What do you see for US stocks and for Australian stocks?

Yeah, great question.

pretty bearish, the Aussie economy.

And it's hard to get optimistic.

I'm not an expert on equities, but what I would say is I'll run you through this little thought experiment.

CBA trades at three and a half times book value.

So its price to book value is 3.5 times.

What is your view on the AI revolution and its ability to keep the stock market going higher?

How do you rationalize those two things?

Well, our views haven't changed.

In late 2021, our Taylor rule models were saying we prepared presentations in December 21 when the cash rate was 0.1% and US 10 years were at 1%.

Our modeling was suggesting the Fed needed to get to 5% to 6%.

We have those presentations showing that.

And no one in the world was saying that at that point in time.

The peak in the Fed's cash rate in late 21 that was forecast for 22, 23 was like around 1%, right? So they thought they'd lift it off near zero to a circle one.

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Mm

... you can't take those losses and use them to reduce your tax elsewhere against your other income, which is like a fundamental investment concept that is accepted globally.

Instead, they're saying, "No, bad luck.

Uh, you can't use those losses," and that reduces the rate of return you'll earn on investment properties.

But the second, and absolutely diabolical double, double whammy, is that they are massively increasing capital gains tax, uh, to pretty much the highest level in the world, from, uh, half your marginal rate.

Um, so if you've got a high growth property that's done well, previously you'd pay maximum 23.5% capital gains tax.

Now you'll pay 46 to 47%, Karl.

Mm.

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So basically, the RBA has to keep inflation between 2% and 3%, or their target is 2.5%.

It's running at 3.9, six-month annualized, or 3.4 on a 12-month basis.

Long story short, they've massively missed the target.

As I've mentioned, they haven't hit the target since 2021.

They're the first to acknowledge that.

And there's nothing wrong with the RBA.

There's understandable rage out there with what's happening here in Australia.