#196 Chris Joye Returns: Middle East Tensions, Trump’s Tariffs & Australia’s Economic Drift

The return of Chris Joye comes at a critical moment, with tensions escalating in the Middle East and Trump’s tariffs now in effect.

In this episode, we reflect on the trade developments since April — back when Trump first rattled markets with his tariff threats.

We look at Trump’s unpredictable economic plays, Coolabah Capital’s bond trading strategy, and how quantitative models are being used to read the chaos. There’s no avoiding the geopolitical tension in the Middle East — or the Elon Musk/Trump rift and the impact on US central bank decisions.

We also bring it back home — diving into Australia’s productivity problem, housing market stress, and the recent NSW budget. And finally, a straight-up conversation on tax reform, the state of leadership in this country, and Australia’s financial future.

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
Hi, my Boris, And this is straight Talk Chris Joey
walking back to the straight Talk mate. Lots happening since
I last said you like you're hearing what March March
March this year and we were talking this is sort
of trade war announcement, sort of period pre trade war,
pre trade war. Okay, so it was pre liberation Day,
that's right, preliberation day, so called liberation day. So he

(00:20):
announced and you know, you were predicting rate cuts, and
we've got a recut in may RBA recut and then
we're probably going to get a rate cut again in July.
But we'll come back to that in a second. Just
if we just peel back though, because you know, with Trump,
you know, doing what he's doing, and with the world,
the volatility is crazy. But sometimes we sort of tend

(00:42):
to forget what has happened before, Like we just sort
of concentrated what's happening now. And we will talk about
Israeli run. But if we just go back to that
March discussion, just remind us what you were saying in March,
pre trade war. Trump.

Speaker 2 (00:57):
Yeah, so I said, I thought you were s equities
would fall forty percent and that it was going to
be really bad, and he was really serious on tariffs,
and no one was prepared for this very hawkish Trump
on tariffs, and that it was basically going to get
pretty ugly. And what happened was the SMP five hundred.

(01:19):
US equities fell twenty two percent post Liberation Day YEP,
and the Nasdaq index fell twenty seven percent. And that
was through to nine April. So two April was Liberation Day,
and then Trump, being the increasingly consummate iterator, backflips on

(01:39):
nine April. He says, Okay, I've scared the shit out
of markets. I've kind of declared a forever trade war
on everyone. I'm going to focus on China, but everyone
else I'll do a deal with. So he's sticking true
to his plan. He's decoupling from China. That's happening. He's
going to bring all that manufacturing home. That's going to

(02:01):
be super positive for US growth in the medium term.
But he's doing trade deals with everybody. Markets loved it.
The day he backflipped, the US sequity market jumped nine
and a half percent. We on that day bought one
point seven billion dollars of bonds.

Speaker 1 (02:19):
And then we've been Colby.

Speaker 2 (02:21):
Yeah, the firm I run, we run fifteen billion, and
then from nine April to thirty April we bought four
point six billion of bonds and we thought, so we were.

Speaker 1 (02:32):
Super bearish March. He bonds between about global wares y.

Speaker 2 (02:35):
Yeah, US banking, so he banks. But on the show
last time.

Speaker 1 (02:38):
I was, you know, the uber bear.

Speaker 2 (02:40):
But we flipped one hundred and eighty degrees when we
saw him basically shift from being an ideological trade warrior.
So basically this hyper zealous guy which was Trump from
the election to nine April to suddenly becoming a market whisperer.
Our judgment was on nine April he was going to
do everything he needed to do to plicate markets, and

(03:04):
therefore it was a super attractive buying opportunity. And at
the same time he's still running some pretty serious intensive
warfare with the boss of the Fed Power.

Speaker 1 (03:19):
Yeah see that.

Speaker 2 (03:19):
And interestingly, and I think this is genius.

Speaker 1 (03:22):
Because because his term is coming up to yeah next year.

Speaker 2 (03:25):
But the genius trade that Trump looks like I think
he's going to affect is he's going to pre announce
his successor I think.

Speaker 1 (03:35):
Soon announce power successor, Yeah, which.

Speaker 2 (03:38):
Is just genius, so he will undermine power and anoint
his success who's dubbish. And the Federal cut rates this
year and pretty aggressively, I think, because they can, and
because rates are very high in the US, so they
are around four and a half percent here ast with

(03:59):
three point eight four And as you said on the
show last time, we said that the RBA would cut
in May. They cut in May, They're going to cut
in July. There will be three more cuts this year,
so five cuts. In title last time we spoke about
the fact that, you know, we were very bullish on housing.
Sydney house prices started rising and Melbourne started rising in

(04:22):
February and they're.

Speaker 1 (04:24):
Climbing quickly off the back of the eight in the
February cut.

Speaker 2 (04:27):
Yeah, and so we call that cut in December, and
basically of the view that the housing market would turn
in February. It's actually notwithstanding we expected. It's quite amazing
how inch straight elastic the market is and Sydney prices
and Melbourne prices going gangbusters.

Speaker 1 (04:46):
When you mean lest you get to a most sensitive
so how the market responds quickly excuse me to either
asset classes, particularly housing just explained something to our listeners.
When you go off and buy global bonds, which were
whether it be issued out of the US or Australia wherever,
how do you make money in these markets? How does

(05:07):
Coolibar make money for its clients or for its basic investors.

Speaker 2 (05:11):
Firstly, our yield's really attractive right now. So we're earning
interest rates on our bond portfolios of around seven to
eight percent, which.

Speaker 1 (05:20):
Is much higher than people would get if they put
in the bank, for example.

Speaker 2 (05:23):
So our yield's really attractive. And then when we buy
and sell bonds, we trade about half a billion to
a billion a day, and we make money eighty ninety
percent of the time.

Speaker 1 (05:33):
Because other people would like to buy those very attractive
interest rates from you because they're not getting it anymore.

Speaker 2 (05:38):
Correct, and they pay you a capital gain correct exactly.
So we might buy a bond paying five point one
percent and sell it for a year to five percent,
and that lower yield to give us a bit of
price appreciation, and that capital gain augments our total return.

Speaker 1 (05:54):
And the reason you make cable gain because you don't
buy one bond at five point one as eleven five
of you buy thousands of millions.

Speaker 2 (06:01):
Yeah, and they're trading like you know, up to a
one to two billion a day, right, And you know
I've got the fifty sixty super smart guys and girls
that work for us, much smarter than me. I'm the brawn,
they're the brains. I'm the window dressing and and but yeah,
crazy smart team. I mean lots of university medalists and

(06:22):
PhDs and super smart dudes.

Speaker 1 (06:24):
How do you find these people?

Speaker 2 (06:27):
We actually find I like to call us like the
odd bods. Like our guys are always just you know,
that crazy smart guy, a girl who's sitting inside a
big organization, who's not political. He's probably been stiffed on
camp a few times and wants to be part of
a big team.

Speaker 1 (06:46):
Stan they missed out on a commission that they're expected
to get or get a bonus or something like that.

Speaker 2 (06:51):
But they're not political, but they are the smartest guys
in the room, and they want to play a team sport.

Speaker 1 (06:58):
Basically, I don't appreciate it. Underappreciated.

Speaker 2 (07:00):
Yeah, and all of our guys are pretty idiosyncratic, a
little eccentric, but they're all team players and cool of
bar as a team sport. Like you know, we're fifty
sixty very talented guys and girls, but it's it's like
a machine. It's not one person making decisions. Where ninety
eight percent of our trading is driven by models, so

(07:23):
financial models, and there's no rock stars, there's no heroes
that billionaire a day. That way, trading is quantitative.

Speaker 1 (07:31):
So when when when the RBA does its modeling And
most people think that you know, the RBA just sits
around there and they will put their hand UPBA or NA.
There's actually the the people within the RBA. The people
work there as opposed to the board. They make submissions
as to what should happen. But the RBA is continually

(07:51):
doing modeling. I mean they they run off I think
one of the model models of the al models users
called Martin I think, or.

Speaker 2 (07:58):
Something along the model of that.

Speaker 1 (08:00):
And there's another one to do GSC. I don't know
what it stands for. But in any event, what are
your guys doing relative to analytics around what the RBA
is doing, because you know, like I just get this
feeling though most people out there think that we're just
sort of saying, well, you know that number coming out
of the AUSTRAMI your statistics was a bit low or

(08:20):
it was a great two point one is a great
headline inflation rate, two four is a great trim million,
and therefore we should just reduce interust rates. No, the
RBA has got all these variables, so they stick into
their models and we'll come back to the model in
a second. But they're sticking to the models, and that
spits out a result. And there's lots of variables, like
there's millions of them, not millions, there's a lot anyway,

(08:42):
And then they build different scenarios for sensitivity. What do
you guys do do you do work around that stuff
too with your team I'm.

Speaker 2 (08:49):
Talking about yeah, So, I mean most of our modeling
is pricing the right interest rate for CBO, RAINS or
NAB to pay us on their.

Speaker 1 (08:57):
Debt so on a bond that U motorable from them CORET.

Speaker 2 (09:00):
So we're lending money to everyone in the world Google, Apple, JP,
Morgan Gold and Sacks, CBA. And what we do is
pricing interust rates better than anyone in the world, we believe,
and we require a huge amount of tech to do that.
So we have like eighty models that we use around
the world. We also more or less let the models trade,

(09:20):
so we have our goes that trade alongside our humans
basically like a proper count. Yeah, like ninety eight percent
of our trading is quantitativele.

Speaker 1 (09:30):
When sentiment gets involved and the cont doesn't understand it.

Speaker 2 (09:33):
Yeah, so that's where the two percent comes in, right.
You know, it's just not a cookie cut of trade.
It might be April or you know, there might be
a trade war, or it might be Trump backflipping, and
then the team step in and saying, okay, we'll wait
a second. The models are saying things are cheap, but
we also think there's a regime change here the personality. Well, yeah,
Trump's shifting course and that's really important for future pricing.

(09:57):
So in addition to pricing every bond of the world
all day every day, we also run a ton of
modeling to try and predict what the RBA and the
fair are going to do. Not because we punt interest rates,
so this is a little bit confusing. We don't bet
on the direction of the RBA before they make a decision, correct,
we never do that with price bonds. But we want

(10:19):
to understand what the RBA is going to do and
what's the what the Fed will do before anyone else
so that we can better trade the bonds.

Speaker 1 (10:27):
So just to take it back a step, just like
you're very technical, super bright, I'll just try to put
that into mark speak. So when you buy the bonds,
you buy the word of the shoe prices, as you know,
whoever's issue in the bonds will be whatever it is.
And what if the shoe prices and the rate they're
offering you ines rate they're offering you. But what you're

(10:48):
talking about is when you do do this analysis or
your team does this analysis in a quantitative sense using
perhaps software or the systems doing it for you, just
put aside the qualitative stuff and a set We'll come
back to that beause I want to talk about Trump.
You're trying to get a sense of what the RBA
is going to do, so you know whether to get
ahead of it by doing a trade in relations to

(11:10):
what you already hold.

Speaker 2 (11:11):
Correct. Yeah, So the way I describe is that we
don't trade macro like the RBA or what they're going
to do almost all the time. However, once or twice
a year, once every couple of years, macro is really important.
Macro is super important in March and April. So because
of our macro modeling, and our macro guys were saying

(11:31):
Trump's going to be crazy hawkish on trade and that's
going to blow up equities. We'd hedged twenty five to
fifty percent of all of our skin March before Liberation Day,
and we'd sold a lot of our bonds. And then
because of our macro analysis in mid April and the
ninth of April, we thought that there was another regime

(11:52):
and that he was going to be much more of
a guy that tried to assuage market concerns and manage markets,
and that this would be risk positive. So our macro
influenced the one point seven billion of buying we did
on the ninth of April. And you know, to talk
a geopolitics, I mean that's been very important for our

(12:12):
trading as well. I mean I was sitting last week
or soo two weeks ago in Zuri at the airport,
and I think we've developed quite a good capacity to
read Trump and to discern his tails.

Speaker 1 (12:25):
He's got clear tells. Can you talk about that? Yeah?

Speaker 2 (12:29):
So, like when he came out and said just before
Israel launched it's onslaught against Iran, he came out and
made this really strong statement.

Speaker 1 (12:41):
He said thirteen fifteen days ago.

Speaker 2 (12:43):
Yeah, and he said there is no risk of Israel
attacking I run imminently, but they might do it. So
at some point internally we were of the view that
he was engaging in subterfuge and that there was a
good chance that actually Israel was about to strike immediately.

Speaker 1 (13:03):
And that's exactly what happened.

Speaker 2 (13:05):
And in that Zime and I wrote about this actually
in the AFI and the reason being, So, the reason
being is he just can't help himself. He's a massive
front runner of inside information. So whenever Trumpy has the
good oil, which he as president of the United States
and leader of the free world, ostensibly he gets the
juice all the time, something cooking well. He always knows what,

(13:25):
he knows what everyone's going to do right, all the time,
and he can't help himself. He wants to be man
in the middle. He wants to be the center of attention.
And so I thought he was being I said to
my guys, he's come out bizarrely and said there's no
chance of an Israeli strike, but Israel's going to do
what Israel's going to do. They're an independent sovereign. Say yeah,
that will be influenced by him. But it's kind of

(13:47):
bizarre that he's taken away that sort of sovereign right
and that decision making he would front run whether they
would and wouldn't strike, because he's also taking.

Speaker 1 (13:57):
Away there.

Speaker 2 (14:00):
To capitalize on strategic surprise. Why would you do that?
It doesn't make sense. So I said to my guys,
I actually think they're going to have a shot, because
this is Trump playing games. He's trying to manipulate global
perceptions of what they will won't do. And subsequently, apparently
he was all in on it, and he said that

(14:22):
to mislead the Iranians. But the really interesting thing was then,
So I was sitting in Zurich airport, I guess almost
a week later, and I was catching a flight to Dubai,
and I had a conference call with my traders in London,
New York. And as I'm talking to them, I'm reading
this article that says that Trump's come out and said

(14:45):
that he's going to give Iran basically two weeks, that
he'll make a decision on whether to strike Iran in
approximately two weeks time. And I said to my guys,
I think he's going to go. I think he's going
to go this weekend. I wrote this in the Financial
you as well. I said on the Friday before he
bombed Ran, I said in the AFR, I think he's

(15:07):
going to have a shot this weekend. And so we
sold about three to five hundred million dollars of bonds
in that phone call, just because I wanted to de
risk and dude. I then jump onto the Emirates flight
and I wake up in the middle of the flight
and the whole planes I can feel the g forces
pushing me back into the seed, the planes kind of
switching direction in an unusually sort of rapid way. I

(15:29):
hit the in flight map. We're right on top of Baghdad,
like literally right above Bagdad, flying through Iraqi air space.
And then I go to my phone and I look
at my Bloomberg chat and there's a headline that the
guys have put up missile sighted in Iraq heading towards
Iran from Israel. And then I chatted my guys and said,
what's going on? Any more headlines? And then they hit

(15:50):
me with a stream of headlines. And so as we
were over Baghdad, the Israelis had launched their wall and
fired three hundred and thirty missiles at Iran and we
were evacuating the air space and I opened my window
shade and looked at the window. I don't know what
they were, but it was a very clear night sky.
I could see Bagdad below us, all the lights, the
city lights, and I could see about five different things

(16:14):
moving at great pace through the sky, whether our cruise
missiles fast jets, I don't know. And that the Iraqi
air space within an hour would be a no fly zone.
And so that was pretty discombobulating. And then we arrived
in Dubai and I'm like, holy shit, like, you know,
get me help, Yeah, game on. And then, of course,
you know Trump he himself bombs aren't so so this

(16:38):
to answer your question, you know, fund managers and investors
sometimes say things like stock because we'll say I pick stocks,
I don't do macro, and I think that's all shit.

Speaker 1 (16:46):
I think you got to do everything. And that's what
we try and build. We try and bring to.

Speaker 2 (16:50):
Bear unrelenting intellectual horsepower in every conceivable vector, whether it's
pricing the bonds, predicting what the IBA is going to do.
So we run a ton of quant models that are
solely geared towards trying to forcus what the feed is
going to do with the IBA is going to do,
not because we're trading it day to day, but once
a year it might be relevant and also doing a
ton of geopolitical work. So you know, we built AI

(17:12):
models that for the first time in history, we've published
research on this. You can go to our website predictingwar
dot com we published years ago.

Speaker 1 (17:21):
Go to your website cool and look on the tab
predicting war dot com.

Speaker 2 (17:24):
And there's actually a separate website called predicting water coom.
We've created at about seven eight nine years ago, and
we built AI models to predict military conflicts between nation
states using two hundred years of military conflict data in
the University of Michigan data set. But we wanted to
show you could put a probability on these things if
you look at you know, what nation states are saying

(17:46):
about one another, if you look at the development of
their military capability, their power projection capacity, if you look
at their demography, their economics. The models are quite accurate,
and you know, for example, they put a forty nine
percent of the US and China being involved in some
sort of conflict over the next ten years, and we
published research on it none had ever done, but none

(18:06):
it ever put empirical probabilities, predictive probabilities on the prospective
military conflicts before it. I wanted to show that data
can give you a lot of insight on this. So
so yeah, so I think we got the you know,
we did a good job of anticipating the initial Israeli strikes.

Speaker 1 (18:27):
And that allowed you to de risk.

Speaker 2 (18:29):
No, we actually didn't do anything in response to that,
so we didn't monetize that insight. But we then definitely
did monetize the second event when we anticipated that Trump
would strike over that weekend and bomb ran with the
B two stealth bombers and the GBU fifty seven mop
bombs of twelve thousand ton bombs.

Speaker 1 (18:49):
That the two thousand pounds. Yes, yeah, that he.

Speaker 2 (18:51):
Dropped on Fedora and the Tance and the third nuclear
side and so we did risk ahead of that, and
then when he executed that mission, we then so after
that he basically announced the world, our bombers are out
of Iraqi Iranian airspace. No American souls have been hurt.
We've obliterated these nuclear targets. We actually put all the

(19:15):
risks back on immediately and started to have continuously added risk,
and our view was yeah, continuously brought billions. And that's
because our view was a few things. We think Comedie
is dead. We think his son's dead. We've been arguing this.
You still think that, Yeah, I think, I mean, I
don't know, but we've thought for about a week or
so that Comedy is dead.

Speaker 1 (19:34):
I think it's very haven't seen him.

Speaker 2 (19:36):
We haven't seen him. We haven't heard from him.

Speaker 1 (19:37):
You've seen the foreign minister or.

Speaker 2 (19:39):
His successor, which is his son. They're all am I A.
And so we think either community is dead and his
son's dead, which I think is very very likely, or
there's been some sort of regime change that we don't
know about yet. But I think the Iranians are going
to reveal whatever they reveal in due course. And it
looks like there's six hundred kilos of enricher iranium was
inside for door. You remember there was all this reporting

(20:01):
that oh, they evacuated with it, but I think the
intelligence suggests it was actually sitting inside for Door.

Speaker 1 (20:05):
And it's been buried in there.

Speaker 2 (20:07):
And the kind of mainstream media claims that they did
no damage to Fedora absolute horseshit, Like all the damage
assessments from the Iranians, from Israelis and now from the
CIA say that you know, this stuff was very very
seriously damaged and has put the program back many many years.
So yeah, so macro is important, mate, as you know,
like you, I do it all grow your whole life.

Speaker 1 (20:29):
But but I mean, what I find extraordinarily interesting is
working out the tell based on language. And it's not
just based on words, but it's based on timing. There
are probably a number of elements in these things. And
we look, we used to sort of do this with
the Reserve Bank and the Geroe Powells. Well he used
to always trying to sort of second guess what he
or she's going to do, and you know, set your

(20:52):
interest rates for example, and in my case at mees
rates ahead of a rate reduction, trying to get ahead
of her and get market share. It's a bit more
difficult today, but it's interesting in terms of the trades
that you do that you look at your user comp models,
but then you go off and you do your sort
of you know, your reasonable inness assessment, your overall assessment
based on what you see and where you see what
you hear? How many other things leading up to that?

(21:14):
And I'll get off this and see but this intreaues
me how many other things for example, for example, when
Trump was not available to talk to Albanizi and sort
of the meeting of the G seven, what it was
when Albanzi turned up, Trump sort of made himself unavailable.
Do you look at those things and also say, hang on,
something is big going on.

Speaker 2 (21:34):
Yeah, this signal with the noise wasn't just that. It
was the key for me where I thought, Okay, this
is really on. So we thought he'd bomb them that weekend,
even though he'd set the world up to think it
was two weeks away. Because he can't help himself again,
he wants to be a man in the middle. He
wants to be smarter than everyone else. And he is
freaking smart. Like he is serially underestimated. Like I'm one

(21:54):
hundred percent certain Trump is crazy smart guy. He's never drunk,
he's never done drugs. Yes, got all these hyperbolic and
other sort of you know for many people on savory characteristics,
but this dude is he's an absolute weapon.

Speaker 1 (22:07):
Can we just get into that a little bit? Like,
as I I'm waiting before we did.

Speaker 2 (22:10):
Let me answer your question, h because there was something interesting.
So he bolts from the G seven for his emergency
national security meetings. He has multiple multiple meetings over the
course of the weekend. But the thing that was really
interesting for me where I thought, Okay, we've really got
this right, was he's always giving presses, so he's always
talking the media. Every time he's in Force one, he's
giving you basically a doorstop interview, and on this occasion,

(22:35):
to the National security meeting and from the National security meeting,
he refused to talk to the media, and I thought,
that's different. So the accumulation of evidence, the fact that
he once again tried to mislead the world about the
timetable and he wanted to be the smartest guy in
the room, the fact that Israel had aerial superiority and
it was a very easy mission to execute, the fact

(22:55):
that the GBU fifty sevens are really the only weapon
that can penetrate sixty meters of high performance contray concrete.
And even then the GBU fifty sevens, which are the
thirty pound bombs that they dropped on the tents and
for door fourteen of them twelve year, twelveteen. Yeah, but
even though they actually can't get through sixty meters of
high performance concrete, so they drop them through the aerill sorry,

(23:16):
the air conditioning shafts, so the ventilation shafts, and so,
you know, for me, and also being a narcissist, I thought,
this is just such a perfect window of opportunity where
he can come in. The Israelis have done all the
heavy lifting. You know, they killed thirty generals, They've got
rid of all the air defenses, all the aircraft decimated.
I ran, and he just comes over the top with

(23:37):
his seven, you know, deathly looking stealth B twenty B
two raiders and finishes the Iranians off. And then so
this is the Kamene puzzle that we still don't know
the answer to. He tweets out afterwards that the hit
quote unquote is what sealed the peace steal right says

(24:00):
like our raid on these nuclear sides and the hit,
but he puts it in adverted commas sealed the piece. Still,
I reckon he was intimating to a Kamene hit. So
I think he's got the old double entendre going. And
so the one hit was obviously the hit on the
nuclear sides. But the other hit was I think he
knows that comedy's gone. It's also interesting, fascinating. Actually he

(24:23):
called for regime change in Iran. He called for Migga
makeer run great again. And then now when they've asked
him a war about regime change run, he say, oh,
we don't need regime change in a run. You know,
that would be chaos, That would be a huge one
for me. What he's actually saying is we've already had
regime change in a run. We're now dealing with the
new guys and we're fine with that.

Speaker 1 (24:39):
That's very interesting. And why do you think that it
hasn't been revealed here is because the Iranians just don't
want to tell the world.

Speaker 2 (24:44):
Yeah, I think they want to manage the optics. I mean,
they've just had the worst twelve day war, you know,
arguably and ranks up there in the history of warfare.
Is one of the most one sided conflicts ever. So
you know, as a proud nation, they're obviously humiliated, and
I think they I think it's also there's a real
problem in terms of geopolitical precedent with a nation state

(25:06):
knocking off a national leader doesn't really happen often.

Speaker 1 (25:10):
It's very very rare.

Speaker 2 (25:11):
So I think neither the Israelis nor the Americans really
want to author that assassination, even though it's extremely likely
that he and his son and he's in he's wider
family have all been assassinated because they were sitting in
a bunker in northern Tehran. I think it's called Leversan
the suburb and the Israelis and the Americans, I think
we're pounding. Well, the Israelis were certainly pounding that bunker.

(25:32):
Remember Trump came out and boasted on Twitter or truth
social that he knew exactly where KEMANI was and we
weren't going to kill him yet, right, We weren't going
to We weren't going to take him out at this point.

Speaker 1 (25:45):
But he You know, I could be wrong, but I
think he's been taken out. That is, if I could
just go one step further on their cynicism that some
people might suggest it's just cynicism. But in terms of timing,
do you think the whole thing was time for his
arrival at NATO to sort of take control of NATO

(26:06):
as well, Because like, if I'm wanting to convince ever
a NATO, you now spend five percent or three and
a half plus one and a half of your GDP
on defense. But if I want to convince you, I
wanted to show you that I can do what I
say I'm going to do. And I mean, do you
think the whole thing was timed around this NATO? I

(26:26):
think am I being super cinical here?

Speaker 2 (26:28):
I mean, I just take a step even further back.
I mean, it's extraordinary. This has been a multi decade
problem for the world, dealing with a theocracy that is
hell bent on trying to evistrate America and Israel. I mean,
it's a really serious problem. And that was also hellbent
on weaponizing uranium and developing nuclear weapons that they could
potentially provide to the who he is and you know,

(26:50):
theirs pro mass Hesbela. So this was a profound, multi
decade problem that George Bush, Obama, Clinton and Biden and
Trump had never been up to resolve, and then one
fell swoop. Trump has again superficially dealt with the problem now,
but also in a very kinetic aggressive way, like sending

(27:12):
his seven stealth bombers and bombing these guys, you know,
back into the dark ages. It's pretty full on. I
had never thought about the NATO angle. I think you're right.
I think he wanted to capitalize on that window. I
had a naper Nator. But here's the next profound because it.

Speaker 1 (27:25):
Was literally a week after but mart and he normally,
I mean, he's not going to go unless he controls it.
I mean, if you saw he sat, He's sat next
to the president of NATO, right next to him. And
actually they changed the whole event for him, so they
because he doesn't like to sit too long in those disations,
so they actually said, okay, we're just going to have
one on ones. That's pretty amazing.

Speaker 2 (27:43):
But here's what's even more amazing is this guy, the
celebrity apprentice star. He'll from a business partner, right, he
has single handedly, single handedly changed European history, Like he
has reversed the course of European history by forcing these
otherwise previously very dubbish from a military perspective, state, So

(28:05):
we're spending nothing on defense to boost defense spending to
five percent of GDP, I mean, that's extraordinary. That's sort
of in line with long term US defense spinning. But
no one in the world spends that much on defense
aside from America and China. Here in Australia, we're spending
less than half that, and we're an arguably.

Speaker 1 (28:21):
Just a small GDP relative everybody else.

Speaker 2 (28:24):
And we're arguably in a equally if not more precarious
position given our proximity to the south trying to see Taiwan.
But Trump has done this. No one else has done this.
You know, he was excoriated for you know, not being
a multilaterist, and for threatening to withdraw from NATO, and
for being you know, Pudin's bitch, and then Ella Mask's bitch,

(28:45):
and then China's bitch and North Korea's bitch. But actually
he's There was some sort of interview I saw in
the last twenty four hours where apparently the American head
of NATA referred to him as daddy and this is Trump.
But he's pretty, and he's the guy with the big
swinging dick, and he's a trigger puller, like he's a killer.

Speaker 1 (29:04):
And yeah, trump trade, the so called Trump trade, the
taco trade, that was the other thing. So like he's
absolutely blasted it.

Speaker 2 (29:12):
Yeah yeah, so you know Trump always chickens out the
taco trade trade. That was the other reason I thought
he'd go hard and go quickly.

Speaker 1 (29:18):
He wouldn't like that.

Speaker 2 (29:19):
He would have hated the tarco trade and this taco
trade was getting a huge amount of narrative or momentum,
narrative momentum in the mainstream media, and that would have
That's the antithesis of the way he sees himself. He
sees himself as a hitter, right, and he is. He
makes decisions, and he often changes his mind, but which

(29:40):
is entitled to do right, Like, you know, he wages
forever trade war and everyone and then he decides, you know,
a week and a half later that he'll do deals,
but he won't do deal with deals with China. He's
saying he'll do deals with China, but the reality is
they're decoupling right that manufacturing is coming home, and that's
his key mission. He wants to square up the rest
of the world and make sure that people don't cheat
on trade. And I think that's a perfectly kind of

(30:00):
reasonable ambition. But isn't it interesting that this guy that
has been dismissed by everybody as being you know, hypermiopic
and just incapable of rational cojun deep strategic thought, this
is the dude that is revolution revolutionizing the geostrategic environment

(30:21):
in the Middle East and Europe.

Speaker 1 (30:23):
I mean, it's extraordinary generary.

Speaker 2 (30:25):
He's aways been nominated for a Nobel Peace Prize as
a result of the And not only does he bomb,
you know, the Iranians into oblivion, but he is also
catalyzed and negotiated the ceasefire. And I presume now that
Ukraine and Russia and the crosshairs, and he's kind of
started to create a lot of distance between himself and
Putin because he's running around now saying, well, Puttin, offer

(30:45):
to mediate between Punaimi and said, I'll mediate between a
run and Israel. And he said, dude, you mediate your
own war. My problems with you, mate, You're not meeting anything,
mediating anything on my buff.

Speaker 1 (30:55):
He said this.

Speaker 2 (30:56):
So it's interesting, and it's classically sort of he's a
preternatural businessman, like, you know, I take you at face
value until I can't take you at face value. But
when I can't take you at face value, I'm going
to treat you differently. And that's the way Trump seems
to work.

Speaker 1 (31:08):
It's very itederative.

Speaker 2 (31:09):
We were talking about this before. He's massively adaptive, like
he's constantly iterating his business model or his mental model
to adjust for the circumstances. You know, if people want
to be you do handshake deals and principle based transactions.
I can do that. But if they fuck me over, well,
then I'll fuck them back five times harder and then
we'll see, you know what the consequences are.

Speaker 1 (31:31):
Just if I could just go flip back to because
that stuffs fascinating in terms of someone being so strategic
and on their not on their own. Obviously you've got
a team, but someone is so strategy and such a
short period. He's had to be the president for like
most of this year. So if I just tracked back
on one step bar in terms of the bringing manufacturing
back to the United States and the point you just

(31:53):
may decoupling, maybe we could just spend a little bit
of time thinking about that, particularly in relation to interest rates,
because in the US and the like, if we take
what you just said is being correct, and I tend
to agree with I do agree with you, his constant
belligerent behavior against the current Federal Reserve boss your own

(32:16):
power would be indicative of a bigger strategy. Plant It's
not just because he doesn't like him there's a Biggert
strategy plan. What is it that? Why do you think
he wants to get interest rates down in America irrespective
and just take inflation out of it. Why is he
trying to make money cheap in the United States? And
why does he want to do couple from China? And
why does why would he be happy for the US
dollar to suffer as a result of that? There's some

(32:38):
obviously examples reasons for it, but maybe you could explain that,
you know, like they might manufacture, they need to export
get better currency results. Why do you take us through that?

Speaker 2 (32:47):
So when you peel back the onion on Trumps, there's
always a really lucid strategic clarity underpinning his decision making.
That's what I'm finding. And you know, I'm not a
trump ack lite. I didn't have strong views on him
in his first administration.

Speaker 1 (33:02):
Like he's different this time, Aroun one hundred percent.

Speaker 2 (33:04):
Yeah, And this is the keyp on is different, which
doesn't normally happen. Like we've just elected our government. Our
bow is going to be exactly the same, charm is
going to let me be the same. And presumably they're
in bolden because they think they have a mandate, so
they're going to do more of the same. We're not
going to see I doubt much iteration or evolution, other
than them doubling down on whatever they were doing in
the past, which is spending a shitload of money and
crowding out the private sector, and government solving all of

(33:27):
our problems and tax reform, which will be interesting.

Speaker 1 (33:31):
Right so I think.

Speaker 2 (33:34):
So the Trump program is actually really simple, but it
is intricate. So part one is, okay, we set up
this free trade system after World War two and we
said we'll trade with anyone, and over the period since
that time, we dropped all about tariffs and our trade subsidies.
And the idea was if everyone trades on equal terms.

(33:54):
You know, Mark bills houses, Chris has a factory that
produces close that's your pawer of advantage, that's my competitive advantage,
and we all benefit from trade and we're prosperous. And
that's the capitalist model, the Western liberal democratic model, which
worked incredibly well post World War two. But then, of
course some country started to cheat, like Australians to cheated.
We decided to subsidize the production of movies and we

(34:15):
start stealing investment from Hollywood. No one really talks about this,
but the reality is we've stolen a ton of investment
from Hollywood. And then Trump turns around say's, actually, I'm
going to wa one hundred percent tariffs on any foreign
made films. And we're like, oh, shock, how did you
do that? But the truth is we just can't compete
with Hollywood, and so we're cheating by getting government to
kind of bonds, yeah, compensate for our deficiency. So he's like,

(34:39):
we need to square everybody up globally. But the main
culprit here has been China. China has been treating cheating
relentlessly and also stealing an intellectual property and being very
strategic in trying to dominate key market sectors that have
long term geostrategic value, like telecommunications ext up with Huawei,

(35:01):
and so Trump's like, we've actually thought we were outsourcing
all of our manufacturing to a benign partner in China
over the last thirty forty years, but actually they've ended
up with control of all of our supply chains, and
the event of any kinetic conflict, we're really screwed. And
the truth is now with automation AI and digital printing,
we can produce all this stuff at home, because obviously
Musk has been an influence in the background. You know,

(35:22):
Musk with SpaceX and with Tesla has proven you can
build anything you want in an America and be well beating.

Speaker 1 (35:26):
You know.

Speaker 2 (35:27):
He's got a monopoly in global satellite business more or less,
and he was dominant in the EV business until the
Chinese totle it all his IP and created a BYD
and BYD started decimating Tesla. So so I think part
one is he wants to get trade back on an
equal footing. Part two is unless you're a trusted counterparty,
as in, if you're going to try and ask for

(35:48):
US twenty four to seven and you're going to present
a serious, potentially existential military threat to US, as the
Chinese in his view, he's not going to trade with
you at all, and he's going to bring all that
investment home. So that's the game plan. To do that.
You need to have credible trade barriers and that investment
reassuring that home will create massive growth in the year.
So that's really positive the United States.

Speaker 1 (36:09):
Massive economic growth.

Speaker 2 (36:10):
Massive economic growth, but it also create capacity and that
all things being equal. On the one hand, the investment
could be inflationary, but the capacity could be deflactury. But
just that's one part of his program. The second part
of his program is he wants to deliver about eight
point one trillion tax cuts, massive tax cuts. He has
to pay for them, and if he doesn't have money,
he's got to borrow the money, and that means he's

(36:30):
got to issue eight point one trillion dollars worth of
debt and that's going to push up long term interest
rates because people like me, the christ Joys the world
are going to say, actually, Trumpy, I'm not going to
lend you that money unless you pay me high rates.
And that's generally what's happened in the US. Ten government
bond yield has risen from about three point six percent
in September last year to mid fours and people are
very worried about the global tsunami of government borrowing and

(36:54):
therefore the dead binge, partly because here in Australia, the
States and the Feds are spending crazy amounts of money.
We've now our government has a share of our economy
is the biggest it's been since World War Two. Our
government here in Australias accounted for two thirds of all
economic growth since the pandemic and has accounted for more
than fifty percent of all jobs growth.

Speaker 1 (37:11):
And that's not your federal birth state now.

Speaker 2 (37:13):
Federal and state, so that's Australia. Now Europeans are saying, well,
we're going to spend five percent of g to be
having done Circle one to fund defense. So where they
going to get their money. They have to borrow the
money and massive amount of debt, which means it's actually
perversely good for someone like Maye because it means I'm
going to get great interest rates on those bonds, right,
so it means long term interstrates are going to stay high.

(37:34):
But coming back to Trumpy, he wants people to pay
a lot of taxes. I get that. In California, if
you're a top income, your top producer, you pay more
than fifty to fifty five percent.

Speaker 1 (37:42):
That's because you pay Californian text too, and federal text.

Speaker 2 (37:46):
And in New York you pay over fifty percent as well.
But in Florida, where they're running budget surpluses and they're
running their finances really well, you only pay thirty eight
percent total tax if you're a top income. So a
lot of people are moving from New York and California
down to Texas where you have the same think thirty
eight percent top tax, and Florida. And so the US
has had this cathartic internal conflict that's created the huge

(38:08):
intense debate between the Republicans and the Democrats because they're
seeing economic mayhem and social mayhem in California, particularly San
Francisco kind of failing city, California, fault state, massive budget deficits,
sort of on the brink of insolvency. And then they're
seeing the counterfaction, which is Florida and Texas, budget surpluses,
crime under control, generally, business thriving and flourishing. And that's

(38:32):
I think what's galvanized the momentum behind Trump's program. So
he wants to get taxes low. He's got to fund
them to do that. He's got to get rid of
big government. Specifically, he's got a shrink government by fifteen percent.
It's not that much. If he does that, he gets
about a trillion a year in savings, and that fully
pays for the tax cuts. Now, if you shrink government
and you cut government spending by fifteen percent or a

(38:53):
trillion a year, that's deflationary. Because all that money a
trullion year was going out there to contractors, builders, you know,
service providers and government employees. Now are spending that money.
That demand goes, So that's deflation and that creates job losses.
On the other hand, the tax cuts, tax cuts are
inflationing because that's more money in people's pockets they can
spend that. And then clearly the returning all the supply

(39:15):
chains back to America, so reassuring the manufacturing, getting this
massive manufacturing boom in the US, which I think will happen.
It'll happen much faster than people think over the next
few years. That's also inflationy. But the key point is
the Fed things are normal ingstraate it's three percent. They're
currently at four and a quarter to four and a half.
Inflation has been pretty benign. Tariffs will push up inflation temporarily,

(39:35):
but it'll pass through the data like a pig through
a python. And here and now the Fed should be
cutting now. Trump is right about power, So this is
where the signal and the noise is. Power's a bit
of a dickhead. Okay, I shouldn't probably say that, but
I'll tell you he was very political prior to and
during the U S election, So he was pulling super
hard for Biden and Harris, and they were cutting when

(39:55):
they shouldn't have been cutting. As I argued at the time.
As soon as Trump was elected, they stopped cutting. They
cut once more in descemi've basically they said we're not
going to do any more cuts. They haven't cut since.
And he's been quite reckless in the way that he's
been talking about, for example, the tariffs. He's been trying
to maximize financial market volatively. He's been trying to sheet
home as much blame to Trump for the tariffs, even

(40:17):
though the tariffs in and of themselves are necessary and
reasonable because everyone the world's been cheating and stealing American
sort of basically stealing their prosperity, particularly the Chinese, anyone
who hasn't been trading on fair terms, and he's just
trying to square them up. So you do need tariffs
of some sort to rewrite big global economy. But the

(40:37):
ultimate endgame is we're going to have multiple trading blocks.
We're going to have the non democratic authoritarian states, the Chinas,
the Irans, the Russias and North Koreas trading with themselves
and probably some African and Asian nations, and then you
have the Western liberal democracies. But you can see this
is a big juggling tax cuts on the one hand,
cutting government spending on the other hand, reassuring some applight chains,

(41:01):
and then issuing potentially a lot of debt if you
can't if you can't get the government spending changes, he
will have to issue a lot of debt. And this
comes back to the FED. The feeds at four and
a half percent. Inflation in the US has been benign.
Normal is three. So what Trump is saying, you should
be closer to three, and you should be moving towards three,
and they haven't been doing.

Speaker 1 (41:18):
And we America in the country as a as a borrower,
as a borrower, could be paying a lot less interest
exactly if you reduce the rate.

Speaker 2 (41:27):
Yeah, that's the one liner. The one liner is the
Americans have a lot of government debt. Potentially that government
debt is going to increase unless they crush government spending.
So Trump wants to get the interest right down on
that government debt. And one way to do that is
definitely try and get the Fed to cut But I
think intellectually he's right, the FED should be cutting I mean,
I think the FED should be cutting right now. It's
not that they should put rates at a really low level,

(41:48):
but they should probably be getting closer to neutral and
their way. I mean, they're miles away from neutro at
four and a quarter to four and a half neutral three.
They should be much closer to three. And I think,
you know, he's had it with power, and so he's
latest I think movies to say, you know what, I'm
going to appoint your successor or naming name your successor exactly,
and then that will completely undermine powers authority, and power

(42:10):
will be forced now to contend with an internal replacement
that he will have to to some extent reflect the
will of So so it's all really interesting and the
world's definitely a more safe and stable place post Trump
Bombinger run, just make no mistake about that. Like, everyone
feels better about the Middle East. The Saudis are happy,
the Syrians are happy, the Jordanians are very happy, the
Israelis are happy.

Speaker 1 (42:30):
The Emirates happy.

Speaker 2 (42:32):
The Emirates are very happy. Happy, everyone's even Qatar and Oman,
which you know have had close ties to a run. Yeah,
they're probably neutral to positive. So so you know, one
guy's done this and it's just quite amazing.

Speaker 1 (42:48):
It's amazing, It is quite amazing because.

Speaker 2 (42:50):
We don't have leadership like that in this country. Mate.
Well yeah, but like you should run for office, thanks
very much.

Speaker 1 (42:55):
So let's just bueld it back. You should do something. Yeah, well,
you can't run for office in this country. The problem
is in this country. You can in the US, but
you can't in this country. In this country got to
being a party. The party's got to win or be
able to do deals with somebody else and have a coalition,
so to speak. And then you're going to be by
your party voted in to be the dute And that's
the problem in this country. That's the issue around that.

(43:17):
I mean, it's fraught with danger. If I could just
peel it back then. So relative to anyone who's listening
to this, who's interested in interest rates and prosperity here
in Australia, which by the way, is that the RBA
is that mandate you know, welfare and prosperity of all Australians,
by the way, which is the terminology in its mandate.

(43:37):
What do you think all this means for Australia. So
I'm not going to talk just put interest rates aside
for the moment. What do you think this means for
US just as a nation? What's happening in the US.

Speaker 2 (43:48):
I'm actually loath to kind of talk about it because
I've got some pretty serious concerns and fears short term,
like we're spinning like drunken salors. So all that a
government levels, at government levels, all that public money from
the states and the fairs, is going to mean that
growth in austral is going to be good and the
economy will look good, will look good. Economy is going
to be totally fine because the government will be powering

(44:09):
that growth well.

Speaker 1 (44:10):
In terms of dudyp measurement. Correct, Yeah, but that doesn't
mean it's good.

Speaker 2 (44:13):
It doesn't.

Speaker 1 (44:14):
If we go to look at private sectors part it's
not so good.

Speaker 2 (44:16):
Yeah, it's abysmal. And then we've also got super strong
population growth and a lot of these new immigrants have
voted for labor and so that's going to continue and
it's putting a lot of pressure on cities. But as
far as the economic data's concerned, people come to the country,
they spend money. That's positive in the long run. I mean,
we're really screwed.

Speaker 1 (44:31):
Do you think it's your musing? Okay, do you think
GDP today is a poor measurement of how well we're
doing because it can be manipulated.

Speaker 2 (44:39):
Yes, one hundred percent can be manipulated. I mean it's
a measurement. It's a very carefully measured proxy for the
rate of change in output over time. But I mean
what I'm focused on is productivity and what that means
is output for our work, So how much we produce
for the amount of time we put into it. And
on that basis, Australia. Australia looks terrible. I mean, we're

(45:02):
on a productivity basis, labor productivity in total what's called
multi factor productivity, but basically.

Speaker 1 (45:08):
Whether you've gone backwards MFP, Yeah, it's gone backwards.

Speaker 2 (45:11):
So if whether you look at broad productivity or just
labor productivity, what you see as Australia's productivity performance has
not really improved over a quarter of a century, and
we're lagging Europe, We're lagging by long way the US,
and we're going to end up Asia as of etha.
We're going to be a beach resort for rich members
of the literati in the Indo Pacific region. And it's

(45:34):
okay for the short term, it's okay probably for the
next five, ten to fifteen years, but eventually for our
children's children, it's going to be a massive problem and
we won't produce anything. There won't be any entrepreneurship, any
real innovation, and then living standards will start to decay signif.

Speaker 1 (45:49):
Have but not significantly, I guess because one of the
things I found quite fascinating the other day when I
was looking at capital investments, So in other words, the
amount of money that gets reinvested by not any prophecies,
but also by the government in terms of how efficient,
how efficient I should say, employees can be for example,
you know the verious tools that employees can use to
be much more productive. Our cabin investments like at an

(46:13):
all time low. As you just mentioned. Our productivity relatively speaking,
has been in terms of normal measurements is ridiculously loan
as probably the worst it's been for a long long time.
But what a really fascinating is a sent about eighty
percent of our productivity is coming from services sector. It
doesn't come out of product products actual products, So eighty

(46:34):
percent and becaurse I'm not having here having to go
at you, Jimlake, but you know, when you keep putting
people long into public service and not having our public
servance side because as a space for public service saying
can be wrong. But the more times you just keep
loading up the employment number, well then I'm employed as
a result of all the people you bring into the country.

(46:55):
The more times you can continue to do that, you're
just building up this services sector which by definition, generally speaking,
isn't that productive. So as a result of that, the
productive productivity of the country is very very low. Opposite
in the United States, opposite in Germany, and heavily with
the amount of capital that Germany and the US have reinvested,
we aren't investing anything into our public service in terms

(47:17):
of making them more efficient and therefore more production.

Speaker 2 (47:19):
You're exactly right, Mark, It's interesting, Well, not only we're
not really producing anything in Australia like tangible goods, that's
all been offshore, but we're not actually investing in technology
or soft capital investment. Yeah, but we're not investing in
technology to support our services.

Speaker 1 (47:35):
Yeah, correct, that's what I'm saying. We're just saying, go
into the job, so people working longer hours, more hours,
but they're not working more efficiently and they're more productive.

Speaker 2 (47:42):
So it doesn't matter hay sliced, does it. Whether you
look at research and development, whether you look at the
amount of money that firms are investing in technology, software
and tools to make their employees more productive, whether you
look at overall capital spending, labor productivity, which is bismal,
total productivity terrible. It's just a disaster, and we're kind
of just kicking the can down the road by bringing

(48:05):
massive amounts of people in the country to grow through
population growth, and by borrowing from the future and spending today.
You know, a country, a state like Victoria just prior
to the pandemic in twenty nineteen, I think owed the
world forty five to fifty billion. Within a few years
Victoria owed the world close to three hundred billion. And

(48:26):
it's interesting. I saw Peter Thiel in the last twenty
four hours came out and said that he thinks the
reason that millennials have sort of pivoted to a hard
left political direction is they've got a lot of student
debt and they can't afford to buy a home, so
they're looking for the public sector to provide that panacea
to that solution. And I definitely, you know, notice it

(48:47):
when I speak to the younger generations that worked for us,
a lot of them voted labor and which is not
a bad thing, Jim. I'm not party political. I don't
really care. I just want solutions. But but it is
interesting I think people, and particularly in a very entitled
place and economy like Australia, where you've had just like

(49:07):
you've been hit on the ass by every golden rainbow,
imaginable well beating population growth, world beating endowments of commodities
and natural resources and now you know, mega public spending
and the absence of a bona fidi recession since nineteen
ninety one. You know, people have just become accustomed to
expect these solutions to be perveyed to them. And I

(49:29):
think that's the problem. So Asias of bethro is the
direction in which we're heading a beach resort for the
well held of the region. And I think it's a
huge problem. But what can we do about it in
the meantime? In the short term, and everyone's so myopic
and hedonistic. In the short term, everything's going to be fine.
In Australia like rate's going to come down. The rbable
to cut three times this year. The cash read will
go to three percent. It's currently a three point eight

(49:50):
five percent. House prices are starting having been very weak
in Sydney and Melbourne, house prices we're falling in twenty
twenty four. House prices are rising at a decent clip,
not a crazy clip, but we'll get a very robust
housing recovery, which is good.

Speaker 1 (50:02):
Do you subscribe to the View you rate reductions house
price increases?

Speaker 2 (50:06):
Of course? Yeah, Well it's not, it's an empirical fact.
I know my esteemed mate he does not.

Speaker 1 (50:13):
I saw I saw something of on next recently. He
doesn't subscribe to View.

Speaker 2 (50:17):
It's just wrong. I mean it affis purchasing power. The
only way interest rates coming down directly and very materially
change the amount of debt that you can afford.

Speaker 1 (50:27):
To assume, and it goes straight into the property.

Speaker 2 (50:30):
And therefore interest rates coming down directly impact the value
of the property that you can purchase. Nothing formula, and
it gets capitalized into prices and the only thing that
can change that is supply. Yeah, and so you produce
more houses. But you know, we can't change supply instantaneously.
That's a multi year process. So the supply side, so
you know, in the long run, the supply side should

(50:53):
react to those changes in demand that are a function
of changes in interest rates. But there's no doubt that
house prices are highly interest rate sensitive. And it's not
a bad thing. I mean, this is what the NBA.
This is called the transmission mechanism. The RBA cuts rates,
that reduces borrowing costs, and that shows up in the
form of more discretionary disposable income, higher house prices. So

(51:17):
the housing market is a key channel through which monetary
policy provides it bequeaths that economic relief to the broader community.
It's not a bad thing.

Speaker 1 (51:26):
But yeah, there's a lot of power for our monetary
policy too. We observe during the rate rise period because
most trainers are on fixed on verable rates, but during
a rate reduction period, that verbal rate is pretty valuable
and it actually reflects in the purchase purchasing power. As
as you said, it's amazing, it's actually just as solid

(51:48):
on the way down as it is on the way up.

Speaker 2 (51:50):
Well, I'll tell you this, and i'd say this to Kookie.
Doubt Cookie's got to this, well, maybe has got to
this part of the interview. But if you look at
the daily Cooreo Logic house price indexes that I helped
co create, they're published on College Week's website. You can
see them every day, and you hit the back series
tab on the core Logic website and you dis select
every city except for Sydney. What you'll see is that
Sydney prices were falling until the middle of Februar this

(52:11):
year cuts rates. Literally the same week they cut rates,
house prices turned one hundred and eight degrees, started rising again,
and then rose and rose and rose, and then they
started to stabilize a little bit until May. When May
came along, we got the cut and they went off
again to the races. So there's you know, it's unambiguously
the case that prices are very responsive to changes in

(52:33):
the purchasing power of those properties, which is governed by incomes.

Speaker 1 (52:38):
And income is fixed, but the amount of money you
can borrow is variable. Because correct interest rates goes down,
you can borrow more money. That's what we do. We
lend you more money if because when we do our calculation,
your debt servicing ability is far greater because the interest
rate we assume you're going to pay is much lower.

Speaker 2 (52:55):
I actually want to ask you a question, like, you've
had a bit to do with Trump yourself back the
day when he was the gregarious entrepreneur and he's political,
he wasn't in that political decision making mode. But I
remember asking you about this years ago. I actually can't
remember your response. So what was he like?

Speaker 1 (53:10):
Well, yeah, but the thing I've had a trumpes is
very purposeful. So he knew everything he was doing, down
to the most minute detail, how he dressed, how he
addressed the camera, what we talked about. Because I interviewed
interviewed him. I spent like forty five minutes interviewing him. Yeah, yeah,
we did a live TV interview, Yeah, one online which

(53:32):
I'm trying to call you but I can't find it.
But it's his purposefulness in relation to his answers and
everything he tracks and he sits on the same topics
he won't It doesn't matter what questions ask He knew
what answers he wanted to give me.

Speaker 2 (53:46):
So so interesting because I see that in that mindfulness
and purpose purposefulness that you mention. You see that actually
in his interviews.

Speaker 1 (53:54):
Now he knows what he wants to get out before
he gets there.

Speaker 2 (53:56):
He's delivering those very, very clearly cultivated messages, but he's
also very strategic with their delivery. Have you seen the
there's a really good little video of him recently where
he's getting ready for an interview.

Speaker 1 (54:07):
Have you seen this one?

Speaker 2 (54:08):
And so there's two actually, So he's prepping for an
interview and there's a table with a glass of water
next to him, and he's just sitting there and the
camera's rolling and the MIC's hot, and he says, hey, John,
move that table. And so he moves the table and
he just sits and he says, actually bring it back,
and bring the glass back. And the glass has a

(54:30):
little piece of paper on top of the glass. Just
get rid of the piece of paper on top of
the glass, and get rid of the matt under the glass.
And he's just looking himself in the camera. Yeah, that's perfect.
And then there's another shot of him in the Oval
office and he's recording his commentary on the I think
the US economy and he's being fairly there's a lot

(54:50):
of gesticulation and he's quite emphatic, and somebody coughers coughs
halfway through. You know what he is. This is a
kind of distant coffee you can hear in the background
because it stops. Why the hell would you cougher the room?
Leave the room and let's roll again, And he kind
of seamlessly just slides straight back into that discourse.

Speaker 1 (55:10):
But yes, super super, I would say this, Chris, like
a irrespective of your politics, whether your Republican or a
Democrat or a liberal or a labor whatever, never underestimate him.
If you do, you're going to do it at your
own peril. The guy is on on narrative, on brand,

(55:32):
on everything. He absolutely does like he knows exactly what
he's going to do the outcome and it is not right.
He gets it fixed and he has the ability to.
By the way, when when when I did the interview
to preempt where you might go first because and I
won't say what he was asked me not to talk about,
but he actually preempted a number of things to me
before we got to that territory. And he did it

(55:53):
through his head of pr person here they come and
told me what territories you cannot go. And then when
we did talk about fainily enough. He was. He was
extremely critical of China an Australia's relationship with China, and
I said to him, well, you know, like at seventy
percent of our trade, you know, like export trade, and

(56:13):
he just didn't copy. He's just but they're raping you,
he said, are they are taking you for a ride?
And he did not. And I thought it was chill
because like you know, this is like they're a major
trading part I think I don't want to go down
the territory. But he didn't give a damn. So to
some extent, and be honest, he's fearless. He's fearless like
in a commercial Sceen is quite fearless. He doesn't care

(56:34):
if the opposition is his.

Speaker 2 (56:36):
Ear blown off. And he was up there saying five
fight fight. The dude's got balls, like he's he's a hitter. Yeah,
he's a real hitter. And it's interesting how controlled and yeah,
strategic and disciplined he is with his own decisioning and
external as you were saying, communications like everything the no drinking,
the no drugs, the appearance, the way, everything's very very careful.

Speaker 1 (56:58):
He's always on cure always and then he's messaging is
just relentless, and relentless is a good word. And we're
not here trying to blow smoke up the president's bump.
But in terms of observations, I think relentless is a
good word. He's relentless with his messaging about himself and
everything that he's trying to achieve. In terms of his strategy,
he's totally relentless. And even at seventy nine, just turns

(57:21):
seventy nine. That's quite amazing. Acuities, incredible leaks, bang bang bang,
and he's on and everything sort of set out, And
I just want to quickly.

Speaker 2 (57:30):
Ask you before we go on, so one other point
here that is important to your comment that we're not
here to blow up, blow win up Trump's us. Like
my job, I run fifteen billion, My job is to
anticipate what the MOFO is going to do, right, I
have to. You know, I invest a huge amount resources
in trying to study him and understand him. And then
through that process, if I find his decision making interesting

(57:53):
and informative and illuminating, I'm actually trying to learn myself.
You know, how can I better prosecute my own decision
making problems? You know, when you've got a guy that's
been elected president twice, he's a multi billionaire. Okay, he
comes with all his again let's say acknowledged shortcomings, but
there's there's the signal with the noise, there's there's something
we can everyone can learn from Trump.

Speaker 1 (58:14):
And that's what today's about. And by the way, what
do you read about the must trade?

Speaker 2 (58:19):
Great question. Yeah, so I think he just blew up.
I think he really regrets the you know, vicious exit.
I think I think that was an amazing partnership. I
really hoped that it would endure. I actually think there'll
be a reproachment at some point. Musk will come back
to owl between his legs. I mean, Musk got way

(58:41):
over his skis. He was politicizing everything he touched. Tesla
was blowing up, he was a risk of losing SpaceX contracts.
He wasn't focused on his businesses. And you know, I
don't know, I mean he was. I don't want to
call him a nascist, but he was clearly enjoying being
in the Oval officer every day, sleeping in the Lincoln Room,
being joint press conferences with Trump all the time, and

(59:03):
I guess being at the center of a global decision
making authority, dealing with leaders of nation states. So he
was clearly getting off on that. You could see whether
he has this ketamine addiction, I'm not sure, but it's
clear that that he's an unusual cat, and it seemed
if you look at the tapes, he was on something.

Speaker 1 (59:23):
And he has retracted a bit since.

Speaker 2 (59:25):
Yeah, and he's you know, he's he's definitely retracted a
fair bit since. So, I mean, the big beautiful bill.
Sure it has a lot of pork barreling in it,
but these things are always compromises. You know. The tax
cuts are important, the defense spending is important. I thought
Doge had a lot of momentum behind it. So he
kind of torched Doge. He torched his constituency inside the

(59:46):
White House. He potentially torched a lot of his access
in the context of his own businesses like Tesla and SpaceX.
SpaceX's biggest customers the US government, So that's a that's
a big potential problem. I think it's interesting how his
crawl right back into his shell musk, and he's thus
far been pretty a political except for the Californian rights

(01:00:08):
where he's been retweeting what Trump and Jady Vance have
been saying, so I think I think Mask made a
big mistake and it wouldn't surprise me if he was intoxicated.
I also thought the way that Trump dealt with him
was really interesting, like really interesting. He was far less
vicious and far more restrained until Muss started dropping the

(01:00:29):
personal bombs on Trump, and then he just said, listen,
you know, if you want to get personal, we can
get personal. Like, you know, we don't need to do
business with you if you want to go down that route.

Speaker 1 (01:00:36):
That's not shout, but that's like that's like the Iran
Iran trade, like, yeah, you got forty days. Yeah, yeah,
I mean will do a deal. He'll do an ultimatum
that's to anyone.

Speaker 2 (01:00:46):
Correat Yeah, And Jady Vance said, I thought it was
really interesting. Jeddy Vance said, we love Elin, he's been
great for us, but do you really want to get
into a blood rivalry with Donald Trump at this point
in his career. No, that's not the trade you want
to do, and he was just like, you get back
into your box. I love Musk. I think he's amazing

(01:01:08):
and he's an extraordinary human being. He's done so much
for society. But I think it was just a mistake.
We all make mistakes, and I think I think Musk
will iterate big time. So I expect Musk to come
back out and swing strongly behind Trump in whatever ways
he can in the future. There was also I mean,
I think Trump made the point that Musk was upset
about him removing the electric vehicle subsidies by way of

(01:01:33):
this big, bold, beautiful bill, whatever it's called. And whether
that paid played part of it, I'm not sure. There
was also, I think issues with Musk dealing with the
broader administration. It's one thing to have a bilateral relationship
with Trump when you've got to deal with all of
his lackey's. Someone like Musk is going to blow up
those guys because he's just you know, for sure, he's
a force of nature. And so yeah, but I'm disappointed, mate,

(01:01:57):
because I thought Musk had a lot of answers to
Trump's problems from a policy perspective, like Musk has really
extraordinary strategic clarity, and he was right on the economics.
You know, you've got to cut government spending in the
US in order to balance the books, and you need
to balance the budget in order to start paying back
the debt and reducing the burden of the interest rate

(01:02:17):
servicing costs. So yeah, it was disappointed.

Speaker 1 (01:02:19):
I got down in Murky on in next week. What
would you say about the budget that came up from
New South Wales on Tuesday this week?

Speaker 2 (01:02:25):
Mate, Mooki is probably the best politician in Australia. Definitely
the best treasure, best treasure in Australia. I'm sorry, definitely
the best stay treasurer your soft mate, come on, So yeah,
Mooki is definitely. I think he's the hardest working, smartest
politician in the country. He is formidably intelligent. He know
what's different about Murky as well. I think he really

(01:02:47):
is in it for the right reasons. He doesn't want
to be Premier or Prime Minister. He cares about change
and he's also very sensible. I've dealt with him a lot.
He's a fucking weapon, mate, He's an absolute beast man.

Speaker 1 (01:02:59):
How much of the budget do you think was about
saying or preserving our credit rating for New South Wales
I'm talking about.

Speaker 2 (01:03:07):
I mean with a good look. Yeah, I think we
think they're at risk of losing the credit rating. But
he's doing everything he can to try and salvage it.
I can tell you this. You know, the Victorians are
borrying about forty billion a year, the Queensland's borring about
forty billion a year. Mook, He's only borrowing twenty four
billion a year for a bigger state, for a much
bigger state. And so he's been incredibly disciplined on debt.

(01:03:30):
And that's something I spoke to him a lot about
before he became treasurer. He's an immense he's an immense
human being, and he's one of the good guys. Like
if someone like him could become premier or Prime minister,
that's when you win, you know, when you've got somebody
who's there for the right reasons, who isn't a narcissist,
who isn't just trying to accumulate power and kind of

(01:03:52):
settle scores, And then.

Speaker 1 (01:03:54):
That's how that's how I see Christian's by the way,
at a state level, yeah, I think christ is there
for the right reasons. Us again that right, but he's
in the right reasons. He's not trying to settle scores.
It's I think it's a bit different at the federal level.
But I meant anyway, I rate both.

Speaker 2 (01:04:07):
I've only met him once and I had like a
meeting with Min's and Murky and Men's was fantastic. He
went to Princeton. He's a farman, super impressive guy. And
I think the fact that there is also normal normal
and the fact that their relationship is sort of seem
to be high fidelity is very positive.

Speaker 1 (01:04:28):
One more question for Chris. So one of our listeners
has asked asked us to ask you this question, he says,
from one of our Mental Plus subscribers, Aaron Scott, and
he says, I'm here to to hear Chris. Chris's thoughts
about tax reform, and we like to see lower income taxes,
a high broad based consumer tax such as an increase
the GST, or he says, an increase in CGT. So

(01:04:52):
I presume it could be meaning capital against AX or
the GST. But we are we do have a reform. Sorry,
we do have a someone coming up in August. I
think it is question is have they asked you to
come along?

Speaker 2 (01:05:02):
And they haven't asked me either, So what are you
not one of the good guys as nor am I
one of Charmers himself, or one of those guys said
a long time ago that dealing with me, you've got
to use fireproof gloves, so they don't trust me. And
that's fine. I mean, I've got no problem with any
of them. As said, I'm pretty a political but I
just the problem is I say what I think and
I can't be controlled and therefore, well, you're not going

(01:05:24):
to be a job.

Speaker 1 (01:05:25):
Why would you?

Speaker 2 (01:05:25):
Yeah, But I think answer to the question, I think
everything's on the table, capital gains tax discounts, capital gains
tax period GSD.

Speaker 1 (01:05:34):
He's made it pretty clearly.

Speaker 2 (01:05:36):
I would just think that state taxes, gst capital gains taxes,
you know, mineral resource rent taxes, stamp duty is like
state and federal taxes. I think it's all on the
table because they're going to need to raise a lot
of tax.

Speaker 1 (01:05:53):
Or that'll borrow more money, which is a problem.

Speaker 2 (01:05:55):
Yeah, yeah, to pay the interest on the the borrowings
of their currently.

Speaker 1 (01:06:02):
Yeah.

Speaker 2 (01:06:02):
So I think taxes are heading one way, and I
think it's gonna be really nasty unfortunately. And I think
this is over a ten. Particularly if they get another
two terms, you're going to see a huge increase in
the public tax stake to fund the NDIS. I mean,
that's sixty billion a year, as big as medicare one
and nine kids are apparently autistic. It's just the biggest.

(01:06:23):
It's the biggest rued in the history of ruds.

Speaker 1 (01:06:25):
And you know, one of the reason why I found
it the other day is because if you're diagnosed and
prescribed as autistic, and I don't mean severely autistic, I
don't mean completely different everybody else, because there are autistic
people in kids who are really at a disadvantage to
some extent, and fair enough, but even if you're mildly autistic,

(01:06:50):
however that it gets diagnosed that they at the HC,
they get special advantages in terms of how they do
the exam. They get much more time.

Speaker 2 (01:06:58):
Well, it's also assessed not by anyone who's into pen interview,
but both whomever you choose to have the assessment made by.
And it's not means tested.

Speaker 1 (01:07:05):
So clever parents will say that diagnosed every.

Speaker 2 (01:07:11):
Man and their dogs now in the NDIS. And so
I think the taxes are heading one way. I mean,
you're going to be paying a lot of tax to
the government because the government's got to pay for the NDS.
They're going to pay for all this infrastructure, they're going
to pay for the huge public service and the fact
that they represent a larger share of the economy than
any government we've seen since more or less World War Two.

(01:07:32):
So I think forget what they say, like any any
claims that we're not going to do gs here, we're
not going to do with stay taxes. I think it's
all on the table. Maybe not this term, maybe next term,
but it's they're coming for everybody. There's gonna be a
lot of tax paid. I mean, and you see the
bifurcation here between libertarian states like Florida in the US

(01:07:54):
and the super center left states like California. I mean,
the totality of taxes you pay in California fifty six,
where you're paying basically half that in Florida, because they're
just two distinctly different business models. And I think it
also is unfortunately generational. Younger generations want government to solve
their problems. Order generations want government to get out of
the way.

Speaker 1 (01:08:14):
And yeah, have you got one quick, quick one that
just came through to my mind. Let's forget about the
unfairness of the total tax or the way its been
calculator should say, but this superinnoation tax over over three
million dollars was your view.

Speaker 2 (01:08:29):
It just doesn't make any sense to me at all, Like,
I have no idea where this came from.

Speaker 1 (01:08:32):
It's not indexed.

Speaker 2 (01:08:33):
I mean, it just looks like an a team gains
unrealized gains. It looks like an attempt just to attax
into oblivion anyone who has a large superbalance.

Speaker 1 (01:08:43):
But what would be the episode?

Speaker 2 (01:08:44):
Presumably the intent is to get them out of Super.
But where's that money going to go? It's probably going
to go back into the owner occupied property, right, Like,
what are you going to do? You're going to take
your fix million Super and say, fine, I'm just going
to upgrade to a bigger house and get tax free
capital gains on my home.

Speaker 1 (01:09:01):
Maybe they've got that lined up as well.

Speaker 2 (01:09:04):
Wouldn't surprise me, mate, it would not. I mean it's
going to be nasty. It's going to be really bad.

Speaker 1 (01:09:08):
This is terrible. But but it's not yet. We'll wait
and see what happens in August or whenever he's having
commting and what you know, Dreasure, you should be inviting
this bloke and a few other people that I know,
but I doubt very much again invite us. We'll at
least tell you what you should you need to hear.

Speaker 2 (01:09:24):
We won't be there, So I say what we need
to do is Australian needs to be a magnet for
the best talent globally and to do that we need
to have globally competitive tax rates. And we know we're close,
like we need to radically revise. We should be less
progressive in our tax regimes.

Speaker 1 (01:09:38):
It should be.

Speaker 2 (01:09:40):
Much the tax CAU should be much flatter, much lower.
And but it'll happen. What's going to happen is we're
gonna have a couple of terms of this and then
there will be big problems. But eventually you get a
trumpy and style character who just come in and will
just slash all the taxes, and so you know, the
pendulum will swing in the other direction and eventually just

(01:10:01):
gonna stay alive long enough, you guys, stay alive long enough.

Speaker 1 (01:10:03):
Yeah, thanks mate, good to speak in Chris

Speaker 2 (01:10:18):
M.