Future Generation Australia Limited (FGX) Earnings Call Transcript & Summary

Good morning, and welcome, everyone. I'm Kate Thorley, the CEO of Wilson Asset Management. And it is my great pleasure to welcome you all here today. And I just love looking out in the audience and seeing so many familiar faces. So thank you all so much for being here. And also a welcome to those of you who are joining us on the live stream. I really hope that you enjoy today's presentations. I'd like to start by acknowledging the traditional owners of the land where we're meeting today, the Gadigal people of the Eora Nation, and pay my respects to their elders both past and present. Today's presentations are general in nature, and that means that we're not taking into account your personal financial situation. It also means that our views on the market and stocks, they do change, and they do change daily. So please bear that in mind. So the team and I absolutely love traveling around on these national road shows. It is a real highlight for myself and the team because we know from 25 years of doing these presentations, that you love hearing from the team in terms of their insights on the market. We know that you love also understanding about the companies that we're investing in on your behalf. These listed investment companies are your companies, and it's really important that we come around and meet with you and also give you the chance to ask us questions. So that will be both formally during this morning's presentation, but also informally over lunch later on. Your feedback is really important to us as well. So there is a survey form on your chairs. We will e-mail that out also afterwards. So again, if you could please give us any feedback so we can always strive to do better. We really appreciate it. I know myself and the team have been speaking to a lot of shareholders over the last few months. And again, if we've spoken to you and you've given us feedback, thank you so much. We do really appreciate it. So when Microcap on Tuesday announced a share purchase plan and a placement, this is to WAM Microcap shareholders only. You would have already received an e-mail from Boardroom yesterday. The offer is now open. So if you have any questions, please let myself or a member of the team know, where the whole team is here today, so we're always happy to answer any questions. You can see that the offer is open. It is a tight deadline. The offer is not open for very long, and the capital raising amount is a little tight as well. So just make sure that you bear that in mind if you're a WAM Microcap shareholder and give yourself plenty of time to speak to your broker or adviser if you have one. So today's agenda. Before I hand over to Geoff, this morning, you will be hearing from each of the portfolio managers for each of the listed investment companies that you're invested in. We will then be holding a live buy/hold/sell because we know you love your stock stories. We'll have a Q&A session from the floor. We'll then invite the Future Generation team to present on Future Gen Australia and also Future Generation Global. Then we'll have lunch where, again, as I said, you'll have a chance to meet with the team and ask any questions also informally. And then after lunch, we've got a real highlight at 1:00. Anthony MacDonald from the AFR will be hosting a panel discussion with the former RBA Governor Philip Lowe, who is our new -- or will soon be our new Chair for Future Gen Australia, and also with Geoff Wilson and Portfolio Manager Nikki Thomas from Magellan. So if you can, please stay around for that, that's on at 1:00, following lunch. So with that, I'm now going to hand over to our Chairman and Founder, Geoff Wilson, who will give you an update on his view of the market, the LIC sector and WAM Strategic. Thanks, Geoff.

Look, thank you very much, Kate. And welcome, everyone. There are a lot of familiar faces. And if anyone can cast their mind back I've -- I noticed some of the [ regulars ] that were, when we started off, I think our first shareholders' presentation was in Macquarie Street, and afterwards, we gave you all donuts. And I think there was about 20 people there and I think all the donuts were stale. Then for a decade, we gave you nothing. Actually, it's probably longer than decade and a half, as long as we could. It is your money. You've got to remember when you're having that lemon water out there, it's your money you're drinking. So, no, but look, thank you very much for coming today. I've got a couple of things I'd like to cover off on. The -- in terms of -- we've got -- first of all, what are we trying to do? We know our -- we're focused on making a difference, making a difference in terms of performing, in terms of the money that you allow us to manage on your behalf, making a difference in terms of standing up for what we believe is right. And that's from an investment perspective, and a number of people we've talked about franking credits, and we'll talk about some other things that we're doing at the moment. We're in Canberra yesterday doing the presentation. And Jesse, our CFO; Sam, Head of Comms, and myself had a meeting with treasury. We'll talk about that project. And also, what also are we trying to do? We're trying to have excellence in terms of communication and engagement with yourselves, you shareholders. Because we're only here because of you. You own the company and we're here because you allow us to manage that money on your behalf. And just on that -- and thank you. The reason why the format -- we're using this format today is because of feedback from yourselves. And we used it yesterday in Canberra, and we actually think it's a better format than the one we used 12 months ago for the shareholder presentations. But what we do -- and we're also adjusting a few things, where the [ NTAs ], I know for a long time people have said, "Look, I know you announced the NTAs on the 14th each month. Can we have some of them a little earlier?" And what we're doing is we're in the process of decoupling the NTAs. And so that will allow us to announce some of them at various points in time up until the 14th. And you'll see in your bag, your little WAM bag, in here, there's sort of a blank copy of a new look NTA in theory. And any ideas -- and there's a little design competition. Any feedback you have in terms of what you'd like on there, what you don't like on there. So the NTAs that will come out this month will actually be in this form. But then once we've got the feedback from -- once we finish [indiscernible] the feedback from everyone, then you'll see the following month NTA, which will be the one we'll use for a reasonable period of time. Also, the NTA competition was a competition that just sort of -- just came into our minds in the last couple of days. So before that, we hadn't had a WAM bag competition for, I don't know, probably 10 years. Bill, was it -- how long ago was it, do you think?

[indiscernible].

yes, at least -- nearly a decade ago. But what we're going to do is do a WAM bag competition again. Anyone put their hand -- does anyone remember when we had the WAM bag competition before? Put your hand up. See a lot of new shareholders, that means. I don't know if that's good or bad. But no, what effectively it is, is you've all got the Wilson Asset Management on one side, Future Gen on the other side, you've got the bags, you pick them up out in the front. Any one of the presentation, pick them up. Anyone online, well, you probably have to come into the office and pick them up. And what we'd like you to do is take a photo out of the bag somewhat interesting. Now I remember last time, there was and it's -- and the competition runs till the 1st of August. I remember last time, there was someone -- I think there were a few people on holidays, there was pictures taken on boats. I think there's one in front of the Taj Mahal. So there's going to be 7 prizes. So -- and look, there was someone last time, I'm not encouraging this, and it's probably not politically acceptable anymore, but they took a picture and all they had was the WAM bag. So we're not encouraging that at all. And what we're going to do, in the office, for those of you who've been in office, we've got a wall that was empty, and we're looking at potentially buying some art to put on there. And I said, look, and we decided we're better off just having pictures of shareholders. And obviously, whoever wins the WAM bag, you'll be slightly bigger than the other ones. And when we're doing this presentation in 12 months' time, we'll have the slide -- we'll put the slide up, all the pictures of all the entries of all the people that have gone into that WAM Bag Competition. So that's -- what else is on my list of things I need to cover off. So the stock market. So what's the market going to do? Yes. Of course, that's a million dollar question. The latter part of last year, I had been -- I've been surprised that we hadn't had incredible time in the stock market, after the amount of -- the trillions of dollars that was pumped into the system, the incredibly strong bull market in bonds, and the free money that we had go back in the last few years. And the -- probably the latter part of last year, early part of this year, as we -- this year, obviously, we're in the presidential -- U.S. Presidential election year. I turned a little bit more bullish because, effectively -- and I remember when I started work in the stock market, 1980 at Scottish Amicable, in the investment department [ Don Brinkworth ] -- there, I mean he drilled into us effectively how it works, the Presidential election cycle in the U.S. Obviously, the biggest consumer in the world, in America, and how the money is pumped into the system, because whoever is in wants to get reelected. So I turned positive. And I thought -- and all the statistics tell you that. I know we sent the letter out -- or an e-mail out a month or so ago just taking you through some of the statistics. Since I think 1929 in the Presidential election cycle year, the market's gone up 75% of the time. And it's gone up a little above 7% on average per annum. Also, when markets hits new highs, they tend to keep hitting new highs. And the statistic was that -- for that was about 83% of the time the market keeps going up, once it hit a high 12 months after it hit its first high, and it goes up about 13%. So in terms of -- I was sitting reasonably positive looking for this year. The tough part is, in the first quarter, looking at the Dow, it's up 10.16%. So we've already had a lot of the performance. It's actually performed better than the average performance in a Presidential year. So to me, I still think it will be a reasonable year. Obviously, inflation is -- appears to be under control, interest rates coming down. I think the statistic is something like, if -- in the year where interest rates actually drop, I think the market goes up nearly every -- has gone up historically every year when interest rates have come -- have started to come down. So yes, I'm reasonably positive. What worries me a little bit is the markets being so strong in the first quarter. So there could be a little bit of indigestion along the way. And I know a lot of people -- and we'll probably talk about this a little bit later, in the 1:00 session, I know Anthony, I've seen his questions, I've got to pick some stocks. I've actually got 3 stocks that I'll talk about, that I think a good value. But in terms of effectively where we're going over the next 12 months and inflation and interest rates. In terms of -- a number of people have talked about the LIC sector, the closed-end fund sector. Obviously, in New York and I've been seeing some of the -- well, actually, I had a meeting with the biggest investor -- the biggest fund manager that invests in closed-end funds globally. That's Boaz Weinstein from Saba, a good meeting with him and [indiscernible]. And in terms of where is the LIC sector? And I was just talking to some shareholders earlier and I said I'm going to cover off it, and then they said, we've got some -- there's new people here, the listed investment companies. And thinking about listed, I just -- then I was thinking about the phrase to sort of encapsulate listed investment companies. I think it's the thinking man's ETF. Well, maybe the thinking person -- sorry, that's very -- yes. It's the thinking person's ETF. The great thing about listed investment, first of all, they're structurally superior to ETFs, they are a closed-end pool of capital. So you're not influenced by money flowing in and out. Yes, so they're closed-end pool of capital, can invest wherever it wants, take a medium, long-term view. And the reason why most of -- a lot of our business is listed investment companies is because research that Morgan Stanley in the U.S. did about 30, 35 years ago, which showed that a closed-end pool of capital, like a listed investment company in Australia or closed-end fund in overseas, outperforms an open-ended pool of capital like just a normal managed fund in Australia. It was about by 2% to 2.5% per annum. Now why does that happen? That happens because the average -- for the open-ended pool, the capital money flows into the top of the market and money flows out of the bottom of the market. And the average investor gets about half the market's performance, because they tend to buy at the top and they tend to sell at the bottom. So if you're managing an open-ended pool of capital, you're forced to buy at the top and you're forced to sell at the bottom. When you've got a closed-end pool of capital, that doesn't happen to you. And where are we with listed investment companies at the moment? We're just going through a consolidation phase. When we flow to WAM Capital, I think there are 20 -- high 20s LICs listed in Australia. It did get up to 100 -- nearly 120. And now I think there's about -- there's a little under 90 LICs. That's about $50 billion, which is about a little over 1% -- like the whole fund management industry in Australia is $4.5 trillion. ETFs are 150 trillion (sic) [ billion ], they're about 3%. And LICs are about 1%. They've been around since 1868, The Foreign and Colonial when they floated in the U.S. to democratize investing, and be around for the next 100 or 200 years. And we're just going through a consolidation phase. Why have I got -- we haven't got it up there. It's down here. Can we put that slide up? Yes. So can anyone -- could you -- anyone put up their hand who's on Twitter? Geez, this is an impressive group here. A lot more than -- sorry, on X. A lot more than yesterday in Canberra. The -- as I said earlier, I've just been to the U.S. I had meetings with Catriona and [ Nick ]. Catriona is based in New York, who runs the Global Fund. We went and saw a number of fund managers. I mentioned earlier that we saw the biggest investor in LICs globally. We also saw probably the person that will be floating the largest closed-end fund ever, Bill Ackman. He's a hedge fund manager over there. He manages [ his structures ] in a closed-end fund. He's a big fan of Warren Buffet. Well who knows? I mean people argue that Berkshire Hathaway is the biggest LIC, you can argue, a closed-end fund, in the world. So anyway, the -- it was interesting the feedback. But -- and we also saw -- and some of the other fund managers, BlackRock, $9 trillion of funds under management, the KKR guys, the Apollo guys. And what -- I've been on Twitter, probably like I've been on Facebook, I think I've got 32 friends on Facebook. I've been on these social medias for a long time but never used them. But what really came home, talking to the activists over there in the funds management world and the people that they were agitating, that media -- that legally -- the older group legally and in the media can match each other. What -- say, Bill Ackman has, 1.3 million followers, or Boaz, they have a very strong social media presence. And so I started, 2.5 weeks ago, with 0 followers. I was really excited when I got 1 follower. And I was incredibly -- I was nearly more excited when I got 3 followers. But to me, Wilson Asset Management had a Twitter presence for a long time, we've got I think 2,500 followers. I think I'm up to 253 in the last 2 weeks. So -- but to me, my plan is to get that to 80,000 to 100,000 followers. And it's also -- it's to use that if we need to. Now in terms of trying to make a difference, you'd all be aware, back in 2008 and 2009, when the then opposition was coming in with a very illogical strategy on the dividend imputation system or franking credits, we ran a petition. I think we've got 25,000 or 30,000 people signing that petition. And it gave us a lot of muscle to actually -- to get things changed. At the moment, we're still fighting on the franking system. And what a lot of people don't realize, and it's interesting, on Twitter, some younger people say, oh, franking is for the old people. They don't realize that -- and Paul Keating boarded in -- the Labor Party boarded in, it is brilliant for Australian companies. It's actually brilliant for the young people in Australia because it gets Australian companies to invest in Australia, pay tax in Australia, employ Australians. And if you want to dismantle that system, you'll end up -- cast your mind back before that was brought in. Then a lot of Australian companies -- look at the Australian banks. I was talking to a shareholder earlier, we're reminiscing about Westpac when they had all those troubles back in the late '80s, early '90s. Now why -- significant money offshore plus the Swiss loans, but they had invested overseas. To me, the franking system encourages Australian companies to pay tax in Australia and employ Australians. And that's what the younger generation should want. I should want a job. Anyway, so to me, at the moment, we're still on franking. We're not happy. We think taxing unrealized capital gains in super is a very -- that does not make sense. It's illogical. And it will have negative consequences for people -- for the investing. And also, what we're talking to treasury yesterday was leveling the playing field in terms of the professional investor. The carve-out for professional investors, they're trying to increase -- sorry, there's talk that the threshold will be increased. We want to take it back to where it was before [indiscernible] came in. New Zealand, they did it -- they took it back, it could have been nearly 15, 20 years ago. So if a company is listed on the stock market, and the company is raising money, say, at a discount to the share price, let everyone participate, because the stock has to abide by continuous disclosures to be listed. Why do you just let the big super funds or the fund managers get the cheap stock, and you can't do it and you the retail investor have to buy it off the fund manager at a high price? And in terms of hybrids, the same thing on hybrids. They've cut out the retail investor. And so to me, that's just not fair. So that's another thing that we're focused on. And in terms of -- I'd just like to -- in terms of my stock, in terms of a portfolio that I'm responsible for managing money, it's WAM Strategic Value. We all put our money in it -- when the IPO occurred. The NTAs, what, about $1.30, $1.31, is above the price we put our money in, but the share price isn't. And no one is happy about that. The plan is we're growing the dividends. The share price performance more recently is good. It's still under the IPO price. There's been a bit of action in the portfolio. There's takeover, et cetera. And the portfolio so far this year has done very well. I think it's up -- it's outperformed the market, and it's up about 16-odd percent. And the actual -- and some of the -- and this is again, good feedback from shareholders. Some shareholders said, look, in WAM Strategic, you're buying shares at a discount to NTA, can you tell us what -- if they were trying to get NTA those shares, that the company you own shares in, what would they be trading at? And I think it would be about $1.50. So we're WAM Strategic. It's in its early years of life. We've seen that with a lot of LICs. It takes time for everyone to be aligned with and agree with what the strategy of the investment manager, what they're trying to achieve. Then you get less selling. The share price, we call it tightens -- sorry, the shareholder base tightens up, and you get a trading -- it gets to equilibrium to trade around NTA, and if not, a premium. I mean the one that took the longest for us to get it to a premium was WAM Research. Besides from when we floated it to -- besides the first month or 2, it took us about 7 years to get it into traded NTA. And then unfortunately, we did too good a job in terms of tightening up the share [ register ], because I think about a 50-plus percent premium of NTA, which is as illogical as LIC is trading at a discount. And someone asked me at the foyer like what LIC should I buy at the moment? To me, start off looking at the ones at a discount. Because if you can buy $1 of assets for $0.90 or $0.85, you're better off doing that because you'll get the free kick if the share price can get to NTA. And that's why I sort of said I think LICs are the thinking man's ETFs. If you've got no idea, buy an ETF. If you want to do a bit of research and look at -- and maybe sort of buy $1 -- get 110% exposure to the market, or 115%, because you're buying assets cheaply than you do. And make -- doing the research and making the assessment that you believe the manager can get the share price to trade at NTA, if not a premium. So that's my little bit of the presentation. What -- I'd like to invite Catriona onto the stage. As I said, I've spent -- Catriona, that's right, come up. I was going to keep talking while you come up. I think I've been seeing you too much. It's weird, in the old days, I just see you in Australia. But in -- that's right, I saw you last week in New York. So thank you, Catriona. And I think you're going to -- because I'm tweeting now. I said in my tweet this morning that there'll be 2 AI stocks. I'm relying on you for one, and I'm relying on Oscar for the other.

Got it. Thank you, So 15 years ago, I was living in London, working as a portfolio manager investing globally. It was amidst the Global Financial Crisis. And now at this time, one of the thematics that was being discussed was the aging infrastructure across the U.S. and the issues of the financial system and the utilities and their inability to invest amidst a cost-cutting efforts that they were putting in place. At the time, there was also a thematic underway with these utilities, as they cut costs, they were outsourcing their labor forces. Fast forward to today, and you have a significantly outsourced labor force that maintains and upgrades the grid in the U.S. You also have never-before-seen power demands being placed on the grid across the U.S. And this is because of effects such as reshoring. You've got energy transition and renewables being added onto the grid. And you've also got artificial intelligence that's now coming into the picture. The [ IA ] estimates that 1 ChatGPT search uses 10x the electricity as a Google search. Imagine layering that across the 330 million people in the U.S. and how much we all Google-search each day. This is where one of the thematics that the WAM Global portfolio is exposed to comes into the picture, critical assets and infrastructure. One of the core holdings in the portfolio is a business called Quanta Services, which I know from those days back in London 15 years ago. It's a business that we invested in 2020 amidst the fallout from COVID. It was one of the areas that was enabled -- their workforce was actually able to be out in the field. So they're the ones that the utilities outsource for maintaining and the upgrading of the grid to. And they're the biggest and the best in the U.S. at what they do. They have a best-in-class management team. I caught up with the CEO, Duke Austin, and CFO, Jayshree Desai, last month in Florida, and we catch up with the management team regularly. Since we invested in 2020, the share price has gone from USD 40 to USD 240. And it's a great example of what we look for when we're finding stocks for the WAM Global portfolio. What we're looking for is businesses that have advantaged industry positions, have super high-quality management teams that we watch -- execute over time, and in many cases, who we've known for decades of time. We look for multiyear earnings drivers. And that critical assets and infrastructure thematic, we think, has significant longevity. Those -- that investment that's occurring in terms of communications infrastructure, because of huge data demand and growth, and because of that power, increased demands on the electricity and transmission grid in terms of power demand we think is decades-long in terms of earnings growth drivers for a stock like Quanta. There's been -- is estimated to be $2 billion to $4 trillion that needs to be invested in the aging infrastructure across the U.S. And there's been various pieces of legislation that have been passed that really underwrite the funding of that spend. When I think about the portfolio, and as I said, the process for us is really those characteristics that we're looking for, one of the things we do across the team is do a significant amount of travel. We're constantly across Europe, the U.S. and Asia. As Geoff said, I'm currently based out of New York. And so we are on the ground meeting the companies that we invest in. We talk to competitors, to suppliers when we invest in these businesses. We talk to former employees, industry experts. And that's really core to our process. Now there's a number of thematics that the portfolio is exposed to that really underpin that factor of multiyear earnings growth. We think they'll be structural themes that play across many of the stocks in the portfolio and really underwrite the earnings growth that we see for the businesses that we own. And in our view, ultimately -- share prices move around, but ultimately, earnings growth drives share prices over the long term. Some of the thematics that the portfolio is exposed to that are driving that multiyear earnings growth: a digital enterprise, electronic marketplaces, innovative health, and critical assets, which is that Quanta an example of -- Quanta is an example that fits in that bucket. But one of the thematics that's overriding everything and getting an enormous amount of attention right now is artificial intelligence. We talked about this at a roadshow last year. But in terms of airplay and time that has really been focused on AI in the last year, it's picked up considerably. We have -- we've spent a considerable amount of time assessing every business we did own in the portfolio and working out who is really the beneficiaries and why is this so significant when we look at the stocks we own and the world more generally. We do think artificial intelligence represents one of the biggest inflection points that we've seen in over a decade. What is AI? It's the aggregation of billions of data points to train computer models to be predictive about the world. In terms of how we overlay it across those structural growth drivers that we see in the portfolio, let me give you a few examples of stocks that we own, whilst they have this multiyear earnings growth driven by these structural themes, how AI really overlays over that. Take, for example, Booz Allen Hamilton. So they're the largest consultant to the U.S. government in terms of implementing technology. So the expertise to implement a technology across the U.S. government is really done by people like Booz Allen Hamilton. They come in and roll out technology for the U.S. government. They're the largest at what they do. The team has over a decade of time getting to know this management team. We see enormous amount of investment that the U.S. government needs to do in technology for -- with both with the cloud and then with rolling out AI. And we think Booz Allen Hamilton has -- when we look at the pipeline of opportunities, the contracts they've already signed, we see multiyear double-digit earnings growth for this business. SAP is another example, German listed. Anyone who knows ERP systems in -- knows that it used to be a 2-horse race between Oracle and SAP. SAP really leads the way now. To be able to use AI, companies around the world need to first implement the cloud. And that's where S/4 HANA, the SAP product, comes into play. They are the sort of ERP enterprise resource planning. It's basically the backbone of large organizations around the world. SAP, quite a big exercise in terms of input. For anyone who's done an SAP implementation, it takes a lot of time, but it's very hard to remove once it's in. And when you transition to the cloud, which an S/4HANA is their product in this space, it steps up the revenue generated by SAP considerably, and is, again, very sticky, very hard to remove. And we think they're layering -- they have this incredible customer base that really is being forced because of the developments in technology to transition to the cloud and then will be using both SAP's AI tools and also the utilizing of the incredible database that SAP houses. So we think they're very well placed to benefit from AI. In electronic marketplaces, we own and always have done across the fund, a number of exchanges. So a couple of businesses here, Intercontinental Exchange and Tradeweb, for example. Now Tradeweb is the largest exchange in fixed income markets. So fixed income markets are 20, 30 years behind equity markets in terms of moving on exchange. So think about the ASX 20 years ago. Fixed income markets, 1.3 -- $133 trillion in assets that need to move on exchange. Tradeweb extreme -- the best player in the market at what they do, number one. Incredible business. These are great businesses because they've got fixed cost bases, and you add on increasing trading and that drops straight through to the bottom line for these businesses. So we think that's in early days in terms of the electronic -- electronification of the market, for example, in fixed income. And then you're going to layer on, you have incredible data housed in the exchange businesses, and no AI model -- well, no AI model works without high-quality data. And so these businesses really are -- have the best-quality data in each of their niches ICE. Intercontinental Exchange, another example there. They are electronifying the mortgage market. Again, massive opportunity. They're already best-in-class in energy markets and other assets, equity markets, et cetera. So this is their latest asset class that they're electronifying. Again, all these exchanges have just incredible data sets. And the large language models in AI are only as good as the data that goes in, as we've all seen from some of the outputs that go in when you have poor-quality data. Innovative health, COVID, post-COVID, we've seen incredible amounts of money go into drug development, drug discovery living in the U.S., it's interesting, even when you do say preventative cancer screening, they're already using AI. You can already pay -- say, for example, you go to get preventative cancer screening just as a precautionary measure, and they offer you an AI addition to -- which uses the data they have to be even more predictive of cancer, which is amazing. In the innovative health space, we think AI is really speeding up the drug development process and being used very early days in academia and R&D to speed up drug discovery, and has enormous uses. One of the businesses -- I mean, we own a number of businesses in this space, and we tend to love picks and shovel businesses. So not making a call on which drug does well, we like to own the picks and shovels, the gold mining analogy rather -- so not making a call on a particular drug or treatment type. So we own Avantor, Thermo Fisher, [ ICON ]. ICON is a great example of a business that will be nearer term benefiting from AI. Large and small pharma companies around the world increasingly actually outsource the -- running through clinical trials through the FDA. So running the clinical trials and getting drugs through the FDA process. They're again the leader in the space. We think as AI speeds up drug development, ICON, which is listed in the U.S., is going to benefit incredibly from this. So another great beneficiary of AI. The last one is critical assets, and that's the example that I led off with, which Quanta is a great example. I mean massive investment in communications and electrical and transmission grid infrastructure required. They are, we think, the best play on that in the U.S. Applus listed there is another example. They do critical testing and inspection of critical assets. It's a regulated business, Spanish listed, and actually had recently 2 takeover offers. So we think this is the start of various takeovers that will happen in the market. But another great example of an exposure to critical assets. So to summarize, I mean, we -- when I look at the portfolio of stocks we own, we're incredibly excited about the opportunities we see in the world, where we think the businesses we own, as I said, super high-quality, run by outstanding management teams, multiyear earnings growth trajectories for these businesses, overlaid with valuation discipline that we apply and the need to have a catalyst. And as I said, what we do is travel around the world, getting to know these businesses, talking to customers, competitors, and super excited about the portfolio. Thank you.

Thanks, Catriona. Now before you go, I've got 2 questions I wanted to pose to Catriona, before we invite the other portfolio managers up. So you were just talking through your investment process. What's key to finding a high-quality company to fit your process? And what makes a good investment?

Sure. So for us, the starting point is as much what we rule out as what we put in. And there's a number of industries, there's a number of types of businesses like -- that we just won't touch. And that really rules out an enormous part of the universe that might seem on paper very large, but if you take out businesses that don't make money, businesses that have balance sheets that are highly levered, if you take out highly cyclical businesses where there's very low barriers to entry, we think that takes out enormous part of the universe of companies that we would consider investing in. And then for us, it's really those points around finding businesses that where we think the industry position longer term is being enhanced, and they're growing in terms of their positioning, and we think that that their business model has sustainability. It's about getting to know the management teams, and, over time, seeing them actually deliver on what they say. And then it's overlaying that with needing valuation discipline. Because I mean I talked about AI, but there's no doubt that there's a lot of pretenders in this space. And every -- it's amazing when you look at the earnings call transcripts and any company that could even mention AI, we're seeing its share price go up on the day of these announcements. And you just know there's so much fluff in there. And so you've got to really dig underneath the surface and work out what is fluff and what is reality and what is sustainable over time. Because with any new like technology, often it's all hype or excitement at the beginning, but the reality takes a lot longer to play out. So differentiating there.

That's great. And one more question in terms of, we are hearing a lot more about mergers and acquisitions. Is there an M&A wave coming? And if so, how are you positioning the portfolio?

Thank you. So yes, in terms of M&A, it is interesting, we've had interest rates move up a long way, and we had a lot of both strategic -- so, corporate buyers and PEs sitting on the sidelines because lots of them use debt for deals. And so they were waiting -- if you don't know what your cost of capital is and how high rates are going to go, you sit and pause and wait and you also hope that with higher rates that valuations will go down. So there was a bit of a stalemate over the last 18 months. Some deals were definitely getting done in Australia, there's been a lot because the Aussie dollar has been weak. But overseas, there has been some, but there's been a bit of a buyer themselves couldn't meet. Now with rates likely -- definitely on pause and likely heading down, we are seeing the M&A activity start to increase. I mean we have a lot of our businesses, we think, super interesting as M&A targets. Applus is one where we've already seen it be bid for like 2 different PE buyers. And there's supposedly $2.6 trillion sitting already raised by PE funds and strategic buyers ready to deploy. So we do think it's definitely an area that will be heating up.

That's great. Thanks, Catriona. I'll now invite up on stage Matt Haupt, who is the Lead Portfolio Manager for WAM Leaders. So just to remind everyone, WAM Leaders is actively looking at that ASX 200 part of the Australian market. The WAM Leaders team have had very strong performance over the medium and long term. So Matt, over to you.

Thanks, Kate. And good morning, everyone. I thought the good place to start today would be around market bubbles. So throughout history, we've had various periods of asset speculation or asset bubbles. And I guess the question is, are we in a bubble at the moment? Predominantly bubbles happen because of a few reasons: liquidity, scarcity or technological change. And we'd probably classify AI in that technological change bucket. So are we in an AI bubble? We don't think so yet. And I guess, yet is the defining factor to focus on here. Because AI really, at the core, is a tool for companies to use for productivity or for sales. Currently, the speculation is around the hardware, and a lot of money is crowded into hardware. We're looking for this market to develop and broaden across into companies that will actually benefit from the technology. And that's what we're really focused on. Bubbles also happen around periods when there's uncertainty as well. Effectively, there is vacuum for AI to do well. We had interest rates falling -- the expectations of interest rates falling. And to be honest, the market is very confused where we are at the moment. I speak to a lot of experts globally and a lot of them said this is the most confusing they've ever experienced in their lives with markets. We've got indicators not working, we've got people thinking we're late stage, early stage of the business cycle. There is mass confusion. So when AI came along, all of a sudden, here was something money could flock towards. And I think that's really what we're seeing now. A lack of conviction in the broader economy, AI is a certainty you can back on. And that's what we're seeing at the moment. So are we in a bubble yet? Valuations say no. But what we want to see is a broadening out of the benefits of AI, to Catriona's point as well, across the broad spectrum of the economy. So that's where we sit at the moment on AI. And, I guess, why do these other bubbles form? It's really off the back of the COVID policy tools, which we went effectively into full on -- full-blown stimulus mode. We did have excess liquidity, and with Bitcoin, there is a scarcity as well. So that's where bubbles love to thrive. And obviously, recently, liquidity has improved, even though you'd be reading about quantitative tightening, financial conditions have eased, and that's why we've had a rally in the stock market as well. So too early to call a bubble yet, but valuations say we are not in a bubble. But we've got 2 ways we can play AI thematics without paying for them at the moment. So I'd like to share those stocks with you now. And they're probably not what you think they'll be. All right. So we've got Telstra and Santos. So we all know Telstra, a great mobile company with great customer service. I was just trying to gauge the response there, because I think if I say great customer service 10 years ago, it would have been a worse response, so I think they've improved. So Telstra, obviously, a great mobile business, fantastic. Why do we like Telstra? Probably the forgotten part of Telstra is this. 99% of data connectivity is run through subsea cables. Telstra own over 400,000 kilometers of subsea cables, enough to lap the world 10 times over. What they're doing now is rolling out fiber optic cables to connect all the capital cities. Previously, this was very, very old technology, very low fiber strands. They're putting in big, big cables to connect the capital cities. So we think about 10% of the business of Telstra is exposed to potential growth. You're going to see data traffic improved by 30% compounded per annum for the next decade caller. They are in a terrific position to capitalize on this. The government gave them the money for the copper. Now they're using that money to put fiber back into the ground. We think Telstra is in a great position to capitalize on this, they will have effectively the best market position in cable within Australia and what a great position and what a great privilege to be involved with Telstra on that front, too. So Telstra you are not paying for any uplift here for AI. They have exposure. And the core business is a great stand-alone business anyway. So we think Telstra is an extremely attractive way of playing that, and you'll get paid for in a good dividend over the years. And the other 1 there is Santos. So you might not think -- where's the link between Santos and AI think Katrina touched on it as well. The energy intensity of AI is huge. So we've been reading a lot of studies saying effectively the electricity demand, and I'm going to throw EV in here as well as AI. Effectively, over the next 10 years, electricity demand could double and how is that going to be met? Is it going to be met through renewables? We do not think so. So we think the gas journey has longer to play out and Santos is an incredibly cheap way of playing that thematic as well. And again, best-in-class assets, PNG, LNG is one of the best global assets out there, motivated management team, and again, we think this exposure will benefit from these trends, both on AI and EV. And again, you are not paying for any of these benefits currently. So we think this is probably the most attractive way to play it, and that's how we're doing it within the WAM Leaders portfolio without taking a bet on which chip will be the best. These guys connect and power AI. So we think that's the smartest way to play it. Now I'm going to share a bit of a stock story with you. Bear with me is it might be a bit long, but here we go. It was the 27th of November 2020. The market was up about 9% for the month. We had the vaccines for the COVID. Everything was looking really good for our portfolio and Treasury Wines. It's around lunch time on that Friday of the 27th, we're watching the screens as we do quite often when we don't have meetings. The Treasury share price started to fall, we're like down 1%. Well, that's unusual, down 2%, down 3%, down 4%, down 5% down 11%, we're like -- we're searching, we're scrambling, looking for articles and all these news feeds started coming out, China tariffs. China accuses Australia of dumping wine. Treasury goes into a trading hold at 1:08 p.m. down 11%. What do we do? They came out and confirmed that China was, in fact, putting tariffs on Australian wine. Now we're coming out of halt on the Monday. So what we do, part of the way we manage money is, obviously, we've got deep histories for these companies. We know their exposures. So over the weekend, we did all the sums. We did the research. We said if we got below $9, we were above Treasury Wines. And the reason why we were above Treasury Wines was because we factored in the displacement of Chinese volumes and the impact for the company, we thought they could divert volumes and could trade through it. And for us, we love companies that you cannot replace Treasury, you cannot replace their brands and their vineyards. For us, that is such an attractive business. And if you get back towards the value of their assets, we are a buyer of those businesses every day. So Treasury came out of whole on the Monday $8.30 fantastic. We were willing to pay $9. We just continue to buy the stock over the next few days and the stock kept falling. I mean the Monday, Tuesday was down around 6% more, but we had conviction. We had done the work, we realized there was an opportunity here. Thankfully, in December, the stock was up 9%. So our homework was correct. But during this journey of tariffs on Australian wine, Treasury did a few very good things. They restructured, they took the opportunity to restructure their channels into the rest of Southeast Asia. They maintained a workforce in China to keep relations open. They restructured the U.S. distribution business and they acquired 2 very strong companies in the U.S. to bolster that earnings capacity out of the U.S. and become the #1 premium wine player in the U.S. So as you're aware, as of last week, the tariffs have been lifted. So now Treasury have the ability to push volume back into China. And the real pleasing thing is not only the volume, the price, so wine up in China, always carried a little bit more of a premium. And we're getting early feedback of distributors saying, we want penfolds again. And the unlooked aspect here is: When you sell Penfolds in China, you can -- quite often, you have to bundle other products or bring other products online with the Penfolds within the Treasury Wine brand portfolio. So we think there is going to be a general uplift in volume as well, and discounting is effectively dead. So we think Treasury is in a fantastic position to go forward with high earnings growth and the growth engine of China is back. So we think that is fantastic and is still valid not according to the benefit upside we see. But there's also an added benefit that I've got for you today. So Treasury Wine have been very kind to us -- but can you guys directly you can guess what the biggest trend we're seeing right now come on AI, of course, I've got to talk about how given everyone else has talked about it. Now we talked about AI this time last year. And it was around the same time that companies such as NVIDIA and the tech companies are globally in the United States really started to rally. And so we took the decision as a team to interview all the Chief Executive Officers and the Chief Financial Officers of all the companies that we invest in to ask them what's the impact on AI on your business? Now we conduct over 5,000 company meetings a year across the small cap team and the overwhelming response was that AI is a game changer. And I think it's best exemplified by the Microsoft CEO, where he was quoted as saying he thought that AI could be bigger than the Internet itself. Now as we look at AI, we see 2 broad categories of companies that will benefit, you'll see those -- that will achieve higher levels of revenue growth and those that will see a lower cost base. Now on the revenue growth side, we think data centers are well positioned here. They'll see a spike in data consumption, storage and connectivity and data center company next DC is the best -- are well placed here. Could you imagine a world where a computer effectively interprets data from an injury -- for an X-ray and could determine that injury before it goes to a doctor. Well, ProMedica's in the health care software space is developing products here that can really benefit the company over the longer-term. And on the cost side, look, a lot of companies are going to benefit here and clearly benefiting now. But we do think the e-commerce sector, in particular, has seen a lot of benefits over the last 12 months. And that's as they use computers to replace humans for like mundane tasks such as simple customer service activities. And certainly, Temple and Webster and Kogan have had really strong results as late. Now when we put it all together, we look at the 5,000 company meetings, the team came together before the presentation and said, "What's the company that we think is the most exposed to AI and we'll do the best. And that company is called Megaport, and the ticker is MP1. So Megaport provides data connectivity between data centers globally. In other words, it allows a data center in New York to speak directly to a data center in Sydney in the most efficient manner. Now our catalyst to buy shares in Megaport came from the announcement of the new Chief Executive Officer, Michael Reid, which happened in April of last year. Now as is often the case, we sometimes get ideas to the portfolio from the most unlikely places. And in this case, it actually came from one of my best mates who works in the technology sector, and I've got a random text one night. And it says, "Hey, Oscar, I've worked with [ Topper Reid ] for a number of years. He's the best CEO in the technology sector in Australia, you should take a look at Megaport. And say, oh, gee, that's a little bit random. I probably should have a look at Megaport ahead. So we did, and the team did a lot of calls domestically and overseas, understanding more about Megaport, more about Michael, is what the strategy of the business could be. [indiscernible] our team went over to the United States, like Katrina, did a whole heap of meetings trying to understand AI and when we came back together, the conclusion was, look, Michael, certainly was the real deal. The strategy for Megaport will be taken well by the market and that we thought AI could really be a game changer for the company in time. So look, I'm about 30 seconds from finishing my presentation. But given myself, Matt and Katrina have talked about AI, I thought I'll give you a little bit of taste of AI to conclude.

Our continued research on Megaport over the last year suggests that the company will benefit from AI due to increased customer growth and larger contract wins. We think the business can beat revenue and earnings expectations which could lead to a re-rating of the share price over the next few years. So thanks for your time today, and please don't think I can replace Oscar and the other members of the One Capital team yet.

Oscar. I don't think anything could replay too. Thank you very much for that. I've only got one question, and it's -- in terms of -- I spoke about the raising in WAM MicroCap earlier. Can you just talk to me about the opportunities that you're seeing in that MicroCap space and why we're raising money?

Yes, it's plenty cadence. Really exciting. It's -- I mean, we last raised money in the market cap portfolio back in -- I think it was July 2020, just as we came out of COVID and it's very similar to that point in time our fact it probably is better. And the way, it's pretty simple. When we saw the 2022 sell-off since that point, large cap companies have done incredibly well, which is what you'd expect. The last 6 months or so the largest small cap companies are doing well. And now we think the microcap companies are driven. And to give you an example, I mean, we saw an initial public offering just the other day. And the company came around, I think it was 6 months earlier and they wanted a valuation of, say, 10x earnings, and we're participating in this IPO at now 5x earnings. So it just shows you there hasn't been any of this activity for a long, long time. And so we think it's going to build from here. And so yes, we're really excited the opportunities and think our shareholders will be well placed.

Great. Thank you. Thank you. I'm now going to invite Dania Zinurova on stage. She's the portfolio manager for WAM Alternative Assets which gives retail investors exposure to best-in-class investment partners covering things like private equity, agriculture infrastructure. All within our beloved listed investment company structure. So thank you, Dania.

Yes. Thank you, Kate. Good morning, everyone. Thank you for trusting me with managing your money in WAM Alternative Assets. Now I'm sure you heard a lot of very insightful information today quite technical. So what I would like you to do now is to relax, sit back and maybe even close your eyes for a few seconds. And think about the question, an important question. What is your most precious asset? I've been getting some really interesting answers to this question. My wife, my money, my house. For me personally, it's my health and my demand for health is inelastic. We all want to be well, we all want to live as long as possible. So as a portfolio manager, I see health care assets and health care businesses as the most valuable investments in the portfolio. And we have over 10% invested in the sector, and it is a growing allocation. On the screen, there are just a few examples of the companies where we invest in the portfolio. Why is it such an important theme from the investment perspective? Because the long-term fundamentals in the health care sector are impossible to ignore. They are just too attractive. Few charts to illustrate this. The Australian health care market does face a lot of challenges and also presents lots of opportunities for investors. We see now and expect in the future that hospital admissions will continue to grow. There are not enough beds available. There are not enough medical nurses available to meet that growing demand. We currently spend $96 billion on Australian hospital care a year. And the aging population in Australia is expected to double by 2060. Now what's very interesting about our market in this sector in Australia is that, the demand for specialist health care services is driven by the number of GP referrals. And we did see this number going down during the pandemic because apparently, when we don't see our GPs face-to-face, they're less likely to give us a referral to see a specialist. And even here, when we look at the forecast numbers, we do see that we'll have significant challenges with demand for GP services significantly outstripping the supply of GP services. Now all this is happening regardless of where we are in the economic cycle because health is our most precious asset. There are 2.5 million private businesses registered in Australia, 2.5 million and health care sector is the fastest-growing sector, and you can see this is last year data showing it. This is where WMA invest and those investments are not accessible by retail and wholesale investors. WAM Alternative Assets is a listed investment company. It's listed on FX. The ticker is WMA, so the structure is exactly the same as all other leagues that we manage. You know what to expect. Its portfolio is quite different. We invest in tangible assets and businesses that are privately owned. Their values do not change day-to-day. They have a great potential to deliver fairly stable income return over time, but also deliver strong capital growth, all this with lower volatility. I'll give you a few examples from the portfolio where we invest and what sort of companies and to illustrate the investment return potential. One of the businesses is Better Medical. That was an investment in a private business that owned and operated 6 GP clinics in South Australia. Within 5 years' time, the business grew to 34 clinics across Australia and when we sold the business, it delivered over 30% investment return. Healthcare Australia or HCA, as we call it, is our supply side of the story. So when we talked about not enough medical staff, not enough nurses. Why? Because HCA is the main supplier of labor, health care labor in Australia. So they supply nurses and medical staff to hospitals. We have another investment in Advara HeartCare. This is, again, a privately owned business that owns and operates over 130 cardiology clinics across Australia. To give you a sense of the ticket sizes, how much it takes to invest in one of those businesses in HCA Australia, our ticket size was [ $5 million ], and that was the minimum ticket size. Those investments are private equity investments. So what do we expect from those investments in terms of the return potential. We usually look at about 20% to 25% return or in other terms, 2.5x, 3.5x money invested. To put it into perspective, we all love Australian residential property. It tends to double in value every 10 years. I'm talking about the potential of tripling the value of investment within a shorter period of time, usually 5 to 7 years. So by buying WMA shares you'd be adding all those complementary benefits to your investment portfolios and you'll be getting access to the investments and to the companies that otherwise not accessible to the general public. Thank you.

Thanks, Dania. I've got a question for you. Sorry, I've got [indiscernible]. You talked a lot about health care. What are some of the other themes that you play in the alternative assets portfolio.

Yes. So health care, obviously, the most precious one. We invest across 4 key themes. So the other 3 digitalization, climate change and growing demand for food. And also just to clarify, it's not all private equity, so we would invest in infrastructure, real estate, private debt, et cetera, as you mentioned at the beginning.

That's right. All right. Thanks, Dania. Now I am going to invite -- where's Geoff and the -- actually, no Dania, you stay up here. We're doing the -- I keep falling down that. Correct. Geoff and the portfolio managers back up on stage for the Q&A from the floor. And while we're doing that, if everyone just stand up and stretch your legs, because you have been sitting for a moment. While you guys come up. Thank you. Have a little stretch, very good. Wake everyone up. So we're going to have microphones across the front. So if you want to put your hand up if you've got a question, Geoff, how do you want to do it? you like to start?

How do we, yes, we'll work it out somehow. Thanks, Alex. And just the -- actually, with my little -- sorry, I just do a little interview with the ABC look upside down. Here we are. We've got to put them a badge back on. While I'm putting my badge back on, if anyone -- if you see anyone with a badge, then they work for Wilson Asset Management, or I could read out the 55 people's names. Which should you prefer the badge, okay? So any questions you have for us. Yes, please come and ask the -- if we don't cover them here, ask us. In terms of -- yes, so we'll start off with the questions. As Kate said, we'll try to be as democratic as possible. In terms of going from side to side, but actually, I think we're going to start in the middle. Olivia has got the question and Bridge has got another question there. So we'll try to keep it moving as quickly as we can, so we can get the maximum time in what have we got? We've got 20 minutes of questions, and then we're doing by [ wholesale ]. And any questions that aren't answered, please, as I said, you can although e-mail us or ask anyone from Wilson Asset Management here. Thank you.

Good morning, everyone. And as always, thank you for your time today and for this year and for your investing efforts. It's always appreciated. You've talked quite a bit about artificial intelligence in terms of investing and so on. Two words you haven't mentioned is cybersecurity. So can you talk about the process or the work that companies are doing in terms of AI, how they're quantifying their benefits of that, but also how they're talking to you about cybersecurity and how they're managing that risk?

Sure. So great question. In terms of quantifying the benefits of AI, it is extremely mixed and very little in terms of the way of actual revenues being generated today. So a lot of the copilots, et cetera, there's still businesses even like -- they're trying to work out the way to monetize AI and so it's very early days in that. I mean NVIDIA is the obvious example where they're actually making enormous revenues right now from GPU hardware that's going into data centers. So they are generating actual revenue today. If you look across the spectrum of thousands of businesses that we look at, it's been a very mixed situation in terms of the company. So say Adobe has released a product, they've got a -- they charge for it, et cetera. So every model across every business is very different in how they are monetizing it. So there's no one fits all. And some of them as I mean, Oscar, pointed out in terms of some of it in some cases, it's a revenue benefit from AI and some of it's a cost out, in which case, they won't actually quantify, they're just -- and in a lot of cases, even where they're removing workers they're putting them into more skill, say, you've got a more automated task that has lower skill, they're then employing more highly skilled people to do different parts of their offering for customer service even. So I'd say it's -- there's no one size fits all answer on how companies are actually monetizing it. It's very different by company. In terms of cybersecurity, it's -- I mean, it's a question that we -- it comes up for our boards every company around the world is contemplating how they should be thinking about cybersecurity. I mean we've seen numerous hacks of big institutions in both Australia, I mean even where with AT&T in the U.S. as my phone provider, and they just got hacked last week. So it's not just an Australian problem. It's a global problem. And I mean we look at -- there's various actually listed cybersecurity companies. We have owned Fortinet, for example, in the past. We don't right now. Some of the valuations have got [indiscernible] on some of these names because of, again, it's -- everyone knows it's an issue. So we look at the companies as investment, stand-alone investment opportunities. But for any company and any board around the world, they have to be looking at cybersecurity. It's coming up. Their boards are asking how are you thinking about it? And what technology are you using to protect data assets, et cetera. So it's a very relevant topic right now for every corporate.

A good question. We had a question down here. Thank you.

Yes. Geoff, you mentioned the U.S. presidential cycle. And what are the things I'm concerned about is that you have a situation where you have 2 candidates, which are a very good quality, okay. You have, one, if he's elected, we'll have runaway inflation like we do in Hungary, okay? The other one, I suspect what may happen as a result like we had in 1964. For those of you not my generation, that was the Lyndon Johnson Goldwater race. Lyndon Johnson got 60% of the vote. Not only that, he also controlled the Senate in the house. He was not a liberal himself, but his cabinet was very liberal and they brought in [ Job Corps score ], all sorts of different programs under the new frontier, which is proposed by Kennedy, and once again blew out the budget. So you're a situation where -- you have a situation where either candidate.

So you're saying heads you lose tails you lose.

Yes.

Okay. So what's the answer to that?

Well, it is -- I mean, it's a very tight race at the moment. And as you say, neither alternative seems great. Biden, as we've all seen from this year, is doing enormous fiscal spend, which is causing deficit issues in the U.S., which continue unabated. Trump, you've got the discussion around borders, and tax and then geopolitical -- on the geopolitical front, what they'll do with tariffs, but the tariffs are still in place. And interestingly, Biden has continued on the Trump tariffs. So you think they're quite worlds apart on that, but they've actually continued on the same policy. So look, I don't disagree that neither alternative is great. I don't think -- like one of the things that has been discussed with Trump is, does he repeal some of the fiscal things like IRA. But the reality is that the main beneficiaries of the IRA are in red states, so he's going to be hurting his own constituency if he repeals -- repeals the things like the IRA. So I mean it's not great from a budgeting perspective, the spend, but it's been very beneficial to the economy. And I think that probably the question is, yes, what happens on trade under either candidate. But the reality is that right now, they're the 2 candidates and neither of terrifically.

In terms of the equity market, so from an equity market perspective.

Well, I think the spend is going to go on this year. Next year is the question. And I think things like the IRA are enormously look like they're actually very much required -- like not everything within them because there's some things where I don't understand necessarily why you're spending on that. But they are putting the U.S. at the forefront of the energy transition and they needed to because they were well behind. So I think the fiscal spend will actually continue in a number of these areas.

So you're saying if Biden wins or Trump wins? Another specific sectors...

Yes. And I don't think -- sorry, on the other point with the sweep. I don't think it will be a sweep, a GOP sweep. But it's early to call. So in which case. Yes, or a democratic sweep, I think it will be a mixed house. So you'll have a different house in Senate. So it's not going to be massive in terms of repealing pieces of legislation. So I'm not -- I just think it's relatively neutral like in terms of -- unless trade wars go crazy again, which it's hard to call.

Okay. No, good question. And we just over here. Thank you.

Yes. I'm just interested in comments Oscar made about Megaport. And the last half yearly result was great. Share buy has spiked on that. I'm just wondering what the implications of AI. You've heard about NVIDIA's new chips coming out and saying that they're so much more effective and so much more efficient than what's currently out there. What's the impact of those sort of technological changes likely to be on capital spend for someone like NextDC and Megaport? Is it likely to disrupt them, do you see other players coming in using the newer better value technology?

Yes. So NextDC is a very capital-heavy business. And you will -- I mean that business will continue -- god knows how long really to keep raising money in developing data centers given not only do you have to switch the cloud that Katrina was talking about in her presentation, but you've got now this new phenomenon with AI. So for a business like NextDC, which is capital hungry, yes, you'll definitely see them probably come to market, raise more capital and also issue more debt. That's their business effectively. Megaport, on the other hand is very much capital-light. And that's -- and one -- we own both of those in the portfolio, but that's also a big reason why we like Megaport and global business. And interestingly enough, the interest -- what's happening with NVIDIA, which is happening globally is because a lot of the other big tech companies are developing their own AI chips. NVIDIA is trying to flood the market and so there's all these new cloud services providers that are actually coming up and are launching the random very small companies that have got access to the NVIDIA chips. And that's the exciting thing for Megaport because they're finding this whole new customer base that they haven't seen before. So it's fascinating we're only at the early stages here. So yes, we're very positive for the company longer-term.

I think the short-term, if the question was also on the impact of businesses outside the AI sector, what I see for some private companies, and we had an example in the portfolio for online retail enabler company in Southeast Asia, where they embraced AI used to improve the operational efficiencies and cut quite a significant part of their workforce. Now on the financial side, it improved the financial performance of the company quite significantly within 6 months' time. So I think short-term, many businesses who implemented in the right way, they would benefit long-term that is likely to lead to some serious structural shifts potentially unemployment rising across some sectors that would be affected more and maybe demand for new skills.

Okay. Excellent. We will go far right down the left and then we'll come back I think we've got Billy here.

Yes. Just a question about the takeover by WAM leaders on QVE equities considering that the portfolios are fishing in very different ponds. It was a bit of a surprise. Is that to get franking credits that take over has been done?

Yes. I mean the answer is no. The -- they actually are in similar ponds. That's why WAM leaders actually made the bid for QVE. QVE's the top 100, but minus the top 20 and the WAM leaders, obviously, it's the top couple of hundred. But probably -- I'm just trying to find -- pick the eyes out of that. So to me, they are quite similar. The -- I mean the main reason it was an opportunity to grow the size of WAM leaders and we've seen it with African Argo or I mean, when Soul Pattinson took over Milton. It was just a cash -- sorry, it was a script for script. But you see when you get bigger in the LIC space, then the financial -- it's -- people who want to move big lumps of money around, they want to go for the LICs that are larger and have liquidity. So it was an opportunity to increase liquidity. It's NTA for NTA, but if anyone wants cash out, it's a 2.5% discount. So that's an opportunity there for leaders to make a little bit of money on the spread they were holding about 90% cash. I mean there is a secondary benefit. There is some franking in there that obviously will be positive, but that wasn't the main reason. That was a secondary benefit. The main reason is to keep growing leaders. And so then -- because at the moment, you look at the LIC landscape, you've got Africa, the largest you've got Argo, the second largest and now you've probably got WAM leaders, the third largest door, just a little bit ahead after this is over, just a little bit ahead of WAM capital. And if you look at WAM leaders, you've got a better yield playing in a similar pond to the [ Afix ] and the Argos, but they have a different investment strategy. Where we're very active in terms of our investment strategy. So that's the logic of it. And just putting the other hat on, putting the WAM strategic head on, WAM strategic, obviously, yes, there's a cash-out alternative. So WAM strategic. Obviously, I can't speak on behalf of the board, I'm just one member. But actually, the Board doesn't make the decision investment committee does. The fund manager does. So there's a group for this, but we'll work out what we do there. We'll more likely go for the cash and yes, so we don't have to own shares in another one of our LICs. Thanks.

Thanks, Geoff. Thanks for being here today and for your hospitality, all the great contributions. I just wanted to ask you about profits reserve -- sorry, franking reserves because I love the LIC snapshot document, and it's a great tool that I can use when I'm explaining to people about the profits reserve and how that can give you an indication of the possibility of -- the predictability of future dividends. But it doesn't tell us what the franking reserves are and therefore, whether the company, the LIC can pay a fully franked dividend. And we've seen with WAM Capital and WAM Research, that hasn't been possible this time. So is it possible -- and I know a couple of the other LICs outside the WAM family have started to include the franking reserves which gives some indication of the potential of paying fully franked dividends.

Yes. No a very fair question, Bill. And let me try to explain it. And one of the reasons why we started doing the profit reserve was because we were trying to explain to people to understand our ability to pay dividends or not. And so that's why we do that and try to keep you fully informed from that perspective. So to pay a dividend, first of all, you need a profit. We put it into a reserve. Some people ask the question is, then do you hold that money in cash over here? No, we don't. It's just an accounting thing. And we're investing the whole portfolio. If hypothetically, the portfolio was $100 million, and there was a $10 million profit reserve, we're investing $100 million. And it's just -- on the accounts, it says $10 million is in a profit reserve. Now our profit reserve is a combination of our realized profit and our unrealized profit. So that's why it's harder to give you the actual franking. Because obviously, if it's realized profit, then you pay tax and there's franking attached to the tax payment. If it's an unrealized profit, then there's no tax paid. So there tends to be a lag and you can have the profit reserve depending on timing, it could be in a situation where the market goes up, the -- say it goes from $100 million to $120 million, $20 million -- say there was $100 million of shareholders' funds, $20 million goes into the profit reserve. In the 12 months, it's unrealized, not a share is sold. The value of the portfolio goes back to $100 million. You've got $100 million of shareholders' funds. You've got $20 million in the profit reserve and you got $20 million of retained losses. So you could pay a $20 million dividend but it would be unfranked. So it just so people understand the profit reserve side of things. And so for the franking to turn up is we've got to pay tax. And for us, because we're traders for tax purposes, it tends to be dynamic, the tax payment because we have a choice of either value in the stock at market or cost and so therefore, your tax payment may change. So it's not -- we would hate -- like the profit reserve is the profit reserve, but we'd hate to say, look, we have no franking. And then all of a sudden, we have a lot of franking. So to me, we wouldn't want to be misleading. So I know it's not perfect, but that's sort of that's where we've come to. But very good question, Bill. We'll go back across Thanks, Hanna. Yes.

On the relatively new investor in WAM, and I bought some WAM in 2021 at about $2. And I bought some more later on at about $1.70 and my question is the share market now is at a record -- relatively record high, if the share market were to drop, would the share price of WAM drop as well? Because what I'm seeing is a drop in my capital value, even though I'm getting paid a reasonable dividend, that dividend as a percent will drop as the share price drops. So in effect, it's going down. I'm losing money relatively speaking.

It's a very fair question. I'll ask the question to myself slightly differently, but it's a very fair question. The -- and why don't we say, look, why don't we just focus on the shares you bought at $2 and let me just take you through it. And probably I need to probably pull you up on when you're saying the dividend is a fair dividend yield. The -- effectively, if you cast your mind back, and it's probably just look at the COVID period. At the start of COVID, the market fell, I think the area where WAM Capital invest in is mids and smalls. WAM Leaders is large cap, WAM Capital is mids and smalls, WAM MicroCap, MicroCap and WAM Global, Global and the others do we can talk about. And WAM, obviously, I'll turn it. So therefore, the value of the assets fell by , I think the portfolio is down 20-odd percent at the start of COVID. And then the question was from the Board's perspective, like do we cut the dividend by 20% or do we cut the dividend by more? And the Board decided, no, we won't cut the dividend. We keep it at a high level. And then we -- and we're paying out 10% of the value of the assets. Now that's 10% after tax. So to make that, we've got to make 13.5%. So we're going to make 13.5%, pay 3.5% or actually, so 13%, paid by 3% in a bit percent tax and then we can pay a 10% fully franked dividend. And with the market, the market is yielding, what is it yielding 3.8% or something like that, last time and it was 77%, franked. So that's sort of competition. And so what we did, but we paid that out, but we'd lost assets. So we're down 20%, and we paid out another effectively 13.5%. So you're down 33.5%. And then we -- because we had the profit reserves and we had the franking, then we kept doing it. So if you look at the performance of the portfolio and the WAM Capital guys have done an exceptional job, like go back in -- if I was talking to you in November last year, we were thinking, "Oh, maybe we're going to have to cut the WAM Capital dividend. Because we're running out of money in the profit reserves and Oscar and his team, like they have performed exceptionally well. Outperformed the small orgs and outperform the [ old orgs ] as well over this last period, which has given us more on the profit reserve, which can keep the dividend going. But broadly, since that -- over that COVID period, I think the portfolio went up about 6% a year for 4 years or 6 or 6 in a bit, but we're paying out effectively 13% or 13.5%. So effectively, like the money has got to come from somewhere. And so it's actually capital. So when you look at your return, you've actually -- you're getting a fully franked dividend where you get -- if it's in your super fund and you get the tax back. You've got to look at the whole equation. So if we'd halved the dividend at the start, the share price would have been. We would have paid out half the amount and the share price would now be about $2.20. So you'd feel a lot better, but we've given you the cash. And then the question is what have you done with that cash, which I don't know. So whether you've invested wisely or not. So but the answer -- but your real question was what happened. And so that just gives you an understanding. That's why with a lot of the other LICs, we've got them to about 5% or 6% NTA, the yields are about 5% or 6%, fully franked. We're conscious as boards now for the other LICs not to go too hard because in the end, say, if you're going to deliver 12% per annum over time, you beat the market by 2%. That's pretax. You pay tax, you're 9%. And if you're paying out 10%, then you're going back 1% a year forever. But in terms of -- but to answer your question, what happens if the market falls. Yes, the share price well, you'd assume the assets fall and the share price falls. That's probably the answer. Thanks. We've got a question here.

I spent 3 months in the States last year, Katrina, and I was a bit shocked at how expensive it had become driving West to East, eventually landing in New York, and I think that's where you live. And everyone from the bankers down seems to be optimistic about inflation and interest rates dropping. But even in the last few days, there's been volatility in the U.S. markets, which is affected here. Do you -- living in New York, actually, what evidence do you see that inflation is falling? And just following up on the question here about the election, could the U.S. survive without illegal immigration which, again, in New York, you've got people who are obviously illegals running the services fast food sector.

Yes. Good questions. And it is interesting. Immigration illegal and legal has been a big driver of the U.S. economy more generally. And is -- particularly in that the jobs you're talking about. So I think that has been a factor for economic growth across the U.S. So that's certainly a factor. In terms of day-to-day inflation, it has definitely come New York is incredibly expensive. I totally agree. I'll often do the compare -- you're living in it, so you kind of get used to it. But also you're adding tips on to everything. It is -- it does feel like a very expensive city on basic products, say like milk, for example, I can certainly see deflation has come back into this. So it got as high as you were paying for 4 liters equivalent of milk , you might have been paying $6. It's back to $3.50. So you've seen massive deflation in products like that, which is really helping the cost of living for the average person. And you certainly have seen some trends with there was an enormous influx of people going out to restaurants and spending on services and it certainly is still a services versus goods-led economy at the moment. But you are seeing people make choices between perhaps eating more at home, they might go for 1 meal out rather than 2 or whatever. So there are choices being made and how people spend their money. There has been wage inflation. And that, again, is in terms of the inflation statistics, you are -- whenever we talk to companies like Daily, certainly, the inflation there has come down. So you definitely say on the wages. On the rent front, for example, again, the inflation statistics that's a very lagging factor that goes into the inflation statistics, and that's what's going to, I think, will benefit the shelter component and rent component of inflation statistics that's still coming through, which will help inflation numbers continue to come down. So yes, when you go through all the elements, we are seeing ongoing inflation coming down. I mean we're chatting back and forth, oils is something to think about in terms of inflation statistics, what -- how that moves things going forward. But yes, living on the ground, definitely inflation is coming down, but I totally take your point, New York is a very expensive city. And even comparing New York to other places in the U.S., it's a standout.

Look, unfortunately, we're just a little over time. But everyone's here, we're having lunch together. So please come and ask anyone. We just want to do -- I think it's 15 minutes of -- or 13 minutes to buy hold sale. So people have set in the various stocks. And if we get through a lease, we can take a few from the floor. And what I'll try to do is -- I don't know, I'll just -- maybe I'll just try to read them out.

I'm not going the other guys out...

What's that?

We get everyone up.

Okay. Great. All the investment guys -- all right, you're going Okay. No problem. That's right. They might like something unlisted. No, they can't buy it. Good point. That's why they buy WMI.

I think we're all got to stand up.

I'm going to move down one.

No, we're all standing.

We're standing. Okay. Great. So how do we actually do this? So as everyone say buy, hold, sell, if I give the stock and everyone says it?

No idea.

Alex?

Heads or tails.

Yes, heads you lose, tails you lose or heads you win.

No, I think you're just going to give it to one person.

Okay.

One person. Okay. Great. Okay. I'll just hit the stocks. And the first in, it's like the buzzer. I'll start with an easy one, which I'm flying on tonight to Queensland, Qantas.

Anna?

Come on, someone's got to do it.

Anna...

It's got a quick games a good game. We've lost a minute. Yes, buy or sell?

I'd say it's a buy for us at the moment.

Perfect. That's it. That's all we do. you haven't done it with this before Anna? No.

Okay. So Bank of Queensland. So yes. [indiscernible].

Sell.

Okay, Beach Energy?

Buy.

Okay. What about APE?

Sell?

Should all be upset about that. I like the old APE. There's always opportunities. CTT? Bit topical.

We knew that's coming.

Buy.

All right. Okay. That was CTT. It's in the papers a lot. Pilbara Minerals?

Buy for one week, sell the next week.

Okay. That's that one. AGL? I've got to harm once. They're the ones who put set in. What are we doing? AGL?

I think it's [indiscernible].

Okay. Tabcorp?

Sell.

Sell. Okay. Did I ask Bank of Queensland, that I've done that. Yes. Okay. The Origin?

Hold.

Okay. What about a good global Aussie company, Atlassian? Got to be careful what kind of book might be after.

I know exactly. Sell.

Sell or hold? The [indiscernible] here. Premium?

Hold.

Mitchell Services?

Hold.

Hold. Okay, Amcor?

Sell.

Ridley -- it's a double sell, okay. Ridley?

Hold.

Okay. New Farm?

Sell.

Hold.

Okay.

Well, base probably -- it's a sell. Was that Harvey Norman?

Buy.

Buy. Tesla?

Can I take that one?

Yes.

Nick?

Sell.

Okay. Jeez, because he's in my Twitter man. My [indiscernible].

Yes.

So LiveHire?

Sell.

Sell? And what about -- we've got -- is it Telix?

Telix Pharma.

Telix Pharma?

I'd say hold at the moment.

Okay. So we've got 9 minutes, have we? So now we'll just go anyone in the audience. Okay. So how we -- I'll repeat it -- so okay, we're going to -- this will be chaos, this will be lot when we had the franking credit signs, everyone was jumping everywhere. So what I'm going to do is I'm systematically going to go through because we've got time. We'll start over here and you shout out your stock, and I'll repeat it. So what have we got? Sorry, okay, we'll start here. These are the rules of the game. The rules of the game. We will start -- if you can stand up, stand up, then I know who you are. And then I'll point to you, you'd set up the name of the stock, and I'll repeat it. Okay. We'll start over there. Yes, as many as you want. So -- Select Harvest?

Buy.

Lendlease?

Sell.

Okay. API is it? API?

Hold.

Wesfarmers.

Sell.

Yes. But it's a great company. One of the great companies.

Yes.

Sorry. MGH?

Buy.

BME -- Was it PriMedicus?

Hold.

God, I remember was seeing him when it was nothing. Yes. Come on guys, you're going to have to help me here. G8 Education.

Buy. That's it. Great. ORI?

Buy.

Zero?

Hold.

We sort of -- yes. Willis?

Buy.

Close The Gap -- Close The Loop. I thought I was at bank station. Mind the gap.

Shares are going down, so Close The Gap. Buy. Yes.

Data3?

Sell.

Sell?

Light & Wonder?

It's a buy. Who was it?

Light & Wonder.

Light & Wonder. Yes, buy it. ResMed?

So we debate every day. Hold.

Is that right? Jeez. I thought it's a buy, but no. Don't ask me. Yes. American Rare Earths?

Don't know what. Sell.

Sorry.

Anything in Rare Earths.

[indiscernible] premier investment.

We like that one.

We like [indiscernible]. Yes. Ramsey?

Hold.

Yes. Okay. Cobram Estate?

I'm going to say buy.

Boss Energy?

Buy.

Buy. Do we have yet -- Star?

[indiscernible] buy.

You're getting a knife and you're twisting it in. It has to be a buy. Well, what -- high conviction buy. IFM?

Buy.

And we had another one up there. Are you -- Sorry? Who?

BreveBIG?

Hold.

Hold. Okay. Propel Funerals?

Safety, buy.

Okay. Let's -- what do we do here, yes? Who? A&P? You've got to wait till 1:00 to hear whether that's a buy or sell. So that's one of my 3 stocks this afternoon. You're very smart. You've come early. It's cheap. Like it's -- yes, they're finally getting their act together anyway, but it's buy, hold, sell.

Mesoblast.

Mesoblast?

Sell. Sorry.

Domain and Channel 9.

Domain and Channel 9?

Domain hold, Channel 9 sell.

TPG?

Hold.

First Telstra, we prefer Telstra.

I prefer Telstra. Insignia?

You're going to hold there. They had a good update.

Sorry, we'll go back, Arafura?

I don't know. I think you know that.

You're going to have a no view?

Hold.

QBA?

Had a very good run, let's say, hold.

Yes.

Okay.

REA?

Hold.

Hold.

Endeavor?

Let's say sell it.

Bit expensive. John?

NEXTDC.

NEXTDC?

Hold.

Technology...

Bigton Technologies.

Another one.

Bigton technologies. We heard it here.

Droneshield.

I sell, I think. Too hard.

[indiscernible]

Sell.

Newmont.

Sell.

Mineral Resources.

Short-term buy.

Short-term buy, but medium term what?

Sell.

Transurban.

Buy.

Okay. Do we have any more yet? Sorry...

Santa Barbara.

What is Santa Barbara first?

Sell.

Novo Nordisk.

Buy.

Okay. We just -- we'll do one there.

Findi.

Was it...

Findi.

I don't know I don't know, now -- should we be buying it? Is there another one? Yes. But so do we -- so it's going to go up another 300. Okay. No, we'll look at that. Thank you for that. Yes.

Helius.

I think hold here, hold.

BHP.

The big Australian.

Buy.

IPX.

Sell.

Deterra?

Hold? Okay. We'll do Seven West Media first, and then we'll do yours. Seven West.

I think hold.

Hold.

And what were the 2 mining ones? Azure Mining?

We know Evolution. It's a buy, but not on their result day because it generally disappoints but...

Okay. But maybe on the other one. Okay. Yes. Is it Balkan Energy?

Don't know.

CXL, Calix.

Hold, I think.

Hold. Whitehaven?

Buy.

Who's that? [indiscernible].

Well, it can't get much worse. I'm going to say hold.

Goodman? They loved it a year ago, but it's had a some...

$33, so got to be a sell.

Okay. Do we have any -- I'll go backwards, yes. [indiscernible]?

Hold.

Rob Miller will be happy. He is after perpetual. Sorry, WooliesX?

I'm going to say sell.

Brickworks and WiseTech?

Brickworks, hold.

WiseTech is a buy, but...

Now unfortunately -- sorry, we're right on time and the Future Gen presentations next. Any of things that didn't get answered?

Actually, I know we can't.

I was going to say, e-mail them in, but I think, "Oh, we're going to give general advice." Well, that was general advice. That was just a game, a buy-hold-sell game. So unfortunately, if you can get the guys over lunch later on. Thank you. Thank you, everyone. Good work. And now Caroline is coming to the stage, the CEO of Future Generation -- sorry, we're going to listen to this video first, and then Caroline is coming to the stage. [Presentation]

Hello. I'm Caroline Gurney. I am the CEO of each generation. And hopefully, you enjoyed that video. This is a disclaimer. I won't go through it all. I assume that we are not going to be giving general advice or any advice. So please bear with us as I go to the next slide. And I like to welcome first of all Jackie Hallan, who is the acting CEO of ReachOut. ReachOut is an amazing not-for-profit that we support. And Jackie is going to tell you all about it. And we'll hopefully be joined by Sina a little later, and he is one of their youth investors, and he's going to share his story as well. And I'd like to have Nikki Thomas. So Nikki is one of our pro bono fund managers. She works with Magellan. She's one of their senior portfolio managers and she is going to talk to you about what she thinks is the global outlook for the moment. And I'm going to get Geoff back to the stage as well because -- it's Geoff.

I'm in the entertainment -- I'm part of the entertainment. I'm trying to balance it. I'm trying to gender balance. I mean I think we've gone a bit too far left. I can't wait for Sina to come.

We've got him on the far end. So we'll take questions afterwards. And then we're going to -- basically, we're going to do this for half an hour, so it might be quite rapid because we want to get you to lunch. And then we have a panel with our new Future Generation Australia Chair, Philip Lowe from -- the ex Reserve Bank Governor, and Nikki will be joining him and so will Geoff, and then he'll be interviewed by Anthony MacDonald, who is the Chanticleer columnist for the FR. So you've watched the video and hopefully you've all heard about Future Generation before. It was founded by Geoff, and he basically saw how they were raising serious amounts of money for philanthropy in the U.K. and how they're also getting investment returns back to the shareholders. So he came back here, and he basically went to the hall of famous, like we went back to you instead of Magellan co-owners. He spoke to David Paradice of Paradice Asset Management. Peter Cooper and a number of all the others. And they basically said, okay, we will work pro bono. No management fees and no performance fees. And so shareholders get a return for the money that they manage. And basically, we can give 1% of our net assets every year to not for profit. And it's really amazing to have on the stage, one of our not-for-profit and one of our pro bono fund managers and the founder. Because it's made a serious difference. We've now given $75.8 million since inception, which is nearly 10 years to not-for-profit. Not-for-profits in the use mental health space for Future Generation Global and to not-for-profits in the use of risk base for Future Generation Australia. But importantly, they're also -- they are investment vehicles. And because you have the best boutique fund managers working for you, you're getting great dividends, growing stream of dividends, and you're also getting that sort of capital preservation. And I think the way Geoff likes to describe it, so I'm going to take it from him, is a win-win-win. And that's basically what that slide shows you. So without further ado, I'm actually going to go to Nikki. Nikki has been a huge supporter of Future Generation Global for us and basically talks at many of our events and really helps us get the message out, and they're a huge organization as well. And Nikki manages the global fund for Magellan. And I'm really interested in why you manage our money, but also what's your global outlook at the moment? What are you seeing overseas? We've heard from WAM, but what are you seeing in particular?

Okay, 2 questions. To answer the first one. You get to this point in your career, I guess, and you can give money to charity. That's kind of easy. But then Future Generation is just this unique opportunity where I'm passionate about investing. I love it, and I work way too hard and trying to make sure I take care of clients' money. And this gives me the opportunity to bring that passion and that work to bear against the charity and to be able to raise money indirectly, but by managing money for people and then that money going to charities, means. It's a layer of contribution that's hard to give when you work really hard by just giving cash to people. So it's just a lovely blend, I think. And the alignment of interest around FTG's thought process around creating long-term wealth creation for the people who invest in it is identical to ours. So it feels very sensible to be involved in something like this. So stepping across to the world where such a fascinating place at the moment. So how do we see it? To be honest, look, I'm of a glass half full kind of person. Luckily, I work in equities and not bonds. And I tend to see a lot of opportunity ahead of us. I think we've been through a period where interest rates drove markets for a while. It was all about rising rates, and that's, of course, a headwind if you're investing in equities. We're now at the other side of that, we inflate [indiscernible]. We haven't yet seen them come down. So we haven't got the tailwind yet, but we've certainly hit the point where that headwind has gone away. And so the narrative really, I think, that drives markets from here is all about the earnings, all about the corporate profitability. And I think we're in good shape. As I look across the last round reporting season, we'll have another one coming up soon. The companies that we're seeing delivering better-than-expected results has actually been the ones in the cyclical end of the market. In other words, they're catching an economic cycle upturn. So everyone has been busy talking about, "Oh, we're going to get a recession because of all these rate rises." It's definitely hurt in places like Australia because we're much more sensitive to interest rates. But in places like the U.S., they kind of got through it just fine. And household wealth up 8%. Their stock market is looking great, their house prices are strong, and there's a lot of opportunity out there. So I think there is -- we're -- we've had a really good 6 months in market. So I'm not going to say we're going to do 25% again in the next 6 months. But I look to the end of the year, and I'm like, I could see double-digit returns even from here just because of the opportunities that are coming down the pipe and artificial intelligence is the next big, major technological breakthrough. Disruptive innovation is the single most powerful force in capitalism, and we're going to live the next round of it. So I think that's really exciting.

So in terms of your portfolio, because you're talking about what's been happening globally in markets, how are you changing your portfolio and your stocks in particular to make sure you capture those opportunities?

Yes. I probably should ground this in how we think about managing money for people. And we run a process and a philosophy that's very about -- much about long-term wealth creation in an absolute sense where we think you don't retire on relative returns. Marcus has a tendency to think relative, it's competition, got to beat the index, whereas we're like don't need to beat the index, need to make people's money. And so we tend to take an approach that let's go for the amazing returns, but let's be thoughtful about capital preservation. Let's not buy bad quality companies that could blow us up. So we're very high quality in the way we think about the opportunities in front of us. And so that keeps us very much focused on only parts of the market really. So then when we think about the question you just asked me, which was...

Can I ask you a question?

Yes.

Because I was fascinated and I know we had industrialization and I mean, in theory.

Yes, I don't remember that one, but yeah.

In a more recent history, that's right. We had the Internet, which I know like we will and we had the tech rec on the other side, our valuation has gotten too extreme, et cetera. And I know with these major changes, than incredible productivity benefit, et cetera. So with the AI -- yes, you're looking from a global perspective. Like when do we get -- when -- I know we're getting a little bit of benefits now, but when do we get that.

Yes, it's really early.

Yes. When do we get it?

Yes, it's a great question. Let me give you a bit of a framework around it perhaps. So when you get major technological breakthroughs, you tend to get S curves. What I mean by that is you get a slow period of penetration adoption, and then it takes off and you get exponential growth, and then we hit a plateau. And you've seen that with PCs and the Internet and smartphones. We get this rapid period of adoption. That S curve typically happens at around 20% of penetration. And you can get in that exponential period. I mean if you think about PC adoption. Over a 10-year period, compound annual growth was 41% per annum. So you want to be a part of that. So when do we -- so to me, this will be interesting for a while. We're all trying to work out how to do it, how do we -- and at the moment, you make your money if you're buying the enablers of it. So the enablers of those and particularly Gen AI, the enablers of those have 2 characteristics: deep pockets and lots and lots of data. So it's really simple. We've got lots of those in the portfolio, Microsoft, Amazon, Google. They're the ones who will make this come to life NVIDIA. And then the next round is putting AI to work with all the industries and all the companies across the world. And that will be a little way away because people are still trying to figure all that out and it will take us a while. But once organizations start to adapt, you'll start and we'll start to adapt in a [indiscernible].

We just don't know where we get that is whether...

It's kind of 20% penetration. I would say you've got to be thinking -- this is moving faster than anything else, but I'd be cautious not putting it too far forward. So maybe 4 years, 5 years, and then you'll start to get real. You'll get lots of great opportunities now, but that tipping point is still a ways away.

Anything else?

No, that was just -- sorry.

Jackie?

Well, I could add to the AI.

That's true, actually, especially with your platform. The question I also want to ask you because I've heard you talk about your view on China or not China? Would you care to share that with us today? Hi Sina, thank you very much. I've lost my friend.

Sorry, no way, I am going to push down. I'll be out there in a minute.

Looks like the barbecue.

So China, China is an amazing economy. It's the second largest economy in the world. We said to people about a year ago, we think China is going to be a derating asset because of political risk and economic risk and various other things. And I feel like I was very clever. But genuinely, I thought it was going to derate over about 4 or 5 years and that happened in one. So it has unraveled a lot faster than we thought in terms of valuations. And I think the thing for us when we think about it is, it is really hard to know if you've got your arms around your money inside of China these days. So the political risk is high. Foreigners are leaving China. Capital is leaving China, which hasn't happened for decades. Economic growth is struggling. Consumer confidence is weak. Business confidence is weak. It's a pretty hard place to go as an investor. It looks cheap, but cheap can be a value trap. So we're not investing there, but what we are doing is looking at what's happening inside China because it has ramifications for the rest of the world, and that's really important. The one piece that I think is fascinating at the moment is we had the Made in China 2025 goals in 2015, right, 10 years now or nearly 10 years. And that was about building strategic industries, industrial complexes and now look at what they've done. They are way out in front on EVs. Car capacity in China today is 50 million cars a year. How many cars a year do we need globally, 90 million.

Wow.

That's crazy. So they're building cars like crazy and they're cheap as I expect a lot of them to turn up here. Batteries, so all the lithium and stuff that we sell. Renewable energy, wind, biggest wind companies are in China. Solar, biggest solar companies are in China. These guys have built an amazing industrial complex. What does that mean for the rest of the world? Well, we're trying to block it with tariffs in some places, it might slow things down. But Chinese goods, because there is such overcapacity and they are so cheap because of that, are going to flood the world market, I think, over the next 5 to 10 years. And they'll come through emerging markets first, probably and penetrate. But if you don't have cost competitiveness with China in those sorts of industries, I think European cars, you're in a world of pain. So it's going to have implications across the globe. And some of that will be positive for Australia, but there'll be negative implications as well. So that, to me, is the issue around China as opposed to saying do a bottom fish here inside of China from an investment opportunity because that's a really tough game to play.

Excellent. Thank you. Our shareholders love stock picks as we all saw previously. What would be your stock pick? What's the one you're looking at for the long term at the moment, you'd like to talk about today.

I have lots.

They're coming later. So Nikki is going back on the paddle.

I have lots of businesses I think are superbly positioned as we look forward, and that is what we are always looking for. But I would say our top positions in the strategy and thus the top positions inside of our FTG exposure sit with Amazon and Microsoft. It sounds a bit crazy. I'm going to talk Amazon quickly. This is a $1.7 trillion market cap company, so you all went, no way that's going to grow. So let me contextualize that. It operates in kind of just 2 industries, e-commerce and cloud. In e-commerce -- because e-commerce is taking share of retail sales gradually every year at about 1% per annum, e-commerce grows at about 10% per annum in most markets. So you've got an industry growing double digits, and Amazon is the biggest. And then in the other part, you've got cloud, which had a terrible year last year and fourth quarter grew just 13%. Everyone was very disappointed. So you've got cloud going 20% plus and it's going to accelerate on the back of AI. So -- and its #1 cloud business in the world. So firstly, it's growing in great growing industry. Secondly, it's dominant and scaled and getting operating leverage. And then the third piece is when you break the business down -- at the moment, 16% of profits come -- of revenues come from AWS, it's cloud business. 67% of profits come from AWS. That tells you the margin differential. So one's 30% margin, selling goods on REIT as a retailer, is likely to make your money. So they're moving more and more to providing services to people around their websites, hosting, advertising, prime video, all of those things. So you get revenue growth at double digit. You get margin expansion that we think adds another 10% or 15% per annum in growth. We've got a company that can grow 20% to 30% per annum over the next 3 to 5 years. And we haven't really put much AI stuff in there yet. I think that's pretty compelling.

I think so too. Excellent. Well, as you can see, we have some of the brightest minds working for you. But what I want to go to next is basically my stock picks. And could I -- the slides up, we see them? You see them. So basically, mine is Future Generation Australia. As you can see there, that is a growing stream of dividends that the Board is very, very thinks that's incredibly important, and that's something that they have been growing over time. In terms of the portfolio performance since the sort of the last 12 months to the end of February, it's been 12.1%. And if you look at our dividends, the fully grossed up dividend yield has been 8%. And before that, in terms of the fully franked dividend yield is 5.6%. The profits reserve for Future Generation Australia is $0.326 per share, and we have dividend coverage. And I know earlier that a lot of people talked about that profits reserve, and that's 4.9 years. My next stock pick obviously, is Future Generation Global, which Nikki is one of our brilliant fund managers there, along with 13 others. Once again there, we have the dividend coverage of 8.3 years. And that's a profit reserve at the end of February of $0.61 per share. Pleasingly, the investment performance, and we've had -- we have really worked on that. As you know, we have 2 investment committees that work pro bono and that is their day job. That is really their jam. That's what they worked really hard on. And we've had a bit of turnover of fund managers in that portfolio, and we've sort of changed how many fund managers in terms of what percentage they manage. So that 23.4% is something we're really pleased with at the moment, especially as it does have a small cap SKU. And the gross dividend yield there is 7.9%. And once again, 3 years ago, we went to twice yearly in terms of dividends. And that is still growing, and that's something we're really pleased with sort of $0.072 per share, sort of that whole fully that year now. I know I'm running out of time. So any questions on the performance or portfolio, we can take those in questions. And obviously, we do have Geoff, who's on our investment committee as well. So I'm going to go to a really important part of what we do, and it is a major differentiator for us because we're the only investment vehicle that actually gives more than $10 million a year to not for profit. And Jackie is the acting CEO of ReachOut, and it is the largest platform for helping young people through their issues. It's a question I actually wanted to ask, and I know Geoff may just stand up and move around. But how many of you have had to deal with family members or friends or young people that have mental health issues? Is that something you -- I can see quite a few people. And I think it's very -- I do as well. And I think it's something that we're increasingly talking about, and I think that's really important. So Jackie, tell us about ReachOut, tell us about your amazing platform.

Yes. Thank you. So at ReachOut, we're guided by a really clear and simple ambition, and that's helping young people feel better. And that's better about who they are and their place in the world and better about accessing support when they need it. And so as a service, we're 100% online, so we're available when and where young people need it. And we also provide support for parents and carriers and educators because we know that wrap around support is really important. And yes, in terms of our offering, we have digital self-help resources that you can access at any time. Online communities, where you can connect with other young people, share what's going on for you and learn from each other and also one-on-one support with trained and professional peer workers. And so that just gives young people a range of options to engage and support.

Excellent. Thank you. So welcome, Sina to the stage as well. We're very lucky to have you today. Sina, would you mind -- you are a youth ambassador for ReachOut? I mean would you mind sharing if you can, some of your journey and what you're actually doing now with ReachOut?

Sitting up here listening to you guys, makes me want to talk about my stock tips instead.

Have you got money in the market?

I do. I did. And then after a downturn, I had to pull back, which I get to on the cost of living part, if we talk about that and talk about the knock on effects of cost of living when it comes to young people investing as well. Because as we know, investing can be a great platform for generating wealth later in life, as you all know. And I feel because of the cost of living and mental health concerns, a lot of young people being put off from entering the market early. And I think everyone in this room will realize that entering the market early is the greatest indicator of success. But in my own -- in terms of my own lived experience journey, I've suffered from ADHD and depression. And a lot of people hear ADHD and say, "Oh, I feel that way too. I feel disorganized or I feel a bit lazy with certain things." But there's a difference when it's your every day and when it's just a one-off thing for you. And ADHD can be quite paralyzing and it's often co-morbid with other disorders, including depression. Because when you can't function, when you keep failing university courses, not because of your own incapacity to do well, but because of your inability to function, it can be quite a depressing situation to be in. And through ReachOut -- and also, it can be quite isolating when you feel that you're alone and everyone else is succeeding, but you don't see other people's struggles. Through ReachOut, I met a cohort of other people, and I got access to a wealth of resources that made me realize that what I'm experiencing isn't a reflection of myself, it's a health issue that I need help battling. And what that did is, it empowered me to go seek help, seek medication, seek treatment and therapy and ultimately get to a place where I could function, where I could succeed in life. And I think what ReachOut does is, it provides a free platform that anyone, anytime, anywhere can access. And by doing that, it breaks down the stigma associated with mental health. Then I think stigma is one of the biggest things that stops people from accessing mental health support, because stigma makes you feel that you're alone and that no one else is there to support you. But accessing resources like ReachOut, makes you realize that, that's not the case. And through this service, I met a lot of other young people that were going through their own mental health journeys, and through that, we managed to exchange tips and learn from each other and see what works for each other. And through services like PeerChat, where people use their lived experiences to create safe places for other people to understand what they're going through and provide tips of what they've gone through to figure out how to get through this dark period of time that they might be in. I think that I can't stop talking about of ReachOut. So I could go on for hours. So I might cut that there.

Let's go to -- I mean, in terms of the numbers, they have been rising incredibly fast. The numbers, every time I read them, they're getting bigger and bigger. It's sort of millions and millions, 1 in 3 young people. And I find it really interesting when you talk about the stigma because I feel that everywhere we're reading about mental health, like the Australian, as your shareholders sent me two brilliant articles and the weekend about mental health. And for young people and how we're trying to look after them. So you're saying the stigma is still there, and we've got that sort of cost of living pressure for young people. I'm just really interested in any thoughts.

Regarding cost of living and stigma?

Can I just touch on the stigma piece first? And then -- yes. So I think what's really interesting and when you say the stats, what we know is that 40% of young people are experiencing mental health challenges and 1 million aren't getting help. And so I think when we think about stigma, we often think about society and yes, there's more talk about it and more coverage. But what we hear and what you've heard from Sina's experience today, too, is that it's often self-stigma that I feel like I should be able to deal with this by myself. And I feel like everybody else's successful. And so it's actually about your expectations of yourself. That's a really key challenge. And I think one of the strengths of ReachOut that Sina touched on is that young people say to us, "I don't want help. I don't feel helpless. I want somebody to guide me. I want somebody to walk with me on my journey." And I think that's really powerful insight. And yes, cost of living, we're seeing it having huge impact some way.

Of course. But really quickly before I get into that, the power of ReachOut is it's not just support services and information for the person that's going through a mental health -- a period of ill mental health. It's also there for friends and family to provide you with the resources to understand what someone might be going through and to better support a person going through something. In terms of cost of living, we're very lucky at ReachOut. This year, we've launched a youth advocates program where part of that work is to work with government and raise the voices of young people and issues that concern us. And part of that has been forming a submission to parliament on the cost of living. We did a survey in 2022, where 52% of young people reported concerns of facing mental ill health and the cost of living crisis, feeling pressures -- financial pressures. Let me phrase that correctly. When we did the same survey last year, we found that, that number had increased to about 70%. So that shows you the scale of the impact of cost of living. And part of the submission that we did, we noticed that the cost of living, what it does, it makes people feel quite lonely and isolated, which further accelerates the mental health crisis. And drawing from my own personal example, part of the reason that I was like today relates to the cost of living. I used to live about 10 minutes from my closest friends, I used to live about 25, 30 minutes of the city via public transport. But because of how unaffordable it is to live anywhere close to the city anymore, I live now nearly 2 hours away via public transport from the city. I love about an hour away from my friends, my support network, my family, people that I would normally turn to when I'm not feeling okay. And when you're so far removed from everything you know because you simply can't afford to live close to your supports, it is an incredibly isolating experience. And when you add in factors, when you consider the holistic aspect of the cost of living crisis, you've got things like the increasing cost of fuel. Now what that does is that, if someone calls me and says, "Hey, do you want to come over today? Do you want to hang out? Do you want to go do some social activities to energize you?" Is that I've got to consider that every time I drive to a place and drive back, I'll be filling up my car every 3, 4 days. That's about $110 a tank. Now I'm a university student doing my internships and clinical placements, and I'm not getting paid for that. So paying $110 every 3, 4 days when you're getting youth allowance about $600 a fortnight is incredibly unsustainable and incredibly unaffordable. So the cost of living crisis isn't just that, "Hey, groceries are up, hey, the cost of fuel is up." It's how do these things link together. And back to the whole portfolio and money in the market is that as a young person I've now taken all my money out of the market and put it in a savings account. And that might be to the game to you all, but I feel that I can't risk my money being in a market when we talk about the financial markets being so unpredictable at the moment. And we don't know what's going to happen. Whether it be mistiming what happened in China and having your money in there when you shouldn't have had been there, which is not speaking from personal experience, but probably it's those sense of security that we don't have as young people, to be able to build our futures up and to invest and to put our money in markets and increase our financial literacy. So I think that's a very important factor to consider because as I said, time in the market is the biggest factor of success, I think.

Thank you. Thank you very much.

[indiscernible] I manage it.

Time in the market, not timing.

I am just going to wrap up now. But obviously, we have some amazing not-for-profits, and we have amazing fund managers that actually support as well as the Board and all of our investment committee. But I really think that the more we can do for these not-for-profits by investing in vehicles like this could really make such a difference for the future because it's untied funding and untied funding is whereby you give the money to a not-for-profit and you say, do what you do really, really well with this money, and we don't direct it. And so for you, Jackie, I know you said that's been amazingly beneficial.

Yes, it's been transformative for our organization because it allows you to move from [indiscernible] project-based funding to investing in core capabilities and to touch on putting AI to work. We're actually exploring that at the moment as part of our innovation program looking at how generative AI could be used to support young people in mental health and well-being. I think we hear all about the dangers of it, but actually like what if we put it to work in a really positive way. And so funding like Future Generation provides is something like the government is not going to invest in innovation and that experimental approach. So yes, and also to be able to magnify our impact in days like today.

Excellent. Are there any questions because I know that lunch is going to be ready in a few minutes.

Don't stand in the way of people and their food.

We've all got to come back in half an hour for the second part. We have a question there. sir?

[indiscernible].

As in how do we decide which not-for-profits to fund?

Exactly. Exactly. That's right. How do you decide where the money goes to. Does it go equally to all those partners that you're working with?

One of the best -- one of the things I love about Future Generation, this is a very democratic model. So for example, all shareholders can vote where they would like their 1% to go of our nominated not-for-profits. So for example, we have 24 not-for-profits. And if you are in say, Future Generation Global. If you want to give it to ReachOut, you can actually say, "With my shares, I'd like to give my 1% to ReachOut." But you -- but in terms of us finding those not-for-profits, we did a massive expressions of interest. Where we went out to the market for Future Generation Global, to get the best not-for-profits, to work together, to make a really credible impact in prevention of youth mental health. And we had 176 applications, and we chose 14, and it was very saddening. Any other questions?

[indiscernible].

So the question -- just got to repeat the question. So the question was, how big is ReachOut, staffing, et cetera?

Absolutely. So ReachOut is a national organization. Staffing, we've just grown in the last year, 34%. So we're now at a 90 staff person head count and $17 million operating budget. 50-50 government and private funding and helping or visitors to our website of 2 million people a year. And then we are, at the moment, looking to grow our PeerChat service to -- so we're on track to deliver 2,000 one-on-one sessions this year. And the government recently came in to fund them because this work was just so necessary to get out to the most number of young people.

I think I might wrap it up there, but thank you very much for listening. And please come back in -- actually, in less than 30 minutes now and for the next part. Thank you very much.

All right. Everyone ready for an interesting panel with some real investment heavy heaters. Thank you very much for having to see you. So we have Nikki Thomas from Magellan. Philip Lowe, the former RBA Governor is now Chairman of Future Generation Australia; and Geoff Wilson, who I'm sure everyone is familiar with. I'm Anthony MacDonald, I work for the Australian financial review on the Chanticleer column. It's a real privilege for me to be here in front of such a big crowd. We've got lots to talk about, the market, the economy, it's all very, very delicately poised at the moment. We've got what looks like the soft landing that may be on track. Markets have got nuts, valuations through the roof. Share prices, house prices, credit spreads, it's all extremely frothy out there. It feels quite exuberant. But I think we should probably start with Philip Lowe, given he is the man of the hour. First of all, Philip, how is your golf handicap. And is this future generation thing getting in the way?

No, it's not getting in the way. My golf handicap has come down 4 shots since I finished at the RBA. So practice does improve things.

Congratulations.

But I was incredibly privileged to be asked to join Future Generation Australia. I had exposure to the fund 5 or 6 years ago when I was the RBA governor and I spoke at a lunch and I was incredibly impressed by the combination of good returns to investors and money going to kid's charities. During my time at the RBA, I met many people who worked in the financial sector who really wanted to make a difference to people's lives. And Future Generation is kind of a really good example of that where the funds managers and the service providers provide their services for free and the money goes to kid's charities, $10 million a year. So it brings together 2 of my passions, finance and helping kids. And we've got people in the finance sector who really want to make a difference to the society in which they live, and I'm really proud to be associated with it. So if my golf handicap goes a bit slower now because I've got more things to do, that's a good trade-off for me.

Good to hear. Now Philip, it's been more than a year, maybe 18 months since you were telling us about this narrow path for the soft landing for the Australian economy. And what do you think about that soft landing at the moment now that you're about 6 months or so out of the RBA. Do you still think we're on track.

Well, I think we're still on that narrow path. Inflation is coming down. It's got -- we've got further work to do. I think the main challenge will be now to make sure that inflation stays back in the 2% to 3% range. And there's still quite a lot of cost pressures in the economy, partly because productivity growth is weak. That's something I spoke about a lot when I was the RBA governor. I think it still remain -- should remain a really important focus for the country because if we can't get stronger productivity growth, everything is going to get harder. It's on your investments, your wages won't be able to go up as quickly in the budget position will be under challenged. We're still on that narrow path in the short run, but in the medium term, the challenge is to make sure that we get better at doing stuff. And if we don't do that, then our living standards will stagnate.

Geoff, we'll throw to you because you're the Australian investor on the panel. What do you make of the Australian inflation outlook at the moment in the economy?

Yes. To me, it's -- I'm just interested in Philip's comments. And one that has been its productivity and how do we drive that? And I suppose that's one of the frustrating things that we haven't been able to deliver on that. But in terms of looking at the Australian landscape, like it looks pretty reasonable from our perspective. Obviously, we're in a -- from a global perspective and Nikki is -- we're talking about that, we're in a presidential election year. In terms of equities, and I know everyone is here because they are interested in the equity market is -- if you had asked me 2 years ago, will equity market be up 14%. The year that we just had fiscal year '23, and then it would be up another what is up so far year-to-date. Yes, I don't know whether a similar type of amount. I'd say I don't think so. Yes. So in terms of -- from the equity market, it's performed -- the Australian markets performed well. To me, the reason -- and we'll probably go on to that a little bit more. You were setting us up in terms of how frothy it is. But we can talk about it later. We're still of the view that interest rates towards the latter part of the year in Australia will come off. And yes, I just hope that the person sitting in your seat now pulls the levers correctly. And I mean it's just such a tough job.

Well it's a Board that pulls the lever. Not just everybody...

Oh, okay. Sorry. The Board pulls the lever and the government doesn't make it halfway, like the government doesn't -- may get us to stimulate.

Yes. So we're on track here in Australia. Nikki, you're obviously the global investor, big global outlook. In the United States economy is the one that we will get up every morning and look at the news coming from the U.S. And last year over there, by the end of the year, it looked like it had been about as good as it could have been like 3% plus real GDP growth, unemployment below 4%, inflation around 2% by the end of the year. Where does it go from here?

So I mean...

It's there.

Yes, all the it. So -- except inflation. So very simply, and I think the biggest problem we have when we're invested in markets is we can anchor. We can anchor to what we've seen behind us and go, oh, the market -- the U.S. market is up 25% right now. So there's a whole lot of people go, oh, it must be a bubble because that's just too much. It could go another 10% to 15% from here because things are changing under the hold and what drives markets when it's not interest rates and it's been interest rates for a long period of time. That's what drive markets down so far. Now we're at a point where interest rates are plateauing at worst and probably going to come down later this year in most countries around the world. That's a tailwind for economies and for investors in equities as if we get that fall in policy rates. Why will we get a fall in policy rates because we've nailed inflation. The only way we won't get it is because inflation stays sticky, and central banks will stay true to their goal of managing to push inflation down. So they will stay high on policy rates to do that. Why would inflation not come down? Because growth is too good. Sounds pretty good to me. If I'm an investor, I want good growth. So there's not -- it's kind of hard to find a place here where you go if inflation stays high, it's because growth is good. If inflation comes down, interest rates come down, that's good. It's a very good narrative, I think. And then you think about the productivity improvements that are coming down the pipe on the back of AI, yet to be visible. But in the U.S., productivity is up 2.7% last time I looked, that's incredible. House prices are running hard. Markets are running hard. Household wealth has grown 8% in the U.S. last year. They've got lots of excess cash. In fact, higher interest rates is beneficial in that economy because they've got plenty of cash. It's a pretty good outlook. You talk to be bearish, but I'm not. So I just think we will climb the wall of watering.

You're talking to be bullish.

I am. But f you don't climb the wall of worry in equities and you look at any long run chart of equities, when you've had a period like we had in 2022, that's your opportunity. This is when markets reset around interest rates. And then once interest rates get behind you again, you can have another great 5 or 6 or 7 years. Okay, there will be volatility. Could we pull back 5% in the short term? Of course. But that's not the game you guys want to play. You want to play the -- I want to make money for the next 5, 10 years. And that's what I'm -- That's the game I want to play too. I want have...

Yes, Nikki. Yes, you're saying it's all good. So no matter -- so even if they don't cut rates, it's because the economy is charging, if they do cut rate, it helps keep seeing keep things stimulating. So are you not then concerned whether the Fed cuts rates this year or not?

Look, our view is that policy rates are likely to come down in the latter half of the year because as we look at the inflation, narrows even what's happening and watching the data, the data says, this is coming lower. It's been -- it's looked a little sticky in the short term, but all of those trends -- and really, we got inflation because COVID created a disconnect between demand and supply. We fixed the supply issue and demand bifurcate between goods and services, but most of those demand get didn't massively above the curve, didn't in the U.S. So it's come back to the curve. So if you get demand and supply back in balance, inflation will come down because policy rates are forcing it down. So we think that's what will likely happen. But we -- you don't invest on a specific decision around what interest rates might be in 6 months' time.

Yes, absolutely. I mean it sounds like you're talking Philip Lowe's language there with the demand and the supply. We heard...

He would understand it much better than me, hopefully.

Philip, what do you think about the RBA's next move? You think up down...

I've given up answering questions like that. But the RBA kind of has really been saying it's kind of very open. It's possible that interest rates have to go up again. I think it's more likely the next move will be down, but it's possible they'll need to go up again because there's still quite a lot of underlying cost pressures in the economy. If wages are growing up, going at, say, 4% that doesn't make the 2.5% inflation unless productivity growth picks up. So over the long periods of time, there's a close correspondence between increasing prices and increases in wages less productivity growth. And at the moment, productivity growth is close to 0. Wages are growing at 4%. That doesn't make a 2.5% inflation on a sustainable basis. So the hope is, and this is what the RBA is forecasting. The productivity growth picks up, so that we can sustain decent rates of wage growth. But if productivity growth does not pick up, we're going to be in a very difficult position because the cost pressures in the economy will be delivering higher rates of inflation than the central bank is comfortable with. I know one thing, it's the central bank and the whole central banks like there's a creature of their framework. And their framework is interest rates are going to be given by the inflation -- determined by the inflation outlook. And if we can't lift productivity growth and wages and costs are growing at 4%, then the Central Bank will have difficulty lowering interest rates. I think this is a critical issue, not just the short-term interest rates, but the living standards for us all over the next 5 or 10 years. Can we do better at lifting productivity? And if we can't, things are going to be pretty tough. the stickiness of that inflation.

The stickiness of that inflation, I mean, is that something you've become more worried about recently?

No, this was -- when I was there, this was something we talked a lot about that the inflation would come down because oil prices have stopped going up and maybe come down and goods price inflation was slow. The supply/demand things out of COVID would be rebalanced. And that would bring inflation down, that's exactly what's happened. The missing piece so far is growth in underlying services prices. The services prices driven by wages and productivity. And that piece hasn't fallen into place yet. And it's going to need to, if the central bank is going to be able to lower interest rates on a sustainable basis, and we're not there yet.

Absolutely.

I think it's good to note that inflation expectations is a good leading indicator. Now they potentially got a little bit unanchored in places like the U.K. and Australia. But in the U.S., inflation expectations peaked out a while ago and have been coming down. Inflation expectations is what people think they should get in a wage increase in the future. And if they're looking for 2.5%, even if even if they got 4% last year, you go like we got to say that 2.5%. So in the U.S., inflation expectations are actually well anchored and always have been. So you'd have an answer on when they are here but...

The same is true here, but we can only sustain big increases in real wages if we get better at doing stuff. And if we can't get better at doing stuff, then wages and everything has to grow at 2.5%, which is quite a big difference to where we are now. It might happen naturally, but it might not.

I'm talking nominal, not real.

Geoff, bring this back to markets for us. So the ASX is at almost 8,000 points, S&P 500 is heading towards 5,500, both huge numbers. Like I said, asset prices are -- it's really expensive out there. Do you think the market has run ahead of where sort of says we should be? Or...

Well, I mean the good thing is the market does run ahead. So it has the -- in terms of -- it's tough like I tend to be on the conservative side. So I spend a lot of time being sort of on the bearer side. And sort of up until the latter part of last year, I was waiting for a few cracks, inflation to be higher and there'll be some cracks. I couldn't believe that we didn't have the pain after the trillions of dollars that was pumped into the economy after COVID, et cetera, et cetera. From an equity markets perspective. And then the latter part of -- I think after the performance of the market in December and then looking -- excepting we're in the presidential election year this year, and looking at all the stats about how markets perform in those presidential election years. Then I thought, well, hey, it's going to be a good year, '24. And then, of course, the U.S. market is up 10% in 3 months. I'm sort of more like you, and I think Nikki mentioned it as well, maybe the market just run a little bit hard in the short term. I'm still of the view that '24 will be a good year. Like assuming everything works in terms of I mean to me, the interesting thing is the expectations for cuts in interest rates were a lot greater going back a number of months ago, I'd say in the U.S., was it 6% or something like that? Now it's down to 2% or 3% or...

Probably 2% as of this week.

Yes. So that's -- so to me, the markets sort of climbed at wall of worry quite well.

It's [indiscernible] of earnings. It's real.

Yes, exactly. And a lot of it has -- the pre-expansion, I think over the last 4 years. I think it's only about 18% or something. It's a very small pre-expansion.

But it's the forward-looking earnings that everyone is excited about.

Yes. And so broadly, an it's a hard way event. It's not a yes or no. I'm bullish, but just -- I just -- the markets just run really strong.

So you think that we get through this period of higher inflation, higher interest rates without any negative consequence in equity markets.

Well, I'll just try to [indiscernible].

We did. We had them. We had some horrible equity market.

I sort of -- if you want my next 2 year view, I think this will be a good year. I think next year will be a tough year in terms of equities.

I don't. But it worth knowing that U.K. -- if you think technical recession, the U.K. has been in recession. Finland has been in a recession. Ireland has been in recession France, I think has been in a recession. Germany is down close. Australia has looked a bit ugly. So the world hasn't got through this in perfect shape. It's just we tend to focus a lot on the U.S. It's 65% of World Indices. And it's done an extraordinary job of getting through this with fiscal policy stimulus and a very well-executed process by the central banks QT coming in and interest rates going up aggressively in a market that isn't as variable in its lending. So Australia has -- a 2-year fixed is variable. So variable lending means the interest rate impact hits people quickly. The U.S., they borrow 30 a year against their house. They're all sitting there today going, I'm not moving. I've got a 3% mortgage. And so the pain of interest rates is far less effective in the U.S. for slowing down demand and people think twice. So that's a real, I think, important reasons to why the U.S. has been a bit different in this environment.

Absolutely. While we're talking about the U.S., Nikki, obviously, we've got the Magnificent 7 which has accounted for a huge part of the gains. For those of us that didn't buy the Magnificent 7 like myself. Is it too late?

Well, let me contextualize. We do love an acronym, don't we bricks and fangs and Magnificent 7 was coined in April 2023, a whole year ago. And at April 2023, the Magnificent 7 accounted for nearly 90% of S&P performance. It was all about those 7 stocks. In January this year, there was still 45% of performance. It was all very narrow. It's really widening out. And to be honest, in that Magnificent 7, NVIDIA's shot the lights out, Tesla is actually down 20%. So there is no Magnificent 7 anymore. You can dead and burry that one even just within a year. There are some magnificent, but it's not the 7 anymore. And why the magnificent performed so well? And is it too late? They've really performed really well because the market has started to understand that there is a massive technological breakthrough happening before our eyes and that disruptive innovation is the powerhouse of capitalism and its artificial intelligence. And if you look at who's performing, NVIDIA, it provides the semiconductors and accelerated computing for AI, Microsoft co-pilot. It's going to be the leader as we go through this next massive transition around technology. Amazon, it's the cloud business and the AI enabler. So the businesses we own are in the space where we see the opportunity is still large in front of them, and that's why we've stayed invested in those. Something like Tesla, the world has changed a lot on Tesla in the last year. So it's pretty hard to get excited about someone who sells electric vehicles when you can see millions of electric vehicles coming out of China at really cheap prices and probably going to land on our shores. I don't think I'd want to be Tesla today because that world changed a lot in the last 12 months.

But NVIDIA is still to buy?

I think NVIDIA is an extraordinary business that is so well positioned for this. So I'd put it up there with Intel when we went down the PC route or Cisco when we started making some mobile phones. But often those businesses have their time in the sun, and then it moves on to other things. So I'd be -- I still think it's a great business, and it's probably going to continue to win for a year or 2. Just be a little careful that there will become a time with that extraordinary growth that it is seeing. It's doubling in size and its earnings are doing that as well. So it's not like it suddenly got expensive. It's just it's growing so fast. But it will hit a point where the growth will slow right down. Some people think AI is going to be a 2-year story, I don't. But if you did, you definitely wouldn't own NVIDIA.

We'll come back to some stock tips because I know that's what we all want at the end of the day. Let's just think about something big in Australia, though. And this is something that our paper has been thinking a lot about, Philip, and that's sort of the outlook for the next 40 years for the economy. So in the intergenerational report, it told us that we should be thinking at about 2.2% a year economic growth. When in the past 40 years, we had 3% a year economic growth, right? That's, say, 1% a year difference. I mean do you think that's something that we should sit here today and except? Is there something we can do to try and progress as much as we have in the past 40 years? Or do we just have to accept that it's slower?

I think we should be concerned about it. I mean the intergeneration report is predicting kind of growth of 2.2% on average over the next 40 years. 1.2% of that comes from productivity growth and 1% from increasing size of the labor force. It's increasing size of the labor force. That's pretty much a reasonable estimate. But 1.2% a year for productivity growth is much, much better than we've done over the past decade and half. And certainly much better than what we've done in the last 5 years. So to get 2.2%, if the population is going to grow pretty much as the forecast, then we're going to have to get better at doing stuff here I am coming back to productivity growth. And if we can't get 1.2% productivity growth and the economy is going to grow 1 point something rather. So that's going to be really challenging for everybody. Investors, workers and the government. So this is why I think it's the third time I've said this, productivity growth is the key. It's the only way the businesses can, in the end, generate growing profit streams. It's the only way that workers can get wage increases faster than inflation. I think it's the only way the government budget position can get better. So there's a lot of things we can do. I don't think we're doing enough of them.

Yes. So how should we unlock that productivity growth?

Well, there's been endless inquiries when I go to the parliamentary committees and the Senate estimates that asked me what to do. And I said the first thing to do would be to read the hundreds of reports that have been written on this topic. But the things in the reports are hard.

Did any of them say we have?

No, the things in the reports are hard. I mean one of the things that almost all the economists say is the tax system is not fit for purpose. We tax income generation and wealth generation too heavily and consumption too lightly. So that in a political world, you're kind of in trouble. The energy transition is not working well. Energy should be a national asset for Australia. People have different views whether it is or maybe it's in becoming a liability. So there are things we can do there. The way we train people to -- in education and to take advantage of the wonderful things that you were talking about. I think there's further work to be done. And the other area that's critical is investing for the rapidly growing population. The population of Australia is growing very quickly at the moment. And the capital stock is not rising quickly enough to deal with the rapidly rising population and it's most evident most streams in the housing market with a number of houses and apartments we're building isn't fast enough for the rapid growth in the population. But that's just one example. There are lots of examples where the country's stock of capital is not keeping pace with the growth in the population. And what happens is that we get all these inefficiencies, congestion, rising housing prices, which causes all sorts of problems we heard about in the previous session. So keeping pace, keeping the capital stock and the housing stock pace with growing population is really critical. And we're falling behind there. I think we're following behind on tax reform. We're falling behind on energy and education. There are things in each of those areas that can be done. The answers aren't in kind of at the technical level, they're at the political level because addressing each of those things...

We better get your back.

I say to the politicians all the time. This is a political problem not an economic problem. How does our society build the consensus to deal with the tax issues, education, energy and what was the fourth one I mentioned, the education. So how do we generate the political consensus to at least move forward because at the moment, we're stuck. And if we're stuck and we keep saying so, our living standards will stagnate and we'll all be stuck.

Well, thanks for reading all those productivity reports. It's probably why you handicap. Geoff, would you give us a stock tips?

I was going to say I can't compete with Philip. Yes. Let's go to some stocks. Well, the I've actually got three. Yes. But there's sort of one main one and two side ones only because I think last year, I mentioned one, so I just want to cover off on that. And the first one is sort of like a fallen angel from an Australian perspective. And it's A2 milk. And it's got I think about $1 billion of cash, 20% of its market cap in cash. And the interesting thing is -- and it's continuing to gain market share in China. It's -- I think it's got a little over 6% of the milk market up there now, the baby market. And it will continue to grow. And the fascinating thing is -- we just think it's cheap. And we think there's going to be earnings surprises. I mean we try to buy undervalued growth companies when we're going to see a catalyst is going to change the valuation. We're pretty sure the next reporting will be a positive earnings surprise. And sort of the left field part is this year is the year of the Dragon, which is, what is it, power and there's a whole lot of positive things. I think marriages in China, I think marriage registrations were up 40% in the quarter to December. So everyone's going to -- everyone wants to have a child this year. And if you sell infant milk formula, then that's a little cherry on the top. Like it's -- I mean it's quite heavily shorted. We think the share price could easily increase 50% over the next 12 months. That's sort of the -- on the other two is just another one I've mentioned before, sticking with the ice. Some people love it. Some people hate it. And we used to hate it and now we're sort of more close on A&P.

Another fallen angel.

Fallen angel. I've got all the fallen angels. But yes, just cheap, like it's trading below asset backing. State of asset backing is trading at 15%. So you're buying -- sort of like buying a future genes. They're trading below asset backing you're buying a dollar for $0.85 and yes, so to me, and we're pretty sure I'll get it right, otherwise, whoever is in there won't be there. And the third one is GDC, global data centers, which I think I might have given a year ago at this. And share price has done well. But again, it's trading at about 25% discount. It's -- all the assets are being sold and the money is going to give back to investors. So you'll eventually get above -- well, we think it's about $3.07 a share pretax.

That's good. So a bit of everything. Yes, that's not cheap for you. I was looking at up it's about 27x for.

Yes, we think it's -- well, okay. We think it's 18x next year. And if you think about it, like I said, it's captive bills got to build in cash. In theory, they are going to be running at 25% geared. So they've probably got $2 billion of excess capital. So in theory, if they gave $2 billion back to shareholders or what do they use that $2 billion capacity for? Maybe they buy something that's EPS accretive. So you get the catalyst from that. So we think one of those will play out.

Good to hear. All right. We'll get to questions in a second, but Nikki, we're the stock tips. What's -- what do you like at the moment?

Quite a lot of things, about 27 or 28 stocks. So the first stock tip is just by FTG or MGIC and then you'll get a lovely portfolio of great companies. But if you went into the portfolio, I guess our 2 largest positions set with Microsoft and Amazon. These are extraordinary large companies, but with incredible growth prospects ahead of them. And I think people we talked about Amazon a little bit earlier, a $1.7 trillion market cap company. Sitting in Australia, people think you're a little bit mad when you say you think it's going to grow. But if you just look at the big pieces of Amazon, e-commerce takes 1% of market share of retail sales every year. That means e-commerce typically grows at least 10% per annum. So that's one industry. Its industry is growing double digits every year. The other industry is cloud. Last year, cloud had a terrible year because the big organizations optimize their cloud spend, and it grew here at terrible, terrible, terrible number, 13%. So it typically goes at 20%, 25%, 30%, because we're going through a massive transition of on-premise to cloud. Now you're laying on top of that, the adoption of AI and the need for cloud and all the data that you store in cloud to make AI come to life. And they're the leading player. So you've got one business that's in an industry growing probably 20% per annum, maybe higher, the other 10%. Then you've got e-commerce, sells a lot of stuff, makes a very small margin. But if you pull the business apart and look at where the real earnings are, so 16% of revenues in Amazon and AWS, 67% of operating profits is AWS, scaled, highly profitable, fast-growing business. And then the other piece, which is really about services to retailers. So it's the West field of online. It's host everybody. It's where you go and gather as retailers. They then provide advertising against all the eyeballs. They give you prime video, so you get entertainment. And they're the largest -- second largest logistics player in the U.S. today with what they've built over the last 3 years. So when you think about that services piece and how fast that's going to grow, it lifts margins of the group and they get operating leverage. So when you pull it all together, you get a business that probably goes 20% to 30% per annum for at least the next 3 years. It is a behemoth, but it's incredibly well positioned, very well run, a very innovative company, and it's going to take people on the journey of AI. And it plays as well as Switzerland in the cloud. So whatever you want to do, however you want to do it, Amazon will stand behind you and help you get there. And it's built its own semiconductor chips, so Trinium and inference, bedrock, Cube, for coating so it's a really smart company that we think will continue to take a lot of share and deliver very good results for shareholders.

Great. couple of former Magnificent 7 stocks. Philip, I don't want to leave you out. Have you been buying anything you want to tell us about?

No. I don't give financial advice, but I will ask you to take a look at FGX and FTG. You can get access to really world-class investors, and you can do good buy funding kid's charities. So if you haven't already looked at it, could I just ask you to take a look at it.

Good idea. All right. Is there any questions from people here today for our panelists?

An issue that we haven't talked about that I'd like to get your view on government debt globally. This seems to be a number that just perennially goes up every year. And every year, we're told it's not a problem. Is that -- what is your view on the level of government debt in Australia and globally? Is it a problem? Is it not a problem? What if anything needs to be done?

In Australia, I don't think it's a problem. And as you know, it probably had a couple of years of surpluses and debt to GDP and particularly high by global standards. It's manageable. And by and large, Australian fiscal policy over the past few decades has been run responsibly. I can't say the same thing about the United States. Their budget deficits of 5% of GDP in the indefinite future. And it's really hard to see given the fracturing of the U.S. political system, how are they going to address that. So debt to GDP in the U.S. keeps rising and it's going to keep rising. At the moment and for the foreseeable future, investors are going to be prepared to buy that debt. But at some point, something can happen. And the switch could turn and investors might decide that if they're going to hold U.S. debt, they require much higher premiums at the moment, that's not the case. But the inability of the political system in the U.S. to address the rising debt is a major issue. And it's actually not just the U.S., a number of other countries, the fracturing of politics is making it difficult because there are a lot of demands on the public purse. There's defense, there's infrastructure, there's energy, there's the aging of the population, all big demands on the public purse who in this room wants to pay more taxes to finance that nobody probably. So that's the way we're living and it's really important that here in Australia, we find a way to finance government expenditure at the moment. we're doing okay, but the politics makes me a bit nervous, particularly in the U.S.

Would you like a question just [indiscernible].

Mine can come as someone but a comment. But the 4 things that you mentioned, I think, education, health, those other big ticket items. I cannot see us getting those things resolved until we get better politics. And also the other thing that bothers me incredibly is the gap between the wealth fleet and the poor now. I just don't see how we're going to change that.

Just kind of a comment on your comment. Australians and the Australian political system has done a pretty good job over the last 40 years of addressing problems. And as a result of that, Australians enjoyed growth in their real incomes over those 30 years that not many other people in the world have in the advanced economy. So we've done a pretty good job over time. My hope is that by continuing to speak out about it and others, if they keep speaking out about that, that will help the political class and the media to lead us to a better place. If we can't, then our living standards will stagnate. That's the reality.

It's good to put the context around it though. Australia is actually a very egalitarian society with very low levels of income inequality on the world stage. So the U.S. and China are way worse than Australia. And so we do a good job. We pay people well when they do jobs that are more manual or don't require as much intellect. And one of the interesting things that I think could occur, [ David Ottar ] talked about this recently with AI is as we challenge because AI will reduce the marginal cost of human thinking and reasoning what happens is some of those very extreme paid jobs that are all about the knowledge worker, probably won't get paid as much some time in the future and actually...

Nikki, are you saying that we are knowledgeable, are we?

I think it's all right. But if you think about what's happening at the moment, and we're seeing younger people are starting to go back and get to the trades because there's real money to be made in those trades. And AI is going to be helpful in some of those things, but you can't replace a good chip or a good electrician. And may see some of the more intellectual knowledge people head in that direction because of the opportunities that, that presents and the incomes that can deliver people. And so maybe that actually helps us work through this process over a decade or so. But it's a challenge. Aging population is a challenge for everyone.

All right. Who else has a question? Let's go over here first, Geoff.

I have a question for Philip. You talked before about Australia's tax system as being inefficient. If you had free rain, what changes would you make?

Great Question.

Well, I don't have [indiscernible]. I used to be trained not to answer a hypothetical question. So I think that's very good training. But I can tell you what these reports that are prepared by like international Monetary Fund and other kind of organizations, they just say that Australia by comparison with other countries, taxes consumption too low. And the taxes wealth generation too highly. In other words, the GST is too low and income and wealth tax is too high. Politician can't say that, but that's what the advice to the politicians would be from the various think tanks. And there are a lot of kind of -- in addition, they're advised there are a lot of individual distortions in the tax system we could kind of simplify it while keeping the progressive nature of the tax system, which is one f the things that actually make sure that post-tax income in quality is low, and it's one of the great things about our society is that post tax income and equality is not that high. So that can be preserved while addressing these other issues in the tax system, but which political party wants to take that on.

Just while you're on a roll, in terms of just in Australia and who actually makes the monetary policy decisions. The treasurer wants to a couple -- appoint a couple of new people to the new Monetary Policy Board. Angus Taylor says all existing members must carry over to the to the new Board to avoid political appointments. Do you have any view on who should be setting the manager policy?

Well, a new Board, obviously, if the legislation gets passed, I can see the merit in both arguments that the existing board members were appointed for 5 years to set interest rates. I think there's a strong case for them, allow them to carry out that mandate. Otherwise, you're kind of changing the composition of people who said interest rates mid-course. And we're in a difficult delicate period over the next little while. So I think there are benefits from continuity. The government obviously wants to replace some of the existing people with other people, but that could work as well as long as the people are good better. I really see a benefit in continuity at the moment.

Okay. Another question over here?

Just on media. Your 4 points, I think media have a role to play in making governments accountable. I don't see it happening at the moment. And I think we're being told incorrect facts. And I think renewable energy is going to end a disaster for Australia and I think we need to really be honest public about it. So I think somehow someone's got a whole media to account because they've lost the plug.

I think we have to be careful not to lash out at journalists who work in publications like the AFR. A lot of people today may be less in this room, but a lot of people say get their media and their news from social media, that's where it's really broken because there is no guardrails around that, and there still isn't. So to me, that is a much bigger issue. In fact, we need to support good quality journalism that was always the way the News Corp and others were brought to account, and they helped make sure we had people who are constantly pushing and challenging politicians. So we should be sponsoring good quality journalism, but I don't think you get that in social media.

All right. Over here.

I'm Paul from Thornley. I just want to challenge you, Philip, about the goods and services tax. A lot of people see that as being attacked on poorer people because they spend more of their income on food and services. My belief is that there are pockets of wealth in the country that aren't that aren't being used productively in the national good. Perhaps people like myself who have benefited by inheritances and things. Older people who generally, I feel have it more comfortable than younger people who are struggling to get into their first homes. So I was just wondering, are there any other ways in which we can maintain the gross debt at the level it is without spending more money by asking wealthier people to share their wealth more with other Australians.

Well, there are a lot of things that can be done. It's just really whether the political appetite exists to do them that another thing that these reports on the strain tax system highlight is just how concessional the treatment of housing is in the Australian tax system. Not surprisingly, a lot of people invest in housing. So the treatment of the family home in assets tests, in the pensions test, the lack of capital gains tax, the negative gearing arrangement. So there are a lot of things that people have drawn attention to that could help, but each of those is very politically sensitive, isn't? So we're kind of -- we're in this world now. I think we're stuck and nothing really happens. And it's fine right now. But will it be fine in 10 years' time? If we keep getting stuck, nothing really changes. Then our living standards will stagnate. And it will be our kids and grandchildren that pay the cost of that.

Absolutely. All right. Any last questions out there? One, are there on the left?

Yes. My name is Hans. I just wonder when [indiscernible] and liberals come together where by some of the big companies start buying techs, where they haven't done for years and not having to do for years to come. And there is where the problem sits. They got the -- in Holland, they got 8, 10, 12 different parties in the system, whereby 2 or 3 have the former government. But here you got one or the other. And it doesn't seem to come to a fair system where I have people living on the street. Well, a lot of big companies making millions and millions of dollars and fiddle the books and never buy any cent of tax in the past and not going to spend any tax in the future. I wonder where we're going to do about that.

Lucky none of us are politicians. We would like someone to do something about it. It's the hard part. We'll get Anthony can write an article on it.

Yes. Let's chat here. All right. Any last final call for questions. One here, let's go last question. We're a little bit over time, but I think it's important.

Philip has only got a golf game to get to so.

No, no, it's rainy outside.

The concerns I have is just around the geopolitical situation and the playoff between Australia-China, Australia-America, and we seem to be a big player in this whole dynamic, and that has a significant impact on the investment environment for Australians for the long-term perspective would be my view. But how do we sell I don't know, is there an answer to this problem, i.e., Treasury Winery Estates, lobsters, iron ore, coal, gas?

Well, I think the issue you're getting at is Australia has an economic relationship with China that then come somewhat into conflict with the fact that we are allied with the U.S. and the U.S. and China kind of having tensions between them. And we are a little bit of the meat in the sandwich and that I think so far, we've done a good job of navigating it. And I don't think you can solve it. I think the reality is we do have both opportunities and risks that come at us in Australia because we are so close to China. We have an enormous cohort of Chinese people who come to live here and that can be very beneficial for our economy. We sell a lot of natural resources across to China, and particularly around the renewable space. Lithium has come up to being, I think, the #2 natural resource last year after iron ore. We thought we were just at iron ore country and now we're a lithium country. We are rich with these resources. That means that's an opportunity for the Australian economy to benefit from the relationship with China. So we navigate this. It's challenging, but I think you will never see Australia step away from the allied relationship with the U.S. because it is fundamentally important to a little country like us to have the U.S. at our backs and to always have that ally aligned with us. And the political system is in concert with ours. We run a democracy, we're not running a communist party. We don't have autocracies. And so we just have to navigate that carefully, and I think Australia does a pretty good job of this.

And actually, I know I'm going a little off topic, but it reminds me when you asked the question, you were answering it a couple of years ago, I'm bringing it back to stocks, which I'm more comfortable in. We had a substantial position in Myer, and we bought it because we're back in the management and Sally Lou, who I love is a great Australian and great retailer. He had a position and we -- and they want to get rid of the management and the whole board. So we had to sort of do what Australia does. We had to walk that very tight line type right but not fall of it. I mean, to me, that's unfortunately, it's sort of -- that's what we have to do because as you're saying, how we are and in the end, yes, we lost a chair, management stayed. Myer's done reasonably well, bounced back and I mean we'll get through it. It's just very...

Xi Jinping and Biden met last week. They're having conversations. The U.S. -- lots of U.S. corporates were in China last week, having meetings. So yes, there's tension. But no one wants a hot war, no one wants any of these hotspots around the world to turn into a war. Everyone ran [indiscernible], any of them and U.S., no one wants...

It's not like we end up with Donald.

Donald just want to look good. He's a narcissist. The other day, what was the comment? Markets are going up. That's because people think I'm going to be president.

Yes, the market going down, I don't think it's Biden.

So he will be pro-growth probably, and he'll probably have a bit of a go at putting more tariffs on China. But people telling me is doing something great, you'd be happy.

Yes. And with Geoff filling his both with A2 milk company stock, he needs this Australia-China relationship.

That would be a disaster, wouldn't it?

Yes. All right. Well, thank you, everyone, for listening. Would you place put your hands together for our panel. Nikki, Philip, and Geoff.

Thanks, everyone.