Our first LIVE Motley Fool Money. March 29, 2024

26:25It was in an army disposal store. I was a scout when I was a kid, so, you know, 85 years ago. And I remember the first – I saw this machine. And I remember the guy, it was, you know, he runs an army disposal store, a bit of a nerdy guy, which was great. So I was like, you know, I think mum or dad might have said, you know, what's this? And he sent me this. He showed me this. Oh, you do this, you do this, you press the buttons. And it was mind-blowing, right? Again, because I'm old, we used to have notes, physical notes, in the ashtray of the old 8Z Holden Kingswood when I was a kid. And you put the petrol money in there, right?

26:55And you'd fill up the car. And you'd have to fill it exactly$20 because that's how much money you had. That's the cash you had to pay with, right? Not that many years later, believe it or not. We're now at a point where one person at the bar has paid with cash. Armour Guard cannot turn a profit trucking our cash around the country. And one-third of the ATMs have gone over the last five years or so. it is an extraordinary change to the way we live our lives. And I think we've talked a lot about innovation. We've talked a lot about technology. We've talked about iPhones, for example. iPhones are 16 years old.

27:27Something ridiculously small, right? Can you remember a time where you'd have one of these in front of you? He says, holding up an iPhone that people at home can't see. Not an iPhone, it's an Android phone. But there was a time, right? And I think there's a couple of lessons here. First of all, we'll talk about the cash bit without mentioning the other thing. we will but but the big the bigger the bigger picture here is the pace of innovation for me it's the things that we you know we're not still drawing flying cars despite the promise of the jetsons and i'm still a little bit cranky at george for that one but the the pace of innovation things we take for granted so incredibly quickly podcast didn't exist a decade ago um by the way funny inside story we got a phone call from uh one of the content director at triple m sydney and he called me he said oh it's mike fitzpatrick here from triple m i said okay good mate he said uh do you want to do a podcast so i don't know do you want to give it a go i said i suppose yeah when you're getting off like that of course you haven't got to have a go podcast is young no one's doing it it's kind of you know it's one of those things i said it ram in his first time when he was with us at the full i said do you want to do a podcast yeah okay i'll do that that's how we're doing this podcast now in front of you guys so uh so that was a fateful call had they not called me i don't know whether we would have done a podcast maybe by now we would have tried to do something, but that's the origin.

28:40Five people on my street who do a podcast. We would have done a podcast. Four of them are him under different guises. The pace of technology, though, is incredible. And so I guess, mate, I'll ask you about the death of cash without mentioning the other thing, and you can mention it at the end, I promise. And then I want to talk about innovation. So just, you know, Armaguard, what does it do? I mean, it's potentially pretty seismic if banks and retailers can't get cash around the country. Yeah, I mean, it is gone already. I mean, the saying is the future is here. It's just not evenly distributed.

29:10And we're at the front in Australia. Like you'd be surprised in the States how many people use checks. That's true. You know, let alone cash. It's bizarre. But, you know, most of these changes, we always, whatever the technology, we assume this sort of linear thing. But it's not. It's an S-curve. It's nothing, something, and then it's just normal again. and that is look predicting the future is hard but I'm going to go there and say there is no cash in 10 years oh no cash there's no cash alright audience participation time again who reckons cash is dead inside 10 years show of hands I reckon about a third of people count the smart ones there is definitely a revolution being formatted tonight who reckons 20 years who reckons never yeah that's next question ah a few hands so about maybe a third of the audience digital cash just to be clear let's move on we'll cut that one out a third of the audience roughly inside 10 years another third or so inside 20 and if you're saying never now it's gone happens it's gone it is it is gone for purely economic reasons that's the thing that's exactly they are armaguard is having to be subsidized because they need that service um it's like all the banks are closing their branches in regional areas.

30:30We talked about that on the pod recently. Why? Well, because they're assholes. Well, they are assholes. But not because they're assholes. They're doing that. They're doing it because they don't make any money. Like, they're not doing it. Like, why? So, the only reason we do that is because there is a political will at this point just like, well, what about grandma and granddad? We can't throw them to the wolves. Granted. By the way, I'm not saying we should. but that's the only thing that is the only finger in the dam wall is that right and and once once that um uh sunrise sunset that passes yeah then then no why would you and it's not as though it it's not as though it'll be a a bloody revolution no one wants it i mean no one here wanted it one person put their hand up and and why because it's easier to go tap tap tap and have it all there and audited and on a budget and just it's so much easier it is it is 100 gone and then and then there's cool stuff you can do with with not um uh the other thing and and not really cool at all in fact orwellian scary stuff that's yeah because what what you can do with cbdcs which are coming they're already the rba is working on it central bank digital currencies for those who don't live in Bitcoin land?

31:50It's programmable money and it's got all the features of cash except it's controlled by the RBA and it's not a conspiratorial thing it's just what it is but it gives you it will, I imagine it will come in under a banner of well it allows us to do this and allows us to do that but it also comes with incredible control mechanisms as well and you can see what they're doing in China and other places which have have a form of this so i think it's something that will be again i always i don't i really don't wear a tinfoil hat but you you've got a virtual one it's digital these days you know one of one of the one of the challenges of living in australia which is so great in so many different ways and why everyone wants to come here is that we've got it so good but it is it is there's not a there's not a big gap to cross between uh what we have and what other places.

32:45Even look at what happened in Hong Kong not too long ago. What's happening there? It's Hong Kong. It's the first world country, right? Isn't there an argument against getting rid of cash? Aren't there going to be a group of people who some will obviously go to digital currencies of which we won't mention. Others will though say I'm going to stay with cash because I don't want that level of control. Yeah, but they won't have a choice. No one's accepting it anymore. You can't get it out anyway. The banks aren't stocking it anymore. That's the problem. Armaguard's not shipping it around anymore. And it's not that there is someone will do something wrong with it but something could do something wrong with it the wonderful thing i have about cash is i can pull out a pineapple from my wallet and i can give it to anyone and it's only between me and that person who wants it who wants the 50 hands up everybody i don't carry cash hey we checked into the hotel together this afternoon and he insisted on using his digital id and then he insisted on tapping as he doesn't carry cards anymore so there you go just to make a point and took five times as long as it took you but i did it i wasn't gonna say that you did You made your point.

33:45But, I mean, it's one of those things. You're seeing it play out in the US a little bit now with some of the stuff that Trump is saying. Not to get political, but it is a fine line. I'm going to forget the quote here, but we take certain liberties for granted. And I think it's something that we should fight for to have cash around because there is something that I think is a fundamental human right for me to take the money that I have earned to spend it in a way that is appropriate. without someone having the capacity to control or see what I'm doing. Am I buying drugs and doing all kinds? No, I'm not.

34:17But still, none of your bloody business, right? Now, others go, well, I'm not doing anything wrong, so I don't care. But I just think, well, wait until the people that you don't like are in power. And then they do start thinking about, well, you're protesting in the main street because of climate change, for example, something you passionately believe in. And the government of the day says, we don't want to do that. so you can't actually spend your money in the CBT. You can't catch a tram there anymore. You can't do that. In fact, now we're going to dock you your social credit. It gets very dark very quickly.

34:50So I just think it is something that will happen almost quietly and with a murmur, but cash will go. And I think we need to be vigilant as to what replaces it. And not about the other thing. I mean, it's a massive tailwind for the other thing. It just is. You don't - It is a tie-in for it. Well, it just, you don't, it's for a lot of people in our situation, it is a solution that doesn't have a problem in front of it. For a lot of other people, it's very different. And then when that flips around potentially a little bit and all of a sudden it's like, hmm, I wouldn't mind actually having a little bit of privacy in my life.

35:28It just, it sort of drives that kind of thing. So - No, I agree with that actually. It's absolutely a tie-in for that. Yeah, it is. Hey, let's go to investing more purely after, it's covering the waterfront so far this evening. Mate, mergers and demergers are back with a massive vengeance on the ASX. It always comes in cycles. Doesn't it? And I've got to say, I said to you earlier today, I was really surprised. If I was going to be a private equity buyer in particular or a trade buyer in general, the time to buy those things with their money was really, really cheap. If you could find an ongoing business that had something going for it, share prices were down through the back of the pandemic, interest was zero at central bank level, a couple of percent.

36:09I think Apple did a hundred year debt issuance at 1 % or something stupid. And if you're going to be a buyer of an asset, that's the time if you're really, in theory, these private equity guys are supposed to be the masters of the universe and have all of that great ability and everything else to go and make those purchases. And I was kind of waiting for it, waiting for it, waiting for it, and nothing happened. But all of a sudden this year, and I suspect it's because they can now see through the dark clouds and because maybe there's an assumption that rates aren't going up anymore, so they kind of have a sense of their maximum exposure.

36:39Now, they can go up, of course, but they probably won't. So they have a sense of their maximum exposure. I'll just write a quick list before we do this, mate. Altium is coming off the ASX. MMA Offshore, the business known as Mermaid Marine. McGrath announced this week was being taken over by Knight Frank. Not a great stuff. Newmont, the gold miner. API. Plenty of others besides little businesses. Healthscope is dealing with issues. is Optus maybe bought by Brookfield. Now, again, it's owned by Singtel, so it's not an ASX listed company. But again, moving from the realm of the public markets to the private markets.

37:12Speaking of thinking into the future, mate, there is a future, I reckon, in the not too distant, one option, one option of 10 years, 15 years hence. Australia's been talking about a tie-up with the Singapore Stock Exchange for ages. And national interest grounds, the government said, no, no, no, we want our own exchange. Now, we all want that. I'd like that because it kind of keeps me in a job. All those things are true. But at some point, if we keep losing some of these large Australian businesses, and small ones, frankly, Atlassian lists overseas directly, these guys are being bought up. Now, they're good moves in cycles.

37:40There'll be times when there are no deals being done again, and I'm not predicting the end of the world, certainly not the end of the ASX. But if you kind of think far enough forward and think, if the big, well-known, large capitalization companies go private one way or the other, it does make you wonder what's left for the ASX. Are you seeing trends? Are you seeing themes? Are you having thoughts about what's happening in terms of the way corporate money is being thrown around? I mean, it definitely goes in cycles and there's different strategies that are in vogue. So, you know, it's always funny to see a company rationally.

38:13I was talking about McGrath with you before, right? So they listed not that long ago and you read the prospectus and it's like access to capital markets. We can now do this. It's going to accelerate our strategy. Oh, it's brilliant. It's listed. You've got to be listed. Now it's like, yeah, you don't want to be listed. It's too much compliance. Wait a second, but you just, you know, so there is seemingly good articulations of why we need to do this. And I feel as though it's the consultants that really end up making the money in the whole thing. And it's usually a certain kind of magic that's involved in the math.

38:48So it's like one plus one equals three. Essentially, we take this business, we take this business. and the sum of the parts is worth more than the two separately. And then you've got the other ones like, well, if we split these apart, BHP did it not that long ago with - Billison. Yes. It's our 32. It's our 32. Thank you. And it's like, this is going to be brilliant. And I, again, pretty cynical, a company is spinning something off because it doesn't want it. I mean, here's this great business unit. Let's get rid of it because that's going to be brilliant for shareholders. Then we can focus over here.

39:26Give me a break, right? Like it's just, it's a complete nonsense. So the other thing is, is you can rest a little bit on the stats here rather than just shooting from the hip as I was. And we've quoted it a lot because it's a good stat, which is that generally these kinds of deals only add value to shareholders one in three times. right and the other third it's sort of it's a wash and then it loses money and um uh things look very good on a powerpoint slide deck that are very hard to do and you usually have things like uh synergies uh efficiency gains cost savings cost you know all these kinds of things which is just brutally brutally hard to actually happen and more often than not it's the empire building of a board and management team than it is a hard calculus on what's beneficial for shareholders so i'm usually skeptical of it nevertheless it's nice if you hold something and and a takeover of a company well actually no no i take that back a couple times it's happened to me i've been pretty annoyed by it because even though i got taken out at a higher price i felt as though it was still opportunistic and i would have been better to hold the company through to fruition so Let it play out.

40:43I think, I guess it's a long ramble, but what I would say is when you're a shareholder in a company that is going through something like this, try and play devil's advocate with it because it is never going to be presented to you as a difficult decision that we have to make. It's a brilliant decision and you're going to love it is how it's picked every time, every time. And statistically, we know it's not. My favorite example is the Tabcorp Tattersalls merger. So Tabcorp, the gambling business, says, you know what? We should merge with Tattersalls. Then we'll have more diversity. We'll have the lotteries business.

41:12We'll have a gambling business. It'll be a great business. It's a great idea. We should definitely do this. It's going to add value, all the synergies and everything else, cost savings. And for those who followed the story, Tabcorp then spun off the Lottery Corporation, which was the old Tattersalls, because they were better businesses apart, because each could then focus on what it was doing and et cetera, et cetera. BHP, you're at BHP. The other one's the BHP oil assets, where BHP said, we're getting rid of the oil assets, spinning off the wood side. It's going to be great for wood side shareholders, great for BHP shareholders.

41:36And you think, well, hang on, who actually wins out of that deal? you're getting the same message you're dividing into two pieces it's I will say one thing mate I will be a little less cynical than you which is unusual for me that's unusual yeah it is there is no value created by definition but it is possible and this is where again nuance is important it's possible that there is more value recognised by the market because there are different groups of shareholders and the Motley Fool this is not an ad we run different services we run some high growth services some income services right we run some for 25 year olds stuff for retirees.

42:10And the same company won't fit in both portfolios because some investors don't want that, but they want the other one and vice versa. Now, if your crown did this or tried to do this ages ago, speaking of businesses in trouble, they try to spin off the property assets from the gambling assets and basically say, you know what? There are property investors who will invest in listed property because they want certain things out of it. There are equities-based investors who want operating businesses with growth potential, and they're going to pay a certain amount for that. Now, if you try and sell a combination of both, no one really wants the hybrid version because I don't really want the property with the casinos or I don't really want an operating business with the property.

42:47I'm going to choose one or the other. And I think there is genuine, very, very short-term. I won't say value creation because that's a ridiculous phrase invented by investment bankers to justify their fees. But there is very real short-term opportunity and maybe even the natural owners of some assets. So speaking of PE, sorry, I'll finish my point. It is possible two separate businesses owned by two separate groups of shareholders who value things differently. It's Game Theory 101. We all know Game Theory, right? One of those great ideas of, this is a bit of an unfortunate example, of a divorcing couple.

43:20Well, they say you got 100 points each, and you can allocate those points against any of the assets that we have. And what you find is when you add those things up, each person gets more than 100 points worth of value because I might value the car, she might value the couch. I might value the cat, she might value the dog. Whereas if we said we're going to have half each, I don't really want that half, but that is what it is, right? So when you start to think about that, there is some obvious and real benefit, not value, but benefit from separating those shareholder groups. But there is absolutely no value actually created.

43:51It's just a realization of value. And I can see some tiny amounts of justification for some of that. The problem is, to Ram's more cynical point, is it's generally investment bankers who walk in and say i can create value for you i can get your shareholders give you some more money and a bonus and you can be the on the board of this and the of that both mergers and and uh divestors divestitures as they go through for exactly those reasons right and you can always make a case and they believe that's the other thing i've been in corporate boardrooms where a management team has said after a long due diligence everyone gets invested in the process this is the problem with again psychological biases we talk about regularly By the time you spent six months working on a deal, no one can see how that deal could possibly go badly because you're so invested in getting it done.

44:32You want to believe. And there's no more, ask Mulder and Scully. There's no more, for the kids, that's an old TV show, don't worry. There is no more, there's no stronger, you know, psychological bias, I don't think, that I want to believe. I will put aside any misgivings because I so badly want this to be true. I will, you know, not even consciously, subconsciously, blinker all that stuff out. Yeah, it could happen, but it's probably not going to. I'll probably be fine. I think there's some reality to that as well. I think if the world was – are there any investment bankers in the room before I say this?

45:02No one's going to put their hand up anyway. I think if there were fewer investment bankers in corporate boardrooms, shareholders would end up with a lot more money. Put it that way. Yeah. I mean, look, there are instances where it's incredible. It can change a company. I've used the ProMedicus example before. They bought Visage. And that is – Talk about sliding doors. It just – you never would have heard their name, right? And that is they were doing practice management software before they were doing PAX, you know, medical image storage and retrieval and all this kind of thing. And it has made them one of the most successful companies ever on the ASX, one acquisition.

45:40Yeah. So it can work and it can work very, very well. so yeah and the thing I always think is what is what is it that you can bring to this business with your existing assets and brands etc that that business can't do sometimes there is a 1 plus 1 equals 3 scenario you know I'm sure you know Coke could do a lot better with give me another soft drink brand Pepsi Thank you. Then I could, right? Like there are legitimate synergies. Synergies are a real thing. Yep. That's a great example, actually, because you think about the economies of scale. You've got a truck going to a place. If you throw a couple of pallets of drink on a truck, because you know more for the truck probably because you've got to pay the driver and the fuel and the rent on the truck and the lease and whatever else.

46:31If you can fill it rather than having half full, there are genuine economies of scale with growing volume. Yeah. I would, yeah. And to bring it to a practical point, if you've got shares in a company and it's going through something like this, particularly let's speak about divestors because they're the ones that are sort of happening.

46:51Ask what they're getting rid of because you'll get both. You'll get shares in both. And it's probably only one that you want. It doesn't matter what they've told you. You just don't get rid of something good. so I would be and I if I was more prepared and had done some due diligence I would have done some research here because I can guarantee you that almost any split that you've seen it has been two different outcomes almost almost without exception so yeah just be careful there you go don't buy the spin mate let's let's finish with a a bit of fun overnight there's a brand new social network oh yes listed on the world stock exchange that's not Twitter It's not Facebook.

47:35It's not Instagram. It's not WhatsApp. Truth Social. You forgot X. No, I said Twitter. You can't... We had this conversation, by the way. Andrew insists on calling them posts. I call them tweets, and I will always call them tweets because I just am that bloody minded I like to do that. Trump made more money in a day than he had, even on the most generous of assumptions. You've got to give it to the guy. Before he listed this company, He was worth on the most recent, I think it was Fortune or Forbes,$3.1 billion. For the last court case, maybe you can half that. I'm not sure. $4 billion richer as a result of reverse listing Trump technology and media, media and technology, into just a shelf company they kind of tried to merge it into.

48:22The shares are up 50 % at one point, closed up 15%. This is a business that is doing tens of millions in revenue? tens of millions worth 8 billion US wait wait wait tens of billions and it sounds like a lot it's not when you're looking at at these other tens of millions that's right sorry tens of millions it's not a lot of money but that's the top line the bottom line is negative hundreds of millions so I mean in a way you've you kind of got to go wait a second if you and I started a social media app and we were just getting 10 or 20 million a year at the top line, bleeding cash, and we listed at that price, I mean, there's nothing you can do except sort of go, bravo.

49:14Like, you found people that were that dumb? Because this thing's gone to zero. I mean, it's not even a comment on Trump, you know? But you have got these people in such a lather that they will buy monkey JPEGs because he was selling NFTs. at one point. Trump NFTs. And now he's dumped on retail in the classic cynical move. It's a family podcast. I won't use the term, but a rubbish company. And he got away with it. And so, I mean, as much as it blows your brain away, you just think, well, bravo. I heard it called the ultimate meme stock today. And it was fascinating. I think it's a lesson and maybe a warning or an opportunity.

50:04I'm not sure which. If you think about any company only needs enough true believers to make it worth something. And if you're going to list that company, you only need enough true believers to buy the shares, right? And whatever your political affiliation. You've mentioned that with Elon before. Yes. That's right. The power of a cult. And I do use it a bit disparagingly actually about Elon because he's a bit special. but the same is true as truth social right there are there are just the true believers and there's there's two ways this goes right if you could find enough buyers perpetually for shares in trump media and technology there's no reason for this to be a bad business i'm sorry bad stock bad stock specifically right no matter how it goes financially there's one reason it goes bad financially well what i'm saying is that there's enough true believers who keep buying it from you This is the thing about sentiment, right?

50:56It's very true, but it's the whole weighing voting machine kind of thing. That's my point. Yeah. I'm sorry. 100 % my point. And as long as – this is the thing, right? So NFTs went through the roof for a very, very long time. Why? Because there are enough true believers being added to the cult over time to keep the machine rolling until it stopped. When was the last time we saw a headline about an NFT? Non-fungible token, for those who can't recall the acronym. It's supposed to be the next big thing. Twitter had them. You could have it as your profile picture on Twitter. It's going to be wonderful.

51:25They're selling monkey pictures. Kevin Hart just sold his recently for a 98 % loss or something. That's a lot, yeah? Yeah. So now, that being said, we've talked a lot about companies. CSL has always been stupidly expensive on the ASX, right? To its credit, it keeps growing. But it's always had a PE which has been larger than its growth because people have chosen to believe that this will continue to be the case. Do you remember Fleetwood? I used to have shares in Fleetwood. Right. I think I did too. Fleetwood was a mobile home builder. I don't know why I admitted to that. Yeah, I did too. Fleetwood was effectively a mobile home builder that used to provide demountable tile accommodation for mining camps, right?

52:05It was the mining boom, just to put context here. And it was a pick and shovels play. I'm just going to save us some face here. So you could make this really nice... We're not saving face, dude. It's like, well, it doesn't really matter what the mines do. They're going to demand these kinds of things. These guys have been family-run business, had been doing it for years. The books were really clean. It just, the mining boom didn't boom forever. And that's the thing. So for a very long time, this business was the best thing since sliced bread. The business did well because the mining had been rolled on.

52:35And what happens? The true believers see those numbers and say, look, look what it's doing. Look what it's doing. Look what it's doing. And when you get in that state, you can't believe there is a time in which the music stops. We've seen that. I mentioned lithium earlier. I'm sorry for anyone who's here or listening who's a lithium company shareholder. We've seen that story play out. Now, it's not over. I've got my face in 12 months' time. The lithium price 10X is from here, and I'm not doing this again next year because you'll all hate me at it. But, you know, assuming it doesn't, we might be back here next year.

53:04And the reality in terms of what that trend can look like, you made the point. This was the point I was going to make. Andrew stole my thunder beautifully, is at the end of the day, with very, very, very, very, very rare exceptions, the market remains a weighing machine. You can ride sentiment for a while. If you're really, really lucky, you can ride the sentiment far enough. Can I mention Afterpay? If any Afterpay shareholders here, went from$1 to$150, and people looked at the merger and the buyout by Square and said, look, I'm a genius. See how much they paid? Square's now worth less as a company than the price they paid for Afterpay.

53:40Now, I'm not blaming. If you made something... Good, sorry. It's called Block. It's called Square. The same. I refuse to move into the modern age. I'm still living in 1973 and you can't stop me. Block slash square is worth less now. Maybe that's why it's worthless. I'll tell you why it's called Block later. Thank you. I won't be listening. I'll be at the bar. The reality is that when the music stops, the music stops, right? So if you're really, really lucky, maybe you get out at the right time. Maybe you own the company, the stock. That defies gravity forever or for eventually forever because people believe for long enough.

54:19It's two things. Don't buy the sentiment. Whatever the company, whatever your political view is, whatever your social, whatever it is, don't buy the story, buy the business. Secondly, don't buy anything that Trump has touched. I think you can actually say that objectively, right? That's better than my answer. Trump University and the stakes he had at once. They're like every single one a disaster. Do you know there's a Donald Trump Bible? Yes, I did. I wasn't going to go into this one. And it's marketed as the only Bible endorsed by Donald Trump, which I got to figure the bloke upstairs doesn't need Donald Trump's endorsement.

54:54But I don't know. Maybe he does. Again, genius. Like you got away with that? It's got a copy of the US Constitution, I think the National Anthem, and some song written by a country musician. A picture of him hugging the flag on the back. I'm not entirely sure. On that wonderful note, we are going to finish this podcast. Will you come back on Sunday? Yes, I will. Will you have done an ultra marathon in the meantime? You know I will. And drink some beers along the way. We will have maybe a beer or two. Make sure you do rejoin us on Sunday. For those of us here at the pub, please stay, have a drink.

55:29We'll be back in about 15 minutes. And until then, 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. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.