Transcript #545

QAV 545 CLUB

Cameron  00:06

Wel­come back to QAV, TK. This is episode 545. This is Tues­day the 15th of Novem­ber. We’re record­ing this at 8:40am Bris­bane time, 9:40am Cape Schanck time, because we have a spe­cial guest we’re going to do an inter­view with a lit­tle bit lat­er on this morn­ing which will come out in an episode in a cou­ple of weeks. That aside, how’s it going down at Cape Schanck, TK?

Tony  00:33

It’s very wet at the moment, Cam, I’m leav­ing today. Pack­ing up. So, it’s been busy over the last day or so. It’s always a busy time clean­ing the place and mak­ing sure it’s all ship-shape for the next per­son — which is usu­al­ly me. Yeah, that’s how I want peo­ple to treat it.

Cameron  00:51

Leav­ing it ship-shape for future Tony.

Tony  00:53

That’s right. But no, it’s been rain­ing heav­i­ly. We had flood­ing down here on Sun­day night/Monday morn­ing.

Cameron  00:59

Wow. That’s no good. So, no golf then? Or do you play any­way? You’d be out there in a boat.

Tony  01:06

No, I actu­al­ly got to play on Sun­day after­noon, which was good, but very windy. And then the storm blew in about mid­night. That was my last round. I could have gone out last night, but I fig­ured I did­n’t want to pack wet clubs, so I did­n’t do it.

Cameron  01:20

Well, that’s no good, Tony, but you’ll be back down at some stage, I guess? You’ll be back down over Christ­mas.

Tony  01:27

Yeah, back down in Decem­ber. I’m only back up in Syd­ney for a cou­ple of weeks.

Cameron  01:31

Great. How was the Mel­bourne dinner/drinks night you did last week with­out me?

Tony  01:38

Oh, not as good as if you were there.

Cameron  01:40

Sure, sure. Had a good time?

Tony  01:42

Yeah, I did. It was great catch­ing up with them. A cou­ple new faces, which was nice, and the old faces which are good, too. A few inter­est­ing dis­cus­sions. There was a request for a QAV fund to be set up, which I thought was inter­est­ing. It was actu­al­ly good, because we sat around the table and talked, and often­times at the din­ners we sort of break up into lit­tle groups, but we stayed as a big group. And some­one said, you know, “what were your thoughts of when you start­ed QAV?” And I said, “well, you know, I said to Cam, ‘why would peo­ple keep sub­scrib­ing once they’ve got a grip on how to do a down­load and man­age their own invest­ments?’ I’m sur­prised that peo­ple still are three and a bit years lat­er.” And one of the guys piped up and said, “yeah, but it’s a bit like hav­ing a per­son­al train­er.” That’s why they sub­scribe. It’s like a per­son­al finan­cial train­er. So, you get to go through all the mar­ket cycles and stay part of the group, which I thought was a good anal­o­gy.

Cameron  02:34

Except we don’t give per­son­al advice, let’s just be very clear about that in case ASIC are lis­ten­ing.

Tony  02:40

Yeah, it’s a gen­er­al finan­cial advi­sor.

Cameron  02:42

So, you’re like a per­son­al train­er that’s not so per­son­al. More like a Tik­Tok per­son­al train­er that’s just say­ing “sit ups are good for your abs, just do lots of sit ups.” And you go “sit ups? Right. Yeah. Okay, good. Thanks for the reminder.”

Tony  02:53

I guess so, yeah. Pulled porks were pop­u­lar, espe­cial­ly the one last week on Dal­rym­ple Bay. The feed­back was they found a lot inter­est­ing in that, so that was good. There was a bit of a dis­cus­sion on super­an­nu­a­tion because the gov­ern­men­t’s start­ing its “con­ver­sa­tion”, which seems to be the way they start all their agen­das these days, on whether the tax ben­e­fits on large Super bal­ances should be with­drawn. And so, they’re dis­cussing the pur­pose of Super. My thoughts on that were it’s fine to take away the gen­er­ous tax ben­e­fits for large Super bal­ances, I don’t have a prob­lem with that per se, but you’ve got to be able to do it in such a way that the peo­ple who set up their finances have a chance to either pull them out of Super and put them to use some in some oth­er means before the changes take place, or you grand­fa­ther it. Because one of the prob­lems with tin­ker­ing with Super is every time you change the rules, it gives peo­ple less and less moti­va­tion to lock up their mon­ey for the rest of their life in Super because the rules are going to change. So, I think it’s fine to tin­ker with it, no sys­tem is per­fect, but I think you’ve got to think about the peo­ple who struc­tured their lives in such a way that they’ve locked up all this mon­ey in Super and now it’s gonna get taxed when they did­n’t think it would be

Cameron  04:07

Yeah, true. I agree with all of that. Good, I’m glad the event went well, and thanks again to Andy for mak­ing his place avail­able for us down there. Makes life a lot eas­i­er and it’s a bet­ter envi­ron­ment, I think, by the sounds of it for a social get togeth­er.

Tony  04:27

He was a great host; it was real­ly good.

Cameron  04:29

All right. Well, there’s some stuff in the news this week that I want­ed to get your thoughts on, Tony. The first one I have here is from Mar­ket­Watch: “Bit­coin own­ers are bel­ly aching about its plunge, but the dig­i­tal cur­ren­cies volatil­i­ty is no more extreme than that of stocks.” I was like, wow, well Bit­coin is down 65% in the last year, our port­fo­lio’s not down 65%. But I guess maybe there’s an index that you know of that’s down that much? Let’s say a year ago, Bit­coin was trad­ing at about $90,000 — Aussie, that is — now its trad­ing at about $24,000. That’s a 70% decline rough­ly in a year?

Tony  05:20

Depends which stocks you’re talk­ing about. The NAS­DAQ’s down quite a bit this year. But yeah, the stocks we invest in don’t tend to be that volatile.

Cameron  05:27

You know what, the NASDAQ a year ago was trad­ing at $70 USD, $70.66. It’s cur­rent­ly trad­ing at $66.40 USD.

Tony  05:38

NASDAQ? $70 USD?

Cameron  05:40

Yeah.

Tony  05:41

Would­n’t it be $70,000?

Cameron  05:43

Well, no. $70.66. That’s what it says on NDAQ on my lit­tle stock tick­er. Any­way, point being that it’s not down that much. It was down in May, it was down at $47, but it’s recov­ered. So, it’s down about 10%, I’d say, over the course of the year ver­sus Bit­coin, down 70%. Dow Jones over the last year, Dow Jones was $36,100.

Tony  06:09

Sor­ry, let me stop you. You’re look­ing at NASDAQ the com­pa­ny.

Cameron  06:12

Yeah, yeah.

Tony  06:13

I’m talk­ing the NASDAQ index.

Cameron  06:15

Does­n’t that track the index?

Tony  06:17

No, I think it’s the com­pa­ny that runs the index. It’s like the ASX com­pa­ny here.

Cameron  06:23

Why do I have that in my stock tick­er? How do I get NASDAQ the index in here?

Tony  06:28

I don’t know. But NASDAQ the index a year ago was at $16,000, and now it’s down to $11, 100.

Cameron  06:36

Okay, what’s that?

Tony  06:37

It’s lost $5000, so about 35/40%. So, just down 30% In the last year, sor­ry.

Cameron  06:46

Right. Well, it’s still not as bad as Bit­coin. Dow Jones was at $36,000 a year ago, now it’s $33,000. So, it’s down about 10%.

Tony  06:56

Did you see the front page of the Fin Review today? There’s anoth­er cryp­to… What do you call them? Coin­base or exchange? Has fold­ed in in Sin­ga­pore.

Cameron  07:06

No. I did­n’t see that. Yeah, right. Well, the thing that got my atten­tion about this arti­cle by a guy called Mark Hol­bert in Mar­ket Watch, the sub­head­ing, the sub­ti­tle says, “Bit­coin is cur­rent­ly trad­ing at 33% dis­count to fair val­ue.” I was like, whoa, real­ly? There’s a fair val­ue for Bit­coin? How?  Tell me more, tell me more. The arti­cle says, “some Bit­coin own­ers are com­plain­ing about the cru­el and unfair twists of fate that have led the cryp­tocur­ren­cy to plunge in recent days. In a five-day peri­od from last week­end to its Wednes­day low, Bit­coin fell near­ly 30%. That came on top of the huge loss it had suf­fered in the pre­vi­ous year.” And then it goes on, “…but as big as those loss­es have been, Bit­coin enthu­si­asts need to stop their bel­ly aching. They say they want Bit­coin along with oth­er cryp­tocur­ren­cies to mature into a full-fledged asset class as opposed to a basic cur­ren­cy, but if so, they must accept the inevitabil­i­ty that it will trade well above or below fair val­ue. Wide as Bit­coins devi­a­tions have been, they’ve been no more extreme than those of the S&P 500 SPX or gold GC00.” Well, as we’ve just seen, they’re a bit big­ger than the NASDAQ and Dow Jones. But to con­tin­ue…

Tony  08:25

I think what they’re say­ing is in any par­tic­u­lar peri­od, you can com­pare it. So, like the mark mar­ket crash of 1930 would have been a huge drop in the Dow.

Cameron  08:33

Right. “To reach those con­clu­sions, I relied on the only Bit­coin val­u­a­tion mod­el of which I’m aware,” I was like, oh, yes, that sounds inter­est­ing. Please tell me.

Tony  08:43

An IV for Bit­coin.

Cameron  08:44

Yeah, because that’s what we’ve been ask­ing peo­ple for near­ly four years we’ve been doing this show, when­ev­er there’s a Bit­coin advo­cate talk­ing to us. We’re like, “tell us how you val­ue a sin­gle coin.” And then it’s like, get ready for an hour of ram­bling, usu­al­ly, with lots of words like “stor­er of val­ue” and like, real­ly, what val­ue is it stor­ing?

Tony  09:08

Who does the medi­a­tion dis­trib­uted finances?

Cameron  09:10

Yeah, and then some­thing about the Reserve Bank and the future of cur­ren­cy. “To reach those con­clu­sions, I rely on the only Bit­coin val­u­a­tion mod­el which bases bit­coins fair val­ue on some­thing called Met­calfe’s Law, a for­mal­i­sa­tion of what’s known as a net­work effect. This effect exists when the val­ue of a net­work grows along with the num­ber of users. The Met­calfe’s Law ver­sion holds that this val­ue is pro­por­tion­al to the square of the num­ber of users. Claude Erb, a for­mer com­modi­ties Port­fo­lio Man­ag­er at TCW Group, is the ana­lyst who has applied Met­calfe’s law to Bit­coin. He assumes that every Bit­coin that has been mined rep­re­sents one user in the net­work. The accom­pa­ny­ing chart below plots Bit­coin’s actu­al price since 2010 along­side the esti­mate of Erbs mod­el,” and he says, “it’s a remark­ably close fit” and it is. He says, “cur­rent­ly the mod­el cal­cu­lates Bit­coin’s fair val­ue to be around $26,100, sig­nif­i­cant­ly high­er than its cur­rent price in the mid $17,000s.” So, I’m not sure I’m buy­ing this, Tony. I remem­ber the good old dot­com days in the 90s when every­thing was val­ued based on Met­calfe’s Law. It did­n’t work out real­ly well in the 90s.

Tony  10:23

We’re worth mil­lions, Cam, if you square the num­ber of sub­scribers we have.

Cameron  10:27

Well, I think you’re already worth mil­lions, Tony. If you’re going to share it, then we’re both worth mil­lions, true. I’m not sure I’m gonna try and sell that. Well, maybe we should just IPO QAV and say, “look, based on Met­calfe’s law…”

Tony  10:40

So, which judge hands out these laws?

Cameron  10:45

The oth­er way of inter­pret­ing this, call me crazy, call me stu­pid, is that the more peo­ple min­ing coins, the more peo­ple buy­ing coins, the more the val­ue is going to go up. That sort of makes sense. So, the price to peo­ple, not the val­ue, the price is going to go up, the more peo­ple that are com­pet­ing to buy a lim­it­ed num­ber of coins. What I don’t work out with this graph that he’s done, how do you apply the val­ue of a coin? Is it the entire val­ue of all bit­coins trad­ed divid­ed by the num­ber of coins mined, and there­fore that’s the val­ue of a coin? That’s the price of a coin, but how do you deter­mine the val­ue? We always say, I don’t know who we quote, is it Hue or one of these guys, or Mont­gomery, maybe: there’s a big dif­fer­ence between val­ue and price. Val­ue and price are two dif­fer­ent things. I think it’s a Roger Mont­gomery quote.

Tony  11:37

The quote comes from Ben­jamin Gra­ham, and its “price is what you pay, and val­ue is what you get.”

Cameron  11:42

What you get, yeah. So, I under­stand this mod­el is demon­strat­ing a rela­tion­ship between the amount of coins mined and the price of Bit­coin, but I’m not sure how you trans­late that into the val­ue. I saw Chris, a friend of mine, ex-Uber exec, post­ed on Face­book yes­ter­day. He’s been a big Bit­coin cryp­to advo­cate for years, and he said some­thing about, you know, “you’ve got to under­stand that it’s about stored val­ue.” And I’m like, real­ly? Like where is the val­ue stored? Like, if I get a Bit­coin and I crack it open, is there some­thing of val­ue or gold inside there or some­thing? Or, you know, even some food, some­thing I can eat? Like, I don’t get it. I hon­est­ly don’t get where the val­ue is being stored in this. Do you have a bet­ter under­stand­ing? You’re way smarter than I am. Can you work this out?

Tony  12:35

I’m not sure about that. No, and I thought Bit­coin halved ear­li­er this year. Don’t they, every cou­ple of years, halve the num­ber of Bit­coins in cir­cu­la­tion?

Cameron  12:44

Yeah, they do.

Tony  12:46

So, does the val­ue halve? The val­ue goes up when that hap­pens. How can there be a link between the num­ber of Bit­coins and the val­ue?

Cameron  12:54

I don’t know, its Bit­coin maths, Tony.

Tony  12:59

I’m not an expert on Met­calfe’s Law. I mean, I have heard of the Net­work Effect, and it does make sense to me. I’m not sure it’s a law of physics, but maybe there is some­one in social sci­ences who can tell us that if you have enough peo­ple sit­ting in a cir­cle, and they’re each pay­ing x per­son a dol­lar, you can put a val­ue on the cir­cle. But it does­n’t real­ly obey the laws of physics, I don’t think, or val­u­a­tion, real­ly.

Cameron  13:23

Well, I could­n’t make any sense of it. Speak­ing of things I can’t make sense of: Twit­ter. I get to laugh at all the peo­ple that say, “Twit­ter’s now a dump­ster fire since Elon Musk bought it.” I’m like, real­ly? Have you been on Twit­ter in the last ten years?

Tony  13:37

I stopped using it a long time ago.

Cameron  13:38

Yeah, I was one of the ear­ly adopters of Twit­ter back in 2006/2007 when it came out, and I was very active on it for a cou­ple of years. Did you ever see the thing I tried to get off the ground, “The Twit­ter­ies.” The Twit­ter short sto­ries.

Tony  13:54

No.

Cameron  13:55

Very ear­ly days of Twit­ter, I tried to get a new form of lit­er­a­ture where it would be writ­ten tweet by tweet by a group of peo­ple. So, a group of peo­ple would sign up on a forum that I had called Twit­ter­ies: Twit­ter short sto­ries, and, you know, I would write the first line and then the next per­son in line had to write the next line, and then the next per­son had to write the next line. I was try­ing to see what kind of sto­ries would emerge if peo­ple were lim­it­ed to a hun­dred and six­ty char­ac­ters or what­ev­er it was at the time, hun­dred and eighty char­ac­ters, that you had to write a line of the sto­ry. But what I found was, you know, the first twen­ty peo­ple would take it seri­ous­ly and some­thing real­ly inter­est­ing would be start­ing to emerge and then the inevitable per­son would be like, “and then some­body came along with an atom bomb and just blew them all up. The end.” There was always one that had to come in and just…

Tony  14:43

Dump­ster fire.

Cameron  14:43

Yeah. But I gave up on Twit­ter a long time ago. It’s a dump­ster fire. I don’t know what you’d call what Elon Musk is doing with it, but it’s so much fun to watch. As I’m sure every­one has heard, he came up with this new ver­i­fi­ca­tion sys­tem. Ver­i­fi­ca­tion, I don’t know how much you’ve paid atten­tion to this, but for the younger gen­er­a­tion — like Hunter and Tay­lor’s gen­er­a­tion — ver­i­fi­ca­tion is a big deal. Tay­lor’s jumped through so many hoops in the last year or two to try and get him­self ver­i­fied, and all of his tal­ent that he man­ages ver­i­fied on Insta­gram and Snapchat, and Twit­ter and Face­book and all this kind of stuff. And I’m always like, “who cares?” He goes, “when you’re ver­i­fied that’s like goals. Then you can,” as the kids say, “slide into celebri­ties DMs.” And I’m like, “real­ly? That sounds hor­ri­ble.” So, any­way, get old Elon Musk has changed the rules of how to get ver­i­fied. It’s cost­ing $8. Sub­se­quent­ly, as every­one’s heard, a whole bunch of fake accounts were set up and got ver­i­fied and have just been cre­at­ing hav­oc out there in the streets. There was a fake account set up for Eli Lil­ly, big phar­ma­ceu­ti­cal com­pa­ny in the US, and the fake account said they were going to start giv­ing out insulin for free. Eli Lil­ly’s share price crashed when this came out, even though they put out a sub­se­quent offi­cial tweet say­ing, “don’t believe those guys, that’s a fake account.” And then I think the fake account said “no, you’re the fake account. We’re the real account.” It did recov­er a bit, but then it declined again. So, you know, before this hap­pened, it was trad­ing at $368 on the New York Stock Exchange, USD. Its cur­rent­ly at $356. It dropped down to $346 and it’s edged up a bit, but it’s still way below where it was. Bil­lions of dol­lars wiped off their mar­ket cap because of fake tweets from fake accounts. As an investor, Tony, how would you feel about that if you were heav­i­ly invest­ed in Eli Lil­ly?

Cameron  14:44

Yeah, not great. I imag­ine the class lawyers in the US are hav­ing a look at this and will be suing Twit­ter. It just rein­forces my opin­ion of Elon Musk that he’s the pro­to-typ­i­cal Bond vil­lain. And I got­ta say, the only dump­ster fire going on is with the $44 bil­lion he raised to buy Twit­ter, I can’t see it sur­viv­ing. When things like this are allowed to go on when it’s not rais­ing any mon­ey.… From the accounts you read, Twit­ter’s only rev­enue is from adver­tis­ing at the moment, and big com­pa­nies like Eli Lil­ly aren’t going to adver­tise on Twit­ter going for­ward and any­one who’s seen this won’t adver­tise on Twit­ter. So, good luck to Elon.

Tony  16:50

Or maybe he’s a genius. Maybe they need to adver­tise now to tell every­body not to believe the fake tweets, the fake tweets that say they’re giv­ing insulin away for free. Maybe, you know, this is a cun­ning 5D chess strat­e­gy that he’s done here.

Tony  17:49

It could be, but would­n’t you make the ver­i­fi­ca­tion cost like $80,000 a month rather than $8 so only Eli Lil­ly can afford to say they’re Eli Lil­ly? At eight bucks a month, any­one can afford to be ver­i­fied.

Cameron  18:01

Yeah, well, peo­ple are still bitch­ing about it. I set up a Tony Kynas­ton account and got that ver­i­fied, so just be care­ful.

Tony  18:11

Well, some­one’s tak­en my account. I’m now, I think, TKynaston1 or some­thing on Twit­ter.

Cameron  18:16

Oh, real­ly?

Tony  18:17

Yeah. I tried to log in when QAV start­ed, and I lost my account because I had­n’t used it in a long time. Some­one’s tak­en it.

Cameron  18:25

Some­one had tak­en over TKyno. Are they active? Are they tweet­ing as you?

Tony  18:29

No, it just went. I don’t know what’s hap­pened to it.

Cameron  18:32

Right, just a squat­ter wait­ing for some­one to come and pay them mon­ey to get it. Speak­ing of dump­ster fires; I remem­ber read­ing in the Finan­cial Review a cou­ple of weeks ago, Octo­ber 28, 2022, Finan­cial Review mag­a­zine, on the week­end. “Can this man solve Cryp­to’s $2 tril­lion image prob­lem. Sam Bankman-Fried to spend US $1 bil­lion on shoring up cryp­to busi­ness­es, and yet he’s still not con­vinced the indus­try has proved itself. Depend­ing on how you define young Sam Bankman-Fried as the world’s rich­est young per­son, the finan­cial mar­kets maven owns a large per­son­al stake in FTX, a cryp­tocur­ren­cy exchange he co-found­ed in 2019, and which has become the world’s third largest. His net worth is esti­mat­ed by Bloomberg at US $15 bil­lion, although it had been us $25 bil­lion before this year’s melt­down in cryp­to mar­kets.” He’s thir­ty. There are a lot of asso­ci­a­tions with him being like War­ren Buf­fett because he does­n’t like to splash his wealth around. And maybe he should have splashed it around while he still had it, is what I’m say­ing. You know, nice sound­ing guy. It says “he speaks pub­licly about liv­ing mod­est­ly and the impor­tance of giv­ing. He’s pos­si­bly the most promi­nent fol­low­er of a new mod­ern phi­los­o­phy called Effec­tive Altru­ism, which stud­ies how to donate mon­ey while max­imis­ing its impact, while also giv­ing young peo­ple a set of com­pelling rea­sons to earn as much wealth as they can.” So, that was Octo­ber 28th that he was going to save cryp­to. Novem­ber 14th, 2022 in the finan­cial review: “FTX col­lapse puts US audi­tors in the spot­light. The col­lapse of FTX has thrown a spot­light on the two US account­ing firms that the cryp­to cur­ren­cy exchange said it used to audit its books.” Yeah, so FTX, the com­pa­ny that was going to save cryp­to, two weeks lat­er is now in bank­rupt­cy pro­ceed­ings or liq­ui­da­tion or some­thing. His trad­ing firm Alame­da Research also col­lapsed. The col­lapse of cryp­to all over the place.

Tony  20:36

Yeah, there’s a cou­ple of inter­est­ing things about that. He was on the front cov­er of For­tune a cou­ple of weeks ago, and the head­line was “is this the next War­ren Buf­fett?” And then he was on the front cov­er of the AFR week­end as the rich­est per­son under thir­ty, I think it was, in Aus­tralia. And with­in two weeks, he was broke. So, he cer­tain­ly solved Bit­coins brand prob­lem. We now know what the brand is worth. But two issues here; one is there’s some­thing going on and it has­n’t been uncov­ered com­plete­ly yet, but mon­ey was syphoned out of the cryp­to exchange into Alame­da Research — or at least that’s the alle­ga­tion — to prop it up before they both went bank­rupt. That’s door num­ber one; door num­ber two is that hack­ers got involved as it was crum­bling, and they syphoned off a large wad of mon­ey out of the cryp­to exchange as well. So, that has­tened the down­fall and that mon­ey’s gone. So, we’ve been say­ing it for a long time, but just be care­ful with Bit­coin and cryp­to. It’s unreg­u­lat­ed, and that means that the gov­ern­ment is not going to stand up and ensure your deposits and your sav­ings, and you are play­ing with real cash, and there are real peo­ple out there who are try­ing very hard to take it off you.

Cameron  21:44

Yeah, I’m see­ing just con­stant sto­ries in the ABC these days of peo­ple say­ing they lost their life sav­ings in this cryp­to scam, that cryp­to scam, it’s pret­ty trag­ic.

Tony  21:56

And there were sto­ries, I remem­ber this time last year, of peo­ple sell­ing their house to put it into Bit­coin. I feel sor­ry for them, too.

Cameron  22:02

Yeah, I knew guys who were try­ing to con­vince me it was going to be worth $100,000 or a mil­lion dol­lars a share. It was, you know, nev­er end­ing. Well, who knows? It may be back, it may recov­er and go to a mil­lion dol­lars. But I would­n’t want to be heav­i­ly invest­ed in it over the course of the last year, I’ll tell you.

Tony  22:21

Alright, that’s enough of Bit­coin. Let’s move on.

Cameron  22:23

Let’s move on. Light ver­sus club. Peo­ple have been ask­ing me to explain the dif­fer­ence between QAV Light and QAV Club. So, back ear­li­er in the year, we sort of soft launched/beta launched this thing called QAV Light. A cou­ple of rea­sons why; over the last few years we’ve had a lot of peo­ple email me say­ing “I love what you guys are doing, love QAV, love the phi­los­o­phy. Just can’t either afford the time to do the check­list and study it and fig­ure out how to make it work by myself, too busy, or just can’t fig­ure it out, not smart enough.” Or “just can’t afford a QAV Club sub­scrip­tion and a Stock Doc­tor sub­scrip­tion,” and all that kind of stuff. Which is fine. QAV Club was designed for a par­tic­u­lar kind of investor, so it was­n’t designed for every­body. But we, you know, we want to help peo­ple where we can. So, we launched a low­er cost, low­er effort prod­uct just to test to see how it goes, part­ly based on chats that we had with peo­ple like Lee. He said there’d be an oppor­tu­ni­ty in the mar­ket­place for some­thing like that. So basi­cal­ly, the deal with Light is peo­ple pay $29 a month plus GST, they get a cou­ple of free stock tips from me every Mon­day. When we do the buy list, I fil­ter it and send out a cou­ple of stock tips, which I then track in a port­fo­lio. Peo­ple can buy those stocks if it meets their cri­te­ria in terms of their aver­age dai­ly trade require­ments or not, or just pass on it, it’s up to them how they run it. And then I track those stocks accord­ing to our usu­al sell trig­gers, and if they become a sell, I will sell them out of the port­fo­lios that we’re run­ning and I email the Light sub­scribers and say, “hey, we just sold this stock and that stock and we’re replac­ing it with these stocks.” So, peo­ple, if they bought it, they know that they might want to sell it as well, and they can play along. So, that’s all you get with Light; you get these emails when­ev­er we buy or sell some­thing, ver­sus the Club. So, the Light sub­scribers don’t get access to the pre­mi­um episodes, they don’t get access to the check­lists, the buy lists, the Face­book group or the Slack group, or the din­ners, or to ask ques­tions, or the Bible, or the course, or all that kind of stuff, which is for Club sub­scribers. Our Club sub­scribers on the oth­er hand can see the Light updates each week. They can play along with that too if they want while they’re learn­ing to do it them­selves. But basi­cal­ly, in my head, the dif­fer­ence is Club is for peo­ple that want to do it them­selves and light is for peo­ple who don’t want to do it them­selves, they want us just to tell them what to do and play along that way. Now, when we launched it, I was­n’t sure if we were going to keep doing it because I was­n’t sure how much work there was going to be. It turns out, it’s a lot of work. I’m still fig­ur­ing out how to get smarter about doing the work. And you know, when we launched it, I think, in April, I thought, well, it’ll just be an email once a week: “yeah, we’re gonna buy these two stocks. Thank you, good­bye.” Of course, the mar­ket crashed the week after we launched it and instead of, you know, just one email a week, it’s turned into quite often four or five emails a week as things have passed through rule ones and I’ve had to replace them. It’s been, obvi­ous­ly, as every­one knows, the last six months has been a chal­leng­ing time as investors, and it has­n’t real­ly been as smooth sail­ing as it had been pre­vi­ous­ly. So, I’m not sure how long I’ll keep doing this. It may be a short-term exper­i­ment; it may be a long term. I’ll make a call on it at some point. But that hope­ful­ly is the dif­fer­ence between Light and Club for peo­ple. If you have any ques­tions, shoot me an email. I also want­ed to just quick­ly talk about the Bret­te­la­tor beta. We always have a beta ver­sion of the Bret­te­la­tor run­ning where Brett is test­ing dif­fer­ent stuff with Tony. We’ve been work­ing on a beta for a while. It’s not quite ready for prime­time yet, we’re still work­ing out a few bugs in it, but peo­ple have been see­ing my screen­shots of it in the updates and say­ing, “hey, that looks dif­fer­ent. Can I have it?” And I have to keep say­ing “yeah, not quite yet.” So, don’t send me those emails. If there’s a new ver­sion, I’ll tell you. That is that. Port­fo­lio update. Has­n’t been a good week for us. It’s been a great week for the All-Ord’s, not a great week for us because of coal. We’ve been tak­ing a beat­ing on some of our coal stocks in the last week. So, last week I think I said our port­fo­lio since incep­tion, the dum­my port­fo­lio, was up about 70% ver­sus the STW, which was round­about 1%. It’s had a good week, it’s up 1.58%; we’ve dropped down to 14.56 — that’s per annum with a CAGR cal­cu­la­tion. So, we’ve dropped a lit­tle bit, it’s increased a lit­tle bit, but we’re still doing sev­en times, rough­ly, bet­ter than the STW since incep­tion, which still seems insane­ly too good. But that’s what Navexa says. So, take it for what it’s worth. That’s it from me, Tony, what have you got to chat about?

Tony  27:43

A cou­ple of things. So, I’ve updat­ed the mort­gage rate that we use in our cal­cu­la­tions. I did a sur­vey of the majors last week, and peo­ple need to plug in 6.07% as the bank rate that we use to test the yield of the stock against. So, that’s both in my spread­sheets and the Flit­man mod­el. Nick­el is a buy again. I checked that recent­ly and I don’t think it appears on the score­card, so I’ll need to get Alex to add that to the score­card and track it from now on, but nick­el looks like it’s a buy.

Cameron  28:17

Sor­ry, what stocks does that affect off the top of your head, Tony?

Tony  28:21

I can’t think of any, Cam. Might be South 32, was that nick­el as well as alu­mini­um?

Cameron  28:27

I’ve got a tab in the spread­sheet that I’m just going to fil­ter on nick­el. So, to some extent accord­ing to this list. Well, there’s quite a lot of com­pa­nies. Let me see, who are the big ones that we may be aware of? Well, BHP has an expo­sure. I imag­ine it’s not a big part of their rev­enue, though. MLX, Met­als X Lim­it­ed.

Tony  28:53

Yeah, South 32 has an expo­sure as well. That was the one I think I was look­ing up.

Cameron  28:58

South 32, Posei­don Nick­el, Rio, Sand­fire Resources, Sheffield Resources — SFX. Noth­ing else that I can see here that I remem­ber being promi­nent on the buy list, but a lot of com­pa­nies. We’ll add nick­el to Comm Sta­tus so we can start track­ing it. Is there one on Stock Doc­tor? Where are you look­ing at it?

Tony  29:25

I was look­ing at it in Stock Doc­tor, yep. And then I just want­ed to read out a lit­tle bit of a sum­ma­ry from an AFR arti­cle from James Thomp­son. And it’s because of the QAV stock in the news, which was NAB, who have new results. The results are in Stock Doc­tor and it’s still on the buy list last time I looked. This was on the 10th of Novem­ber, so what’s that? About five days ago. And it was a bit of an insight into NAB under the CEO Ross McE­wan, and it reads: “in a fun­ny way, the suc­cess of the turn­around that Ross McE­wan has engi­neered at Nation­al Aus­tralia Bank over the past three years can be judged by what’s absent from the bank’s four-year results as much as what is actu­al­ly there. For the fourth con­sec­u­tive half, McE­wan has deliv­ered a set of num­bers with zero notable or extra­or­di­nary items, i.e.. no cus­tomer reme­di­a­tion pro­vi­sions, no impair­ments on strug­gling busi­ness units, no loss­es on asset sales, no cap­i­talised soft­ware charges. McE­wan is Aus­tralian bank­ing’s Mr Clean, and a 25% gain in NAB’s share price since he arrived in Decem­ber 2019 shows how much investors val­ue his ‘no sur­pris­es’ approach. The lack of notable items also allows the guts of the bank to shine. Cash earn­ings rose 8.3% to 7.1 bil­lion in the year to Sep­tem­ber 30, with oper­at­ing income up 8.9% and expens­es up 5.6%, or 3.9% when the recent acqui­si­tion of Citibank’s con­sumer busi­ness is includ­ed, which was in line with guid­ance. Cash return on equi­ty which slumped as low as 8.3% in the 2020 finan­cial year hit 11.7% in 2022. In addi­tion to being Mr Clean, McE­wan is bank­ing’s Mr Sim­ple; from the moment he arrived at the bank, he has delib­er­ate­ly talked down the com­plex­i­ties of mod­ern bank­ing, argu­ing it is essen­tial­ly a game of look­ing after cus­tomers and staff. ‘Do the basics well and deliv­er what you say you’re going to do’ was how he described his inter­nal mantra on Wednes­day.” So, that’s the quote from the AFR. I just thought it was a good quote. McE­wan is well respect­ed. You know, one of the bet­ter, if not the best of the bank­ing CEOs in Aus­tralia, and it’s good to see his sim­pli­fi­ca­tion process seems to be work­ing.

Cameron  1:06:11

The QAV Pod­cast is a pro­duc­tion of Space­craft 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.