This episode: Australian income drops, Munger says we need to buy tech stocks, Pulled Pork on CVL.

Club edition only: ASX historical average 13.2%, Iron ore and China, HESTA fined by ASIC, ANZ’s results lead to drop, how to deal with a situation when a buy list stock is in play, Interest rate rise means a change to IV value, MQG did not take an impairment, using Tradingview for commodities, and a refresher on what stocks to sell when you need cash.


QAV 646 Club

[00:00:00] Cameron: Welcome to QAV episode 646, 14th of November 2023. Tony, how did your bets go in the cup?

[00:00:20] Tony: they’re still coming. Actually, I finished up backing the winner as a saver, but, um, no, my tip was Vow and Declare, which… Looked like it was going to loom in the straight, but it’s a very long straight at Flemington, so it didn’t

[00:00:31] Tony: win. I think it ran about sixth or seventh.

[00:00:35] Cameron: Ninth, actually.

[00:00:37] Tony: Okay. I’m being 

[00:00:38] Cameron: And I know that

[00:00:40] Cameron: because I’m running a cup day promotion for QAV

[00:00:43] Cameron: members. I meant to do it

[00:00:44] Cameron: last week. 

[00:00:45] Tony: Ha haha ha ha! Ha ha ha ha ha ha ha ha 

[00:00:49] Cameron: it’s a post cup day promotion. For QAV club members who want to take advantage,

[00:00:55] Cameron: they can upgrade from a monthly subscription to an annual subscription. [00:01:00] They’ll save an extra, I think it’s 20 percent off their first year, but, uh, in honor of your Tip last week, I said, it’s only valid for nine, the first nine people, and it only runs for nine days.

[00:01:17] Cameron: It’s Tony’s Cup Day tip promotion. There you go. So go to the website and check that out. It underperformed like our portfolios.

[00:01:27] Tony: someone’s gonna make some money out

[00:01:28] Tony: of it. Ha ha ha ha ha ha ha ha!

[00:01:32] Cameron: Speaking of making money, Australians are making money. Tony, according to the Financial Review, Australia records biggest income decline in the developed world. Economists have urged treasurer Jim Chalmers to overhaul Australia’s tax system after new data showed households suffered the largest fall in living standards of any advanced economy over the past year.

[00:01:56] Cameron: Now, I can’t figure this out because every other day I read how to, [00:02:00] you know, no one can afford to buy a house because of real estate prices, including me, 

[00:02:04] Tony: Hmm hmm. 

[00:02:05] Cameron: uh, but we’re also suffering from an income drop. So obviously not the people buying all the real estate and pushing the real estate prices up that are suffering from the income drop.

[00:02:15] Tony: Yeah, I mean, the people really want to hear me bang on about the RBA again, but this is again, the left hand not knowing what the right hand’s doing. So, uh, somewhere in that article, it talks about… Inflation and the RBA putting interest rates up, which of course affects people’s, um, you know, take home or net income after they pay their mortgage.

[00:02:40] Tony: And then it talks about the 25 billion the government has given people to ease the cost of living crisis. Uh, what’s that doing? It’s putting, pushing inflation up. What’s the RBA doing? It’s raising interest rates. It’s like just such a, and then what’s happening with the unions? They’re going, well, we can’t keep up.

[00:02:56] Tony: on our current pay with all this give us a pay rise so [00:03:00] it’s it’s a it’s a stupid stupidly run vicious cycle and and i i just can’t highlighting the fact that someone’s got to you know understand the mix between monetary and fiscal policy and get it right there are some other things going on i mean there’s um i think In the mix, there’s also the fact that there was a big cash blast during COVID and so that money’s coming to an end.

[00:03:26] Tony: People put that and probably put it into savings and now they’ve spent that. So, you know, they’re not, they can’t rely on that anymore. Um, there’s immigrations. I think this was the biggest immigration intake ever this year. Um, they’re competing with people for rents and for house prices. So that’s pushing things up as well.

[00:03:44] Tony: There’s a flip side to immigration and that they’re also, um, entering the workforce. And that’s been one of the problems that, you know, building companies in particular have been calling out that they can’t, you know, get enough people to work for them to be able to keep up with the [00:04:00] supply of new housing, which is one of the reasons why house prices are going up as well.

[00:04:04] Tony: So there’s a lot of things going on, but it, you know, like, come on, guys, it’s… 2023. The RBA has been saying for the last 40 friggin years, we only have one thing to use to fight inflation. It’s interest rates. And now we’ve got the treasurer going, it’s a cost of living crisis. I’ll give you some money back.

[00:04:24] Tony: It’s, it’s just, and now we’re the worst performing country in the OECD. So well done. Well done, RBA. Well done,

[00:04:34] Tony: Treasurer. Grow up.

[00:04:36] Cameron: You blaming the Labour Party? Or is it, uh, is it a multi party problem here?

[00:04:43] Tony: Uh, you know, as I said, I think part of it was the COVID splash as well. Say, I’m not picking on any one particular party. The Labor Party are more likely to give, um, cost of living relief as they have, uh, to, to the lower, uh, income brackets to help pay their energy bills, for [00:05:00] example. So I get that, but, but it’s, it’s having an impact.

[00:05:04] Tony: It’s having an impact across the economy.

[00:05:07] Tony: I just, you know, I can imagine if Paul Keating was here what he’d be saying. 

[00:05:12] Cameron: He is here, 

[00:05:12] Tony: He is here, but he’s keeping quiet because it’s the Labor Party, I guess. But yeah, I think it’s just a mess and someone’s got to take charge. Uh, the other point I want to make is there will not be tax, um, law changes in the first term government.

[00:05:25] Tony: There never is. Because, you know, you’ve got to win the second term election first, then you can do… Something difficult, but, um, if, if history’s any guide that usually years, there’ll be another cash splash before the next federal election. Um, which will also impact the economy and put inflation up and hence interest rates up and then the RBL put interest rates up, which will also impact the economy and push inflation up.

[00:05:52] Tony: It’s just,

[00:05:53] Tony: come on guys, get real. It’s not hard.

[00:05:58] Cameron: apparently no one told Gough Whitlam you [00:06:00] had to wait until your second term before you could do any difficult things.

[00:06:03] Tony: Correct. 

[00:06:07] Cameron: He sat down with a pen and a pad and just did them all in 

[00:06:11] Tony: Well, true, but they weren’t, I don’t think there was any tax reform in that. They were mainly social justice issues. Yeah. Yeah. So I’m just, I’m just, I’m in despair that, that, you know, we, the level of, of, uh, people, um, running the economy and, and how they don’t seem to sync. I guess they talk to each other, but come on, just, you know, it’s not hard.

[00:06:36] Tony: It’s, you know, stop, stop, stop putting interest rates up RBA. Right. Right. Give us a break and stop with the cash splash, Mr. Treasurer, and let’s just see what happens. And things will settle down because I’m firmly in the camp that inflation is due to the COVID time period when we had supply chain disruptions and when we had, um, a [00:07:00] much higher price of oil, uh, those things are, you know, they haven’t completely settled down, but they’re settling down and the reason why we’re number one Uh, on the cost of living decrease in the OECD is because the other countries have let, have, you know, we’re seeing those, those kinds of inflationary pressures flow through their economies.

[00:07:19] Tony: If you, there was also a table published, I think, in today’s Fin Review, which talked about, uh, the projected inflation. Um, expected in all the OECD countries. And again, I think we’re pretty close to the highest because the other countries, just like we would, if we did, if we did less than what we’re doing now, are letting the supply chain issues flow through, flow through.

[00:07:40] Tony: And, uh, um, haven’t been, um, as generous with the cash splash. Uh, perhaps the US has been with the Inflation Reduction Act, but the UK hasn’t been, for example. And it’s projected to have a much lower inflation next year. We’re projected to have the same. So. You know, under our current rules and operating policies, I don’t [00:08:00] expect to see interest rates dropping next, next year.

[00:08:02] Tony: They’ll be at best where they are now, and they are inflationary. It’s, it’s, they’re part of the problem. We’ve got to get someone smarter than the people who run the show now who think that raising interest rates is going to bring down inflation. Um, it might, it might, but you know, it’s like saying, um, I’m going to sore off your legs so you don’t, so you don’t get, um, uh, infected.

[00:08:28] Tony: It’s, it’s like, but the real, the whole, the whole Policy behind raising interest rates and controlling inflation with that particular, um, tool, uh, is to try and keep us out of a recession. But Jesus, if the five years we, you know, we have to bear that for is worse than the recession, why are we doing it?

[00:08:49] Tony: Why are we doing it when our living standards are going down 5%? Why do we keep doing

[00:08:54] Tony: this?

[00:08:54] Cameron: So, what are the reserve banks or the central banks in

[00:08:58] Cameron: other countries doing

[00:08:59] Cameron: [00:09:00] differently? Like if I look at this chart of real household gross disposable income per capita, Australia is at the bottom, it’s dropped 5. 1 percent over the last 12 months to June 2023 this is. The United States is up 3. 5 percent over the same period, the United Kingdom is up 2.

[00:09:20] Cameron: 2%, France is up 1. 6%. Any idea what they’re doing? Their central banks are doing differently? Because I know the U. S. has been putting up interest rates as well. What’s, what’s, why is their income going up at the same time when ours isn’t?

[00:09:36] Tony: I think it’s probably going to be a case by case. So in the US, for example, if I look at that case, uh, their, their local oil industries ratcheting up to, to, you know, fully, uh, fully being engaged again. So their shale oil industries keeping the price of oil lower in the US. Um, most US people, I think, if not all US homeowners are on a fixed [00:10:00] rate mortgage.

[00:10:00] Tony: So when the central bank puts up interest rates in the US, it has a much slower. and lower impact on the people who own real estate than it does here because we’re all unfixed. And that’s another issue for Australia too. Um, during COVID a lot of people, I think it was like 50 or 60 percent of mortgage holders, locked in rates at 2 percent and they’re all coming off that now.

[00:10:23] Tony: So that’s another reason why, um, The higher interest rates are biting hard on them. And you know, that’s another good, good indication. Is the RBA taking that into account? If every, if, if like 60%, whatever the number is, if half the people who have mortgages this year are suddenly paying three times the interest rate they were paying last year, isn’t that enough of an interest rate rise to slow the economy?

[00:10:45] Tony: Why are you putting interest rates up as well? So, you know, um, I would think in places like the UK and France, they haven’t given as much back in the way of, um, relief to, to the [00:11:00] general population, I don’t know that for a fact, but I’m guessing that’s the case, um, and therefore it’s not this left hand, right hand argument where the central banks Putting up interest rates to slow the economy and the government’s giving handouts to people to pay for the cost of living and one’s negating the other.

[00:11:16] Tony: Um, so yeah, I think it’s, I think it’s case by case. We had a lot of, a lot of money given out during COVID. I think some of that’s been banked and it’s now being spent. So people are coming off that. We have the fixed, the fixed rate that’s called the fixed rate cliff. I don’t think it’s as bad as that, but people are paying a lot more under variable rates for their mortgages.

[00:11:36] Tony: Um, And, uh, yeah, there’s been 25 billion, according to the Fin Review, given away to people to ease their cost of living

[00:11:45] Tony: burdens, which is kind of negating what the RBA is doing by raising interest

[00:11:48] Tony: rates.

[00:11:49] Cameron: All right, well moving right along. I saw another interesting chart this week. This is a market index. I was looking for something about [00:12:00] historical ASX returns. According to this study, 122 years of historical returns, it says since 1900, the Australian share markers returned an average of 13. 2 percent per annum.

[00:12:15] Cameron: I always thought it was like 

[00:12:16] Tony: Yeah. Yeah. That’s my understanding as well. I had to look at the link you sent me and I can save dropping it all into a spreadsheet and doing a calculation myself, which I haven’t done. I couldn’t see anything wrong with it, but it looks a bit high to

[00:12:31] Tony: me.

[00:12:32] Cameron: Hmm, okay, that’s it.

[00:12:35] Tony: Yeah, I can’t say anything more. I’ve always 

[00:12:38] Cameron: No more commentary on 

[00:12:38] Tony: years to be 10 percent in the share market. Yeah, 

[00:12:42] Cameron: they’re the numbers

[00:12:42] Cameron: that I always hear quoted, 13. 2%. So if, if the historical average is 13. 2%, does that mean if we want to do double market, we have to do 26%?

[00:12:52] Tony: Yeah, it does. Which I haven’t.

[00:12:56] Tony: So yeah, we might do less than that [00:13:00] eventually.

[00:13:01] Cameron: All right, moving along. Uh, Iron ore prices, Tony. China, China’s saying that iron ore’s too expensive. This is in the Financial Review during the week. Iron ore prices slipped on Wednesday after the world’s top steelmaker said prices had reached unreasonable levels amid diverging views among analysts on the outlook for the key steelmaking ingredient.

[00:13:26] Cameron: I think this was, uh, Guobin. who is the president of China Minerals Resources Group said that they were squeezing margins at steelmakers. Uh, it goes on in the article to say that there are widespread expectation among brokers for the prices to remain close to U. S. 100 a ton after falling from highs touched in January.

[00:13:52] Cameron: I checked this after I read this article and when our Uh, buy list came out yesterday. Iron ore is still a buy [00:14:00] for us, but obviously we, we go by the end of the month price, not by the daily prices. Uh, there was a bit of a decline apparently on a daily basis of iron ore. Got any thoughts on this one?

[00:14:15] Tony: Um, I try not to pick commodities. It’s, uh, it’s, it’s, you know, I had a haircut today. If I asked the barber if I paid too much, they’d say no. But if you asked me, I’d say yes. I was asking a steelmaker whether iron ore is too high. It’s the same sort of thing, isn’t it? Then they’re going to say, no, it’s great.

[00:14:32] Tony: You’re going to say, no, it’s too high. So there’s a bit of that going on. Um, yeah, I mean, you know, the iron ore got up to 220 a ton. 18 months ago or two years ago when we were owning stocks like FMG. So, uh, and generally, um, 100 probably is, is close to average, I suppose. So that, that makes sense. But no, I don’t have anything, any particular light to shed on this.

[00:14:59] Tony: [00:15:00] Um, I suspect maybe there might be some stimulus in China. Um, If the economy’s not doing well, uh, which usually flows through into the iron ore price and, and

[00:15:09] Tony: the steel price because construction gets a boost, but I don’t know on this particular occasion, haven’t paid attention to it. 

[00:15:16] Cameron: I think the more important question we all want to know is, what do you pay for a haircut?

[00:15:19] Cameron: And where do you get your hair cut? 

[00:15:23] Tony: What would you want to know that for? 

[00:15:26] Cameron: Well, I always imagine like, you know, rich guys, I remember Gordon Gekko in

[00:15:30] Cameron: Wall Street had a barber come to him and he’s like, buy, sell, buy, sell on his phone and the guy’s sitting there trimming his hair while he’s doing it.

[00:15:39] Cameron: Do you have someone come to you and cut your hair

[00:15:42] Tony: probably cheaper. Cost me a hundred bucks for a haircut today. 

[00:15:46] Cameron: bucks? Oh

[00:15:48] Cameron: my God, what are they cutting her with? Like 

[00:15:51] Tony: Yeah.

[00:15:52] Tony: No, I think it’s gold in itself.

[00:15:54] Tony: It’s, you know.

[00:15:55] Cameron: That’s, you could see like a King’s Cross [00:16:00] hairdresser. Where do you go to get your hair 

[00:16:01] Tony: Yeah, just down the road in Bayswater Road. Near 

[00:16:04] Cameron: so that you’re paying for the real estate? Is that what you’re paying for?

[00:16:07] Tony: Yep. I mean, I get a nice wash as well.

[00:16:10] Cameron: Oh, that’s

[00:16:11] Tony: Yeah.

[00:16:13] Cameron: Let’s not go any further with that line of questioning. It’s making you uncomfortable. Um, Uh, well this is, I like this one. I’ve read a couple of stories about HESTA, the Superfund, over the last couple of days, but this was one in Financial Newswire. HESTA hit with ASIC false and misleading charges.

[00:16:31] Cameron: Now we’re always having a bit of a laugh at the superannuation funds and their performance, but I think the one I read this morning was about people pulling their money out of so called, You know, uh, environmentally sustainable funds because there’s a lot of claims of greenwashing going on and people are saying, yeah, A, their performance sucks and B, we don’t think they’re really investing in sustainable stuff like they tell us they are.

[00:16:58] Cameron: But this… This [00:17:00] story says major health focused industry superannuation fund, HESTA, has paid 48, 600 after being faced with Australian Securities and Investment Commission action over allegedly false and misleading statements in marketing materials. The regulator said HESTA paid 48, 600 to comply with three infringement notices.

[00:17:22] Cameron: Issued by ASIC regarding alleged false or misleading statements about its balanced growth superannuation investment option, the statements referenced 10 year performance figures of the balanced growth option, but did not note the period the figures related to. ASIC said it alleges these statements may have misled consumers into believing the performance figures used were up to the present day when the 10 year period used by HESTA to calculate those figures had ended between 5 and 14 months [00:18:00] prior to publication.

[00:18:01] Cameron: Oh, well, they’re like, Oh, we just like our web developers slow. Web developers just got a lot on his plate. Didn’t have time to update the website. 

[00:18:10] Tony: enough, I think, I think that probably

[00:18:12] Tony: is the case that, um, they run old ads or rerun old ads.

[00:18:17] Cameron: could be, um, and their printed

[00:18:19] Cameron: materials probably don’t get refreshed that often, but I, I, I had to laugh at 48, 600 for three infringements. 

[00:18:28] Tony: And how much money have they made in

[00:18:30] Tony: 14 months by advertising falsely compared to the 46, 000? Yeah,

[00:18:35] Cameron: I think, like that’s the definition of a, uh, slap on the wrist and a

[00:18:39] Cameron: stern look, isn’t 

[00:18:40] Tony: slap on the wrist with a wet lettuce is what it really 

[00:18:42] Cameron: Yeah,

[00:18:43] Tony: Yeah, well, hopefully it, you know, makes everyone else sit up and

[00:18:47] Tony: pay attention now before they rerun old ads.

[00:18:50] Cameron: I think it would make everyone else go,

[00:18:52] Tony: Yeah,

[00:18:52] Cameron: That’s it? Shit, what are we paying our web developer per minute to update the website? Eh, it’s not

[00:18:58] Cameron: even, not even [00:19:00] 

[00:19:00] Tony: yeah, true. Good point. 

[00:19:01] Cameron: Charlie Munger, Tony, says that we need to start buying tech stocks, like Apple and Alphabet, or risk being left behind.

[00:19:11] Tony: that’s our solution. Gosh, I feel left behind at the moment in the share market. Just got to buy 

[00:19:17] Cameron: I was like, what?

[00:19:18] Cameron: Bloody hell, Charlie, we’ve been listening to you say,

[00:19:22] Cameron: not buy these

[00:19:23] Cameron: things, and now you’re saying we’re gonna get left behind, you know, when you’re 99, I guess you can just start making shit up. Um… It’s, it’s the Magnificent Sevens world and we’re all just living in it, Charlie Munger says.

[00:19:36] Cameron: A handful of mostly technology companies have grown so dominant and outperformed the stock market to such a great extent in recent years that investors who don’t own any of them risk being left behind, Warren Buffett’s business partner has said in two recent interviews. What everybody has learned is that everybody needs some significant participation in the companies that do [00:20:00] better than everybody else.

[00:20:01] Cameron: Munger told the Acquired Podcast, you need two or three of them at least. So, uh, I don’t know, Tony, what does that mean for us?

[00:20:13] Tony: well, it’s a, it’s a, yeah, interesting dilemma, isn’t it? And it’s, it flows into the theme that we’ve seen. I’ve seen graphs in the last couple of months, which says that, uh, you know, the Australian index has been flat for many years as we’ve spoken about. And the US index, if you take out those big FANG stocks or whatever they’re called now has been pretty much flat.

[00:20:35] Tony: So all the growth has come from those. Tech stocks. The question is, will it continue to come from those tech stocks? And, and I’d rather punch myself in the face than pay 30 times earnings for Apple, notwithstanding, Charlie’s a much smarter investor than I am, and, um, and he makes a good point. Um, And there, I know that Buffett is prepared to pay up for quality, and Charlie made [00:21:00] the point somewhere in that article that, you know, that, uh, that Berkshire bought Apple when it did in 2017 or 18, and it’s up three times since then, so, good on them, but, uh, it, yeah.

[00:21:14] Tony: And I’ve also heard Charlie talk about, um, Apple as still being a value investment because he thinks the future earnings are going to dwarf the current earnings, and so even at 30 times P. E. it’s worth buying, but, um, it’s a whole different mindset, I think, and… Yeah, go ahead and do it if you want, um, but it’s also looking at the, looking at something which has done

[00:21:37] Tony: Well, for the last Seven years or something and saying, will it continue to do well?

[00:21:41] Tony: And I’m

[00:21:42] Tony: not so sure.

[00:21:44] Cameron: Well, the Magnificent Seven apparently are Apple, Microsoft, Alphabet, Amazon, Meta, Tesla, and Nvidia. 

[00:21:53] Tony: So if you go through all of those, um, Alphabet seems to have, well, I’m going to [00:22:00] say Alphabet doesn’t seem to have a natural competitor, but I’m also going to contradict myself because if someone gets a good AI. Search engine going then an alphabet doesn’t and that can come under threat Apple I mean, it seems it like I like Apple I’ve all my stuff is Apple and I pay up for it But at some stage people are gonna stop paying more for the newest iPhone and just go, you know What I’m gonna I’m gonna buy a cheaper Google version or whatever that that day will come at some stage Microsoft I remember 10 years ago, or less than that, when I was in Canada, um, Microsoft was the, was being touted as the worst stock to buy, um, on the, you know, the Dow, because, you know, it just had a bad run, and it’s kind of got its act together.

[00:22:48] Tony: Um, what else, Tesla? I seriously think Tesla could face some kind of threat, um, when all of the other manufacturers get decent electronic [00:23:00] vehicles on the market, and when China starts producing them cheaply, so in Japan I guess too, so I, you know, I think Tesla’s a wonderful cars. But again, I’m not going to pay nosebleeds earnings for it.

[00:23:13] Tony: Um, yeah, so I think each of those stocks, um, uh, have been great stocks to have invested in. And if I had a TARDIS, I would go back and, and buy them. But, um, they’re just so expensive now, I can’t. Whenever things go wrong in the economy, whenever things go wrong with them or their industry, they fall. They’re highly volatile.

[00:23:35] Tony: They fall quite sharply. So I’m not going to say Charlie’s wrong. He’s a smart guy. If you want to buy Apple, buy Apple.

[00:23:42] Tony: I just can’t bring myself to do it. But

[00:23:46] Cameron: these seven companies have in common is that they’re all… Very heavily invested in AI. That’s the thing that’s, you know, I think driving predominantly, certainly [00:24:00] Microsoft’s share price in the last year in particular, it’s 50 percent stake or 49 per stake, whatever it has in open AI.

[00:24:10] Cameron: Um, Google obviously has a big investment in AI, so does Meta, so does Tesla now, Elon just launched his AI Grok last week for limited, uh, audiences. NVIDIA’s producing the A100s and the H100s that, uh, driving AI, the chipsets. Apple, you know, their, their play isn’t obvious yet, but everyone assumes that they’re going to be a big part of writing this into the future, if not with their own major AI engine that at least the devices that a lot of the AIs are running on.

[00:24:48] Cameron: Um, Amazon as well, you know, AWS, the engine, the platform that a lot of these things are hosted on. So it’s the big AI plays and, um, yeah, right. I [00:25:00] mean, Bill Gates came out and said recently, and I’ve heard other people like Mark Andresen say this over the last few months, is that when, when the AI revolution hits in the, like mainstream in the next year or two, no one’s ever going to go to Google again.

[00:25:18] Cameron: He said, no, Bill Gates said last week, no one’s ever going to Google again. Never, no one’s ever going to Amazon again. Because you’ll just say to your AI assistant, book me a flight. Buy me a book, do this, whatever, and it’ll go out and find you the best deal, the best price, and book it for you, and organize it for you.

[00:25:38] Cameron: But all these companies, Amazon and Google, etc., have got their own AI plays, which they figure will pick up the slack for the lost revenue and those sorts of things. But, um, yeah, we don’t have any major AI plays. I mean, Canva’s adding AI to their stuff, and I’m sure Atlassian will have an AI component to what they do, but we don’t have any major.

[00:25:58] Cameron: AI pure [00:26:00] plays in Australia to get involved in.

[00:26:02] Tony: again, Cam, I know it’s your thing, but how do I predict the cash flows going forward? How do I discount them

[00:26:08] Tony: back? NVIDIA, I just looked up now, is trading on a PE of 116 times.

[00:26:15] Cameron: Yeah, well I said 

[00:26:16] Tony: They’re priced for perfection and we don’t even know if AI is going to make a buck

[00:26:19] Tony: of income for them yet.

[00:26:22] Cameron: I was, um,

[00:26:24] Tony: Haven’t we seen this before? 

[00:26:26] Cameron: Yeah. Oh, I mean, I’m talking to a couple of people this week about Microsoft’s, I think Samatino

[00:26:31] Cameron: on Futuristic, we were talking about this. And I was like, I’m not even confident that OpenAI won’t end up the Netscape of 

[00:26:40] Tony: Yeah, absolutely. 

[00:26:42] Cameron: You know, it’s got a massive early lead. It’s dominating everything right now, but I’ve seen this before.

[00:26:48] Tony: Mmm. 

[00:26:50] Cameron: I, I saw it with Netscape. I, you know, and I think the biggest death threat to open AI is that Microsoft buys all of it and takes it [00:27:00] inside and internalizes it, because that’s never a good thing. I mean, Satya Nadella, the CEO of Microsoft seems to be doing a good job with the company. Better than Ballmer did, but, um, you know, these big organizations and their political fiefdoms and everything that goes on tend to swallow these things up and suck the juice out of them for a while.

[00:27:23] Cameron: China’s Alibaba just upgraded their latest AI last week, um, you know, China’s AI plays have not really hit the mainstream Western attention yet, but I expect big things to come out of China. Building their own chipsets to rival NVIDIA as well. I mean, once that hits, the impact that’ll have on OpenAI and Google’s BARD gets up to speed and Meta’s plays get up to speed, Lambda, et cetera.

[00:27:51] Cameron: So yeah, look at the great Tesla’s play. There’s going to be a, you know, I don’t think OpenAI has got a moat is actually what I said. That’s worth much, you know,

[00:27:59] Tony: Well, [00:28:00] and that’s the, but that’s also the way that these things develop, Cameron. You’ve named half a dozen companies there with their own version of AI. They can’t all succeed. I mean, Amazon sells, you know, sold books and, and Barnes Noble sold books and then eventually Amazon sold books and that was it.

[00:28:16] Tony: Yeah. Microsoft had a search engine, there were three or four search engines, but now there’s only Google. These, these developments tend to land with, into the future with one or two companies that go forward. So, um, betting on them all may not be the right thing to do. And picking which ones it’s going to be is also very hard to do.

[00:28:36] Tony: So paying a premium, and I’m not just talking a premium, 116 times earning, earnings for a chip maker. Um, Just, again, it Just, sounds like the tech bubble all over again,

[00:28:49] Tony: what we were seeing back then in 2000. 

[00:28:53] Cameron: the big difference is Charlie and Warren have always told us to steer clear of them. And now they’re doubling down on it and saying, you’re an idiot if you [00:29:00] don’t get two or three of them.

[00:29:02] Tony: Yeah. it’s strange, isn’t it? And I, and I don’t think Charlie, I’m halfway through the podcast that interviewed Charlie, um, In that interview, he talks about Apple. He doesn’t, and he comes at it from a business point of view, rather than an AI point of view. And he, you know, he talks about their, um, their sales, their ability to rise, raise prices with each, you know, new, new issue, the profit margin they have, all those kinds of traditional sort of industrial type company, company metrics that they look at.

[00:29:31] Tony: He’s not coming at it from

[00:29:33] Tony: any sort of, um, world beating tech

[00:29:37] Tony: point, point of view with Apple.

[00:29:40] Cameron: Yeah, well Apple doesn’t have a pure AI play

[00:29:42] Tony: Mm hmm. 

[00:29:43] Cameron: so you couldn’t anyway. Yeah, it’s interesting. Well, I was hoping you would be able to put my mind at rest there Tony, but um, 

[00:29:51] Tony: Look, no, 

[00:29:51] Cameron: left me wanting.

[00:29:52] Tony: um, and I’ve heard other interviews with Charlie and Warren and they’ve talked about how they missed the boat on some of these companies and, and Charlie was [00:30:00] saying that we should have bought Alphabet years ago because they can manufacture an ad for a cent and they can charge a dollar when it appears.

[00:30:07] Tony: So that’s the kind of business that they like. So I get why he’s doing it. Um, I guess, you know, to… To take that kind of argument further, it’s, it’s the kind of stock that they’d probably buy in a downturn when there was a recession going on and there was blood on the streets. You know, that’s the kind of time you’d want to buy those companies, but just paying these kind of nosebleed prices for them,

[00:30:32] Tony: I don’t think that’s safe.

[00:30:33] Cameron: Well, speaking of, uh, not playing it safe, I won’t apologize for being aggressive, ANZ boss stares down mortgage critics. ANZ boss Shane Elliott insists he’s still generating good returns from mortgages despite aggressive pricing that has shaken up the market. So Shane Elliott was waxing lyrical yesterday, um, [00:31:00] everyone, all the other banks were complaining about him apparently, but the key thing from our perspective is their full year cash profit was up 14 percent of their total.

[00:31:09] Cameron: To 7. 4 billion, but was 1. 3 percent below market consensus and the share price dropped.

[00:31:18] Tony: Yeah. And I bought them last week because they come onto the buy list for a day or 

[00:31:22] Cameron: Oh, did you? Yeah. 

[00:31:24] Tony: And I’m not, I’m not worried. What’s happening with ANZ, I think, this is my commentary, but may not be the real case, uh, is that they still desperately want to buy the bank out of, um, Suncorp in Queensland, which has been blocked by the regulator for lessening competition.

[00:31:45] Tony: And so ANZ have been driving prices down, um, in the home loan market trying to win. Excuse me, trying to win shares so they can say to the regulator, Hey, it’s good for competition. We’re, you know, we’re very competitive. Um, so I think that’s what’s [00:32:00] going on. It’s, it’s a, it’s a play for the regulator or play for the courts who are now going to decide on appeal, whether that merger can go through.

[00:32:08] Tony: Shane Elliott says the reason why they’ve been able to be aggressive on mortgages is because ANZ, as opposed to the other big three majors, has, um, a large, large ish, um, network in Asia, footprint in Asia. And so. He’s saying that that business is now more profitable than the Australian business and he can use the surplus cash to discount on mortgages and that may be the case.

[00:32:31] Tony: Um, it’ll be the first damn time in history that ANZ’s ever said the Asian business is going well. Uh, but anyway, hopefully it is

[00:32:39] Tony: because I’m a shareholder now. 

[00:32:40] Cameron: Yeah, the share price didn’t recover really

[00:32:43] Cameron: after that fall a

[00:32:43] Cameron: couple of days ago either.

[00:32:45] Tony: No, and I think what’s happened as well is all, all, so the three… Major banks have done their annual results presentations over the last couple of weeks and ComBank I think came out today with its quarterly update. They report on a different time cycle [00:33:00] and uh, all of them are saying that The last year has been really good for banking with rising interest rates, but we don’t see it going forward as good because of all the things we talked about before, there’s cost of living, pressures on people, and even though interest rates are high, deposit rates are also going up, so there’s pressure on their margins, and I think that’s what’s also being absorbed

[00:33:26] Tony: by the investing community is what’s it going to look like in a year’s time for these banks. 

[00:33:30] Cameron: Apparently there’s a, I’m not sure who the PR firm is, but there’s a PR firm out there that’s getting a lot of work in the Australian corporate space telling CEOs to use the term one trick pony. This week, because Shane Elliott said they’re not a one trick pony. Then I read this morning that the CEO of Elders said that they’re not a one trick pony.

[00:33:53] Cameron: Um, Moderna also recently said that they’re not a one trick pony. Um, [00:34:00] apparently saying I’m not a one trick pony is the way to express yourself as a CEO, uh, at the moment.

[00:34:07] Tony: as an investor, I just want a one trick pony. If you’re doing,

[00:34:10] Tony: if you’ve got two ponies you should be de merging and we can decide which pony you want to invest in. It’s like either a.

[00:34:17] Cameron: How many ponies do you actually own though, Tony? 

[00:34:21] Tony: I don’t want to buy a circus when I’m

[00:34:22] Tony: investing.

[00:34:23] Cameron: Um, he was talking about the fact that, um, their profits, I think their retail bank profits, uh, weren’t as good. But, um, where’s 

[00:34:36] Tony: And he’s saying that they’ve got more income coming in from Asia, which is helping and all that

[00:34:39] Tony: kind of stuff. Yeah. No, I get it.

[00:34:41] Cameron: Yeah, yeah, yeah. He said, we’ve just had the two best halves in our company’s history, but it just so happens that the first half was even better than the second. But on its own, the second half is a really outstanding result. We’re not a one trick pony. We’re not just an Australian retail business, etc, [00:35:00] etc.

[00:35:00] Cameron: Anyway, one trick pony. I think that’ll be the title of this 

[00:35:03] Tony: Right. 

[00:35:04] Cameron: Um, 

[00:35:06] Tony: It is funny though. I agree with you. It’s funny how, how people use the same terms. It’s like someone puts out a press

[00:35:12] Tony: release and it must just get circulated for sure.

[00:35:14] Cameron: Yeah, it’s almost like, um, I don’t know if you ever saw this, but the Daily Show used to do a good job of this, they’d take Fox commentators, people on Fox News, and you’d just see them using the same phrases over and over again, like 10 different Fox hosts using the same talking points, with exactly the same phrases, driving it home and home and home.

[00:35:39] Cameron: Yes, I did a thing about that on TikTok last week, you know, I keep hearing the term, this, you know, these attacks are not justified. Hamas’s attack on Israel is not justified, or Russia’s invasion of Ukraine was not justified. Keep hearing the media say these things are not justified, and I’m like, well, [00:36:00] obviously they are justified to the people who are doing them.

[00:36:04] Cameron: They think it’s justified and it’s justifiable, it’s reasonable, it’s acceptable. So I blanket saying that they’re not justified. It’s nonsense. Maybe you don’t think you could, you can justify it, but that’s because we’re on the other side of the battle. You never, you never get a, you know, the victim of something is, or the ally of a victim of something is never going to agree to the justification of the attack in the first place.

[00:36:28] Cameron: But to just say it’s not justified is a nonsense statement. Better off asking why do, why does the other side think it’s justified? What is their justification for it? Then we might be able to have some dialogue and get somewhere.

[00:36:41] Tony: Well, that’s right. If it’s, If

[00:36:42] Tony: they’ve done something, which is an extreme, why, why would they forced into doing an extreme act? 

[00:36:46] Cameron: Well, because they’re all crazy, Tony. They’re crazy, madmen. 

[00:36:51] Tony: Cause they’re all Muslims or communists. 

[00:36:54] Cameron: yeah, or Putin’s 

[00:36:56] Tony: know, when I was 

[00:36:56] Cameron: He’s just mad. 

[00:36:57] Tony: I was a kid, I’d never cut in the ice with mom when I go and [00:37:00] say, yeah, but what she did wasn’t fair. What my sister did wasn’t fair. It’s

[00:37:04] Tony: like, so life’s not fair. Can’t say

[00:37:08] Cameron: I thought you were going to say when you called your mum a Muslim. Well, yeah, you’re a Muslim.

[00:37:14] Cameron: Hey, um,

[00:37:14] Tony: know what a Muslim was when I was a kid. 

[00:37:17] Cameron: no, me neither, still don’t. Um, I got two questions for you, Tony,

[00:37:21] Cameron: that came up for me in buying stuff the other, uh, last couple of days. The first one, I went to buy SXL, Southern Cross Media Group, for light yesterday, but when I went to buy it, uh, take, I noticed a take, I learned to check the news, the, the, the announcements before I bought it.

[00:37:41] Cameron: Um, a takeover offer is being considered. There’s been two takeover offers, I think, of Southern Cross Media recently. But when I went to buy it yesterday morning, the share price had already jumped. About 5 percent in the morning. And then it crashed a little bit, came back a bit. Um, and then [00:38:00] it jumped up again.

[00:38:01] Cameron: So by the time I got to it, like late morning, it had jumped from, I don’t know, like 92 cents to 97 cents. And I was like, like it could keep going up. It could go down. What’s going on. I ended up getting spooked and I didn’t buy it. It was our, our analysis price when Alex did it on the weekend was 92 and a half cents.

[00:38:26] Cameron: It was already like 97 cents by the time I got to it, 97, 98. And I was like, I don’t know, part of me wanted to buy it thinking if there’s a little bit of, you know, horse trading going on here, it might go up, but. Anyway, I didn’t, and I wanted to ask you what you would do in a situation like that, if you know, there’s a couple of competing offers, shit, it’s up to a dollar, dollar and two today.

[00:38:53] Cameron: So there you go. I should have bought it, but 

[00:38:55] Tony: Well, maybe. I’m not a fan of buying into takeover situations. [00:39:00] If, if we’d already owned it and there’s a takeover, it’s a bit different. You know, we get a free ride. But, um, yeah, the, the, There’s probably, there’s often more downside risk than upside risk. The upside risk is that someone lobs another bid or they up their current bid, but the share price is generally trading at around the takeover offers.

[00:39:20] Tony: So you’re hoping that somebody else will enter the party and make another bid or that someone currently there will be forced to put the price up. Um, but you’re kind of moving away from

[00:39:31] Tony: fundamentals when you’re trying to value those companies. And the risk is that people walk away and the price drops.

[00:39:36] Tony: So. 

[00:39:37] Cameron: Well, both of these offers were non binding offers too. So they were like suck it and see offers. And yeah, I was like, Oh, I could get into the paper. We’ll get into the whatever you call it, whether you’re opening the kimono a little 

[00:39:52] Tony: Oh, due diligence. 

[00:39:53] Cameron: numbers that bit. Yes. That’s a bit, I like my term better. Um, and they go, [00:40:00] Oh shit.

[00:40:01] Cameron: Yeah, we don’t like this at all. Yeah. And then it collapsed, but you make a good point. Like getting sucked into that is, is forecasting really, isn’t it? You’re getting sucked into the hype of this could go to the moon.

[00:40:12] Tony: You’re right, Doug. I mean, these people are

[00:40:15] Tony: spending lots of money on these companies. They’re going to try and buy it for as little, as little as they can. 

[00:40:20] Cameron: Yeah. 

[00:40:20] Tony: It can’t, it can get into a bidding war for sure. And, and you’re right. There’s generally a playbook for these things. The first step is the young.

[00:40:27] Tony: Unconditional is the conditional bid, the non binding bid. Then they go unconditional and then they go final and then eventually, although due diligence along the way at some stage, and eventually the board will make a recommendation. So there are some people who are skilled at Playing that, and they’re probably buying this company now, because there hasn’t been a board recommendation yet.

[00:40:48] Tony: But there is always the risk that people go away, and the price drops. And it can drop back to what it was before this all

[00:40:56] Tony: started, which is probably a fair way below [00:41:00] the current 1, 2 share price. 

[00:41:03] Cameron: So general rule, if it’s already in play, when it appears on our buy list,

[00:41:08] Cameron: probably walk 

[00:41:09] Tony: Yeah. 

[00:41:10] Cameron: If it’s in play, walk away. There you go. That’s going to be my motto.

[00:41:15] Tony: And what about ask for due

[00:41:16] Tony: diligence so you can see the kimono get opened?

[00:41:19] Cameron: Yeah. I’ve been, I’ve been in some Australian boardrooms. I don’t want to see any of those in Australian boardrooms, Tony. Uh, just to buy the buy, another for our club members, another stock on our buy list, SZL, uh, has been suspended from trading pending a voluntary delisting. So SXL is the one that’s in play, SZL is Sezzle, which you talked about recently I 

[00:41:44] Tony: No, I don’t

[00:41:45] Tony: think so. That’s a buy now pay later company.

[00:41:48] Tony: Isn’t it? If I did talk about it, I’d say don’t buy it.

[00:41:51] Cameron: I think it.

[00:41:52] Cameron: came up on, um, one of our shows? No? I’m searching through my [00:42:00] notes. 

[00:42:00] Tony: not ringing a bell 

[00:42:02] Cameron: No, okay, I don’t know, somebody’s been talking to me about Sezzle then, not you.

[00:42:07] Cameron: Okay, so that’s all I’ve got on my talking points for this week, Tony, what have you got?

[00:42:12] Tony: Yeah, I’ve got a, uh, very little to talk about, um, I wanted to do a shout out to a chap called Lachie, who I played golf with again on, on Sunday, and we played golf before, and last time we played golf, I mean, this is, Lachie’s a wonderful golf player, and, uh, manages a shopping centre, Um, for one of the large companies that do that and we got talking about finances and he was kind of all interested in QAV and interested in investing and um, we talked about the simple steps to take.

[00:42:41] Tony: He’s, I think, probably early thirties or late twenties, um, and was trying to save for a home and all the rest of it. And then we chatted again on the weekend, he saw my name on the booking sheet and joined us, which was great. Um, and the, I was saying, Oh, You know, really getting my stuff in order. I’ve [00:43:00] rented out a room in the house.

[00:43:01] Tony: Um, that’s going to help save, you know, for a deposit and all the rest. So it was really nice to, to see someone take some action and trying to get, you know, their finances, financials together. So big shout out to Lock, shout out to Lockie. Well done, mate. Um, and thanks for the game. It was great. Uh, Interest rates rose last week on Melbourne Cup Day, it wasn’t the only thing that was, um, of interest that day.

[00:43:24] Tony: And so people, if they haven’t already, and they do run their own, um, buy list spreadsheets need to change the, the hurdle rate we use in IV calculations to 4. 35%, which I think we’ve done in our buy list that we put out, but if anyone’s doing it separately, they need to do that. I did want to talk about Macquarie Group, because I know we touched on it briefly.

[00:43:46] Tony: Last week, and then I went on to Phil Muscatello’s show yesterday, and he asked me about impairments and write downs, and that made me think, I may have mentioned last week that Macquarie had taken an impairment [00:44:00] because of its ESG assets, and I did check into that, and it hasn’t. What’s happened with Macquarie?

[00:44:05] Tony: I just want to clarify for the record. Um, Macquarie, uh, in its, um, Division Macquarie Asset Management, which basically the business model for MAM is that they get into infrastructure developments at the ground floor, often put the syndicate together to, to, um, to bid for, you know, the toll road or the bridge or whatever the government’s, um, uh, tendering for, uh, and then they oftentimes provide the financing.

[00:44:31] Tony: And then when the thing’s built and up and running, then they, they, they’ll sell it off at a, um, Decent profit margin. So they were doing that in the ESG space with wind farms, solar farms, etc. And they called out the fact that they have shut the door on selling any of those. For the near future, um, and, uh, I took that to mean they were going to write down those assets, but they haven’t yet.

[00:44:55] Tony: I guess if there continues to be a problem and they can’t sell them for the prices they [00:45:00] need to, then at some stage they will have to write down those asset values, but they haven’t done it yet. So, um, if I said that last week, I apologize, it was a bit misleading. And the last thing I have, Cam, is a pulled pork.

[00:45:13] Tony: Uh, which was a request, and this is on a company called Civmec, CVL. So thanks for the, for the request, it’s um, interesting company, I, I quite like it. However, it’s a very small company, sorry, it’s a, it’s a company with a very small ADT of only 13, 000 on average, so it won’t suit people like myself and other people like me out there.

[00:45:37] Tony: Uh, but it is a good company, and… The reason why I thought I would do the pulled pork on it is it is possible that the ADT may improve next year. So people might want to hear about it now and think about investing next year if they, if they like the company. And the reason for that is this company originally listed on the Singapore exchange, uh, back in [00:46:00] 2012.

[00:46:01] Tony: It actually started up in 2009. I should say it’s, it’s a construction and engineering company. Um, it does work across all different sectors, energy, resources, marine, defence, infrastructure, and it does construction and build and maintenance work, um, as engineering companies do. Uh, but they listed for some reason on the Singapore Exchange in 2012, and then, uh, in 2018, took up a dual listing on the ASX.

[00:46:31] Tony: So, um, dual listed. And if you look at the… The shareholder information in Stock Doctor, there’s a large, almost half of the, the, uh, shares are listed as being owned by the Chess Depository Nominees Company, which I think is people from Singapore co investing in Australia, um, so if the company does go ahead and they put their plan in place.

[00:46:57] Tony: comes to fruition, which is, uh, what [00:47:00] they’re, what they’re doing is to repatriate, repatriate to Australia. Uh, then we may see that, uh, we have all the shares on one exchange and there may be a better, um, uh, float available, uh, to, uh, to, to buy and sell in the share market. The other reason why there’s a low ADT on this stock, which is probably a good thing, is that there are two large owners.

[00:47:21] Tony: Um, who are both, uh, one CEO and one’s chairman, and they have something like 40 percent of the shares themselves. So between Singapore investors and the owners, it’s like 90 percent of the stock is, is accounted for. And so it’s only the, the rump that’s trading every day. And so we have a low, a low ADT.

[00:47:41] Tony: The other reason for repatriating to Australia, like the company’s called out is because they’re doing more and more work for the Navy and, and defense work. And The government’s getting tighter and tighter on, um, on their rules about local sourcing. So the government wants to buy Australian, [00:48:00] um, and this company’s head offices are currently in Singapore, even though they do all their work in Australia.

[00:48:06] Tony: Their, their staff are in Australia. It’s basically an Australian company in everything but name. Um, so they’ll take steps to come back, which should help. Uh, what else can I say about it? It’s um, I guess the value prop for this company, and why is it different to other engineering companies. And, by the by, CIV probably stands for Civil and Mechanical, which are two types of engineering.

[00:48:30] Tony: Civil is, if anyone went through an Australian university when I did, the engineers were all debating whether Civil was better than Mechanical, which is better than Electrical, which is better than Chemical is like four, four types of engineering you could do with this. So civil is, is, um, engineering which builds bridges and roads and buildings and mechanical is the type of engineering that builds big tractors and trains and mechanical type, uh, engineering.

[00:48:56] Tony: So CivMech is the name. I guess that’s where it came from. [00:49:00] Um, but their value prop, which I found interesting is they have a really big, uh, Facility over in WA, just south of Perth, and they have another one in Newcastle, which isn’t quite as big, and a smaller one again in Gladstone, which are all kind of, you know, areas around resources and natural gas, so they’re kind of good places for engineering companies to be.

[00:49:22] Tony: But the value prop for this company is its big facility in WA, which enables it to do a lot of Pre build constructing in a, in a large hangar like warehouse. And so that’s, that’s, um, there’s some benefit in that. So rather than, say, building a bridge on site, they can build large portions of the bridge under cover.

[00:49:43] Tony: They won’t be affected by weather during construction. And then truck it out to the site and put it in place in a pre fab. type format. Um, and that’s, um, that saves them lost days for, for being able to work in all types of, um, of [00:50:00] weather. Uh, it also, um, I think is, is cheaper, um, to, to build in the one facility and keep that running, um, full bore.

[00:50:09] Tony: Uh, and they also have some other, um, they do their painting on site, which I think is, is, um, is advantageous as well. So. That’s their value prop. They can build things like, you know, the dumpsters for large mining trucks can be built on that hangar, um, again, which is a bit of differentiation from other people that produce that.

[00:50:29] Tony: So anyway, so that’s the company in a nutshell. Looking at the numbers, uh, share price I did the analysis at is a dollar. There’s no consensus target, which is not surprising because, you know, with such a low ADT, no stockbroker’s going to worry about. Researching this company. Dividend yield is 5%, which doesn’t meet our hurdle, but it’s pretty good.

[00:50:51] Tony: Uh, Stock Doctor financial health is strong and steady, also good. It trades on PropCaf of 5. 3 times, uh, [00:51:00] also good. Net equity per share is 0. 83, which is below the stock price, but if you look at Book Plus 30%, which is 1. 08, it’s, uh, we’re buying it cheaper than, uh, Book Plus 30%, which gives it a tick on our, on our checklist.

[00:51:14] Tony: We don’t have any forecast earnings growth, so I can’t do any, um, checking for that. Directors hold 41 percent according to Stock Doctor, so that’s a big tick there. P is 8. 6 times, which is not the highest or lowest, so we can’t score it on that, but it’s still pretty low. Equity’s been going up consistently, which I like, so that’s a tick there.

[00:51:35] Tony: So all in all, the quality score for this company is 10 because some of those things like Um, Owner, Founders, or Directors holding a large amount is, um, scoring a 2. So it’s 10 out of 11, or 91%, and the QAV score is 0. 17. So, except for that low ADT, I think it’s a great investment. And if they can change that next year, and free up, uh, some of that float, [00:52:00] then it will come onto our, um, radar screens.

[00:52:04] Tony: Uh, pros and cons. Um, one thing I liked about it is the dividend payout ratio is only 45%, but they’re able to trade at a yield of 5 percent with their dividends. So, that’s, that’s pretty low and, um, if they need to play around with that, they can to get the yield up. Uh, the other thing which I like about this company is that more and more of the business is coming from maintenance, which means it’s recurring.

[00:52:27] Tony: There’s typically they’re signing three year or five year maintenance contracts. And so that’s good. Um, also too, the last figures, uh, NPAT and sales were both up. I’m just trying to find the numbers here, uh, up 7%, um, year on year. So that’s good. And the rule of the book is up 17 or 18%. Year on year. So they’ve got an order book of 1.

[00:52:48] Tony: 1 billion worth of work. So from that point of view, the business metrics are very attractive. Um, and the only, only con I can see, um, holding against this [00:53:00] company is the low ADT, which may change. So all in all, I think it’s a, it’s worth having a look at and perhaps having a look at next year, if they

[00:53:07] Tony: can solve the ADT issue by repatriating back to Australia. 

[00:53:12] Cameron: You missed the most important kind of engineering in

[00:53:15] Cameron: your breakdown of engineering.

[00:53:17] Cameron: Tony. Prompt

[00:53:18] Cameron: engineering.

[00:53:19] Tony: I’ve never heard of prompt engineering. I wasn’t taught at

[00:53:22] Tony: university back in the eighties.

[00:53:24] Cameron: No, that’s an AI thing, Tony. Prompt engineers. Companies are paying hundreds of thousands of dollars in salaries for prompt engineers. People who know how to write a good prompt. For an AI, Prompt Engineering. 

[00:53:39] Tony: must qualify for that job then. 

[00:53:42] Cameron: I, I, if I wasn’t completely unhireable at this

[00:53:46] Cameron: age, uh, yes, spent a lot of time on Prompt Engineering. 

[00:53:50] Tony: Well, give the job to Hunter or Taylor and you tell them the prompts to use.

[00:53:55] Cameron: yeah, I, I, you

[00:53:56] Cameron: know, Taylor’s less hireable than I am. They’re both, my boys are [00:54:00] less hireable than

[00:54:00] Cameron: I am. 

[00:54:01] Tony: Oh, come on.

[00:54:01] Cameron: Almost. 

[00:54:03] Tony: Haven’t heard from Taylor for a

[00:54:04] Tony: while. What’s he up to?

[00:54:05] Cameron: Oh, killing it,

[00:54:06] Tony: Good. Good on him.

[00:54:08] Cameron: Yeah. He’s crushing it. It’s doing well. Um, alright, well thank you. That was a request from Jackie, so I hope you liked that. Jackie, a couple of questions this week.

[00:54:19] Cameron: First one’s from Rob. Would be interested what, to see what Tony thinks about using TradingView for commodities. The free version provides access to most of our commodities and the benefit is that it makes the process faster because the lines are persistent across sessions. I did like the idea of having a, uh, just one source that we go to for all of our commodities because we tend to use Stock Doctor and then we go looking in other places where there isn’t Stock Doctor.

[00:54:49] Cameron: We’ve used TradingView a bit. Do you have a particular view on TradingView as a source?

[00:54:54] Tony: it. It’s a good, it’s a good product. Um, and it’s free, as Rob said, so I’m not against it. [00:55:00] I only had a play around this morning to see if we could do all of our Commodities on it, and I’m still, um, I’d still have to play around with it further to work out things like thermal column, which, which, um, of the many options to, um, to use that we should use.

[00:55:16] Tony: But yeah, it looks good. Looks promising. I didn’t understand the comment about persistent across sessions. I’m not sure what that means. If you come

[00:55:24] Tony: back in the future, does it, you can, it’s, I guess it’s, it’s saved your settings perhaps? 

[00:55:31] Cameron: I assume that’s what he means and I know that’s

[00:55:33] Cameron: the way that Stock

[00:55:34] Cameron: Doctor works as well, it saves you a little lines. I’ve, I haven’t used TradingView, I don’t think. I’ve used Trading

[00:55:42] Cameron: Economics a bit. But I don’t think any of our standard charts are trading view. I don’t even know how to find the commodities in here.

[00:55:53] Tony: Just, just go into the search bar and type in gold or oil or whatever [00:56:00] or Brent 

[00:56:02] Cameron: Gold, XAU. Oh, you 

[00:56:05] Tony: choice of US dollars or Australian dollars. Um, just with that, I clicked on the five year for gold and it was giving me a weekly chart. So that was one thing I have to play around with and see if I can get a five year monthly chart,

[00:56:17] Tony: for example. 

[00:56:18] Cameron: zoom in. Let me get to a line chart. Just sort of press and hold command while zooming in to maintain chart position. Oh, there you go. Yeah. Yeah, you can just sort of zoom in with your mousey thing. Yeah, if I click on the five year thing, it goes back to weekly actually for me, but 

[00:56:44] Tony: but I had to this morning too. 

[00:56:46] Cameron: yeah, you can just, yeah, but I can zoom in.

[00:56:51] Cameron: All right. Well, I’ll check that out. Maybe we can standardize on that if they’ve got everything. I’ll, I’ll have a play around with the regular list that we look at and see if we can just [00:57:00] standardize on this. So thank you for that suggestion, Rob. Good one. The other question is from Adnan, who calls himself the Bitters Nazi.

[00:57:08] Cameron: Did you get that reference, 

[00:57:10] Tony: No. 

[00:57:11] Cameron: A couple of months ago, when you were off the booze, and I told you that we like to drink tonic water, sugar free tonic water, with some bitters in it. And he was like, you know, if Tony’s trying to stay off the booze, you can’t recommend bitters, because it has alcohol in it.

[00:57:25] Cameron: So he’s the Bitters Nazi. 

[00:57:26] Tony: I got 

[00:57:27] Cameron: Mr. Reilly, he says, and Tony and Alex, I have a question. Is it likely I’ll need to partially liquidate my portfolio? Oh. Yes, okay. It is likely I’ll need to partially liquidate my portfolio to pay for a deposit on my first home. Any suggestions on what sort of stocks I should be culling based purely on the numbers as is the QAV way?

[00:57:50] Cameron: Now I know that we’ve talked about this before, let me see if I can remember. I think you’ve said if you had, this gets back to something you’ve talked about, if you have [00:58:00] to sell stocks because you need cash for something, how would you go about it? Um, You would start off with the ones that are underperforming.

[00:58:12] Cameron: Is that where you’d 

[00:58:13] Tony: I’d start it. I’d trim any losses, first of all. So it’s all about capital gains tax minimization. 

[00:58:19] Cameron: Right. 

[00:58:20] Tony: So if I have to sell something, it’s called a crystallizing transaction, and it becomes taxable after that. So, yeah, I mean, generally, my portfolio, somewhere at some stage will have stocks in there which are, you know, less than…

[00:58:33] Tony: Well, I paid for them. There haven’t been a rule one yet or something like that. There’ll be one or two percent below. So I’ll start with those and then I’ll, and then I’ll drop the,

[00:58:43] Tony: the capital gains list. So the ones I’ll be keeping will have the biggest capital gains tax liability going forward. 

[00:58:49] Cameron: Is there anything else that you take into consideration? 

[00:58:52] Tony: So, um, depending on add and end situation, like for me, if I’m using dividends to pay the mortgage, then I’ll try and hold onto [00:59:00] the higher paying dividend yields and sell the lower paying ones first. Yeah, um, I guess that they’re probably the only considerations, but yeah, if anyone’s doing any sort of filtering on the list for ADT or, or yield or something else and yeah, sell the worst, worst of those first, but, but definitely be very cognizant of your capital gains tax position when you do it all. 

[00:59:25] Cameron: Because you don’t want to have to have a big capital gains tax bill when you’re trying to put together a deposit for 

[00:59:30] Tony: Well, that’s right.

[00:59:30] Tony: And find out you have to sell some more shares to pay that. So yeah, no, definitely

[00:59:37] Cameron: Don’t take that as personal financial advice. Adnan, we don’t know your personal financial 

[00:59:41] Tony: we do not. 

[00:59:42] Cameron: See a, see a financial advisor or ask your mum. Um, That’s it. Oh, uh, nice. Sorry. At the bottom there, Adnan says, uh, He appreciates and enjoys the podcast each week and intends to be a member for years to come.

[00:59:58] Cameron: That’s 

[00:59:59] Tony: That’s great. [01:00:00] Thanks Adnan. 

[01:00:01] Cameron: Happy to have 

[01:00:01] Tony: Yeah. 

[01:00:02] Cameron: even if you’re the bitters Nazi. Well, that’s all of the questions for this week. Tony, we’re into after hours. Melbourne Cup, 

[01:00:14] Tony: Yeah, I think we’ve talked about it. Yeah, no, nothing bad. There was a,

[01:00:17] Cameron: You had a, good day though. 

[01:00:18] Tony: yeah, I did. Yeah, it was good. We actually went, actually, I should tell you about that. Very interesting function I went to. So, uh, all of my mates went out to Randwick Racecourse, which is a race day up here, which, even though it’s not the Melbourne Cups in Melbourne, they still have a, an event here.

[01:00:32] Tony: But, um, Jenny was invited to a function. through, um, uh, business contacts, and so we went along to it and it was fantastic. It was, um, not a, I mean, they had a widescreen TV in the corner showing the races, but no one paid attention to it. Uh, it was just fantastic. I guess house, but it was basically a converted electricity substation over in Redfern, full of art on the bottom floor.

[01:00:57] Tony: And not just like the art that we have, which is stuff [01:01:00] we like, it’s like, you know, world renowned art. And the cream of Sydney business was there. The Turnbulls were there and all sorts of other, you know, names and faces you recognize. And um, Yeah, so I had a mineral water and a plate of, um, cheese and salami and

[01:01:19] Tony: rubbed elbows with the Hoi Poloi in Sydney, which was interesting. 

[01:01:24] Cameron: you get into it? With Malcolm? 

[01:01:26] Tony: No, I didn’t, I didn’t talk to him. He had a lot of people talking to him. I spoke to a couple of, um, you know, board directors, which was interesting, um, but yeah, I just found it fascinating. It’s, um, yeah, there wasn’t much interest in the Melbourne Cup, um, there was a, there’s a lot of, um, How will I put this?

[01:01:47] Tony: It’s obviously a very smart room, so lots of talking and opinions going on, um, lots of pontificating, um, but yeah, it was pretty relaxed and nice, it was interesting. 

[01:01:59] Cameron: Michelle Bullock [01:02:00] wasn’t there? 

[01:02:01] Tony: She may have been, um, there was a couple of media types there you’d recognise, Annabelle Crabbe was there, so, um, yeah. 

[01:02:08] Cameron: Was she cooking? 

[01:02:09] Tony: No, she wasn’t.

[01:02:10] Tony: Yeah, interesting. Interesting way to spend Melbourne Cup Day.

[01:02:14] Cameron: There you go, the circles that you move 

[01:02:17] Tony: Well, Jenny moves in, I was just a handbag.

[01:02:20] Cameron: You’re the handbag. Yeah. 

[01:02:23] Tony: I was like, shut up, there’s a horse race on.

[01:02:25] Cameron: no one came up to you and Turnbull didn’t come up to you and say he enjoys listening to QAV? No.

[01:02:31] Tony: didn’t. No. 

[01:02:33] Cameron: Well, we’ve, we’re halfway through watching a movie that I will highly recommend to anyone who likes Bollywood films. Um, Jawan. J A W A N. Did you ever watch Triple R? Did I get you to watch Triple 

[01:02:47] Tony: I haven’t yet. No, you did recommend it. 

[01:02:51] Cameron: This is in the vein of Triple R. It’s also on Netflix. Jawan. It stars the guy who’s probably the biggest movie star in India, I think, Shah Rukh Khan. [01:03:00] SRK. Uh, he’s 58 now, but still looking good. Great hair, great body, does some great dances, but it’s, it’s, it’s a, it’s a, it’s like classic over the top Bollywood film.

[01:03:16] Cameron: Like, he’s basically, it’s like a Robin Hood story. Modern day Robin Hood story. He’s this. Terrorist, who’s, um, going after corrupt government officials and corrupt businessmen and making them pay billions and billions of dollars to, uh, poor farmers in India and, and, but it’s, but it’s just, it’s like crazy over the top production.

[01:03:45] Cameron: I think it’s the highest grossing film ever to come out of. India, so it’s 2023, uh, production. I mean, like, but you know, then they’ll have a big shootout, massive shootout, and then it’ll break into a massive dance scene [01:04:00] with him leading a thousand dance girls. And the lyrics of the song are like, be a manly man, you know, do what a man should do.

[01:04:08] Cameron: And he’s like. Dancin always doin it, and it’s fantastic. But I keep laughing with Chrissy, like, there’s so many ridiculous plot holes in this thing, and it’s so over the top, that if it was a Hollywood film, I would have turned it off after 20 minutes. I’d be like, ah, this is ridiculous, this is bullshit, I can’t, I can’t deal with this.

[01:04:27] Cameron: But because it’s a Bollywood film, it’s a whole different level of criterion, that I will accept things in a Bollywood film that I would never expect. I’d never accept in a Hollywood film or an Australian film, you know? I don’t know why that is. I don’t know why.

[01:04:42] Tony: Well, it’s got its own genre, hasn’t it? It’s like when you go to the Broadway, you expect show tunes on the stage.

[01:04:48] Tony: It’s, you don’t see them movies or our types of movies, but yeah, it’s just the genre of the thing.

[01:04:54] Cameron: It is, yeah. I mean, there are musicals. I

[01:04:56] Cameron: like a good musical like La La Land or whatever that comes out of Hollywood. But, uh,[01:05:00] 

[01:05:00] Cameron: yeah, no, this is just, just, like, just so… There’s so much joie de vivre in these Bollywood productions. It’s just, they look like they’re having so much fun. You know, crazy over the top action as well as massive dances and romantic stuff.

[01:05:18] Cameron: And the whole, the whole package! Something for everyone. it’s about three hours long and Chrissy and I watch about 20 minutes of TV, about three times a week. You know, that’s, by the time we finish everything and, you know, occasionally we’ll settle down if we’re not too tired and watch half an hour, you know, but it’s, we, we, we don’t have, uh, We don’t have three hours spare in one hit to sit down and watch something very often, but um, Thoroughly enjoying it, giving me a lot of joy, yeah.

[01:05:51] Tony: Well, I watched The Killer

[01:05:52] Tony: last night, the, uh, David Fincher.

[01:05:55] Cameron: The Fassbender one, Hunter told me he [01:06:00] really enjoyed it, did you like it?

[01:06:01] Tony: I liked it. I wouldn’t say I loved it, but I liked it. It’s, um, it’s Fincher, so it’s slow moving

[01:06:06] Tony: and atmospheric. But, um, yeah, I quite enjoyed it. Mmm.

[01:06:13] Cameron: Fincher’s one of my favourite guys. He’s

[01:06:16] Cameron: very rarely let me down, I think. And Fassbender’s a good actor as well, though I haven’t seen him in much of late. But he’s a very solid performer. 

[01:06:26] Tony: and he was good in this too.

[01:06:28] Tony: Yeah.

[01:06:29] Cameron: You ever see Fincher’s The Game?

[01:06:32] Tony: No, I don’t think so. 

[01:06:35] Cameron: Early film, pre Se7en, pre Fight 

[01:06:39] Tony: okay. Yep. 

[01:06:40] Cameron: Sean Penn and Michael Douglas. Michael Douglas, uh, Sean Penn throws a birthday party for him 

[01:06:47] Tony: yeah. Rings a bell. 

[01:06:50] Cameron: I think he g Sean Penn gives Michael Douglas, he’s his big brother, a birthday

[01:06:53] Cameron: present. And it’s some big scam and thing, [01:07:00] he gets kidnapped he thinks, and then the guy takes the cops to the office where he was kidnapped or the place where he was kidnapped and no one’s there, it hasn’t been occupied for six months or something, anyway, yeah, it was good.

[01:07:14] Cameron: That was the first time I think I ever saw a Fincher film and recognized him as a director to pay attention to. It was like 25 years ago or something, late 90s I think, early 90s, mid 90s. Jolly good. Well, that’s 

[01:07:28] Tony: Mm hmm. 

[01:07:29] Cameron: me, Tony. 

[01:07:30] Tony: ASX camp. 

[01:07:32] Cameron: happy share market to you, Tony. And, uh, with a bit of luck,

[01:07:36] Cameron: we’ll be back next week when the market will have, we, we did say last week.

[01:07:41] Cameron: The market had been going up and up and up and we didn’t believe it would last because we were punch drunk and we were right. I, I, I, we didn’t mention this before though that last Tuesday after we recorded, was it Tuesday when the RBA interest rates went up, the market sort of didn’t [01:08:00] take a hit, it just sort of blipped and kept going 

[01:08:02] Tony: Yeah,

[01:08:03] Tony: I’d expected it.

[01:08:04] Cameron: week. Is that what it 

[01:08:06] Tony: Yeah?

[01:08:06] Tony: Oh, definitely. Everyone was tipping a 25 percent hike. 

[01:08:11] Cameron: Right. So it, it sort of just, uh, took a beat.

[01:08:15] Cameron: And then it kept going.

[01:08:17] Tony: Yeah. Yeah. I mean, and perhaps the RBA knew that and didn’t want to surprise the market with not putting interest rates up or putting up, putting them up with a different amount. So I get it. But, um, yeah, no, it was, it. was forecast to happen.

[01:08:31] Cameron: Right. Yeah, But,

[01:08:33] Cameron: I mean, it’s been forecast before and the market always takes a hit.

[01:08:38] Tony: that’s right. I guess there’s a bit of a lead from Wall Street. Um, central banks makes noises one day they won’t need to drop, uh, to raise interest rates going forward. And then they come out the next day and say, well, I just want to expand on that comment. We may

[01:08:51] Tony: have to. So it’s, yeah,

[01:08:54] Cameron: Well, it was back up today, but if I look at like the,

[01:08:57] Cameron: you know, if I look at the last, what, [01:09:00] 12 months? Still down over the last 12 months, but seems to be on a climb since the beginning of November. So we’ll see what happens. 

[01:09:11] Tony: It’s allowed me to, to invest again. I was in cash

[01:09:13] Tony: there for a while and I’m now getting back close to fully invested.

[01:09:17] Cameron: Yeah. I managed to buy a lot of stuff for the light portfolios and my super portfolio. I think I’m nearly fully invested in my super portfolio again for the first time in a long time. It’s been tricky. 

[01:09:30] Tony: I’ve just got an email from Alex.

[01:09:31] Tony: saying sorry, she picked up my request to come on the show.

[01:09:34] Cameron: Bit late, Alex.

[01:09:36] Tony: we’ll get you next week.

[01:09:38] Cameron: Yeah. All right. Thanks, mate. You have a good week. 

[01:09:40] Tony: you too. [01:10:00] [01:11:00] 


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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