TK’s back to talk about: “Santa Claus” rallies, a Pulled pork on Resimac RMC, and using an ATR stop loss.

In our club episode, we’re also talking about how to score N/A on Health Stable or Increasing, and What I Learned About Investing from Darwin by Pulak Prasad, WHC & Thermal Coal, Skill Compensation, Dogs of the Dow, and the proposed Woodside/Santos merger.

Transcription

QAV 702 Club
[00:00:00] Cameron: Welcome
[00:00:09] Cameron: back, QAV, Episode 702, TK back in the booth in uh, sunny Sydney,
[00:00:19] Cameron: TK, how you doing?
[00:00:20] Tony: Good. You’ve had a great rest, thank you.
[00:00:24] Cameron: What have you been doing over the Christmas
[00:00:27] Cameron: New Year’s break, TK?
[00:00:29] Tony: Yeah, it’s been busy. I’ve been down to Cape
[00:00:31] Tony: Schanck, um, did Christmas down there, came back up here, uh, had rugby up on the weekend, we played a couple of rounds of golf. As you can
[00:00:42] Tony: probably see,
[00:00:44] Tony: we’ve spent the last few days moving furniture around at
[00:00:47] Tony: our place because we’re getting ready to, um, to list the Sky Palace.
[00:00:51] Tony: We’re moving on.
[00:00:53] Cameron: Wow, that’s big news! I mean, your market value would be at an all time peak now because of the Sky Palace moniker that I created. So, uh,
[00:01:05] Cameron: I’ll be expecting my commission when you sell it for coming up with the Sky Palace. Is that how your real estate agent is marketed? Just the Sky
[00:01:11] Tony: No, no, no.
[00:01:14] Cameron: they don’t know a good thing when they hear
[00:01:16] Tony: I’ll talk to him about it.
[00:01:18] Cameron: Yeah, tell them I
[00:01:18] Tony: I’ll mention it. Right.
[00:01:20] Cameron: So you’re moving
[00:01:21] Cameron: out of Sydney.
[00:01:23] Tony: That’s the plan. I mean, one step at
[00:01:25] Tony: a time. We, um, need to get a price here
[00:01:28] Tony: so that we can move to Melbourne,
[00:01:31] Tony: settle in down there,
[00:01:33] Tony: put our feet up. Pay the mortgage down, off,
[00:01:37] Tony: that’s it.
[00:01:39] Cameron: Retirement in Melbourne.
[00:01:40] Tony: Yes, live off dividends.
[00:01:44] Cameron: Well, that’s exciting. In Melbourne, obviously, because that’s where Alex
[00:01:48] Cameron: is, your daughter.
[00:01:49] Tony: that’s right. They also tell me there’s a price differential between Sydney and Melbourne, so we’re
[00:01:54] Tony: hoping that
[00:01:54] Tony: we can buy something, you know, there’s probably, no, well, something is
[00:02:01] Tony: good in Melbourne as we’re leaving here, but I think we’ll struggle to find something equivalent
[00:02:06] Tony: to
[00:02:06] Cameron: You’re not gonna get that view.
[00:02:08] Tony: No, exactly.
[00:02:09] Tony: Yeah. But, um, yeah, so
[00:02:12] Tony: Time to move on. Jenny’s, you know, she’s on the board,
[00:02:15] Tony: um, which is barely covering
[00:02:19] Tony: the cost of staying here in terms of body corporate fees and things like
[00:02:22] Tony: that. Uh, so yeah, no, it’s time to, to think about retirement.
[00:02:27] Cameron: And, uh, you lived in
[00:02:29] Cameron: Melbourne for how long, last time? I’d
[00:02:32] Tony: Uh, on and off over 20
[00:02:34] Tony: years.
[00:02:35] Cameron: say you’ve got deep roots in Melbourne, lots of friends.
[00:02:38] Tony: Melbourne feels like home to me, really.
[00:02:39] Cameron: me too.
[00:02:40] Tony: Yeah. Well, move down.
[00:02:43] Cameron: I’m jealous. I can’t, man. I can’t leave my Kung Fu school now. I’m screwed, you know.
[00:02:49] Cameron: Even the Grandmaster’s down there, but he’s
[00:02:51] Tony: I was going to say, how about that? Brisbane’s got the only, Kung Fu school in Australia.
[00:02:55] Cameron: Not the only, just the best! the best Kung Fu school, I could never leave. Maybe when I get my black belt, we might be able to leave and go somewhere.
[00:03:05] Cameron: Well, that’s big news, Tony. Um, big news in the market while you’ve been away. I don’t know if you were paying Much attention, but it had like a, it finished the year 52 week high, give or take, depending on whether you look at my numbers or the financial reviews numbers, almost at an all time high by, by the end of December.
[00:03:29] Cameron: And then I started the new year by just going tits up, um,
[00:03:38] Tony: was a Santa rally and he just had a hangover in January.
[00:03:41] Cameron: Santa rally. Yeah. Um. I mean, as always, I can’t really tell why it was going up and why it
[00:03:50] Cameron: was going down.
[00:03:51] Cameron: It doesn’t seem like much has changed. People think rates are going to go up. They think they’re not going to go up. They think they’re going to go up, goes
[00:03:59] Cameron: backwards and forwards.
[00:04:01] Tony: Yeah. I mean, when the market does this, it’s a bit of a debate of opinion. It’s before Christmas, people were saying, Oh, that’s it for rate rises in the U. S. They’ll be cutting them soon. And bear in mind, people are looking generally nine months ahead. And they make financial decisions on the stock market, at least the big funds do.
[00:04:19] Tony: And then, um, so they started to, to buy into the market
[00:04:24] Tony: and then after Christmas they went, oh,
[00:04:25] Tony: hang on, maybe it’s not going to,
[00:04:28] Tony: interest rates may not come down as quickly,
[00:04:31] Tony: as soon as we thought. So,
[00:04:32] Cameron: They sobered up,
[00:04:33] Tony: they slowed it up, exactly,
[00:04:34] Tony: yes,
[00:04:36] Cameron: Christmas lunches were all done and they sobered up and, You know, we’re like, oh shit, they start thinking about. You know, who they
[00:04:43] Cameron: slept with at the Christmas party, whether or not there
[00:04:46] Cameron: are photos, should they have really done it in
[00:04:49] Cameron: Parliament House, um,
[00:04:51] Tony: I’m just thinking about our Christmas party and it’s not a pleasant thought thinking about who we’d sleep with,
[00:05:01] Cameron: and,
[00:05:02] Tony: wife.
[00:05:03] Cameron: Yeah. of course, of course, goes
[00:05:04] Tony: that’s very pleasant.
[00:05:06] Cameron: Um, and, you know,
[00:05:08] Tony: But also too, I think it’s, it’s also, um, it’s also a thing that there’s what they call window dressing. So at the end of every, at the end of every year in particular, but half and quarter, uh, fund managers buy and sell things to make their returns look better.
[00:05:23] Tony: So it’s not unusual for on the last couple of days for there to be a rally and then it pulls back. So like if they, if they own a shitty stock 24th of December, or.
[00:05:35] Tony: 30th of December, they sell it, their portfolio goes up, market goes up, blah, blah, blah. And then, you know, next, next day, January 1, they buy it back again.
[00:05:46] Cameron: really, does that really happen? Yeah? You
[00:05:49] Tony: Oh, yeah. Window dressing’s a thing. Absolutely. All that, well, I know the questions are going to get asked, right? Like when they rule off their books and they go along to their analyst meetings and the first thing the answer is going to say is, you know, why don’t you have Tesla in your portfolio? So they all buy Tesla, right, before Christmas
[00:06:06] Tony: and the market rises.
[00:06:08] Cameron: Yeah.
[00:06:08] Tony: Yeah.
[00:06:10] Cameron: They probably should have seen that
[00:06:11] Cameron: question coming and bought it a little bit earlier.
[00:06:14] Tony: Oh, some do, I’m sure.
[00:06:16] Cameron: Yeah. Well, our portfolio, when I did the report earlier this week, since inception, 2nd of September 2019, for people paying
[00:06:27] Cameron: attention, um, it, it’s doing a little bit It’s a little bit less than double market since inception, actually, I say since inception, but now I’m using the all time thing for Navexa, which probably goes back to when the first money was spent.
[00:06:41] Cameron: But we figured out that Navexa is smart, uh, good enough to work out cash flows and insight, you know. Cash on hold and work it all out. Anyway, whatever it is, it says, uh, yeah, we’re about just a little under, a little shy of 16 percent per annum over that period, um, versus the, um, STW, the SBDR200, which is about 8.
[00:07:06] Cameron: 8%,
[00:07:07] Cameron: a little bit under 9.
[00:07:09] Tony: And just on that, I mean, I hope I’m not telling tales out of school, but you were talking about one of our listeners
[00:07:14] Tony: who was skeptical of
[00:07:16] Tony: those returns and set up a regression test, and what did they come back with after doing their testing?
[00:07:22] Cameron: Yeah.
[00:07:22] Cameron: I think you said it was about 18 19 percent a year, regression testing it over like, I don’t know, 20 years or something. So, um, yeah, I mean, seems to work, funnily enough. For the financial year, the dummy portfolio
[00:07:36] Cameron: is doing about 1.
[00:07:38] Tony: Funnily enough. Seems to work funnily enough.
[00:07:41] Cameron: enough, yeah, who would have thought?
[00:07:43] Tony: Put that on my tombstones. Huh. Seemed to work funnily enough,
[00:07:47] Cameron: enough.
[00:07:50] Cameron: Hey, could
[00:07:51] Tony: Hey, yeah, how about that?
[00:07:52] Cameron: Yeah. Yeah.
[00:07:54] Tony: it.
[00:07:55] Cameron: Uh, every other financial year, the dummy
[00:07:58] Cameron: portfolio is doing about 1. 6 times better than the SPDR200. 30 day
[00:08:03] Cameron: report. Um, we were doing much better than the STW in the first week of January. By the second week of January, not so much. We’d slipped down. Um, a lot of stocks in the red in the last seven days.
[00:08:17] Cameron: That was when I did this yesterday. So it’s yesterday morning’s probably worse today. Uh, and in the last week, we had to sell Whitehaven Coal and we bought CAA. Now, just, just on that, it’s in the question later on, but I mentioned it, so I might as well bring it up now. I sold our holdings in WHC because Thermal Coal became a sell, I think on the 3rd of January when we checked it, but it turned around.
[00:08:45] Cameron: On the same day, coal did, thermal coal did. If I look at the dailies, it’s back up. And even if I look at the monthly, it’s kind of sort of, I think on or just slightly above the sell line. I haven’t crunched the numbers, but just looking at the graph, that’s where it is. And Whitehaven Coal. Has kept going up, too.
[00:09:07] Cameron: Now, uh, one of our astute listeners in the chat room suggested it might be because the market is looking to when Whitehaven Coal moves to 60 percent
[00:09:17] Cameron: Met Coal with the BHP Mines acquisition.
[00:09:20] Tony: hmm. Mm hmm.
[00:09:22] Cameron: And I thought that was a reasonable suggestion, and The numbers that we have at the moment in our spreadsheet suggest WHC is about 82 percent
[00:09:31] Cameron: thermal and 18
[00:09:33] Cameron: percent metallurgical.
[00:09:36] Cameron: Um, if it takes on this BHP thing, it changes and, but, you know, when we’re doing a commodity analysis on a stock like that, do we look at where it’s commodity breakdown is today or what it might
[00:09:51] Cameron: be? A year from now.
[00:09:54] Tony: Well, I mean, yeah, it’s a good question. I, I always like to use the hard data of today, but the market’s going to look ahead, as you say, um, and I mean, it’s also possible that,
[00:10:08] Tony: you know, um,
[00:10:10] Tony: I looked at the call graph too. It’s kind of getting towards its lows. So
[00:10:14] Tony: it’s also possible that. You know, commodities traders are saying, well, we think coal’s going to turn up from here, and they’re starting to place their bets
[00:10:21] Tony: accordingly.
[00:10:22] Tony: But I think you’re right, or the person in the chat room was right, because if you look at the graph of Whitehaven versus the other coal companies, like Yancoal and New Hope, Whitehaven, I think Yancoal, I think New Hope has also been going up, but not as strongly as Whitehaven. And Whitehaven picked up after it announced that it had bought those, BHP assets.
[00:10:45] Tony:
[00:10:45] Cameron: Uh, well, anyway, so we sold WHC. I said in the chat room that it might be back on the buy list next week if the coal price keeps going
[00:10:54] Tony: Mm hmm. Mm
[00:10:56] Cameron: clever dog, I think it was Nick, said, uh, well, let me know if you buy it, so then I’ll know it’s at its peak and I’ll sell it, or something along the line. Uh, thanks for that, Nick.
[00:11:05] Cameron: But, again, you know, sometimes these sell triggers don’t work out in their favor, but as I pointed out a few times, I ran some analysis on the sell triggers for the light portfolios over the
[00:11:18] Cameron: last year and a half, two years, whatever it was, and it came out about 50
[00:11:22] Cameron: 50. Fifty percent, and not fifty percent of the time, I want to be clear on that, did it work versus not work.
[00:11:29] Cameron: I think it was the economic benefit, uh, or the economic impact. of our sell triggers was pretty much zero from what I could tell. I didn’t look at the actual number of instances where a share continued to go down after we sold it and stayed down or rebounded and if so how long it took to rebound and the cost of money in that period and all those sorts of things but just that you know we economically we seem to be okay by.
[00:11:59] Cameron: Executing our various sell triggers. So, but rationally speaking, roughly half of the time, it’ll work out in our favor. Roughly half of the time, it won’t work out in our favor. We just hope that it works out in our
[00:12:10] Cameron: favor a little bit more often than not, right?
[00:12:13] Tony: Six out of ten. Yeah. Mm
[00:12:15] Cameron: Yeah, at times.
[00:12:16] Tony: Mm
[00:12:19] Cameron: And also I wanted to point out that the data set that I did that analysis on was pretty big. That was four portfolios. So, I’m assessing the impact over, you know, 70 or 80 stocks over that period, uh, sorry, 70, 80 stocks at any given time, so hundreds and hundreds of stocks. If I did the analysis on just one portfolio with a smaller data set, I’m wondering if it would be any different, or if the fact that we’re buying and selling all of those stocks based on the same rules, statistically it should work out roughly the same as doing
[00:12:54] Cameron: it on a small data set, right?
[00:12:57] Tony: Oh, no. Not at all. You could, a small well, you’ve got the problem with small sample sizes. Why, you know, polling of election results can be crap because they don’t call enough people, right?
[00:13:09] Cameron: Right, but we’re using the same rules to decide what we buy and what we
[00:13:13] Cameron: sell and when we buy it and when we sell it. Whether it’s on 20 stocks or on 100 stocks or on 1, 000 stocks, if the same rules are being applied, um, you would expect that you would get a, an average result across
[00:13:31] Cameron: whatever size the set is.
[00:13:32] Cameron: Right.
[00:13:33] Tony: Yeah, but the smaller the sample size, the more volatile and the more the standard deviation from the average
[00:13:38] Tony: result.
[00:13:39] Cameron: But if I looked at four portfolios of a smaller data set, and
[00:13:45] Cameron: then average them out.
[00:13:50] Tony: I think you’re right when you first said you had
[00:13:53] Tony: 80 stocks at any one time and you had a large sample base, yeah.
[00:13:57] Tony: It sounds like it’s a solid result.
[00:13:59] Cameron: I started reading Introduction to Probability over the
[00:14:02] Tony: Ah, good.
[00:14:04] Cameron: I need to, I think I
[00:14:04] Cameron: need to read more. Keep reading.
[00:14:07] Tony: Yeah, don’t just read the introduction. Read the first chapter at least.
[00:14:10] Cameron: Man, I had to use ChatGPT to explain every, every sentence in the
[00:14:14] Cameron: book. It was assuming a deeper knowledge of data sets and terminology
[00:14:20] Cameron: than I
[00:14:20] Cameron: have. So,
[00:14:21] Cameron: had this idea,
[00:14:22] Cameron: Uh, during one of my, uh,
[00:14:24] Cameron: fill in shows. I came across this list, Morgan Housel. Steven Mabb’s mentioned him before in some of his books, but he has this website called 100 Little Ideas, and I’ve just been going through them one at a time and finding them quite interesting.
[00:14:37] Cameron: The first one I did a couple of weeks ago was Depressive Realism. Depressed people have a more accurate view of the world because they’re more realistic about how risky and fragile life is, the opposite of blissfully
[00:14:48] Cameron: unaware.
[00:14:50] Tony: Mm
[00:14:50] Cameron: I thought that was fun. This one is skill compensation. People who are exceptionally good at one thing tend to be exceptionally poor at another.
[00:15:01] Cameron: Can you, how do you feel about that?
[00:15:04] Tony: Oh, I think it’s absolutely true in my case. I’m good at investing in crap at golf.
[00:15:09] Cameron: Thought you were good at golf didn’t you just win a tournament?
[00:15:11] Tony: did, yeah. Well, luckily golf works on the handicap system, so it takes into account how good you are.
[00:15:17] Cameron: The trade off hypothesis. What other things are you
[00:15:19] Tony: Well, I think, uh, let me count the ways.
[00:15:24] Cameron: Lovemaking, uh,
[00:15:26] Tony: how would you know?
[00:15:30] Cameron: people talk.
[00:15:31] Tony: Well, I think it, I think it’s a really good point though. Like it’s like, you see it every day, right? Um, people think that somebody who’s a good athlete or good at sport
[00:15:41] Tony: is going to be good in every aspect of life. And therefore they should be a role model. It’s, they should be, they should have, I think every athlete should have tattooed on their forehead.
[00:15:50] Tony: I am not a role model. It’s just like, yeah.
[00:15:54] Cameron: Well, they’re a role model if you want to be
[00:15:55] Cameron: good at the thing that they’re good at.
[00:15:58] Tony: Well, yeah, but like, they don’t role model that, right? They keep it quiet. They don’t, they don’t tell you, hey, I spent four hours in the gym, and then I spent two hours going for a run, and then I, you know, drank a dozen eggs this morning for breakfast. You don’t hear about that. You just hear about the fact that they were
[00:16:12] Tony: drinking, drinking Coke, you know,
[00:16:15] Cameron: Yeah, well, that’s called
[00:16:16] Tony: not drinking, eating, sniffing
[00:16:18] Tony: Coke,
[00:16:19] Cameron: Oh,
[00:16:19] Tony: at the, at the boxing match or something like
[00:16:21] Cameron: Oh Yeah. That’s spending money, not making money. Yeah. No, I mean, yeah. I look, obviously to begin, to be really good at
[00:16:29] Cameron: something, you have to spend a lot of time and effort focusing
[00:16:33] Cameron: on it. And that’s going to mean you’re not going to be focusing on being good at other things.
[00:16:40] Cameron: Um, and I think we all have like natural, Neurological strengths and weaknesses too.
[00:16:48] Tony: Yeah.
[00:16:49] Cameron: I’m really good at some things and completely useless at other things. And when it, when somebody points out the things that I’m bad at, I’m like, yeah, I’m
[00:16:58] Cameron: really bad at that.
[00:17:00] Tony: And that’s important too, to acknowledge your weaknesses, right?
[00:17:03] Cameron: And also to go, and I, you know, I’m a big believer in, you know, not accepting your weaknesses either.
[00:17:09] Cameron: Say, okay, I’m not good at this. How can I get better at it?
[00:17:12] Cameron: If I’m not good at probability, all right, let me go read some books about it. Or I’m not good at Excel. Let
[00:17:18] Cameron: me do a course, you know, I’m
[00:17:20] Tony: No, that’s great. That’s a great way to
[00:17:22] Cameron: some books on time
[00:17:23] Cameron: management. See if I can learn a few things that’ll help, you know,
[00:17:26] Tony: Yeah, but like,
[00:17:27] Cameron: I, I tend to find a lot of people that are like, Oh yeah, I’m bad at that.
[00:17:30] Cameron: And I’m never going to get better
[00:17:32] Tony: Ah, okay.
[00:17:32] Cameron: approach, which
[00:17:33] Cameron: I think is.
[00:17:35] Cameron: Lazy.
[00:17:36] Tony: It is. Yeah. but
[00:17:37] Tony: it’s like, that’s why the term polymath is so sparingly used because a lot of people aren’t experts in more than
[00:17:44] Tony: one field.
[00:17:45] Cameron: yes.
[00:17:47] Cameron: And a lot of people like me aren’t
[00:17:48] Cameron: experts in any fields, but we
[00:17:51] Tony: Well, competency. Let’s just say competency in one field.
[00:17:54] Cameron: Yeah. Uh,
[00:17:57] Tony: And look, and it’s important as an investor, right? There’s a
[00:17:59] Tony: red flag for me. If I see on the board of a company, especially a young company that’s maybe
[00:18:03] Tony: gonna float, that there’s a sports
[00:18:05] Tony: person or a celebrity on the board, it’s just like, no, no deal.
[00:18:09] Tony: Forget about it.
[00:18:10] Cameron: Yeah.
[00:18:11] Tony: And I’ve seen it happen so many times. X footballer gets a spot on the board. No,
[00:18:15] Cameron: Well, but that’s just so you can get meetings with people, right? Oh, Wally Lewis is gonna be at the meeting. He’s on our board. So, you know, people all take the meeting just so they can meet. The celebrity, right?
[00:18:26] Tony: Yeah.
[00:18:28] Cameron: Not that there aren’t celebrities, sporting celebrities that turn out to be, you got your Greg Normans or whoever, that turn out
[00:18:33] Cameron: to be good businessmen.
[00:18:35] Cameron: I assume Greg Normans
[00:18:36] Tony: Name another one.
[00:18:39] Cameron: Uh, Um,
[00:18:41] Tony: um, uh,
[00:18:43] Cameron: the guy who fought
[00:18:44] Cameron: Ali. George Frazer! He
[00:18:48] Tony: Okay.
[00:18:49] Cameron: was selling, you know, he must’ve
[00:18:50] Cameron: sold millions of those grills.
[00:18:53] Tony: So do you reckon George Fraser said, I’m done with boxing, I gotta get me A grill
[00:18:57] Cameron: Yeah. Yeah. I got to get the grill. Yeah. My boxing is okay, but my real passion, what I’ve always wanted to do is come up with a
[00:19:05] Cameron: fatless grill. Yeah. Okay. Like that, what I’m
[00:19:09] Cameron: saying is, look, there are exceptions to the rule. There are sporting celebrities that are good at business, but more often than
[00:19:15] Cameron: you assume, not.
[00:19:17] Cameron: Same with movie stars
[00:19:18] Tony: Oh, well, you don’t assume anything. They may be good at business, right? They’ve still got to prove themselves in that field as
[00:19:23] Tony: well. And if they spent 10, 000 hours becoming a good sporting person, it’s unlikely they’ve had bandwidth to do much else than, than that.
[00:19:32] Cameron: but, but, you know, getting back to, uh, what I said before, though, I do
[00:19:38] Cameron: think that if you’re exceptionally poor at something and you acknowledge
[00:19:41] Cameron: that, and it’s something that you want to be better
[00:19:44] Cameron: at, we live in the golden age of Whether it’s watch a YouTube, take a course, listen to a podcast, or you know, as you know, lately for me, I sucked at coding and now I have
[00:19:56] Cameron: ChatGPT, then I can write.
[00:19:57] Tony: So you still suck at coding, but ChatGPT, is really good.
[00:20:02] Cameron: That’s true. Yeah, I took Fox, well Chrissy actually, and I took Fox to an Apple, workshop at Apple Chermside a
[00:20:10] Cameron: couple of
[00:20:11] Tony: Oh, they must have loved that.
[00:20:13] Cameron: They did.
[00:20:16] Cameron: Why do you say that?
[00:20:18] Tony: Hey, come on, family. We’re going to an Apple store for a workshop.
[00:20:22] Cameron: Oh no, Fox did like a whole series of Apple workshops. He does, over the holidays, Lego workshops and Apple workshops.
[00:20:28] Cameron: And they were like, build your own emoji
[00:20:31] Cameron: and
[00:20:31] Tony: See, Well, I suck at that stuff. I got no idea.
[00:20:34] Cameron: they, It’s
[00:20:37] Tony: got no idea. I make fun of people who have an idea. That’s even worse.
[00:20:41] Cameron: ha Like people who
[00:20:43] Cameron: buy Bitcoin. Um,
[00:20:46] Tony: They’re gonna do well. Well, they have done well this year. It
[00:20:48] Cameron: yes.
[00:20:49] Tony: has been a good trade because they’re about to
[00:20:52] Tony: approve all these ETFs in the
[00:20:54] Tony: US.
[00:20:55] Cameron: You think that’s going to work out?
[00:20:57] Tony: well, I think so because
[00:20:58] Tony: like, it’s a bit, bit like when a, a stock goes into the index, all the, all the funds have to buy. Yeah. Anyway.
[00:21:05] Cameron: Until somebody works out that? they shouldn’t be and
[00:21:08] Cameron: then they’ll dump them all. In a heartbeat. Right.
[00:21:12] Tony: Well, yeah. I mean, if, if I was ever gonna buy Bitcoin, I’d buy it this month and then sell it in February
[00:21:18] Tony: when the, all the, all the ETFs come on the market
[00:21:20] Tony: and And
[00:21:21] Cameron: are you going to do that? Are
[00:21:22] Tony: No, I wouldn’t even know how to buy
[00:21:24] Tony: Bitcoin ,uh, anyway.
[00:21:28] Cameron: was in the middle of a story then,
[00:21:29] Tony: You were, we were at, you were at Charm. I’ll set the, I’ll set the scene for you.
[00:21:33] Tony: You’re at
[00:21:33] Cameron: Apple coding.
[00:21:34] Tony: can’t to the Apple store.
[00:21:36] Cameron: So what are the, they give the kids iPads and it crazily like
[00:21:41] Cameron: nearly all of them that Fox went
[00:21:42] Cameron: to, it was just him
[00:21:43] Cameron: and one other kid. It’s like a free. Apple workshop
[00:21:47] Cameron: for kids. There’s usually, it’s Fox and one other kid and the other kid’s always one of Fox’s friends. Chrissy’s got two tickets and they’ve gone to this thing and there’s no other kids.
[00:21:57] Tony: Really? I’m Surp. I’m shocked.
[00:22:00] Cameron: no, what? Oh, anyway, the last one that he did that I, that I was sitting next to him was a coding workshop. How to write code for, you know, Fox’s nine and they’re teaching him how to use
[00:22:11] Cameron: Apple, um. Coding technology to write code.
[00:22:14] Cameron: And they’ve got these like coding things for kids. And, and it was super exciting for me because I was saying to the guy taking the course, Hey, uh, I write code these days. Yeah. Yeah. I write code. He goes, really? I go, yeah, yeah. I go, but ChatGPT does all the work. I mean, I just, you know, anyway, you can get good at things or you can get an AI to be good at them for you
[00:22:35] Tony: Actually, I reckon one of the Semial moments in my life is, was when I was at school about grade 11, the school bought a Apple two pc. Like one of the first apples that came out and the teacher, um, one of the teachers set up a computer club which I went along to and they had, I think they had the three books, the three apple twos, they had the three books on how to program in BASIC on an apple and like eventually it got to be my turn to take it home and I just sat up like all night just amazed, oh that’s how you write code to make a cursor go around the screen and that’s and like.
[00:23:14] Tony: I think by the end of the summer holidays, I’d written all these
[00:23:16] Tony: computer programs for video games and stuff in BASIC. It was just like, such an, as you were talking about before about, you know, how your eyes open up when you can do things with
[00:23:25] Tony: code. That was just brilliant.
[00:23:28] Cameron: Yeah. I was always jealous in the 80s of the guys whose families could afford computers or that had access to computers. A friend of mine who lived across the road, um, you know, I remember going
[00:23:39] Cameron: over his house like 83 or something and he showed me they had a modem
[00:23:43] Cameron: coupler for the phone. He’d stick the old Bakelite
[00:23:45] Tony: Ah, ha ha ha
[00:23:46] Cameron: coupler.
[00:23:47] Cameron: I was probably Plastic, but, and you know, the dial in modem and the thing and showing me the basic programs. And I was so jealous of those guys
[00:23:57] Cameron: You know, we, I don’t think we even had a TV at that
[00:23:59] Cameron: stage and these guys had computers and they were doing stuff.
[00:24:02] Tony: you wouldn’t have been jealous of the computer club in 1979 or whatever it was at
[00:24:07] Tony: school. There was, there was, there was me, the cross eyed albino, the tall
[00:24:13] Tony: pimply kid who looks like Moss from the IT department. It was like, there was like four of us.
[00:24:20] Cameron: yeah, no, I, I am jealous. Uh, those, those would have been great times anyway.
[00:24:25] Cameron: Um, there you go. Let’s move on from the
[00:24:27] Tony: Oh, one more thing. So what your talk about
[00:24:30] Tony: these, um, hundred little ideas reminds me of something I read in the book about, um, Paddy Power, the gambling. company. Uh, and it stuck with me for a long time. And, and, uh, the CEO there said he always tried to hire, or he always looked for underconfident overachievers.
[00:24:50] Tony: And I think that’s a great,
[00:24:51] Tony: a great summary of, uh, of, uh, you know, someone who’s really useful, but doesn’t
[00:24:56] Tony: have the profile or the personality to get ahead, but is really doing all the heavy lifting in the company.
[00:25:03] Cameron: Yeah. Well, I think like the under confidence bit to me suggests a realistic awareness of their strengths and weaknesses. You know, they’re
[00:25:13] Cameron: not full of themselves. So they work hard, they’re smart, but they don’t. You
[00:25:17] Cameron: know, overestimate their own abilities.
[00:25:21] Tony: or the abilities of what they’re doing, right? So, how many times have, like, when I was working in corporate, you’d be working on a project, the CEO would come along and go, Wow, that’s fantastic! Hey guys, have you seen this? Let’s roll
[00:25:33] Tony: it out! And I’m like, uh, yeah, this is just like a prototype. You can’t do that yet.
[00:25:40] Cameron: No.
[00:25:40] Tony: I know all the risks and they know, they just see all
[00:25:42] Tony: the upside.
[00:25:43] Cameron: Yeah. Moving right along. Dogs of the Dow, Tony, Steven Mabb. Uh, name checking him
[00:25:51] Cameron: again on
[00:25:51] Tony: Mm hmm.
[00:25:52] Cameron: Sent me an email this
[00:25:53] Cameron: morning. Dogs of the ASX win again in 2003, 8th of January, 2024. Hugh Dive. Huge dive? Huge dive. Atlas, Atlas Funds Management. The last 12 months have been surprisingly good for equity investors, with the ASX200 up 7.
[00:26:09] Cameron: 8 percent or 12. 4 percent including dividends, though this was admirably aided by one of the better Santa Claus rallies in recent years. Indeed, at the end of October 2023, the ASX200 was underwater by 3. 6 percent for the year. Wow. When writing this dog’s piece in January 2023, like many, Atlas had a very cautious outlook for 2023.
[00:26:34] Cameron: 12 months ago, we’d seen a 3 percent rise in the cash rate and looming fixed interest rate cliff that was expected to see retail sales crater and house prices plummet. In November 2022, at their results, Westpac’s forecast of a 3. 85 percent cash rate resulted in their economic models predicting unemployment to rise by 4.
[00:26:55] Cameron: 5%, a 16 percent fall in house prices nationally, and a spike in
[00:27:00] Cameron: bad debts. In 2023,
[00:27:04] Tony: why do, why do economists, why do economists still hold jobs, Ken? Like, seriously.
[00:27:10] Cameron: I was out to lunch with, uh, a guy yesterday who painted my portrait, you know, my godfather portrait, I
[00:27:16] Cameron: finally took delivery of that yesterday, he’s been offering it to me for years and he submitted it to the Archibald and it didn’t get in, but I eventually caught up with him and took it off him. Anyway, we were talking about, uh, Economists predicting stuff and this and that.
[00:27:30] Cameron: And I, I quoted, I said, you know, Tony said, Tony always says, show me a rich economist. If economists knew what they were talking about, they’d all be rich. I
[00:27:38] Tony: I wouldn’t be working for
[00:27:39] Cameron: economist.
[00:27:40] Tony: Exactly. Yeah.
[00:27:41] Cameron: I said the same as with finance journalists as well. Show me a rich finance journalist. Um, anyway, he goes on to say in 2023, consumer discretion is one of the strongest
[00:27:51] Cameron: sectors on the ASX gaining 22.
[00:27:53] Cameron: As always, at this time of the year, investors will be picking through the market’s trash of 2022 to find some treasure to drive portfolio returns over the coming year. Invariably, several bottom performing stocks will confound market expectations and stage remarkable comebacks as we saw in 2023. Anyway, he says the, uh, 2023 dogs had a stellar year up 26 percent, it’s best year since 2016.
[00:28:21] Cameron: People want to know who they were. Star Entertainment. Uh, uh, actually was one of the dogs, he’s still a dog, down 65
[00:28:29] Cameron: percent in 2023. James
[00:28:33] Tony: dog. It’s a pit bull now.
[00:28:34] Tony: It’s a big dog.
[00:28:35] Cameron: James Hardy, was down 52 percent in 2022, up 104 percent in
[00:28:40] Cameron: 2023. Reliance Worldwide, down 51 percent in 2022, up
[00:28:45] Cameron: 50 percent in 2023. Xero, down 50 up 51 percent in 2023.
[00:28:53] Cameron: ARB up 34, Reese up 56, Domino Pizza down 13, Charterhall Group down 1, Seek up 26%, Downer EDI up 20%. So it says the ASX 200 was up 12 percent for the year. And the, um, average of the dogs was 26%. So, continues to do well, the dogs. But you’ve done some regression
[00:29:20] Cameron: testing on the dogs, uh, in the past,
[00:29:21] Tony: Well, I, yeah, I didn’t need to. Well, this time I didn’t need to do regression testing. I just Googled how, how, how down the dog’s gone long term.
[00:29:31] Cameron: Yeah.
[00:29:32] Tony: you’ll see it’s, uh, it’s like. 1 percent underperformed the index over the long term. So, um, to be fair, like last time I had a detailed look at this was about 15 years ago, and it was slightly outperforming the last 10 years.
[00:29:45] Tony: For example, um, this is the US market. Um, Google’s telling me that the. Dow Jones was up 11. 48 percent and the dogs were up 10. 02%. So it’s, you know, that kind of, it seems to, it seems to be index hugging, I guess is my point.
[00:30:05] Tony: I actually like the concept because it’s a natural
[00:30:08] Tony: contrarian system. Um, so I like all, all that about it, but it just, it just doesn’t outperform.
[00:30:16] Tony: That much over time.
[00:30:18] Cameron: Yeah. Oh, funny, I went to search my notes to see when the last time was, we talked about it, and the first note that came up
[00:30:24] Cameron: was thing I took in July of last year. If you’d followed the strategy since 2009, you’d have beaten the Dow Jones in 6 out of those 10 years. That’s not bad at all for such a simple strategy, though the number falls to 5 out of 10 when you compare it to performance of the broader S& P 500 index.
[00:30:43] Cameron: Goes through good patches and bad patches, etc, etc. So, yeah, it underperforms, uh, the two indices slightly more than half the time,
[00:30:53] Cameron: which, you know, not good, but people.
[00:30:56] Tony: toss. Well, it’s a coin toss. And, um,
[00:30:58] Tony: yeah, I mean, it’s, it’s entirely possible if someone starts out with the dogs is down and does some more research that they could outperform the market. Um, and I think that’s what the article was saying is that this guy from Atlas, Hugh Dive, doesn’t just buy the whole 10 stocks.
[00:31:13] Tony: They buy the ones they like or think will outperform.
[00:31:16] Cameron: Right.
[00:31:17] Tony: So it’s a good starting list. Um, but yeah, I mean I’ve always liked the idea of it, it’s just never performed. And I guess that’s the learning for me is whenever you get these articles, especially in the financial press, where they talk about something which is up 25
[00:31:30] Tony: percent over the last 12 months, whatever it is, just Google long term performance of this or that, and uh, and see if it’s worth your while going any further.
[00:31:39] Cameron: Yeah. All right. Well, that’s all my notes, TK.
[00:31:45] Cameron: What do you got?
[00:31:47] Tony: I’ve got a pulled pork on, uh, Actually, I’ve got two things. I’m sorry. I’ll do the pulled pork next. I’ve got a question that was asked last time I was on the show, three weeks ago, uh, from Jim, who was wanting to know about my thoughts on the Woodside Santos merger. So I’ll answer that first, and then I’ll do a pulled pork on Resimac RMC after that.
[00:32:14] Cameron: Okay.
[00:32:15] Tony: Okay, so Woodside Santos merger, uh, announced a month or so ago, um, it’s been, the merger was proposed by Woodside. So Woodside and Santos are two big oil and gas players on the Australian market, in the Australian market. Um, Woodside had proposed a merger. Um, at this stage there’s no further details on that.
[00:32:36] Tony: There’s no let’s do a merger at this price or how many shares do the Santos shareholders get or whatever. So we still don’t have all the information yet. But the idea is that, uh, the merger would create the sixth largest LNG player, natural gas player in the world. Uh, and I guess it makes sense to do one now, apart from all the benefits of merging these two large companies, which would give them, you know, economies of scale and some synergies.
[00:33:04] Tony: Uh, it would give them a better seat at the table when they’re negotiating contracts with their Asian buyers. Cause it’s not one company being played off against the other. It’s one, one company dealing with their, their buyer. So it strengthens their hand. But the other, the other issue is in the background, of course, is a lot of mergers and acquisitions are happening in this space around the world.
[00:33:27] Tony: Uh, so for example, Exxon and Chevron in the last 12 months, both took over large. US LNG providers. So there’s consolidation going on in the industry. It’s, it’s happens in industries. This is kind of the big get big or get out stage of the growth cycle. Um, and it’s, so it’s time to, to merge. I suspect what’s also You know, driving this is that Woodside are picking, uh, not picking Santos, not just because they’re also in Australia and, and they actually own already some, they co jointly own some oil and gas fields already in Australia.
[00:34:02] Tony: Um, if Woodside joins Santos, they get access to Papua New Guinea, which is an emerging market, um, in this, in this space. But I think what must also be in the back. of the minds of both Woodside and Santos is, hey, if there’s a lot of M& A going on and we’re a small fry, we’re a small fish in this pond, how long until we get taken out?
[00:34:25] Tony: So, by becoming the sixth player, that lessens that happening. Doesn’t say it won’t happen, but it does lessen it. Um, but there’s an awful lot to watch out for because none of the details about how the merger will work have been released yet. Uh, the obvious one is, you know, watch this space. Someone could actually lob a bid for Santos before this.
[00:34:46] Tony: Um, goes much further and just takes Santos off the table because Woodside are trying to do this as some kind of merger of equals, um, without paying a premium. And that’s one of the problems. I think they’ll have to pay some kind of premium to merge with Santos. Otherwise, why would the Santos shareholders do it?
[00:35:02] Tony: They’re going along reasonably nicely now. Um, something else to watch for is that Santos haven’t agreed to anything yet. And why should they, without knowing a deal? So they may decide that they don’t want to merge and they might start doing. What’s called defensive plays. So they might, um, either take on more debt and buy something or the reverse sell, start selling assets, um, into the market.
[00:35:24] Tony: Sort of the, um, the idea being that, uh, if they have assets, which the market isn’t valuing within Santos, and if they, if they flick them out and demerge them, they get the full value for it, which bulks up the benefit to Santos. Uh, other things which we should take into account, Woodside has just completed the purchase of BHP.
[00:35:44] Tony: Um, Oil Assets, uh, in the last sort of 12 to 18 months. So they’re really on a, on a bit of an M& A spree at the moment. And so if they do get this deal away, that’s two very large deals in two years. And I think there might be some, some stomach upset going forward after having those two bites so quickly.
[00:36:06] Tony: Um, so that’s an issue that people need to think about. Um, So basically I don’t have an opinion yet because, like the Santos board, we don’t know what the deal is. But if I look at the numbers in the buy list, uh, Santos isn’t on the buy list, it was in the past. And it’s technically a hole at the moment, it’s below its QAV score has dropped to 05 because it has been doing reasonably well.
[00:36:33] Tony: It’s market cap is 22 billion, so it’s the smaller of these two players if they merge. And that’s got to be an issue, like, Santos management and directors have to be saying to themselves, well, If we get dealt into this merger, we’re going to be working for Woodside because they’re three times as big as we are.
[00:36:51] Tony: Um, so ego comes into this and human, human sort of self interest comes into this. And so they might, you know, do a few twists and turns to try and either improve the deal or to get out of it and save their jobs. So you can’t discount that. Woodside is on our buy list. There’s a QAV score of 0. 14. Uh, however, it’s all mostly Josephine.
[00:37:13] Tony: So You may not want to buy it just yet. And, you know, I’ve got to say, with all this much going on, you may want to wait and see if they do announce a takeover and what the deal is there as well before you buy. So, um, my opinion on this? I have no opinion at this stage. We’ve got to wait and see what the deal is.
[00:37:32] Tony: If I owned either of these and I don’t, I’d hold them. Um, I think, I think there’s a small chance both or either could be a takeover target, which would see the price go up. I think, I, I, my gut says it would, uh, there won’t be a merger of equals or a nil premium merger that Woodside’s going to have to pay up for Santos.
[00:37:52] Tony: So, that might tip the
[00:37:54] Tony: scales in Santos favour to own Santos. However, As I said, it’s, it’s now off our buy list and Woodside’s
[00:38:01] Tony: on. So, um, yeah, that’s my take on the merger.
[00:38:05] Cameron: Thanks. I’m just, uh, making a note in my, um, buy list notes tab about that. So if either of them pops up on my buy list, I can remember to,
[00:38:17] Cameron: uh, take another look at it.
[00:38:20] Tony: Yeah, we’ll just, I mean,
[00:38:23] Tony: Woodside is almost a Josephine, so chances are by the end of today, it won’t be a buy. Um, if it was, I’d be happy buying it. Um,
[00:38:31] Tony: but it is going to be a situation where we don’t have all the information yet.
[00:38:35] Cameron: Right.
[00:38:35] Tony: Yeah. And Santos is a QAV score of 0. 05. So it’ll take a while for it to come back on the buy list.
[00:38:41] Cameron: Yeah, I
[00:38:43] Cameron: like to have notes in there though, just cause I’ll forget 10
[00:38:46] Tony: Yeah, well,
[00:38:48] Cameron: that we ever talked about.
[00:38:49] Tony: the other thing on Woodside too is it, um, it has bogged up the oil side of its business and the oil price is going
[00:38:54] Tony: down. So I don’t
[00:38:57] Tony: think oil, I think it’s still a majority LNG. So we’re scoring it based on that. But
[00:39:01] Tony: um, yeah, it’s being dragged down a bit by the oil price
[00:39:04] Tony: declining.
[00:39:05] Cameron: Right. Thank you, Tony. Um, you want to do your pulled pork on Resimac?
[00:39:12] Tony: I do
[00:39:14] Cameron: check to see if it’s, uh, in the buy list. What’s the
[00:39:18] Cameron: code?
[00:39:19] Tony: RMC. It’s number one on the buy list of the one
[00:39:21] Cameron: I mean, I mean in my alerts list. Uh,
[00:39:25] Cameron: yeah, no, it’s okay.
[00:39:27] Cameron: You can, you can talk about this one. Go, go for your life.
[00:39:29] Tony: I thought, I thought you’d have it in the light portfolios already because it’s, It’s top of the buy list
[00:39:34] Cameron: It’s in the possible portfolios, the one I fill up when we don’t have actually any cash left to buy anything, or we’ve got two
[00:39:42] Cameron: parcels of something, but I still want to give light
[00:39:45] Cameron: people an option. So yeah, we’ve held it since the 29th of December, and it’s up 8 percent since then in the possible portfolio.
[00:39:53] Tony: Okay. Well, you know, give people warning. I’m going to be a hold it. It’s, uh, I’m about to do a pulled pork on it.
[00:40:00] Cameron: Yeah, you saw the one that happened when you were
[00:40:03] Cameron: away, right?
[00:40:06] Tony: I’ll call lithium.
[00:40:07] Cameron: yeah,
[00:40:08] Tony: I did. But in my defense, I said,
[00:40:11] Tony: Don’t buy it till the price improves. Yeah.
[00:40:15] Cameron: then it crashed.
[00:40:17] Tony: Yeah.
[00:40:17] Cameron: ha ha ha ha ha
[00:40:20] Cameron: Anyway, off you go with
[00:40:22] Tony: Pull Pork Resimac, RMC. So, it’s a non bank mortgage lender. So, what that means is that it doesn’t take deposits. So, in Australia, to be legally called a bank, you’ve got to get approval to take deposits, become an authorized depository. I think it’s deposit receiving company. Anyway, you’ve got to be authorized to take deposits and follow all the rules and regulations for that.
[00:40:47] Tony: But this company doesn’t, but it still lends, still loans mortgages and personal loans and business loans to people. Which means that it tends to play in the In the part of the market where people can’t get loans from the big banks for whatever reason, like they’re a contractor or they’re a small business owner, or they’re credit impaired.
[00:41:08] Tony: They’ve had some credit problems. So this company basically uses brokers to sell their mortgages. It also has an online. Business, which it uses to, um, to also market their securities or the, sorry, their loans. And then what it does is it, it pulls all the mortgage loans over a period, uh, rolls them all up, gets them rated, and then puts out what’s called an, um, a mortgage backed security.
[00:41:37] Tony: It’s a bit like a bond. To the market. So people who want a guaranteed income will go into the market and buy these securities and I’ll get a guaranteed coupon value from RMC, which will be less than what the mortgage is. Mortgagee has to pay them for the mortgage loan that they’ve linked up, and then RMC takes the gap, the margin between those two numbers.
[00:42:04] Tony: So that’s, that’s their business model, and I’ll come back to it in a little while. Now, the company’s been around for a long time, and they claim they’ve issued 45 billion worth of mortgage backed securities since 1987. They claim More than 50, 000 customers and 13 billion in home loans at the moment. Uh, so, as I said, they, they lend to people who find it difficult to get loans from the major banks.
[00:42:33] Tony: They do, from time to time, actually also lend to compete with the major banks. That’s called prime lending. But their bread and butter is the self employed. And they charge a higher rate to those customers to take into account the bigger chance of default. Uh, but they, they, you know, borrow for less than that in the, um, in the mortgage backed securities market.
[00:42:57] Tony: So they get a margin. Uh, they operate in New Zealand as well as Australia. Um, and they also operate a couple of different brands. So Resimax is their main one, but they also have homeloans. com. au, which sells online. They also have an asset finance business offering business loans, car loans, personal loans, and equipment financing.
[00:43:16] Tony: So think of it, think of it being a bank in the traditional sense, but doesn’t have deposits. Um, the securitization model though, I think is interesting and I should, should call it out. Uh, Because, you know, if we go back to GFC times, uh, even though they’re not issuing the type of CDOs, the collateralized debt obligation that, that caused the problems with the GFC, they are issuing something similar, which is to roll up mortgages, get them rated, and then issue them into the, into that same sort of market.
[00:43:51] Tony: Not saying there’s anything wrong with what they do. It’s worked for them for a long time, so I have confidence in what they do. However, if that market dries up for whatever reason, um, because of something other, something else that’s going on, or there’s another, you know, GFC Mark 2 in that market coming along, um, then they’ll have difficulty raising funds to be able to issue mortgages.
[00:44:15] Tony: They, they did come through the GFC, they did come through Covid. So they, they do know how to handle these kinds of, uh, markets in, in difficult times. But their share prices did take a hit in both, both those kinds of, uh, uh, the, both those times. So there will be issues for them, um, getting to the numbers.
[00:44:36] Tony: The ADT for this stock is only 48, 000, so it’s not large, it’ll suit people who have smaller portfolios. The price I’m doing the analysis at is 1. 15, which is greater than consensus target. We don’t often see that, but it is in this case, so scores a zero, or gets a cross for us on that, scores a zero. Yield on the company is rather good, 6.
[00:45:01] Tony: 96, which is above the average for mortgages, so, uh, gets a Click for that. Interestingly enough, Stock Doctor financial health is unknown. So Stock Doctor, their financial health model can have Difficulties with some kinds of finance companies, especially ones that operate in this kind of market, because it doesn’t have the normal sort of business model that they’re used to rating, doesn’t have a sort of coffee shop model, if you, if you like, and, and I think That will become apparent when I go a bit further into the numbers.
[00:45:34] Tony: So, uh, can’t score it for financial health. ROE is pretty good, 16. 75. PE is 98, but not the lowest. So we can’t score it for that. Now we get to operating cashflow. So the PropCaf that we calculate for this company is 0. 23. So the price to operating cashflow is 0. 23 times. Um, but in this case, operating cashflow is a bit more like sales.
[00:46:00] Tony: So it’s more like. Basically, operating cash flow for this company is the income from loaning people mortgages, which is fine, which is only one side of the equation, though, because the financing cash flows has the coupons that they have to pay the people who take out these retail mortgage asset backed securities.
[00:46:21] Tony: So, um, PropCaf on an operating cash flow basis for the company is 0. 23 times, but if I add back or I subtract the financing cash flows, uh, the PropCaf goes up to three times. So it’s still really low, but, you know, it just highlights that the sort of accounting standards for a company like this are a little bit different to, um, a normal industrial type company.
[00:46:46] Tony: Uh, Price, as I said, was 1. 15. It’s greater than IV1, which is 0. 85. Less than IV2, which is 1. 21. So scores 1 for that. Um, net equity per share is 1. 04, so its share price is above that, but book plus 35, so share price is below that. So on our sort of heat map valuation, it’s getting a 2 out of 4, which is not bad.
[00:47:14] Tony: Um, Interestingly enough, the forecast growth for this company is minus 24 percent for EPS. So we’re giving it a minus one for that. Uh, I’m sort of covering some of the risks now for this company now rather than at the end, but they did call out in their annual report that this year has been tough for them.
[00:47:34] Tony: 2023 has been tough for them, uh, for two reasons. Um, one, because housing starts have been low. All the sort of COVID problems that we had with supply chain, et cetera, and the lack of immigrants for a couple of years there during COVID, you know, slowed down the housing commencements, which means less mortgages, which has hurt this business.
[00:48:00] Tony: But also what’s going on is there’s been a mortgage war. Amongst the major banks in the last 12 months and ever since the Hayne Royal Commission, the major banks are basically just mortgage banks now, or do they take deposits, but they’ve all sold off their insurance businesses and their wealth management arms and so they’re left basically just with lending people money for housing.
[00:48:22] Tony: There’s some personal loans and credit cards, etc. But that’s basically the bread and butter of Resimac. So I expect, you know, that Resimac may face some stiffer competition. Um, I don’t know how long it’ll be before these big, you know, Goliaths in the market, you know, I think Resimac has about a 450 million market cap and what’s come back now over, getting up towards 100 billion.
[00:48:47] Tony: So there’s a huge disparity there. Um, might be 75. Billion from memory. Um, so one of two things is going to happen. Either the banks will progressively move up the risk ladder and say, okay, we’ll start lending money to people who are self employed or, um, you know, haven’t been able to get our prime tier loans, or what may happen is one of the banks will just go, hey, That’s it.
[00:49:13] Tony: Let’s not build, let’s buy it, and they buy Resimac, um, and bolt that on to their own business. Subject to ACCC saying it’s, um, doesn’t, you know, um, doesn’t, uh, reduce competition in the market, but I think it’s a watchless space, and I think it’s fair to say that Resimac may find, may get stiffer competition for, um, from, um, from, uh, the major banks going forward.
[00:49:39] Tony: Um, Going through the numbers further, uh, there’s, there’s no owner founder. However, a guy called Duncan Saville owns 63. 5 percent of the company. So, and I’m not sure whether it’s him directly or through his fund. He chairs a company called ICM, which is a, a large fund manager. Uh, so as we’ve said before with, with companies that have this situation, we still score them because there’s someone on the, on the, on the.
[00:50:06] Tony: The board with huge investment experience, but it’s not the owner founder. So it swings and roundabouts, I guess. I think it is beneficial to a company to have someone with this kind of skin in the game who was also, you know, really experienced at investing around the world. So I’m happy to have it as a one in the checklist for that.
[00:50:26] Tony: Um, it’s a new three point trend line up to instance, the last result. So it scores for that. And it has been increasing equity consistently. And as I said before, um, you know, that would probably cover, if not the COVID period, the immediate past COVID period, immediate post COVID period. And so, um, it’s good that the company can grow equity during those kinds of down times as well.
[00:50:48] Tony: Um, even though people, you know, uh, even though it may have had problems. with funding during that time. Anyway, all up quality score is 67%. The QAV score is 2. 92, which pops it on the top of our list. But if I rather than use PropCaf, if I use, uh, operating cashflow, less financing cashflow, uh, it drops the score.
[00:51:11] Tony: The QAV score drops down to 0. 22, which is still high on our list, but not the top of the list. So I’m just highlighting that. To people that sometimes, you know, the PropCaf isn’t the, isn’t the, uh, universal measure and we need to just dig a bit deeper, but it still scores well for us. Um, in terms of other risks, uh, you know, I spoke about the, the major banks.
[00:51:35] Tony: Um, the, the Mortgage War could continue. I mean, the Mortgage War this year has been caused by two things. One, mainly because a NZ, um, have been going after market share because they’re still trying to convince the a c that they should buy the Suncorp banking arm. And their key argument is that, uh, the market will be steeply competitive.
[00:51:57] Tony: If they soak up Suncorp as it is now, so it’s trying to prove that the big banks can be competitive, um, which has meant undercutting the other, undercutting the rates in the market. But the second thing, which is also there, of course, is that people are coming off their 2 percent fixed loans taken out during COVID.
[00:52:14] Tony: And, um, You know, the banks have been fighting each other to rewrite those loans at higher rates. So it’s been a very competitive market. Um, both of those two things will probably finish in 2024 if they haven’t already. So the mortgage rates might normalize or the mortgage market might normalize, but there’s no, there’s no, um, necessary reason for that to happen.
[00:52:38] Tony: Um, so Resimac may find stiff competition and they call that in the annual report that they didn’t write much in the way of prime loans. last year because the banks were so competitive. But when the banks are fat and lazy and the market settles down, then Resimac do go into that prime market as well and compete with them.
[00:52:58] Tony: So that’s going to be choppy for them. Uh, what else can I say? Uh, yeah, no, I think that’s probably it. The business model I think is, is always going to have issues. Um, it, look, they’ve been managing it for a long time and it’s working for them, but should there be a A tightening or a constraint in that, uh, asset backed securities market, then that that will crimp their ability to originate new mortgages, which will crimp their growth.
[00:53:25] Tony: Um, the last point I made was that the forecast, uh, EPS, um, negative growth of 24 percent may already, I think it probably is already priced into the stock price. It’s come down a lot in the last 12 months. Uh, and that might actually, um, Turnout to be fully priced at least, or we might see it get
[00:53:45] Tony: written back if the mortgage walls abate a bit.
[00:53:49] Tony: And I think the market’s kind of working that out because the stair price has gone for a run over the last month
[00:53:55] Tony: or so.
[00:53:58] Cameron: it’s been dropping, looking at their chart for quite a long time, sort of peaked in February 2021. Um, that’s well
[00:54:08] Cameron: before interest rates started to go up, right?
[00:54:11] Tony: Yeah, but that’s when, was that when housing starts may have started to come off because of COVID?
[00:54:17] Cameron: No idea. I’m wondering if
[00:54:18] Cameron: you picked up anything in your reading on it about
[00:54:21] Tony: no, it didn’t.
[00:54:22] Cameron: coming off since then?
[00:54:23] Tony: I didn’t. All I picked up was the last 12 months in the annual report. They, they mentioned that mortgage, mortgage, um, competition was really
[00:54:29] Tony: strong
[00:54:30] Cameron: Right.
[00:54:31] Tony: and that housing starts were down. So it’s kind of like a perfect
[00:54:34] Tony: storm for their business, but they still did reasonably well, but the share price has
[00:54:37] Tony: come down for sure.
[00:54:39] Cameron: Yeah, quite a lot. Alright. Thank you, Tony. There you go, RMC.
[00:54:45] Marker
[00:54:45] Cameron: Um, hi
[00:54:47] Cameron: Alex!
[00:54:48] Alex: Hello, for the third time.
[00:54:52] Cameron: Hey! Hey, they
[00:54:53] Cameron: don’t know that. Welcome! Happy New
[00:54:55] Tony: Now we can’t use that intro, Alex.
[00:55:02] Cameron: Oh, the magic of making the
[00:55:04] Cameron: sausage is gone. Um,
[00:55:07] Cameron: what news do
[00:55:08] Cameron: you have
[00:55:08] Cameron: for us in 2024,
[00:55:09] Cameron: Alex?
[00:55:10] Alex: News, um, found a new house, which is good So we’re moving next week.
[00:55:18] Cameron: Oh, fantastic!
[00:55:20] Alex: Yep. It’s
[00:55:20] Alex: literally two blocks down the road. And I said, I wanted to move to St Kilda, but we made it two blocks South. So, you know, we’re going in the right direction. Maybe in
[00:55:28] Alex: a couple of years we’ll make it South of the hour. Yeah.
[00:55:32] Cameron: Yeah. Yeah, yeah, Oh, well, that’s, that’s exciting for
[00:55:35] Alex: Yep. I’ve got a full
[00:55:37] Alex: upstairs. Um, it’s kind of like a loft kind of upstairs that will be the studio.
[00:55:41] Alex: So I’m pretty excited
[00:55:42] Cameron: Oh, nice. Fantastic.
[00:55:45] Alex: Yeah.
[00:55:46] Cameron: Well, good luck with all of that.
[00:55:48] Cameron: Do you have a question for the listeners today?
[00:55:51] Alex: Yeah. I thought I’d read Angus’s question if that sounds good.
[00:55:55] Cameron: Yes.
[00:55:55] Alex: so Angus says, Hi Cam and TK. There was a long running thread on the ASA forum, I believe titled, Follow This Trade, spearheaded by investor Bill Dodd. He had a system with some similarities to QAV.
[00:56:08] Alex: He would filter stocks by some fundamentals, then use technicals for entry and exit. I’ve, so he’s attached one of the documents to outline the system. Um, he had a five stock portfolio and was running it as a paper portfolio with claims of similar returns to QAV in backtesting. I think the
[00:56:24] Alex: forum thread was getting too hot for the ASA and they asked him to shut it down
[00:56:27] Alex: due to fears of people taking it as investment advice. I know we have a few options floating around regarding adjustments to Rule 1, but I was wondering if TK has
[00:56:36] Alex: ever come across or trialed an ATR stop loss. I’ve attached the
[00:56:40] Alex: documents for full details of how DOD implemented this. Cheers, Angus.
[00:56:45] Tony: Yeah, well thanks Angus and Alex. Uh, I have because ATR is, stands for Average True Range and that’s what most of the Renco calculators use to create the blocks in a Renco graph.
[00:57:03] Tony: They use the Average True Range to, to give the volatility of a stock and that range is one block, whether it’s red or green.
[00:57:11] Tony: For buy or sell. So yeah, so, um, I haven’t, I haven’t particularly just done an ATR stop loss trial, but I had been interested in Renco for quite a while, uh, and I guess it really is a, it really is an ATR stop loss system because when the block goes from green to red you meant to sell so And it uses ATR to calculate the block size But but just quickly if anyone wants to know about average true range I mean by all my all means google it in investopedia or whatever It’ll have a much better definition of what I can give it is a bit calc it is a bit Um mathematical so I can’t give a like a formula out over the Podcasts, it’d be too hard, but basically it’s looking at volatility and range.
[00:57:56] Tony: So it takes a period of time and it says the stock has gone between these ranges, um, and it adjusts all the time and it adjusts for volatility as well as just the max and min. So runs all that through a mathematical formula and comes up with an average true range. And as long as the stock trades within that range, it’s a.
[00:58:18] Tony: Green in the Renko chart for changes, if it goes above that range, it’s still green, it’s a new block, it gets started. If it goes below that range, it’s a red block and you’re meant to sell. So that’s what an average true range is. It’s a way of measuring the volatility and the period, I guess, of the, of the stock over, over a certain period of time.
[00:58:37] Tony: Um, just an update on that Renko trial. So I’ve done, I’ve started two portfolios back in April of last year. One, which simply added. The Renko graph to the current QAV process. So if you like, it was another step. Don’t buy a stock if it’s Renko red and buy it when it’s green, but sell it when it’s red as well as all the other sells on commodity and three point trend lines and rule ones, etc.
[00:59:05] Tony: I’ve stopped that now because it’s underperformed. Um, last time I looked at, I think I stopped it. It was about minus 10 percent compared to the SDW over that time period, which is up about 4 or 5%, I think. So, it wasn’t worth continuing. It was a headache to do because it was an extra step in the process.
[00:59:23] Tony: And I was always getting alerts from Stock Doctor to say, this thing’s rule one, or it’s a three point trend line sell, or it’s a Renko red. Um, plus it was difficult to actually set up alerts for Renko. There’s no alert in Stock Doctor for it. You’ve got to just say, at, you’ve got to sort of eyeball it and say, at this price, I think it’ll go back to being a Renco Red, and then put a stock alert in for that.
[00:59:46] Tony: So, you might get an alert to say it’s Renco Red, you uncheck the graph, and it wasn’t, because the periodicity, the ATR had changed the The value on the block. So, um, yeah, anyway, I’ve stopped doing that. I have continued with the Renko only trial. So I did another trial portfolio, which replaced our sells and, um, sentiment buys.
[01:00:12] Tony: So not using three point trend line charts, not using commodity charts and not using rule ones, but just Renko charts. And that’s doing. Still not beating the STW, but it’s closer. So it’s currently sitting at minus 4 percent since April last year and versus the STW, which I’ve got down here in my notes is 2%, but it might be a little bit more than that.
[01:00:32] Tony: Now, since last time I checked, um, so I’ll persist with that and see, but, uh, you know, just with all of these kinds of momentum indicators, uh, I’m not going to dismiss them because I think there’s a lot of merit in them. I think there’s always merit in checking sentiment when you’re buying and selling. Um, but I had found with moving averages in particular, that the three point trend lines gave me a crisper earlier.
[01:00:59] Tony: Buy and sell signal than these things, which, which, um, tend to take, they take a time period before they establish whether it’s a buy or sell, and that can slow down the process a little bit. So, yeah, that’s, that’s my summary, Angus. I’ll keep trialing Renco. Um, it isn’t working at the moment, and Renco uses ATR,
[01:01:17] Tony: so I don’t think it’s going to be a replacement for what we do.
[01:01:22] Cameron: Do you know anything about the guy who came up with
[01:01:24] Cameron: ATR?
[01:01:27] Tony: Uh, no. Do you?
[01:01:30] Cameron: Yeah, I do. His name was Wells Wilder, Jr. John Wells Wilder, Jr. He was an American real estate developer, engineer, and is called the father of technical analysis, or something like that, or for certain technical indicators. Anyway, only died a couple of years ago, 2021, aged 85, in Christchurch, New Zealand, where he and his wife had moved to.
[01:01:55] Cameron: But I read up a little bit. Uh, on him when I was learning about ATF and got these quotes from him, which I thought I’d read out. Good quotes. Letting your emotions override your plan or
[01:02:07] Cameron: system is the biggest cause of failure.
[01:02:09] Tony: Mm hmm.
[01:02:11] Cameron: Second one was some traders are born with an innate discipline. Most have to learn it the hard way.
[01:02:17] Tony: Yep. That’s true.
[01:02:20] Cameron: And the third was, if you can’t deal with emotion, get out of trading.
[01:02:25] Tony: Three great quotes.
[01:02:27] Cameron: Aren’t they great?
[01:02:28] Tony: Yeah. 100 percent
[01:02:29] Tony: agree.
[01:02:30] Cameron: Yeah. Although, I mean, I don’t know. I think the system,
[01:02:35] Cameron: um, helps deal with emotions. Like,
[01:02:37] Tony: Yeah. that’s the
[01:02:38] Tony: point.
[01:02:38] Cameron: a system.
[01:02:39] Tony: Yeah. Yeah. So yeah, so I’m not dismissing Renka, I’m not dismissing
[01:02:43] Tony: ATR, um, just doesn’t seem to perform as well as what we do now.
[01:02:48] Cameron: Bill Dodd, the guy he was talking about. You ever heard of Bill Dodd
[01:02:52] Tony: I have not. No.
[01:02:54] Cameron: Not related to, uh, David Dodd
[01:02:57] Cameron: as far as I can tell of Graham and Doddsville.
[01:03:00] Tony: Yeah, okay.
[01:03:01] Cameron: I, when I first saw the email, I was like, have we heard of Bill Dodd? And he is got a similar similarities to QAV. Well, duh. And
[01:03:10] Cameron: then I found out not the same guy.
[01:03:13] Tony: Yeah, and look, I think that’s a great, if people want to follow Bill Dodd, look into it, by all means. Um, I think, I think all these systems Um, that have been back tested, that are fairly rigorous
[01:03:23] Tony: and provide you a way of trading and emotionally are worth investigating. For sure. Yeah.
[01:03:29] Cameron: And let us know, uh, what you find.
[01:03:32] Tony: Or even just take bits and pieces from it, let
[01:03:33] Tony: us know.
[01:03:36] Cameron: So a lot of mathematics you said in, um, ATF, ATR, Tony, is that
[01:03:43] Cameron: ATR, is that something we should get Alex to comment on?
[01:03:45] Tony: Ha ha. Ha ha. ha. Ha
[01:03:48] Cameron: You want to explain it to us? Uh,
[01:03:50] Tony: ha. Ha ha. No, I was, I was, I was inviting Alex to talk about her. Was it your grade 12? Probabilities, Maths, Project we worked on?
[01:04:04] Alex: Yeah,
[01:04:04] Tony: Al, it was a grade 11, I can’t remember.
[01:04:06] Alex: uh, I think it was 12, but it was IB, so it was over two
[01:04:09] Alex: years. So it was over two years. I still don’t remember anything about it
[01:04:15] Alex: or how the maths worked, but
[01:04:17] Alex: um, I remember enjoying talking with you about it. That’s the
[01:04:22] Tony: Well, yeah, well, we, um, we downloaded a lot of, um, horse form, didn’t we? And worked out the probabilities of different things predicting the result.
[01:04:32] Alex: First foray into Excel as well.
[01:04:36] Alex: Who would have known?
[01:04:36] Tony: we looked at things like, um, the strike rate percentage, if
[01:04:39] Tony: I recall, and tried to work out whether a horse with the best strike rate percentage in a
[01:04:43] Tony: race would win more often than the average. That’s
[01:04:47] Cameron: has spent every weekend down at the
[01:04:48] Cameron: track.
[01:04:51] Tony: Amazingly, she hasn’t, but her father has.
[01:04:54] Cameron: That’s why she has to move. The bookies are chasing her, she’s on the lam, she’s having
[01:04:59] Cameron: to run from her, uh, gambling debts.
[01:05:02] Alex: Keeping a low profile.
[01:05:06] Tony: She’s moving house again because of it.
[01:05:08] Cameron: Gave up a, yes, that’s what I just said. Gave up a career in mathematics, uh, to pursue art, just to change her
[01:05:14] Cameron: identity, so she couldn’t be traced.
[01:05:16] Tony: Yeah,
[01:05:17] Cameron: Any follow up questions on, uh, ATR, Alex, or J. Wells Wilder Jr.? J W W J, yeah, J W W J, like, what a great name, right?
[01:05:29] Alex: Pretty
[01:05:30] Cameron: Not
[01:05:30] Cameron: related to Gene Wilder either, as far as I can tell.
[01:05:33] Tony: all to our horse, which is now called Wilder. We have a new two year old horse called Wilder.
[01:05:38] Cameron: There you go. What are
[01:05:38] Cameron: its technical indicators like? Good.
[01:05:41] Tony: Uh, no, pretty crappy. Average for our horse. Regress to the mean for our horse. Ha ha ha ha ha ha.
[01:05:48] Cameron: What’s your rule one on a horse like
[01:05:49] Cameron: that?
[01:05:50] Tony: Dog meat. ha. Ha ha
[01:05:52] Cameron: Loses 10
[01:05:53] Tony: ha ha ha ha ha. Yeah, go on.
[01:05:56] Tony: Yeah, no, there are rules
[01:05:57] Tony: to get out. you gotta give them one or two preps and then out. They cost too much. Yeah.
[01:06:01] Cameron: like that with my wives. Uh, Alex, uh, have a good week, Alex.
[01:06:08] Cameron: Thanks for coming on. Talk to you next
[01:06:10] Cameron: week.
[01:06:10] Alex: See you later. Bye, See
[01:06:13] Tony: honey.
[01:06:13] Cameron: Well, what’s next on the question list? Jordan. Oh, you love these questions about, uh, scoring things in the buy list, Tony. I know they’re your favourite sorts of questions.
[01:06:24] Tony: next.
[01:06:25] Cameron: I said to Jordan,
[01:06:27] Cameron: I’ll ask, but he’s gonna yell at me. But
[01:06:29] Tony: I’m not going to yet. Okay. so,
[01:06:31] Cameron: bullet.
[01:06:33] Tony: so,
[01:06:34] Cameron: So here’s the question. Jordan, being eagle eyes, uh, says that, um, there’s a bit of
[01:06:42] Cameron: difference between how we’re scoring things in the buy list each week and
[01:06:46] Cameron: what it says in the Bible. Um, and he’s talking about health, stable or increasing. He says, the Bible says that increasing is a two, stable’s a one, deteriorating is a negative one.
[01:06:58] Cameron: Anything else is zero. Um, I looked in the Bible, does seem to say that, um, but he said in our, well, I said in our check sheet. We’re scoring it differently. We’re doing Daddy 1, Recovering 2, Deteriorating, Minus 1, and NA nothing, like, like, uh, zero score. We’re not penalizing it for something else. So, and I went back and looked at the book that we’ve been working on and it says zero as well,
[01:07:32] Cameron: um, but not a nothing, so I’m confused.
[01:07:35] Tony: Okay, so can I just confirm, we’re talking about whether, so the Bible says anything else
[01:07:42] Tony: is a zero, but the coding in the Excel checklist says anything else is a blank. Okay. Two, two sets of clubs.
[01:07:50] Cameron: to. Hey, you know, Christians fought about
[01:07:56] Cameron: non stuff like this for centuries, Tony.
[01:07:59] Tony: And Excel will treat a zero
[01:08:01] Cameron: slanty
[01:08:03] Cameron: brown hair? Like, nations went to war for centuries over these things. Don’t joke. This is serious
[01:08:09] Cameron: stuff. This could This
[01:08:11] Cameron: could have a 0. 00002
[01:08:15] Cameron: impact on the QAV score.
[01:08:17] Tony: I don’t think it’ll have any
[01:08:18] Tony: impact, because doesn’t Excel treat a zero on the blank the same way? It’s just going to add zero
[01:08:22] Tony: to the score.
[01:08:24] Cameron: Is it? No! No, because No, no, no, no, but Well, no, because when we’re summing up our scores to get the quality score from which the QAV score is derived, um, if there’s a blank, it’ll look like
[01:08:43] Cameron: it’s not summable. So, if you
[01:08:46] Tony: I see. Okay.
[01:08:47] Cameron: Five scores and
[01:08:48] Cameron: one’s a blank, it’ll say four out of four instead of four
[01:08:50] Cameron: out of five, which will
[01:08:53] Tony: I hadn’t thought of that.
[01:08:54] Tony: No, you’re right. Yep. I don’t care. Which way do you want to go? I don’t care. Look, I, I think, I think start a war. I’ll get the popcorn
[01:09:02] Tony: and we’ll let the strongest decide whether it’s going to be a zero or a
[01:09:05] Tony: blank. Okay.
[01:09:06] Cameron: out well for Alexander the
[01:09:07] Cameron: Great’s generals. Yeah,
[01:09:10] Tony: Tell me what to do. I don’t mind. Change the Bible. Yeah. Leave
[01:09:14] Cameron: Change the, Bible.
[01:09:15] Tony: Excel’s going to be harder to change. Yeah.
[01:09:18] Cameron: Good pick up, Jordan. Thanks for starting a war. You can put that on your, uh, CV. Started a war. I better make a note to do that before I forget. Uh, do do do do do, Jim. Uh, just wanted to tell us about a good book that he read. What I Learned About Investing From Darwin by Pulak Prasad. He said, uh, many of the thoughts expressed align with TKs. You ever come across
[01:09:46] Cameron: Pulak Prasad, Tony?
[01:09:48] Tony: I have not, no. I’ll get a copy and have a read.
[01:09:52] Cameron: There you
[01:09:52] Tony: I looked it up when I got this, when I got your notes this morning, and I haven’t read it, um, and I, at first when I saw it, I thought he may have been talking about evolutionary growth algorithms, which were a thing 20 years ago or so. But he’s not, he’s talking about, you know, lessons from biology and evolution, which is probably just as powerful.
[01:10:15] Tony: But yeah, I went down the rabbit hole on EGAs, on evolutionary growth algorithms when they came out 15 or so years ago. Um, couldn’t adapt it to my investing though. Tried to, so, I mean, basically EGAs, um, randomly pick a sample of stocks. So in this case, we’re talking about share investing. You can apply it to almost anything.
[01:10:36] Tony: And there were, there were plenty of examples like in engineering where. And the evolutionary growth algorithm would solve a design problem or fix a, you know, why did the plane crash? It would find the reason for it. And basically what you do is you take a data set, pick a sample, does that sample get you closer or further from what you’re trying to achieve?
[01:10:54] Tony: And then you, you know, replace parts of the sample, pick another sample and it just keeps iterating until you get there. So I tried to adapt that to investing, you know, pick a sample from the ASX that had characteristics which you were looking for. If, you know, the sample didn’t get you close enough to it.
[01:11:10] Tony: Ditch it, get another one, etc. But I could never get the right coding to make it work. And as far as I know, I haven’t heard of anyone who has, so I’m not alone in that. But it’s an interesting, you know, again, interesting area of math to have a look at. And was a big thing, you know, sort of 15 years ago.
[01:11:29] Tony: Everyone was building Databases and data algorithms to use, uh, neural network, neural networking and evolutionary growth algorithms. But I could just never
[01:11:39] Tony: get them to make money for me.
[01:11:41] Cameron: And that’s exactly how generative AI apps are trained, like OpenAI, right? It’s through, uh, coming up with, uh, iterative models on its ability to pick the right next word, and then it gets rewarded if it gets closer to the right word, and punished if it’s
[01:11:59] Cameron: off, and it just runs through millions of models
[01:12:02] Tony: Yeah. It can do it quickly. Yeah.
[01:12:04] Cameron: it can do it.
[01:12:05] Cameron: Speaking, I don’t know if you’ve seen this, but I posted this on Facebook the other day. Um, a company in the US, Future AI, about 24, 48 hours ago, released a
[01:12:15] Cameron: video of their anthropomorphic robot, android y robot. It had learnt how to make a cup of coffee using a pod machine from watching a human do
[01:12:29] Cameron: it. And that’s it.
[01:12:31] Tony: I saw that. Yeah.
[01:12:33] Cameron: coding. Yeah, right. So just a hundred percent AI neural network, self correcting. It spent 10 hours then trying to mimic the human, uh, or get, get the same outcome
[01:12:44] Cameron: as the human, figured out how to do it. And of course, once the computer, once the, the AI has figured out how to, what the perfect model is, it can then download that to
[01:12:53] Cameron: an infinite number of, of robots
[01:12:56] Tony: Can’t, can’t wait to take it to the gun range.
[01:13:00] Cameron: Or golf, you can buy one to
[01:13:02] Cameron: play golf for you.
[01:13:03] Tony: Yeah, right, then I’ll become a caddy professionally.
[01:13:08] Cameron: But that’s amazing. Like when we can just get a robot to watch a human do something and then. It goes,
[01:13:14] Cameron: it goes in the back room for
[01:13:15] Cameron: half a day, comes back out and goes, all right, now how to do it. What’s next? And then it, you know, you download that model into a million worker robots in people’s homes, you know, and they just go around
[01:13:27] Cameron: and kill us all.
[01:13:29] Tony: Yeah. Like driverless cars.
[01:13:32] Cameron: I saw the article I was reading said, uh, I know it was something else, but they were like Cyberdyne Systems and then it was crossed out and put the name of the company. I just worked out how to. Pulak Prasad, by the way, is the founder of Nalanda Capital, a Singapore based firm that invests in listed Indian equities and manages about 5 billion. And, um, according to the Columbia Business School blurb on the book, who published it, the investment profession is in a state of crisis. The vast majority of equity fund managers are a bunch of idiots. No, sorry, that was me. Are unable to beat the market over the long term, which has led to massive outflows from active funds to passive funds.
[01:14:11] Cameron: Where should investors turn in search of a new approach? Pulak Prasad offers a philosophy of patient long term investing based on an unexpected source, evolutionary biology. He draws key lessons from core Darwinian concepts, mixing vivid examples from the natural world with compelling stories of good and bad investing decisions, including his own.
[01:14:32] Cameron: How can bumblebees survival strategies help us accept that we might miss out on Tesla, etc. etc. So, um, there you go. He provides three mantras of investing. Avoid big risks, buy high quality at a fair price, and don’t be
[01:14:49] Cameron: lazy. Be very lazy.
[01:14:52] Tony: Oh, perfect. I love the guy already and I don’t need to read the book now, thank you, that’s great.
[01:15:01] Cameron: You sure this isn’t your brother from another mother in a
[01:15:05] Cameron: Singapore, Tony?
[01:15:07] Cameron: We should reach out to
[01:15:08] Cameron: Pulak Prasad and get him on the show.
[01:15:10] Tony: yeah, except we’re too lazy. Or aren’t you?
[01:15:14] Cameron: You are, but I’m not.
[01:15:16] Tony: No, no, you, are not. You are,
[01:15:17] Cameron: That’s Charlie work,
[01:15:19] Tony: You’re very
[01:15:20] Tony: active.
[01:15:21] Cameron: as they say, and it’s always sunny in Philadelphia. That’s Charlie
[01:15:23] Tony: Ah, okay. I thought you, I thought you?
[01:15:25] Tony: were calling yourself Charlie Munger
[01:15:27] Cameron: Oh, no, the
[01:15:28] Cameron: other Charlie. No, no, The one that eats cat food.
[01:15:34] Cameron: I grew up in India. Poor luck. That’s probably why I
[01:15:36] Cameron: invest in Indian companies. Alright, I will. I’m going to
[01:15:38] Cameron: reach out to him. Thanks for the tip off, Jim. That’s the show. Uh, just after hours now, Tony.
[01:15:44] Cameron: You’ve been on holidays for a few weeks. What have you done?
[01:15:46] Cameron: What have you
[01:15:47] Tony: A lot. Yeah, yeah, a fair bit. So, uh, a couple of good things. I watched Stranger Things season one, which you’ve been getting me to watch for a long time. No,
[01:15:57] Cameron: How have you avoided
[01:15:58] Cameron: that this long, man?
[01:15:59] Tony: Yeah, I know, well, I’m lazy.
[01:16:02] Tony: I got round to watching it, yeah. It was good, I did.
[01:16:05] Cameron: It’s fun.
[01:16:05] Tony: I’ll get round to watching Season 2 in the next few years.
[01:16:09] Cameron: Yeah, well, it declines after
[01:16:11] Tony: Oh, it doesn’t? Okay,
[01:16:13] Cameron: the next couple of seasons aren’t bad, but the last
[01:16:15] Cameron: season was terrible.
[01:16:16] Tony: Okay. A couple of other things, Jenny and I watched The Silo. I don’t know if you’ve seen that. Uh, Sci Fi, it’s a, it’s, it’s like, it’s, I don’t know how to describe it, like it’s, the premise is so skinny, it’s like you, if I tell you what it is, you’ll go, ah, it’s not worth, it’s, it’s about a civilization of like, I think it’s 10, 000 people or 20, 000 people who live in the silo.
[01:16:41] Cameron: Mm hmm.
[01:16:42] Tony: you know, they’re told not to go outside. They have to stay inside. Um, anyway, and, um, so it’s a really thin premise, but gee, it was addictive. It’s a really well made, great cast. Tim Robbins is in it. Um, and, uh, like the, it just. Especially the first two episodes just suck you in and we just had to watch it more and more and more.
[01:17:05] Tony: Um, flags a bit in the middle and it gets good at the end. But, because there’s like this mystery the whole way through, like, so if you do something wrong in the silo, or you choose to, you say, I want to go outside. And there’s this whole judicial process about those words and and they send you outside, right, of the silo and everybody watches outside and the only view they have outside is this sort of barren post apocalyptic world and you’re called a cleaner if you go outside.
[01:17:33] Tony: And they put you into this hazmat suit, sort of tape you in, and then they give you a, uh, a rag, and then they say to you, we’re going to send you outside, but all you have to do is clean the lens, which gives us our view, our feed, from outside, because it keeps getting dirty, you know, from all the post apocalyptic stuff.
[01:17:55] Tony: And so people go outside, even people who say, You know, fuck you, I’m gonna go outside, I’m not gonna clean. They always end up turning around and cleaning the lens.
[01:18:04] Tony: And so that’s the mystery of the show. What happens
[01:18:07] Tony: when they go outside? It takes a season to get
[01:18:09] Tony: there. But it’s, it’s addictive. It’s really good.
[01:18:12] Cameron: Interesting premise.
[01:18:14] Tony: Yeah, so that’s the silo.
[01:18:15] Cameron: runny. Written by Graeme Yost, I see. Or he’s the head of the series who I remember from being the writer of Speed. The original
[01:18:24] Tony: Oh, really?
[01:18:26] Cameron: Which, you gotta Hand it to speed. Like it, A, it turned Keanu Reeves into an action star and B, Dennis Hopper at his all time
[01:18:36] Cameron: best. I loved him at that.
[01:18:38] Cameron: Yeah.
[01:18:39] Tony: Yeah. Good. So there was that and Bookie. Have you seen Bookie yet?
[01:18:45] Cameron: No. What’s bookie?
[01:18:46] Tony: It’s a series. It’s on Foxtel, I think. So I don’t know what streaming service it’s on. Really short. Written by Chuck Lorre, who did Two and a Half Men.
[01:18:56] Cameron: Oh, I’m already out.
[01:18:58] Tony: Charlie Sheen makes a couple of cameos in it. It is, it is the blackest comedy.
[01:19:04] Tony: It’s fantastic. It’s only half an hour an episode. It’s about a bookie, right, in LA. And he’s an ex pro football enforcer, and all the trouble I get into, and it’s hilarious and it’s so well done. Sebastian Manalaro, Manalasco, is the comedian who plays the,
[01:19:25] Tony: yeah, plays the lead.
[01:19:27] Cameron: Right.
[01:19:28] Tony: Can’t recommend it highly enough, it’s so funny.
[01:19:31] Tony: Yeah.
[01:19:32] Cameron: I like Chuck Lorre is, uh, Like a swear word in my house, like all, all
[01:19:38] Cameron: of those shows he’s done in the past, like the,
[01:19:40] Tony: So, well, watch the first episode.
[01:19:42] Cameron: year of TV. Okay.
[01:19:44] Tony: It’s like Mr. Inbetween, but it’s funny. With less violence. Yeah.
[01:19:49] Cameron: Mr. Inbetween, still one of my all time favourite shows and
[01:19:53] Tony: I agree.
[01:19:54] Cameron: greatest last, one of the greatest last scenes in, uh, any, of any,
[01:19:58] Cameron: television series, you know. The conclusion of it, I thought, was just beautifully done. Just, you know. It’ll be one of those ones like Vic Mackey grabbing his gun and walking out of the office that I’ll, I think I’ll remember, it’ll stay with me forever,
[01:20:10] Cameron: yeah.
[01:20:12] Cameron: Alright, what else?
[01:20:13] Tony: Uh, so I’ve got a horse running on Saturday in Indubitably, very hard to pronounce, indubitably
[01:20:20] Cameron: Yeah,
[01:20:21] Tony: Racing and Race two on the Gold Coast. I’m still trying to track down the email. I send it out to people and put it on Facebook. Uh, yeah. Magic Millions Day. This, this is Strange Race. It’s a, it’s, this is an unraced horse, but they have a $500,000 race.
[01:20:35] Tony: on Saturday as part of the Magic Millions Day for unraced horses based on their barrier trials. So we got in on the barrier trial and, um, fingers crossed, be good to kick in the pants to January if we can earn some prize money.
[01:20:49] Tony: Uh, and the last thing I want to talk about is I listened to the Acquired podcast, which is, um, you probably know about it.
[01:20:56] Tony: It used to be IT based. Now it’s more generally investment based. Um, but they had an interview with Charlie Munger, which I
[01:21:02] Tony: listened to And, that sort of. Maybe listen to a couple of other
[01:21:05] Tony: ones. So worth checking out if you haven’t checked it out.
[01:21:09] Cameron: one of his last interviews, I think,
[01:21:10] Tony: it, was, yeah.
[01:21:11] Cameron: like not long before he died?
[01:21:14] Tony: Correct.
[01:21:15] Cameron: And, uh, the, the hosts are investors,
[01:21:18] Cameron: are they? Are they active guys?
[01:21:20] Tony: Yeah, I don’t, I don’t know if they have a fund management business, but they are active guys. Um, and as I said, they move from just, they, they tend to pick out a few companies a year and do a deep dive or a series on them, like Nike or, um, Walmart
[01:21:36] Tony: or Costco, that kind of thing. Yeah. Um, what’s the, what’s the big, um, premium brand company?
[01:21:43] Tony: LVMH, I think it is. Yeah. That’s all the stuff.
[01:21:46] Cameron: Vuitton. Yep.
[01:21:47] Tony: Louis Vuitton, yeah. So yeah, worth
[01:21:50] Tony: listening.
[01:21:50] Cameron: on November, uh, 6th, 2023. They had him on. There you go.
[01:21:58] Tony: yeah, so that’s what I’ve been doing.
[01:22:01] Cameron: Oh, sounds busy, man. Well, uh, Chrissy and I have been obsessed with Bollywood, uh, still. Like, most of our TV watching has been Bollywood films.
[01:22:12] Cameron: Um. Having so much fun watching all of these Shah Rukh Khan films from the 90s. They’re all absolutely bonkers mad, um, but fun, fun, fantomly entertainment. Lots of singing, lots of dancing, lots of corny storylines that make no sense.
[01:22:29] Cameron: Lots of emotion, um, just, we just sit there with big grins on our faces. Like, these films are so ridiculously bonkers. Um, you have to go, what? Why? How is this guy? It’s like Tommy Wiseau film, but with song and dances, songs and dances
[01:22:49] Cameron: every 10 minutes thrown in. Good stuff.
[01:22:52] Tony: So, so I was watching a movie last night called The Erskineville Kings, a very old Australian movie from the 90s.
[01:22:58] Cameron: mm,
[01:22:59] Tony: One of, well, an early Hugh Jackman film, but also with Joel Edgerton in it too. Joel Edgerton in the opening scenes made me think of you because he’s running a video
[01:23:08] Tony: store
[01:23:08] Cameron: mm.
[01:23:09] Tony: he loves Bollywood.
[01:23:10] Tony: So he goes home and he’s got like about, he’s written about six Bollywood Videos and the posters roll up and he said, just what you did.
[01:23:17] Tony: This is bonkers. It’s crazy. You gotta get into it.
[01:23:19] Cameron: And it really is, like the more, we’ve become obsessed with it, um, like, just, it’s, it’s bonkers, it really is. Like if, if a Hollywood film tried to get away with one fraction of what an average Bollywood film, I’d just turn it off, I’d go, well this is stupid. But for some reason
[01:23:41] Cameron: They just get to sell it. I don’t know if it’s a cultural thing or if it’s just like, they’re just having such a good time
[01:23:48] Cameron: that you’re like, Alright, I’m along for the
[01:23:50] Tony: I’m island
[01:23:51] Cameron: Yeah. We just love it so much. Fox loves it. We play the music in the car. We drive around, and it’s, apart from Sparks being our just permanent playlist in the car. Um, Bollywood
[01:24:04] Cameron: soundtracks. We listen, we’re all listen, we can all sing along to Bollywood soundtracks in Hindi. You know, it’s, it’s, it’s, uh, it’s really nuts.
[01:24:13] Cameron: It’s so much fun. Uh, another thing that’s fun is Pete Davidson’s TV
[01:24:18] Cameron: show, Bupkus. Have you caught any of that?
[01:24:21] Tony: I haven’t, I saw it I should check it out.
[01:24:24] Cameron: Like Pete Davidson when he was on SNL, I thought he was quirky, but never really struck me as funny, or that funny, he always looked really uncomfortable. In the film that he
[01:24:33] Cameron: made a few years ago, um,
[01:24:36] Cameron: and this TV series,
[01:24:38] Tony: King of Long Island, wasn’t it.
[01:24:39] Tony: Something.
[01:24:40] Cameron: Staten Island. I think, King of Staten Island, yeah. Where he played, he played a loose Loose version of himself.
[01:24:47] Cameron: And in this TV show, he plays a version of himself,
[01:24:50] Cameron: but it’s got Edie
[01:24:51] Cameron: Falco as his mother, Joe Pesci as his grandfather, Bobby Cannavali is his uncle. It’s just stacked with everybody wants to be part of this produced by Lorne Michaels, but it’s just. It’s, I mean, man, Joe Pesci as his grandfather is worth the price of admission.
[01:25:13] Cameron: But Edie Falco as well, it’s just, just great. And he plays this, you know, he plays himself basically, like a rich guy with his history of drugs and tattoos and flame out celebrity relationships and he’s just Trying to figure out his life and fix it. And he’s getting his tattoos taken off. Cause he, he, Joe Pesci asks him why he’s getting his tattoos removed.
[01:25:38] Cameron: He goes, Oh, you know, I just figure I’m 30 now. I want people to start taking me seriously. Pesci’s like. Listen, you dumb fuck, tattoos aren’t why people don’t take you seriously. He’s just always chain smoking and telling him how it is, you know, Joe Pesci style. I mean, I can’t believe like it took De Niro and Scorsese like five years to get Pesci to.
[01:26:01] Cameron: Be willing to make the Irishman, but he’s now doing this TV show for Pete Davidson. I mean, it’s amazing to me and probably the last thing Peshy will ever do, and you know, that’s sad to think about, but he’s, um, he’s been one of the great dramatic and comedic actors. Like we watched Home Alone one and
[01:26:22] Cameron: two again with Over Christmas with Fox
[01:26:24] Tony: Lethal Weapon
[01:26:25] Cameron: Lethal Weapon films that he did.
[01:26:29] Cameron: Leo Goetz. I mean, just, like, surprisingly good. Guy’s got no acting experience.
[01:26:35] Tony: No, he started off as a singer, wasn’t he? He was in
[01:26:37] Cameron: He was a singer with, with, no, not a boy band, it was like a nightclub act, with
[01:26:42] Cameron: him and the guy from The Sopranos who had Tony Soprano waxed.
[01:26:47] Cameron: Um,
[01:26:49] Tony: yeah.
[01:26:50] Cameron: uh, began with a V,
[01:26:53] Tony: I know who you mean.
[01:26:55] Cameron: blonde, short silver
[01:26:57] Tony: Mmm.
[01:26:58] Cameron: Um,
[01:26:59] Cameron: I gotta look it up now. Who had Tony Soprano whacked?
[01:27:01] Cameron: Frank Vincent played Phil Leotardo.
[01:27:06] Tony: Okay.
[01:27:07] Cameron: So, yeah, Joe Pesci and Phil Leotardo had, like, this nightclub act, and then they both ended up in early Scorsese films. Uh, well, Frank Vincent was in, um, Goodfellas, and, you know, Joe goes back
[01:27:21] Cameron: with him years before that, but they both just started doing, like, low budget, you know, Italian New York films, and anyway, yeah.
[01:27:29] Cameron: So Pesci, love Pesci. And then I’ve been reading Marcus Aurelius a lot. Um, first time I’ve pulled out meditation since I was in my early 20s probably, and I’m just blown away by how great a recipe for living a happy life it is. It aligns with my own, you know, philosophy over the last 30 years. Um, just, it should be.
[01:27:55] Cameron: Mandated reading, I think, for everyone who hits 18, should be like,
[01:28:01] Cameron: Alright, before you can go out into the world, you need
[01:28:03] Tony: Yeah. This is how you grow up.
[01:28:05] Cameron: read Marcus Aurelius five times, you know, and you should be tested on your understanding of Marcus Aurelius version of Stoicism. Like, impressive, impressive
[01:28:15] Cameron: book for anyone to write at any time, let alone guy writing it while he was the emperor of the Roman Empire.
[01:28:24] Tony: Mm hmm.
[01:28:24] Cameron: And be Writing it for himself and, and his last, in his last will and testament, he wanted it to be burned. Uh, he didn’t, it was never meant for public consumption. It was for, it was his meditations to himself to, to, um, remind himself how to be a good emperor. Every day, a good
[01:28:43] Tony: Right. Wow.
[01:28:45] Cameron: was to, hey, think about this dummy, you know, and he beats up on himself a lot and he’s like critical of himself and reminding himself how to live a happy,
[01:28:55] Cameron: productive, you know, uh, life as a, as anyone, let alone being an emperor.
[01:29:01] Cameron: Um, yeah, just
[01:29:03] Cameron: cannot recommend it enough. Really great book.
[01:29:05] Tony: Yeah, I read a book last year called The Obstacle Is The Way, which was a modern retelling of meditations. That’s Really good too.
[01:29:13] Cameron: Oh,
[01:29:14] Cameron: yeah. You mentioned that, I think, at some point. I’ll have to dig that up.
[01:29:18] Tony: hmm.
[01:29:19] Cameron: That’s it. I gotta go to
[01:29:20] Cameron: Kung Fu.
[01:29:21] Tony: All right.
[01:29:22] Cameron: Thank you,
[01:29:23] Tony: Good to chat again. It’s been a
[01:29:24] Tony: while.
[01:29:25] Cameron: Yeah. nice to see your face, man. I’ve missed you. Welcome back to the show.
[01:29:31] Tony: Thank You
[01:29:32] Cameron: Have a good week.
[01:29:33] Tony: too. Bye.
[01:29:34] Cameron: Have a good week,
[01:29:34] Cameron: everybody.
[01:29:36] Tony: Happy ASX.

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