AUSTRALIA’S MOST POPULAR BUSINESS PODCAST

Fear & Greed, Fear and Greed

Wednesday 28 June 2023

APRA forces Medibank to hold an extra $250 million in capital after last year’s cyber breach, setting a scary precedent for the industry. 

Also today:

  • Things are booming at KFC as consumers look for value
  • Qantas says the consumer slowdown shouldn’t affect earnings
  • And there’s a labour shortage in the dairy sector – and the labourers are cows

Plus don’t miss the latest episode of How Do They Afford That?

This week it’s all about the pros and cons of pet insurance. Get the episode from APPLE, SPOTIFY, or anywhere you listen to podcasts.

Find out more: https://fearandgreed.com.au

See omnystudio.com/listener for privacy information.

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Michael Thompson: APRA forces Medibank to hold an extra $ 250 million in capital

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Michael Thompson: after last year’s cyber breach, setting a scary precedent for

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Michael Thompson: the industry. Things are booming at KFC as consumers look

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Michael Thompson: for value. And there’s a labor shortage in the dairy

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Michael Thompson: sector, and the laborers are cows.
It’s Wednesday, the 28th

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Michael Thompson: of June, 2023. Welcome to Fear and Greed, Australia’s most

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Michael Thompson: popular business podcast. I’m Michael Thompson and good morning, Sean Aylmer.

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Sean Aylmer: Good morning, Michael. An eclectic mix of stories this morning,

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Sean Aylmer: shall we say, from APRA to cows.

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Michael Thompson: I’m amazed I got through that without laughing. ” The laborers

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Michael Thompson: are cows,” who comes up with this stuff, Sean?

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Sean Aylmer: Who? I don’t don’t know. I don’t know.

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Michael Thompson: After the show, you have an interview still on kind

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Michael Thompson: of the four- legged kind of theme here. Steve Piek,

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Michael Thompson: he only has two legs, but he’s the founder and

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Michael Thompson: CEO of BTX Racing.

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Sean Aylmer: Yes. And racing in this instance refers to thoroughbred racing.

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Sean Aylmer: So BTX is using blockchain technology to offer micro shares

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Sean Aylmer: in racehorses. So, if you’re interested in that, you can

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Sean Aylmer: buy into racehorses using this technology. It’s a really fascinating

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Sean Aylmer: chat. I’m not sure that you’re going to make much

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Sean Aylmer: money out of it, but could be good fun.

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Michael Thompson: Yeah, it’s a really good chat. It’s worth a listen.

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Michael Thompson: It’s coming up later on. The main story though this

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Michael Thompson: morning, Sean, the insurance regulator has told Medibank to hold

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Michael Thompson: an extra $ 250 million in regulatory capital as punishment for

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Michael Thompson: last year’s massive cyber breach.

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Sean Aylmer: The Australian Prudential Regulation Authority said it would force Medibank

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Sean Aylmer: to hold the extra money until the company can complete

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Sean Aylmer: a more detailed remediation plan, and the regulator will also

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Sean Aylmer: conduct a targeted technology review to ensure the company’s standards

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Sean Aylmer: are up to scratch.
Last year, a cyber breach resulted

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Sean Aylmer: in medical details of millions of Australians being stolen and

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Sean Aylmer: posted online. Shares in the company dropped immediately after the

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Sean Aylmer: announcement. Yesterday they finished the day down about 4%, which

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Sean Aylmer: was the worst of the top 200. The company is

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Sean Aylmer: facing down three class action lawsuits from customers and shareholders

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Sean Aylmer: because of the breach. Also, law firm Morris Blackburn has

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Sean Aylmer: filed a complaint to the office of the Australian Information

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Sean Aylmer: Commissioner, which can force Medibank to compensate affected customers.

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Michael Thompson: Sean, I mean this is 250 million dollars is a lot

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Michael Thompson: of money. It grabbed me from the start there, but

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Michael Thompson: I don’t want to be kind of dismissive or anything,

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Michael Thompson: but why should we care so much about this story?

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Sean Aylmer: Because I told you. No.

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Michael Thompson: That’s reasonable. I suppose maybe I was a little bit

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Michael Thompson: blunt there, but please go on.

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Sean Aylmer: Well look, the fact that Medibank has to hold an extra

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Sean Aylmer: 250 million dollars in capital means it’s less able to

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Sean Aylmer: invest as it might like, but it’s a big company.

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Sean Aylmer: It isn’t going to break the bank, so to speak,

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Sean Aylmer: or the insurance company in this instance. However, the fact

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Sean Aylmer: that APRA imposed the requirement is going to scare the

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Sean Aylmer: bejesus out of plenty of other smaller companies in insurance

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Sean Aylmer: and banking. APRA has now set a precedent on cyber breaches and

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Sean Aylmer: many other companies are just a dodgy email away from

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Sean Aylmer: suffering exactly the same experience as Medibank. Many of those

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Sean Aylmer: probably wouldn’t survive a 250 million dollar capital charge. The

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Sean Aylmer: regulator is clearly saying it won’t tolerate weaknesses in IT

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Sean Aylmer: systems across the board. It’s important because everyone in finance

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Sean Aylmer: and insurance now knows what the benchmark is. It now

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Sean Aylmer: knows how much regulatory capital they may be forced to

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Sean Aylmer: hold, and many of them wouldn’t be able to afford it.

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Michael Thompson: And it might scare the bejesus out of them.

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Sean Aylmer: I love that word, bejesus.

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Michael Thompson: Oh, it’s fantastic, and as I’ve waited a long time

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Michael Thompson: to hear you used it in Fear and Greeds, so thank

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Michael Thompson: you for fulfilling that need today, Sean. How did local

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Michael Thompson: markets perform yesterday?

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Sean Aylmer: The S& P SX 200 closed up 0.6% to 7, 118 points. Some of

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Sean Aylmer: the defensive stocks went backwards, notably CSL and Telstra. The

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Sean Aylmer: tech sector had a tough day. WiseTech Global was off

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Sean Aylmer: more than 1%. REA finished half a percent lower, but

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Sean Aylmer: otherwise most large caps ended the day in the black.

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Sean Aylmer: Higher iron ore prices helped the big miners with four

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Sean Aylmer: to skew up nearly 3%. Rio up 1.7%, and BHP 1. 5%

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Sean Aylmer: stronger. Westpac led the banks jumping nearly 2% while (inaudible)

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Sean Aylmer: wasn’t that far behind. National Australia Bank and Macquarie

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Sean Aylmer: both ended more than 1% higher. Gold Dig and Newcrest

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Sean Aylmer: Mining and QB Insurance also did pretty well.
And Michael,

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Sean Aylmer: it was a good day for real estate stocks, and

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Sean Aylmer: it’s been a while since I’ve been able to say

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Sean Aylmer: that. The sector itself was up more than 2% with

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Sean Aylmer: some of the better performers, including Center Group, which raised

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Sean Aylmer: 4%. Others that did pretty well were Abacus, Charter, Hall

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Sean Aylmer: and Murvac. It follows news over the past fortnight that

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Sean Aylmer: New South Wales Premier, Chris Mins has offered property developers

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Sean Aylmer: an extra 30% height on apartment buildings worth more than

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Sean Aylmer: 75 million dollars. That’s enormous. The condition is that they

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Sean Aylmer: subsidize 15% of the homes all about affordable housing. Also,

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Sean Aylmer: the developments need to be within 800 meters of transport

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Sean Aylmer: hubs as this news has filtered out, some of the

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Sean Aylmer: real estate investment trusts have done pretty well.

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Michael Thompson: That is interesting. What about international markets? What’s going on?

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Sean Aylmer: Trading on Wall Street remains fairly mixed at the moment.

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Sean Aylmer: It’s pretty much all about the prevailing view that the

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Sean Aylmer: world’s largest economy is heading towards a recession and interest

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Sean Aylmer: rate cuts, which had been penciled in for later this

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Sean Aylmer: year, are now not likely until 2024. That’s putting downward

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Sean Aylmer: pressure on the boss. Oil is up a bit after

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Sean Aylmer: fears of more turmoil in Russia subsided. Gold is steady,

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Sean Aylmer: as is coal. Iron ore prices are higher. I mentioned

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Sean Aylmer: that. That’s after a Chinese official said that growth had

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Sean Aylmer: picked up this quarter and more stimulus is on the

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Sean Aylmer: cards. And Michael, the Aussie dollar is buying just over

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Sean Aylmer: 67 US cents.

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Michael Thompson: Yeah, very big day in the US. Sean, there’s a

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Michael Thompson: book launching over there.

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Sean Aylmer: Is there really?

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Michael Thompson: In just a few hours? Yes.

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Sean Aylmer: No. Surely what a new unfounded author?

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Michael Thompson: They might be heading towards a recession, Sean, but I’ll

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Michael Thompson: tell you what, literary markets are a buzz with excitement.

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Michael Thompson: I might be overstating a little bit, but How To

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Michael Thompson: Be Remembered goes on sale officially kind of overnight in

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Michael Thompson: the US. And there’ll be a launch held in just

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Michael Thompson: a couple of hours, so it’s all very exciting.

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Sean Aylmer: Ah, very exciting, Michael. It’s such an incredible achievement. Well done.

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Michael Thompson: And that is the first and last time you’ll ever

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Michael Thompson: hear me mention it on this podcast, Sean.

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Sean Aylmer: Can I just tell you, I want to boast about

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Sean Aylmer: something too. I’ve got that smug grin this morning. That

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Sean Aylmer: one gets when they go to the dentist.

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Michael Thompson: Can I say you’re looking particularly shiny in the mouth today?

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Sean Aylmer: Yeah. Yeah, I am. Well, they cleaned my teeth. No

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Sean Aylmer: problems, no fillings, and you walk out knowing that you

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Sean Aylmer: don’t have to go back in for another 12 months.

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Sean Aylmer: Feeling pretty good about myself, Michael.

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Michael Thompson: Do you have any feelings?

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Sean Aylmer: Oh, I do. From years ago. Not, yeah, why?

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Michael Thompson: That’s impressive though, to be heading to the dentist at

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Michael Thompson: your age and not needing any work done.

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Sean Aylmer: I can’t… We got to go to break, please.

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Michael Thompson: It was intended as a compliment, Sean. We’ll be back

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Michael Thompson: in a moment with the rest of the day’s business

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Michael Thompson: news.
Sean, BHP Chief Executive Mike Henry says, ” The mining

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Michael Thompson: group will not be investing any further growth dollars in

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Michael Thompson: Queensland after the state’s increase in coal royalties.” Saying the

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Michael Thompson: changes were unpredictable and unreasonable. That is a big whack.

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Sean Aylmer: Not happy, Anastasia. In a speech to the World Mining

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Sean Aylmer: Congress in Brisbane, Mr. Henry spoke about Chile where the

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Sean Aylmer: government has attempted to increase royalties on copper production, but

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Sean Aylmer: is willing to enter into respectful discussions and strike a

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Sean Aylmer: balance. That’s according to Mr. Henry. Now Queensland Premier Anastasia

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Sean Aylmer: Palaszczuk seemed fairly unfazed about it. She was announcing the

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Sean Aylmer: state’s critical mineral strategy yesterday. She shrugged off the threats

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Sean Aylmer: from BHP saying, ” There are plenty of other investors In

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Sean Aylmer: Queensland.” Henry was more positive about the federal government’s critical

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Sean Aylmer: minerals strategy. He backed the approach saying there was no

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Sean Aylmer: need for additional subsidies for the sector.

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Michael Thompson: Opposition leader Peter Dutton says, the Albanese government 110 million

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Michael Thompson: dollar support package for Ukraine is depriving it of the

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Michael Thompson: military equipment it needs to resist Russia’s illegal invasion.

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Sean Aylmer: Dutton said, ” The Albanese government could provide Ukraine with Hawkeye

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Sean Aylmer: mobility vehicles and also increase the manufacturing of those vehicles

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Sean Aylmer: in Australia.” That would provide significant benefits in the fight

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Sean Aylmer: against Russia. He said, ” The government’s package announced earlier in

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Sean Aylmer: the week didn’t include Hawkeye vehicles even though Ukraine had

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Sean Aylmer: specifically asked for them.” Defense minister Richard Miles from buff

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Sean Aylmer: criticism of the package saying it’s the fourth assistance program

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Sean Aylmer: from the labor government. And Ukraine and other European nations

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Sean Aylmer: understand that Australia is punching above its weight in respect

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Sean Aylmer: to the assistance.

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Michael Thompson: Sean, this is interesting. One area of the economy where

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Michael Thompson: the cost of living pressures haven’t yet bitten. Well, not

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Michael Thompson: I suppose too hard, is travel. With Qantas saying it

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Michael Thompson: doesn’t think the consumer slowdown will affect earnings.

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Sean Aylmer: The National Carrier yesterday said its domestic capacity is back

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Sean Aylmer: to pre- pandemic levels, and it’s added 11 international routes

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Sean Aylmer: to meet demand since mid- May. This school holiday period,

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Sean Aylmer: Qantas expects to carry 4 million passengers. Pretty amazing. The

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Sean Aylmer: top domestic leisure destinations include the Gold Coast in Cairns.

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Sean Aylmer: Not surprising given the weather. While new international routes include

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Sean Aylmer: Sydney, Auckland, New York, and Perth, Rome. Qantas said it’s

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Sean Aylmer: taken delivery of six new aircrafts since January, including its

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Sean Aylmer: eighth airbus, A320 near long range aircraft. The ninth is

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Sean Aylmer: due next month. Michael, something I’m sure you’ll look forward to.

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Michael Thompson: Oh, very excited by any aircraft story, Sean. At Collins

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Michael Thompson: Foods owner of 272 KFC fast food restaurants says, ” Persistent inflation

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Michael Thompson: is putting its profit margins under pressure, but same store

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Michael Thompson: sales growth has surged in recent weeks and that sent

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Michael Thompson: its share price up 18%.”

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Sean Aylmer: Yes. Now the cost of running KFC outlets is rising,

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Sean Aylmer: thanks to increased wages, energy prices, and the cost of

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Sean Aylmer: ingredients. As a result, the group said profit for the

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Sean Aylmer: 12 months to the end of April was down 77%.

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Sean Aylmer: Not hoping was a 37 million dollar impairment related to

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Sean Aylmer: its 28 Taco Bell outlets in Australia, which really aren’t

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Sean Aylmer: doing so well.
Now, Chief Executive Joy O’Malley said, households

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Sean Aylmer: were recognizing the good value the brand offered. And in

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Sean Aylmer: the last seven weeks, sales across the same stores have

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Sean Aylmer: jumped by nearly 9%. That’s why the share price took

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Sean Aylmer: off yesterday. The group also operates 48 KFC outlets in the

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Sean Aylmer: Netherlands and 16 in Germany. The local Taco Bell outlets,

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Sean Aylmer: 15 of which are in Queensland, nine in Victoria and

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Sean Aylmer: four in Western Australia, made an overall loss of one

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Sean Aylmer: and a half million dollars last year. Clearly, we love

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Sean Aylmer: the chicken, not so much the taco.

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Michael Thompson: Oh, you changed pronunciation, there at the instant.

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Sean Aylmer: I did.

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Michael Thompson: That is what I love about you, is the fact

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Michael Thompson: that we have ridiculed you mercilessly in the past for

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Michael Thompson: saying taco instead of taco.

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Sean Aylmer: I was just impressed that you were so kind of

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Sean Aylmer: confident in yourself that you would continue to mispronounce it,

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Sean Aylmer: or ignorant one or the other.

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Michael Thompson: No, no, no, no. It’s confidence. Now, Sean, the story that nearly

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Michael Thompson: made me lose it at the start of the show,

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Michael Thompson: there’s a labor shortage in the dairy industry in Australia.

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Michael Thompson: And by labor, I mean not enough cows to supply

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Michael Thompson: milk, and that’s what’s pushing up prices.

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Sean Aylmer: Yes, there’s been a 9% drop in the volume of

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Sean Aylmer: milk being produced by dairy farmers in Australia over the

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Sean Aylmer: past two years. There are about 700 million liters. And

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Sean Aylmer: there’s plenty of competition for the milk, including private label

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Sean Aylmer: companies like Woolworths and Coles. Also, input costs are rising.

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Sean Aylmer: Bottom line for most of us is that milk prices

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Sean Aylmer: are likely to rise. In fact, this is happening as

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Sean Aylmer: global milk prices are actually falling. Barry Irvin, the Executive

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Sean Aylmer: Chair of Bega Cheese, which owns the dairy farmers Big

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Sean Aylmer: M and Farmers Union Milk Brands, as well as Vegemite,

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Sean Aylmer: I might just add that, said, as a result of

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Sean Aylmer: price pressures, the group is reviewing some of its operations

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Sean Aylmer: in country Victoria. Michael, it isn’t just the cows in

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Sean Aylmer: short supply. There’s also a shortage of people to milk

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Sean Aylmer: them according to Irvin. There you go.

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Michael Thompson: Uber, Sean, has promoted two Australians, putting them in charge

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Michael Thompson: of two and a half billion dollars in global advertising

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Michael Thompson: and marketing spending after their local success.

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Sean Aylmer: So Georgie Jeffries has been given the reigns of marketing

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Sean Aylmer: in the United States in Canada, which is easily Uber’s

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Sean Aylmer: largest single market. Lucinda Barlow, who was leading Uber in

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Sean Aylmer: Asia Civic has been put in charge of international marketing

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Sean Aylmer: in the more than 60 countries that aren’t the US

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Sean Aylmer: and Canada, according to report in the financial review.
The

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Sean Aylmer: rise of Australians in the ranks of Uber reflects the

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Sean Aylmer: success of the Uber campaign here, a campaign that has helped

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Sean Aylmer: Uber take a 55% market share in Australia’s online food

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Sean Aylmer: ordering sector. I got to say, I love those ads.

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Sean Aylmer: The Kardashians, Mark for the (inaudible) , where he goes,

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Sean Aylmer: do you think anyone can change their nickname? Can Uber

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Sean Aylmer: change your nickname? And the guy says, ” Yeah, yeah, I

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Sean Aylmer: think so.” Then someone walks past me and goes hi,

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Sean Aylmer: Poo. Yeah, they’re just great ads. Anyway, they’ve done very

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Sean Aylmer: well. Uber spent about two and a half billion dollars

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Sean Aylmer: on advertising in the past two years, globally, two and

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Sean Aylmer: a half billion dollars. Another 3. 3 billion dollars on

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Sean Aylmer: discounts, promotions on loyalty programs. The success in Australia means

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Sean Aylmer: a couple of Aussies have done very well and been promoted.

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Michael Thompson: Did you see? I can’t engage with you anymore now

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Michael Thompson: on anything except for business news. I’m just trying to

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Michael Thompson: keep us on track. I’m watching the clock here, Sean,

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Michael Thompson: and I’m mindful of the fact that the clock is

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Michael Thompson: ticking, so.

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Sean Aylmer: Okay, let’s keep going.

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Michael Thompson: International news, President Joe Biden said that the US and

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Michael Thompson: NATO played no role in the Wagner group’s short- lived

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Michael Thompson: insurrection in Russia, calling the uprising and the longer term

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Michael Thompson: challenges opposes for President Vladimir Putin’s authority, a struggle within

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Michael Thompson: the Russian system.

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Sean Aylmer: Biden and US ally supporting Ukraine want to be seen

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Sean Aylmer: a long way away from the mercenaries insurgency, which is

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Sean Aylmer: the biggest threat to Putin in his two decades leading

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Sean Aylmer: Russia. They’re concerned that Putin could use accusations of Western

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Sean Aylmer: involvement to rally Russians to his defense. Meanwhile, Putin appeared

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Sean Aylmer: on TV yesterday morning in his first public comments since

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Sean Aylmer: the rebellion. He said, Russia’s enemies had hoped the Mutiny

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Sean Aylmer: would succeed in dividing and weakening Russia, but they miscalculated

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Sean Aylmer: is what he said. He identified the enemies as the neo-

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Sean Aylmer: Nazis in Kyiv, their Western patrons and other national traders.

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Sean Aylmer: He also accused the Wagner group leaders of betraying their country.

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Michael Thompson: Sean, China is on course to achieve its 5% target

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Michael Thompson: for economic growth in 2023 set by Beijing earlier this

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Michael Thompson: year. According to Premier Lee Kwang, who also slammed Western

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Michael Thompson: efforts to de- risk the global economy.

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Sean Aylmer: Lee addressed a meeting of global political and business leaders

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Sean Aylmer: at the World Economic Forum in Northern China, known colloquially

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Sean Aylmer: as the summer Davos. The event returned after a three

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Sean Aylmer: year hiatus caused by the Covid pandemic. Now, China’s grappling

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Sean Aylmer: with a slowing post Covid recovery with a number of

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Sean Aylmer: lackluster indicators in recent weeks signaling the rebound is running

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Sean Aylmer: out of steam. Its Central Bank last week cut key

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Sean Aylmer: interest rates in a bid to counter the slowdown. There

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Sean Aylmer: are also reports of a potential upcoming tranche of measures

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Sean Aylmer: targeting multiple areas of the economy, but the Chinese Premier yesterday

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Sean Aylmer: projected a positive outlook for the domestic economy, reassuring investors

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Sean Aylmer: that China was fully confident and capable of developing stable

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Sean Aylmer: high quality growth over the longer term. He added that

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Sean Aylmer: the nation would roll out more practical and effective measures

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Sean Aylmer: on expanding domestic demand and stimulating market dynamism. He also

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Sean Aylmer: slammed efforts in the West to de- risk the global

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Sean Aylmer: economy as a false proposition.

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Michael Thompson: All right. Last one, Sean. A fairly serious story to

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Michael Thompson: finish on today. Malaria has spread from mosquitoes to humans

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Michael Thompson: inside the US for the first time in 20 years.

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Sean Aylmer: The Centers for Disease Control and Prevention said four cases

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Sean Aylmer: of mosquito transmitted malaria were reported in Florida within the

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Sean Aylmer: last two months, and a single case was also found

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Sean Aylmer: in Texas. All patients are okay. They’re improving after receiving

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Sean Aylmer: treatment. The CDC said that anopheles mosquitoes, which are found

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Sean Aylmer: throughout many regions of the country, are capable of transmitting

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Sean Aylmer: malaria if they feed on a malaria infected person. However,

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Sean Aylmer: it stressed the risk of catching malaria in the US

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Sean Aylmer: remains extremely low. Before Covid, some 2000 malaria cases were

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Sean Aylmer: reported in the US each year. Almost all of them

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Sean Aylmer: coming from travelers who had visited malarial countries, infections led

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Sean Aylmer: to between five and 10 deaths annually.

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Michael Thompson: Okay. Up next is the Fear and Greed Daily interview,

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Michael Thompson: and today you’re speaking with Steve Piek, the founder and

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Michael Thompson: CEO of BTX racing.

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Sean Aylmer: Yeah. It’s all about using blockchain technology to create a system where you

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Sean Aylmer: can buy micro shares in thorough beds, in racehorses. Very, very

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Sean Aylmer: integral. I quite like that one. I thought it was

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Sean Aylmer: very interesting.

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Michael Thompson: Yeah, I agree. It was a really interesting chat. Definitely

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Michael Thompson: worth a listen, Sean. Today is of course, Wednesday, which

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Michael Thompson: means there’s a new episode as well of How Do

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Michael Thompson: They Afford That out today, me and Canna Campbell, the

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Michael Thompson: founder of Sugar Mama TV are talking today about all

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Michael Thompson: things pet insurance. Basically, is it worth it? The pros,

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Michael Thompson: the cons, the costs, and just going through that in

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Michael Thompson: some detail. Definitely worth a listen if you happen to

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Michael Thompson: have any animals in your household.

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Sean Aylmer: Well, I wish I had listened to it because only

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Sean Aylmer: about three months ago I got pet insurance for the

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Sean Aylmer: first time, or I got a program which alleviates the

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Sean Aylmer: cost of my pet. I’ve always been against it, but

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Sean Aylmer: at some point I thought, maybe I should have listened

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Sean Aylmer: to you guys first though before making the decision.

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Michael Thompson: Well, no, you can still listen to it today. It

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Michael Thompson: won’t actually change any of the decisions that you made,

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Michael Thompson: but it might make you feel better about them, Sean.

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Sean Aylmer: All worse, Michael. All worse. We’ll see.

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Michael Thompson: Yeah, that’s also a possibility. Thank you very much.

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Sean Aylmer: Thanks, Michael.

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Michael Thompson: It’s Wednesday the 28th of June, 2023. Make sure you’re

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Michael Thompson: following the podcast. Join us online on LinkedIn, Instagram, Twitter, and

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Michael Thompson: Facebook. And stay up to date on all the business

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Michael Thompson: news with Alexa and your Amazon Echo Smart speaker. Simply

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00:17:58,590 –> 00:18:01,080
Michael Thompson: say, Alexa, play the Fear and Greed podcast at catch

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Michael Thompson: the latest episode. You can get yours now@ amazon. com.

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Michael Thompson: au. I’m Michael Thompson and that was Fear and Greed.

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Michael Thompson: Have a great day.