The strange new Super tax... October 6, 2023

0:07Welcome to Motley Fool Money, the podcast that is going to charge you 30 % tax on all of the earnings you make listening to this podcast. I'm Scott Phillips. He is Andrew Page. It was a lame one, but it's all I had. How are you, Mr. Page? Pretty good. 30 % ain't bad. I'll take that. Will you? On what though? 30 % of nothing is still nothing, right? Don't get into the weeds. I'm all about the headlines. You and every politician ever, mate. That's a lovely intro into what we're going to talk about. But before I do, how's your week, mate? it's been pretty good actually yeah pretty nice uh it's where are we still in school holidays so you know new south wales um oh saving time too oh i'm loving it absolutely loving that yeah that's weird i know people our farmers don't like it i know you know it's but seriously it is it is just brilliant absolutely brilliant yeah i mean each to their own but if you don't like it there's something wrong with you right there's just a joke it's a joke for reference listeners andrew just before this podcast started recording said i'm in a ranty mood today so expect expect punching andrew page today because i think we're gonna get a bit of that over the next hour or so as we chat through what's on all barrels blazing today exactly you'll feel better after at least there's that hey um mate before we do get on i do have a question for you what is that this this straw man thing i'm curious if you can just let me know maybe what it is what it does how the whole thing works i'm happy to enlighten you sir uh we are and thanks for asking um we're an online private investment club there you go and you founded it i did and you run it i do and where would you find that straw man thing strawman.com there you go uh love it let's get into the uh into the real details the really good stuff um let's talk tax how front afternoon let's talk tax because that's how you hook listeners.

2:03That's how you get people to really, really want to listen to this podcast. Click, click, click, click. There you go. For the four of you still left, we're going to talk about tax. Mate, two, there's a lot of movement on tax at the moment and kind of not in really, really big ways, but actually lots of little ways. And so we're going to talk about the Victorian property taxes just to kind of mull over the pros and cons of that stuff. But before we do, I wanted to talk about what's really old news but newly confirmed news. The new approach to superannuation balances. Treasury Chalmers on Wednesday this week confirmed that the basically plans or the super tax plans, as originally suggested, are going to be made into law if they can pass it through the parliament.

2:50Now, I'm not sure what the independents and crossbenchers think about this, but the plan is to go ahead as previously planned that is a 30 tax on earnings above three million dollars in a super fund and and here's the bit i still am just perplexed by uh and we'll talk about maybe why in a second the 30 tax is going to be levied not on realized gains not on income kill me now yeah but on unrealized gains in the super fund in other words if the value of your shares goes up, you have to pay tax on that whether you sell those shares or not. Whether those companies pay a dividend or not, you are still up for the tax.

3:31And I got to say, mate, I just, I got a bit, speaking of ranty, a bit ranty on Twitter this morning. We're recording this on Thursday, the 5th of October. So if you were following me yesterday morning, my apologies. I am just flabbergasted, mate. I don't even, well, I have some thoughts as to why they may i've done it but i but that aside the idea of taxing unrealized gains is just the most bizarre thing i think i've ever heard in my life the tax system is already stupidly complex as it is now you're going to have to work out how much you actually gained in terms of realized gains plus the unrealized gains and there's gonna be some tax on that and then apparently you can carry forward unrealized losses and then put off that against future realized unrealized gains the whole That thing just sounds like an accountant's picnic, and it's just the world's worst way to live your tax, surely.

4:19Yeah, yeah. I mean, obviously it is. And the thing is, it's like I can't spend it until I sell it anyway. So, you know, it's sort of – we've talked about it in other ways before, but, you know, it's a very difficult setting tax policy, but there is a reality that you kind of need to if we want public services. And I guess my general philosophy is I think perfect is the enemy of the good. You want something that's sort of – simplicity is something that I think we should all – fairness and simplicity should be the two overarching goals. And this just complicates things and it's just – it's absolute madness.

4:59Having said that, I'm very supportive of a 30 % tax on large balances. I don't think that is too onerous at all, given that the intended purpose was to fund your retirement, not as a tax haven for wealthy individuals. And some people listening to that would probably be upset. and I get that, but you have had incredible, there should be tax incentives to save. And there are, and they're still there and they still be benefited from that. But it's just like, you know, there is, the pendulum can swing too far on that. And I, you know, I think people who rail about it, you can always say, well, you know, you can make massive donations to charity and get huge tax deductions and you won't suffer that problem.

5:42That'll fix it. If it's really that bad, If it's so bad that you want to go for the alternative, that avenue is open to you. Anyway, I've lost the other half of the audience now. It just makes absolutely no sense, mate. I have long said... Look, so firstly, your point about simplicity is absolutely right. You've obviously been reading my mind if not my tweets, because I said exactly that. I'm not a person who thinks that simplicity should be a goal, right, in itself. I think you want fairness and you want effectiveness as the first two goals. But that said, if you achieve those two things, do it in the simplest way possible.

6:16You know, I think we need to be careful of the order of these things. But all you're doing is creating an accountant's picnic, a whole lot more fees, a whole lot more, frankly, you know, tax minimization schemes where people are going to say, well, I'll take money out here. I'll put it over there. I'll put it in the family trust. I'll do whatever else. It just, it beggars belief. As someone said on Twitter in response to me this morning, if you think$3 million is too much, just cap the super fund. Make people take out the difference. Like, just the idea of living in a super, taxing at 30, but on unrealized gains.

6:45Imagine you have in your, you know, you're not a massive property investment fan, and that's fine. I'm not particularly either. But if you might have a house in your super fund, right? And frankly, so$3 million is a lot of money. But you've said before, the places around you go for large amounts of money. Let's assume that in three years' time, five years' time, 10 years' time, whatever it is, the house is now worth$3.04 million, right? And then all of a sudden, that goes up 8%, 10 % a year. You're not getting that rental yield. so then what do you do you've got to sell the only asset at whatever price you can get for it because you're now a full seller because you've got tax bill owing you got to you got to pay that tax bill you got to then reinvest those assets it's just the whole thing it's just absolute stupidity and i just i gotta say mate i i have to believe see here's the let me get political for a second i am not yet a fan of much of what the current government has done financially right for all of everything else that you know they may have may not have done by the way i was no fan of treasurer of Frydenberg either so the pox on both their houses as always but you know i i have to believe well i don't know for sure my gut my gut feeling is jim chalmers said hey what we want to do is effectively cap super i want to make this as onerous and unattractive as possible so that everybody takes their money out and effectively implements their own three million dollar cap because i'm making it hard for them to do it and so i'm going to make it a tax on unrealized gains knowing it's going to be painful so that people have to do other things or choose to do other things because they don't want to pay the tax i i think i guess because i've got to believe that's true because if not it's just it's just ideologically blind or just dumb like the three options are it's dumb not thought through very well it's ideologically blind i yeah i want to do this anyway i don't care what happens or it's actually deliberately a case of i'm going to try and make this so unattractive and onerous that people with more than three million super can take it out deliberately to avoid exactly that that scenario i just don't think i can't believe there is a genuine attempt to actually use this as a proper fairness slash revenue raising mechanism given the reality i think about smsf most people have smsf specifically to hold property and again whether they should or not different question he's certainly not doing it because he's caring about their asset allocation you know it just i have to believe it's done trying to be sneaky trying to be clever and saying again i'm not being political um i guess i'm because i'm bagging a politician but i have to believe he wanted to be able to say to people no i didn't ban super no i didn't cap your super funds i'm not i'm not a bad guy just pay the tax on the gains 30 that's not too much i think i have to believe that's the intent though by the way they released the information on the same day as the ato released information that were apparently x number of people with more than 100 million in super so you get to say look over there look at those fat cats i'm going to tax them oh and by the way everybody else with more than three million dollars in super you know it's just it just it just smells of political posturing and just trying a little bit too hard to be too clever politically it doesn't feel like this is a really well thought through policy that actually anybody would i don't i still know anyone who's saying you know what this is a really good idea treasurer well done thank you i mean i just i just beggars belief i don't get it i agree i agree i i think that that interpretation is probably right but i'd still class that as the dumb approach because maybe yeah no one likes you anyway right like it'd be different it'd be different if you did that and people didn't catch on and then thought Okay, I guess that, you know, no.

10:04So I always come back to the point where it's like, well, have some guts. Stand behind what you believe and make the argument in a forthright, rational manner. You know, stop talking down. Everything is dumbed down in our society. I'm sorry. Like we just pander to the lowest common denominator all the time. And it assumes that we're all idiots and people aren't idiots, right? So I'd like to believe that that's true for most of us. I mean, none of us are solving, you know, we're not all applying for the Fields Medal in mathematics, but, you know, there's a fair degree of common sense out there.

10:43Make your argument and stand behind it, right? Like just this is too clever by half, or we want to do this, but we just need to adjust. And my point is, if it worked, then, okay, there's a cynical argument to be made, but it doesn't work. so like what's the point ah you know you know what you know what's worse too mate is well it's not actually worse just additionally bad is the fact that they're not indexing the three million dollars right that's the cap no and that's not the that's not the thing that's bad about it chalmers then says oh we'll leave that up to future governments now for governments that that make laws years and years into the future you know the bloody stage three tax cuts were supported by the current government when in opposition they didn't kick in for three years happy to make those things when give money away but i'll leave the indexation now if you don't want to index it say i'm not going to index it as you say have the hard conversation i'm not going to index it because dot dot cool great or i'm going to index it because rather that's like oh yeah no i'm not going to index it other future governments can decide what to do with that it is just they should they should if that's honestly the view then charmer should stop indexation of every other benefit and and you know uh requirement in in the government if you're going to index pensions but i index this if you're going to index whatever and your view is not i don't like indexation or this is not doesn't need to be next but we'll leave it to future governments leave everything else to future governments cancel all indexation on every payment every benefit every threshold cancel a lot and so we're not gonna do any of it because we don't we only leave it to future governments of course he's not doing that and this is just this political the cynical rubbish that we have to put up with um i actually i i still want to believe that chalmers wants to do the right because they have the right reasons i have to believe either he or his advisors are trying to just be too clever with this stuff and rather than actually standing for something they took the small target you know view to the election and then forgot that in government you're not supposed to remain a small target you know there's still an opposition right they're still desperately trying to avoid doing anything i just find the whole thing just it just is really really frustrating as you say more complexity it just again either not thought through or thought through badly or cynically trying to game the whole thing just if you're going to be in government guys just do something do it properly you know or don't do it if you want to be in government great you want to be there to make a change if you say to warm the seats go away just you know again pox on both their houses that last mob left an absolute mess so frankly these guys look great by comparison just because the last lot were awful by the time they finished their turn they really finished it up you know a rundown jalopy with with two wheels and you know friend flintzine feet under the bottom of it but the current but the current government went oh i guess we can live with that yeah we'll just we'll just kind of we'll put an extra couple of wheels on it but we won't do much else to fix the thing it just the whole thing is bizarre absolutely timid you know what's always interesting is when every now and again the guard is lowered and you hear a poly speaking with passion and conviction like you know like a motley for money rant kind of style you know just like like an adam rant you know saying google it mate or you know i'm trying to think of other examples every now and again it happens and and And you know what?

13:46It's all over the news. It's all over social media. It gets rapturous applause from so many quarters. And yet the 400 grand a year PR consultants that they're using were just like, no, no, we need to script it like this and we need to say it like this and this is how you're talking. We're like, no, no, get up there on the soapbox and rant and say what you mean. I really love there's a comedian in the UK called Jonathan Pye. He just is brilliant. does some really good YouTube clips and that. And he just rants about sort of various policies or whatever. He does it in such a good way where it's like, it's funny, but it's like so true.

14:24And it just cuts through. Like the brilliance of comedy is that you can sort of say things that in a way that, you know, it's only funny because it's true, right? Otherwise it's just sort of nonsensical kind of stuff. And I just feel that we need more of that. I would vote definitely for someone. I guess I who tells it like it is but this is where you I've got a lot of sympathy for the the Jackie Lambie's oh yeah um the catters and I disagree with so much of their policy but god I love the the the you know where that you know what they're about right you know and and they've got a way of breaking things down pretty simply and I just I you know they might not always land at the conclusion I would yeah but those conviction sort of politicians straight talking politicians i i would take any any day over someone who's going to just sort of waffle on through focus group talking points it's just gonna like i can't watch it i can't watch those interviews anymore i have to turn the tv off yeah and it's i completely agree with you it's the best thing about recent politics is the is the absolute phalanx of independence that have turned up um i'm i think you're right about jackie lambie you know i probably i agree with probably 75 % of the time and she normally doesn't agree with the rest of the time.

15:37But you know she's legitimate. You know she's genuine. You know she's listened and has come up with an idea she thinks is best for her constituents in the country because that's just the right thing to do. You know, there is zero sense that she's... The other guy, really, I'm a big fan of is David Pocock, the ACT senator. Such a fan. He's doing a great job. The Teals, I think, are much better than the majors. They're kind of getting a little bit, you know, there's a little bit of, you know, vote buying or vote being a little aware of the votes obviously they're in you know formerly liberal seats and so they know where their bread's butter they've got to kind of be liberal light at some cases and some of their policies they've stood up for agree with even the super stuff um you know peter dutton wanted to repeal the the new tax and the the teals rather than actually recognizing that super is too generous and needs to be improved kind of went straight to that yeah yeah yeah we think that we it's like well okay you you aren't seeing your constituents and i guess we can't again they are politicians right so you you expect they actually voted to represent their electorate i suppose that's true i suppose you know but in any case oh yeah but but they're still better than the others because as you say at least they're doing the right things for the right reasons not pandering to to to other other groups there's a really funny this is kind of a business comment too but there's a really funny thing going on at the moment mate the you know so i always go back to my supermarket analogy woolies and coals are everything to everybody right and you kind of got to be because you want to be big and if you want to have a thousand stores each in the country and you want to have you know you want to offer everything to everybody and so you kind of say well how do i how do i run my business on a four to six percent margin uh and i have bread and deli and fruit and veg and grocery and everything else and you kind of you try and be everything to everybody and what's happening i think in i'll get back to politics and draw those two together what's happening is interesting right now is the specialist green grocers are popping back up the specialist butchers particularly in some areas and often the more affluent areas are popping back up the um the but on the other hand the aldis who say actually i don't need to make you know 25 gross margins on baked beans or corn or whatever i can make 10 and just have a really really really small range of products in a really high turnover environment you know so there's costco really really bulk so there's kind of this idea that you know on one hand the and this is the way i go back to the majors the majors might be you know liberal labor like woolies and coals right try to be everything to everybody and so you kind of you've got to try and appeal to the you know the inner city professional as well as the the farmer in the bush and as well as the university student as well as the whatever and try and try and cobble together some sort of majority uh which is the woolies and coals approach then you've got the aldis that you know i don't know who's who but you know the jackie lamber the david pocock the teals the andrew wilkes um the greens to a lesser extent they there's that kind of idea of you know let's try and pull this together but we only have to represent not only represent a certain factor but we don't have to appeal to everybody all the time you know the greens aren't worried about annoying the the you know the right-wing farmer in the bush because they only want to take the inner city seats the you know the teals the same thing they're not you know they're they're playing individual games and i think it's just a fascinating way that politics is kind of being reshaped as as this kind of process plays out in the same way that the kind of grocery sector is is playing out it's worth thinking i will draw this back to investing because it is worth thinking about at what point being big and dominant goes from being in a massive advantage you know walmart had every chance to crush amazon 1995 6 7 8 9 they could have they could have and should have killed amazon dead right or done a deal or bought them or something blockbuster could have bought netflix you know but they were all big and dominant and all of a sudden you get past the point when all of a sudden your dominance becomes a millstone because you are still trying to be everything to everybody while someone else is saying, I'm not going to provide greeters at the front door.

19:18I don't have to worry about theft. I'm going to just do really big bulky stuff or books or whatever it is in a warehouse and get them to you cheaply. Netflix says, I'm not going to worry about having stores and rental returns and all that kind of stuff. I'm going to do it digitally. I'm going to make this work. I'm going to make it simple. I'm going to overcome those objectives, those objections, I should say. And so it does kind of matter. I think as an investor, thinking through when your company is dominant enough to take on all comers, but also being really careful for the point of time at which it just kind of ticks over to i used to have the dominant player now i've got the the calcified incumbent while someone else races straight past me i i actually think the a lot of the bigger companies particularly in tech have learned that lesson and and you see it with you know there's probably some dated examples now but you know Facebook buying up WhatsApp or Google buying up YouTube, but actually with all the AI noise at the moment, you know, like Microsoft paying 10 billion for, was it 10 billion for open AI or at least for the stake in it?

20:22Yeah, yeah. And I think they recognize that, you know, this is an industry, our industry is just, it's a story of disruption. And if we are not going to whistle as we walk past the graveyard, right? So when anything looks like a threat, we buy it up. And some of those acquisitions will be silly in hindsight. But we're so big, our cost of capital is so low. That's the other advantage, right? So there's scale advantages, there's network effects. I think we don't talk enough about the cost of capital advantage. These people will lend to them hand over fist because they are so strong and so dominant.

20:57And they'll happily do it at much, much, much, much lower rates. That is a huge advantage. And so you just sit there and you go, ooh, is that going to be a worry to – We'll buy it. Everyone knows the Kodak example. On the board of Google and Apple and Netflix, everyone knows the Blockbuster example. There should be a Kodak or a Blockbuster poster on every boardroom wall, right? They know it. Now, I don't think everyone's got that memo. And you're right, I think, in a lot of places. But in tech, I do think that has changed. The other thing I was going to say was you do see trends in markets or in business where you go from, we want to be vertically integrated, we want to be everything in the supply chain, to, no, no, no, we just want to be niche specialist operators.

21:45So we merge, merge, merge, we divest, we divest, we divest. We merge, merge, merge, and this pendulum swings back and forth as well. And you get these lovely slide decks outlining, you know, some investment bankers put together, the rationale. Value creation. You know, unlock synergies and do this. And now we're going to like, and then, you know, five years later, like clockwork, there's another deck. breaking it back apart. This is why we need to split it apart and this is why it's good for shareholders to do it this way, you know? It's like, okay. Just quietly, by the way, that was Tats and Tattersalls.

22:16Sorry, Tabcorp and Tattersalls. They literally joined the two businesses together and now they've split them apart to Tabcorp and the Lottery Corporation. It's exactly what happened there. Exactly. Oh, 100%. Yep, yep. So we've talked about politics. Should we delve into religion next? That's not, that's not. I do want to go back to politics for a second. We're down to like three listeners at this point. I know, I know. Hey, so I'm loathe to mention property to you, Andrew, but I'm going to because I can't help myself. And it was an interesting story. Last couple of weeks, we've seen really, they're not big dollar value changes, but they are interesting philosophical, political policy changes in Victoria.

22:56Three of them. The first was an Airbnb tax of seven and a half percent, which was supposed to somehow help the housing market. we'll talk about that in a second the second one was announced only this week which was that uh there's going to be a tax uh applied outside so that in some parts of victoria and in melbourne these are already some of these exist but a statewide tax on undeveloped property and thirdly a a tax on vacant property so that idea of you're not using it you're not developing it or you're using it for airbnb we're gonna we're gonna get you now yeah so so a couple of they're kind of in two buckets i'll i'll delete off a little bit then you can i'll let you please the the airbnb thing seven and a half percent the i'm just as as you are i'm sick of the cynicism of politics right this was this was promoted some sort of housing affordability measure that somehow adding a seven and a half percent you know fee on top of airbnb was going to somehow improve housing affordability.

23:56Now, I don't know, mate, I would suspect that seven and a half percent, frankly, will end up being, as is often the case, paid by the holiday maker, doesn't come out of the owner's pocket, and will do almost exactly nothing for housing accessibility affordability, because I don't know anyone who's going to say, actually, I want this to run as Airbnb, I'm now going to sell it back to some struggling renter for a third of the price I bought it for, or half the price I bought it for, right? It's just that the market does not gonna work that way. Now, you know, is there on the very, very, very margin someone who said, okay, I'll turn it back into a long-term rental?

24:31I guess. Someone who says, I'm not gonna do this anymore. I don't want the hassle. I'll just sell it and someone else can buy it and live in it? I guess. The chance that this is, if there's 15 houses that get sold as a result of this, I will be staggered, right? This seems like, to me, literally like revenue raising dressed up as a quote, housing affordability measure. I think for the other ones too, even the Victorian Treasurer has said this tax on vacant and undeveloped property. Get this. How much is going to... Have you seen the numbers? It's going to raise... In a year, it's going to raise$37 million.

25:05Oh, my goodness. Like, I was on radio this week and he said, that's one train carriage. You know, and it's probably not, but it's not miles away from that. And you just kind of think, again, there's three things here. There is... Is more revenue better? I guess if you're Victoria, given the state budget problem, probably. Is it ideologically or philosophically defensible? I guess if that's your view. But when you dress these things up as we're going to fix housing affordability for Victorians and you put these things in place, it's just, again, back to that simplicity complexity problem. If you've got to raise$37 million, increase taxes by 0.01 % or whatever it is, right?

25:41The idea of adding more bureaucracy and more tax forms and more of this, more of that. Again, will someone sell their undeveloped property because you levy them with a really tiny tax, maybe on the very, very, very margin, for everyone else, just cost it to be business. They're going to pay, the increase in interest rates is more than whatever the Victorian government's going to levy. If you haven't sold the property by now on the back of those rate increases, and by the way, when rates then start to fall at some point, probably next year, maybe the year after, it's going to be by more than the tax is costing you.

26:10And again, so I end up thinking this whole charade is dressed up as, and I've had people on Twitter say, well, at least they're doing something. I'm like, that's exactly what they want you to say. At least we're trying something. At least we're doing something. So they really care this mob. They're going to do the right thing by us. And by the way, I'm mindful of a bagged a state and a federal labor government. I've certainly done my fair share of bagging liberals. So if you're new to the podcast, trust me, I'm not holding a special place for the LNP. But it just strikes me as bizarre. Again, on one hand, it's not a big deal because people are going to absorb it and get on with it.

26:41So who cares? On the other hand, the idea that the cynicism of we're fixing housing, For everything else that you could do to fix housing affordability, these three measures, in my mind at least, aren't that. Am I wrong? No, you're not. They're fiddling while Rome burns. Are they? It's absolutely madness. And at the edge of the edge of the edge. Yeah, you know, and it's great for headlines because you're going to have a firm view of it one way or the other. Yes, yes. It sort of misses the broader point. You know what? You were just speaking and you reminded me of, I'm going to forget the details, but I bet you I can remind you.

27:15remember when Amazon was on the rise and people were ordering stuff online overseas and they were looking at introducing extra, whether it was a tax or a levy on parcels. That's right. And again, you know, it's sort of like the world is changing. Oh my gosh, it's so unfair for local retailers. We need to do something. We'll do this. And the way that the maths worked at the time, and this is going, I want to say, gosh, 10 years at least ago, was that the money raised wasn't even enough to pay for the administration of the policy. I'm not even slightly surprised by that, mate. I wish I was. Do you know what I mean?

28:00It's sort of like, it is the height of madness. And you think, what the F is going on there? And what is going on there, I assume, to be cynical, is that local business people who have a little bit of clout pick up the phone to their memory. This is outrageous. Someone needs to do something. You know, my revenues are falling. It's like, we'll do this. And never mind, it doesn't make any sense. It's all about sort of protecting my mate's interests rather than actually doing something that's, in fact, in this instance, bad for the consumer. I was like, the consumer's like, well, I'm just doing this.

28:36Not because I'm not trying to stick it to the man here. I just got a really good deal from overseas. And isn't this capitalism and global markets and all the good stuff that I thought that everyone was on board with until it hurts them and then they're not. And this is exactly the same kind of thing. And I think you do need to look at it on a net basis. I haven't done the numbers. I've got no interest in doing the numbers. But that$37 million that you raised, that's a gross number. Let's factor in the cost of administering it. I, again, would not be surprised if it's a net negative overall. So we just – we build up – there is – when you – what am I trying to say here?

29:21there is money spent that can be very inflationary because it's just extra money being spent in the economy that doesn't produce or do anything and this is a classic example of that if however the government raised a bunch of money and then and then invested in productive assets whether that be a road or factories or things like that they're actually not that we're actually removing a bit of tape so people can get on with things you know what it's just like it's actually so yes you're spending government money maybe it's even printed government money yeah but we we've actually got lots of real world examples of that particularly in the u.s when was it eisenhower i forget now they did a lot of big nation building kind of expenditure huge big deficits you know to finance it all but it's actually it actually turned out to be pretty good because in this instance they spent the money wisely.

30:15And so I guess I'm going off to a slightly different track here, but this is where I think it's relevant in this instance is that whenever you're building up bureaucracies that don't have an impact on our productive capacity and productivity is what every politician loves to talk about without knowing the first thing about what it is and what it means. What you are literally doing is adding to inflationary pressures. You're making life more difficult for businesses and consumers. You're throwing more money into the economy, which you're just basically employing professional emailers and people who have meetings.

30:52That's what their job is. And nothing gets done and we all get more frustrated and the problem doesn't get solved and we make a bunch of malinvestment. It's really maddening.

31:12I was reminded again during the week, too, speaking of bashing governments, let's do it. And this time I get to do it about the LNP, or Liberal National Party, depending on which state you're in. During the 0.1 % interest days, I made the argument that government should be borrowing an absolute truckload of money. Oh, hell yeah. In fact, given the credit, by the way, I will actually give the state LNP a wrap. Well, it didn't happen, but Dom Perrottet, who was then the treasurer, after that became premier, he actually floated the idea of actually creating a effectively a state fund with borrowed money entirely for that purpose literally saying i'm going to borrow this money invested in infrastructure at these really low rates because why the hell wouldn't you it makes perfect sense when interest is so low i made the argument before and this is a little bit further away from from orthodoxy the government should have taken either whole ownership or very significant minority stakes in things like our our minerals miners if you could borrow it if you borrow it you know what was the government bond rate less than two percent and you can and you could buy a uh companies who or shares in companies who get an absolute sweetheart deal in terms of natural resources but also the the sheer cash flow generation that was always going to be in excess of the borrowing cost and you've got the backing of a ability literally to tax the government the population as much as little as you needed to even if things got terrible which they wouldn't have it's just it financially it was just the biggest the world's largest we talked about before i would i've said before i would borrow my entire future investable cash right now if i could lock it in at two percent you know if i if i take it a massive as long as there's no margin call and again if you're the government there's no margin call they could have literally borrowed as much as they wanted to they could have bought 49 of rio fortescue bhp santos you know whatever it was at the wood side, at these stupidly low rates.

33:04It's just incredibly maddening there is just so little. And look, it would have got objection and maybe they shouldn't have done it after or maybe I'm on the minority side here. But to not even have considered or flowed or talked about these things and instead just bumbled on with borrow more money, give more tax cuts, buy some more votes, just yeah, maddening is the right world. Yes. And get this for madness. I... i've got to steady myself who think about the other side of that trade right there were not just a few people there were very significant institutions pension funds financial you know captains of industry who lent the u.s government the european government's money for 30 years at zero percent like what the hell like who anyone who did that i just basically is like you need to be fired immediately like exactly like there'll be some people who are speculating on the bonds because if they feel as though interest rates are going to move in a certain direction and they're basically trading the price of the bond okay okay fine that's that's your bag you you do you but in terms of people buying these as as long-term instruments saving instruments it's just like i i the fact that they were able to say can we borrow money for 30 years at zero percent interest and people said yep you're like what oh really so to your point hell yeah but borrow like there's no tomorrow like you oh my gosh we can actually get this away and people will actually give us money for these promissory notes decades into the future like forget inflation and what happened there like even if it was like a two percent inflation for 30 years it's like this is the best deal ever correct correct i like and it was just like and and major banks major pension funds like you know sovereign wealth fund like the big big big money all bought this stuff and it just whenever you think that there's adults in charge of the world just remember that that point that that people lent these institutions money for 30 years at zero percent like oh my god anyway that's it's madness yes it's it's just incredibly frustrating mate let's move on um i don't know i don't know how much you've got to say about this one but it is notable uh and maybe it's this this is a teachable moment as the cool kids say uh you might brought to my attention that something that was written in the afr earlier this week that uh block the The business formerly known as Square, the business formerly known as whatever else it was before then, they'd bought Afterpay.

35:48That's why most Australians, if they have shares, will have shares in Square, largely because of the deal with Afterpay. Block is now, well, laying off staff, but also the entire company, the entire company Block, is worth less than the price they paid just for Afterpay. Was it two years ago, 18 months ago, whatever that was consummated. It's a hell of a fall from grace. Yeah. I mean, wow. I have to say the founders of Afterpay, just like, you know, chef kiss. Like you timed that perfectly. Afterpay, what? They did get shares in Block and I'm sure there was, I forget the detail of the deal. So there's probably escrow, they're locked up or whatever.

36:35But, you know, they basically sold at exactly the top. and you know it it turns out that huh it's it's not this you know money-making machine that everyone thought it was i will say this though about block so there's we've always got to be careful to do this so the shares have just been absolutely decimated right yes nevertheless the gross profit i'm just got yahoo finance up here because i just googled it um but their revenue has gone from like 4 million, sorry, this must be billions. Yes, 4.7 billion in 2019. The trailing 12 months was 19.6 billion at the top line. Right. And on a gross profit basis, they went from 1.8 billion three and a half years ago to 6.8 billion.

37:20I mean, they're doing something, right? Well, this is my issue with that. I know you and I differ on crypto and I don't know what else Jack Dorsey's up to. No, we're completely aligned on crypto. Yes, fair enough. Thank you. Just not on Bitcoin. Exactly. I think the Square business is excellent. Honestly, if I could take over Square business, if I could let Jack do his thing over in a corner, I know Jack's really important to the business, right? So it's a bit like Elon, you can't divorce the person from the company necessarily. But if Jack kind of took his kind of crypto, Bitcoin, whatever else he's doing over there, and his new social network over there, and frankly took Afterpay with him over there, and I could just have the Square business, just the payments app and the go anywhere terminals.

38:06I think that is a really, really great business. I would love to own that business. And maybe I should even own it despite the other stuff because maybe it's worth it despite the distractions and Jack's flights are fancy. I don't know. But I just, honestly, I think it's a really, really interesting business to have and to own. I think it's got a long, long, long future. Maybe eventually those tap and goes are built into phones, for example. So Square is not miles away. For those who don't know, they're a little white, literally square, terminals you kind of tap if you go to a farmer's market or some cafes and that kind of stuff.

38:37Anyone on the go, the coffee vans. As a payment technology, again, maybe Apple or Google, someone else puts them into the phones eventually, so this is obsolete. But assuming it's not, it's just a spectacularly good, all the cards are accepted, super easy. You don't need expensive infrastructure from the bank. You set it up, whatever. It's just really, really simple. I really like that business. I don't think I would necessarily want to join Team Jack with whatever Jack had planned for the business. Because I'm not entirely sure, like the Afterpay deal, frankly. Now, I would say, by the way, the one saving grace for Block is they paid for Afterpay largely using Block shares.

39:14Yes. And so at some point, they used really expensive shares to buy really expensive shares. So when they both fell, they weren't giving as much away as it otherwise might seem. Jack was never going to sell the company at that higher price. So there is an element of if your shares are overpriced, using them for acquisitions actually makes sense. We talked a lot about uses of capital, but the one time you want to sell shares or use equity to make a takeover is when they're stupidly priced. Now, I'm not going to argue that Block was necessarily stupidly priced, certainly highly priced compared to now, but that's part of the calculus, of course.