Why are Chinese hackers trying to take down Aussie miners?

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

Thomas: [00:00:39] Yeah, good. Adam, how are you doing? 

Adam: [00:00:40] I'm doing very well, thank you. Nothing to plug today. Nothing to plug at all. So let's get straight into it. Massive show coming up. According to the ABS, the size of households is shrinking. We'll ask Thomas what might be causing our houses to shrink if we leave them out in the rain too long, perhaps. Fake social media accounts are slinging dirt on Australian miner liners and not in a good mining kind of way for the first time ever. The 6040 investing rule is failing. We'll take a look at what it is and find out whether my personal investing strategy, the 5050 gas, is also under threat. THOMAS Every week I spend literally minutes and minutes preparing for this show. But you gave me a story today about a government that is making their own beer from poo water, then selling it to its people. And I thought, Yeah, really, I'll take the day off. These jokes right themselves. That's coming up later. But first, Ashley has sent us an email. I wanted to get to it quickly. Actually send us an email CV at Equity Mates dot com and kind of a long email. But essentially he's asking if we could use the GST as a policy lever to fight inflation. Thomas Is that something we can do? 

Thomas: [00:01:53] Ah yeah, definitely in theory. Um, yeah. Anything that sort of increases the tax take and takes money out of, out of households is going to slow the economy. So if the economy is running too hot, upping the GST rate is going to slow things down a bit. So that might take the heat out of inflation. Do we have this sort of like automatic stabilisers built into the tax system? So like when the economy's going badly, there's money coming out of the government going into like dollar payments and things like that. So it automatically stabilises the economy to an extent. So there's a lot of that going on. But yeah, so yeah, theoretically it's possible. I think it would be very politically difficult to sell people a hike in the GST as inflation's taking off.

Speaker 1: [00:02:39] You know, you. 

Adam: [00:02:40] Feel right, increases were fine. Well, get ready for GST increases, right. So it's not going to happen any time soon. Yeah, I reckon. 

Thomas: [00:02:47] No, no, no, no. It really went out of fashion and I think as he points out in the email, you'd need an independent board to sort of oversee it and manage it services. You wouldn't have the short termism of government just messing around with it. But yeah, difficult, difficult, difficult. 

Adam: [00:03:03] I actually hope that answers your question. He did mention modern monetary theory in the question as well there somewhere, but I think that's unrelated dependent.

Thomas: [00:03:11] Yeah, not not directly. I mean they're not the money more monetary theorists aren't talking about using the GST. 

Adam: [00:03:17] Without they've all gone very quiet now. 

Speaker 1: [00:03:19] That they're not really talking about much. 

Adam: [00:03:25] All right, Thomas, is it true that our houses are getting smaller? 

Thomas: [00:03:29] No, no, not well. No, no. 

Speaker 1: [00:03:32] Not all. [00:03:32][0.8]

Thomas: [00:03:34] Households. [00:03:34][0.0]

Speaker 1: [00:03:35] Slightly near. [00:03:36][0.4]

Thomas: [00:03:39] No, no, they're not. The average household size is getting smaller. So this is some data that came out of the census. We got the census results last year from the 2021 census, and that showed that the average household size is now down from 2.6 people to 2.5 people. [00:03:55][16.0]

Adam: [00:03:56] Oh, big news. 2.6 to 2.5. Yeah. Yeah. Mhm. [00:04:00][4.2]

Thomas: [00:04:00] But that's when you're talking about a population of 24 million. That's actually pretty big is it. [00:04:05][4.9]

Adam: [00:04:05] Yeah. [00:04:05][0.0]

Thomas: [00:04:06] And what it means is that for the same number of people you need about an extra 150 to 200000 homes. [00:04:13][7.0]

Adam: [00:04:13] Right. So there's less there's less people living per house. So therefore you need more houses. [00:04:17][3.4]

Thomas: [00:04:17] Yeah. Yeah. For the same population. [00:04:19][1.4]

Adam: [00:04:20] Why are they doing it? Why? Why? We've got less people per house. [00:04:22][2.2]

Thomas: [00:04:22] That's a good question. Yeah, big question. I mean, sort of people talking about I think there's a couple of things. One is like the potentially the need for home offices that came out of COVID. So that meant people got kicked out of bedrooms and people had or when people went and found houses with extra rooms so they could have. The Home Office is one of the theories. I don't know how how solid that is. [00:04:47][24.7]

Adam: [00:04:47] Oh, we did it. We converted one of our rooms and we didn't get rid of any people from the house. [00:04:51][3.8]

Speaker 1: [00:04:55] Started to get. [00:04:55][0.6]

Adam: [00:04:55] Rid of the youngest the other day, but she stayed on. Yeah. [00:04:58][2.8]

Thomas: [00:04:59] So I don't know. I mean, it's interesting. You look the you also get the look at household composition. So you've also got a fall in group households. So group households, I mean, they're pretty small, like 4.3% of the total of households in 2016. That's down to 3.9%. It's a bit of a bit of a drop in group households, not as many group households as they used to be. [00:05:18][19.9]

Adam: [00:05:19] Group households being what, like chair house leavers like. [00:05:22][2.8]

Thomas: [00:05:23] Yeah. [00:05:23][0.0]

Adam: [00:05:23] Students and stuff. [00:05:24][0.5]

Thomas: [00:05:24] Yeah. Yeah. And non-family related people together. Yeah. [00:05:29][4.4]

Adam: [00:05:29] I lived in a share house class. I think 33. [00:05:31][1.7]

Speaker 1: [00:05:34] Had called me immature. Anyway, that's pretty common. [00:05:38][4.3]

Thomas: [00:05:39] But yeah. But family households is down from 71.3 to 74.5. These don't sound like huge numbers, but they're pretty significant when with the census in the population data. So it's like small, small percentage changes can be quite big. Hmm. And then. But then a big pick up in single person households, up from 24.4 to 25.6. So it seems that seems at least that some of the story is that there's more people going it alone. And that's that's why the average size is falling. [00:06:08][29.4]

Adam: [00:06:08] I was watching we crashed the other night, the TV series that we work on, the collapse of, we work. And that was all about community. And I thought as I was watching all these people gathering together. So this is not it's not what we want. [00:06:20][11.7]

Speaker 1: [00:06:20] Shore funding. [00:06:22][2.1]

Adam: [00:06:25] Maybe I've been tempted by that. [00:06:26][1.4]

Speaker 1: [00:06:28] But the desire to live alone. [00:06:29][1.4]

Thomas: [00:06:30] Yeah, well, I think that's what social media, the whole social media experiments taught us is that we're very excited to be connected for a while and realise we didn't really want to be that close. [00:06:40][10.0]

Adam: [00:06:40] We can switch off. Yeah, look at. [00:06:43][3.0]

Speaker 1: [00:06:43] Names. [00:06:43][0.0]

Thomas: [00:06:44] The interesting about this is it solves a bit of a puzzle, which we suspected but was. You weren't sure when you talked a little bit about this on the show before. But one of the big puzzles to come out of COVID was that, you know, when it when it first landed in the borders shut a lot of the property market analysts are saying, well, this is going to affect rental prices because, you know, we have a quite a high immigration intake each year that's going to go to zero. Therefore, that's a lot of demand for for rental housing is going to disappear. There's going to be rental slack and and rental prices will fall. That's what that was the kind of consensus view when COVID first hit. But what happened was the exact opposite. And the rental market tightened phenomenally and rents soared. So rents were up 17 and a half percent over the year in Sydney 18.6 and in Brisbane for 15% in Melbourne. So huge jumps in rental prices. And look at the number of available rental properties like typically, you know, between 2015 and 2020 there was about 80,000 rental properties on the market at any point in time that's now down to under 40,000. So the number of available rental properties is halved and the vacancy rate to 1%, which is the tightest it's ever been. So yeah, we got ended up with an incredibly tight rental market, even though immigration had gone to zero and this seemed and this seems to be the driving factor that that need that fall in average household size even though it's not massive 2.6 to 2.5, that's an extra 200,000 homes. You put that in context, like we build 60,000 new homes every in most years. So if it if it happened all at once, you. Talking about over three years worth of demand suddenly entering the market at the same time. [00:08:29][105.1]

Adam: [00:08:30] Yeah, right. [00:08:30][0.3]

Thomas: [00:08:30] Which is why it's sort of why. Why I think it's gone as tight as it has. [00:08:34][3.4]

Adam: [00:08:34] Is it exacerbated by, you know, supply chain shocks and whatever in terms of building houses and stuff? Is that is that come into it at all or. You know, I talk about 60,000 a year that we normally build. Are we slower building as well as that kind of? [00:08:48][13.3]

Thomas: [00:08:48] I think I think that's probably hurting at the margin, but it's probably not. It's getting it. It gets swamped by this by this factor, I reckon. [00:08:55][6.8]

Adam: [00:08:56] So what do we do? Do we just start building those like those living like pods, sleeping pods that they have in like Japan and stuff? Is that is then the answer? We're all we're all working from home that we just start sleeping at work. [00:09:07][11.7]

Speaker 1: [00:09:10] Yeah. I don't. [00:09:10][0.2]

Thomas: [00:09:10] Know. I mean, some some people were saying that, you know, this this increase in demand for single person households is a bit mixed in terms of what's being brought to the market. Like, mostly, we construct new family homes. We're not you know, we're not creating that many single person dwellings. But that's where demand is at the. [00:09:29][18.4]

Adam: [00:09:29] Moment because the earlier the oh, the odd one bedroom flat was always thought they were difficult to kind of to sell because, you know, when I was first looking at buying a house or buying a unit, I kind of ruled out one bedroom and those are the two. They're kind of unappealing. But you're saying they're the flavour of the month? [00:09:46][17.3]

Thomas: [00:09:47] Yeah, this. I think it's definitely demand for it. I'm going to be interesting to look at where those single person households are in like if you know there might be single people living in three bedroom houses. [00:09:56][9.6]

Speaker 1: [00:09:57] Mhm. [00:09:57][0.0]

Thomas: [00:09:58] You know, just chilling with hanging out, just hanging out with the big space and. [00:10:03][5.2]

Adam: [00:10:03] Popcorn before they. [00:10:04][0.9]

Speaker 1: [00:10:04] Go into the theatre room. [00:10:05][1.1]

Adam: [00:10:09] All right, Thomas, you told me that Ozzy Minhas might be under threat of cyber attack. What's going on there? [00:10:14][5.1]

Thomas: [00:10:15] Hmm. So this is interesting story we got last week that there's an Aussie miner called Linus. Hmm. It's in the rare earths business. [00:10:23][8.0]

Adam: [00:10:23] He invented Linux. Did it? Yes. No, I didn't. This is different. And again, it's one little gag for the computer, guys, that they'll know. [00:10:33][9.1]

Speaker 1: [00:10:33] Yeah. Oh, three of them. Thanks for this. Yeah. [00:10:38][4.9]

Thomas: [00:10:39] So, yeah. So Linus was was the was the target of a cyber attack, apparently. So. This comes from a US cyber security firm called Mandiant. Did a report saying that Linus got targeted. So, Linus. What they're saying is Linus was pushing for this project. They're getting government support in Texas, and they wanted to build a rare earths processing plant. Mm hmm. And they were negotiating a deal with the US government to get $120 million support package to get this project up and running in Texas. And as this is going on, apparently this is what Mandiant reckons is that Chinese agents acting on behalf of the Chinese government started trying to drum up a protest on social media in Facebook and to sort of like to just quash this this rare earth push. [00:11:31][52.7]

Adam: [00:11:32] It's a hand. It was in Texas. It was an Australian company in Texas. But the Chinese government. [00:11:37][5.3]

Speaker 1: [00:11:38] Mm hmm. [00:11:38][0.1]

Adam: [00:11:39] Well, like. Right. Going to do something about it. And the best thing they could come up with was. Let's make some fake Facebook accounts. [00:11:48][9.3]

Speaker 1: [00:11:49] Yeah, that's layers and. [00:11:50][1.5]

Adam: [00:11:52] Layers of matter. And we'll see how they like that. And and this massive cyber company called Mandiant. Like, whoa. [00:11:59][7.1]

Speaker 1: [00:12:00] This is big news. Is there more? Is there more here? [00:12:03][3.5]

Thomas: [00:12:04] Well, there's a sexy name like that saying it's the Chinese programme called the Dragon Bridge. [00:12:08][4.5]

Adam: [00:12:09] Oh, yes. Now. Okay, I'm back. [00:12:11][2.4]

Speaker 1: [00:12:12] In your back. Interested in it? Yeah. Yeah. [00:12:13][1.8]

Thomas: [00:12:14] Linus operates the only non-Chinese owned rare earths processing plant in the world. So there's only one. So China has an almost total monopoly on rare earths processing. [00:12:27][12.3]

Adam: [00:12:27] Do you know, rare earths processing is just, in a sense, a few people listening out there going, what is rare earth? I don't know. It's just minerals and stuff. [00:12:36][8.5]

Thomas: [00:12:36] Yeah, isn't it? Utterly. [00:12:37][1.1]

Speaker 1: [00:12:39] Is this particular. [00:12:40][1.1]

Thomas: [00:12:40] Elements that go into the high tech stuff? [00:12:43][2.6]

Adam: [00:12:43] Trace elements slightly. Good for the lawn. Yeah. Okay. Oh, yeah. Okay. Rare earth. Yeah. [00:12:51][7.3]

Thomas: [00:12:51] Yeah. So and they're used in like the, they used in military equipment, like trains and electric vehicles and stuff like that. Got it. And so, like, yeah, so incredibly important to the sort of the future economy, but also to the military industrial complex. And China has an almost has a has a stranglehold on the rare earths market because it owns every processing plant in the world from one which is owned by Linus and operated in Malaysia. [00:13:17][25.2]

Speaker 1: [00:13:18] Mm hmm. [00:13:18][0.1]

Thomas: [00:13:18] And because rare earths generate low grade radioactivity when they're processed, it seems this is what they're saying is the Chinese government has been running a smear campaign against Linus in in Malaysia as well, and creating a lot of trouble for them there. Right. And that's the playbook that they're then brought to Texas to try and make people in Texas angry about it and try to create a protest to try to kill this deal. And the thing is, at the end, on the other side, the American government and the Australian Government are trying to break this stranglehold and develop their own various processing. So the Export Finance, Export Finance Australia said a government agency has lent $1,000,000,000 to Iluka Resources last in April to to build a rare earths separation plant in NEIGHBOUR in Western Australia. [00:14:12][53.7]

Adam: [00:14:13] Okay, so if we did it here we can do what we want because it's Australia. Yeah. Yeah. [00:14:18][5.0]

Thomas: [00:14:18] We'll probably be a social media campaign. [00:14:19][1.2]

Adam: [00:14:20] Yeah. But it'll be far enough out in the outback maybe be that the any concerns around radioactivity. Although Texas is a big place too. I'm sensing that. What might have been the attraction with Texas? Yeah. Can we just flip it around on these Chinese hackers or whatever and just start like shit posting stuff that they're doing and but the radio, the radiation producing rare earth, if they're doing like. [00:14:42][21.7]

Speaker 1: [00:14:43] I. [00:14:43][0.0]

Adam: [00:14:43] Feel like there's no Virginian here. If they're doing 99%. [00:14:46][2.3]

Speaker 1: [00:14:47] Of the Earth's rare earth. [00:14:49][1.8]

Adam: [00:14:49] Processing, generating radioactive output, then I feel like that's something we could call out and we would have the upper hand over them calling out our 0.08% rare earth processing radiation. [00:15:02][13.4]

Speaker 1: [00:15:03] Yeah. [00:15:03][0.0]

Thomas: [00:15:04] I mean this, but this is the interesting asymmetry in it is that, you know. You don't have any access to social media in China. Social media in China is very tightly controlled by Beijing. [00:15:15][10.4]

Adam: [00:15:16] Yeah, right. [00:15:16][0.4]

Thomas: [00:15:16] Can't just shoot post against state owned corporations trying to build critical infrastructure. [00:15:22][5.1]

Adam: [00:15:23] Yeah. Even Scomo couldn't get his account back when it got taken off him. [00:15:27][4.1]

Speaker 1: [00:15:27] That's right. He got sold in a cafe that was so and so. [00:15:32][5.0]

Adam: [00:15:33] Its governance WeChat account is. [00:15:34][1.5]

Speaker 1: [00:15:34] Man. [00:15:34][0.0]

Adam: [00:15:35] And he's like, have it back. And they're like, now, sorry. There's nothing we can do. No. Right. Yeah. [00:15:39][4.4]

Thomas: [00:15:40] Not even supposed to have one. [00:15:41][0.9]

Adam: [00:15:41] Yeah, right. That's a. [00:15:42][0.8]

Thomas: [00:15:42] Point in a, you know, free in quotation marks nation like America or Australia, you can launch a social media campaign and. [00:15:50][8.5]

Adam: [00:15:51] Which could which could then again be quite effective because it's a democracy. Like which again is the, you know, the flipside in in China, it's like you going to be in a lobby, you're going to you're going to try and get the government voted out. But it doesn't work. [00:16:07][16.1]

Thomas: [00:16:07] I mean, you can you can see it's probably worth a shot, but it's like, what man me through, you know, 50 bucks of Facebook ads at it and see if you can create a right in Texas. But I think it's I mean, what is interesting is, like, if they're doing that right, like that's it, you know, and they talk about the way they did it with like stock images and formulate usernames with random numbers and letters has kind of seems like it didn't seem pretty thinly veiled as a cyber attack or as a coordinated cyber attack. It just happened around the time they're trying to land this deal. Mhm. But if that's going on, what else is going on. Like what else is, you know, what black ops is happening that we're not seeing. [00:16:46][38.3]

Speaker 1: [00:16:49] But I think we. [00:16:50][0.8]

Adam: [00:16:50] Can talk about what they're doing here with black ops coming out of Chinese cyber warfare in the same sentence. This is this is. [00:16:59][8.9]

Thomas: [00:17:00] A come on, you're being naive. [00:17:01][1.1]

Speaker 1: [00:17:02] So what's going on? [00:17:03][0.8]

Thomas: [00:17:06] Is this it just shows this for me. It's like another sign of the times of how far things have turned, you know, up into 2018, 2019. We were happy for China to have the entire rare earths processing industry. No, no one thought that. [00:17:20][14.2]

Adam: [00:17:20] Was really cool, that dirty radiation. [00:17:21][1.0]

Speaker 1: [00:17:22] So that's their problem, you know? Right. [00:17:28][5.8]

Thomas: [00:17:28] But like, no one really thought it was a problem to offshore the entire industrial base. Yeah, everything that could be offshored got offshored to China, and no one thought it was a problem. And then in 2020 or 19, before or before October 2019, and then particularly with 2020, it's like the Western world woke up and went, Whoa, like this is actually a bit of a problem. We and just like, you know, we can't rely on China. They can't have complete control of rare earth. Like that's that's a huge vulnerability. So now they're trying to trying to back-pedal and get out of that. And then China is like trying to not let that happen. So that's that's the tussle that we're in. And, you know, and Anthony Albanese is trying to, you know, repair the relationship with China, but like there's a strategic rivalry happening here, this posting Aussie miners trying to undermine our rare earths processing capacities. Like how do you work that into your negotiation? [00:18:21][52.4]

Adam: [00:18:22] Yeah, yeah. Well, it does explain a few things. Also, someone giving CBA some some some shade the other day, but that was probably what that was, is just Chinese hackers just targeting us. So we'll probably get more of it. Now that we've talked about it, we shouldn't even have gone this far. Yeah, but that's all we do here on Korean investors. Columnist, We push the envelope. All right. Why don't we take a quick break here. We'll grab a word from our sponsors. And coming up after the break, we're going to be talking about the end of the 6040 investing rule, as well as a government that has decided to turn wastewater into beer. All that and more right after this. Comedian versus. [00:19:00][37.7]

Thomas: [00:19:00] Economist. [00:19:00][0.0]

Adam: [00:19:04] Welcome back here. And comedian versus economist. You can send us an email if you'd like. We'd love to get them CV at Equity Mates dot com or via the website Equity Mates dot com forward slash CV. And don't forget to check out our Facebook and Instagram pages at CV podcast. Thomas Apparently it's been a bad year for the 6040 rule. Before we find out why. What is the 6040 rule? [00:19:29][24.8]

Thomas: [00:19:30] The 6040 rule is a portfolio strategy which says that you should have 60% of your portfolio in shares and 40% in bonds. [00:19:38][8.2]

Speaker 1: [00:19:39] Okay. [00:19:39][0.0]

Thomas: [00:19:40] And it's called lazy portfolio strategy and sort of the basic idea. And there's a number of lazy portfolio strategies, but the basic idea is that people are stupid, that you're stupid. [00:19:52][12.1]

Speaker 1: [00:19:54] Or not stupid. [00:19:54][0.2]

Adam: [00:19:55] But this is really speaking to me. The 64 year old lazy and it's targeted to people are stupid, but this is the first time we're hearing about it. I feel like they're really not targeting the demographic well enough. [00:20:07][12.3]

Speaker 1: [00:20:08] Yeah. And then they. [00:20:09][0.9]

Thomas: [00:20:09] Lazy, stupid and poorly. [00:20:10][1.1]

Speaker 1: [00:20:10] Read. It's okay. [00:20:14][4.2]

Adam: [00:20:15] I need a better name though. The 6040 rule with lawyers. [00:20:18][2.5]

Thomas: [00:20:19] Well, it was the first, so it's. And the basic idea is that most people and almost everyone is very hard to manage your portfolio on the fly, that most people aren't capable of reading the economic winds and allocate and, you know, pivoting into equities and then away from equities into bonds and doing that on the fly. And rather than doing that, you should take a lazy portfolio approach and just go like, okay, I'm just going to lock in 6040. That's my rule. And I'm going to just I'm going to rebalance every year. And other than that, I'm just going to ignore it. I'm not going to try and try and actively manage it. [00:20:55][36.5]

Adam: [00:20:56] So how does it work? So you split it between 6040. So you got 60, 60% equities, 40% bonds. What's the attraction with doing it that way? Like why was that seen as a recipe for success and low sort of risk? [00:21:08][12.8]

Thomas: [00:21:09] Because I think an academic came up with it and said that this was a good based on historical data, I think saying that he invented in 1981. So yeah. [00:21:17][7.8]

Adam: [00:21:17] So the idea is like equities go down, the bonds go up. [00:21:21][3.9]

Thomas: [00:21:22] Yeah. Yeah. [00:21:22][0.5]

Adam: [00:21:23] And vice versa. So you kind of. Yeah, but I guess equities go up more than bonds. Yeah. [00:21:28][5.5]

Thomas: [00:21:29] Yeah. I mean the idea you're diversifying and you're and you're trying yeah. You're trying to create something that weathers weathers all the ups and downs of the market. And so so the 6040 was like the original lazy portfolio. And it's the same idea with ETFs. It's why ETFs became popular. It's like rather than trying to pick stocks just back the market or back at thematic and just just sit back and keep your hands off it like you're going to do better. Once you take out fees and cost of trading, you're going to do better just to sit back and not engage. And so the 64 financial advice, yeah, it's not talking to you specifically. [00:22:06][37.7]

Speaker 1: [00:22:07] That it's a handful, but yeah. [00:22:10][3.3]

Thomas: [00:22:11] So yeah, so that's the that's that's sort of the idea. And then so the 6040 was the original rule and then a whole bunch of strategies emerged out of that to try to put some more nuance on that. So another famous one, there's yeah, dozens of them. But like there's the old weather portfolio which was developed by Ray Dalio who we've we've talked a bit about, and that was because Tony Robbins asked him to put together a portfolio mix. So, you know, Tony Robbins, the American success guru. [00:22:40][28.6]

Adam: [00:22:40] Yeah, yeah. They're like a motivational speaking guy. [00:22:43][2.9]

Thomas: [00:22:43] Yeah, yeah, yeah. He wrote a money book, so he went to Ray Dalio, most successful hedge fund manager in the world, one of them, and put the book together and or where the portfolio, which was 40% long term bonds 30%, stocks 15%, intermediate term bonds 75%, gold and 75%. [00:22:59][15.6]

Adam: [00:23:00] Commodities high. That makes up more than 100%, doesn't it? No, no. Oh, no. Mass expert. Not at those numbers that what was it said again. [00:23:10][10.0]

Thomas: [00:23:10] 40% long term bonds, 30% stocks, seven of any 15% intermediate bonds 8570 7.5%. Gold 7.5%. [00:23:18][8.1]

Adam: [00:23:19] Commodities 15. Okay. All right, good. [00:23:22][2.2]

Speaker 1: [00:23:22] Yeah. [00:23:22][0.0]

Thomas: [00:23:23] It says whether portfolio the Winklevoss twins came up with the crypto portfolio, which was 60% shares, 40% bonds, 90% Bitcoin and 140% Dogecoin. [00:23:34][10.8]

Adam: [00:23:40] So it was it was the 60, 40%, 60, 40 rule failing. [00:23:43][3.2]

Thomas: [00:23:43] Now why this is interesting. Yeah. So yeah, it has historically it's done very well like saying that Morgan Stanley saying like it delivers 80% of the stock market's return with only two thirds of the risk. So it's gets good returns with low risk because brands are typically low risk. And then, as you saying, typically in normal, like in the stylised economy in the market that we talk about when growth going well, equities are going great, but bonds aren't doing so good. When growth slowing, then equities aren't doing well, but bonds do well. And so you have you get the sort of the best of both worlds and they balance each other out. But that hasn't happened this year, and it's been the same. Jonathan SHAPIRO wrote an article in the AFR saying It's been the worst year on record for the 6040 rule, saying like 2022 has been the year that's broken the 6040 rule. Vanguard has a balanced ETF, which is 5050, so not quite 6040, but pretty close. And that's down 12% so far this year. So it's getting it's getting hammered and stocks are down, obviously, but bonds are down as well. And that's quite unusual. Historically, you don't normally get that. [00:24:51][68.0]

Adam: [00:24:51] So why zero and a bit on the bonds thing? Why bonds down? Because that's the problem, right? Like equities go down, we go from equities down, the share markets dropped, companies are overvalued or cheap, money is ending, blah, blah, blah. And interest rates are going up. And my understanding is that bonds should start to then go up as interest rates go up. So why bonds down? Like, shouldn't bonds be on the way up to balance it out? What's causing bonds to stay low? [00:25:18][26.7]

Thomas: [00:25:19] Yeah, this is the this is where the gap, in my understanding. [00:25:21][2.3]

Adam: [00:25:22] I'm good. You know, I asked, do you only hear my theory? [00:25:26][4.5]

Thomas: [00:25:27] Yeah, sure. [00:25:27][0.3]

Adam: [00:25:28] Well, my theory is that nobody knows what the hell's going on, yourself included. Yeah, that's right. And that, that bonds, bonds rely on some level of predictability about interest rates. And so because you have, you know, a one year, three year, five year, ten year, whatever, and they're not moving in the way that they would normally move because no one knows what's going to happen ultimately within with interest rates. So you can't you can't offer a ten year bond at 5% interest if you don't know that the interest rate might fall off a cliff in like one year's time. But if the the heads of the central banks like Phil Lowe is is has a pretty ordinary track record of predicting what's going to happen, you know, in two months, let alone in two years. I don't know if that's my rate. [00:26:16][47.6]

Thomas: [00:26:16] That would be my expectation to date that no one predicted no one predicted this kind of market kind of reality. And I think I think my guess is that it does come down to the way that central banks have messed with money markets. So it's not you know, they stopped with money printing. They're no longer just controlling the interest rate, the controlling money across across the spectrum. And so the RBA had the yield curve control policy which was like suppressing the yields over the sort of five, ten year horizon. So do you now long and you're no longer in a free market where it's determined by demand and supply. It's there's a, there's this gorilla in the room. And what the gorilla does with its money determines what's happening with bonds, I think. And because it's all new, like we haven't we haven't had this reality before where this were all the central banks of the world at the same time in their markets messing with yields and actively messing with yields, saying like, here, we're here to do this. We're here to keep control yields. Yeah. So it's kind of a new reality. And as that unwinds, it's sort of it's unpredictable and it's unwinding at the same time as the stock, the share market is coming off. So you've got that sort of that influence of the central banks being unwound at the same time as as, you know, share markets globally, a tanking. So I think that's why it's sort of been a bad year for bonds as well. So I think like the basic theory of the 6040 rule is sound. We just haven't tested it in an economic environment with central banks playing such a dominant role. [00:27:52][95.8]

Adam: [00:27:52] I mean, I think it would be it would be fascinating if like it turned out that 80% of the problems with the 6040 rule were caused by 20% of the monetary policy that we've put in place. Because if the 8020. [00:28:07][15.1]

Speaker 1: [00:28:08] Rule. [00:28:08][0.0]

Adam: [00:28:09] Broke the 6040 rule, that's when you know it's time to just stop. Get out. [00:28:13][4.6]

Speaker 1: [00:28:15] The world start. [00:28:16][0.6]

Adam: [00:28:18] Right, Thomas. Hardly news these days, but there's a new craft beer hitting the market. But this one's a bit different. What's going on? [00:28:25][6.1]

Thomas: [00:28:25] Yeah, this one's being made by recycled sewage water, so. [00:28:28][3.1]

Speaker 1: [00:28:30] I'm proud of it first. Drink your own way. Right. [00:28:37][7.4]

Adam: [00:28:39] Where do we start? What's. [00:28:40][0.8]

Speaker 1: [00:28:41] Yeah. [00:28:41][0.0]

Thomas: [00:28:42] It's happening in Singapore. So Singapore is. [00:28:44][2.1]

Adam: [00:28:44] Leading the way. [00:28:45][0.6]

Thomas: [00:28:45] Here. So, yes, it's a collaboration between the country's water agency, the National Water Agency, and a local craft brewery. Brew works. Works in the beer is called New Brew. [00:28:58][12.6]

Adam: [00:28:58] Hmm. [00:28:58][0.0]

Thomas: [00:28:59] Yeah, it was it Brew Works describes the beer as highly quotable, suitable to Singapore's tropical climate with a smooth, toasted honey like aftertaste. [00:29:09][9.9]

Adam: [00:29:10] Toasted honey? Yeah. The National Water Agency, which is part of pub, which is the Public Utilities Board. But like so once you had that acronym, it's almost like they're obliged to start ranking be. [00:29:22][11.7]

Speaker 1: [00:29:23] Well, we can't we can't call. [00:29:26][3.6]

Adam: [00:29:26] Ourselves pub and not make beer. So I looked around and lo, what are we going to. What do we make it out of? Well, we own the waterworks. [00:29:34][7.2]

Speaker 1: [00:29:36] But drinking, some. [00:29:37][1.1]

Thomas: [00:29:37] Consultants come back with a logo and go. Now, you've totally misread what. [00:29:41][4.0]

Speaker 1: [00:29:41] Comes about like. [00:29:42][1.3]

Thomas: [00:29:43] Oh, what do we do now? [00:29:43][0.6]

Adam: [00:29:45] I think it helps, though. It helps if you if you water agencies controlled by by pub like makes makes buying the beer more palatable. Like if that was in South Australia, we just got like say water and I'm not drinking a beer made by I say water instead of Coopers. We could have poopers. So why are they doing it is the obvious question. Why? Why did they release a beer? Well. [00:30:10][24.9]

Thomas: [00:30:11] Apparently they're big on water recycling, so they do quite a lot of it. Like the like they they call it new water and. Yeah, it's recycled. Yeah. Sewerage water. Hmm. And mostly it's been used for cooling and industrial purposes, but they're. [00:30:28][16.5]

Speaker 1: [00:30:28] Saying what they're calling it industrial natural segway to beer production. [00:30:35][7.0]

Thomas: [00:30:36] They're aiming to meet 55% of their water needs by 2060 through new water. So. Okay, that's pretty substantial. And you remember Singapore is is a small urban island with very few sort of natural resources and I think water's always going to be a story for them. And I think like it's one of the things as we've seen, like we're talking about Singapore with chicken recently with Malaysia banning chicken. Yeah, it's like I think it's one of the things with supply chains breaking down. I think everywhere, nations everywhere are a bit like, whoa, we're a bit vulnerable here to things going with. And Singapore in particular like it's food and water is not sort of missing out on luxury items. It's like your basics. [00:31:17][40.5]

Adam: [00:31:17] Well, this remember because when we talked about that, they were like they were pretty insistent on fresh chicken and like, maybe this is the reason they're like, look, we can't muck around with, like, salmonella or any kind of gastro situation here with like frozen chickens. Because if that hits the waterways, then people are going to be drinking it in their beer. [00:31:39][21.8]

Speaker 1: [00:31:40] And it's too great a risk. Uh, yeah. [00:31:44][4.3]

Thomas: [00:31:44] I mean, there's a treatment process, obviously, that has microfiltration reverse osmosis as well as ultraviolet light. So with uh, but it's also pretty, you think about all of that look, it's got to be fairly energy intensive, which is, you know, we talk about this, the Sun cable project. In WA it's going to like massive solar farm with a cable direct to Singapore. Right. Pumping energy to Singapore. So that's what that's going to go into beer. [00:32:12][28.0]

Adam: [00:32:13] I don't know. I think this might fit into that. Just just because you can. Doesn't mean you should. Category, though. [00:32:19][5.7]

Speaker 1: [00:32:22] Because I remember I remember. [00:32:23][1.0]

Adam: [00:32:24] There was a I remember watching TV a few years ago and I think maybe one of the guys from The Chaser was on there and he was like walking around a Sydney mall somewhere, like handing out drinking water that was made from waste water. So we've had the technology for some time, but, but people were just like tasting it and some people said, yeah, it tastes fine, but ultimately, you know, would you drink it? Probably not, because you've got the choice. You go, Whoa, I've got yeah, I've got tap water. So as long as that's still running. So I think it's smart because like if you go, well, I'm not going to drink water, but if you if you give it to me before my standards significantly drop, once it gets. [00:33:01][37.3]

Speaker 1: [00:33:01] The classic, it's the beer like, you. [00:33:07][6.1]

Adam: [00:33:07] Know, you've got to look at before people drink anything. [00:33:10][2.8]

Speaker 1: [00:33:14] Yeah. I mean. [00:33:15][0.8]

Thomas: [00:33:15] There's a there's a there's a big bridge to cross in terms of public acceptability with it, even though. Yeah, it's is probably perfectly fine. Yeah. Like Toowoomba was talking about doing this a decade or so ago. Oh really. Yeah. They had a water shortage and then. But then someone started calling it Toowoomba. [00:33:32][17.1]

Adam: [00:33:34] Because that was. [00:33:35][0.9]

Speaker 1: [00:33:35] The end of it. We went anywhere after that. Yeah. It's the, it's one name away from. End of production. Uh, you know, you don't. [00:33:45][9.8]

Adam: [00:33:45] Want to be amazing, though, is like they could set it out if they could set it up in such a way. You know how those you know how pubs nowadays have like a visible, like keg room where they store all the kegs and there's pipes and it's all industrial. And then you get those other kind of up-market pubs where you go to the trough in the men's and there's like one way glass that looks out over the restaurant or over the. 

Speaker 1: [00:34:09] Over the brew room. 

Adam: [00:34:11] Like, imagine if you could just see, see, you're going down the trough, straight into a pot. 

Speaker 1: [00:34:18] Circling around a big passing series of little microfiltration barker filtration osmosis devices added straight into the taps. 

Adam: [00:34:30] You'd really feel connected to your local pub to. 

Speaker 1: [00:34:34] To get a sense of community. 

Adam: [00:34:39] On that night. I think I think we live with there. Thank you so much for it. Thank you very much for tuning into community investors. Economist Once again, we do really appreciate you joining us every every week for this silliness at times. But hopefully it's it's interesting and informative as well. Thomas, that's all from us. Thank you for your company once again. Thank you for your company out there. We look forward to talking to you again next time on comedian versus economist.