Will a Credit Quality Death Spiral to kill BNPL?

Adam: [00:01:01] 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: [00:01:15] G'day, how are you doing?

Adam: [00:01:17] I'm very well. Thank you. Don't forget there's still time to register for the ASX share trading game that we're taking part in. We'd love you to join in with us. Gameplay starts on the 3rd of March, so make sure you get signed up, get registered and have a bit of fun along with us. But Thomas massive show coming up. Lots to get through. We're going to be taking a look at buy now, pay later companies, and they're actually set to join Married at First Sight next season as they attempt to find love again. Having found themselves totally unloved by investors, we're going to take a look at what's going on at Lark Distilling. Turns out, not everybody likes ice with their whisky. The Aussie dollar is falling. Gary sent us a message at Cevey podcast and wants to know what that means for buying US stocks. And you know, the property market is out of control when a doghouse is selling for $300000. We'll take a look at why that's selling for so much. But first, Thomas, everyone's panicking about inflation, not BHP. They've rolled out the iron carpet. It would seem what's the what's the deal there? 

Thomas: [00:02:26] BHP reported their results. Yeah, a good result for BHP. They're pretty happy. The underlying profit of $9.7 billion in six months. Wow. Not a bad hourly rate? If you calculate that they bumped their dividend too so analysts were expecting a dollar 24 US dollar 24 per share, but they bumped that up to a dollar fifty. Say, yeah, nice of you're owning BHP shares. But yeah, but they're saying the strong is obviously driven by iron ore prices, which is through the roof, but also for coking coal and copper prices. So yeah, they're they're riding the commodity boom. I think their share prices up 25 per cent since November. 

Adam: [00:03:05] What's BHP making these days? They're still just in in digging up the ground like because if you look at their ads, have you seen any of their TV there? They like you'd swear they were in renewables, like there's like sunshine and green trees and leaves. And like, you know, I'm going to say that they're kind of maybe it's a bit of a stretch. Obviously, that's a conscious effort to rebrand themselves. But they're kind of like, you know, we're getting all this electricity from the Sun now, and it's our copper that's helping, you know, shift that electricity around the grid. It's kind of like, Yeah, I get it, but it's really like like melting asphalt to make the roads and then claiming that you're behind the electric car revolution, you know, like, 

Thomas: [00:03:53] yeah, it's got to make it happen. Yeah. And I mean, the East is definitely a thing like investors are putting a lot of pressure on companies so that with Cannon-Brookes and the AGL takeover this week is pretty, pretty nuts. But yeah, it's like, I think companies are feeling the pressure and they've got a sort of at least rebrand to be a bit greener, if not deliver some results. But I don't know what it's doing on that front. 

Adam: [00:04:15] All right. So you're getting a dollar fifty per share and share prices 48 bucks, that's three percent already just on just on dividend alone. That's pretty sweet. 

Thomas: [00:04:23] Hmm. Yes, good result. And then they're pretty bullish, though, pretty, you know. I mean, obviously, the commodity price is booming along a pretty good. They did mention that this industry wide costs are putting pressure on profits, saying that some commodity linked uncontrollable costs have gone to record highs and they're expecting those the cost profile to remain challenging through the 2020 calendar year, particularly around supply bottlenecks. So inflation's, you know, definitely definitely having an impact. But they reckon chief executive Mike Henry came out and said they're looking at a decade of inflation and said, Do we expect there to be a degree of permanency to this? Certainly, yes, he said. But he thinks it's going to be. We think that demand led inflation. So we were at the moment, we're in a supply shock because it's supply side stuff. It's it's bottlenecks in the supply chains, all of that. That's what's driving price increases. But he sees that moving to more demand pull inflation where there's sort of so much heat in the economy that that starts driving, driving prices higher. And he reckons that's that's broadly positive for commodities. So as the economy ramps up, people need more commodities to do the economic stuff they do, and that's good for for BHP. And so he reckons that BHP will be able to be able to stay on top of their supply chain cost pressures, but and then ride the wave of greater demand in the economy for good times, right? 

Adam: [00:05:48] So well. So inflation's is posing a problem for a lot of companies and a lot of organisations that they're just kind of saying not we're with we're running a really tight ship. We're kind of. We're on top of it, we can handle any of those those increases in cost and just keep smashing it. 

Thomas: [00:06:06] Yeah, pretty much, pretty much. Yeah, that's that's the idea. I mean, the commodity producers are nice and decent at the top of the supply chain, like they're not totally dependent on. I mean, they face labour costs in some other sort of cost, but largely is digging stuff up out of the out of the ground and shipping it around. And so that, like economy wide price pressures don't hit commodity producers as much as they might here hit like tech manufacturers or something that is sort of more in the middle of those supply chains. So it's it's generally sort of good for for commodity producers. 

Adam: [00:06:39] Mm-Hmm. And what's their reliance on, you know, like we've talked a lot about China on this show and struggles of ever ground and the potential collapse of of, you know, the building industry in China. So what's what's China and other countries kind of role here like BHP have a reliance on those. Are those countries for success?

Thomas: [00:07:00] Yeah, I mean, it's definitely been a big part of the demand story. Is China's buildout particularly like you zoom out and look over the past 20 years. You know, the massive urbanisation of the Chinese population that's been, you know, and the older building that's gone along with that, that's been incredibly supportive of commodity prices and really good for companies like BHP. Yet there is a sense that that might be unwinding now, like new property sales in China just through the floor now, like the property sector's in a massive freeze. Not quite a crash yet. So yeah, that's got to be weighing on the outlook, you would think. But so far, you know, iron ore prices are still soaring, like commodity prices are quite high at the moment, so it doesn't seem to be. The China story doesn't seem to be impacting that just yet. 

Adam: [00:07:46] I saw an article the other day that China was building this. Well, I think it's gangs you ever grant was like, that is the soccer team of of the Evergrande Company. So they had they had big, big future ahead. They were building a stadium that was going to like it was going to be bigger than Wembley. It was the biggest. It's going to be the biggest football stadium in the world. And that's just they've just canned it like one third of the way in that it's like now we're just going to park that. So it's just this massive unfinished stadium which who knows if if it'll ever get completed. Yeah. Anyway, did you have anything else you wanted to mention about BHP while we're looking at it? 

Thomas: [00:08:27] Not not that. That's it. That's all. I had a pretty boring break. or I won't take a look at buy now, pay later and Thomas once they were the darlings of the ASX. Now that definitely seemed like they're on the nose. What's going on with buy now, pay later? 

Thomas: [00:08:45] Yeah, it's a buy now. Pay later is a sector is a bit exposed, it seems. I'm reading a bit of bit of analysis lately saying that buy now, pay later is a bit exposed to rising interest rates. So you think about their business models, are they they borrow at sort of sort of the benchmark rates plus a plus a premium depending on the credit quality of their loan book. So yes, that's like, you know, so those those floor interest rates plus a plus a margin, that's what they borrow at. And then they lend that out effectively, even though they're not technically providing credit, but they lend it out to anyone. 

Adam: [00:09:21] Anyone listening, you can't say it's own. This is done about six air quotes in a row. 

Speaker 3: [00:09:28] Yeah. So yeah, so they're lending out 

Thomas: [00:09:30] in quotes money to the to the to their users. And then there's sort of a margin there that they get, even though they're not receiving interest, a lot of them just receive a service fee. Yeah, but look, Italy, they're in the credit business and their costs are rising. But because interest rates are rising, so the bank bill swap rate, that's that's sort of one of the anchor rates that's up a few hundred basis points. So that that's their costs are rising, but they're not able to fully pass that on to the to their consumers, partly because of their fee model rather than an interest model and some other sort of reasons. But. So basically means that their margins are getting compressed. When interest rates go up, their margins get compressed, and that means they become less profitable. So a firm is a big buy now, pay later company in the states. They reckon that for every 100 basis points, interest rates go up, those benchmark rates go up. They see a 40 40 basis point fall in their profit margins. And so falling profit margins. Obviously not a great story, and a firm's results were interesting. Their recent results and their revenue was up seventy seven percent and their active users were up 150 percent to eleven point two million. So on those numbers that should that should be that's going got going. Great guns revenue up seventy seven percent, active users up 150 percent. 

Adam: [00:10:53] This is a firm that the US line up highlighted one one of the giants in the US, right? Yeah, that's 

Thomas: [00:10:59] right. That's right. Yeah. So that. They should be great results, but their margins were down from fifty point eight percent of revenue to forty two point eight percent of revenue, which is quite a big fall, and markets freaked out about that and their share price fell like 45 percent. Wow. Hmm. So, yeah, so falling margins are often, you know, typically a sell signal is either that there's strong competitive pressure, which I think there is a bit in the buy now, pay later space because you've got a lot of a lot of entrants in the market now or it's got this some structural problems and that's those structural problems coming through with with rising interest rates. 

Adam: [00:11:35] And so that's going to get harder to like. That's going to get harder to attract new business, obviously, because they're going to have to add in some way. They're going to have to pass those costs on out. They like through the service fee that's going to have to go up. Do you think do you think this is the end of the buy now, pay later experiments in a sense that, you know, it was like the great saviour and the great alternative to, to credit and to credit cards and that kind of thing. Is that something that can only work in a really hyper low interest environment? 

Thomas: [00:12:06] I don't know about this issue about low, but maybe just stable. Like you said, you know, you lock in your service fee around a particular interest rate. You're getting you're getting money at a particular price and your service fee kind of works with that. But then if interest rates go up, you just if they just change, then that that affects you, the margins that you're getting. And that's sort of what we're what we're seeing. I mean, so there's that there's that issue for buy now, pay later. There's a second issue, which is the credit quality death spiral. So like so we've got an inflationary environment, so everyone's facing higher costs. Interest rates are going up. So that means student loans, car loans, mortgage rates are going up, inflation's going up. So that's eating into the budget. So consumers are feeling feeling the pressure. And then if buy now, pay later increases their rates to try and sort of try and buffer up those margins, the more responsible users or the users that don't have to use it will just pull out because they've got other costs they've got to deal with. And the fees are going up the buy now, pay later. So that is going to get I'm just going to pull out of that and that what that means is that the quality of your user base starts to degrade because you sort of left or you could call it your higher, you know, your quality borrowers, the ones with high credit scores, they start leaving your service and then left with a greater concentration of lower quality credit score uses, which that creates a problem. And because the like the the cost of capital for the buy now, pay later companies, that's in part determined by the quality of their loan, book, loan, book again and in air quotes. So they kind of becomes a bit of a death spiral because then that pushes up the rates that the cost of capital for buy now, pay later, so they have to increase their margins, which further pushes the quality borrowers out of the system again, which means they have their cause. The capital goes up, which means they have to push up their prices again. And so you get these kind of death spiral dynamic happening and, you know, know how serious it is. But I think it's a bit of a problem for them, and I think the market has turned like, definitely sentiment has turned. There were darlings, but you look at in America, the numbers are crazy. So Xzibit is down 95 percent from its IPO. Laybuy is down 91 percent from its IPO zip codes, down 77 percent. Sezzle was down 83 percent over the past year. So yeah, it's a there's definitely a sell off in buy now, pay later happening. And yeah, I think maybe I don't know if it's dead, but I think like it's I mean, fundamentally, it seems to me buy now, pay later is just credit in a different package and credit's been around forever. So that's not going anywhere. Whether buy now, pay later as a way to brand and deliver credit sticks around or has to evolve, I'm not sure we'll have to see 

Adam: [00:14:53] as tough to because you mentioned, you know, that they're going to have lower quality borrowers, subprime borrowers, maybe you might call them. So presumably they're going to start defaulting on some of their debts too, right? So but buy now, pay later. Unlike traditional credit where you think of, you know, if you wanna go get a loan, typically there's a minimum kind of financed amount. So you got to get, you know, you want to buy a car. Maybe it's 20 grand or even a holiday. Maybe it's five grand. You know, there's usually a minimum, whereas the attraction of buy now, pay later was always like, you know, you could borrow it by now you buy a pair of shoes, you know, like if people start defaulting on their pairs of shoes, there's nothing you can go and reclaim. And so like, you can't go. What are we guys going to list a pair of used Reebok's on on marketplace 

Speaker 3: [00:15:40] or something like the? 

Adam: [00:15:42] These companies have got nothing that they can claw back from the consumer. Like, you know, if if I lend you money to buy a car and you can't pay the loan anymore, I can just sell the car and at least get some of my money back. I imagine all of these companies that have just sold like fragrances. And shoes and God knows what else on buy now, pay later is going to be like, Well, have you got any money? No, I haven't. That's why I used to. 

Adam: [00:16:09] I used I used by that vehicle. I didn't have any money. I still haven't got any money and I've worn out the shoes that I've worn. So I think that's good. Yeah. All right, Thomas Gary message this. I think it was via Facebook or Instagram at CBC podcast. Hey, guys, love the show. I don't know if this question is really relevant to economics, exactly. But are you investors wanting to invest in US stocks has to give you changing IUD into us when the dollar is so low at the moment to buy shares? Does it matter? Or is it all relevant to the time we might sell in the future? 

Thomas: [00:16:45] Thomas Yeah, the question is the short answer is yes, it is relevant. If you're investing in US stocks depending on how you do it, but like if you're going into like a US broker, like a stake in Australia or something like that, then you've got to convert your currency first when you deposit your money. And so the exchange rate matters the same story on the other side of the trade when you when you bring it back and if you sell your holdings and bring it back to Aussie dollars, you get an exchange rate sort of question there as well. So to answer is yes. Yes, it does matter. 

Adam: [00:17:19] Hmm. Right. 

Adam: [00:17:21] Oh, yeah. Well, I mean, it happened a lot. I think there was a lot of this with the boom that we saw sort of immediately following Covid or after Covid. You know, what do we have the V-shaped during the recovery and all the companies like Netflix and all the fangs really took off. I remember there was a lot of people saying that they hadn't actually made a lot of money because of the the exchange rate was kind of eating into a lot of those profits. 

Adam: [00:17:47] Mm hmm. 

Thomas: [00:17:48] Yeah. Yeah. I mean, it's sort of a quick I mean, on the long run, look, I think you couldn't you could potentially time it like you sort of know if you're not too sensitive to it. And it's a nice thing about being a retail investor. You don't typically, you're not looking to get in and out too quickly. I mean, some people are depends on how you play it, but you know, the Aussie dollar typically moves within a band like it gets down as low as 50 cents and it gets up as high as a dollar bill or something at a at its at its extremes. And then, you know, over the long run tends to sort of oscillate around 70 75 cents. So you get a fairly idea the kind of rain good idea of the range that it's moving in. It's not going to 25 cents, it's not going to $2, not anytime soon. And so you can sort of like, you know, maybe year load up when it gets to the top of that band, if it gets to sort of the high 80s or 90s or something. If we get that and if it gets down into the mid 60s, maybe that's a good time to sort of bring some money money back, you know? 

Adam: [00:18:45] Are you effectively then just forex trading by proxy, though?

Adam: [00:18:49] Like, I'm going to advise you to buy shares where the dollar is low and I've got a seller where the Dollars like you like you might. 

Adam: [00:18:56] I think maybe forex trading might be the might be the play for you if that's your guy. 

Thomas: [00:19:01] Yeah, but I mean, but that's the thing, right? Like if you're investing in us, is you are effectively taking a position on the currency. You have your forex trading, you have a currency risk and your share price risk. You've got both of those questions, whether you do it consciously or not, like you might just go like, I'm just going to ignore the currency risk and just assume that it's going to balance out in the long run. If I'm just sort of like consistently buying, you know, American stocks when I when I have the chance, when I have the money and then I'll just trust that it'll it'll come out in the wash eventually, and I won't worry too much about it. You could do it like that. But yeah, but but you could also do it the other way. And some people do recommend like when there's some traders I know that say, you know, the Aussie dollar gets down to mid to late 60s. That's a good time to go for US stocks because if you've got a good view on a US stock that you like, you know, like, yeah, I'm going to take that stock risk. But I'm also willing to take the exchange rate risk because the exchange rate, given its sort of historical valuations, is looking pretty good right now. 

Adam: [00:19:58] Yeah, I look at the Dollars drop. It was about 80 cents a year ago, and it's now down to 72 cents. Mm-Hmm. So yeah, it's not huge, but it's going to make a bit of a difference. Yeah. So what's that? Yeah. So what's the play then for if? Is the dollar going to continue heading low? Is that what we're going to see? 

Adam: [00:20:17] This is yeah, this is

Thomas: [00:20:18] the really interesting question right now, and it kind of it swings on terminal rates. So terminal rates is like so, you know, the developed world, pretty much the whole world is hiking interest rates now. At some point they're going at that's going to top out and they'll stop hiking rates. The point at which they stop hiking rates is called the terminal rate. And so you're hearing a lot of discussion now about what's the Fed's terminal rate, what's the RBA's terminal rate? If the interesting thing is, if you look at market pricing, now what the market's expecting rates to do, the US terminal rate is one point eighty seven per cent. The Australian terminal rate is two point forty seven per cent, so it's like 50 basis points higher, 60 basis points higher. Even though the inflation outlook is completely different, inflation's running at seven and a half per cent. In America, it's two and 2.6 per cent here, so it's a little bit hard to square that away. A lot of people saying this is a bit of a puzzle, you know, you know, on that on that measure in 14 months, Australia has the highest interest rate in the developed world. Even though inflation's running very low, so it's sort of like it doesn't really make sense. But if that was to play out and we had a higher interest rate than the US, then that puts upward pressure on the US dollar because if Aussie dollars are returning, more people want more of them and that pushes the price up. So a higher interest rate differential in favour of Australia starts drawing money into Australia, and that pushes the Aussie dollar up. But I don't really know that many, many economists who think that we've got that's going to play out, SEBA is saying. The terminal RBA said terminal rates one point twenty five percent. And so if the Fed gets to one point eighty seven close to two per cent, we're at one point twenty five. That should put downward pressure on the Aussie dollar.

Adam: [00:22:05] So the RBA is bloody lying again. Are they? They're up to their old tricks? 

Adam: [00:22:09] Well, no, no, no, no, no. The RBA yeah, it's got 

Thomas: [00:22:13] nothing to do with this. This is markets pricing in. So you can sort of you can track it. 

Adam: [00:22:17] But the RBA has got a. Weren't they the ones that? Isn't it their forecast or is it the markets for the terminal right now? 

Thomas: [00:22:24] Terminal rates the market? That's what the market reckons. 

Adam: [00:22:26] Oh, it's not the RBA. 

Thomas: [00:22:28] Not not right. The RBA is keeping that to their chest, though they're not. They're not keen to tell you where they think the terminal rates are going to be. 

Adam: [00:22:35] Now, why 

Adam: [00:22:35] would they now 

Adam: [00:22:39] believe them about interest rate increases before so? 

Thomas: [00:22:42] The short answer to your question there is. Who knows? Like if you you know the the current price of exchange rate is based on the collective market's view of where the future of all of these factors, which means that they think that the current price is fair value. How the situation unfolds from here will determine what what that is. But right now, that seems that's the current price is always the market's best guess at what fair value is that makes sense and that the guess changes as circumstances evolve so inconvenient. 

Adam: [00:23:16] Yeah, can I tell you what's going to happen? We can tell you what's happening right now. That could be the motto for CBA.

Adam: [00:24:43] Welcome back here and comedian versus economist, don't forget, you can always send us an email Covid, Equity Mates wsj.com or via the website Equity Mates dot com forward slash CV and you can also, of course, follow us on social media, Facebook and Instagram at CBC podcast. Thomas There's a bit of trouble brewing at a 

Adam: [00:25:08] would be 

Adam: [00:25:09] so much better. This is a beer operation rather than a whisky one man anyway. There's trouble at Loch Distilling this week. The whisky maker's CEO had to step down after footage emerged of him smoking what appeared to be an ice pipe. Um, now, Thomas, before we get into this. I want to ask you, can I make jokes about it or is that like, you know, is this is anything off limits? I just want to gauge how open you are of sharing a defamation lawsuit. 

Adam: [00:25:46] Yeah. 

Thomas: [00:25:47] Now you're on your own show. 

Adam: [00:25:48] I think we all right. But at arm's length. All right.

Adam: [00:25:55] Well, maybe you tell us, tell us what's going on at Lark Distillery? 

Thomas: [00:25:59] Well, yeah, it was the managing director, Jeff Bainbridge. Yeah. So like distilling a Tasmanian whisky maker publicly listed, he was the victim of a shakedown, in his words, in south east Asia. In 2015, he was over on a holiday and someone got some footage of him smoking an ice pipe, apparently. And he said, I attended a gathering with people I didn't know and don't remember much about that night. 

Adam: [00:26:24] Hang on, was someone else holding the spot? 

Adam: [00:26:28] It's tough. It's a tough defence. 

Adam: [00:26:30] Where do you see, man? Let's leave that for the courts. 

Adam: [00:26:35] Yeah, but 

Thomas: [00:26:37] well, I don't think he's denying it. Well, the next morning I was played footage which made it clear I'd been set up as part of a shakedown. And it's like this was 2015. And since then he's he's paid, paid them some money. He engaged a London based threat assessment agency and then eventually just stopped replying to the blackmailers, who then released videos to the media outlets. Yeah, and saying, Although I consider myself a victim of a crime, I accept that I'm also responsible for the circumstances I find myself in. I'm the victim of extortion, but that wouldn't have occurred without my poor judgement. I'm deeply remorseful for my actions, so he is taking responsibility for it. He had stepped aside. 

Adam: [00:27:15] I think I said, I don't want to condone illegal drug use here. Comedian versus economist. But I think you can kind of see, you know, like if you work in a whisky distillery all day and you get home and you want to relax and you look and feel like pouring yourself a whisky, they'll say, Well, maybe you feel like I just gave her a quick ride on the Polar Express and just unwind after a busy day of whisky dealing. That's, you know, I think we shouldn't judge him too harshly. But yeah, because he's not. I mean, you know, he's a whisky dealer to begin with, like, he's not exactly starting at the top of moral mountain away, you know, selling booze. If we if we boil it down. Yeah, yeah. Um, you know, as I say, not condoning illegal drug use by any stretch. 

Thomas: [00:28:12] Yeah, I mean, it's a tricky thing being, you know, a public figure effectively like as the managing director and you're kind of in the news and you go to front for the company, you've got to meet with investors. I think I think I don't think it's like it's an issue per se. 

Adam: [00:28:26] I say this is something they get even through the investor meetings. Oh man, I got this. I got this earnings call in 15 minutes. I might just know. Look, if you if you're the managing director of a public 

Thomas: [00:28:45] company, you know you're representing the company. People want to know that you know they're investing in you. You're managing their money effectively. Yeah. They want to know that you're going to do a good job on that. You're not going to blow it all on on 

Adam: [00:28:58] the IRS or something. Yeah, true. 

Thomas: [00:29:01] So I think I think that's where it became untenable. It's an 

Adam: [00:29:04] interesting question. It's an interesting question, though, is how long are you responsible for the sins of the past? Like, I mean, because this happened in 2016. So 15, 2015. Sorry, so six years ago. So and you know, absolutely not the right thing to be doing. But that was before he was C. It was before he was right or involved managing director and before he was involved in this company. Maybe it was on his job description of his previous gig to not attend 10 parties and occasion of travel like he was part of a crypto start-up. That's just how easily it can happen. Yeah, no. We saw what we saw with Grace Tame as well. So she was she was there was that photo circulating in the media recently with her sitting next to a bong. And that obviously this photo was taken a long time ago, and it's the same sort of deal. How long do you? Because it'd be incriminating photos of everyone, I'm sure, out there doing something to varying degrees of criminality or or otherwise. So, you know, guys, some of. I don't know, there's bound to be photos of me out there that I'd rather not get out. But, you know, because we're all we're all be young and reckless in our younger days. Like, how how long do you kind of, you know? Or is that just the world we're living in now where you need? To have a squeaky clean image from your past as well as your present, yeah,

Thomas: [00:30:35] my sense is that this is shifting is my view and I reckon Trump sort of brought this in, you know, like the whole member, that whole grab them by the pussy kind of quote. Like when that first emerged, everyone was like, That's he's done. That's the end of Trump. You know, you can't as a politician, as a presidential candidate, you can't be on the record talking about grabbing women by the pussy. But he just roll with it and went like, Yeah, that's who I am. You know, and so I think I think the sort of the outrage I think we might be sort of reaching a peak and people are, yeah, people just did stuff. And I kind of think like, as you're saying, like he's a he's the managing director of a of a of a whisky company. He was on holidays in Asia somewhere. Some weird stuff happened. I kind of feel like most people would be like, Yeah, I get it. You shouldn't have done it yet. You messed up. But does it really affect your performance as managing director? Maybe be. People start to look through it 

Adam: [00:31:29] on the Trump thing, though I don't think anyone. I don't think anyone accepted that and condoned. I think it was just he had a large supporter base that like thought that made him cool somehow, which is terrific in its own way. And so, yeah, I I don't I think that's to me, that's a different thing. That's not that's not forgivable. Whereas grace time, for example, smoking a bong, he just got mad. That's that's, you know, that's reckless. Kind of. Mm hmm. That's just something you probably a lot of people would have done, you know, when they were younger. 

Thomas: [00:31:59] Mm hmm. Maybe I'm, I think, was interesting with perennial value management. They owned like a 10 percent stake in Lark. And so you know what? Mr. Bainbridge quit in the share price fell from $4. 55 down to three point sixty. So they got a tank who got a bit of a shellacking there. Belak was like, Yeah, whatever. This is fine saying that is. That said, Lark is a 30 year old company. Jeff was there for two years, and they've got a whisky inventory worth $430 in at maturity, well ahead of today's market cap. And that was their statement on. And so this was like, yeah, it's a small issue. It's a problem. Whatever he's got on, that doesn't mean there's a problem with the company. And I thought it was really interesting that pointing to the whisky inventory of $430 million, so they're locks, market caps, currently 270 million. So their inventory is worth more than their current market cap, and it gets a bit like Warren Buffett's cigar. But stocks, if you remember, that's a Warren Buffett talked about, like when he when he was in his early days as an investor, he went after cigar about companies like companies that had a lot of problems, but they're like one one last finding a cigar, but on the on the street and there's only one laugh. One last puff in it. But that good. You got it for a bargain that that puff is all profit. And taking that saying so perennial sort of saying like, looks a bit like that, like even if they just wound up the company tomorrow, they've got that much inventory on, you know, on hand that they're worth more than their entire market cap. So you can't really go wrong. So like, why would we get out? Like even if we thought this was a big problem with company culture and whatever, rather than just one guy messing up, even even if even if that was the case, the inventories were so much that you can't really go wrong. 

Adam: [00:33:46] And maybe Bainbridge thought the same thing, and he just was walking her out of the party. He saw an ice pipe on the ground with one puff and he thought, I just finish it off. You approve it. The three or four of it. All right, Thomas. Finally, Christie's auction house is auctioning a dog house and it doesn't even come with a dog, and they reckon it's going to fetch $300000 at auction. Man, what a good boy. I wish my dog would fetch me $300000. Why is this dog house so, so valuable? 

Thomas: [00:34:23] Yeah, it's a special one. Because it was it was in Costa Rica and it got hit by a meteorite and put a hole in its roof. So it's a pretty, no frills looking shelter. It's pretty basic, as you expect the dog has to be just some like 

Adam: [00:34:38] second hand or get it on. I think we should spend too much time explaining a dog has to say one thing, and it is very much the right of the dog as it just got hit by media on. Worth pointing out the dog is fine, though. 

Thomas: [00:34:51] Rocky. 

Adam: [00:34:52] Coincidentally, though, yeah, rocky it was. It missed space. Rock just missed Rocky. The dog Bryce. It got hit by a meteorite. And so what would have you couldn't have given it away? Probably you wouldn't. You would have previously 20 bucks for him on Gumtree or whatever. And now it's going to be $300000. 

Thomas: [00:35:10] Yeah, yeah. I mean, it has been mounted on an astroturf platform. 

Adam: [00:35:15] Oh, well, yeah. Well, you had to sign me up. I wasn't interested at $20, but now you've put artificial lawn underneath it. 300000 things about, right? Yeah. 

Thomas: [00:35:32] Yeah, I mean, I didn't realise this, but like meteorite, close calls are incredibly rare. Like, no one has ever been in history that we know of has ever been killed by a meteorite falling out of the sky or on top of them. There was was one woman in Alabama back in 1954 who got hit by something and got a severe bruising. But yeah, because it came through her roof. But apart from that, that's it. 

Adam: [00:35:56] I'll be cancelling my meteorite life insurance policy, that's for sure. Yeah, yeah. Well, there have been some other there's a bit of a precedent for this, too. So that was a mailbox that was struck by a meteorite, which sold for some ridiculous figure. 

Thomas: [00:36:10] Eighty three thousand 

Adam: [00:36:12] eighty three thousand Thank you. Interestingly, though, there was a meteorite that struck and killed a cow. Hmm. And the meteorite, the rock that hit the cow only sold for 5000 mm. So, so the meteorite themselves is not is not seemingly the thing that's of value here, which is a bit puzzling. It's the thing that it hit, which, you know, in the case of the dog house is fine. So, yeah, it was so interesting that this cow got killed by a meteorite. The rock only solved 5000 K the stakes, however, $4000 a kilo. That's not true, although I'd love to say that I would add like hungry jacks. You mean how they describe how juicy and delicious their patties up? We have these the finest cuts. The flame grilled juicy tend to be if you can only get from a cow that's been smashed in there by a meteorite like that. That's a burger that I would. But I think I think it's the cool factor. Like, you 

Thomas: [00:37:16] know, if you have it in your mansion, if you're dropping three hundred thousand, you've obviously got a mansion. You know, you pull in, look at this dog house got hit by a meteorite, maybe actually going to put a dog in it, that would be pretty cool. You could show your friends, look at this dog has got hit by a meteorite. It's not as cool. Like to be in the study going, look at this rock. This rock fell out of the sky and killed a cow. 

Adam: [00:37:35] Everyone's like, Oh yeah, oh, that's a bit of it. 

Thomas: [00:37:38] That's that. 

Adam: [00:37:39] But you'd have to have a sign in the front of your house, the doghouse inside your mansion. That said, like the dog was okay, you'd need that disclaimer, because if you just got like a it's a pretty grim looking scenario. It looks like something out of like CSI Miami or whatever where it's just be like it looks like a like a murder scene where there's just an empty doghouse with a meteor, a hole in the roof. Everyone would be like, Oh man, it must have been the house. His dog lived there until it was killed by a meteorite. He kept it as a shrine to his long lost best friend. But some police tape around the outside of it. Chalk the dog to the front, yeah. Uh, we better wrap it up there, I've got to go and move my dog house onto the lawn. Thank you so much for joining us once again on comedian versus economist. Don't forget, you can check out a range of great shows across Equity Mates Media Get Started Investing feed Equity Mates Investing podcast. You're in good company. Talk money to me. Crypto curious and just another reminder once again to join us for the ASX share market trading game. There's still time to register, get involved and have some fun. That's it for us. We'll talk to you again soon. So, yeah,