How on earth did Australia hang on to its AAA? … and much more.

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. Hi, Thomas. [00:01:06][13.5]

Thomas Keily: [00:01:06] G'day Adam. How are you doing? [00:01:07][0.1]

Adam Keily: [00:01:07] I'm very well, thank you. And a nice relaxing farmstay over the long weekend. [00:01:11][4.1]

Thomas Keily: [00:01:12] did you milk some cow or something? [00:01:13][1.0]

Adam Keily: [00:01:13] No, no. There was a steer there and they let you near the animals, but they did let me near the animals. Well, I had children with me, so it's a ticket. Anyway, the kids got to feed the goats and the chickens and stuff, but there was a steer that was taller than I am. Like, I'm about almost six foot. And this is bull. Well, I was corrected. I called it a bull because it had horns. It was a cow with horns. Um, but turns out once it's been desexed, it's a steer. So they got a little fun fact for you. But this thing was massive weight over a ton. Um, incredible. Anyway, big show coming up. Um, had some nice reviews coming in to on the exchange, which I thought I'd just give mention to one which I particularly enjoyed from Elsie Coughers, who said You guys are hilarious. Every Wednesday is a good one because I started laughing, but weirdly also learning. Thanks for the content, guys. So hopefully she's referring to the podcast and not some other Wednesday morning funny jam session she attends. But thank you, Elsie. You can, of course, leave us a review. We really appreciate it. That helps us out a lot. Or you can always send us an email CVT at equity markets, dot com or head over to the website. Equity markets dot com forward slash c.v, a Thomas big show. We're going to be talking retail sales and CBD movements. You've got some updated data on that. We're also found out that thirty nine percent of millennials consider crypto to be a viable alternative to property investing, which I find hard to believe. You reckon that Commonwealth Bank CBA might be overvalued, so I'm keen to find out why. But first, before we get to all that, Australia has kept its triple-A credit rating. Thomas, after, I guess getting down, do they get do we lose the triple-A at one point [00:02:59][105.8]

Thomas Keily: [00:03:00] nine and we got put on negative watch? Well, there are a few different rating agencies. So there's a handful now, I think like three or four. And they all have a crack at giving us a rating. And S&P is one of the big players, S&P and we went to a negative outlook. So triple-A with a negative outlook. So it's sort of like it's like not only are there are a number of A's involved from AAA triple-A, but you also then have the outlook also gets a rating. So we went to a negative outlook, which was like you got me saying you got your triple-A rating, but there are risks. You got to watch out ridiculous. [00:03:38][38.1]

Adam Keily: [00:03:39] Like you've got a double a triple. Like by that point, you might as well just go to quadruply if it's a positive outlook or stays on triple-A if it's a negative outlook. What? [00:03:50][11.0]

Thomas Keily: [00:03:51] Yeah, triple-A probably really what it should be. [00:03:53][2.8]

Adam Keily: [00:03:54] So what's the lowest rating you can have, because that's all you ever hear about. And maybe it's because we live in a lucky wealthy country, but I've only ever heard of kind of A's in the rating system. Is there this like is this like the popcorn size, the cinema where you can get jumbo, super maxi or gigantic was enormous. No popcorn or like everyone wins a prize, I think. [00:04:21][26.7]

Thomas Keily: [00:04:22] Yeah, no. I mean we often hear triple A and around that mark because we're talking about and sovereigns, we're talking about countries and that's what gets reported in the news and sovereign countries because they can tax and print money and all that sort of business are typically pretty safe bets. And so they have a very high credit rating in the AAA. So that's why when you're talking about national news, you're going to be hearing about triple-A. But the credit rating agencies give every organization potentially looking to raise funds a rating or they can get and can get a rating. And so that can go down to junk. [00:04:59][37.1]

Adam Keily: [00:04:59] So it's the same rating that a company could get is the same rating that a country gets. But by definition of it being sovereign, it gets it's always going to be at that upper tier. [00:05:10][10.7]

Thomas Keily: [00:05:10] Yeah, yeah, yeah, yeah. That's right. [00:05:12][1.9]

Adam Keily: [00:05:13] That's right. And Australia doesn't have any kind of high rate credit cards, doesn't have any kind of risky, never needed to pull anything. It crashes Josh Frydenberg down. That'll be funny though, seeing Josh Frydenberg then at Cash Converters Hockeytown Bridge or something because he didn't have enough money to pay the power bills. [00:05:32][19.4]

Adam Keily: [00:05:38] Good guy. Years of life. Left, right. Yeah. [00:05:43][4.6]

Thomas Keily: [00:05:43] So, yeah, so and that's the way credit rating agencies work. So they are there to act as an intermediary between borrowers and lenders. And to save lenders the hassle of going in, investigating companies or countries to figure out how creditworthy they are, the rating agencies, do all of that legwork, slap a rating on them, and then lenders can know kind of what their credit risk is. And that's the role that they play in the market. That's what credit rating agencies do. [00:06:09][25.1]

Adam Keily: [00:06:09] And so what happens if we get a lower rating or as so, we had a negative outlook for a while. If that dropped to a double, what does that mean? [00:06:18][9.0]

Thomas Keily: [00:06:19] Typically, it means your costs go up. So you're borrowing at a certain interest rate. If if you're riskier then lenders want a higher rate of return to compensate for the risk. So the interest that you're paying goes up. So it does have tangible like it is a significant story. Like if you get downgraded, it means that you've got to pay more to service your debt. [00:06:40][21.6]

Adam Keily: [00:06:41] It's funny to think, though, is like if I was lending you some money and I was charging you 10 percent interest, and then I deemed for whatever reason that you were riskier, I wouldn't just lend you more money and then ask for more back because you're now and you're by definition, you're a risky proposition of what's the risk that I'm not going to get my money back. Like if you went to, like, really risky that I'm just going to lose the money that I lend you, then charging a higher interest rate is not going to help me. [00:07:10][29.7]

Thomas Keily: [00:07:11] No, but that's investing, right. It's all about risk and balancing risks and deploying capital with a view to taking on risks for return. If there's no risk, there's no return. [00:07:22][10.6]

Adam Keily: [00:07:22] I would lend you less money. I think that would be my solution. I would go, you can't borrow as much. [00:07:26][4.2]

Thomas Keily: [00:07:27] Right, right. Right, right. [00:07:29][1.4]

Thomas Keily: [00:07:30] Yeah. [00:07:30][0.0]

Thomas Keily: [00:07:31] But still same [00:07:31][0.3]

Adam Keily: [00:07:32] same rate of interest. You just can't have as much money because it's too risky. [00:07:35][3.2]

Thomas Keily: [00:07:37] Yeah. Yeah. It's a good thing you're not in the Australian Treasury then isn't it. [00:07:41][3.9]

Adam Keily: [00:07:41] I guess is how loan sharks operate. They just charge exorbitant interest rates and then the Japanese or whatever. If you can't buy. [00:07:48][6.3]

Thomas Keily: [00:07:48] Yeah, yeah, yeah. Or just deal with like factor in the defaults as part of their business model and figure like a 10 ten borrowers, one or two of them are going to default. But I get enough interest from the remaining eight that it's I come out of had to do that kind of that kind of mess. [00:08:04][16.1]

Adam Keily: [00:08:05] Is there an international debt collector? So someone is chasing up countries to, uh. [00:08:13][8.3]

Thomas Keily: [00:08:14] No, no, no, there's not. I mean, there's not. Yeah. Now, there's big consequences. If the default on your sovereign debt [00:08:20][5.8]

Adam Keily: [00:08:21] is a big story, can you get away with it? [00:08:24][3.4]

Thomas Keily: [00:08:26] They're calling you up for years afterwards. You got a change in numbers [00:08:30][3.7]

Adam Keily: [00:08:30] and, uh. Right. Well, so that's good news. [00:08:33][2.3]

Thomas Keily: [00:08:33] I yeah. I mean, it's good news. Good news for us. I mean, the borrowing costs aren't going up. I mean, there's a little bit of like a little bit of snickering going on in some sectors of the financial press. So we're back where we were pre covid at triple-A stable our financial situation of the Commonwealth government. So we're talking about Australia being triple-A. We're talking about the Commonwealth government. That's what we're really talking about, not Australia as a nation, but as the Commonwealth government. Um, the financial position of the Commonwealth government has completely changed from where it was pretty covid. So we're now looking we you know, we almost had a budget, a balanced budget. We're now looking at a decade of deficits as far as the eye can see, massive, massive deficits. One of the key metrics they look at is debt to GDP, debt to GDP ratio. But that's gone from 20 per cent. It's busting through 30 percent pretty quickly, 30 per cent to one of the key benchmarks that they look at, passing through 30 per cent, heading to 40 percent. So their outlook is completely different than where it was two years ago. And yet we have exactly the same credit rating. And so some people are going like, well, what's the point of having what are you even doing here? Like, how can you just have a complete 180 in the financial position of the. And then that has no bearing on the on the credit rating at all. You know what, Stan? [00:09:55][82.4]

Adam Keily: [00:09:56] I reckon we're going to need that quadruply after [00:09:57][1.7]

Adam Keily: [00:10:04] we're really settled into a corner here. What if we create a new rating? [00:10:09][4.3]

Thomas Keily: [00:10:13] Going to need some Greek letters in here. [00:10:14][1.6]

Adam Keily: [00:10:15] Triple-A sigma. Yeah, right. [00:10:18][2.5]

Thomas Keily: [00:10:19] Uh, shout out to standard quanta. [00:10:21][2.2]

Adam Keily: [00:10:22] S&P does extend [00:10:24][2.8]

Thomas Keily: [00:10:26] the I mean, so there's two things to sort of story. Things like one is that interest rates are lower so we can service a higher level of debt on the same income. So that's part of the story. So that means that's the reason why it can be a bit more comfortable with that. But we're also moving into the MMT era, which we talked about before, where we just thinking economics and markets and everyone is just thinking about debt a lot differently and for a. Monetary sovereign nation like Australia, where we have the ability to print money because we've got a floating exchange rate and we so we issue debt in our own currency with monetary sovereign. So everyone's just a bit more relaxed about debt. Now, it's not such a big drama. And the credit rating, I think, reflects that. It's a bit like, yeah, Australia is doing great. You guys know [00:11:10][44.2]

Adam Keily: [00:11:11] the survey that I did when I when they come up with the ratings, but it is very low. So you guys good? Yeah, good for the money, but we reckon we're pretty good shape. All right, guys, thanks, S&P. Yeah. [00:11:27][16.2]

Thomas Keily: [00:11:27] The other very funny thing, I don't know if this applies to sovereigns, but, um, one of the criticisms of the rating agencies is that they're paid by the companies that need to do the borrowing. So if you want to go into the big money markets, you need to pay S&P or one of these guys to come and assess you and give you a credit rating. And one of the criticisms when in the global financial crisis is that some of these banks were sort of shopping around the credit rating agencies till they got one that gave them the rating they wanted. [00:11:58][31.0]

Adam Keily: [00:11:59] Can you. Does the government rate itself like, you know, how hotels will give themselves four-star, four star hotel rating? And until the review is, you can you can you opt out? You know, like if I do a franchise, I could say I don't want any reviews coming because sometimes that can work against you. Right. [00:12:19][20.3]

Thomas Keily: [00:12:20] I don't I don't think it works like that because your hedge funds and your pension funds have to have a certain level of luck. It's in their charter that they need to have like a certain amount of assets that are triple-A quality, a certain amount, you know, no more than X percent. That is like a lower on that sort of thing. [00:12:40][19.4]

Adam Keily: [00:12:40] But then there should be some independent authority or something, shouldn't it? Should be some. [00:12:44][3.9]

Thomas Keily: [00:12:45] Well, that's what it's S&P supposed to be. It's supposed to be an independent agency doing this work. Right. But it's not. Well, I yeah. I don't want to get into legal trouble, [00:12:55][10.5]

Speaker 3: [00:12:56] but [00:12:56][0.0]

Adam Keily: [00:12:58] it's about. Oh yeah. [00:13:01][3.0]

Thomas Keily: [00:13:02] No, I think I think I think mostly they are. But, you know, like, like any industry, there are a few things, criticisms that you hear from time to time. [00:13:10][8.7]

Adam Keily: [00:13:11] Yeah, fair enough. All right. So last week we talked about the reject shop and the 11 percent drop in the share price. And we spoke a bit about maybe that was because, well, partly at least because of lack of foot traffic, lack of people, in general, moving into the CBD. Did you get some new data on that this week? [00:13:30][18.6]

Thomas Keily: [00:13:30] Yeah, we've got data on retail sales. So retail sales came in at one point, one percent in April, now 20 percent higher than they were a year ago. That's 20 percent. Yeah, that's a covid affected number like comparing April 2020. So a bit of that story. But I've got a great chart here that Callum Pickering has put together, and indeed he's the chief economist there. And I'll share that to the Instagram account. Is that still? [00:13:53][22.4]

Adam Keily: [00:13:53] Oh, absolutely. Yeah, it's going gangbusters. People having the charts that you're putting up on the Instagram page and also over on Facebook and see the podcast. In fact, Gary Martin tagged you as hashtag chat guru, which next year I'm going to be calling you that straightaway, but I'm [00:14:13][19.6]

Thomas Keily: [00:14:13] going to change legally. Changed my name on this Thomas Chart [00:14:16][3.3]

Adam Keily: [00:14:17] hashtag your first name. Hashtag rimshot. Yeah, yeah, definitely. I think people are into it. It's good. Yeah. [00:14:29][12.6]

Thomas Keily: [00:14:30] So I'll share this one is a great shot from current bitcoin, but basically, it shows that retail sales between 2010 and covid were just on this sort of steady trend upwards, not moving around all that many covid hits. It starts wobbling all over the place, but has now settled quite a bit higher above trend. And he sort of compares that the previous trend in the saying, if the current level is where we would have expected to be in about three to four years. Right. So we're sort of about three to four years ahead of trend on retail sales. So we've had about Knobi thinking that as we've had about four years worth of retail sales in the space of a year in 12 months. [00:15:11][41.3]

Adam Keily: [00:15:12] Yeah. Wow, that's huge. [00:15:14][1.6]

Thomas Keily: [00:15:15] Yeah, it's big. [00:15:15][0.4]

Adam Keily: [00:15:15] It's big. People are going back to the city now. They know like, [00:15:18][2.9]

Thomas Keily: [00:15:18] well, retail sales so that yes, retail sales is is everywhere and includes online and this includes online retail. So I think that's probably picking up a lot of that. Right. And yeah, it's CBD and everywhere. So. Yeah. But it puts that reject shop number in like the disappointing results from the reject shop into comparison because that's what people were expecting it to be big because the retail sales figures are big and small. A lot of retail outlets should be reporting some really strong results based on these numbers unless these non. As a wrong somehow, which could happen sometimes with the statistics, when you get a big shift to online like we've seen, the statistical measures can just don't adjust very well to that, can't they? Just not meant to design, to capture [00:16:02][43.9]

Adam Keily: [00:16:03] like people stop buying a lot from overseas and great importing or whatever? Yeah. Yeah. Well, like, it's very easy to know that someone went to Bunnings and bought something in Australia. It's maybe harder to know that someone ordered something through Alibaba and got it delivered. [00:16:19][15.8]

Thomas Keily: [00:16:20] Yeah, that's right. I don't I don't know about the retail sales figures precisely, but I think it's probably most stuff the ABS does is a survey. So it's not a total count. It's not like they're clocking everything that goes through the tools in Australia. Hmm. [00:16:32][12.3]

Adam Keily: [00:16:33] Um, I've still never done a survey. I really want to. This is odd because I generally reject my survey, but I feel like I'm missing out on these summaries. [00:16:40][7.0]

Thomas Keily: [00:16:42] Just opt-in next time you're presented with [00:16:43][1.6]

Adam Keily: [00:16:43] the pop up box. Yeah. Do you want to take part in our survey. Mhm. [00:16:48][4.5]

Thomas Keily: [00:16:49] Yeah. But it's a good number. The retail sales still so still thumping along. Uh but yeah we got some interesting charts. A Roy Morgan also does share this one as well, but it's the CBD movements. I don't know how they measure this one, but Roy Morgan has a as a measure and it's now so with Melbourne's lock down, most recent lock down CBD movements were down to nineteen percent of where they were pre covered. [00:17:15][26.4]

Adam Keily: [00:17:16] Wow. Yeah, that's to be expected. I guess just everyone who's endured that lockdown in Melbourne. [00:17:22][6.1]

Thomas Keily: [00:17:23] Yeah, rather. Well done. Well done, everyone. But even so. But Melbourne hasn't ever got above 50 per cent since since since covid hit so that that CBD movement. I'll share this chart on the Instagram, but yeah. So that's moved around. But it's never got back above 50 percent. You know which city is doing the best in the country, not Adelaide [00:17:44][21.8]

Adam Keily: [00:17:45] to now to show us. [00:17:49][3.8]

Thomas Keily: [00:17:49] Yeah. Killing it. And you know what? Adelaide hit ninety eight per cent a peak of 98 per cent. [00:17:55][5.2]

Adam Keily: [00:17:56] What everyone was. It was I don't remember that. I would remember that you were part of the two percent. You weren't there. [00:18:03][7.2]

Thomas Keily: [00:18:05] No, no, no. It's 98 per cent of pre Kovar levels, right. [00:18:08][2.6]

Adam Keily: [00:18:08] Yeah, yeah, [00:18:08][0.2]

Thomas Keily: [00:18:09] yeah, yeah. So they got 98 per cent so pretty much back to normal. Um, uh, and on April 12th. [00:18:15][5.8]

Adam Keily: [00:18:15] Hey, it's my birthday. It's your birthday. Yeah. [00:18:18][2.2]

Thomas Keily: [00:18:18] So you know, so oap thirty people in Adelaide went to CBD for drinks [00:18:23][5.0]

Adam Keily: [00:18:23] for you, but how was that, you know people going out to celebrate though they were that stayed home, you know, tough times through Christmas and New Year wasn't happy times. Australia Day kind of went Easter. And then by the time my birthday rolled around, people had had enough time. US they said we're not missing another celebration. So like, I'm kind of a big deal around here right now. That's not surprising. Oh, Adelaide was Adelaide was just visited by a bunch of economists and the Economist Intelligence Unit, Global Livability Index. Adelaide was voted the third most livable city in the world. And I think it was out of one hundred and forty different cities. Wow. The number one city in Australia. So, you know, we're doing something, right? Yeah. Um, so it's not surprising that we're getting good, good movement. [00:19:15][51.9]

Thomas Keily: [00:19:16] Yeah, well, the, the puzzle there is you got up to like you got up to ninety eight percent on April 12th, but you now back down to sixty five per cent, you're still the best is still the top country subsidy in the country. So it's Adelaide. Sixty five. Perth fifty nine. Brisbane fifty two. Hobart forty nine. Thirty eight in Sydney. So you streaks ahead of the rest. [00:19:36][19.4]

Adam Keily: [00:19:36] Well we're all very tired. We were all laughing about I was a big one. Well it does go that way in that light. You've never been. We haven't. We have a pretty big government starting around around February, March. We have a fringe festival. We have the Adelaide Festival. It all kicks off. We have the Adelaide Cup. It's all going on. And then come around about that time. Well, just take off for another A and have a lie down. A cup of tea. [00:20:06][29.7]

Thomas Keily: [00:20:09] That's what makes it livable, doesn't it? [00:20:10][1.5]

Adam Keily: [00:20:10] That's what makes it livable. Um, no, it doesn't. The other good thing about that is that the city is only twenty minutes away from everybody because it's a twenty minute city. So so that doesn't surprise me that we're frequenting the city the most because it's kind of the easiest one to get into and out of summer. Um, I remember being in a taxi in Melbourne once, actually. I was talking to the cab driver and he goes, You guys are where are you from? I said, I'm from Adelaide. And we started talking about trams. And he goes, We got any trams in Adelaide. I said, yeah, we got we got one. It's quite historic, it runs from the CBD to Glenelg and he's like, well, you've got one tramp, so much of a city. [00:20:54][43.7]

Adam Keily: [00:20:57] When did the number of trams become the measure of a city? [00:21:00][3.4]

Thomas Keily: [00:21:02] Yeah, you're quite the economist's economics unit's not putting that in their living behind everything. [00:21:08][5.9]

Adam Keily: [00:21:09] Trams, all one. Yeah. So I think Sydney's got eight trams have three trains. Uh, no, no. I'm not looking to stoke any intercity rivalries here, but, uh, yeah. Suffice to say, I didn't think that that was a fair assessment of our fair city here. And I like the number of trams that we had. It's a heck of a tram as well, even though it only goes one direction. Um, but we've extended it recently to if anyone is thinking about visiting you, you want to be in for a new tramp ride. We're well and truly diverted off of. Of course. Tell you what, why don't we just pause there and we'll grab a quick break and a word from our sponsor. And we'll be back with more after this. [00:21:50][41.9]

Adam Keily: [00:22:19] Welcome back here on comedian versus economist and Thomas, there was a survey out last week which was conducted by global researcher YouGov, and it found that up to 39 per cent of millennials consider crypto to be a viable alternative to the property market because as as has been well documented, now people are being locked out of property, can't get into the property market. And so now apparently they're turning to crypto, which I'm not sure that's the next step in your investing journey, to be honest. If you are thinking about property and you're thinking I might buy a small investment property, maybe a little unit somewhere in the suburbs are priced out of the market, right? Krypto it is I feel like there's like some there's some kind of steps that you might have maybe haven't considered there. And certainly this is not financial advice, but our good friends of equity markets actually do a really good podcast called Get Started Investing. And I don't think that lesson number one is sign up for a coin squad account and get in. Get you get your first rate. [00:23:27][67.6]

Thomas Keily: [00:23:30] Oh, look, I'm pretty one. I'm pretty skeptical about these kind of results. So this one came from cracken, which is a crypto exchange. So has a strong vested interest in the industry. One of the themes that the Bitcoin proponents have been looking to push and have been actively pushing. I did this for a little bit when I was ghostwriting for a crypto investment agency. They're pushing this adoption idea that Bitcoin is on the brink of adoption. And when you get mainstream adoption, then you're going to get at, you know, stratospheric price gains. So this is all about adoption. So this isn't the I'm skeptical of survey measures that talk about adoption because there's a strong they've got a strong interest to push this adoption idea. You can get this through framing a survey by the way you structure surveys can get the results you want. So question one could be, do you know that investment properties in Australia are just stupidly expensive? Yes. Have you thought about investing in crypto more than an investment property? You know, so you prior to someone's prime for that question, but over time they get. Oh, yeah, good point. Yes, I do think I should save for a deposit by investing in [00:24:48][78.1]

Adam Keily: [00:24:48] Krypto question for how much do you love crypto? [00:24:51][3.0]

Thomas Keily: [00:24:56] So it wouldn't surprise me if there's a bit of that going [00:24:59][2.5]

Adam Keily: [00:24:59] on like some friends of mine. What do you like more clowns or real estate agents? [00:25:04][5.2]

Thomas Keily: [00:25:13] So yeah. So I think I think that's probably going on. I think I mean, I think in terms of like the adoption figures that talking about like sort of 20, 25 percent of the population has crypto holdings. That seems to be backed up by a number of survey. So that seems like it's kind of reasonable. But that sort of comparison of like how many people are going like, yeah, they're saying like, I'm thinking about getting into property, but I'm going to go for crypto instead. I don't know. People are making that doing that calculation. Exactly. And but I think and I think it is it's a reasonable point, which they've probably designed to because they want that headline. Is is that because property prices are a great way to get into a newspaper to start talking about the property market tied to crypto bang? You've got a headline there for sure. We came upon our feet. So well played. Yeah. And now that one day and it's just a general, the point is just generally true. House prices are prohibitively expensive. If your early career investor, you don't have a lot of capital to work with, you need, you know, big, big deposit these days. You need a decent income to service that. It makes sense. I think that particularly, you know, the tail end of a strong bull market that people are thinking about crypto rather than thinking about investment properties. [00:26:31][78.4]

Adam Keily: [00:26:32] Is it just that is it just more that people are thinking about investing so that what you're saying like people are just they maybe have some cash or some, you know, they've been saving for a house deposit only to find out that, you know what, you can actually get into the market. So I've got some money. You don't want to keep it in cash. So how could I make, you know, how can I not lose money through inflation or how can I, you know, what can I do with that money so that it's working for me essentially, rather than just sitting in the bank kind of eroding away. So, yeah, maybe you're right. Yeah. [00:27:06][33.4]

Thomas Keily: [00:27:06] I mean, we did. We did see this out of covid. There was a huge surge in people getting interested in the markets and opening up trading accounts and putting money into different asset classes as we did. See that like. It was a really big surge, and at the time it was really counterintuitive, the markets have just crashed, uncertainty's gone through the roof, and people of people have loaded up and gone all in. And I think I think it is interesting. Like I think it's that kind of insecurity that creates this environment where everyone's a bit like, oh, I don't know what my financial future is. And secure markets are doing crazy stuff. I need to get on top of this somehow. I need to invest. I need to get, you know, ladies and get sorted. And uncertainty amplifies that need to get sorted. AirTrain and I think and I think Krypto has sort of played into that because a lot of people have got sorted through crypto. A lot of crypto investors have, you know, gone [00:28:00][53.9]

Adam Keily: [00:28:00] from some very good stories around now. You know, like if you believe the hype and what's not just hype, I guess people are saying, well, now I've made some really good money out of crypto, but I'm sure it's the disclaimer on every investment ever is that past performance does not, you know, is not an indicator of future performance. And so you never know. You know, it's like any investment you should owning I mean, only putting what you might be prepared to lose. But, you know, as I say, don't take financial advice from a podcast, but I will say it again. Equity markets get started. Investing podcast is really good. If you are looking for information, if you're interested in getting started investing, you're not sure kind of how to get into it. Um, you know what to look out for. What how to do it, I guess how to, you know, make it easy on yourself then. That's a really good one to listen to if you're not listening to it already. Donald Trump came out, though. He came out and called crypto a scam. [00:28:53][53.0]

Thomas Keily: [00:28:55] We've got some audio here as a first for cve. We got some audio here of Donald Trump,. [00:28:59][3.9]

Donal Trump: [00:28:59] A bitcoin. It just seems like a scam. I was surprised, you know, with us, it was at 6000 and much lower. I don't like it because it's another currency competing against the dollar. Essentially, it's a currency competing against the dollar. I want the dollar to be the currency of the world. That's what I've always said. [00:29:19][20.2]

Adam Keily: [00:29:21] Yeah, there you go. So Trump, he says it's a scam. He believes in the strong dollar. He's not he's not into the share market because he's saying it's high once the dollar will be the currency of the world. I didn't that doesn't make a lot of sense to me. [00:29:33][12.9]

Thomas Keily: [00:29:34] Oh, yeah. I mean, it is interesting in so the America has had a strong dollar policy for since Bretton Woods since the end of World War Two, where it's the effect the default currency of the world, that there's a lot of benefits that come with that. Partly it's to sort of just generically, vaguely populist like we've got the best currency in the world, which Trump sort of talks to. A lot of his base wouldn't really understand it, but they just want the US dollar to be the best currency in the world without really understanding why. But having a strong dollar, having the US dollar be the default currency of the world has a number of benefits for the American economy. And so it's interesting the way he's framing Bitcoin as a threat to the US dollar, which, you know, a lot of Bitcoin proponents would say that it is it's an existential threat to fiat currency. But so it's interesting that the Trump base may be the vanguard of the push back against crypto and the push to sort of regulating it potentially if Trump gets his way out of existence. So it's interesting. Interesting. So far, we haven't seen a lot of political posturing too strongly one way or the other around crypto. So it's interesting that Trump, even though is out on the outers, he's he still has a hold of the Republican base that that's that portion of it. And he's saying Bitcoin's an enemy. So that's it. I feel like that's a really interesting, pivotal moment in the whole Bitcoin story. Hmm. [00:31:00][85.8]

Adam Keily: [00:31:01] I must admit, as someone is not paying a lot of attention, I haven't heard from Trump in a while. So that was nice to hear his voice again. I think [00:31:09][7.6]

Thomas Keily: [00:31:13] Yeah, I think I think he's been muted a lot of social media. [00:31:17][4.3]

Adam Keily: [00:31:18] I think he's just muted. Social media has been shut down everywhere. So was that from that was from Fox wasn't it. [00:31:24][6.3]

Thomas Keily: [00:31:25] Yeah, yeah, yeah. Yeah. [00:31:25][0.8]

Adam Keily: [00:31:26] I was never going to get kicked off Fox. Um, all right, cool. Well, finally, you reckon CBA, Commonwealth Bank might be overvalued or potentially the other banks are undervalued. [00:31:39][13.1]

Thomas Keily: [00:31:41] Yeah. This is something that the guys at Macro Business put out the other day, which I thought was really interesting. They did great work. Check him out if you're into that sort of thing. Um, yeah. Looking at just compared the earnings ratios, price to earnings ratio of the big four. Um, and typically they move pretty close together, move in a tight pack, the big four. But recently, since the last year, we're now looking at CBA. He's got a four PE of twenty-one, which is, you know, really bullish and the rest of fifteen or lower. So there's quite a big gap between their peers at the moment. Right. Um. So it's an interesting question about why that is like the big four operate in the exact same environment that, you know, there are banks in the Australian economy. So the macro factors are all the same. Maybe there are some firm-level differences. Maybe the CBA has had a better business model, has some exciting products in the offing. And I don't know what they are, but it's a big difference. And yeah, it's not obvious what what what that difference is. So there's a question there. We have seen a gap open up in the past. I've got another chart here. I'll share it on the Instagram page. We have seen that a gap open up. So CBA tends to run ahead of the others typically. But when it has deviated, when it has lurched ahead, it's been CBA that has corrected back to the pack. Right. We've seen that in the last year, the last 10 years or so, that's tended to be what's happened. Just eyeballing this chart. This isn't a strong quant analysis or anything, but [00:33:22][101.4]

Adam Keily: [00:33:23] it's too late. I've already shorted CBA. [00:33:24][1.5]

Adam Keily: [00:33:28] Oh, well, yeah. I mean, that's a smart move. [00:33:30][2.6]

Thomas Keily: [00:33:32] it feels like one of two things has to happen. One is that either side, it's either that CBA share price falls to bring it back in line with the rest of the pack with the other three of the big four or the other three, get a lift and catch up with CBA. So depending on which of those stocks you believed in, you know, either short the CBA, if you, you know, have the mechanisms to do that, that's not available to everyone. [00:33:57][24.9]

Adam Keily: [00:33:59] That's not part of the get start investing theory that think it was a three and a short sale, one of the biggest companies in Australia. [00:34:11][11.8]

Thomas Keily: [00:34:11] Yeah. Or you could go along with the other three and maybe there's a bit of catch up there you can take advantage of. But I don't know, it's just it just crossed mine across my feet. I just thought it was interesting. So just to share in that one and um, we'll keep an eye on it and let you know how it plays out. [00:34:28][16.7]

Adam Keily: [00:34:29] All right. Look, Thomas, we had a couple of listener questions I did want to get to, but I think we've gone well into overtime this week. So what we might do is just shelve those until next week. We can, of course, send us an email cve@equitymates.com Or at the website equitymates.com/cve . So apologies if you're looking forward to the questions this week, I promise we will get to them next week and will be back bigger and better than ever next time on comedian versus Economist. We'll see you then. [00:34:29][0.0]

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