Stock Club EP#170: Cracking the Code on Unions & Equity Risk Premium

Hello everyone!

Welcome to the latest episode of Stock Club, where we dive deep into the fascinating world of finance, investments, and business developments. If you're eager to unravel the intricate dynamics of labour unions, dissect investment strategies, and explore the evolving landscape of major industries, you're in for a treat.

Key Takeaways

1. Labor Unions and Industry Influence: Explore the remarkable power that labor unions hold over public companies. Gain a profound understanding of how unionization affects industries and investments.

2. Hollywood Strike & Yellow Trucking's Bankruptcy: Delve into the ongoing Hollywood strike and its industry-wide consequences. Uncover the aftermath of Yellow trucking company's bankruptcy and its reverberations through the trucking sector.

3. Financial Landscape and Investment Insights: Understand equity risk premium and interest rates. Gain insights into investors' attraction to stocks, the S&P 500's performance, and how taxation strategies in the UK and Italy impact citizens.

4. Stock Market Surges and Legal Changes: Analyze Novo Nordisk's sudden stock surge and Zoom's revised terms of service, exploring the financial implications.

5. Ethics of Taxes and Global Economy: Engage in a thoughtful discussion about taxes, their role in the global economy, and the ethical considerations tied to their implementation.

Stay tuned for more captivating insights and thought-provoking discussions in our upcoming editions. Until then, keep exploring, keep learning, and keep thriving in the world of finance and business!

Transcript:

Michael O'Mahony: 0:05

Anne Marie, Emmet, welcome to another episode of Stock Club. Good to have you both on. We have a busy show today, so we're just going to get straight into it. I'm afraid we don't have time to talk about humans dressed as bears, but for this week we're kicking off. We're back to some industrial action. So I feel like we've been talking about this Hollywood strike for about a month, but it is really taking over basically the entire entertainment industry. So since we last chatted, visual effects workers are now threatened to unionise and join the strike. I think they were just sitting around on their hands anyways, I don't know if there was much work going around and as well as that, in South Korea, the Actors Union is threatening to strike too. So we touched on Netflix a while back and they're kind of international production, so that could be a big factor. There is well, apart from that, apart from Hollywood, we'll say, the trucking company yellow, whose workers are represented by the Teamsters Union, has just filed for bankruptcy as well. So there's an awful lot going on when it comes to unionisation, industrial action and how it affects public companies. So let's take a step back and just start with union. So why are they so important, and especially in relation to public companies. Why should investors be aware of unionisation and the risks in my carry?

Anne Marie: 1:22

Yeah, it's a good question. I read a lot of studies this week to try and figure out the answer to that. It seems like many economic issues you're like, oh, it'll knock on and create some good things and some bad things, but just some numbers kind of around what unions can do for workers. Studies show that union workers receive roughly 20 to 30 percent higher wages and benefits than non union workers. So the question really becomes does this mean that less profit falls to shareholders? Does this mean there are fewer stock buybacks and less money going into dividends and that type of thing? And while paying workers more, it does mean that there are fewer resources available to hire new workers. Studies have shown that productivity is either improved or unaffected by union efforts, and most studies show that collective bargains, as I mentioned, end up lowering the amount of money that falls to. The bottom line is you have to fork over more money for wages and benefits. But I suppose if you have a unionised staff and you work well with them, you at least get to divert the opportunity of a strike, because, as we know, strikes can be very, very expensive, as we've seen from Hollywood these days. I saw the CEO of Discovery coming out and saying, oh, we saved $100 million this quarter because we didn't have to pay anyone. But it's estimated that so far the strike has cost the entertainment industry each studio something like $250 million, so it's not really a savings, but a consideration for how bad strikes are going to be in a unionised effort is going to be for new industries Because, as you were kind of talking about at the top, it's seeming more and more that industrial action is appealing to people that we haven't considered and we talked about this a bit last year in terms of Starbucks. So what would happen if the entirety of Starbucks is staffed to unionise? And I actually think that the more important question is to frame those within the industries in which they're happening or the sectors in which they are happening. I don't think there's like a blanket answer across the board, and that is because, as companies have unionised workers, it often means that they have to redeploy capital towards labour instead of business investments, r&d and other assets like plant property and equipment, which does make a lot of economists argue that hey, like, that slows down growth. If we think about huge tech companies, software companies, they need a tremendous amount of cash in order to promote growth because they're constantly innovating. But I was kind of thinking, you know, if you're in a traditional brick and mortar retailer, if you're in something that's really consumer facing employee heavy, that's probably not as big of a concern. And actually, interestingly, there have been studies that have found that unionised businesses limit risk taking, but that constrains over investment and actually improves information flow within a business, which reduces the likelihood of any kind of stock crash. So it's that idea that forces management to consider their workers more and it just makes them ponder decisions a little bit. They have less money just flowing around waiting for them to make some kind of bad decision and I like that idea that you know management is forced to just be a little bit more considerate and that actually means that at the end of the day, their business is able to survive through good and bad. Additionally, it's worth mentioning that unionised businesses tend to attract talent and have reduced turnover. This tends to increase employee commitments because they feel like they're being taken care of. That actually makes me think of Costco, which is a stock that I haven't spoken about in several episodes, which means it's due, but they're an industry leader and pay and benefits in the traditional brick and mortar retail grocery space and their staff are interestingly not unionised. That's just something that Costco's management opted to do in the early 1990s and that means that they do have industry leading retention. And when that effort was announced I think in 1991 or 1992, it royally punished Costco stock. The street and investors were just not interested in this type of thing. You know if I mean, it is pretty shocking if you were to all of a sudden come out and say, hey, all of our staff are going to be paid $18 an hour, we're going to pay for comprehensive medical insurance and if they want to go to college, we'll, you know, give them a few thousand dollars along the way. But as time kind of wore on, we did start to realise, hey, like, in the long term this is actually going to save a bunch of money. And that is why, you know, we saw Costco stock be incredibly suppressed all through the 1990s and the early 2000s. Of course there were other exterior market conditions going on there. But now, god like, costco is one of, like, the best performing stocks that we have looked at and it is somewhat of a street favourite. People are willing to pay a premium valuation on that stock. That's also a point that's maybe worth mentioning is I think Costco trades it like an industry all time valuation, so it is the thing of oh yeah, you get to feel good about the workers are being paid well, so then probably investors are willing to shell out a little bit more, because it's maybe an ESG play, but this idea of of unionisation will inevitably hurt a shareholder. It seems to be true in the short term, but not necessarily in the long term. Finding suggests that the average effects of a union win at a workplace will decrease the market value of an affected business by 10 to 14%, but that tends to kick in within the first 18 months of the announcement being made in a vote going through, and then a stock will eventually, over time, recover. It is, though, then again the argument of if you have a business, that its growth is highly dependent upon stock buybacks and dividends, then yes, like, maybe the performance of the stock over time will slow down because it just doesn't have as much capital to play with. But then again you're gonna have an economist come in and make the argument like, hey, causing more businesses to unionise ensures that more money goes back into the hands of employees, which means that consumers have more cash to play with, which means that they spend more, and that decreases wealth inequality, which is good for the overall economy. So maybe, if you're thinking in the long term, you can comfortably say hey, I am fine with more and more industries moving back towards unionisation. That being said, after going through all these studies and talking about all these statistics, it is also worth mentioning that unionisation in the United States is a minority. In 1983, about 20% of employees belonged to the union and as of 2021, that number had dropped to just over 10%. This is not a mass labour movement unless more and more people start to vote to join unions, which, as you mentioned at the top, there are a few trickles of labour movements moving in, but we have yet to see a really significant player say hey, our staff has voted to unionise. So that would be something to keep an eye on and also a little bit of reassurance. I felt researching this topic was that annual. In his annual letter to investors, blackrock CEO Larry Fink wrote that workers demanding more from their employers is an essential feature of effective capitalism. It drives prosperity and creates a more competitive landscape for talent, pushing companies to create better, more innovative environments for their employees, actions that will help them achieve greater profits for their shareholders. So it seems like he's thinking again in the more long-term view of hey, this just is going to push more and more cash into the economy, which is good for businesses over the long-term.

Michael O'Mahony: 9:54

Yeah, it's interesting how you talk about short-term versus long-term there, and probably the problem with modern leadership and stuff is that they're very much rewarded for short-term results, and you see this with Starbucks's big pushback against unionisation and what's happening with Amazon as well. So it is a pity to see that maybe if those were founding CEOs fighting that fight or, you know, I don't know Mark Zuckerberg with his incredibly vast ownership structure it might be a different story, whereas if they're kind of more short-term especially Andy Jassy and Amazon, where he's replacing Bezos and that like huge figure and those huge shoots to fill it's a different situation.

Anne Marie: 10:38

But yeah, it's also worth mentioning just that the majority of this strike action and unionisation action is in labour-intensive fields at the minute. You know, it's in things where people are working exceptionally hard and if you can make like, you'd say, oh, like tech workers. You know software engineers, they're not pushing to unionise and it's like well, they get compensated with huge stock-based compensation packages, typically when they go into any major tech company, so they are effectively already making a tremendous amount of money. So I see this as just really a rebalancing of how we perceive and value labour.

Michael O'Mahony: 11:10

Mm-hmm, absolutely Okay, let's go around the house then to kind of the three major topics I mentioned. So we're starting off with the visual effects artists. So they're essentially just joining the Hollywood strike, I imagine. Is that pretty much it?

Anne Marie: 11:25

Yeah, they're voting to join a union and I'm actually quite happy for the VFX artists because I remember several years ago watching a last week tonight episode in which it revealed that VFX artists and video game designers are some of the only non-unionized groups within entertainment and that really means that they bear the brunt of labour within that market. They get really taken advantage of. They have famously terrible working hours, you know, sleeping in the office, that type of stuff, low pay. They are always on temporary contracts, which means they get hired in for a certain job and as soon as the job is done they get laid off Because they're on temporary contracts. It means that it's almost impossible for them to negotiate any kind of benefits or pay increases and they often do not have health insurance. So it's really like the worst of the worst. And that group that you mentioned at the top that is beginning the process of unionisation is the onset FX artists within Marvel Studios, so that is then within Disney, and there's only about 50 of them, so very small, but they did. When they voted on this idea it had a supermajority, so that's good to see. Onset VFX artists are people like data wranglers, production managers, witness camera operators and assistants on both film and TV productions, and they are attempting to join the International Alliance of Theatrical Stage Employees, which represents 168,000 technicians and craft people across live theatre, film and television, so they're very well suited to kind of joining this union. In a statement, the IATSE's VFX organiser, Mark Patchett, said that for almost half a century, workers in the visual effects industry have been denied the same protections and benefits their coworkers and crewmates have relied upon since the beginning of the Hollywood film industry. This is a historic first step for VFX workers coming together with the collective voice, demanding respect for the work that they do. So this is Nice and insignificant, but it is incredibly small. You know, it's only 50 people, but it is something to keep an eye on. If it continues to be a movement and Myself and I spoke yesterday about the actors and the writers going on strike seems to be indicating to the broader industry that there is weakness here, that is that you know. It seems like all these individual groups are waking up and going yeah, we're all being compressed, roll down here at the bottom and the suit user making all this money and we're not, and so I think it could spark something where we could see directors and producers, independent producers, joining in this fight. Going on strike would be incredibly detrimental to Hollywood. So, again, this is a story that investors should be keeping an eye on, particularly if they own disney or water brothers or paramount, since they are big studios that tend to have big vfx budgets. But it's also gonna be hard for streamers, because even though Netflix may not be putting out an Avengers film, you know they are putting out the Irish men and all those dudes to be damaged, and that's the effect. So, yeah, definitely something to watch.

Michael O'Mahony: 14:01

Could be that first time and out the fall on netflix. We talked a few weeks back when we first talked about the strike, about how netflix is. International production capabilities could protect it slightly, because this is very much a US strike bush. That doesn't seem to be the case anymore, so the south african, south koreans actors union Is looking at striking itself. So what's happening there?

Anne Marie: 14:24

Yeah, it's a very similar situation. They seem to be bearing the brunt of streamers coming in, disrupting this industry and then it's not really treating people very well. Apparently, the Korean Broadcasting Actors Union has been attempting to get in contact with Netflix and they're just refusing to come to the table or speak to them or acknowledge them. Anyway, which is very interesting because local broadcasters within Korea have already begun negotiating with performers there, according to union president Song Chang on. He states that supporting actors are not less working for netflix series than local korean network shows because they are paid per episode for fewer episodes, despite them being far more labour intensive and taking longer to shoot. So their per episode rate for supporting actors is three hundred dollars per episode, but those episodes are often taking several days to a week to shoot. You know, if you think about the complexity and the coverage needed for something like squid game, make sense, but imagine making only three hundred dollars to go into like a week and a half worth of work and then, on top of that, similar to every single actor currently on strike in the united states, south korean actors not receiving residuals. So they're not getting anything off the back end which you would normally get Off of a traditional network television show. So they are again making more on the back end working in a local tv station than they would coming in and being in like a huge international netflix drama that brings in all of this money and is credited with kind of sparking the second wave of people signing up for netflix. And so this is really, yeah, throwing a spanner on the works in terms of the argument that we saw all across wall street in that, oh, netflix will be protected from the strike because they source so much content from outside the united states. I would say that that market is right now where there seems to be a big cultural push towards, you know, people being accepting and interested in south korean culture and art. I would say that would be probably a big annoyance and impact for Netflix in terms of its ability to bring out new content in the next probably twelve to eighteen months. So if they effectively go on strike, it would be very, very interesting. As of right now, it seems that korea broadcasting performers rights association would like their contracts to not necessarily resemble sag contracts in terms of compensation but in terms of rights. So they are asking that, whatever the sag policy ends up being for streaming residuals. They would like that to be matched in the South Korean market, which you know could take a huge chunk out of Netflix's profit margin. So yeah, another one to watch.

Michael O'Mahony: 16:55

Okay, lastly, then we have yellow, which is one of America's oldest trucking companies, so it just filed for bankruptcy and actually blamed extended contract negotiations with the teamsters union, which is essentially the truck drivers union, as the cause for its failure. Now, I think this is blaming the wall you crashed into for the car crash. How did this one play out? Because we know the teamsters union are famous, or maybe infamous, for the power they've held in America for Sixty, seventy years, ever since the days of Jimmy Hoffman the connections he had will put it that way. So what happened with yellow?

Anne Marie: 17:35

Yeah. So, as you mentioned yellow co, he really came out swinging at the bankruptcy announcement. He tried to play but placed the entirety of blame upon the teamsters, which is never a good idea. It's kind of like a famous I don't saying in America where everyone is always like you, do not mess with the teamsters. They are incredibly powerful, they're very well connected. You just don't want to do it like if the teamsters go on strike, nothing moves, so nothing can happen. So many industries are affected. Yellow co is. His name is Darren Hawkins, who, unrelated, he made one point two, seven million dollars last year. Just keep that in mind.

Michael O'Mahony: 18:09

Very brave man like, if this is in the yeah, I don't think Darren Hawkins would be no, you'd be in the river, talking like this yeah.

Anne Marie: 18:21

All workers and employers should take note of our experience and worry. A company has the right to manage its own operations but, as we have experience, union leadership was able to halt our business, literally driving our company out of business, despite every effort to work with them. And so now we will go over what yellow has done over the past eight years to put itself out of business. So in recent months the company began bargaining for its next union contract. It needed to sign one before the march of twenty twenty four, but they stood pretty far apart on issues. As we know, the teamsters in the last year to two have been really pushing for an increase in pay. They wanted an eleven dollar per hour increase over the next five years, they wanted pension fund payments and they wanted a couple of operational changes. All of these conditions. Interestingly, we're just met by ups, so obviously it is possible to be in the shipping industry and meet this. The teamsters were already pretty suspicious of yellow coming into this negotiation because it had failed to make payments to the employee pension fund and they owed their employees fifty million dollars In pension contributions, which is pretty significant, and the teamsters had threatened to go on strike. And then yellow came to the negotiating table and begged for more time, and the teamsters granted that, which is unusual for them. Like that is very much an unusual thing to see. And but if we go back, yellow made a lot of expensive acquisitions in the early 2000s and then, in the 2008 financial crisis, all of its customers ran away because, of course, spending dropped significantly and they took a billion dollar loss that year. And then they tried to file for bankruptcy in 2009, but it was avoided because the Teamsters came in and negotiated and agreed to take a pay cut in order to keep its staff employed. So the Teamsters actually saved Yellow back in 2009, and then it considered bankruptcy again in 2014 and in 2020. And before it declared on Tuesday that it was going bankrupt. It has over 100,000 creditors, including Amazon, so lots of people are coming to get their money and the US government got something like 700 million in the COVID loans, whatever small business loans. Yep. It received $700 million under the CARES Act. Interestingly, though, they are currently at the centre of an investigation by the Congressional Oversight Committee because they received that money fraudulently. So in its documentation, yellow claimed that it qualified for a car alone as a company vital to US national security interests because it argued that it sometimes delivers to military bases around the country. But the Congressional Committee's final report determined that any other freight company could have provided this delivery service and Yellow was not essential. And, interestingly, under the CARES Act for national security businesses, yellow received the entirety of the budget for that sector. $700 million was allocated for all national security companies in the United States, so it took everything, and while management came out when they announced bankruptcy, the second statement that they made was that they do intend to fully pay back the federal government for this loan. We'll see if that happens. $700 million is pretty significant. And then, very briefly, what this means for the industry. Yellow is a less than load transport company, meaning it delivers smaller quantities of freight somewhere between like a full trailer truckload to like an individual parcel, so like an Amazon delivery person. They made up about 9% of the LTL market in the United States, so this is a big thing to happen, but there are lots of other players in this industry. The most famous is FedEx. So I would say the other players are just going to eat up this market share. And then, if you're worried about any kind of business that's relying upon freight or shipping, no fear, because when Yellow failed to make those pension payments of $50 million a couple of months ago, the Teamsters already signalled that something was wrong, and so the vast majority of Yellow's clients have already left. Over the last couple of months, they have seen their shipping volume drop by 80%. So it seems like everybody already knew that this was going to happen, so I wouldn't expect it to have a huge ripple effect on the e-commerce industry.

Michael O'Mahony: 22:14

Okay. And then lastly, obviously, because this is what happens now in these markets, the stock was shooting up the day it announced bankruptcy, and a short squeeze.

Anne Marie: 22:24

Yeah, a little bit of a short squeeze Jumped 24% on Tuesday, not great. There have been a couple of short squeezes the last couple of weeks. Tupperware just went, Nicola went Together. These stocks have resulted in 435 million in losses for short sellers this month. That's pretty significant. But my favourite little nugget that's emerged from this trend is Dan Loeb, who's the CEO of the Third Point Hedge Fund. In his recent letter to investors, said, fundamental analysis is increasingly taking a backseat to monitoring daily option expires and Reddit message boards, as evidenced by the numerous short squeezes and manipulations of heavily shorted stocks such as AMC and GameStop in 2021 and other this year. While we have not yet abandoned short selling, we continue to reduce our single name short exposure in favour of market hedges and short baskets, and this is kind of an interesting thing to hear from Loeb and it's kind of something that we have been talking about over the last couple of weeks, even just internally this idea that there are so many independent individual investors now in the market because of the access that's been granted by things like Robinhood, and it does seem to be having a real and almost permanent impact on the market. It's making things far more volatile and unpredictable and I'm very interested to see what this kind of does to the long term impact on the market. It seems to only be affecting the short term things like short selling and options and that type of thing. I wonder, yeah, what the decade outlook will be on this investor access window.

Michael O'Mahony: 23:47

Yeah, Ben Carson has a really interesting kind of running theory he writes about where, essentially, the easier you have access to investing, the more muted the returns become, if that makes sense, so because you can go and just invest automatically in the S&P 500 every month. It's so much less of an effort than if you had to go and ring your broker and you weren't sure what price you were going to get and there were no index funds at the time. So obviously your returns aren't going to be as good as they were historically. It doesn't mean that you shouldn't invest, but that you can't expect anything. It was 12% per annum, like you know collectively. So, yeah, definitely, definitely making an impact just in terms of the access individuals have to the markets now, compared to even what five or six years ago, even pre Robin Hood you know, Okay, let's move on then, Emmys. I want to talk for a few moments about the equity risk premium, because currently it's at a level where the incentive for investors to choose stocks over bonds has reached its lowest point in two decades. This is because the three month treasury bills have hit a high of 5.55%. So can you start by telling us what, what the equity risk premium is?

Emmet Savage: 25:07

Yeah, certainly, mike. You know, over the years I've had the privilege to talk about some of the sexiest stuff out there: Artificial intelligence, robotics, energy storage, DNA sequencing, gene editing, aka CRISPR. We've talked about AgTech, molecular diagnosis, reusable rockets, satellites, you name it. We've had a chat about it here in this podcast and I today have been reduced to equity risk premium, which is better known as ERP to you and me and maybe five of our listeners. The term ERP was coined by Reneesh Mehra and Edward C Prescott in a study published in 1985 titled the Equity Premium Opposite. An earlier version of the paper was published in 82 under a title a test of the inter temporal asset pricing model. Okay. So, however, if I was asked to write a review in the back of the book that these two lads wrote, is the paper? Here's what I would have said. These guys have codified the time proven theory that a bird in the hand is returned to the bush. Five out of five would recommend a follow for more the whole thing about this ERP. Another way you'd describe ERP is a measure of why would you bother buying shares? That's what it is. It's just a fancy financial person, an economist. So why should I buy shares, and the way that Mehra and Prescott said it was that equity risk premium is the excess return that investing in the stock market provides over risk free rate. So, to quote them, this premium compensates investors for taking on the relatively higher risk of equity investing. And if you think about this intuitively, if stocks didn't offer a potentially higher return than risk free investments such as government bonds, well, why would anyone do it at all, considering that there's greater volatility and uncertainty? And there's so many ways we can answer that question, and I'll leave our listeners to hit up Google for the equation on how it's calculated. Oh, it's some laughs. You'll really enjoy that. Folks should really look at how ERP is calculated. Believe me, you'll never look back, but it's. This is newsworthy because, as you said, currently the incentive for investors to choose stocks over bonds has reached its lowest point in two decades, and I know our listeners really just love when I describe the shape of a graph. It's just one of those things I do. It makes the podcast. So everyone just hears the volume on their radio when they hear me describe a graph, so I'm going to do it. So, basically, 20 years ago, the shape of the S&P 500, our benchmark index, the shape of its one year forward earnings minus the yield of 10 year treasury inflation, basically gave us a little graph on let's just call it whether the bird in the hand was better than the tuned. Bush actually won over that. Invert that, sorry. So basically 20 years Wow, this is really fascinating, right? So by 20 years ago the ERP was coming in at about three and a half or come back to that point, and then it went up a bit to 10 years ago, to a high point of about 10. And then it fell all the way back down again to where we are now, which is 20 years low. So basically, the shape of the graph, if you like, over a 20 year period was an upside down V, and that means the higher the point, the better stocks look, and the lower the point, the lower stocks look when compared to the alternative, which is a treasury bond. But what this means in simple, plain English is that the return margin of stocks compared to treasury bonds is now notably low.

Michael O'Mahony: 29:14

Okay, so how long was that?

Emmet Savage: 29:17

Right. So this is so interesting. I really hope our people are listening. We're going to have to jazz it up in some way at the end. So the difference between the earnings yield of the S&P 500 and returns from the 10 year government bond was roughly just 1.1 percentage points last week, which is the smallest gap since 2002. Well, actually, the spread of the 10 year treasury inflation protected security God, this great stuff is often considered to be a more accurate measure due to its adjustment with inflation. So when we bring inflation into the equation, it has also decreased the most minimal points in 2003, which is the 3.5 percentage points I just mentioned in that exciting graph chart a second ago.

Michael O'Mahony: 30:09

Okay, so what does all this mean?

Emmet Savage: 30:11

Right, okay, now that's the question. So financial nerds of which we three are complete financial nerds is that the equity risk premium can't remain this low indefinitely. So that upside down V is fine, but we're not stuck here. At this point it's going to move further down or up again, and a guy called Tim Urbanich told the Wall Street Journal during the week that the current stock to price to earnings ratio in a context of where interest rates just doesn't make sense. And again, moving it back to simple English, what most market observers kind of agree on is that just because the risk premium is low, it doesn't imply that the stock market's upward trend is ending. Historically, risk premiums have been even lower, like in the late 1990s, the dot com bubble, but over time these premiums typically revert to the mean, usually due to reduced corporate earnings forecasts, and there's actually quite a positive outlook among investors that risk premiums is going to stabilise if bond yields decrease rather than stock value is dropping. So look, with inflation potentially abating and slowing down, which is the thing that you know, switch on NBC or Bloomberg television. The conversation is really what's America going to do next with the inflation rates, our interest rates? Rather Well, the data suggests that there's only a marginally higher likelihood of the Fed raising rates this year, and during a recent briefing, the chair of the Federal Reserve, jerome Pell, hinted that there's a possibility of another rate hike, but he also signalled and this is the important thing a steady period if the economic indicators are favourable. So in summary, in summary, two birds in the bush may actually be better than one in the hand, and that economic paper I might actually rewrite my review but which is like a bird in the hand is where two in the bush, unless the two in the bush are better than the one you have in your hand. So actually always, I'll always prefer the two birds in the bush, because we're stock investors and all of this academic stuff is great if you're writing a white paper, if you're a lifelong student of economics and you enjoyed the pursuit of the maths, is the maths behind that? But for us, like, what bearing Does what I have, what I've just said, have the potential of crispr therapeutics? I actually can't find in my logic a dotted line between a breakthrough technology that's gonna change humankind and time proven, academically approved Studies of the relationship between treasury bonds and the stock market. And of course, I know we can sell. Well, I'd rather put my cash in here. It's safer and it's more assured than this other thing. But really we invest because we have collectively agreed that Portion of one's wealth should be appropriated to things that have an outside chance of giant returns or have a chance of outsize returns, rather and that's why we stock invest.

Michael O'Mahony: 33:15

Absolutely yeah, and I think that's definitely what we do at my wall street. For individual investors, you have this opportunity to make life changing returns and Well, there is that risk free rate there and it's at an all time high that makes a difference for institutional investors and everything. But for what we're doing and for, I hope, what a lot of our listeners are doing, it shouldn't be a huge factor in things. It might make some short term fluctuations, but apart from that I'm a re. You were bragging to us yesterday when we met before the call about how this is affecting your savings account savings accounts in general. I know it's not being not being passed on in Ireland half as much as in the states, but I can you. Can you fill us in?

Anne Marie: 33:57

Yes. So increased interest rates kind of across the board and what that's done for bank profits, have meant that you are getting some pretty great interest rates at the minute within a high yield savings account in the United States. I, mine, is coming in about four point three, five percent a PR, which is very good for a savings account. I think. So far as matching that at the minute, they might actually be a little bit ahead at four point four, four point five. So, yeah, it is, if you do not have a savings account where your emergency fund is parked in, something else, it is, if you're american, worthwhile looking into, maybe upgrading to something with a higher interest rate. I'm happy, said. The financial times put out a really great graph back to describing graphs and where they basically said the proportion of interest rates passed on to customers, so the proportion of the bank's interest rate. What if that is being passed on to customers? And up at the very top is the United Kingdom, unfortunate for us, coming at forty three. So a portion of it, like forty three percent of interest rate, is being passed on to consumers in the form of interest for their own accounts. Who's down at the bottom? Oh yeah, way down the bottom at a seven seven percent interest rate, interest is being passed on to consumers and that's actually something that to your powers have taken a note of the last couple days. Italy and Spain. I've introduced windfall taxes on banks for failing to pass on their savings to consumers. Italy is gonna take forty percent of bank profits this quarter in an effort to give those back To citizens, which you know that's. That's nice to see. So this is the official call out to the central bank of Ireland To knock on a I b store and take the billion euros of profit that they announced for this year is a little bit Thirty or forty percent and we just redistribute that amongst ourselves.

Michael O'Mahony: 35:43

That would be great, in fairness they'd be, though they've never done anything wrong or taken any money from taxpayers before, so.

Anne Marie: 35:49

No, absolutely not.

Michael O'Mahony: 35:50

They have always been the noblest of businesses okay, and, on that note, if you're still awake and you're still listening to us, you might love reading from us, where we don't talk about Interest rates and it could be for twenty minutes. We are delivering to your inbox one of the most unique products on the market and it's completely free. No one else is covering the markets we covered with charging for this where we deliver to you a new weekly stock, which could be from Amsterdam, Tokyo, Paris or somewhere in between. So that is a completely free stock, which every week you'll have a red and thirty seconds flat, and we can almost guarantee most of these companies are going to be brand new to you, which is where you get an edge. Sign up now in the show notes for this episode. Okay, big deal or no big deal. I'm going to start with you and novo Nordisk. So Nordisk, so shares of the farm company we're soaring this week, as a study study showed, its obesity drug. We go, we reduce the risk of heart attacks and strokes. Big deal or no big deal?

Anne Marie: 36:45

Yeah, pretty big deal if you're gonna try and invest in this kind of anti obesity trend. Analysts have said that the results would essentially pressure public health systems and private health insurance into covering this new class of drug. They haven't had a tent up to this point, so it's very, very expensive. As we know, like all Drs have been recently developed by companies. They tend to be prohibitively expensive, but this is essentially now like an ethical issue. You know, if you're denying people who are at risk of stroke and heart attack to medication that could legitimately help save their life, I don't. I think you have to do it now at this point. That has meant that this could create a hundred billion dollar a year obesity market in the world. So, yeah, pretty significant. If you happen to be owning any medical mutual funds that own and drug companies have these drugs, it's probably been a great day. Novo share surged as much as sixteen percent upon the publication of the study.

Michael O'Mahony: 37:40

And chairs in general have been soaring since the start of the year, when all this epic craze came out okay, and we're talking about zoom here. So it's this kind of sneaky, strange big brother type news story so it updated its terms of service, meaning user data is now being used to train its AI and machine learning models, and you can't basically can't opt out of it. So big deal or no big deal.

Emmet Savage: 38:07

Oh, yes, sir. Well, during the week, zoom, as you said, updated its terms of service and it allows the company to use this data that we've all basically shared with it for machine learning and AI purposes, without, at that time, providing an option. So wait to hear this. The updated terms also permitted zoom to redistribute, publish, access, use, store, transmit, review, disclose, preserve, extract, modify, reproduce, share, use, display, copy, distribute, translate, transcribe, creative derivative works and process customer content. And they forgot to include the kitchen sink, I mean. Yes, a serious collection of herbs right there, you know, if you went into chat with chippy teens and gave me every variation of the word published or any kind of that's right.

Michael O'Mahony: 39:03

That's a legal team that is waiting to be sued. Yeah, I mean you can use every iteration.

Emmet Savage: 39:10

Yeah, look, can you imagine privacy advocates and legal experts. When I saw this they got so discombobulated. You can just imagine people's mouths. It's really unbelievable. But zoom responded anyway, cuz you know the world set up and you know the privacy and legal experts in the area obviously Took to their keyboards or whatever and made it clear that this was not cool and zoom responded by saying that customers can decide whether to enable gender to a features and, separately, whether to share the customer content for some For product improvement purposes, which is all very confusing, cuz I think in the world we live in, where we interact with hundreds of technical products a year whether you're subscribing for Disney plus or Playing a new game in your PlayStation five and, like people, just click, okay, just get out of the way, get out of the way and that's all fine and that that zoom upset here we've now separated. But I really don't Expect it's done in a way that people know that the B story is transmitting, reviewing, disclosing, preserving, blah, blah, blah, blah, wrapping their way through, like everything then. So yes, so then, as I said, long behold. The clarified that customer content will not be used to train third party models without consent and make it clear that customers can consent to use it, use of their data. It's really all very confusing if you're to get sucked into that world and to me, mike, it's a storm in it in a cup. I think it's no big deal if you use any electric device. What is possible was the exception of your toaster. The internet is listening and watching and learning, judging you and marking my words of five years Samsung is gonna release an AI powered refrigerator. That will tell the team back in Samsung HQ to release an AI powered toaster so they can talk about you when you're not in the room. Did you see what that guy was wearing this morning at breakfast? But, like, like AI, it's moving in, it's all around us and sure zooms and you know, make a list of things they're gonna do with. Your data was caught, it was picked up, it was reported on in the media and what I say? It's no big deal. I say it in full awareness that it's no big deal, because everyone is probably doing it and I think it is a big deal, but it's kind of. They are just one brick and a wall of AI companies that now have stuff on you. They just so happen to go and tell you hey, we're gonna use this stuff for everything we can think of. So there you go. Big brother is watching. We know it, baby.

Michael O'Mahony: 41:45

Yeah, I think with something like zoom, though the fear is that because it's so much use for business communication and stuff, I imagine there's a bunch of trade secrets and hush hush and conversations people Would assume would be private. Like I think if Facebook came out and said they're Doing the same at WhatsApp right now, this would be a much bigger news story.

Emmet Savage: 42:08

You're absolutely right. I mean the case. So my presumption, which may be flawed, is incorrect, is that Live zooms are live events that are not recorded. You have to opt in to record an event or a broadcast and that then, I presume, is deposited on their servers. I think an awful lot. I'd imagine 95% of zooms are in the moment like a phone call and not recorded, but that isn't a lesson. The point you made, Mike, there's no doubt. I mean who in business hasn't had confidential conversations? What colleagues are customers, who haven't? I mean that's the nature of business and for zoom to know suddenly say that's ours. Thanks very much. No, sorry, it's not so. Okay, do you know what I'm gonna do? I'm gonna change my mind. I think it is a big deal. What do you guys think?

Anne Marie: 42:57

Yeah, I think it's a big deal. I saw a number of people on Various forms of social media, talking about the fact that oh, you know, a lot of lawyers use zoom as a way to communicate with their clients. You know that effectively ruins, like, client privilege between a lawyer. I know that some people like zoom is sometimes used by medical Professionals in order to, you know, check in with the patient. That effectively ruins doctor patient confidentiality. I know that Something I saw within the strike community of the WGA. They were like during 2020, we all got in the habit of planning whole television episodes and discussing them and working them out on zoom. That continues to happen. Up until the strike, they basically were like that's a huge breach of confidentiality. None of the studios are gonna want, you know, their potential content ending up in some zoom algorithm six months before an episode comes out. So, yeah, I think it could be. It could damage their Business clientele significantly if they don't. I don't know, walk this back effectively and then talk about oh yeah, no, we encrypt your conversations. We are, we do not use your data. Blah, blah, blah.

Michael O'Mahony: 44:03

Yeah, I think zoom is having a bad week when it comes to reputational damage. They just announced that they're bringing all the employees back to the office as well, which is wild.

Emmet Savage: 44:17

Are you serious? It really is kind of like I don't know, like Heinz saying guess what you're not allowed to use or catch up anymore.

Michael O'Mahony: 44:27

Zoom. Getting sick of zoom meetings is really yeah. Okay, on that note we're gonna finish up, but before we do, I just want to give a quick word from our friends and sponsors at Vodafone business. I used to think of Vodafone business as only a reliable provider of mobile and broadband needs, but they're really stepping up to help Irish businesses grow and flourish in an increasingly digital world. So they now offer a whole array of digital apps, from productivity tools and security solutions to IT support and even website builders. More recently, vodafone have launched their V Hub digital advisory service. With its new service, Irish businesses of all sizes Can offer free one-to-one digital support and advice tailored to their business by simply booking a call with one of the V Hub digital Experts on the Vodafone business website, search Vodafone V Hub for more information. Okay, Emma and Amri, thank you very much for joining me and thanks everyone for listening. That's it for today's show. If you have any questions you'd like to answer or elevated pitches you'd like to tackle, make sure you can touch. You can find us on Twitter at MyWastryHQ on Tiktok at myWaster. You simply just email us a pod at myWastry.com. If you're enjoying the show, make sure to tell your friends about us. Don't forget to leave a review on whatever podcast platform you listen to us on. Thanks for joining us and we will talk to you next week.