Latest / The Curve / TCW22: Why and how is AI impacting money, biz + the markets!

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TCW22: Why and how is AI impacting money, biz + the markets! · The Curve

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  Hi and welcome to the Curve Weekly. The podcast that keeps you up to date with all the money,
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  business and stock market tea. Everyone should experience for us at least once in their lives
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  and Annie shouldn't miss out just because she can't afford it. Help me, I'm going to
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  vet where I'm the other side of the world. I know and we're not even together. It's so weird.
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  I'm in the English countryside and I tell you what I think this is my future. I just need to find
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  a lovely English countryman and I'm going to move to be living here. You remind me of that movie.
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  What is it the holiday? You know, we're there in the English country with Jude Law and like
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  Cape Windsor. Cape Windsor. Yeah, yeah, it's exactly what it reminds me of. That's one of my favourite
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  movies. Oh nice. This house that I'm in, it's got thatched roof. So it's like it was built in
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  the 1600s. So this is my family like cousins, aunties, uncles and they live on this giant piece of land
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  like this big farm about an hour out of London and it is the cutest house. Like I'm so tall,
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  I have to duck to get through the doorways and stuff. That's how small it is and like you look
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  at the roof and it's all uneven and it's just the cutest thing you've got. I love it. My dad's
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  first house was a thatched cottage actually. Oh really? I mean my mum, they lived in a thatched
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  cottage. Oh, because he's from England. Yeah, yeah. I think he was like in British.
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  Wait, you know, didn't it come through the cracks in terms of the thatching? He's like, no.
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  Oh wait, did you actually think that? Yeah, when I was little because you know, it's just sticks and
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  twigs and I don't know, yeah, whatever else is thatching. And where are you? I am in
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  Islington when Angel in London. Very exciting. How's the busy class flight? Nice.
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  Except I still have terrible jet lag, but it's right. It takes every for every hour of time
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  difference. It takes me that many days to get over jet lag. So it's going to take us two weeks,
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  12 days to get over jet lag. Trying to stay awake the first day we got here was just I felt sick,
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  like nauseous. And then but I've been sleeping fine. Went to an English pub last night with my
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  cousins had a pint. Oh my God, in the pubs here, they've got the stakela called tequila rosé
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  or tequila rose tequila rose. And it's this pink shot of it's almost like a dessert. It's kind of
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  like a a bay leaves with a rose taste in it, but it's tequila. And I tell you what, I think that's
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  my future. You'll probably think it's techie and yucky, but I am such a fan. Why would I think that
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  because it's not straight to killer? Yeah, it's not. And it does, honestly, it just tastes like
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  like pink bay leaves or something. It doesn't really even taste like tequila. I was sipping on my
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  shot. You quite like the sweet tequila. Yeah, do coconut tequila rose tequila. I love it. It's so
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  nice. And you want to leave. Please come back to actual London city though, please. No, I love the
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  country. And this is me. Yeah, the best thing is that you can buy the actual financial times here.
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  I'm so stoked. It's like one of the greatest toys when I come to London. It's been able to
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  read the physical financial times. Can you send me a photo of it? Yeah, there's one on the
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  kitchen table, actually, went and got one this morning. Oh my god, cute. You've already bought
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  yep. Yeah, I had that with my coffee this morning. Yeah, if I can imagine if you got to write
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  something in it, would that be like being in the New York Times for a writer? Is that the equivalent?
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  Yeah, I guess it's all the Wall Street Journal. Let's go for that. Yeah, they're pretty amazing
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  publications. But speaking of what's happening in the financial times, we had a pretty strong
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  week again in the stock market last week. We had the S&P 500 up 3%, the NASDAQ up 4%, New Zealand
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  up slightly and Aussie down. And so the S&P 500 is now up 12% for the year. So we've had the first
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  five months of the year and now in June. And it's up 12%. So historically, the stock market's done
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  around 8 to 9%. So it's tracking pretty well and I kind of wanted to touch on one thing. So
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  say the stock market is going up and up and up. And it's historically done 8 to 9% on average
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  and say, you know, it's doing 30% this year. That means that the next year or the next
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  period in order to get back to that long run average or that mean, it's going to have to have
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  a negative year. And so it's just something to be aware of, you know, if you're invested in a
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  fund and it's done really, really well, say it's up 20% for the year, but it's a long run average
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  is like 8 to 9%. Then you kind of should be thinking in your head, okay, it's got a correct
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  in order to deliver that 8 to 9% rather than 20% that it's tracking at.
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  So therefore, it's going to have to have some negative years in amongst the really, really positive ones.
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  So it's just something to remember because we've had a few emails of people kind of chopping it,
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  wanting, wanting advice on chopping and changing their Kiwi Saver or their retirement funds or
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  like obviously we can't give advice, but it's just... Oh, I've seen quite a few messages come
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  through about that. Anyway, that's probably a lesson for another day, but it just means, you know,
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  look at the performance, the short-term performance in relation to that long run average. If it's above,
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  then, you know, it has to come down most likely. If it's below, then it has to go up. Take 2021,
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  for example, the stock market was up about 20%. The long run average has been about 8 to 9%.
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  And then we saw last year that big correction in the stock market in order to balance out that
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  really high growth year, really bad year, means that you get back to that kind of long-run average.
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  So that's just what I'm meaning when things are doing really well. Just remember, you know,
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  is this above the long run average or below? Therefore, what can I expect in the future?
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  Anyway, why have the market been so strong this week? Well, there's kind of two reasons
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  which I'm going to touch on. And firstly, it's all around, sorry, just getting FaceTime to
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  begin. Firstly, it's around the AI boom. Stop it.
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  Easy one in your shout out. There's a stock calling Victoria. We're in the middle of a podcast
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  record. It's going to work. I'm over here to work. Leave me alone.
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  I know you're really lively. Please leave me alone. Please leave me alone. Oh, gosh.
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  I'll call you that baby, Daisy, not a boyfriend, but yeah, just an update, because everyone
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  will be like, who the hell is Adam? Oh, no, we don't need to put that in.
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  Anyway, sorry. Absolutely not. So far we did it out. She always does. She's told.
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  Oh, anyway, anyway. So there's two reasons that the stock market's been really, really strong
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  this past week. Firstly, is all this boom that we're seeing and this frenzy and this hype.
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  Whatever you want to call that around AI artificial intelligence, the second is around the US
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  debt ceiling. So I'll start off with a more boring one in my opinion, which is the US debt ceiling.
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  So that has been resolved. So that is where the US government has borrows over $30 trillion
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  in money. And they've now been told you can't borrow anymore. You just start paying it back.
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  And they're like, well, we can't. And so there was a risk that we're going to do what we call
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  default on this debt and say, sorry, we can't pay it back, which would have been really, really,
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  really bad. So they figured out a less bad option. And that is all around giving, they've been
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  given an extension. So about another two years until 2025. So the good thing is that it removes
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  the uncertainty in the market because the stock market hates uncertainty. I was just going to say
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  before you continue, anyone that's listening, it's like, what is the debt ceiling? We talk about
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  this kind of cumulatively every week. So on the curve weekly, if you haven't listened before,
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  this is the first time it's kind of like, if you if you do follow it, you'll know exactly what
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  Vic's talking about. If you're like, I'm confused, just keep listening week to week because I think
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  whatever happens in the market or in the economy, in the world, each episode each week is kind of
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  not building on it, but you'll understand the more that you listen. So if you're listening,
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  you're like, this isn't for me. I don't know what you're talking about. I think most people
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  have listened to the last few weeks. Well, not what's going on. Yes, yeah, that's good.
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  Like I remember when you first mentioned the debt ceiling. And I was like, what are you talking
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  about? And now I'm like, oh, yeah, I'm following the US to figure out a way to pay that trillions
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  of dollars. Yes. Yeah. And so they've got this extension for another couple of years.
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  But they've had to sign up to a few agreements of what they're going to do in order to reduce
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  their spending. So the debt doesn't keep blowing out. And one of them is with student loans.
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  So students in the US with student loans now have got to start repaying those. So that's about
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  $400 a month for some students starting from August. So that's, yeah, it's going to really
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  significantly impact people with lower incomes. All of a sudden people are going to have
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  start paying $400 a month on top of the fact that inflation is through the roof interest rates
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  are rising. If I was sitting here and someone told me, you know what, in August, you're going
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  to start paying $400 a month, you'd be like, oh gosh, especially a student where your incomes
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  usually pretty low. I just had to start doing that with the bloody student loan. It's so useful.
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  Especially when you're not expecting it. Totally. You budget for a certain amount of money to spend,
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  and then things like that. And that's kind of why it's really important to have emergency funds
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  as well, because that can really help you figure out, you know, adjust your budget. Just give
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  you a bit of breathing room, I guess, is what a really good thing that an emergency fund can do.
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  But hypothetically, what if your emergency fund has been blowing completely?
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  Is this hypothetically asking for a friend? I've used the whole $5,000. I don't know what to do.
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  It's so stressful. The acne studio's clothing is not an emergency. So if you're all right.
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  Excuse me, I have not gone to acne studios. I wish. I'm really excited to go there.
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  Shut up, okay? Just pause it. No, just peruse. I'll just have a look. Just have a look, but
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  what is that? I can't afford it. I can't afford it. We're on the same salary now, girl.
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  Okay, I can't afford it. I'm like, oh, God. He spent some of us like this this class,
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  and some of us like driving me. Oh, my God. You're never going to let this go.
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  Now, here is a stat for you. Artificial intelligence, the industry, is expected to be worth
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  $1.3 trillion in 2032. It's only $40 billion right now. That's 32 times the size it is now.
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  So it's going to grow by 32 times in the next 10 years, which is insane. That's an annual growth rate
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  of over 40% per year. And this is why everyone's getting hyped up in hysterical and trying to figure
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  out what companies are going to benefit, what should, what stock shall be buying and all this.
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  And then one of those that's done really, really well, which is, it's called Nvidia.
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  And it's up about 170% this year in the first five months of this year. So it has gone bananas.
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  And they make that microchips and computing robots. They do all the software and applications
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  and stuff that go into artificial intelligence. So that company has gone crazy. There's lots of other
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  companies that have gone crazy. People are really trying to get exposure to this growing trend
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  that's going to be expected to be an explosion of growth for the next 10 years. One thing that scares
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  me is that there has been a lot of hysteria and a lot of hype in this space. And with a company
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  like Nvidia, who's share prices up 170%. That is crazy. In such a short space of time,
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  five months, it's share price up 170%. That scares me because that screams bubble to me in terms of
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  will this bubble burst? Are people getting way too excited over the growth or the expected growth
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  of the artificial intelligence market? And therefore, everyone's dropping on the bandwagon.
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  And maybe the growth doesn't end up being as strong as people expect. Or maybe these companies,
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  these artificial intelligence companies start disappointing in terms of financial results.
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  And therefore, the bubble burst and people lose lots of money. That's what scares me when I see
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  share prices that are going up so quickly, like in the videos. Because there's a common phrase in
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  finance and I love it. And it's a phrase that says share prices take the stairs up and the
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  elevator down. And that is very true when you see something that slowly goes up and up and up.
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  Or even quickly, but if you disappoint in terms of your financial results or people want to get
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  out, everyone gets out at the same time and the share price just goes straight down.
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  It's like the fear for the rainbow's end. Exactly, exactly. Just screaming all the way down.
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  When I went on the fear for when I was like 14, I got so stressed out on the way down that I
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  clinched my neck so badly that the paramedics had to help me out of the chair. That's how stressed
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  out I was. So I think maybe I'll steer clear of an abibia. Oh my gosh. Jeez.
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  Can't handle the fall. It freaks me out so much. That's probably why you need Botox in your jaw now.
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  Totally. A hundred percent. And other news, which is actually quite relevant for us off,
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  the European inflation came out last week as well. And a function is at 5.3% in May, which was
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  less than what they're expecting, which was about five and a half. So that was really, really good
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  news. However, they had kind of downplayed the excitement by saying that this is kind of one
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  data point. Don't get too excited. They still need to raise interest rates. There's still
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  need to get that inflation down to that two point. It's two to three percent band in order for,
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  which is the band for a healthy economy. And so they're like, don't get too excited. But it is
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  positive news. 5.3. That's getting closer and closer to that two to three percent level. And
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  ours is still in New Zealand. It's over six and a half percent, I think. So we've still got a long
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  way to go. And lastly, Lululemon, really, really good result. They had this week. I am probably
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  contributed to that result, to be honest, the number of Lululemon tights and tops that I've bought
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  over the last three months. Do you know what I noticed, which I thought was quite cool,
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  when I was at a Pilates class recently? There was like four or five of us that were wearing
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  Lululemon's that had holes in them. I know this sounds weird, but I just thought kind of cool that
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  all of us are still holding on to these pants that work perfectly fine with all what little holes
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  in our bumps or knees are weaver and still wearing them. Because I've just kept mine. I'm like,
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  they work perfectly fine. I'm not going to throw them out because I've got a hole in the knee.
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  And it was just, I really looking around being like, hole, hole, hole, hole, which sounds bad. But
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  I mean, we've probably all had them for five years. It's not as though they're brand new and
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  ripping. But I just thought, kind of cool that everyone's hanging on to stuff that's maybe not
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  quite perfect, but still really functional. And if you had ships, yoga pants, and they've got
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  a hole in them, you ditch them. But obviously they're good enough that you want to keep wearing them.
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  And when they get a hole, you're like, I don't care. I'm going to keep wearing them. But Lululemon
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  actually has a policy and the types fail from a manufacturing point of view. So say they
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  undo it on the stitching or something like that. Not a hole that you've caught in in reps.
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  But if there is a manufacturing fault, they may well replace it for free. So if the stitching comes
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  undone or something like that, then they replace them for free, which is quite good. So it's kind
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  of a lifetime guarantee. So what was their share price result? Yeah. So they had a really, really
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  good result. And it was all around them successfully stretching into new markets. Long.
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  See what I'm talking for you? Yeah. So they've launched into Mendeswear, which is doing really,
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  really well and shoes, which is doing really well. The biggest thing that contributed to their
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  result was the move to this direct consumer model. So Nike's done it. Adidas has done it. A lot
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  of the big names have done it. And they're starting, it's effectively just a fancy word for
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  doing online. And you can just sell direct to the consumer. And therefore it's much more
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  higher margin, which means more profitability for the business. So they've seen a big shift in
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  that post COVID, which is really, really good. And lead to them having a really good result.
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  Yeah. I mean, that makes total sense, especially if you've bought their products before
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  and you're a loyal customer, you're just going to buy the same thing online again. He knows
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  how loyal it's not that hard. So next week, Vic and I are going to be in Italy. We're going
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  traveling with a bunch of friends, which is very exciting. Our first holiday in a while,
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  we're going to be broadcasting live from broadcasting live. I mean, not technically live,
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  but we're going to be recording the curve weekly from Italy. How good it's going to be so fun.
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  Yeah. So excited. But we're going with 16 people. So we'll have to tell them to be like,
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  Shush, be quiet. Is he 16? Oh, so typical Sophie, all right. It hasn't been in the group chat
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  from the very beginning for about three months ago. So what do I have to pay? What, where's the
• 18:11
  location? What's the book? You see me a flight? I'm like, God, I'm like, your PA sometimes. Yeah,
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  it's funny. I could just jazz you a bit like, you actually have to pay this amount into my bank account
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  for the trip. Yes, and they never see me again. I'm excited because I've got no expectations,
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  because I have no idea what we're doing. It's great. And to round out this curve weekly,
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  we're going to finish with the would you rather? Oh, really? Yes. This is quite a relevant one,
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  actually. Would you rather spend a million dollars on clothes or a million dollars on travel?
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  Travel? 100 percent. And what about you? That's so easy. Hey, actually, probably a good investment.
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  If you spend a million dollars on like Birken bags and jewellery and things that actually
• 18:59
  help their value, it's probably be quite a good investment, but don't spend a million dollars
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  on fast fashion. Oh, my God. Imagine, yeah, I'm going to spend a million dollars in H&M.
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  Okay, Vic, I'll see you in Italy. Yes, see you then. Bye. Bye.
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  Thank you so much for listening to The Curve Weekly. Make sure you hit the subscribe button
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• 19:37
  week and see you next Monday. Bye. Bye. See you next Tuesday.
• 19:46
  See you next Tuesday. I mean Monday.