The latest AI action, Trump and housing

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[Music]

Hello, I'm Alan Kohler, Editor at Large of Intelligent Investor and Finance Presenter and Columnist for the ABC.

And I'm Stephen Mayne, contributor at Intelligent Investor, Founder of Crikey and shareholder activist.

And we are...

The Money Café, Alan.

What have you been up to, Stephen?

How are you, boss? What have I been up to? I've actually been quite exercised by the passing of Anna Murdoch for some reason this week. I just find the whole Murdoch situation fascinating, they were married for 31 years, they met when she was a cadet at The Daily Mirror in 1960s, she was on the News Corp board for eight years and then he just gave her the punt and all sorts of crazy stuff has happened since then and I've sort of been pondering, if only Rupert had stuck with Anna after 31 years of marriage, done another 27 years, the whole News Corp world would have been potentially quite different and you wouldn't have a situation where Rupert's six kids are all multi-billionaires and they're all richer than him.

He obviously decided he only lives once, even if it is for a long time and he wants to have other women, obviously, that's what he decided.

Because at his mother's funeral, he got up and said, "She was so devoted to my father, Sir Keith, that she stayed single and never married again for 60 years after he died." So he was talking up that sort of loyalty... Anyway, I just think it's amazing. It's been a week now since she passed, the family has not said a word, which I just find amazing. Normally, you have public tributes and so they're so split...

I haven't noticed this, have the children not even said anything?

No one. It was announced through the New York Post, there's a furniture store in Palm Beach which sort of did the announcement locally in Palm Beach, Florida. I've actually written to Rupert's PR people and said, "Can you just make a statement?" Because I've got all these statements of everything he said about everything else who's died, when Roger Ailes died, when Larry Lamb died... He's given all these tributes to all these people over the years and I've added them all up and yet, he can't say a single word when the mother of three of his kids, ex News Corp Director, 31 years of marriage and it's just an amazing family drama.

Don't tell me they've ignored you, Stephen?

Well, I'm waiting to hear back, but it's quite an interesting list when you list all the tributes he's given to everyone over the years and can't get a word out of him on Anna. The other interesting thing, was I went up to Sydney last week for the Aristocrat AGM, the big pokies manufacturer. They spent $45 million dollars in legal fees suing their competitor, Light & Wonder, that came out of the AGM, they had a big settlement.

By the way, I presume they didn't pay for your airfares, did they?

No. It's funny, when I ran for their board three years ago, they did pay for my airfares to go up and be interviewed by the Chair, but no, not this time. My first question was, are we still giving a free car to our 102-year-old billionaire founder, Len Ainsworth, even though he doesn't drive anymore?

And the answer was?

And they said, "No, not anymore, it stopped recently." So that was news because he used to get a new Porsche or a new Rolls Royce every three years.

How recently?

They just said, "No, we've stopped recently."

So when he was 101?

Well, possibly, yeah, because he's a billionaire in his own right... Then, I got him to admit that the family still owns about 15 per cent of the company because when Len handed over his shares to his seven sons, he said, "If any of you sell, I'll sue you and you've got to give me 80 per cent of the proceeds. One of them did sell and he did sue him and got 80 per cent of the proceeds. So, when he does die, there's going to be this avalanche of Aristocrat shares that are going to hit the market because all these sons haven't been able to sell because the old man demands the stock when they do sell. It's 15 per cent of the company, but it's not announced, they don't announce it as one big holding, they pretend they're all separate.

What basis has he got for demanding 80 per cent of the - is it in some sort of agreement?

It's in the agreement. When he gifted the shares to his sons, he said, "If you ever sell, you've got to give me 80 per cent of the proceeds as long as I'm alive." And he's the first billionaire to get to 100.

It's amazing.

It is an amazing story, yeah. If he's no longer getting the free Porsche every three years, has he let his sons off and said, "You can now sell." Or is he going to sue them at 102 just like Rupert sued his own kids at 94?

It was a free Porsche every three years?

Yeah and he had Bentleys, Audis - and fully maintained. But finally, he said, "No, I don't need it anymore." Anyway, that was all good fun. What about you, have you - geez, this whole - Trump's about to give his state of the union, we're talking at 8:20 on Wednesday morning. I guess we start with tariffs, what's your take on all of that? High Court win, Supreme Court win, but then he just bangs them on again, 10 per cent, 15 per cent, 10 per cent, it just changes every day.

I suppose what it means is that the whole area of international trade is completely confused now, no one's got any idea what's going to happen because - does he have any basis now for doing it? He's talked about this Section 122, which allows him to put 15 per cent tariffs on everybody, but it's only for 150 days, so nobody's really clear about what's going on. He keeps asserting that he's going to continue the tariffs and will be able to do so. There's not really any certainty about that, so I think nobody knows, certainly not me, what's going to happen.

It is a substantial reduction in his power, because this was the element of the law that he used most frequently, particularly with international. Anyone would insult him or any minor thing would happen, he's just go bang, international economic emergency provision and on the tariff went. He was using this particular device far more than any others. It is a dramatic reduction in power, a lot of the other countries are now not going to sign or commit to their trade deals, I suspect, because he's lost his weapon. You've now got this big debate about he owes every American family a thousand bucks and this whole controversy of how do you repay $250 billion? He doesn't want to repay any of it. FedEx have just sued saying, "Give us our money back..." It's quite a mess, isn't it? But he's so dedicated to his tariffs. This was a big chance to give everyone a tax cut and so, "I'm going to give every family a thousand dollars. Okay, we can't do it." Instead, he's just doubling down, looking for every possible way we can put new tariffs on.

Clearly, the reason he loves the tariffs so much is - well, there's two reasons. One, is as you say, gives him a lot of power and he's able to use them to get deals with other countries and secondly, it enables him to raise taxes while saying that the American people aren't paying the taxes, it's been paid by other countries. It's sort of a double win for him, which is why he doesn't want to give them away.

Then we've got AI, which is - I'm going to call it the 'SaaS flash crash', because it really has been a bit of a tech wreck now. If you look at the size of some of the drops in the stocks, Atlassian, 70 per cent plus. Atlassian - we used to talk about those two Sydney-based founders each being worth $20 billion on our rich list and now the whole company's not even worth the $20 billion, US dollars that is. So it has just been an absolute wipeout and every day - IBM shares down 13 per cent yesterday and all of this is just on predictions because none of these companies have actually reported a drop in profit, a loss of contracts. It's all just prediction.

Yes and Scott Farquhar and Michael Cannon-Brookes did manage to spend $100 million each on houses at Point Piper in Sydney before everything went pear shaped, didn't they?

They'll be okay, they've taken enough off the table over the years...

They'll be fine. Clearly what's happening is investors are shooting first and asking questions later. The issue of which particular software companies are going to be affected by AI is nowhere near resolved. It is unclear, for example, to what extent Salesforce will be affected. The IBM one was specific to Anthropic announcing that Claude can deal with COBOL, the computer language that's been around for 60 years and is still in a fair bit of use, COBOL. Apparently, it's 90 per cent of ATMs use COBOL and so on. Apparently, IBM makes a lot of money out of that and now Claude is able to automate COBOL in some way, so that was kind of what was behind the IBM one. But it isn't clear at all what AI will do to the software companies, but investors aren't hanging around waiting to find out.

People love an acronym, it's the HALO trade now. You want to buy stocks that are 'Heavy Assets Light Obsolescence', that's a Caterpillar, a McDonalds, something with tangible assets that you can touch and feel and can't be replaced and is light on for risk of obsolescence. Maccas, world's greatest restaurant property bank, worth $330 billion. AI cannot destroy that, we've all got to eat, they own the physical assets. Property, as an asset class, is still globally larger than stocks. But anything which is just software or you can't touch it, it's relying on data. They are just getting wiped out and it does feel like the tech wreck and the other thing is the element of financial contagion, the fact that private equity and private credit is getting smashed at the same time, the Blackstones of the worlds, the Blue Owls, because people fear that their loans are going to go bad to a lot of these software companies, these light asset companies. That's where I think it's really, really interesting, is it's not just going to be softwares, but it's the contagion, the flow-on effect, which is almost like the GFC. It was CDOs and property and then it spread right through the financial system. What do you think about the risk of financial contagion from an AI disruption point of view?

I just don't know, clearly if some lender is over-extended to a software company that goes bust, they're obviously in trouble. It's just impossible to know. It was interesting on Monday, the fall in the software companies and the market generally was due to a blog post by a company called Citrini Research, which did a - and I referred to this on the ABC news last night, it did a sort of a scenario analysis or at least it was a...

It was a novel, wasn't it? They were making up what the situation was going to be in 2028, so it was for the novel/prediction piece.

That's right, it was pretended to be written in June in 2028 about what suddenly is going on and the S&P 500, it proposed is down 38% from its 2026 highs. That spooked everybody, but it's clearly - I've been reading lots of responses to it that have debunked it and they've said that it's completely impossible to imagine that scenario. I suppose what's going on with AI, is nobody really knows, it's just created this massive amount of uncertainty. Nobody really knows whether the AI companies themselves are going to make enough money to justify the investment they're making in data centres and GPUs. Nobody knows what impact it's going to have on software companies or on the level of employment.

One of the things that this Citrini Research prediction was on about was the unemployment. Although, it did propose that unemployment in 2028 was 10.2 per cent, which is not that much. It's a recession level of unemployment, yes, but it's not like the level of unemployment that the AI people like Dario Amodei and Elon Musk and so on are predicting, which is that they take all white collar jobs. I suppose the thing is that 2028 is only a couple of years in the future, maybe in five years it takes all white collar jobs, I don't know.

I just find the scale and the speed of the deals, it's not just the tech app sort of rollout side of things. Just overnight, Facebook or Meta has done a massive deal with AMD, the chip manufacturer, which could include Facebook finishing up with 20 per cent of the stock. The whole deal is worth $20 million plus and it goes as far as into warrants. The more chips you deliver us, the more we can buy your shares, so it's a really long-term all in partnership. AMD shares are up 9 per cent on the back of that deal. Suddenly, their market cap's $350 billion US. It's nothing like Nvidia, which is at $4.7 trillion dollar market cap, is the one unconditional clear winner from this whole chaos and they're holding up absolutely brilliantly.

Whereas, poor old Microsoft, it's market cap has crashed, it's suddenly down to $2.88 trillion. That was a $4 trillion dollar company just a few months ago. It's one of the first companies that's ever lost a trillion dollars in market cap. It still is a magnificent seven plus Broadcom, I think they are still perceived to be dominating, plus Anthropic, plus AI. You've got these other players entering the game but just the scale of the share price movements in the key players themselves and all the sectors that are going to get disrupted. I've just never seen anything like that. That Citrini sub-stack post, where every stock that got named in a novel got hit 5-10 per cent, the market is so skittish, it's so jumping at shadows, it just doesn't know what's going to happen and everyone is now realising the impact is going to be enormous, but we haven't actually seen it yet. So it's this giant guessing game, I've just never seen a guessing game like it in 40 years of watching the markets, it's just unprecedented.

That's true. I should preview, I'm doing a four-part series for the ABC news on AI, I've been writing about it in Intelligent Investor at great length and to some extent, I'm just kind of summarising what I've been writing for Intelligent Investor on the ABC on the Sunday Night News, starting next Sunday with the decline in the cost of intelligence or the price of intelligence and how that has occurred and what does that mean?

It's getting to become your new housing... There should be a quarterly essay in this as well, Alan pivots from the housing king to the AI king.

I offered them a quarterly essay on the subject and they said, "We've got someone else doing that, so no thanks."

They've knocked back the best seller... Goodness me!

To be honest, I don't know who they've got but it's apparently coming out soon.

The problem with it is, with something like that, it's out of date after about a week. So you do a six-month quarterly essay and then it's just moving too fast to actually do something in print that's going to hold the test of time.

Meanwhile, in Australia, we're arguing about capital gains tax discount and having a Senate inquiry, which I appeared at on Monday.

You did. Who invited you? Was it the Chairman of the committee? Was it the Labor Party attempting to borrow Alan Kohler's credibility to impose a tax hike on the Australian voters, is that what's going on here?

Well, the committee invited me, I think the Chairman is Nick McKim, who is the Greens Senator. When I was there, there were only three Senators, Andrew Bragg is the Liberal Senator and he wasn't there for some reason. There was Richard Dowling who's the Tasmanian Senator for Labor and Ellie Whiteaker who was a Wester Australian Senator.

Alan, two Tasmanians and a sandgroper, got together to talk about - was it the housing crisis or the CGT or both?

It's a capital gains tax inquiry, but obviously it strays into housing a fair bit. I made my point that I think the 50 per cent discount is more than it needs to be in terms of adjusting for inflation, which is what it replaced in 1999 that the inflation adjustment had been going since '85 and so I sort of proposed that it should be half that. I also think there's an argument to say, get rid of it entirely and just tax capital gains in full, nominal capital gains. That's what Bernie Fraser proposed yesterday. I think there's an argument for that because we don't adjust income taxes for inflation at all, either the amount or the tax scales which were adjusted for inflation for three years in the 1970s by Malcolm Fraser and he gave it away because it removed the ability for him to announce nice tax cuts every now and again. I think that clearly Jim Chalmers and Treasury are thinking about what they're going to do and there aren't too many options with CGT, either you reduce the discount to some extent or you go back to an inflation adjustment.

It's quite complicated for me, this could be one of those ones where on budget night, you do need the lock up because the new regime applies from midnight that night. Whenever you change something like an asset tax, you have to change the date that it applies from. You go back to 1985, this is why I say Rupert Murdoch should never have moved News Corp to Delaware in 2004, because he was sitting on a pre-1985 shareholding which was capital gains tax free, so if he just stayed in Australia and stayed married to Anna, he'd be sitting on a $30 billion dollar tax free capital gain in News Corp. It's going to be quite messy in terms of how they do the change and it could trigger a lot of asset trading. Should you sell your assets now if suddenly the tax rate's going to effectively be double? Because if you're putting it up to effectively 45 per cent, that is a punitive - if you're going to make $10 million selling a business, you've got to give $4.5 million to the Government, that's a very high by global standards tax rate. Although, I presume they reintroduce the inflation adjusted - they have to do that, you'd think, so we just go back to the old system.

I don't think they'll tax the nominal gain, I don't think they'll get rid of the adjustment entirely. That'd be a big deal. There's got to be more to it than that. In some ways, that's a minor thing, there's plenty more that needs to be done with tax and also with housing, really. I mean, they've got to think about much more. Changing the CGT discount won't do much for housing affordability and won't do much for productivity or taxation in general, really.

We do need an actual overall package, bring back Ken Henry, let's get the whole package. We haven't had a decent package of tax reform since the GST was introduced and this was just going to be one little nip and tuck at the system which overall needs a dramatic overall revamp, I would argue. They're going to do something, they're clearly flying the kite and I reckon they'll announce it on budget night and it'll raise billions but it's probably fair enough because capital is undertaxed relative to labour. We've got a lot of questions, boss, we probably should get onto it.

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Now, Bryn and Tim have both got AI questions. Bryn says, "In a future where AI takes many human jobs, what happens to all the debt, e.g. the home loans? As many people will be unemployed and won't be able to make payments. The question can extend to all debt beyond home loans." Tim says, "At the risk of over-simplifying things, won't AI increase productivity by default for most businesses who adopt the tech? If so, given the constant calls for enhanced productivity in Australia, isn't it simply a matter of time before broad AI adoption delivers a lot of those productivity increases that everyone's calling for?" What do you think? Stranded assets, debts, financial contagion, people can't repay their debts because they get sacked from AI? I mean, I guess that's any sort of recession or massive increase in unemployment, that's always a big factor, isn't it?

As for Tim's question, it's certainly true that the AI optimists, including most of the people doing it are saying that there'll be a massive improvement in productivity and an era of abundance. We'll all have anything we want and it'll all just be great. That's a feasible scenario, for sure. But obviously if tons of people lose their jobs, then they're not going to be able to service a mortgage. I think to some extent, this is a matter of timing in a way. I've been thinking about it as a bit like house fires, so if your house burns down, you're on your own, really. But if everyone in your town's house burns down because of a bushfire, the Government has to step in and help out. It seems to me that if one or two people lose their jobs as a result of AI, then they're basically on their own. But if a million people lose their jobs, obviously the Government's going to have to step in. The trouble is, there's probably a timing difference between when the Government actually does step in and restructure the economy to ensure that all these people can live and don't default on their mortgages.

And there will be growth. People forget, like when the iPhone came in, everyone said, "It's going to destroy the PC." But there's two million jobs globally of people developing apps for the iPhone, so just listening to your Talking Finance last week which was fascinating, at the end of it, I sort of thought, gee whiz, I can get a whole bunch of AI generated support people or bots to go along to AGMs on my behalf. On November 25 last year, I did 11 AGMs on one day. Surely, in a couple of years' time, I'll have a couple of bots trained up and they'll be able to do all that for me and I'll just be sitting there training them up to go and lodge the written questions for me at the AGMs online.

Stephen, you'll be a much more productive pest.

Correct. The productivity gain is going to be incredible, but I do agree that the white collar job wipeout and the value destruction in white collar tech software is going to be pronounced and that's the scariest thing, but the Government's will have to intervene, because as you say, when a massive fire comes along, out comes the cheque book to support the people who've been hit.

Yes, but the question is at what point does the Government do that and what happens along the way before that happens? The answer is, I just don't know.

Who's also got the capacity to do it. I mean, if the Americans have suddenly got to pay back their $37 trillion dollars of debt, there's a crash in the currency. It does come down to your balance sheet strength to actually deal with Black Swan events or major events and a lot of people in life don't go along preparing for that sudden health shock. Governments are the same, a lot of them haven't got much in reserve from a balance sheet point of view to step up if there's a crisis. I think that financial capacity to respond at the corporate individual and Government level will be an interesting thing to watch and it will be different in different countries.

Max says, "As a 35-year-old just starting to build wealth, the proposed changes to reduce the capital gains tax concession from 50 per cent to potentially 33 per cent..." Don't know where he gets that from, but yes, that's probably one of the options, "...is a bit of a kick in the guts. There are now generations of Australians that aren't rich. This change isn't a wealth tax. As an idea, why not introduce this discount to either gains over a particular value or for those selling over a certain age? Why not actually decrease the discount to 25 per cent or even zero per cent for certain groups so it's a genuine wealth tax?" Yeah, I suppose so, it's very, very complicated.

I'm not personally against an actual wealth tax. The problem with wealth taxes is that they, by definition, don't tax the transaction so that you've got to have the money for it if you tax 0.1 per cent of someone's wealth.

Council rates are the best example of that in Australia, that's based on capital improved value, but you can't pickup your house and move it, whereas a lot of billionaires in San Francisco are moving to Florida or Texas because they don't like this new billionaire tax. You've always got to watch that you don't introduce a system that's going to drive capital or investment away.

Yeah, as I've been saying, you've got to tax immobile capital because most capital is very mobile, whether it's the rich person or the digital company, they can operate from anywhere. That means, what's immobile is minerals and housing, so you've got to tax them properly.

I do agree with Max though, that overall young people in labour is overtaxed. Capital is undertaxed. Max would do better if he wasn't punitive personal income tax rates. The top tax rate kicking in at 190,000 is just ridiculously brutal, bracket creep smashing everyone, over $300 billion coming from income tax every year. Hopefully, the Government will give something back on the income tax front when they do this grab on the capital side.

Hugh says, "Absolutely love the podcast, it means I can talk shop with my corporate mates. You've been banging on about how Australia's productivity levels have fallen, particularly in the construction industry. Your comments about Government policy reform really ring in my ears. Why would a small business owner be motivated to work that extra 10 per cent hard, when every day I'm hit with stamp duty, crazy levels of insurance, business tax, personal tax, worker benefit schemes, GST confused clients, higher interest rates on business and personal loans. It seems to me like it's just easier to do the bear minimum and walk the dog. What three policies would you implement to better motivate Australians to work and innovate?" Well, you could do an hour on that one, Alan.

I would go back to death duties, I'd go hard against the banks, I think the big banks are taking too much value in hitting businesses too hard. I don't like the fact that our big banks are 30 per cent of our market and I don't know, get the states to tax miners a lot more. What would you do?

I think we've got to tax miners a lot more and resources. I think that this is what Ken Henry proposed which Kevin Rudd tried to introduce, he got rolled on that and then Julia Gillard's Government did introduce it in 2010 and then it was repealed in 2013. So, really, I think that there needs to be a much bigger tax on miners which would lead then to lower taxes on income, particularly income so that people are more motivated. I think that's the way to go.

All right, boss, your turn.

Nathan says, "I agree with Alan that the salary of politicians likely plays an underrated role in their behaviour. Curious as to your thoughts on its impact in keeping the Coalition together. How many national shadow ministers, backbenchers, struggle to pay their mortgages during the months when the Coalition splits up? Also, spare a thought for the poor AGS payroll officer who has to figure out that the pro rata salary of the national shadow ministers during the off-weeks?" Yeah, I think you're right. I was thinking that these Nationals senior people get pay bumps when they become shadow ministers, for sure. So, yeah, I think that's an important part of it.

Show me the incentive and I'll show you the outcome. Nathan is right, the incentive is there for the Nationals to stay in the Coalition and for their leaders to be paid more as shadow ministers, that's the logical plan.

In particular for the leader of the Nationals who becomes Deputy Prime Minister, which is a big pay bump. I don't know what he gets but I'm sure that it's a fair bit more than he would as a backbencher.

It also plays into leadership challenges, because the challenger who'll be sitting on the backbench not earning much, can then promise a whole bunch of fellow backbenchers a ministerial job and a pay rise. So you've often got payroll management is a way of executing a coup and clinging onto your job, "Vote for me and you can keep the whip's job, son! With the other guy, you'll be out and you'll lose a $100K a year." That's a big driver in all this stuff.

I think if anyone's wondering how much of an incentive or a driver this provides on politicians, think about how does it motivate you? How does your salary and improving it motivate or change your behaviour? Because I think that it's pretty universal.

Or it's self-interest. People are sucking up to Trump because it's in their financial interest, they hate doing it, they feel terrible about it, but they're just acting rationally to preserve their shareholders and personal positions and reputation and profits. That's just life with the incentives in a capitalist system. Justin says, "Long time listener, first time caller, love the show. I recently did a deep dive on why long-term mortgages aren't available in Australia after the late last rate rise. Question - could Australia, with structural reforms, establish an active long-term debt market and adopt Denmark's balance principal mortgage bonds and use this also to fund our growth? Why don't we have long-term mortgages in Australia, Alan? Do we need a Fannie Mae or Freddie Mac?"

Well, we do and in order to write my quarterly essay on housing, I investigated this and 30-year mortgages were introduced in the US when they created Fannie Mae, which is the federal mortgage association. The job of the Fannie Mae was and still is to buy mortgages off banks to provide them with liquidity. The problem with 30-year mortgages provided by banks was that that locks them into lending money for a long term, but most of the deposits, the money that they get in, is short-term, so it just increases the risk of the banks. The thing is, when that was done in the 1930s in The United States, the US had a democrat president and we had a conservative Prime Minister, conservative Government and we didn't follow suit, didn't do it.

We leave it to the market, the Aussie market...

And by the time Labor got in, which was I think 1941, we were in the middle of the war so nobody really thought about anything else but the war. Then the moment passed and Menzies got in and nobody was interested in doing it. Could we do it in other ways? I'm not sure and to be honest, I don't know what Denmark's balanced principal mortgage bonds are.

The problem with doing it was that there could be an element of nationalisation of the banking service. At the end of the day, our States and Federal Government can and do borrow 10, 20, 30-year money, so if they can borrow 10, 20, 30-year money, why can't they on-lend it to people for their most important thing, a roof over their head? And line up those long-term loans from the markets to their people so they can have some certainty on what they're paying on their mortgage. Instead, everyone's sitting there, watching the headlines, terrified that their mortgage rate is going to change because you can't buy - well, you can get some fixed term loans but it's nothing like the American long-term system, which is far better, let's be honest, it's a better system, you can sleep at night, you can make long-term plans.

It has a couple of impacts, not unintended, but certainly not directly associated with the mortgages. One, is that it discourages people from selling their house because they then have to start a new mortgage and it reduces the amount of stamp duty revenue of the states; and secondly, it makes monetary policy not work very well. In the US, when the Federal Reserve changes interest rates, it doesn't have much of an impact on consumers, mortgage holders, because most people are sitting on 30-year mortgages and it doesn't make any difference to what they're repaying.

Whereas, in Australia, there's an instant transmission of rate hikes because the mortgages are set to the cash rate that the RBA does, so the variable mortgage rate moves up and down very quickly and we're all sitting around wondering, will the banks pass on the rate cuts and the rate hikes or not. In the US, that doesn't matter. The US monetary policy tends to work mainly on businesses where their loans are much more variable and set according to the Fed funds rate.

Let's move onto question eight from Tony, "I was shocked to hear James say on last week's podcast that, "We're producing too many electric vehicles and they are being stockpiled everywhere in Australia." For a second, I thought it was his pitch to join the pay TV channel formerly known as Sky News. Do you agree that the sheer weight of the economic benefit, let alone the emission reductions, will lead to a more rapid transition to EVs than many are predicting. Or will the scare campaigns driven in many cases by the entrenched ICE manufacturers prevail for a while yet?" I think the cheaper flood of EVs is a good thing and it just becomes more price competitive and so it will drive take-up at a time globally when subsidies from Governments are being wound back.

So we've moved from a Government subsidy of EV model to a Chinese subsidy of EV because they're manufacturing millions of EVs, some would say at a loss or a limited profit, and flooding the world's markets with them. I don't think that's necessarily a bad thing.

I agree. I think everyone will end up driving an electric vehicle, for sure. I've got an EV and one of the interesting consequences of having an EV is that you don't really know what it's costing you to run. When you had a petrol car, you know exactly the cost to fill it up and every few weeks you'd have to go and do it and you'd see the amount of money that you're putting into it. With EVs, you're connected to your electricity every night and it obviously increases your electricity bill, but you don't know what it is, so it actually feels like it's costing you nothing and I've thought about and tried to think about what it's costing me in the extra electricity but it's completely impossible, you've got no idea. So it feels a bit like it costs you nothing because your electricity bill is probably higher, but who knows.

Well, whatever the case is, it's costing you less than if you were using fuel, but some would argue it can be an inconvenience in the amount of time it takes you to charge, there's issues with supply chain and getting parts, there's issues with resale value - supposedly, the EV cars have been falling faster than traditional cars. Overall, I think there's little doubt that you'll be in front if you drive an EV.

It's definitely not inconvenient, I just plug it in overnight and drive off in the morning, it's fine. The other thing I think is worth mentioning is, I reckon that eventually, possibly 10 years, I don't know when, we won't be driving cars at all, we'll be sitting in the back seat while they drive us.

EV cars will be driving us, correct.

Because apart from anything else, the insurance will be lower because they don't have accidents, self-driving cars, they don't bash into each other, so I think that we'll be sitting in the back seat, letting the car drive us because it'll cost less in insurance.

I agree, absolutely right. Your turn, boss.

What else can we go with?

What about Mark? Mark's asking, "Let's have some merch! Love the show." Can we get some Money Café merch, Alan?

I'm not directly involved in this, I'm told, "Watch this space! We're working on something behind the scenes." So, who knows.

Very exciting.

Kendall says, "Why are interest rates used to manage inflation? Recent news articles say only one-third of Australians have a mortgage which means raising interest rates only affects a third of Australians. Who is controlling the other two-thirds' Australians' spending? Interest rates just lead to more profit for the banks and their shareholders. Those with an interest in the banks are unlikely to be those with mortgages because they can't afford bank shares. So the rich get richer and keep spending, which doesn't help inflation." That's true, I mean the whole basis of monetary policy is that the people who have a mortgage cut back more than the people who don't have a mortgage increase their spending.

It also has a business impact. If the economy is overheating because there's too much business activity, too much speculation, too much capital investment driving up costs of supplies, etcetera... It's meant to slow down business activity because for businesses, they've got to pay more money to take out a loan to build that new factory. It's not just households and mortgages, it is meant to slow the economy so it doesn't overheat, triggering inflation. You can't lose it, I mean Kendall's point is right and it benefits those with cash because they get more on their term deposits, but it does slowdown business as well which is what the Government is trying to do or the Reserve Bank's trying to do.

Douglas says, "I was just listening to last week's podcast and the listener's question about physical gold. You commented that an ETF is exactly the same as physical gold, but there's a key point you missed. Counterparty risk. Physical gold has no counterparty risk, whereas every electronic version, ETFs, which is gold stored on your behalf, blockchain gold, etcetera, has a counterparty that introduces a risk element to the risk. That's why central banks buy physical gold and store it themselves." What do you think, boss?

Yeah, that's obviously right in theory. The problem is that the physical gold price that you buy and sell for is set according to the paper gold price. It's not a separate market, the ABC Bullion and the Perth Mint that buy and sell gold, physical gold, set the price according to the spot market and the futures market, as I was explaining. It's true, except that they're linked.

Also, physical gold, there's a risk that your gold's going to get stolen, so that's a risk that doesn't exist with ETFs. You've got to store it, you've got to insure it if there's a robbery, you've got to buy a big safe... So there's actually costs around holding physical gold and our institutions are very, very sophisticated. When did the last gold ETF actually default. It's like saying, there's a counterparty risk if I take a mortgage out with the Commonwealth Bank, because the Commonwealth Bank could go broke. Well, yes, it's a theoretical risk, but is it really going to eventuate? I would say, unlikely, with credible sellers of gold ETFs.

Also, if you've got a mortgage with the Commonwealth Bank and they go broke, you've got their money, it's fine. The problem is, if you've given them your money.

Yes. Nathan says, "I loved Alan's quick rundown of all the cost categories that collapsed in each industrial revolution. Tech style labour, transport, communication and now intelligence. As investors, we're looking to what's next? What's the next cost to collapse? Is it energy? If so, where should we invest, or is it still too early or will private capital continue to capture the big gains? That goes to your four-part series, doesn't it, Alan? On the collapsing cost of intelligence with the rollout of AI.

It is interesting talking about energy cost, because the cost of energy is collapsing now. Solar and wind, in particular solar, is the lowest cost of energy. It's not falling to zero because of the cost of building the solar panels but they've collapsed in price, the cost of PV, photovoltaic, cells has collapsed mainly because of what China is up to. The next step with energy possibly is fusion energy, there's a lot of people close to, they say, coming up with fusion, which is a new form of nuclear, which is potentially very cheap and perpetual. I think that's an interesting point about falling cost of energy, which could keep falling with the price of photovoltaic cells. Now they're talking about having them in space, not just data centres, but actual solar arrays as satellites, collecting energy from the sun.

The reason it's potentially cheaper there, is because it runs 24 hours a day, rather than just when it's daytime and it's much closer to the sun so it gets unadulterated sun rays that don't have to go through the atmosphere. There's a lot of talk about that. I don't know if that will actually happen, because you've got to then convert it into microwaves which get beamed to earth and collected in microwave collection centres and then get turned back into electricity and you've got to pay for the rocket to go up, so that's expensive as well. I haven't seen any cost estimate of what that power will cost.

Even with intelligence, $700 billion US dollars in capital expenditure by the magnificent seven and a couple others is the largest ever capital expenditure in history to provide cheap intelligence to everyone else. There's still a big cost in delivering that cheap intelligence, but it's certainly coming.

Just briefly, what usually happens with those big capex events that we've seen now and have seen in the past, is that there's a big stock market bust and everyone goes broke and the capital's lost and everyone starts again.

I think, yes, you usually lose money in that capital intensive phase. But often at the end of it, it can turn into a bonanza and that was like the tech wreck. There was a lot of investment, a lot of the fibre went bad, but a lot of the other tech investment, a lot of companies went broke but ultimately the Googles and the Facebooks of the world and the Microsofts emerged, more powerful than any corporates we've ever seen and even today with so-called SaaS, flash crash, they're still worth more than $20 billion, those big magnificent seven tech stocks, even as some of them are going to negative cash flow like Amazon and even as they're going to spend $700 billion this year, up from $400 billion US last year.

We've never seen any spending like it, but it's been done by companies that have never been as rich and powerful as capitalism has produced. It's all unprecedented stuff. Time for one more, Alan, you can choose it.

Long-term listener says, "I listened to a talk recently, the lack of measured productivity in the burgeoning care sector. Nobody ever discusses how the bulk of care provided in Australia is unpaid and usually by women staying home, as it has been for generations. It just isn't measured, discuss." Yes, that's true, I don't think that's ever going to be measured, really, I don't think it's going to - I mean, it's true, but it's not going to happen.

Both things are true, aren't they? The cost of the care sector, the care sector is a growing sector in the economy, nursing homes, childcare... There's a lot more people in it being paid, but there's also an enormous amount of people in it doing it as volunteers and has been forever thus. I don't know how you can measure it.

I think the question is also talking about people looking after disabled people at home or old people at home who aren't in the institution and not part of the ABS measured system. They're not being measured either, so I think that's true but I do wonder at what point we start having robots doing work.

I think it's going to be a big factor. But we've never spent more from a Government spending point of view, just look at the NDIS, it's absolutely enormous and the growth in the childcare sector and the aged care sector have also been enormous and maybe there is a productivity issue in the paid professional element of that sector. But absolutely right, there is an enormous amount of work being done that's unpaid and not measured and it should be discussed more, long-time listener, so I agree with you.

That's it for today. Thanks very much, everyone, for listening to today's episode of the Money Café, I'll be back next week with Stephen Mayne again, so I can't wait for that, Stephen. [Laughs]

See you in the café, boss, next time, looking forward to it.

Send in your question and we'll answer it - unfortunately we're getting so many questions, we can't answer them all. Today I think we answered about half the questions. Maybe we should do an Easter special where we just do questions for an hour or something, what do you think, Stephen?

I'd support that. Other podcasts do that, they have a debate podcast and then they have a questions podcast totally separate. But we're getting so many, 20-plus a week now and they're all great questions too, so keep sending them in. Don't lose heart if we don't read your question out, keep going!

Keep going! I'll talk to James to see if we can get him lined up for a special with the three of us doing nothing but answering questions.

A questions festival, that'd be great.

Okay, until next week, I'm Alan Kohler, Editor at Large of Intelligent Investor.

And I'm Stephen Mayne and we'll see you next week.

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Got a question for next week? Please send it to themoneycafe@eurekareport.com.au.