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The Contrarians catchup
Adam was on assignment in Queenstown, New Zealand. His observation: almost no one serving tourists was a native New Zealander. “New Zealand is relying on it. And they are obviously a tourist hotspot. So I’m not sure how we’re gonna go with migration levels dropping because I don’t think it’s gonna be great.”
The Queenstown gondola and luge operation reportedly does around $300M in revenue and $86M in earnings, with a $15-per-ride luge that pumps someone through roughly every five seconds. Adir’s reaction: “If it’s anything close to that, how is that not been consolidated up by some global tourism operator?” Adam: “Unlike a ski resort where you’ve got to manage the resort, you’ve got no snow making, all this other stuff. This is just one gondola up a mountain. And then you’ve got the luge, which is non-motorised, so there’s a handful of staff.”
Mike claimed last episode that GTA 6 would be digital-only, hurting JB Hi-Fi. He was wrong. There is a physical box in stores, but no disc inside it, just a download code. Adir: “Mike has mastered the art of AI, which is just say it confidently and make sure the facts don’t blur the confidence.”
Adir upgraded to an NVIDIA 5080 Blackwell graphics card. “I can tell you what’s going on in my computer, and there has been a big increase in the power of that technology in the last three years. It’s actually unbelievable.”
The Greens elected David Shoebridge as their new leader. Adir is delighted. “What I like is when extremists run extreme parties, because then you can see them for what they are. My dream for that party is it’s completely destroyed and replaced by a real environmental party, because there are lots of people that want to vote on climate change issues and other environmental issues.”
Jim Chalmers’ most self-defeating policy yet
The RBA’s ban on credit card surcharges went live October 1, and within days social media lit up with merchants raising prices by 10% or more to recoup the costs they can no longer pass on as a line item. Most damningly, the ATO itself announced it would stop accepting credit cards, saying it was “not appropriate for the cost of credit card merchant fees to be transferred to the community.”
Adam: “Jim Chalmers told everyone it’s not going to cost you any more. And the ATO are basically saying to Jim Chalmers, who the ATO reports to, ‘Jim, you’re a liar’. The ATO couldn’t be more clear in saying Jim Chalmers has lied to the Australian public.”
Adir: “Nobody had this problem. Literally nobody had this problem. The banks were happy raking in the money. They gave some of it back to consumers as frequent flyer points. No consumer was up in arms about the 1.5-2% credit card fee. And the merchant, they just got to say you know what, we’re happy to accept this form of payment, but there’s gonna be a you’re gonna have to recoup the cost. Nobody had any issues. Who had any issues?”
Adir: “I’ve seen situations in stores where cash now attracts a discount of 5%, but using a credit card attracts a penalty of 10%. So they’ve taken a 2% fee and turned it into a 10% fee. Who’s gonna stop it? Nobody is gonna hunt it down.”
Adam: “The problem is the banks maybe charge us 70 bips, but we have a 20-30 basis point Stripe charge, and then you’ve got a few other interchange fees in there as well. The problem is, whilst the banks reduced their amount, Stripe obviously can’t reduce their amount ‘cause that’s not part of this. And there’s a couple of phases going. So Chalmers is just too stupid, and the RBA is too stupid, to understand that the merchant fee being charged by businesses wasn’t just the bank merchant fee. There was a bunch of other merchants in there, and they didn’t reduce the fee at all.”
On AMEX specifically:
Adam: “What AMEX has said is we expect merchants to not charge a fee, but AMEX aren’t reducing that two to three percent cost to merchants. So if you’re using AMEX as a merchant, you’re getting completely squeezed here.”
Retail is dead, and a recession is coming
Adir spent the weekend walking Melbourne and Sydney retail strips. Every store except one was empty. The exception: Muji, packed almost entirely with Southeast Asian customers.
Adir: “Louis Vuitton, Chanel, Moncler, empty. Not a single customer in those stores. Then you go down into all the like RM Williams had a few customers, but like Peter Alexander, empty. The mall was dead. Dead. And every store was empty and every store on the side street was empty.”
Adir: “The firings are about to begin because retail is too distressed not to start firing people and trying to cut costs. I think there’ll be a wave of bankruptcies in February next year after people get through Black Friday and Christmas.”
Adir: “You’re about to see the $7 coffee in Melbourne. There is zero doubt in my mind whatsoever that this credit card fee change is going to drive another wave of inflation and we are going to end up with another interest rate rise. And they’re not going to be able to say it wasn’t me.”
Adir: “My very strong belief is the next federal election will occur during a recession. I think it’s going to be essentially impossible to avoid a recession from here.”
On Adir’s 17-year-old daughter, who sells secondhand goods on eBay and Depop:
Adir: “She said all the stuff that is $20, that has stopped selling. And all the stuff that’s $5, it’s selling, but people are sending her offers to try and haggle it down. She literally said the words to me, how am I supposed to price my product in this economy? Nobody’s got any money. Like, she’s 17. That’s a 17-year-old who sells on eBay-slash-vintage picking this up. How is the Treasurer of Australia not understanding what is going on in this country?”
Pleasers vs doers, and how Australia lost the plot
Adam framed the last 20 years of Australian government as the triumph of pleasers over doers. He nominated Hawke/Keating, Jeff Kennett, and Howard/Costello as the last governments to genuinely do things. Everything since has been an exercise in popularity management.
Adam: “The absolute worst situation is when you’re a pleaser and a doer. So when you’re effective at doing the wrong thing. And the classic example of that obviously is the Dan Andrews government; unfortunately Dan Andrews was an incredible politician and he was able to push through horrendous policy after horrendous policy.”
Adir: “We’ve never had a higher tax take. We’ve never had a higher deficit. We’ve never had a higher debt load. We’ve never had more public servants. And so this country is setting itself up really, I think, for, I don’t want to say catastrophe because it’s like we’re not going to sink into the ocean. But the days of this being a rich, growing, lucky country largely look like they’re going to end if this continues, notwithstanding a mining boom.”
Adir: “You can be an ideological warrior of the left. But also you’re the treasurer of the country. What’s he doing? Like this country is in dire straits economically. You need to be fixing it and taking it very seriously. And the ideology all has to go out the window.”
On the CGT changes and the ASX:
Adir: “Once this law comes in, I think there is a very big risk that there’s going to be a consequential shift away from growth tech on the ASX, and we are just going to see a wave of PE, private equity acquisitions of these tech businesses at lower prices. The ASX should be coming out and attacking this policy as terrible for its business. The number of companies listed on the ASX is going backwards.”
The $12B sleeper from South Australia
Codan (not to be confused with Boden), a 68-year-old South Australian electronics company originally known for its gold detection and high-frequency radio businesses, has become Australia’s third-largest listed tech company at $12B, after releasing extraordinary results. Its communications segment, which sells radio frequency components to drone manufacturers in the US, is set to deliver $400M in first-half FY27 revenue, up from $221M the prior year. EBIT margin has expanded from 26% to 40%. Group net profit after tax for the half is expected to be not less than $160M, versus $71M last year. Three years ago the shares were $3.50. They are now $63.
Adam: “This is unbelievable. This is a business that’s over a hundred on Rule of 40, I think. Doubling revenue and growing margin at the same time.”
Adam: “Run out of South Australia, low profile. I think the founder’s widow is well and truly ensconced on the rich list, like well in the billions now. But it’s the classic tortoise and the hare. These guys are the absolute tortoise. Founded in 1959 by three students from the University of Adelaide and it just keeps growing.”
On the valuation risk:
Adir: “On a financial metrics basis it might be too late to buy this. Paying 70 or 80 times earnings. I mean I know. But your bet is in order to justify the multiple it has to double, and so where’s your upside? There’s a lot of downside risk.”
Koala IPO: the call keeps paying off
Koala, which floated at $3.80 and which both hosts backed at IPO and again when it fell to $3.20, is now trading at $5.05, giving it a market cap of $458M on a 16x PE. Adam and Adir noted this as the third consecutive stock call (alongside CSL and Codan) that has played out faster than either expected.
Adir: “Of the three, actually as it happens, I felt most confident that Koala was going to get the re-rating first. Koala, I know this business. And so this is doing pretty much exactly what we said it would do. It’s just everything happens faster right now.”
Adam: “Koala we knew is really well managed. We think Danny and Mitch are great. I still think it’s one of the more reasonable buys out there.”
Five other stories worth following:
British startup Omni has launched plant-based functional dog foods promising joint, skin and even calming benefits, while claiming 73% lower emissions. It is also developing LeanPaws, an Ozempic-inspired weight-loss supplement specifically for overweight dogs.
Humanoid robot maker Figure destroyed robots in a Finnish steel foundry to protect its intellectual property, filming them jumping into molten steel. It is now selling metal bars from the remains for as much as $1,900.
Grindr is expanding beyond dating with a $250M acquisition of HIV-prevention startup Freddie. The company will fold Freddie into Grindr Health alongside its Woodwork telehealth and pharmacy business, while revenue growth continues strongly.
Debris believed to belong to a Canadian Gulfstream G100 air ambulance was found near Nantucket after the aircraft, carrying six people from Bermuda to Boston, reported electrical problems during stormy conditions and then disappeared.
President Trump announced a Super Intelligence Force led by National Intelligence Director Jay Clayton, with senior FTC and Defense officials included. Elon Musk endorsed replacing “AI” with “SI” and proposed renaming SpaceXAI to SpaceXSI.