Why is Biden putting the boot into Bezos?

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. Thomas. 

Thomas: [00:00:39] G'day. Adam, how are you doing? 

Adam: [00:00:40] I'm doing very well. Thank you. Hey, Thomas. We're on a break next week, so no show next week and no show the week after. We're having two weeks off for the school holidays and then we'll be back. I'd say refreshed, but I took the kids bowling to lunch and then to intensity today. And I am a wreck. So that's day one of the school holidays down two weeks. We'll see how we're talking about anyway. As always, a big show coming up. So let's get stuck straight into it. Start ups are slowing down. Will people just go back to looking for a job instead of inventing one on comedian versus economist? It's corporate America versus the US government, as Bezos battles Biden. But first, Thomas, renamed Energy, is considering renaming itself to damped energy as it tries to get rid of customers. What is going on there? 

Thomas: [00:01:37] We take this one off a couple of weeks ago. I can't remember when, but we got it. We got an email from Phil CB podcast something, something. You know. 

Speaker 1: [00:01:47] Your letter. 

Adam: [00:01:49] CVE at Equity Mates. They'll call us all via the website Equity Mates dot com forwards less CV. Nice job Thomas. Slick as ever. Yeah, so. 

Thomas: [00:01:59] Fools. And a few forwarded us an email from Rand Energy. He was a Rand Energy customer and remember were telling all their customers to that they could find better deals elsewhere and that they should seriously consider leaving. [00:02:11][11.9]

Adam: [00:02:11] This did seem a bit odd at times, it's fair to say. This was certainly the first time I've ever heard of a business of any sort telling their customers, Hey, you can probably score a better deal. Woollies have certainly never told me to maybe check out the Red Spot specials at Coles. It was a bit odd. I don't think neither of us could come up with a reasonable explanation that made a lot of sense to us. [00:02:39][28.1]

Thomas: [00:02:40] No, we took a couple of I think the best guess for us was that they knew prices were going up. They weren't they didn't have enough electricity. They weren't covered for electricity, which meant they maybe had to buy at inflated spot prices, which meant that they just needed to get rid of customers. Yeah, that was sort of a biscuit. And then they just put that with the like a bit of marketing spin around being the honest guys in the market. Hmm. Turns out though, it might be a little bit more to the story. The AFA revealed last week that they had hedged positions so them and re a is a New Zealand company. But then there is a crew on this listed on the ASX which is listed. [00:03:24][44.4]

Adam: [00:03:26] Are you googling this right now? As we talked, I thought I usually come in with notes. [00:03:30][4.3]

Thomas: [00:03:31] And I well I kids are away. So I had a bit of a big weekend on. [00:03:35][3.6]

Speaker 1: [00:03:37] Who little dust. [00:03:38][1.0]

Adam: [00:03:38] Had some mates go round, got some spreadsheets out. [00:03:41][2.3]

Speaker 1: [00:03:42] I did some, some brackets. [00:03:44][2.6]

Thomas: [00:03:50] Yeah. No, no they're on the ASX. Oh sorry. I knew that the acronym, the acronym is LP. I just couldn't remember what it stood for. It's local planning, energy. They're on the ASX anyway, but now it turns out that the Australian Energy Regulator is investigating them because they had hedge positions which they then sold back to the market, worth up to about $100 million, which is what they're they I if I, if I was saying so. So basically they, they were, they had bought energy in the futures market. So they had lost that contract in back when, when energy was kind of cheap. And then energy, energy prices exploded. And it sort of it's interesting actually looking at energy prices are trying to sort of clock this today like it was sort of around $60 per megawatt hour. Now it's up around four like 490 a store in Queensland. But it's sort of like it moves around. So it's like it's hard to know where to sort of like draw the average. Like whether you look at the quarterly or the weekly numbers, you get different numbers, but energy prices have exploded. That's no secret. So what they found themselves in the situation is they had bought a lot of cheap energy in the futures market, which had now that energy had exploded in value. Right. And so rather than giving it to their customers at the contracted price, which was contracts that were set 12 months ago or something which was relatively cheap, they could not give it to their customers and give it back to the market and make a lot of money, apparently. [00:05:19][89.3]

Adam: [00:05:20] Well, what happened to me? The same thing the other day, actually. I filled up the car. With petrol's like a dollar 20 a litre. And then petrol prices went like gangbusters to like two bucks. So there I am sitting on a full tank of petrol that I paid a dollar totally a litre for. So I just, I just Jerry can that up started on Facebook Marketplace and told the kids to walk to school. I'm back and I mean, I see what they're doing, but I guess they couldn't they couldn't just tell their customers, look, we don't want to sell you like we're not going to sell you the electricity because they were contracted with the customers to sell them. Right. So. So they instead would that day they wrote them all that like the letter that they wrote, people like feel a letter saying, hey, maybe you could shop around for a better deal, one that doesn't involve us selling you electricity that we could make a lot more from if we sold it back into the market. [00:06:15][55.0]

Thomas: [00:06:16] It was sort of odd because they weren't sort of saying what was specific to them. You know, energy prices are exploding. If the customers shop around, they're going to find another retailer who's got the same cost pressures. On the wholesale side, customers are facing rising prices no matter which retailer they go to, even the Gentile, as their prices are going up. So, you know, like our, like AGL, like they generate and retail these two businesses banded together but even they're not protected like they're they retailers getting smashed as well. [00:06:45][29.1]

Adam: [00:06:45] If Phil shopped around, was he going to find a better price given that the market had already started going up like yeah and they had the other retailers and the Gen Taylors would be like, well, now the writing's on the wall. We, we don't want to sell you the energy we've got. [00:07:01][15.1]

Thomas: [00:07:01] Yeah, yeah, right. This is the thing in the AFR article is that apparently they quoted some unnamed executives from from the big retailers were really annoyed about this because they end up with the customers after these. [00:07:15][13.8]

Adam: [00:07:16] Of the amp. [00:07:16][0.7]

Thomas: [00:07:16] Left and they went and joined Origin or AGL or whatever and they're like, God damn it, all customers. [00:07:21][4.5]

Speaker 1: [00:07:23] Have come. [00:07:23][0.6]

Thomas: [00:07:23] To the energy. [00:07:24][0.3]

Adam: [00:07:25] World. Are we living where we go? Business is fighting over not having customers. Not a lot of you take a look. [00:07:33][7.7]

Thomas: [00:07:33] It's hard to know what they did wrong exactly. Like you look at revamps letter and like it's a little bit a little bit sneaky. They saying, like, we just want to be straight up with you, you're going to get a better deal elsewhere. We recommend that you go. They weren't saying the straight up version sounds like it was. We've got we're sitting on contracts for some really sweet energy and we just want to sell it back to the wholesale market. So we'd prefer that you left. That would be like the straight talking version. Sounds like. [00:08:00][27.2]

Speaker 1: [00:08:01] I would love. [00:08:01][0.4]

Adam: [00:08:02] To have been a fly on the wall in the committee meeting, but I had to come up with the plausible reason why they didn't want just the residual. [00:08:09][7.3]

Speaker 1: [00:08:10] Stuff. [00:08:10][0.0]

Adam: [00:08:11] Like the the pricing committee would have gone to the marketing department and just been like, look, we're going to challenge you. We're ready to get rid of our customers. [00:08:21][10.2]

Speaker 1: [00:08:22] We like what we do. [00:08:23][1.5]

Adam: [00:08:24] Yeah, we do. Right? [00:08:24][0.6]

Speaker 1: [00:08:25] We. [00:08:25][0.0]

Adam: [00:08:26] We literally spend four years building this business, trying to attract people to go enjoy this and all this is to get rid of what they're saying. [00:08:35][9.0]

Thomas: [00:08:35] And Damian Glanville, he gave some comment. He's a, he's a CEO of LP, he gave some commentary to the, to the AFA and saying like look it was either that or go broke. Basically the quote was we were running around scrambling to raise money for the credit support. I was remortgaging my houses as was just. [00:08:53][17.8]

Speaker 1: [00:08:54] Yeah. Houses, plural houses. It was tough times for everybody. Yeah. I didn't. [00:09:03][9.4]

Adam: [00:09:04] Know where to park my. [00:09:04][0.8]

Speaker 1: [00:09:04] Cars. [00:09:04][0.0]

Adam: [00:09:06] And the rebel against my houses. [00:09:07][1.1]

Speaker 1: [00:09:10] I sold three of my boats. [00:09:11][0.9]

Adam: [00:09:13] To go for live. [00:09:14][0.6]

Thomas: [00:09:14] Yeah, but it goes on. We've sunk a shitload of cash into the business and we could see that it was going to evaporate overnight. Selling my hedges was what the business needed to do to get my sunken costs back, which I think is right. Like, I think, you know what? My my retail is collapsed as well. Like, it's gone out of business and I've got I've got to I've got to find a new job because. [00:09:33][19.0]

Adam: [00:09:33] You didn't leave when you were told. [00:09:34][1.0]

Thomas: [00:09:39] Yeah, well, the funny thing is that you get your contract gets bounced to a new retailer unless you do you nominate another one, right. Yeah. So if you want to choose, you sort of. But then you can't, you can switch once you get bounced if you don't like where you end up. So far, it's a funny system. [00:09:54][15.2]

Adam: [00:09:55] Does the government ever step in here? Does the government have a role to kind of go like, well, hey, we noticed that your electricity provider has kicked you out of there. They didn't want you as a customer. And we understand you've gone shopping and no one else wants you as a customer. Like, if everybody's like when nobody wants to sell me electricity, does the government can the government step in? [00:10:18][23.0]

Thomas: [00:10:18] Well, no, no, no. It's a it's a market in quotation marks, right? Yeah. There's no there's no, no. Nationally owned electricity retailer. No, there's nothing nothing they can really do. Yeah. Yeah. And so there's there's retailers sort of collapsing all over the place. And so in that sense, like, I got a bit of sympathy for El-P and rearmed because, you know, they were sitting on this, you know, lucrative cash like that with the hedges and that's what's going to get them. That's almost sounding like the only hope to get them through this period and survive and then come back into the market and keep going. I can get why why they were they you know probably had to do that. [00:10:56][38.2]

Adam: [00:10:56] Well, is is that legal what they're doing? Can they? I guess so. I just think advising people, I guess you probably get a better deal. I should and I can I don't. [00:11:06][9.3]

Thomas: [00:11:06] Know what law they'd be breaking. They're like, it's a bit, you know, they're not it doesn't sound like with romance. My reading of the email, they're not being fully transparent, but they're not being. [00:11:15][9.0]

Adam: [00:11:16] No, nobody is these days. But, you know, everyday low prices, my bum. All right, Thomas. 2022 has been a rough year for start ups. What's going on now? Yeah. [00:11:32][16.5]

Thomas: [00:11:33] So it does seem like the the the market has turned a bit in terms of like support for Start-Ups. So 2021 sort of venture capital fundraising was through the roof. I think we talked about this. We covered some data this a little while ago, you know, probably like six or nine months ago now, kind of a lose track. Yeah, it's like huge amount of money, huge amount of venture capital money flowing into Australia. Yeah. Like whatever this or you even called the show Wire or the start up to magnet for cash because the first quarter of 2022 was huge. But it's it's slowing very rapidly. It's down start funding is down that 52%. Right. Yeah. So cut through venture is a big organisation. I don't know what they do exactly. I think they do, they do data on venture capital. Yeah. Saying down 52% from a year earlier. Yeah. 44 deals completed in June down from 63 this time last year. [00:12:27][53.8]

Adam: [00:12:27] What does this mean. Fewer start-ups starting up or the ones that are the existing start-ups more having to cut costs or what? [00:12:36][8.9]

Thomas: [00:12:36] So different different funding round. So when a new company will go for different funding round and you get the, you know, the early, I don't know what they call they've got different names like series A, Series B. Mm. There's different stages of that. They write that they raise capital. And so the different, the data here just captures the total amount going into the different series. And one of the things they're saying is like it's moving towards later series investment that the early stage investing that that's dried up the most. [00:13:05][28.9]

Adam: [00:13:06] Right. [00:13:06][0.0]

Thomas: [00:13:06] And there's been a bit of a shift away from fintech, which was sort of when we last time we talked about that was that was a big driver. [00:13:12][5.4]

Adam: [00:13:13] Now the bank closed in. They both are. [00:13:16][2.5]

Thomas: [00:13:16] So yeah. [00:13:17][0.7]

Adam: [00:13:18] It was like there was a bunch of these neobanks around for a while and then I think all the neobanks got bored out. Well, this one h got bought up by the big banks and then there was just a few, you know, banks left floating around going someone by us to and they're like, Nah, we've got one already got one. Like picking kids for the school school sports day. [00:13:38][20.3]

Thomas: [00:13:39] You know, the one the ones that got big funding this quarter were edtech education tech. Yeah. Yeah. So, so funding seems to be sort of drying up a little bit. There's also the Sydney Morning Herald and the AFL running articles on the number of start ups shedding staff. Right. Yeah. So Sandal was the one of the big ones that was a Sydney you know centre was a shipping business, was sort of taking on Australia Post but sort of focussed on business. The business trade. [00:14:04][25.7]

Adam: [00:14:05] Right. [00:14:05][0.0]

Thomas: [00:14:05] Post without the office is their their tagline classic. [00:14:08][2.8]

Adam: [00:14:09] Some clever. [00:14:09][0.2]

Thomas: [00:14:10] Yeah. Smart. Yeah. But they were a bit of a darling of like 12 months ago. But yeah they've now made 12% of their workforce redundant. Right. And what the CEO described as a pre-emptive step and he's saying that he's, he's seeing what's going on in America and getting a bit nervous, which they. [00:14:29][18.6]

Adam: [00:14:29] Don't see. They're getting rid of some customers to try and scale back the scale back divide, keep the staff on. [00:14:41][11.9]

Thomas: [00:14:41] So yeah, so they're, they're cutting staff. Airtasker now that the sort of famous name that they, they cut 5% of their staff, all the presto one. [00:14:50][8.6]

Speaker 1: [00:14:50] I didn't think they. [00:14:51][0.5]

Adam: [00:14:51] Had any staff. That was the point of Airtasker was people paid other people to do the work. It was is working with Antosca but they do you know if they need someone to short notice, you know, where they could go find someone they got together anyway this guy. [00:15:09][17.9]

Speaker 1: [00:15:09] Laid out. [00:15:09][0.2]

Adam: [00:15:11] Right. [00:15:11][0.0]

Thomas: [00:15:12] When when Volk closed down that neobank that was 140 people lost their job there. [00:15:16][3.6]

Adam: [00:15:16] Well, my my love is that there's a new start up called early work. And what early work does is they help people who've been laid off. Like Start-Ups that have closed. It's the solution. The solution to Start-Ups running out of venture capital and having to layoff staff is a new Start-Up model to help place people who've lost work due to failing start-ups. I don't know where this is going to end. [00:15:47][30.9]

Thomas: [00:15:47] Every crisis is an opportunity. [00:15:48][1.0]

Adam: [00:15:49] That's right. Exactly right. Exactly. Given how low the unemployment rate is at the moment, is this going to. Is this the kind of thing that's going to show up in the jobs data or is this. [00:15:59][9.2]

Thomas: [00:15:59] Well, yeah. I mean, it's funny the way they're reporting it. So spindles like shed 12% of their staff. That's 26 people. Yeah, they should five, 5%. That's nine people. You know, they're not big numbers because they're not big companies. I mean, that's interesting. Like, think about Sendo and Airtasker, like big names. Like they got big splash names. Everyone's like, I don't know. I feel like, you know, they household not household names, but they're pretty well known. But they're like tiny organisations. Like a task is 200 people. [00:16:32][32.2]

Adam: [00:16:32] That's the whole point of the organisation, isn't it? I think. [00:16:34][1.9]

Thomas: [00:16:34] It's tech. I think that's. [00:16:35][0.8]

Adam: [00:16:35] Everything. Yes. Tech, yeah. So you got some got some developers and I don't want to oversimplify it, but for the whole point is that you're not running all this stuff a bit like Uber doesn't run us a fleet of cars. Yeah. Yeah. The whole, the whole idea is that it works because you don't have to run a fleet of cars. Right. Yeah. And so it makes sense. They don't have a huge staff now. [00:16:57][21.2]

Thomas: [00:16:57] Yeah, that's right. [00:16:57][0.4]

Adam: [00:16:58] Okay. So it's just a tech story then. So what does this tell us about where the where the economy is that anything? Is it or is it just economy? [00:17:04][6.0]

Thomas: [00:17:04] I think I think it's I think it points to the liquidity like, you know, the there was a boom in 2021, like a massive amount of venture capital money flowing around into start-ups, into into different things, into SPACs, those, you know, blank check companies. [00:17:19][14.8]

Adam: [00:17:20] I never understood SPACs. Oh, it's like SPAC filler all over SPACs. No idea. [00:17:25][5.0]

Thomas: [00:17:26] Yeah. But basically it's a blank check company where investors put all their money in and go like, we don't know what you're going to buy, but go out and buy something. And we're just trying to buy something good. [00:17:35][9.9]

Adam: [00:17:36] For who's running them. But I think I think SPACs like SPAC, by the way, for anyone who hasn't heard the term before, I think especially special purpose acquisition companies. [00:17:44][8.5]

Thomas: [00:17:45] Yeah. Yeah. [00:17:45][0.3]

Adam: [00:17:46] So like it's so as you say it's so objective is to like by other companies. Mhm. Mhm. From what I read the other day that they're all failing as well. All these over the SPACs. [00:17:55][9.1]

Thomas: [00:17:55] Yeah. Yeah. And, and I think, I think it's a case of the liquidity tide going out. So you had all this money coming out of money printing out of the central banks that's now turned. Interest rates are rising. [00:18:06][10.5]

Speaker 1: [00:18:07] And. [00:18:07][0.0]

Thomas: [00:18:07] That liquidity starting to dry up. Dry up. Hmm. That's changing the game. Yeah, there just isn't it isn't the money that was around before. And so I oh, I have Ventures partner Laurence Schwartz was quoted saying that growth at all costs is no longer being rewarded by investors. And there's a shifting mindset towards businesses that have strong growth, but that are also capital efficient with strong, strong underlying metrics like gross profit, sensible customer acquisition costs, lifetime value retention and engagement. So basically they're saying like, there's that's the, you know, the metrics of a good business. So money's now now more interested in good businesses, whereas before they were just interested in growth, they didn't really care about underlying business. [00:18:49][41.5]

Adam: [00:18:50] Spec. [00:18:50][0.0]

Thomas: [00:18:50] Etc., etc.. Yeah, that's yeah. [00:18:52][1.9]

Adam: [00:18:53] So yeah, which makes sense. So it's no more Becky's, no more SPACs. But I did say that specs and specs, it's making a comeback. So instead of specs and specs. [00:19:06][12.9]

Speaker 1: [00:19:06] We'll have to fix its specs. [00:19:07][0.7]

Adam: [00:19:12] Why don't we? On that ridiculous note, why don't we pause? We grab a quick break from this week's sponsor and be back. After the break. We're going to be looking at Beezus versus BYD and stick around. More comedian versus economist right after this. Welcome back here on comedian versus economist. You can get in touch with us via social media, Facebook and Instagram at CV podcast or of course, send us an email CV at Equity Mates dot com or via the website Equity Mates dot com forward slash CV. Thomas. Hmm. Jeff Bezos is fighting with Joe Biden. What's going on with the heavy hitters? [00:19:52][39.8]

Thomas: [00:19:52] Yeah, they're they're they're involved in a bit of an ongoing Twitter spat. [00:19:56][3.5]

Adam: [00:19:57] Now it's become sort of Twitter man. Like, what kind of people? I don't know. I, I, I'd, I'd like to see a phone call between them, you know, something old school like kind of a face to face meeting. They met up and, you know, they had a coffee and it all kicked off. And Biden and Bezos was just say, tumbling out of a cafe into the street, you know, like everything. After all these all these big fights happen on Twitter these days, anyway. [00:20:25][28.0]

Thomas: [00:20:25] Well, I mean, they're talking they're talking to different and I mean, this a weird thing. You're pretending to talk to someone, but you really talking to your base supporters. Anyway, President Biden came out and said that he had demanded that the petrol companies lowered their petrol prices at the pump at a time of war and global peril. They bring down the price you are charging at the pump to reflect the cost you're paying for the product and do it now, he wrote. And that point, Jeff Bezos, he chimed in and said that that kind of talk was that inflation is far too important. A problem for the White House to keep making statements like this is either straight ahead misdirection or a deep misunderstanding of basic market dynamics. [00:21:08][42.3]

Adam: [00:21:09] He said he's familiar with Trump's tweets during his time in the White House, his neophyte. [00:21:13][3.5]

Speaker 1: [00:21:15] I think it's fair to say it's. [00:21:17][2.4]

Adam: [00:21:17] Fair to say the standard of tweets coming out of the White House these days is significantly improved. [00:21:21][4.0]

Speaker 1: [00:21:24] Yeah. [00:21:24][0.0]

Adam: [00:21:26] Yeah, yeah, maybe so. [00:21:27][1.5]

Thomas: [00:21:27] But then anyway, so then the White House press secretary fired back, saying that, yeah, the oil prices had fallen $15 a barrel in the past month, but the petrol prices at the pumps hadn't changed. And they said that the market was failing the American consumer. And then she goes, But I guess it's not surprising that you think oil and gas companies using market power to reap record profits at the expense of the American people is the way our economy is supposed to work. Hmm. [00:21:54][27.0]

Adam: [00:21:55] Zing. [00:21:55][0.0]

Thomas: [00:21:56] Zing. Yeah. I mean. I mean, this is the press that the White House press secretary. Right. Is sinking the boot into the third richest person on the planet. [00:22:04][8.4]

Speaker 1: [00:22:06] I love it. [00:22:06][0.6]

Adam: [00:22:08] But he's not running Amazon anymore. He's just this is flying space rockets in outer space. So, yeah, maybe she's like, wow, what's he going to do? Yeah, yeah. He's not in charge. He's this is. It's a really rich man. Yeah. Yeah. [00:22:22][14.0]

Thomas: [00:22:22] I mean, it's interesting. I think, like, I think the politics has changed quite a lot because you now have this one of the horses that Trump rode to power was anti corporate America and anti-Big Business, which and he run he won over Rust Belt America, which had seen the offshoring of of industry and jobs to other countries and then totally hollowed out the domestic economy and left people without jobs. Those constituents were, you know, previously working class and Democrat leaning. He won a lot of them over in 2016 by being anti-Wall Street anti-big corporations. And that that's that theme as far as flows through the Republican Party. And Ted Cruz now is sort of is flying the banner for that one. And he's being anti anti-big corporations and anti-big America and saying that, you know, whereas the Republican Party was always the the party of business, he's now saying that that Wall Street and the Democrats are in bed together. And that's the problem with the Democrats. [00:23:26][63.4]

Adam: [00:23:26] Right. [00:23:26][0.0]

Thomas: [00:23:27] So there's now this is the Republican Party's got a bit of an interesting split there happening at the moment, which hasn't it hasn't doesn't seem to heal yet and be interesting to see how it resolves. But basically billionaires and now the Democrats are saying like I guess that opened up a weakness we were to we were seen to be too pro Wall Street seem to. [00:23:45][17.7]

Adam: [00:23:45] Hang on the Democrats is a Biden is a Democrat, right? Yeah. 

Thomas: [00:23:48] Yeah. 

Adam: [00:23:48] Yeah. Okay. Gotcha. Yeah. And Trump was a Republican. 

Thomas: [00:23:50] Yeah, yeah, yeah, yeah.

Adam: [00:23:52] Sorry. 

Thomas: [00:23:52] Just yeah. And so the Democrats are like, well, we were seen to be too. We we got hammered because we were seen to be in bed with big business. We need to be making sure that we're not. We're going to shift that public perception and sticking the boot into billionaires seems to be the way to do it right. Well, is why is one strategy and which is why I think, you know, you got the press secretary just going to town on him, which is, you know, like he could say, like, is that really appropriate for like, you know, the press secretary of the leader of the free world to be making calls like that? But that's that's the sort of weird Twitter verse that we live in now. [00:24:25][32.7]

Adam: [00:24:25] Yeah. [00:24:25][0.0]

Thomas: [00:24:26] You know, I don't think Biden's got any political friends. Really does. Take his money, but they know there's no one going to stand up for him in this. 

Adam: [00:24:33] So is that what Bezos is saying? Is Bezos calling him on the sort of political bullshit or is he this Bezos? What's his motivation? 

Thomas: [00:24:42] Like, what's this spat started. So that's where it that's what happened last week. But this spat started a few weeks ago where President Biden tweeted, you want to bring down inflation question mark. Let's make sure that the wealthiest corporations pay their fair share. 

Speaker 1: [00:24:57] Right. 

Thomas: [00:24:58] And so you sound like you want to bring down inflation. Let's make sure wealthy corporations are paying tax and the businesses like what? That doesn't even make sense. Like saying like he tweeted, the newly created disinformation board should review this tweet. Or maybe they need to form a not a new non-sequitur board instead. Raising corporate tax. Corporate taxes is fine to discuss timing. Inflation is critical to discuss. Mushing them together is just misdirection. 

Adam: [00:25:23] Hmm. What do you reckon? 

Thomas: [00:25:24] I mean, it's to an extent it's right. So Lawrence Summers, who was the former treasury secretary in America, I think under Clinton, maybe he said it sort of like, yeah, it's like it's mostly wrong what Bezos is saying. Like if you if the problem is excess demand and there's too much economy, too much money in the economy, as a general rule, take the government taking more out of the economy in tax slows the economy down. And so if you got inflation because there's too much demand and too much money in the system, raising taxes and taking money out of the system is a way to cool inflation and that that kind of works. Right. But it is sort of it's not direct. You don't typically talk about raising taxes as a way of fighting inflation. It depends on where inflation is. Right. So like, if you. 

Adam: [00:26:09] You could do it though, like because we talked last week about somebody wrote us in saying could we raise the GST as a way of fighting inflation rather than raising interest rates? Could we could we raise the GST? Everyone have to pay a bit more money that would reduce their spending and yada, yada, yada. So yeah, I don't know. Is that is that the argument that they're saying or is that is that what Biden saying? They think if they paid more tax, then that would somehow control inflation because they're not spending as much. 

Thomas: [00:26:37] Yeah, there'd be less money in the system. Yeah. If the government took it out and then just sat on it and then didn't put it back into the system, that that would, that lowers the amount of money in the system and that theoretically lowers demand which pulls down demand, demand, pull inflation if that's what if that's what you're fighting. But I think businesses point is like when we talk about inflation, we're really talking about cost push inflation. It's all about supply bottlenecks, it's all about the disruptions with COVID and those sort of things. And if you're talking about like too much demand money in the system, well, you just printed like a gazillion dollars. 

Speaker 1: [00:27:14] And just let. 

Thomas: [00:27:15] It flow out. Like you blame corporations for that. 

Adam: [00:27:18] Like, I do feel like that's starting to bite people in the arse a bit now. Isn't that the whole money printing thing? That's it's starting to not look like such a terrific idea because there's nowhere to put money. We've disrupted the the equilibrium somehow of the markets. And there's a lot going on on the war and and COVID and everything else. But I feel like a lot of this is going to start getting traced back to that, that crazy money printing that went on. 

Speaker 1: [00:27:45] Yeah. 

Thomas: [00:27:46] I, yeah, I think it is. But I think, I think the, the thing to remember is the scale like is sort of like saying having a coffee is fine. Mainlining coffee straight into your veins is not a great idea. Like it was a bit like that. Like some money printing in a measured dose, slowly scaled up, carefully watching where your like where the slack is in your economy and where things are too tight. And then managing around that which is which is more closer to the MMT position, like the MMT position was never just print money like a madman who got it into the economy, which is kind of what we ended up doing because we got away with it in 2008. So, you know, us went into QE after the global financial crisis and had some money printing and and it sort of worked out alright. We didn't get any inflation. The Fed undershot the inflation target for most of the 2000 and tends to be we kind of got away with that and then. 

Adam: [00:28:43] They'd been like baby.

Thomas: [00:28:47] Like I think the scale of money printing, I think in hindsight is definitely a mistake where the money printing as a concept was a mistake. And I think I think we probably overclocked how the impact that Clover was going to have on demand. I don't I don't think it was quite as bad as we anticipated it being. And it was, you know, it was really pretty bad. 

Adam: [00:29:08] Like. Yeah, supply chain disruption all over the world, isn't it. 

Speaker 1: [00:29:12] Yeah, pretty bad. Yeah.

Adam: [00:29:14] Well then what you scale is are you working.

Speaker 1: [00:29:16] On. 

Adam: [00:29:18] How bad supply chain disruption is. But yeah. 

Thomas: [00:29:22] But not only. 

Adam: [00:29:23] Where I'm sitting. 

Thomas: [00:29:24] Yeah, but no the, the problem is there's too much debt, there's too much demand now, like we like. In Australia we talk about job keep job, keep overclock things. There were companies that didn't need the support. They've got a lot of support. There were individuals who got a lot of support there that didn't really need the support that was there for people who definitely needed it and they got it and that's great. We're definitely not threatening the Australian context. I think you'd say we overclocked it and ended up with with too much demand and too much money in the system. And that's where a lot of that inflation is coming from. 

Adam: [00:29:55] When just out of curiosity, do you know do you know when Biden was sending these tweets? Was it was it late at night?

Thomas: [00:30:01] President couldn't tell you because. 

Adam: [00:30:02] I did read something the other day that people are starting to question that maybe Biden's a bit old and that and that his his political staffers and aides are like, look, he can't really come out at night time anymore. He shouldn't. He just needs to get to bed nice and early. But then, on the contrary, some other people like, nah, he's a super ager. That's a thing as a super age, as someone as super ager is someone like in their eighties, but they kind of have the cognitive abilities of someone like in their forties or something.

Thomas: [00:30:36] So like, okay, yeah. 

Adam: [00:30:38] I'm a super ager of it. I'm in my forties, but I have the cognitive ability of a five year old. Finally on the show today, we got an email from Nick. Send us an email at Equity Mates dot com with a little bit of a correction from last week. And I can't help but want to blame you, Thomas. Despite this, I think being my fault, I think last week we were talking about the 6040 rule and 64 year rule being 60% equities and 40% bonds making up a portfolio that was pretty resilient. We're talking about bonds and how bond prices are structured, and I think I might have said that. So when interest rates go up, bonds go up. But Nick sent us an email kind of correcting it. And I'm going to take Nick's word, but I'd like you to explain what's going on, because I got still got no idea. 

Thomas: [00:31:31] Yeah. You know, Nick's Nick's right. This right. I mean, it's why is this why this is such a interesting phase in the market and why and why we're sort of out of sync or why the 64 stopped, 6040 rule stopped working. And so the idea with the 6040 rule is that when you're equities are falling, the new year bonds are rising and vice versa, and you kind of balance it out. And so typically in a normal cycle, when interest rates are rising, it's because the economy is running really hot. And when the economy is running really hot, corporate profits are up and and equities are booming. And you sort of like having to raise rates to sort of cool, cool things down. And but when interest rates go up, then then bonds fall. When the economy's tanking and company profits are falling and share prices are going down, then you start cutting interest rates and that pushes up bonds. And so you have falling equities in that scenario about rising bonds. Right. And that's typically how it works. But what we've got, why it's sort of weird now is because equity valuations exploded on the back of cheap money and money interest rates and money printing. And now that that's being unwound, so you've got interest rates rising, that sort of speculative heat is coming out of the market and the market is correcting. So you've got interest rates rising at the same time, which is then causing equities to fall. And because of the interest rates rising, which is pushing down bond prices and equities are falling because liquidity is coming out of the system. And so that's sort of like the unusual situation you've got and why the 6040 rule doesn't work in a market like this. And so I think it was worth trying to sort of get to. Yeah, it's like it's sort of an artificial market that's been created by it, by super cheap money. That's what's broken the 6040 year over year yet. And Nick's right. Thanks for that correction. That's good. 

Adam: [00:33:21] Yeah. Thanks very much, Nick. Look, if you want to send us an email CV at Equity Mates dot com, you can get in touch with us there. That's it for us this week. We have two weeks off. We'll be away for a couple of weeks. Hopefully our absence will make your heart grow fonder. In the meantime, I hope you will hope you're enjoying school holidays with your kids if you got them. Otherwise, we will come back refreshed, raring to go in a couple of weeks and we look forward to your company then. Bye for now.