Are 40-year mortgages about to become the norm? August 7, 2026

24:36And then they would, a little bit in terms of banking models, the way banks work is that they borrow short and they lend long. So when you put your money at the bank, you're actually giving the bank a collateral-free loan. I love to say that because it's sort of like it feels quite shocking, but it's incredibly true. So you're lending them some money, and that's on call. You can, in theory, take that out. And in most – again, maybe we'll find out one day when there's an emergency. In theory, you can take that out whenever you like. People from other parts of the world go, mm-mm, no, no, don't make that assumption.

25:11Bank run, yeah. But anyway, let's say that you, for most points of time, you can. But then you've lent it to someone for 30 years. Now, the more clever you get with the financialization, the more that you risk the balance sheet of the bank, which means that it only doesn't take a system-wide systemic structural collapse to undo you. It's just sort of like you become a Rams home loan or one of these players. It's just sort of like you overextended yourself. you cannot service your own debts and you've fallen short of various capital requirements that the regulators put on and you find yourself holding the bag and you go out of business and someone else will buy the line book off you.

25:56That's what keeps things in check, I would argue. And it's just like any bank that was like very clearly got the message, like you're on your own. You can do what you like with shareholders money. You can raise money from the bond market. You can lend it out. You can do whatever stupid thing that you want to do, but you better tread carefully because the second that you get out of line, you're wiped out. Your bondholders are gone. Your equity holders are gone. All of the employees, yourself, the board, you're all gone. You've lost everything and you've done a huge amount of damage on the way, mind you.

26:23But I think that would very much clarify the decisions here. It's just when we have the system that we have, which is a political class that will bail them out at every way or throw stimulus at it in every way, shape or form. All it does is it just it actually says the rational thing to do here when the party's going and the music's pumping, get up and dance and dance like crazy, you know, because we can't lose. We can't lose. And so it's sort of like to regulate it, I think is, let me walk this back. I'm not saying banks should not be regulated. There should be regulation. I'm just always nervous when regulation is the immediate knee-jerk answer to these things.

27:07I would, and especially when we frame it as markets of the problem. Now, you haven't done that, and this is where the nuance comes into it. But I wanted to expand on it because so often that is the take. It's like, oh, it's the free market. that's what's caused all of these kinds of problems. It's like, well, not really. It's the public sector tampering and interfering and providing implicit guarantees. And like these things, in the absence of those things, you're just not going to get the scale and colour of these kinds of catastrophes or the potential for it than you otherwise would. And so I think there's a sensible middle ground in here where we're just like, let's let banks innovate.

27:47I mean, it's always a cringe term when you say innovate in the banking context. Let them do what they want. They can lend out whoever they want, do to whoever they want, however they want to do it. But it's just like they face the upside if they get it right and they face the downside if it gets it wrong. You've got to have that there because if you don't, you have the moral hazard. If you have the moral hazard, you have all these stupid things sort of happening. So not really far off from what you're saying, but yeah. No, I hear you. I guess I'm making the point that the solution, well, of the range of solutions, and you've given one very good one at a root cause level, shouldn't prevent us from making alternative choices because however people see the market now, we shouldn't interfere with banks from here because it's necessarily bad.

28:37I think there's, you're right, there's multiple ways of solving the problem, but either way, I think the allowance of, I mean, I don't know, Matt, so I think you're right. I'm sure you could do it with a speech tomorrow. Right, exactly. I am pledging that we were never, ever, banks are never getting bailed out. We will bail out depositors up to 250K as we now do. So don't worry, Joe Public, you're fine. But if you're worried about some, you know, CEO on a gazillion dollars a year doing something stupid and that they need to be bailed out, otherwise we're all screwed. It doesn't make any sense when you look at it, but that's the card that will be played.

29:16You do that and it's just like there is a very serious and frank discussions in the boardroom the next day. And I would guarantee that there is the risk committee gets together. and I guarantee that they'll go, listen, we need to really just run the ruler over things and make sure that we haven't stuck our neck out too far. I would bet a lot of money on that outcome. See, I've got to say, and we've had this conversation before, so I won't overdo it because the listeners have heard it. I don't actually think that would happen. And I think the issue is the principal agent problem, which is if the shelves won't get bailed out, that sucks.

29:52But for as long as I'm the CEO who cares more about my next bonus than their equity. There is a – and you've put it, you know, having private banks and stuff. And I think my personal view is that that's still the kind of core issue for me is that idea of – so the principal agent problem basically says that the principal is that in this case the shareholder, the agent is, in theory, if corporate governance works, work on behalf of the shareholder. But if you think about who are the shareholders, if there is too many of them who are short-term fundies or short-term speculators who are like, dudes, here's the thing.

30:27I know if everything goes really badly, Commonwealth Bank, the equity goes to zero. But if it goes well, the share price goes up 20%, you get a$5 million bonus, and I get to tell my fund holders, I do a really good job. So you know what? Just push it a little bit past the red line. And there is so much, because it's principal agent and short-term, long-term, right? Does it risk the existence of the bank? Yes. Is that likely in the next six months? No. Okay. So I'm incentivized to take whatever risk I can in the six-month period or 12 months or two years, get my bonus, get the hell out of Dodge, and leave a smoldering wreck behind.

31:03And that's my only concern. I don't disagree with you overall. In the wake of that, though, what would everyone do? I'm really going for a very long-term sort of structural, foundational kind of just – Yeah, yeah. It has to be a – what's the word I'm looking for? you know, a shared secret that's just like amongst the community. It's like you're on your own. And think about it too, the ultimate, we often forget this, depositors, we, we have the ultimate power here. It's like if you, I mean, all of a sudden a few whispers start getting out there, a few journalists start actually doing their job.

31:40You know, it's like I am not leaving my funds at Bank X because I know what they're doing, which means that I actually risk losing all of my money because of, and actually this the other point I wanted to make here is that what the 40-year mortgage is doing and the 50-year mortgage that will soon follow that is that the bank's actually becoming a landlord. I mean, you can call it interest if you want, but it's, you know, I remember the old things, people would go, rent money is dead money, you know? And it's like, yeah, so is interest though, right? Like, it's not going to you. And effectively, when you think about it, so look at the mechanisms here, the bank, poof, here's some free money that we just tapped into existence on our keyboard, That's going to be used to buy the house.

32:24Now, you own it technically. Your name's on the deed, but it's the collateral for the things effectively and it wouldn't have bought us. So it's basically our house and we're going to collect a huge amount of rent on it over the next 40 years. And so you sort of look at it from the perspective of the shareholders or the bank. It's sort of like, well, I guess that is your job. You borrow at one rate and you lend at a higher rate. You capture the spread. Hopefully you add some sensible custodian solutions and some banking service solutions to it. You add some credit into the economy, sort of do all of this kind of, you know, ostensibly sort of decent things.

33:00But if all of the major banks are just going to be landlords on unproductive assets on the hope that the tenants will, there'll be enough tenants and that they'll be able to pay the rents that are required to get the attractive return on equity to make sure that this whole calculus works. It's just a very different – it's just like I might as well just invest in a property trust at this point, except a property trust that can create its own money and cause insane amounts of inflation for the rest of us. Sorry, that was another tangent going away from the other thing. But I think we can all agree.

33:35It's just a terrible – it's a terrible idea. It's a – and the trouble is is that a lot of people, as I said at the start, a lot of people will take it up. And I don't begrudge them to it because they're desperate at this point. They want a house and you'll do it. And there's even a rationality to it when the world is in an insane system. An insane stance is probably the most sane thing that you can do. I mean, it being lifetime rents, I should say. Yeah. You're just renting from the bank instead, you know. Pretty much, well, at some point, that's, you know, if you're still paying the mortgage when you're dead, that's what you've done.

34:08You literally have, even though if you have technical equity at some point, unless you've ever stopped paying that interest, you've pretty much been a lifetime renter. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

34:25We had a fun metaphor metaphor? Yeah, probably. In the Finn this week. And it was the ASX's Stephen Bradbury moment. And it's kind of a cool idea. We all remember Stephen Bradbury, of course, the speed skater who managed to stay on his feet, were all around him, crashed and Burnley won the gold at, I don't know which Olympics was it. It was a long time ago. It feels like yesterday. And apparently the ASX has had its Stephen Bradbury moment. And the story goes like this, and the headline's not very, well, it's a fun headline. It's not very useful, but there's some interesting talking points out of it.

34:57So the ASX had a pretty ordinary year this year. We're up at 4 % over the last 12 months. I say this year, the last 12 months, not just this calendar year. It's about a perfectly average year, really. because dividends would be up 8%, 9 % total return. Like, that's almost bang on the average. Yeah, exactly, exactly. It's one of those. But in the context of US markets, for example, being up double-digit percentages, a lot of the rest of the world's markets being up strongly as well. And up to this point, it's largely been a story of tech really soaring. And it turns out, we might have mentioned this before, Australia is mostly banks and miners.

35:38And so frankly - Houses and holes. That's how we roll. So frankly, we shouldn't be surprised. And no one who's paying attention is surprised that we're underperforming the S &P. And I should say, too, this is the S &P 500 at the US market. And people are going to ask me, I like to believe they know the answer. They just want to hear it for other people's benefit. It's like, why are we lagging the US? Aren't we supposed to follow the US? It's like, well, if you're not getting growth of the sort that's being delivered elsewhere, you're not going to get the same asset price increases. That's perfectly logical and normal.

36:08It's what should happen. By the way, very quickly, what a fascinating thing that we all think that the US – and we go through this dance every morning. Oh, US markets are up, so the ASX is going to open up. It's like, what? Different companies, different geographies? I mean, actually, there is a massive correlation there, so I get it. But there's no real fundamental reason why that should necessarily be true. Not necessarily. I think there is an element of global capital and global influences economically and stuff. You're right in a one-for-one relationship. I suspect if there's some sense of the oil price is down overnight or up overnight or whatever, and therefore economic activity globally is this, and I kind of get why someone with global capital or capital that is global would say, okay, economic growth is less likely globally, therefore all assets are worth a little bit less.

36:57I kind of - Oh, yeah, I get that. I get directly the point, but your broader point is absolutely valid, which is Amazon's up so Westpac shares are up. Makes kind of no sense, right? Or whatever version that you want to get with. Well, people just do it like you're looking at your screen and they want, oh, you asked up, oh, I'm in a bullish mood. It's a self-fulfilling prophecy. Yes, exactly. I guarantee you if we wake up tomorrow morning and the NASDAQ has dropped 8%, everything will sell off on our market today. Yes, correct, correct. Now, if it was – and a lot of the time there isn't some clear macro happening that points to it.

37:28It's just sort of like, oh, investors got spooked about something could be very specific to Meta or something, you know, something like that. Jensen Hanks, thank you. NVIDIA said something and it's just sort of like, oh, yep, okay, and BHP's down as a result. That's the weird part. It's like, wow. It's like Woolies during COVID. It's like, I mean, if the world ends, no one's eating baked beans. Okay, fine. Short of that, everything else goes wrong before Woolies stops selling groceries, right? Because if there's 50 % less of us because we all die, okay. But other than that, it's like, man, kind of, you know, yes, yes, Webjet's down because people have less flights.

38:07That makes sense. When we're at least going to sell less groceries, I mean, you know, it matters. Anyway, so that's what we're up to so far. Over the last month, the Australian market is up and is the best performing market in the world over the last month. And so the Stephen Bradbury moment, the kind of idea is, hey, everyone else is out ahead of us. Things are going really well. And all of a sudden, the last month, they fall off and we kind of skate through and we're doing well over the last month. That's the point of the headline. And it's a kind of a fun headline. It's not true because we're still not up ahead of them year to date.

38:39So it's kind of like they were three laps ahead of us. They fell over and now we're only two laps behind. We spoke about the base effect last week. Yes, yes, exactly, exactly. So that's all true. What I thought, the point I wanted to draw from this, mate, I'm sure you'll have some thoughts, is the Australian market is up 4 % over the past 12 months. So keep that in here. This is the All Lords. And this is as of Wednesday night, by the way, recording this Thursday morning, up 4 % over the past 12 months. Over the past eight trading days, we're up 5%. So over the previous 357 days, the ASX was down 1 % year on year.

39:21Then we add 5 % over eight trading days. So for the 365 days, we're now up 4%. Now, you might think, well, yeah, randomness happens and all that stuff. And I'm going to say to you, correct. And that's entirely the point. No one, and there was some, God love them. There were some fund managers interviewed on this story, right? I'm not going to name them and they're not bad people. But it's like, oh, yeah, it's really surprising the market's up. It's like, yes, yes, that's the point. Wait, no, that is damning. Sorry, I can't hold my tongue. You work in this industry and it's like, hey, no one told me it was going to be volatile.

39:59Like, what? But it's not only that. It's like we were surprised at the time. It's like, well, you thought you could forecast it the rest of the time? But these guys think that they can see around. That's the arrogance here, you know. It's just like, oh, that's surprising. Like, what part of that is surprising? Like, that is just, like, normal. Well, it's both, right? So it's always surprising. And so, therefore, it's always normal. So I'm agreeing with you 100%, right? It is literally, when you say it's supposed to be like, the quote should have been, yeah, we never know what's happening, which is exactly your point, right?

40:28It's like, yeah, it happened. Yeah, sure. Did you expect it? Well, I mean, it could have been up or down. I didn't expect it to be a lot of time. Right, right. I'm not surprised that it happened because some of these things happen. Didn't expect it either because these things happen. It's just one of those things. I mean, were you sitting around a room five days ago going, I really think that the next five trading days, and if you were, someone needs to slap you across the face very hard. And that's the point, right? We'll do it for us, I suppose. Well, it just has. That's the other thing. If you were, and we've had so many people say, oh, the market can't go up because of X, Y, Z, right?

40:59Because of oil, because of the economy, because of tax changes, capital gains tax. I'm bullish all of a sudden. Oh, mate, people, there was, I've had people on Twitter, I know I'm not bagging this, people, a week ago. Oh, you'd be stupid to invest in Australia. Shares won't go up because capital gains tax has changed. Dealing of gearing has changed. Now, again, whether you like or don't like the policy is not the point. The point is that was announced more than eight days ago. Eight days later, the market's up 5%, right? And it's not irrelevant anyway because it's just noise in this timescale.

41:27Of course it is. But yes, except that if you weren't invested because you thought it was relevant, you're still down. If you jump out of the market eight days ago because no one said, hey, guess what? Next week and a half, market's up 5%, you've missed that gain. And that's kind of the point. and my broad point is one we've made before but i wanted to use the data specifically to make the point timing the market is a mugs game i might say it's totally impossible someone will do it somewhere and they might even do it five times in a row because infinite number of monkeys and different number of typewriters but the idea that you can somehow know and again if the so-called masters of the universe sometimes self-professed sometimes the top levels given to them fund managers can't know isn't that the point isn't that if these are supposed to be the professionals and they don't know, that's kind of the point.

42:16What should we do? Let's ask the dude that's underperformed the market for the last 10 years. He'll know. Right. But individually, this is, I mean, yes, it's always fun to bag the fundies. The message for our listeners is stay invested because you can't know. By the way, those eight days might have been down 5 % as well. I'm not saying, I didn't know. I'm not saying, oh, they were idiots for being out of the market. Of course it was going to happen. No, it wasn't of course going to happen. No one knew. It's a very logical thing to – here's the thing, mate. This is why this is so important. It's entirely logical to think.

42:50The war in Iran is going on. Inflation is up. Interest rates still remain higher than they were a year ago. There is concern about tax changes. Crushing global debt and an absolute lack of any productivity. Yes, yes, no productivity growth. Real wages are down because discretionary spending is down. This thing is going to hell. Now, you might even be right. Demographic crisis. I mean, I go for a long run up. I'll give you a list of whatever you want. And so you go, well, of course I wouldn't invest then. It's like, well, guess what the market... Now, maybe the market falls again another 5%. I'm not saying it's permanent.

43:25I'm not saying you should have expected it. I'm not saying it was always going to happen. I'm just making the point that for all those people who told me why the market couldn't rise because of all the bad stuff, it did. And it's just the absolute folly of trying to guess where the market's going to go. And more importantly, mate, just to drag your points about for all those things that are negative and bad, they've been negative and bad on and off for sometimes the same reasons, sometimes very different reasons. For the past 5, 10, 15, 20 and 30 years, while the market's gone to extraordinary heights because individual businesses have found ways to create products and services that meet people's needs and wants.

44:02It's kind of the point. So, yes, Stephen Bradbury, God love you. Good on you, mate. Well done. But just a reminder not to try and... The economy is not the market, is the other thing to think about, right? It is just not. We've said before, those people who got out of the market during COVID and said, I won't get back in until the COVID's over, until the coast is clear. The market was higher when COVID was declared over by the WHO than it was not in the depths of the decline, but at the peak before COVID hit. In other words, you went from COVID not existing to COVID being over and the market was up over that period of time through that COVID period.

44:41So the idea that you can sort of somehow say the world is doing this, therefore the share market must do that, it is just a complete and absolute nonsense. So yes, it might be the Stephen Bradbury moment. Be happy your shares are up. Just remember trying to predict the movements of the market is an absolute mugs game to the point of being, I don't think it's difficult and controversial, just entirely counterproductive. Oh yeah. I mean, what you're getting at here is actually a really, there's a lot of studies, a study that's been repeated again and again and again. And you can do this yourself.

45:16Go to the ASX, download the last 12 months or whatever period you want of data. Sort top to bottom in terms of the best individual gains. And then just take away the top three days. Three out of 300. Sorry, I shouldn't say 365. There are weekends and public holidays, 250, whatever it is. Yep. So three out of 250, and you will find that that total, that overall aggregate return collapses. Now, before some smart aleck says, yeah, same if you miss the three worst days. Yes, but the point is, is that you don't know which day is going to be the best and which is going to be the worst. And so by, and it's this, it's the whole, was it Peter Lynch where he said more money has been lost in preparing for the bear market than the actual bear market itself?

45:59you know it's it's it's it's a tolerance to volatility that is really the secret here if there was one thing that i could call quote unquote the secret it's a tolerance to to this kind of stuff and just when i saw that headline i just like just ridiculous what does it what does five days mean what does a year even mean it's so irrelevant it's all noise it makes no difference whatsoever um you know but but that's very easy to say and very hard to internalize yes and and And you just made the point, well, it's just like, just hang through it. You'll be fine. You'll be fine. And Andrew says the day before the market collapses 30%.

46:39But I guess what I'm saying is as a genuine long-term investor, you probably will be fine. But particularly if you've got ABC Learning and HIH and insert failed corporate fraud here, then no, you're never coming back. But in any kind of reasonably sensibly curated portfolio, you will be absolutely fine. So, yeah, it's a good point, mate. What a nonsense, though. What a nonsense. I can't believe that these kinds of things get the attention that they do. It's just... Do you know what? I agree with you from people like us. But I kind of get it. I know exactly why they get the attention. And it's because humans hate uncertainty.

47:26And we're kind of back to your point about making your peace with stuff, right? And so why have we always asked people to study the entrails of animals or look to the stars or to the crystal ball or look to their preferred religious prophets or whatever? And it's just that idea that we are just instinctively really – we kind of develop conscious brains from the animals, right? With the ability to think and to imagine and to wonder. And the downside of that was we kind of went, but what if it's not? and I honestly think and again it's not to justify the view necessarily I think the smart rational he says being completely egotistical

48:06the evolution is we can't know and we have to be okay with that but I think the instinct of why do you ask because people want to know I did a keynote address during the week and I was asked by one of the people there what's going to happen next with this and I won't go to the details I get asked all the time in the media you get us all the time too what about that so i don't know well okay i'll ask someone who does then and just that that instinctive need that really deep human need to know to remove the uncertainty to to give yourself some sort of confidence it's that the ability to self-delude on that basis i think is phenomenal and it doesn't justify it and journalists should know better and hopefully people who's in this podcast know better and it's not instinctive that's the other thing you have to have worked through the idea why are there so many people who trust the seers of different, you know, types and stripes and, you know, whether it's a faith-based thing or some sort of tarot reader or Ouija boards.

48:59Or a central banker. Right? Well, it's all that stuff. It's all the same thing. Give me some sense that I will be okay, that you know what's going on, that you will do the thing. It's why governments have increasingly become, you know, go to an election, promise to solve people's problems and I'll vote for you. The other guy says, I can't solve your problems. It's your, again, your cartoon, right? Simple but wrong and complex but right. It's just, I just want to know that you're going to make it okay or you can explain it or that you're in charge or that I don't have to worry. That's so deeply ingrained human impulse.

49:28I really honestly, I think that's the answer, Matt. I really, really do. That's why we despite ourselves, why we listen. Yeah, it's definitely the answer and it's definitely any of it. I'd be lying certainly if I say I didn't feel these emotions when it happened. It's that ability to sort of just take a breath and think before you act. Don't let the lizard part of your brain drive your decisions. use the frontal cortex. We're pretty lucky. We've got a pretty big one, you know, like you use, use that part of it. And just like, if you're starting out in all of this and you're expecting just up and to the right in a nice smooth trajectory, I mean, what are you thinking?

50:04What are you smoking? What made you arrive at that conclusion? Generally people arrive at that conclusion because they ignore the share market for forever until it's a bull market. They look back over the last 12 months and go, I guess that's going to go on forever. I mean, it's like, Like, you know, I mean, you're right. Like, I get it. I get it. I get it in the same way that, I don't know, I hear a roar and I want to run because it's probably a, you know, saber-toothed tiger or something. And it's like, no, it's just a meme on someone's phone. Of course it is. You just, like, take a think about it for a second.

50:34You know, downtown Melbourne, you're not going to have these things, right? Yeah. So true. The point is, mate, can I just, another bit of news, this is on the agenda, but it sort of feeds into all of this. Did you see what happened on the Kospi? I've heard snippets of it. I don't watch it. Kospi is the South Korean stock market. Sorry, sorry. The South, sorry. Yeah, South Korean stock market. So it's had a cracker of a run until recently because they make a lot of chips there. They've done pretty well out of the iTrade as a market. Something like, I'm going to make this up, but the magnitude is roughly right.

51:11Something like a third of the adult population has had a margin call. That's too big a number. But 10 % of the adult population has had a margin call. Why? No one's interested in the market. Everyone's getting – well, it seems like everyone's getting super rich. I'm going to buy it. It turns out the people who got even richer were the ones who used leverage. So I'm going to buy it. I'm going to use a margin line there. And then things started falling. And then that caused a few margin calls, which caused some forced selling, which caused things to fall further. Boom, boom, boom, boom, boom. And the whole thing's just collapsed.

51:43and the reason is for exactly the thing that we're talking about. Yes. I extrapolated a near-term trajectory and I went to the eyeballs and not only did I not make the money that I expected, I've actually reset things and I'm back to where I was 20 years ago. In many cases, I'll never come back. Don't be that person. Yeah, yeah, yeah. So anyway, that's a good point, a really good point. Mate, we've got a couple of topics to cover off. I'll cover the second one first to make sure we get there.

52:19Yes, it's a Bitcoin one, but we'll make it reasonably quick, or if you want it to be longer, we'll still make it quick, but I understand you want to make it longer. There was some significant news in the market this week, and you kind of said to me, hey, mate, I think we need to talk about this because it's kind of a big deal. And I had missed it entirely, and after you explained it to me, you said, yeah, and still the market missed it. is we talk about people we ask and things that get reported and read and that kind of stuff. We are slaves to our own impulses and the things that really are going to make us read and click and pay attention or that kind of stuff.

52:53And he said, if this is a bull market in Bitcoin, this would be a huge story because no one's paying attention. But it's an important one to talk about. And before anyone has this sense of rounding into a bit of a pro Bitcoin thing or whatever, there's actually the opposite, mate. So I really appreciate you bringing it to me and to bring it to our listeners because this is something that, you know, if – and we talk a lot about partisanship and barracking. You've got to just gloss this over and ignore it entirely. And it turns out that it's been a small issue, a large issue for a small number of people.

53:24And it seems like things have been not resolved, at least have been mitigated. But it's still a really important kind of issue and conversation to have. So just tell us about what happened. I think it was this week or last week. It's been five days ago, six days ago now when the podcast will come out. So what happened? Look, the first thing to say is if you have a cold card hardware wallet, stop what you're listening to right now. Google what's going on and move your funds. Cold card hardware. Cold card hardware wallet. It's from a company called CoinKite. Right. So what happened was this, mate.

54:00So I'm probably going to go a little bit over a lot of people's head if you're not in the weeds because there's a lot of terms I'll throw out here. But the point is not to have a big education session on what seed signing devices are and all of this other kind of nonsense. But just that there are these things called hardware wallets, right? They store what's called your seed phrase, which is essentially your secret keys to your Bitcoin. And CoinKite, the maker of the cold card, was really considered the preeminent, like the best of the best. and they did something years ago. Oh gosh, four years ago, something like that.

54:40Actually more, maybe five years ago where they changed a bit of their code and the TLDR is that meant that their random number generator wasn't working, which means anyone who's using a certain set of their devices was not creating a pure random seed. Now, if it's not purely random, it means that computers can brute force the available search space. So instead of having to find literally an atom in 100 million different Milky Way galaxies worth of stuff, they could look at one atom in maybe something the size of a virus particle. You know, it's something that a computer can do pretty quickly. And so once this, and so what happened, and this is a sign of the times, someone pointed a very high-powered AI model at a lot of this thing.

55:27And it said, hey, there's an exploit here. And it meant that this is ongoing. This is happening right now. I think a lot of the addresses have been found because people are just, all you have to do is guess, right? You just have to guess a lot of numbers, but computers can guess very fast. And it meant that a lot of people, thousands of people, have had all their Bitcoin stolen. And what the tragedy of this is, is that they did everything right. They took self-custody. They bought what was regarded as the best device. They kept it off the internet. They did everything that all the hardcore Bitcoiners would say you would have to do.

56:06And they lost it all, you know, and it's an absolute tragedy. And so if that's been you and you've been caught up in it, I don't know what else to say. My heart breaks for you because there is no recourse. It's gone. That is the, yeah. So another thing to stress, so this isn't to do with Bitcoin per se, the protocol. This is to do with a private company's commercial product, and they screwed up. But it was a really rude awakening, though, for a lot of us in this space who, I think if you had said this a week ago, that there's going to be an exploit found in a hardware wallet, and it's going to be the cold card.

56:52I don't think any Bitcoin would have believed you. I was like, nah, there's too many eyes on that prize. They've looked at it. And it turns out that it was just sitting there, sitting there for all these years. Now, this is happening across the entire software landscape. You know, all of these zero-day exploits, a lot of the frontier models have been held back purely so Anthropic and OpenAI can give, you know, the AMPs and whatnot of this world time to look for these zero-day exploits so they can patch them before these models are released. But this is the world that we're living in. So, again, if you're not aware of it, now's the time to go off and explore it.

57:29Now that you are aware of it, again, it's my sworn blood oath duty as a Bitcoin. Bitcoin is fine. Bitcoin is fine. But it really, it's a tragedy is what it is. And as I said to you, if there is a silver lining here, it's that Bitcoin's gone through this before, Mt. Gox, FTX, various other things where these tragedies sort of happen and it just casts doubt across the whole market. The fact, let's assume nothing at this point, but assuming that this survives, right, and it should, it will very much harden the entire ecosystem and it'll strengthen the Lindy effect. And it'd just be one of those trial by fire kind of things.

58:18But, yeah, it's important to point out when the negatives happen and not just the positives. So, yeah. The other thing is to remember, without getting way down the rabbit hole here, is that the reason why you can be reasonably confident that Bitcoin itself is fine is because it's not based, it's based just on very large random numbers. And AI or any AI, any kind of intelligence, no matter how advanced, you can't be so smart that you can guess a very large number. Like that's just pure guesswork and grunt work. And the numbers here are so astronomical. So to hack Bitcoin itself, Bitcoin proper, I don't want to ever say never because there's always the unknowns, but it's exceedingly sort of unlikely because of that.

59:05But yeah, go and Google it and have a look around if it's interested and I hope you're all safe out there. Nice one, mate. Yeah, I mean, hopefully, look, every time there's a problem fix that does strengthen what's left. Obviously, you mentioned to be off air that a whole lot of people are throwing a whole lot of money and time and effort now at trying to make sure there's no alternative or additional examples of this elsewhere. There's a lot of self-interest involved in making sure Well, that's not the case. So self-interest often is, as Paul Keating used to say, always back self-interest. At least you know what's trying.

59:34So there is that sense of trying to find these things and root them out. Now, I would say, man, I don't. I want to say on behalf of you or even necessarily as a particularly informed view. But as always, things like diversification matter. Eggs in baskets, all that kind of stuff. And points of failure too. So think about that. Again, we talk about that with shares, right? Diversification is not all four banks. and it's not even banks plus home builders plus REITs. You know, the things that are the types of risk you're taking. In this case, it was the hardware wallets themselves. Just think about how you want to, if you own Bitcoin, how you want to diversify or manage the risk of, and not even the same thing, because it's a bit like the US, you know, sorry, the UK plane, the English planes that flew back and they used to work out where the bullets were and then put the new metal over the bullet holes.

1:00:23and then all of a sudden someone realized, hang on, the ones that don't come back are the ones we care about. The place that didn't get shot there, the place that had they been shot there, wouldn't have happened. So it's probably not going to be a hardware wallet next time. Hopefully there is no next time at all. But just be sensible. Be diversified. Think really carefully about where your exposures are. Sorry, just to clarify, when you say diversified, you're not talking from the asset perspective, although you also are referring to that. Yes, yes, yes. But just on that, it's like it's probably a good idea.

1:00:53I don't want to tell anyone what to do, right? Like you've got to take this stuff very seriously. Self-custody is a very big responsibility, but probably spread it around a number of different wallets. Probably a good idea to employ a seed phrase. Probably even a great idea you can consider things like multi-seg and collaborative custody. There's a whole range of solutions that are out there. Every single thing, you've got to remember everything in life, outside, forget Bitcoin, everything has a trade-off, right? And you've got to discover the set of trade-offs that you're most happy with and knowing that there is a spectrum out there.

1:01:27And the point that you're really making here is if you are going to Bitcoin and you are going to hold it yourself, maybe spread it around a little bit. It's probably a sensible idea. Yeah, nice one. Nicely put. Mate, I want to finish off quickly and we've done a little bit about AI in weeks gone past, so we won't talk about it too much. But I thought there was a couple of things worth talking about in this week's news. The first was that on, I think it was Monday, might've been Tuesday, So Qantas plans to offshore outsource and have replaced with AI up to 1 ,000 Australian jobs. And that's kind of outsourcing offshore, and that's been going on for a while in big companies.

1:02:04So no super surprise. AI, obviously new, but not brand, brand new. Plenty of companies are looking at doing it. But I thought what was interesting, mate, is this is not just the usual customer service and IT. This was marketing and human resources and other stuff on top of that, which is not really generally considered the stuff that tends to be offshore or outsourced, but it is the sort of thing that can start to be done, at least in part, by artificial intelligence. Second part of the Qantas news was they're using Accenture, the consulting firm, to do it. And so we may well see some degree of specialization in some of these skills that other companies are using.

1:02:44So you can outsource to Accenture to just have people employed to program your website, or you can outsource to Accenture to use AI to do other things. So I thought that was just interesting in itself. And then the third thing, let's jump into all these in a minute. But third thing was Westpac on Wednesday reported it had saved 12 ,500 labor hours in approving or reviewing and approving loan applications and credit card applications using artificial intelligence. What they say is going to amount to about 150 ,000 labor hours a year using what they call agentic AI. Now, I'm not going to get into a whole lot of detail because no one wants the boring stuff.

1:03:26There's other pods on this sort of stuff if you want it. But what is interesting is this is not just asking ChatGPT to design your recipe for a beef goulash. And it's not just saying, can you please find me all the instances of this? But it's actually putting AI inside workflows to do some of this work for you. Now, knowing the banks, there's a non-zero chance in five years' time we look back and say, yeah, ASIC fined them$84 million for using AI badly, not programming it properly, not giving it appropriate oversight. So I'm going to say I wouldn't take the odds against that one. I wouldn't take the bet against it.

1:03:58Don't worry, the fine will sound big, but will be inconsequential. Let's put a bold prediction that's out there. And then you'll see a go, I'm sorry, I'm so sorry. We won't do it again. But I used it to make the point that agentic AI, essentially putting AI inside the workflow, or making in some cases the entire workflow itself, is really the next frontier here. It's not just can I look something up in AI rather than knowing it myself or Googling it. That's absolutely part of it. But when you start to design workflows where AI is allowed to, encouraged to, told to, do some of these processes, that's where there's really significant moves.

1:04:39And I think this is the first time we've seen a large Australian company talk about the agentic side of AI. And again, I'm not going into the details. Do your own research on AI and look it up and ask AI to tell you about it. But I'm a massive bull in general on AI, not necessarily AI investing, but AI. But more importantly, it's happening, right? And so just be aware of it. Understand what's going on. Understand who's using it, what the opportunity is going to be, what the risks are going to be. I'm mindful that every time, you know, through Bitcoin, five years ago every company was using blockchain for this and blockchain for that.

1:05:13And be careful of the buzzwords, but also understand where your companies are exposed to it in terms of opportunities, but also potential threats. So that's my general thought. Are your thoughts on Cornus or Westpac or AI generally? Oh, it's happening. Like genies out of the bottle. This is nothing. We're the opening. The starting gun is only just fired. I use this analogy a lot, but what the hell, it's a good one. You know, we've had the zero to one moment. We know how to do this now. There could be a new paradigm shifting breakthrough. When I say could, there's probably almost certainly going to be something like that at some point in the future.

1:05:52I don't know. They're really hard to predict. But a lot of the, ever since, when was it? Sam Altman tweeted out that first chat GPT tweet. 21, 22? Gosh, I can't remember. I think it was 21, 22. I got it. Not that long ago, right? Because it seems like it shouldn't have been, yeah, yeah, yeah. Like it's so rapidly growing and they have not required any particularly new novel insights. It's just been one of optimization, right? And so this is happening. It's getting better all the time. As everyone knows, I've been using it a lot personally. Just this calendar year, the leaps and bounds that are being made are just mind-boggling.

1:06:32And so what you're getting to before with an agent is it's just you put what's called a harness on an LLM. And that just gives it a suite of tools, maybe an instruction set, maybe a personal library of references. So it's sort of a bit more – the LLMs are very – they're extreme generalists. Great generalists, but very, very terrible short-term memory. Sort of master of all, specialist of none. Sorry, Jack. Jack of all tries, master of none. Thank you. Thank you. That one there. Harnessing is when you sort of put a wrapper. Well, a harness, it's such a great term, right? I've never heard that before.

1:07:10It's a great term. And you put the harness on it. Open claw is a type of harness, right? And you wrap it around it and it just gives it like various skills and tools that can be a specialist. This is happening. It is going to happen. It is a good thing. It is going to – I was talking about before, this is the one great hope in terms of productivity and I think a very realistic one. But it's going to be huge in terms of the upheaval and the displacement that it causes. Good and bad with all of that. So it's hard to be too much of a cheerleader without recognizing some of the pain that it's going to cause.

1:07:49But my particular insight is, so A on coding, which I've gone on and on about, like the world has changed there. But I just think most professional services, vocations are in big trouble. Lawyers and accountants really just speak to me, really strike me as particularly in danger. and I say that not that that profession is going to disappear, but so much of the work now can be done so much faster and so much faster. I think it has to kind of shrink. I pointed an agentic model at my Xero account just recently and I said to you, this was like, my accountant's getting the flick. They're gone. They can't compete with this.

1:08:36Maybe I'll keep an accountant just to eyeball it and sign it off at the end of the day And it feels like I'm being denigrating to the profession. I'm not. It's an incredibly important profession. It's just you're competing with someone, something that you just can't compete with, you know. And it's true for our job as well. It's true for a lot of jobs. So I guess what I would say is in regards to all of it is there's just no point shouting at the tide at this point. You know, you have to recognize the challenges that are there. but you also said that this is going to bring with it incredible opportunities.

1:09:11And I think that is really what you need to be alert for. Yeah, absolutely. It's an investing podcast. So absolutely in terms of the, the investing front, but, but also in terms of just your own life and, and what you can do with it yourself. You know, I said to straw man members the other day, it's like, if you've ever had an itch or an idea to start a business, there has never ever been easier. You know, most of the infrastructure you need is a SAS product. And all of them talk to agents. You need legal help. You need marketing help. You need accounting help. You need regulatory help. You need coding help.

1:09:46It's all there for a very, very minimal subscription. Like this is, and I see this as a wonderful thing. I think this is going to be the era of the entrepreneur. Whereas in, think about what you used to have to do. You had to assemble a team like the Avengers, right? You had to assemble a team. I need someone who can do this. I need someone who can do that. I need to raise a bucket ton of money, right? And we all have to coordinate. And those things are there to a degree now. But I genuinely think in our lifetimes, we will see the rise of the first billion dollar one person company. It's going to happen.

1:10:20Right. And maybe it's not going to be you, but maybe you could be a one person business that's got a very, very tidy set of financials. Right. For the scale that you're operating at. And I would say that the people, and you know me, mate, I am fascinated by technological paradigm shifts. I do. And I've made a great study of them over the years. And there's one thing that always, there's many things that repeat. But the one thing that I guess I'll emphasize here is that those that deny it, fight it, poo-poo it, always do not, history does not look on them kindly. And those that lean into it, embrace it are the ones who really write history going forward, you know?

1:11:13And so again, that, that, that doesn't, that's not to suggest there aren't downsides and there won't be very real world impacts here, but whatever you can do at this point to, to get more familiar, do it. A hundred percent. Lean into it. Yes, yes, yes. I mean, I've used myself as an example, As I've said before on the pod, I didn't know the first thing about coding. I've just rewritten the entire website. And it was lots and lots and lots of hours of me saying, explain that to me like I'm a 12-year-old. I don't get that. How do I do that? What's wrong with this? Back and forth. And it's just like the journey I have been on, I have learned so much.

1:11:52And I think as an investor, you cannot not have an opinion on AI, regardless of what sector, regardless of what style of investing you are. and if you want to have an opinion on AI, yeah, absolutely. Listen to the podcast, read the blog post, 100%, definitely do that. But use it. Use it, right? Use it and you will see for yourself. Even if it really nothing comes of it, the experience itself will be so instructional. And, mate, you and I, I think we can speak to it more directly in terms of because we were starting to sort of adult just as the internet was sort of going mainstream. And then we now look back as 50-year-old men and it's like all of the billionaires are tech pretty much, right?

1:12:41Like all of the biggest companies are tech. The world is shaped by tech. Who was it? It was the people who leaned into this. Then you've got the others of this world, the publishing and broadcastings, the news corps, the others of this world that are going, no, it's nothing. The Harvey Normans of the world, no one's ever going to buy a couch online. You know, and it's like, just don't be that dude. Don't be that dude is what I'm saying. And it's scary. It's confronting. It's intimidating. It's frustrating. It's two steps forward. It's one step back. But I don't know. I think I've emphasized it as much as I possibly can.

1:13:19Getting amongst it will be left behind. I'm glad you mentioned the when we were young thing, mate, only because, you know, we're all nice. It's nice to reminisce. young. But no, so here's why it's important, right? And I love that you highlighted the fact that who are the new billionaires? And we've done this a little bit before, but I'm just going to, in the context of what you just said, I've just quickly looked it up and it's a promote called Creative Planning. It's what I found. So I'm assuming it's going to be true, but let's go with it. In 1990, right? When you and I were kind of, you know, getting older, but not old yet.

1:13:50We were still in high school. The top 10 US listed companies, right? Let's wash over a few a second. Exxon, oil company. General Electric, general manufacturing. IBM, it's okay, tech, but making mainframes and services. Hardware. AT &T, the American version of Telstra. Philip Morris, the tobacco mob. Merck, Bristol Myers, both drug companies. DuPont, chemicals. Amoco and Bell South, which is one of the spinoffs of AT &T. So that was the 1990. What a portfolio. And they were spectacular. They were really successful. And by the way, the previous 10 years, they weren't that simply similar, right?

1:14:32And so people are saying maybe 99 is probably wrong. I've got 99 and 2000. So I went with 1990 because 2000, you end up with the dot-com bubble, so it's not a really useful comparative. But at that point, you look at that and go 1995, years later, the internet was effectively released, kind of a bit before that. But, you know, there or thereabouts, 95 is kind of where it really starts to become a property. It's been up for ages, the internet. But yeah, but sort of in residential homes. It was like 93, I think. So kind of 95, you're kind of starting to get there. Now, so 1990 did that number. 2025, again last year, but close enough to it.

1:15:06The top companies, Apple, not in the top 10. Microsoft, not in the top 10. NVIDIA, the chipmaker you mentioned, which is now the biggest actually, by the way, since then. Alphabet owns Google, YouTube, a whole lot of other stuff. I own shares. Amazon, I own shares. Meta, that's the Facebook business. Instagram, WhatsApp, Berkshire Hathaway interesting for its own sake, different conversation Broadcom, Tesla and Eli Lilly so you mentioned that point now, in 1995 people were saying the internet's not going to be a thing, maybe it'll be a thing but it won't be too big, it's going to be bad it's going to put people out of work, for all of the naysayers and critics and negatives man, there's been lots of negatives about the internet let's not put it around the bush, right there's been some crappy outcomes from the internet get on YouTube and search for internet hot takes 1997 or something.

1:15:54Yes, yes, yes. But some of those hot takes were real, right? So there's a difference between will there be some negatives from AI? Yes. Will there be some positives? Hell yes. Will it happen anyway? Hell, hell yes. And so it's one thing. Imagine being 1997. Oh, this is that thing? Ah, maybe. And you mentioned the hot takes, mate. There's millions of them out there. But, you know, maybe it won't be a big deal. Maybe it won't do much. Okay, maybe it'll do something, but probably not too much. Who's going to beat GE? AG is massive. Come on, seriously. Exxon, oil. Who bought bigger than oil? Nothing.

1:16:24Power's the world. How could it possibly? You go through every single company and say why that wouldn't possibly have been beaten in a submission. And these new top 10, none of them were in the top 10 in 1990. And most of them, if they existed, were top. Meta doesn't exist. NVIDIA doesn't exist. Alphabet, I'm pretty sure in 1990, Google doesn't exist. So not just have big Tesla, not just have become bigger, but have existed and grown. because of that sort of stuff. So really seriously think about it. The chance that in 10, 20, 30 years time, we have a significantly boosted... And maybe those companies, by the way, are still the top ones that is using AI to do that.

1:17:03But any of those cases don't underestimate the revolutionary properties of AI. We've done this before and I apologize for doing it again, but I really want to land this one because I think if you're ignoring it or hoping it goes away or poo-pooing it, I think you're going to be wrong. There'll be lots of money lost in AI investing, but AI as a tech is here to stay. Most of the money invested in AI will be lost. Right. Most of the money invested in railways was lost. Yes. But we still use trains. It's just like there's two separate things. That's exactly. Good one. Yeah, last one. Yeah, mate. Well said.

1:17:33It's exciting times. I think it's scary, but it is exciting. And just to bring an investing lens to it, I think what you want to do, you started this segment by sort of talking about how these things are being put into workflows you know um any of your companies you've invested in if they're not using ai either directly as a component of their product or behind the scenes in helping to build their product or aren't taking it seriously that's a signal in itself now at the same time just because someone is taught and i can tell you as someone who regularly every week i speak to one or two ceos is part of strong and everyone's talking about doing it.

1:18:16So the opposite isn't true. Like, oh, they're talking about it. They must be a good company. I can guarantee you that that is definitely not the case. But there are those out there that just don't want to acknowledge it all. So that to me is a pretty big red flag. And those that are, I think I've mentioned it before, but I'll just quickly do it again. I think what you want to do is find the companies that are using it either to exploit a data advantage because everyone's got access to the model, but no one's got access to your data. I think anyone that's got good data has a significant advantage with these tools.

1:18:49And the other one is just that integration. I don't want to get too much into company-specific details here, but it's just like whether you're using, what do I use? I use things like MailChimp and Xero, pin payments, all of these platforms, if you're not greeted by an agent at the door, say, hey, what do you want to do? in the near future, it will be replaced by a product that does. And just to your point, like, you know, while Zuck was in college building Facebook and all of the major, you know, media enterprises didn't pay them any attention. Right now, I guarantee you that there's a 23-year-old and their mate right now building a product.

1:19:30I don't know if it'll be work, but like there's probably 10 ,000 of those kind of people. And it's just like, yeah, you could pay$80 a month, zero subscription or you can pay us five bucks a month and let's do it all for you. Here's an email address. Send all your receipts here. We'll do your taxes. Something, I'm being a little bit coy and a little bit flippant maybe, but something like that. It's a range of possibilities, yeah. And this is what's fascinating, mate. So I think that's very possible. The other thing I think is really possible, we've seen the tech. I think the tech companies are more aware of it than the old companies were.

1:19:59Oh, they are, yes. And so you look at the likes of Meta. So Facebook bought Instagram. They bought WhatsApp. Google bought YouTube. YouTube, right? Exactly. And so I wouldn't, I wouldn't, I don't know which way this would go, but you're right. It's going to be the, you know, the quick and the dead. You're either aware of this, you're either buying it, building it, or you're being beaten by it. And that's kind of the, they're probably your three options. So it's going to be fascinating to watch. Google's a good example, mate. Remember when AI first broke, there was a lot of narrative around Google's dead.

1:20:30Why do I need a search engine anymore? Now, by the way, the jury's still out on that. I mean, let me phrase it this way. It's still a live possibility. But what's been incredibly interesting is that anyone who's used the Google suite of products will know that they have done exactly what we're talking about. It's integrated. It's in your Gmail. It's in Google Drive. It's in Google Workspace. It's in all of those kinds of things. So you've got a half-decent subscription there across the Google suite, and there is an agent there to help you at every sort of step of the way. And that doesn't mean the Google suite.

1:21:05Google's going to win. Let me be very quick to add that, but they get it. And the worry that I have out there is that the incumbents that tend to lose are the ones that do not want to destroy their own business. And you have to, I'm going to go with zero as an example here. They cater very heavily to accountants, which that's kind of very important for them. But if I was zero, I would be looking to leapfrog that because someone's going to do it for you. There's going to be some very difficult decisions for a lot of businesses, which is we've got this great cash cow here. I don't know how long it's going to last.

1:21:43Someone's going to disrupt it. It might as well be us. And that's the challenge, right? If you can do that well. That's super hard. Yes, exactly, exactly. Because the reality is if you don't, you can go, no, I don't want to do it. It's too profitable. Let's see how we go. I'm like, yeah, well, you'll make more money for the next five years. and then you'll cease to exist or you can make less money for the next few years and then be amongst the best of the best in the next era until the next disruptive tech comes along. Exactly, exactly. All right. I think we've done AI to death, mate. Thanks for a fun chat.

1:22:16I've thoroughly enjoyed it. Happy birthday, Strawman. Keep an eye out for Strawman reopening this Sunday evening, I think you said? Yes, Sunday evening we'll do it. Yeah, Munga is the discount code, M-U-N-G-E-R. M-U-N-G-E-R. Until then, we'll come back on Sunday in the meantime, actually. We'll probably talk about it on Sunday morning. But for the first half of your weekend, Fool on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation.

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