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Here’s what you need to know today

• Liberal leader Sussan Ley and Nationals leader David Littleproud have met, with the Nationals reportedly willing to come back into the Coalition agreement. Littleproud said the aim was to reform the Coalition and create a joint shadow cabinet before Parliament resumes on 22 July. (The Age)
  
  

• OpenAI is getting into hardware. The AI pioneer has acquired io, the company cofounded by former Apple design genius Sir Jony Ive, famous for designing the iPhone. OpenAI has paid $6.4 billion and has plans to build its own hardware as CEO Sam Altman plans to “reimagine what it means to use a computer”. (NY Times)
  
  

• For the first time ever, Australia’s big 3 venture capital firms - Blackbird, Airtree and Square Peg - have backed the same startup in the same funding round. All three have participated in Airwallex’s US$300 million Series F round. (Capital Brief)
  
  

• Rio Tinto CEO Jakob Stausholm has announced he will step down at the end of the year. Stausholm took over as CEO in 2021 and since then the Australian mining giant has been focused on transitioning its portfolio to support the energy transition, particularly lithium. (Capital Brief)
  
  

• A White House meeting turned testy as US President Donald Trump dimmed the lights and played video to South African President Cyril Ramaphosa, accusing the South African leader of supporting a “white genocide”. (The Guardian)
  
  

• The United Nations has claimed no aid has reached civilians in Gaza, two days after Israel lifted its 11-week blockade on aid trucks. This claim comes the same day that multiple nations claimed the Israeli military fired warning shots at a UN delegation visiting the country. (BBC)
  
  

• In response to recent escalations in Gaza, many of Israel’s allies have responded. Britain has frozen trade talks with Israel, the EU says it will review its economic agreement with the country, while Canada and France have also threatened “concrete actions” if Israel does not stop the war. (Reuters)
  
  

• Bitcoin reached a new all-time high, breaking US$110,000 for the first time ever. The cryptocurrency is up 48% since its post-Liberation Day low on 9 April.

What the…?

Public relations firms are trying to boost their client reputations in the eyes of AI. Semafor have reported on a new service being offered by one PR firm, called 'PreBunk’, that is intended to provide “ongoing proactive ‘education’ of the LLMs about your company and its reputation.”

As more and more users are turning to AI chatbots rather than traditional search for information, PR firms are looking to shape the AI’s outputs. We’re sure this is just the tip of the iceberg - as AI chatbots become a larger and more trusted source of information, there will be all kinds of governments, businesses and individuals with an interest in shaping the AI’s outputs. (Semafor)

Investing is a lifelong journey

Here’s what you can learn today.

Be wary of such a narrow market

This is an excerpt from our conversation with Alexander Whight, Portfolio Manager and Head of Global Equities at Milford. Listen to the full episode on Basis Points. (Apple | Spotify | YouTube)

Alexander: It [the year] is barely two months old, but it absolutely has been headline after headline. I think our best ideas are somewhat independent of that noise. We actively look to find investment ideas that are somewhat in charge of their own destiny.

Maybe before touching on the noise, it's worth thinking also about just where markets are coming into this year and where we've been over the last couple of years. If we look at the S&P 500 over the last two years, there's only 27, 28% of stocks that have outperformed the index return in that period. So it's barely one in four stocks that are actually doing better than the overall market indices are doing, which is pretty startling.

Compared to the last 30 years, that's the lowest it's been. It's been a really narrowly led market. It's been narrowly led by some of the large cap stocks that have been outperforming. Not just the large caps, but really anything exposed to that AI infrastructure build out phase.

When we think about some of the news flow and noise of this year, then certainly that AI infrastructure trade and where we are on that journey has been called into question a couple of times. A lot of it's been politically related in the US, the new Trump administration, what they are doing in terms of tariffs, government expenditure and areas they are targeting for cuts.

So it's probably those two dynamics that I'd really call out as being most noisy and most impactful for where we are.

That concentration point is really important. Historically, when we do get to these extreme levels of concentration, there are some measures that suggest we're at the most concentrated we've been since the 1960s. When we are at these levels of concentration, historically we do see a real pickup in volatility. In the 12 months following, you get top decile type volatility. So we think it's really important to be mindful of the skews within your portfolio, how diversified you are, whether by stock or by factor, or whether you're overly positioned for one particular macro outcome.

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