QAV #711 — Business As Usual

QAV 711 Club

[00:00:00] Tony: 3.

[00:00:11] Cameron: Wel­come to QAV episode 711. 711 is kind of a 911 here, had tech­ni­cal issues. Um, this is the 12th of March, 2024, TK. How are you?

[00:00:25] Tony: Good. Good. It’s 2. 2024. So I’ve had half an hour of

[00:00:31] Tony: fun and games.

[00:00:32] Cameron: It’s time to go to the den­tist, 2. 30. Um,

[00:00:35] Tony: ha ha ha

[00:00:37] Cameron: bit of a wild and crazy week on the stock mar­ket, Tony.

[00:00:40] Tony: Ooh, yeah, espe­cial­ly yes­ter­day.

[00:00:42] Cameron: Yeah. For any­one pay­ing atten­tion, it kind of was going uppi­ty uppi­ty up last week, and then Mon­day just crashed back, back to where it was at the begin­ning of the week, real­ly. It’s not like it’s fall­en by that much, you know, in the grand scheme of things.

[00:01:00] Cameron: uh,

[00:01:00] Tony: but it was almost a 2 per­cent drop in a day, which is

[00:01:02] Tony: unusu­al.

[00:01:03] Cameron: yeah. So what hap­pened, uh, to cause that? Did you, uh, make any sense of it?

[00:01:11] Tony: Oh, if you believe what you read, there was, uh, there’s some CPI fig­ures com­ing out in the States tonight, I think. And so traders were tak­ing prof­its in case the num­bers were bad. It’s been a strong, I mean, the US mar­ket’s been far stronger than we, our mar­ket has. So there’s been some prof­it tak­ing in

[00:01:31] Tony: case of uncer­tain­ty.

[00:01:33] Cameron: Right.

[00:01:33] Tony: So we’ll see what hap­pens tomor­row.

[00:01:35] Cameron: Hmm.

[00:01:36] Tony: Hmm,

[00:01:36] Cameron: Well, always, always fun and games. Um, I’ve got a pulled pork request to add, uh, to the list. Um,

[00:01:47] Tony: I was going through the list yes­ter­day. I thought, I bet your cam’s going to ask for that one.

[00:01:51] Cameron: wow, you know me so well,

[00:01:53] Tony: I almost

[00:01:54] Tony: start­ed prep­ping it and I thought, well, it’s got an ADT of about 1, 000. I thought, no,

[00:01:58] Tony: I can’t do

[00:01:59] Tony: that.

[00:01:59] Cameron: Oh, this is LVE, Love Group. Love Group Glob­al. Uh, I had a quick look at it. Bunch of sex toys, I think. Sex toy,

[00:02:09] Tony: no?

[00:02:10] Tony: no, dat­ing app, dat­ing

[00:02:11] Cameron: Oh, is that all? Damn, I want­ed to hear you talk about sex toys for

[00:02:14] Cameron: half an hour. Ha,

[00:02:15] Cameron: ha, ha, ha. Uh, dat­ing app, oh well, yeah, still fun, but maybe not worth it if it’s got that low an ADT. Um, we, I did notice, uh, at some point in the last cou­ple of days, Tony, that TGA, Thorn Group Lim­it­ed, delist­ed at the end of last year.

[00:02:39] Cameron: I could­n’t, I had a look through the notes, I could­n’t see that we talked about that at all. Do you remem­ber us talk­ing about that?

[00:02:45] Tony: Yeah, it was tak­en over from mem­o­ry, was­n’t it?

[00:02:48] Cameron: Yes, a com­pa­ny called Sum­mers Lim­it­ed acquired all of the shares.

[00:02:52] Tony: Right.

[00:02:53] Cameron: Well, they were, they were sort of a bit of a, um, Reg­u­lar on the buy list TGA, I don’t think we bought them very often though, there was some, some issues with them I think, I can’t remem­ber what it was, but they did­n’t real­ly end up. Being bought a great deal, but, uh, yeah, gone.

[00:03:12] Cameron: Part of that thing you’ve been talk­ing about for the last cou­ple of weeks, just M& A activ­i­ty, tak­ing com­pa­nies off the ASX.

[00:03:20] Tony: Includ­ing, we both picked up on this one,

[00:03:23] Tony: VUK.

[00:03:27] Cameron: of drink­ing cham­pagne and our, uh, Face­book group, uh, picked it up. Well, the peo­ple that for some rea­son man­aged to still hold Vir­gin UK, it’s being acquired, share price shot up. 30 per­cent in a day and I did­n’t own it. I had to rule one it around 2. 90 a while back.

[00:03:48] Cameron: So I was furi­ous that I did­n’t hold on. That would have been a good one to have. Con­grat­u­la­tions to every­one that

[00:03:56] Tony: Yes. Yes. Con­grat­u­la­tions.

[00:03:58] Cameron: to it.

[00:04:00] Tony: And that’s what, I mean, it’s what we were talk­ing about last week and the week before, the shrink­ing ASX, and some­one asks, is it good or bad? Well, this is a case where it’s good.

[00:04:07] Cameron: Mm.

[00:04:08] Tony: And prob­a­bly Thorn Group was too. I don’t remem­ber the details, but I think Thorn Group was

[00:04:12] Tony: prob­a­bly tak­en over at a pre­mi­um as well.

[00:04:15] Tony: Both com­pa­nies on the buy list.

[00:04:17] Cameron: Yeah. Yeah. So it’s good if you hold them. Um,

[00:04:21] Tony: Yeah.

[00:04:22] Cameron: did, did you hold v UK last

[00:04:24] Tony: I did­n’t. I had it. I had owned it in the past and I was think­ing about buy­ing it again. A cou­ple of times I had a look at it, though it was a Josephine, so I did­n’t get it when I had mon­ey to spend. Um, but yeah, I’ve always liked it, um, ever since it first came on the buy list a cou­ple of years ago.

[00:04:41] Cameron: Mm, I’ve bought and sold it a bunch of times over the last few years and had to rule one it, I think, on a num­ber of, um, num­ber of, uh, buy­ers. But there you go. So that was a nice win for peo­ple that hold onto it. They’re being tak­en over by who? Exact­ly.

[00:04:58] Tony: uh, the com­pa­ny’s called Nation­wide Build­ing Soci­ety. So the back­ground sto­ry of the Vir­gin UK is it was owned by NAB, Nation­al Aus­tralia Bank, um, many years ago when they expand­ed over­seas. And then when that did­n’t work, they spun off What was called back then the Clydes­dale Bank­ing Group and it rebadged as Vir­gin UK, but and it had a dual list­ing, but most of the most of the share­hold­ers were still Aus­tralian based, some­thing like two thirds, I think, because of the fact that they used to be Nation­al Aus­tralia Bank share­hold­ers.

[00:05:33] Tony: And, uh, Yeah, it’s, it’s, um, it’s been list­ed here, um, list­ed over there and now being tak­en over by a build­ing soci­ety in the UK and bulk­ing, bulk­ing it up with the com­bined, the com­bined net­work of both bank branch­es and tech­nol­o­gy, et cetera.

[00:05:51] Cameron: And pay­ing a mas­sive pre­mi­um in order to grab the shares.

[00:05:54] Tony: Yeah, that’s right.

[00:05:56] Cameron: Well, that’s what hap­pens when you buy shares that we think are under­val­ued. Um, oth­er peo­ple think they’re under­val­ued too some­times. That’s the, that’s sort of part of the plan.

[00:06:10] Cameron: Um, Well, uh, what else have I got in my list of things to talk about?

[00:06:16] Cameron: NWS, um,

[00:06:19] Cameron: some­body, yeah, some­body’s

[00:06:22] Tony: Haha­ha.

[00:06:23] Cameron: atti­tude. Some­body point­ed out, uh, about a month ago that the shares out­stand­ing fig­ure in Stock Doc­tor, that was you, was it? It looked wrong.

[00:06:36] Tony: Because, I saw, actu­al­ly last time this hap­pened I bought them,

[00:06:40] Tony: must have been six months ago with their last results. And then real­ized there was a mis­take in the num­ber of shares out­stand­ing in Stock Doc­tor.

[00:06:46] Cameron: So when you let me know I reached out

[00:06:48] Cameron: to Vic­tor at Stock Doc­tor and asked him to look into it. He said he would and then a month lat­er got back to me and said yeah the num­ber was wrong and they’d fixed it. But any­one using Stock Doc­tor to do their analy­sis on that for the last month would have been get­ting bad, bad num­bers.

[00:07:05] Cameron: So it’s dis­ap­point­ing that it took him that long to fix a data cor­rup­tion

[00:07:10] Tony: Well, espe­cial­ly when it hap­pened last half as

[00:07:12] Tony: well,

[00:07:13] Cameron: Uh,

[00:07:13] Tony: that is bad. You think you’ve, you know? Dyeris­er note or make a

[00:07:17] Tony: code change. So it did­n’t hap­pen again, but it’s a shame to say it did.

[00:07:22] Cameron: Yeah, or, you know, when I point­ed out that it had hap­pened pre­vi­ous­ly and then it hap­pened again, it took them a month to, should have only tak­en them ten min­utes to look into it and fig­ure out it was wrong, I don’t know why it took so long. Uh, there’s a com­pa­ny called, um, IRI, Tony, uh, Inte­grat­ed Research Lim­it­ed, they’re, they were on the buy list, uh, this week.

[00:07:49] Cameron: I near­ly bought them for the dum­my port­fo­lio until I went and read through their announce­ments and I saw this, Syd­ney 6th of March, Inte­grat­ed Research Lim­it­ed today announces that Miss Cathy, Ms. Cathy Astin will resign from the board with effect from the 31st of March 2024. Ms. Astin has been a Direc­tor of Inte­grat­ed Research since April 2022.

[00:08:13] Cameron: Dur­ing her tenure, Ms. Astin served as Chair of the Audit and Risk Com­mit­tee. The Direc­tors have accept­ed Ms. Astin’s res­ig­na­tion with regret. I was like, when the Chair of the Audit and Risk Com­mit­tee sud­den­ly resigns, I’m not sure that’s a good sign. I paint­ed that as a red flag. I know we nor­mal­ly say CEO, CFO, but when your chair of your audit and risk com­mit­tee all of a sud­den, sud­den­ly pulls the pin, it could be noth­ing, it could also be, no, I’m refus­ing to sign off on this audit.

[00:08:48] Cameron: So I decid­ed to leave it alone. What do you think? What would your reac­tion be? Mmm. Mmm.

[00:08:54] Tony: Uh, it’s hard to say. Um, it’s, it’s yeah, I don’t know. I mean, I had a look into it and there’s been three res­ig­na­tions of direc­tors in the last six months. So that’s not a good look. How­ev­er, if you look at the share price, which is, which is Tanked, um, in the recent past. I sus­pect there’s a bit of board renew­al going on.

[00:09:16] Tony: for direc­tors tak­ing respon­si­bil­i­ty for bad per­for­mance, per­haps. So that could also be the rea­son, as could any oth­er rea­son. But yeah, it’s either board renew­al, I think, or there’s some­thing, some­thing wrong,

[00:09:28] Tony: um, with the com­pa­ny to see three going in six months is unusu­al.

[00:09:32] Cameron: Mmm. Well, It’s

[00:09:34] Tony: with a com­pa­ny like this.

[00:09:35] Tony: Like if this was hap­pen­ing to a large cap com­pa­ny, you’d be able to read some sto­ries about it and try and piece togeth­er what was going on, but it’s such a small

[00:09:42] Tony: cap. It’s not get­ting any cov­er­age. So it’s, I don’t know.

[00:09:46] Cameron: Mm. A bit like Fortes­cue Met­als.

[00:09:51] Tony: Well, yeah. Um, yeah, Fortes­cue is like that. I don’t think it had that many board direc­tors resign, but

[00:10:01] Tony: it cer­tain­ly had changes in CFOs and CEOs, which is a bit wor­ry­ing.

[00:10:07] Cameron: And the share price has­n’t been doing too well late­ly at Fortes­cue either. I don’t know how much that’s got to do with Iron Ore or how much it’s

[00:10:14] Tony: Yeah, I think I know

[00:10:15] Tony: prob­a­bly.

[00:10:15] Cameron: Twig­gy. Mm. Uh, well that’s all the news sto­ries I

[00:10:20] Cameron: have for this week. Tony, got any­thing else to talk about that’s tak­en your inter­est? Mm

[00:10:24] Cameron: hmm.

[00:10:25] Tony: I, um, want­ed to fol­low up on some­thing we spoke about last week, uh, and that was you’d done some regres­sion or you did some regres­sion test­ing using the regres­sion tool and had, uh, thought the tool had a bug in it so that it was buy­ing, sor­ry, it was sell­ing stocks when they fell below their sec­ond buy line.

[00:10:46] Tony: Um, and I thought, wow, that’s an inter­est­ing con­cept. And serendip­i­tous and some­times That can lead to great break­throughs in sci­ence. So I actu­al­ly did some regres­sion test­ing myself using our old buy list. And, um, I do a thing, a quick, quick and dirty regres­sion test­ing, which I call the one stock port­fo­lio.

[00:11:06] Tony: So I just buy one stock and fol­low it through for the last four years and trade it, um, and do it with a, like, I do that with two dif­fer­ent lev­els, like a high ADT. Thresh­old to make sure there was­n’t as gear for that. Um, and what I found was in both cas­es, a one stock port­fo­lio lost mon­ey over that time we’ve had buy list.

[00:11:31] Tony: So I went back to August, 2020 and, and run some dum­my port­fo­lios through. Um, so I don’t think. I don’t think that was behind the out­per­for­mance and the regres­sion test­ing, it must be some­thing else. But it was worth look­ing at because I think some­times these kinds of areas can throw up a bit of a left

[00:11:48] Tony: field.

[00:11:49] Tony: Inter­est­ing thing to research, but in this

[00:11:51] Tony: case, it did­n’t go any­where.

[00:11:53] Cameron: hmm. Well, I’m not exact­ly sure that’s in ret­ro­spect hav­ing spo­ken to Matt I’m not sure that’s exact­ly what his sys­tem was doing, um, what it was using is the 3PTL cell trig­ger, but he fixed that. And I ran, uh, anoth­er test this week and the CAGA fell from 25 per­cent back down to 16 per­cent when he fixed the cell trig­ger.

[00:12:24] Cameron: So then I was like, no, no, no, I put it back the way it was.

[00:12:27] Tony: Yeah. But you still think there might be some bugs in that code.

[00:12:32] Cameron: I think there’s a bug in

[00:12:33] Cameron: the buy, uh, line

[00:12:36] Cameron: cal­cu­la­tion now. It’s, well, it’s, it’s not tak­ing into account account, the sec­ond buy line. So it’s buy­ing stuff too ear­ly. If some­thing has become a Josephine, but it’s above the buy line, but below the sec­ond buy line, it’s still buy­ing it, even though

[00:12:51] Tony: Mm hmm.

[00:12:51] Cameron: know, it’s sort of a falling knife, has­n’t re estab­lished

[00:12:53] Cameron: itself.

[00:12:54] Cameron: So we’re going to work on resolv­ing that next. Um, and then we’re going to have a, I think a, It’ll be inter­est­ing to see. Pret­ty, um, good regres­sion test­ing sys­tem, still not real­ly tak­ing into account com­mod­i­ty prices or qual­i­fied audits. I men­tioned to Tony off air that I’ve been spend­ing a bit of time over the last week try­ing to script a way of check­ing for qual­i­fied audits.

[00:13:20] Cameron: Um,

[00:13:21] Tony: Yeah. And if any­one, if any­one out there has a way of, um, or knows of a source of,

[00:13:28] Tony: Annu­al reports, they can let us know too.

[00:13:31] Cameron: Yes, and I’ve already, I’ve tried List­Corp, and I’ve tried ASX,

[00:13:34] Cameron: and, um, I haven’t gone into the Stock Doc­tor route yet for some T’s and C’s rea­sons, but, um, you know, I’m look­ing at a way of try­ing to get a quick, reli­able, script­ed access to it. Annu­al reports so we can then read them, have an AI read them and look for qual­i­fied audit stuff.

[00:13:54] Cameron: It’s turn­ing out to be far hard­er than I thought it would be to get this script­ed, but um, I’m mak­ing slow progress. But yeah, any­way, that’s inter­est­ing that you did that and found that in your test­ing the sell­ing that ear­ly Was, uh, not a good thing. Yeah.

[00:14:13] Tony: gen­er­al­ly, um, was that we were buy­ing on the upswing and then, uh, an upswing is inevitably fol­lowed by a down­swing of some, at some stage, and, uh, If there was like a, so that, so the upswing was form­ing the new H1 for the sec­ond buy line, if it then dropped off, which it often does, and then kicked up again, there’s your H2, and say we’re get­ting a new sec­ond buy line, um, which was then crossed, so if it went sort of above that again and it came back down, so basi­cal­ly noth­ing goes up in a straight line, but there was, if there’s a zigzag, it was sell­ing out real­ly quick­ly, and often­times at a,

[00:14:53] Tony: you know, sort of five or ten per­cent drop on what the pur­chase price had been.

[00:14:59] Cameron: When I did that regres­sion test and then I went and had a look at what was hap­pen­ing, I found a few instances of that, but, um, what­ev­er, for what­ev­er rea­son, it still was deliv­er­ing a 25 per­cent CAGA. So I haven’t quite fig­ured out what it was doing and why yet, but, um, I’ll have to work with Matt on try­ing to iso­late that so we can, um, We can do some more test­ing.

[00:15:23] Cameron: Well,

[00:15:24] Tony: That’s all I had, but I’ve got a pulled pork to do if you want to do that now.

[00:15:27] Cameron: yeah, now. we’ve got a cou­ple of ques­tions. Mmm,

[00:15:29] Tony: Yeah, so my pulled pork isn’t on LVE, which I did have a look at. Actu­al­ly, the oth­er one I had a look at too, which I’m hap­py to do if any­one wants, is Atlas Pearls. Which I know I’ve done a pulled pork on before. And it’s always been a real­ly small ADT stock, but it has, because its share price has tak­en off, the ADT is get­ting big­ger.

[00:15:51] Tony: So I did con­sid­er it. It’s still, still not very large, but inter­est­ing that the busi­ness is doing so well.

[00:15:58] Cameron: hmm,

[00:15:59] Tony: It looks like it’s because of the pearl trade, which imme­di­ate­ly got me think­ing, Oh, it’s a com­mod­i­ty stock. I should go and try and find a five year graph of South Sea Island pearls, or South Sea pearls.

[00:16:13] Tony: But I could­n’t. There are plen­ty of arti­cles about how the pearl mar­ket’s tak­ing off, which has obvi­ous­ly helped Atlas, but

[00:16:19] Tony: I could­n’t find any

[00:16:20] Tony: graphs.

[00:16:21] Cameron: And did you get a sense for what’s dri­ving the pearl mar­ket?

[00:16:24] Tony: No, I did­n’t.

[00:16:25] Cameron: It’s not used in, uh, NVIDIA aren’t using them in their GPUs or any­thing.

[00:16:30] Tony: Not that I

[00:16:31] Tony: could see.

[00:16:31] Cameron: We’re grow­ing AIs inside of, uh, clamshells.

[00:16:35] Tony: Yeah, the only hypoth­e­sis I could get was that, uh, Atlas Pearls had put a lot of effort into mak­ing their, uh, pearls, um, what’s the word I’m look­ing for, uh, clear­er, more con­cen­trat­ed, so they have less impu­ri­ties, and the mar­ket is stronger for that kind of pearl than the one they were pro­duc­ing before. Um, but it still seems like the Pearl mar­ket has huge volatil­i­ty in it.

[00:16:59] Tony: So, uh, Atlas Pearls, even though it’s doing well now, may be

[00:17:04] Tony: sub­ject to volatil­i­ty in the future as well. But yeah, worth a look.

[00:17:07] Tony: Inter­est­ing

[00:17:08] Cameron: to me that in the 21st cen­tu­ry there’s still a mar­ket for some by prod­uct made by a clam.

[00:17:15] Tony: Yeah.

[00:17:16] Cameron: we can make, you know, fake pearls that look just as good, real­ly? I mean, why are we pay­ing crazy mon­ey for real pearls? It’s a

[00:17:27] Tony: Well, it’s, it’s inter­est­ing. Yeah, it’s like dia­monds, but it’s almost like there are some things that we can’t arti­fi­cial­ly recre­ate. Like, go and make ener­gy from the sun like a plant does, using chloro­phyll. Sci­ence still has­n’t cracked that. They can’t do it in the lab. And peo­ple can point to dif­fer­ences in engi­neered arti­fi­cial dia­monds com­pared to the real things.

[00:17:55] Tony: You know, the arti­fi­cial ones have like a very rigid lat­tice­work struc­ture, where­as the real ones don’t. So, yeah, it’s um, I’m not to say that some­one could­n’t grow a dia­mond that had a less rigid struc­ture, but yeah, maybe they can’t do it for the same price you can through min­ing, I don’t know. But I had a look at Atlas Pearls and I thought, geez, the CEO of this com­pa­ny has the best job in the world.

[00:18:18] Tony: I was read­ing through it all and the guy works four days a week, gets paid two or three hun­dred grand, lives in Bali, um, on a beach.

[00:18:28] Tony: All the pro­cess­ing is just done by hand off the beach. It just looks so idyl­lic.

[00:18:34] Cameron: That’s where they, that’s where they do it. It’s off bar­ley. It’s not done

[00:18:37] Cameron: in like fac­to­ries. It’s done

[00:18:39] Tony: No, no, it’s done in the sea. Yeah. Off the beach in Indone­sia. Yeah.

[00:18:46] Cameron: Good job.

[00:18:46] Tony: Any­way, worth look­ing at if you’ve got a small port­fo­lio.

[00:18:51] Cameron: We hold

[00:18:51] Tony: I’m going to do

[00:18:52] Tony: it.

[00:18:52] Cameron: one of the port­fo­lios, Light or the Dum­my or some­thing like that.

[00:18:55] Tony: Well, it must have done well, because

[00:18:56] Tony: It’s, like, I think the share price has tripled in the last year or so.

[00:19:00] Cameron: Yeah, I think it’s up about. It’s 35 per­cent since I got it. It’s, uh, I looked at it this week cause it had, it dropped like 5%, uh, the oth­er day, uh, on the big crash day, but it’s still way, way up since we bought it, which was­n’t that long ago, but yeah, it’s done very well.

[00:19:16] Cameron: Yeah.

[00:19:18] Tony: Any­way, I’m doing a large cap stock today, Bank of Queens­land. And, uh,

[00:19:23] Tony: I have to declare straight away that, uh, Jen­ny’s at a board meet­ing today for the Bank of Queens­land. So,

[00:19:29] Cameron: So we’re get­ting the inside sto­ry.

[00:19:32] Cameron: Just that

[00:19:33] Tony: And she’ll be, but she’ll be, she’ll be pleased to hear that, uh, the stocks are buy.

[00:19:38] Cameron: All

[00:19:38] Tony: as a direct, as a direc­tor, she’s meant, she’s meant to buy some and she’s been hold­ing off wait­ing for it to become a buy.

[00:19:43] Tony: So

[00:19:44] Cameron: Oh, that’s

[00:19:44] Tony: she can tick that box and get some. Um, and I guess I should make it clear that Jen­ny and I, Jen­ny does­n’t know I’m doing this pulled pork, I only decid­ed to do it this morn­ing after she’d left. And, um, So she’s had no input into it or any sort of clear­ance on it. Uh, and I’m not, I don’t think I’m telling any tales out of school.

[00:20:01] Tony: We some­times talk about Bank of Queens­land, but, um, uh, noth­ing. That’s not in the pub­lic domain.

[00:20:07] Cameron: Do you own any?

[00:20:09] Tony: No, I don’t. I may, I may buy some, like I said, Jen­ny has to buy some, so it’s a good time to buy, and it’s a large ADT stock, which cer­tain­ly suits me. Um, and we’ll suit every­one lis­ten­ing. So it’s, um, it’s worth inves­ti­gat­ing.

[00:20:23] Tony: Uh, any­one who does­n’t know, Bank of Queens­land is, as it states on the label, a bank from Queens­land and, uh, has 154 branch­es around Aus­tralia. And it’s a full ser­vice bank, has cred­it cards, a bit of insur­ance, busi­ness bank­ing. Deposits, mort­gages, all the usu­al stuff. A cou­ple of things that have hap­pened in the last year or two which are impor­tant to know.

[00:20:46] Tony: They acquired a bank called Mem­bers Equi­ty, ME Bank, which is an online retail bank. So they have spent a lot of effort into both merg­ing with ME Bank, but also into, uh, The dig­i­tal bank­ing world and ME Bank’s an online bank, um, and also to the attrac­tion of ME Bank is it has a lot of, uh, non Queens­land cus­tomers.

[00:21:08] Tony: So, uh, Bank of Queens­land is always try­ing to diver­si­fy away from its, its, um, cus­tomer base his­tor­i­cal­ly in Queens­land. The oth­er thing which I found inter­est­ing when I was doing my research is that Bank of Queens­land oper­ates a busi­ness bank, um, And it has a lot of expe­ri­ence in bank­ing in Queens­land and that skews it a bit towards agri­cul­ture.

[00:21:29] Tony: Um, but the inter­est­ing thing I think is that, uh, slight­ly more prof­it comes from the busi­ness bank­ing arm than from the retail bank­ing arm for Bank of Queens­land. So I think that’s a, an oppor­tu­ni­ty for the, rather than nec­es­sar­i­ly focus­ing on retail bank­ing, which I’ll get to a bit lat­er on, is, is par­tic­u­lar­ly tough at the moment, and par­tic­u­lar­ly tough for small banks.

[00:21:47] Tony: because of the struc­ture of, um, of the reg­u­la­tions around, uh, around bank­ing. Um, so it might be worth their while to con­cen­trate on the, the busi­ness bank­ing side. His­to­ry for this, for this busi­ness goes way back, uh, to 1874. And it start­ed off as, as, uh, Queens­land’s first build­ing soci­ety, which was called the Bris­bane Per­ma­nent Ben­e­fit Build­ing and Invest­ment Soci­ety.

[00:22:13] Tony: And the mar­keters got a hold of it and said, yeah, it’s called Bank Queens­land. Very catchy, yeah. Uh, so three years lat­er it then became a bank in 1877. Um, went along doing that for quite a while. Uh, by about 1942 it merged with oth­er Queens­land finan­cial insti­tu­tions and became a trad­ing bank. In oth­er words, it han­dles every­one’s trans­ac­tions, not just their, uh, mort­gages.

[00:22:39] Tony: Uh, and in the 1970s, it adopt­ed the Bank of Queens­land name and list­ed on the ASX in 1971. Uh, it was­n’t until 1985 that it opened its first region­al branch­es out­side of Bris­bane, uh, in Cairns and Townsville. So I thought that was inter­est­ing that it wait­ed that long to do that. Uh, and that may have, um, been because there was a bit of a, Build­ing Soci­ety explo­sion up and down the Queens­land coast in the in the late 80s ear­ly 90s and it seemed like every coun­try town was set­ting up a build­ing soci­ety.

[00:23:13] Tony: And Bank of Queens­land actu­al­ly did merge with one of these in 2007 called the Mack­ay based Pio­neer Per­ma­nent Build­ing Soci­ety and it also merged with one in WA called the Home Build­ing Soci­ety. So, um, It was bulk­ing up dur­ing the 2000s. 2010, it bought St. Andrew’s Insur­ance Man­u­fac­tur­er of Con­sumer Cred­it Insur­ance.

[00:23:38] Tony: 2013, acquired Vir­gin Mon­ey Aus­tralia, not to be con­fused with Vir­gin UK, which has the licence in the UK, but there is a sep­a­rate busi­ness in Aus­tralia called Vir­gin Mon­ey, and Bank of Queens­land still runs that as a sep­a­rate brand, even though they owned it here. 2014, it acquired anoth­er bank called Investec Bank, and 2021 it dou­bled the size of the retail bank by buy­ing ME Bank and it turns 150 in Sep­tem­ber the 1st this year.

[00:24:09] Tony: So it’s been around for a long time. So that’s, that’s the back­ground on Bank of Queens­land. I’m pret­ty sure peo­ple will, will know about it. Turn­ing to the num­bers. Share price when I did this analy­sis was at 6. 21, slight­ly dif­fer­ent today but not by much. ADT for this stock is 10 mil­lion, so it’s very large.

[00:24:29] Tony: And I want to point out that this is, like some of the oth­er banks, a finan­cial year that ends on the 31st of August. So we’re using August 23 num­bers, which means we’ll get new results in a cou­ple of months. May change things, but we’re using old num­bers for now. Uh, this, the share price of 621 is way above con­sen­sus tar­get by about 24%, so that’s, I thought that was inter­est­ing in itself, and we don’t score it, uh, on that basis.

[00:24:58] Tony: It’s also way above IV1 and IV2, and, um, so we can’t score it for that. Uh, the yield on this bank is 6. 6%, which is just under our thresh­old for giv­ing it a tick. So even though it’s got a good yield, we can’t score it for that. And for those who are inter­est­ed, the ROE is only 7. 3%, which is quite low. Now, banks often have a low ROE because of the way their busi­ness works.

[00:25:24] Tony: They, they move around large, Blocks of mon­ey, bor­row­ing and lend­ing. And so they can have low ROEs, but this is low for a bank as well. Stock Doc­tor finan­cial health and trend are strong and steady. So it gets a score for those. And it’s a recent three point upturn. So it gets a score for that. It’s been on the down, been a falling knife for a while now.

[00:25:47] Tony: It’s just turned up recent­ly. PE is 8. 5, which is the low­est in three years, so we can score it for that, and there’s no con­sis­tent­ly increas­ing equi­ty, so we can’t score it for that. The big dri­ver for this com­pa­ny being on our buy list is Prop­Caf, which is 1. 15 times, so huge amount of cash com­ing in, which is good.

[00:26:10] Tony: Neg­a­tive equi­ty per share. is 9. 29. So he can buy this com­pa­ny for less than book val­ue, which gives it a score. Um, it gives it a one for that. The oth­er big detrac­tor, which I think was behind the com­pa­ny being below its con­sen­sus tar­get price is that earn­ings per share growth is, is fore­cast to be minus 39%.

[00:26:32] Tony: So, um, it’s gets a neg­a­tive one for that. And that’s prob­a­bly what the Um, con­sen­sus price is being dri­ven on, but like with all these kinds of things that come on our buy list because peo­ple are expect­ing them to, to pro­duce low­er results in the next half. But the ques­tion is, have they found their bot­tom?

[00:26:51] Tony: Has the mar­ket fac­tored in what’s com­ing? And, and giv­en the share prices declined so much recent­ly and is now turn­ing up, I sus­pect it has, but that’s, that’s spec­u­la­tion on my part. Uh, going on with this check­list, obvi­ous­ly no own­er There’s no Methuse­lahs on the board. Uh, all that added up is a qual­i­ty score of 10 out of 17 or 59%, but a QAV score of 0.

[00:27:13] Tony: 51, putting it near the top of our list. And that’s large­ly because of that Prop­Caf met­ric that we have. Um, so that’s, that’s the scor­ing side. I did want to go through some risks and oppor­tu­ni­ties for this com­pa­ny, and it cer­tain­ly had its prob­lems in the last, uh, six to 12 months. Uh, there’s been a CEO changeover.

[00:27:34] Tony: Um, Large­ly I think around, um, some enforce­able under­tak­ings that were, um, were forced on the bank by the reg­u­la­tor. And they had to do with the risk man­age­ment sys­tems in the bank. And so the bank has had to put 60 mil­lion into risk man­age­ment pro­grams, um, main­ly it seems for cyber­se­cu­ri­ty and anti mon­ey laun­der­ing.

[00:27:54] Tony: Um, but you know, obvi­ous­ly that 60 mil­lion is not com­ing through in prof­it. So they’ve had to bulk up, they were forced to bulk up, um, their risk man­age­ment process­es. Um, There has been, I mean the ME bank inte­gra­tion must be, you know, chal­leng­ing, um, as any inte­gra­tion would be. I’m not hear­ing any­thing or read­ing any­thing to say it’s going any bet­ter or worse than the inte­gra­tions, but they basi­cal­ly dou­ble the size of their bank through that inte­gra­tion, so it would be a large project to under­take.

[00:28:22] Tony: I think, um, the things I want­ed to focus on with RISC would be the The mort­gage war that’s been going on, par­tic­u­lar­ly amongst the big banks and Mac­quar­ie, the big five, uh, and also to the increas­ing in fund­ing costs. Now, Bank of Queens­land has a bit of an advan­tage over the major banks in that it has a strong deposit base.

[00:28:39] Tony: So Bank of Queens­land has to go into the mar­ket for less, uh, uh, bond issuances to, to raise mon­ey for mort­gages. Um, so it’s less reliant on that. How­ev­er, um, Bank of Queens­land being small­er than the major banks also has a, um, Uh, a worse fund­ing cost. So the cred­it rat­ing agen­cies gen­er­al­ly require Bank of Queens­land to, uh, have a hun­dred basis points dif­fer­ence between the cost of fund­ing that they get ver­sus the major banks.

[00:29:10] Tony: And that makes sense. Com­Bank is going to be a, you know, a sure bet if you were in the bond mar­ket then, um, then, uh, get­ting your mon­ey back from Bank of Queens­land. And it’s only a hun­dred basis points, but, uh, you know, that kind of dif­fer­ence in the mort­gage wall can, um, the dif­fer­ence between grow­ing your mort­gage book and shrink­ing it.

[00:29:29] Tony: and Bank of Queens­land has shrunk its mort­gage book this year. So, it’s not in a good place because of that. But, addi­tion­al­ly, there has been a bit of a his­tor­i­cal bias against the small­er banks in terms of how much cap­i­tal they have to retain um, to, to uh, And that start­ed with the, the Basel 2 ini­tia­tive, which was the world­wide rules around bank­ing cap­i­tal struc­tures.

[00:30:00] Tony: And then Basel 3 came along after the GFC. And they, they basi­cal­ly say that the, Banks, which are called stan­dard­ized banks, like, um, like Bank of Queens­land, so small­er banks, um, have to car­ry more cap­i­tal, which reduces their mar­gin. And I’m try­ing to think of a way to explain this with­out going to becom­ing too tech­ni­cal.

[00:30:22] Tony: If you thought about it as a cost of doing busi­ness, then, um, It costs them more to issue each mort­gage than it does for Com­mon­wealth Bank, for exam­ple, basi­cal­ly just because of the account­ing stan­dards, the way that they work to, um, to try and pro­tect in the bank­ing sys­tem from the risk of a small­er bank going under.

[00:30:39] Tony: The small­er banks, um, have con­straints on, on their abil­i­ty to raise cap­i­tal. And so, there­fore, when they issue a mort­gage, it costs them more to do it. That’s a struc­tur­al, um, Dis­ad­van­tage for them and it’s always going to be there I think. Um, there was a bit of a bit of a nar­row­ing of the gap when Basel 3 came out but it’s still there.

[00:30:56] Tony: So that’s a, that’s a risk to note. It does­n’t just affect Bank of Queens­land, it affects all the small play­ers like Bendi­go Ade­laide Bank and the oth­ers as well. So yeah, that’s some­thing to take into account. And I think on the, on the oppor­tu­ni­ty side, I’ve always thought, um, and I did, I did have a, uh, a rel­a­tive who ran a build­ing soci­ety in Queens­land, and they loved the fact that they could put a branch office in Syd­ney and Mel­bourne and steal mar­ket share from the big banks for lit­tle cost.

[00:31:27] Tony: They did­n’t have to have a branch net­work to serve, to ser­vice cus­tomers down there. And, and that they could use their exist­ing tech­nol­o­gy to write the loans, et cetera. Uh, and so Bank of Queens­land, I think. has an oppor­tu­ni­ty to do that and they cer­tain­ly have branch­es in most major cities around Aus­tralia.

[00:31:43] Tony: The ques­tion is could they be doing a bet­ter job of it and I think that’s an oppor­tu­ni­ty for them. The, the, anoth­er oppor­tu­ni­ty for them is, and they do lever­age it well, is their Queens­land her­itage and so there is a loy­al parochial band of peo­ple who will always bank with Bank of Queens­land or Sun­corp in Queens­land.

[00:32:01] Tony: Their busi­ness bank has very strong ties into the agri­cul­tur­al sec­tor, so there’ll always be a strong region­al base of cus­tomers for this bank. So some­how it’d be good if they could lever­age that into oth­er region­al areas in New South Wales and Vic­to­ria or around Aus­tralia. I don’t think they’ve cracked that yet, but I see the busi­ness bank as being the area that they could.

[00:32:19] Tony: Poten­tial­ly get the biggest oppor­tu­ni­ty from, um, again, lever­ag­ing the fact that they have strong ties to the ag sec­tor in Queens­land must mean that there’s a mar­ket for them in region­al areas for busi­ness bank­ing in the rest of Aus­tralia. So yeah, so that’s Bank of Queens­land just come on the buy list this week, um, large ADT

[00:32:39] Tony: stock and seems to be turn­ing up going into its report­ing

[00:32:42] Tony: sea­son in a month or two.

[00:32:45] Cameron: And the share price looks like it peaked back in Octo­ber 70 and has been sort of con­sis­tent­ly falling since then. Sort of hit a bot­tom about, what’s that, uh, Octo­ber 23 at 5. 46. So it slid for two years and is now at 6. 12, maybe on its way up again. As you say, we don’t real­ly know, but Yeah, so, a lot of issues the last cou­ple of years, you were say­ing.

[00:33:19] Tony: Lot of issues and I’m, who knows, but giv­en the con­text of the upturn in the share price recent­ly and after the huge decline, per­haps all the bad news has fac­tored into the share

[00:33:30] Tony: price.

[00:33:31] Cameron: Mmm. Alright, thank you Tony. You’ll get, uh, reward­ed, I’m sure, by Jen­ny when she comes home for that.

[00:33:40] Cameron: B. O. Q. Alright, well, uh, let’s get into ques­tions. Um, Dan­ny, uh, sent through a bunch. He said we could, like, save them up. Did you wan­na answer all of them or just one of them? How many do you wan­na tack­le today?

[00:33:59] Tony: Now I can tack­le them all, but depend­ing on time, but yeah, I’ve

[00:34:02] Tony: cer­tain­ly prepped for doing them

[00:34:04] Tony: All

[00:34:05] Cameron: All right. Well, let’s start with the first one and see how we go.

[00:34:08] Tony: Yeah.

[00:34:08] Cameron: Um, Dan­ny says, If you plan to move over­seas for a few years or even on a per­ma­nent basis, what are the things you need to be aware of that can impact your local invest­ment strat­e­gy and returns? For exam­ple, I know you won’t be able to use your frank­ing cred­its, which is a slight hit on your net returns.

[00:34:27] Cameron: Keen to hear about what Tony took into account dur­ing his time in Cana­da. Is it main­ly BAU? I’m also keen to hear if there are sig­nif­i­cant impli­ca­tions on invest­ment prop­er­ties and tax. What’s BAU, Tony?

[00:34:42] Tony: Busi­ness as usu­al.

[00:34:43] Cameron: Oh,

[00:34:45] Tony: Yeah.

[00:34:47] Cameron: there you

[00:34:47] Tony: Which it large­ly was. Look, I think my, you know, I’ve got to put a pre­am­ble into my remarks is that, uh, Dan­ny, if he is going over­seas, should real­ly get tax advice and prob­a­bly from a multi­na­tion­al play­er. And when we went over­seas, both in New Zealand and Cana­da, we got advice from PWC on how it would affect our tax­a­tion.

[00:35:09] Tony: sit­u­a­tion in both the new coun­try and in Aus­tralia. So that’s the first thing to do, I think. So I can tell you what hap­pened to me and what we looked at, but it does­n’t replace get­ting prop­er advice from from a pro­fes­sion­al. The first thing to note about shares is that when we went over­seas, I don’t think the laws changed, but we had the option to draw a line on our CGT base.

[00:35:32] Tony: And then, um, so that meant I had to pay, if I chose to do that, which I did, I had to pay cap­i­tal gains tax on my shares as that cur­rent­ly exist­ed the day I left, but then I did­n’t pay cap­i­tal gains tax while I was over­seas, so you have to sort of weigh up the pros and cons of doing that. So, um, if you think you’re going to be over­seas for a long time, it may be worth pay­ing off what­ev­er cap­i­tal gains are out­stand­ing on paper at that stage.

[00:35:58] Tony: And then not pay­ing cap­i­tal gains tax until you come back. Um, well, so pay no cap­i­tal gains tax while you’re over­seas. And then it starts again when you come back. Um, so that’s the first thing to note. Uh, the sec­ond thing is that depend­ing on where Dan­ny’s going, yeah, we always had Dual tax­a­tion arrange­ments with Aus­tralia.

[00:36:15] Tony: So both in Cana­da and New Zealand, we were taxed in both coun­tries, and then one coun­try gave the oth­er an off­set for tax already paid. Which meant you’re basi­cal­ly pay­ing the worst tax of either of those coun­tries. So that’s some­thing to get your head around as well. Um, I mean, there were pret­ty sim­i­lar tax, tax, tax­ing regimes in both coun­tries.

[00:36:38] Tony: There were a bit of, there were one or two quirks that were dif­fer­ent in Cana­da. Um, GST is high­er in Cana­da. They call it HRT over there and it’s 13. 5 per­cent or it was when I was there. Um, but things like I was­n’t allowed to. Uh, deduct the cost of prepar­ing my tax returns, which I can do in Aus­tralia, like account­ing costs are deductible.

[00:37:01] Tony: In Cana­da, they are, if it’s like a book­keep­er keep­ing your books through­out the year, but the cost of prepar­ing the tax return was­n’t, and that. Does­n’t seem like much, except I was prepar­ing tax returns in Cana­da and Aus­tralia. So it was a dou­ble sort of cost. So, um, it was, um, I was unable to claim that in Cana­da.

[00:37:20] Tony: Uh, the oth­er thing to be aware of is that, um, there’s a thing often­times for immi­grants, and it depends whether Dan­ny’s going over there to live or to, and to work or just to, to vis­it. Um, but there often­times are col­lo­qui­al­ly what’s called gold­en immi­grant rules, and there are in Aus­tralia as well. But in Cana­da, um.

[00:37:39] Tony: We had the oppor­tu­ni­ty to invest in a par­tic­u­lar trust struc­ture, which is offered to immi­grants who have a cer­tain amount of wealth to invest. And, um, we could buy, uh, we could buy shares in the trust and pay no tax on those shares for the first five years that we were in Cana­da. But, uh, we, but I could­n’t man­age the, the invest­ments of those shares.

[00:38:03] Tony: It’s kind of strange. Again, a bit of an arcane tax sit­u­a­tion. The, the, the invest­ment trust was set up in one of the Um, Cay­man Island, Cay­man, not the Cay­man Islands, um, one of the Caribbean islands. So I think it was in, um, was­n’t Bermu­da, but it might’ve been in, yeah, I’m not sure, Jamaica or some­where like that.

[00:38:24] Tony: So yeah, you put your mon­ey into a trust. It’s reg­is­tered in Jamaica and looked after by a cus­to­di­an in Jamaica and all the banks in Cana­da had cus­to­di­an offices in Jamaica. So they were doing it through a bank, a rep­utable bank. And then I put the mon­ey into LICs. And in ETFs, I could­n’t man­age it myself, but they were then invest­ed tax free.

[00:38:43] Tony: So there’ll be some kind of ver­sion of that in almost every coun­try. The coun­tries love to have wealthy immi­grants who are going to invest to go over and spend their mon­ey. And I had been told cas­es in the US, which were even bet­ter than that, where, you know, you could go to Cer­tain states in the U. S.

[00:39:04] Tony: and invest a cer­tain amount, um, whether it was in the stock mar­ket or a local busi­ness or a house and get tax free sta­tus for a num­ber of years. So they are attrac­tive and worth look­ing at, but they’ll be dif­fer­ent depend­ing on where you’re going. Um, the oth­er issue I think Um, to be aware of was around your house, and that’s prob­a­bly the trick­i­est one.

[00:39:26] Tony: So, and I think this may be chang­ing, so it’s worth­while get­ting more recent advice, but when we moved over­seas, even though we were rent­ing out our house in Aus­tralia, we got a six year cap­i­tal gains tax exemp­tion. So nor­mal­ly if you live in a house and buy anoth­er house but then rent out the first house you lived in, you’d pay cap­i­tal gains tax on any increase in the val­ue of that house from the day that you start­ed to rent it out.

[00:39:52] Tony: Um, that was­n’t the case if you were liv­ing over­seas. You had a six year lease. Exemp­tion from Cap­i­tal Gains Tax. And that was so expats like my wife could go over­seas and work and come back and not be pay­ing CGT on keep­ing the house. I think that may, there was some talk of it being removed. I don’t know if it has or changed, but it’s worth­while look­ing at.

[00:40:14] Tony: Um, The oth­er thing to be aware of is, is if you do buy a house over­seas, that there are, you do need tax advice and you do need to think about which house becomes your prin­ci­pal place of res­i­den­cy. So, um, Cana­da had sim­i­lar laws to Aus­tralia. In Aus­tralia, we could rely on a six year rule to not pay cap­i­tal gains tax and we could call our house in Cana­da, our prin­ci­pal place of res­i­den­cy.

[00:40:38] Tony: And then com­ing back to Aus­tralia, we had to sort out which You know, which was which, so we could avoid pay­ing cap­i­tal gains tax on either. Um, so yeah, so there are a few. A few dif­fer­ent tricks. In terms of invest­ing, um, I oper­at­ed as nor­mal, and I think I’ve said this before on the pod­cast, I did­n’t invest in Cana­da on the Stock Exchange there or the US because I strug­gled to find tools, um, back then any­way, which was as good as Stock Doc­tor, um, and the AFR.

[00:41:08] Tony: I used to still read, sub­scribe dig­i­tal­ly and still read the AFR every day when I was in Cana­da and I invest­ed in Aus­tralia, um, nor­mal­ly. I did have that mon­ey in, um, Cana­da. invest­ment in the invest­ment trust in Bar­ba­dos or wher­ev­er it was, although that stopped, the gov­ern­ment did a reverse turn on that after about a year and we had to take the mon­ey out and rein­vest it so it went back into the Aus­tralian mar­ket.

[00:41:32] Tony: So, yeah, there was lit­tle dif­fer­ence. In terms of frank­ing cred­its, Dan­ny, just I think, again, if the com­pa­ny, if the coun­try has a dual tax­a­tion regime with Aus­tralia, you can still claim the frank­ing cred­its on your Aus­tralian tax return part of things. Um, so yeah, there’s this always, always this, I used to pay tax in Cana­da first and then get that tax, um, Tak­en into account when I was pay­ing tax in Aus­tralia and the tax in Aus­tralia still worked the same way as if I was liv­ing here, there was­n’t much dif­fer­ence except for some of those, you know, CGT rules I out­lined, um, and then you get cred­its, but the frank­ing cred­its still worked on the Aus­tralian side any­way.

[00:42:15] Tony: So, um, it was, to a large extent, busi­ness as usu­al for me.

[00:42:20] Cameron: Hmm. Inter­est­ing. It’s all a bit mud­dling. Head mud­dling.

[00:42:26] Tony: Mmm, it was, and I remem­ber before we went across to Cana­da spend­ing an East­er at Cape Schanck, going through every­thing, tax advice and num­bers and try­ing to crunch what was the bet­ter option for us to do. But, uh, you do need to do

[00:42:38] Tony: that before you go.

[00:42:40] Cameron: Hmm. They don’t make it easy. All right. Well, the next ques­tion from Dan­ny, with the con­cerns about QAV mem­bers joint­ly buy­ing in or out on shares, would that risk be reduced if we review our aver­age dai­ly trade per­cent­age? From mem­o­ry, we said you should­n’t buy more than 20 per­cent of the dai­ly vol­ume.

[00:42:59] Cameron: To mit­i­gate a bit of risk, would it be safer to look at 10 per­cent or 5%?

[00:43:04] Tony: Well, I think it would, um, the prob­lem is that then you’re hav­ing a big­ger port­fo­lio because, uh, You know, if you’re, if you’re work­ing out your ADT, sort of tak­ing 15 stocks, work­ing out your port­fo­lio size and then work­ing out your ADT from there, if you half your ADT, you’re going to have 30 stocks, not 15.

[00:43:23] Tony: So, um, that’s the quid pro quo. So I’m not inclined to do that. I think hold­ing, if you have too big a port­fo­lio, you start to get index like returns rather than, um, out­per­for­mance. So, um, I think we’re just going to have to find anoth­er way. And we still haven’t proved that we are caus­ing prob­lems with our buy­ing and sell­ing

[00:43:44] Tony: through QAV,

[00:43:47] Cameron: Yes, and I mean, I think we’re on the, our assump­tion is at this stage that we’re not affect­ing it, based on your chats with your long term stock­bro­ker and what his thoughts would be. Yeah. Um, okay. Mov­ing right along, dur­ing a pulled pork, Tony often cre­ates an aware­ness that a par­tic­u­lar com­pa­ny is like­ly to issue shares through a cap raise.

[00:44:11] Cameron: This means a risk for shares to be dilut­ed, cor­rect me if I’m wrong, or that you prob­a­bly should be will­ing to buy more when­ev­er a cap raise hap­pens. I prob­a­bly don’t ful­ly under­stand the log­ic behind it. Also, with our strat­e­gy to always be invest­ed, it means that you may not have cap­i­tal avail­able to invest when­ev­er a cap raise hap­pens.

[00:44:30] Cameron: So that would mean that buy­ing a share that is like­ly to go through a cap raise is less appeal­ing for us, even some­thing to steer clear of if you won’t have cap­i­tal avail­able.

[00:44:42] Tony: Yeah, that’s exact­ly the issue. I don’t have a prob­lem with a com­pa­ny that’s going to raise cap­i­tal from time to time. Because there might be a gold­en oppor­tu­ni­ty to, you know, dou­ble the mine or dou­ble the fac­to­ries or what­ev­er, dou­ble the cof­fee shops that the com­pa­ny oper­ates, dou­ble the bank, as the Bank of Queens­land did, dou­ble the size of its retail bank.

[00:45:05] Tony: Oppor­tu­ni­ties like that present them­selves from time to time and they should be tak­en. So cap­i­tal rais­ings per se aren’t a bad thing. I think what, what I’d like to high­light when I’m doing a pulled pork is if I think a com­pa­ny is going to be a ser­i­al cap­i­tal rais­er. And that par­tic­u­lar­ly hap­pens I’ve found with, with unprof­itable growth com­pa­nies that, that they, they grow for a while and then they Um, can’t fund it, and so they raise cap­i­tal.

[00:45:31] Tony: It’s a bit like, uh, ven­ture cap­i­tal com­pa­nies, or unlist­ed tech com­pa­nies. You hear about Series A, Series B, Series C fundrais­ings. It’s expect­ed from those com­pa­nies that they’ll need cap­i­tal to keep going, because they’re unprof­itable. Some of those com­pa­nies, Types of com­pa­nies exist on the share mar­ket and they’re the ones that, um, I, I don’t like, um, some peo­ple do, but either way, go into it with your eyes open, know­ing that if you just bought shares in six months or a year’s time, you’re prob­a­bly going to be asked to buy more shares or be dilut­ed.

[00:46:02] Tony: So that’s, that’s the issue for me. And as Dan­ny points out, some­times a cap­i­tal rais­ing will occur. When you, does­n’t suit you and you don’t have the cap­i­tal to put into things. So, um, that’s also to be tak­en into account. So I, I pre­fer com­pa­nies that I think, uh, have, well, I know have lots of cash and there­fore are less like­ly to need to raise cap­i­tal.

[00:46:21] Tony: Um, but they some­times do, and some­times it, um, You know, it hap­pens across the mar­ket. I remem­ber dur­ing the GFC and a lit­tle bit dur­ing COVID, lots of com­pa­nies raised cap­i­tal to strip what they call strength­en their bal­ance sheets, um, in case things got worse. Uh, and that’s kind of like a pru­dent thing for them to do.

[00:46:40] Tony: Um, and so. The, the rule with those cap­i­tal rais­ings or with any cap­i­tal rais­ing is, you know, is the dis­count that you’re being offered worth tak­ing up the shares. Um, and so you, you look at the share price when the cap­i­tal rais­ing is, is about to take place and you com­pare that to what you’re being offered.

[00:46:58] Tony: And gen­er­al­ly you only take up the offer­ing efforts, the share prices less than what the shares have been trad­ing at. So you want get, you wan­na get some kind of dis­count for the dilu­tion. That you’re, um, you’re forced to take and the fact that you have to put more cap­i­tal in. So, yeah, but in a nut­shell, cap­i­tal rais­ings aren’t bad.

[00:47:14] Tony: I think ser­i­al cap­i­tal rais­es are, um, and, uh, you know, if a com­pa­ny’s doing a cap­i­tal rais­ing, take it as a case by case,

[00:47:24] Tony: um, sit­u­a­tion and look at whether you’re get­ting, um, prop­er rec­om­pense for your dilu­tion.

[00:47:31] Cameron: mean, the sort of fil­ter­ing mech­a­nisms that we have in

[00:47:34] Cameron: place would tend to fil­ter out com­pa­nies that don’t gen­er­ate a lot of cap­i­tal. Cash, they’re going to be los­ing some scor­ing. How often do you think you see ser­i­al cap­i­tal rais­es com­ing on the buy

[00:47:46] Cameron: list?

[00:47:47] Tony: Oh, nev­er. Yeah, I mean, we do get com­pa­nies rais­ing cap­i­tal on the buy list, but on, of the shares that I’ve owned, you know, it’s prob­a­bly once a year, if that,

[00:47:59] Cameron: Yeah,

[00:48:00] Tony: and it tends to be, it often is in the min­ing space. So, you know, gold min­ing though, or I think, if I think back to Sand­fire Resources, they, um, they knew that the Gross­er cop­per mine was going to run out of cop­per at some stage in the fore­see­able future, and so they bought anoth­er cop­per min­ing com­pa­ny in Spain and raised cap­i­tal to do

[00:48:20] Tony: that.

[00:48:20] Cameron: Hmm, but for spe­cif­ic projects, not

[00:48:25] Tony: Spe­cif­ic oppor­tu­ni­ties and prod­ucts. Or some­times it hap­pens across the board in GFC type sit­u­a­tions where com­pa­nies are a bit wor­ried about the future. And

[00:48:33] Tony: so they want to bulk up their bal­ance sheets to write about.

[00:48:39] Cameron: want to do anoth­er one?

[00:48:41] Tony: Sure.

[00:48:42] Cameron: Dan­ny says, I’d be keen one day to hear about the dif­fer­ent ways how a com­pa­ny can take on debt and what the main rea­sons are. I can imag­ine it’s usu­al­ly for M& A activ­i­ty or a sig­nif­i­cant fixed asset pur­chase, for exam­ple. What would be the main rea­sons and what are the dif­fer­ent ways of tak­ing on debt?

[00:48:59] Cameron: For exam­ple, a cap raise or tak­ing on a loan with a bank. Is a cap raise more appeal­ing than a bank loan? What’s Tony’s rea­son­ing when look­ing at the debt struc­ture of a busi­ness?

[00:49:09] Tony: Oh, if I can start with the, the end of that ques­tion first, the debt struc­ture of busi­ness, I think is crit­i­cal. And, uh, I, I pre­fer com­pa­nies with low amounts of debt. Um, again, same rea­son I like com­pa­nies with lots of cash because they have, they have resilience, um, they’re robust and they have fire­pow­er if an oppor­tu­ni­ty comes along.

[00:49:28] Tony: So. Um, I, I tend to look at com­pa­nies with about, uh, debt to assets of about 30%, which is debt to equi­ty, depend­ing on their cap­i­tal struc­ture, usu­al­ly of around 50%, 50 or 60%, so no more than that. Um, and, and the rea­son for that is that, uh, if you’re tak­ing on lots of debts, even if it’s for a good thing, like to acquire a, um, a good A good com­pa­ny or a good oppor­tu­ni­ty, uh, you’ve got to always be care­ful that the ris­ing, ris­ing inter­est rates don’t, um, soak up all your prof­it.

[00:50:02] Tony: That’s, that’s the biggest issue. It’s a bit like, you know, they talk about mort­gage stress in the hous­ing mar­ket at the moment that, um, peo­ple who believe the RBA gov­er­nor when he said that the inter­est rates weren’t going to rise and took out as much mort­gage as they could. Dur­ing COVID, and then inter­est rates have risen in the fastest, uh, accel­er­a­tions ever.

[00:50:23] Tony: Um, and now those peo­ple are sit­ting on large mort­gage bills, large inter­est bills. Same thing can, same thing can hap­pen with a com­pa­ny. So in terms of the com­pa­nies which have the least risk, it’s the ones with the least debt, usu­al­ly. Um, so that’s, that’s the way I view it. And I’m always, it’s always in the back of my mind, although this is not relat­ed to com­pa­ny debt.

[00:50:42] Tony: Um, War­ren Buf­fet­t’s quote that he said, Um, that if he had geared his own share­hold­ing into Berk­shire Hath­away, he would have gone broke twice. So, um, even though that’s per­son­al debt, it’s not com­pa­ny debt, he’s basi­cal­ly point­ing out that it’s always got to be tak­en, um, very, very con­ser­v­a­tive­ly if you’re going to gear up to do some­thing.

[00:51:04] Tony: Uh, back to cap­i­tal rais­ings, um, Why would a com­pa­ny raise cap­i­tal? Well, usu­al­ly it’s because they can’t bor­row either any more or what they need to raise is too high for its bankers to loan them mon­ey respon­si­bly. So, debt’s usu­al­ly the first option for a com­pa­ny, but if they can’t raise enough to do what they need to do, they’ll raise mon­ey via cap­i­tal rais­ing.

[00:51:30] Tony: And so that’s gen­er­al­ly how it works. Um, the oth­er type of com­pa­ny, the ser­i­al cap­i­tal ris­es that, that, um, I tend not to like, but they can be mar­ket dar­lings, so I should men­tion now what I call roll ups. And, um, so these are com­pa­nies like WiseTech Glob­al, which has been rolling up, uh, ship­ping, freight man­age­ment soft­ware busi­ness­es around the world, and it’s done very, very, very well at that.

[00:51:57] Tony: Um, uh, oth­er sort of roll ups I’ve expe­ri­enced in the past, prob­a­bly the clas­sic one is ABC Learn­ing, um, way back before the GFC, which was rolling up kinder­gartens. And so these busi­ness­es exist by sim­ply say­ing, we’re going to be, we’re going to use our Our share script, which has a high PE, to offer to com­pa­nies which have low­er val­u­a­tions, um, which is attrac­tive to us, in oth­er words, we’re pay­ing less than we would if we were pay­ing cash for those com­pa­nies, and we’ll offer them shares in our com­pa­nies and we’ll merge that new busi­ness into our exist­ing busi­ness and our busi­ness will grow.

[00:52:32] Tony: And that’s, that’s a great busi­ness mod­el for a while until you can’t roll up any­more. And then you, then you sort of work out whether the under­ly­ing busi­ness­es as a whole are prof­itable or not. And, um, you know, I think my expe­ri­ence is that in the best cas­es, the com­pa­ny rewrites from being a growth com­pa­ny to being a sort of busi­ness as usu­al type com­pa­ny, and the PE can halve or even go down more than that, which means the share price drops off a lot or worse.

[00:53:02] Tony: They, they get to the end of their, Cap­i­tal rais­ing, or their cap­i­tal rais­ing and their growth and their roll up, um, peri­od fin­ish­es, and they sud­den­ly real­ize the under­ly­ing busi­ness isn’t prof­itable at all. What was, it’s a bit of a Ponzi scheme. What was hap­pen­ing was every time they had to pro­duce some num­bers, they acquired anoth­er com­pa­ny, which made their growth look good and their sales look good, and, and they could say, well, we’re not mak­ing mon­ey now, but you know, when we build this great busi­ness, it’ll, it’ll have monop­o­lis­tic um, poten­tial because there’ll be no one else com­pet­ing against us and we’ll do well.

[00:53:33] Tony: And some­times they don’t. And, um, yeah, they come a crop­per, which was a bit like what hap­pened to ABC Learn­ing. So, um, that’s the oth­er thing to note, but yeah, I’m gen­er­al­ly wary of com­pa­nies that con­tin­u­ous­ly raise cap­i­tal. I mean, if you’re a good busi­ness, why do you need to keep rais­ing cap­i­tal? Sure­ly you should be fund­ing things from your own cash

[00:53:52] Tony: flow.

[00:53:54] Cameron: And we don’t real­ly look at debt lev­els or debt to equi­ty lev­els in our check­lists. Why is that?

[00:54:03] Tony: We do. It is a core part of the Stock Doc­tor health rat­ings, finan­cial health

[00:54:08] Tony: rat­ings.

[00:54:08] Cameron: yes, right. It’s bun­dled into that.

[00:54:11] Tony: Yeah,

[00:54:12] Cameron: All right. Well, the last one from Dan­ny. Share buy­backs. I’ve been a mem­ber for a few years now, but I’ve nev­er real­ly seen sig­nif­i­cant share price increas­es when a share buy­back hap­pens. I’m prob­a­bly wrong. Keen to under­stand Tony’s views. We always like it, but I’ve nev­er real­ly seen a major ben­e­fit. All

[00:54:30] Tony: well, I’ll talk about two com­pa­nies who have ben­e­fit­ed from share buy­backs. The one that’s One of the things that is near and dear to a lot of peo­ple’s hearts in this forum is Fleet Part­ners, um, which decid­ed not to pay div­i­dends, but to use that mon­ey to buy back shares at an appro­pri­ate price and an appro­pri­ate time.

[00:54:48] Tony: And I think, you know, they’ve gone at their low­est in the last five years from about 50 cents up to 3. 50, um, in the last, what’s that, 50 cents back in March of 2020 dur­ing COVID. And they’re now at 3. 50. So they’ve been a huge, a huge ben­e­fi­cia­ry of buy­backs. Um, and the oth­er one I’ll men­tion, of course, is Berk­shire Hath­away, which, um, has been buy­ing back its shares.

[00:55:15] Tony: In, in the last cou­ple of years. Um, and, and again, there are buy­backs and there are buy­backs. So, um, War­ren Buf­fet always says he’s hap­py to buy back his own shares if he can’t find some­thing else big to buy. And that’s the issue for them, is they’ve got so much cash that they have to go out and buy.

[00:55:31] Tony: Indus­try size com­pa­nies to make a dif­fer­ence. And so they, they, they force more and more to buy back their shares. Um, the rea­son why that works is because there’s, um, the same amount of prof­it going to less share­hold­ers. So every­body’s tak­en the, in the prof­it pie goes up, um, which means if the com­pa­ny does pay div­i­dends, your div­i­dends should go up as well, but cer­tain­ly your share of the earn­ings goes up.

[00:55:53] Tony: And so the share price reflects that. So the share price gen­er­al­ly goes up to reflect the fact that each share is get­ting more of the prof­it pie. So that’s the basic, um, math behind share buy­backs. But, but again, you’ve got to be care­ful, um, to, to look at it on a case by case basis. So when a com­pa­ny like Berk­shire Hath­away is buy­ing back its shares, it’s basi­cal­ly say­ing we can’t see any oth­er growth oppor­tu­ni­ties in our indus­try or in an adja­cent indus­try.

[00:56:21] Tony: And so it’s, it’s in some respects. Under­stand­ably for Berk­shire Hath­away, giv­en their cash pile, but in some respects, it’s an admis­sion of guilt or admis­sion of inabil­i­ty for man­age­ment to grow the busi­ness. So that, that can be an issue. Um, if, if you, if the man­age­men­t’s buy­ing back shares of a bad com­pa­ny or pay­ing too much for them, um, then you, you know, you’re in the hid­ing to noth­ing with that as well.

[00:56:44] Tony: So you’ve got to be care­ful that man­age­ment is, um, is try­ing to exhaust oth­er options first before, before buy­ing back. But, um, and gen­er­al­ly, I guess, um, You know, share buy­backs are part of the cap­i­tal allo­ca­tion port­fo­lio of options for man­age­ment. The first one’s got to be, as I said before, going for growth, whether it’s using cash flow or going into debt to grow the com­pa­ny.

[00:57:10] Tony: And then, uh, you know, they’ve got to con­sid­er div­i­dend pay­ments. Is it bet­ter off, um, are they bet­ter off buy­ing back their shares or is the share price too high at the moment and there­fore it’s not worth it? So they should be issu­ing, um, big­ger div­i­dends to their, uh, investors instead, which makes the com­pa­ny more attrac­tive to investors.

[00:57:28] Tony: And frank­ing cred­its in Aus­tralia will pay a part of that. And I think it’s a real­ly good pic­ture as well because if a com­pa­ny has lots of, um, lots of tax paid on past prof­its and are not issu­ing div­i­dends, then that’s a, you know, a 30 per­cent ben­e­fit to the com­pa­ny. Some investors like super­an­nu­ants, uh, who can get a, get a frank­ing cred­it if the com­pa­ny pays a div­i­dend.

[00:57:51] Tony: So there’s, there’s a whole lot of mov­ing parts in, in whether you should do a buy­back or not. Um, and it’s, it’s best to look at it on a case by case basis is to see whether it’s doing well or not, but cer­tain­ly it’s ben­e­fit­ed us and fleet part­ners and it ben­e­fits Berk­shire

[00:58:04] Tony: Hath­away as well.

[00:58:08] Cameron: right. Thank you, Dan­ny, for those great ques­tions. Thank you, Tony. The only oth­er ques­tion we had this week was from Phil, who asked for pulled porks on DGL or MSV. I saw, I did, I did some, uh, look­ing at the notes. We did DGL 22nd of Novem­ber last year, but MSV, I don’t think we’ve done since episode 10 on the 7th of May, 2019.

[00:58:38] Cameron: Can you remem­ber

[00:58:39] Tony: hap­py to go back and,

[00:58:40] Cameron: Mitchell Ser­vices since then?

[00:58:42] Tony: I haven’t done it since then, no, but I do remem­ber doing it. So I’m hap­py to go back and do it.

[00:58:47] Tony: again.

[00:58:47] Cameron: Time for an update on Mitchell Ser­vices. Uh, Phil did ask me if I had a list of all the pulled porks any­where on the web­site, which I don’t, so I will try and pull that togeth­er at some stage. Uh, well that’s it, TK. We’re in After Hours. What has, uh, tak­en your spare time in the last week?

[00:59:12] Tony: Well, it’s, this seems to hap­pen every year, but, um, at least it hap­pened last year. Net­flix, in par­tic­u­lar, and the oth­er stream­ing ser­vices as well, to a less­er extent, just release a whole heap of new con­tent. Seems to be around the start of March. So I, um, I’ve been watch­ing, I just fin­ished watch­ing last night, The Gen­tle­man.

[00:59:31] Tony: which was the Guy Ritchie pro­duced short series on Net­flix and it was good, I real­ly enjoyed it. Yeah, worth watch­ing. Not, not right up there with Snatch or Lock­stock, but yeah, noth­ing real­ly is, but um, still pret­ty good, still worth watch­ing. Bray Win­ston makes a cameo, he’s good in it. Vin­nie Jones, an old Vin­nie Jones is real­ly good in it too, so yeah, it’s worth watch­ing.

[00:59:54] Tony: A lot of the, you know, pho­to­graph­ic tricks that, you know, Guy Ritchie uses of cam­eras mov­ing with actors as they fall and all that

[01:00:01] Tony: kind of stuff. So, yeah, I enjoyed it. It’s good, worth watch­ing.

[01:00:07] Cameron: Hmm, I liked, uh, it was the name of the film too, was­n’t it?

[01:00:09] Cameron: The one he did with Hugh Grant?

[01:00:12] Tony: the Matthew McConaugh­ey

[01:00:13] Tony: one.

[01:00:14] Cameron: That’s right, yeah, it’s called The Gen­tle­man.

[01:00:15] Tony: so it does­n’t fol­low on from the film. It’s, you know, slight­ly dif­fer­ent, but still Guy Ritchie’s home turf. British gang­sters and aris­toc­ra­cy.

[01:00:24] Cameron: Mm hmm.

[01:00:26] Cameron: Hmm.

[01:00:26] Tony: I start­ed watch­ing Poor Thing, but I haven’t got­ten through that one yet. It’s quite long.

[01:00:31] Cameron: is that a film or a series?

[01:00:33] Tony: It’s

[01:00:33] Tony: a film.

[01:00:34] Cameron: Right, it just got some Oscar love, I think I saw in the

[01:00:37] Tony: Yeah, Emma, what’s that, Emma Stone won Best Actress for it.

[01:00:41] Cameron: Yeah, good for her.

[01:00:42] Tony: Yeah, it’s very, very imag­i­na­tive, very,

[01:00:45] Tony: very crazy and out there, but enjoy­able.

[01:00:47] Cameron: I final­ly got around to watch­ing The Thing From Anoth­er World. The 1951 Howard Marks ver­sion of the thing sto­ry.

[01:00:57] Tony: Ah, and?

[01:00:59] Cameron: And, you know, inter­est­ing, not, not as great as Car­pen­ter’s ver­sion, I think, but I’d always heard good things about it. Um, I think I saw Taran­ti­no and Stephen Col­bert talk­ing about it a while ago and say­ing that they both loved it. You know, I, uh, not bad for a 1951 sci­ence fic­tion film, but, um, Some of the dia­logues, I think the best thing about it for me was the actress in it, Mar­garet Sheri­dan, who plays sort of the love inter­est.

[01:01:33] Cameron: She’s the Cather­ine Hep­burn esque, fast talk­ing, smart, mod­ern woman, who’s basi­cal­ly try­ing to hood­wink the cap­tain of the plane that flies down there into mar­ry­ing her. Um, in a Cather­ine Hep­burn y kind of way. But yeah, the whole, the thing that struck me most about it was the anti sci­ence Mes­sage in it.

[01:02:00] Cameron: Have you seen it? The, the

[01:02:03] Tony: not for a long time. Not since I

[01:02:04] Tony: was a teenag­er.

[01:02:06] Cameron: It’s got this post Atom Bomb Hol­ly­wood thing about the arro­gant sci­en­tists who think, you know, they, any­thing in the cause of sci­ence is jus­ti­fi­able. And the mil­i­tary guys basi­cal­ly. pulling them into line because there’s this sci­en­tist in the North Pole base when they dis­cov­er the alien craft and the alien that they res­cued from it he wants to study it even when it escapes and it’s killed a few peo­ple he’s like no no we must­n’t destroy it this is more intel­li­gent than us and it’s a thing and we need to study it and the mil­i­tary are all get out of the way crazy mad sci­en­tist we have to destroy this thing it’s a threat

[01:02:53] Tony: very Ter­mi­na­tor 2, isn’t it?

[01:02:55] Cameron: Uh, yeah,

[01:02:58] Tony: cor­po­ra­tion wants to study the

[01:03:00] Tony: alien, yeah,

[01:03:01] Cameron: well, the thing that I actu­al­ly was think­ing all the way through it is it’s very alien, and aliens, in

[01:03:09] Tony: Oh, sor­ry, not Ter­mi­na­tor. Sor­ry, not Ter­mi­na­tor 2. I meant

[01:03:11] Tony: Aliens.

[01:03:12] Cameron: right, yeah, well there is a thing in Ter­mi­na­tor 2 where the

[01:03:15] Cameron: guy who, they go back and the guy who’s built the, uh, who’s, they, the guy who’s build­ing the thing, the, the

[01:03:25] Tony: Oh,

[01:03:25] Tony: Skynet.

[01:03:26] Cameron: guy who’s build­ing Skynet, yeah, no,

[01:03:28] Tony: yeah, yeah,

[01:03:29] Tony: They go to his house.

[01:03:30] Cameron: Yeah,

[01:03:31] Cameron: but no, it’s very alien, and alien­sy, and there’s actu­al­ly, um, a Geiger counter plays a big role in this film, where they’re, they’re track­ing this thing’s move­ments around the base using a Geiger counter, which remind­ed me of Aliens, the James Cameron one, where

[01:03:48] Tony: Yeah,

[01:03:49] Tony: right.

[01:03:49] Cameron: You know, they can’t see it, but they know that they’re, they’re mov­ing some­where in the, in the bass.

[01:03:55] Cameron: And just the way that he used that to build ten­sion, they did a lit­tle bit of that in the Hawks.

[01:04:01] Tony: Mm hmm.

[01:04:02] Cameron: But, you know, it was, yeah, just this, um, anti sci­ence thing, which real­ly struck me. The, the, the under­ly­ing mes­sage that sci­ence for the sake of sci­ence was­n’t nec­es­sar­i­ly a good thing. And I think that was a, a trend in Hol­ly­wood sci­ence fic­tion films, um, after World War II and the atom bomb, and a lot of con­cerns about what the atom bomb had done and all that kind of thing.

[01:04:29] Cameron: They make a few direct ref­er­ences to that.

[01:04:33] Tony: Oh, there’s all sorts of movies about, you know, um, alli­ga­tors in sew­ers grow­ing to large,

[01:04:40] Tony: large dimen­sions and all sorts of, um, oth­er irra­di­at­ed ani­mals.

[01:04:46] Cameron: Toma­toes and blobs and all that kind of stuff.

[01:04:49] Tony: ants, spi­ders.

[01:04:51] Cameron: yeah. And it struck me because I’ve been read­ing A. C. Grayling’s book, The Fron­tiers of Knowl­edge. If you’ve ever read any of A. C. Grayling’s

[01:05:00] Tony: No.

[01:05:01] Cameron: British poly­math, philoso­pher, author. He wrote a book, the first one of his books I read 10 or 15 years ago was called The Good Book.

[01:05:13] Cameron: It was his ver­sion of the Bible, but writ­ten from the per­spec­tive of an athe­ist, philoso­pher, sci­en­tist. Um, and it was writ­ten in the style of the Old Tes­ta­ment, but writ­ten with a pure­ly sci­en­tif­ic, athe­is­tic base, which is inter­est­ing. But this one’s more recent, The Fron­tiers of Knowl­edge, just talk­ing about, I think the, the, Sub­ti­tle is How We, What We Know and How We Know It.

[01:05:38] Cameron: Um, and you know, there’s one quote of his that I, I saved from this. He talks about, um, sci­ence is arguably human­i­ty’s great­est intel­lec­tu­al achieve­ment. The sci­en­tif­ic method is the par­a­digm of respon­si­ble, Care­ful, scrupu­lous inves­ti­ga­tion into its var­i­ous sub­ject mat­ters, and it is acute­ly self crit­i­cal and con­trolled by the empir­i­cal data of exper­i­ment, which is to say by the way the world is, and not by how we wish it to be, which I thought was a good quote.

[01:06:11] Cameron: But the thing that struck me most about this book, he does it, it’s a bit like, um, Yuval Noah Harar­i’s book on, uh, Sapi­ens. He’s going back over the his­to­ry of human­i­ty and when we devel­oped writ­ing and the wheel and, and con­trol­ling fire and then the appli­ca­tions of fire and the build­ing of cities and how long these things took.

[01:06:34] Cameron: Like, wheels were known of in cer­tain parts, like I think, like the wheel was I think invent­ed in Sumer or some­where in Mesopotamia. They knew about it in Egypt for like a thou­sand years before they actu­al­ly used it in appli­ca­tion. And in dif­fer­ent parts of the world, the same thing, they knew about these things, but did­n’t actu­al­ly use them for thou­sands of a thou­sand years or so.

[01:06:59] Cameron: But it just struck me how slow progress was for the major­i­ty of human his­to­ry. Like how long it took for lan­guage of fire or the wheel or, uh, you know, even things like, Mov­ing from the Cop­per Age to the Bronze Age to the Iron Age to the Steel Age, just thou­sands of years stuck in one tech­no­log­i­cal par­a­digm and then they’d slow­ly fig­ure out how to put some tin into the cop­per to make bronze and then that would take, you know, thou­sands of years to spread around the world and then, you know, you get to the Iron Age, And

[01:07:46] Tony: but it’s like, you could look at the reverse thing too, like, you know, if you’re spend­ing most of your time

[01:07:51] Tony: try­ing to feed your­self and fend off your ene­mies, when do you have time to add tin to cop­per and

[01:07:55] Tony: get

[01:07:56] Tony: bronze?

[01:07:56] Cameron: that’s exact­ly the point that he makes, you know, peo­ple were busy sur­viv­ing. There was­n’t a lot of spare intel­lec­tu­al resources to exper­i­ment with this kind of stuff. But what struck me most is like think­ing about for the major­i­ty of human his­to­ry, how slow change hap­pened and then how much change we deal with.

[01:08:19] Cameron: Now, how the change par­a­digm has explod­ed, and the fact that we haven’t all gone com­plete­ly insane.

[01:08:26] Cameron: Like Chris­sy was say­ing to me, I was talk­ing to Chris­sy about this over din­ner last night, and she was like, Oh, that’s why, you know, we have so many men­tal health issues today, is just the amount of change that we’re deal­ing with, peo­ple can’t cope with.

[01:08:37] Cameron: And I said, actu­al­ly, I think the oppo­site is true. The fact that we cope with it at all is astound­ing to me. The amount of, like, my moth­er grew up in a house that did­n’t have elec­tric­i­ty. Now she has arti­fi­cial intel­li­gence app on her mobile com­put­ing device that she car­ries. She has an Apple watch like that That’s insan­i­ty in her 76 years What she has seen it’s beyond sci­ence fic­tion lev­els of Progress.

[01:09:06] Cameron: And yet she’s not bat shit insane. She’s a lit­tle bit crazy, but she’s not like how?

[01:09:12] Tony: She’s your moth­er

[01:09:13] Tony: after all.

[01:09:14] Cameron: Yes, exact­ly. She’s had to live with me for 53 years, put up with the fact that

[01:09:18] Cameron: She’s respon­si­ble for unleash­ing me on the world. But you get what I’m say­ing? Like how the

[01:09:24] Tony: Yeah. Yeah, I

[01:09:25] Tony: do.

[01:09:25] Cameron: how our brains have adapt­ed to deal with this amount of

[01:09:28] Cameron: change?

[01:09:30] Tony: I think, um, I think there’s a fair bit of dis­con­nec­tion going on too, like, you know, my par­ents, for exam­ple, were always scep­ti­cal of tech­nol­o­gy, always scep­ti­cal of change, and, um, they just dis­con­nect­ed, they would have a black and white TV for as long as pos­si­ble, have a Hold­en Com­modore for as long as pos­si­ble, and, you know, they just enjoyed the sim­ple life.

[01:09:53] Tony: There’s a fair bit of dis­con­nec­tion, I think, that copes with change, and that’s, I’m not being dis­re­spect­ful to them, um, Mum was less so, dad was very much in that sort of style of liv­ing. Um, and you know, the good side of that was that he loved to work with tim­ber. So he’d go and, you know, make cab­i­netry and. Use a lathe and all that kind of stuff. They’re very old fash­ioned type, um, ways of spend­ing your time and doing things. And that was his thing. And that was real­ly great because we got lots of stuff around the house made by dad and that was, that was real­ly good. But yeah, I think peo­ple just dis­con­nect.

[01:10:29] Tony: They don’t cope with change. I, the famous sto­ry in our house­hold was that, you know, dad retired ear­ly at 53 because he did­n’t want to, he was about to go on a course to learn how to use a com­put­er and he did­n’t want to do it. So he retired. But he had, like dad had. Huge fin­gers. I think he would have been

[01:10:47] Tony: strug­gling to hit each indi­vid­ual key on

[01:10:49] Tony: the key­board too.

[01:10:53] Cameron: But the human brain today, like the brain inside of. Alex, the Twins, or Fox, or us, isn’t that dif­fer­ent from the brains that peo­ple had in Rome or in Athens in 300 BCE? And yet the amount of change, the amount of com­plex­i­ty. That our brains deal with is at an insane lev­el com­pared to what they lived with, even though in their days, they thought they were going through a lot of change.

[01:11:23] Cameron: Um, and yet

[01:11:25] Tony: Yes, and yes, yeah, look, I under­stand what you’re say­ing, but that’s, they have grown up with that too. Like Alex was using an iPad from a very, very ear­ly age. And that’s, I guess that’s the oth­er side of the coin is iPads have been around now for 20,

[01:11:39] Tony: What­ev­er, 20 plus years. Why haven’t they, why aren’t they touch­ing the air now and hav­ing a

[01:11:44] Tony: holo­gram

[01:11:45] Cameron: iPad came out in 2011, just before Steve died, so.

[01:11:49] Tony: Okay, um, but I find tech­nol­o­gy moves real­ly slow. It’s infu­ri­at­ing to me that we don’t have hov­er­boards and jet cars and pri­vate jet packs and anti­mat­ter, not anti­mat­ter, um, trans­porter beams and all that kind of stuff that I was

[01:12:04] Tony: promised, promised I tell you,

[01:12:06] Tony: as a kid was going to hap­pen.

[01:12:08] Cameron: Yeah.

[01:12:10] Cameron: Yeah. No, that’s, that’s a good point. Mmm.

[01:12:13] Tony: nuclear reac­tors in my home,

[01:12:16] Tony: pow­er­ing

[01:12:16] Tony: every­thing.

[01:12:17] Cameron: Mm hmm.

[01:12:18] Tony: So,

[01:12:19] Tony: so yeah, I’m chomp­ing at the

[01:12:21] Cameron: reac­tors does Aus­tralia have now?

[01:12:23] Tony: one

[01:12:24] Tony: at Lucas Heights for med­ical

[01:12:25] Tony: research.

[01:12:26] Cameron: yeah, like that’s pret­ty appalling. Why don’t we, why aren’t we full of nuclear reac­tors run­ning the pow­er

[01:12:35] Tony: Well, for the same rea­son, we’re not full of wind farms and solar pan­el

[01:12:38] Tony: farms?

[01:12:39] Tony: Peo­ple don’t want them in their back­yard.

[01:12:42] Cameron: Is that why we don’t have solar and wind farms?

[01:12:45] Tony: We have plen­ty of solar on rooftops, but try putting a wind farm, you know, some­where. You can’t put it off­shore because that’s going to spoil some­one’s view. And you can’t put it on a farm because the farm­ers don’t want it. And, you know, the trans­mis­sion lines can’t go across their land. And, yeah, now, oh, that’s prob­a­bly a com­mer­cial nego­ti­a­tion, but it’s a lot hard­er

[01:13:06] Tony: to do than peo­ple think.

[01:13:07] Cameron: Hmm. Yeah. Things are hard to do. Any­way, I’ve been read­ing that. It’s been inter­est­ing. Now watch the first episode of Shogun. Were you a big fan of James Clavel­l’s books in the

[01:13:19] Tony: I was­n’t real­ly, no.

[01:13:22] Cameron: Read them and did­n’t like

[01:13:23] Cameron: them or did­n’t read them?

[01:13:24] Tony: a bit of both. I mean, they were always real­ly thick books, but I

[01:13:30] Tony: pre­ferred Asi­mov to Clav­el, I guess. Yeah.

[01:13:34] Cameron: I love Clav­el, I read all of his books when I

[01:13:37] Cameron: was a teenag­er. You know, I love that sort of mix of, I don’t know, the exot­ic, uh, the white man in the for­eign lands with, uh, exot­ic women and adven­ture and samu­rais and all that kind of stuff.

[01:13:53] Tony: I nev­er found that inter­est­ing or exot­ic. No, I was just like, yeah, there’s a guy who lives in Asia doing his thing. Okay, put a ray gun in his hand or give him

[01:14:05] Tony: an anti­mat­ter trans­porter. Sure, I’m in, make it some­thing inter­est­ing.

[01:14:12] Cameron: Any­way, watch the first episode of the new series. It’s very

[01:14:14] Cameron: lush. It’s a bit like Game of Thrones, but in Japan in 1600. I’m not sure I’m sold on it. After the first episode, I was like, eh, not sure.

[01:14:25] Tony: they made a minis­eries

[01:14:26] Tony: of Shogun when I was a kid,

[01:14:28] Tony: I

[01:14:28] Tony: think,

[01:14:28] Cameron: In the 80s, yeah, mid 80s, yeah, yeah, with

[01:14:31] Tony: which I did­n’t watch either, Richard Basar, not Richard Basar,

[01:14:35] Tony: the guy from the Thorn

[01:14:36] Tony: Birds.

[01:14:37] Cameron: Yeah, Richard,

[01:14:39] Tony: he seemed to be in Cham­ber­lain, he seemed to be in

[01:14:41] Tony: every­thing,

[01:14:42] Cameron: he was, he was the man, yeah,

[01:14:44] Tony: And he always, but he always brought the, it was always them focused on the love inter­est too much for me. It

[01:14:48] Tony: was, it was more of a romance sto­ry than an

[01:14:51] Tony: adven­ture sto­ry, I found.

[01:14:54] Cameron: And was­n’t he in like, uh, Indi­ana Jones rip off 2 at

[01:15:01] Tony: oh prob­a­bly, he was in the orig­i­nal Bourne movies and he was in, um,

[01:15:06] Tony: Uh, Thorn Birds,

[01:15:08] Tony: Shogun,

[01:15:10] Cameron: yeah, I’m just look­ing, Peaks. What?

[01:15:15] Tony: oh real­ly?

[01:15:16] Cameron: Bill Kennedy? One episode? I remem­ber him from Twin Peaks.

[01:15:22] Cameron: Um, yeah, I think he did, uh, it was like when Indi­ana Jones came out and they were sort of try­ing to make, uh, Indi­ana Jones style, style films. I think Tom Sel­l­eck made one and he made

[01:15:36] Cameron: one.

[01:15:37] Tony: Yep.

[01:15:38] Cameron: Yeah. Yes,

[01:15:42] Tony: that’s called some­thing like Qui qui quigley of the Out­back

[01:15:45] Tony: or some­thing?

[01:15:45] Cameron: that’s right.

[01:15:46] Tony: I think, Yeah,

[01:15:47] Cameron: that’s right. Oh, he played Octavius in a Julius Cae­sar thing in 1972. Any­way, yeah, they did make one. I think it was a bit of a hit. There you go. There you go, 1980. He played John Black­thorne. Um, so any­way, this one’s obvi­ous­ly Oh, Alan Quater­main in The Lost City of Gold.

[01:16:11] Tony: that’s it. You’re right. Or the

[01:16:12] Tony: main,

[01:16:13] Tony: yeah.

[01:16:13] Cameron: And he was in the Bourne Iden­ti­ty series too, yeah.

[01:16:16] Cameron: Which I love the Bourne

[01:16:17] Cameron: books too, in the 80s, I read all of those.

[01:16:20] Tony: I must admit I pre­ferred Robert Lulum to Clavell.

[01:16:22] Cameron: Yeah, right. What­ev­er hap­pened to this guy? Is he still alive?

[01:16:27] Tony: I loved, I loved all the titles for the, um, Lu books. They were always the Born Iden­ti­ty, the Osman week­end, it was almost

[01:16:35] Tony: like a sen­tence like just.

[01:16:37] Cameron: Yeah.

[01:16:37] Tony: The whole, was it the Whole Craft

[01:16:39] Tony: Covenant?

[01:16:40] Cameron: Yeah. Great titles.

[01:16:42] Tony: Steven Fry says he likes to play a par­lor game where they sit around and have to sum­ma­rize their day as a Lud­lum title.

[01:16:51] Tony: There was the, you know, the Kynas­ton shop­ping adven­ture or some­thing like that.

[01:16:57] Cameron: The, uh, the, uh, what was it? The

[01:17:00] Tony: the Riley pod­cast.

[01:17:01] Cameron: BOQ decep­tion.

[01:17:03] Cameron: Yeah.

[01:17:05] Tony: Yeah.

[01:17:06] Cameron: All right. Well, that’s all I’ve got for this week, TK. Short episode this week, in and out. Like, apart from all the tech issues at the begin­ning. Thank you. Any trav­els com­ing up this week, Tony?

[01:17:19] Tony: No, I’m stuck here set­ting up the house

[01:17:22] Tony: for inspec­tions, which is good, but no, does­n’t allow trav­el.

[01:17:28] Cameron: Well, good luck with all of that. I’ll talk to you next week. Have a

[01:17:30] Cameron: good, week. Bye.

[01:17:31] Tony: Yep. Hap­py ASX.