Brexit, Clive Palmer, markets & more

Hello and welcome to the bumper first edition of Talking Finance for 2019.  I’m Alan Kohler and this week it’s all about the big Brexit vote in the British Parliament and what that means for markets, so we’ll have a deep dive into that, first with Evan Lucas, Chief Market Strategist at InvestSMART, and then Eleanor Creagh, Market Strategist at Saxo Bank.  Also this week, Michael Pachi, National Political Editor for Macquarie Media brings us up to date on Politics as the new year begins, and in particular, what’s going on with Clive Palmer and all these ads he’s buying?

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital, runs me through the latest economic data.  And Trevor Long, technology commentator, tells us about all the gadgets on show at CES, the biggest tech show on earth in Las Vegas last week.

Listen to the podcast or read the full transcript below:

[Music]

Now, let’s hear about the markets from Evan Lucas, the Chief Strategist at InvestSMART.  Evan, the Pound actually went up after the Brexit vote the other night, but it stayed there last night, it didn’t go down, so it’s holding.  The FTSE slipped a bit, but if you look at it over the last few days this week it’s actually holding pretty well.  So far, at least, Brexit has not had a big impact on markets, do you think that will last?

EL:  I do, and look, it depends on how you view the reaction to this.  The reason I say that, we’ve actually been suggesting that the Pound was going to go up off the back of this anyway, so bear with me as I sort of do this explanation to explain why I hold that view.  First and foremost, everybody expected the vote on Tuesday to fail, it did.  Not the size – everybody was not expecting it to be 230 votes but expecting it to fail.  They were expecting for Corbyn to call a no-confidence vote, which has happened, and for that to fail.  All of those things, although that sounds like negative news is actually good news from the market’s perspective. 

The reason for that is, what happened two weeks ago around a vote that actually now saw that if on Monday, because she has three days to go away to Brussels, do some form of tweaking or some form of renegotiation of the current withdrawal agreement, and then have it to vote again on this coming Monday.  That’s likely to fail.  The reason the market sees that as a positive is because it’s very, very likely now that she will form some form of rainbow coalition.  Most likely, tory remainers, Labor Party MPs, Lib-Dems, a few other colours inside there that will actually find some form of “deal” to be done. 

That was more likely to be EU positive and economically positive, and so all that probably explains why the Pound is actually going up, because they see the possibility of a very reasonable economic – and I say that deliberately – economic outcome of this whole scenario rather than what was going on before.  The other thing the market is clearly now also pricing in is the probability of Article 50, which is this whole trigger mechanism which comes up on the 29^th of March being pushed out further.  The Europeans have history in this, they love pushing out a deadline and the market’s probability at that’s now actually at 68% that the article is to be pushed out.  They’re two positive outcomes, most likely some form of pro-EU coalition doing whatever that will be for a “Brexit” and Article 50 giving themselves more time.  

More broadly on the markets, Evan, obviously December was terrible, it was at the end of a fairly substantial correction.  We’ve had a reasonable bounce since then because the market was oversold I guess in December.  Do you think that that is over now, that investors can relax, that it won’t be a bear market?

EL:  [Laughs] Investors can never relax.  Look, you’re right about December.  The way I answer that question is you’ve got to look at what happened in the US.  The US actually had their worst December in over 50 years, but since their low, which was actually Christmas Eve, the US markets are up 7.5%.  Why I say there’s a bit of conundrum to it, is we are now in US earnings season and about to enter Australian earnings season for the half.  Next week is the start of most of the quarterlies, so the big ones come out next week in terms of quarterly production updates for all the miners.  The expectation in the market from what you just talked about, that big pull back, that huge correction we’ve seen, is a very pessimistic view around earnings.

The market’s expectations are probably so low that the probability of seeing more beats than misses is actually probably onto the upside now.  There is a chance for the rest of January and a bit of February in the US that they will continue to probably do okay.  Last night we saw a very good movement upside in someone like Goldman Sachs, who had their best day in 10 years off the back of the fact that their trading update and fourth quarterly numbers were better. 

Looking into Australia, you’ve already been starting to somewhat see that.  You’ve been seeing discretionary and staples stocks push-pull.  Some of them have been good, some of them haven’t been so good, but in the main they’re slightly above expectations.  Maybe all of that pessimism that’s been baked into markets can be picked up during earnings season.

Interesting, so the thing to now focus on is not all the stuff that occurred last year and the valuation and the negatives, but earnings season now?

EL:  Yeah, it is.  However, the caveat is that there is unfortunately a reasonable amount of macro risk domestically and overseas in 2019.  Looking here, the New South Wales election, the federal election and I know there’s a lot of people’s opinions out there in the markets particularly around the franking credits that accompany possible changes to that under an ALP Government, also the changes to negative gearing.  Then you’ve also got the European parliamentary elections, so unfortunately there will be things that will push things around.  But in the short-term, in the interim, it’s nice to talk about bottom-up fundamentals rather than having to be talking about other materials.  

It is, indeed.  Okay, Evan, great to talk to you, thanks.

EL:  Thanks, Alan.

[Music]

And now to look a bit more deeply into the market reaction to the Brexit vote, here’s Eleanor Creagh, the Australian strategist for Saxo Bank.  Eleanor, the markets have come out of the Brexit vote the other night quite positive, obviously feeling like now that that’s out of the way things were going to improve and there’s a possibility perhaps of there being no Brexit at all.  Do you think that those feelings, those views of the market are well-founded or do you think the market’s riding for a fall?

EC:  I think the market is getting a little bit too optimistic on the possibility of no Brexit, the second referendum scenario.  We don’t view this as a particularly likely option.  While it’s probably the outcome that I guess the markets would really like and it’s maybe arguably the most economically and Sterling-positive outcome, I guess depending on the question that was asked in the second referendum.  It’s not an easy option to pursue.  There doesn’t even seen to be a parliamental majority for it and I think as well, looking at the YouGov polls there isn’t even a majority for a second referendum within the British public, they’re not even supportive of it.  I think the poll was that around 8% of the public actually said, yes, they would like a second referendum.

And I think you also have that issue whereby if you were to go down that route of the second referendum, you’re really calling into question I guess that that original democratic decision whereby parliament – they can’t really just rebel against the people’s vote and call a second referendum because they can’t find a solution to the answer that people gave them without risking a civil insurrection and a wall of cynicism for British democracy in the future and I think especially given what we’re seeing unfold in Europe at the moment with the Gilets Jaune and things, it’s something that parliament really can’t risk at the moment.

In that sense, yes, I think the market is getting a little bit too optimistic on the ‘no Brexit’ scenario.  However, I think that on ruling out that no-deal option and I guess, starting to price out the fact that we won’t be falling off a cliff and crashing out on March 29^th.  The market’s probably justified to be doing that.  I think now that we’ve had that no-confidence vote fail, we’re going to have May’s Government turn to members of parliament and we’re probably going to have a series of indicative votes and shedding Light on those impossible paths, like whether to pursue that softer Brexit start, maybe a Norway style route, and essentially how to protect from that no deal outcome.

With parliament now in control of Brexit and a cross-party compromise looking more likely, then it’s likely that we do get that softer Brexit and we also veto that no deal crash out option.  That is more market positive and I think that is the reason right now why Sterling is remaining resilient.

I suppose the answer is that if that’s what happens, that is to say we end up with a deal and Brexit goes ahead or possibly the departure is delayed, the Article 50 triggering on March 29^th is delayed, if those things occur then that’ll be fairly positive for markets.  Or at least it’ll be steady as she goes because that’s what the market has kind of priced in.

EC:  Yeah, I think so, and I think looking at all the available pathways right now, it really looks like all roads do lead to that delay of Brexit and extension of Article 50.  However, there is a downside to that with the extension of Article 50 and the delay of Brexit, it really only serves to kind of maximise that economic paralysis that we have in the UK at the moment, whereby businesses and consumers are stuck in limbo.  I guess Brexit is still in a state of flux at the moment and none of that uncertainty has been removed really, apart from just sort of starting to price out that no deal scenario. 

Really, the longer that we do have this political paralysis, the more economically negative the effect becomes on the UK, so we do have that risk still there, I think in terms of markets.  And I think really, at the moment we need to arrive at a consensus on what kind of Brexit parliament will say yes to.  It’s really still unclear as to what the majority is in parliament, so we know that they don’t want May’s deal.  I think that’s very clear that that’s a majority.  We also know that they don’t want no deal, but aside from that there isn’t really a majority.

Is Saxo Bank’s view that Brexit is potentially a big negative for global markets or just for British markets?

EC:  For global markets we think that the outcome is going to be fairly contained to the EU and the UK.  I think specifically those are where the main market impacts will be felt.  Obviously, we’re starting to price out that no deal scenario.  If a no deal scenario were again to rear its head, that could be quite negative for both the UK and the EU, but that’s not our base case scenario at the moment.

Thanks very much Eleanor.

EC:  No worries.

[Music]

[Parliament audio clip]

And now to tell us about politics at the start of this election year is Michael Pachi from Macquarie Media.  Well, Michael, it’s been a lively time in politics, there’s plenty to talk about, but before we get onto what the Government and the Opposition are up to, can I just ask you what the hell is going on with Clive Palmer?  Every time I turn on the TV, there he is?  I mean, he’s spending a huge amount of money on TV advertising, what’s he trying to achieve?

MP:  I’m not sure what he’s trying to achieve because the money they spent would now be bordering on the millions of dollars between TV ads, radio ads, billboard ads, these mass text messages that he’s sent, all this sort of stuff that he’s doing…  He’s saying that he’s going to field every lower house seat at the election which is only 5 months away.  He’s expected to also run for a lower house seat himself, he may run for a Senate seat.  But firstly, we haven’t heard about any of his candidates that he’s planning to field in each of the 150 lower house seats.  We only know that he’s got one Senate candidate, that’s Brian Burston, who was the former One Nation senator who defected from that party.

I’m not really sure what he’s planning to achieve because most people, you would think, Alan, just simply would not vote for him because he’s got a massive credibility problem regardless of all these ads that he’s doing.

In your experience of politics in this country, will TV ads make a difference?  I mean, obviously he’s trying to win seats and possibly even gain the balance of power in the lower house or something.  I mean, do TV ads of the sort of blitz we’ve seen actually work?  

MP:  Well, I think that the sort of blitz that we’re seeing in times gone by would have definitely worked, but remember he’s blitzing every platform.  He’s not just blitzing TV, he’s blitzing TV, radio, social media… He’s blitzing every platform.  You would think that it may do something.  The problem is with a Palmer United or the United Australia Party, we don’t know who their candidates are apart from its leader in Clive Palmer.  That’s the issue here.  We only know about one candidate, we’ve got maybe a feeling of what the party might be about, but we don’t know who the candidates are that are standing.  He hasn’t announced any candidates as far as I know.  I don’t even think he’s announced himself if he’s actually going to stand at the election.

No, he hasn’t.

MP:  No, that’s exactly right.  He hasn’t said that he’s going to stand, himself, at this election and I remember when he was around last time he hated being in parliament.  Half the time he wasn’t even there.  He would just stay in Queensland, he wouldn’t even turn up to parliament.  I remember quite famously he said that he wasn’t going to charge the taxpayer the trips between Queensland and Canberra and that he would use his own plane.  As we know, his planes were then grounded and he did start using the taxpayer funded travel service.  Who knows what’s going on here?  I don’t know if the major parties are worried at the moment.  They could be, I wouldn’t have a clue if they are or they’re not.  They might be thinking, ‘Well, what’s he doing spending all this money?’, ‘Does he stand a chance of winning some of these seats?’

I would say, Clive Palmer probably would have stood a better chance of maybe winning one or two seats if he focused his campaign on maybe one state and put all of his resources in one state, rather than trying to contest seats across the country. 

Well, it’ll be fascinating to watch it.  The other interesting thing that occurred lately was the Deputy Prime Minister and Leader of the National Party, Michael McCormack, doing an Elvis impersonation.  Obviously, it was quite amusing, but was there anything serious about that?  

MP:  The bottom line is, Michael McCormack – there’s a lot of people that say they don’t know who he is, that he’s the problem for the National Party in the sense that he’s not getting out there and cutting through on policy issues.  Obviously, he’s decided to take matters into his own hands and earlier this week, I think it was, dressed up as Elvis and then started doing Elvis impersonations for the TV.  I would argue that if the National Party and the Government in general was in a better position, that maybe something like that would be seen as a bit of fun. 

But the bottom line is, I think the Government at the moment does have a bit of a credibility problem and when you’ve got the Deputy Prime Minister or the Nationals leader – and I think he may have been the acting Prime Minister when he did dress up as Elvis, I think that when that sort of stuff happens in the condition that the Government is in at the moment, I don’t know that it actually quite works.  Some people might see it as a bit of fun.  I think most people would see it as no more than just a stunt and some people might even be embarrassed by it.  As I say, there was other issues around as well. 

One of the big issues of course was all these dead fish that are emerging in the Darling River and New South Wales and maybe some people were thinking, ‘Well, should we really be dealing with issues like that?’ which are national heartland type issues, rather than going around, dressing up like Elvis and singing Elvis songs to try and boost your own personal profile and try to make yourself be ‘every man’.  I just think at this point in time for the Government, they don’t want the ‘every man’ type feel, they want people that they feel can run the economy and run the country very credibly. 

It is a balancing act, but at this point in time, I think it was a mis-step for the Government for one of its senior ministers, in this case the Deputy Prime Minister, to dress up as Elvis and start singing Elvis songs.

Overall, Michael, I mean obviously we’re heading into an election campaign now and I would think that the perception everywhere is that the coalition’s going to lose, polling certainly suggests that.  Does that become self-fulfilling in the sense that there’s a loser momentum that takes hold?  

MP:  Yes, absolutely, one hundred per cent.  I think that the perception now is already out there that the coalition will lose the coming election, and I think that when you’ve got that happening you do start seeing a lack of discipline within the party.  The big issue here is that you’re going to start seeing MPs and senators, liberal MPs and national MPs and senators who are up for re-election, if they feel that they could lose their seat they’ll do whatever it takes to try and hold onto their seat, even if that means going against the grain when it comes to party policy or whatever the case may be.  We’ve seen some examples of that ill-discipline starting to come through, where people think, you know what, I need to win my seat and if there’s a majority of people in my electorate that don’t believe in the direction of the Government, well I’m going to speak out against it.

There was some internal polling that was an issue earlier in the week out of Victoria, which pretty much suggested that most National and Liberal MPs were likely to lose their seats, two or three of them may just hold on.  Which is quite damning when you think that a state like Victoria has now become really in play.  Normally, the key states are seen to be New South Wales and Queensland, but now you’ve got the Government not happy to only worry about New South Wales and Queensland, but also worry about states like Victoria where it could lose a lot of seats. 

Western Australia, potentially the only person that may survive Western Australia is Julie Bishop.  Some of the others could lose their seats like Christian Porter, Michael Keenan, [Ben Wyatt [20:11.4], all these people could lose their seat in WA as well.  And as I say, when it comes to New South Wales and Queensland, I think that New South Wales may be okay for the Federal Government, but in terms of Queensland I think they’ve still got problems.  Although, I do think that Scott Morrison taking over the leadership has made things a little bit more bearable for Queensland.  They just simply weren’t warming to people like Malcolm Turnbull, but I think they’re warming a little bit more to Scott Morrison than they were to Turnbull. 

But Victoria’s the problem, isn’t it?  I mean, they could lose virtually every seat in Victoria.

MP:  Yes, completely, and that’s a massive problem for them.  We’ve got to keep in mind, Alan, when it comes to the Government, the Coalition needs to win seats, it can’t afford to lose them.  At the moment, they’ve only got, what?  73 seats?  A minority government.  The reality is, they need to win seats, not continue losing them.  If they’re going to lose seats in Victoria, they’re already behind the eight-ball, and if they’re losing seats in WA, even in Queensland, New South Wales, Tassie, SA, the rest of the country, they really are in trouble.  The polling suggests that they’ll lose about 20 seats, maybe a few more, maybe a few less.  I think that it will be probably a bit tighter than that.  I think that as we get closer to the polls, sure I think the Government will lose, the Coalition will lose – it may not be the 20 or 25 seats. 

What I think we’re going to be seeing, Alan, is we’re definitely going to see more independent paid seats in this election and also, the other thing I think we’ll see – I think it’ll be interesting to watch whether or not there’s going to be a greater deal of informal voting.  We’ve started seeing more people vote informal over the last couple of elections and I think that that trend of informal voting is going to continue.  People are just not resonating or engaging with either of the major parties and maybe they feel that some of the Independents aren’t quite right for them.  They’ll go into the ballot booth, have their name ticked off and Bob’s you’re uncle, they just won’t vote for anybody.  

Good on you, Michael, thanks.

MP:  No problems, Alan.

[Music]

And now to bring us up to date on the economy, here’s Shane Oliver, Chief Economist with AMP Capital.  Shane, we haven’t had a lot of data this far into the new year, but what we’ve had, what do you think of it?

SO:  So far, it’s been a little bit on the soft side.  You’re right, there hasn’t been a lot of data out so far, but we have seen quite softish readings for some business surveys – they were the AIG PMIs, basically, surveys of businesses, they were on the soft side.  We’ve seen some soft housing data particularly for house prices, with the rate of decline in Sydney and Melbourne seemingly accelerating into the end of the year and December, and we also saw quite a sharp fall in building approvals, pointing to a weak building activity through this year.  And on top of all of that, we’ve seen some figures for job vacancies and haven’t got the employment data yet, but the jobs vacancy figures are also on the soft side, showing some loss of momentum. 

Those things have been well and truly soft, consumer sentiment also down.  I guess, one bright spot was retail sales for November, but that may have been artificially boosted by Black Thursday and Cyber Monday sales, and so therefore might have brought forward spending from the critical month of December, which looks to have been quite mixed or soft.  Overall, the economic data in Australia has been on the soft side. 

The last time I spoke to you, you were talking about the potential for a rate cut in 2019.  I presume the data that you’ve seen so far just confirms that view?

SO:  Yes, we’re still looking for a rate cut this year and the data has confirmed that.  I don’t think the Reserve Bank is there just yet, I think when they meet again in early February they’ll probably tell us that they still expect the next move in interest rates will be up.  But I do expect to see some softening in their confidence.  We have seen increasing Reserve Bank concern about slowing credit growth.  Obviously, initially in response to the regulatory moves but also that that got a reinforcement from the Royal Commission.  I think the Reserve Bank will be cutting, but it’s probably still a story for later this year.  But that said, if the economic data remains as soft as it has been lately then that tightening could come some time in the next few months.  I don’t think February, but March/April. 

There’s always this issue of timing around the election.  The Reserve Bank will change interest rates in an election campaign if it’s absolutely necessary, or if it feels it’s absolutely necessary, but it would prefer not to so I tend to think that it’s unlikely they’ll move in May unless it’s a real emergency.  If they do get the inkling they’re going to cut in the next few months, it could come in April, but our base case is not until around August and then another cut in November.  

In fact, if it happened in April I think it would be on the same day as the Federal Budget.

SO:  That could well be, and of course there was a precedent for that back in 2016, you may recall, the budget is normally on the second Tuesday of the month, of course it was brought forward one week so they could announce an election soon after that budget.  And of course, the Reserve Bank cut interest rates on the same day as the budget in that first Tuesday of May 2016, so they could do the same thing again this time around, which might mean a double whammy of seemingly good news because the budget will probably announce bigger tax cuts starting in July if the Government is returned.  And I think Labor is also promising tax cuts for low to middle income earners.  Then, if you get interest rate cut on the same day, then that might provide a bit of a short-term boost to confidence.  Time will tell on that one.  I think the Reserve Bank would rather wait and see what happens in the budget and the election before undertaking another rate cut.

But even if they’re not on the same day, you are predicting basically at least one rate cut this year and a fiscal stimulus in the pre-election budget.  Therefore, you’re looking to see a fair bit of stimulus this year.  What sort of impact do you think that will have on both the markets and the economy?

SO:  It should be supportive of things.  I mean, we always get into these debates about whether the banks will pass on any rate cuts and whether it will help anyway.  History has shown that the banks have been under pressure regarding their funding costs since the GFC, since 2008 where we’ve seen out of cycle interest rate hikes, so there’s nothing new there.   But history also tells us, when the Reserve Bank cuts interest rates, even when the banks are under pressure, they do pass a big chunk of it on, if not the whole amount.  This time around, they’re going to be under a lot of pressure to pass it on.  If you’ve got a $400,000 mortgage – I did a rough calculation, I think a 0.25% interest rate cut is almost equal to a $1,000 saving on your interest bill – it’s a bit more complicated than that, but it’s almost up at that sort of level. 

If I’m right and they cut twice, each time 0.25%, then that’s a $2,000 saving.  That’s not to be sneezed at, that will help spending for those with a mortgage, particularly for those who are feeling a little bit depressed given house prices have been falling.  At least it will maintain spending, it may not boost it but at least it will maintain spending in the UK economy.  That will provide a bit of help, as will the tax cuts.  I think on their own the tax cuts probably won’t be big enough, given what the MYEFO, the Mid-Year Economic Fiscal Outlook, had flagged back in December.  The amount of money put aside for the tax cuts probably isn’t enough to provide a big enough boost to households. 

But when you put the two together I think that will help and ultimately that will do two things.  One, it will provide a bit confidence to the share market that the economy isn’t going into recession.  Yes, it’s likely to see a bit of a softer patch, weaker than the Government and the Reserve Bank are hoping.  But it’s not going to go into recession and I think continued strength in infrastructure spending and non-mining investment will help that as well.  The other aspect of course is that it may help drive a bit of a pick up in growth as we go into 2020.  There could be some positives coming down the track but for the time being, yes I think things are a bit on the soft side.  The Reserve Bank will have to cut interest rates.  But yeah, there is scope for a bit of optimism looking out beyond the next six months or so.  

And just finally, obviously we’re now starting to get material on the fourth quarter, building up to GDP in a month or so.  What do you think we’re going to find out about the fourth quarter?  

SO:  Well, the next big release on the table of course is the December quarter CPI numbers, which will come out – I think it’s the last Wednesday of January – I think that’s the 31^st or the 30^th, I can’t remember the precise date but that’s probably going to show that inflation in Australia remains relatively benign.  Obviously, we’ve seen a big fall in petrol prices.  You’ve got some seasonal weakness in the December quarter as well for pharmaceutical costs, that’s just the way the health system works in Australia.  But against that, of course tobacco prices will go up.  But I think the underlying picture will be one of inflation staying pretty benign, around 0.4% on a quarterly basis, around 1.8-1.9% on an annual basis, which leaves it below the Reserve Bank’s targets. 

That would be consistent, I think, with our view that interest rates will come down at some point this year.  The other aspect of course is when the December quarter GDP numbers come out they’re a little bit further away.  But my feeling is that when those numbers are released in early March, that they will show that December quarter growth has remained relatively subdued.  The most recent number showed annual growth at 2.8% and I expect will probably show continued growth around that sort of level, somewhere in the range of 2.5-3%, but not the 3.5% that the Reserve Bank has been referring to.

Good on you, Shane

SO:  My pleasure, Alan.

[Music]

Now, for our technology chat this week we need to focus on the big consumer electronics show in Las Vegas which has just finished, and who better than Trevor Long, who goes every year and he commentates on technology for the Nine Network’s Today Show, as well as everywhere else.  Here’s Trevor, just back from Las Vegas.  Trevor, your top award from CES, which I think  was shared with a lot of people, was the roll-up TV, the TV that rolls up.  I thought it was great too.  Tell us a bit about that.

TL:  I think one of the reasons why I got excited about it was because it’s one of those things that you see as a concept.   A lot of concepts get revealed at these shows which are basically companies saying, “Look what we can do!”, but then there’s no plan or no likelihood of it ever coming to market.  Whereas, this – actually, last year they showed this behind the scenes to a few people, the concept of an OLED TV rolling up, but this year they’ve actually made a product.  This will physically be on sale this year in Australia and think of it this way – a lot of people have an entertainment and many people are lucky enough to have a beautiful view perhaps, out of their lounge room they might have windows. 

The TV sticks up on top of that entertainment unit permanently, blocking that view when you’re not watching television.  So, when you’re not watching TV you’ve got this big black box breaking up that view.  LG’s vision is that instead of that big black box that’s always there, you put a small box on top of the entertainment unit or in that place and when you want the TV it comes up magically out of that box and when you don’t want it, it rolls up again.  There’s been plenty of great installations of televisions into bed heads and things over the years.  The magic here is this thing literally rolls up like a garage door inside that box and it is remarkable to think that a television screen could be rolled, let alone into such a small space.  No doubt, an amazing innovation, a great product, but it will be very expensive.  

How much?

TL:  Well, they haven’t released pricing yet, but I’m going to say to you it’s going to be at least $20,000 dollars.  I can’t imagine it being less.  Their flagship signature product a couple of years ago started at around $20,000 or more.  This will be not for the faint-hearted and certainly something very aspirational for most.

Trevor, I remember when Plasma TVs were $20,000 dollars and now they’re somewhat less than that.

TL:  Spot-on, and if others can find a way to innovate in this way and make it cheaper over the years ahead, we’ll simply look back on 2019 as being the year that first started that trend.  Samsung are alternatively doing a similar thing with the black box on the wall and what they’re doing is saying, instead of keeping it as a black box that’s off, have it on pretty much all the time, but not showing television, it might be showing artwork or your own photos or the weather or the time.  There is this big trend towards, hang on a minute, massive televisions are becoming almost standard, so what are we doing with that wall space when we’re not physically watching television.  I think it’s an interesting space to play in because we have that thing on the wall all the time but we only watch television a few hours of the day.  

Before we get onto talking about other gadgets, was there any sort of theme that came out of CS this year that sort of stood out?  I mean, in previous years I think it was all about AI and so on and drones in other years.  What was the kind of key thing this year?

TL:  You’re right, AI has reared its head quite heavily this year, as it has in past.  I do worry that it’s a buzz word that everyone just uses and we don’t really know what artificial intelligence genuinely is.  And I also loathe to tell you that my theme is actually smart home because I’ve been talking about that for years.  I’ve probably said four out of the last six or seven CES conventions were smart home based.  But it is a big difference this year because when I say smart home, there’s now a familiarity with things like Google Home or Alexa or Apple’s Siri and because of that familiarity and the number of people that have got those devices in their home, it’s starting to become so much more real for people to say, “Well, what can I have in my home that’s smart?  How can I have a lightbulb or a socket that’s controlled via this smart device?”. 

The likes of Google and Amazon have created, I guess, the entry point to the smart home that made it more real than ever before, so we’re now seeing products that off the shelf can be setup very easily.  When I setup my home five or six years ago, Alan, the concept of a smart home was real but it was 16 apps on my phone to control 16 different products.  Today, you just need the words, ‘Hey Google’, and you’re controlling everything in your home.   It’s going to be a big year for the connected and smart home.

One of my favourite little gadgets was Bluetooth on a vinyl turntable, but in a sense that you think, ‘Oh well of course, about time!’

TL:  It took me by surprise and I loved it when I first heard about it.  Then I had a listen and, even better.  Think about people like you and me who have probably got not only our own records but our family’s – I’ve got my whole family’s 45s and 33s in boxes and I’ve played with vinyl players before in the last few years because it has been a resurgence.  But I’ve always required this hi-fi system or these complicated amplifiers and things to actually get listening.  Sony’s new turntable – again, this is a real product coming into Australia in May for, I think, $300 dollars off the top of my head, is a turntable.  Plug it into the power, sit it somewhere nice in the house. 

But then, no wires required back to some amplifier or speaker system, you can just pair a set of Bluetooth headphones or a nice Bluetooth speaker and bring out that vinyl, enjoy the records of old and enjoy them on the speaker that you use today.  A really good product that I think will do very well for them here in Australia and around the world.

And a thing that you called a ‘bloody ripper idea’ was a vending machine for bread, which just bakes one loaf at a time, or at least bakes continuously and serves them up via a vending machine.  But that’s kind of not a consumer electronics thing, is it?  It’s a great idea, but it doesn’t kind of fit with CES.

TL:  I think it fits with CES because they want to get attention, but it’s more a B2B, business to business product.  And I’m a baker – I worked in bakeries for many years back in the day.  You go to your big Coles or Woolworths and they’ve got big bakeries and bakers, but you go to your small grocers, IGA or the like, they don’t have room for a big bakery, let alone staffing.  This machine, the Bread-Bot, literally makes the bread out of just simple formula, one bag in and then out the other end comes fresh bread and it’s stored in a vending machine style format, so you just press a button and you’ve got a loaf of bread.  I love the idea and I think that it has some real market around the world, but no, not a direct to consumer product for your home.

Well, no, and this, the next one – and we have to make this the last one, we’re running out of time – the thing that you’ve called best concept, which you’re saying will change transportation, is the air taxi, the Bell Nexus Air Taxi, which you say and it is true that it looks stunning and it’s got six big rotor blades on it…  

TL:  Six big rotor blades attached to what is essentially a helicopter body to change flight, vertical take-off, horizontal flight, four passengers, one – they don’t even call it a pilot, they call it a machine controller or something like that.  The idea here is that by 2025, these things will be in the air providing air taxi services through essentially, Uber Elevate, which is Uber’s vision for the future where, I’m about to fly into Melbourne, instead of getting a car from Tullamarine all the way to the city, I might get an Uber Elevate, in one of these Air Taxis from Tullamarine to St Kilda and either bike or walk or get a car that final leg.  It’s taking people off that road and changing transport for the future.  It’s a very interesting and regulation riddled area, but it’s going to change big time over the next 10 years.

But Trevor, why isn’t it a helicopter?  I mean, it’s kind of just a helicopter, it’s just got six blades instead of one or two.

TL:  It’s a great question, Alan.  The point here is, a) they’re going electric, so it’ll be powered differently; and b) you do need a different style of safety regulations.  This thing is safer to be around than a helicopter because of the way the blades are configured and they’re in kind of rotor housings because they want this thing to be landing in many more places than helicopters currently ever would.  Essentially, it’s also towards that autonomous future where a safer flight with six rotors than a single rotor helicopter and that makes for potential autonomy in the future and autonomous air travel as much a reality as autonomous cars.

Great to talk, Trevor, thanks.

TL:  My pleasure.

[Music]

Happy Birthday, Sade, the Nigerian-born singer who turned 61 yesterday, would you believe it, and this song is in honour of our Chairman, Paul Clitheroe, who is indeed a Smooth Operator…

[Music]

That’s all from me, talk to you next week.