Khush: 0:10

Welcome to the UFC crisis, we challenge ourselves to explore the world of business tech, investing in science, get curious and be part of the journey as we discuss, challenge and learn. So today we are doing a 2023 wrapped and bit of a 2020. For outlook episode, we're going to wrap our favorite topics and the big stories that we've talked about this year, up in this episode, and then look forward and in those trends going forward. So we'll talk about markets, crypto renewables, AI, and EVs. Lukey. How are you mate?

Luke: 0:43

Very well. Thanks. And we're also going to do a little prediction at the end as well. Yeah, super keen.

Khush: 0:49

We'll launch straight into it. Because we have a lot of content today. What is keeping you curious at the moment?

Luke: 0:54

So I have learned about Enron and the fraudulent collapse of the company. And it's relevant for us because we both operate within the utilities industry. And so I've learned about the impact that it's had mark to market accounting, micromolar, accounting, what all this meant, what's kind of happened after this has all occurred. And yeah, just how it's kind of impacted the industry and really changed things forever. So yeah, that's, that's me. What about you?

Khush: 1:22

Damn. That sounds interesting. And I reckon, in a way we could do like, we like doing thesis episodes, or like, what's good about companies in industries? Where we could do fairly as episode we could do like Enron and FTX, or something, that'd be fine. What's keeping me curious? Well, in seeing what the episode actually 2024 is keeping me curious. I'm very keen for the year ahead. But you know, lots of happening are moving cities. So keen, keen for that, and curious to see what it brings. But I think, what's one of your favorite codes actually, that land off you? It's like, people underestimate or overestimate what they can achieve in a year. And underestimate what they can achieve in I think it was like two or five or 10 years.

Luke: 2:01

Yeah, yeah. Yeah. So four months is a long time. Once you get once you get the first 12 cracking, you know? Yeah.

Khush: 2:09

And for me, I think a lot of things that continuing on, so pretty excited for that. Anyway, to launch into it. Let's jump into markets, I think you're going to start us off.

Luke: 2:18

Yeah, we're going to just do a bit of a recap on investments and markets and kind of what's happened in terms of finance across the last 12 months. One of the big ones has been inflation. So every country has had inflation and has increased interest rates. So that's, you know, that's gone worldwide. That's one of the big ones, the Federal Reserve, obviously, kind of leading the charge, they went in pretty early, there's a good chance they'll, they'll reduce them significantly in 2024. But one of the other big things that happened in the US was also the debt ceiling was reached. That was a big one. We also had to know three bank failures. I think only two of them were in the US. That was the Silicon Valley Bank, Credit Suisse and first republic bank. And that was their second largest banking collapse since Lehman Brothers. And then first republic overtook Silicon Valley Bank as the new second biggest so they had with they haven't had banking collapses like this since the Yeah, like since 2008, which is in second year, actually. Yeah. Yeah. Since the GFC. Exactly. So that that was crazy. And to cap the year off, we had gold up 16% oil down a percent and Bitcoin up 161%, which is pretty crazy. But that just goes to show that yeah, like, even in markets that were that had this much turmoil. There were still some things that were up, which is interesting. And that those were the safe havens, but oil was down I think is quite. Yeah, that's pretty interesting to me. And then I think the the other big one was the China real estate collapse. So they had Evergrande. That was in 2022. And then then they had Country Garden in 2023. Yeah, that's, that's a real problem for them. They've basically been able to the vet able to have unlimited growth, essentially, by just pumping money into real estate. And I guess when you when you don't play your cards, right, in real estate and selling things that aren't actually developed yet, you can have a lot of problems. And I'll leave it with the last one as well, which was the WeWork collapse, which is the US biggest startup failure in history. So they filed for I think, chapter 11 or chapter seven bankruptcy. And that happens. Yeah, in 2003 as well, so yeah, there was a lot that happened. Yeah.

Khush: 4:39

So a couple things that stood out to me there is, you know, in theory, all of that is bad or a lot of that was was bad news. And in theory, it should have affected markets very negatively, but overall across the year, were significantly up in the major markets. The s&p 500 is well up and and it has had a bit of a big run in the last quarter of the year, you know, with inflation up to like 10.5% in the UK. That's pretty crazy. And in Australia here that we had, you know, 12 interest rate rises within 13 months, which is unheard of since the very cheap money years of COVID. It's crazy to see that, you know, this has been like an overall good year for equity markets. So, you know, giving a prediction out of that is going to be absolutely ridiculous. Big Year, but yeah, generally the predictions now or at the end,

Luke: 5:33

let's do them now. Well, we'll do them for each section. Yeah. Okay.

Khush: 5:37

What do you reckon? What do you reckon happens looking in 2024? In markets, I'm going to focus on equity markets, but yeah, whatever.

Luke: 5:44

For me, the big one is going to be interest rates are going to drop back down. I think that that's going to be interesting. But I think a lot of people are thinking they're going to completely go back to the lows that they that we previously had, and I don't think that's going to happen. I think they're going to find a bit of a middle ground where they decrease, but they don't get super cheap. We're not gonna have money. That's super, super cheap, I don't think I think especially the US is walking a bit of a fine line, because they kept increasing interest rates, then they had banking collapses. That was more to do with their bonds, I think, but um, then they're basically stopped increasing them. And I think that, that that's what's gonna be really interesting. What are they you?

Khush: 6:23

Yeah, well, I think I agree with that. I think interest rates are going to start coming down. Not that we've really seen that in Australia. But inflation has come down. I think now, it's like in the 4% range here. But

Luke: 6:40

what it peaked out at around seven point something,

Khush: 6:42

yeah. And now it's starting to come down like inflation has. So, you know, interest rates should follow that. And the markets been really hot on the back of that news, I think, uh, but I think markets are very forward looking. So they might be pricing in interest rates going back down to very cheap money levels, like COVID. So I think, look, you know, if interest, interest rates come down, historically risky assets do better. So, like, crypto in equities would do better. But this year, it's been full of bad news. And we've still had a good year in equities. So I'm gonna go contrarian. And I think it's gonna be a bad year. I think people are going to be over exuberant, over exuberant realize we're not getting cheap interest rates. And I think it's gonna we're going to end all our major markets lowering at the end of training. Really just gonna throw it out there. Yeah.

Luke: 7:29

Okay. I didn't expect that. I was waiting for you to just kind of rein it in a little bit. I didn't think you'd go for contrarian. That's interesting. Okay, I didn't I wasn't ready for that.

Khush: 7:41

Well, 2023 was full contrarian. So why not?

Luke: 7:44

All right. Yeah. Fair enough. Fair enough. Yeah, I guess following markets. The next thing would be crypto and what's going on with that? It's a market of itself. I guess. If we look back at 2023, we see some some major things that happened. One was the Aetherium layer two growth and the token drops, which was for layer twos, especially so Coinbase had base come out, arbitrarily had the ARB token drop and optimism had the OP token drop as well. So that's huge growth there. But I think yeah, that's that's really positive for the theory. I think what's not so positive for the industry was the by Nance CEO, CZ stepping down and being having some criminal charges, which is crazy. Money laundering, essentially, to that that was a very interesting one. We had Coinbase and binance. Both of them were sued Coinbase stock price absolutely exploded towards the back end of the year. Yeah, we were expecting a Bitcoin ETF approval from Blackrock or fidelity or a bunch of other kind of Og, you know, Wall Street players. And that didn't happen, which is interesting. They had the Fed now cbdc launch which was the essentially digital US dollar launched, which was rather uneventful To be honest, Sam bankrupt, fried, were found guilty and was sentenced to prison, which is good. And I'd say the last one which did happen towards the end of the year was safe Moon LLC filed for chapter seven bankruptcy. And was it's been investigated for securities fraud, which is really good because they were one of the guests quote unquote, scams that were just straight up, basically saying, we'll make you heaps, they had nothing to back it up. So I think that's really good.

Khush: 9:26

It seems like a bit of it's been a bit of a not a consolidation year, but we'll clear out urine in crypto, you know, will bilancio gone, I suppose the whole of FTX gone and obviously sambangan fried with that gone and then safe mood as well. So maybe, you know, we started to clean up the industry and becomes less of that wild west. And I think we've talked about once before. It's

Luke: 9:48

hard to know. I mean, you know, it could be another shocker of a year we've had two years in a row we've had significant issues with large exchanges FTX and then Barnett's back to back so who knows But at the same time, I think one of the Yeah, one of the benefits is that, yeah, those huge plays are gone now. I mean, obviously, finance isn't gone, they're still operating. But I think it will add regulatory clarity. But that also could be a bad thing. So we'll really wait and see, I think it's very up in the air as to how it goes. The Bitcoin hardening will happen in 2024. So I think that's, that's interesting. But as you said, before, everything's priced in, you know, you think it's already priced. Did you think of that that's priced in? So we'll say,

Khush: 10:31

Well, okay, well, I'm not gonna let you get away with saying we'll see in the spirit episode. So what's your what's your outlook for crypto Treasury for?

Luke: 10:40

I think it will be a much better year than 2023. I think the main my main prediction is that a spot Bitcoin ETF will be approved of some description. And I think it's unlikely that a spot a theory of ETF will be approved. But I think that that when that news does happen, it will be quite a big pump. And I think it will happen in 24. I don't know when but I think it will. Yeah, that's my prediction. Yeah. Okay, cool, have anything. I'm

Khush: 11:06

not crazily big. But I think that look, everything I read is that institutional investing is getting more excited and interested in the crypto space. So I think that's going to continue to have a bit more of an uptick. And I think there's a couple of key moments with that. One is just what you said the Bitcoin spot ETF being created, because that makes it so much easier for institutions to get involved and have some portion of the assets in crypto. So that's probably my big one. And if regulation and regulatory clarity comes through, again, that supports the institutional buying to crypto. So as that happens, it becomes more mainstream. So I think it could be a year of growth of awareness and growth of acceptance of crypto so

Luke: 11:52

and just for clarity, there actually is a BTC ETF, and I believe it's run by greyscale. But the difference here is that it's not a spot ETF, which means that you're not actually trading on the spot price, you're you're trading on portions of BTC that the company owns. And they can essentially charge what they will like, like so there's usually a premium, and it's not, there's basically a lot of implications with it. So that's that's kind of the the point is, if it's a spot ETF, it's exactly based on the value of the asset, which is way more interesting to institutions. So yeah,

Khush: 12:23

right. Um, well, thank you for that. That was very hard prediction to make. But it was good fun, I might take on renewables in the energy transition piece. So just the big news in that, unfortunately, I have not much good news to start with global emissions of carbon dioxide rose to about 41 billion tonnes. So that's not all greenhouse gases, that's not co2 II, but it rose in no surprises, the majority of that about 37 billion was from fossil fuels of burning fossil fuels. And that I think I read it was a is a record. So not good news there. And if these carbon dioxide emission levels persist is a beneficial 50% chance that our climate system would reach that 1.5 degrees of warming above pre industrial levels in about seven years. So like 2030. And that's what the Paris Agreement commits to try to prevent happening. So obviously, a lot needs to be done. But I'll give you the other side of the coin, which is essentially that renewable energy surge, but installation surged by 107 gigawatts to reach 440 gigawatts total. So you can see a massive growth there, the solar was to two thirds of that. And there's been a crazy uptick, which obviously, we've we've definitely seen in Australia, of rooftop solar, so on homes. And then I think China was a leader overall, accounting for 55% of global in additions of renewable capacity in the last few years. So it's projected to keep growing and that's by, you know, policy adoption from the big players, way higher fossil fuel buses, so everyone would know that, you know, if you're filling up your car at a petrol station, you're paying a lot more than you were probably two or three years ago, and energy security concerns. So there's been a lot of onshoring. So typically, oil and gas comes from big players that gets piped in, for example, from Russia to Europe, but a lot of that has been sort of taken into a country's own hands by producing the energy there. So I'll talk about EVs later, and obviously, renewables really starting to see a bit of that quick uptick in installation, but why are we still emitting more? Essentially, it's because everything's getting back to pre COVID levels. So all the emissions are pumping him out. But the problem is that the renewables and EVS as we've talked about before are the easiest solution. So emissions still growing, but that's because decarbonizing the big things like heavy industry and producing materials such as steel, cement and plastic, I still emitting a hell of a lot. So I think just a lot of r&d needs to go into that space before we can really start seeing some some headway and progress.

Luke: 15:12

And what's your prediction for, for renewables?

Khush: 15:16

Well, I'll start off negative. So I'm going to finish optimistically, I like that, I like that. So the thing is with with all these solutions, it takes time for things to show results. So for example, it's been a long time for us or in Australia, especially to to achieve emissions reductions initially, but they're starting to increase a bit more quickly. So at this stage, we'll we'll hit 37% by 2030 37% reduction on 2005 levels, but we are with additional measures can hit 42%. And then also the big, big things are starting to happen. So an example which used to be Australian but as global. The company FFI or Fortescue, future Industries has been all over cop 28 and all over the world touting what they're doing. But they've got, you know, actual solutions being demonstrated such as green ammonia shipping, eliminating diesel from there are heavy operations, and building electrolyzer factories. So all that's very hard and takes a long time and requires a lot of capital, but it's starting to happen. So I think, you know, in the next couple of years, the fruits of the labor of labor with renewables and EVS will start to show a bit more, but then also, some of that big stuff is starting to kick off. And I think if we talk about technology, S curves, we're going to see progress a bit later on. So we're going to keep pushing really hard. But that's, that's what I'm saying.

Luke: 16:42

Yeah. So our next topic is AI, which I think is potentially one of the most interesting ones simply because it involves the whole NASDAQ, if you're on the NASDAQ, and you're not involved, you're in trouble. So I think it's actually pretty easy. And that is that, you know, we've seen a bunch of charge up declines, essentially, a lot of LLM release, we had barred, we had Larmer. We had grock. We had heaps of them. And I think that's gonna be really interesting. And I think one of the big things that happened as well was that church EBT went multimodal, which essentially means that it's not just text anymore, it could do other things. And I think that was a huge step forward. And I think that will probably be a theme in 2024 as well, I think, yeah, we had a huge amount of growth in that space everyone was claiming to be involved with it was, was also a little bit of a funny one. And I would say the big one for the whole year was actually nothing to do with AI at all, but an indirect connection, which was GPU shortage, the absolute mooning of invidious stock. And just the way it's doing, yeah, essentially the shovels in the goldmine, or the pigs in the Gold Rush scenario. And I think that that's really interesting. And I'll make this one quick, because it's hard. There's a lot of moving parts. But I would say that my prediction for this is that video generation is going to grow significantly, after some of the the image generation that we had a lot of progression in. I think that the fake generation of images is going to pose a real big problem. And I think that the solution to that is going to end up being blockchain funnily enough, that's a bit of a hot take. Yeah, and I think that the last one is that someone or multiple companies are going to integrate AI, as in LLM, and the the progression there into assistants, so like, Siri, or Google assistant, or whatever. And I think that the last one will be the growth of micro models. So really small models that run locally on things like a watch or a phone. I think that those are, that's my prediction for what changes that? Yes. Well,

Khush: 18:44

okay, so hang on, I'll pull you up quickly. Micro models. So there's local API's, like so. So as learning from a massive global data set the learning from a local device and application specific data set, instead

Luke: 18:59

of being you know, 500 billion parameters, they might be a little small, 7 billion, and it can actually run locally, and it's still really useful. I think those are going to have real growth and people are going to find great ways of optimizing it without throwing you know, infinite data and compute at it. I think that will be a big change. Yeah.

Khush: 19:19

Okay, so the lack of the need of crazy amounts of community to improve and keep iterating and then quickly assistance integration is that already happening? Or it's in the works because obviously like you know, you can use some of these guys as your your help, but it's not in those. What does Amazon

Luke: 19:38

yeah like Alexa or like I so I mean directly into one of those where it can do way more. And I think the one of the reasons why it hasn't happened is because you kind of you unlock the door a bit like suddenly can do a bunch of things or a can't do a bunch of things. We asked him to do something but it can't actually, you know, open your app and do something but I think that will be a big, big change. And I don't know who's going to do it first. But I think yeah, that's a big one quicker. And

Khush: 20:04

then speaking on opening the door, what happens in terms of ethics space of AI? Because we did see, one of the other big things is Sam Altman got fired and rehired. And I think that was around. I don't know, the full details. I don't think anybody fully knows unless you're in that boardroom. But that was around ethics with AI. What happens in that space? If you've got any any bold prediction?

Luke: 20:27

I don't know. I think it's there'll be more regulation. I don't know whether this is the year for it. It might be next year. I'm not sure. But I think it'll continue to be more significant. But I actually have a feeling that this might be the year that people really realize that that's important, if that makes sense. Yeah. So it's, you know, that people are aware of it, but it's not like really a thing. And then this year, it'll be like, well, we need some controls around AI. This is crazy. And I think a lot of that will actually come off the back of fake images. But yeah, yeah, right.

Khush: 21:00

Well, it seems like this is that's a theme around all of these spaces that we're talking because they're also fast moving that, you know, traditional regulations, stuff has not kept up or cannot keep up because it's so yeah, well, alright, I'll jump into the interest of time, the last topic that we talked about, obviously, this year, and we'll probably continue to look at going forward. And it's electric vehicles. So I'll try and keep it short. But essentially, this is good news in terms of the transition, glow plug in vehicle registrations were up 45%, late in the year compared to late in 2022. So that's a hell of a lot more than market share, was 35%. In China, by the end of the year, John was 35% Plus, Norway had a 90% market share, and this is sorry, of new vehicles being bought. And then Australia was less than 10%. And us here that just about 10%. The thing is, in the smaller markets, the growth rate is crazy year on year, it's nearly, you know, 4050 60%, but it's pretty good to see some of the major markets, namely China, and some of the European markets hitting a big market share in new vehicles sold. But the issue I suppose is that doesn't represent all the cars are currently on road. So EVs would make up a small portion of that. So one of the big things that that this means is, and I was reading a little bit about this is in terms of new cars sold, it's kind of getting into the disruption zone of an S curve. So if you imagine, you know, a tech adoption S curve. And a good example, in sort of this space is solar panels on your home solar panels. So you know, once I hit that one of those inflection points, now there are, you know, on two thirds or more of roofs in Australia, and a lot of the developed world has really seen a massive uptick. And they're one of the biggest contributors to energy systems in those countries. So if the world hits that with electric vehicles, which I think is entirely possible, within the next two or three years, we can really see some crazy market shares of electric vehicles. So a couple of big things this year, I suppose the best seller of EVs was Tesla's model Y by BYD song car, but that was both plug in hybrid and battery, and then followed by Tesla's model three, the cybertruck was released, which is obviously big, big news. Finally, and the biggest sales in the world by brand was BYD, but beating Tesla, but they're on the same sort of order of magnitude. So two big players, Tesla and BYD absolutely dominated by Yeah, they're continuing to grow. And I suppose looking forward, they need to grow. For example, for Australia to hit our climate emission targets, we need to hit 50% of new cars sold by 2030 to be electric. And that's probably mirrored mostly around the world because I suppose our current targets are in line with the Paris Agreement. So any country that is the same EVs Yeah, but I think that's that's looking likely for EVs. I'm pretty bullish, because, you know, in the countries that have seen those massive updates, so you thinking China, Germany, Norway, there's been really like ambitious government policies, vehicle tax incentives, subsidies, and basically just making EVs cheaper and more accessible. And the rest of the world is learning that so you're seeing some of those come through, for example, in Australia, Australia that the National Evie strategy was released. So that's sort of starting to happen. But then also on the consumer side, there's been crazy high fuel prices, which might incentivize people to buy EVs and that's all over the world. It's not discriminatory, only to develop countries. Yeah. And then software battery prices actually could bring cars down. I know when I was doing research a few years ago on EVs. It was said that 2024 2025 was when a lot of EVs start hitting prosperity with your internal combustion counterparts. So, you know that very well could happen this year. I think it will. And I think the next year will be a big one. And we'll get into that the steep part of the S curve. So, EVs, I think will start taking off.

Luke: 25:17

Do you have any predictions? Do I dare ask about potential stock price changes? Or

Khush: 25:23

deary? Me? I'm not not even convinced that nowadays, growth rates of EVs are, you know, related to stock price for evey companies. I think it's more about, you know, margins, economies of scale, who can produce cheaper, who can do it more sustainably, you know, longer term. So I think that's probably the thing to watch. I think, you know, it's also about that infrastructure piece. So another thing was in Australia, for example, you know, in 2023 57%, more public charges were installed than the year before. So yeah, that was, that's good. And that's sort of growing around the world. But that definitely needs to continue to make sure that they're actually integrated into our society. Well,

Luke: 26:12

that's the key piece for a lot of countries for sure.

Khush: 26:15

Yeah, just

Luke: 26:16

like us. Yeah.

Khush: 26:17

Can Can the grid cope? Can you install the Chargers enough? Can it be supported? Just like yeah, fuel cars have? Do you have any predictions around EVs?

Luke: 26:28

Not really, I mean, I think for the next few years, they'll it'll continue to be the most interesting year in terms of EBS. That's simply because you're going to have more adoption and more production. And I think that that means you get more competition, which means more interesting for the consumer, which means for us, it's more just, it's just good to watch, you know, but I don't, I don't think I have any particular predictions.

Khush: 26:53

I think the experience part is very important as well. So like experience of actually driving them and getting them out. What happens in batteries longer term. So no, very interesting. Quick one when you buy a Tesla,

Luke: 27:07

mate. Do I ever want one? I? I really do. But I don't think I don't think this is the year for it. Unfortunately. I've done a little bit of research on on solid state batteries. And it's it's, it's pushed me to hang on a little bit. So we'll see. We'll see. I don't know, but not this year, I think is the answer. Unfortunately,

Khush: 27:29

for a while, I thought you were definitely gonna be first but it might be a race between us now. Oh, really? Maybe? I don't know. Maybe I will go on then. Any any closing thoughts? Any other wild crazy predictions? Yeah. The trade for or big reflections from 23.

Luke: 27:46

I disagree with your contrarian view. I? Yeah. I don't think it's going to be worse than 23. That's for sure. You know, I'm

Khush: 27:56

talking purely on market return. So I think I can't remember. I don't know exactly how far I reckon.

Luke: 28:02

I think it'd be better. You reckon? I think it'd be better. I think it'd be good.

Khush: 28:07

Okay. Well, you've priced everyone's price to everything. So you first in it's gonna be better. And I've priced in No, I haven't. Yeah, I've just throwing out my query who might like I like

Luke: 28:19

it. I think it's a it's a good take. I think it's a wrong take. But I think it's, it's good. It's good.

Khush: 28:25

Anything that's guaranteed about predictions is wrong, in some ways. Yeah. True.

Luke: 28:29

Sure. Yeah. Thanks for listening to this. And all of this is completely wrong.

Khush: 28:37

A Well, let's get at least we haven't a crack. All right. Well, if there's nothing else, then we'll wrap up there. Thanks for listening. Find us at GRC crosses.com and GRC crisis on Instagram. We're also on LinkedIn. We're on the major streaming streaming services so you can listen how you like, I got a favor to ask. It's not the usual one. If you got anything out of this episode, or you enjoyed it, could you please go to your podcast player and give us a five star review? That would mean a lot and help us get found by the next person. So thank you lucky, and I'll see you in the next episode.

Luke: 29:09

Thank you