where’s my parcel?’ and Ren takes on Cathie Wood…

HOSTS Alec Renehan & Bryce Leske|20 September, 2021

Meet your hosts

  • Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

Have you bought the Get Started Investing book? If you have, thank you! But the real question is… has it arrived yet? Cause chances are, probably not… Aside from it being endlessly frustrating that Australia Post is being so slow, Bryce and Alec talk about how your online shopping order not arriving for a couple of days (which feels like a first world problem) is actually symptomatic of a larger issue, with freight earnings climbing to their highest peak since 2008. They talk about whether this is going to effect inflation, and what impact it will have on your investing.

The guys also talk about the downfall of the hedge fund heroes, Facebook’s obsession with the Metaverse, and Ren takes on Cathie Wood’s Bitcoin thesis…

You can find the article about the Metaverse by Matthew Ball here

If you want to let Alec or Bryce know what you think of an episode, write to them here

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Bryce: [00:00:15] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy Ren. How's it going? 

Alec: [00:00:30] I'm very good. Bryce very excited for this episode for three big reasons. OK, well, back in the studio. Yes. We're double vaxxed. Yes. And we're taking on Mondays. 

Bryce: [00:00:41] That's right. We're getting back to some amchok the good old days of just talking about what's on our radar when it comes to the world of investing and finance and business. And today, we've got four big topics to get through. We're going to have a look at what is going on in worldwide, shaping People's Australia Post, taking longer than expected. We're going to chat about active managers struggling the metaverse. And can Bitcoin reach that five hundred K mark? 

Alec: [00:01:06] Yeah, you love to hear that.

Bryce: [00:01:08] Oh, I'd love to do that. I'd love to say it, 

Alec: [00:01:11] but let's let's get stuck in. There's a lot happening in investing market. We've obviously had a very busy schedule and I haven't had a chance to cover all of this. So we're going to try and hit a number of those topics in this episode. So you wanted to talk about shipping. In fact, you were insistent that this episode covers shipping. I know you're firstly waiting for a few Australia Post on top of the list for you. So let's start 

Bryce: [00:01:37] there. Yeah, we're giving you a lack of e-commerce shopping. You're you're probably unaware of what's going on. 

Bryce: [00:01:44] I wouldn't have a clue.

Bryce: [00:01:45] In fact, I don't think Australia Post even delivers to you, 

Alec: [00:01:47] and I actually don't. It's been a real frustration. 

Bryce: [00:01:50] So, yes, look, covid no doubt is significantly impacting both international and domestic supply chains. Well, in Australia, we all are aware of what's going on with Australia Post because no one is receiving their packages on time. Five hundred Australia Post workers are in isolation at the moment, so they had to pause their parcel, pick up from e commerce for three days. To me, that doesn't really make a lot of sense because then there's just going to be back up on back up. But you've got to do what you've got to do. And no, I'm not questioning it. 

Alec: [00:02:23] And I also think that probably it probably makes sense to them inside the building. Faecal really unfortunate timing for us because it was announced the day after our book sold out on Amazon in October. I know it's a 

Bryce: [00:02:37] yeah, 

Alec: [00:02:37] it's if you are waiting for a book, it will come. It will 

Bryce: [00:02:41] come. It will come. We have no idea when.

Bryce: [00:02:44] So if you got one, congratulations. But also not only on post closing down for a couple of days, but online orders are now at Christmas levels that we saw in twenty twenty. E-commerce for online is up four hundred and seventy three per cent in terms of parcels coming through on post. So huge impact on supply chains here in Australia. But I'm more interested at what's going on a global level because it's not just Australia Post Ren the economic reopening after covid that we saw in America and Europe has just spurred demand for goods and raw materials. We've seen housing, raw materials imports drastically increase and these supply chains are now coming under a lot of stress. But not only that, the virus now continues to disrupt, you know, significant areas of the supply chain. So we're seeing workforces impacted. We're seeing crews on ships getting covid and having to get turned around. And there's no better example of that than what's going on in the Californian ports at the moment. With ships being turned around. I think there's 56 ships sitting out at sea in California. So it's pretty interesting what's going on. But I think the biggest sort of investing lens for me is what impact is this having? 

Alec: [00:04:03] Yeah, well, I think there's there's a few a few more things. But I think to separate what you're saying, there's a demand side, which is people like you are just sitting at home ordering stuff online all day and the demand is surging. And then there's a supply side. And international shipping picked Clifford wrong. They forecast that covid would depress international shipping and then it really picked up and they they were surprised by it and they're still recovering. And there's just unbelievable queues. But I think the cost of moving a container from China to Europe has jumped 600 per cent. Yeah. So just like crazy cost increases. But there's also all these other unforeseen things, like there was that explosion at that Chinese port, Tianjin, which is one of China's main shipping ports and stuff like that. It's just like everything that could go wrong on the supply side has gone wrong on the supply side. 

Bryce: [00:04:53] And to put that price increase into perspective, that is over the last year alone, that 600 percent, and that's the highest it's been since 2008. And anyway, you look online, if you want to dig a bit deeper into this, you know, and have a look at what's going on, the flow on effect of that is obviously increases in prices, because if all Joe Bloggs in. Warehouse here in Australia is trying to import all of this product from China or from from Europe or wherever it may be, but the cost of shipping every few months is increasing 100 per cent, 100 per cent, then we know that that's going to have flow on effects. 

Alec: [00:05:29] Well, let's put a pin in pricing, because there's some stuff more generally that I want to talk about. But let's focus on shipping. So I'm an investor in twenty twenty one. I don't want to buy an NFA or Dogecoin. I hear that shipping is going to the merchant ship.

Bryce: [00:05:45] She thinks the next big thing. 

Alec: [00:05:46] Well, what's what's a poor investor to do about it? 

Bryce: [00:05:49] Well, look, the boat may have sailed on this side, but if you were lucky enough to recognise what was going on a year ago, I had a look at some of the performance of some of the big shipping companies around the world. So the biggest is AP Moller Maersk. And they are swimming in profits. They've increased their profit estimates by five billion. That's pretty incredible to go to the market and say, hey, we've we've kind of got the profit wrong. We're bumping it up by five. 

Alec: [00:06:21] B, put that in context, though, like as a percentage, is that like one percent of 

Bryce: [00:06:25] one hundred percent, 

Bryce: [00:06:27]

Bryce: [00:06:28] hundred percent over the last year, the third largest carrier in the world, CMA, CGM, they have said that they're freezing their spot right when it comes to what they're charging to preserve their long term client relationships. So that actually means they're saying no to any further profit from here. They're they're saying that if we increase our prices any more, we are at risk of actually losing customers because it's just such an increase that it's putting demand on their customers. So pretty, pretty impressive. But then also had to think, well, what does it mean for retailers here in Australia? We know that our books sold out and it's really hard to get access to a product. And if you're trying to buy things for Christmas yourself, you might find that a not available or huge delays. 

Alec: [00:07:11] Yeah, well, I like Amazon or someone saying stop buying Christmas presents now. 

Bryce: [00:07:15] Now they're saying don't wait till December. 

Alec: [00:07:17] I mean, good marketing is seriously

Bryce: [00:07:19] good shopping tactic. But Kogan Dotcom, we know that he has significant stock excess stock. He kind of got Covid wrong in a way. 

Alec: [00:07:29] Yeah. And he told us he spoke about that when we interviewed it. Yeah. 

Bryce: [00:07:31] He's he's not shying away from it. Yeah. This might play into his favour as a retailer here in Australia. He's got stock and he doesn't need to be waiting for too many suppliers to be giving it to him from overseas. So maybe less impacted by supply chain. So keep an eye on how that plays out amongst other e-commerce retailers here in Australia. 

Alec: [00:07:49] Yeah, but it's too SPAD because even if he's got stock in warehouses, if Australia Post and DHL and FedEx can't get it to your door, he's got a supply issue. He doesn't have bricks and mortar stores that we can go to. 

Bryce: [00:08:01] No, but he'll at least have this stock. Some suppliers might say we've actually can't get these TVs into Australia in time, so we're just going to take them. Yeah, but anyway, a lot going on. So that's that's kind of high level. The big shipping companies are just, you know, really reaping the rewards, I guess. Yeah. 

Alec: [00:08:20] And in terms of how long this will take to unwind, people expect it will take a while. I mean, some people are saying twenty, twenty to some people are saying twenty, twenty three. But really the supply and demand equation needs to equalise. It's like it is out of equilibrium right now. And either demand needs to come down to sort of more normalised levels. But I think shopping habits will die hard, like shopping habits will have changed in this pandemic. So if demand remains elevated, supply needs to catch up and it will. But, you know, ships were put in dry dock and were being repaired and now they're coming back online. And, you know, they need to get containers to the right place. China needs to rebuild this port that exploded like there's a lot of things. And then that backlog just needs to clear. But it will unwind in the same way that lumber unwind, unwind and 

Bryce: [00:09:05] unwound 

Alec: [00:09:07] like lumber. If you remember earlier in this year, just. Yeah, yeah, yeah. As well. And that was because Canadian lumber mills got covid wrong as well. Oh, they shut down and then they didn't reopen quickly enough. Home-building demand skyrocketed in the US. They couldn't get enough Canadian lumber, so prices just went to the moon. But Mills came back online. They caught up the supply side, caught up with the demand side and prices have come back down. It will happen. You know, the cure to high prices is high prices. If prices stay high, more supply comes online and supply and demand equalise. 

Bryce: [00:09:41] Well, speaking of prices, this then begs the question, and we should probably have a chat about what does this mean from the point of view of inflation? 

Alec: [00:09:49] Yeah. Now, inflation is a big narrative that's happening more in the US than in Australia. But as with everything culturally and economically, what starts in the US seems to seep out around the world. So the inflation story is one of the big stories in the US and you're seeing it across the economy over there. Shipping, which you just touched on, is a big contributor to it because it raises the price of raw materials. It raises the price of. Inputs across the economy when we're seeing outputs like the cost of food, especially made in the US, is just going through the roof, it's pretty unbelievable. The Biden administration had some like adjusted inflation metric, which there are a bunch of main pages I'm referring to, like similar to what Wetwork did when it was like community adjusted. Abida And we tried to go for what they do. They just like stripped out a whole bunch of key buckets of from the like the safety nets and like food and stuff like meat and stuff like that. And like, if you take these out, inflation isn't that bad, but shipping is a key contributor to inflation. But the other one that I think is really important to watch is wages, because if we talk about things, supply and demand being out of work in the US at the moment, the supply demand for labour is out of whack. There is just a desperation to get

Bryce: [00:11:14] to get people to market. Isn't there a labour shortage?

Alec: [00:11:17] Labour shortage? Yeah, yeah, yeah. And labour shortage. But then also high unemployment and a lot like the it's just like the dynamics of people taking government assistance and not going back to work or people being able to like, leave jobs. And like the labour mobility is at an all time high and these are all good things. But what it has meant is that prices for labour are just going up. So Amazon obviously raise their wage to fifteen a few years ago, like pre pandemic, and that's had massive ripple effects. There's some really interesting economic studies that are coming out that show how Amazon, because they're so big, they basically set a price floor in communities. And you can see when Amazon, with a 15 dollar minimum wage, open a new warehouse in a new community that lifts wages everywhere because now all of a sudden, every employer is competing with that 15 dollar minimum wage that Amazon is offering, which is great to say in the states. But Amazon have just announced they're hiring another hundred twenty five thousand workers with an average starting wage of eight dollars an hour. So they continue to raise wages. A lot of other big businesses are responding. So Walmart have raised their minimum wage three times in the past 12 months. The average starting wage, I think, is now in the six teens. And you got to remember, the US national minimum wage is like seven dollars. Yeah, yeah. Target followed suit. A bunch of other companies have followed suit. But then what companies are doing is then they're so desperate for labour, they're throwing in all the benefits. So Walmart have announced they're paying the college tuition or willing to pay the college tuition of all one point five million employees. Wow. And college tuition in a state is expected 

Bryce: [00:13:00] to

Alec: [00:13:01] target, then followed suit, have followed suit. A bunch of other companies are now basically just throwing money at Labour to get them in the door. 

Bryce: [00:13:11] But is the shortage because people just don't want to go back to their old jobs or like, is it because there's so many new jobs coming online 

Alec: [00:13:19] because they're all trading in EFTPOS? 

Bryce: [00:13:21] Yeah, well, that's the thing. 

Alec: [00:13:24] It's it's multiple factors. Like a lot of people don't want to go to their jobs because, well, there was concern and stuff like that and there was government assistance. So it was like, I don't want to take that risk. But also the the labour market is so hot. There's so many opportunities outside of minimum wage at Wal-Mart or Chipotle or Target and stuff like that. So, yeah, it's multiple reasons. But if shipping is a key input across the economy, Labour is also a key input across the economy. And they're both very hot at the moment. Yeah. So I think to close out this inflation conversation, what does it mean as investors? I think you just have to be ready that inflation is back in the US. And how is it transitory? Is it a base effect or is it here to stay? Are all open questions? Will the labour market find an equilibrium and level out? Will the shipping markets similarly return to a sort of, you know, normal level? There will be questions at the moment, but right now there's inflation and you've got to invest accordingly. So companies that can raise prices or, you know, there are industries that are growing faster than inflation, avoiding, you know, like commodity products that are price takers, not price makers. You know, all that all that sort of core investing stuff when it comes to investing in inflation, don't invest in bonds unless they're like inflation protected bonds, that kind of stuff. Yeah. Don't leave your money in a savings account.

Bryce: [00:14:56] Tiankai zero 

Bryce: [00:14:57] point zero one cent 

Alec: [00:14:58] apparently in the states, the average interest rate at a bricks and mortar bank on a savings account, six basis points, zero point zero six percent interest. 

Bryce: [00:15:08] Sounds like similar to here in Australia. Yeah, I haven't done my research. That's right. Anyway, I'm going to leave you with a bit. A quote from Nevile, a big thinker on check him out on Twitter at Narval. He says, The paradox of inflation is that employment, investment and wealth all boom before the house of cards collapses. So just leave you with that to point 

Alec: [00:15:29] out, you 

Bryce: [00:15:31] know. Yes, we'll leave it there and we will move on to have a chat about why active managers are really struggling at the moment. But before we do, we'll just take a quick break. So Ren, we all we've spoken about active management versus passive investing here on the show plenty of times and the big debate around whether or not it's worth paying the fees when it comes to, you know, putting your money with some active managers. And there have been times where they've done really well. There have been times where they have certainly underperformed. We know that some 90 per cent plus of active managers struggle to outperform the market. And we're really starting to say that at the moment.

Bryce: [00:16:08] Yeah. 

Alec: [00:16:09] I want to take you back to the early 1990s and 2000s. If you're a hedge fund manager, you're a God like you were a billionaire. You were seen as like, you know, the not the king of the world. But like there was there was some term which I'm forgotten. But the Wolf of Wall Street. No, it was like I can't remember. But like hedge fund managers were watching it when it came to markets and you saw people come out like Daliyah Ackman Greenblat come in saying, I like those guys, those names that we all know, like they got it when the going was good and they became billionaires off the back of being hedge fund managers. Who when's the last time you've heard of, like a new superstar hedge fund manager?

Bryce: [00:16:55] Come thought Kathy would go. 

Alec: [00:16:57] Well, yeah, OK. But she's she's active. Yeah. 

Bryce: [00:17:02] Frazis. 

Alec: [00:17:03] Yeah, it's tough. It's tough to be an active manager right now. And Bridgewater. Which was right. Well which is right. Dollars firm that he founded, Bridgewater Associates, they're kind of the canary in the coal mine for a lot of this stuff. So Bridgewater assets reached one hundred and sixty dollars billion a few years ago, biggest hedge fund in the world. But as the market just keeps grinding higher and as the index keeps outperforming a lot of these active managers, Bridgewater is struggling. So Bridgewater lost twelve point one billion in assets under management last year, redemptions from people who don't want their performance. One of the biggest pension funds in the US have just put them on notice. A twenty one billion dollar pension fund, the Orange County Employees Retirement Systems is considering pulling their money out of the hedge fund. And the report got leaked. And it's just an interesting look at how these active managers are underperforming. So Orange County Pension have been invested in Bridgewater since 2005 and they've earned four point five percent per annum. That's awful. Yeah. What the hell? Yeah, not right. No Bridgewater from Bridgewater. Yeah. 

Bryce: [00:18:20] You'd be spewing off to face, 

Alec: [00:18:22] I assume, after face. Yeah. So that's roughly two and a half percent less than the benchmark index. So if I just put it in like an S&P 500 index fund, I assume that's the benchmark index. They would have done 200 basis points better. Yeah. The Bridgewater strategy has only outperformed the pensions target once in the last five years, and Bridgewater strategy has lagged when it comes to both a seven year and a 10 year time frame. 

Bryce: [00:18:53] Yeah, that's fascinating. I mean, this is one of the struggles of being active manager, though, that if you if you have the pressure from these pension funds to be delivering whatever that target is year on year, and they don't give you the the luxury and beauty of saying we want this. Well, I guess they haven't hit that ten year time frame anyway. 

Alec: [00:19:12] So I get the whole long term thing. But yeah. Yeah, sure. But also, like you have to say that if people want to be long term investors, they can just buy passive. Like part of the reason that you go active is because you want to say that year on year outperformance. Yeah, okay. I guess the the interesting thing to watch here is people expect, I guess, a bit of a snowball effect with some of this stuff. If some of the big name pension funds or endowments pooled their money from active mobile phone, 

Bryce: [00:19:40] I guess the question is, where are they putting it after they pull it? 

Alec: [00:19:43] Great question. Right now, I think a lot flows into private equity and then a lot flows into passive products. Yeah, yeah. So private equity is the is the go to spot for endowments and pensions at the moment. Yeah. Just because they're the ones getting the returns, they're getting the hedge fund like returns in hedge funds are getting those returns in the nineties announced that. Hey boys, now it's Payet. Some point pay will be oversaturated. And you know the passive voice. Yeah well the passive boys and girls do well. They do very well. But yeah, it's interesting. I mean, the market moves in cycles and, you know, different different strategies outperform at different times. And no one's saying that pension funds and endowments are going to go to zero percent active management. But I think that era of the radios being the superstars of the market is over for now. And who knows, maybe it will be like some of the boys. 

Bryce: [00:20:41] What's going to be interesting? When I think about this is, you know, because the same if you look at what's happening here in Australia, one of the best performing fund managers for a very long time has been Magellan. They've drastically underperformed the market in the last 12 months. But then you speak to experts in in the markets and they'll often sort of couch that in all. But these guys generally perform better in down markets and that sort of stuff. But I guess you have to ask yourself how long you're willing to forgo market returns to have your money with someone that is potentially going to outperform when the market is is trending down and trying to pick that point is very difficult. So, yeah, it's it's fascinating what's going on for me. Forget kind of stock picking at the moment because the market is absolutely just ripping and there is nothing wrong. I mean, if you've been in an index since 2009, if you've been in an index since the bottom of the what was it, March 20, 20, you absolutely be tearing up in your portfolio. 

Alec: [00:21:41] We did a we did a social post on Instagram looking at a bunch of the global fund managers earlier this year. And a lot of them have underperformed. The global MSCI benchmark did like twenty eight and a half percent and tough to beat that. But I think as retail investors, it's great. Like you don't you don't have to overthink this. The when the market when the index is driven by four or four or five tech companies that are trillion dollar companies but seem to have unbelievable growth runways ahead of them, you don't have to think that much.

Bryce: [00:22:14] You're looking interesting to look at their thirteen F of Bridgewater to actually see what they're invested in. 

Bryce: [00:22:20] You can do that. 

Bryce: [00:22:21] I will bring that next week. Yeah, it looks so there's for me. Yeah. Forget stockpicking really at the moment. 

Alec: [00:22:30] Just obviously. Yeah. Well the thing is, like when we're doing some interviews for the book, I would say that I have a core satellite approach where I put passive and then I have like individual stock picks in my satellite portfolio. And I would say I don't think I can beat the market and people would laugh at me and they're like, why are you doing it? And it's like, this is why I don't think I can beat the market. Because Ray D'Alessio, well, he's no longer involved, but like, his team can't beat the market, like Greenblat can't beat the market. Hamish Douglass and Magellan can't beat the market this year. Who am I to 

Bryce: [00:23:01] think that I can beat them?

Bryce: [00:23:02] Because it's going to be people listening, being like I beat the market. 

Alec: [00:23:04] Yeah, yeah, yeah. But, you know, friends, despite the market, there are definitely people that can, um. But I think that Coryn satellite approach has well and truly been proven in the market that we're in now and 

Bryce: [00:23:18] also beating it over a long period of time. That's the tricky part as well. You might be able to beat it this year, being fortunate to be in a couple of stocks that jump 50 percent or thereabouts, but like try and do that in five or 10 years. It's very, 

Alec: [00:23:28] very difficult trying to beat the market when you've got, like, small amounts of money and you're putting it in small amounts of stocks as easy as well. It's when you it's when you have a

Bryce: [00:23:37] hundred and twenty billion. 

Bryce: [00:23:38] Yeah. 

Bryce: [00:23:41] So let's move on. Ren another big topic that is it's one of those things where you talk about it once and all of a sudden you start seeing it everywhere. Well, that's for me anyway. And we spoke about it on Hospers and maybe a couple of months ago. And now it's really I'm seeing it everywhere. And that is discussion around the metaverse and what it all means. 

Alec: [00:23:59] This should be an offline gripe. But if you read thoughts Dollars, you would have heard about the metaverse about 12 months ago. We you 

Bryce: [00:24:05] know where. Oh, no, I don't. 

Alec: [00:24:09] Yeah, the metaverse. Well, given that you're hearing a lot about it recently, what is it? 

Bryce: [00:24:13] It's bloody confusing. That's what it 

Bryce: [00:24:16] is. And I want to I want to say at the top of this that in these episodes, I think this is going to be a topic that I want to come back to and keep exploring. I've put it on my my list of things to try and get my head around in a much more comprehensive way. NFTE, how it all kind of ties together, because no doubt that if it does play out in the way that Zuckerberg is talking about and a lot of people on online are talking about, it is truly transformational and it's going to be it's going to be quite massive, really. So I'm sure you've got your head around it. But really, it's the immersive Internet as the Zuck explains it. And Facebook is going hard on the metaverse.

Alec: [00:24:55] Yeah, that's it. Immersive Internet. So I guess they explain like I'm five ways to explain it is traditionally the Internet was mediated through your computer. You had it set up in your living room or you study and you went and you sat down and you still looked on pretty cool. Then the Internet was mediated through your phone and it was on you all the time. So it was no longer like fixed in a location. You walked around with it and it was but it was it was ever present, but it was still mediated through that screen. What if it was ever present but not mediated through a screen? What if it was just all around you? It was truly immersive and it was, I guess, ubiquitous. It was. It was always on. It was always present. 

Bryce: [00:25:42] Again, I get it explained 

Bryce: [00:25:44] more 

Bryce: [00:25:46] like like. All right. So I still have to wear something that makes it all around me. Or is everything around me connected to the Internet? Am I saying things that are not real but generated by.

Alec: [00:25:59] Yeah. So the other way to think of it is basically think of a seamless integration between the physical world, augmented reality, extended reality and virtual reality all into one seamless digital and physical world 

Bryce: [00:26:17] that's so clear as mud. 

Alec: [00:26:20] So let's let's get practical and talk about because, you know, over the long term, this this could take thousands of different iterations. It could be it's going to be holograms like chips in your brain. Potentially life could be a whole bunch of stuff. But but let's let's talk about what what the metaverse is today in twenty twenty one and why why it's relevant. So Zuckerberg, in his recent Facebook earnings call, spoke about how Facebook's future was in the metaverse. And a number of different companies are making similar noise or positioning themselves in similar ways. Now, for years, Facebook have been experimenting with virtual reality. They bought Oculus. I don't even know how many years ago, but years ago now, which is that VR headset virtual reality. Yeah, but the reason that's relevant today is Facebook have announced a partnership with Raybon, the sunglasses maker, and they are doing something that has. That many big tech companies before them have failed to do wearable glasses, wearable glasses. The first iteration of the metaverse for Facebook is going to be wearable glasses that are connected to the Internet and that you can take photos and videos from that. You know, those things like you could look up Google Maps and so you could have the maps projected on the glasses and it could direct you nothing. 

Bryce: [00:27:46] Linking Google glasses. 

Alec: [00:27:48] Well, snap. Well, hold on. Let's just take take one step back. So, you know, you can also do things like reply to messages, all of that, all that stuff that you do on the Internet through your phone. They want to be able to take it into your glasses so that that's what their vision is.

Bryce: [00:28:04] So it's may already have

Bryce: [00:28:05] glasses,

Alec: [00:28:07] but that does immediately lead to the question that you just asked Google Glass and SNAP Glasses. So tell us about those experiments. 

Bryce: [00:28:16] Well, SNAP was the first to try this many years ago in some form, probably the first big dog to give it a crack. And they failed. And, you know, they was the whole privacy. I don't know if someone's looking at me taking photos or that sort of jazz. So they kind of failed. Still very much playing in the augmented reality. I suppose, though, Google Glasses. They haven't released the latest update, have they? They've got some. 

Alec: [00:28:42] So Google Glass was released to like Silicon Valley beta testers. There was a term that was coined gloss, hols,

Bryce: [00:28:49] glass, maybe like Clouseau,

Alec: [00:28:54] and there were like Silicon Valley bars that were banning people wearing Google Glass and all this stuff. So Google pulled it and now they're using it for, I guess, like industrial applications and stuff like that or that, you know. Well, there's like a clear product model that

Bryce: [00:29:08] makes 

Alec: [00:29:08] sense where it's like if you're working in a warehouse and you need to figure out, like where you need to pick the glasses and it can direct you with augmented reality, stuff like that. So I think they've pulled back from the consumer side of it, but they're still just like testing and learning. But Facebook had looked at SNAP, have looked at Google, have looked at their failures and said, we're going to do the same 

Bryce: [00:29:30] thing, we're going to do the same thing and we're going to partner with Raybon. Interesting that they partnered with them. I guess I can understand why, you know, who's going to nail this apple yet? They're going to sit back and wait and then let everyone fail and they're going to come out with these gorgeous looking glasses that integrate with everything you've got. They they brought out the air pods and everyone hated on them and now everyone loves them. And they're just going to swoop in and just say, guys, you all suck. We've got these guys, we've got these glasses. And everyone's going like, yo, 

Bryce: [00:30:04] yeah, that 

Alec: [00:30:05] is you absolutely nailed it. Yeah, well, people are saying that part of the reason that SNAP and Google failed was their glasses just looked bad. And so people are giving Facebook credit for partnering with Raybon because they're like, well, they'll look cool at least to confront some of the concerns around being able to be filmed and like take photos when no one knows, like you're wearing glasses right now. I don't know if you're taking a photo of me. If you Google glasses, apparently there's like a light that goes on when you're recording or taking photos. I don't know if that's going to be enough to, like, cloud these concerns, but that's sort of the build. But really, Facebook and making the bet that the world is ready and that the world wasn't ready before. But the world is now ready for this. 

Bryce: [00:30:51] I'm ready. I think it's really exciting. I think we're going into, you know, the next ten years with this stuff is just, again, going to probably be such an advance on the last ten. We're going to be doing things that are just like, what the hell? You know, we're going to I'm going to have glasses on the golf course. It's going to be telling me how far away my shot is. It's probably going to give me a path on the green for for my podding. You know, when you press eye on Tiger Woods golf, I think the challenge is, though, switching off now is just going to be even more difficult with this. You know, the more that we immerse ourselves in Internet and immerse ourselves with connecting our lives to all this stuff, moving away and having downtime, it's just going to be super difficult, I think. And and I think the third point for me is that it's just another example of how these big tech companies just keep churning out growth, is just able to invest in all of these things and just keep creating new product and compounding. And that's why the big dogs at the top of the pile at the moment and will continue to do so, I think, for the next ten years. 

Alec: [00:31:56] Yeah. And I think the ability to make big bets and fail and, you know, make enough bets that enough of them succeed is a hallmark of these companies. That is probably not something we ever saw from the top end of town in years past. I was having a look at it and there have been some monumental failures for all the tech companies. I mean, Microsoft is ridiculed. I like the Windows Phone and the Microsoft Zune and stuff like that, Apple's had some big failures, especially pre iPhone and you know, when jobs left and stuff like that, there was there's been some spectacular failures. You know, everyone at Google has failed with social and messaging for like 20 years. Basically, since they've existed. Everyone all of these companies make big bets and fail. And, you know, Facebook, maybe this will work, maybe this won't. But it's it's a fascinating one to track. And I think whether or not Facebook succeed with the right band glasses, this metaverse conversation is a conversation that is investors. We should be absolutely should be across. This is the next generation of the Internet. It is going to be everywhere. It's going to be ubiquitous. It's going to be immersive. How and what that looks like and when that really comes to the fore, I guess remains to be seen. But as investors, this is this is something that we're early on compared to like the rest of the world and it's worth paying attention to will include included in our show notes. This article from Matthew Ball is a Vaizey in Silicon Valley, and he's become kind of like a de facto thought leader in this space, will include one of his articles in the show notes so people can go and read more if they want to. If I want to, I guess, get their head around this metaverse conversation. 

Bryce: [00:33:44] Yeah, too. Right, Ren. I as I said at the top, this is a topic that I want to keep exploring. So stay tuned as we continue to track the progress of this now to close out final news, pace is around Bitcoin can't have an episode without talking about Bitcoin. And the big question is, can it reach 500 K?

Alec: [00:34:06] Yeah. Now click click bait. Headlines aside, the reason I wanted to include this was because I heard Kathy Wood, who for people who are unfamiliar with the name future guest on Equity Mates, if we can get her to reply to us and current current CEO of ARC Invest, they make a number of ETFs that invest in, I guess, a lot of technology companies. You know, Kathy would is probably the most famous Tesla bull. She's a Bitcoin bull. She's a square bull. She's she's really bullish on, I guess, the future of a lot of these tech companies. She was interviewed and there's a clip where she spoke about Bitcoin reaching five hundred and I want to play. So let's listen to that and let's chat about it. 

Speaker 4: [00:34:49] If we're right and companies continue to diversify their cash into something like Bitcoin and institutions, institutional investors start allocating five percent of their funds towards, I'll just say, Bitcoin for right now, because we did that and we framed it for Bitcoin could be for other cryptos as well. We believe that the price will be tenfold of where it is today. So instead of forty five thousand over five hundred thousand.

Alec: [00:35:29] So there you go. If companies and institutions all just put five percent of their money into Bitcoin, the price of one Bitcoin will go from forty five thousand USA to five over five hundred thousand USA. What is Bryce Leskie Bitcoin Bill? Think of that. 

Bryce: [00:35:43] It's not an argument that or a bull case that I haven't heard before, but it's just a big if. What if they put it into something else?

Bryce: [00:35:51] Yeah, exactly. 

Bryce: [00:35:53] Like what if they put it into Ethereum or what if they choose to or start piling into gold or if they all just start piling into commercial real estate. Well, you know.

Alec: [00:36:02] Yeah, yeah, yeah. OK, well I'm glad you're saying that because I was worried that you would be like taking the same approach as that. But the logic is weak that the logic is incredibly weak. What if everyone put five percent of their balance sheet into anything? It would go to the moon. What if everyone put what if every institution put five percent of their money into platinum to Commonwealth Bank shares?

Bryce: [00:36:27] Equity Mates, Equity Mates? [00:36:28][1.3]

Alec: [00:36:31] The question shouldn't be what would happen if? The question should be how likely is that? Well, yeah, but yeah.

Bryce: [00:36:37] Yeah. And that's what's not answer because 

Alec: [00:36:39] the question, the answer to the question, what would happen if is obvious but not important. Yeah. The question, the important question is how likely is it that and obviously there are some companies that have put some of their treasury into Bitcoin and some institutions are getting some exposure to Bitcoin, but that is very different to making it a store of value that every institution and every endowment and every pension fund in the world is going to put money into. 

Bryce: [00:37:06] Yeah, and I'm not closely following every institution and every company around the world and what they're doing with the reserve cash on their balance sheets. But it feels like the headlines that were being made, say, six, 12 months. So when you had the Teslas and the MicroStrategy is putting. Their cash into Bitcoin, we're not seeing any of those headlines at the moment, we're not seeing large institutions, at least I'm not anyway could be wrong with not seeing as much as that as much of that sort of news story coming through. So the likelihood it feels of this trend of everyone putting five per cent on their balance sheet is waning a little.

Alec: [00:37:47] So the reason that Bitcoin Twitter got very excited about that, that 500 number is if Bitcoin reaches 500 K, it will have a larger market cap than gold. 

Bryce: [00:38:00] Right. So it's just a market for them to be like, 

Alec: [00:38:03] well, it's just like that's a that's a big milestone. Like Bitcoin has crossed some pretty incredible milestones in terms of its market cap relative to other things. I think it it may not be bigger than silver now, but it crossed silver, I'm pretty sure. And, you know, it's right up there in terms of like the biggest companies listed around the world. But the gold market cap is one that, you know, for people who say Bitcoin is a store of value, gold is the historical store of value. So if Bitcoin can cross gold, that would that would be exciting for a lot of people who are Bitcoin believers. It's just a funny it's funny logic. Like you imagine if I came on Equity Mates and gave you the thesis today, Unpegging Square, because I believe that if every company in the world put one percent of their Treasury into square stock Square would be a trillion dollar company. 

Bryce: [00:38:54] How do I get off the show? 

Alec: [00:38:57] And the people who are big Bitcoin believers will be yelling at us right now being like, but there are people that are answering the how likely is it that question? But my problem is that that isn't the conversation that's put forward in these online spaces on Bitcoin, Twitter, on Bitcoin, Reddit and stuff like that, the the price conversation is that the conversation that's put forward, not the technology or the store of value or the enabling cross-border payments or, you know, any of those reasons why companies might store some of their treasuries in Bitcoin. That's not the conversation. We're saying no

Bryce: [00:39:35] warrant, just like the metaverse. I'm going to keep tracking the price action of Bitcoin and who's putting five percent on their balance sheet in and know. 

Alec: [00:39:43] So I know I know you're wrapping up, but I just want to tell you one funny story about crypto that came out this week. Did you say the Wal-Mart Litecoin story? No. Litecoin is a crypto that was big in twenty seventeen, but we haven't seen a lot of it since, but I'm sure it's taken along there way. Someone released a fake press release saying that Wal-Mart will now start accepting Bitcoin and not and there were media agencies that picked it up and thought it was legit. And what's the point where Walmart eventually had to come out and rafea about the price of Bitcoin? 

Bryce: [00:40:20] Sharda skyrocketed. Right. 

Bryce: [00:40:22] Interesting. Or maybe. Well, yeah. I mean, we can't start releasing fake press releases for some stocks, 

Alec: [00:40:28] but I reckon I reckon it's bad for crypto markets generally. Like the reason that we haven't seen a Bitcoin ETF yet is partly because people are worried that those markets can be manipulated too easily. And so they don't want to wrap it into an ETF structure, things like this. A fake press release that sends sends this crypto to the moon is not a good case. Study in crypto markets can't be manipulated. 

Bryce: [00:40:51] Yeah, full of trolls. The crypto world. Anyway, we have reached the end of our episode. That was a lot of fun Ren for big topics that we Covid stay tuned for for next Monday as we continue to cover what's going on in markets and what's really interesting us on our investing journey. So the the content doesn't stop there, though. You can find us all over the Internet. We will be in the metaverse. We'll be there in the metaverse at some point. It is up with an email contact@equitymates.com. We're on Instagram Tik-tok Twitter. Join our Facebook discussion group as well. And also make sure you check check out our brand new website, Equity Mates. Dotcom, plenty going on there. All our watch lists, a bunch of resources, books, you name it. And yeah, please do leave us a five star review on your podcast player, if you can. We would greatly appreciate it. So, Ren, as always, we'll chat stocks next week. 

Alec: [00:41:43] Sounds good.

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