Gold and stocks both on the rise. October 3, 2025

24:03And at some point in time, their team's going to be in power and they're going to be doing things that you don't want to do. In which case, all of a sudden, no, now you're against debt and deficit, right? And it's kind of like - Yeah, correct. That it would be, I would have sympathy for it if there was some higher objective pursuit that virtually everyone agreed on. And we were hyper aware, cognizant of the trade-offs and the costs associated with it. It's the fact that we're really just saying who's got the better pet project, frankly. and let's just not face the reality of the costs by imparting the costs in a very weird, roundabout, indirect kind of way.

24:47I would actually have more sympathy for it. It was just like, well, we're going to do this, but we're going to increase your taxes. It's like, well, at least it's transparent. At least it's in front of me. At least I as a citizen can go, right, okay, we're doing that and that's the cost that I've got to bear. To cut my taxes and increase my services and then to tell me that it's free, is just like you're insulting my intelligence and you're actually doing it to me in a far more pernicious, underhanded kind of way and a way that's much more difficult to back out of down the track. It's just, it's craven political theatre and it's so depressing.

25:21It's bait and switch. Yeah. And that's, you know, and they deserve every bit of criticism they get. No one. Yeah. This is why across the West, all the fringe parties are in the ascent. Totally. Because I don't even I don't even hate the terms right and left. What does that even mean anymore? Like they've lost all mean. I think there's traditional descriptions of that but if you took someone from the 50s I bet you they would have a very different view as to what right and left kind of. The ALP-DLP split for those who you know the 60s 70s 50s where it was. The Kemp Menzies in power 15 years. I mean they were the social conservatives.

26:01Yes. Yes. They were all in their grave. The right way the Liberal Party had more in common with the DLP than with Fraser's Liberals. I don't think things have swapped. They've kind of switched 90 degrees. Yeah, yeah. Because the old DLP with the social conservatives, we've now changed massively back to, yeah, to... Well, it doesn't... For one, it doesn't mean anything. But two, I think the recognition is more apparent is after successive governments of different stripes, like, oh, you're all as bad as each other. So I'm going to go the populist. again open a history book is like yeah of course like that happens every single time right because you're both useless i'm going to go to someone offering peddling easy answers totally going to make the situation worse by the way it's like no good ever comes of this but when people are desperate and the the the problem is very hard to grasp and the solution is very difficult to face you know it's just how we go right so what you made mention the other day is sort of like you One Nation's in the ascent.

27:01What is it over in the UK, the Farage's party? Is it Reform? Reform UK. They're doing really well. Yeah, they are. The German elections were just held. I mean, the list goes on. Trump, right? The list goes on and on and on. And it's like, this is why I keep banging the table with my mates. It's kind of why economics matters. I know you think it's just this weird thing. It's just sort of this academic curiosity that doesn't really matter in the real world. I was like, yeah, it kind of matters. And all the things that you're railing about is downstream of the economic models that we employ and the thoughts and the actions that we pursue within that calling.

27:41That's it. And I think the implications of those things, as you say, the reality is people are going, hang on, my wife sucks. And I don't think anyone else has the answer. And he might not have the answer too, but I'll give him a go because these guys are - Well, he's promising something for me. A change and improvement. and back to the good days and all that, all sort of good stuff. Yeah. People have got their fingers on the pulse, I think. It's just sort of like, I really like the idea of the K-shaped economy. I think that really captures it well. K-shaped economy is just where some people are doing really well, others are doing very badly.

28:11And so you can have two people who are absolutely correct in their diagnosis within their own personal sphere. It's like everyone's whinging, things are actually pretty good, or life has never been harder. Who's correct? Both of them are correct within their own contexts. and I think we're just we're seeing that that kind of thing continue and again we just lead to very unproductive discussions because we can't seem to sort of consider a circumstance or discuss possible alternatives outside of our own particular circumstances which is which is depressing which yeah you can get really deep into political and economic philosophy at this point so I'll pull back at this stage.

28:50Yeah. I think that is a big part of the problem though. It's hard. Let's move on, mate, to actually I was saying in the policy area, there's been some fascinating conversations. This is one of those ones where I, speaking of the consequences of economics, I've actually, I've got reasonably strong opinions and kind of views on some of this stuff in terms of where I kind of think policy should be and hopefully reasonably considered and hopefully not too partisan or political, just hopefully identification of good policy. But let's be honest, I'm as imperfect as anybody else. The gas reservation idea, I'm kind of torn on.

29:28So the idea basically at the moment is people saying, hey, we've not enough Australian gas because it's all been contracted to somebody else. We can't get our own gas. Therefore, gas prices are too high. Therefore, we should have a gas reservation system. That is a portion of the gas extracted should be reserved for Australian use. What is unsaid but kind of implied is in theory at cheaper prices. than would otherwise be the case. And the government's kind of toyed with the idea for quite a while now, I'd say more than 12 months, it's been kind of on and off the agenda. Reports in the media this week that they might make export licenses contingent on gas being supplied to Australia.

30:03And on one level, I'm big on resource rents and royalties, our stuff should be ours, and I'm big on that. When you artificially though say to somebody, you must sell X percent or X volume of your production to a given market, implicit in that is i'm going to make that number so high that you flood the market with supply therefore pushing prices down and frankly i think this is a losing proposition in public so i imagine 85 of our listeners right now are saying what's the problem with that scott if the if the if the big greedy gas companies have to supply gas to us at a cheaper price it's our gas anyway we should want it we want to have it we want lower prices what is the problem and on one level i agree it's a national resource to not get full value from that national resource seems a policy failure so so far so good i don't i struggle because i want your thoughts because i struggle because i don't think we want governments effectively putting de facto price caps in place by saying you must do x otherwise you can't sell your product you know it's it's not nationalization but it's not miles away from it in the sense that you're kind of saying well the volume will have to be enough to push price down because they're politicians that's why they want to do it right Let's be really honest.

31:15And so you're making a company, you're forcing companies to sell a product under market price. It's effectively a price gap. Because you want to, frankly, win votes. And because you want to pretend that it's about making energy cheaper for Australians. And I just, I find the mechanism uncomfortable. I don't, if it happened, would it be a disaster? No. The companies would still drill the gas. We'd get gas, the electricity would be cheaper. People say, where's the problem? The problem is kind of in the ideological setup because when does it then become about bread and when does it then become about mechanic services and when does it then become about wine?

31:49And so there's that. The other thing, and just because people say, well, that's worth doing, I'm just going to throw the alternative up, which is when you do that, you mean the price is lower. We're going to use it all now. So we use more of it because the price is lower. So frankly, that's bad for the environment anyway. What also means we are going to use that resource at a lower price than others would have been sold for. So we're using too much. We're using it too cheap. who are not recognising full value, if we want to get our fair share, our fair value from the gas that's being extracted, for me it goes back to those resource rents and royalties that we've talked about before.

32:21If the companies aren't paying enough for gas, then by all means, take more of that value as a resource rent effectively, the amount that the country gets to provide that gas to those people who export. That's, I think, a far, far better solution than trying to create an artificially below market price for ideological reasons. Now, again, I said there are economic benefits from it. Don't get me wrong. In the instance, definitely worth doing. If you argue against it, no. And I hate slippery slope arguments. If we do this, then everything will be why. That's rubbish. I mean, every law no one likes.

32:53I say, ah, slippery slope. Well, the alternative to that is anarchy because as soon as you get the first law, there may be a second one. So any law is a slippery slope. Therefore, no law should be passed, which is clearly stupid. I don't know, Matt. What do you think? I really honestly see both sides of this from a national interest perspective. I think I come down on make it freely available, don't reserve any gas, but get more resource rents, royalties for the privilege. Yeah, it is a tough one. I mean, the instinct is, yeah, this is a good move. And I think it probably is on balance an improvement from where we are today.

33:24Yes, that's true. Because where we are today is terrible. Yes, yes. We're getting nothing and they're all selling it overseas and they're profiteering from it. I mean, it's criminal is what it is. It's terrible is too soft a word. It is absolutely egregious, outrageous, and, like, I don't know why we're not all marching down the streets. You know, it's just we are being - Because people don't understand it. It's out of sight of mind. Yeah, that's why. We're being robbed, basically. But you have a budget deficit. You could fill that gap tomorrow by taxing resources appropriately based on their actual market value rather than just some sort of discount.

33:56100%. I mean, politicians are so easily swayed. It's like, all you have to do is rock up and promise a handful of jobs, and you can do what you like. It's like, but I'll create jobs. You'll create jobs? Yep. Okay. Go for it. Right. Absolutely rape and pillage. Whatever you need to do. Right. It's fine. I tweeted out this wonderful, banger of a line I hadn't come across before from an economist I hadn't heard of before, Alex Taborek. He said, a price is a signal wrapped in an incentive, which is a banger. I love it. It's a lot. It's a lot. Isn't it fantastic? Yeah. And I mention it because this is always and everywhere the outcome of price controls.

34:36I mean, prices are too high. What do we do about it? We should just mandate that they're lower. Again, as if that fixes anything. Think about the people who are producing it. A very simple example here. We've got apples. The price of apples are too low. It should only be a dollar per apple. I don't know. I'm making up numbers here. it was like you would think that that fixes the problem except if most people cost most producers spend a dollar 10 in making the apple it's like well making growing the apple producing delivering the apple to market so it's like well i'm just not going to do it because every apple i sell is a loss for me of 10 cents and the more apples i sell the more of a loss that i will make so it's sort So the end result to price fixing is food lines, bread lines.

35:23It massively reduces supply. And again, high school economics here, supply versus demand, it massively exacerbates the problem. So price controls do not work. And this is, I think, in the year 2025, we can say that unequivocally and as objectively as you can because literally every single time that we have done this, it has not worked out well. And I've got to be quick to add here that it's not through, you know, some Machiavellian sort of cynical application of policy. People genuinely, good intentioned people, well-meaning people are trying to make things better. I get it, but you're not. And this is absolutely an instance of that.

36:09I think you've got to, we've talked about it last week, really, is like the involvement of government in the economy really should just be there to set clear expectations and rules, make sure that we account for various externalities, but then let the free market work it all out. And so what you, I'm with you. I mean, I do not want to give away these limited resources that we all own collectively for virtually free to foreign multinationals. Even Australian companies, mate. Like it's, they're taking a commonwealth. We use the phrase commonwealth, I mean, Commonwealth of Australia. The commonwealth, literally the words that make up that title.

36:45For that to go from public hands to private hands without the public, the country, the common people. I don't mean public in a socialist or communist way. I mean, literally, you know, we collectively own those assets. We're saying, you can have them. Yeah. We should be saying, you can have them if you pay me a fair price. I don't give stuff if Woodside is domiciled in Australia. I mean, how does that help me and the common wealth of the country? Yeah, 100%. Yeah, it's absolute madness. So it's not just foreign multinationals, which is like very much a negative these days and for pretty good reason, really, let's be honest.

37:16But yeah, you said as high a threshold on that tax as you can. Of course you should. Right up to the point where no one's developing anymore. That's exactly what you want, mate. When the first mine falls over, that's the future. Okay, we've gone too far. We'll wind it back a bit. And so think about it here. is like, again, prices are what coordinate everything here. Can I encourage for the hundredth time, everyone just to Google, there's an article from 50 years ago called iPencil. And it is just, I don't know why it's not mandatory reading for any like year 10 student doing economics. I'll just leave it at that.

37:52iPencil, read it. It's going to blow your mind. There's your homework listeners. There'll be a test. And what I'm really just saying here is that prices coordinate everything. The price is a signal and it's wrapped in an incentive, right? These companies will continue to develop and extract. And I'm not even having a go at them. I'm doing it because we, the end consumer, desire energy because energy is really good, right? Like we like energy. Energy is a proxy for wealth, right? We like energy. And let's not get into the environmental debate because we should absolutely be doing it in the cleanest way possible.

38:27But I'm just talking about like they're doing it because there is a market demand for their end product. They will always do that wherever there is a decent return on investment to be made. And there is definitely a good return on investment to be made at the current levies that we impose. So we're not imposing enough of them. And it's not because it's anti-big business. It's not because it's anti-capitalism. It's just recognizing a finite resource that we all own. And if, you know, let's – if you've got a problem with that, you should start giving away your own assets to other people. Yeah, that's right.

38:59Also, sell your house for about, you know, a quarter of its market value. Yeah. Why not? Yeah, do it. No, I mean, of course not. No. It's almost, you know, a fiduciary duty to not do that. Not because it's all about maximizing profit, but these incentive mechanisms are what allow us to do everything that we do. And as you say, it is such a slippery slope. Once you start introducing this for the best of intentions, for the best of reasons, it just leads to poverty. It leads to poverty and no one's better off in that regard. Because here's the thing, like we all want cheap energy, but a little bit like, frankly, the resources we already extract.

39:39We extract the resources, we spend the resource rents and royalties on current spending because we just want the trinkets now. And it's the same thing. You make energy cheaper, fine. We use more energy, we use it more cheaply. this year fine what's the next year well nothing because we've already used it maybe we produce something maybe we produce that thing a little bit cheaper maybe living stands are a little bit higher but that's a one off the next year you've still got to go through the process of working out where the value should be captured and to your point mate bread would be cheaper if we made wheat farmers sell their product at 50 % of market value we can do that tomorrow yep and then three weeks later there's no bread on the shelves right and that's the and that's the challenge is you end up and if you want again if you want to capture more value If you're the wheat farm and flowers making too much profit, why don't you put the wheat price up?

40:23But that's the equivalent here of the resource price. Make money there. And if you, I still wouldn't do it, but if you want to, why don't you subsidise energy bills by the value of that? If you want to do it that way around. So, right, I'm going to collect more money from you because that's just the market value. And then government's job in redistribution is we just collected that much money. What do we do with it? And if energy prices are a problem, I've been critical of the energy side. I mean, just reduce the tax, right? Because we get more of a source of revenue here. So now we've got an opportunity to legitimately reduce tax, right?

40:49Even easier. I mean, I still would put it in a sovereign wealth fund and then you put the money, the proceeds back into the budget forever. I mean, that's my general point on the sovereign wealth fund is that the Commonwealth is an inherited wealth from literally millions and, God knows, you're a scientist, how many million years did it take the oil to turn up from dinosaur bones? Oh, 100 million. Yeah, a long time. I find, you know, as an investor, I find that idea just, we waited 100 million years for it and then we blew it in the year with nothing to show for it. Yeah. It's like, man, really?

41:21Is that what you guys thought was a good idea? Use it by all means. I'm not anti-using it. Well, we should get... Hopefully it bootstraps the next phase of our energy infrastructure. Maybe it's a necessary path on our way to colonizing the stars. But you've got to get off the cheap, nasty stuff at some point. Yeah. We went from whale oil to oil, and there was benefits to the whales, and we would have made whales that could otherwise. So things do move on, but not having a fair price is madness. I just want to pull on this thread a little bit more, because it is such a profound thing. And you think about what is required for someone like Woodside to get something out of the ground that was put there 100 million years ago, right?

41:59Like along that path, you've got to get engineers to work for you. They're going to be using processes and techniques discovered, invented, refined by people who lived 100 years previously. They're now going out to these regions using technology that requires everything from an insight into metallurgy to, you know, the rubber on the tires of the truck to, you know, geochemical engineering. I mean, every single step of the process involves, involves, let me get that right, probably, you know, tens of thousands of different unique insights and coordinations. Like there is someone right now in the forests of Sumatra collecting rubber who has no idea what that's going to be used for and no idea how it would be used or how they would even do it and the person buying it has got no idea what's a rubber tree even look like and how do I get it and actually once I've got it how do I actually refine this and actually what what's the chemical process that's I mean it it's this is why I pencil is such a profound thing right and and and and this is why it's all the reason I mentioned it's why it's such a slippery slope because on one part of it you go i'm just gonna change this one little thing and but that's it that's all i'm gonna do it's like yes but that the downstream knock-on consequences of that it's it is a chaotic multivariate dynamic system that you haven't it's the three-body problem if you're familiar with that like you you can't predict how this thing is is going to change but you are all you can say with certainty is you're going to perturb it in an unknown way.

43:39And what we observe again through history is that the effects are, they're pernicious, they're delayed in time, but they're also really unexpected. You know, the butterfly theory kind of stuff's like, oh, that you can almost, in retrospect, if you think hard enough, you can draw a line between the two, but in advance, you never could have mapped out, oh, butterfly flapped its wings in Brazil and now there's a tornado in Texas. Like how do you connect those two dots in advance? And that's what you're doing with a direct interference with prices. And people impart a moral dimension to this. And I think that's a mistake.

44:17Again, it comes from a good place, but it's a signal. It's telling you something. It's why the rubber farmer in Sumatra doesn't need to know about any of it. All they need to know is what can I sell this for? And the person buying is what can I buy it for? Right, right. And the market in between sorts out the supply chain. And I'll sort everything out. And in fact, what price I'm prepared to pay will depend on what end use I have in mind and what I can say. It coordinates everything. So all you have to do is worry about your own little sphere of influence and go, what is the best way for me to use my time, my energy and my resources?

44:51Not because I'm some craven capitalist that's all about just making as much money as possible. It's because I just want to create the best life possible for the minimum amount of work, which I think anyone listening to that is going to go, well, not me. I think we're all going to agree. Unless I know what's happening, I'm not going to do anything. Exactly. And as soon as we come in and start tinkering with it, imagine if you gave me your iPhone and opened up and said, you're allowed to change one of the diodes in here. Just one. Don't worry. There's plenty of redundancy built into the code. You know, it's like, it feels reckless.

45:20And in a way that I can't predict, maybe like nothing happens. Or maybe I just, you know, release all of your private photos to the web. I don't know. Right. And that's the point. It's not that the planners are evil or their intentions are wrong or they're trying to direct things, even in a way that we all agree is possible. No one human can possibly comprehend the fundamental, to quote Dirk gently, the fundamental interconnectedness of all things and then play through how each one knocks on to the other. It's the height of hubris, if not madness, to think otherwise. And yet our elected reps do it all the time.

46:00And we go, yeah, that's a good idea. Like, is it though? Is it really? Sorry, rant over. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

46:15I want to go to the EV stuff that's been in the news. Yes, that's a great example. Yes. And there's a couple of things going on and they're kind of both worthwhile and different. We've talked about both of them, I think, in the past, but worth bringing them back up in that context and kind of putting them together. we know we saw in the fin this week um an article basically the uptake of the eb the ev so electric vehicle fbt exemption so lots of acronyms because that's just fun has been phenomenally i'll say successful but i'll put successful in quotes and this speaking of the folly of forecasting the um the the ato apparently forecast and you know you've got to put a number somewhere if you're to do a budget, right?

46:56So you need to put, I'm not necessarily against forecasting because you've got to say how much is this going to cost me? What should I do? Is it worth doing? All that kind of stuff. It's also just very quickly, it's more, there's nothing wrong with it if you do so as a means to try and help with your planning, but recognizing that it is, I guess, it's the same, we make mistakes as investors all the time. My intrinsic value calculation is$14.62.3. It's like, that's a really, you've got to have a value. It's a really interesting frame, but don't, Don't pretend for a second that you're right here.

47:28Like, you can't be right. Exactly. So, apparently, Treasury had expected there to be 4 ,700 FBT leases taken up under this program. Turns out, according to the fin, it's more than 100 ,000. I'm just a little bit off. A little bit off. Order of magnitude or four. A remarkable increase. Now, I say successful because I'm first blush. And this is where, again, like the gas thing, it gets really nuanced. First blush, if it's important to subsidize EVs, and if you want lots of people to buy them, because that's why you're doing it, and if you can get almost 20 or more than 20 times as many people to buy them as otherwise, that would seem to be a roaring success, right?

48:07Because you're achieving your own. And you're achieving your own in bigger numbers like could have hoped for. And so if you're, honestly, if you're a political animal and you have your party and you're on the left right now, you're saying, oh, good on Chris Bowen and Jim Chalmers and Albo. They've delivered amazing success. we want more EVs, they've got more EVs, how good is that? That's not even necessarily wrong. And I don't think it's wrong because of the number. So the article or paper was about the number, and it's worth talking about. By the way, disproportionately, the buyers earned over$150 ,000 a year.

48:35So is this really environmental benefit or is this middle-upper-class welfare? Right, you can make a choice. And we can leave that aside, frankly, but it's worth noting. The bigger thing here is whether or not that was good spending. and I said at the time before this was even numbers were even known this is I think very ordinary spending not because the aim isn't worthy but because of two of your favourite words mate opportunity cost money spent on this program is money that can't by definition be spent elsewhere now let's unpack it you're going to give people a fringe benefits tax exemption for buying an EV that's going to cost the federal budget some money so there's that and you're going to do it in theory because you want people to buy EVs and using this as the mechanism.

49:21Again, not an unreasonable thing to do. I wouldn't use FBT. I think Novata leasing is terrible, but let's just keep that aside for now. You've decided that's what you're trying to do and you're paying money for every EV sold. Now, my question to you is, not to you personally, the rhetorical question is, how many EVs would have been sold otherwise? And therefore, what is the real cost of the program? It's the counterfactual. Right, the counterfactual. This is what I want you to think about. Now, I'm going to give you two really, really different outcomes, right? Now, let's say in version one of this program, no EVs would have been sold without the subsidy.

49:53So the subsidy has actually been really effective because now there's 100 ,000 cars sold that wouldn't have otherwise been sold. Now, whether you should subsidize it, whether this is the right mechanism, I'm going to put that aside for a second. Just say, you've achieved a result. 100 ,000 EVs sold. There would have been none. That spending, you can work out what it costs per vehicle. Now, let's give you another example. These are both extremes. I don't think either is likely. Let's say there were going to be 95 ,000 cars sold, EV sold anyway. and 5 ,000 people who went, oh, I was going to buy a Hilux, but I'll buy a BYD Shark Ute instead or I'll buy a Tesla Model S or I'll buy whatever instead.

50:25I was going to buy one, I'll buy the other now. You've had a significant change on the decision of those 5 ,000 people. The problem is you've given 100 ,000 subsidies to change 5 ,000 mines. In terms of the counterfactual, the increment actually costs 20 times as much per changed mind because 95 ,000 would have been bought anyway. So what you're really doing is changing the 5 ,000 mines. Now, the reality is probably somewhere in between. My strong supposition is that people have got that sort of money and are prepared to buy an EV. I don't think the FPT exemption makes a massive difference. You're either going to buy it or not.

51:00You're not going to go, gee, I was going to buy myself a Maserati, but I'll buy an MG or a Cherry because you give me a subsidy, right? You're probably going to say, gee, I'd love an EV. I'll go and compare them. And did it change some mines? Yes. The subsidy makes it cheaper than the alternative. So, yes, some people thought, well, I won't buy a BMW 3 Series. I'll buy a Tesla Model 3 instead. And so that's a changed one, and that's a benefit. That's an economic outcome or environmental outcome, sorry. That's worth doing if you believe, I'll get back to some objection in a second. But the counterfactual matters.

51:32How much did it cost me per changed outcome? Not total outcome, per changed outcome. What would have happened anyway? Now, think about this really simple example, right? You give your kids some pocket money, and you say, well, Well, I will give you five bucks a week as pocket money. I'll give you another five bucks if you brush your teeth every morning. So they get 10 bucks. Now, maybe that extra five bucks has made your kids brush their teeth every morning for the week. And so maybe it's worthwhile. At some point, they're going to brush their teeth because it becomes a habit because that's what we do.

52:01And after that, every five bucks you're giving them is not achieving any different outcome at all. You're just giving me 10 bucks a week pocket money. And again, it's an imperfect analogy. But it's worth keeping those two things in mind because the counterfactual, what would have happened otherwise is what that means. is really, really important. My strong view is it's not going to be, it wasn't, a meaningful difference. Quick one, mate, for me, just to round it off, then I'll let you jump in. I also think, for what it's worth, that this is a questionable decision in terms of the efficiency of the spending overall.

52:32In other words, what environmental outcomes do we get for the economic cost? Because again, if you're going to buy the cars anyway, not only is it not good ROI money-wise, the environmental benefits aren't great. But let me layer on top of that the fact that maybe people are going to buy a new car anyway. If you thought, I might buy an EV next time I change my car, I'd probably go four or five years away. And someone says, if I give you a subsidy, will you do it now? Now, I'm no expert on embedded energy. But I reckon if I drove my Hilux for another five years versus buying a whole brand new car and increasing the demand for new vehicles in total, I might have lower transport emissions.

53:05I dare say the production emissions, the transport getting it to me emissions. That, again, think about the counterfactual. So would I have higher transport emissions? Absolutely. What if I backed out the fact I would have driven the car for longer and not replaced the vehicle, not needed a new car to be produced, manufactured, the materials mined, the emissions of creation, of sending it to the country and dirty polluting ships that transport stuff across the oceans. I don't know what that break even is, but it's not even, even if it was a case of getting an EV earlier, it's messy, mate. I would have happily had to see them spend money on electrification.

53:38You've talked about it before. Saul Griffiths, his book. You can do it with insulation. You can do it. Frankly, I do it on batteries. We can talk about batteries in a minute. But there are many, many better ways. This strikes me as one of those people think EVs are good. Governments want people to think EVs are good. Governments want to give people money to do good things. It feels like an easy vote winner. It feels like a really simple first-order thinking solution. More EVs means less pollution. Therefore, we should do it. Therefore, we should spend the money on it without really thinking about the counterfactual and the alternatives, the opportunity cost.

54:10That's why I've always thought, and this number is just new, always thought it was a questionable policy at best. You know, I actually don't have much to add. I think you've just nailed it. No, you've absolutely nailed it. You've got to be so careful in this day and age to say an opinion like that because the knee-jerk reaction is also you're against the environment, Scott. It's like, no, I'm for the environment. I'm just saying if we're going to spend our very limited resources, is let's get the most bang for buck that we can get from it. That's what I'm saying. I mean, we can do something that's super expensive and doesn't move the dial if it makes you feel better, but do you want to feel better or do you want to actually have a tangible outcome that moves us closer to our goal?

54:52I mean, it's the latter, obviously, right? And it's just, I mean, it makes no sense until you put it through the political lens and go, well, it does help buy votes. And I am so sorry to land on that as a cynical so what, But it's kind of like, how else do you rationalize it? How else do you rationalize otherwise intelligent people doing this if it isn't for the fact that it helps me win votes? I would put it to you that if a politician was to come out and say, I've got this policy. By the way, it's super complex and you're going to have to spend six weeks of intense study just to wrap your head around it.

55:26But the most brilliant people in our society have done this and have concluded that this is by far going to really move the needle on environmental impacts and reducing emissions and all these kind of good stuff. Or I can say free electric vehicle, you know, it's like the ladder is going to win. It's just going to win. It's like even though, even though, you know, if you thought about it, you'd go, yeah, but it's actually counterproductive to our ends. And that's the sad part of it. So I just, I don't want to add anything other than just to really emphasize or encourage the second, third order thinking here, which isn't Scott's against electric vehicles, right?

56:08What Scott's saying is you're against wasteful counterproductive spending that has very real costs elsewhere. That's my issue, right? So take the money that's being spent here. I would have a carbon tax. Yeah. You think of, you know, anti-environment. No, no, I would have a carbon tax tomorrow. Right. Right? I would spend the money on electrification. I would spend the money on insulation. I would spend the money on all sorts of things. And I'm no environmental expert, right? But I just... Handing out subsidies to rich people that are going to do something anyway is just dumb. That's what it is, right?

56:40Let's just call it. Imagine when you find every pensioner, insulate their house. Yeah. Or replace their gas and other appliances with electric appliances. Yeah. Or build more... Put money in a solar energy production. It doesn't need to be a subsidy for the individual. It's just the idea that somehow it's at a per vehicle basis, a good, the best, it's impossible to me that it's even close to the best possible environmental ROI. And yes, it's about the money because the money is the opportunity cost. So of course, it's to some degree about the money. It has to be. I'm going to spend a dollar, all of us in our lives.

57:12We've got a limited amount of money. If you spend your money on a new t-shirt, you can't buy the pair of shorts. You spend the money on the shorts, you can't buy the t-shirt. Which do you want? Which is better for you? Which is going to give you the best outcome? it's not a case of well I like shirts I just went buying the shirts well dude you haven't got any shorts and you can buy the shirt if you want but you got two shirts no shorts and you probably can't go to the shops because you know got nothing on it but um this is why the this is what I mean it goes back to the earlier conversation right like I'll not not to go too far down this topic but with with the carbon tax because you mentioned it yeah what's really nice about that is it it harnesses the power of the price mechanism so all you're saying is hey we think that too much carbon in the atmosphere is a bad thing.

57:52Just go with me. If you don't agree with that, then I don't know. Study science. I don't know. But let's just say that we agree on that. And I think there's probably broad community consensus besides some noisy, shouty people on social media. I think there's pretty broad consensus on that view. All the debate happens on, well, how do we do it? And this comes back to the problem of very Hayakian problem of planning, really, which is, well, rather than us dictating where the best allocate the resources. We'll put a price mechanism on it. And then all of a sudden, well, that means it's going to be more expensive for the producers.

58:27So they're going to pass on the price to the consumers of that energy. That price mechanism is going to signal this. It's like, I'm going to be more incentivized to look for non-carbon based products and services because it's cheaper. And I'm going to do it in a way that makes sense to my values, to my subjective opinions, to my personal life circumstances. And on average, over time aggregated, that's going to lead to really, it's this more organic, emergent kind of thing that's going to grow up that everyone's going to be acting in their own self-interest. But in a way, we're sort of like, we're taking the externality of carbon production and we're putting a price on it.

59:07And that price is now trickling and filtering through the system, influencing our decisions and steering us away from the things that we don't want without any central government bureaucracy telling you what, you know, other than the ATO, telling you exactly what and how to do. And again, I don't say it as I'm not really, I'm not anti-government at all. It's just that I think we give government agency, we expect too much of any one group of human beings to be able to sensibly plan and objectively do so on these very difficult holistic issues. So just put a price on it and then people will adapt around it and then we'll have a result that's better for everyone's individual circumstances and we achieve our broader aims overall.

59:56It's perfect sense. But it's a three-letter word that starts with T and if you say that as a politician, you're dead. So you don't say it and we don't do it. And we're talking about environmental ROI. If you put a tax on – again, you're right, we should make a bad carbon tax while we're here. Let's call it a levy. and let's call it a subscription fee. It's a price on - Society subscription fee. Throw a Nexus subscription. Civilization or subscription fee. Well, not a bad idea, right? Yeah. It's insurance on the fact we have a livable world. There is that. There is that. What's great about a broad carbon tank?

1:00:31So you said it was an EV purchase, right? So hang on. If I want to use less energy, buy, replace my heater, no, you can't get any money for that. Okay. If I want to buy a bike, no, no money for that. What if I want to buy a smaller ice car that has less... No, you can't have any money for that. But if I'm going to reduce my emissions, yeah. No, the only way we will pay you to reduce your emissions is only specifically if you buy yourself an EV that's under a certain price and you do it through a Novota leasing scheme with fringe benefits tax. Even if you're charging it through a coal-fired power station.

1:01:02Right, exactly. Yes, yes, literally, right? And so compared to carbon tax. You say, well, actually, so it turns out petrol is now cheap. Now it's more expensive. Yeah. So is coal-fired energy. So I was using electricity more broadly because it comes from partly that source, to your point. Okay, well, now I'm seeing my house going, by the way, I would offset the carbon dividend, right? So the idea is your carbon tax goes up. You give every household, I'll pick it up, a thousand bucks a year. As a dividend, that will be roughly revenue neutral. That's fine because again, it's the pricing we care about.

1:01:29We're not trying to raise revenue here. So then you go, I've got this thousand bucks. Well, I could go buy an EV or I could buy a more efficient hot water heater or I could put solar panels on the roof or I could buy myself a bike and not drive the car as frequently. I can make those jobs. Who am I or anyone to say, no, Scott, no, no, no, no. Of all those options, a bike is for you. Right. You need a bike. And like, but I - You have to have a bike. But I hate riding. I live in a very hilly area and my knees bun. That's the nonsense of it. Right. You nailed it right there. It's just like, Scott will do what's right for Scott.

1:02:04But in that framework, we'll still - Give it the price signals. Yeah. And my point is actually, and just to be really clear, my point is about governments telling me or not telling me what to do at a personal freedom level. It's just a fundamental idea of I will make the decision that makes me best off financially and environmentally. So I'll do that. And the price signals lets me choose which one makes most sense for my circumstances. To your point, someone else says, actually, I live in the inner city. An EV that I'm going to drive from point A to point B is not very useful. So I'm normally getting an Uber anyway.

1:02:35So maybe Uber is a Tesla sometimes, but maybe it's a Holden Captiva sometimes. Or I could buy myself a bike, for example. Or I could throw out the hot water heater or throw out the gas heater and buy an electric heater or whatever it is that you're going to do. I said put panels on the roof, whatever those options are. It means that we are individually making the best decisions for us. And so, yes, maybe 100 ,000 people still buy an EV, but another 100 ,000 people buy a bike, another 100 ,000 people put solar. You get the best result. People can decide, not because government doesn't know better.

1:03:07I mean, it doesn't at an individual level. It doesn't because it can't. Not because it's incompetent or useless or evil. It just can't. That's the point. You must all buy Levi's 501 size 34 with a long leg length. Yeah. But hang on, I'm fat or short or skinny or – no, that's what you've got to do. Because we think everyone should have jeans. Everyone should have pants. Pants are important. Here's some pants. Here's some money. Buy the pants that suit you. Again, it's not anti-government. It's not anti-authority. It's just literally from an economic and environmental return on investment. You say to people, here's some money, go and invest it as wisely as you can.

1:03:40In your interest, they'll find the way. They'll do it. It's just effective systems planning within the context of natural human behaviour. It's just acknowledging the reality of how we all act, of what human nature is, which is we are always going to try and improve our own lot.

1:04:00That's harnessing it. At a policy tool level, it's not anti-government, it's not a small government. It's literally, I want a policy outcome. How do I best achieve that? I give people money and invite them to act in their own self-interest. And if I structure the system, the incentive properly, that's the value. You don't say, this is the incentive you must have because this is what I think works. I mean, you know, make some votes, as you say, people get a show. Look at me, cars people have bought, therefore it's great. If you care about the outcomes rather than the optics, you wouldn't have an EV subsidy.

1:04:27And I'll make the final point too because I have heard this one as well, which people say, well, they need to do this subsidy because otherwise I wouldn't be able to afford it. And isn't that better anyway because it makes things cheaper. But back to our earlier point, it's like, does it make things cheaper? Not if it's a deficit, if that money comes from a deficit, a perpetual deficit where we're loaded up in debt, we're never paying it back. You're going to pay for it one way or the other. So you are conning yourself if you think it is quote unquote free. Your groceries will go up. Your holidays will go up.

1:05:02your house will go up you know or the house that you aspire to buy will go up maybe I should frame it that way because everyone's like what's wrong with my house going on in value yeah so it's just by the way childcare subsidies anyone? right we know what happened there you gave childcare subsidies all the childcare fees went up why? because they could how hard do you reckon EV makers are fighting right now on price oh or they're looking there going we thought we were going to have to run a discount promotion but the government's just sending people away screw that we'll sell it full price then I mean you're inviting them to property.

1:05:32You're inviting them to price couch for an outcome that you would have otherwise got most of anyway because people want to buy those cars. And the manufacturers probably would have come to the party anyway. Yeah. It's just madness. And if they weren't going to come to... Here's the other more like... I guess not more, but another profound thing. Let's say that through all of the investment and effort that Elon and BYD and all these people are doing, they just can't deliver it in a way that people buy it. Well, that's a C. I mean, yeah, it's a bit of a shame. I'm not saying it isn't. But at the same time, it's really just saying, well, people aren't picking up what you're putting down, bro.

1:06:11They're just not doing it. Now, are they wrong? It's like, I don't know. You can, there is no right or wrong. There is just observable fact. And like, no one is doing it. So either you find a way to do it more productively so people will want it, or you just hope that they're going to change their individual subjective preferences to devote more of their disposable income towards doing it. But that's the signal, right? The signal is what people, it is what economists call a revealed preference because you can say all day long what I prefer, but when you actually buy something or don't buy something, that is your true preference.

1:06:44And that's what actually helps these companies coordinate their production better and compete to deliver it in a more efficient kind of way. And it's just, and that, I mean, look, there's a lot of uh flaws for for mr musk and unfortunately you can't say anything nice about someone who's generally pretty crazy and weird because people are complex but i'll give him i'll give him credit right like he i i would think without musk the electric vehicle industry would be 10 years behind where it is right now 100 oh unquestionably you know and um and he did this he i mean i got a lot of government subsidies out of it and there is something to be said for like trying to sort of prime the pump on certain things.

1:07:28But by doing that and forcing other manufacturers to the table, we've now allowed the free market competition to actually deliver what we've always wanted in the first place. So maybe you need a bit of help to get those plates spinning. The plates are spinning. Right, exactly. Walk away now. Walk away. Stop doing what you're doing. It's the same we talked off air about the solar panel subsidy. Yes, yes. Great idea. Great idea. And then it's just like, oh, we went way too far on that. Now it's a problem for the grid stability. It's just like, you can take a good idea and you can prosecute it for too long so that it actually now becomes counterproductive with a lot of these things.

1:08:09Which is frankly right with the COVID spending. Yeah. I mean, the idea of like, should we support the economy in that circumstance? Yes. Do we do too much for too long without the appropriate safeguards? Yes. Guess what sort of hole we dug ourselves? You know, that's... Was it bad to do? No. So was it bad to not fix it and do it better? Yes, then that's where we are, as you say. Mistakes to err is to be human, right? So no one, I don't think. Yeah, apparently. For other people. I'm curious. But, you know, I don't think you can fault any judgments of error, especially when they're made in the heat of the moment with this time-sensitive kind of pressures.

1:08:48But you can totally fault it when it's just like, then you make no action to remedy it or to walk back from. It's like, we made the wrong call, but you know what? We're just going to stick with it. Once we realize we didn't do anything about it. Yeah. These are just human-made things. You can just do stuff, right? It turns out you can just change your mind. Hey, Matt, let's finish on a topic that I know is a favorite of yours and we'll see how long this takes. I'm hoping not long, but we'll see. We're an hour and nine in, so this is an interesting setup. Well, you mentioned it off air and you've wanted to do this for a while and I think it's worth airing, is the very strange, historically anyway, circumstance of the gold price being at record highs and rising reasonably quickly at the same time as shares are at or near record highs.

1:09:37Because traditionally, and this is, there's no rule that this needs to have been the case, nor that it can't change now. But traditionally, gold has been the safe haven asset, the fear asset, the hedge against inflation, all those kind of things. And people have generally sold their shares and bought gold. And when there's so-called risk on, which is a horrible cliche, but when people feel more confident and optimistic and when greed overtakes fear, they sell their gold because it doesn't produce anything. And they go and buy real assets, well, not real assets, they buy growth assets. So they buy shares and they kind of, the two tend to, more often than not, sit on opposite sides of the seesaw, at least in relative terms.

1:10:12They don't go down permanently or lower than they were, but you kind of have that trade to swap between gold as a safe haven and shares in particular, but others as growth assets for that growth where people are feeling good. It is really unusual for gold and shares to both be doing it at the same time. And that was kind of your observation. I'll invite you to share some thoughts. Gosh, there's a lot of thoughts to share. I mean, I don't want to – I could, but I won't go too far down the so what. But I think if nothing else, it's just noteworthy because generally speaking - Because I'm usual, right?

1:10:50Yeah. I mean, we can argue all day long as to what should or shouldn't be, which is always, you know, like, who are we to say what should or shouldn't be? I still like now the podcast is something. I know. I know. Too bad in his life podcast history. Oftentimes just humans in general as to like, you know, I think we don't - there are certain realities of existence that we just don't like. And it's like, yeah, but that's still just how it is, right? That's right. So, you know, perpetual motion machines would be fantastic, but we don't have them. Desperately scrolling and I can't find it because I'm going to throw you some bangers of some stats here.

1:11:24But gold, suffice to say, as you've set it up, has performed crazy well. It's helped perform the NASDAQ in recent times. I couldn't believe you told me that this morning. It's incredible. And again, let's just remember what it is. It's a lump of rock, essentially. It does nothing. And it makes jewelry and you can use it in surgery. draw a pie chart of gold that we have extracted and refined. And it's just all store of value is all it is. And it's a store of value because it just has certain characteristics that make it useful for that. It's just scarce and fungible and all of those kinds of good things.

1:11:58And so generally speaking, it's something that becomes completely irrelevant for investors when the economy is functioning well, we've got good prosperity, life is good. Why am I going to take all my hard work and put it into this lump of metal. Like it doesn't make sense, particularly when there are productive, high returning investments to be had and to push forward humanity and to increase our material wellbeing and to solve hunger and poverty and all of these kind of high and noble ideals. But no, we're actually doing all of that and buying gold, which you just don't see in history. And well, actually you do.

1:12:37There are generally you see it in periods of hyperinflation. Why my German is the classic one there. You can go around to various parts. Turkey is a good example in recent times. Gosh, there's thousands of them. And the reason is it's like no one's buying it because they perceive a return in real time. They just want, they're very worried about inflation. And so this is just my synopsis, but it's not an edge case synopsis. I think this is if you ask anyone who follows this space, it's just sort of like markets are going up, houses are going up sorry so equities are going up houses going up gold's going up because no one wants the money because the money because you idiots are like pumping money into the system like drunken sailors here with very little productive return on investment so it's sort of like I actually don't care if I don't get a real return I just want to preserve the money that I have already made and when you look at the it's actually interesting pictures you see out of the gold dealers in Sydney lines out the door on open.

1:13:41People buy actual gold, not an ETF, actual gold bars to bury in the backyard or something like that. But that's interesting. But let's face it, that's not moving the global$20 trillion gold market. And that's what the market cap of all gold in the world ever discovered and refined, not discovered, but extracted and refined. It's worth about$20 trillion US dollars or something like that. One of the biggest buyers is central banks. and what they are replacing are US treasuries. So it goes back to my original point because I'm going, who's buying bonds? And the answer is, well, traditional big players are buying less of it because they're not idiots.

1:14:23Not entirely idiots. Let's not go too far. They're not entirely idiots because it's like, I'm buying literally, not even, I was going to say a piece of paper, not even a piece of paper. I'm buying a digital promise that this person or this group of people who have absolutely demonstrated beyond any shadow of a doubt have no fiscal discipline whatsoever, who are drowning in debt and adding more debt, are going to pay me back. I mean, they're absolutely going to pay me back in nominal terms, but they're not going to pay me back in real terms. So I'm going to, like any sensible forward planning economic actor, I'm just going to go for something else.

1:14:58And this is why we've long sort of talked about, why are the banks so expensive? if it doesn't make any sense on a PE base, why is Coles and Woolies trading at PEs in the mid-20? They're a mature consumer staples, great businesses, but they're not growing that far. Why is housing going for what it's going for? It's because the money's broken and people are looking for a money substitute because, I mean, that's my supposition. I would love to have another explanation for it because what else could it possibly be? so and I feel as though there's a lot there's that great saying of don't look at what people say look at what people do yeah and when the central Christine Lagarde gets up there from the EU ECB or you know Powell or our central bank whatever they're saying is one thing but just like look at what they're doing and they're letting a lot of this treasuries run off and they're replacing it with gold that's the one gold is absolutely useless in almost every regard except for the fact that you just can't click your fingers and make more of it.

1:16:03And that's the play. And I think, honestly, I think that's also, you know, why shares are doing well at the same time because it's not just a fear of inflation per se. I didn't finish that thought, but yes, you're right. Sorry, no, yeah. Do you want to pick up your own? No, no, no, no. Do it, do it, do it. I was going to say, what people don't often understand or know is the bond market is massively larger than the share market. Massively larger. So proportional reductions in exposure to bonds have a much larger proportional impact on the gold market or the share market because you've got more money rushing in.

1:16:38You know, it's the... Rushing into a small pipe, when it gets to a larger pipe, you know, it kind of... It moves... Sorry, from large to small. It moves with a faster velocity because you've just got to push more, more quickly through a smaller space. Every rapid and every river you've ever seen. It's exactly what happens. So you kind of see that impact. I'm tempted to then try and do well firstly the thing is we're guessing we are speculating we're inferring right because there is no there is no general group of researchers that say oh John Smith decided to sell bonds and buy gold because they don't tell you why they're doing it right all we know is it's definitely not because there are any problems it's definitely not that correct we're just doing it must be some other reason just trust us bro so you'll never know exactly why but we can infer based on flows of money and a bit of expertise and experience and all that kind of stuff.

1:17:24So that's important. So that's worth mentioning. In terms of the so what, is it possible that as a result, shares and gold are overvalued? Yes. Am I saying you should do something about that? No, because I don't know. Maybe this is a permanent new state, in which case there is no reduction, right? Because why go back to bonds until or unless they become more attractive relative to shares and gold? So I don't want anyone to start thinking, aha, I see this big influx into shares that obviously will reverse at some point. And at that point, shares are going to fall. So therefore, the smart thing would be to sell your shares.

1:17:54Two reasons. One, what else are you going to buy? You're going to buy bonds instead now? No. You're going to get cash? I mean, you can, but we've just spent the first third and the last quarter or 10 minutes of the podcast talking about the inflationary impact. So do you want to be in cash? Probably not. Okay, well, where do you want to be? And I'm not saying you should buy, therefore, shares at any price either. I do think you should be careful about what you're buying. The higher the market is, I've said this before, the more you need to be careful about which companies you buy shares in. because when the market crashes 40%, you can buy most of anything and probably do very well from there.

1:18:25If the market's at highs, will it go higher? Well, historically, it always has at some point, maybe straight away, maybe it crashes first, maybe it falls slightly first, maybe it stagnates first. The market's never not gone higher, so be careful being out of the market. But also, that said, the inflationary impact, if inflation's going to run at picking up at 3%, then you're losing 3 % of your purchasing power every year you're out of the market waiting for some other thing to happen. So I guess I just want to make that point, because it's really tempting for people to say, I hear what you say, Andrew.

1:18:51Therefore, you can work with a different view, by the way. But, you know, okay, what he's saying is lots of money chasing gold, lots of money chasing shares. When that stops, they'll drop. Therefore, they're artificially higher. Therefore, it would be a silly idea to buy them. And if you, by the way, if you are saying that, feel free. I just think you ought to be very careful about how you treat that circumstance because if you're hearing Andrew say this and saying, well, therefore, I know what to do. Oh, gosh, no. Forth, it's not that good. Yeah, do what you want to do. I'm not. This is not financial advice.

1:19:16But you're not selling your shares either, right? That's the other thing. I mentioned some of the examples in history and you tend to see, I mean, you've got to remember money is half of every transaction. It's just a measuring stick. It's a ruler. It's all money is. It's just a tool, right? And when you see every asset going up, the better way to think of it is like, no, the assets aren't going up in value. The money's going down in value. It's the same coin. You're just looking at it the other way. and you will buy Woolworths at a 40 times PE when you, not because you think you're going to get a great return there, but because Woolworths as an organisation, as an institution has, for want of a better word, an intrinsic value to it because it does real productive things that represents value.

1:20:03That's why, and so people are buying, my supposition is that people are buying it at excessive valuations not because they think that they're going to get a double-digit real return over the long term. They're just things like, well, if I leave it in money, I am bleeding in, and I would probably say that official CPI figures undercook things a little bit, but let's call it reasonable. It's like I am literally, not literally, I'm metaphorically holding a melting ice cube here. Yes, that's right. So if I work, I get paid in money, I leave it there, it's just going to bleed away, or I can buy something that's definitely got value and is increasing in value.

1:20:39Yes, it might be overvalued, but it's better than nothing. It's why we often talk about meltdowns in markets, but melt-ups are a phenomenon too. And melt-ups generally happen towards the end of big periods of monetary debasement because it's just like, well, when the dust settles and if we reset the currency, as happened many, many, many, many times in history and even in recent history, it's like Woolworths is still going to be worth something. We're going from the drachma to the euro. I don't know. We're going from Celsius to Fahrenheit. We're going from inches to centimeters. I mean, it's all arbitrary units here, but the thing that holds the value is the company.

1:21:18The thing that holds the value, you know, is the house, is the land, is the Picasso. Like those things have real value, right? And the money is just a way of measuring it. And so it's just like, I will swap the thing that doesn't have any tangible backing to it and is decaying in value for the thing that has some value and is increasing in value. That is just a sensible play. And I think that's what we're sort of seeing here. I'll put some numbers on it. So let's add up every single asset in the world, every single house, every single share, private, public, art, collectibles, even the money itself.

1:21:58We can add up all the value of all the US dollars, all the EUs, all the yen, all the Aussie dollars. And so bonds is$300 trillion. It's about a third of the entire pie. Huge, right? Equities is a third of that. So it's about 100 trillion. So every company in the world, add that, buy them all, multiply it by three, and you'd just be able to buy all the bonds in the world. And so it's your exact point. It's not like you need a wholesale dump here. It's just like even at the margins, these things start to fall off. The money has to find a home. The value has to find shelter. And when it comes to shelter, look, when you're stuck out in a storm, you're not going to be too picky about what barn you're going to run to.

1:22:45Like if there's a barn or I'm staying out here being hit by hailstones or I'm going to that barn, I'm running to the barn. The person who goes, yeah, but oh, it's not built very well and it's not very good quality. I don't know if the asset value of this barn is really that great and it's going to go up over the light you do. I just don't want to stand in the hail. And I think it's a terrible metaphor, but I think that's what's happening with gold. So one thing I'll just mention here at the end of it, because I'm seeing more of it, is in our world of equities, gold stocks are on a tear. Obviously, because gold is on a tear and gold stocks are a leveraged play on that.

1:23:21And as it happens in any kind of scenario where you see very bullish price action, the very action itself attracts more people. And so I'm not telling people not to buy gold stocks or anything, but don't, I just, I'm always nervous when people buy stuff because it's going up, quote unquote. And it's like, at least have a view of the dynamics that are behind that. And then they have an informed view as to whether or not you think that will continue. Buying a company because, oh, they make gold and gold is going up is just such a peripheral view of things and such a shallow analysis that you're going to get burned.

1:23:59And here's one thing I learned about gold companies years ago is that gold companies, people who run gold companies like their jobs. I let that one sit there for a bit. Like they're a weird breed, unlike the rest of us, you know, but they like their jobs. And generally speaking, I think people must imagine that there's just lumps of pure bars of gold on the ground. You just dig it up. No, it's incredibly diluted in the Earth's crust, incredibly diluted. And when you have a plot of land with gold in it, some clumps are more valuable than other clumps. And so what does a gold miner do? And this is just purely rational.

1:24:35I've got an asset. I want to maximize the life of my asset. When the price of gold is super high, I mine the marginal stuff. I mine the back to the price action, the price signal. Yes. If it's going to cost me, I'm going to make up numbers because I don't know gold mining. If I'm going to mine gold and it's going to cost me$5 ,000 an ounce to get it out of the ground when it's selling for$3 ,800 an ounce, I'm just not going to do it because I'm not an idiot, right? But when it's$10 ,000 an ounce, I will. And in fact, why would I mine the really high-grade$2 ,000 per ounce extraction stuff I've got?

1:25:14So you get this weird phenomena that as the gold price rises, the gold producers shift to the more marginal veins of gold. I'm terrible here. I've made geology here, whatever it happens to be called. And so therefore the margins don't expand as you would imagine. It's not like, oh, we're continuing to extract the most lowest cost grade here. No, we're shifting. So you can actually have some really perverse incentives. The other thing that gold miners do is just like all humans do in all industries, the good times are here, the good times will last forever. So you not only start mining, it will expand, it will borrow, and it gets more and more risky.

1:25:58Now, very quickly add, because especially people on Strongman who love their gold and are very good at gold understand all of this. So when they're buying gold, they're buying companies that have really good quality deposits. The infrastructure and the CapEx is already in train. The management are prudent capital allocators and aren't just going to start spending like drunken sellers just because the price of gold. And there's a lot of deep analysis to all of this kind of stuff. So my only, it's a very long-winded way of saying, I just wanted to make mention of the fact that gold is doing this really weird thing, unlike that we haven't seen in a long time, but doesn't mean ape into any gold stock that you find, I guess is the TLDR.

1:26:39I like it. Mate, just to leave our listeners for something, just because it's fun, I jumped onto gold.org, which is this World Gold Council. And just for fun, they say, quote, our best estimates suggest around 2016 ,000 tons of gold have been mined throughout history. Interestingly, about two thirds of this gold has been extracted since 1950, end quote. Another quote, to put the total amount of mined gold into perspective, just to your point, mate, about the amount of it. If we were to gather all of the gold ever mined, into a single cube. Yep. It would measure approximately, have a think just before I say this.

1:27:14I know the answer. So others don't. 22 metres on each side. It's not that big. That's a, that's not big. It's not that big. All the gold, ever mind. It's like an Olympic swimming pool or something. Yeah, it's half as long and deep, obviously, but yeah, exactly. It's crazy. So yeah, it's just what it's worth. It's a, it's a thing. But that's, when people say, but what does gold do? That's what gold does. It exists in a scarce form. That's what it does. And it doesn't rust. So, by the way, approximated usage. Jewelry, 45 % of the tonnage of a mine is in jewelry. 22 % is in bars and coins. 17 % owned by central banks.

1:27:59And 15 % is other, which I assume is probably just industrial use. That's the industrial. And I would put a great... So, it's interesting when you dig into that. When you look at the jewelry angle. Yeah. I would lump that under the – I would put that as the bars of gold and the storage because particularly certain places where culturally it's super important. India is the obvious example. Yes, it is. And why? Why are the Indians mad for gold? Well, there's a monetary lesson in all of this that I won't go into here. And all I'm saying is they're not irrational, right? They're not irrational. And so within the Indian culture, it's like it's not as though they're, you know, it's the aesthetics that are just so darn pleasing, you know.

1:28:43And there is definitely that dimension too, Gold. Absolutely there is. That's right. But for most families there, it's just like, no, this is our savings. That's what it is. So what's the use case? Just to contextualize what I said earlier with what you just sort of said then, most of what it does exists just in a pure form, sometimes pressed into a necklace or a ring as well, but really just to be there and to be very, well, you can't snap your fingers and double it, right? That's what it does. And I'm trying so hard not to go to those obvious analogy in the world. You know, it's like, what does Bitcoin do?

1:29:21Well, it does the same thing. It's just scarce. And that's it. And I'll shut up at that point. I will say for you, fix the money, fix the world. Hell yeah, man. Hell yeah. On that happy note. Have a great first half of your weekend. We'll see you on Sunday. And full 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. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under financial services license 400691.