QAV 621 Transcript

QAV 621 CLUB

Cameron  00:06

Wel­come back to QAV. This is episode 621. We’ve just been talk­ing about sex palaces off air. You missed out on a great con­ver­sa­tion. It’s the 23rd of May 2023 to 2:22pm on the East Coast. Would have been my dad’s sev­en­ty-fourth birth­day today, if he had­n’t died twen­ty-two years ago. How are you, TK?

Tony  00:28

Good. Well, we were talk­ing about Tiberius, and if any­one wants to know the con­text of the sex palace con­ver­sa­tion, look up Tiberius and the his­to­ry of Rome.

Cameron  00:39

That’s where it start­ed. Lis­ten to my Life of Cae­sar series. It’s a lot of fun. Or just watch the open­ing of Caligu­la because you see a sex palace in the open­ing of Caligu­la. That’s where the great Tito what­ev­er his name was, Mal­colm McDow­ell, film from the mid 70s, starts in Tiberius’ sex palace with Peter O’Toole as Tiberius enjoy­ing his debauch­ery.

Tony  01:07

Well named Peter O’Toole.

Cameron  01:12

Par­tic­u­lar­ly for that film.

Tony  01:14

Oh dear.

Cameron  01:14

You see a lot of tools in that film. Rough week in the mar­kets, TK. Rough, rough week.

Tony  01:22

Yeah. You’ve got to laugh, haven’t you?

Cameron  01:23

Or cry. Yes, rough week. Picked up a bit today, but there’s just been a lot of sell­ing. I don’t know about you, but par­tic­u­lar­ly for the light port­fo­lios. It has­n’t real­ly affect­ed the dum­my port­fo­lio a great deal. I think I had to sell maybe one thing out of my Super. But, yeah, for the light port­fo­lios I’ve had to sell a lot in the last week, and it’s been very tough to find much to buy. Very tough.

Tony  01:49

Same. I had to sell a cou­ple of gold stocks I had, Perseus Min­ing and West African Resources today. Or the last two days. I haven’t been able to find any­thing to buy either, so I’m sit­ting on a bit of cash. I can’t even dou­ble buy some­thing, that’s how light the pick­ings are at the moment.

Cameron  02:05

And it’s not because gold’s a sell, right, it’s just a Josephine. They rule oned or 3PTL’d or some­thing.

Tony  02:12

Yeah, I think I was rule one down at both of them.

Cameron  02:14

Wheat did become a sell when Alex did the charts for us on Mon­day morn­ing, which meant I had to sell Grain­Corp out of the light port­fo­lios. It’s been an inter­est­ing time.

Tony  02:27

I’m also run­ning a paper port­fo­lio for QAV stocks above a score of 0.2, and I only man­aged to buy two stocks for that port­fo­lio in the last month or so since I start­ed it, and I had to sell both of them. So, it’s sit­ting in cash. So, that’s how dif­fi­cult the con­di­tions are at the moment.

Cameron  02:45

Well, I want to talk to you a bit about that when I get to the light port­fo­lios, because I seem to have been sit­ting on a lot of cash for a long time in the light port­fo­lios. And it’s hurt­ing us, com­par­a­tive­ly, look­ing at the STW. When you’re sit­ting on a lot of cash that’s not doing any­thing, you’re going to under­per­form the index, right. But before I get to that, let me talk about the dum­my port­fo­lios. So, I did my week­ly report today, and just again, for my own san­i­ty, remind­ed myself that when I look at the two year All Ords chart, it’s bare­ly gone any­where in two years. That’s pret­ty much exact­ly where it was two years ago. Maybe up by, I don’t know, 3 or 4% or some­thing, but it has been a two-year hold­ing pat­tern, more or less, for investors. It’s gone up and it’s gone down, but if you com­pare today to where it was two years ago, it’s bare­ly moved. So, it’s no won­der then that the dum­my port­fo­lio over the last few years is only up 6 or 7% per annum, CAGR per annum, over that peri­od, ver­sus the STW, which is pret­ty much the same. A lit­tle bit ahead of us today, but give or take, it’s pret­ty much neck on neck over the last year. So, it feels like a lot of hard work to do noth­ing. A lot of hard work to get nowhere in two years.

Tony  03:58

Yeah, that was the old rule when I was work­ing cor­po­rate: you got paid bonus­es every year until the year you worked the hard­est, and then you got noth­ing. Which is usu­al­ly the case, right.

Cameron  04:08

Yeah, I’ve done way more sell­ing in the last cou­ple of years, way more trad­ing than we did in the ear­ly days of the pod­cast for no return, but I guess we’re doing the trad­ing because the mar­kets bumpy?

Tony  04:19

Well, yeah, I mean, inter­est rates have had a big effect, I think, on the mar­ket. The ris­ing inter­est rates have had an effect on the mar­ket, big effect.

Cameron  04:25

Ris­ing inter­est rates, trade wars, real wars. It’s been a bumpy cou­ple of years.

Tony  04:32

Yeah. Hav­ing said all that, get­ting 6% or 7% a year dur­ing that kind of tur­moil is pret­ty good.

Cameron  04:38

Yeah. And then I look at the ten year All Ords chart, which looks great. It’s gone up a lot in the last ten years. I won­der to myself, well, what will it look like ten years from now, or ten years from two years ago. Eight years from now.

Tony  04:53

If we knew that, we would­n’t have to wor­ry about invest­ing our­selves.

Cameron  04:58

Well, we kind of do know, right? Unless this time it’s dif­fer­ent, Tony. “This time it’s dif­fer­ent, Tony. It’s always dif­fer­ent, Tony.” Unless it’s dif­fer­ent, the mar­ket always goes up over ten years, right? His­tor­i­cal­ly.

Tony  05:10

Well, it should, yeah. On aver­age it goes up 10% a year, his­tor­i­cal­ly. But you know, there have been long peri­ods like the GFC. Ten years since the GFC, it’s basi­cal­ly back to where it start­ed from.

Cameron  05:21

That’s right. Yeah. But that was, that was a big tank, the GFC. But any­way, the QAV report since incep­tion. For new lis­ten­ers, that’s Sep­tem­ber 2019. Dum­my port­fo­lio is up around about 16.24% per annum accord­ing to Navexa, ver­sus the STW, the SPDR 200, which is up 7.18. So, we’re still doing about two and a half times bet­ter than the index since incep­tion. This finan­cial year, though, it’s up 16.5%, we’re up 8.5%. For the quar­ter, it’s up 1.6. We’re down a quar­ter of a per­cent now. We were ahead of it for the quar­ter a lit­tle while ago, ear­ly on in the quar­ter, but we’ve tak­en a bit of a dive recent­ly. So, it’s been a dif­fi­cult peri­od. Haven’t been sit­ting on cash in the dum­my port­fo­lio, though, so I can’t blame that. We’ve just had a cou­ple of stocks… Well, noth­ing’s done real­ly well. It’s kind of been tough times.

Tony  06:29

And I think there was, accord­ing to Navexa, the report I got there was one big drop in the dum­my port­fo­lio’s hold­ings.

Cameron  06:35

In the last week?

Tony  06:37

Yeah.

Cameron  06:38

CLX, which we’re going to talk about. Bloody CLX. So, when I checked this morn­ing, we hold it in the dum­my port­fo­lio and it’s still above it’s buy price in the dum­my port­fo­lio. Also held it in the light port­fo­lio. When I checked my alerts at 8 am this morn­ing, 9 am, it had just become a rule one yes­ter­day after­noon. But it was, like, you know, 11% down. And the AFR said the mar­ket was gonna go up today and I had to go out for a cou­ple of hours, go to kung fu, what­ev­er. So, I thought, oh well, I’ll wait until the mar­ket opens. I’ll wait until 11. You know, you always say wait till 11 and see how things pan out. I was at kung fu, got back at lunchtime, and it had dropped anoth­er 9% this morn­ing. So, it was down like 20% by the time I final­ly sold it. Checked the news, noth­ing about CGI logis­tics, or some­thing?

Tony  07:35

CTI logis­tics, yep.

Cameron  07:37

CTI. I could see noth­ing in the Fin, noth­ing in Hot­Cop­per. Noth­ing in the news. Noth­ing on Stock Doc­tor, but they’re down 20% in a day. So, I don’t know what the hel­l’s going on there. But no bueno. Any­where else I should look?

Tony  07:53

No, that’s what I would do. I just had a quick look then; I could­n’t see any­thing to explain the drop. Is it ex-div­i­dend? Hang on, let’s check ex-div­i­dend. You check that?

Cameron  08:01

No, the div­i­dend was back in April.

Tony  08:04

Okay.

Cameron  08:04

I did check that. So, yeah, it’s just one of those ones that came out of nowhere. It’s still above water, but it did drop… Well, actu­al­ly, the report that I ran this morn­ing on our last sev­en days for the dum­my port­fo­lio said it was down 9%. It’s prob­a­bly down a lot more than that now. It was up, obvi­ous­ly. It’s still above water, as I said. It was up, like, 20 odd per­cent last week in our port­fo­lio, and now it’s prob­a­bly get­ting close to a rule one. No, but it’s prob­a­bly back to what we paid for it. The oth­er one that shocked me dur­ing the last week was Allog­gio Group, ALO. As I was call­ing it on the day, How Low Can You Go? How low can you go. On the 24th of March, and it was a good per­former in the dum­my port­fo­lio, but on the 24th of March, they announced they’d entered into a “scheme imple­men­ta­tion deed with Next Cap­i­tal, pur­suant to which Next Cap­i­tal would acquire 100% of the com­pa­ny’s shares. The pro­pos­al is to be imple­ment­ed by way of a com­pa­ny scheme of arrange­ment for 30 cents per share in cash, which will be sub­ject to share­hold­er and call approval.” Now at the time, it was trad­ing around about 19 cents, 18/19 cents. Shot up close to 30 cents, up to about 28 cents on the announce­ment. It was great. Hap­py Days for every­body. QAV gets in there, finds a stock that’s under­val­ued, buys it. Some­body comes along, pitch­es a high­er price. Hap­py days. I’m drink­ing cham­pagne. On the 15th of May it goes into a trad­ing hold. On the 17th of May it comes out of the trad­ing halt and announced, “after a low­er than expect­ed April 2023 trad­ing results with May and June 2023 results and antic­i­pat­ed to be low­er than pre­vi­ous­ly fore­cast, the com­pa­ny’s earn­ings have been neg­a­tive­ly impact­ed.” The share price col­lapsed down to 16.5 cents, and it was a 3PTL sell. We still got out of it at a slight prof­it, amaz­ing­ly. But some­thing fishy going on there, I thought to myself. There’s an acqui­si­tion under­way, all of a sud­den, they go into a trad­ing halt, and then come out and say, “nah, bad results are com­ing,” and the share price plum­met­ed. I feel like they’re Waystar Roy­co. Next cap­i­tal is Lukas Mat­son.

Tony  10:38

GoJo.

Cameron  10:39

GoJo. Yeah, he’s like, well, it’s not that Logan died, but the results are down and the share price… Like why am I pay­ing 30 cents a share for this thing now when your share price is only 16 cents a share? I think it’s time to go back to the nego­ti­at­ing table.

Tony  10:55

Yeah. I should be clear. I know one of the direc­tors of Next Cap­i­tal as well. Not that we’ve ever spo­ken about this acqui­si­tion.

Cameron  11:02

Oh, well, time to get that per­son on the show.

Tony  11:09

If ASIC are lis­ten­ing, I haven’t ever spo­ken to him, to Patrick about this. I don’t know what’s going on. But yeah, I did read through the announce­ments after you raised it before the show, and it does look inter­est­ing. I mean, yeah, they’ve come out and said they’re not going to make the sort of pro­jec­tions they said they were going to make, but I think I had a look, and it was only like a mil­lion dol­lars less than what they were pro­ject­ing. And it’s a small cap com­pa­ny, so a mil­lion dol­lars is prob­a­bly, you know, mate­r­i­al. 25% of their prof­it, maybe. So, my gut feel says that they’re going to still do a deal. It may not be at 30 cents, but again, the announce­ment says Next Cap­i­tal haven’t walked away. They trig­gered a medi­a­tion clause to talk about the takeover. So, I don’t know, I’m just guess­ing here. I sus­pect that they’ll still do a deal at some stage. The share price actu­al­ly recov­ered today. It’s back up to 19 cents from 16. It prob­a­bly won’t get back to 30. If I was Next Cap­i­tal, I would­n’t pay as much as I was orig­i­nal­ly offer­ing if the com­pa­ny has come out and said, “we’re earn­ing less than we fore­cast.” But well, who knows? I’m not in the room, as they say, to these dis­cus­sions. But if the com­pa­ny was attrac­tive a month ago, and it’s come out and said we’re not going to make the same prof­it we’re going to make, but we’re still going to make a good prof­it, yes, I asked to revise my offer, but I would­n’t walk away. So, we’ll see.

Cameron  12:34

Well, that was painful.

Tony  12:35

It’s painful, but it’s also a small cap stock. I mean, that’s the oth­er thing, too; it’s such a low vol­ume of shares. It’s $40,000 a day, I think. Volatil­i­ty tends to go hand in hand with those small ADTs.

Cameron  12:48

And, of course, the instincts from QAV investors when some­thing like this hap­pens, well cer­tain­ly mine was, well, this is an over­re­ac­tion. We should just hold on to it and it’ll prob­a­bly go back up. It’ll prob­a­bly turn around. And as you say, it has come back a lit­tle bit. But rules is rules. So, I did sell it on the day, because it could have gone the oth­er way, too, could have fall­en fur­ther. So, just to remind peo­ple, Allog­gio spe­cialise in man­ag­ing short term accom­mo­da­tion from one night to three months. “For hol­i­day mak­ers, inter­na­tion­al trav­ellers, cor­po­rate guests, gov­ern­ment and pri­vate sec­tor con­trac­tors. It pro­vides the ser­vices through hotels, motels, and short-term rent rolls.” So, I don’t know what’s hap­pen­ing in the short-term accom­mo­da­tion mar­ket.

Tony  13:43

Well, they came out.… I read the announce­ments — and again, I don’t know this com­pa­ny very well — but they came out and said that they would nor­mal­ly expect to get high­er rentals after East­er, and that they had­n’t kept pace with last year. Main­ly because peo­ple are a lit­tle bit tighter on cash because of ris­ing inter­est rates, or maybe a lit­tle bit uncer­tain, and there­fore aren’t tak­ing as many hol­i­days. That’s what they’re say­ing. I did also note, and again, I could be read­ing too much into it, but they had bought, they’d diver­si­fied into a com­pa­ny which I think did laun­dry. I’m not sure whether that was a chain of laun­dro­mats or whether it was like a com­mer­cial provider of laun­dry ser­vices, and that that was under­per­form­ing. But the good news was that they weren’t hap­py to pay the earnouts to the peo­ple they bought this com­pa­ny from because the prof­it was down. So, if I put my Machi­avel­lian cap on and I say, “well, I’ve just bought this com­pa­ny and there’s earn outs, if it does­n’t work out as well, then I don’t pay them the earn out and actu­al­ly save mon­ey, even though I lose a bit on the oper­at­ing line.” I hope that’s not one of the rea­sons why they’ve had to report a reduc­tion in their fore­cast prof­it which has caused Next Cap­i­tal to walk away. They may have been too smart for them­selves. But I’m read­ing a lot into that, so who knows what hap­pened.

Cameron  15:01

Allog­gio appar­ent­ly is the Ital­ian word for accom­mo­da­tion, Tony.

Tony  15:05

Makes sense.

Cameron  15:07

I did not know that.

Tony  15:08

Lodg­ing.

Cameron  15:09

Well, there you go. So, those were a cou­ple of shocks that I had this week, CLX and ALO. But you know, I’m glad that we have rules, because even though it’s upset­ting and frus­trat­ing, you don’t have to tie your­self up in knots think­ing about what to do and try­ing to out think the mar­ket or pre­dict things.

Tony  15:32

And the oth­er thing we’re not get­ting tied up in is try­ing to work out what’s hap­pen­ing based on the announce­ments, because, you know, they can be either scant on detail, they can be late on infor­ma­tion, and they can, I guess, have a par­tic­u­lar per­spec­tive to suit the par­ty that’s mak­ing the announce­ment. So, with­out know­ing what’s going on with Next Cap­i­tal or with Allog­gio, it’s dif­fi­cult to know how to val­ue the stock.

Cameron  15:56

They put out some­thing on the 17th of March, have they put any­thing to explain? Well, they did, they said they had a low­er-than-expect­ed trad­ing result. They got a new announce­ment that came out yes­ter­day, I see. Some­thing called… An update. “Con­sul­ta­tion peri­od extend­ed.” Oh okay, so this is next cap­i­tal say­ing, “Yeah, we’ll think about it.”

Tony  16:25

This is GoJo say­ing, “well, yeah, Logan’s dead, I don’t know if the com­pa­ny’s worth as much.”

Cameron  16:31

I like this, in this 22nd of May announce­ment, in bold at the end they’ve writ­ten: “ALO share­hold­ers do not need to take any action at the present time.” Like yeah, well, I don’t know about that. They do, they need to sell their shares and get out.

Tony  16:47

Well, maybe. I mean. That’s pret­ty stan­dard, to put that onto a release like this.

Cameron  16:52

We took action. Steven Mabb sent me a great lit­tle graph­ic.

Tony  17:00

Looks like a future cof­fee mug.

Cameron  17:02

It does, yes. We will steal this and do our own ver­sion of it. It’s from Mor­gan Housel, author of the Psy­chol­o­gy of Mon­ey, he says. And it’s just a nice lit­tle graph­ic, enti­tled “some things I’ve learned about mon­ey.” And I thought these were good. I’ll read a few of them. “The Jone­ses aren’t as rich or as hap­py as you think they are.” You can just put the Kynas­ton’s in there. Aren’t as rich or hap­py as you think they are.

Tony  17:28

We are hap­py.

Cameron  17:31

Oh, the Kynas­ton’s are as rich and hap­py as you think they are, but not he Jone­ses.

Tony  17:37

Fun­ni­ly enough, my sis­ter is a Jones. She mar­ried a Jones. They’re pret­ty hap­py.

Cameron  17:41

She’s rich and hap­py. Oh, that’s good. “The more com­pli­cat­ed the invest­ment advice, the less use­ful it is,” I like that one. “Get rich quick and get poor quick are two sides of the same coin.” Thought that was clever.

Tony  17:56

Yeah, that’s good.

Cameron  17:57

“Ask about any­thing you don’t under­stand.” I’ve always lived by that rule. It’s one of the things I noticed ear­ly on in my career, was that the smartest, most seem­ing­ly con­fi­dent peo­ple I knew were the first to admit they did­n’t under­stand some­thing and ask for it to be explained over and over, rather than fake that they under­stood it. They’d go, “Hold on.” Like, Microsoft peo­ple used to say, “explain it to me like I’m five,” right, which has become more of a com­mon thing on Red­dit and places like that. But, explain it to me like I don’t under­stand, because I don’t, and not be afraid to say that, right? Just explain it to me, because I want to under­stand it and I’m not embar­rassed about say­ing that I don’t under­stand it. Where­as a lot of peo­ple I think kind of just pre­tend that they under­stand stuff, and they, you know, fake it. Not good. “A house is a place to live, not an invest­ment.” Would you agree with that, Tony?

Tony  18:56

I did­n’t actu­al­ly, no. I think it is true a house is a place to live, but they are good invest­ments as well.

Cameron  19:03

Won­der why he says that, though? Do you under­stand his fram­ing of that, where it would make sense?

Tony  19:09

I don’t know, actu­al­ly. I mean, peo­ple like Roger Mont­gomery have often said that the prop­er­ty mar­ket is a bit of a sham because you can’t val­ue it. Although he does admit you can use the rental yield as a way to val­ue it. But the point he’s mak­ing is that most val­u­a­tions are com­par­a­tive val­u­a­tion. So, house A is for sale, it’s the same size as house B, and house B sold last week for a mil­lion dol­lars, there­fore house A is worth a mil­lion. There’s no sort of fun­da­men­tal way of, from the ground up, work­ing out what house A is real­ly worth. Although you can rent it out and get an income and you can say that’s a yield. You can com­pare it to a bond or the bank or what­ev­er and work out what it’s worth. So, yeah, I don’t agree with that.

Cameron  19:49

The thing that’s always con­fused me about real estate is if I buy a house, let’s say I buy a three bed­room house for $500,000, and then ten years lat­er it’s worth a mil­lion bucks, and I sell it for a mil­lion bucks, I’ve made $500,000 on my invest­ment over that ten year peri­od. But if I want to move into anoth­er three-bed­room house that’s equiv­a­lent, it’s going to be worth a mil­lion bucks. So, I’m gonna have to spend a mil­lion bucks to buy the same kind of house. So, that kind of nul­li­fies my invest­ment return.

Tony  20:22

Yeah, no, you’re right. The oth­er dimen­sion to this is hous­es are real­ly good to gear against. After ten years, you’ve got the extra $500,000 which you can use as equi­ty to be able to bor­row, and then invest some­where else; either in anoth­er house or the stock mar­ket or a busi­ness or what­ev­er, or a project.

Cameron  20:39

Rather than sell­ing it and just spend­ing that mon­ey on real estate.

Tony  20:43

Cor­rect. But no, you’re dead, right. Unless you’re chang­ing the mar­ket, it’s a zero-sum game.

Cameron  20:49

Yeah. Or you know, you buy some­thing that’s less­er than the thing that you just sold. Or you’re real­ly smart, and you buy a fix­er upper or some­thing every time. I know there’s a lot of peo­ple that do that.

Tony  21:01

Yeah. So, when I say change the mar­ket, you’ve bought some­thing and con­vert­ed it into some­thing else. Fixed it up, tak­en a big block of land and made it into two hous­es, or some­thing like that. Or you’ve sold out of Bris­bane, Syd­ney, and then moved to the coun­try, for exam­ple, or moved over­seas. So, yeah, you changed the mar­ket.

Cameron  21:18

Here’s anoth­er inter­est­ing one: “admire peo­ple who earn more mon­ey than you, not peo­ple who spend more mon­ey than you.”

Tony  21:26

I real­ly liked the sec­ond part about that. I’m not sure I admire every­one who earns more mon­ey than me. But yeah, cer­tain­ly the sec­ond part of it. But this whole idea of Insta­gram peo­ple dri­ving around in Maser­atis does not impress me one bit, and I cer­tain­ly don’t admire them.

Cameron  21:40

Par­tic­u­lar­ly when you find out that most of them rent­ed those Maser­atis for a day. “Your mort­gage bro­ker is lying to you about how much house you can afford.”

Tony  21:52

Yeah, true.

Cameron  21:54

Par­tic­u­lar­ly if you’re in Amer­i­ca before 2008, with the Fan­nie Mae and what­ev­er.

Tony  22:02

Fred­die Mac.

Cameron  22:03

Fred­die Mac.

Tony  22:04

Well, the mort­gage bro­ker has an incen­tive. They’re paid com­mis­sion based on the size of the mort­gage, so they’re always going to try and shoe­horn you in to some­thing big­ger. Luck­i­ly enough in Aus­tralia, APRA does have tests on the banks to make sure you can repay your loans when inter­est rates rise. But, you know, at the same time, pri­or to the GFC, there were a lot of peo­ple get­ting loans who had fal­si­fied the appli­ca­tion process, gamed the appli­ca­tion process.

Cameron  22:34

I like the next one: “you don’t need to be a math whiz to make good mon­ey deci­sions. Finan­cial suc­cess is 5% intel­li­gence and 95% dis­ci­pline.”

Tony  22:42

Cor­rect. And 0% emo­tion.

Cameron  22:46

Yes. Like I always say to new mem­bers, new QAV club mem­bers, like, it took a lot of intel­li­gence on your behalf to put QAV togeth­er. But I feel for those of us that are lever­ag­ing your work, it does­n’t take a lot of intel­li­gence to run QAV as a process. There’s a learn­ing curve, but it does­n’t take a lot of intel­li­gence to run. It’s most­ly, in my expe­ri­ence any­way, just the dis­ci­pline. Obey­ing the rules and fol­low­ing the steps and not let­ting emo­tion get involved and not try­ing to out think the sys­tem.

Tony  23:23

Well, it might be a hum­ble brag on my part, but it did­n’t take a whole lot of intel­li­gence to set up QAV either. It’s just learn­ing from oth­er peo­ple, much in the way sci­en­tists often work.

Cameron  23:33

Sci­en­tists are smart, though, Tony.

Tony  23:35

Well, they are, I cer­tain­ly would agree with that. But no, I mean, I did­n’t invent val­ue invest­ing. It was just me that learned it was right for me and how to apply it to my cir­cum­stances. So, yeah, there’s a cer­tain amount of intel­li­gence in that and dis­ci­pline, but I think the quotes real­ly good. It’s main­ly dis­ci­pline.

Cameron  23:53

“Rais­ing income should­n’t mean a rise in lifestyle.”

Tony  23:59

I’ve always said, and prob­a­bly less so these days, but when I was work­ing, every time I got a pro­mo­tion, I just got pro­mot­ed into a big­ger class of bills. Big­ger car bet­ter or bet­ter car, big­ger house, bet­ter school.

Cameron  24:15

And it’s chal­leng­ing. I find that one real­ly chal­leng­ing. Like, you know, get a nice block of brie and spend mon­ey on kung kung fu lessons. There’s always a way of jus­ti­fy­ing spend­ing mon­ey. It’s not hard. Even when you’re try­ing not to spend mon­ey. It’s always easy. It’s a slip­pery slope, spend­ing mon­ey.

Tony  24:34

Yeah, absolute­ly.

Cameron  24:36

“Fore­cast­ing is for the weath­er.”

Tony  24:39

And it’s not even good for the weath­er. That’s a great say­ing, I think, that’s real­ly good.

Cameron  24:48

Cof­fee mug quote, right there.

Tony  24:49

Yeah.

Cameron  24:51

“Fees erode per­for­mance.” We’ve talked about that on the show many times. “There is an inverse rela­tion­ship between invest­ment per­for­mance and time spent watch­ing finan­cial news.” I like that.

Tony  25:05

Espe­cial­ly when you go to the States and see Bloomberg and MSNBC and all those. The shows are just so vac­u­ous.

Cameron  25:14

Who’s that guy with the big red but­ton?

Tony  25:18

With the base­ball bat, who comes out and takes a swipe at things and then hits the red but­ton. Yeah.

Cameron  25:23

It’s enter­tain­ment.

Tony  25:24

It’s enter­tain­ment. Yeah, exact­ly. For peo­ple who don’t like real­i­ty TV, it just morphs into oth­er things. You know, there’s an ele­ment of pol­i­tics in it, there’s an ele­ment of cul­ture in it, and all that kind of stuff. Then even­tu­al­ly it gets down to eco­nom­ics. What’s Chi­na doing? What’s Rus­sia doing? Like, you would­n’t hear any­thing on Bloomberg about Allog­gio, even if it was an Amer­i­can com­pa­ny, right? They just don’t get down into that nit­ty grit­ty detail.

Cameron  25:47

I did­n’t hear any­thing about it here, either.

Tony  25:50

Yeah, well, there you go. Yeah, so that’s a good one. Hey, you missed out one, which I just want­ed to touch on briefly: “nev­er reach for yield.”

Cameron  25:57

Yeah, I did­n’t under­stand that one. That’s why I skipped it. What does that mean?

Tony  26:01

Well, it’s par­tic­u­lar­ly per­ti­nent to our time peri­od right now. And what it means is that… Maybe it’s not as per­ti­nent to now, maybe it’s per­ti­nent to more last year. When inter­est rates are low, and you can’t get mon­ey from putting your mon­ey in the bank, retirees in par­tic­u­lar — but I guess any­one can fall into this trap — can be pre­sent­ed with offers. “Put your mon­ey with us and we’ll give you 4% yield or 5% yield.” Now I’m see­ing lots of ads in the paper say­ing, you know, “we’ll pay you 9% yield on a month­ly basis or a quar­ter­ly basis, “or what­ev­er. And it’s always a trap, right? It’s risk and reward. You start with the basic build­ing block that a bond is giv­ing 4% yield now. How much extra risk do you want to take to get to the num­ber you need to live on to accept, to take that risk? So, I’m always remind­ed of Ralph Nader’s doc­u­men­tary Unsafe at Any Speed, which was rev­o­lu­tion­ary back in the 60s. I think it was GM, one of the big car com­pa­nies had a car — I think it was a Nova, I think it was a Chevy Nova so it must have been GM — which, under cer­tain cir­cum­stances, at a cer­tain speed, would get the speed wob­bles, rollover, and the fuel tank would explode into a fiery crash and kill peo­ple. And then GM, the exec­u­tives at GM did an analy­sis on this and worked out it was cheap­er to pay out the fam­i­lies of the peo­ple who died in the Chevy Nova crash­es, then to recall the Chevy Novas and fix them. Ralph Nad­er exposed this and the doc­u­men­tary was called Unsafe at Any Speed” right? Because does­n’t mat­ter how fast you drove this Nova, you took a chance that it was going to get the wob­bles and all over and explode. And I feel it’s the same log­ic that applies to yield, right? If a gov­ern­ment bond is the risk­less yield, you can get and you can get 4%, why do you take the extra risk to get 5/6/7/8/9% and invest in, you know, a fund set up by a prop­er­ty devel­op­er who’s promis­ing the world. To me, the grasp for extra yield is Unsafe at Any Speed.

Cameron  28:06

It’s fun­ny you men­tion that because I had in after-hours to talk about the fact that Chris­sy and I rewatched Fight Club over the week­end. There’s a scene in Fight Club that talks about this, I just pulled it up on YouTube.

Speak­er 1, Fight Club  28:12

“On a long enough time­line, the sur­vival rate for every­one drops to zero. I was a recall coor­di­na­tor. My job was to apply the for­mu­la. A new car built by my com­pa­ny leaves some­where trav­el­ling at six­ty miles per hour, the rear dif­fer­en­tial locks up.”

Speak­er 2, FC28:37

“The teenager’s braces are wrapped around the back­seat ash­tray. Might make a good anti-smok­ing ad”

Speak­er 1, FC  28:42

“The car crash­es and burns with every­one trapped inside. Now, should we ini­ti­ate a recall?”

Speak­er 2, FC 28:48

“The father must have been huge. You see where the fats burned the seat? Poly­ester shirt. Very mod­ern art.”

Speak­er 1, FC  28:55

“Take the num­ber of vehi­cles in the field A, mul­ti­ply it by the prob­a­ble rate of fail­ure B, then mul­ti­ply the result by the aver­age out of court set­tle­ment C. A times B times C equals X. If X is less than the cost of a recall, we don’t do one.”

Speak­er 3, FC 29:13

“Are there are a lot of these kinds of acci­dents?”

Speak­er 1, FC  29:17

“You would­n’t believe.”

Speak­er 3, FC 29:19

“Which car com­pa­ny do you work for?”

Speak­er 1, FC  29:21

“A major one.”

Cameron  29:24

So, there you go. That’s the eco­nom­ics of recalls.

Cameron  29:27

I think I’ve seen that years ago.

Tony  29:27

Yeah. I apol­o­gise if it was­n’t GM that I’m talk­ing about, but I think it was the Chevy Nova that caused the prob­lems. But yeah, I love Chuck Palah­niuk’s writ­ing. I’ve read all his books, they’re bril­liant, and they always get into these kinds of, you know, egre­gious cor­po­rate greed things, or just quirky bits of soci­ety that need expos­ing. You’d love anoth­er movie of his. I think it’s called “Choke” from mem­o­ry. It’s great, too.

Tony  29:59

It starred Sam Rock­well.

Cameron  30:01

Oh, well, I just watched a bloody Sam Rock­well film this week, too, I’m going to talk about. I love Sam Rock­well.

Tony  30:08

So, it’s about a guy who goes into restau­rants and then orders a fan­cy meal and then chokes so he gets the meal for free.

Cameron  30:14

Oh, right. Yeah. I haven’t seen that. I’ve got to see that. Oh, it’s direct­ed by Clark Gregg. Wow.

Tony  30:22

I don’t know who he is.

Cameron  30:24

Have you seen any of the Mar­vel films? The Avengers films or any of that kind of stuff?

Tony  30:29

Yep.

Cameron  30:29

He’s Agent Coul­son in Shield and the Avengers films. Yeah. He’s also a direc­tor. And he direct­ed Chuck. There you go. Co-wrote it with Chuck Palah­niuk and direct­ed it. I watched “Heist” over the last week. You ever seen that? 2001 David Mamet film?

Tony  30:52

Yeah.

Cameron  1:29:25

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.