Commodity Updates, WSI crash, Australia spooks global LNG markets, Buffett says he could make 50% return per year, FMG CFO quits, QAN in a bit of a pickle, Pulled pork on AIZ, are the sins of a former CEO carried forward, and an update from Tony on the use of RENKO charts.

QAV 636

[00:00:00] Cameron: Welcome back to QAV, episode 636, Tony, or should I say Big Daddy? It’s what I’ve told everyone we’re calling you because it was Father’s Day on Sunday and I said you’re sort of the father to us all on this show, so from now on I’m referring to you as Big Daddy. Do you have a nice Father’s Day, Big Daddy?

[00:00:24] Tony: I did have a nice Father’s Day. I’m not sure I like Big Daddy, but yeah, I did have a nice Father’s Day, thank you. I went to see Jenny’s father. We had lunch, which was lovely.

[00:00:34] Cameron: Oh, that’s nice. Big Daddy is just cat in a hot tin

[00:00:37] Tony: it is, yeah.

[00:00:38] Cameron: That’s what

[00:00:38] Tony: was his name? Burl Ives. Burl

[00:00:40] Cameron: their lives, yeah. I see, Big Daddy. I’ll talk to you like that from now on. Come on now.

[00:00:46] Tony: If I, if I recall though, he died of cancer, didn’t he? At the end? That was, that’s what it was all about. He was dying or something.

[00:00:53] Cameron: Yeah.

[00:00:53] Tony: Paul Newman, Elizabeth Taylor. the reason that sticks in, my memory was that, um, I was reading in the biography of the, of [00:01:00] Jim Morrison that he had received some kind of distinction or, the only thing he did well at film school in, at, uh, UCLA was putting on a production of Cat in the Hot Tin Roof.

[00:01:12] Tony: And using a small red spotlight in the background as the only scenery which got bigger and bigger to signify 

[00:01:18] Tony: the cancer spreading in big data, you know? 

[00:01:20] Cameron: wow. I thought it was all about Paul Newman’s character being closeted homosexual, but that didn’t make it into the film version. Apparently that’s in the original play, but they,

[00:01:30] Tony: bit like breakfast at Tiffany’s. She was a hooker and her friend was gay, 

[00:01:34] Tony: yeah.

[00:01:34] Cameron: Yeah, but you can’t say that in Hollywood in the fifties or sixties.

[00:01:38] Tony: No, you just take a photo of a girl in a black dress standing in front of Tiffany’s in the morning and you left to your 

[00:01:44] Tony: imagination how she got there. 

[00:01:47] Cameron: Yeah. Anyway, Big Daddy, Market Update, uh,

[00:01:50] Tony: What do we call you? Little Boy? Little Hos?

[00:01:52] Cameron: Baby Billy. You watch the Righteous Gemstones?

[00:01:56] Tony: I’ve seen a couple of 

[00:01:57] Tony: episodes, but I haven’t watched it from start to finish. That’s 

[00:01:59] Tony: [00:02:00] good.

[00:02:00] Cameron: At some point, Walton Goggins comes into it as their uncle, but he’s called Baby Billy. 

[00:02:05] Cameron: And he, in the last season, he has this TV show. He’s trying to get them to fund a Bible based TV show, which he calls Baby Billy’s Bible Bonkers. But he has a, he has a whistle on his ss’s.

[00:02:17] Cameron: Baby Billy Bible Bonkers.

[00:02:20] Tony: Well, that’s got to be 

[00:02:20] Tony: the name of this episode, hasn’t it? 

[00:02:24] Cameron: and his favorite saying is, Come on now, come on now. We’ve been doing that around the house for the last couple of weeks. Even got Fox doing it now. Oh, come on now, come on now.

[00:02:34] Cameron: Anyway, 

[00:02:34] Tony: not your Twiggy Forrest impersonation, is it? Come on now.

[00:02:38] Cameron: come on

[00:02:38] Tony: good. all good.

[00:02:40] Cameron: we’ll get to FMG News. Uh, market, uh, down today by about half a percent. Uh, it didn’t have a too bad a week last week, recovered on Monday from Friday’s down day.

[00:02:51] Cameron: But, um, I wanted to talk about commodity updates. When I did the buy list yesterday, Tony, I decided there was a lot of. Changes in the Commodities, I [00:03:00] got Crude Oil as a buy, Copper as a buy, Aluminium as a buy, Manganese as a buy, Steel as a buy, LNG as a buy, Lithium as a sell, So I had to get rid of the last couple of parcels of PLS that we didn’t have to rule one a week ago.

[00:03:16] Cameron: Um, Platinum 

[00:03:16] Tony: So 

[00:03:16] Cameron: a Josephine.

[00:03:18] Tony: I looked at that, because I still have my PLS. I must have a lower Rule 1. And it was close to a sell, but it wasn’t a sell today. oh sorry, 

[00:03:27] Cameron: right? So, Yeah, 

[00:03:28] Tony: yeah, but I think the September figure is the month to date figure,

[00:03:31] Cameron: right. Okay. Yeah. Well, I’ve 

[00:03:34] Tony: the graph, but if you look at the gap between months, it’s bigger than in September. 

[00:03:38] Cameron: Yeah. Well, it’s just on its sell line and, you know, if anything, I think. Anyway, good enough for me. Screw 

[00:03:46] Cameron: lithium. you know…

[00:03:47] Tony: Ha 

[00:03:47] Tony: ha ha. 

[00:03:48] Cameron: What has lithium ever done for 

[00:03:49] Cameron: anybody? Anyway, I sold PLS yesterday.  

[00:03:52] Tony: OK, well, I probably will this week, but I’ll work it. 

[00:03:54] Cameron: I guess the more interesting part of that for me is that crude oil… LNG is [00:04:00] 

[00:04:01] Cameron: a buy, a 

[00:04:01] Cameron: lot of stocks, well not a lot, but a couple of stocks on our

[00:04:04] Cameron: buy list that are 

[00:04:05] Cameron: in crude oil and 

[00:04:06] Cameron: LNG.

[00:04:07] Cameron: So they’re 

[00:04:08] Cameron: back 

[00:04:08] Cameron: on the radar for us. I don’t know if there’s any copper 

[00:04:12] Cameron: stocks 

[00:04:13] Cameron: these days. Um, but, uh, anyway. 

[00:04:16] Tony: South 32, from memory 

[00:04:17] Tony: maybe? and a lot of the gold stocks are 

[00:04:21] Tony: sometimes half gold, half copper, or 

[00:04:22] Tony: partially copper. We’ve had some of those. 

[00:04:24] Tony: before.

[00:04:26] Cameron: Well, yeah, they’re not on our buy list at the moment though, I’m just…

[00:04:30] Tony: Samphire was the big one.

[00:04:31] Cameron: yeah, it’s not showing up either, at the moment. 

[00:04:34] Cameron: Anywho, moving right along. 

[00:04:38] Cameron: WSI, 

[00:04:39] Cameron: Tony. Wow. Um, you know, I did my, um, weekly webinar for some of the new subscribers last week. And, you know, as I, I talk about my 

[00:04:49] Cameron: process for 

[00:04:51] Cameron: processing my daily alerts and how I 

[00:04:55] Cameron: normally check them first thing in the morning, and then I wait until about 10, 11, and then I [00:05:00] sell.

[00:05:00] Cameron: And then I don’t worry about it for the rest of the day. Cause I said things,

[00:05:02] Cameron: things 

[00:05:03] Cameron: very rarely 

[00:05:04] Cameron: drop quickly. Well, Westar Industries 

[00:05:07] Cameron: decided to 

[00:05:07] Cameron: prove me wrong on that last 

[00:05:09] Cameron: week. 

[00:05:11] Cameron: They dropped their preliminary final report on the 31st of August, which showed 

[00:05:17] Cameron: a 60% profit drop. Their shares dropped 

[00:05:21] Cameron: 32% 

[00:05:23] Cameron: on Friday. But, uh, I kind of love this. In drilling through their preliminary final report, they say the drop was 

[00:05:31] Cameron: largely attributable to close out settlements on two projects combined with significant supplier and subcontractor cost 

[00:05:38] Cameron: inflation and skilled labor pressures on long term construction projects, and then I love this line.

[00:05:44] Cameron: Despite the profitability on initial 

[00:05:47] Cameron: face 

[00:05:47] Cameron: value not potentially meeting typical market 

[00:05:50] Cameron: expectations Blah, blah, blah, blah, blah. Like, 

[00:05:54] Cameron: really? You think? Yeah, potentially 

[00:05:58] Cameron: not meaning?

[00:05:59] Cameron: Really?[00:06:00] 

[00:06:00] Tony: Yeah, I’m not familiar with the stock. It’s a really, it’s a really small one. So like with such a small ADT, they can bounce around like that. 

[00:06:07] Tony: It’s about 14, 000, Stock 

[00:06:09] Tony: Doctor 

[00:06:09] Tony: saying, 

[00:06:10] Cameron: I think a few people in, uh,  our various forums pointed that out too, that they sort of have a history of pretty wild swings. W ss I, anyway, 32%. ss I, anyway, 32%. So I had to ax that that was, uh, fun. fun. But then I’m going back, looking over the last, yeah, look, half the last couple of years, like they had a big drop back in, uh, let’s see, may of 2022. They dropped quite a bit. 

[00:06:37] Tony:  coming up to end of financial 

[00:06:38] Tony: year. Yeah, 

[00:06:40] Cameron: same thing in June of 2021. No, They didn’t have a big drop, but they had come down a lot, and then they spiked in August. So I guess their financials were good, that year. Anyway, there you go. What else if I… Had this week, um, Oh, well, speaking of LNG just becoming a buy, I saw this interesting [00:07:00] article.

[00:07:00] Cameron: One of the newsletters I subscribe to, International Intrigue, had this story about, uh, Two massive Chevron liquefied natural gas projects in Western Western Australia planned to take escalating strike action from Thursday the 7th of September after weeks of failed negotiations on pay and conditions. The plants, Wheatstone and Gorgon, aren’t your ordinary LNG facilities. 

[00:07:27] Cameron: They produce 5-7% of the

[00:07:29] Cameron: world’s 

[00:07:30] Cameron: total LNG 

[00:07:31] Cameron: supply

[00:07:33] Cameron: with 500 employees. So gas prices have whipsawed over recent 

[00:07:38] Cameron: weeks as markets track each round of union negotiations in Australia. Why? 

[00:07:43] Cameron: Chevron sells its Australian LNG 

[00:07:46] Cameron: to Asia, 47% to Japan alone. And disruptions can force those buyers into a bidding war with Europe for replacement cargoes coming out 

[00:07:54] Cameron: of Qatar and the US. LNG markets were already pretty 

[00:07:59] Cameron: [00:08:00] complex. Around 16% of the EU’s LNG 

[00:08:02] Cameron: still comes from Russia. Some utilities switch back to coal or oil when LNG gets too pricey. Places like India 

[00:08:09] Cameron: just buy less LNG when prices 

[00:08:11] Cameron: spike, and the 

[00:08:11] Cameron: EU has now hit its LNG storage targets 

[00:08:15] Cameron: early for 

[00:08:15] Cameron: winter. So the strike action in Australia hasn’t started yet, could 

[00:08:19] Cameron: still be 

[00:08:20] Cameron: averted, and 

[00:08:20] Cameron: if it starts, will start small, but that’s still enough to trigger 

[00:08:25] Cameron: global jitters. I thought that was an interesting breakdown on LNG stuff

[00:08:30] Cameron: that I wasn’t

[00:08:31] Cameron: really aware of. 

[00:08:32] Tony: I was just going to say Gorgon and Wheatstone were being developed when I was at Shell. They’re huge.

[00:08:36] Cameron: Right.

[00:08:37] Tony: Um, they, and they started off as JV partnerships between all the oil companies and Woodside. Um, and I think Chevron’s been buying out the other partners over time. 

[00:08:46] Cameron: Well, this, this article also says the same 

[00:08:49] Cameron: union just reached a deal to avert another LNG 

[00:08:51] Cameron: strike nearby. Its earlier action at an Australian shell plant

[00:08:55] Cameron: cost 1 billion in lost exports. Japan has [00:09:00] questioned Australia’s reliability as an energy supplier. Its Prime Minister visited the 

[00:09:04] Cameron: Middle East in July to firm up 

[00:09:06] Cameron: supplies. 

[00:09:08] Cameron: So, uh, there 

[00:09:10] Cameron: you 

[00:09:10] Tony: yeah, and if, you were, if you were Qatar, I’d probably be paying the union organisers to agitate for a strike too in, in Australia, 

[00:09:20] Cameron: Interesting. allegedly. 

[00:09:23] Tony: I’m joking. Um, yeah, allegedly. But, but yeah, I mean, it’s, it’s this whole idea of sovereign risk again, isn’t it? I mean, if, if we can’t guarantee continuous supply for whatever reason, whether it’s, strikes or cyclones or government puts new taxes or wants the LNG to go into Australian domestically first, it’s it comes back to sovereign risk.

[00:09:44] Tony: And it’s, it’s a kind of a fine line that Even countries like Australia work, uh, walk, because if, like, like, LNG is so important to keep the power on that, yeah, Tokyo is not going to muck around, they’re just going to go straight up and find other suppliers, and even if [00:10:00] we do

[00:10:00] Tony: retain the contracts, they’ll always have backups in place, and they won’t want to give 

[00:10:03] Tony: us all the business going forward, so it’s an interesting situation.

[00:10:07] Cameron: Is it sovereign risk though? When, you know, workers are striking at a 

[00:10:12] Cameron: plant, how’s that tie into the country. itself being risky? 

[00:10:16] Cameron: Is it just the labor laws in the country that make it 

[00:10:19] Cameron: a sovereign risk? 

[00:10:20] Tony: yeah, yeah, yeah, I mean, sovereign risk? 

[00:10:23] Tony: normally applies to, you know, action at the government level but I guess it really applies to the whole country. And it’s infrastructure and it’s people. Yeah. So I put it this way, there’d be less sovereign risk if you’re buying the gas from China. 

[00:10:38] Tony: I can’t imagine a strike being let to go too long in a, in a authoritarian region. 

[00:10:46] Cameron: No, not big on strikes in 

[00:10:48] Cameron: China.

[00:10:49] Tony: No. Yeah. 

[00:10:50] Cameron: to, 

[00:10:50] Cameron: because it’s a communist 

[00:10:51] Tony: Come in. Come in. We 

[00:10:53] Cameron: Everyone is taken care 

[00:10:54] Cameron: of 

[00:10:54] Tony: We negotiate with you 

[00:10:55] Cameron: Everyone’s looked after They don’t need to, 

[00:10:57] Cameron: strike.

[00:10:58] Tony: Right.

[00:10:58] Cameron: Alright, let’s talk about 

[00:10:59] Tony: [00:11:00] Everyone’s looked, everyone’s looked after in Australia, by the 

[00:11:02] Tony: way, too.

[00:11:04] Cameron: Well, 

[00:11:05] Tony: I’d love to be on the 

[00:11:06] Tony: pay packet that the Gorgon workers are on. I imagine 

[00:11:08] Tony: it’s quite high. 

[00:11:10] Cameron: you wouldn’t get out of bed for their pay packet, I’m sure, Tony, but 

[00:11:13] Tony: But I mean, you know, solidarity with the Gorgon 

[00:11:15] Cameron: yeah, I’m all for 

[00:11:16] Tony: Who knows what they’re being paid. 

[00:11:18] Tony: Yeah, 

[00:11:18] Cameron: Sharing, sharing of the 

[00:11:20] Cameron: profits, down to the workers. I’ve just been doing actually, on my Cold War show, we’ve just been doing we’re building up to Operation Ajax, 1953, when the CIA overthrew the government of Iran, because they were going to nationalize their oil. And the British, Churchill convinced the newly founded CIA to go and overthrow the government of Iran for him.

[00:11:44] Cameron: But, in order to build up for that, I’ve been doing sort of the history of Iran in the early 20th century. late 19th and early 20th century, uh, looking at the all of the concessions that, the British and the Russians were extracting out of the shahs at the time [00:12:00] and all of the pressure that those countries were put on.

[00:12:02] Cameron: Of course, oil being discovered around about 1908 just increased that through the roof. Churchill said it was like a fairy tale gift from the, from the gods for Britain to have discovered their own source of oil. But, uh, I, I know that the conditions of the workers in Iran working on British oil 

[00:12:21] Cameron: extraction and refineries was just like brutal in the early to mid 20th century. It was just, they were getting paid nothing and living in the most god awful conditions. Anyway, 

[00:12:36] Tony: Did Churchill set those conditions, 

[00:12:39] Cameron: well, uh, yes, I guess The British 

[00:12:42] Cameron: government The British government, uh, controlled 

[00:12:45] Cameron: APOC, the Anglo Persian Oil Company, which became, I think, BP, eventually, but, uh, yeah. 

[00:12:53] Cameron: So, yes, they were the ones, they were, they were paying them, so they probably did set those conditions. Anyhoo! 

[00:12:58] Tony: And did the Middle East [00:13:00] players go, Oh, that’s, that’s acceptable conditions, is it? So can I think some of those continue until today in some 

[00:13:06] Tony: of those

[00:13:07] Cameron: No, they, I think the, the, the Iranians under Mossadegh, who was the prime minister, decided to nationalize the, oil interest because America had recently

[00:13:17] Cameron: discovered oil in Iraq. And I think Iraq was getting 50 cents on the

[00:13:21] Cameron: dollar for 

[00:13:22] Cameron: all of the oil that came out of Iraq in Iran was getting like six 

[00:13:26] Cameron: cents on the dollar. and, so he tried to renegotiate. with Churchill. And Churchill 

[00:13:32] Cameron: told him where he could stick his renegotiations. so he said, fine, we’ll just nationalize 

[00:13:36] Cameron: the whole thing then, and you can go to hell. And so Churchill didn’t like 

[00:13:41] Cameron: that. But didn’t have the wherewithal after World War II 

[00:13:45] Cameron: to overthrow the country by himself.

[00:13:47] Cameron: So

[00:13:47] Cameron: he had to ask, uh, the 

[00:13:48] Cameron: Americans to do it for him, which they did. 

[00:13:52] Cameron: And 

[00:13:52] Cameron: then lied about it for 50 years. 

[00:13:54] Tony: oils played such a big part in the 20th century world history. politically, uh, [00:14:00] and, uh, economically. But yeah, it’s also, I mean, I, I enjoyed the book called the Seven Sisters, um, which came out in about the eighties, I think, on the history of how, uh, what was the big oil company there prior to the breakup?

[00:14:10] Tony: Anyway, there was a big oil company that was broken up into seven competing oil companies, but they pretty much got along, cosied up and set the 

[00:14:17] Tony: price high. Oh, it was Standard Oil. You’re right. I think so.

[00:14:21] Tony: Yes. Yeah. 

[00:14:22] Tony: Yeah. 

[00:14:23] Tony: So good story. And then, you know, expanded out around the world, um, no rules outside the US. Yeah.

[00:14:29] Cameron: Well, moving right along, uh, last week, uh, Alex I 

[00:14:32] Cameron: think asked a question about, uh, these guys at Ticker saying that they were getting 30 60% a year, and we, we gave some

[00:14:39] Cameron: thoughts on that. And he pointed me. Later on during the week to a quote from Warren Buffett from 1999,

[00:14:48] Cameron: where Warren said, If I

[00:14:49] Cameron: was running 1, 000, 000 today, or 10, 000, 000 for that matter, I’d be fully invested.

[00:14:55] Cameron: Anyone who says that size does not hurt investment performance is selling. [00:15:00] 

[00:15:00] Cameron: The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing 

[00:15:07] Cameron: peanuts then. It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year 

[00:15:14] Cameron: on 1, 000, 000.

[00:15:15] Cameron: No, I know I could. I guarantee that. 

[00:15:20] Cameron: And then Charlie, long time QAV Club member, uh, reminded me about Jim Simons, 

[00:15:25] Cameron: who I know you’re a 

[00:15:26] Cameron: big fan of. Uh, the guy who, did he invent 

[00:15:30] Cameron: quant? 

[00:15:31] Cameron: You read a book on him years ago, didn’t you? 

[00:15:33] Tony: Oh, yes. Okay. Yes. Yes. Yes. Yeah. It was Simon’s. You’re right. I 

[00:15:36] Cameron: Yeah. he gave me that look like, who, what? Yeah, the 

[00:15:39] Cameron: quant guy.

[00:15:40] Tony: Yeah. yes. Yes. I know who you 

[00:15:43] Cameron: And he, uh, achieved 

[00:15:44] Cameron: 66% CAGR for 30 

[00:15:47] Cameron: years, 

[00:15:48] Cameron: apparently. Um, the man who solved the market, which I think is the book you read. So that, you know, 

[00:15:57] Cameron: Warren says he could earn 50% a year 

[00:15:59] Cameron: on 10 million.[00:16:00] Um, obviously Jim 

[00:16:01] Cameron: Simons figured it out. So it can be done, or Buffett believes it can be done. 

[00:16:05] Cameron: Jim Simons did it with his quant stuff. So 

[00:16:09] Cameron: what 

[00:16:10] Cameron: does Buffett know that we don’t know that he could make 50% a year on 10 million?

[00:16:14] Tony: He’s just a better investor than I am, I think, Cam.

[00:16:17] Cameron: gonna say that ? 

[00:16:22] Tony: I fully, I fully, um,

[00:16:24] Tony: acknowledge 

[00:16:24] Tony: that. And so is Simons. I think, I’m not sure 

[00:16:28] Tony: about Simons, I mean, the 

[00:16:29] Tony: question for 

[00:16:30] Tony: both Buffett and 

[00:16:30] Tony: Simons is, 

[00:16:32] Tony: um, and is how 

[00:16:33] Tony: long

[00:16:33] Tony: can they do it for? So, 

[00:16:36] Tony: Buffett’s saying he could do it if he had up to 

[00:16:37] Tony: 10 million. Does that mean he gets the 10 

[00:16:40] Tony: million. and then

[00:16:40] Tony: sells and stays at 10 million and sells

[00:16:42] Tony: and that’s legitimate? And he 

[00:16:44] Tony: gets a 50%

[00:16:45] Tony: return? That’s fine. Um, Simons, uh, Simons may still be getting high

[00:16:50] Tony: returns. I think he shut his fund

[00:16:51] Tony: to outside money, um,

[00:16:52] Tony: 8 years, 7 or 8 years ago. 

[00:16:54] Tony: Uh, and…

[00:16:56] Tony: he made his

[00:16:56] Tony: money from getting into big data before anybody else [00:17:00] did and looking at things 

[00:17:02] Tony: like, um, you know, If a hurricane’s 

[00:17:04] Tony: off

[00:17:04] Tony: the coast of Florida, what does that 

[00:17:05] Tony: mean for 

[00:17:06] Tony: Walmart shares?

[00:17:07] Tony: That kind of thing. So putting together, 

[00:17:09] Tony: um, I wouldn’t say non 

[00:17:10] Tony: logical, but

[00:17:11] Tony: on the surface, uncoordinated bits

[00:17:13] Tony: of data and then profiting by trading the stocks based on that. Uh, that’s now a big part of what, 

[00:17:19] Tony: A lot of hedge funds do, so, um, I don’t know if you would continue to do, 

[00:17:22] Tony: that. So, I 

[00:17:24] Tony: guess, you know, I mean, what I say, what I said last week, 

[00:17:26] Tony: which 50% per annum over a long period of time sounds, 

[00:17:30] Tony: um, too high, um, to say 

[00:17:31] Tony: that it sounds too high for you and I 

[00:17:34] Tony: to get

[00:17:34] Tony: continuously over a long period of time.

[00:17:36] Tony: There’s probably a better way of 

[00:17:37] Cameron: An hour put putting 

[00:17:39] Cameron: in an hour a week 

[00:17:40] Cameron: or a couple hours a week, 

[00:17:42] Tony: Yes, that’s right. And the other thing too, is if, I mean, if I can do it, I 

[00:17:47] Tony: guess anyone can do it, but, um, you do have to, they will 

[00:17:49] Tony: have to work. A lot harder than what I 

[00:17:51] Tony: work and, 

[00:17:53] Tony: uh, and, um, I’m, you know,

[00:17:54] Tony: like Simon, sorry, you know, invested heavily in

[00:17:58] Tony: data servers and hiring [00:18:00] PhDs and all that kind

[00:18:01] Tony: of stuff.

[00:18:01] Tony: So it was a big business for him really in the end. But if we want access to those people, we’re going to pay a really high price for it. So 

[00:18:07] Tony: those numbers would be before fees.

[00:18:10] Tony: I know Buffett was charging 220 back when he was a, 

[00:18:13] Tony: um, 

[00:18:13] Tony: an unlisted investor, investment 

[00:18:15] Tony: management, which means that he took 2% to run the thing and then 20% of any profit.

[00:18:19] Tony: So 50% drops 

[00:18:22] Tony: a lot. Um, but it’s still a great return. So 

[00:18:25] Tony: I’m not going to say you begrudging from that. And you can, you can see it. It’s in there. If you go and look at the Berkshire Hathaway Annual reports, he always puts 

[00:18:33] Tony: the long term per annum returns for Berkshire Hathaway. That didn’t start in the 50s, it started in the 60s, but the first 10 years you’re often 

[00:18:42] Tony: seeing 100% return, 80% 

[00:18:44] Tony: return, 70% return.

[00:18:46] Tony: It’s quite large and also quite volatile to be, to be fair. Oh

[00:18:50] Cameron: Well, yeah. And again, I encourage anyone who 

[00:18:53] Cameron: thinks they can get those returns to 

[00:18:55] Cameron: go out and do it, and then come and tell us 

[00:18:57] Cameron: how you did it. 

[00:18:59] Tony: it, 

[00:18:59] Cameron: [00:19:00] Yeah. 

[00:19:00] Cameron: Come back and share the 

[00:19:02] Cameron: share the wisdom with us. 

[00:19:04] Cameron: Uh, but again, I, I. 

[00:19:05] Tony: And don’t say crypto. 

[00:19:08] Cameron: Hey, I, I was just looking at Bitcoin, man. 

[00:19:10] Cameron: Bitcoin’s up nearly like 80% since the 

[00:19:13] Cameron: beginning of the year. 

[00:19:14] Cameron: Mean it’s still down 80% 

[00:19:16] Cameron: from where it was two years ago. But ,you know,

[00:19:20] Cameron: you wanna ride the lightning? 

[00:19:21] Cameron: Um, no, but I get the, the amount of time and effort that you put in, I think is the

[00:19:24] Cameron: key thing, like, yeah.

[00:19:26] Cameron: And if you wanna work 

[00:19:27] Cameron: eight hours a day, 18 hours a day on investing, you probably should get better returns than somebody who puts in an hour a day on average, as you do. 

[00:19:37] Tony: Mm hmm. Correct. Yeah. 

[00:19:39] Cameron: and that’s the trade 

[00:19:40] Tony: Yeah. And that’s a big part of it. I 

[00:19:41] Tony: mean, yeah, no, exactly. I’m not, to be honest, I’m not 

[00:19:45] Tony: sure I

[00:19:45] Tony: would get um, you know, uh, it’s almost like diminishing returns. The more you put in, you don’t necessarily double. If I put the double of the outs in, I don’t know if I get 

[00:19:52] Tony: double the returns.

[00:19:54] Tony: Really, I might, but um, you can work a long time with investing and not

[00:19:57] Tony: improve your returns. Mm hmm.

[00:19:59] Cameron: [00:20:00] Yeah, but like, you know, we’ve had guys on the show that run funds that go out and meet with managing directors of 

[00:20:08] Cameron: firms and they get to see the numbers and they pick it 

[00:20:11] Cameron: apart, 

[00:20:12] Cameron: they understand the sector and they understand the, you know, the, the, you know, the, the competition and they get down into the economics of the business and they know who’s who in the zoo.

[00:20:21] Cameron: We don’t really do that. 

[00:20:23] Tony: Yeah, I think, no, we don’t plan to do that, and I don’t, I’m not 

[00:20:26] Tony: even sure 

[00:20:27] Tony: if we did that it would make a big difference. Buffett

[00:20:29] Tony: doesn’t do that. He quite 

[00:20:30] Tony: famously lives in Omaha. To avoid doing that, doesn’t want to talk to the people

[00:20:34] Tony: running 

[00:20:34] Tony: the 

[00:20:34] Tony: business. Yeah, or to Wall Street, I could. Analyst nut? 

[00:20:38] Cameron: Well, no, he did. It 

[00:20:39] Cameron: is in the book about him

[00:20:40] Cameron: Berkshire Hathaway, he 

[00:20:42] Cameron: went and 

[00:20:42] Cameron: met with the guy that owned 

[00:20:43] Cameron: Berkshire Hathaway and negotiated a deal with him before he took

[00:20:48] Cameron: it over, right? 

[00:20:50] Tony: Well, the full story is, he bought a stake in Berkshire Hathaway, I don’t know if he actually talked to them beforehand, uh, got on the board, and then was upset with the way the company

[00:20:59] Tony: was 

[00:20:59] Tony: being [00:21:00] run, and then decided to buy them 

[00:21:02] Tony: out, made 

[00:21:02] Tony: an offer,

[00:21:03] Tony: I think the chairman had agreed a particular 

[00:21:05] Tony: offer, 

[00:21:06] Tony: and then reneged,

[00:21:07] Tony: and they’re 

[00:21:08] Tony: only talking 

[00:21:08] Tony: about… Half a cent or something 

[00:21:11] Tony: difference in the price and Buffett said 

[00:21:12] Tony: stuff you and went out and 

[00:21:13] Tony: launched a 

[00:21:13] Tony: takeover and bought it all. So, yeah, I don’t think, I don’t know if you would 

[00:21:17] Tony: have 

[00:21:17] Tony: met with

[00:21:18] Tony: anyone at Berkshire Hathaway before, before buying his

[00:21:21] Cameron: Well, I just remember in his, the early part of his investing career, when no one else was doing 

[00:21:27] Cameron: it, 

[00:21:27] Cameron: really, no one else, outside of you know, Ben Graham, was really, and he 

[00:21:34] Cameron: wasn’t even really doing it the way Buffett 

[00:21:36] Cameron: was doing it, he was more of a 

[00:21:38] Cameron: professorial

[00:21:38] Cameron: type, but Buffett was 

[00:21:40] Cameron: saying that it was amazing to him that if he 

[00:21:41] Cameron: went and

[00:21:42] Cameron: knocked on the door, of managing directors of 

[00:21:45] Cameron: these companies and said, Hey, I 

[00:21:46] Cameron: want to talk to you

[00:21:47] Cameron: about your company. Cause I’m 

[00:21:48] Cameron: thinking about investing into that. I’m like, 

[00:21:49] Cameron: what? 

[00:21:50] Cameron: Uh, sure. Come

[00:21:50] Cameron: in. He’s this young guy who wanted to know how 

[00:21:53] Cameron: their

[00:21:53] Cameron: business works, you know? 

[00:21:57] Tony: It happened in a couple of cases and I think it was Geico was [00:22:00] the famous one where on a Saturday afternoon he wanted to learn about insurance. I end up on the door of the Geico’s building and the CEO was the only person working who answered and spent the afternoon telling him about insurance.

[00:22:10] Tony: Um, but I don’t know that Buffett did that. Um, and there were plenty of funds around at that time. I mean, you know

[00:22:16] Tony: Wall Street was awash with funds, which is one of the reasons why it crashed in 29 so badly. Um, so there would have been heaps of analysts maybe with companies around 

[00:22:24] Tony: that 

[00:22:24] Tony: time. 

[00:22:24] Cameron: okay. 

[00:22:25] Tony: Anyway, it’s, it’s probably a moot point. Yes, you could, you 

[00:22:29] Tony: could potentially 

[00:22:30] Tony: meet with, um, companies like

[00:22:32] Tony: Jeff Wilson does at WAM, um, always on the road, 

[00:22:35] Tony: but his returns aren’t 50% per 

[00:22:38] Tony: annum. So,

[00:22:39] Tony: um, I’m not sure that’s a necessarily the thing to do. Um, it’s more likely, 

[00:22:43] Tony: I think the, the, 

[00:22:43] Tony: more the, 

[00:22:43] Tony: if, if you put a gun to 

[00:22:45] Tony: my 

[00:22:45] Tony: head 

[00:22:45] Tony: and say, how, how would you get higher returns? I’d say 

[00:22:48] Tony: Concentrate your 

[00:22:49] Tony: bets. 

[00:22:50] Tony: You know, find a, find something you really, really, really like and put everything into it, 

[00:22:56] Tony: you know?

[00:22:57] Tony: yeah, 

[00:22:57] Tony: um, And then ride the 

[00:22:58] Tony: volatility. [00:23:00] 

[00:23:00] Tony: And that’s, that was going to lead, so that was going to lead me to 

[00:23:04] Tony: an article that was in today’s LiveWire about this very, very topic where, um, a company, I think it was called Alpha Architect from the States did research on, uh, just trying to find my notes, um, Uh, the returns for, for companies across the deciles, um, every five years.

[00:23:20] Tony: So by that I mean they took the, the five year returns of companies listed in the us, 

[00:23:25] Tony: ranked them from top to bottom in terms of the biggest cagr, and then broke them up into 10% bands. So the highest 10%, 

[00:23:32] Tony: uh, and their analysis went back to 1927. The highest 

[00:23:36] Tony: 10% achieved if you could pick the 

[00:23:38] Tony: highest 10%.

[00:23:39] Tony: At the start of the five year period, you would get 30% returns CAGR since 1927. So even if you are investing with

[00:23:48] Tony: hindsight and you knew at the start of every five year period what the best performing stocks were, the top 10% of stocks, you’re only getting 30%. 

[00:23:56] Tony: and and part of that reason is

[00:23:58] Tony: because of the [00:24:00] of the volatility. 

[00:24:01] Tony: So There’s lots of big crashes even in the top 10% of stocks along the way and then they recover. 

[00:24:07] Tony: So, to me, um, the thing that, that, that I pulled out of that quote you gave me was that Buffett said in there somewhere about, um, he’s always fully invested. If I was running a million dollars today or 10 million dollars today for that matter, I’d be fully invested.

[00:24:23] Tony: So I think that’s the key point is, you’re going to get volatility, but don’t try and time the market and sell out when it’s low and buy in when it’s high. Yeah, and I also, these people, Alpha Architect also pointed out that Even if you’d bought Amazon when it listed, which is probably one of the best performing stocks in the U.

[00:24:41] Tony: S. Uh, it’s achieved 33% CAGR. Over 

[00:24:44] Tony: time. So to get as high as 50, you’ve got 

[00:24:48] Tony: to be doing something more than just buying it, finding a good company and, um, and investing in it. 

[00:24:52] Cameron: Well, I think the key takeaway then from Buffett’s quote is that he’s full of shit. And speaking of full of shit, Fortescue 

[00:24:57] Cameron: medals.

[00:24:59] Tony: Well, I don’t think Buffett’s [00:25:00] full of shit. I think it’s an interesting, interesting discussion, interesting commentary on 

[00:25:03] Cameron: Yeah. But that’s not as good a segue into fortescue metals. Tony, 

[00:25:06] Cameron: I was , I was trying to slide 

[00:25:08] Tony: The big, the big vision. ,

[00:25:10] Cameron: ,the big vision . So we talked last week about how 

[00:25:15] Cameron: Fiona Hicks, the c e o of Fortescue Metals resigned slash was pushed. Um, a couple of 

[00:25:21] Cameron: days later, their C F O. 

[00:25:23] Cameron: Resigned, slashed, was pushed, and then, this is Christine Morris, and then, a day or two after that, Guy DeBell, 

[00:25:35] Cameron: who was the former central banker, quit the board 

[00:25:39] Cameron: of Fortescue Future, Industry.

[00:25:42] Cameron: So three senior people in the space of a week left 

[00:25:47] Cameron: Fortescue. 

[00:25:48] Cameron: Um, conspiracy theories aside 

[00:25:50] Cameron: about Andrew Forrest’s big vision, uh, what’s redder than a red flag, Tony? We said last week it was a red flag. What’s redder than a red flag? Like a nuclear bomb [00:26:00] going off? 

[00:26:00] Cameron: Is that 

[00:26:01] Cameron: going on? 

[00:26:03] Tony: Yeah, I mean, they’ve had, they’ve had reasons behind each of the departures, which you’d expect 

[00:26:07] Tony: from a big company, but probably got a, an investor relations team thinking of things to say when someone leaves. 

[00:26:15] Cameron: Well, there was an interesting article in the 

[00:26:17] Cameron: Financial 

[00:26:17] Tony: yeah, it looks, it’s a big red flag. 

[00:26:20] Cameron: There was an 

[00:26:20] Cameron: interesting article in the 

[00:26:21] Cameron: Financial Review by Peter Kerr, Resources 

[00:26:25] Cameron: Reporter, on the 1st of 

[00:26:26] Cameron: September. He said Fortescue Metals 

[00:26:29] Cameron: investors are split over whether Andrew 

[00:26:31] Cameron: Forrest is damaging its culture with a former major shareholder selling down

[00:26:35] Cameron: his stake. over fears the company’s chairman might wreck 

[00:26:39] Cameron: the iron ore major. But manufacturing millionaire Peter

[00:26:43] Cameron: White’s suggestion that Dr. Forrest should get the 

[00:26:45] Cameron: hell out of Fortescue’s daily

[00:26:47] Cameron: operations came as other large investors said Dr. Forrest

[00:26:51] Cameron: deserved more respect. It goes on to quote from, Tumazos.[00:27:00] 

[00:27:02] Cameron: said Fortescue

[00:27:03] Cameron: had formidable employees and the company’s core is very strong. Mr. Tumazos, an

[00:27:08] Cameron: investor in. the United States, is in

[00:27:10] Cameron: the Greek islands as he 

[00:27:12] Cameron: awaits payment of almost 78, 000 in final dividends from

[00:27:16] Cameron: Fortescue. Does it matter if Mickey Mouse or Donald Duck are CEO or 

[00:27:20] Cameron: chairman? he 

[00:27:21] Cameron: asked the 

[00:27:21] Cameron: AFR Weekend, It amazes 

[00:27:24] Cameron: me how little Andrew is appreciated or respected for creating so much

[00:27:27] Cameron: wealth and employment. These attitudes focus on ridiculing 

[00:27:31] Cameron: Fortescue’s energy businesses, which is either too late to ridicule, where it is too late to ridicule its iron ore successes. Throughout Fortescue’s history, I’ve 

[00:27:39] Cameron: found that the Australian sell side analysts and financial press are very quick

[00:27:44] Cameron: to piss in their face.

[00:27:46] Cameron: Over the past decade, I have consistently recommended and owned Fortescue shares. Mr. Tumazos said, adding that he was not deterred by the exit of Ms. Hicks, who had been in the top job for six months, and Ms. Morris, who was Chief Financial [00:28:00] Officer for less than two months. Sometimes in my own office, we had to make a hire twice to find the right person, or we determined after a short time that some paper credentials were meaningless, he

[00:28:10] Cameron: said.

[00:28:11] Cameron: In the case of Fiona leaving after seven months, she had not been there long enough to make a contribution or fully learn the business. At the outset, I wondered if a career at Woodside, which is 

[00:28:21] Cameron: BHP like, was an ideal prep for Fortescue, which 

[00:28:24] Cameron: has a less 

[00:28:25] Cameron: bureaucratic or less traditional culture. The departure of a 20 year veteran 

[00:28:30] Cameron: might concern me more. I know you’ve been a big fan of Twiggy Forrest over the years. Tony, what do you think about Mr

[00:28:37] Cameron: Tumazos’s comments? 

[00:28:39] Tony: didn’t Elizabeth Gaines leave too? Recently, 

[00:28:42] Cameron: Yes. Yeah, 

[00:28:44] Tony: I think she left. Yes. Well, she’s been there for 20 years or something 

[00:28:47] Tony: for a long time. So, um, Oh, look, I, I, 

[00:28:48] Tony: um, I understand both sides of the argument. Um, to me, it’s a red 

[00:28:51] Tony: flag when staff leave, especially

[00:28:53] Tony: staff from. who have 

[00:28:54] Tony: good career records in big institutions and big companies.

[00:28:58] Tony: Uh, the flip side of that coin is you [00:29:00] could say that it’s a, it’s still a family operation and the culture’s fast and loose, and

[00:29:05] Tony: it’s all about being entrepreneurial.

[00:29:07] Tony: So I get both sides of that, but. It does appear like

[00:29:12] Tony: if you’re investing in Fortescue, now you’re catching a tiger by the tail and holding on.

[00:29:16] Tony: So, um, but, you know, I’ve, I think the, was

[00:29:19] Tony: it Jim Thomas, if I didn’t catch his name, sorry, but analyst who said he

[00:29:24] Tony: was happy to stay in, or the investor who was happy to stay in. He makes a good point. Like I’ve been hearing about Trudy Forrest all the

[00:29:31] Tony: way through my investing career, starting with the time he had a nickel.

[00:29:37] Tony: Mine, and Processing Plant that

[00:29:39] Tony: went broke and cost a lot of people a lot of money. And, uh, and I was surprised to see that he was able to raise money again for Fortescue and sell that vision. And there’s been plenty of… bad press along the way and plenty of left turns and plenty of surprise endings and things when he you know couldn’t get the it’s almost like a [00:30:00] cliffhanger every week it’s like 

[00:30:01] Tony: if if if Fortescue can get 

[00:30:03] Tony: access to the

[00:30:04] Tony: railway the rail lines operated by BHP and Rio that’ll be the making of the 

[00:30:08] Tony: company next week Rio and BHP 

[00:30:11] Tony: refuse to let Fortescue use their their 

[00:30:14] Tony: rail track Twiggy takes them to the

[00:30:15] Tony: courts um could Twiggy loses the week after

[00:30:19] Tony: you know week after that Twiggy Raises money to build his own

[00:30:24] Tony: 500km railway to the port.

[00:30:26] Tony: Um, Twiggy can’t get port access to offload his iron ore, you know, it just goes on and 

[00:30:30] Tony: on and on. But he always breaks through and it’s,

[00:30:32] Cameron: He’s, he’s, he’s, he’s the China of Australia, is what he is. 

[00:30:35] Cameron: We’re talking about this, you know, for 15 years, there’s always these negative stories about China’s economy 

[00:30:39] Cameron: and how it’s, it’s falling over. 

[00:30:42] Tony: Yeah. 

[00:30:43] Cameron: Australia’s China. John Tumazos, by 

[00:30:46] Cameron: the

[00:30:46] Cameron: way, 

[00:30:46] Tony: So, 

[00:30:47] Cameron: John Tumazos, yeah, you know he’s, um, independent because his company is called Very Independent Research, LLC. 

[00:30:55] Cameron: So you know! 

[00:30:56] Tony: and the fact that he was waiting for, what was it, the He was 

[00:30:59] Tony: waiting for a 70, [00:31:00] 000 dividend, so he’s not really a big fund manager invested in Fortescue, but, um, anyway, yeah.

[00:31:07] Cameron: Anyway, 

[00:31:08] Tony: Um, so, yeah, I think it’s a red flag. I 

[00:31:10] Tony: think it’s a red flag because, um, even 

[00:31:12] Tony: if Putney’s 

[00:31:14] Tony: right, 

[00:31:14] Tony: and people like, uh, Ms. 

[00:31:15] Tony: Hicks, who came out of Woodside, was a bad fit for the culture, 

[00:31:19] Tony: um, 

[00:31:19] Tony: I would have thought the Woodside culture 

[00:31:20] Tony: was pretty good, and they knew how to get shit done 

[00:31:23] Tony: in a big company, so, um, yeah, 

[00:31:25] Tony: it’s 

[00:31:26] Tony: it’s always the problem with owner 

[00:31:28] Tony: founder companies, I mean, they, they, they 

[00:31:30] Tony: keep their hands in, 

[00:31:30] Tony: they move 

[00:31:31] Tony: entrepreneurially, uh, but then what happens? They’re 

[00:31:34] Tony: very volatile, and 

[00:31:35] Tony: what happens when they 

[00:31:35] Tony: move on? Somehow the company’s got to survive, yeah. Mm

[00:31:38] Cameron: but you know, you, you often talk about one of the most important factors we look for as an owner 

[00:31:45] Cameron: founder that’s got a lot of skin in the game. You know, 

[00:31:48] Cameron: he’s got a lot of skin in the game. 

[00:31:50] Tony: yeah. Yeah, so has his 

[00:31:51] Tony: wife, who he divorced recently as well. So there’s a lot 

[00:31:53] Tony: going on in the, in the orbit of Annette Twiggy at the moment. I’d hope he’s focused on the,

[00:31:59] Cameron: he’s, 

[00:31:59] Cameron: got, a lot of 

[00:31:59] Cameron: skin in [00:32:00] the game.

[00:32:01] Cameron: He’s got a lot of game and he’s been putting his skin in 

[00:32:04] Cameron: the game. 

[00:32:05] Cameron: apparently, 

[00:32:06] Cameron: allegedly. Speaking of not a good fit 

[00:32:11] Cameron: Not a good fit for organizations. Alan Joyce 

[00:32:14] Cameron: has moved his retirement up by two months. He’s leaving tomorrow. Qantas has got themselves in a

[00:32:22] Cameron: bit of a pickle. 

[00:32:23] Tony: Yes, I did see that today and, um, I’m going to do a pulled pork on 

[00:32:26] Tony: Air New Zealand

[00:32:26] Tony: in 

[00:32:27] Tony: a few minutes as a contrast to, um, to, Qantas. um,

[00:32:30] Tony: but yeah, the 

[00:32:31] Tony: share price is up slightly today, 

[00:32:32] Tony: which might be the market, but 

[00:32:34] Tony: it 

[00:32:34] Tony: could also be on 

[00:32:34] Tony: a resignation. but anyway, look, kudos. I mean, first of 

[00:32:37] Tony: all, I 

[00:32:38] Tony: think Alan Joyce has been a

[00:32:39] Tony: good

[00:32:39] Tony: CEO. 

[00:32:40] Tony: Um, he’s been there for 15 

[00:32:41] Tony: years, 

[00:32:42] Tony: which is perhaps a little 

[00:32:42] Tony: bit too long. Um, but kudos to, um, to Ria Window in the 

[00:32:46] Tony: AFR, because I, I think he’s probably 

[00:32:48] Tony: behind 

[00:32:48] Tony: the scalp of claim, or claiming the 

[00:32:50] Tony: scalp of Alan 

[00:32:51] Tony: Joyce. So, he was the, 

[00:32:53] Tony: the first, uh, Joe 

[00:32:53] Tony: Astin was the first 

[00:32:54] Tony: person to start raising 

[00:32:56] Tony: issues about, Qantas using the

[00:32:58] Tony: Chairman’s Club to dole

[00:32:59] Tony: out,[00:33:00]  um, you know, favours to 

[00:33:01] Tony: politicians and 

[00:33:02] Tony: then started 

[00:33:03] Tony: reporting on the fact that

[00:33:03] Tony: Anthony Albanese’s son 

[00:33:05] Tony: had been made a member of the Chairman’s Lounge and how that 

[00:33:07] Tony: wasn’t declared on 

[00:33:08] Tony: Albanese’s, um, uh, what do they call them?

[00:33:10] Tony: The record of donations 

[00:33:11] Tony: or whatever it’s called. Um, and, uh, and 

[00:33:14] Tony: then started 

[00:33:15] Tony: to take on Qantas performance and how much money it received during COVID, and all this kind of, and then started to

[00:33:21] Tony: find people who couldn’t claim their 

[00:33:23] Tony: flight credits, which were refunded during COVID, etc, etc. Alan Joyce’s response was to stop stocking the AFR in their lounges.

[00:33:31] Tony: He couldn’t read 

[00:33:31] Tony: about 

[00:33:32] Tony: it. And, uh, eventually ASIC got involved and said, yeah, there’s, there’s where there’s smoke, there’s 

[00:33:38] Tony: fire, and now Qantas might be on the hook 

[00:33:39] Tony: for 250 million in fines if they did try and sell people tickets to flights, which they knew had already been canselled. So, yeah, it’s, 

[00:33:49] Tony: uh, it’s a bit of a, I mean, it probably would have all come out eventually, but it’s a bit 

[00:33:52] Tony: of a coup for investigative journalism.

[00:33:54] Tony: And, um, yeah, 

[00:33:55] Tony: I mean, uh,

[00:33:55] Tony: Alan Joyce has been very polarizing because he 

[00:33:57] Tony: takes issues on social, um, he takes stances [00:34:00] on social 

[00:34:00] Tony: issues. Um, and he also, you know, 

[00:34:02] Tony: um, uh,

[00:34:02] Tony: pushes donations, et cetera, 

[00:34:04] Tony: to courses that suit him, 

[00:34:05] Tony: which I guess most CEOs do. So I’ve, I’ve always

[00:34:09] Tony: seen him to be very 

[00:34:09] Tony: effective, but perhaps he’s been there for too 

[00:34:11] Tony: long now.

[00:34:13] Cameron: well, Qantas is down in our portfolio. We hold a couple of parcels of it. Um, it’s down five to 10% and I think. Might be a rule one today by the way it’s going, although it’s been 

[00:34:24] Cameron: close to that for a week or so anyway. But, 

[00:34:26] Cameron: um, 

[00:34:26] Cameron: yes, uh, 

[00:34:27] Tony: Yes, I own, I own a stock 

[00:34:29] Tony: and I’m looking for 

[00:34:30] Tony: a bounce. With the new CEO taking over.

[00:34:33] Cameron: yeah, well the markets, it sort of did spike up a bit this morning, but then it came 

[00:34:38] Cameron: back down again, sort of was up by sort of 1030 and back down after that. So it’s still hovering around a rule one sell for me. 

[00:34:49] Cameron: so Um,

[00:34:51] Cameron: The market doesn’t seem to have given it a 

[00:34:53] Cameron: bye bye Allen bounce yet. We’ll see what happens over the next couple of days, but…

[00:34:58] Cameron: Well, that’s all I have on my list of [00:35:00] things to talk about, TK. What have you got to cover off before 

[00:35:03] Cameron: we get into some 

[00:35:04] Cameron: questions? 

[00:35:05] Tony: Yeah, so just a couple of things. 

[00:35:06] Tony: Um, The RBA is meeting today, so probably in about half an hour’s time. It’s 

[00:35:11] Tony: sort of largely expected that

[00:35:12] Tony: they’ll keep rates on hold, but we’ll, I guess we’ll 

[00:35:14] Tony: wait and see. Uh, and, um, I hope they 

[00:35:17] Tony: do because inflation clearly is coming 

[00:35:19] Tony: down even though 

[00:35:20] Tony: it’s, um, still reasonably high.

[00:35:22] Tony: Um, so that, that’ll be a good thing if they 

[00:35:24] Tony: do. Uh, I did want to talk 

[00:35:25] Tony: about, um, the, well, it’s the 

[00:35:27] Tony: start of the month. So people, um, who set their own alerts should be checking three point trend lines and setting 

[00:35:31] Tony: alerts. It’s what I’ve been 

[00:35:33] Tony: doing over the last day or so. Um, because the 

[00:35:36] Tony: trend line, 

[00:35:36] Tony: three point trend line sells. Alerts 

[00:35:39] Tony: change over time, 

[00:35:41] Tony: the positions change, so just check all those.

[00:35:45] Tony: What else have I got? I just wanted to say a big shout out to some of our 

[00:35:50] Tony: listeners who I got to meet at the Affordable 

[00:35:52] Tony: Art Fair on the weekend,

[00:35:53] Tony: which was lovely. 

[00:35:54] Tony: Thanks for coming in and supporting the art show 

[00:35:56] Tony: and 

[00:35:56] Tony: going up and seeing Alex. It’s been a wonderful [00:36:00] weekend for her. 

[00:36:00] Tony: She sold a lot of paintings 

[00:36:02] Tony: and it’s a very positive 

[00:36:05] Tony: start to her 

[00:36:05] Tony: career in the arts industry. I’m very happy and proud for her. But I bumped into people I hadn’t met 

[00:36:12] Tony: before. So shout out to Annette 

[00:36:14] Tony: and Toby. Um, and then Brett’s family came in. I saw them 

[00:36:17] Tony: on the Sunday afternoon as well, which is nice 

[00:36:18] Tony: to meet the whole gang, so.

[00:36:20] Tony: Lovely. Thank you. 

[00:36:21] Cameron: They were like, this is who you’ve 

[00:36:22] Cameron: You’ve been working for free for all these years.

[00:36:25] Tony: Yeah. Yeah. 

[00:36:25] Tony: No. No, they were, uh, the, I think 

[00:36:26] Tony: the, 

[00:36:26] Tony: there was three children and I think the 

[00:36:28] Tony: one, the girl was, um, interested in art. So it was a, I think her first time 

[00:36:32] Tony: in an art show. So that 

[00:36:33] Tony: was 

[00:36:33] Tony: a bit of an eye 

[00:36:33] Tony: opener for 

[00:36:34] Cameron: great. yeah, 

[00:36:35] Cameron: congratulations to Alex, very happy for her, 

[00:36:37] Cameron: that’s terrific. 

[00:36:38] Tony: Yeah. And she won’t be on the show today 

[00:36:39] Tony: ’cause she’s going on the holiday after all 

[00:36:41] Tony: the 

[00:36:42] Tony: weeks of late nights painting and , 

[00:36:45] Tony: getting things ready for 

[00:36:46] Tony: the show. 

[00:36:47] Tony: Yeah, but good on it. It’s great. Pulled 

[00:36:49] Tony: pork time, Cam, as I said, and New Zealand. Bit of foreshadowing there,

[00:36:55] Cameron: Now, I’m a little bit worried about this, Tony, because I just added 

[00:36:58] Cameron: them to some of our portfolios 

[00:36:59] Cameron: [00:37:00] yesterday, and I know it’s already 

[00:37:02] Cameron: very close to its sell line. It was just above the sell line, and I thought I’ll take a punt on it, didn’t know you were going to do a pulled pork on it, so that could be the death knell of it, but let’s 

[00:37:12] Cameron: see how we go.

[00:37:14] Cameron: Gird my loins. 

[00:37:16] Tony: yeah, Pulled Pork. 

[00:37:17] Tony: Alright, so it’s Air New Zealand, code is 

[00:37:19] Tony: AIZ.

[00:37:20] Tony: I often think ANZ, but that’s the bank, so it’s AIZ. And as you said, 

[00:37:25] Tony: it’s just above its sell 

[00:37:26] Tony: line, 

[00:37:26] Tony: only like by a cent and a half when 

[00:37:28] Tony: I 

[00:37:28] Tony: last looked. Reasonably 

[00:37:30] Tony: sized business, ADT of 

[00:37:31] Tony: 344, 000, so that’s not too bad. 

[00:37:35] Tony: But It’s dual listed, 

[00:37:37] Tony: so listed in New Zealand, listed in Australia and also the New Zealand government is still 

[00:37:43] Tony: a big owner of this company, so it tends not to get much trading from the big instos, so, 

[00:37:50] Tony: The, Even though it’s an 

[00:37:52] Tony: ADT of 344, 000, there is that big 

[00:37:55] Tony: shareholder sitting there and that kind of tends to keep people off the 

[00:37:58] Tony: register, [00:38:00] but it should be big 

[00:38:00] Tony: enough for 

[00:38:00] Tony: most people.

[00:38:01] Tony: A couple of 

[00:38:02] Tony: things I wanted to say about it. I mean, I think people are familiar with who 

[00:38:05] Tony: our New

[00:38:05] Tony: Zealand is.

[00:38:07] Tony: It’s New

[00:38:07] Tony: Zealand’s flagship carrier. They it was interesting to go through their 

[00:38:12] Tony: results and announcements and 

[00:38:15] Tony: to think 

[00:38:15] Tony: about how 

[00:38:16] Tony: they compare with Qantas, 

[00:38:17] Tony: compare and contrast with Qantas. 

[00:38:20] Tony: They’ve reported in their most recent results that they’ve got, the last half anyway, has had lots of tailwinds 

[00:38:26] Tony: in their business, as it has with Qantas. 

[00:38:28] Tony: So they’re getting back up close 

[00:38:30] Tony: to Pre COVID but they’re saying post pre COVID levels of profitability, et cetera, and sales, but they’re saying post COVID, they’ve seen some impacts which are, which are going down which are, sorry, well, the impacts are lessening, so their customer demand is increasing post COVID, there was, there has certainly been some constrained market capacity because a lot of airliners mothballed their planes, or at least 

[00:38:52] Tony: put them out in the desert where they 

[00:38:53] Tony: wouldn’t rust over time, so they’re, They’re, 

[00:38:56] Tony: Still all to come back online and there’s been lower fuel [00:39:00] prices, 

[00:39:00] Tony: um, in the 

[00:39:01] Tony: second half of F 

[00:39:02] Tony: 23,

[00:39:03] Cameron: What, what, deserts in New Zealand are they putting planes 

[00:39:06] Cameron: in? 

[00:39:06] Tony: Not in New Zealand, but over in? 

[00:39:08] Tony: Nevada, you Google, Google the plane graveyard, there’s a, 

[00:39:12] Tony: there’s, there’s, it’s in 

[00:39:13] Tony: Nevada or Death Valley or somewhere around there where 

[00:39:15] Tony: they, they, put these planes, there’s just rows and rows of like fields of 747s and Airbuses all 

[00:39:22] Tony: sitting there. Yeah. Yeah. 

[00:39:24] Tony: And something they’re saying Not Air New Zealand, but some other market players are saying they may not come back out.

[00:39:30] Tony: They’re just going to buy new planes instead. 

[00:39:32] Tony: So, there is a constraint on the 

[00:39:34] Tony: number of seats available in the air at the moment because of that. But, and it’s certainly going to be a part of both Qantas and Air New Zealand going forward that they’ve got to upgrade their fleets and, and find new leases.

[00:39:45] Tony: And that’s one of the issues that they, they called out. I think the interesting thing on the day of Alan Joyce’s retirement is the guy who runs and New Zealand is named Greg Foran. Anybody who’s been investing as long as I 

[00:39:58] Tony: have that might [00:40:00] trigger a memory. So Greg Foran, I don’t see the Foran.

[00:40:03] Tony: F O R 

[00:40:04] Tony: A N, I’m 

[00:40:04] Tony: not sure how to pronounce it, Foran or Foran.

[00:40:06] Tony: He was 

[00:40:09] Tony: in line to run Woolworths a long time ago, maybe 15 or so years ago, and was passed over for a guy called O’Brien who was more of, I think, a strategic guy rather than an operational guy. And that’s a whole different story again about how well or not strategy managers are at running big companies and ex consultants at running big companies.

[00:40:36] Tony: Asterisk. They’re terrible at it. That’s the footnote. Anyway, but Foran thought he, he was hard done by and No Future was there in Woolworths and went across and ran. Walmart in China and did a good job and then went to the States and ran I think, well, I called him CEO of Walmart, but I imagine by looking from my knowledge of what he did, he sounded more like [00:41:00] COO.

[00:41:00] Tony: But anyway, he was either number one or number 

[00:41:02] Tony: two at Walmart and did a really good job there. And Walmart was on the skids there for a while before he took it over and he cleaned up the stores and made sure the stock was always available and did a few initiatives like 

[00:41:15] Tony: curbside pickups and stuff, which have seen 

[00:41:17] Tony: Walmart return to its its rightful position.

[00:41:20] Tony: I think this Walmart shares are up about 30% this year or something in the U. S. Anyway He is a Kiwi by birth so he surprisingly resigned and left Walmart a couple of years ago and maybe three years ago because he, I think, almost on the first day of his becoming the CEO of AA New Zealand, COVID hit and he had to deal with all of that.

[00:41:42] Tony: So it was kind of a baptism by fire. Doesn’t, has, I did a Google search and couldn’t find out if there were any reasons why he came back. There was some analysis from some trade magazines in the States that said there was some friction between the guy who ran the internet division of 

[00:41:57] Tony: Walmart and foreign, [00:42:00] foreign, like, who knows he may have just decided he wanted 

[00:42:03] Tony: to go back to New Zealand and raise his family 

[00:42:05] Tony: there.

[00:42:05] Tony: So, 

[00:42:05] Cameron: with, didn’t agree with Twiggy’s big vision. 

[00:42:10] Cameron: Wasn’t on board, wasn’t on board with the 

[00:42:11] Cameron: big

[00:42:12] Tony: he’s he’s sold. He saw Twiggy’s big vision and said, 

[00:42:15] Tony: yeah, not for me. 

[00:42:19] Cameron: not big enough. 

[00:42:20] Tony: Anyway, it’s a long way of saying I 

[00:42:22] Tony: think Air New Zealand are very privileged to have this 

[00:42:25] Tony: guy 

[00:42:25] Tony: running their business. He’s a, he’s a top class experienced, globally experienced CEO. And I would expect, even though he’s, he’s probably getting up towards my age, I would expect to, you know, to see Air New Zealand run very, 

[00:42:40] Tony: very Strongly and well with him at the helm.

[00:42:43] Tony: Anyway, so let me go through the numbers of Air New Zealand. I’m using a share price of 77 cents per share. It’s greater than the IV1 and we don’t have an IV2. And as I’ve said before, I like situations where we don’t have any sort of consensus [00:43:00] forward guidance for a company. It means that people aren’t watching it.

[00:43:04] Tony: So it’s good for us small investors to be able to 

[00:43:07] Tony: get a stake before the big people muscle 

[00:43:10] Tony: in. I think the reason for that 

[00:43:13] Tony: is because the government owns so

[00:43:15] Tony: much of our New Zealand and that’s oftentimes something 

[00:43:17] Tony: that

[00:43:19] Tony: fundies won’t like. I looked up Stock Doctor and it said… You’ll like this Cam, it said that the number, the largest shareholder was Her Majesty the Queen in right of New Zealand. And Stock Doctor’s actually saying they own 51% when I was Googling doing my research, somebody else said 49%, and Stock Doctor may be right, or this other person may be right, but it’s around half is owned by the New Zealand, or Her Majesty the Queen, who is now dead, so I don’t know how she’s the owner.

[00:43:48] Tony: But they’re usually on government anyway, owns half of approximately half, did own it outright, they’ve been selling down for the last decade or so, from 100% down to 75% and then progressively from [00:44:00] there. But I think fund managers would quite rightly see that if they bought a reasonable stake in our New Zealand, they wouldn’t have a controlling interest, and I would think that even though 

[00:44:12] Tony: the New Zealand government is selling down, they’re probably going to be focused more on things like service and making sure there’s good route coverage across New Zealand for regional people.

[00:44:23] Tony: Airports being serviced by you know, aircraft and enough flights rather than making the last buck for shareholders. So that would be the view I would 

[00:44:31] Tony: think of most large instos. I don’t necessarily share that view or I certainly see enough positives to go with that negative. The New Zealand government is, is also going to be there to do what the Australian government is doing at the moment, which is to run interference for heavily subsidised other international carriers from getting a toehold in the market, whether that’s good or bad, I’m, I’m kind of on the fence on that one.

[00:44:55] Tony: I think it’s, it’s it’s important to have a, have a [00:45:00] controlling stake in, in being able to provide a service, But there’s a point where it becomes so expensive to fly that you may as well allow other people in and erode the national carrier just to get better deals on flights. So it’s always a bit of a bit of a two edged sword that one.

[00:45:18] Tony: But certainly having the government as a major shareholder would mean you’d expect that they wouldn’t be allowing Emirates, Qatar, etc. to come in and take over large market shares. Anyway, back to the numbers the, they haven’t been paying a dividend since COVID, but they actually have announced a special dividend of six pence, six cents per share.

[00:45:40] Tony: And I’ll just highlight the fact now that I think that the stock goes ex dividend in two days, so what’s today? It’s now the 5th and I think it goes ex dividend on the 7th, so if you’re interested in the dividend, get in quickly if you hear this in time. But I think probably the better news is that Apart from that sort of make up for the fact they haven’t been paying [00:46:00] dividends for a while, they forecast they’re going to pay between, have a payout ratio of between 30 and 70 percent going forward.

[00:46:07] Tony: So they will start paying dividends again, which is something I like to see. Obviously no owner founder, although when I was living in New Zealand, someone tried to convince me that the, the New Zealander made the first powered flight in the world before the Wright Brothers, which I always found hilarious because New Zealanders like to claim every discovery in the world first so it’s always an interesting discussion over a few beers.

[00:46:30] Tony: Anyway, that’s an aside but no owner founder. No, no consensus forecast, which I said is good for us. It’s hard to say whether this is the lowest PE or not because there’s been no profit since COVID for this company. So, it, you know, we can’t score it as the lowest PE even though it’s the only PE.

[00:46:49] Tony: So it’s hard to do that. As you’d expect, no increasing, consistently increasing equity, because they’ve been living off their cash during COVID. So, all in all, a quality score of 70%, [00:47:00] which is still pretty good, and a QAV score of 0. 45, so it’s cheap at the moment. It’s rebounded from its lows probably three or so months ago and, but be careful because it’s just above its its sell line.

[00:47:13] Tony: A couple of other things I think the positives for this company are definitely the CEO. I think the negatives, I mean, I struggle to see whether I would put the government ownership in the positive or negative camp, but certainly if you were an insta you’d probably say it was a negative because of the misalignment of objectives but I think there are some positives as I said.

[00:47:32] Tony: And yeah, all the normal ones that we spoke about with QADIS in the past about fuel, and I think they’re, they’re forecasting that they have either hedged or they’re expecting a price for fuel, I think from memory it was a dollar, yeah, a dollar five US per barrel is what they are using to forecast.

[00:47:49] Tony: So that will be a key metric to watch if you’re a New Zealand investor. is the fuel price. If the fuel price goes above that, it will probably be affecting their forecast and therefore probably their profits. [00:48:00] If it stays below that, you probably can expect a better than expected profit, but that’s the average for the year.

[00:48:06] Tony: And they quite possibly also hedged around that. I know that they’ve hedged there. The New Zealand exchange rate to the US dollar to make sure that that doesn’t affect what they pay for fuel and other costs, I guess. And they’re also, and they’re hedged for fuel. So I think 50% was the number from memory, which is probably pretty standard for an all for an airline, because historically the airlines have been negatively correlated to the oil price.

[00:48:31] Tony: In other words, when one goes up, the other one goes down in terms of price because it’s such a big cost for them. The other thing they called out in their. Their results presentation was that their costs have increased by 16% across the board due to inflation. So, that has got to be a negative going forward.

[00:48:49] Tony: That hopefully will come down, but it may also be a squeeze on their margins going forward. So, anyway, that’s our New Zealand. Interesting, interesting little [00:49:00] company. I have owned 

[00:49:00] Tony: it in the past. I don’t own it now. But when I saw who was running it, I thought, big tick from 

[00:49:04] Tony: me on that one.

[00:49:06] Cameron: Good stuff, well, let’s hope you’re right on that, because we own it, and as we said it’s really close to the sell 

[00:49:13] Cameron: line, 

[00:49:14] Cameron: see how it goes. I always enjoy flying with Air New Zealand I gotta say, although they 

[00:49:20] Cameron: did sort of half, half sort of do the 

[00:49:22] Cameron: dirty 

[00:49:23] Cameron: on 

[00:49:23] Cameron: me a couple of years ago, last 

[00:49:25] Cameron: year, but 

[00:49:26] Cameron: that’s all right. 

[00:49:27] Tony: What’d they do? 

[00:49:27] Cameron: Well, I bought the we were flying to The US and I bought 

[00:49:30] Cameron: these special seatings

[00:49:33] Cameron: that you know, like say, you could lie down, I 

[00:49:36] Cameron: can’t remember what they called it, paid extra for 

[00:49:38] Cameron: some sort of lie down 

[00:49:40] Tony: Premium. Premium. economy? 

[00:49:42] Cameron: premium economy. That was it. Yeah. but 

[00:49:45] Cameron: we couldn’t actually use it, 

[00:49:47] Cameron: For some reason. 

[00:49:49] Cameron: And I asked them about it and they were like tough.

[00:49:52] Cameron: So I 

[00:49:54] Cameron: thought they’d 

[00:49:54] Tony: That’s not good. 

[00:49:55] Cameron: do me a favor and I can’t remember what the deal was, but there’s something we paid for. It couldn’t use it [00:50:00] and they wouldn’t give me a refund. They 

[00:50:01] Cameron: said, you know, tough 

[00:50:02] Cameron: titty. So, 

[00:50:03] Tony: Yeah, that’s always been one of

[00:50:04] Tony: my 

[00:50:04] Tony: criticisms 

[00:50:04] Tony: One of my criticisms of Qantas is the Air New 

[00:50:07] Tony: Zealand is in the other alliance network. I think that one’s called Star 

[00:50:10] Tony: Alliance 

[00:50:11] Tony: and I forget the

[00:50:13] Tony: And so when I was living in Canada 

[00:50:14] Tony: and occasionally flew Air Canada, which were also part of the Air New Zealand 

[00:50:18] Tony: alliance, 

[00:50:19] Tony: I would sometimes get on the Air New Zealand leg and the planes were great.

[00:50:22] Tony: The service was great. They tended to be much newer 

[00:50:24] Tony: planes than Qantas flew. So, you know, I can see 

[00:50:27] Tony: that they’re fairly competitive in the market. with their their offering.

[00:50:31] Cameron: hmm. Nice friendly staff though, apart from, actually the staff on the planes, when I explained that 

[00:50:38] Cameron: I couldn’t use it for whatever reason, they said, oh, that’s fine, just, they gave me a little thing, they said, contact customer support when you get there, we’ll make a note of the system, they’ll look after you, you’ll be right, and then I did that, and they were like, nah.

[00:50:48] Cameron: So anyway, the staff on the plane were nice though. Alright, well, Alex, as you said, our official keeper of the questions, asker of the questions, is not, available, so I’m going to [00:51:00] resume the job of being the keeper of the questions today. Only two. First one’s from John. G’day, where’s my certificate? I think this is because he completed the course last week.

[00:51:11] Cameron: He says, I’ve been doing some background homework before, it’s in the mail, John. I’ve been doing some background homework before jumping into VUK, Virgin UK. I stumbled on an article in the AFR dated September 5th, 2019 about David Duffy,

[00:51:26] Cameron: who was the former CEO 

[00:51:28] Cameron: of CYBG. PLC, before he joined VUK. 

[00:51:36] Cameron: I tell my kids, they learn by 

[00:51:37] Cameron: making mistakes, but VUK is this, but VUK is this reasonable or considered bad news and don’t touch, have a great weekend.

[00:51:46] Cameron: So this article that he’s pointed us to, Chanticleer, From 2019, CYBG Share Collapse Explained. Says shareholders and CYBG woke up on Thursday morning to a shock

[00:51:57] Cameron: announcement that soon resulted in [00:52:00] about one fifth of the

[00:52:01] Cameron: value of the bank being wiped out and David Duffy. 

[00:52:06] Cameron: Was the head honcho there at the

[00:52:08] Cameron: time.

[00:52:09] Cameron: So do you take 

[00:52:11] Cameron: into account the track record of a CEO, something like this? Tony when looking at an investment, if they’ve had things like this in their past, is that a black mark? Is that on 

[00:52:22] Cameron: the 

[00:52:22] Cameron: checklist? 

[00:52:25] Tony: It’s not, I think you know that, but it’s 

[00:52:26] Tony: not. No, unless it’s, 

[00:52:28] Tony: unless it’s what we were talking about before with people leaving the 

[00:52:32] Tony: organisation unexpectedly and, and I 

[00:52:34] Tony: guess in the case of Fortescue in large numbers, it’s not a red flag for me. And we’re going back to 

[00:52:40] Tony: 2019 for this particular 

[00:52:41] Tony: issue with CYBG and I did do a pulled pork on 

[00:52:44] Tony: VUK last time it was on our buy list 

[00:52:46] Tony: and when it was a year or two ago. But quickly, CYBG was the 

[00:52:52] Tony: Clydesdale Bank in the UK, not a big bank, but about a decade or so ago, 

[00:52:57] Tony: National Australia Bank, 

[00:52:58] Tony: NAB, went over to the 

[00:52:59] Tony: UK [00:53:00] as part of its growth

[00:53:01] Tony: initiatives, and also, I think, from when we went

[00:53:03] Tony: into the States and bought Homestead, I think it was called, a 

[00:53:06] Tony: Homestead a bank 

[00:53:07] Tony: over there.

[00:53:08] Tony: And both ended pretty badly for them, particularly Homestate. Largely because, even though banking is a fairly simple 

[00:53:15] Tony: business. it’s also a fairly local

[00:53:17] Tony: business. And you know, if you didn’t grow up in the 

[00:53:19] Tony: States, you wouldn’t necessarily know all the ins and outs of why there.

[00:53:24] Tony: are idiosyncrasies in how home loans are

[00:53:26] Tony: written and managed and taken out over there.

[00:53:29] Tony: Similarly, I 

[00:53:30] Tony: guess, with the UK. The particular 

[00:53:32] Tony: article refers to, 

[00:53:33] Tony: well anyway, so long story short, NAB sold off both of those, sold off Clydesdale Bank. A company was formed and licensed the Virgin brand and now it’s called Virgin 

[00:53:42] Tony: UK, so it’s basically a UK bank. It’s still listed in Australia, largely 

[00:53:46] Tony: because of the people who were 

[00:53:50] Tony: spun

[00:53:50] Tony: out of NAB when they were shareholders here in National 

[00:53:53] Tony: Australia Bank and when the CYBG branch was spun out and became VUK.

[00:53:58] Tony: They kept the listing in [00:54:00] Australia. I quite like the UK, it’s 

[00:54:01] Tony: been, I’ve owned it in the past, I, you know, had to sell it when it went down for whatever reason. I would certainly buy it again. 

[00:54:08] Tony: 2019 is a long time ago 

[00:54:10] Tony: to be picking out issues

[00:54:12] Tony: on this bank. A particular issue that’s referred to by the article was one

[00:54:16] Tony: about it’s, I think it’s called PPI insurance over there.

[00:54:19] Tony: If my reading of it is correct, 

[00:54:20] Tony: it’s, it’s like mortgage insurance here where if I’m right, 

[00:54:24] Tony: you can get a 

[00:54:25] Tony: higher equity or the bank will lend you more money if you take out this insurance which protects the bank if you default on your 

[00:54:32] Tony: mortgage. So, it’s a way of, you know, banks might lend you 

[00:54:35] Tony: 80% of the, of the equity in the house.

[00:54:39] Tony: But if you take out mortgage insurance, they might lend you 90%. I think it’s something similar. The issue in the UK was that the banks were basically signing this insurance to everyone, it seems, bundling it up in the mortgage and not telling you what the split was between mortgage insurance price and the price of the mortgage.

[00:54:56] Tony: So, you know, hooray for the banks, they were making an extra mortgage [00:55:00] insurance sale they might not have made, and you couldn’t shop around because you didn’t know what the rate was on your insurance compared to another provider. So. And then there was some kind of scandal where I don’t know the ins and outs of it, but anyway, the, the banks had to write off some of these insurance, either claims or sales, and this guy, David Duffy, understated what the provision was for this particular bank, the regulator found out.

[00:55:26] Tony: told them to up the provision and then he had to declare it to the market and dragged his feet in doing so and the share price dropped a lot, became known. However, all that aside, the bank is still very well capitalized, was even very well capitalized during this problem. I guess they’ve paid their fine by now and they’re moving on.

[00:55:44] Tony: So, yeah, I’m not worried about it. Probably my last comment on a company like VUK is I would expect it to be one of the smaller banks in the UK So it, you know, as the smallest player or one of the small players, it might be more [00:56:00] volatile with issues like this compared to some of the big banks over 

[00:56:03] Tony: there. Just like we see here with some of the small banks here and how volatile they are compared to Commonwealth Bank, for example. 

[00:56:11] Cameron: So the overarching lesson here is we don’t really take into account 

[00:56:16] Cameron: the track record of senior executives. 

[00:56:21] Cameron: Maybe it’s the Bill Gates’s philosophy where at Microsoft in the 

[00:56:25] Cameron: older days, he used to, if somebody screwed up and cost him a lot of money, he’d promote them and 

[00:56:30] Cameron: say, well, you won’t do that again.

[00:56:31] Cameron: So I’ve, you’ve just had, you’ve just 

[00:56:35] Cameron: had a very expensive education. I expect you 

[00:56:37] Cameron: to put that to good 

[00:56:38] Cameron: use. 

[00:56:40] Tony: Yeah, 

[00:56:41] Tony: and I actually have some sympathy with that, 

[00:56:42] Tony: However, if you do it twice, I think that’s I’d be showing you the door.

[00:56:46] Cameron: Yeah. Well, VUK, we do hold it in the dummy portfolio and it’s 

[00:56:51] Cameron: down about 6% since we bought it 

[00:56:53] Cameron: at the end of July, 

[00:56:54] Cameron: so 

[00:56:55] Cameron: let’s see how David Duffy does with our investment. [00:57:00] Thanks for the question, John. Last question is from James. Hi Cam, is there any update from Tony on the use of 

[00:57:06] Cameron: Renko charts? 

[00:57:07] Tony: Yeah. So I’m still running my paper trials for those. So I’m 

[00:57:12] Tony: running, I’ll talk about three, 

[00:57:14] Tony: two are 

[00:57:14] Tony: Renco’s and 

[00:57:15] Tony: one’s a different one, which I’ll explain in a minute. So when I say a trial, I set up dummy portfolios in an Excel spreadsheet a couple of months ago. So the Renco trials 

[00:57:25] Tony: go back 

[00:57:25] Tony: until

[00:57:26] Tony: the 26th of April this year.

[00:57:28] Tony: So they’re 

[00:57:28] Tony: now, what, some four months old. But 

[00:57:31] Tony: but, and there are two trials. One 

[00:57:33] Tony: is. I used RENCO charts in conjunction with 

[00:57:36] Tony: all the things we use for QAV on whether to buy or 

[00:57:39] Tony: sell. 

[00:57:39] Tony: So, 3 point trend lines, commodities, sales rule 1 sales, QAV 

[00:57:47] Tony: score, the buy first, that kind of thing. So basically I was just not buying a stock if it had a red bar on its RENCO 

[00:57:54] Tony: chart.

[00:57:54] Tony: And I 

[00:57:55] Tony: added selling a stock if it had a 

[00:57:57] Tony: red bar, 

[00:57:58] Tony: if the chart went from a green [00:58:00] bar to a red bar. 

[00:58:01] Tony: So that, and it took a little while to get fully invested with that. 

[00:58:05] Tony: That particular trial 

[00:58:07] Tony: is running at 

[00:58:08] Tony: minus 4%, so it’s 

[00:58:10] Tony: lagging the market since then. I think it also lags the dummy portfolio from 

[00:58:14] Tony: memory too, because I benchmark both. I’ve set up not as recently as that, I actually set it up at the same time, but it’s taken me a long time to get to 

[00:58:23] Tony: 10 stocks invested only in the last month or so from memory. And this is a Renko 

[00:58:28] Tony: only

[00:58:29] Tony: trial, So it still buys things from the buy list top down but only if they have a green, Bar on a 

[00:58:36] Tony: Renko chart, and then I 

[00:58:37] Tony: sell them if they have a red bar on a Renko 

[00:58:38] Tony: chart. And I don’t use any of the other 3 point trend lines or Commodity All Rule 1 sells for 

[00:58:43] Tony: that. that particular one is up 1. 2%, so 

[00:58:48] Tony: it’s actually doing slightly better than the other 

[00:58:51] Tony: benchmarks, but it’s very early days, so they’re two things which I’ll keep running. 

[00:58:56] Tony: And then the last one I wanted to talk about today, which isn’t Renko, but it’s [00:59:00] another dummy portfolio I set up a little while ago, again 26th of April, 

[00:59:03] Tony: but it’s taken a long time to get that one invested as

[00:59:06] Tony: Well, is a portfolio of QAV stocks with a score of greater than 

[00:59:10] Tony: 2. So, 

[00:59:12] Tony: Not buying on the buy list below 2 

[00:59:16] Tony: rather than 1 as as a 

[00:59:18] Tony: trial. And that 

[00:59:20] Tony: actually has been returning 

[00:59:22] Tony: 8%, so that’s the best returning of those dummy portfolios. However, I, I want to make two points. One, it’s, it’s really only been in the last month or so, probably since the company reporting season, and I’ve been able to find 10 stocks to put into that portfolio.

[00:59:37] Tony: It’s had three or four back since the start of April, so that could be affecting it’s, it’s results, because the other ones have been fuller for longer, certainly the first one has. But also to it’s different to the analysis that Ryan’s been doing, where, where he was comparing bottom up purchasing versus top down purchasing and found little difference.

[00:59:58] Tony: So you’d think if [01:00:00] we were only buying down to 2, that should reasonably equate to Ryan’s analysis of top down only purchasing. But Ryan’s gone back to re do some of that work. We found a couple of things that he wasn’t applying to the analysis, which I’d like him to apply, and probably not his fault, probably my fault for not specifying things.

[01:00:21] Tony: in detail. So he’s gone back to make sure at the moment that he is applying the ADT rules of not buying something which is more than five times the investment amount. Although the ADT is less than five times the investment amount. Yeah, so he’s doing that but certainly the analysis to date suggests that there’s no difference.

[01:00:40] Tony: However I did decide to benchmark test it myself and do a dummy portfolio and it’s working well. So I’ll just keep running it and see what happens. And then when 

[01:00:51] Tony: Ryan’s analysis is finished, I’ll bring that forward too. And hopefully in the next couple of 

[01:00:55] Tony: weeks we can reduce that and publish it.

[01:00:59] Cameron: Really? [01:01:00] So when you say that one’s doing 8% and the other one, the Renko one’s doing 1%, is that 8% and 1% return or 8% and 1% better than the benchmark 

[01:01:13] Cameron: or better than the 

[01:01:14] Cameron: dummy portfolio or something? 

[01:01:16] Tony: Yeah, just the straight return. 

[01:01:18] Tony: So, you know, I put, I think from memory, I put a hundred thousand 

[01:01:21] Tony: into each. 

[01:01:22] Tony: So I’m going to close the 

[01:01:22] Tony: session now. One’s 108, 000 and one’s 

[01:01:24] Tony: 101, 000. So it’s not a CAGR. I

[01:01:27] Tony: haven’t had it long enough to do a CAGR and it’s not like, I have benchmarked it against the benchmarks, but 

[01:01:33] Tony: that is the return of the fund.

[01:01:36] Tony: Not the difference with the benchmark.

[01:01:39] Cameron: Interesting. Thank you for that, Tony. Thank you, James, for the question. That’s 

[01:01:44] Cameron: it for questions this week. 

[01:01:47] Cameron: After hours, you’re at Cape Schanck, obviously. 

[01:01:50] Cameron: What else is

[01:01:51] Cameron: going on in your world for fun? 

[01:01:54] Tony: Jenny 

[01:01:54] Tony: down here and Ruddy down here, which is nice. We’ve been up and down to Melbourne to see Alex at the art show, to go to [01:02:00] Jenny’s 

[01:02:00] Tony: Family, with Jenny’s family for Father’s Day 

[01:02:03] Tony: lunch. So it’s been, yeah, it’s been, 

[01:02:04] Tony: a nice sort of family 

[01:02:05] Tony: affair 

[01:02:05] Tony: down here. Caught up with 

[01:02:07] Tony: some 

[01:02:07] Tony: friends yesterday.

[01:02:09] Tony: Been lovely. That’s been happening. So we did 

[01:02:11] Tony: actually last night, got back from lunch late and put on the new Indiana 

[01:02:15] Tony: Jones movie, which was a lot of fun. 

[01:02:17] Tony: Very 

[01:02:17] Cameron: or the recent one? 

[01:02:20] Tony: yeah, the recent one, this, what’s it called? The 

[01:02:22] Tony: Dial of Destiny or something. Yeah. About time travel. 

[01:02:25] Cameron: Yeah. 

[01:02:26] Tony: Yeah.

[01:02:27] Cameron: How 

[01:02:27] Cameron: was 

[01:02:28] Tony: I liked it. Good fun. 

[01:02:30] Tony: Oh, seven at The most, 

[01:02:32] Tony: six or 

[01:02:33] Tony: seven.

[01:02:34] Tony: Yeah, a lot of, I mean, you know, you’ve got to suspend 

[01:02:36] Tony: belief. We were sitting, like Ronnie and I just sat there and picked holes in the script the whole way through, but you gotta do, you can’t do that, you gotta just go 

[01:02:43] Tony: with the flow. But a lot of fun things too, like Indiana’s 

[01:02:47] Tony: Harrison Ford’s 80 years old now, so,

[01:02:50] Cameron: yeah. 

[01:02:50] Tony: be an action chase 

[01:02:51] Tony: scene, and instead of 

[01:02:53] Tony: seeing Indy 

[01:02:53] Tony: running after a 

[01:02:54] Tony: like, a car getting away, you’d just see him take a step into the camera like he’d just been running, and I’d just caught [01:03:00] up with him.

[01:03:00] Tony: That’s all you’d see. It’s just the one step in the camera. 

[01:03:04] Tony: But yeah, Phoebe Waller Bridges was great. Really like what she does. 

[01:03:08] Tony: And, you know. 

[01:03:10] Tony: Good, good Spielberg produced, you know, Saturday, Saturday afternoon matinee 

[01:03:16] Tony: fun.

[01:03:17] Cameron: Did you watch 

[01:03:18] Tony: Mads 

[01:03:18] Tony: Mikkelsen was a great. 

[01:03:19] Tony: Mads Mikkelsen I 

[01:03:20] Tony: love Fleabag.

[01:03:21] Cameron: Yeah, me too. Thought it was great. Yeah. Really 

[01:03:25] Tony: Yeah. Really good. Mads Mikkelsen plays a great baddie as he always does. So that was good. 

[01:03:31] Cameron: Yeah. 

[01:03:31] Cameron: He does make a good baddie. 

[01:03:33] Cameron: Oh, that’s

[01:03:34] Cameron: good. That gives me 

[01:03:35] Cameron: hope. I didn’t really intend on watching it, but I’ll give it a crack now. I haven’t seen much. Oh I’ve been re watching my cousin 

[01:03:43] Cameron: Vinny. 

[01:03:44] Cameron: We haven’t finished it yet, but Chrissy apparently had never seen it. I was, I was flicking through the TV one night when we were doing a stretching, looking for something to watch.

[01:03:52] Cameron: And I was like, Oh God, I haven’t seen my cousin Vinny for years. And 

[01:03:55] Cameron: she said, I’ve never 

[01:03:56] Cameron: seen it. I was going, come on, you 

[01:03:57] Cameron: must’ve seen my cousin Vinny. [01:04:00] 

[01:04:00] Cameron: She’s like, no. So we put it 

[01:04:01] Cameron: on and it, it’s silly, but it, you 

[01:04:05] Cameron: know, it’s great too. It’s one of those films. It’s 

[01:04:07] Cameron: ridiculous, but. Joe Pesci and Marisa Tomei 

[01:04:14] Cameron: just just gold to 

[01:04:15] Cameron: watch.

[01:04:16] Cameron: Just, it was 

[01:04:16] Cameron: good fun. Yeah. Enjoying it. 

[01:04:19] Tony: And the great Fred 

[01:04:21] Tony: Gwynn. Herman Munster plays the judge. 

[01:04:23] Cameron: the judge. Yeah, 

[01:04:23] Cameron: no, he’s great in it and Ralph 

[01:04:26] Cameron: Macchio iss in it, but he 

[01:04:27] Cameron: doesn’t have much to 

[01:04:28] Cameron: do. 

[01:04:28] Cameron: But there’s the lawyer

[01:04:29] Cameron: in it. The, he’s the lawyer for the 

[01:04:32] Cameron: prosecution against Ralph Mao’s character, who I’m pretty sure 

[01:04:35] Cameron: Walton Goggins got the character for, for baby 

[01:04:38] Cameron: Billy from Righteous Ear.

[01:04:40] Cameron: ’cause he, because he talks like 

[01:04:41] Cameron: his lies, he’s got the same 

[01:04:43] Cameron: southern accent with the whistles on the end of his ashes. And he’s talking to the, talking to the jury with his hands up like 

[01:04:51] Cameron: this. And now we’re going to explain something to 

[01:04:53] Cameron: y’all here. I want you just to listen a 

[01:04:55] Cameron: little moment here while I explain how this went down.

[01:04:58] Cameron: Yeah. 

[01:04:58] Cameron: Yeah. You hear 

[01:04:59] Cameron: now? [01:05:00] Come on 

[01:05:00] Cameron: now. It’s really good. I love, I love a good, the accents of that 

[01:05:04] Cameron: film are great. Like all the, they’re in the, wherever 

[01:05:06] Cameron: they are, somewhere in

[01:05:06] Cameron: the deep South. And 

[01:05:07] Cameron: then you’ve 

[01:05:08] Cameron: got the 

[01:05:09] Cameron: Joe Pesci and Marisa 

[01:05:10] Cameron: Tomei from 

[01:05:11] Cameron: New York with their out of the, over the top sort of Brooklyn Jersey type 

[01:05:14] Cameron: accents.

[01:05:15] Cameron: It’s

[01:05:16] Cameron: a lot of fun. 

[01:05:18] Tony: there was a very controversial Oscar win for Marisa too, if I recall. A surprise. Oscar win. 

[01:05:24] Tony: Oh, yeah. yeah. well there you go, see, surprise. But she was up 

[01:05:29] Tony: against some famous actresses and she got, and she pulled 

[01:05:32] Tony: it off and got the Oscar. 

[01:05:34] Tony: Which I think may have been due 

[01:05:36] Tony: to… 

[01:05:37] Tony: Someone lobbied, like paying, you know, 

[01:05:39] Tony: I don’t know, I don’t know, 

[01:05:40] Tony: if that was

[01:05:42] Tony: a a

[01:05:43] Tony: Miramax film, but probably used the Miramax way of you know, buying off Oscars, 

[01:05:48] Tony: To achieve it.

[01:05:49] Tony: So,

[01:05:50] Tony: not saying it happened that way, but it was a very 

[01:05:52] Tony: surprise 

[01:05:53] Tony: winner. 

[01:05:54] Cameron: 20th 

[01:05:54] Cameron: Century Fox, distributed by Palo Vista Productions, who [01:06:00] directed it Jonathan Lin. 

[01:06:02] Cameron: Yeah, no, she’s 

[01:06:03] Cameron: great 

[01:06:04] Cameron: in it, just she’s just bursting with just, 

[01:06:07] Cameron: charisma in that. She’s gorgeous and she’s just, she’s smart and she’s scrappy and,

[01:06:13] Cameron: yeah, 

[01:06:13] Cameron: really great role. 

[01:06:16] Tony: yeah, but look, look at in, in hindsight, she, she deserved a bit at the time. I remember

[01:06:21] Tony: everyone scratched their heads saying, what, how did she win

[01:06:23] Tony: an 

[01:06:23] Tony: Oscar for that? I’m just going to see who she was up against, but from memory, it 

[01:06:27] Tony: was people 

[01:06:28] Tony: like 

[01:06:28] Tony: Emma Thompson and Meryl Streep.

[01:06:30] Cameron: Yeah, well, they’ve got enough Oscars, they don’t need any more.

[01:06:34] Tony: yeah, 

[01:06:35] Cameron: Best Supporting Actress she got Yeah, I didn’t know that, that’s 

[01:06:37] Cameron: fantastic.

[01:06:39] Tony: yeah,

[01:06:40] Cameron: Um, 

[01:06:40] Tony: uh, doesn’t, I can’t find it 

[01:06:42] Tony: easy. 

[01:06:42] Cameron: we watched a couple 

[01:06:43] Cameron: of episodes of Mr. Inbetween last night, trying to finish that. We’re in the last season, I 

[01:06:48] Cameron: think there’s only a couple more 

[01:06:49] Cameron: left. Just great, really great show. 

[01:06:52] Tony: Isn’t it? 

[01:06:53] Cameron: And it’s the comedy in it, with Gary, his best 

[01:06:56] Cameron: mate. 

[01:06:57] Cameron: You know, what we 

[01:06:58] Cameron: watched last night, he, [01:07:00] he, he just started 

[01:07:01] Cameron: his, uh, 

[01:07:01] Cameron: porn production business where he’ll go to your 

[01:07:04] Cameron: house and film your porn video. And his 

[01:07:06] Cameron: first clients are a couple of gay guys. And you kind of see him 

[01:07:10] Cameron: sort of freaking out, but then

[01:07:12] Cameron: like gritting 

[01:07:13] Cameron: his teeth.

[01:07:13] Cameron: He needs 

[01:07:13] Cameron: the money. He’s pushing 

[01:07:15] Cameron: ahead with it. Uh, just the

[01:07:16] Tony: Yeah, He’s 

[01:07:17] Tony: bought the equipment, needs 

[01:07:18] Tony: to pay for the equipment. Yeah. ha

[01:07:20] Tony: ha 

[01:07:20] Tony: ha 

[01:07:21] Cameron: the comedy in the show is really well done. Really gotta hand it to the team behind it. It’s 

[01:07:26] Cameron: very good.

[01:07:28] Tony: Yeah. I’ve just looked, just Googled who Marissa beat, and I remember why it was a big deal here because she beat Judy Davis,

[01:07:36] Tony: so 

[01:07:36] Tony: there was a bit of a focus on… The Oscars that year from Australia. But she beat Joan Plowright, Vanessa Redgrave, and Miranda 

[01:07:45] Tony: Richardson. 

[01:07:46] Cameron: Oh, 

[01:07:46] Tony: And the um, I remember the scuttlebutt, the scuttlebutt was she got it because she was the only 

[01:07:51] Tony: American up for 

[01:07:53] Cameron: Right. 

[01:07:54] Cameron: Well, good for her. 

[01:07:56] Tony: it. Mmm. No, she deserves it. Especially in hindsight when you [01:08:00] see what other great things she’s done. 

[01:08:01] Cameron: Yeah, she’s great, and, uh, it’s just a great, it’s 

[01:08:04] Cameron: just a great, great, role, you. know, it’s just really, like, the, the film itself, as I said, it’s silly, 

[01:08:10] Cameron: and it, it, it, It’s full of 80s tropes, but, 

[01:08:14] Cameron: um, or early 

[01:08:14] Cameron: 90s tropes, but, um,

[01:08:15] Cameron: she, she, she, she’s, I think, better than Joe Pesci in the film, she’s, uh, she’s really, 

[01:08:21] Cameron: really 

[01:08:21] Cameron: entertaining, so, 

[01:08:22] Cameron: good for her.

[01:08:24] Tony: Mmm. Yeah, it’s 

[01:08:25] Cameron: Alright, 

[01:08:26] Cameron: TK, 

[01:08:26] Cameron: well, I know you’ve… Got things to do, I’ll let you go. 

[01:08:30] Cameron: Thank you for taking time to chat with us today, Big Daddy. 

[01:08:34] Cameron: And, uh, where will you be this 

[01:08:36] Cameron: time next week? 

[01:08:38] Tony: Well, I was going to talk to you off air. I’m, I’m going to be traveling between Cross Harbour and the Gold Coast. 

[01:08:44] Tony: I’ve got a golf tournament that finishes on the Tuesday and I jump in a car and drive up

[01:08:47] Tony: to 

[01:08:47] Tony: our accommodation up there. So I won’t be able to 

[01:08:50] Tony: record 

[01:08:51] Tony: at this time next 

[01:08:52] Tony: week. 

[01:08:53] Cameron: Well, right. I might have to wangle a guest. I’ll see, 

[01:08:57] Cameron: I’ll work something out. [01:09:00] 

[01:09:00] Tony: Yeah, 

[01:09:01] Tony: I can record before then or 

[01:09:04] Tony: after that. I just can’t do it, 

[01:09:05] Tony: on Tuesday. Oh, I can’t do it, 

[01:09:06] Tony: I can’t do it 

[01:09:07] Tony: Monday either, but I could do it Thursday or 

[01:09:08] Tony: Friday this week if you find a 

[01:09:10] Tony: guest. 

[01:09:11] Cameron: This week? 

[01:09:13] Tony: Yeah,

[01:09:14] Cameron: Well, that’s 

[01:09:15] Tony: back in Sydney on 

[01:09:16] Tony: Friday. 

[01:09:19] Tony: Actually back in Sydney on, yeah I won’t get back up until Thursday late afternoon, so, Friday this week or Wednesday next week.

[01:09:25] Cameron: all right. Well, I’ll have a think. We’ll work something out. All right.

[01:09:28] Tony: Yeah, okay. 

[01:09:29] Cameron: Have a good trip. 

[01:09:30] Cameron: I’ll 

[01:09:31] Tony: All right, 

[01:09:31] Tony: thanks.

[01:09:32] Cameron: talk to you soon. Bye.

[01:09:33] Tony: All right, cheers, Bye.[01:10:00] 


QAV 725 – Mr Lazy & Mr Dumb

In this episode of QAV, Cameron and Tony dive into recent market activities, the RBA’s decisions, the Lindy Effect, substantial shareholder announcements, and GrainCorp’s prospects, along with a detailed analysis of Embark Early Education (EVO). Member questions about living off a share portfolio during down years and the differences between value and quality investing are addressed. Additionally, Tony clarifies the calculation of shares on issue for Rio Tinto, emphasizing global figures for earnings per share. In after hours, the duo also covers Mario Puzo’s ‘The Godfather’, Alphonse Mucha, and the Archibald Prize, and discuss the potential and risks of AI, drawing references from science fiction. They wrap up with thoughts on films and books, including ‘Klara and the Sun’.

QAV 724 – Our First U.S. Episode

In this episode of QAV, Cam and Tony explore the U.S. market for the first time, with a brief introduction of Tony and his QAV system of value investing, a discussion of value v growth investing, a discussion of the performance of our U.S. dummy portfolio, a deep dive or ‘Pulled Pork’ segment on Reinsurance Group of America (RGA), and a review of the FY survey results we’ve received so far from club members.


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