Transcript #503

QAV 503 Club

Cameron  00:06

Wel­come back to QAV 503, TK. This is the, what day is it today? Tues­day the 25th of Jan­u­ary, 2022. And the mar­ket is melt­ing down. It’s like the Wicked Witch of the West. It’s “I’m melt­ing! I’m melt­ing!”

Tony  00:29

Yeah, and I’ll tell you what, I wish you’d done that intro for me this morn­ing because Jan­u­ary the 25th is a spe­cial day for us. It’s my wed­ding anniver­sary, and I for­got com­plete­ly about it.

Cameron  00:40

Are you melt­ing? Did Jen­ny throw a buck­et of water over you?

Tony  00:46

Well Jen­ny’s in Syd­ney and I’m still at Cape Schanck. She rang me at 9:30 and I thought “oh, some­thing’s wrong” because we nor­mal­ly talk in the evenings after our day’s fin­ished and we’ve got stuff to talk about. And she’s nor­mal­ly work­ing. Any­way, she rang up to wish me a hap­py anniver­sary.

Cameron  01:01

Wow.

Tony  01:02

Yeah. After 24 years.

Tony  01:05

I’ll have to in the future. I don’t even have it in my diary. I was so good, this is the first time I’ve ever for­got­ten. I was so good at remem­ber­ing that I did­n’t even both­er about it. But, yeah, I’ll have to change my tune. But, in my defence, like it’s hard to even keep track of days down here let alone dates. It’s just won­der­ful.

Cameron  01:05

Dude, don’t you have staff to, you know, organ­ise anniver­sary presents for your wife? I thought that’s what rich peo­ple always did. They have peo­ple that take care of this stuff.

Cameron  01:32

Well, the mar­kets melt­ing down, she can’t expect you to remem­ber triv­ial things like your wed­ding anniver­sary when peo­ple on our Face­book group are hav­ing a con­nip­tion. Nah, they’re not actu­al­ly, I’m quite sur­prised and pleased.

Tony  01:45

They’re not, which is good.

Cameron  01:46

Yeah. Every­one’s just sort of laugh­ing it off and going “you know, she’s good.” Tay­lor, not so much. Well, I know why the mar­kets melt­ing down, it’s because Meat­loaf died. I mean, I took it hard and I think the rest of the world is tak­ing it hard as well. I mean, true. He had­n’t real­ly done much of con­se­quence since 1978. But, you know, that was enough to change the world for­ev­er. I’m guess­ing though you’re prob­a­bly not a big Meat­loaf fan.

Tony  02:18

No, I’m a big fan of his act­ing. I real­ly liked his Fight Club char­ac­ter, but not the music side, no. I mean, I think when did Bat out of Hell come out? ’77?

Cameron  02:29

’77/’78, yeah.

Tony  02:31

I was well and tru­ly into punk rock by then, and he was just part of the old group that had to move on. That whole Rocky Hor­ror stuff was just urgh, dev­ils, like a, you had to throw some holy water at it and make the sign of the cross and move them on. And melt them down, just like the mar­ket.

Cameron  02:48

Well, I made some Meat­loaf jokes in one of our posts and James Simp­son said “much like QAV stock pick strike rate, two out of three ain’t bad.” Now, i laughed at that and I said to James I’m gonna steal that, but I think I did use that on an ear­ly episode of QAV. I think if we go back through the archives, I’ve made that Meat­loaf ref­er­ence before talk­ing about our 60% strike rate. But I had for­got­ten and James pulled it out, so shout out to James. So, back to the mar­ket. It’s at its low­est point since May of ’21, and I remem­ber hav­ing a joke in the newslet­ter a few weeks ago when it was at its all-time high. Three weeks ago, the AOrd was at its all-time high. I remem­ber writ­ing in the newslet­ter “don’t let the fact that sup­ply chains around the world have ground to a halt and this is going on and that is going on and COVID and blah, blah. No, the mar­kets going, every­thing’s great. It’s at an all-time high.” And now we’ve just wiped out. In one week, the mar­kets wiped out eight months’ worth of gains. But I thought the mar­ket was ratio­nal, Tony, and that all of these things are built in and it’s all fac­tored in and every­one knows what’s going on, and it’s a per­fect storm of real­ly intel­li­gent high­ly paid pro­fes­sion­als.

Tony  04:09

The effi­cient mar­ket the­o­ry, hey. Com­plete bunk. I mean, the mar­ket hates uncer­tain­ty and there’s cer­tain­ly plen­ty of uncer­tain­ty. Most ana­lysts are attribut­ing it towards, around inter­est rates, which has cer­tain­ly caused the high growth stocks to pull back. But clear­ly there’s one thing the Aus­tralian mar­ket hates even more than uncer­tain­ty, it’s the cer­tain­ty of see­ing the Amer­i­can mar­ket go down. So, we typ­i­cal­ly fall in lock­step. Peo­ple get up in the morn­ing, see what the US mar­ket’s done overnight, and then trade accord­ing­ly. So, I think there’s all of that going on at the moment. Our mar­ket is over­val­ued, but not to the extent that the US mar­ket is and espe­cial­ly not to the extent that the NASDAQ mar­ket is. So, there’s more than one thing hap­pen­ing, as there always is. And it’s not just inter­est rates, it’s the Ukraine and what Rus­sia will do there, and, you know, then peo­ple start extrap­o­lat­ing if Rus­sia goes into Ukraine, will Chi­na use that as a dis­trac­tion and go into Tai­wan? Peo­ple’s minds spin out of con­trol when there’s a tiny bit of uncer­tain­ty going on. And in fact, it’s not even real­ly that uncer­tain; inter­est rates are gonna go up. So, that’s pret­ty cer­tain. They may not go up as quick­ly now that the mar­kets com­ing off, but they’re gonna go up. They have to, I mean, if they go down that’s prob­a­bly even a worse out­come for the mar­ket then if they go up. So, yeah, there’s always a lot of over­re­ac­tion going on.

Cameron  05:29

But all of this uncer­tain­ty was there three weeks ago, when the mar­ket was at an all-time high and every­one was buoy­ant.

Tony  05:35

Yeah.

Cameron  05:35

At the time I was like, “what’s going on? Every­one — like the mar­kets boom­ing and yet, you know, there’s chaos hap­pen­ing every­where.” I don’t see what’s changed in the last three weeks that’s tak­en us from being at peak mar­ket to crash­ing and burn­ing and every­one run­ning for the hills.

Tony  05:54

Well, I’m sure if we divine the tea leaves we’ll find out that Jerome Pow­ell said some­thing about inter­est rates in the last three weeks which has spooked the mar­ket, espe­cial­ly the high growth side of the mar­ket. It’s also, don’t for­get, it’s also, we’re com­ing into report­ing sea­son in Aus­tralia, but it is quar­ter­ly report­ing sea­son in the US and stocks like Net­flix and Pelo­ton which are high growth stocks were smashed last week because of their quar­ter­ly num­bers not being up to what the ana­lysts thought. So, there’s a bit of that going on, too.

Cameron  06:19

As for Rus­sia and the Ukraine, I think the US gov­ern­ment and West­ern media have been pre­dict­ing the US is going to invade Ukraine every year since 2014. So, it’s noth­ing new.

Tony  06:33

The US or, the US or Rus­sia?

Cameron  06:36

US has been pre­dict­ing that Rus­sia is going to invade Ukraine every year for the last eight years. Maybe they will, maybe they won’t, but just seems like that’s a bit of a rinse and repeat sto­ry.

Tony  06:48

Well, there is, isn’t there 100,000 troops lined up on the bor­der now, I think that’s dif­fer­ent.

Cameron  06:52

It’s their bor­der. It’s their coun­try. They’re putting troops on their bor­der. It’s not like… Any­way, don’t get me start­ed. Oh, I could go on for hours on that.

Tony  07:03

No, I know. It’s the­atre, it’s the­atre for dif­fer­ent rea­sons, isn’t it? For dif­fer­ent con­sump­tion?

Cameron  07:09

Yeah, well, who knows what’s dri­ving it? I’ll pick it apart on a Bull­shit Fil­ter episode next week, I think. But, Tay­lor called me ear­li­er, he and his bud­dy Chris final­ly nut­ted up ear­li­er this week, did a check­list, and decid­ed to go and invest a big chunk of their mon­ey. They’ve been dab­bling in QAV for the last six or eight months, you know, I think they bought like five stocks each six or eight months ago. And a cou­ple of those went up, remem­ber? I think three of them went up like 60% and Tay­lor was like, “Tony, Tony does­n’t know what he’s doing.” And they’ve all come back since then. And his oth­ers, you know, went back­wards. He was like, “uh, this QAV thing. It’s not work­ing.” I was like, “well, you only bought five stocks champ, you got­ta, you got­ta fol­low the rules.” Any­way, he was say­ing, “look, Chris bought a bunch of stocks Mon­day, and now they’re all down, every­thing’s down. Sure­ly we should be going to cash and not invest­ing in the mar­ket.” And I was try­ing to talk you through, we’ve touched on this before, but I fig­ured we got a lot of new peo­ple lis­ten­ing and they may not have heard us talk about this before. I’m sure there’s a lot of peo­ple out there think­ing is this the time when you just go to cash, you get out of the mar­ket? Can you use a three-point trend­line to deter­mine when the mar­ket is going to turn around ver­sus being ful­ly invest­ed? Do you want to just walk us quick­ly through your think­ing around that kind of stuff?

Tony  08:33

Yeah, and I actu­al­ly have revis­it­ed that think­ing in the last few days, because it’d be great if we could time the mar­ket. I mean, we’ve been talk­ing about this now for prob­a­bly three months, maybe even six months, about signs that the mar­ket’s becom­ing quite top­py. And peo­ple have been talk­ing with us since the start of QAV three years ago about the cap Shiller ratio being at its all-time high in the US for stocks. And then I was talk­ing about recent­ly the sec­ond, world’s sec­ond tallest build­ing being built, which was always a sign that the mar­ket is flush with lots of cheap cap­i­tal and peo­ple start to build glo­ri­ous edi­fices to them­selves. And not just that, I remem­ber there was a lis­ten­er last year who wrote in and said, you know, the ASX has just become a three-point trend line sell, is that a sign to go to cash? And I remem­ber us talk­ing about that and say­ing that no, because some QAV stocks will do well even when the mar­ket’s down. And also, too, I did go back and check that analy­sis on the mar­ket going back over a num­ber of years, and even though it may have cor­re­lat­ed this time, and we’re kind of six months since that ques­tion was raised — or three to six months since that ques­tion was raised — it does­n’t always cor­re­late and going to cash at the wrong time is a, it’s a death-trap if you’re an investor. And you can just ask Hamish Dou­glas about that. He’s been in cash or had a large cash hold­ing with the Mag­el­lan Fund since the COVID cough and his share price’s now less than a quar­ter of what it was at its high point. So, there’s always oth­er sig­nals that the mar­ket is get­ting into over­val­ued ter­ri­to­ry. We could sell out at those points when they start to appear, but I’ve also been in mar­kets where the mar­ket goes up anoth­er 40%/50% in that last sort of Bull run and that can be a real­ly mag­nif­i­cent time to make mon­ey. The only tried and true way of being able to tell when to go to cash is to use the three-point trend­lines and rule 1. And I’ve sold, I sold ANZ recent­ly, because it went down. I’ll prob­a­bly have to sell some oth­er things. But I’m not sit­ting on cash, I’m going to rein- I have rein­vest­ed the ANZ mon­ey into Cham­pi­on Iron, which we spoke about a week or two ago. So, there are still things to buy, we’re gonna do a pulled pork lat­er on a stock that is still going up. So, the mar­ket tur­moil may mean the index is down, it may mean the blue chips are down, it may mean the high-fly­ing stocks are down but does­n’t mean we’re down and out. And there are stocks still on our buy list that you can buy. But apply­ing our rules will tell us when to go to cash. I haven’t gone to cash yet. I would­n’t be sur­prised if we wake up tomor­row and there’s been a mar­ket ral­ly in the States, because that’s the way it works; is like a pen­du­lum, it swings too far one way some­times. I would­n’t also be sur­prised if the mar­kets down again tomor­row. That’s just how it works. And this is like an argu­ment, right? It’s a, it’s an argu­ment between peo­ple like Jere­my Grantham who are say­ing “I told you so, the mar­kets over­val­ued, we’re all doomed” — and he’s said that every sec­ond year for the last twen­ty years — and the bulls. The, I’ve for­got­ten the lady’s name now who runs Ark Invest­ments, that “we’re still on the dawn of a bright future for green stocks and ESG stocks and Tes­la and stocks like that, and we should still invest.” So, it’s an argu­ment, it goes on every day, and even­tu­al­ly there’ll be some more cer­tain­ty that comes back to the mar­ket. But volatil­i­ty is our friend. Don’t for­get that. We’re not any­where near like we were going into the COVID cough in March 2020 when we did go to cash. And if you recall, it was only a month after that, that we made some of our best returns for a long time. So, that’s just the way the mar­ket works.

Cameron  11:59

Cathie Wood would be the Ark inno­va­tions lady.

Tony  12:03

Thank you. Yeah, Cathie Wood.

Cameron  12:05

Yeah, I was explain­ing to Tay­lor that, yeah, the whole mar­ket can be down but our job is to try and find the win­ners inside of that. We’re look­ing for the stocks that are counter cycli­cal, that are doing well while the rest of the mar­ket is plum­met­ing, if we can find them. And you know, like you I had to sell ECX, had to rule 1 some of my ECX hold­ings the oth­er day, and I replaced them with EHL. And then I had to get rid of BlueScope today, rule 1 again, and replace them with CIA. Like you I picked up some CIA, which is still doing well, not a Josephine. There are stocks out there, there’s a lot of Josephine’s out there, but there are some that aren’t, and it’s our job to find those and buy them. Not all of our picks will work out, obvi­ous­ly, but hope­ful­ly we can find enough to keep grow­ing while the rest of the mar­kets tank­ing.

Tony  12:59

Cor­rect. It is some short term, you know, don’t want to de-empha­sise that. I mean, we’re, we’re back, the Navexa port­fo­lio was down 4.5% for the week — that’s our dum­my port­fo­lio. So, yeah, it’s, it’s not nice to see your, your posi­tions go back­wards. But this is what hap­pens; it’s always two steps for­ward, one step back and that’s how it’s going to be for the rest of time in terms of the share mar­ket. I mean, there are prag­mat­ic things you can do. I did spend a bit of time on the week­end going through my port­fo­lio and our dum­my port­fo­lio and updat­ing my alerts, both for rule 1s and first sell prices. So, that’s some­thing that peo­ple can be doing. So, I did get an alert on ANZ, I got an alert on a stock, I don’t own, which was on our buy list called Nufarm. I’ve been fol­low­ing it because it was a large cap and it was on our buy list and poten­tial­ly there­fore was a buy oppor­tu­ni­ty for me going for­ward, but it won’t be now. So yeah, it’s a good time to make sure you’re on top of your alerts and know what your three-point trend prices are, and your rule 1s.

Cameron  13:57

Yeah. Mov­ing along, you sent me some­thing about an arti­cle in the Finan­cial Review about the per­ils of high-fly­ing tech stocks men­tion­ing-talk­ing about Cathie Wood and Ark Inno­va­tions.

Tony  14:08

Yeah, so this, I mean, this is the quote that gets trot­ted out all the time. Once, or, I should­n’t say all the time, every time there’s a mar­ket down­turn — so, prob­a­bly once every five-sev­en years — the famous Buf­fett quote that when the tide goes out we’ll see who’s been swim­ming with­out shorts, or some­thing like that.

Cameron  14:26

Swim­ming naked.

Tony  14:27

Swim­ming naked, yeah. And this is one of those times. He’s always warned that buy­ing high val­u­a­tion, sor­ry, high growth stocks with high prices and ridicu­lous val­u­a­tions is always in the short term gonna make you mon­ey, but in the long term gonna real­ly hurt you. And it’s this kind of time when you can see how it gets hurt. So, the FAANG, if you look at the FAANG stocks, the F‑A-A-N‑G stocks on the US mar­ket, which is your alpha­bets and your Apples, and your Net­flix’s and your Googles and what was Face­book when it was called *that*, it’s now called Meta. So, it’s the demand stocks or the main stocks now, I guess. But if you take those five stocks out of the NASDAQ, the NASDAQ is down more than 40% from its twelve months high. And even some of those stocks, like I said, Net­flix is down 20% after its results came out last week. So, those high growth stocks are drop­ping quick­ly and that’s always been the prob­lem. And if you look at Block, which was the old After­pay, which list­ed on the ASX last week, it’s now down 50% from its high as well. And if you look at Bit­coin, it’s almost down 50% from its high. Last time I had a look it was $35,000 US a coin, and it’s high was 67,000. And the, I guess the core of the AFR arti­cle I post­ed was that the per­for­mance of Berk­shire Hath­away now is catch­ing up to Cathie Woods Ark Fund. They’re almost neck and neck. I don’t think it’s for the cal­en­dar year, but it might be for the finan­cial year. So, it’s just the old Buf­fett say­ing about tides, these things come in cycles and you can put your mon­ey in these high growth stocks for a while and make mon­ey but don’t leave it there because they, when the mar­ket turns, these are the ones that always get dumped, they get smashed.

Cameron  16:04

Which you’ve been telling me for three years, and After­pay had a dip dur­ing the COVID cough, but then it came rock­et­ing back, and then it, then it stopped.

Tony  16:17

Now it’s halved again.

Cameron  16:19

Yeah, the peo­ple that bought it a few years ago and held on to it and sold it at the peak prob­a­bly did well, would have done very well out of it. But as we kept say­ing, well, how do you know when the right time is to buy, and how do you know when the right time is to sell for some­thing like this? How do you decide when it’s under­val­ued? It’s real­ly dif­fi­cult to apply any sort of sci­ence and method­ol­o­gy to it. Although I know Steve Mabb and Lee were work­ing on some­thing based I think on the work that Steve did at the ASA. They’re try­ing to work out some algo­rithms for these high growth stocks. So, I’m sure they’ll come up with some­thing real­ly inter­est­ing. But it’s, what­ev­er it is, you need to have some sort of sci­ence and log­ic behind it. There may be some peo­ple out there that are super, super smart that have worked this out, but I sus­pect that the vast major­i­ty of peo­ple invest­ing in these things are just doing it by FOMO. There’s no sci­ence behind it.

Tony  17:09

Well, exact­ly. And that’s, good luck to Steve, I hope he does come up with some­thing and hope he shares it with us, too, if it works. That’d be great to be able to prof­it out of these cycles. And they are cycli­cal. I mean, the thing that wor­ries me about, some­times the way I look at it is these stocks are almost like pump and dumps. Yeah, sure, Buf­fet­t’s out there say­ing, “oh, val­ue invest­ing is great.” But he’s not out there say­ing, you know, hyp­ing Wal­mart, or hyp­ing Berk­shire Hath­away rail­roads, you’re not telling peo­ple to buy shares in those things, the same way that Cathie Wood’s out there hyp­ing every day in the press, buy Tes­la, buy Tes­la, it’s a great invest­ment. And I’m not by any means try­ing to impugn Cathie’s motives or, or her abil­i­ties or any­thing like that, but the whole high growth stock thing does have the flavour of pump and dump. It’s peo­ple who, for what­ev­er rea­son, they buy these stocks cheap­ly — maybe they buy a hun­dred — and then when, when one or two do well, they get behind them and they push them and push them and push them. And that helps the price to go up, and as you say it becomes FOMO and then peo­ple jump in. And then yeah, it all ends in tears when the Punch­bowl gets tak­en away as Ben Bernanke used to say, or Greenspan think it was used to say.

Cameron  18:20

Yeah, and there is a, there’s a cosy rela­tion­ship — I talked about this in the Psy­chopath Epi­dem­ic — there’s this cosy, cosy rela­tion­ship often between ven­ture cap­i­tal mon­ey and big invest­ing funds and the, you know, in the tech indus­try, I saw this when I was in the tech indus­try, there’s a tight rela­tion­ship between the ven­ture cap­i­tal indus­try in Sil­i­con Val­ley, and the tech media out of Sil­i­con Val­ley. And so, what would often hap­pen is you’d have what­ev­er the hot start-up of the peri­od was, and sad­ly, it was nev­er real­ly pod­cast­ing, but oth­er things at the time that would come along, you know, there was always the flavour of the month thing. And, you’d see these ven­ture cap­i­tal firms sink­ing tonnes of mon­ey into these start-ups, then their friends in the tech media would be pump­ing these things, “this is going to be the next big thing,” “this is going to take over the world,” “this is going to be huge.” Then that would start to float, the orig­i­nal VCs obvi­ous­ly had a good exit with the float some of their equi­ty and then they would hold on to some and then have their friends in the media pump it up and pump it up and pump it up, then they’d even­tu­al­ly exit just as all these wannabe copy­cat com­pa­nies would launch an IPO and all the pun­ters who missed out on the first round would try and get in the sec­ond round. And then these things would all crash and burn; maybe one would sur­vive, quite often none of them would sur­vive or they’d piv­ot into some­thing else, or what­ev­er. And then you just see the cycle rinse and repeat every few years, then it’s the VCs are on the new thing and the cycle starts all over again. It always struck me as this cosy lit­tle pump and dump. And no one ever went “hey,” to the tech jour­nal­ists “hold on, the thing you were pump­ing three years ago just fell over and burned. Well, why are we lis­ten­ing to you now?” No one remem­bers, just time moves on and they just pump a new thing com­ing along. And a lot of this, a lot of the Bit­coin stuff and the high tech stuff just does remind me a lot of that cycle, the cosy rela­tion­ship between the big invest­ing funds and the finance media in the space.

Tony  20:19

Your prob­lem was when you start­ed pod­cast­ing, you did­n’t get Hen­ry Blod­get to take 10% of your com­pa­ny, and then go and sprout it to the, to the .com world for you and make mon­ey that way.

Cameron  20:31

That’s what I should have done. Speak­ing of cryp­to, I saw of good arti­cle in the Fin this morn­ing by Kevin Davis who’s a pro­fes­sor of finance at the Uni­ver­si­ty of Mel­bourne. Arti­cle titled “Why cryp­to is gam­bling and not invest­ing.” And I thought, hel­lo, he’s been lis­ten­ing to our pod­cast. Wel­come. Shout out to, shout out to Kevin, if you’re lis­ten­ing in, because we’ve been say­ing that on this show for three years.

Tony  20:58

And I guess that’s good, it’s good that that arti­cle bal­anced the oth­er ones that have been in the AFR in the last week or two that rich peo­ple are think­ing about get­ting into bit­coin now it’s come off its highs. That’s almost irre­spon­si­ble jour­nal­ism, I think.

Cameron  21:09

Yeah. Is there such a thing as respon­si­ble jour­nal­ism these days? Not a lot of it out there, I’ve got­ta be hon­est.

Tony  21:16

Yeah, it’s rot­ting in Bell­more prison.

Cameron  21:18

Yeah, that’s true. Bel­marsh, Bel­marsh.

Tony  21:21

Oh, Bel­marsh is it? Sor­ry. Hey, do you think when Assange goes to the tri­al, they’ll put him in a box and then like wheel him out from his sell down like a trol­ley car.

Cameron  21:33

Real­ly slow­ly, real­ly, real­ly slowl.

Tony  21:36

With mood light­ing.

Cameron  21:38

Mak­ing a ref­er­ence obvi­ous­ly to Blofeld in the most recent James Bond film who was also in, also in Bel­marsh Prison. See, they threw Blofeld in with Julian Assange.

Tony  21:51

When  Jen­ny and I were watch­ing, I’m going “hang on, Bel­more Prison must be like a hun­dred years old, if not dou­ble that.” Like there’s no way there’s a rail­way to bring pris­on­ers out of their cells.

Cameron  22:02

What the movie should have been is Blofeld in Bel­marsh with Julian and the two of them cook­ing up some­thing togeth­er to take down MI5 and Bond and the whole thing. That would have been worth watch­ing.

Tony  22:16

Or, maybe Julian Assange is an ex-007.

Cameron  22:19

Well, I’ve been work­ing on a com­ic book script, I don’t know if I’ve ever told you about this, I’ve been work­ing on and off for years. And it, back before Julian was in prison, in fact, but it starts off with Super­man fly­ing into the Bat­cave and say­ing to Bat­man, “hey, have you seen all this stuff that Wik­iLeaks have been pub­lish­ing about how the US is spon­sor­ing ter­ror­ists all around the world? Why are we muck­ing around with the Jok­er and the Rid­dler? We should be tak­ing down the mil­i­tary con­trac­tors and the lob­by­ists, They’re the real evil.” And Bat­man just turns to him and goes “who do you think’s been fund­ing Wik­iLeaks for the last ten years, you dip­shit, it’s the Wayne Foun­da­tion that’s been fund­ing it all. About time you woke up? Let’s go. Strap on.” Any­way. That’s my fan­ta­sy super­hero world.

Tony  23:04

Well, that’s how the Wayne foun­da­tion makes it’s mon­ey, isn’t it? Sell­ing high tech to the mil­i­tary?

Cameron  23:08

Yeah, well, in in the recent Christo­pher Nolan ver­sions of the sto­ry, yeah, like a Stark. Tony Stark. Alright, well, you want to get into your deep dive, your pulled pork?

Tony  23:22

Oh yeah, just a cou­ple of oth­er things to talk about, sor­ry, before we do. A cou­ple of stocks in the news. So, con­fes­sion sea­son has claimed a cou­ple of stocks on the buy list. Adairs, ADH, has been on the buy list for a while. It’s been a Josephine for a long time, so I don’t know if any­one would be own­ing it. But they came out and fessed up to the fact that their sales aren’t, haven’t been great dur­ing Omi­cron. So, their stock dropped like a stone in the last cou­ple of days. One I own, South 32, they actu­al­ly pub­lished some good sales num­bers in that they’re a min­er which has spun out of BHP that mines all of the things that BHP did­n’t want back then but are now all of the vogue stocks now they’re doing well, like your cop­pers and your zincs and your nick­els and alu­mini­um and things like that. And they’ve been doing real­ly well over the last twelve months. But they’re down, I think 3 or 4% last time I looked any­way, because they said their costs had been increased because of Omi­cron. So, sales are up, mar­gins were good, but costs were up so spooked the mar­ket a lit­tle bit. And the last one hap­pened in the last, well hap­pened overnight. So, I own shares in West African Resources, WAF, and that’s been smashed today because there’s been a mil­i­tary coup in Burk­i­na Faso. So, if you do have a hot­line to Super­man, can you tell him to go in and fix the West African mil­i­tary for me, please, because West African Resources has dropped a lot — like 15–20% in the last, well today. It’s get­ting down close to a rule 1 for me. It’s way above its three-point trend sell line, because it’s a gold stock and it’s been doing well, but it’s retraced a lot of its gains for the last twelve months and I just high­light it so if peo­ple haven’t come across that in the news they can check their alerts are set for West African Resources as well.

Cameron  25:05

So, you want me to get Super­man to be your pri­vate merc and go and you know, rough peo­ple up for the sake of your port­fo­lio. Does this meet your ESG frame­work, Tony?

Tony  25:17

I’ll give him 10% of the port­fo­lio , he can make sure it always goes up for me.

Cameron  25:25

I had to rule 1 West African Resources quite a while ago, I think. I think it’s been a lit­tle bit rocky for a while, has­n’t it?

Tony  25:33

Yeah, it’s been up and down because there’s been mil­i­tary coups in the neigh­bour­ing coun­tries and it got put in that whole gen­er­al area when some of the oth­er ones came off, and then it went up again, and now it’s come back again. I don’t know what the result will be with the coup, it’s a break­ing sit­u­a­tion, and obvi­ous­ly I’m not an expert. So, we’ll have to let sen­ti­ment guide us on this one.

Cameron  25:53

Yeah, I think when we talked about it a while back you did high­light the fact that stocks like that were sub­ject to some form of sov­er­eign risk or for­eign stuff going on.

Tony  26:06

Cor­rect. This is exact­ly an exam­ple of sov­er­eign risk that things come out of the blue like this in coun­tries that aren’t near us, and we don’t know much about. So, yep, sov­er­eign risk is very much alive and well with this one, and that’s one of the rea­sons why it was so cheap. I mean, it was, it’s a very prof­itable com­pa­ny in a gold mine when gold’s gone up a lot, even though it’s been lev­el for a while, but it’s been cheap because of sov­er­eign risk and looks like that may cause us to sell it but we’ll see what hap­pens.

Cameron  26:33

Okay, what else you got?

Tony  26:35

No, that’s it. Pulled pork now, thanks.

Cameron  26:37

All right. So, stocks of the week this week, which I chose yes­ter­day morn­ing, Mon­day morn­ing, where RVR and RIO, two min­ers. Both looked okay at the time, but lots hap­pened in the last 24 hours. Of course, as I tell, I tell peo­ple every week when I put out the stocks of the week, check them for a Josephine before you do any­thing because a lot can change, par­tic­u­lar­ly in a tur­bu­lent mar­ket like this. And you emailed me this morn­ing and said that RVR has in fact become a Josephine since then.

Tony  27:08

Yeah, it was down like 15% today last time I had a look, so some­thing’s gone on there.

Cameron  27:12

Yikes.

Tony  27:14

Yeah. Small-cap min­ers. I don’t know much about it, so I’m going to focus on Rio for the pulled pork. Rio Tin­to.

Cameron  27:20

Nev­er heard of them. What do they do, Tony?

Tony  27:24

Well, it’s kind of sur­pris­ing because they’ve shot them­selves in the foot a lot in the last twelve months. They’ve been in the news which is not what you, not for all good rea­sons. But any­way, Rio, Rio Tin­to, big min­er, one of the big-cap stocks on the ASX. Large­ly iron ore, iron ore makes up 76% of its rev­enues, but it also has some cop­per, baux­ite, alu­mini­um or alu­minia — alu­mi­na, sor­ry, get the pro­nun­ci­a­tion right — dia­monds and tita­ni­um oxide. So, it has diver­si­fied a bit and has had some good news in the papers recent­ly, in the last day or so. So, they’ve been try­ing for a long time to sort out a cop­per mine called Oyu Tol­goi, and I hope I pro­nounced that right because I’ve nev­er heard it men­tioned, I’ve only read it, in Mon­go­lia. And just in the last day or so it looks like they may have sort­ed out their prob­lems with the Mon­go­lian gov­ern­ment and the old Oyu Tol­goi cop­per mine will go ahead, which is a big deal for Rio and, and will boost the amount of cop­per that they have in their mix. That may change things for us. I mean, the mine won’t hap­pen, won’t get start­ed for a while and won’t hap­pen for a while, so not a short-term issue. But that’s anoth­er thing if cop­per does become a big part of Rio, we’ll have to reassess whether we treat it as an iron ore stock or a cop­per stock or both. So, at the moment, it’s pre­dom­i­nant­ly iron ore. Last year it mired itself in con­tro­ver­sy, it blew up an Abo­rig­i­nal or a First Nations sacred site in a place called Juukan Gorge, which was a ter­ri­ble thing to take place and seemed like man­age­ment were at six­es and sev­ens in deal­ing with it and even­tu­al­ly it claimed the scalp of the old CEO. And the CFO has been pro­mot­ed now to run­ning the com­pa­ny. So, a lot of things going on with Rio Tin­to, more than you’d want to see in a big blue-chip min­er. But, things might be turn­ing around, it came back onto our buy list recent­ly so it scores a point for that. It’s a recent three-point upturn after going off when iron ore stocks dropped, but also it was also a three-point trend sell — prob­a­bly because of the Juukan Gorge con­tro­ver­sy. Today, the share price is $1.69, so almost $1.70, so 25th of Jan­u­ary, and it is just slight­ly under the con­sen­sus tar­get, so it scores a point for that for share price. It’s a star income stock and it scores half a point for that with Stock Doc­tor, and the rea­son why it’s a star income stocks because, well, one of the rea­sons is because it has a yield of near­ly 8.5%, so that’s very high and cer­tain­ly above the bank rate so it scores a 1 for that. Finan­cial health is strong and steady, as you’d expect from a real­ly big large-cap com­pa­ny like this, so it scores for those. For peo­ple who are inter­est­ed, the ROE is 35%, and the Pr/OpCaf —  the price to oper­at­ing cash flow — was 5.6 times. So, that’s, it’s get­ting up there but it’s still, you know, when you con­sid­er it to be a large-cap stock on the ASX, it’s still very cheap. PE is 7, which is not a record low for the last six halves, so it does­n’t score for that, but still a low PE. And the inter­est­ing thing with this com­pa­ny is that the PE is less than the yield, so that’s always been a low val­ue indi­ca­tor to me, or a great val­ue by indi­ca­tor to me. Nev­er heard any­one else talk about it, but cer­tain­ly some­thing I’ve observed over my years in the stock mar­ket. So, it gets a point for that on our QAV score list. It’s less than its IV 2, it’s just above its IV 1, and it’s less than two times it’s IV 2, so it scores 1 point for each of those. It’s got a high growth pro­file, so growth over PE is three times which is twice what we want to see to get onto our check­list and it’s scored a 2 for growth. As I said before, it’s a new three-point upturn, even though it’s been a buy for a long time it did come off the list at the end of last year. Equi­ty has been bounc­ing around a bit so it does­n’t get a, a score for that. So, over­all, the qual­i­ty side of things’ 83% and the QAV total, and we take into account the Pr/OpCaf is 0.15, giv­en its got an aver­age dai­ly trade of $117 mil­lion it’s cer­tain­ly one that would fit every investor’s cri­te­ria.

Cameron  31:34

Very good. Thank you, TK. Rio. Do you know how it end­ed up in Aus­tralia?

Tony  31:42

Yeah, I think it’s a British min­er, it may even be dual list­ed and peo­ple might be aware of that because they’ve seen BHP repa­tri­at­ed back to Aus­tralia which has been in the head­lines, or the finan­cial head­lines, recent­ly. I think it was because of CRA, a com­pa­ny it bought in WA which was a big min­er over here of iron ore and, and that was kind of a turn­ing point for Rio back prob­a­bly about twen­ty or thir­ty years ago from mem­o­ry.

Cameron  32:05

Yeah, Conz­inc Rio Tin­to of Aus­tralia. I did a sort of a his­to­ry on it when I was pick­ing it as the stock of the week yes­ter­day. It’s named after the riv­er in Spain, which has been mined for min­er­als for five thou­sand years, the Rio Tin­to, and when the Span­ish monar­chy sold the rights to mine on the Rio Riv­er in 1873 the rights were pur­chased by a con­sor­tium led by the Scot­tish indus­tri­al­ist Hugh Math­e­son, famous for Jar­dine Math­e­son, and the com­pa­ny soon I think by the end of the 1880s was in the hands of the Roth­schild fam­i­ly. And then there was a series of acqui­si­tions and merg­ers over the next cen­tu­ry, and then in 1962 Rio Tin­to com­pa­ny merged with Con­sol­i­dat­ed Zinc, which was an Aus­tralian firm, to form the Rio Tin­to Zinc cor­po­ra­tion, RTZ, and its main sub­sidiary was Conz­inc Rio Tin­to of Aus­tralia, CRA. And then in 1995 the com­pa­ny’s merged into a dual list­ed com­pa­ny run by sin­gle man­age­ment. So, there you go. That’s my short his­to­ry of Rio Tin­to. I’ve always won­dered with a name like that, how did end up list­ed in Aus­tralia, so did some back­ground.

Tony  33:22

And I won­der, like, the Tin­to Riv­er, that sounds to me like it may have been coloured by the cop­per maybe, had a col­oration to it or a tint.

Cameron  33:28

Hm. Tin­to, Rio. Yeah. Good think­ing.

Tony  33:32

Poten­tial­ly. I’m not sure.

Cameron  33:33

We’ll get one of our interns to look into that. Are you ready to get into the Q&A for this week, Tony?

Tony  33:42

Yeah, sure. Absolute­ly.

Cameron  33:44

All right. Well, the first ques­tion this week comes from Jeff. He says he found a ques­tion from an arti­cle in the AFR relat­ing to West­pac. There was a line includ­ed in the arti­cle — this is from the 18th of Jan­u­ary — the title of the arti­cle was “West­pac fol­lows CBA deal with five-year Aussie debt deal”. There was, he says, there was a line in the arti­cle “CBA launched its deal at a pro­posed spread of 75 basis points above swaps and end­ed up wind­ing it back to 70 basis points.” And he asks, “what the hell does that mean?”

Tony  34:21

Yeah, we’re get­ting into the area of bonds, which is not some­thing I’m strong on, but I do know what this means. So we know what a bond is, its a way for a com­pa­ny to raise debt. It issues a coupon, if you like, to com­pa­nies or to indi­vid­u­als poten­tial­ly as well who buy the bond, and it will have cer­tain char­ac­ter­is­tics. I think in this case, it was a five-year bond maybe. Any­way, you will have a term, the way the bond will work is at the end of that term the com­pa­ny has to buy it back off you at face val­ue or con­vert it into debt or roll it over into anoth­er bond. So, I think that’s prob­a­bly the three main things that hap­pen in the life of a bond. And, along the way they agree to pay you the coupon, the inter­est, I guess the div­i­dend you receive, although it’s not a div­i­dend in the way that we think of div­i­dends and there’s no frank­ing cred­its, it’s just the amount of mon­ey that there’s a per­cent­age of what the face val­ue of the bond was when it was issued. So, it’s basi­cal­ly like you issu­ing a mort­gage to the bank, except the oth­er way around. So, instead of you tak­ing out a mort­gage for a peri­od of time and agree­ing to pay them an inter­est rate, you give them your mon­ey and they give you a piece of paper which says that they’ll pay you back in full over after a time peri­od and they’ll give you a coupon each year for that peri­od of the of the bond. So, if it’s a fixed income bond then the amount is known up front, so it might be like 1% or 2% giv­en inter­est rates are very low at the moment, it’s usu­al­ly between 2 and 3%. This par­tic­u­lar issuance was part fixed and part float­ing, and float­ing inter­est rate bonds now are of more inter­est to the mar­ket than fixed because inter­est rates are going up. So, if you, if you take a bond, give your mon­ey to the bank, and they have a fixed income bond with you for five years and it’s at 1%, at the end of five years if the inter­est rates are now at 5%, you effec­tive­ly, you’ve missed out on the oppor­tu­ni­ty of tak­ing mon­ey off the table, and your bond is worth a lot less. The bonds are often trad­able on the sec­ondary mar­ket, and if the inter­est rates go up then the bond val­ue goes down. So, just to explain; that if I gave West­pac a mil­lion dol­lars, bought this bond off them and it was a 1% coupon, but then inter­est rates rose to 2%, the val­ue of the bond, say it was issued at $100 per bond, would go down to accom­mo­date the fact that the per­son buy­ing it from you want­ed the mar­ket inter­est rate of 2%. So, the face val­ue of the bond goes down when inter­est rates go up. So, what peo­ple are after these days are float­ing rate bonds, so that if inter­est rates go up then the amount that they receive on their, on their bond pur­chase also goes up because you can hold the bond until its term fin­ish­es and get your mon­ey back from West­pac or get rolled over into anoth­er bond or what­ev­er the deal is, but if you do have to trade the bond in between and inter­est rates are high­er than what the coupon was set at, then you’re going to lose mon­ey. You won’t get your mil­lion dol­lars back if you have to sell it, you might get $900,000 or some­thing so that the new buy­er gets a high­er, still gets the 1% of the orig­i­nal val­ue from West­pac but because they paid $900,000 for it, that’s now worth more to them and more in line with what the mar­ket is get­ting as a yield. So, any­way, long sto­ry short, the way that the float­ing rates are often quot­ed is a cer­tain per­cent­age above the swap rate. And again, this is very tech­ni­cal. Swap rate, though it’s some­times called a BBSW, it’s the bank bill swap rate that banks use as a bench­mark to be able to trade with them­selves or between them­selves. That itself is some­times set through trad­ing and some­times it can be tied — I should­n’t say some­times, I think it might be tied to the RBA’s short-term rate. So, the RBA will pub­lish a long-term rate, which we tend to think about but there can also be a short-term rate pub­lished. Any­way, the banks need a bench­mark so that when they’re, they’re trad­ing with each oth­er all the time, and some­times they have a short term need for cash to set­tle a deal or what­ev­er or to, some­times to repa­tri­ate bonds, and they’ll go and bor­row it from a dif­fer­ent bank. And they have a bank bill swap rate, which is gen­er­al­ly what peo­ple think of as the short-term mon­ey mar­ket. So, if you’ve ever heard peo­ple say, “I sold my house and I rolled the mon­ey in the short-term mon­ey mar­ket until I bought some­thing else,” they’re get­ting some­thing like the bank bill swap rate. So, it’s a fair­ly low rate. So, what West­pac is offer­ing with this par­tic­u­lar deal, and what CBA offered with their deal, is to always pay you a cer­tain per­cent­age above the bank bill swap rate — in oth­er words, the short term. And that is the float­ing com­po­nent of the bond, and it means that as inter­est rates rise, the bank bill swap rate will go up as well and so you as the coupon hold­er get more from the bank. And that’s, that’s to pro­tect your cap­i­tal in case, in the event, and it’s like­ly, that inter­est rates will rise. Now, the oth­er point that is part of the ques­tion was that when this deal, the orig­i­nal deal was going out, the pro­posed spread was 75 basis points above the bank bill swap rate and they end­ed up want­i­ng to get back to 70 basis points. So, what that means is that there was a lot of demand for this kind of bond and the bank issued, like, met that demand with the ini­tial offer­ing at 75 basis points and then prob­a­bly went out into the mar­ket and offered more at 70 basis points to soak up some of that demand, which was a bet­ter deal for the bank. So, long sto­ry short, this was just say­ing that the invest­ment com­mu­ni­ty is look­ing for bonds that have a float­ing com­po­nent so they can pro­tect them­selves from ris­ing inter­est rates, and there’s so much demand out there that the banks can low­er the spread that they offer on this kind of prod­uct.

Cameron  39:56

So, it’s a pro­tec­tion mech­a­nism for them to make sure they don’t get caught out if inter­est rates go up.

Tony  40:04

Yeah. And in fact, I know it’s very pop­u­lar in the US, and I think — I don’t know what the offer­ings are here because I don’t fol­low the bond mar­ket — but Infla­tion Pro­tect­ed bonds are the oth­er big thing at the moment. So, they also float as infla­tion goes up. So, they’re pegged to some kind of CPI mech­a­nism which means that if infla­tion ris­es you, you are pro­tect­ed with your ini­tial cap­i­tal.

Cameron  40:25

Okay, the bank bill swap rate, or BBSW. I thought that was a, thought that was a porn sub­cat­e­go­ry, but just be care­ful if you Google that. Nev­er know what you’re gonna come up with.

Tony  40:40

There prob­a­bly is banker porn, right? They prob­a­bly all watch BBSW like hawks. “Hey, did you see the BBSW went up today. Woohoo.”

Cameron  40:52

Both hands above the table, please, Jeff, both hands above the table. All right. Thank you, Jeff, for that ques­tion. Michael says he was lis­ten­ing to SO2EO5. Oh, God, I won­der when we record­ed that? Would have been just before the COVID cough, I think. He says — in ear­ly 2020, I’m guess­ing — “Tony was mus­ing that some­one start­ing their port­fo­lio then might want to wait until the end of report­ing sea­son. Would he still be think­ing this way today giv­en how close we are to report­ing sea­son?

Tony  41:27

Yeah, good ques­tion. I’m not hes­i­tat­ing to buy things. Like I said, I’ve sold out at ANZ, bought into Cham­pi­on Iron even though we’re close to report­ing sea­son. I could get caught out if Cham­pi­on Iron has a poor report, but the sur­pris­es are less and less in the mar­ket these days with con­fes­sion sea­son com­ing first and the quar­ter­ly reports, espe­cial­ly for the min­ers which have to divulge what their sales are at least among oth­er things. So, it’s a rea­son­ably informed mar­ket. And gen­er­al­ly, if you see a stock going into report­ing sea­son, it’s a good sign as well. If you see stocks going down, like we saw with Myer a week or two ago, it’s not a good sign. So, I’m still rea­son­ably com­fort­able. If you want to be super cau­tious than yeah, hold off and buy in Feb­ru­ary. And look, there’s no doubt that we’re com­ing into the busiest time of the year for us when com­pa­ny report­ing sea­son hap­pens, and its gonna hap­pen with the back­drop of the mar­ket cor­rect­ing. So, yeah, I mean, golf games might get thin on the ground for a while. But, we’ll require focus and down­loads and things like that. Like I said, I’m com­fort­able going in, I’d be going in prob­a­bly a lit­tle bit slow­er than nor­mal. But hav­ing said that, I don’t think there’s going to be a whole heap of stocks on the buy list any­way that aren’t Josephine’s at the moment. So, you can be cau­tious any­way just nat­u­ral­ly. Still fol­low the rules. Some­one made an inter­est­ing com­ment on the Face­book group which I read recent­ly when they said that they had gone into the mar­ket and bought some stocks, but only the ones that were on a dif­fer­ent report­ing cycle — so the ones that report­ed March or Sep­tem­ber — which I thought was an inter­est­ing way to do it as well. So, Michael might want to con­sid­er that. But yeah, Michael, I’m, if I were start­ing out today, I’d still be fol­low­ing the rules and buy­ing, but just bear in mind that you might have some sell­ing and rebuy­ing to do dur­ing the com­pa­ny report­ing sea­son.

Cameron  43:14

And that leads me to think like, there’s prob­a­bly some peo­ple out there that have just start­ed their port­fo­lio or are in the process of build­ing it up, and of course every­thing’s tank­ing and they’re look­ing at, you know, I think I’ve seen a few peo­ple say in the Face­book group, “oh, I’ve had to sell 40%/50% of my port­fo­lio in the last week because of rule 1 sells,” which, you know, if you just bought recent­ly that could eas­i­ly hap­pen to you as every­thing is falling around you. But, what would you say to those peo­ple? I know we’ve been through peri­ods like this in the past, but for new folks that have just kicked off and now they’re los­ing 10–20% of their port­fo­lio, they’ve paid bro­ker­age, every­thing’s, they’re hav­ing to R1 every­thing, what sug­ges­tions would you have?

Tony  43:57

Yeah, I say hold the line. I mean, it’s prob­a­bly unfor­tu­nate that you start­ed the but and enter the mar­ket when it’s been in this sit­u­a­tion, but that can’t be helped. And all I can say is you’ll make it back in the long term, that’s cer­tain­ly been my expe­ri­ence. Con­tin­ue to fol­low the process. But look, I, first of all I do empathise and sym­pa­thise with them, it’s cer­tain­ly not easy for me at the moment los­ing large sums of mon­ey when you look at stocks. So, I do, I do sym­pa­thise with you. But real­ly it’s, this is part of invest­ing, and all I can say is that if you keep fol­low­ing the process it will come good for you.

Cameron  44:30

Tay­lor said to me today like “oh, I just can’t you know, it’s just real­ly hard to see all this mon­ey.” I go “if you can’t, if you can’t han­dle see­ing your port­fo­lio go down then maybe you should­n’t be invest­ing. Take up knit­ting or some­thing like that. You don’t have the, you don’t have the con­sti­tu­tion for it, don’t do it. Like go do some­thing else, put your mon­ey in an ETF and close your eyes and don’t wor­ry about it. That’s okay.” I’m not being dis­parag­ing, but that is part of, that’s one thing I’ve learned from you over the last cou­ple of years is this is just part of it. The mar­ket goes up, the mar­ket, I, you know… it’s as John Den­ver said, “some days are dia­monds and some days are coa, and you just have to just ignore it.” Like you just fol­low the rules. Yeah, there’s red on the screen for days or weeks or months at a time, it’s just a colour on the screen. Don’t wor­ry about it, don’t think of it. Just, I mean, it’s easy for me to say this because I’ve been lis­ten­ing to you every week for three years. But, I’m absolute­ly con­vinced hav­ing watched the last three years and talk to you about it that it’s cycli­cal, these things go down then they go up, as you said; two steps for­ward, one, step back, one, two. And it sucks if you got, if you start in the one step back­ward part of the phase.

Tony  45:44

Yeah.

Cameron  45:45

But if you’ve been lis­ten­ing to the show for a while, and you trust that Tony knows what he’s talk­ing about, then this is just, this is just part of it. It just hap­pens. It goes down, then it goes back up, then it goes down, then it goes back up, then it goes down. And, no you can’t real­ly time it, you can’t fig­ure out when’s the right time to… it’s like play­ing Frog­ger, you can’t fig­ure out the right time jump­ing, you just jump and then you fol­low with the car — did you ever play Frog­ger, Tony, does any­one remem­ber Frog­ger? Am I the only per­son who played Frog­ger?

Tony  46:18

Yeah, I did.

Cameron  46:19

Frog­ger you just jump in, right, and then as the cars come at you, you jump out of the way and then when you see an oppor­tu­ni­ty you jump up a lev­el, then you go side­ways a lit­tle bit and then you jump up. You don’t, you can ever wait until all the cars are per­fect­ly lined up and you go straight across the five lanes of traf­fic, you just have to jump in and get going and keep mov­ing.

Tony  46:39

No, that’s right. And also, too, I’m remind­ed of Char­lie Munger who said if you can’t stom­ach a 50% drop in your share port­fo­lio, then don’t do it. You are going to learn a lot about your own per­son­al­i­ty doing this, as well.

Cameron  46:51

Yeah, yeah. And I think you said real­ly ear­ly on in the show quot­ing maybe Buf­fett or Ben Gra­ham or Munger or one of these guys, that I think there’s, it’s a Buf­fett say­ing, some­thing about, it does­n’t take a high degree of intel­li­gence to be an investor, but it does take a cer­tain kind of per­son­al­i­ty. You’ve just got to be able to fol­low a sys­tem, ignore the noise, ignore what the mar­kets doing, just be dis­ci­plined and fol­low your thing and have a lit­tle bit of ice in your veins and just have that lev­el of con­fi­dence that the sys­tem — what­ev­er sys­tem it is that you’re apply­ing, not nec­es­sar­i­ly, does­n’t have to be QAV, can be any sys­tem — but that the sys­tem that you’re apply­ing works long term, and there­fore you should just ignore short term fluc­tu­a­tions. Volatil­i­ty.

Tony  47:40

Yeah, that’s exact­ly right. You gam­i­fy it, right? It’s like, okay, you might have start­ed play­ing Monop­oly and land­ed on go to jail on your first turn, do you pack up and go home? You keep going, you’ve got to gam­i­fy it. And, and that’s, this is how the mar­kets gonna be. I mean, the flip side is that I don’t know how long it will be, I don’t know if it’ll be tomor­row or next week or next year, we’ll turn around and we’ll go “Mr Mar­kets been real­ly pes­simistic for a long time. Now, he’s just pre­sent­ed me with the best deal I’ve seen for years, I’m gonna buy.” So, and we have a sys­tem to be able to take the stress out of that, even if we sit on cash for the next twelve months or two years. We’ll still come out ahead.

Cameron  48:20

Yeah, it’s that, that abil­i­ty just to trust the sys­tem and ignore the back­drop and the noise and ignore the num­bers, like your own num­bers. Just go yeah, as you said, gam­i­fy it. Just realise that it’s just, it’s short term noise is the way I think of it real­ly now. Yeah, I’ve got to sell some stuff, I’ve got to replace some stuff.

Tony  48:41

Exact­ly.

Cameron  48:42

Does­n’t mat­ter. You just do it. It’s like going for a run when you don’t feel like it because you know that the long-term ben­e­fits are there. It’s just, that you just put the shoes on. Or what­ev­er, you go to the gym, right? You don’t think about it. You just do it. You don’t think about it, “Just Do It”.

Tony  49:00

Yeah, put your Nikes on.

Cameron  49:01

Yeah, no, like seri­ous­ly, like it took me a while to get there and, but once I got there it made life a lot eas­i­er. Like, Tay­lor still rings me like every day, “did you see what hap­pened today? This went up. This went down.” Like, Dude, seri­ous­ly, you’re gonna kill your­self. Like, stop wor­ry­ing about it. Like, it’s… Mov­ing right along. Ange: “hi, Cam after two plus years, I real­ly thought I under­stood the three-point trend­lines but when you and Tony had that con­ver­sa­tion late in the last series about going back to an old buy line, I thought there would be a lot of dis­cus­sion as it was the oppo­site of the buy line fol­lows the sell line. You brought it up again at the start of the series, but you agreed with Tony to sort it out off air so I’m still con­fused. If the buy line fol­lows the sell, then the chart would look like my attached sam­ple, buy fol­lows sell, which is what you respond­ed back to Ali­son on Face­book this evening regard­ing ANZ and is how I’d always thought it would be drawn. From the recent pod­cast, I thought Tony was say­ing that once a sell line changes, you go back to where the sell line starts and you for­get about all the buys and sells along the way and plot the buy line so the buy’s third point is after the start of the sell line again. So, ignor­ing buy fol­lows recent sell rule. I thought your con­fu­sion was valid,” thank you, Ange, “so we must think the same way. Did you sort it out? If so, can you share your find­ings?” And I said, “No, wait­ing for Tony to get back to me on that.”

Tony  50:32

Well, first of all, Ange, I apol­o­gise. I prob­a­bly miss-well, just con­fused peo­ple, as you said, and Cameron and oth­er lis­ten­ers. The first thing I want to say is the Bret­te­la­tor has the cor­rect ver­sion of the three-point trend line code draw­ing algo­rithm in it. So, if I’ve said things to con­fuse peo­ple, or I’ve con­fused myself — which I am lis­ten­ing to Ange’s ques­tion — I apol­o­gise. Real­ly, real­ly it is go back to the Bret­te­la­tor and use that and see if it match­es up to what you think. And if you still have, have issues, then then get back to us. But yeah, this has been obvi­ous­ly con­fus­ing, and I apol­o­gise if I’ve led peo­ple down the gar­den path, it was­n’t my inten­tion.

Cameron  51:16

Well, I don’t think any of us thought it was your inten­tion, but let’s talk about what the rule is right now in your head. So, well, I think we’re back. The last time we talked about this a cou­ple of weeks ago, I think we got back to the buy line fol­lows the sell line, right? Is that where we’re at today, right?

Tony  51:33

Yes, that’s right.

Cameron  51:34

So, if there’s a new sell line, mean­ing we’ve got a new L2 some­where on a chart, and it’s the sell line has fall­en, we still have to go back and plot out the his­tor­i­cal buy and sell lines to see when the last buy line would have been. We don’t just go back to what­ev­er bu line makes sense, based on the cur­rent sell line, we have to go back and do the his­tor­i­cal lines.

Tony  52:04

I think so. It’s con­fus­ing me now talk­ing about it. But yeah, so the change that we made last year, which maybe threw peo­ple was that, and this was in response to some com­pa­nies like Super Cheap Auto, I think Nick Scali at the time any­way, that were going up after the COVID cough, but they were going up in a jagged sort of way. So, they were con­tin­u­ous­ly cross­ing their sell line as a sell and then going up above it and becom­ing a buy again. And so, the change that we made to the Bret­te­la­tor was to say if there’s a sell line and there’s an L2 trough below that sell line, we use that as the new L2. So, the sell line keeps, I guess, get­ting low­er, if you like. So, it’s always, it does­n’t have a trough to the right of it, which was the, which was the impor­tant point. But all the oth­er rules stayed the same. So, yes, the buy line should still fol­low the sell line, but we, we do draw a new sell line when we see a trough out­side of the cur­rent one, or to the right of the cur­rent one.

Cameron  53:02

Right. But when we’re try­ing to work out what buy line we’re using, we have to step back­wards. We have to roll the tape back­wards.

Tony  53:13

So, you’re still look­ing for a buy line fol­low­ing the sell line, if that’s what you mean. Yeah.

Cameron  53:17

Yes. So, we have to fig­ure out, okay, so we know what today’s sell line is, we have to go back and draw the pre­vi­ous sell line and then draw a buy line where H2 falls after the most recent sell event.

Tony  53:34

Look, I’m gonna hes­i­tate to agree with that, because I’m just strug­gling to get the word­ing right on this. It’s the buy line fol­lows the sell line. I think one of the out­stand­ing issues is whether it’s H2 that you need to wor­ry about being after the sell line, or whether it’s just the buy line. I think the last sort of round of con­ver­sa­tions Brett and I have had about the Bret­te­la­tor was whether we use the H2 fol­low­ing the sell line, or whether it’s just the buy line has a buy price which is above the cur­rent sell line. I don’t want to get tied up into word­ing around H2, I think this is where the prob­lem is. The basic con­cept is if we draw a new sell line and the new buy line should be drawn such that the buy line cross­es the graph, the share price graph, after that last sell line. Does that make sense? H2 may come before or dur­ing that sell peri­od.

Cameron  54:25

Okay, but the line cross­es it after the sell. The third point, if you like.

Tony  54:32

The line… I’m get­ting… let’s work through an exam­ple. This is, it’s hard for me to think about these things uni­ver­sal­ly with­out talk­ing through an exam­ple.

Cameron  54:39

I’ll tell you the one, the one where this rose late last year was, we were talk­ing about CBA.

Tony  54:45

CBA. Okay.

Cameron  54:46

Do you have it open in front of you?

Tony  54:48

I do. Yes. And CBA was def­i­nite­ly one of these exam­ples I was talk­ing about com­ing out of the COVID cough. There was a high­er sell line then there is today and then it went back­wards below that sell line, so we said let’s draw the new trough as a new L2.

Cameron  55:02

So, the cur­rent sell line, God, CBA’s gone below its sell line too, shit. CBA’s a sell.

Tony  55:03

Oh no.

Cameron  55:12

I own that. Got­ta dump that today, too. So, the way that I draw the sell line today is I’ve got, we’ve got a bit of a flat bot­tom down there from March 2020 through to Sep­tem­ber 2020. So, we’re using Sep­tem­ber 2020 as L1 and Novem­ber 2021 as L2. Agree?

Tony  55:34

Yep, I do.

Cameron  55:35

Okay. The pre­vi­ous sell line would have gone through again, Sep­tem­ber 2020, and through Feb­ru­ary 2021.

Tony  55:44

Cor­rect.

Cameron  55:45

So, when that sell line was active, the rel­e­vant sell line, it would have crossed over, would’ve become a sell using that sell line I’d say some­where around July ’21.

Tony  56:02

Yep. Sounds right.

Cameron  56:04

Okay. So, when we were talk­ing about it, like, yeah, I think in Decem­ber, I was say­ing, “so how do we, how do we draw a buy line for this, now? Because it was very hard at the time to get a buy line that fol­lowed that sell event in July ’21 and you said some­thing about, “well, it’s got a new sell line, now, because we had the L2 in Novem­ber, and so we could go back to using the buy line that start­ed in Jan­u­ary 2020 with H1 and went through Jan­u­ary ’21 as H2.”

Tony  56:41

Yeah, that looks about right to me. So, you go back look­ing for a buy line. We don’t have a buy line that comes after the sell line, so we go back to the last buy line. Which means it’s not a buy, its a sell.

Cameron  56:52

But that’s the prob­lem.

Tony  56:53

Why’s that the prob­lem?

Cameron  56:55

Oh, well. Well, because at the time, the price was above that buy line.

Tony  57:02

Oh.

Cameron  57:03

And above the sell line.

Tony  57:04

Price was above…?

Cameron  57:05

So, you were say­ing well, we just… yeah, if you go to Decem­ber ’21. So, you were say­ing it’s a buy because it’s above that buy line. But that buy line does­n’t come after the pre­vi­ous sell line. Pre­vi­ous sell line we just said would have made it a sell in July. That buy line comes before that.

Tony  57:24

Right. Okay. I can see what you’re say­ing.

Cameron  57:27

And at the time you said, I said “well hold on. The buy line does­n’t fol­low the sell line.” You said “does­n’t mat­ter. There’s a new sell line. So you just get back to the old buy line.” I was like, “but I thought the buy line had to fol­low the sell line,” and you said “no.” And so that’s the con­fu­sion.

Tony  57:42

Okay, so you can’t draw a buy line after the sell line. So, you go back to the old buy line.

Cameron  57:47

But it does­n’t come after the sell line. So, is it a valid buy line or not?

Tony  57:51

Well, I’ve always assumed it was, yeah. If you can’t draw a cur­rent buy line, you’ve got to go back to the last buy line. We had this prob­lem with Rio last year, as well. It was going up all the time, and we could­n’t draw a buy line because there was nev­er a H2. It was always H1, H1, H1 going high­er and high­er and high­er. So, like to draw a buy line for Rio, we had to go right back past five years to get a H1 with a H2.

Cameron  58:12

Which I think was also FMG last year too, which made sense because we did­n’t have a sell any­where in that peri­od, either. If there has­n’t been a sell event for sev­er­al years, going back to a buy line thats sev­er­al years old is fine. But what con­fused me then and still con­fus­es me now with this one is we have this rule that the buy line has to fol­low the sell line, but in this case, we’re say­ing well, no, because we can’t draw a new buy line. We’re just using an old buy line and that seems to break the rule. Even though, on paper, look­ing at the chart, it’s obvi­ous­ly a buy real­ly, I mean, not today, but it would have been in Decem­ber because it had been shot up from like $80 to $105 or some­thing. So, it looks like a buy, so it makes sense that we would use that buy line, but but it breaks the buy line fol­lows the sell on rule. So, there­in lies the con­fu­sion.

Tony  59:08

Sor­ry, you’re say­ing it was in July that is crossed over as a sell on your chart? That must have been after that. L2 was July, was­n’t it?

Cameron  59:15

No L2 is, was, Feb­ru­ary ’21.

Tony  59:20

Yes. Okay. And it cross­es the line there­fore cross­es in July, or a bit lat­er than that?

Cameron  59:25

July, accord­ing to Stock Doc­tor.

Tony  59:28

Yeah. Okay, July. All right. So, then if I put into the Bret­te­la­tor first of August, and it’s call­ing it a buy. It’s doing exact­ly what I said, it went back to the last buy line even though it does­n’t, there’s no buy line after the cur­rent sell. And that’s the way the code, Bret­te­la­tor code works. If it can’t get a buy line thats more, more recent than a pri­or one it goes back to the last buy line you can draw, basi­cal­ly. And it says if the price is above that, tick, and if the price is above the sell line, tick. So, CBA would have been a buy on the first of August, 2021.

Cameron  1:00:00

Okay. Which means, though, that the buy line fol­lows the sell line isn’t nec­es­sar­i­ly always true.

Tony  1:00:06

No, I guess that’s true. So, first of Sep­tem­ber it’s a sell again in the Bret­te­la­tor. So, even though it’s above the buy price, it’s, the graph crossed the sell line. So, it’s below it’s sell price and there’s no buy line after that. So, we can’t buy it. And that was, that was a thing we were work­ing with, was how do we han­dle these graphs which we can see are going up, but they’re going up in a zigzag fash­ion and keep cross­ing and then recross­ing their sell lines. And so, that’s the code we came up with, is what’s in the Bret­te­la­tor now. But yeah, there’s no buy line com­ing after the sell line for CBA. Or for any stock-or there is now.

Cameron  1:00:42

Yeah, so how do we, how do we phrase this for the folks at home try­ing to fig­ure out their own buy and sell lines? Buy line fol­lows the sell line, unless you can’t draw a new buy line in which case the last buy line is active?

Tony  1:01:01

I think I can see where the con­fu­sion is, I hope. Kin­da like it’s all mak­ing sense to me, but it’s get­ting the word­ing right I think, as you’re say­ing. So, the last sell line, as you said, was cross­ing in July and there was a buy line before that which was cross­ing much ear­li­er in the same year. It was clear­ly a sell at that stage, we could­n’t draw a buy line after the sell. So, yeah, so the first of Sep­tem­ber is a sell because that sell line you were talk­ing about is still in force. The share price is cross­ing…

Cameron  1:01:32

First of Sep­tem­ber ’21?

Tony  1:01:35

Yeah, 2021. If I put that into the Bret­te­la­tor we can see what you’re talk­ing about. So, the sell, the sec­ond to last sell line to the cut was the last sell line before the cur­rent sell line was in force, and the sell price is $103.22, accord­ing to the red line, and the share price was $101 on the first of Sep­tem­ber. So, its a sell, and we haven’t been able to buy after that, so that buy line is com­ing, yeah, its com­ing before the cur­rent sell. So, you’re right. So, we can’t draw a buy line after the sell line. The code says we go back to the buy line before that. We check to see if the price is above that. Yes. Is it above the sell price? No. So, it’s a sell.

Cameron  1:02:12

Right, and then we get to Decem­ber ’21. We’ve got a new L2 at the end of Novem­ber, so we have a new sell line, but we still can’t draw a new buy line that comes after with an H2 or any point that comes after the last sell.

Tony  1:02:30

Yeah. So, it’s still a sell though, right? Because the price first of Decem­ber was $93.88 and the sell price is $110, so it’s below that. So, yeah, we haven’t been able to draw a new buy line so its still a sell.

Cameron  1:02:43

But it’s got a new sell line.

Tony  1:02:46

Yeah, because there was a trough that came out after that. So, again, there was a trough that hap­pened after the pri­or sell line, which caused us to redraw the sell line. We can’t redraw the buy line, but it’s below the sell line.

Cameron  1:02:58

Well, it’s not below the new sell line. In Decem­ber there’s a new sell line with L2 at the end of Novem­ber. And in Decem­ber, the price was going up. So, it was above that new sell line.

Tony  1:03:12

Not accord­ing to the Bret­te­la­tor, I’ve got first, I’m using first of Decem­ber. Are you using 31st of Decem­ber, are you?

Cameron  1:03:17

Yeah, I guess I’m just look­ing at the five-year month­ly in Stock Doc­tor.

Tony  1:03:22

Yeah, so that gives us a new sell line. So, that’s actu­al­ly two sell lines after the first of Sep­tem­ber date. And it’s now a buy because the old buy line is still in place and it’s above its new sell line.

Cameron  1:03:37

Right, but that all buy line, again, does­n’t come after the old sell line. Yeah.

Tony  1:03:45

Yeah, no, you’re right. So, there’s, so we need new word­ing. It’s cer­tain­ly how the Bret­te­la­tor works.

Cameron  1:03:52

But does that mean the Bret­te­la­tor’s right though?

Tony  1:03:54

I think it is, yeah.

Cameron  1:03:56

Bret­te­la­tor only works based on what you told it. But yeah. Makes sense if I look at it on a graph, if instinc­tive­ly I go “well, yeah, would have been a buy then.” But, I don’t know when to break the buy line fol­lows the sell line rule.

Tony  1:04:09

Yeah. So, it’s got to be if you can’t draw a new buy line you go back to the old buy line.

Cameron  1:04:14

If you can’t draw a new buy line, you go back to the old buy line.

Tony  1:04:19

Yeah, so we have I guess a cou­ple of inter­sect­ing rules here in the code. So, the the code for the Bret­te­la­tor says if I can’t draw, go back to when I can draw the most recent buy line. For­get about with it comes after a sell line. And that’s what it’s doing. And that gives us a buy line on, well, as at 31st of Decem­ber it gives us a buy price of $83.77, which was way back in Feb­ru­ary ’21. So, it’s been in force for a long time. What’s been stop­ping us from buy­ing it is that it’s been below its sell line as well, which has been much steep­er. And then, because we can draw that new low point in Novem­ber 21, the sell line drops to that and it becomes a buy again.

Cameron  1:04:57

So, for the folks lis­ten­ing at home, our draft word­ing is “if you can’t draw a new buy line, use the old buy line even if it does­n’t come after the last sell event.”

Tony  1:05:08

Yeah. You’re a bet­ter word smith than me. I’d say use the Bret­te­la­tor.

Cameron  1:05:13

Well, yeah, but it does­n’t, we know the Bret­te­la­tor does­n’t work for 50% of the stocks that we’re look­ing at from Google Finance lim­i­ta­tions under 50 cents, etc., etc. So, at least half the time we have to draw our own lines.

Tony  1:05:26

Yeah, okay, fair enough. But that’s what’s hap­pen­ing, so it’s always try­ing to draw a new, the lat­est sell line and the lat­est buy line, and then look­ing for the price being above both of those two things. I’m just try­ing to think where we got to with the buy price fol­low­ing the sell price. I can’t remem­ber what the rea­son­ing for that was. But as you say, it’s not, it’s not apply­ing in this case.

Cameron  1:05:47

Okay. Well, that’ll do for now. Ange, I hope that helps a lit­tle bit. I guess we’ll, if we come up with exam­ples over the next com­ing months where these things con­tin­ue to not work, we can sort of adjust the word­ing as we go.

Tony  1:06:04

Yeah, look, I appre­ci­ate that. Like I said, I’m sor­ry if it’s con­fus­ing. It’s obvi­ous­ly, get­ting the word­ing rights impor­tant, but I haven’t real­ly focused on it, I’ve just focused on get­ting the cod­ing right in the Bret­te­la­tor.

Cameron  1:06:13

And well, as I point­ed out to peo­ple in a recent episode, last time we touched on this, like in the three years that we’ve been doing the show, I don’t think, I mean, this has nev­er come up before. So, there are always new things that come up, and it’s not like you had a set of rules that were giv­en to you on Mount Olym­pus by the gods. You’re kind of try­ing to work this out as you go and put word­ing around stuff that you’ve been doing instinc­tive­ly for 30 years, so.

Tony  1:06:39

Cor­rect. And that’s the hard thing, yeah, it’s instinc­tive to me but try­ing to cod­i­fy it is the hard thing. And I think the, like I said, it was this change has come about because of the COVID cough. What hap­pened to share prices after the COVID cough is pret­ty rare, I haven’t seen such a steep rise across the board so quick­ly. And that was, when we had the old rules in place, that was play­ing hav­oc with the lines. We were, you know, sort of miss­ing out on stocks that were going up just because they hap­pened to zigzag from month to month. So, we made a new rule change to it.

Cameron  1:07:10

And it’s, yeah, so rare, rare cir­cum­stances, but bear with us. We’ll try and work it out as we go.

Tony  1:07:18

We’ll get the word­ing right, sor­ry Ange.

Cameron  1:07:19

Max says “hi Tony, KR M is up 90% since I got on,”

Tony  1:07:24

Yay.

Cameron  1:07:25

I won­der if it still is.

Tony  1:07:26

He owes us a beer.

Cameron  1:07:27

I don’t think so, I saw KRMs share price today, it’s plum­met­ed. Well, it’s still up a big way since when we put it on our stock tip of the week. “KRM is up 90% since I got on but there does­n’t appear to be any jus­ti­fi­ca­tion for such a big jump. They’ve since come out say­ing they found a new gold ten­e­ment just before report­ing sea­son which is an old trick used when earn­ings don’t match the price. We use 3PTL as our sell, but if their earn­ings are that poor it may drop more than 20% on release, which would be good to avoid. Do you have any oth­er tips regard­ing sell­ing in this sce­nario? The com­pa­ny has been great, it’s just the tim­ing of the release that has me con­cerned. Also, MQG has dropped sig­nif­i­cant­ly in recent days due to upcom­ing inter­est rate ris­es and low­er than expect­ed earn­ings so insid­ers are jump­ing off.” Let’s start with KRM, got any tips on how to avoid bad news?

Tony  1:08:22

No, I don’t sor­ry, I haven’t come across min­ers releas­ing new ten­e­ments to hide poor results, but I’ll take Max’s word for it. It sounds like it might be a way of drum­ming up some good pub­lic­i­ty before bad results, so no I don’t. KRM is still above its sell line, so I’d be hold­ing it for that or rule 1ing it if Max needs to. But, well, a cou­ple of oth­er points. Yes, it’s nev­er great see­ing stocks turn down into report­ing sea­son, but again, I haven’t got rules around that. Like, I’ve, in the past I’ve done things like if a stock is going down into report­ing sea­son, sell it, but then the mar­kets got it wrong and it comes out with a good result and you miss out on that retrace­ment. So, yeah, I don’t have any rules for this. I think if Max is feel­ing uncom­fort­able, then cer­tain­ly sell it, don’t hold it, don’t lose sleep over it, you had a good run. Take some prof­its. But then don’t get upset if it turns around and puts in a good result and you miss out on the upside. But I cer­tain­ly don’t have any rules around what to do in this sit­u­a­tion except focus on how good it’s been.

Cameron  1:09:23

Nev­er look back, you taught me that.

Tony  1:09:26

Yeah, that’s right.

Cameron  1:09:27

I nev­er look back, I nev­er check stocks after I sell them. Their dead to me until the next time they turn up on my list.

Tony  1:09:35

As for MQG, MQG is, is cer­tain­ly a stock that will have prob­lems with inter­est rates ris­ing, not because of val­u­a­tion issues, but because it now has a very large infra­struc­ture busi­ness. So, Mac­quar­ie Bank and then Mac­quar­ie group has evolved over the years and it used to be a bit of a invest­ment bank and a retail bank, I guess, for a while. A stock bro­ker­age way back in the, in the 80s. And it just finds new busi­ness­es to invest in and gives them the cap­i­tal to grow, and now is prob­a­bly one of the biggest infra­struc­ture man­agers in the world. So, why is that inter­est rate sen­si­tive? Because they bor­row lots to fund toll roads, bridges with tolls on them, any oth­er sort of infra­struc­ture. I think maybe air­ports, maybe docks, not too sure about those. But cer­tain­ly, things like toll roads and bridges require lots of debt fund­ing, and so as inter­est rates rise, unless they can back to back that rise in what they charge their con­sumers, which is always hard but it can be done, they’ll suf­fer. So, that’s prob­a­bly the rea­son why I think Mac­quar­ie group has gone down recent­ly. Could also just be part of the sell­off of the mar­ket. But I think that would be the rea­son.

Cameron  1:10:43

I’m just try­ing to get the Bret­te­la­tor to work so I can see whether or not MQG is a sell. Look­ing at it on Stock Doc­tor, it’s very close. It’s like, right on it.

Tony  1:10:55

It’s get­ting close. It’s get­ting close, yeah.

Cameron  1:10:59

That’s a shame.

Tony  1:11:00

It’s three cents off a sell on the Bret­te­la­tor. Its sell price is $182 and the cur­rent price is $185 in change. So, it’s get­ting close. Yeah.

Cameron  1:11:10

Oh, that’s anoth­er one I’m gonna have to get rid of.

Tony  1:11:14

Quite pos­si­bly.

Cameron  1:11:16

It was doing well there too, recent­ly. It was up, like, 5–10% in the last cou­ple of weeks.

Tony  1:11:23

Yeah, it was. Yeah. So, hope­ful­ly, we don’t have to sell it but we’ll see.

Cameron  1:11:26

Alright, lis­ten, I’ve got one more late ques­tion. I know we’re going long though. It’s a quick one. Do you want to have a crack at it, or? It’s just about mar­ket val­ue.

Tony  1:11:35

Sure.

Cameron  1:11:36

Just came in late from Ben. He says “hi Cam and Tony, love the show. A few times I’ve seen a cer­tain share price and then when I’ve bought it it’s risen a few cents in my invoice in com­par­i­son to the share price at the time. This isn’t includ­ing bro­ker­age fee. Tony has touched on this issue to be care­ful when buy­ing shares at mar­ket val­ue. I’ve tried buy­ing shares at a cer­tain val­ue, but I haven’t been suc­cess­ful. The offers have sat there in my Comm­Sec account, and I see the price is going up. So, to avoid miss­ing out, I’ve just delet­ed the offer and returned to buy­ing at mar­ket val­ue. Would Tony mind sug­gest­ing the best way to buy shares alter­na­tive to buy­ing at mar­ket, in par­tic­u­lar for a stock where the price is on the move? Thanks, gents. Take care dur­ing this rocky peri­od as well as sil­ly sea­son upon us. Cheers, Ben.”

Tony  1:12:19

Okay, Ben, well, I buy every­thing at mar­ket and that’s large­ly because it’s much eas­i­er for me to deal with my stock bro­ker with the amounts I’m using to do it at mar­ket. I have the same issue you do. I’ll fac­tor into my cal­cu­la­tion of how much to buy a cer­tain price and invari­ably the price comes back a few cents more than that, often not, not a whole lot more. That’s just real­ly the, if you think about it, what hap­pens when you meet the mar­ket. So, if you have, let’s, let’s pick Mac­quar­ie group. So, at the moment, the last shares trad­ed at $182. So, there are going to be peo­ple who want to buy at $181 and peo­ple who want to sell it at $183. And when some­one goes at mar­ket, those two things meet. So, it’ll prob­a­bly be some­where in the mid­dle of those two bids and sells. And so that’s why it’s a usu­al­ly a cou­ple of cents high­er or a cou­ple cents low­er if you’re sell­ing than what you’re see­ing on the screen, because of that, you know, set­tling in the mid­dle that occurs with­in that mar­ket trade. Occa­sion­al­ly, very occa­sion­al­ly in the past, I’ve used the price lim­it. But, like you, that can take days and weeks to exe­cute a trade and lots of toing and fro­ing on chang­ing prices and the rest of it. So, yeah, all my trades are at mar­ket. I can’t real­ly help you, sor­ry, Ben.

Cameron  1:13:34

Yeah, some­body post­ed in the forum a while back some­thing that helped me. Just look­ing at the spread, real­is­ing that the price that you see when you’re look­ing at the price is real­ly just the clos­ing price, or the…

Tony  1:13:48

Or the last trade.

Cameron  1:13:49

The last trade, yeah. But when you look at the spread of what peo­ple are will­ing to buy and sell at, there’s always a big range. When you go in at mar­ket, the trench of shares that were avail­able at that price may have been gone by the time you get in there and you’re get­ting the next best deal. Yeah, I stopped wor­ry­ing about it.

Tony  1:14:08

Yeah, very much so, I agree. Espe­cial­ly for liq­uid stocks. It might be a bit dif­fer­ent if it’s a real­ly small cap illiq­uid stock, you can move the mar­ket around, but for big liq­uid stocks just exe­cute, I exe­cute at mar­ket.

Cameron  1:14:19

And if it’s a stock, I mean, that where a cou­ple of cents is going to matter/make a big dif­fer­ence between whether or not you buy it or don’t buy it, maybe don’t buy that stock. Like if a cou­ple of cents move­ments going to make a big dif­fer­ence to you then buy some­thing else, maybe.

Tony  1:14:35

Good point, Cam. If you like Mac­quar­ie group, if it keeps drop­ping and it’s only a few cents above its sell price and you put that mar­ket order in, you don’t want to buy it and then have to sell it straight away. So, just be care­ful of that.

Cameron  1:14:46

After hours. I’ve been read­ing Three Crooked Kings by Matthew Con­don. You ever read that?

Tony  1:14:53

I haven’t, no. Matthew Con­don the jour­nal­ist?

Cameron  1:14:57

Yes, it’s the sto­ry of Ter­ry Lewis and the cor­rupt Queens­land Police Force and politi­cians in the good old days. It came out in 2013, so it’s not new, but I was hav­ing a con­ver­sa­tion with some­body recent­ly about this and realised I did­n’t real­ly know a lot about that sto­ry. So, I’ve been drilling into that. The cor­rupt cops of Queens­land, fas­ci­nat­ing stuff.

Tony  1:15:23

Yeah, lived through it all. It was a crazy time. I love Ter­ry Lewis’s clas­sic line when he’s in the doc and said, he was asked “how did he make so much mon­ey?” He said, “I’m a very good punter.”

Cameron  1:15:36

For peo­ple out­side of Queens­land, it’s you know, there was this whole, I think it start­ed with the death of a madam, the whole thing that fell apart. Yeah, Shirley Brif­man. The blurb for the book says “the shock­ing True Sto­ry of Queens­land and how soci­ety was shaped by almost a half a cen­tu­ry of cor­rup­tion at its core as Ter­ence Mur­ray Lewis deposed and jailed for­mer police com­mis­sion­er. From his entry into the force in 1949, Lewis rose through the ranks becom­ing part of the so called Rat Pack with detec­tives Glen­don Patrick Calla­han and Tony Mur­phy, under the guid­ing influ­ence of Com­mis­sion­er Frank Bischof. The next four decades make for a sear­ing tale of cops and killings, bag men and black­mail, and sin and sleaze that expos­es a police under­world, which oper­at­ed from Queens­land and into New South Wales. This grip­ping book expos­es the final pieces of the puz­zle, unearths new evi­dence on cold cas­es and explores the piv­otal role that whis­tle-blow­er Shirley Brif­man, pros­ti­tute and broth­el own­er, played until her sud­den death.” So, good stuff.

Tony  1:16:43

Wow. Yeah, it was a tumul­tuous time, all right. There were ille­gal casi­nos where every­one knew where they were. You had the whole Bjelke-Peter­son dimen­sion to it and Russ Hinze and all of that, too. So inter­est­ing. Have you ever seen that-it’s not Queens­land relat­ed, it’s New South Wales relat­ed, but sim­i­lar sort of thing? Have you seen Blue Mur­der, the series that Richard Rox­burgh sort of made him a bit of a name?

Cameron  1:17:09

Ah, loved it. I’ve watched it twice over the years. When it first came out, when­ev­er that was. It was fair­ly ear­ly days. And I recall like, like we’re used to that kind of grit­ty, vio­lent tele­vi­sion now, but it was very ear­ly on they did that. I remem­ber it just being bru­tal com­pared to most stuff on TV back in the day.

Tony  1:17:29

Yeah, sim­i­lar sort of sto­ry, yeah. Cor­rupt cops. Who’­da thought?

Cameron  1:17:34

What have you been doing for enter­tain­ment by your­self down there with­out your fam­i­ly?

Tony  1:17:40

Yeah, just, well play­ing a lot of golf which has been great. So, Bil­lions has start­ed up again. The lat­est series they’re releas­ing episodes by week. So, that’s worth watch­ing, I enjoy Bil­lions. Although, like a lot of these things, it’s, it’s a soap opera set in the world of high finance in New York, but it’s been lots of fun along the way. And I’ve gone back to House of Cards, so, I decid­ed I was going to clear out my Net­flix list that I’ve had sit­ting there for years and had­n’t got­ten around to watch­ing and been going back to sea­son three of House of Cards, which is, it’s amaz­ing how much con­tent they pro­duced. Its tak­ing me ages to go through the sea­sons. And I’ve still got a cou­ple to go.

Cameron  1:18:19

This is the US ver­sion, not the UK ver­sion?

Tony  1:18:22

Yes. I remem­ber see­ing the UK ver­sion when I was a kid, but the US ver­sion def­i­nite­ly, the Kevin Spacey can­cel cul­ture event in the end…

Cameron  1:18:33

Yeah, the series kind of, just kind of evap­o­rat­ed into noth­ing after they had to get rid of him. But I tell you what, I rewatched the UK ver­sion after the first US sea­son, I think, and I got a tell you, I think the British sea­son, British ver­sion, is bet­ter. Stands up, is real­ly great. Very, very obvi­ous­ly Shake­speare­an and yeah, real­ly well done.

Tony  1:19:00

Fran­cis Urquhart with his “f you” cuf­flinks.

Cameron  1:19:04

Yeah.

Tony  1:19:05

Yeah, it was good. And Stings wife I think was in it. Or not Stings wife, who’s the, Knopfler’s wife was in it.

Cameron  1:19:11

Oh, okay. And you’ve had Wor­dle down on your after-hours list for the last cou­ple of weeks. What? What’s up with Wor­dle?

Tony  1:19:19

Do you know what it is?

Cameron  1:19:20

I read an arti­cle about it, how it’s tak­ing the world by storm after I saw you put it on there. And I was like, what is it? Like a, like a Scrab­ble thing? What is it?

Tony  1:19:29

Like yeah, sort of. I get up every morn­ing and do it, Jen­ny put me onto it. So, it’s an inter­est­ing web­site. Like there’s no ads, there’s no sub­scrip­tion, you just click on it. And then every day you get a new puz­zle to solve. And it’s five let­ters, you have to enter five let­ters, and then it will tell you which let­ters occur in the word it’s think­ing of and you have to guess what it is by putting in anoth­er word, and it will tell you which let­ters of those in that word are in the one it’s think­ing of and you’ve got to try and do it in at least, with the least num­ber of goes. And then it just locks you out for 24 hours and you get anoth­er go the next day. So, its, yeah, you get up, I get up every day and do it. It’s a lot of fun.

Cameron  1:20:06

I read that some guy devel­oped it for his girl­friend or his part­ner or his friend or some­thing just as a, some sort of COVID dis­trac­tion for them, and it sort of blew up and it’s become this glob­al phe­nom­e­non.

Tony  1:20:19

Yeah, it’s, it’s nice to wake up to in the morn­ings, to the new Wor­dle that comes onto your phone.

Cameron  1:20:24

Alrighty, then. Well, that’s the show for this week. Thank you, Tony. When do you head back to Syd­ney? Do you know yet?

Tony  1:20:32

Oh, anoth­er week at least. I’m just wait­ing to hear about some ren­o­va­tions that are hap­pen­ing up there. They were sup­posed to have start­ed by now, but there’s been some hold ups. So, they’re meant to fin­ish at the end of next week, they’re not big ones, but after that. So, prob­a­bly anoth­er two weeks, maybe.

Cameron  1:20:46

Right. Okay, good stuff.

Tony  1:20:48

Jen­ny and I were talk­ing today and she said don’t come back. There’s COVID in the apart­ment block, there’s peo­ple, young peo­ple in groups walk­ing around with­out marks on. It’s just, yeah, very dis­tract­ing. And down here’s par­adise. I went and played golf yes­ter­day — so The Nation­al has a fourth golf course clos­er to Mel­bourne, its about an hour’s dri­ve from here back up in north Frankston which is a very dif­fer­ent course. These cours­es down here are buf­fet­ed by winds and there a cou­ple of links cours­es and a hills course. And then the Long Island course in Frankston is more of a sand belt type of course. I went and played it yes­ter­day and I had the whole course to myself, it was real­ly great. It was a beau­ti­ful­ly kept course, I had­n’t played it in about five years. And then I got off the course and one of the staff mem­bers came out of the pro shop to have a chat, and we’re both sit­ting there with our masks, and he said “how was it?” And I said “oh, just fan­tas­tic” and he said, “I’m real­ly sur­prised you got round,” and I said “why’s that?” He said “look, it’s 35 degrees” so it was just real­ly hot. I was wilt­ing on the last cou­ple of holes, but gee it was nice. It was just so, so good to go for a long walk on a beau­ti­ful golf course. It was love­ly.

Cameron  1:21:51

No one to see you when you pick your ball up out of the rough and throw it back on the green and tap it in the hole.

Tony  1:21:58

True. Well that’s the beau­ty about golf, you have to self-report. Again, it’s, it’s a reveal­er of your per­son­al­i­ty, your char­ac­ter. I play with some CEOs who can’t add up, that’s for sure. All right,

Cameron  1:22:13

Thank you mate. Have a good week.

Tony  1:22:15

Thanks Cam. Okay, you too. Bye.

Cameron  1:22:20

The QAV Pod­cast is a pro­duc­tion of space craft pub­lish­ing Pro­pri­etary Lim­it­ed autho­rised rep­re­sen­ta­tive of AFSL 520442 AFS rep­re­sen­ta­tive num­ber 001292718. Please don’t make any invest­ment deci­sions based sole­ly on lis­ten­ing to this pod­cast. This is pre­sent­ed as gen­er­al advice only not per­son­al finan­cial advice. We don’t know your per­son­al finan­cial cir­cum­stances. Please see a finan­cial plan­ner before mak­ing any invest­ing deci­sions.