Transcript for QAV 429 Club Edition

Cameron  00:05

Welcome back to QAV TK, episode 429. How are you today?

Tony  00:14

Very well, Cam. A little bit bleary-eyed after watching the British Open for the last four days at night, but no, good. Living the life in lockdown [laughing].

Cameron  00:24

What hours is that on?

Tony  00:27

It was coming on about seven at night and then going through about four in the morning, but I didn’t stay up the whole time.

Cameron  00:32

How long do you stay up?

Tony  00:35

I was staying up until around midnight watching it and then sort of checking things again about four in the morning to see how it finished.

Cameron  00:41

Four in the morning? [laughter] All right. Well, that’s good. So you’re hanging in there. It looks like your prediction or Norman Swan’s prediction last week in Sydney could be locked into. Christmas might be true the way it’s going.

Tony  00:43

Yes.

Cameron  00:44

You have to get up and do a four o’clock in the morning pee break like I do.

Tony  00:47

[laughing] I don’t know, I was just waking up naturally, got no idea. Just excited. Yes it probably was, it’s like you live in lockdown you just lose all sense of time anyway.

Cameron  01:00

[laughing]

Tony  01:00

It’s like I’m getting up and going to play golf or something, it’s just…

Cameron  01:03

Like being at Crown Casino.

Tony  01:06

It is a bit except if we get clocks on the walls here.

Cameron  01:08

Yes, [laughing] you should take them down and then you [laughing] just won’t know what’s going on.

Tony  01:13

Yes. So we had a couple of betting pools going under who was going to win the British Open and I managed to win them both which was good.

Cameron  01:22

Well done, lucky-

Tony  01:24

Yes.

Cameron  01:24

[unintelligible 01:25] that’s you name.

Tony  01:27

Yes, well another spreadsheet on golf tipping [laughing]. God, I hope not.

Cameron  01:47

But yes, it could be Melbourne’s in lockdown. Yes,

Tony  01:50

[inaudible 01:50]

 

Cameron  01:50

But anyway, people don’t need to be reminded about that. It’s all depressing. Let’s get into fun stuff.

Tony  01:57

[laughing]

Cameron  01:57

Brent Sweeney, a QAV club member, posted on our Facebook page. Thanks QAV investor community, Cameron and Tony. I just completed my financial year end calculations and I achieved a 21.29% return with dividends reinvested. I started in February, so I only captured five months of the financial year. This is in comparison to the AXJOA, the All Ords Total return Index, which returned 8.44% from the beginning of February. So terrific result for Brent.  “I found that 14 out of 19 stocks were in the green, 73% strike rate, which I’m very impressed with many thanks. I’m interested to know what strike rate others have managed to achieve.” So any other QAV club members out there… I’m actually working on like a little table. Little like a-

Tony  02:39

Yes.

Cameron  02:54

Table where people can post their results and we can have a competition. We’ll make it interesting.

Tony  03:05

Yes, like a league table.

 

Cameron  03:06

Yes, the winner each month gets to go and spend a week at Tony’s place.

Tony  03:11

In Lockdown.

Cameron  03:11

[laughing]

Tony  03:14

At hotel California [laughing].

Cameron  03:16

[laughing] Yes, that’s great. Andrew McLennan then posted I’ve owned 24 stocks in my 14 month QAV journey with a 62.5% returning a positive strike rate so…

Tony  03:30

Which is about what I get too so that’s pretty normal. I think.

Cameron  03:33

Yes, 6 out of 10 you always say, right?

Tony  03:35

Yes. Correct.

Cameron  03:36

That’s great. So well done, guys. It’s really always great to see people posting the kind of success that they’re having.

Tony  03:46

Yes.

Cameron  03:47

Tony, can we go over the wording of the three-point trend line stuff in the Bible? Because I had a backwards and forwards with somebody the other day and I got all discombobulated.

Tony  04:02

Sure.

Cameron  04:05

Because we’ve had a couple of discussions about this recently in Facebook or emails or something and I know it’s in fluid flux. It’s a bit fluid, the wording at the moment.

Tony  04:21

Yes, I don’t think the Bible has the fat bottom and fat top line and flat bottom and flat top lines in it yet.

Cameron  04:29

No, it doesn’t. Good point. I have to do that.  Yes, but this is just-

Tony  04:35

And yes…

Cameron  04:35

About- sorry, this is just about drawing the lines outside of that.

Tony  04:41

Yes.

Cameron  04:42

So it says to draw a byline, this is on page 17 for people playing along at home, the rule on a 5-year monthly chart i.e. a chart which shows month end prices over 5-years mark. The highest peak after the last breach of a Sell-Line.

Tony  05:02

Yes.

Cameron  05:04

Is that true?

Tony  05:04

Yes, the Buy-Line follows a Sell-Line.

Cameron  05:09

Right. But when I’m drawing a chart, I’m not usually looking for the last Sell-Line. When I’m doing a Buy-Line I’m just doing the highest peak, the highest point on the chart. Am I doing it wrong? Should I be checking? If there’s a Buy-Line or something?

Tony  05:31

Yes, so you should do what you’re doing and then draw the Sell-Line and then check to see if the Buy-Line is before the Sell-Line, if it is, you need to draw another Buy-Line later on. So probably better if we work through an example. What’s a good example?

Cameron  05:52

Let’s look at one of the ones that we’re going to have to talk about later. Well CBA, you want to do CBA?

Tony  06:00

Let’s do CBA. I’ll tell you why.

Cameron  06:01

  1. OK.

Tony  06:02

Let’s do CBA.

Cameron  06:03

Right.

Tony  06:04

So how would you start?

Cameron  06:06

OK, well, its highest point on a 5-year monthly is end of June 2021. So I’m ignoring that to start with and I’m going…

Tony  06:17

Why is that?

Cameron  06:18

Well, because it’s been in a buy for a while. It’s dropped back just recently, but I think it was a buy well before that. So I want to see when it became a buy. Before it went on its latest run from sort of coved on up.

Tony  06:37

Yes, so you want the buy that comes after the Sell, the last Sell?

Cameron  06:43

Well, I would go back and find the highest point before the latest runs. So that is April 2017, I think $87.40.

Tony  06:55

Yes.

Cameron  06:57

And then I would normally draw a line through the next highest peak to the right, that’s not cutting anything else off, which I think is probably January 2020.  Yes.  OK. So that is straight forward and if I drag that out, it would have told me that it had become a Buy.

Tony  07:22

The only problem is that’s a flat top?

Cameron  07:26

Oh yes, it is right, is it really?

Tony  07:26

Yes. So well, is that you? Yes, well, just using the segment tool on stock doctor. I’m seeing minus 2.77%. between those two points.

Cameron  07:28

2.83%. Is that what you said?

Tony  07:32

Yes, I had 2.77.

Cameron  07:43

Yes, OK.

Tony  07:44

The points don’t always anchor on the peaks. Yes.

Cameron  07:46

OK, so that falls foul of the flat right line rules. So what do we do then? Do we take the last one as the first one?

Tony  07:56

We do, yes.

Cameron  07:57

Right and so then we’re drawing it through January 21.

Tony  08:05

January 21, yes. Peak to peak or you can actually draw… You’re actually drawing it before then, Cam. You’re doing it through July 2020. Oh, no, sorry. You’re right, no, the next one’s higher. Sorry, January 21. Yes.

Cameron  08:25

Okay, so January 21. Then I have to work out what the previous Sell-Line was.

Tony  08:38

Yes. So I think this will be a fairly straightforward when you don’t, you should do it. But I think you’ll find the sale happened prior to January 21. So prior to that, where it crosses, sorry.

Cameron  08:51

Right? So the previous Sell-Line would have started May 18 was at 69.3 but then October 18, was at 69.23 and then January 19, was at 69.1. So what’s that? Oh, that’s only one or 3%.

Tony  09:16

OK, so you could do… I’m not going to start where you’re starting. I think the again, we start with the low point on the graph, which is March 2020.

Cameron  09:25

Oh, so I don’t need to go back before that first peak for the Buy-Line.

Tony  09:31

No, the point is we draw the Buy-Line as we have and then we draw the Cell-Line and see if the Buy-Line comes after the Sell.

Cameron  09:39

So you start unintelligible 09:43] March 2020. What are you going to use as your L2 September?

Tony  09:48

September, yes. However, that’s a flat bottom, the 4% difference.

Cameron  09:59

3% I got yes, OK.

Tony  10:03

So then we use September as L1.

Cameron  10:05

Yes and then…

Tony  10:07

And then the next lowest pick to the right. It’s going to be February 21.

Cameron  10:13

Which is the Sell-Line that caused you to sell today? Or call a Sell today?

Tony  10:18

Yes.

Cameron  10:19

  1. So the Buy-Line that we drew started in January 2020. So that comes before the current Sell-Line, but-

Tony  10:33

Correct.

Cameron  10:34

But there would have been a Sell-Line before that the bible says,

Tony  10:37

Correct.

Cameron  10:39

Mark the highest peak after the last breach of a Sell-Line. So OK , let’s go back a week. I know that you’ve decided that you’re going to sell CBA today. But go back a week before that occurred? What would the last Sell-Line have looked like then? Is the last Sell-Line the last time it breached the Sell-Line or just the last Sell-Line, in theory, even if it hasn’t breached the Sell-Line?

 

Tony  11:08

No, it’s the last time it breached. So it would have been as you were starting to say before back around March 2019 and then probably up through December 2019. Although I have to check that because it looks like there’s a flat bottom going on there. So it starts with May 2018 and then goes through October 18, January 19, March 19. But if I draw a line through those, there’s only like 1.5% between all those points. I’m going to take the right most point there, which is the last one on that flat bottom.

Cameron  11:46

March 19.

Tony  11:46

March 19.

Cameron  11:47

Yes.

Tony  11:49

And then put it up through October 19. Or actually, then, October 19, would probably mean we want to use December 19. Because there’s a trough after that.

Cameron  12:01

Yes.

Tony  12:02

So then I’m getting a Sell back in February 2020.

Cameron  12:05

Yes.

Tony  12:06

So our Buy-Line is fine. It comes after that Sell.

Cameron  12:09

But it starts before the sell. We’ve got h1 in January 2020 in the Sell in February 2020.

Tony  12:16

Yes, that’s OK. We’ve got the last Sell would have been February 2020 and the current Buy that we just did before was March 21. So that comes after the last Sell.

Cameron  12:28

Yes. But the wording in the bible says, mark the highest peak after the last breach of a Sell-Line. Then mark the next highest price or peak to the right of the first price. But what we’ve done here is h1 one comes before the breach of the Sell-Line.

Tony  12:50

OK, yes, I see. I think the bible’s wrong, then. We’re just looking for us a Buy-Line that comes after that Sell-Line.

Cameron  12:56

Yes. Right. So what I think it should say is you mark the highest peak, then you mark the next highest price or peak to the right of the first price, which comes after the breach of a Sell-Line. That’s the second h peak that needs to come after the Sell-Line.

Tony  13:16

Yes, true.

Cameron  13:17

That’s what I thought that’s actually as you put it to somebody in an email or a Facebook post or something last week-

Tony  13:24

[laughing] OK.

Cameron  13:24

I can’t remember who it was. But you said that and. Right. OK, well, that was exhausting. But… [laughing]

Tony  13:37

Alright, then you’ve been in my life for last week or two like going through all the deal and trying to code it to other people here. Yes.

Cameron  13:44

Right. OK. Well, let me just make a note in my revision history, that I changed that. OK. All right. Well, I’ll post that CBA chart up onto the website and people can have a look at it, and compare it with their own. But that’s instructive. Thanks for walking through that and shout out to- I think it was Andrew who picked up that there were some wording changes in the bible that he was confused by and good reason to be confused because there was probably wrong I don’t know how that crept in there. Sorry about that. Andrew, and anyone else who has been confused by that surprise. No one else has picked it up and asked me about it actually before now.  Paul, on MML he is talking about your deep dive into Medusa mining last week. By the way, have you seen what’s happened to its share price since then?

Tony  14:42

No. What’s happened?  Nothing. It’s good. [laughing]

Cameron  14:49

But HUM’s up 7% today GLE is up 9% today.

Tony  14:54

Oh, fantastic.

Cameron  14:56

Well, fantastic for me yes. It’s nearly back to what I paid for it.

Tony  14:58

[laughing]

Cameron  15:02

Yes, but you were talking about you did your deep dive on MML last week and Paul says, Hi guys, really like the analysis of MML. One thing that might factor into the depressed price is their safety record. I think there’s been a number of deaths at their mining last year which makes it an unattractive ongoing investment for many myself included. On the plus side, a quick perusal of ASX releases shows the CEO is purchasing shares under a superannuation trust he shares with his wife, which would not show up on the stock doctor register. Although small purchases, it does appear to be a positive pattern. Cheers, Paul. What do you think of all of that, Tony?

Tony  15:47

No, it’s good analysis from Paul, I wasn’t aware of it. I’d have to go and look at what their safety record is and whether it’s a cause for concern. Obviously, it is if someone’s died, but I just don’t know how bad it is and I’d expect for an ASX listed company that if they’ve had a death on the mine that they’d be doing a lot to improve their safety procedures as well.

Cameron  16:12

Right.

Tony  16:12

But yeah, I haven’t looked into it.

Cameron  16:15

OK, thank you, Paul. Tony, can I ask you a question about working out my portfolio performance for the last financial years. I said earlier, I was putting up this table for QAV club members to report the performance. So I thought I should work out my performance for last year.

Tony  16:35

Yes.

Cameron  16:35

And I bought and sold a lot of stuff last year had a couple of stocks that did really well, a couple that didn’t do so well, had to sell a bunch of stuff because I needed to pay bills and then right towards the end, like in early June, late May, early June, bought a bunch of stocks, add a lot of capital to it and so if I look at my portfolio report in share size, or stock doctor, it says something like 5% for the year.

Tony  17:13

Right.

Cameron  17:13

But I know I mean, I had some stocks that went up 50% 70%, TRS, I had CCP both had really good runs for the year. So it doesn’t seem to reflect what really happened. So I tried to break it out. I did a download or an export out of stock doctor into a spreadsheet and I remember because we talked about this some time ago with one of our QAV club members and we were saying, if you have a lot of capital going in and out, you need to look at each stock and work out what the performance was on that stock that you bought and sold, and then tally up the performances to get an overall performance. Is that right?

Tony  17:59

Yes, I don’t think so. I think if you’ve put lots of capital in the last month, that’s going to depress your performance, because it’s going to give you the all the appreciations and less depreciations you’ve had over the year. Over that last capital base, probably-

Cameron  18:18

Yes, but…

 

Tony  18:19

But it depends on the method of calculation, there is very different methods of calculation. Sometimes it’s the average capital base, sometimes they just take this ending capital away from the starting capital, and then put that over the starting capital to give you a return. But that’s not going to be a fair comparison. Because if you put a lot in at the end, it depresses the return. Sorry-

Cameron  18:44

Right.

Tony  18:44

It improves the return. If you put up… if you started off with $10,000 and you put $50,000 in the last month.

Cameron  18:51

Yes.

Tony  18:51

You haven’t made 40,000 you’ve just added more capital.

Cameron  18:54

Yes, right.

Tony  18:55

Yes. So the I think what we talked about before was doing it month on month and then like you said on that last month, if you put all the capital in and didn’t have much of a return, it’s just going to be 1/12 of the final calculation.

Cameron  19:12

Right, OK.

Tony  19:14

If you do starting amount of capital, and at the end of the first month, you work out what the increase was, and then do it for the second month, third month, etc., and sum all those up. That’s probably a better calculation, but it’s a complicated way of doing it.

Cameron  19:32

Right. What’s so what I did, as I said before, was I looked at all of the trades, and the ones that I sold, I worked out what the performance of them was during the duration that I owned them. The ones that I didn’t sell, I hadn’t sold by the end of the financial year. I just did a mark to market for the end of the financial year and calculated what the performance of it was. Then I had TRS, I had a couple of parcels of TRS, which I owned before the beginning of the last financial year, but sold during the financial year.

So I did a mark to market on what they were worth at the beginning of the 2021 financial year and calculated from that. So then I ended up with a table of individual performances for each stock and added those up and that said, my portfolio was down 57% for the financial year and I thought, well, that doesn’t sound right. [laughing]

Tony  20:32

No, it’s because… if you’d worked out the volume weighted situation for each of those stocks, you’re still going to have the same problem, you put lots of capital in towards the end.

Cameron  20:44

Right.

Tony  20:44

So I think the best way to do it, if you’ve got lots of ins and outs is to do it month on month and add up the months.

Cameron  20:49

Like I been doing for the last couple of years with the QAV portfolio just monthly results.

Tony  20:57

Yes, we’re doing a mark to market each month for sure. Yes.

Cameron  21:00

Yes.

Tony  21:01

Yes.

Cameron  21:02

Well, that’s…

Tony  21:02

Which is not quite what we were doing with the dummy portfolio. We were doing annual ones as well. Because the portfolio doesn’t have all those ins and outs in it. We didn’t introduce any new capital.

Cameron  21:12

Yes. Right. But I was doing a monthly end of month summary with the market to market and all that kind of stuff.

Tony  21:18

Yes.

Cameron  21:20

Well, that’s time consuming and annoying, Tony, I don’t want to do that. Why? Why don’t these platforms like Sharesight and Nevexa and Stock Doctor do that for me?

Tony  21:32

We’ll probably need to talk to them or an account because I’m not an expert in this field, but they probably do. It’s just one of the options you can select. We’re getting into money weightings versus other waitings. So I’m just not sure what the option is.

Cameron  21:47

I’m sure one of our listeners knows how it works. Somebody please tell me because it just did my head in this morning. I hate spreadsheets, as everyone knows. [laughing]

Tony  21:59

Yes, I can’t help you much more than that. Because over time, all that kind of ins and outs should even out to a certain extent, I’m assuming.

Cameron  22:09

Right but it probably helps if you add…you’ll always be adding more capital. If you’re lucky.

Tony  22:19

Yes.

Cameron  22:21

Yes. So you’ve still got that situation where you need to work out if you add a million bucks in, what’s the performance if you’re trying to keep track of it.

Tony  22:21

Yes, I guess the way I’ve done it for myself is to to ignore the capital inflows and outflows because if you have inflows in one year, it’s resets the base for the next year, you’ve got to get a return off that capital anyway. So if this year looks good, because you put money in next year is going to look good as well, because of performance, not because that money, the money was already in there. If that makes sense.

Cameron  22:56

What if you add more money the next year as well? Well, not every year. Every year, yes. You’re going to look really good [laughing] If you’re using a dodgy calculation, but if you’re actually trying to work out the actual performance, it’s complicated.

Tony  23:10

Yes, I’ve done it before using IRR calculations, which is a formula in Excel, which takes into account each month’s ins and outs. So it gives you a better calculation of your internal rate of return.

Cameron  23:25

Right.

Tony  23:26

But that’s kind of theoretical.

Cameron  23:34

Tony  23:35

Only because it’s like, say it calculated, you had a 10% return for the year. What does that mean for you, you had so many ins and outs so it’s pretty hard to make any decisions based on that and if you took what’s out in the first month, that might affect the internal rate of return and put lots in the last month and it will still affect the IRR.

Cameron  23:52

So how do you know if you’re doing a good job or not?

Tony  23:54

Stop taking money out of your portfolio?

Cameron  23:59

[laughing]

Tony  23:59

[laughing]

Cameron  23:59

It’s easy for you to say.

Tony  24:01

[laughing] Yes, my guess would be to do it month by month and add it up.

Cameron  24:08

OK, I’ll have a crack at that. Thank you. All right. You wanted to talk a little bit further about the question we had last week, we had a young fellow 25 said, if you were 25? What would you do? How would you do it? You wanted to expand on your answer a little bit.

Tony  24:29

Yes, so this is a bit like the article we wrote on private school education and what it would be worth to you over a long period of time if you took that money and invested it using QAV. So the benchmark answer to the question is to take your pot of money and let it accumulate without touching it for 30 years and I’ve compared that against something that we’ve done ourselves, which is a blend of using property and gearing and investing in the stock market, I just wanted to run through that.  I hasten to add, this is not in any way financial advice for the person who asked the question, but I’m doing it to highlight a couple of things. One is the use of gearing and two is, I think, one of the things which I found useful and motivational over the years and we spoke about briefly before is doing up a financial plan and a spreadsheet for your own circumstances and play around with those numbers and see what a period of time that suits you and your horizons might look like.

So I’ve just done a quick one on my computer and I assumed the person who was 25 could invest for the next 30 years until retirement at 55 and I put some other assumptions in which may be unrealistic for a 25-year-old, but they make the math easy, so we can talk about it and the assumption I use was that the person went out and bought a house to live in, which was worth a million dollars and I picked that number, because it’s a one, so it’s easy to do the math, but that might be unrealistic that someone could do that at 25. But interest rates are low.

So generally, to buy a million-dollar house, you’d need a deposit of 200,000 and you’d borrow 800,000, from the bank and I let that run just without doing any sums at all, let that run for 30 years, and which is pretty much how most people in Australia do their investing, they go and buy a house when they’re young, as soon as they can, and they live in it and when they get to retirement age, they sell it, pay off the debt and go from there, work out their retirements, buy a cheaper house, use the difference to invest for the retirement, but that house using a 9% inflator for the house would be worth about $13 million over after 30 years.  So the gearing doesn’t change. So that $800,000 of mortgage, I guess it will get paid off over 30 years. But it never got higher than what it started, which was $800,000, which means the equity is now 12.2, which is a nice sum. I mean, you’ve got to take into account that that $12.2 million in 30 years’ time isn’t worth $12.2 million now.

So then the next base case to compare that to was to have $200,000 of equity, instead of using it for deposit in your house to go off and invest in the stock market using QAV. In other words, it grows at 19.5% and after 30 years, you get to $31 million. So that’s better than putting it into your house and then to get accumulate over time and that makes sense because the house accumulated at 9% and QAV’s accumulating at 19.5 %.  But there’s kind of a blend, which worked for me and these aren’t my numbers, but I just wanted to share them as an example. So the thing to note, first of all, is if you go out and buy a house with 200 down on a million dollars over the first five years say the value of the house grows to $1.5 million and that’s just 9% growth every year. But your equity, because the mortgage hasn’t gone up, it’s still $800,000 your equity is grown to be $700,000, which is actually about a 30% return because you had leverage.

So that’s actually better than QAV. So we kind of need to harness that, which turns out to be a blend of investing in your own home, letting the equity grow because of natural growth and gearing and then redrawing down the mortgage and putting it into shares. So, for example, after those five years the house is worth 1.5 million, but your equity is worth 700,000. The gearing is worth 800,000.  So you’ve actually got a lot of equity, your house is worth 1.5 million, you can go back to the bank and say how much would you lend me now that my house is worth 1.5 million and the bank would say 80%. So you can increase your gearing, reduce your equity.

So if you geared up again, you would have $1.2 million worth of gearing which is 80% of the new house value after five years of 1.5 million, which means your equity has dropped to be 300,000 but you’ve got an extra $400,000 there to put into the share market, that new gearing, if you like, again doesn’t change over time.

So after another five years, so 10 years into this scenario, your house has gone up in value again, it’s now worth $2.3 million, your gearing hasn’t changed at $1.2 million. So you now have equity of 1.1 million. If you’ve invested the share into the share market, and the 400,000, that went into the share market, when you re-geared is now worth a million dollars, you’ve now got $1.75 million, or $1.7 million of equity after 10 years.

So you’ve turned that $200,000 into $1.7 million over 10 years, which is quite a high return on equity, and CAGR, cumulative appreciated growth.  And then if you sort of let that continue on, at the end of 30 years, you would then have $48 million in equity, because the house keeps appreciating at 9%. But the shares keep appreciating it 19.5% and your gearing hasn’t changed, and you probably paid it off anyway over that time. Bear in mind, you need a job to pay for the gearing and but bear in mind as well you’re getting some income from the dividends. At a certain point during that investment process, the dividends get large enough to pay for all the gearing.

Cameron  31:32

Right.

Tony  31:33

So you can stop working if you want. For this calculation, I haven’t worked out what it was. Anyway, if you did it again, if you re-gear again and invest it in the market. After 15 years, without going through all the numbers, it gets to $64 million as your total equity, which is better than starting off with 200,000 and putting it in the share market where you ended up with 30 and it’s all because of the power of leverage and the fact that the gearing doesn’t increase over time, but the house appreciates in value and the stocks appreciate in value and eventually as we said the stocks can pay off the mortgage and keep going.

So I think it’s worthwhile for anybody ready to sit down and do this kind of calculation for themselves put their own figures in working out their own time horizon, knowing their own circumstances working out when they’re comfortable re-gearing and putting the increased equity into the share market and doing this calculation for themselves. It’s quite motivational, and for someone who’s got 30 years to go can become quite a big sum.

Cameron  32:45

Wow. Can you share your spreadsheet with us?

Tony  32:49

I knew you’d ask that. [laughing] I’d probably prefer to… Yes, I can, I’ll tidy it up. It’s just notes for me at the moment and share it within a week or two.

Cameron  33:00

OK.

Tony  33:01

But I’ll share it as basically a template for people to do their own plans with. So they can punch in the numbers that they think suit them and then they can see what it comes out with at the end.

Cameron  33:11

And what about for people who are 50, Tony? Where do we..

Tony  33:16

We can punching numbers in…Well, how long do you plan to invest for? Well, the rest of my life?  20 years? 30 years?

Cameron  33:22

I’m not sure how long I’ve got.

Tony  33:24

So these numbers still apply to you.

Cameron  33:26

So the same thing works whether you’re 25 or 50.

Tony  33:30

Correct? Yes . You’ll have to put your different assumptions in there about gearing, because if you don’t have a job to pay it off, that might be because you’ve retired. It might be difficult. But yes, you can play around with the numbers and come up with your own projections.

Cameron  33:46

Terrific. Yes, I hadn’t thought about that before the power of the gearing.

Tony  33:51

Yes and that’s the real benefit of owning property and of course, a couple of other comments to make was this is basically what I’ve done over the years. The numbers aren’t real for me but we’ve bought and sold property along the way we’ve kept property and negatively geared it and then bought another property. So all those things muddy the waters.

Cameron  34:16

Yes.

Tony  34:17

But they can all be they can all be spread sheeted and planned and a couple of other things to point out is when in this model, I’m just using an interest only loan. So you’ve got to take into account that these days interest only loans aren’t as easy to come by. So again, just delays the period of time until the shares are big enough to pay off both the principal and interest for the line. Whereas when I did it, you know 20 odd years ago when I started, you could pay off just the interest component, which was cheaper to do. They’re still available today. I still have one. But after the Haine inquiry The bank has cracked down on them and how much they’ll lend interest on it.

Cameron  34:59

Right.

Tony  35:00

But in my principal and interest mortgage, I still have an offset facility, which means if I put money in the bank, it offsets the interest and I have a redraw facility, which means if I have paid as the variable nature of interest rates change, but the repayments don’t. If I’ve got ahead and my repayments, I can redraw it.

So, there are other ways of doing it. But I think also too, no one laid out this map for me 20 years ago, so I had to sort of problem solve this and game it along the way, and spreadsheet and planet and that’s the challenge I’m throwing out to the 25 year olds out there is you may not be able to do exactly what I’ve done, but working out for yourselves, maybe investment properties allow you to gear and when they increase in value, you can put the money into the share market at a better rate of return and maybe you start off in the country and buy property in the country, which you know, is a lot cheaper than in a city, that might be the way you get your foothold in the market. Why not? People have already tried… Sorry?

Cameron  36:06

It won’t all be underwater in 30 years, like property in the city.

Tony  36:10

[laughing] Yes, maybe you want to take on a margin line as some of our subscribers have told us they do, at least to get you going, maybe you do QAV until you get to a $200,000 deposit, and then you start buying property and then you can gear it after five years, or whatever the period of time is. But yes, certainly, you’ll need to solve your own problems going forward. But I just wanted to get people to think about this mentality of doing, A of doing a plan for themselves and B of using the gearing that’s available with property to boost their returns.

Cameron  36:42

The most 25 year olds probably think they’re just going to put it in Bit coin and get rich like that in five years.

 

Tony  36:50

Yes, that’s I mean, that’s probably one of the- I wouldn’t say a regret. But one of the hidden learnings for me was that I didn’t start doing this until I was 35. So-

Cameron  37:01

Yes.

Tony  37:02

If I started when I was 25, the order of magnitude of our equity would be a little higher now than it is, but anyway, but that’s why I’ve decided to share this and that’s why it’s great for 25-year-old to be able to do it because the end numbers are so much higher after 30 years, or 40 years or 50 years.

Cameron  37:20

So you didn’t get this from anywhere when you were-

Tony  37:23

No.

Cameron  37:24

  1. You just worked it out. 35, you just figured it out at some point.

Tony  37:28

Correct, yes. And-

Cameron  37:29

Wow.

Tony  37:30

Along the way, like, it goes against conventional wisdom. I mean, I had a boss at work, who said, What the hell are you buying against the house to invest in the share market for and I just figured that if everything went south, I just had a mortgage on the house, which should take longer to pay off. That was the sort of fallback. But as it turned out, it worked. Well.

Cameron  37:48

I wonder if we keep doing this a few years. At some point few years from now, I think people will be able to go into a bank and say, I just want to borrow money to invest in shares and they’ll say what are you talking about, you’ve got QAV and they’ll g… banks will go, Oh, QAV, OK, that’s fine. Yes. How much do you want?

Tony  38:05

[laughing] Yes, right. Yes.

Cameron  38:09

Proven, it’s more solid than real estate. Oh, thanks, Tony. Well, there you go. 25 year olds listening to this. Good luck.

Tony  38:19

35 year olds and 50 year olds, yes, get out there and plan and see what you can get to…

Cameron  38:25

Yes.

Tony  38:25

And play around with it. Play around with gearing.

Cameron  38:27

Yes, alright. Moving right along, you wanted to talk about 3PTL lines and alerts.

Tony  38:37

Oh yes, just the brief comment. I think I spoke a couple of weeks ago about what I do Between reporting season. Like I said, I raised alerts in Stock Doctor and then just recently, as I was going in looking at the banks, I noticed the alerts were out of date. So it’s important to probably every month, go in and just check your calculator against those alerts and upgrade them if you need to.

Cameron  38:59

Right. Redrawing the 3PTL’s because things may have changed.

Tony  39:04

Well, because the graphs, yes. There’s two things that can happen the graph moves to the right and that might change your peak an L1 or a H1, peak or trough, so you might need to redraw it, but even if you don’t the lines are going to extend that extra month which means the price is going to rise for a Sell and drop for a Buy.

Cameron  39:24

Yes. Good point. All right, thanks. You picked up a bug? Not the COVID, a Calculator Bug.  Right.

 

Tony  39:35

Yes, look, I picked it up for myself. It’s not in the template that’s on the website or anything like that, but it just may have gotten into other people’s spreadsheets as well. I picked it up I was looking at CBA.

So I’ve taken the template for the three-point trend cap code per company, and I’ve copied it 20 or 30 times since then maybe even more 50 times for different companies. When I went back and looked at CBA to update its Sell-Line, there was a part of the cell that does the calculation for the ratio of how many days in the month we’ve gone through, was hardwired into that CBA cell. It wasn’t in any of the other cells.

So somehow it got overwritten. But it should be a calculation of the… There’s a formula to go something like, equals today, brackets over number of days in the month or something like that and works out the ratio of days into the month. So just check that for me, please and before you go too much further with your own calculators and make sure it hasn’t copied from anyone else’s-

Tony  40:41

Spreadsheets.

Cameron  40:42

Well, I think the one in Dropbox is working because I was using it recently and I had another issue, but I don’t think I had that issue. I didn’t pick it up if I did, but I’ll check again. Thanks.

Tony  40:53

OK.

Cameron  40:53

Stock of the week.

Tony  40:56

Yes, so I we’ve already mentioned that I’m planning to sell out of CommBank and we’re recording this on Monday at the 19th of July. So I won’t do it for… We put it out of stock journal today. So I may do it tomorrow if CommBank keeps dropping quickly. But I’ll wait till Wednesday otherwise, at this stage, I haven’t done a download today. If I was selling it today, I’d be buying Suncorp SUN which is further down the list and it’s big enough for me to buy.

So we can talk… I’d like to talk about Suncorp.  And I make those two declarations just so I’m not front running people who have also worked out at CBA as a sell today and they want to sell their shares and then we’ll buy something, their circumstances will be different. I’m not saying go out and buy Suncorp. I’m saying it’s well I’m looking at for myself. So these aren’t recommendations, they’re just declarations. If someone wants to buy suncorp, they have a chance of doing it before I do so I can’t be seen to be profiting off of them. If I had aborted already and then talk about on the show it would look bad. So that’s why I do it.  So following on from Paul’s comment that when we talk about a stock of the week, we should probably just pull a part of it. I wanted to go into Suncorp and talk about it. Interesting one overall, I think people would know that Suncorp is a Queensland based bank and insurance company.

So interested that Suncorp had recently crossed its Buy-Line, it’s selling pretty close to its Sell-Line, but it’s been going up whereas the banks have come down. So all I can gather is that the insurance side of the business is doing okay. Because it should be facing all sorts of problems and issues that the other banks have been facing since the COVID has come back into Australia but also around the world. We’ll talk about that in further detail when we get to that one of the questions about banks.  Anyway, Suncorp has a QAV score of point 0.12, the current price was .1131 when I looked this up before the recording, it’s large in its ADT.

Let’s have a quick look at what it’s ADT is two years. But it’s… just have a quick look at ADT for Suncorp. Average Daily Trade of what’s that? 25.9 billion. So it’s quite large. It’s slightly less than the Stock Doctor QAV, sorry, slightly greater than the Stock Doctor QAV, so scores no points there has a good yield of 3.19%. So scores a point there, which is above the 2.5. I think we use 2.6 we use in our checklist.  Financial health is strong, price operating cash flow 5.5 P of 17, which is its average for the stock market, but probably starting to get up there for bank.

The QAV to calculation is $11.79. So the price is below that. So it gets a point for that and has good equity. So it gets a point for being less than book plus 30%. Growth is reasonable but not enough to give the point. So growth over P/E is less than 1.5. Partly because the P/E is up at 17. It’s a bank so it doesn’t have the doesn’t have a founder owner or large holdings by the board in any individual case or aggregates so scores nothing there. It’s a borderline star income stock.

So it gets one point, gets half a point for each. As you’d expect being a big bank doesn’t have a qualified Audit so no red flags.  Consistent strong financial health, it’s a new upturn. As I said before, it’s just turned up again, even though it’s selling close to its Sell-Line. So it scores 10 out of 50, or 67%, for quality, and the QAV of 0.12. A couple of risks with banks. Same as the banks, and we’ll talk about those when we get to the banking question, in general, but this company also has insurance.  And so there are risks with insurance companies, which people may or may not be aware with.

So we’re all sorry. So first of all, there’s a normal risk that there are more cyclones than predicted for this year or there’s a flood, or lots of hail storms can affect the profitability of insurance companies. They tend to try and manage that risk when they arrange insurance, but sometimes you get outliers, which can hurt profitability, and also to COVID-19. So, interestingly enough with this, with the Australian insurers, a lot of Australian insurers were hit by a court decision recently, so although insurance policies excluded COVID-19 from payouts, but a court has ruled in a lot of cases, that wasn’t the case, and the contract should be enforced for COVID-19 payout. So the insurance companies took hits, that happened last year.

So most of that’s washed through and they’ve provided for it this year. So I think we’re through that, but it will obviously cause some concerns. If when there’s more claims arising from the latest lockdown. So that could be a risk as well.  Yes, so that’s some Suncorp and that’s a bit of a pull apart for people, they can compare it to their own analysis on Suncorp.

Cameron  46:35

Pull apart, I like that. It’s like a pulled pork.

I have to come up with the name for that.

Cameron  46:42

Did you drill down into why the courts ruled against the insurance companies?

Tony  46:48

I did but I’ve forgotten but it’s something like there was policy wording. No, I’d have to look at it. The policy wording was something like excludes epidemics and there was no…

Cameron  46:59

I did read up on it a few weeks ago, it was a policy, the policy wording that they’ve been using in their contracts referred to a piece of government pandemic legislation referred to the name of the government led legislation. So it says-

Tony  47:14

OK.

Cameron  47:15

We won’t cover anything that’s covered by this piece of government legislation. But the government changed the legislation 10 years ago, changed the title of the legislation. But the insurance companies didn’t change their boiler plate. So they were all referring to an exemption referring to a piece of government legislation that had changed 10 years ago, and they never changed their contracts. So the court went, well, you said it was this one and that doesn’t even exist anymore and the new pandemics covered by this one-

Tony  47:49

Right.

Cameron  47:49

So you’ve got to pay up.

Tony  47:52

Yes.

Cameron  47:53

I just thought it was ironic, because insurance companies always don’t pay because of, some sort of archaic piece of wording in the contract that the signee missed.

Tony  48:05

Yes, we [inaudible 48:05]

Cameron  48:06

We couldn’t believe that they all got caught. They all had the same thing. They all had the same wording in it, though.

Tony  48:12

Was it all of them? or most of them?

Cameron  48:14

Well, all the ones that the court ruling was against, I think it was more than one company.

Tony  48:18

Yes. it was a fair number. I know and you’re right, yes. This works against them. But that example and forum financial example, which there was more coverage on over the weekend. It’s the same sort of thing, isn’t it? No one’s paying attention, right.  The detailed changes in a contract, and no one picks it up for 10 years. Same with the fraud, that’s going on with the alleged fraud that’s going on with foreign financial.

Cameron  48:43

What we need, I think what we need is a profession of people whose job it is to check legal contracts. I don’t know what you would call that profession, what that would look like but just a highly paid… [laughing] I was going with lawyers, but yes, white-collar professions that get paid a lot of money to check contracts. I think that’s what we all need.

Tony  48:58

[inaudible 48:58] [laughing]

Cameron  49:07

HUM, yes. Well, I don’t know what happened to HUM today, apart from the fact that it jumped back up 7%. So maybe people figured out that the whole Forum finance exposure wasn’t as big a deal as they thought it was.

Tony  49:23

Yes, that would be my guess. But I haven’t checked the announcements from HUM. Let me just have a quick look.

Cameron  49:31

Bumped it, bumped right up.

Tony  49:35

Oh they put out a business update today. Let’s have a look. Fourth quarter 21 transaction volume is up 57%, well over the prior period or PCP. What’s that?

Cameron  49:39

It’s a kind of drug that you get in clubs in New York-

Tony  50:01

[laughing]

Cameron  50:02

Outside of that, I don’t know. [laughing]

Tony  50:05

[laughing]

Cameron  50:10

Record quarterly BNPL segment transaction volume up 68.7% on PCP.

Tony  50:18

So that’s their venue buying now payload their product. So that would have been coming off a very low base because it was only launched last year. So that makes sense and potentially the transaction volume was down last year because of COVID, too, but I’m not sure.

Cameron  50:32

Right.

Tony  50:34

But yes, it looks like it’s a quite a good update on trade.

Cameron  50:38

Based on an audited accounts cash net profit after tax of 68.4 million up 121.1% on PCP.

Tony  50:50

Yes, so basically then they’ve probably got their accounts in and they’re announcing them to the market ahead of their actual update after they’re audited.

Cameron  51:00

Right. Previous corresponding period Google is telling me is what PCP stands for.

Tony  51:07

Thank you. Good.

Cameron  51:08

Jamie Oliver’s listening somewhere in a car just shaking his head going, Oh, my gosh, you guys.

Tony  51:16

I’m just scrolling through trying to find if there’s an update on forum in the

Cameron  51:21

Control F, Tony. FY 21 cash end pad includes 1.5 million pre-tax of impairment losses due to balance sheet exposure to foreign finance, potential exposure from solid receivables is considered to be a contingent liability.

Tony  51:36

What does that mean? Does that mean? They said it was 12 and now it’s only 1.5 I guess it might…

Cameron  51:42

Contingent liability is a liability that may occur depending on the outcome of an uncertain future event.

 

Tony  51:50

I must admit, I thought the 12 million exposures sounded like a contingent liability because they’d sold off the business that had the liability.

Cameron  51:58

Right.

Tony  51:59

But… Yes. I don’t know.

Cameron  52:01

Speaking of James Oliver, I did the transcript of the episode where we had James on and posted that up late last week and really enjoyed listening to it again and going through what he was saying, line by line word by word. I mean, I understood it a lot more the second time around so if anyone is interested in reading that you can go up to the blog post page for the James Oliver interview, whichever one that was, I can’t remember, a couple of weeks ago and you’ll see a link to the transcript and you can go through and get all the wording. Just chuckling to myself because I remember after we were finished the recording I said that was really good and you were like what was an order? [unintelligible 52:46]  [laughing] [laughing] That was a quiet moment between you and me. That’s bedroom conversation, Tony. You can’t share that.

Tony  52:58

You can edit me out then, sorry. [laughing]

Cameron  53:03

It was a lot for my brain to take in. I think it was at the end of a two-hour episode too or no, that’s when we edited i in anyway. It was big. Anyway I appreciated that change. I took it in a lot more. You were getting quite excited in that interview too; you were like… I could tell, it was almost like a US Masters Tournament for you. You were all excited. [laughing]

Tony  53:26

[laughing] Maybe Jamie and I can go to the British Open next year to get away.

Cameron  53:26

I’m sure he’d love that. OK, banks being close to the three PTL’s. You wanted to talk about that. Well, there’s a question about it. So you want to just plow through the questions and we’ll come back to that.  Oh, OK.

Tony  53:46

Yes.

Cameron  53:47

Question Doug. Hi, Doug. has Tony tested or considered the idea of not selling that is holding a stock if it is still scoring well on the QAV scorecard but has dipped below its 3PTL Sell-Line. Case is currently in point CBA WBC ADH etc. All are still scoring well, but sentiment seems to have turned against them for now. It seems to me slightly foolish to sell out when the numbers are still good and reporting season so close. Surely it could go either way. But the flip side is you’d be in again on the next three PTL Buy signal. So why jumped ship and pay taxes and brokerage VUK is another recent example.

Tony  54:34

Yes, look, it’s a good question, couple of points. So generally with the banks and I’ll address them first. The banks have come out again, which they should and said things like are we’re not going to…. We’re going to give people loan holidays again. Now that the COVID shutdowns hit Sydney and Melbourne. We’re not going to evict people if they haven’t been able to pay their mortgages or their loans or repossess cars if they’ve got a car loan, that kind of thing.

So I think what’s happening with the banks at the moment is the analysts are saying, hang on, we factored in all this, all this right back of provisions in the last half, because we came out of COVID and it didn’t hurt as much and so the banks either provided for bad debts and losses, and they’re going to be rewritten back into the profit and loss.  And then the analysts were also saying and counting on the fact that they would then flow through to increase dividends or share buybacks and there’s various reports out there about what those numbers might mean.

Now the brakes are back on Sydney and Melbourne. The analysts are saying, hang on, maybe they’re not going to write back the provisions. At the level we thought they would, which means maybe no dividend increase, which means maybe no share buyback, at least in the short term, or it’s all pushed back six months and that’s what’s depressing. I think all the banks share prices in the last couple of weeks.

So that’s the banks, on the other ones like Adair’s. And, well Adair’s is still way above its Sell-Line. So I wouldn’t contemplate selling Adair’s yet. Even though it’s in a downturn at the moment. I think what I said last week is I wouldn’t be buying Adair’s at the moment, because it’s going through a downturn with its share price. So that’s Adair’s.  So it’s funny that we’ve started this concept of a fat bottom that the Sell-Line follows the latest upswing.

So it’s new. It’s not I mean, I did some research on it historically, and it works and it was part of my investigations into what we do with commodity shares, like FMG to get us out if there was a big downturn, so I think it’s kind of serve us well, but it’s new. So this situation with the banks might be a case which doesn’t work for this kind of new fat bottom Sell-Line. But time will tell. But given the fact that we’re in COVID again, I don’t see the banks up turning anytime quickly from where they are now and if you look at VUK. Another case in point, if we have a look at that. It crossed its Sell-Line, its fat bottom Sell-Line a couple of weeks ago, and we sold and I sold out of mine and it’s dropped from there.

So to answer the question, from Doug, yes, that might be short term, maybe in six months’ time, when we get through COVID. Again, and we’re all vaccinated and whatnot, the banks will start to write back more from provisions and do more dividends or increase their dividends and do share buybacks. But, a lot can happen between now and then. So I’m still comfortable selling those shares now, rather than waiting for new fleet. Well, it’s in some cases, the banks don’t report next month anyway. So you’re waiting until September for some of them. So I think CommBank does, I think the UK might but the other ones don’t. So factor that into your own decisions.

The other point to note here is that with the banks in particular, we’re using fat bottoms to draw new Sell-Lines. So if we go back and look at Commonwealth Bank as an example, that we called up before, before we talked about fat bottoms, the Sell price for CommBank will be much lower than what its current share price is. It’s only since we started this concept of looking at a trough as not just being a one-month event, but it might be three or four months and therefore using the full sort of trough to draw our lines that we have started getting… I’ll call them hug lines. I started to get Sell-Lines which go up steeply and follow the upward slope for the recent trends. Just looking at CommBank, if we weren’t using the fat bottom, then the sale price is going to be around $66 and the current share price is at 97 odd dollars.  So if you look at the graph of the VUK and draw a Sell-Line and it’s gone, it’s continued to drop is my point from that Sell-Line rows, if we use the old Sell-Line we’d still be holding and we wouldn’t be selling until about $1.40 and the share price is currently 340.

So just wanted to raise that point as well. Fat bottom Sell-Lines is new, there might be issues with it, but it didn’t come out of any sort of back testing on this. But having said that, I think it’s working for the VUK and might work for our banks as well. So I’m happy to sell. Now the recommendation of Doug, Doug might want to go back and not use fat bottom shares and hold them I fully respect that and take his point about transaction costs but yes, I’m selling.

Cameron  1:00:05

I’m just looking at the VUK chart here I noticed that it’s still a buy from a MACD perspective. I know right, we’re talking about MACD, we’re saying that there’s a lag between our Sell-Lines and MACD. This looks like a case in point. Yes, exactly.  Mark, hi Cam, I was looking at Kingrose Mining KRM today my QAV scores 0.24 and noticed in their latest quarterly ASX release, they’ve announced the cessation of gold production and they are transitioning back to exploration only. This would presumably mean the cessation of cash flow also maybe they should come off the top scorers list. Cheers, Mark. OK. Thank you, Doug. Thank you, Tony.

Tony  1:01:00

Yes, really good pick up there, Mark. Couple of points, it’s likely that they’ll come off the top scorers list when the results come out, because the operating cash flow isn’t there, as Mark said. But as we know, if something comes, drops down the list and falls off the top scorers list, we still might hold it and just looking at KRM, it seems like going back to exploration has been a good thing because the share price is increasing over the last couple of months.

So my take on KRM is that people have worked out that the mine life was coming over the last couple of years, and the share price has dropped from sort of 15 cents to a low of about three cents back in December 2019 and that now people are getting comfortable with that and getting comfortable with the exploration program and the amount of cash they’ve got to do that and the likelihood of finding another scene etc. and starting another mine so would fully support Mark, if he decided he didn’t want to be in a gold exploration company and therefore sold the stock, I understand that completely.

But the way I would do this from a QAV perspective, and I don’t know Kingrose Mine, but the way I would do it is to follow sentiment from now on.

So the operating cash flow might go away and will but if the stock keeps going up, then I’d still hold it until sentiment turned down on this one.  Another point to make about the cash flow going away is if people are using Stock Doctor and go into the statement of cash flows for KRM or any company across the top of that the numbers is a heading and it’s got two boxes, one says as reported, and or two buttons, sorry, as reported or annualized and we always use annualized and that smooth’s out the operating cash flow force. But it means that if there’s cash flow in this half and next half, there isn’t any you’ll still see cash flow in the June 20, column.

So you might want to look in this particular case at as reported and click on that button and you’ll get the f act that the cash flows possibly ran out because they’re not exporting gold anymore and you might want to use that in this one instance anyway-

Cameron  1:03:28

Right.

 

Tony  1:03:28

In your calculations for the checklist.

Cameron  1:03:31

Right.

Tony  1:03:32

Does that make sense, Cam?

Cameron  1:03:34

It does. Yes. But looking at their cash statement. It looks like they’re sitting on- Well, as of the end of December -they were sitting on 31.5 million dollars in cash. Correct?  Which is a lot of cash for them going back June 16. At the end of the period, they had one and a half million, then 2 million, 6 million, 5 million. 10 million, 5 million, 4 million 19 million, 23 million, 31.5 million. So they’re cashed up and they can probably do a lot with that cash if they’re clever little kitties.

Tony  1:04:07

Yes.  Yes. A couple of other comments, I guess. Like I don’t know this company that well or where it’s exploring or whatever. Generally exploring for mines won’t cost a whole heap. It’s a person with like… It’s maybe a team of a couple of people out with a drill wherever

Cameron  1:04:28

They are metal detectors, just messing around with metal detectors on the beach.  I saw someone doing that yesterday. Yes.

Tony  1:04:33

[laughing] Oh yes, were they drilling for gold or digging for for gold?

Cameron  1:04:38

Mining for gold, looking for gold.

Tony  1:04:39

But exploration… Mining for gold, yes.

Cameron  1:04:40

Yes. They’re just going to hire a million people with metal, that’s what they’re doing with their 31 million, million people with metal detectors just to cover the land. That would be fantastic.

Tony  1:04:54

But anyway, my point was the exploration-

Cameron  1:04:56

Alright.

Tony  1:04:56

Won’t be that expensive. But if they do strike it and need to develop a mine they’ll need to cash it down and they may even do an equity raise to fund setting up a mine again. So that’s just something to bear in mind.

Cameron  1:05:09

OK, thanks for the question, Mark. Last question of the day, Petra, she posted this on Facebook today. I noticed that C6C- round of applause I got it right first time. First time ever I got that right first time-

Tony  1:05:21

[laughing]

Cameron  1:05:22

Has dropped approximately [laughing] like 9.5% today. Not sure- I practiced that before we went to it- Not sure why, can someone shed some light on the Sell-Line? I’ve tried to draw it but I’m not sure if it’s right. Looks like it might have breached a while back and I pulled up the copper commodities price, but I think I did the wrong one again. But it looked like it was coming back as well. Did you look at the looked at the right the copper physical price? I probably [unintelligible 01:05:52]

Tony  1:05:51

So first of all, just look at C6C. We’ll address the Sell-Line with C6C first of all.

Cameron  1:05:57

Tony  1:05:58

I’m getting Petra drew a line that hugs the upward trend a lot more than what I’m getting. I’m getting a sell price of about 69 cents.

Cameron  1:06:10

Where are you [unintelligible 01:06:12]

Tony  1:06:10

Started using March 2020?

Cameron  1:06:13

Yes.

Tony  1:06:14

And then I’ll go across to may 2020.

Cameron  1:06:18

Yes.

Tony  1:06:20

The price in March was 42 cents. The price in May was 50. Or sorry, the price in March was point 0.42. Yes, 42 cents. The price in May was 50 cents.

Cameron  1:06:32

Yes. So it’s a lot more than 8%.

Tony  1:06:35

Yes. That’s actually… that’s about 8%. I’m just looking at it now.

Cameron  1:06:43

14% I get.

Tony  1:06:45

Yes, you’re right. Stock Doctor is giving me something really strange. Stock doctors giving me-

Cameron  1:06:51

That’s telling me 14%.

Tony  1:06:53

Is it?

Cameron  1:06:54

Yes, but it’s kind of rough.

 

Tony  1:06:55

Yes 11%. So that’s the line I’m using.

Cameron  1:06:57

More than eight.

Tony  1:06:58

Yes, more than 8.

Cameron  1:06:59

So that comes about 82 cents if you drag that across.

Tony  1:07:04

Yes, correct.

Cameron  1:07:06

And it’s currently a $3.62. So it’s long way off its sell price if we’re using that, which is a… looks scary. I know. People look at that and go, Oh, my God, it’s already come off from top of $4.57 down to $3.62. I’m not going to wait for it to drop all the way down 80 cents?

Tony  1:07:24

Well, that’s the next point I want to make is that a graph like this can be a little bit deceptive in that drop from, say 450 to 360 is on a percentage terms? Let’s say it’s dropped about 25%?

Cameron  1:07:42

Yes.

Tony  1:07:42

So if you go back, it’s head drops, which are more than that. So back in, say January, it was 77 cents, it dropped back to 42 cents in March, that’s a drop of about 40%. But it looks a lot smaller, because the numbers are smaller. So what am I trying to say, if the share price was 20 cents and it dropped two cents, that’s a 10% drop and looks quite small on the graph. If the share price has risen to be two bucks, and it drops 10%. That’s kind of like a big drop, even though they’re both 10 percents, one’s 20 cents and one’s two cents. So that amplitude gets magnified on the right hand side of these graphs sometimes.

So just bear that in mind when you’re looking at a drop. At the right hand side. It’s potentially percentage-wise, that’s still through a drop. But something which has happened before, but you don’t see it in the graph that way.

Cameron  1:08:39

Right. That doesn’t help. That doesn’t help if your portfolio is losing money. I mean, people still freak out.

Tony  1:08:46

Yes, but I think people freak out when they see that sort of, I see the share graph going down and it looks quite dramatic, but it’s not. Percentage-wise, it might not be as big as people are thinking, like the graph is a bit misleading. That’s the first point. Second point is yes, I think what’s happening with these copper producers is that the underlying for the commodity is going down, I’m just going to look at what that is.

So I’m using Stock Doctor, if you go to the Stock Doctor and type in copper. So I’ve opened the graph already. I’m typing in copper and I’ll see a whole heap of copper mines. But I’ve got copper futures, down towards the bottom, which is H G hash, and then copper physical, which is X C U underscore and so as pointed out by one of our subscribers, probably copper physical is the better one to use, the copper futures tends to be a bit more optimistic. But copper physical showing.

Cameron  1:09:52

Sorry, where are you finding this again, I’m in the commodity section.

Tony  1:09:58

No. So if you use the Sock Doctor commodities- -You’re going to get the futures graph, which is H G hash.

Cameron  1:10:01

Yes. Where do I get the copper physical?

Tony  1:10:09

Copper physical?

Cameron  1:10:09

Yes.

 

Tony  1:10:09

So you need to…

Cameron  1:10:10

Just typing company search.

Tony  1:10:11

Company search isn’t working, because it’s not a company. But where I’m finding it is when I’m in advanced charting for say, C6C-

Cameron  1:10:20

Yes.

Tony  1:10:21

Over on the left hand side of the graph at the top, it says enter code or name.

Cameron  1:10:26

Yes.

Tony  1:10:26

And if you type copper in there…

Cameron  1:10:29

Right

Tony  1:10:31

Yes.

Cameron  1:10:31

I typed X C U in there and I didn’t find it. But I see it.

Tony  1:10:36

X C U underscore is actually what it is.

Cameron  1:10:39

Yes, right. OK. I’ve got it. Thanks. Good.

 

Tony  1:10:42

Yea and so if I draw a Sell-Line with that graph, I’m getting a sell price about 9181 and the current price is 9309. So it’s getting close to itself.

Cameron  1:10:59

Does it have a flat bottom?

Tony  1:11:00

No, I don’t think so.

Cameron  1:11:02

So low point. I’ve got August 2016 at 4602. Next low point- [unintelligible 01:11:13]  4797. Yes.

Tony  1:11:16

You’re talking about X C U underscore here.

Cameron  1:11:19

Yes.

Tony  1:11:21

I’ve got low point [unintelligible 01:11:23]

Cameron  1:11:24

You got to…

Tony  1:11:25

Say March 2020…

Cameron  1:11:26

You’re looking at a five year chart?

Tony  1:11:28

Yes.

Cameron  1:11:29

My 5-year chart. It’s got one at August 2016. What’s your August 2016 close price?

 

Tony  1:11:38

I don’t even have August 20, I’ve got 2016. My starting price is June 17. Let me just refresh and make sure that’s right.

Cameron  1:11:48

That’s our five years, right? That’s four years.

Tony  1:11:50

Correct, no you’re right. Sorry, I had to refresh that for some reason.

Cameron  1:11:54

But it’s alright because it’s a flat bottom.

Tony  1:11:56

Yes, that’s right.

Cameron  1:11:58

So it’s about 4% difference, 4 or 5% difference. So we’re actually using the covert cough to start off as it’s L1. Right. Sorry, for all that and go to the center.

Tony  1:12:02

No, that’s OK. No, you’re right. So I for some reason, I’ve lost that left hand couple of months on my graph.

Cameron  1:12:14

And then you’re drawing it through May 2020, is that right?

Tony  1:12:19

Correct.

Cameron  1:12:21

Yes, OK so that gets us around. 8997?

Tony  1:12:25

Yes. 8997. unintelligible 01:12:27]

Cameron  1:12:29

Yes. So it’s a lot steeper than the C6C Sell-Line.

Tony  1:12:39

Yes.

Cameron  1:12:42

What would you do if the copper price breaches the copper Sell-Line? [unintelligible 01:12:53]

Tony  1:12:53

Because I’d have to go back and analyze the C6C in detail. But what can happen with commodities companies is a whole heap of things that are affected by the price, obviously. But like, if a company- I’m not saying if this is the case with C6C -if a company is making a small margin on copper or iron ore or whatever. When the share price drops, when a copper commodity price drops down, that could wipe out their profit, which has a big impact on the share price.  [unintelligible 01:12:53] Even just FC6C is making a lot of money on copper, which is probably more likely that sort of profitability is being multiplied by its P E ratio and that affects the stock price and if that profitability is reduced, because the copper price is going down, and the sort of give that multiplying effect on the share price because of the P E ratio, which acts like a force multiplier on that.

So there’s those two things.  There’s also… I’m not sure again about C6C, it could also be exploring and people extrapolating from the known reserves while it could be worth and therefore the price will go up and down a lot more with the commodity going up and down. But generally, when the underlying commodity goes down, the share prices go down for these companies, which is happening now with C6C. In this case, I’d use the copper Sell-Line to sell out of C6C.

Cameron  1:14:21

Right.

Tony  1:14:21

Yes, OK. Thanks, Petra. Thanks, Tony. I think Doug then went on the Facebook group chat today to ask about other companies and some and I guess, paraphrasing Doug’s some of the companies on our list that both gold and copper producers. So what happens to those. I’d have to go case by case and look at them, but with the gold generally with the gold price going reasonably sideways in a couple of price going down and if it breached that Sell-Line, I’d probably think seriously about selling some of those copper gold companies as well. But- Right. It’ll be courses for courses if one’s only got a small amount of copper and a large amount of gold, you probably hold it but otherwise, sell it.

Cameron  1:15:07

  1. Thank you, Tony. Thank you, everybody for your questions. That’s full lid. You were reading anything good this week. Take in your lockdown.

Tony  1:15:18

I’ve just been watching the golf and working. [laughing]

Cameron  1:15:25

All right. I’m halfway through the first Matt Helm novel, type of books on China I’ve been reading. Never any Matt Helms books?

Tony  1:15:38

[inaudible 01:15:38] had starred Dean Martin.

Cameron  1:15:40

Dean Martin. Yes, well, in the Tarantino novel of once upon a time in Hollywood. He says that the Dean Martin movies were terrible. Of course, Sharon Tate was in one of them. That’s how it ties into the book. The Wrecking Crew, but he said the books were fantastic. So I’d never read any of Matt Helm books. So I started reading the first one. Death of a citizen 1958 it takes place and it’s good. Yes, really good. Really pretty. Very good. [laughing]

Tony  1:16:09

It’s because of James Bond [inaudible 01:16:09] Yes.

Cameron  1:16:09

Yes.

Tony  1:16:09

And Dean Martin was fantastic.

Cameron  1:16:09

But the books. The books are spoofs. They’re hardcore, gritty spy, Pulp Fiction novel types.

Tony  1:16:09

I think I saw the Wrecking Crew about a month ago.

Cameron  1:16:11

It was published in 1960. Oh, yes, it was good.

Tony  1:16:14

It was just terrible. But yes, it was funny.  What’s the one I should read first though?

Cameron  1:16:34

Yes. Death of a citizen. Yes, it’s pretty good. He starts off. He’s like a retired assassin, he’s been retired for 15 years or something, married, kids. He is in some sort of society- He’s a novelist. He’s in some sort of society party and he sees a woman that he used to work with, another assassin come in, hasn’t seen him for 15 years. They slept together once. When they were killing Nazis and he walks, he thinks, he goes, oh my god, I guess I should better go over and say hello and as he walks towards her, she gives him the signal. Don’t expose my cover. I will make contact. So it goes on from there.

Tony  1:17:25

Certainly.

Cameron  1:17:25

They’re pulling him out of retirement. Just when he thought he was out. They dragged him back in.  Like a [unintelligible 01:17:47] I was just going to say that like a [unintelligible 01:17:50]

Tony  1:17:30

[inaudible 01:17:27] the Wrecking Crew, the movie, where he keeps trying to retire and they keep bringing him back in and he meets up with other assassins he’s slept with before. But it’s like 60s camp comedy guy. Like a Batman episode.  The guy who used to play King Tut plays the baddie in the Wrecking Crew. Bad actor.

Cameron  1:17:57

Yes, King Tut. But is that really Batman. [unintelligible 01:18:03]

Tony  1:18:08

laughing]

Cameron  1:18:14

Victor Bono. Yes. Right. All right. Well. Have a great week, Tony, and everybody listening to this and we’ll be back next time.

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