QAV Weekly Update 2023-08-22

QAV 633 Club

[00:00:05] Cameron: Wel­come back to QAV. This is episode 6 33. We’re record­ing this on the 15th of August, 2023. Hap­py birth­day to Napoleon Bona­parte. Born in, let’s say, let’s see if my mem­o­ry serves me well. 1769. I’m think­ing. So what would that make him?

[00:00:25] Cameron: 354. Hap­py birth­day, Napoleon. You’ve been to Napoleon’s home­town of Ajac­cio in

[00:00:32] Tony: I have. It was a great trip. Yeah,

[00:00:34] Cameron: When did we go there? 20, 2018.

[00:00:38] Tony: Yeah, it’s been five or six years ago now. Five years

[00:00:40] Cameron: yeah. Five years Yeah. Tell you what not going back there in sum­mer. Look­ing at the sum­mer tem­per­a­tures around Europe this year, I think Europe in the sum­mer’s not going to hap­pen. Not going to do that. But love­ly. I love Ajac­cio. Love­ly lit­tle place.

[00:00:54] Tony: Had a nice beach too, so we could go for a swim if it was hot. Not much to burn in Ajac­cio as I recall.. [00:01:00] It was a vol­canic rock from mem­o­ry.

[00:01:02] Cameron: Yeah, not like in Hawaii this week.

[00:01:05] Tony: Oh, it’s ter­ri­ble.

[00:01:07] Cameron: Greece gets lots of fires. Any­way, what are we talk­ing about that for? Let’s talk about oth­er things that are burn­ing. Aus­tralian stocks burnt last week after Fitch down­grad­ed the US’s cred­it rat­ing. It’s burn­ing. The U. S. ‘s cred­it rat­ing. I don’t know how the U. S. ‘s cred­it rat­ing could take a hit, but I did read a lit­tle bit of this report.

[00:01:27] Cameron: It’s pret­ty scathing about the, the state of the Unit­ed States. This in Perth Now, it’s an AAP arti­cle from August 2nd, say­ing the local share mar­ket has giv­en up all of Tues­day’s gains and then some after Fitch Rat­ings down­grad­ed the Unit­ed States cred­it wor­thi­ness, cit­ing a steady dete­ri­o­ra­tion in gov­er­nance.

[00:01:50] Tony: a steady dete­ri­o­ra­tion.

[00:01:51] Cameron: Yeah, yeah, this is dur­ing a Biden admin­is­tra­tion, but I guess he’s… Deal­ing with the Repub­li­cans con­trol­ling the,

[00:01:57] Tony: Yeah,

[00:01:58] Cameron: the House or the Sen­ate, one of the [00:02:00] oth­ers, yeah. But of course it affects us when the U. S. gets down­grad­ed. The U. S. cred­it rat­ing was down­grad­ed from AA to AA plus from AAA.

[00:02:09] Cameron: Say­ing there has been a decline in coher­ence and cred­i­bil­i­ty of US pol­i­cy­mak­ing dur­ing the past due two decades, the repeat­ed debt lim­it polit­i­cal stand­offs, and last minute res­o­lu­tions have erod­ed con­fi­dence in fis­cal man­age­ment, the rat­ing agency said, so why does this affect Aus­tralia? Tony, why does our share price show mar­ket take a hit when the US’ cred­it rat­ing goes down?

[00:02:34] Tony: Yeah, I asked myself the same ques­tion. I think, I think the the, the Rat­ings Agency down­grad­ed Amer­i­ca as much for that, what you just read out about debt ceil­ings and, and par­ti­san pol­i­tics, as much as that, but it’s also increas­ing debt over­all, so the U. S. is is more indebt­ed now than it’s ever been, as is most coun­tries around the world, [00:03:00] because of all the mon­ey print­ing that’s gone on through the GFC and now COVID.

[00:03:04] Tony: So I think that’s prob­a­bly the main rea­son they’ve used the debt ceil­ings as an addi­tion­al rea­son, but I think the main one is that, I for­get now what the num­bers are, but the U. S. debt is at record highs, as it is prob­a­bly in Aus­tralia too. Which means that the cost of debt gets a lit­tle bit dear­er, if the cred­it rat­ing down­grades you, you have to pay more.

[00:03:23] Tony: You have to, if you’re a gov­ern­ment, you have to pay a slight­ly high­er… Div­i­dend on the bond that you’re issu­ing, which is the way that they raise debt, and so it all becomes a bit more expen­sive, so I sus­pect that’s why Aus­tralia went down too, on the basis that that kind of increase in the cost of debt would flow around the world, not just to the U. S. and there­fore affect us. That’s, that’s the best rea­son I can give, but yeah, it does kind of strike me as strange that noth­ing hap­pened in Aus­tralia and our share mar­ket went down as well, heh heh,

[00:03:52] Cameron: Well, I’ll tell you I know that we’ve got one new fan to the QAV pod­cast that would appar­ent­ly be out­go­ing, RBA [00:04:00] Gov­er­nor Philip Lowe. It’s report­ed in the ABC on Sun­day, they’re say­ing there could be bet­ter ways to man­age infla­tion. Are there bet­ter ways to man­age infla­tion? Reserve Bank Gov­er­nor Philip Lowe says there prob­a­bly are.

[00:04:12] Cameron: Last week in one of his final pub­lic appear­ances as Cen­tral Bank Gov­er­nor, he said mon­e­tary pol­i­cy was a very blunt instru­ment that spread pain unequal­ly through the com­mu­ni­ty. He said under an alter­na­tive sys­tem, Sug­gest­ed by Tony Kynas­ton, Mon­e­tary author­i­ties could work dif­fer­ent­ly with gov­ern­ment and trea­sury to bet­ter coor­di­nate their infla­tion fight­ing poli­cies.

[00:04:32] Cameron: We should think seri­ous­ly about it over the long term. You know, I like, okay, that’s nice, but I always love it when out­go­ing peo­ple say, you know what, we should do this dif­fer­ent­ly. And they did­n’t say it in the pre­ced­ing 10 years when they actu­al­ly had some pow­er. They were always say­ing it. Oh, it’s like when Kevin Rudd start­ed crit­i­ciz­ing Mur­doch’s con­trol over the media

[00:04:54] Tony: Yeah,

[00:04:55] Cameron: after he was no longer Prime Min­is­ter and could actu­al­ly do some­thing about it.

[00:04:59] Tony: [00:05:00] it. Exact­ly.

[00:05:01] Cameron: Bit late, Kev.

[00:05:02] Tony: Exact­ly. Well, look, I’m, I’m glad that for once I agree with the RBA gov­er­nor because I don’t often see eye to eye with his, his views and poli­cies,

[00:05:12] Cameron: He runs away when he sees you on the street, we found out the

[00:05:15] Tony: yeah, he did run the oth­er way. But, but I agree with you, for God’s sake, you’ve been at the RBA for 40 years, now you’ve just worked it out, or if you haven’t just worked it out, now you’re just final­ly telling some­one about it, for God’s sake.

[00:05:26] Tony: You, you are the prin­ci­pal dri­ver of the econ­o­my, you’re the Grand Poobah of Aus­tralian eco­nom­ics, and you wait until you’re sacked before you come out and tell us how to do it bet­ter?

[00:05:37] Cameron: And he’s even, he even took a swing at the review that they recent­ly had. He said, well, we’ve had this review, so now we’re pro­ceed­ing to imple­ment the rec­om­men­da­tions, but at a very high lev­el, I still think there’s worth giv­ing thought to coor­di­na­tion between mon­e­tary and fis­cal pol­i­cy, which appar­ent­ly was­n’t part of the review.

[00:05:56] Cameron: He says the rea­son the mon­e­tary pol­i­cy has real­ly been assigned to an [00:06:00] inde­pen­dent cen­tral bank is it’s very dif­fi­cult for the polit­i­cal class to do what we’re cur­rent­ly doing, that is putting up inter­est rates. Peo­ple are hurt­ing, it’s very uncom­fort­able, and we’re putting up inter­est rates. In parts of the com­mu­ni­ty, we’re incred­i­bly unpop­u­lar.

[00:06:13] Cameron: I often read in the news­pa­per and lis­ten to Tony Kynas­ton’s pod­cast that I’m the most unpop­u­lar per­son in the coun­try. It’s much hard­er for the polit­i­cal class to be unpop­u­lar in the way the Reserve Bank, and I am unpop­u­lar. So I’m pop­u­lar, I have to run away when I see Tony com­ing down the street. And that’s large­ly why set­ting of inter­est rates and man­ag­ing the infla­tion cycle has been assigned to an inde­pen­dent cen­tral bank who does­n’t have to wor­ry about being re elect­ed and being pop­u­lar, he said.

[00:06:36] Cameron: I thought it was so they were at arm’s length from the gov­ern­ment and could just make sol­id eco­nom­ic deci­sions with­out polit­i­cal influ­ence. He makes it sound like they’re just like, oh, you know, we don’t want to be the bad guys. We’ll farm it off to you. You can be the bad guys and then

[00:06:52] Tony: yeah, can you, can you imag­ine Paul J Keat­ing shirk­ing away from a tough deci­sion? Look, I have some sym­pa­thy for what he’s say­ing. He’s, he’s, he’s [00:07:00] actu­al­ly cor­rect. It’s if, if the gov­ern­ment was in charge of inter­est rates, which they were, Pri­or to about the 80s, I think, when the RBA was set up inde­pen­dent­ly. Well, you see what hap­pens, we get print­ing of mon­ey freely ad infini­tum until, you know, the debt gets down­grad­ed.

[00:07:17] Tony: So, that’s, you know, that’s, that is the issue. He’s dead right with that. But, I mean, he’s… He’s also been the RBA Gov­er­nor for the last sev­en years. Did he ever go to the gov­ern­ment and say, Hey I could put inter­est rates up now, which would smash the econ­o­my across all house­holds and sec­tors and busi­ness­es, or we could work togeth­er and maybe you could do a bit of a rebate on ener­gy prices and fuel prices for a lit­tle while, and I’ll keep them where they are.

[00:07:45] Tony: Just because you’re inde­pen­dent does­n’t mean you can’t col­lude. Well, I sup­pose that’s a bit of a tau­tol­ogy. What I mean is you can be inde­pen­dent in that you’re not report­ing to the gov­ern­ment, but you can still work with them. and coor­di­nate pol­i­cy for the bet­ter­ment of the coun­try.

[00:07:58] Cameron: Hmm. Well, let’s [00:08:00] hope his suc­ces­sor does some­thing, or is able to work out some dif­fer­ent deal.

[00:08:05] Tony: Yeah, well he’s also doing the sack­cloth and ash­es trick, isn’t he? Oh, you know, I had it real­ly tough for my reign. I took all the brunt of the neg­a­tive out­pour­ings of peo­ple of Aus­tralia just for the bet­ter­ment of the econ­o­my. I’m going now. You’ll miss me when I’m gone. You won’t have me to kick around any­more once I’m gone.

[00:08:22] Cameron: The Joh Bjelke Peter­son argu­ment.

[00:08:24] Tony: Richard Nixon argu­ment.

[00:08:26] Cameron: Him too, was it? Hmm.

[00:08:27] Tony: Yeah, that’s where it comes from. Yeah.

[00:08:29] Cameron: Well, I think the pulled, pulled, pulled, pulled, I can’t even say it, the pulled pork curse is final­ly, well and tru­ly bro­ken, Tony. You did Nick Scali last week they came out with their results. And mar­ket’s very hap­py. Very hap­py with it.

[00:08:45] Cameron: They’re even up today when most things aren’t. They jumped from 10. 68 up to 12. 43. Nice, nice jump on the back of their thing. So there you go. No more pulled pork [00:09:00]curse. But Nick Scali did warn of slides in orders. Nick Scali boss, Antho­ny Scali, said he’s brac­ing for a tougher year ahead, warn­ing that con­sumers are very cau­tious and spend­ing on big tick­et items such as sofas is com­ing under pres­sure.

[00:09:14] Cameron: He did not pro­vide any full, firm, full year guid­ance for the new finan­cial year, but flagged that July orders fell 8. 1% from strong sales in July last year. to 39. 7 mil­lion. Shares rock­et­ed up 14. 5% after the ear­ly update to the year was not as bad as the mar­ket had feared. So, we don’t, we don’t own Nick Scali, I don’t think, but good luck to any­one who

[00:09:40] Tony: yeah, I think it only came back on the buy list last week from mem­o­ry, which is why I did it,

[00:09:45] Cameron: well, yeah, well, that would have been a nice one to get in on, but yeah, we missed out. Well, what else have I got in my news items for this week? Let’s see. MYR! Myer rebound­ed after last week’s [00:10:00] plunge. They’re still not back to where they were, but let’s see, they were trad­ing at about 71 cents, and they came out with their, you know, we did okay announce­ment, and the mar­ket said, yeah, not good enough.

[00:10:14] Cameron: They dropped down to 61 cents, went back up to, what’s that, around about 68, they’re down with the mar­ket today to 65, but so they’re sort of halfway back to where they were. And that, that always sort of amazes me. I mean, I know it’s a big mar­ket, and they’re a rel­a­tive­ly well trad­ed stock, but, you know, it’s sort of, they take that kind of a beat­ing and then the mar­ket goes, eh, you know what.

[00:10:39] Cameron: Eh, that was­n’t that bad, real­ly. Like, a day lat­er, two

[00:10:42] Tony: well that’s how the mar­ket’s meant to work though, right? Like there’s peo­ple out there who say I want to buy Myer but only at 60 cents, and when the price gets to 60 cents they wade into the mar­ket again.

[00:10:50] Cameron: jump in. Yeah,

[00:10:52] Tony: Ooh,

[00:10:53] Cameron: assume it’s not the same peo­ple who sold it buy­ing back in.

[00:10:56] Tony: yeah, prob­a­bly not. Yeah.

[00:10:57] Cameron: Last sto­ry I’ve got, this is from today. [00:11:00] Min­ers fall as iron ore price breach­es 100 US a ton. got a bunch of FMG in our var­i­ous port­fo­lios and they’re near­ly all rule ones at the moment. A weak­en­ing iron ore price pushed min­ing giants in the Aus­tralian share mar­ket low­er on Mon­day, ahead of anoth­er batch of Chi­nese eco­nom­ic data set to drop on Tues­day.

[00:11:19] Cameron: Iron ore futures trad­ed in Sin­ga­pore briefly fell below 100 US a ton, amid fur­ther evi­dence of a weak­en­ing Chi­nese econ­o­my. The appar­ent­ly Chi­nese trust com­pa­ny Zhongxi Enter­prise Group had delayed pay­ments to three of its clients. Spark­ing liq­uid­i­ty fears in the coun­try’s ail­ing econ­o­my, and the result­ing demand for iron ore.

[00:11:39] Cameron: The news arrived after one of the nation’s largest devel­op­ers, Coun­try Gar­den Hold­ings, last week report­ed steep loss­es in their first half of the year, and said it would sus­pend trad­ing in sev­er­al onshore bonds. So, we do have a ques­tion lat­er on from Cos­min about Iron Ore and its cycli­cal dips in [00:12:00] Octo­ber.

[00:12:00] Cameron: We’ll leave that to then, but do you have any thoughts on Iron Ore and Chi­na? I think Iron Ore we clas­si­fied as a Josephine when we put out the buy list yes­ter­day.

[00:12:10] Tony: just be, I, I had a looked before it came on. I thought it was a buy on the buy list but it should be a Josephine today. I think it’s and I think it’s just become a Josephine, so just be care­ful peo­ple. If you’re using the buy list, it should be a Josephine

[00:12:23] Cameron: Buy list says Josephine.

[00:12:24] Tony: does it? No, I’m look­ing at, well, the one I had looked at said said buy.

[00:12:30] Cameron: yeah, you must be look­ing at a wrong,

[00:12:32] Tony: An old one. Maybe

[00:12:33] Tony: Sor­ry, I was look­ing at the wrong one.

[00:12:34] Cameron: so yes, it’s def­i­nite­ly a Josephine, not a sell yet, but prob­a­bly not far off.

[00:12:42] Tony: Yeah, look, we’ve seen this before in Chi­na most recent­ly with Ever­grande, anoth­er big prop­er­ty devel­op­er that I can’t recall now whether it went bank­rupt or it was bailed out by the gov­ern­ment, but this hap­pens from time to time. I don’t want to make any pre­dic­tions, but often­times when things get dire in the prop­er­ty mar­ket, the [00:13:00] gov­ern­ment steps in with some kind of fis­cal mon­ey print­ing or the equiv­a­lent of in Chi­na and and helps out the econ­o­my, but it’s not, it’s not guar­an­teed.

[00:13:09] Tony: So we’ve seen this before.

[00:13:11] Cameron: Well, we’ll just do what we nor­mal­ly do, hold on to it until either the stock or the under­ly­ing com­mod­i­ty becomes a sell, and then we move out of it.

[00:13:21] Tony: cor­rect.

[00:13:22] Cameron: All right. What have you got? Pulled pork today, Tony.

[00:13:26] Tony: Yeah, I’ve got it. Let me just make sure I’ve cov­ered off on every­thing. Yeah, Pulled Pork, Baby Bunting, which was a request. Or as I guess it could be known as Baby Bun­nings. It’s the cat­e­go­ry killer for, for mater­ni­ty and new­borns. If any­body has­n’t been into a baby bunting store, they’ll notice that it’s it’s large, it has many dif­fer­ent types of prams, bassinets, rock­ers, they also sell dis­pos­able nap­pies and nap­py wash­ers and all that kind of stuff.

[00:13:59] Tony: So [00:14:00] it’s basi­cal­ly a one stop shop for expect­ing moth­ers and new mums. We went there back when it was just one store in Cam­ber­well in Mel­bourne. So it’s been around for 40 odd years accord­ing to its web­site. One of the inter­est­ing things. I found out about this com­pa­ny was it was set up by the Nadel­man fam­i­ly and they exit­ed the reg­is­ter I’m not sure exact­ly when, but per­haps around the time of list­ing and so we don’t have an own­er founder in this.

[00:14:25] Tony: Now it’s, I think that’s prob­a­bly okay. I sus­pect that, I don’t know why, but it’s pos­si­ble that the Nadel­man fam­i­ly had no one to take over the con­tin­ued run­ning of the busi­ness. And that’s often the case with com­pa­nies that list is that it’s a way for the founders to exit with­out pass­ing it on to their chil­dren.

[00:14:44] Tony: So it’s, it’s prob­a­bly okay, but it is a bit sur­pris­ing that a fam­i­ly run store does­n’t have a, a descen­dant on, at least on the, on the board, but it’s, you know, by the by, and it’s it’s pos­si­bly quite okay but [00:15:00] it’s not the case in this par­tic­u­lar case. We don’t have an own­er founder on the board. It’s.

[00:15:05] Tony: It’s, the com­pa­ny, if peo­ple aren’t that famil­iar with it, they have 70 stores across Aus­tralia and New Zealand, all in this sort of cat­e­go­ry, cat­e­go­ry killer baby, sort of baby area. The New Zealand expan­sion is recent. They’ve rolled out a cou­ple of stores in New Zealand with anoth­er rate planned.

[00:15:22] Tony: But one of the things I want­ed to men­tion about this is I think New Zealand’s going to be an issue for them because in Aus­tralia when they launched at least when they list­ed online back in 2015, they even­tu­al­ly became the cat­e­go­ry killer. So there were net­works of oth­er babies and mater­ni­ty stores and even­tu­al­ly they all either were fold­ed into Baby Bunting or went broke because Baby Bunting just grew and grew and grew, under­cut them on prices, on range, on con­ve­nience, on ser­vices, all those kinds of things became known as the des­ti­na­tion for new mums or expect­ing mums to go to.[00:16:00]

[00:16:00] Tony: And the oth­er net­works fell away. They’re start­ing that process again in New Zealand, which may work out well for them because they do have You know, a great val­ue propo­si­tion, but there is already exist­ing com­peti­tors and one called Baby Fac­to­ry amongst oth­ers has already a net­work of 25 stores over there.

[00:16:18] Tony: So that, that could be an issue for them. One of the things I, I noticed about this com­pa­ny is when I was read­ing their annu­al report in prep­ping for this and on their web­site is they do have a, a focus and an empha­sis on ESG. So there’s a lot of A lot of time and effort devot­ed to you know, being a good cor­po­rate cit­i­zen.

[00:16:38] Tony: They’ve got a pol­i­cy on not buy­ing things from coun­tries with slave labor issues. They’ve, they’ve… put a lot of effort into using recy­cled pack­ag­ing in their stores. So I’m guess­ing that’s a big thing for them. And I won­der if it’s because if, if, you know, Mum’s focus­ing on the future of her new­born [00:17:00] baby, that they’re think­ing about these kinds of things.

[00:17:02] Tony: So that maybe is one of their sort of hid­den val­ue propo­si­tions as well. But there cer­tain­ly is a large empha­sis on ESG for this com­pa­ny. As I said before, most of the com­pe­ti­tion has fall­en by the way­side, includ­ing there was one. cat­e­go­ry killer that came from the UK into Aus­tralia and even­tu­al­ly went into liq­ui­da­tion because it could­n’t com­pete.

[00:17:21] Tony: So, so Baby Bunting has a his­to­ry of doing well. Its com­peti­tors real­ly now are Kmart, Big W, Tar­get and Myer. That kind of depart­ment start­ed off as Prams and Bassinets and oth­er mater­ni­ty cat­e­gories as well. But the ben­e­fit of baby bunting, of course, is, is the fact it’s all in one place, it has a much wider range than you’ll find in a K Mart but it’s still pos­si­ble that peo­ple go into baby bunting and shop around and find the thing they want and go and try and shop around at K Mart and Big W and get a cheap­er price for it.

[00:17:52] Tony: So that may be an issue for them. The inter­est­ing thing is they just announced the lat­est results last Fri­day and they, [00:18:00] the results on, on. paper or on face val­ue weren’t good. Even though the share price has risen since the results came out a bit like Nick Scali, I guess they’re not as bad as peo­ple thought, but just to run through them, sales were up 1. 7% to 515. 8 mil­lion. How­ev­er, like for like sales were down 3. 6%. And that’s an impor­tant thing for retail­ers and one of the things that ana­lysts will focus on. Like for like sales is basi­cal­ly how the sales from stores that were open for more than 12 months and how they’re doing. So, if they’re going down, it means a cou­ple of things.

[00:18:33] Tony: Either there’s a, there’s a prob­lem with the, with the, the, the for­mat and the offer­ing or the pric­ing. Or, the new stores are can­ni­bal­iz­ing the exist­ing net­work, so that could be a an issue for this, for this com­pa­ny, because after all, how many mater­ni­ty stores can you open in a coun­try before you start can­ni­bal­iz­ing, but that may not be the issue.

[00:18:53] Tony: Online sales were also down over 8% to 103 mil­lion. So still a large part of the busi­ness, about 20% is now [00:19:00] online. Net prof­it was down 51% to 14. 5 mil­lion. And the div­i­dend was cut by more than half, to 7.5 cents. So that last thing is quite wor­ry­ing because com­pa­nies, as we’ve learned, are very low to drop their div­i­dends because it los­es faith with the share­hold­ers.

[00:19:17] Tony: They like to to be able to fore­cast that they’re going to receive a cer­tain lev­el of income, par­tic­u­lar­ly if you’re a retiree and buy­ing this stock for income rea­sons. The NPAT being down 51% is, is a big issue. It was called out that that was caused by increas­ing infla­tion in costs. A lot of it to do was with the New Zealand open­ing and yeah, those, those two things, basi­cal­ly.

[00:19:42] Tony: The share price is down more than 50% over the last 12 months, and the out­look that was pro­vid­ed when the results were announced were for the first 6 weeks of trad­ing, sales were down 4%, and like for like sales were down 9%. So it, it sur­pris­es me the share price is going up [00:20:00]because I find those two things quite wor­ry­ing.

[00:20:02] Tony: But the share price is going up. So I’m going to do this analy­sis at 2. 09, which was the share price on the week­end, but I think it’s more like 2. 30 today. So it did drop when the results were announced on Fri­day, but it’s, it’s going back up again. And the share price is trend­ing up. It’s still a Josephine accord­ing to the Bret­ta­la­tor.

[00:20:21] Tony: So it’s got a long way to get back to its buy price, but it is Now above its sell price and it’s trend­ing up. I should say before I go into the num­bers, this is not a QAV buy stock. It’s a Josephine at best. And we’ll see when I go through the num­bers that it does­n’t reach the thresh­olds either. So I’m using the June 23 num­bers, which came out last week and a price of 2.

[00:20:40] Tony: 09. Stock Doc­tor finan­cial health for this com­pa­ny is strong and steady. The PE is 19. 87, which is rea­son­ably high for a retail­er, but it’s nei­ther the low­est, so we don’t score it. High­est or low­est for the last three years, I should say. The prop cap for this com­pa­ny is 6. 5 times, so not too bad, get­ting up towards our, our high end, but it’s still with­in [00:21:00] our our lim­its.

[00:21:02] Tony: IV1 is only 54 cents and IV2 is 1. 19, which is, you know, almost half what the share price is now, so that’s not good. And like­wise for book plus 30% is, is 1. 04, so you can’t buy this on those met­rics cheap­ly. Fore­cast growth is 14% and I find that inter­est­ing because they’ve called out that their like for like sales are down 9% in the first six weeks and that their sales over­all were down what I say 4% in the first six weeks.

[00:21:30] Tony: So I can’t see how earn­ings per share is going to go 14%. The only way I think it can be is if in this last results, those costs which were incurred in New Zealand were one off and they won’t incur again. So it’s pos­si­ble earn­ings per share goes up. How­ev­er, even if we take that into account. and agree with it, the growth over PE is still 0. 7. So it does­n’t score on a growth basis for us. As I said before, the Nadel­mans and their descen­dants don’t own any mean­ing­ful, mean­ing­ful num­bers of shares in this com­pa­ny. [00:22:00] Direc­tors only own 0. 79 of 1%, so it for own­er founder. All in all, the qual­i­ty score for this com­pa­ny is 3 out of 15, which is only 20%.

[00:22:09] Tony: And the QAV score is 0. 03. So a lot of, a lot of issues there sales are down, like for like sales are down, over­seas expan­sion into poten­tial­ly a tough mar­ket for them and then this extra issue is, is, which I’ll talk about now, is that they have a new CEO com­ing in Octo­ber. So Matt Spence, Spencer, who was there from list­ing and by all accounts has done a good job.

[00:22:36] Tony: announced he was leav­ing the com­pa­ny ear­li­er this year. The com­pa­ny has been in care­tak­er mode with I think the CFO act­ing as CEO and the new CEO starts in Octo­ber. So this is a com­pa­ny which is fac­ing cost increase issues, like for like sales decrease issues, an over­seas expan­sion into a tough mar­ket.

[00:22:56] Tony: And I’m going to tell you the pre­vi­ous role for the Incom­ing [00:23:00] Chief Exec­u­tive that they’ve just employed. The pre­vi­ous role for the Incom­ing Chief Exec­u­tive was the Glob­al Chief Prod­uct and Chief Strat­e­gy Offi­cer for After­pay.

[00:23:11] Cameron: Mm.

[00:23:12] Tony: kin­da, kin­da strange to me, when I read it I laughed, I thought that was, that was inter­est­ing that they’re gonna put a, an inter­net retail­er in charge of a com­pa­ny fac­ing very, very basic retail issues of costs and sales and I don’t know, this per­son, they might have had a pre­vi­ous role in retail, their CV says they worked for Accent One, the shoe com­pa­ny, so they’ve had some retail­ing expe­ri­ence, but I’m sur­prised we’re not see­ing a very expe­ri­enced retail­er come out of Wes­Farm­ers or Kmart or Tar­get or some­one like that to take on this role. The fact that we’re not, sug­gests to me that when tapped and approached, they said no. So I’m, I’m draw­ing a bit of a long bow here, but if expe­ri­enced retail­ers aren’t tak­ing this offer, but tak­ing this job up there’s prob­a­bly some­thing going on there which [00:24:00] did­n’t appeal to them.

[00:24:00] Tony: But when it’s being giv­en to the Chief Prod­uct Strat­e­gy Offi­cer for After­pay it’s… Not, would­n’t have been the first per­son on my list. Now, I’m being harsh 20% of the sales from this com­pa­ny come online. So they’re obvi­ous­ly try­ing to expand that by putting a, some­one with an online expe­ri­ence in.

[00:24:19] Tony: But gee I was gonna head this pulled pork, “back­ing the wrong horse”, because I think they’ve got the wrong per­son in the role. My opin­ion, could be wrong. The mar­ket’s lik­ing it, so maybe I am wrong. But, it’s got­ta lift. It’s got­ta lift like for like sales, it’s got­ta lift div­i­dends, it’s got­ta improve the New Zealand roll­out, and it’s got­ta do it all with decreas­ing costs.

[00:24:40] Tony: So, I think it needs a very expe­ri­enced oper­a­tional retail­er to run this com­pa­ny.

[00:24:45] Cameron: And just look­ing at the Bret­ta­la­tor, I don’t think it’s even a Josephine. It’s

[00:24:50] Tony: Oh, you don’t? Okay.

[00:24:51] Cameron: well, it’s well below its buy line. It’s not even above the buy line. Right. So

[00:24:56] Tony: sor­ry, yes, you’re right, actu­al­ly. It’s, yeah, it’s above its sell line, below its [00:25:00]buy line.

[00:25:00] Cameron: yeah. Long way to go. I mean, it is trend­ing upwards, but a long way to go before it would be a buy for us. So that was a request from Mar­cus.

[00:25:08] Cameron: Who I think is a for­mer employ­ee at BBN, so hope that helps. And

[00:25:15] Tony: He may have some­thing to add, Mar­cus, if you’ve got some­thing about baby bunting you’ve learnt over the years and I’ve got wrong, then please fol­low up.

[00:25:22] Cameron: And he’s appar­ent­ly in Den­mark at the moment catch­ing up with Princess Mary, I believe. So he said he did­n’t see her at the local Aussie South­ern cross, I think for the Matil­da’s game. So, but he said maybe she’ll be there for the, if they make the grand final or some­thing.

[00:25:39] Tony: That’s in Aus­tralia.

[00:25:40] Cameron: Oh, well, you know, she is a, she is a, she’s a princess.

[00:25:43] Cameron: She can make it to Aus­tralia. I’m sure not a big deal.

[00:25:46] Tony: Yeah, but he’s in, he’s in Den­mark.

[00:25:48] Cameron: Maybe he’s in Den­mark to bring her back to Aus­tralia. Maybe that’s his new gig leav­ing baby bunting is princess mind­ing. I don’t know. I did­n’t ask. Any­way, have fun in Den­mark, Marcus.[00:26:00]

[00:26:00] Cameron: Hey Alex!

[00:26:01] Tony: Hel­lo?

[00:26:02] Alex: Hi.

[00:26:02] Tony: Ha ha ha ha.

[00:26:05] Cameron: How are you, Alex?

[00:26:06] Alex: Oh, all right. Thank you. A bit fran­tic get­ting close to the fair. So yeah, I’m good oth­er­wise.

[00:26:13] Cameron: Love­ly. So, what do you have for us this week, Alex? Keep­er of the ques­tions.

[00:26:18] Alex: Yeah. Well, I have a ques­tion from, I think this one’s from Chris. It’s a bit of a long one and I haven’t edit­ed it, edit­ed it for my ease of read­ing. So apolo­gies if I stum­ble a lit­tle bit. It says Can TK pro­vide any advice on this one? Acknowl­edge that it’s pret­ty rare and unique. So I have a fam­i­ly mem­ber with an invest­ment in a com­pa­ny called Updater.

[00:26:39] Alex: They are a soft­ware com­pa­ny pro­vid­ing a plat­form for con­nect­ing ser­vices when mov­ing house. They were list­ed on the ASX until 2018 and are list­ed to move to the US. Shares were val­ued around 21. 25. They were meant to list on NASDAQ over pre­vi­ous 3 4 years, but excus­es have ranged from COVID to poor IPO [00:27:00] val­u­a­tions.

[00:27:00] Alex: Not com­plete­ly unrea­son­able. The rev­enue has been grow­ing steadi­ly. They have been ten­der­ing for a US mil­i­tary con­tract for 3 4 years. This was meant to be the holy grail. Final­ly, they got it ear­li­er this year, and in brack­ets, includ­ing lengthy court case against com­peti­tor. So they’ve known about that, the require­ments for quite a while.

[00:27:20] Alex: How­ev­er, now they’ve got it, they’ve said that they’re unable to ser­vice it with­out sig­nif­i­cant cap­i­tal injec­tion. To secure the cap­i­tal, they’ve dilut­ed the shares, so 21. 25 is now val­ued at 0. 75. Fuckin ouch! Fam­i­ly mem­bers have been offered anoth­er par­cel of shares up to the ini­tial pur­chase quan­ti­ty at 0. 75. Updater have appar­ent­ly now

[00:27:43] Cameron (2): ALLEGEDLY

[00:27:44] Cameron (2): burned a lot of promi­nent investors. And in brack­ets, Lowy, Bail­lieus, Man­aged Funds. And so the sto­ry is there’s a lot more over­sight on their man­age­ment. So, there are three ques­tions. First one, Would it be worth dou­bling the par­cel of shares to dol­lar cost aver­age the loss down to approx­i­mate­ly [00:28:00] 11 by gam­bling an extra 3 5% of orig­i­nal cost?

[00:28:05] Cameron (2): I say gam­ble as this is now a pri­vate com­pa­ny with lit­tle trans­paren­cy com­pared with a pub­lic com­pa­ny. Should I read all three out?

[00:28:11] Tony: Yeah. Read the three out and then I’ll go through them.

[00:28:13] Alex: Alright, ques­tion two. What are the chances of a tech com­pa­ny that has been oper­at­ing in the US since 2018 going from 0. 75 to A, 21. 25 in brack­ets, not tak­ing up the offer, or B, 11, tak­ing up the addi­tion­al 3 5% invest­ment? And the third ques­tion, or based on a loss of at 97% 97% of val­ue of ini­tial invest­ment by cur­rent man­age­ment, would it like­ly be just throw­ing good mon­ey after bad?

[00:28:40] Alex: Any advice on whether to take them up on an offer would be appre­ci­at­ed. Attached is their lat­est share­hold­er update that might pro­vide some insight.

[00:28:46] Tony: Yeah, thanks. Oh, by the way, I did­n’t get the update, so I can’t sor­ry, I can’t Sor­ry, I thought I attached that to my email.

[00:28:54] Tony: oh, you might have, I did­n’t see it, sor­ry.

[00:28:55] Cameron: Oh.

[00:28:56] Tony: Any­way, it, it prob­a­bly does­n’t mat­ter Yeah, [00:29:00] well, I think this, I’d throw this one into the buck­et of sunk cost fal­la­cy. So just because you’re an investor and it’s almost gone to zero, it does­n’t mean you should put more mon­ey in to try and get it back.

[00:29:10] Tony: The only way you’d want to invest in this com­pa­ny is if there was a com­pelling sto­ry for it at 75 cents a share and giv­en that they’re not very trans­par­ent and you don’t have much to go on, it’s pret­ty hard to judge that one. So yeah, that’s, unfor­tu­nate­ly that’s what you have to do. So, Chris, like it’s, yeah, I can’t give per­son­al advice if it was me and this was a gen­er­al sit­u­a­tion where I’d owned a com­pa­ny and it’s gone almost to zero and it’s not, not just a dilu­tion, it’s a dis­in­te­gra­tion real­ly of the share price. You’d have to ques­tion why that man­age­ment can sud­den­ly turn things around.

[00:29:45] Tony: And you’d be look­ing at the num­bers that they pro­vide with the, with the requests for more cap­i­tal. And yeah, just. Prob­a­bly halv­ing them all and try­ing to decide whether you could invest in them or not, but [00:30:00] yeah, I think the chances of it com­ing around aren’t great. Updater, I only have a, I don’t know much about it.

[00:30:06] Tony: It was on the ASX. It’s a com­pa­ny that allows you to, in one sort of cen­tral loca­tion, have all your address details updat­ed to all the util­i­ties when you move house. So that’s the busi­ness mod­el. I’ve got to say, I’m not sure about Aus­tralia, but when I left Cana­da, that was a free ser­vice offered by Cana­da, Cana­da Post when I was leav­ing.

[00:30:27] Tony: And I applied for a mail redi­rec­tion. They came back and said, tick this box and we’ll tell. You know, these dozen or so major util­i­ties of your new address, so I’m not sure how com­pet­i­tive Updater can be in a mar­ket where peo­ple are giv­ing away the same ser­vice for free. So unless they’ve cracked that one I can’t see them adding much val­ue, which is prob­a­bly why their shares are down to 75 cents.

[00:30:49] Tony: If they have got some kind of deal with the U. S. gov­ern­ment that obvi­ous­ly would be a good thing for the com­pa­ny. So, Chris, you’re going to have to sit down and nut out [00:31:00] the num­bers on how much they’re mak­ing for every per­son that moves over the next nine years, I think it was, for the con­tract. But again, if the ser­vice is avail­able for free from Cana­da Post, chances are it’s also avail­able from U. S. Post. And I’m not sure why the U. S. gov­ern­ment would be pay­ing you lots of mon­ey or updat­ing lots of mon­ey to… to do this ser­vice when they can get it from their own, their own gov­ern­ment depart­ment for next to noth­ing. It does­n’t sound like a, like it’s a, it’s a, a busi­ness mod­el with, with a moat around it, I guess is what I’m try­ing to say.

[00:31:30] Tony: But I don’t know the details of it or any sort of haven’t fol­lowed this stock it’s, it’s, to me, it’s anoth­er exam­ple of a stock with high fly­ing ambi­tions that has crashed to worth on, on high mul­ti­ples. And it’s, unfor­tu­nate­ly, not unusu­al to see some of the, the biggest investors in the coun­try, you know, throw, throw a few bucks at it and lose out.

[00:31:50] Tony: Which is kind of their busi­ness mod­el, we’ll play back a hun­dred com­pa­nies or kiss a hun­dred frogs and one turns out to be a uni­corn and they make mon­ey, so I don’t know if they’ll be los­ing [00:32:00] sleep over this.

[00:32:01] Cameron: That was my approach to mar­riages too. But any­way, keep going.

[00:32:03] Tony: well it’d be, I guess it’d be an indi­ca­tor as to how seri­ous­ly they took the idea if they were putting mon­ey in, but you prob­a­bly won’t know about that until the after the the round, the fundrais­ing round clos­es. So, Chris, sor­ry, I can’t say any­thing more about it, but I think it’s a sunk cost fal­la­cy.

[00:32:19] Tony: Your fam­i­ly mem­bers prob­a­bly bet­ter off just tak­ing what they’ve lost and sell­ing the shares and then putting it against the cap­i­tal prof­its some­where that they might have

[00:32:27] Tony: Their port­fo­lio.

[00:32:28] Cameron: how do you even sell the shares?

[00:32:31] Tony: Yeah, good point. I think it was, is it, okay, again, I don’t know much about it. I think it’s going to list on the NASDAQ, isn’t it?

[00:32:38] Cameron: In the­o­ry.

[00:32:39] Tony: In the­o­ry, yeah. If it lists on the NASDAQ, then they can sell their shares.

[00:32:42] Cameron: So what, what’s the process? I mean, I did live through this when I had an invest­ment in hot cop­per back in the ear­ly 2000s, but which I think, oh, it might’ve been acquired. But I, any­way, I lost all my mon­ey in it, but. If a com­pa­ny delists, if you invest in a com­pa­ny in the ASX and then it [00:33:00] delists, what’s, what, you know, what hap­pens to your legal own­er­ship over the shares in that com­pa­ny?

[00:33:06] Cameron: How is that man­aged? How, you know, what’s the over­sight of that? Do you, do you have any idea of what

[00:33:12] Tony: Yeah, yeah. Unfor­tu­nate­ly, I’ve gone through it as well with one or two invest­ments over the years. One was a New Zealand insur­ance com­pa­ny, which, which was delist­ed. It’s, it’s still a com­pa­ny that you own shares and it’s just not pub­licly trad­ed. So I think from mem­o­ry, what hap­pened with the New Zealand insur­ance com­pa­ny was some­one came along and offered a very small amount for the shares to buy them out on a pri­vate basis.

[00:33:36] Tony: So you can sell them. If, if it, if it delists and then just sits there, you’re stuck. If no one wants to buy your shares you can’t even claim the cap­i­tal loss until it goes into liq­ui­da­tion. And then that liq­ui­da­tion event will get list­ed with the ATO as being the trig­ger for a cap­i­tal loss.

[00:33:54] Tony: And then you can write it off.

[00:33:55] Cameron: And I imag­ine there’s got to be some sort of, [00:34:00] frame­work around pro­tect­ing investors. I mean, if I invest in a start­up, they can’t just take my mon­ey for the shares and then go, yeah, we’ve changed our mind. We’ve delist­ed. Thanks very much. Good night. And take off.

[00:34:10] Tony: course. Well, of course they could I’m, I’m sure it’s hap­pened.

[00:34:14] Cameron: Yeah, right. So they could do that. And then there’s just like the law­suits that come after­wards for some­thing. I just looked up

[00:34:21] Tony: Yeah, cor­rect. Yeah. So I’m not sure, I can’t remem­ber about a update. They, I remem­ber at the time they were say­ing, oh, the val­ue we’re not val­ued at a high enough mul­ti­ple on the A S X. We’re gonna go and list on the Nas­daq. That would be the time to have sold before it delist­ed. I’m, I’m, I, like I said, I’m not famil­iar with Updater.

[00:34:38] Tony: I sus­pect there was a peri­od after they announced they were leav­ing where you could have sold your shares. As in they did­n’t delist and then tell you about it. They would have said we’re going to delist and move to the NASDAQ and you should have had time to sell.

[00:34:50] Cameron: I just looked up an arti­cle from August 15th, 2018, exact­ly five years ago today. Also Napoleon’s [00:35:00] birth­day. It says Updater the

[00:35:02] Cameron (2): 6 hun­dred and 45

[00:35:05] Cameron (2): mil­lion tech­nol­o­gy com­pa­ny that pro­vides ser­vices to Amer­i­cans who are mov­ing home is plan­ning to delist from the Aus­tralian Secu­ri­ties Exchange after it said inter­na­tion­al ven­ture funds were keen to back the com­pa­ny if it went pri­vate.

[00:35:18] Cameron (2): In an announce­ment to the exchange on Wednes­day, updater said it would seek share­hold­er approval. to delist the com­pa­ny, but would allow share­hold­ers to remain invest­ed once the com­pa­ny is pri­vate. The board believed it was in the best inter­est of all secu­ri­ty hold­ers to take the com­pa­ny pri­vate after finan­cial investors and par­ties expressed an inter­est in invest­ing in Updater so long as it was a pri­vate com­pa­ny.

[00:35:40] Cameron (2): The state­ment said, The high­ly unusu­al move is like­ly to catch some investors off guard and raise ques­tions about the role of the ASX in fund­ing tech­nol­o­gy com­pa­nies, the increased shift towards pri­vate own­er­ship, and the appar­ent flood of U. S. ven­ture cap­i­tal will­ing to fund high growth com­pa­nies. So they were going to ask the share­hold­ers to [00:36:00] give them approval to delist, and I assume they had enough con­trol over enough share­hold­ers that they got that approval.

[00:36:06] Cameron (2): Would­n’t have to be 100%

[00:36:07] Tony: Yeah,

[00:36:07] Cameron: It’d be some sort of, yeah, lev­el they had to get.

[00:36:10] Tony: well, just think through the log­ic of that, Cam. The over­seas ven­ture cap­i­tal­ists want to buy the com­pa­ny, but not at the price that’s list­ed at. You have to delist first so we can then buy you. Right. So what they’re say­ing is we think you’re wild­ly over­val­ued . If you have a delist­ed us, no, we’ll, we’ll tip the hat around and we’ll buy you at a much low­er val­u­a­tion. Cause if they, if the, if the flip side was true, if the US ven­ture com­pa­ny com­pa­nies were inter­est­ed in this com­pa­ny is a pri­vate­ly list­ed com­pa­ny, then buy the freak­ing thing on the ASX and then delist it, known it

[00:36:43] Cameron: This arti­cle goes on. It’s, it’s pret­ty, pret­ty good read actu­al­ly. They’re quot­ing the chief exec­u­tive and founder, David Green­berg. Ooh, that name rings a bell.

[00:36:52] Cameron: yeah. Green­berg.

[00:36:53] Tony: Is, is that D Store? Green­berg?

[00:36:56] Cameron: that from the D Store days? Could [00:37:00] be I don’t think so. I knew that. I knew all the peo­ple had. Dstore. Any­way he said man­age­ment was plan­ning to accel­er­ate its growth and scale towards 35% share of house­hold moves. 35%! Oh my god. As well as expand­ing into inter­na­tion­al moves, stu­dent moves and mil­i­tary moves.

[00:37:18] Cameron: Updater also pro­vid­ed an update on its busi­ness progress. It said book­ings for the sec­ond quar­ter more than dou­bled to US 5. 1 mil­lion. They were val­ued at 645 mil­lion dol­lars. And their sales were, had just dou­bled to 5. 1 mil­lion for the sec­ond quar­ter. Big, big dif­fer­ence between how much mon­ey they’re bring­ing in and what their val­u­a­tion was.

[00:37:44] Tony: so, and did they say they were, did they say they were han­dling 30% of U. S. moves

[00:37:49] Cameron: was their goal. Yeah, that was their

[00:37:50] Tony: as a goal? Right, okay.

[00:37:52] Cameron: It said man­age­ment con­firmed its guid­ance that it would achieve all it’s year end stat­ed goals, includ­ing a total rev­enue of [00:38:00] between 19 and 23 mil­lion US dol­lars. But yeah, they had to delist to get this mon­ey, so any­way, Yeeeaaah­hh…

[00:38:09] Tony: so,

[00:38:09] Cameron: Good mon­ey after bad is basi­cal­ly what you’re say­ing, you think.

[00:38:12] Tony: Well, I think, I don’t want, I can’t give finan­cial advice on this one, and I’d be doing it,

[00:38:16] Cameron: but if it was you,

[00:38:18] Tony: I’d be doing it in igno­rance. If it was me, I’d be check­ing out the detailed infor­ma­tion that they should have been pre­sent­ed with, and be mak­ing my case for invest­ment based on those num­bers and not what I’d already spent on the com­pa­ny.

[00:38:29] Tony: But you know me, would I invest in the com­pa­ny earn­ing 5 mil­lion bucks and val­ued at 500 mil­lion

[00:38:35] Cameron: I was gonna say, the next step is then tell your fam­i­ly to start lis­ten­ing to QAV so they don’t, Yeah.

[00:38:39] Cameron: Don’t do this again. All right, Alex, any, any fol­low up ques­tions?

[00:38:44] Tony: Yeah

[00:38:44] Alex: This might be too junior a ques­tion but you’re talk­ing about Buf­fet­t’s idea, I think, of hav­ing a moat around a busi­ness. What would be an exam­ple of a busi­ness with a moat around it?

[00:38:55] Tony: yeah. So a moat is some­thing which for the, [00:39:00] so it’s like a moat around the cas­tle that makes the cas­tle. It’s it. Increas­es the defences on the cas­tle. So, Buf­fett says a busi­ness with a moat is able to raise it’s prices regard­less of what the eco­nom­ic cycle is. And has a high bar­ri­er to entry into that indus­try.

[00:39:15] Tony: So Wal­mart for exam­ple is a busi­ness with a moat. It’s so big now and so well run that basi­cal­ly any oth­er com­peti­tor open­ing up and try­ing to com­pete with it just can’t match it’s prices. And so peo­ple will still go to Wal­mart. So that’s a moat. So it’s that, it’s a busi­ness with strengths and defens­es, which, which means it’s hard for some­one to come in and com­pete with them.

[00:39:38] Alex: Okay, cool, thank you.

[00:39:39] Tony: Yeah. And in this case, if, if Updater’s busi­ness mod­el is just to, to pro­vide your details to util­i­ties when you move, I would have thought any kid in the garage with a lap­top can prob­a­bly com­pete with them on that. And giv­en that, it’s not sur­pris­ing that Cana­da Post was doing it for free. So yeah, it’s a low moat busi­ness.

[00:39:57] Cameron: Accord­ing to David Green­berg’s LinkedIn[00:40:00] he’s an Amer­i­can, not an Aussie. Before start­ing Updater 12 years and six months ago, he was a cor­po­rate attor­ney, merg­ers and acqui­si­tions for Cra­vath, Swain Moore, and went to Cor­nell Law School, but it says that Updater has raised near­ly 500 mil­lion. and is backed by Vista Fideli­ty, Soft­Bank, IA Ven­tures, Sec­ond Cen­tu­ry Ven­tures, Com­merce Ven­tures, and over 10 oth­er insti­tu­tion­al funds.

[00:40:27] Cameron: They have 250 full time employ­ees and over 300 con­trac­tors work­ing to rein­vent the mov­ing expe­ri­ence.

[00:40:34] Tony: Well, look, I’m prob­a­bly skimmed over what they, what they do. So I would, would, you know, hap­pi­ly admit that if they’re doing more than just pro­vid­ing address­es to util­i­ties, then that makes sense, but, and the peo­ple who are invest­ing in them aren’t stu­pid, so there must be some­thing else going on there besides what they say they do.

[00:40:50] Cameron: Tech­nol­o­gy owned by Updater touch­es near­ly 50% of all house­hold moves in the U. S. annu­al­ly. So they’ve got some­thing going on.

[00:40:58] Tony: Yeah. For 5 mil­lion [00:41:00] worth of rev­enue.

[00:41:01] Cameron: Well,

[00:41:01] Tony: 5 mil­lion, five years ago.

[00:41:02] Cameron: five years ago. Yeah. Yeah. All right. Thank you, Alex. Hope that helps Chris. Prob­a­bly not, but there you go.

[00:41:10] Alex: thank you. See you lat­er.

[00:41:11] Cameron: Bye.

[00:41:12] Tony: see you tomor­row.

[00:41:13] Cameron: Last ques­tion, Tony, comes from Cos­min. Cos­min says, I’ve been talk­ing to a friend of mine who was say­ing that all the big play­ers in the iron mar­ket like BHP, Rio, and FMG are hav­ing a dip in the month of Octo­ber pret­ty much every year.

[00:41:27] Cameron: Now, I’ve had a look on Yahoo Finance, all three of them, and indeed it appears that they do dip in the month of Octo­ber. What I’ve seen though is that, for a kind of aver­age price if we’ll con­sid­er just the Octo­ber price for every year, with my friend was that we could not pre­dict when and where the price will go until next Octo­ber.

[00:41:47] Cameron: So, sort of speak­ing, we’ll nev­er know when to sell from Octo­ber till next Octo­ber. And he was just ask­ing on Face­book, can any­one have a look at these three play­ers and come up with some sort of a con­clu­sion? I think what he’s [00:42:00] ask­ing is, is there any way of us pre­dict­ing that the share price is going to tum­ble in Octo­ber because it always does, and there­fore get­ting out ahead of time.

[00:42:11] Cameron: So I’ve got BHP’s chart in front of me. And, you know, if I go back, let’s go back five years. So if I look in 2019, they did start to dip in Octo­ber, fell right through to late Novem­ber when they start­ed pick­ing up again. 2020, they dipped in the COVID crash. But then again, after they recov­ered from that, they start­ed dip­ping at the begin­ning of August, all the way down to ear­ly Novem­ber when they recov­ered.

[00:42:40] Cameron: 2021, they peaked at the begin­ning of August and then declined all the way down to the end of Octo­ber when they start­ed going back up. So it’s sort of all over the place. I mean, there is a dip in that part of the year sort of, well, if I actu­al­ly, if I look at March in 2022, they peaked in March and then [00:43:00] declined, they recov­ered a lit­tle bit in June, but then declined again, right down to Octo­ber and then start­ed pick­ing up in the mid­dle of Octo­ber.

[00:43:08] Cameron: So there does­n’t seem to be a great trend there. If I look at FMG over the last five years. Let’s see, July, def­i­nite­ly no decline in Octo­ber, real­ly, for FMG, maybe a lit­tle minor one, but it just, as we know, we had it, we owned it back then. It just went up and up and up and up. 2020, it did start drop­ping at the end of August and then picked back up at the begin­ning of Novem­ber.

[00:43:35] Cameron: 2021 it peaked in July and then fell all the way down to Octo­ber and then it picked back up. 2022 it sort of start­ed drop­ping in June all the way down to Octo­ber. So Octo­ber does seem to be a bit of a bot­tom there in the last cou­ple of years for FMG. I don’t know what to make of that. If I look at the iron ore price that we talked about ear­li­er, let’s see [00:44:00] what the trend is for the iron ore price in the last five years bot­tom in Novem­ber 2018, bot­tom in April, 2020 just went up. mas­sive­ly that year. Did start drop­ping, but it start­ed drop­ping in 2021, it start­ed drop­ping in June, fell all the way down in Novem­ber when it recov­ered. March 22 it start­ed drop­ping, all the way down, it bot­tomed out in Octo­ber, recov­ered, and it’s sort of been declin­ing now, pret­ty much steadi­ly since March.

[00:44:29] Cameron: Spiked a bit in June, but is head­ing back down again. Are you com­fort­able mak­ing a pre­dic­tion, Tony, on iron ore and iron ore relat­ed stocks? that we should start to ditch them as soon as they start to decline in March and fol­low them, not buy them again until Novem­ber.

[00:44:46] Tony: No, I’m not, I’m not sure. Okay, so, so my first thought was, it’s not the iron ore price that’s the prob­lem here, and I think you’re right with the graph. It’s, it’s been going up since about 2017 was a [00:45:00] dip in,

[00:45:00] Cameron: Iron ore price. All

[00:45:01] Tony: I know, yeah, it was a dip in Octo­ber 2022, so I, I can see that. How­ev­er my first thought is that the, the div­i­dends for these com­pa­nies are paid in Sep­tem­ber, so per­haps there’s some kind of hang­over.

[00:45:16] Tony: With peo­ple who’ve, you know, wait­ed for their div­i­dend, the share price does drop in Sep­tem­ber. Would they then sell because they’ve got the div­i­dend to move on or not? That could depress the share prices in Octo­ber. If I was right, we’d see a sim­i­lar thing in March which I was see­ing a lit­tle bit.

[00:45:31] Tony: So that, that could be it. So that’s… That’s the­o­ry num­ber one. The­o­ry num­ber two is there’s some­thing going on with the iron ore price, but I’m not see­ing it too much in the graph. Last year it hap­pened, but not nec­es­sar­i­ly for the years before that. So is there a sea­son­al­i­ty for iron ore? I mean, Octo­ber is com­ing into our sum­mer, which is com­ing into win­ter.

[00:45:51] Tony: Over­seas, I don’t know why iron ore would be sea­son­al unless it actu­al­ly let me think about that it’s pos­si­bly it is because I know in Cana­da for exam­ple that [00:46:00] con­struc­tion halt­ed a lot dur­ing win­ter because they just could­n’t work because it was so damn cold so it’s pos­si­ble that parts of Chi­na get snowed in and it’s dif­fi­cult to work so yeah there could be a sea­son­al­i­ty fac­tor in it but then why does­n’t that con­tin­ue into Novem­ber and Decem­ber and Feb­ru­ary, which would also be snow cov­ered months.

[00:46:19] Tony: So yeah, I’m not sure what’s going on there. Either way, if it was a pre­dictable occur­rence, I’m sure I would have heard about it. We all would have heard about it in the mar­ket that traders sell out in Sep­tem­ber for what­ev­er rea­son, but I haven’t heard that at all in the last 15, 20, 25 years of invest­ing in the share mar­ket.

[00:46:39] Tony: So I’m not sure what’s going on. But yeah, same old, same old thing we use out. We use our ways of decid­ing when to buy and sell rather than try­ing to pre­dict an Octo­ber decline. My oth­er com­ment to make would be if, if if it is, well, great time to buy. Because, you know, if Octo­ber is the low­est month for the year, then yeah, buy it.

[00:46:58] Tony: Buy in Octo­ber. [00:47:00] And if it does rebound, then why sell in Sep­tem­ber unless you want to buy in Octo­ber, I guess. Well, just hold on if it’s going to rebound.

[00:47:06] Cameron: right. Thank you, Tony. Hope that helps Cos­min. That’s it for ques­tions this week, Tony. That’s it. After hours, you wrote Axe is back. I don’t know

[00:47:18] Tony: Axe is back.

[00:47:19] Cameron: your, is that your deodor­ant?

[00:47:21] Tony: That’s Bil­lions.

[00:47:22] Cameron: Oh,

[00:47:24] Tony: The new and last series of bil­lions has start­ed. This week

[00:47:27] Cameron: I watched the trail­er for that last night. Actu­al­ly. Chris­sy’s been lis­ten­ing to a pod­cast inter­view with Paul Gia­mat­ti and we were toss­ing up whether or not we should give bil­lions anoth­er crack.

[00:47:36] Tony: Yeah, you don’t need to go much beyond this sea­son or last sea­son, real­ly. A lot goes on, but it’s it, yeah, it kind of refresh­es every year as well. No, it’s good. It’s good to see the old gang back togeth­er. They’ve so the, the cur­rent guy has tak­en over Axe. So recap on this, the show Axe, who was the main pro­tag­o­nist, the bit, the hedge fund man­ag­er who ran Axe Cap­i­tal was [00:48:00]run out of town by Paul Gia­mat­ti’s char­ac­ter, who was the New York Attor­ney Gen­er­al and rather than face jail time, dis­ap­peared to Switzer­land.

[00:48:08] Tony: No one’s sup­posed to know where he is or make con­tact with him or what­ev­er. In the last sea­son, his com­pa­ny was bought by I for­got the actor’s name now, Corey Stahl, I think his name

[00:48:18] Cameron: Mm-hmm.

[00:48:19] Tony: Yeah, who’s now mak­ing a run for US Pres­i­dent. And the senior staff at the hedge fund are going, Holy shit, if this guy becomes Pres­i­dent, we’re all fucked.

[00:48:28] Tony: And so, they’ve reached out to get Axe back. And, turns out, Axe has done some… Neat trades in Ukraine for the US gov­ern­ment, so he’s back in the good books with them. So he’s, he’s com­ing back.

[00:48:41] Cameron: he’s, he’s the Hunter Biden of the show.

[00:48:43] Tony: That was good, good fun to see the all the char­ac­ters back and Paul Gia­mat­ti’s great in it as always. Yeah, it’s like good fun.

[00:48:52] Cameron: Great actor Paul Gia­mat­ti.

[00:48:54] Tony: Oh,

[00:48:54] Cameron: Who, who did he play? You gave me that DVD pack years and years ago. One of [00:49:00] the found­ing

[00:49:01] Tony: the sec­ond US pres­i­dent I for­got his name.

[00:49:03] Cameron: Any­way, he was good. Mm-hmm.

[00:49:06] Tony: in that. Yeah,

[00:49:06] Cameron: Mm-hmm. Mm-hmm.

[00:49:08] Tony: but good in plen­ty.

[00:49:09] Cameron: The Eagle and the Shark. You watched

[00:49:11] Tony: are you on the show?

[00:49:11] Cameron: Yeah. It’s

[00:49:12] Tony: You have! Yeah, it’s good, isn’t it?

[00:49:14] Cameron: yeah. Jer­maine Clement.

[00:49:16] Tony: Yeah. And Tai­ka Wait­i­ti,

[00:49:18] Cameron: total­ly. Yeah.

[00:49:20] Tony: Yeah, so the first time I seen it, I saw it just the oth­er night and loved it. Just came up as a rec­om­men­da­tion in my Net­flix feed.

[00:49:26] Tony: Had­n’t seen it before. It must have just come out before I went to New Zealand because when I was in New Zealand, Boy came out, which was prob­a­bly Taika’s break­through sort of movie

[00:49:36] Cameron: Yeah.

[00:49:37] Tony: before he was launched on the inter­na­tion­al stage. But gee, it was a great film. Eagle and the Shark. Real­ly enjoyed it.

[00:49:42] Cameron: Yeah, real­ly fun. Quirky. I liked it.

[00:49:44] Tony: Quirky. So that if you like Napoleon Dyna­mite, you’ll like it. It’s just that sort of nerdy humor. It’s great.

[00:49:50] Cameron: Yeah. I love Jer­maine Clement and Taika’s stuff, but Jer­maine’s… Always good. Like every­thing he does is is a win­ner for me. He’s just got a [00:50:00] very weird sense of humor. I like it. And Yeah, and a very expres­sive, rub­bery face as an actor too.

[00:50:06] Cameron: the

[00:50:06] Tony: You can sort of express a lot of emo­tion through it. Yeah, it’s good.

[00:50:10] Cameron: Matil­das, you’ve been watch­ing the ladies soc­cer?

[00:50:14] Tony: yeah, have you?

[00:50:15] Cameron: No.

[00:50:16] Tony: Haven’t jumped on the band­wag­on?

[00:50:18] Cameron: Got no idea what’s going on. Don’t care. I mean, Tay­lor was giv­ing me a hard time about it the oth­er day. Even my boys are get­ting behind it. Well, they used to play soc­cer, so that makes sense. I

[00:50:27] Tony: right, yeah.

[00:50:27] Cameron: shit.

[00:50:28] Tony: Yeah, no, big thing in our house­hold, was a big game on last Sat­ur­day night, which every­one will know about who’s lis­ten­ing to this. So I don’t need to go through it again. And the finals, or the semi final is Wednes­day night, night before Jen­ny’s birth­day, so we’re actu­al­ly have a din­ner book, so we’re gonna have to hur­ry and come home to watch it.

[00:50:44] Tony: First time an Aus­tralian team’s made the semi final of a FIFA World Cup, so it’s a big deal.

[00:50:50] Cameron: Good for them. I’m hap­py for them. Yeah.

[00:50:52] Tony: yeah, and I mean, I think the excit­ing thing is that you know, hope­ful­ly wom­en’s sport will get a boost from this and I’ll start get­ting [00:51:00] paid more decent­ly than what they’re get­ting paid. So I think that’s great.

[00:51:04] Cameron: Well, I’ve been read­ing a lot this week, Tony. I read… In one sit­ting the oth­er night a rel­a­tive­ly small book on the Great Famine, Irish Famine

[00:51:13] Tony: Oh,

[00:51:14] Cameron: of the

[00:51:14] Tony: ter­ri­ble time.

[00:51:16] Cameron: Yeah, and I, I, and I, you know, I came, I, I did because of, I saw a Sinead O’Con­nor song where she was singing about The British treat­ment of the Irish dur­ing the Great Famine.

[00:51:28] Cameron: And I was like, I real­ly should, I mean, that’s prob­a­bly when the Reillys moved from Ire­land to Scot­land, I real­ly should know more about it. So I down­loaded this book and read it in one sit­ting the oth­er night and it was just flab­ber­gast­ed at the British. mis­han­dling and treat­ment of the Irish. In my head, it was just you know, some­thing hap­pened with the pota­toes and a lot of Irish starved, but the details of how the British treat­ed them was appalling, real­ly

[00:51:59] Tony: [00:52:00] Ooh, ooh, they still car­ry the scars today, don’t they? Yeah, I remem­ber being in Ire­land and going through into a muse­um where they were play­ing videos of like peo­ple read­ing out clips of, of quotes from that time and it was just so mov­ing to hear what peo­ple went through. I think from mem­o­ry this par­tic­u­lar exhi­bi­tion was about the Irish that had gone to the West Indies and just what they went through dur­ing that dias­po­ra.

[00:52:25] Tony: It was just appalling.

[00:52:27] Cameron: Mm. They said, like, a lot of them were com­mit­ting crimes to try and get shipped to Aus­tralia. A lot went, of the ones, I think 10% of the pop­u­la­tion of Ire­land, they think, died. And anoth­er, and 20% of the peo­ple who sur­vived left the coun­try. Per­ma­nent­ly. Went to Scot­land or the Unit­ed States or Aus­tralia, et cetera.

[00:52:50] Cameron: But yeah, it was bru­tal. Just four years of star­va­tion and unem­ploy­ment and pover­ty and dis­ease and [00:53:00] just, yeah, dev­as­tat­ing. Any­way.

[00:53:02] Tony: I remem­ber when we were in Ire­land too, every­where we went there’d be a lit­tle farm with a sign say­ing fresh dug spuds. So the pota­toes are a big part of their econ­o­my. dug spuds.

[00:53:13] Cameron: and that’s what I did­n’t real­ize too, is why they ate, why they sur­vived on pota­toes, and, and also just like dur­ing the famine, there were still oth­er crops being grown right across Ire­land, but they were all being export­ed to the US and, and to Britain, and they were like, Nah, Irish will be fine. We need them.

[00:53:32] Cameron: We need it more than they do. Kind of remind­ed me of Churchill and the famine in India. in dur­ing World War II when they were starv­ing in India and the British were sit­ting on mas­sive sup­plies of food in India and Churchill refused to hand it over to the Indi­ans because he thought his troops might need it.

[00:53:52] Cameron: So you know, screw you. He said he lit­er­al­ly, remem­ber we cov­ered this in our Cold War show once, there’s a quote, I [00:54:00] don’t have it lit­er­al­ly, but it’s basi­cal­ly some­thing like One, you know, one less dirty Indi­an is one less prob­lem that we have to wor­ry about or some­thing hor­ri­bly racist like that. Any­way so yeah, I read that and I’ve been read­ing, try­ing to work my way through The Soft Machine by William S. Bur­roughs, his

[00:54:19] Tony: Ah.

[00:54:20] Cameron: cut up book, the first book he used the cut up tech­nique in and it’s just this drug fueled, homo­sex­u­al, vio­lent ram­bling, non­sen­si­cal stream of con­scious­ness. thing, which is I think more fas­ci­nat­ing for me as because of the influ­ence that it had in, in terms of fic­tion and also the use of the cut up tech­nique than as an enjoy­able read, but it’s you know, it’s, it’s tough.

[00:54:55] Cameron: You ever read William S. Bur­roughs?

[00:54:57] Tony: I’ve read The Naked Lunch, which I [00:55:00] enjoyed. Haven’t read The Soft Machine though.

[00:55:02] Cameron: I, I’ve read the Naked Lunch too. It was years ago, and I decid­ed to give this a crack, but, whoa. Hard going. Hard going. Any­way, I was won­der­ing if you were into

[00:55:10] Tony: But you’re a, you’re the man who read, who’s read­ing Ulysses as well.

[00:55:14] Cameron: Ovid. I’m still work­ing my way through Ovid’s Meta­mor­phoses.

[00:55:18] Tony: I thought you were doing Ulysses too, James JOyce

[00:55:20] Cameron: Oh, no, I did do, yeah. That, that Ulysses, I thought you meant Home­r’s Ulysses. No, I yeah. Yeah. I am sort of still going back to that from time to time. try­ing to, You know, before I die, I need to have read these things, I fig­ure, you know, try­ing

[00:55:34] Tony: a cou­ple of, a cou­ple of months ago.

[00:55:36] Cameron: them.

[00:55:36] Tony: I start­ed read­ing, what’s the, I for­get now what the oth­er one was from James Joyce, where he makes the lan­guage up and like you, it’s just, it’s a bit like the soft machine. It’s almost unread­able. It’s,

[00:55:45] Cameron: Mmm,

[00:55:46] Tony: yeah, dif­fi­cult reads.

[00:55:47] Cameron: Any­way, that’s most­ly it. I haven’t real­ly watched, oh, I re watched The Depart­ed. Scors­ese film. Mmm, Eh, Yeah, Mmm. Kin­da does­n’t work for me. I’ve nev­er real­ly been a huge fan [00:56:00] of The Depart­ed. Yeah, I just kin­da find it a lit­tle bit sil­ly. Real­ly?

[00:56:03] Tony: I’d like to see, I haven’t seen the orig­i­nal, which would be inter­est­ing to, to see.

[00:56:07] Cameron: I, I was a big fan of the orig­i­nal and saw it before the Scors­ese film, like 10 years before. Loved the orig­i­nal. And still think, I mean it’s a while since I’ve seen the orig­i­nal. But my mem­o­ry of it, when I saw The Depart­ed the first time, I thought the orig­i­nal was bet­ter. Has a bet­ter rend­ing.

[00:56:23] Cameron: Infer­nal Affairs. Yeah, good one. Yeah.

[00:56:25] Tony: Well, yeah, my mem­o­ry of the part, and of course it was Scors­ese and all that, so you got­ta love it, but Nichol­son stole the show, and to me, I’m nev­er a fan of DiCaprio and even Matt Damon to that extent, so I was, and Wahlberg, so I was like, oh gee, I know, I know Scors­ese likes to cast DiCaprio, which you can some­times For­give, but the three of them,

[00:56:50] Cameron: Mm.

[00:56:51] Tony: it was, yeah, as soon as, as soon as things went away from Nichol­son I just lost inter­est.

[00:56:57] Cameron: Yeah. Yeah. Yeah. Nichol­son is def­i­nite­ly the [00:57:00] best thing in and I think it was prob­a­bly one of the last films that he made too. I think he kind of retired after that. He has­n’t done any­thing for a long time. He’s,

[00:57:06] Tony: Yeah.

[00:57:07] Cameron: but yeah, but even his char­ac­ter is kind of a lit­tle bit ridicu­lous, the whole thing. It’s just, it’s, Scors­ese’s bet­ter films, but any­way, it’s worth

[00:57:17] Tony: No, fair enough.

[00:57:18] Cameron: just for Jack.

[00:57:19] Cameron: Jack is always enter­tain­ing. He makes every­thing bet­ter.

[00:57:23] Tony: And the, and the Irish punk sound­track too that accom­pa­nies him, I think that’s great.

[00:57:27] Cameron: Yeah,

[00:57:28] Tony: Yeah.

[00:57:29] Cameron: All right, well that’s it for the show this week. I got­ta go put some bread in the oven and that’s not a euphemism. Tony, thanks for, thanks for shar­ing your wis­dom with us again this week and good luck with your invest­ing out there. QAV a good week every­one.

[00:57:46] Tony: Yeah. Like­wise. Thanks Cam. See ya. [00:58:00] [00:59:00]