Episode: QAV 427

Length: 1:15:16

Cameron Reily [0:04]: Welcome back to QAV. This is Episode 427. How are you surviving lockdown TK?

Tony Kynaston [0:11]: Good. Yes, having a bit of fun just staying at home for as long as I can. Hey, we had a COVID case in the building last week, had to be taken out by ambulance to the hospital. So, I do not want to even go downstairs at the moment.

Cameron Reily [0:30]: I kind of love the whole lockdown thing, I think it’s great. I don’t have to make excuses for just staying home and being a fantastic home.

Tony Kynaston [0:40]: I’d bit like that too. And like the golf courses are open here we do not feel like going out and even venturing out into public places and that’s probably safe. Jenny worked out, she pointed out to me, it’s the second time now. I’ve been one hour away from someone with COVID. Last year at the National I was an hour away from when the person had COVID. And then this time I was in the coffee shop downstairs. I was one hour away from the person with COVID. So, I think I’m on borrowed time here.

Cameron Reily [1:10]: One hour Kynaston that’s what we’ll start calling you. Well, before we get into other news, I know you’ve got some stuff you need to talk about. I want to talk about our end-of-financial year final report, Tony 48.42% according to Navexa, versus the ASX 28.48%. So, 20 points not exactly double, a little bit less than double the ASX 200. Not sure about the All Ords generally speaking what it did any idea with the All Ords do?

Tony Kynaston [1:51]: The All Ords accumulation index was 30.2%.

Cameron Reily [1:55]: 30.2%. Okay. So we didn’t double it but it was the best year on record I read in the Financial Review of the All Ords, but we outperformed it quite nicely, looking good. So, it was a good year, did you have a good year in your portfolio?

Tony Kynaston [2:14]: I did not as good as a dummy portfolio but beat the index on a gross basis where we’re making more money out of the portfolio now because we’re Jenny doesn’t have an income. So, that’s hitting us on a net basis but yes, gross was good.

Cameron Reily [2:29]: You’re living on it, yes. Good stuff. Well, I hope everyone else out there had a good year, if you’ve been investing for a year; I know we’ve had some reports come in from some of our long-term club members that had great years. But there are probably more stories that we haven’t heard. So, if you want to share them with us confidentially or publicly, on the Facebook group, or just shoot us an email if you want to keep it confidential. We’d love to hear how you did but it was certainly a good year for us. Now to other not-so-good news VUK Tony, what’s going on with VUK?

Tony Kynaston [3:08]: Well, it’s dropped again below its sell line today. So, I’ll just call it up… the selling price was I think 366 and we’re that finished today. And today is Wednesday, the seventh of July, I should say. So, Virgin UK finished at 357 down 3.7% today, so a bit of a drop.

Cameron Reily [3:39]: So, we bought, we sold, we bought it again and we’re going to sell it again.

Tony Kynaston [3:45]: Correct. And I’m going to sell it too from my portfolio unless something changes in the next day or so. So, I’ll give people 24 hours’ notice when this is going out Cam?

Cameron Reily [3:56]: Probably go out tomorrow. So, Friday, probably it’ll have been out for 24 hours.

Tony Kynaston [4:02]: Okay, well [cross-talking 04:03], Friday, unless virgin drops through the floor, but I don’t think it will even bounce back. Yes, so always selling I’m not sure if I’m going to buy it and it’s pretty hard to predict what’ll happen on Friday but I was thinking of a couple of things so I’ll outline my options. I own some shares and Ramelius which is probably the next thing on my list to buy. But I don’t have a full position on those because I’ve had them for a long time and the portfolio was smaller so I’ll probably add to Ramelius. And I may buy some ideas or some back into JB Hi-Fi again, which are the next ones on my list. Just looking at both Adairs and JB Hi-Fi I’ll see how they go. Adairs is in a bit of a downturn at the moment even though it’s above its byline. So I may wait for that one and JB Hi-Fi is a bit similar so we’ll see if turn up. If that’s the case, I don’t decide to buy those Silver Light Resources is the next one on the buy list, which is big enough for me to grab the same thing as Ramelius. So, I already have a small parcel of these so I’ll add to it but anyway, that’s what’s likely to happen on Friday for me.

Cameron Reily [5:18]: Not financial advice, people make their own decisions.

Tony Kynaston [5:21]: No, I’m giving people this notice so, it’s more about transparency. So I’m not saying to mentioned a stock and then as people start to buy, well, if I already own it, and I’ve mentioned it, and people start to buy it that helps me, which is not the whole idea of this. And giving people plenty of time to get their positions set before I make a trade myself. But not sure what it’ll be, but it’ll be in that sort of set. And then for the dummy portfolio, too, I think we need to replace Virgin UK. And I think the next one for us is Millennium Services. I did the download today to work out what I was going to do. And MIL is the code.

Cameron Reily [6:07]: Sorry, MIL.

Tony Kynaston [6:10]: It’s the second item on the list after my last download with a QAV score of 1.32. It’s pretty small, though, it’s only got an average daily traded amount of $10,000. But that’s big enough for us to put into the dummy portfolio.

Cameron Reily [6:29]: Very good. Unless VUK goes back up and we buy it the third time in this many weeks.

Tony Kynaston [6:37]: It’s possible and that’s an issue I think with some of these stocks now that we’re looking at double bottoms and I guess that means that the sell line is much steeper than it has been. And so I should also say, too, that this is not just happening with Virgin UK, but it was happening with the other bank. So, let’s have a look, Westpac banking, and NAB have also crossed their sell lines today. But again, they’re all pretty steep; the sell lines are sort of following the upward trend. So, Virgin UK, Westpac, and NAB may all reverse and go back into buy territory soon, but they’re all skirting around their sell lines and those three across so I’m taking them out of the top scorer’s list as of today.

Cameron Reily [7:34]: Well, in other news, Myer has been a good one for Taylor and me we bought it out a few weeks ago. I think it’s at 33% or something in the last few weeks. Thanks to Solomon Lew deciding that he wanted to increase his stake, and I think he’s trying to get the board fired today.

Tony Kynaston [8:00]: He’s been doing that for years. Either that or he’s a closet QAV member.

Cameron Reily [8:05]: Yes, it could be that, sure.

Tony Kynaston [8:09]: [Cross-talking 08:08], playbook he did with country roads, springs to mind. But there are other retailers that he’s been involved in. He’ll take a stake, criticize the board agitate for board seats, slowly increase the stake, but never launch a takeover. So we’ll see what happens. But it’s sort of a fuse on the buyer, who’s buying, I think highlights to other fund managers that there’s a lot of value in Myer, which I think is, also happening, which is good.

Cameron Reily [8:36]: Well, I know they’ve been closing stores and I read articles about they’re under pressure from online retailing, which, after you left, they gave up on that. But you got to wonder why they’re not leading the country and online retailing. We had Joe on the show talking about that a couple of years ago, didn’t we?

Tony Kynaston [8:57]: Yes. Look, it’s 15 years ago since I worked there, but the culture was very much back then. And online retailing would only ever amount to one or two percent of sales. And the feeling was that we were better off opening a new store than investing the money in an online platform. It was going to be that small, but now especially since COVID, I guess there are probably around 15% of sales. So it’s a meaningful number for them, and then scrambling to catch up.

Cameron Reily [9:26]: Bit late.

Tony Kynaston [9:28]: And the interesting thing is Solly Lew was probably the biggest proponent on the Coles Myer board anyway, that time, of all this online stuff never going to work, it’s just a load of shit. I’ve been in rag trader all my life this is how it works, you buy stuff, you open a store, and you sell stuff.

Cameron Reily [9:48]: You were trying to tell him this time, it’s different and he was like, no it’s probably isn’t.

Tony Kynaston [9:53]: That’s right [inaudible 09:53]. The roles were reversed. And to be fair, he’s probably embraced it now since I left, he’s probably embraced it in his other businesses like Smiggle and Peter Alexander does a lot of E-trade. So, he probably understands it all now. Well at least his managers do.

Cameron Reily [10:18]: Well, it’s had a good run the last couple of weeks. So [cross-talking 10:20].

Tony Kynaston [10:22]: Good timing, that’s great.

Cameron Reily [10:24]: Well, I keep putting [cross-talking 10:24] what goes up can come down, don’t get too excited that it comes back down. In the next week, you never know but so far, so good.

Tony Kynaston [10:35]: And that kind of leads me to the stock of the week, which I’m going to say is Grange Resources. Again, another tip to buy but caught my eye, it’s jumped up quite a lot in the last few days. That’s been on the buy list for it’s been in their dummy portfolio since November last year when we put it in at 28 cents, so it’s now at 68 cents so, it’s getting up there it’s going to be one of our better performance, I think in over 12 months. I don’t know what’s going on with Grange there’s no news. The only thing I could dig up through internet searches was that they had a mind approval. So that could be people sort of realizing that minor approval means that they’re going to expand or at least have a longer mine life with their current operations. But it’s been increasing quite quickly.

Cameron Reily [11:26]: It’s gone up 10 and a half percent today.

Tony Kynaston [11:30]:  So, something’s going on. I imagine they’ll have to make an announcement soon over that kind of increase, but as yet, don’t know what it is. 

Cameron Reily [11:38]: 165% since we bought it, that’s incredible.

Tony Kynaston [11:42]: No announcements that management is making yet, but something’s got to happen.

Cameron Reily [11:48]: Good stuff. So, Grange Resources even though it’s gone up, what are you scratching there?

Tony Kynaston [11:54]: Sorry, just scratch my arm. Around the area where I had my COVID shot.

Cameron Reily [12:03]: So, even though it’s gone up, 165% since we bought it in November, it’s your stock of the week. Do you think it’s still scored as well?

Tony Kynaston [12:13]: Yes, it does. Let me just call that up, let me have a look. So, it is still scoring point two seven. That’s good, I did my download this morning so, it won’t have some of that last jump in it but it did have some.

Cameron Reily [12:32]: What else you got in the news that you want to talk about, TK?

Tony Kynaston [12:35]: Just a couple of things. What I have someone asked a question last week about what do I do between reporting seasons and I talked about what I did, but I had kind of kept track of what I did over the last week just so I could be a bit more accurate, just wanted to add to that answer. So apart from reading the Fin review every day, I also look at Alan Kohler’s, Eureka Report, Weekend Update or read that. So generally for me if there’s nothing else on it usually isn’t Sunday, Sunday morning, in particular is a good time for me to catch up on all the emails and articles I didn’t get to during the week. So, I usually read The Weekend Update from the Eureka Report on the weekend. I might skip through Stephen Mayne’s column once a week. So he’s also in Eureka Report, he generally reports on capital raisings in takeovers and things like that which can be interesting for background reasons. And it’s always good to dig into the machinations of companies and what they do.

So that’s something I glanced through, I listened to Your Money Cafe probably most weeks, it’s a podcast. And he goes for half an hour usually at split recently. So it used to be Alan Kohler and James Kirby and now they split and gone their separate ways. They both have a podcast called Your Money Café once a week Stock Doctor put out a video recording on a Friday afternoon. So I generally just do a scan of the email and see if there’s a company in there which I own or am of interest in and just at least listen to that part of their video so that’s occasionally I’ll do that. I glanced at the Stock Doctor daily digest, again, looking for big movements in the market. That’s where my alerts will come through oftentimes to for Stock Doctor, so check those out. We glance at Livewire every day but again, hardly ever click on the links unless it’s something interesting or that catches my interest. But that’s not a bad resource. And in my portfolio, I benchmark it against how the Wilson Asset Management portfolios going and Stock Doctor portfolios, or at least that what they claim they around Stock Doctor stocks are doing, which is what I use. So that’s probably what I do in the regular week.

Sometimes it’s only like five minutes here and there. And then the other thing is that I keep up the discipline of reading. And generally, most of my books are sometimes it’s a novel, but they’re mainly nonfiction. And generally, all their biographies or biographies around investment types and I’ve read a couple of good ones recently, we spoke about the Zell one, I’m being too subtle. I read one, a very old one, actually, from the 70s, called Zeckendorf [recently], it’s not on stock investing’s a property investor, but it was just a great read. And quite motivating in terms of problem-solving, he spent his whole career trying to solve property problems and became quite big on it and had a great life too. Oftentimes, buying properties would mean they take over the business that was underneath it, just to get the deal done. And one of them was a cabaret, one of those old dinner time supper clubs in New York, where he’d sort of based himself as an office there. And all the bigwigs of New York would come by and sit at this table and get they get free drinks and all that says you made a bit of a career out of it, interesting read anyway good fun read. So I just wanted to sort of expanding on what I said last time about what I do between company reporting seasons.

Cameron Reily [12:37]: Just a lot of reading, keeping abreast.

Tony Kynaston [16:30]: Pretty much, keeping abreast. Doesn’t have to take too much time but you got to be disciplined about it.

Cameron Reily [16:37]: I’ve been reading Tarantino’s new book, The Once Upon a Time in Hollywood Novella, as he calls it. Have you heard about this?

Tony Kynaston [16:47]: No.

Cameron Reily [16:48]: He’s written the book version of the movie, expanded on all the stories and told stories that weren’t in the film and as an old in the 70s in the 80s, hit films, whatever book comes out afterward, sort of the film book version of the film he’s done his own and it’s good sets the timing, as you would expect. Can I talk about the selling price for BCN?

Tony Kynaston [17:21]: Yes, sure.

Cameron Reily [17:23]: So, I bought BCN a couple of weeks ago, and its share price has been coming back, and looking I was throwing the pricing into the sell price calculator and I don’t think it’s working for me. Either I’m doing something wrong, or well, let’s just go with I’m doing something about this more liking scenarios always.

Tony Kynaston [17:47]: [Inaudible 17:54], we talked about it; it was getting pretty close to its sell, wasn’t it?

Cameron Reily [17:57]: I don’t know, when were we talking about that?

Tony Kynaston [18:00]: A couple of weeks ago.

Cameron Reily [18:01]: Okay. Well, I bought it anyway.

Tony Kynaston [18:03]: Okay. Well, I’m getting a low point in December 2016.

Cameron Reily [18:11]: Point 0027.

Tony Kynaston [18:13]: Yes, point 0027. Correct.

Cameron Reily [18:15]: And the second one?

Tony Kynaston [18:17]: I think the second one is going to be April 2019 at point 018.

Cameron Reily [18:24]: I’ve got a point 0206. What have you got, point 018?

Tony Kynaston [18:28]: April 2019 .018.

Cameron Reily [18:33]: Okay, when I put that into the calculator, sorry.

Tony Kynaston [18:37]: So, I’m going to get very close to its sell price now.

Cameron Reily [18:40]: So, I get a target of about 33 cents, sorry, 3.3 cents, which is what I think I put in to stop doctor anyway; we’re just looking at the graph so okay.

Tony Kynaston [18:51]: It’s 3.4 now, so it’s pretty close.

Cameron Reily [18:54]: There you go.

Tony Kynaston [18:56]: Actually, it’s something I haven’t found before I just had been using it over the last few days if you go into those Stock Doctor advanced charting pages. There are some tabs on the left-hand side one says folders, one says events, one says drawing tools I’ve been clicking on drawing tools and using segment underlines. If you click on that, then you’ll have to close the tab down to get back to the full graph again. And then click on the low point you can draw a line-up. Then if you extrapolate a little along to the right axis gives you the selling price.

Cameron Reily [19:36]: Alright, does it for you.

Tony Kynaston [19:37]: Rather than just eyeballing it so you get a closer number.

Cameron Reily [19:46]: Doesn’t seem to go all the way to the edge for me, it sort of drops out just to the, okay [inaudible 19:50].

Tony Kynaston [19:51]: It goes as far as their graph does so partway through the month. I found that useful recently.

Cameron Reily [19:59]: Very good. Alright, so well, thanks for helping me clear that up. That’s good as always Cameron error. I was reading an article in the Fin the last week, and it was talking about the investment strategy known as Dogs of the Dow. I think we’ve talked about this before, I thought you’d mentioned this before.

Tony Kynaston [20:26]: Possibly, would have been a while ago I can’t recall when.

Cameron Reily [20:30]: So, it’s popularized by contrarian investor Michael O’Higgins in his 1991 book Beating The Dow advocates buying the 10 worst-performing stocks over the past 12 months from the Dow Jones Industrial Average at the beginning of the year, and only selecting dividend-paying companies. So you’ve played with this before?

Tony Kynaston [20:52]: Yes, it usually gets a good return not as high as QAV but it’s a similar sort of process it’s a quick and dirty way of finding value. So, he advocated I think, he said that there is called Dog to the Dow I but I think he does say take it from like in Australia, it’d be like a top 100 or the top 200. So he’s not taking a lot of small-cap stocks and he’s also saying you should take ones of heavy a dividend yield. So in other words, management at least thinks that the company is going to be continuing because they’re paying a dividend and not sort of completely strapped for cash. And so it often works you won’t get QAV numbers, but you’ll get a vibe index, I think from over the time, it’s like probably 12 or 13, maybe 14 15%. I’m not sure what the numbers are would be different from the Dow compared to the ASX possibly too.

But the idea is, it’s good to contrary and investment, you’re taking a company, which is a big, solid company, and you’re buying it when it’s cheap. And so the value side of things comes from the fact that if they were the worst performers from last year, but they may not be ongoing, sometimes they are. But if you think about Australia that will probably be stocks like Flight Center, which had a bad year because of COVID. But if things lift next year, well which you hope they will we get international travel back and more cross border travel within Australia, then you should see them improve. So, Flight Center quarters. I’m not sure what’s on the list this year for Dog to the Dow but it’ll be companies like that. And the idea is that a good year was a bad year but if it’s something external like that, hopefully, the externality clears up after 12 months. But if it’s something internal management’s going to be working pretty hard at fixing it going forward. Myer might even be at Dog of the Dow, I’m not sure.

Cameron Reily [22:54]: In the article in the Financial Review, he was saying A2 Milk was the biggest dog on the ASX 100 last year it fell 67.8%.

Tony Kynaston [23:05]: And let that be a lesson to Growth Stock Investors. A2 Milk was always on the top of everyone’s buy list and that had a high PE and was a river of gold flying into China and China went, no don’t want you anymore.

Cameron Reily [23:30]: A2M, I’m just looking at its chart, yes.

Tony Kynaston [23:34]: And I think from memory, I read today’s paper that A2 Milk bought some other kind of maybe a nutrient company or a nutritional company in New Zealand. So, they madly trying to diversify away I guess from selling milk into China. And I think they still do quite a bit of that but I think it’s not as big as it was. So, the management or diversify and work out a way of becoming more profitable because they’re under huge amounts of pressure to do that. And chances are this year might be good.

Cameron Reily [24:10]: Alright. Well, let’s talk about Duncan in the mystery of the reducing scores.

Tony Kynaston [24:17]: Yes, it was a good question. Good pick-up from Duncan.

Cameron Reily [24:20: It’s my attempt today a Sherlock Holmes type novel. Mystery of the Reducing Scores. So, Duncan shot me an email he said, Hey, I just noticed that in Andrews’s version of the checklist if you give a stock a score for consistently increasing equity if you give it a one, it’s QAV score goes down. And if you give it a zero, it also goes down. He said, is this a bug in the checklist? And I asked Andrew and he said, Well, I think that’s the same coding. I got out of Tony’s checklist and I checked with you and you said yes, no, that’s he wrote this lengthy email that even if I hadn’t been on holidays and Bundaberg or whenever never to understand it just kind of crushed my brain with all of this metricsand stuff. [Cross-talking 25:09] you did. And then I forwarded it to Andrew and he said, yes, that doesn’t make total sense. What he’s saying is I couldn’t understand his email either. I think Duncan came back, I forwarded it to Duncan, and he said, I understand it but okay and I was like, glad I’m not the only one. So can you explain it in English for us? Why giving it a positive score for consistently increasing equity would reduce its QAV score, not bump it up, Tony?

Tony Kynaston [25:37]: Yes. So why is it so?

Cameron Reily [25:41]: Sand in a funnel supported by a string, a slight push…

Tony Kynaston [25:46]: So, first of all, it doesn’t, it’s not just related to increasing equity; it’s related to any score on the checklist and a couple of points. So, I think there’s something like 18 items on the checklist so the numerator for the checklist is the score. So, sometimes you get one, sometimes you get two, sometimes you get zeros, sometimes you get minus ones. The denominator is the number of items that you’ve been scored on in the checklist. So, if you have gaps for things like more than six PE’s, or if you haven’t got a PE if you don’t have an owner, founder, all those kinds of things, and sometimes you don’t get the score on that matrix. So, some companies might have, for example, a score of four out of four. So they’ve achieved one score for four items, and they’ve only had four items that we can score them on, so they get 100%. So, if you then say, as in Duncan’s case, let’s look at the increasing equity, okay, they get a five, I get another one for that, they’re getting five out of five so it’s still 100%. So, increasing equity doesn’t add to their QAV score, it’s 100%. If in that case, if they scored four out of four, and the next thing we scored them on was saying on either the record PE and I received a score of two, then they’ll go to six out of four.

Cameron Reily [27:30]: So, 120%?

Tony Kynaston [27:31]: Six out of five, sorry, yes, so whatever that works out to be 115% or something. If they then add, another one becomes seven out of six, and the percentage goes down a little bit. So that’s how the QAV score can go down if they have a funny one in between. If they’ve scored a two at some stage, and then we started at one’s the percentage goes down.

Cameron Reily [28:02]: So, it’s just math.

Tony Kynaston [28:03]: It’s just math. The other way of doing it, which I had used originally and then rejected as if you just add up the score so years ago, if in the case of this company got a score of four, and all the possible 17 or 18 items, then how does that compare with a company that actually could score 17 items, but only got a score of four. And my sort of experience at the time said that the company which scored four out of four was a better company than one that is scored four out of eighteen. So, the company that scored four out of eighteen has lots of failures and so then I changed it to a percentage basis. And so this company with four out of four gets 100, the company or four out of 18 gets whatever that is, 20%, or whatever the number is. And that’s how you get a better quality score. And then I’ve got sort of bastardize because I started getting some twos and some minus ones and so, you get these strange occurrences, we can have more than 100%.

And if you add one more to the checklist that reduces the percentage, so but I think the bigger point is, so Duncan’s correct, the first thing is I think we should use the percentage rather than just the sum of the scores, because that solves the problem where someone gets lots of bad scores. And then even though the percentage can change by a little bit, and we’re talking sort of maybe five to 10% when these things happen, the score can go down, it’s still going to be unlikely that it will change the ranking on the QAV list because we’re also then dividing it by the price to operating cash flow. So you’d have to find a company that had the same price to operating cash flow and very similar if not the same quality school before that sort of little micro change in the percentage for a quality score would throw it to a different ranking. And even then it would only be one slot on the ladder. So, it never worried me that sort of anomaly with the math was happening.

Cameron Reily [30:14]: Okay. Well, that’s good. We should read your email that simply I would have understood it.

Tony Kynaston [30:20]: I did write it that simply.

Cameron Reily [30:26]: Well, I don’t get it and I beg to disagree. But apparently, Andrew understands.

Tony Kynaston [30:31]: Okay, good.

Cameron Reily [30:35]: Shout out to Lachlan and James. Lachlan Dixon for posting his charts on Facebook and James Simpson, for jumping in with his thoughts and then also to Cosmin who posted his scorecard and charts again this week good on you guys, great to see folks taking the plunge and posting their stuff up there and getting better at it. And just sort of asking the community and you and I to have a look at what they’re doing terrific stuff. So want to encourage that as we said last time.

Tony Kynaston [31:13]: I do too. And I’ve done a download now. So I can have a look at them and compare them to my scores too and talk about the good difference. See what should happen.

Cameron Reily [31:22]: Good stuff, alright. Anything else in the news of the week before we get into Q&A for you TK?

Tony Kynaston [31:28]: I think we had a stock journal, which was the Image Resources was back on the top scorers’ list. It’s turned up, I think we took it off a week or two ago and it’s back on now. So, just [cross-talking 31:42].

Cameron Reily [31:42]: Alright, back on. Okay, here are the questions. The first one is from Daniel. And Daniel sent us a question last week that we may have misunderstood. So he just was sending us a clarification. He was talking about commodity prices. And I think he was talking about some of the declining and you looked at them and said, no, they’re still going up. He said, “I was mainly wanting to reference copper, but also gold, IndexMundi has a lag to its graphs, copper has started to tail off, which has also put SFR into a slight downturn, nothing too major, but it’s still tracking the underlying commodity and started to tail off. I know, Tony mentioned over the short term. But how short are we talking? We’d love to know some more insights.” I don’t remember what the short-term comment was, do you?

Tony Kynaston [32:38]: No I’m not sure, possibly he’s talking about the recent period; I’m not sure what short-term refers to. So regarding copper, I’m pretty sure it’s in Stock Doctor as a graph and it’s more up to date than IndexMundi is so you can go into the Stock Doctor and have a look at it. And then chart and look, it’s getting closer to its sell line, but it’s not there yet. And it did sort of turn up this month so it could just be a slight aberration we’ll see. In that possibly is driving Sandfire, Sandfire is well above its sell line so, I’m not too worried about that. And similar sort of thing with gold you can also look at gold in Stock Doctor if you want to have a look at the gold chart.

Cameron Reily [33:26]: Hold on before you move on to gold. Can we go back to copper?

Tony Kynaston [33:32]: Yes, sure.

Cameron Reily [33:33]: So, do you have to go into advanced charting, to do the [cross-talking 33:39].

Tony Kynaston [33:39]: Yes, I’m going to the front page of the Stock Doctor. So just click on the top left where it says Stock Doctor, it’ll take you there. And then CMD for commodities over on the right-hand side where there’s a box about markets in the copper, and then advanced charting.

Cameron Reily [33:53]: Then advance charting and that gives you your five-year monthly.

Tony Kynaston [33:57]: Correct, yes.

Cameron Reily [33:58]: I’ve got an L1 here of August 16 at 206 and then an L2 at 224 on March 20. Is that bump up against the 8% rule?

Tony Kynaston [34:15]: It does, I’m just checking it out. It’s so close it’s not funny at some 8% is 2235, and that March is 224.

Cameron Reily [34:27]: So, would you use March as L1, is that what you’re doing?

Tony Kynaston [34:31]: Yes, I think so it’s so close and besides the August 16 is about to drop off anyway. So we’re only going to be a month early if we use the second one. But again, if I draw, I’m going to go in and use this drawing function I’ve come across. So if I put the L1 as March 2020. The L2 is going to be May 2020.

Cameron Reily [35:02]: That’s a little late.

Tony Kynaston [35:04]: Yes, exactly. So it’s not going [cross-talking 35:06].

Cameron Reily [35:06]: 364 and it’s currently 431.

Tony Kynaston [35:10]: Yes, I’m getting a sell-off around 370. It’s 431, as you say, yes. So we’re a long way to go for that.

Cameron Reily [35:20]: And I’m just going to look at SFR Sandfire Resources and see where that is. Well, the sell line for that looks similar it’s currently trading at 689 and the sell line I think comes in around 536.

Tony Kynaston [35:38]: That sounds right. So, it’s ways above it.

Cameron Reily [35:42]: Ways to go to. Well, it sort of did come back and it’s bumped back up by the looks of it this month.

Tony Kynaston [35:50]: It almost looks like the copper graph, doesn’t it?

Cameron Reily [35:52]: Pretty much, yes. Okay.

Tony Kynaston [35:57]: So, Daniels, right to track these things. But I think we’re still comfortably above the sell lines for copper. I think the sign was for gold, too, if we just have a quick look at that. Again, I’ll use Stock Doctor so we have more up-to-date data. And just have a look at the bottom on gold so December 2016 is the low point at 1172.9. I’ll see if it has a flat bottom. I get the next point is below 1266 we’ll swap it.

Cameron Reily [36:30]: It’s 119 1 I think.

Tony Kynaston [36:32]: Yes. The next one to the right of that’s 1214. So I’m going to use November 2018 as the low point here as our one.

Cameron Reily [36:41]: Which one, November?

Tony Kynaston [36:44]: Yes, 18.

Cameron Reily [36:46]: Right. Yes.

Tony Kynaston [36:48]: So, let me just draw a line from there.

Cameron Reily [36:51]: It comes in around about 1606 1608 1610, something like that.

Tony Kynaston [36:58]: Yes, I’m getting 1608 as well. So again, 200 points above where the current price is at 1801. So a [bit things] to come back to that. Gold has been in a sideways pattern for the last probably almost 12 months now. So but again, it’ll just take a COVID outbreak or something’s funny going on in the world or interest rates to rise and I think gold will come back but here it’s above its sell line. So Daniel, good to watch those, and a Stock Doctor has both of those another site I found recently called YCharts as up-to-date data for commodities as well if IndexMundi’s lagging a bit. IndexMundi the strain sometimes it’s up to date, and sometimes it lags a bit, so I’m not sure what’s going on there. But ycharts.com you might want to have a look at too.

Cameron Reily [37:55]: Okay, thanks, Daniel. James. Hi, I came you get Tony’s thoughts on the rally and coal prices sticking with commodities. Coal companies seem to be stuck in the doldrums I know it’s getting harder for in-store investors to buy them due to ESG pressures. By the way, speaking of ESG pressures, my mom who I was just with got her endeavor group share certificate. She worked for Woolworths for 25 years, and she has an employee share still so that thing that we were talking about a few weeks ago the demerger has gone through.

Tony Kynaston [38:37]: Okay. Good to know. But you going to hold on to them or sell them or what?

Cameron Reily [38:46]: I think she’s going to hold on to them.

Tony Kynaston [38:48]: Okay, well good for her.

Cameron Reily [38:49]: So, I can’t see coal commodities in Stock Doctor.

Tony Kynaston [38:56]: That’s right. And I think I had looked at it too recently, and in IndexMundi, it’s the one may graph so it’s not the most recent. So I went into this one called YCharts and if you go into ycharts.com, it’ll ask you to sign up but I just goggled Australian coal price chart, and there was a link to go straight to the charts, it’s like a bypass list, the signup process for YCharts, you not listening. And I get the June 21 graph and so James is right, the chair price has been rocketing up in the last month or so. It’s been a three-point buy though, for a long time, I think we talked about coal maybe 18 months ago. Not at least back in 2020 anyway when it became a three-point buy and what’s happened since then, even though the commodity price was going up the coal mines in Australia have been going down until recently this last leg up in Coal prices keep them up as well. So, I went back and had a look at the coal miners so they’re on the QAV list and there are three there’s new hope, Whitehaven coal, and Yancoal. I’ll talk about Yancoal first, it has a very tiny free float because it’s owned by I think one or two large Chinese coal companies.

And so that one would be too small for me to buy and possibly too small for other people to buy so it’s probably the easiest one to deal with. And because of that free flow, I think Yancoal has for a long time been in a sort of falling knife situation. So the code is YAL and just going into Stock Doctor for it, the average daily trade is $65,000, not too bad, but given the size of the market cap on the company, which is the market cap for Yancoal is 2.6 billion and only 65,000 is traded per day. If I look at the chart, it’s kind of caught betwixt and between here it’s I think it’s above it sell line one of these which have been very high on the left-hand side and they’re almost flatlining on the right-hand side so I would say it’s above it’s selling. It’s kind of questionable whether it’s above its buy it’s almost getting almost too granular to decide. So, I think it’s a maybe I haven’t put it through the three-point train calculator to work it out. But to me this is kind of still I’d want to see a bit of an uptrend in this stock before I’d be confident to say it’s incidents buy space rather than its sell space because it kind of just keeps going back and forwards along that horizontal line around the current price.

So, that’s Yancoal so that’s probably my third one on the list that I’ll be considering but Whitehaven Coal is now in an uptrend, but it only has a QAV score of point 02. So, I wouldn’t be considering it, New Hope Coal is the one I potentially would want to consider. But its QAV score still only .07, so if we have a look at its graph, it’s pretty good now it’s turned up. I think we owned New Hope Coal at some stage in the dummy portfolio as well. If I have a look at this chart, it had also been a falling knife all these coal companies have been falling knife for a long time. And the main reason for that not just because of ESG concerns but also to China had put the screws on importing Australian coal. I don’t think they’ve ever come out and said they won’t do it but they play [unclear 42:54] and makeup reasons why the coal shipments can’t dock and all this kind of stuff and that they need to be run through some extensive testing to make sure the quality of the call is accurate.

All this kind of stuff, which has been a bit of a dampener on sales to China but in the meantime, the coal companies have found other customers so they starting to benefit from the increase in price and work their way around the Chinese blockage. So, New Hope is definitely in a biased situation but the highest score is point 07, but it is the highest-scoring coal company on our checklist. So, if people are keen on playing the commodity theme and want to buy a coal miner again, not a recommendation here but this is something people might want to consider. They could look at New Hope and I could relax their scoring so they buying something at point 07, but that’s probably all I’ll say about it. It’s up to people to do their research on this one.

Cameron Reily [43:59]: It’s currently trading at $1.84 we did sell it in May of last year at $1.39 we bought it in April and solid Three weeks later for $1.39.

Tony Kynaston [44:12]: So, I possibly shouldn’t hang on to it.

Cameron Reily [44:14]: Rules are rules.

Tony Kynaston [44:15]: Anyway, rules are rules. Exactly, you’re protecting your downside.

Cameron Reily [44:22]: Thanks, James. Here’s one from Glen. What are Tony’s thoughts on SUL Super Retail’s Chart it’s a hard one to judge because it’s climbing so quick after the COVID cough and the 3PTL is chasing and just as quick will Tony right this a 3PTL  buy as the highest point is the current share price if it is a buy the QAV score is about 0.27 which makes my top 20 list? Did you talk about this one recently? I seem to feel like we’ve talked about this recently?

Tony Kynaston [44:55]: No, I don’t think so Super Retail Groups one I’ve been watching myself, Glen, because I’d like to buy some, it’s the right sort of average daily traded amount for me. But I’ve had the same problem you’re having I can’t make the buy line stack up. And I don’t know if it’s a bit of a lag since we got this question. But the rightmost point is no longer the highest; it’s dropped off from there. So it’s starting to fall back on itself and this is kind of a bit of a common pattern we’re seeing with the banks, and with some of the other retailers I was talking about before, like Adairs and JB Hi-Fi, they’ve all shot out of the gates because of the return from COVID and government stimulus.

And now that is sort of played out, I guess there’s a theme, and apart from shutdowns that are happening in Sydney, at the moment, life’s getting back to normal, it’s starting to slow down, it’s still going up. I mean, so if you take the sort of broad-brush view that this is a trend, which is going from bottom left to top right, it’s a good trend. But you can see that sort of every leg down is the slope of the graph is getting less and less. So, I looked at it quite a few months ago, and I think it’s probably since it’s by prices added about 30%. So that’s 30%, I missed out on myself. So I understand where you’re coming from Glen, but I’m still a little bit concerned about the shape of this graph and I think it is in sell territory at the moment. And I want to see it climb above its current sell line before I’d be interested in buying it.

Cameron Reily [46:32]: Can you walk me through how you draw this sell line, it’s starting at the COVID cough, and then through February 21?

Tony Kynaston [46:42]: It’s almost like a falling knife in reverse. So, that sort of the first trough was back in June 2020 and then there’s another trough in November 2020 then another trough in February 2021, which is probably about where it sits, April 2021, would be where I’d be taking the second point four. So, you’ve had all these buy and sells on the way up all those troughs, give it another sell line or the REL two. So the current sell price crossed that sell line in June 2021. The sale price is going to be up around $13, I think at the moment. So, the share price is 1249.

Cameron Reily [47:31]: That was its peak; it was its five-year share price high point.

Tony Kynaston [47:36]: Yes, I know. I could be wrong, this could be a bit of a shortcoming in the way we draw these graphs but it’s kind of makes sense to me. Okay, we’ve missed out on the 30% gain from when the buy price happened. But these retailers aren’t going to go up forever. And as government stimulus gets, well, I’m back and as interest rates start to rise, they’ll be hit hard. So we might be seeing a bit of forecasting for that in the current share price and it’s slipped back below its sell line. As I said, the increase in the graph is getting shallower and shallower as we go. So, I’m personally not a buyer at this price. And I want to see it have another leg up above 1250. Before I sorry, what do we say that price is probably going to be? $13 before I consider it.

Cameron Reily [48:32]: That’s an interesting one. I would have looked at that said since the COVID crash it’s had a pretty good run, but you’re skeptical.

Tony Kynaston [48:41]: No, it’s had a great run. I have no argument with you on that. But every time I’ve gone to look to buy it, it’s kind of made a new low point, a new L2 on the sell line, and become a seller. Again, it’s certainly had three of those since the buy and it’s certainly gone up since then. So I’ve been wrong every time but this is about risk mitigation, one of those turned out just going to keep going is I guess my point and it could be the current one. But I can’t predict, I just follow the system.

Cameron Reily [49:21]: I saw a quote in some investing article I was reading earlier today that I added to the Bible in the maxim section. I think it’s from Niels Bohr, the physicist it was “Predicting is hard, especially when it comes to the future.”

Tony Kynaston [49:41]: And I saw some academic research recently too, which just put paid I think it was based on economics in general, but just skewered any sort of predictions at all from economists it worse than a coin toss.

Cameron Reily [49:57]: I remember early on I was just thinking about the last day or so I remember early on to the podcast. We were talking about the economy, I think like mid-2019. And we were talking about the signs of being a bubble and that kind of stuff and one of our early listeners send me an email said, quite honestly, I don’t care about Tony’s thoughts on the economy. If I want to know about the economy, I’ll ask an economist. And I remember us replying to him at the time. Well, fair enough but I’d rather talk to somebody who’s a successful investor than an economist whose getting paid a wage.

Tony Kynaston [50:34]: It was a fair comment. I think back then we were sort of finding our feet and what their content was and stuff. And I was also talking about, I think, from memory, it was the yield curve and version. Yes. We spin a show about that and the comment was yes, they have economics guys which are fair enough but my point is that it’s trying to predict where this guy is going to be foolish.

Cameron Reily [50:58]: Alright. Here’s one from Elmar. G’day, Elmar. He says IMA came up trumps when I was looking at another stock to my list, Tony agrees. Unfortunately, since then, it has not moved much at all trying to figure out what is going on and not finding anything substantial I found a function on Self Wealth. That seems to show the spread of buy-sell offers out in the market and he attached a little picture here. Doesn’t make much sense to me, unless there’s some strategy employed either push down the buy price, and on the opposite side, pushes it up on the sell-side. I think what he’s talking about here is there’s a big spread here of buyers and sellers around about the same price. How do you read this market depth chart Tony, how do you make sense of this?

Tony Kynaston [51:51]: So, the first point to make is, like I said before, Image Resources came back onto the buy list anyway so it’s above its sell line again so that happened in the last week or so. So that’s the first point for Elmar to take note of. I don’t use these market depths, because Ballieus do my stock trades for me, they will use them. Excuse me, but just to what we’re talking about here is a screenshot of the market for this particular stock. And the screenshot lists that there are buyers who are prepared to sell IMA for 17 cents, buyers in return they’re offering 16 and a half cents for it, it lists how many shares are for sale and those prices and how many shares are wanting to be bought at those prices. And it goes all the way down from that spread, which is half a cent between the seller and the buyer, all the way down to people who wanted to buy it at 10 cents. And they’ve got no hope, by the way, or 8 cents, which I imagine pretty old orders because it would be unusual for it to cross at that kind of price.

So, I guess Elmar’s question is asking, is this telling you anything about the price movement in image resources? I don’t think it is really, it’s pretty normal to see this kind of spread in a market depth sort of snapshot like this. I guess the couple of things which I normally just glean from looking at these; generally, the price will follow the weaker of the sides. So, what I mean by that is the top line on this market depth graph reads that there are buyers who are prepared to buy 364,000 shares at 16 and a half cents and there are sellers who are prepared to sell 222,000 shares at 17 cents. So, what that says is that there are more buyers and sellers and the price is half a cent apart. So, what I would expect to happen in a situation is that there are people in there with more shares to buy than there are sellers. And the price is only half a cent difference, I would expect them to break ranks and accept the selling price at 17 cents.

That’s generally how it works so when you’re seeing one side of the equation that has more volume behind it than the other one, generally, that volume will swamp the other side. And that by price will be met best that’s kind of generally how these markets work. If you think about it as an auction and people will probably be familiar with house auctions. We’ve got someone standing here willing to sell the house for 17 cents, and lots of buyers on the other side going to buy it for 16 and a half cents that’s where the last bit is. Eventually, someone’s going to want to not miss out and put their hand up and take the 17 cents.

Cameron Reily [54:56]: I’ve got 16 and half cents 16 and half cents over here. 17 cents, thank you Mr. Kynaston 17 cents over there in the red hair.

Tony Kynaston [55:07]: So, that’s about all I’m saying in this market depth it looks pretty common for me. As I said, I think this would mean that the price would go to 17 cents I’m not sure what the price is today on, I need to have a quick look. 18 so there you go. So, there’s a volume on the buy side, which is driving the price up is I guess what I’m trying to say.

Cameron Reily [55:29]: 18 and a half actually, I closed that today. I sold it at 16 cents a month ago I’m furious. But then I bought Myer [inaudible 55:37].

Tony Kynaston [55:42]: That’s not a bad rule for the stock market is don’t go and look back when you’ve sold something[cross-talking 55:45] inevitably you’ll be up. You just go around in circles hiding. So, Elma image resources are back in the top scorers’ list anyway, so I wouldn’t be worried about the market it’s pretty natural what you showed us with the market depth screenshot.

Cameron Reily [56:07]: Okay. Thanks, Elmar. Couple more questions, we might be able to knock these off. Geoff, question from my AFR breakfast reading this morning. What is the value slash purpose of doing this? Magellan announced its intention to transition its high conviction trust listed investment company into an active exchange-traded fund follows a similar move earlier this month by Monash Investors which ditched its LIC structure to reinvent itself as an exchange-traded managed fund. I’ve heard a number of these stories recently. Do you know what’s going on here?

Tony Kynaston [56:50]: Yes, look, I don’t know these two in particular but generally, I think what’s happening here is that they’re probably trying to eliminate the share price discount to the net tangible assets value of the Listed Investment Company. So, just quickly, a listed investment company has the price you’re prepared to pay for the shares, and that’s disconnected from the underlying assets, but you can work out what the underlying assets are worth particularly if they are shares because you can get their current prices and add them all up and you’ll get a net tangible assets for the fund. And sometimes listed investment companies, their share price will lag the NTA for whatever reason, a whole heap of reasons as to why that might happen. And the management of the listed investment company will try hard to get that discount traded away. One way to do it in an instant is to become an ETF because you no longer a LIC, the share price always equal the NTA of the underlying assets. I’m not sure in this case, whether the share price went up or it went down when it transferred from being a LIC to the ETF. But certainly, there’s no more discount between the price and the NTA. So that’s probably the main reason I think people are moving out of the LIC space into the ETF space.

Cameron Reily [58:07]: Can you explain to me again, why moving it to an ETF means that there’s one-to-one between the price and the underlying assets?

Tony Kynaston [58:18]: Yes, so the ETF has what’s called a market maker sitting in behind the screen, if you like, behind the scenes with the ETF.

Cameron Reily [58:30]: Like a little leprechaun guy sits on your shoulder?

Tony Kynaston [58:33]: It is like the Wizard of Oz behind the screen and their whole role in life is to buy and sell shares. So that discounts traded away, or whatever just traded away. So they’re furiously matching the share price with the underlying assets. And so the ETF works differently from a LIC as well, I should say. So if you sell your shares, the market maker behind the scenes has to sell the underlying equivalent amount of shares to pay you out. And likewise, if you buy shares, the market maker has to buy some more shares to allow you to buy-in. And so that’s basically what they’re doing that that sort of matchmaking goes on behind the scenes. And the fund always equals the share price if you add up all the underlying assets.

Cameron Reily [58:40]: So, with Berkshire Hathaway is a listed investment company?

Tony Kynaston [59:28]: Yes, it would be it’s a conglomerate. So, this is a good example of what we talked about when we talk about the book value. So, it’s not strictly called a LIC but it acts like one because it holds a portfolio of shares that they’ve invested in. But it also combines it with operating companies. But you can get values for those operating companies if you can work out what they’re worth or what their book value is worth. And then work out a value for Berkshire Hathaway. And that’s the trick and that’s something that Warren Buffett’s always pointed out that the companies that they buy whole as bowlers, like, Burlington steel or Berkshire Hathaway real estate are worth more than they both value. Because they’re, they’re profitable companies that are growing. So, the question for valuing Berkshire Hathaway is how much is that premium to the book value worth for their operating companies?

Cameron Reily [1:00:28]: So when the Berkshire Hathaway shares, according to Warren, going for less than the underlying value of the assets in the company, he does a share buyback, right?

Tony Kynaston [1:00:44]: Correct. The underlying assets plus 30%, is his trigger.

Cameron Reily [1:00:50]: So, why don’t listed investment companies here just do the same thing, if they think the share prices and reflecting the true value of their holdings just do share buybacks?

Tony Kynaston [1:01:01]: It’s certainly one of the things which are available to them. But if you’re listed as an investment company and you’re buying back shares, and then canceling those shares, you have fewer shareholders. It should work out to be the same in terms of your fees because you’re getting paid a fee for the funds on the management and the growth. Potentially, that is a solution, I would think I would hesitate to do it because it means like shareholders on their shareholder base.

Cameron Reily [1:01:32]: I like the fact that Magellan-listed Investment Company was called its high conviction trust. And they’ve gone, you know what, when we said high conviction, we’ve rethought that we’re not that convinced anymore that this is a good idea. We’re going to turn it into something else because we might have been; maybe our marketing guys should have come up with a kind of average conviction trust, reasonable conviction trust.

Tony Kynaston [1:02:02]: Well, a high conviction doesn’t refer to the business that they’re doing. It refers to the shares. I know you knew that but anyway.

Cameron Reily [1:02:09]: Come on, Tony it’s a gag it’s late in the day. Okay, and so an active exchange-traded fund is what it says it’s active. So, they buying or selling to make sure that there is one correlation between the share price and the value of the underlying shares assets. Thanks. Good question, Geoff. Darryl, how do we apply a 3PTL  to a chart given the effect of consolidation like for COG? Someone was talking about COG on Facebook, their share price just rocketed up, I think Darryl, and somebody else was talking about this just recently COG Financial Services.

Tony Kynaston [1:02:58]: Yes, it went through a 10 for one consolidation, and for, I think the share graph is now reflected that so I’ll just confirm that in Stock Doctor. So, it’s back to normal now. So probably on the day that the share price consolidates or maybe for a day or two afterward, you had this huge vertical line because the shares went from being worth 12 cents to be worth $1.20. Because of the consolidation, nothing else happened in the company, they just did a 10 for one swap of their shares. But now the data providers, the Reuters, and the stock doc aren’t like Reuters provides the Stock Doctor with their data. They’ve gone back historically and accounted for that in the past. So, the share price graph looks like it did before the consolidation in terms of its shape.

Cameron Reily [1:03:07]: So, nothing changes in terms of doing a 3PTL , it’s just lag, data lag.

Tony Kynaston [1:03:59]: You can’t do it on the day that the consolidation happens maybe a day or two afterward. It looks strange, but then the data providers work it out and refill it.

Cameron Reily [1:04:07]: Okay. Thanks, Darryl. The good question nonetheless. Alright, last question of the day. And we’ve got to the end of our list. So finally, after weeks of digging through this, better send us some questions for next week, people we’ll just take the week off. Duncan. Hi, Cameron, I note that several financial stocks seem to have crossed their sell lines CBA, VUK, NOB, WC, and MQG, which we’ve talked about earlier, in this episode. I know that this is the opposite of what has been generally forecast. I tried not to use the F word. I wonder if Tony is planning to wait and see or to sell now. Well, I think we’ve answered their question. We’re selling VUK.

Tony Kynaston [1:04:49]: Correct. And we took most of the other ones off the list as well.

Cameron Reily [1:04:54]: Yes. Okay, good one, Duncan. Thank you, Tony. Well, I was going to say what’s on for the rest of the week but staring out the window at that terrible view of Sydney Harbour that you have there.

Tony Kynaston [1:05:08]: Yes, exactly I’m not going anyway.

Cameron Reily [1:05:11]: Alright. You watched anything good recently you want to recommend?

Tony Kynaston [1:05:17]: We’re still watching Call My Agent. We watch three episodes last night, which is great. The French fast comedy and I recommend that Zeckendorf book it’s a lot of fun. It’s about property investing. There’s a little bit about share investing, but a lot of fun and quite motivating in terms of, doing analysis and problem solving and working through problems it’s good.

Cameron Reily [1:05:38]: Is that one named Zeckendorf?

Tony Kynaston [1:05:41]: That was his name. Yes. So, it’s out of print but I’ve got a booktopia, I think, from memory goes back, I think it was written in the 70s. So, he went bust in the 70s. And then the end of the book, he was sort of restarting with his son to get back into the property game, but it’s a great re great bit of history about the growth of the big cities in the US and Canada and South America, too. He did a lot of work in those countries as well. But just one of those people will have just a natural joy of even. Work their way up from nothing. Great story.

Cameron Reily [1:06:19]: Z E C K E N D O R F. If anyone’s wondering how to spell it, he died in 1976 worked with architects I. M. Pei and Le Corbusier.

Tony Kynaston [1:06:40]: I think he found I. M. Pei when he was fresh out of architectural school. And used to call Le Corbusier and they pay each other compliments from time to time, which was interesting as well. And Pei needs a lot of, construction techniques and architectural techniques was a big one for building an office block with a big plaza around it so that people have room to move and congregate and get out in the fresh air as well which wasn’t the done thing back then. So, he was responsible for bringing the UN building to New York. His game plan was to go on mass lots of real estate in big holding cycles from acreages of real estate in New York, where we started. And where the UN building was an old slum and some wars and then when the UN building was casting around for some way to put it, and it sounded like he was going to Philadelphia, he offered up his land, holding it at a slight profit to him, but multiples less of what it was worth in the future. And got the UN building plump in New York [Cross-talking 1:08:01] Wheeler Dealer, the stories are just amazing.

Cameron Reily [1:08:05]: Well, apart from the Tarantino book, I’ve been reading a great book called Why China Leads the World by a guy called Godfree Roberts. Godfree Roberts, the first book to explain China’s success talented the top data in the middle democracy at the bottom. A very fascinating book, most of the books I read on China are written by Westerners. And they’re very critical, obviously, of China and excuse a lot of stuff away. But this guy is probably the opposite he’s an American academic, but he’s probably on the other side. He’s very pro-China and it’s a little bit unbalanced but on the other side, but it’s good to balance up my unbalanced reading with a bit on the [inaudible 1:08:52].But it’s a fascinating look at, all the stuff that China does well like, moves very quickly on stuff and he’s talking early on in the book, he said, well, forget the statistics, but it’s like, just say 1% of our population is a gene have a genius-level IQ. That means China has, like 350 times as many genius IQs as this country like the United States, whatever it is the population going to be much bigger, and it’s like four or five times bigger, right?

Tony Kynaston [1:09:29]: And as they become more middle class, with their economy, if those geniuses will get a chance as well, which is interesting.

Cameron Reily [1:09:36]: And according to this book, that’s all part of the strategy for the last 50 years has been to find all the smart, hardworking, innovative people they can and give them sort of more powers since the danger of being in the late 70s. Realize that to hear have socialism we need to catch up to the rest of the world first, then we can worry about socialism but we can’t do it when we’re all starving. So we need to integrate parts of the market economy and we need to manage it carefully. But we need to build quickly and whatever you think of China, they’ve certainly done that pulled 850 million people out of poverty in the last 40 years. You know Charlie Munger is a big fan since Charlie talking about China or a lot in the last year or so.

Tony Kynaston [1:10:30]: I think that’s right. And we’ve often said before this podcast that the best sort of form of government as a benevolent dictator, and I think China probably comes close to falling into that category, in terms of having that sort of one vision and one person and just driving change, which is often needed.

Cameron Reily [1:10:49]: Well, I’m sure you’ll get a lot of hate mail for that comment. But I don’t think he is a dictator as well I think that’s a bit of a [cross-talking 1:10:56].

Tony Kynaston [1:10:57]: I didn’t mean to mean, he was a dictator, but that sort of idea of the autocrat, it’s benevolent and runs things to suit the country without all the baggage that you have to go through with Western democracy is not a bad model.

Cameron Reily [1:11:10]: Well, in Marxist terms, that would be the vanguard of the proletariat, you have a small group of smart people at the top who run things and they just decide what goes on you’d have to worry about the messiness of a western-style market or a western-style democracy. Anyway enough that, a good book I’m what interesting book is, leave it at that and some finding it interesting. Alright well, have a good week Tony, have a good week listening. Keep the questions coming either questions for the podcast or as I keep telling people, new club members. There’s a lot to get your head around, have no qualms whatsoever, mass shooting me emails, and that’s what I’m here for. I will do my best to help you get your head around it. And if I can’t answer your question, I’ll flick it past Tony, but keep them coming. And keep posting your charts and your scorecards up to the Facebook group that’s great and we’ll be back next week.

Tony Kynaston [1:12:09]: Well, thanks Cam doing a good job answering all those questions as usual. You doing a good job getting this club together and the podcast being produced it’s fantastic. It’s moved on hasn’t it the last sort of 12 months it’s now quite a good community?

Cameron Reily [1:12:27]: A lot of really smart people. You stay safe; don’t leave your room for anything.

Tony Kynaston [1:12:35]: Yes, I’ll try. As I said before, I was being twice very close to COVID now and I’m not prepared to risk it again.

Cameron Reily [1:12:43]: Yes, good strategy. Particularly, seeing how sick you were when you got the vaccine. You first show the vaccine.

Tony Kynaston [1:12:49]: I know

Cameron Reily [1:12:52]: Alright, takes care mate.

Tony Kynaston [1:12:53]: Okay. Cheers.