QAV #627 — Rubberband

Cameron  00:08

Wel­come back to QAV. This is episode 627. Tony, it’s the fourth of July. I said to Chris­sy this morn­ing, do you want to cel­e­brate Inde­pen­dence Day. She’s like, eh, not real­ly. 2023, the first show of the new finan­cial year and we’re going to be talk­ing about per­for­mance and how we did. There’s been an inter­est­ing chat on our Face­book group on how peo­ple have per­formed. All over the place, inter­est­ing­ly. Some good num­bers, some not so good num­bers, which we’ll drill into why that might be. But how are you Tony, before we get into the mar­kets? How’s life in Syd­ney? Rainy up there?

Tony  00:50

Yeah, rainy and fog­gy today. Not too bad, but it’s clear­ing. Hope­ful­ly it’ll clear soon.

Cameron  00:55

You’re not gonna let that stop you play­ing golf though, I imag­ine.

Tony  00:58

 No, I booked in for Thurs­day, so I’ll get out and play. Not play­ing today. Played on Sun­day and it was love­ly. I mean, the weath­er here is fan­tas­tic in win­ter nor­mal­ly, we’re just hav­ing an off day, which is fine. Got to hap­pen at some stage.

Cameron  01:11

If it’s rain­ing, do you put your wellies on?

Tony  01:13

Not wellies, no. I put the rain gear on.

Cameron  01:16

What’s the rain gear? What do you wear on your feet when it’s rain­ing?

Tony  01:18

Oh, golf shoes. They’re nor­mal­ly weath­er­proof.

Cameron  01:21

Oh, okay. Well, let’s get into the mar­kets, Tony. I mean, the All Ords is down a bit today. We’ve got the RBA mak­ing an announce­ment in nine min­utes. We’re record­ing this around 2:21pm on Tues­day. We’re expect­ing an update from the RBA. Do you want to fore­cast what you think the RBA is going to do today, Tony?

Tony  01:47

Yeah, it’s pret­ty impos­si­ble to fore­cast what the RBA is going to do. Most econ­o­mists are bet­ting on the RBA paus­ing, so they won’t raise inter­est rates. I don’t know, I’d be con­trar­i­an and say they prob­a­bly will. I mean, I’ve got lots of issues with the RBA as we’ve talked about before dur­ing the course of the inter­est rate hike cycle. I had sim­i­lar con­cerns years ago when they kept cut­ting inter­est rates, because it was forc­ing retirees up the risk curve to main­tain their retire­ment incomes, and I did­n’t think they need­ed to cut. I mean, you know, one of the argu­ments that has been put for­ward now is our inter­est rates need to rise to be more in line with the rest of the world. Well, if that’s the main case, then just do away with the frig­gin RBA and just, you know, have a robot. Have Chat GPT there say­ing, “Feds raised, UKs raised, Europe’s raised, we need to raise.” If that’s your argu­ment, that should be the last thing. But I think my cur­rent bug­bear with the RBA is the indi­ca­tions are that infla­tion is com­ing down, and I think they’ll prob­a­bly argue that’s only a short-term indi­ca­tion, they want to see if it plays out or not. There are lots of indi­ca­tions that infla­tion is com­ing down. So, the ques­tion in my mind is: the RBA has a man­date to keep inter­est rates, sor­ry, to keep infla­tion between 2 and 3%, but it does­n’t have a man­date as to how long it needs to take to do that. They seem hell bent on doing it quick­ly, which to me is destroy­ing the econ­o­my because the main pres­sure on infla­tion seems to be, at the moment, wage ris­es which are being caused by infla­tion, which is being pushed up by high­er inter­est rates. So, they’re kind of throw­ing gaso­line on the fire, in my opin­ion. And if they want to get infla­tion down to 2 or 3%, they could pause and do noth­ing for a while and see what nat­u­ral­ly occurs. But they seem to be tak­ing this view that, “no, we’ve been told to get infla­tion down to below 3%. We’re gonna do it. We’re just gonna keep doing it. Does­n’t mat­ter what all the side effects are.” And I think that’s wrong. My bet is I’ll be con­trar­i­an and say they’re gonna raise rates, but we’ll know soon.

Cameron  03:53

Well, if you have any friends from your time as a client of PWC, you just call them and ask them what the gov­ern­men­t’s gonna do.

Tony  03:59

Have you ever looked at the PwC logo? It looks like a hand giv­ing some­one the fin­ger. Have a look at it and just squint your eyes.

Cameron  04:09

The logo on their web­site is like some sort of orange set of blocks.

Tony  04:15

Yeah, it’s like a bro­ken bar chart, isn’t it? But the one on the side is like a thumb and the oth­er three are like a mid­dle fin­ger being raised. Any­way.

Cameron  04:25

Yeah. Oh, well, let’s get into it. As I said, not a bad week for the All Ords in the last week but down a bit today, maybe in expec­ta­tion of the RBA. The dum­my port­fo­lio clos­ing out the finan­cial year did­n’t have a bad finan­cial year, depend­ing on how you want to mea­sure it. So, you know, we use Navexa to track our port­fo­lio. Accord­ing to the Navexa, for the finan­cial year we were up 9.5% ver­sus the STW, which was up 14.5 %. But you did your own maths on both…

Tony  05:05

My own maths. Mag­ic maths.

Cameron  05:09

You came up with a dif­fer­ent result. And then we had an email con­ver­sa­tion with the CEO of Navexa, Navarre, who basi­cal­ly told you to shut up and get back in your box.

Tony  05:19

No, he told me to use Excel, which I was doing any­way.

Cameron  05:27

So, your cal­cu­la­tion was pret­ty sim­ple, right? You took the val­ue of the port­fo­lio on the 1st of July last year and the val­ue of the port­fo­lio on the 30th of June this year and cal­cu­lat­ed the dif­fer­ence, and worked that out as a per­cent­age, and it came out at about 10%.

Tony  05:46

Yeah, 10.5/11%. Yep.

Cameron  05:48

And then you took the val­ue of the STW at the same time peri­ods and cal­cu­lat­ed the dif­fer­ences of per­cent­age, and it was 10.5%. So, you said, well, we’re pret­ty much neck and neck with the STW. But in Navexa, there’s a big dif­fer­ence. Now, I tried to fol­low Navar­re’s expla­na­tion in the email thread, and it went way over my head. Can you sum­marise it for every­one?

Tony  06:10

Well, I think we’ve been through this, seen this movie before, but a year or two ago…

Cameron  06:14

He actu­al­ly said, “refer to your emails last year.”

Tony  06:19

Well, there was this whole con­ver­sa­tion in the past about mon­ey weight­ed returns, and time weight­ed returns and Navexa builds every­thing up trans­ac­tion by trans­ac­tion and says, “well, you bought this stock for this peri­od of time and made this prof­it or loss. That’s one build­ing block in the port­fo­lio’s per­for­mance for the year and the next time, you bought anoth­er stock, and it had this hold­ing peri­od, and it made all loss­es, and that’s the next build­ing block, etc, etc.” And it adds it all up and takes the loss­es from the prof­its and gives you your return. Now, I mean, that sounds fine and rea­son­able. But it does­n’t add up when you just look at the end­ing over to start­ing and work out the per­cent­age. I haven’t been able to get to the bot­tom of it and I sus­pect it’s got to do with the cash account that we asked them to put in Navexa. Because if you recall, this kind of also start­ed around a time when we went, “hang on, where’s our div­i­dends going?” They’re get­ting record­ed, I think in terms of per­for­mance, but then the cash was just being lost through the cracks in track­ing it and being able to reuse it to repur­chase things. And some of the exam­ples that were giv­en in Navarre’s emails seem to sug­gest that cash is being treat­ed like a new input into the fund, when it should­n’t be; it’s part of the fund all along. So, I sus­pect that’s what’s the dif­fer­ence, that’s what’s caus­ing a dif­fer­ence, is that the way we oper­ate the dum­my port­fo­lios, we’re say­ing it’s like a her­met­i­cal­ly sealed port­fo­lio. We’re not putting any new cash into it dur­ing the year and we’re not tak­ing cash out. So, our wages aren’t going into it and we’re not liv­ing off div­i­dends. So, it just stays with­in the fund and gets rein­vest­ed. And there­fore, we need a cash account, which gets some­times larg­er, some­times used to buy new things, div­i­dends go into there, and they get reused even­tu­al­ly. And some­times we sit on cash for a while. I sus­pect it’s that cash buffer which isn’t being includ­ed in the port­fo­lio cal­cu­la­tion because, as Navarre said, he builds it up trans­ac­tion by trans­ac­tion of stocks bought, and if there’s cash there, per­haps that’s not been tak­en into account. That’s just my guess, I don’t know oth­er­wise. But you know, for the life of me, I can’t explain why it dif­fers from end val­ue over begin­ning val­ue.

Cameron  08:31

Well, he did say in his email that he is tak­ing the cash into account. And okay, so the dif­fer­ence between your fig­ures and Navex­a’s fig­ures for the QAV port­fo­lio is only a dif­fer­ence between 9.5% and 10.5%? It’s not huge.

Tony  08:47

Yeah.

Cameron  08:47

But your fig­ures for the STW is also 10.5% where there’s is 14.5%. That’s a big dif­fer­ence.

Tony  08:55

Yeah, I can’t explain that.

Cameron  08:58

Why is this so eff­ing hard, Tony?

Tony  09:00

Yeah, that’s my ques­tion. I mean, there’s just so much time being spent on try­ing to get these things cor­rect when it’s end over start gives us a per­cent­age. If you want to do it over time, use the RRI for­mu­la in Excel. End over start and fac­tor in the num­ber of peri­ods.

Cameron  09:21

I think I’m gonna have to do that for my super port­fo­lio, because I went to Aus­tralian Super’s web­site today and tried to work out what my super fund — which is where I do most of my invest­ing, because I don’t have any mon­ey — over the last year was, and when I did the finan­cial year per­for­mance report, it was­n’t includ­ing div­i­dends in that either. And so, I you know, went to their sup­port text mes­sag­ing ser­vice at 9am this morn­ing and said, “hey, why aren’t div­i­dends being includ­ed?” And as of 2:30, I haven’t had a reply from them. So, stel­lar work from Aus­tralian Super. Oh, RBA keeps cash rate on hold at 4.1%.

Tony  10:05

Oh, I lost my bet. Well, good. I think that’s a wise out­come.

Cameron  10:14

Yeah, I won­der what the mar­kets going to think about that. How was your per­for­mance in the last finan­cial year, Tony?

Tony  10:21

Well, you’ll have to bleep this. It was shit­house.

Cameron  10:26

Is that a finan­cial indus­try term?

Tony  10:28

It is, yeah, it is around here. No, it was poor. It was neg­a­tive, some­thing like ‑15%. Just put some con­text around that, when we talk about my per­for­mance, I’m going to start using our self-man­aged super fund, which is, again, her­met­i­cal­ly sealed. I made a lit­tle con­tri­bu­tion to it last year, but not enough to move the dial on returns. And we haven’t been tak­ing mon­ey out. So, it’s like our dum­my port­fo­lio. Now, but it was, it was back­wards. I’m doing that because we’re using the rest of our shares to, you know, live on, and the ins and outs hap­pen­ing with that just makes the per­for­mance of it hard­er to be mean­ing­ful. Yeah, it was neg­a­tive, and I’m gonna have to sit down and work out why. I mean, I think I know why; there were just too many sells dur­ing the year, either rule ones or 3PTLs.

Cameron  11:17

Do you need to have a Zoom call with me, Tony, so I can make sure you’re fol­low­ing the sys­tem cor­rect­ly?

Tony  11:23

I am fol­low­ing the sys­tem. It’s been going against me, unfor­tu­nate­ly. Yeah. So, what can I say? I think there’s been too many sells. I’m going to have a good look at it a bit fur­ther and see if I can glean any­thing from that, that I might be able to do dif­fer­ent­ly. But a cou­ple of oth­er things, which I think may have affect­ed it. I have a much small­er port­fo­lio than I have in the past. I think there’s, you know, eight stocks, I think, from mem­o­ry, in the super­fund port­fo­lio. And that’s a fac­tor of, there’s been peri­ods when I’ve had to rebuy or dou­ble buy a stock because there’s been noth­ing to buy on the buy list. But also, too, I’m hap­py to con­cen­trate my port­fo­lio a bit. I can accept the var­i­ous the volatil­i­ty that comes with that, and this is one of those sit­u­a­tions which is more volatile than the dum­my port­fo­lio and more volatile than the mar­ket. But that goes both ways. When things turn, it’ll be more volatile going upwards as well. And I have done a lot of test­ing on small port­fo­lios. Dylan did some test­ing for me on a four-stock port­fo­lio a cou­ple of years ago, which he said was the opti­mum size for a port­fo­lio, if you can stom­ach the volatil­i­ty.

Cameron  12:33

Four?

Tony  12:34

Char­lie Munger has said a four-stock port­fo­lio is the best size. So, I’m kind of mind­ful of that. I’ve done my own paper test­ing of a one stock port­fo­lio, just buy­ing the biggest ADT stock that we can buy on the buy list, and that’s per­formed bet­ter for me than hold­ing fif­teen stocks. Which kind of makes sense, because a) it’s top of the buy list, and b) it’s, you know, our best idea, so to speak. But it is volatile. So, I think that might also be play­ing into my returns this year, because it’s a small­er port­fo­lio. Yeah, but def­i­nite­ly the prob­lem has just been too many rule 1s and 3PTL and com­mod­i­ty sells. So, got hit hard at the start of the finan­cial year with the coal stocks com­ing off. And then things like Karoon Ener­gy I’ve bought and sold a cou­ple of times dur­ing the year. And it’s kind of just zigzagged, so I’ve been caught out there a cou­ple of times. And then just all the oth­er nor­mal trad­ing and oth­er stocks. Chal­lenger Finan­cial Group was one of them, which was doing well, and then I had to sell out off. So, yeah, I mean, it’s tough, but, you know, I’m not real­ly mea­sur­ing myself on a one-year basis. If I look at the long term returns for that super fund, for the port­fo­lio, it’s still in the long term 17.2%, some­thing like that. So, you know, dou­ble mar­ket, so that’s good. And I kind of think about this is like an elas­tic band; it’s like, if we’re get­ting dou­ble mar­ket over the long term, and we’ve fall­en back behind the mar­ket this time, it’s like stretch­ing an elas­tic band in one way. And then if it’s going to get back up to dou­ble mar­ket on aver­age, it’s going to fling back the oth­er way and give us a good return even­tu­al­ly, to catch up to that kind of long-term aver­age, which I still expect it to do.

Cameron  14:16

I’m sure there’s a lot of peo­ple, par­tic­u­lar­ly our club mem­bers, that will be hap­py to hear that because some of them have had a rough year.

Tony  14:22

Is that schaden­freude? They’re hap­py to hear me lose mon­ey.

Cameron  14:28

I think it’s more in terms of, well, it’s not just them that’s los­ing mon­ey. And, you know, your port­fo­lios are prob­a­bly many, many times big­ger than most of our port­fo­lio. So, 15% down for your port­fo­lio is a big­ger paper loss than it is for most of us. But it’s inter­est­ing because, you know, in terms of the sys­tem, as I said, the dum­my port­fo­lio is up 9.5%/10.5% depend­ing on how you want to mea­sure for the year. Why do you think the dum­my port­fo­lio had a rel­a­tive­ly good year, where­as your super port­fo­lio did­n’t? Just luck of the draw with the stocks that you had to, like, the com­mod­i­ty stocks, you had to sell, and then strug­gled to get back on sol­id ground with the rule 1ing, etc?

Tony  15:22

Yeah, look, it is going to be the mix of stocks, I would think. And per­haps the small­er port­fo­lio’s more volatile. But yeah, I mean, I think the dum­my port­fo­lio can but into a lot small­er stocks then when I can. And some­times hav­ing to buy, some­times the only large cap ADT is way down the bot­tom of the buy list, so I think that might be part of it, too. Like, I think the most recent exam­ple was Collins Food was the last thing on our buy list, and I bought it, and then had to 3PTL it. And now it’s bounced back. So, that’s an illus­tra­tion of what the year has been like for me. Where­as the dum­my port­fo­lio’s large­ly fish­ing at the top of the buy list. So, I think that’s the ben­e­fit of hav­ing less con­straints on ADT.

Cameron  16:06

Yeah, right.

Tony  16:07

And maybe that just means I need to draw the mark high­er for the bot­tom of the buy list, like a high­er cut off for me. But Ryan’s research­ing that for me now and we’ll see what the out­come is.

Cameron  16:19

So, say 0.2 or 0.3?

Tony  16:22

0.2, yeah. And we’re still work­ing through that. He’s been up and down with the results on that. He’s done some research on whether we should buy from the top of the buy list first or buy from the bot­tom of the buy list first. Orig­i­nal­ly it said there was an over­whelm­ing sup­port for the top, and now his lat­est analy­sis is show­ing sup­port for the bot­tom. So, we’ve just got to drill down and get it right. I keep send­ing him back say­ing, “ah, but you did­n’t use the com­mod­i­ty sells, or you sold some­thing when you’re wait­ing for a div­i­dend check to be paid.” So, we’re kind of refin­ing the process to make sure it’s accu­rate. And on top of that, I have been doing a paper test of a QAV 0.2 or bet­ter port­fo­lio, and that’s actu­al­ly been real­ly hard to fill. It’s only got about three stocks in it since I start­ed a cou­ple of months ago, and it’s been under­per­form­ing. So, yeah, there’s a fair bit to go yet before I can decide where to draw the line.

Cameron  17:16

Yeah, I imag­ine you’re a bit like me, because my ADT for my super fund is sim­i­lar. I’m only able to buy ASX 300 stocks in that. And there’ve been long peri­ods over the last year where I have been sit­ting in cash, because I just could­n’t find any­thing that I could buy. And then I would dou­ble up on posi­tions, which makes it a lot more volatile. I think I’ve prob­a­bly got eight or ten stocks in my super port­fo­lio, because it’s been, you know, very dif­fi­cult to find stuff to buy this year. Dou­ble posi­tions on a lot of those, too. So, yeah, that’s kind of been chal­leng­ing. The light port­fo­lios, I did the end of finan­cial year report on those. And you know, we only start­ed that in April last year, and a lot of them, you know, only closed-well, the last one only closed a cou­ple of weeks ago. I start­ed it in Decem­ber ’22 and only closed it a cou­ple of weeks ago because I could­n’t get rid of the start­ing cap­i­tal. It took me six months to get rid of the start­ing cap­i­tal, which is crazy. Every time I’d buy some­thing, I’d have to rule 1 some­thing in the port­fo­lio a week or two lat­er. It’s been a crazy peri­od. But there’s been some inter­est­ing results that peo­ple have report­ed on Face­book. Ed and Brent report­ed their results yes­ter­day, or the day before. Inter­est­ing that their FY23 results were almost iden­ti­cal. I think they were both up about 8.5% for the finan­cial year, which is inter­est­ing.

Tony  18:53

And sim­i­lar to the DP, as well.

Cameron  18:56

Yeah. The DP is, you know, 9.5/10.5 depend­ing on how you mea­sure, but all in the same sort of ball­park. Inter­est­ing. Brent also report­ed his results going back, I think, to FY21. And, you know, this to me is a clas­sic exam­ple of stick­ing with a sys­tem like QAV year in, year out. And he said his total return since Jan­u­ary 2021, which was his incep­tion date, is 78.87% ver­sus the AXJOA total return of 15.18%. So, his out per­for­mance is 63.68% since Jan­u­ary ’21. Finan­cial year ’21 was 21.29% ver­sus 8.4 for the All Ords. FY22 was 35.87% ver­sus ‑0.7% for the All Ords, and ’23 was 8.5% per­cent ver­sus 14.75% for the All-Ords total return index in his calcs, which has an under­per­for­mance of 6%. But all up, you know, over the three years, very good. But I had some­body else say that over the three years, I think it was Stephen, said over his three years, he’s actu­al­ly down a bit. So, that’s inter­est­ing. I sug­gest­ed we jump on Zoom. I want to under­stand more about how his results would be dif­fer­ent from Brents. But there you go. I think the anal­o­gy you made of buy­ing a house last week real­ly res­onat­ed well with me, I’ve thought about that a lot this week. You’re right. You buy a house, spend a mil­lion bucks on a house, the hous­ing mar­ket goes down by 10%. And this struck me as inter­est­ing, too. Like, when we think about the hous­ing mar­ket, and when it gets talked about in the press and the finan­cial media, you know, they don’t say, “your house has gone down by 10%,” it’s the “hous­ing mar­ket across Bris­bane”, or “across Syd­ney” or “across Aus­tralia is down by 10%.” It’s more, you know, dis­persed, the blame for it; “the hous­ing mar­ket is down.” Where­as when it’s my share port­fo­lio, I think, “oh, my port­fo­lio is down by 10%,” regard­less of where the mar­ket is at some times. I think, you know, the oth­er dif­fer­ence is, when peo­ple buy a house, of course, they’re going to live in the house — assum­ing it’s not a rental prop­er­ty, right — they’re liv­ing in the house, sell­ing it and mov­ing has a lot of emo­tion­al, phys­i­cal and emo­tion­al hur­dles you have to get over to do that. But also, there’s some­thing dif­fer­ent, I think, when peo­ple buy a house, they’re prob­a­bly a lit­tle bit more con­fi­dent in the fact that it will do well over the long term, because it’s kind of a gener­ic thing. We know the prop­er­ty mar­ket ris­es. When you’re buy­ing a port­fo­lio of shares, par­tic­u­lar­ly if you don’t have a strat­e­gy in place and you’re not con­fi­dent that you can con­tin­ue to pick shares that will do well in a port­fo­lio over a ten-year peri­od. Before QAV, if I had a share port­fo­lio that was going back by 10/15/20%, it would be easy for me to go, “well, I bought bad shares in bad com­pa­nies and I don’t know what I’m doing,” and they could go down to zero. When you’re fol­low­ing QAV, you know, these com­pa­nies are very unlike­ly to go out of busi­ness, unless, you know, they might get acquired, but they’re not gonna go broke. We’re not buy­ing dot­com start-ups with no prof­its that could lit­er­al­ly, you know, go bel­ly up. These busi­ness­es are going to weath­er a finan­cial storm and if you con­tin­ue to buy good qual­i­ty com­pa­nies that have a good track record of prof­its, and you’re buy­ing them when you think they’re at a dis­count or their intrin­sic val­ue, over the long term they’re prob­a­bly going to do okay, right?

Cameron  18:56

Yeah, well, you said so much there, some real­ly good things in there. It’s in terms of view­ing the hous­ing mar­ket dif­fer­ent­ly to the share mar­ket, it comes back to that dis­cus­sion we had a lit­tle while ago: no one stands around the bar­be­cue talk­ing about shares, they stand around the bar­be­cue talk­ing about prop­er­ty. So, in terms of know­ing that if you buy a house it’s going to go up in the long term, that opin­ions been rein­forced by your par­ents, by your uncles, by your aun­ties, by your col­leagues, by your friends. You’d be hard pressed to go and find a num­ber of peo­ple, but you might find one or two who said, “yeah, the mar­kets gone against me with my house.” Gen­er­al­ly, peo­ple are quite hap­py with how things turned out long term with their hous­ing pur­chase. Where­as, you know, if you raise the spec­tre of stocks in a con­ver­sa­tion, you’ll gen­er­al­ly find some­one who says, “oh, don’t talk to me about stocks. I bought this and it went down.”

Cameron  23:46

Yeah.

Tony  23:47

Or, “I got this tip and it went down.” And so, you don’t get that same sort of pos­i­tive rein­force­ment about the stock mar­ket. But fair­ly soon after I start­ed invest­ing, I always viewed a stock port­fo­lio as anoth­er house, you know, in the same sort of mind­set that it was anoth­er asset to invest in. Rather than being a stock mar­ket of com­pa­nies, it was… At one stage we had our house and I’d kept the pri­or one, so we had two or three rentals plus our own­er occu­pi­er, and we had a share port­fo­lio. And we got rid of the rental prop­er­ties over time and bought big­ger hous­es and more shares. And, you know, now it’s kind of like a two-house port­fo­lio. And that’s how I think of it; it’s just like hav­ing anoth­er house.

Cameron  24:30

Yeah, you’re right. I think for most peo­ple, the idea of prop­er­ty own­er­ship is fair­ly well estab­lished in this coun­try, but shares are like quan­tum mechan­ics for most peo­ple.

Tony  24:41

And it should­n’t be, because they all have super­an­nu­a­tion funds which have shares in them, and they’re usu­al­ly pret­ty com­fort­able with the super­fund. No one’s run­ning up to Can­ber­ra and protest­ing against the super­an­nu­a­tion indus­try or the super­an­nu­a­tion sys­tem. They do on cer­tain issues like tax­a­tion, but gen­er­al­ly peo­ple retire and they’re fair­ly hap­py with how their super has been grow­ing over the years. But they don’t put two and two togeth­er and say, “oh, okay, that’s been dri­ven by the share mar­ket. If I’d done it myself, I’d get a sim­i­lar sort of return.”

Cameron  25:13

Yeah. That reminds me, I was invit­ed out to lunch last week, Tony, by anoth­er long-term pod­cast lis­ten­er of mine. Some­body else who goes back to the Napoleon pod­cast days. And he was in Bris­bane, he’s from Mel­bourne, he was in Bris­bane and took me out to lunch at the Queens­land Club, where I felt like I was in a repub­li­can con­ven­tion. It was full of old rich white men wear­ing suits.

Tony  25:44

I can imag­ine.

Cameron  25:45

I put on a suit for the first time in sev­er­al years to go. It was inter­est­ing. I walked in with a pony­tail and a suit on.

Tony  26:00

And they thought Bar­ry and Stan have come.

Cameron  26:01

Yes, exact­ly. But this guy who took me out runs a wealth management‑a wealth advi­so­ry, sor­ry, a wealth advi­so­ry busi­ness in Mel­bourne. And he said that he’s basi­cal­ly val­ue invest­ing. He’s a big fan of Char­lie and War­ren, and every­thing he does is val­ue. But he said that he always gives his clients what he called a “din­ner par­ty stock”, some­thing to talk about at the din­ner par­ty. He said, I put them all into After­pay when it was like two bucks and, you know, they could talk about that. There’s always some­thing a lit­tle bit sexy and spec­u­la­tive that they can talk about. But 95% of it’s all, you know, real­ly bor­ing, you know, QAV type stocks. He does things a lit­tle bit dif­fer­ent­ly to you. His per­for­mance isn’t quite as good. He said it’s about 15% com­pound, but that’s pret­ty good. So, any­way, I’ve invit­ed him to come on and he’s going to be a guest, David, in the next cou­ple of weeks. So, it’ll be fun to have a chat.

Tony  26:59

Yeah, that’s good. And you just remind­ed me of a cou­ple of inter­ac­tions I’ve had in the last week or so. So, one was with Tay­lor, the next Tom Cruise, after his meet­ing in Syd­ney. But last time he was in Syd­ney, he came, and we had a chat. And it’s always great to see him. It’s real­ly nice, he looks me up and comes around for a chat. But he was say­ing, like, he’s look­ing after these influ­encers, he’s their man­ag­er. And they’ve all got this cash sit­ting there but it’s not their core com­pe­ten­cy on how to invest it. And they’re all scratch­ing their heads about what to do with it. And of course, there­fore, they’re pray to, you know, the Lam­borgh­i­ni deal­ers or who­ev­er, you know, is try­ing to sep­a­rate them from their mon­ey. And sim­i­lar­ly, I played golf with a cou­ple of thir­ty year old guys Sun­day week ago, and we had a chat after­wards. The top­ic turned around to invest­ing when they found out about the pod­cast, and they’re like, “well, we just don’t know where to begin. What do I do? How do I start? I want to go into the stock mar­ket, I’ve got no idea.” And I think these peo­ple have been let down by the fact that you can’t get wealth advice with­out pay­ing $5,000 to a wealth advi­sor who has to do a whole heap of paper­work to send off to the gov­ern­ment before they can give you any sort of advice at all. And I know we talked about this before, but, you know, there was a review into that, and the gov­ern­men­t’s only accept­ed some of the rec­om­men­da­tions, not all of them, so I can’t see it chang­ing any­time soon. But there is a real gap in the mar­ket for some­one to be able to sit down with these peo­ple and say, “hey, this is how you get start­ed.” With the golfers, for exam­ple, we had a chat about, “well, you’ve got to get get into the prop­er­ty mar­ket,” for exam­ple. One of them was rent­ing his own house and I said, “well, that’s just dead mon­ey.” And he’s like, “oh, yeah, but I liked the free­dom.” And you know, I said, “well, if you took that rent mon­ey, could you get a mort­gage” “Yeah.” “Would you have spare rooms to rent out in the house if you did that?” “Oh, yeah, I’d just buy a three- or four-bed­room house and just use one for myself.” I said, “so, some­one can be pay­ing for three quar­ters of the mort­gage?” “Oh, yeah, I had­n’t thought of that.” And we just sort of went on from there. And I said, “well, you know prop­er­ty tends to dou­ble every sev­en-ten year, so in that time peri­od you’ll be able to go and get a sec­ond mort­gage on the prop­er­ty.” “Oh, real­ly? What’s that?” You know? So, just the basics, how to attack things, the prag­mat­ics of how to attack things and get a start, just isn’t being taught. And I think part of that prob­lem is because there’s big bar­ri­ers to prop­er wealth advice in this coun­try. It’s a shame.

Cameron  29:30

I love the fact that you’re on the golf course say­ing, “yeah, I do a pod­cast.”

Tony  29:33

Yeah. It usu­al­ly goes, “what do you do?” “I’m retired.” “Oh, real­ly?” I say, “yeah, but I’m pret­ty busy. I’ve got a horse breed­ing busi­ness, I do a pod­cast, I invest for myself, you know, help a cou­ple oth­er friends out,” and they’re like, “oh, what’s your pod­cast on?” “Qual­i­ty at Val­ue, val­ue invest­ing.” “Oh, tell me about it!” It’s always the top­ic of con­ver­sa­tion once they know.

Cameron  29:56

Yeah, I have sim­i­lar con­ver­sa­tions in my kung fu class­es. “What do you do?” Mov­ing right along, then. Jason from QAV light. One of our light sub­scribers. I don’t encour­age ques­tions from light sub­scribers, but Jason has been very active and giv­en me lots of good feed­back since light start­ed. And he did a lit­tle report for me on his per­for­mance as a QAV light sub­scriber over the last sort of year or so, which I thought was inter­est­ing. He said he’s done fifty sells since he start­ed, with twen­ty-three rule 1 sells and twen­ty-one 3PTL sells. There’s also four com­mod­i­ty sells in there. He said, “I thought I’d focus on the rule 1 sells and whether the 10% was a decent sell line, since in the episode you said it was a bit of a ran­dom num­ber. My aver­age rule 1 loss is at ‑12.69%. Out of my twen­ty-three rule 1 sells, twen­ty-one of them con­tin­ued to drop even fur­ther. Out of those rule 1 sells that dropped even fur­ther, the aver­age low would have been ‑27.41%,” low­er than his buy price. “Out of my twen­ty-three sells, eleven recov­ered to have a high price high­er than my buy. The aver­age per­cent of the recov­ery is 23% above my buy price. The final bit of analy­sis. So, those above that dropped then recov­ered to be a prof­it, how low did they drop? The num­bers tell me they aver­aged to a ‑24.5% loss. Those that did­n’t recov­er to a prof­it aver­age loss was ‑29%. So, what does all this mean? Well, it’s as clear as mud. Maybe a ‑25% loss could be the new rule 1 but los­ing 25% then sell­ing is a tough loss to take, and hon­est­ly a bit of a gam­ble. I would real­ly need to see how much the recov­ery is to off­set the addi­tion­al loss. Maybe that’ll be my next bit of analy­sis. Any­way, take it with a grain of salt. Jason.” I thought that was inter­est­ing to the rule 1 analy­sis, because, you know, I know that’s been a ques­tion you’ve had in your mind, about should we change the fig­ure. You talked about that last week. What do you think about Jason’s analy­sis?

Cameron  1:41:46

The QAV Pod­cast is a pro­duc­tion of Space­craft Pub­lish­ing Pro­pri­etary and 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 invest­ment deci­sions.