In episode 726 of QAV, Tony and Cameron pay tribute to the late Donald Sutherland, then shift to discussing fluctuations in the crude oil market, a detailed analysis of TabCorp Holdings, the market’s over-reaction to HLI news, and FND breaking the curse of the pulled pork.

00:00 Donald Sutherland Tribute
02:40 Ampol and Crude Oil
04:25 HLI and the Market’s Overreaction
09:38 The Curse of the Pulled Pork Broken with FND
11:25 TabCorp Holdings: A Deep Dive
37:46 Wrapping Up and Farewell

Transcription

QAV 726 Club

[00:00:00] Donald Sutherland: Don’t hit me with them negative waves so early in the morning. I think that bridge will be there. Mm hmm. And it’ll be there. It’s a mother beautiful bridge. And it’s gonna be there.

Cameron: RIP Donald Sutherland who got hit with one too many negative waves. Finally. Um

[00:00:25] Tony: make me laugh

[00:00:25] Tony: about Donald. That’s sad news. I

[00:00:27] Tony: was really sad.

[00:00:29] Cameron: Well, it’s not

[00:00:30] Cameron: sad. I mean, what a, What a

[00:00:31] Cameron: career. What a

[00:00:32] Tony: Yeah. Yeah, true. It’s

[00:00:34] Tony: gonna

[00:00:34] Tony: happen.

[00:00:36] Cameron: Um, what a, like, just, this is QAV by the way, episode 726 in case anyone was wondering. Um, yeah, Donald Sutherland passed away and you were of course the first person I thought of when I read the news. Um, but going over his list of films, like, incredible.

[00:00:56] Tony: Yeah.

[00:00:57] Cameron: from MASH through to, you know,

[00:01:00] Cameron: you name it, like,

[00:01:01] Tony: Invasion of the Body Snatchers. Klute.

[00:01:03] Cameron: Look Back. Like, just a

[00:01:07] Cameron: stunning. List of

[00:01:09] Cameron: films.

[00:01:10] Tony: Yeah, and generally, like, one of the few actors where I would go, Oh, okay, he’s got, there’s a new Donald Sutherland film out. I’ve got to watch it. I’ve got to see it. Even if it’s a bad film, he was a great

[00:01:20] Tony: actor.

[00:01:21] Cameron: yeah.

[00:01:21] Cameron: He’s one of those, one of those guys who always

[00:01:24] Cameron: brought his A game to everything and was always good to

[00:01:28] Cameron: watch. Yeah. So,

[00:01:29] Tony: put him in the Michael Caine camp, they were just actors who just wanted to act, they wanted to keep on working. They took all jobs and they brought their A game every time.

[00:01:39] Cameron: Nicolas Cage.

[00:01:40] Tony: Well, I think Nicholas has been

[00:01:42] Tony: A

[00:01:42] Tony: bit wavering.

[00:01:44] Cameron: no, he always

[00:01:45] Tony: some ups and

[00:01:45] Tony: downs.

[00:01:47] Cameron: Funny.

[00:01:47] Tony: And I can say Michael Caine has too in

[00:01:49] Tony: some respects,

[00:01:50] Cameron: Oh yeah.

[00:01:51] Tony: Yeah, but Donald didn’t.

[00:01:53] Tony: Yeah, exactly. Blame it on Rio. Yeah, but uh, but Donald didn’t.

[00:01:59] Tony: He was so good. And, and just like, he just spoke, as a young, as a young kid growing up in Brisbane, amongst all the fuckheads, he just spoke to me.

[00:02:08] Tony: He just, you know, he just, you know, MASH spoke to me, he spoke to me, um, I can’t remember the other, Movies he was in paired up with Elliot Gould a couple of times. And I just thought wow, there is a life outside of this dump. I need to, you know, there is

[00:02:23] Tony: a way out.

[00:02:24] Tony: There’s a lifestyle

[00:02:25] Cameron: is brought to you by Tourism

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

[00:02:30] Cameron: you grow up here, you can become a tourist and go somewhere else as quickly as possible. That’s Tony’s message. Well, more on that in After Hours. Um, more negative waves. Uh, bloody Ampol on the crude oil price. Tony, after last week’s episode, We talked about whether or not Ampol was uh,

[00:02:51] Cameron: crude oil,

[00:02:52] Tony: Mm hmm.

[00:02:53] Cameron: should we, and you said it was and crude oil was a sell, so I sold all of my Ampol, Alex does the commodity status yesterday and crude oil is a buy again, so, no, I don’t have any cash to buy back,

[00:03:11] Tony: Well, you should have. You sold it all last

[00:03:12] Tony: week. You

[00:03:13] Cameron: I reinvested it, last week.

[00:03:15] Cameron: in something else.

[00:03:16] Tony: Don’t hit me with them negative waves.

[00:03:21] Cameron: Oh, I hate that. I hate it. Um, well, uh, look, the market sort of has said it like one of those weeks. Um, had a good, relatively good week last week. Crashed terribly yesterday and then rebounded today back above where it was like, uh, uh, the market. The market. The

[00:03:45] Cameron: market.

[00:03:45] Tony: Don’t look at the market. Don’t follow the market. Stick to the process.

[00:03:52] Cameron: Yeah. Well, part of my process is

[00:03:55] Cameron: looking at

[00:03:56] Tony: Anxed over the market.

[00:03:58] Cameron: No, but I have to sell stuff. So I look at the market when I get alerts and I

[00:04:02] Cameron: have to sell things, right?

[00:04:03] Tony: Why do you look at the market when you get

[00:04:04] Tony: alerts?

[00:04:06] Cameron: Cause it’s, I open my spreadsheet and my spreadsheet tells me where the, what the market’s

[00:04:11] Cameron: done today. Uh, get over it. It’s all right.

[00:04:14] Tony: Oh, I get

[00:04:15] Tony: over it.

[00:04:16] Tony: Gemworth,

[00:04:20] Cameron: do things. Why do you frown? I don’t know, I’m just, that’s my resting bitch face. Um, Ed called me, uh, late last week at some point, I was on my way out to Kung Fu, about HLI, Helia Group, which used to be called something else. What was it before it

[00:04:41] Tony: I think.

[00:04:42] Cameron: Group?

[00:04:42] Cameron: And that’s, I

[00:04:43] Cameron: should know that, came up in my super analysis. We’ll talk about later on. It had just, uh, fallen, crashed on the 18th, went from 4. 22, dropped down to 3. 33. And he said,

[00:05:00] Cameron: look, uh,

[00:05:01] Tony: he called, he called you. You could do something about it.

[00:05:05] Cameron: yeah,

[00:05:05] Tony: Go and get a mortgage camp.

[00:05:10] Cameron: Ed called me to see if it was a

[00:05:12] Cameron: sell

[00:05:12] Cameron: signal.

[00:05:13] Tony: Then he said, Godfather, I’m very sorry to bother you. I hate to bring my problems and lay

[00:05:18] Tony: them at

[00:05:18] Tony: your

[00:05:19] Tony: feet.

[00:05:20] Cameron: Yeah. luckily for him, it was the day of my daughter’s wedding and I could not, uh, Could not decline a request for a favor. Someday in that day may never come. Um, he, uh, don’t get me started on the Godfather, man. I can talk about that more than reading that book. Um, apparently, uh, they’ve had a long term contract.

[00:05:41] Cameron: I think it’s with CBA and there was an announcement that the contract was expired and they were asked to resubmit. And they’re also submitting for more things, but the market just dropped them like a hot rock. All of a sudden, it wasn’t that they’d lost the contract. It was just, uh, the contract’s up and they have to resubmit.

[00:06:05] Cameron: So we talked about it and I said, well, look, you know, it’s, it’s a terrible thing, but it’s not below its three point trend line. It’s not a rule one. I mean, I held it in, uh, I hold it or held it, hold it in, I think super portfolio or something. It dropped a ton, but it was still up, I don’t know, 30 percent from when I bought it.

[00:06:24] Cameron: I said, and it’s, you know, a contract up for renewal is not one of our, Uh, bad news

[00:06:31] Cameron: thing. So you do what you got to do, but you know, I’m going to hold it. Cause you know, I said, I’ll talk to Tony about it next week, but, um, it doesn’t, uh, break any of our sell rules. And then the next day it just rebounded.

[00:06:45] Tony: Ha ha ha ha ha Ha

[00:06:47] Tony: ha.

[00:06:47] Cameron: It hasn’t gone all the way back up, but it went from, it had dropped down to 3. 30, it went back up to 4. 08, it settled in, now it’s like 3. 90. So, um, yeah, it dropped from 4. 20 down to 3. 90 at the end of the day, so, you know, 10 percent

[00:07:02] Cameron: give or take,

[00:07:03] Tony: I dropped for two reasons. I mean, first of all Uh, they lost a big contract to Mabb last year and the stock dropped down because of that. And then CBA, the CBA contract is a large part of their business, I forget the number, like sort of above 20%. And so people were just scared that if it happened again like it did with Mabb, the stock price was going to drop.

[00:07:24] Tony: And this is a classic case of shooting first and Doing the analysis

[00:07:28] Tony: afterwards.

[00:07:29] Tony: People jump the gun.

[00:07:31] Cameron: But what people? Who are these people, Tony? Who are these people that are

[00:07:36] Cameron: These are professionals! I

[00:07:37] Tony: Ooh.

[00:07:38] Cameron: mean, these are professional people! They get paid a lot of money

[00:07:42] Cameron: to be professional!

[00:07:44] Tony: they get paid a lot of money. It doesn’t mean they’re professional.

[00:07:46] Tony: Don’t

[00:07:47] Tony: confuse one

[00:07:47] Tony: with the other.

[00:07:49] Cameron: Isn’t that the definition of a professional? Somebody gets paid a lot of

[00:07:52] Cameron: money to do something?

[00:07:53] Tony: No, a professional is someone who, you know, gets trained in a, in a vocation. Like a doctor

[00:07:59] Tony: or a you know, a lawyer or a teacher.

[00:08:02] Cameron: Isn’t that a

[00:08:02] Cameron: fund manager? Don’t they get trained to being fund

[00:08:04] Cameron: managers?

[00:08:05] Tony: But I go to fund manager school, that’s even worse, they go to finance school, get taught about the efficient market hypothesis, they go to MBAs and get taught how to cut

[00:08:15] Tony: costs and headcount.

[00:08:16] Tony: Yeah.

[00:08:17] Cameron: Well, we’ll talk a little bit about our sell signals later on when I get to my super portfolio analysis. But, in this particular instance, you know, I didn’t panic.

[00:08:30] Cameron: I was like, nah, it’s just, you know, it’s not breaking a rule. So we’re going to hold it and it

[00:08:35] Cameron: rebounded. So

[00:08:37] Tony: Yeah. But look, but just, just think about it. Say you’re the manager of Genworth. Like we’ve identified as being a good company. You’re the manager of Genworth, you know, you’ve got concentration risks. So you’re probably doing other things on the, behind the scenes to, you know, try and mitigate that risk. So

[00:08:51] Cameron: yeah.

[00:08:53] Tony: it’s not like.

[00:08:54] Tony: They’re all out playing golf and then CBA rings up and they go, shit, what are you going to do, play the back nine or go back to work? It’s like, they’ve been thinking about this for a long time and probably, if they’re good, trying to put something in place to

[00:09:06] Tony: mitigate the risk.

[00:09:08] Cameron: Yeah. But what, what, what just strikes me is like how reactive the market is to stuff like that.

[00:09:16] Tony: Yeah.

[00:09:17] Cameron: Like there was, you, you would swear that, you know, somebody from HLI had just shot somebody in the middle of downtown Melbourne and, you know, was dancing around the body or something. Like it was like, what?

[00:09:31] Tony: Mmm.

[00:09:32] Cameron: Anywho, there you go.

[00:09:34] Cameron: Good thing we have rules, uh, is what I told myself. Um, speaking of, uh, rules, you know, we have had this, uh, you know, jokey rule about the curse of the pulled pork, uh, for the last couple of years. You do a deep dive on a stock and it immediately plummets. Well, your good mate at Findi (FND), whatever his name is, uh, who

[00:09:58] Tony: Mr.

[00:09:58] Cameron: offered,

[00:09:59] Tony: Daniel

[00:09:59] Cameron: to come on the show and then ghosted me ever since.

[00:10:02] Cameron: Um

[00:10:03] Tony: He’s probably playing golf,

[00:10:05] Tony: given where the share

[00:10:05] Tony: price is.

[00:10:06] Cameron: heh With diamond, with

[00:10:08] Tony: Yeah.

[00:10:09] Cameron: of diamonds.

[00:10:10] Cameron: Clubs

[00:10:11] Cameron: made of platinum. They’re up 55 percent in the last 90 days, Findi. Up 329 percent since you did a pulled pork on them back in January.

[00:10:26] Tony: So can I just say I’m available for sponsorship. If anybody out there who runs a company would like me to do a pull

[00:10:32] Tony: book.

[00:10:35] Cameron: 329 percent since January! Wow. Um, and he did listen to your book and he emailed us and said, thanks very much. Um, you know, things are going well, but, um, that’s, uh, that’s, that’s a good one. Good old FND. And I nearly sold it at one stage too, for some reason. I think it, uh, a little while ago, it, it sort of,

[00:11:02] Tony: did dip. Yeah.

[00:11:03] Cameron: It did dip

[00:11:05] Cameron: and I think it nearly, I think it broke a rule one or at some point, but um, I can’t remember what it was.

[00:11:10] Cameron: But anyway, there you go. Max! Max, uh, sent me something on Twitter. Ben Graham’s last will and testament. Uh, this is a little thing that he got out of somewhere, I don’t know where, but I’ll just read it. In his last years, Ben Graham distilled six decades of experience into ten criteria that would help the intelligent investor pick value stocks from the chaff of the market.

[00:11:33] Cameron: The ten. Number one, an earnings to pri You can comment on these as we go. An earnings to price yield of twice the AAA bond yield. The earnings yield is the reciprocal of the price earnings ratio.

[00:11:48] Tony: Yeah. Pretty basic value metric. We use something similar, the lowest PE in the last three years. Um, I like this one in that it does link it back to the bond yield. So it does mean that the PE will change, like the threshold for scoring will change as the, as the market goes up and down. So that’s interesting, but that would be sitting around about nine or 10 at the moment.

[00:12:10] Tony: I’m not sure what a, AAA bond is yielding cash rates at, what’s the cash rate at? 4. 35. So AAA bonds probably yielding about 5, 5. 5. Um, which, and this is saying buy something at, at less than, if the PE is less than double the, um, the bond yield. So he’s talking about buying something in single digits as a PE at the moment.

[00:12:36] Cameron: Uh,

[00:12:38] Cameron: right.

[00:12:39] Tony: Yeah. It’s a, it’s a strange way of saying it, but

[00:12:42] Tony: that’s that’s what he means.

[00:12:44] Cameron: Single digit. It’s an EP, not a

[00:12:48] Cameron: PE.

[00:12:49] Tony: Yes. Yes, he’s using, instead of putting price over earnings, he’s putting earnings over price. And I think that’s just so he can, he can compare it to the bond yield,

[00:13:00] Tony: which is also

[00:13:01] Tony: earnings over price.

[00:13:03] Cameron: do you think that would be a good metric to pay attention

[00:13:07] Cameron: to?

[00:13:08] Tony: Well, I mean, broadly, he’s saying, uh, buy things with a low P. E., but he’s, he’s, he’s defining low P. E. in a kind of relative way by tying it back to the, the bond rate. So in, at times when the bond, bond yield is very high, then, um, you can afford to pay more for stocks to, um, and we’ve got a, uh, a, you know, a wider, the wider target, I guess, to buy stocks.

[00:13:35] Tony: And when the bond yield is very low, he’s saying, um, you should be buying even cheaper stocks. So he’s putting it relative to the bond market.

[00:13:43] Cameron: Right. Okay, number two, a price earnings ratio down to four tenths of the highest average PE ratio the stock reached in the most recent five years. Uh, well, that’s kind of similar to our lowest PE

[00:13:58] Cameron: score, right?

[00:13:59] Tony: Yeah, it is. It’s just, again, he’s defined it slightly differently. He’s taken it over five years and he’s saying if it’s 40 percent off the highest, highest, uh, yeah, highest average PE ratio. I guess that’s, I don’t think he’s saying it’s the average over the five years. I think he’s saying it’s the average PE, the average of the five PEs over the last five

[00:14:18] Tony: years.

[00:14:20] Cameron: Right.

[00:14:21] Tony: So similar sort of

[00:14:22] Tony: thing.

[00:14:23] Cameron: yeah, looking to buy it when it’s PEs relatively low compared to its history. I mean, we don’t, we’ll give it a score if it’s the lowest in the last

[00:14:35] Cameron: three years.

[00:14:36] Tony: well, that’s the interesting thing about this. He’s got a whole scoring system as well, and that, back when I first read Ben Graham, that was one of my key takeaways from it was, yeah, okay, he’s doing, he’s doing factual analysis and then building up a checklist, building a scorecard

[00:14:50] Tony: for it. Yeah.

[00:14:52] Cameron: Number three, a dividend yield of two thirds of the AAA bond yield. So we looked at earnings to price yield

[00:14:59] Tony: Mm hmm.

[00:15:00] Cameron: it’s a dividend

[00:15:01] Cameron: yield.

[00:15:02] Tony: hmm. So again, the dividend yield he’s talking about would be around 4 percent now, two thirds of 4. 35, whatever that works out to be. Mm hmm. And yeah, interesting one. Again, the dividend in the U. S. is a different, has a different framework to dividends here, because at least recently, for the last sort of 30 odd years, we’ve had franking credits and they don’t.

[00:15:25] Tony: So there’s an incentive for companies to pay a higher dividend yield here. to fund retirees investments. Um, but yeah, he is, he is focusing on dividend paying companies and that in a lot of ways that rules out gross stock straight away. Cause, um, it’s very typical for a gross stock not to pay a dividend and put their, you know, whatever money they have, whatever cash they have back into expanding the

[00:15:49] Tony: business.

[00:15:50] Cameron: Yeah. Number four is a stock price down to two thirds of tangible book value per share.

[00:15:59] Tony: Yeah, again, uh, that’s a very deep value, uh, and, you know, it’s, I guess, the one that we use is book plus 30, and that’s the one that Buffett talks about when he rebuys Berkshire Hathaway shares, so, um, two things here, it’s an even deep, it’s an even steeper, um, value metric than what we use, because he’s saying two thirds of tangible value, and the second thing is he’s focusing on tangible, Tangible book value, I guess I can equate with net tangible assets, which is people will be familiar with, more familiar with.

[00:16:30] Tony: Um, and so, you know, it gets down to this whole debate about whether you’re factoring in goodwill or not into the assets of the company. Um, and I don’t know where that stood back in the 1920s and 1930s when he was writing this. Uh, it says the last, the last will on testament, but it doesn’t say when this was written.

[00:16:48] Tony: Um, so it’s gotta be, you know, I think he died in the seventies. So it’s got to be prior to that at some stage, um, the good will argument about whether it was an asset or not, or a tangible asset, really, sort of, from my memory, was a big thing in the 80s, I’m not sure it was a big thing before that.

[00:17:07] Cameron: Right. The next one, number five, a stock price down to two thirds of net current asset value, current assets, current assets, less total debt.

[00:17:18] Tony: Yeah, well, again, a fairly similar thing, I mean, um, net tangible, or tangible assets, or tangible book value is going to have both. Current and non current assets in it, but now he’s going even further than that and saying, um, two thirds of net current assets, uh, and that’s, I mean, the whole thing about this is it’s very deep value, and when I first came across this decades ago and tried to put it into practice, I don’t think I found a stock that, um, met these metrics, it was very hard to find them, and to find something trading at two thirds of its net current assets, so net current asset is something that you can liquidate, Within 12 months, um, so it’s, you know, oftentimes it’s receipts from customers.

[00:17:59] Tony: Um, it, it, it’s not, it’s stock. It’s not things like, uh, the buildings, you know, it usually isn’t anyway. I guess you could sell a building within 12 months, but they’re normally seen as a longer term asset. Um,

[00:18:13] Cameron: it’s your apartment.

[00:18:15] Tony: it can’t take 12 months. Oh God, don’t mention the war. yeah, so it’s, I mean, you know, think about, you’re trying to find a coffee shop, which is, which is for sale.

[00:18:26] Tony: That’s, um, less than its current assets. So current assets in a coffee shop, it’s going to be, um, possibly the equipment, definitely the inventory. So the beans, so you’re buying it for two thirds of what they’re holding in beans. It’s, it’s going to be really hard to find a company that you can buy at this kind of

[00:18:44] Tony: level.

[00:18:45] Tony: And.

[00:18:46] Cameron: it’s a

[00:18:47] Cameron: fire sale, really. I mean,

[00:18:48] Tony: It’s a fire sale, yeah, and then you’ve got to ask the question, why is the fire sale happening? Is it because it’s unloved in the market, but it’s got a future? Or is it actually going out of business?

[00:18:57] Cameron: Or the people have a, you know, Personal emergency, they have to get their cash cause they gotta, I dunno, pay for lawyers bills or something. Whatever it is. Go on the run. Uh, number six, total debt, less than tangible book value. We don’t really look at debt per se,

[00:19:19] Tony: Um, no, we do in terms of the financial health ratings that Stock Doctor use, they factor in debt.

[00:19:25] Tony: Yeah. But we don’t, we don’t specifically pull it out as a, as a,

[00:19:29] Tony: metric.

[00:19:31] Cameron: Number seven, current ratio, current assets divided by current liabilities of two or more. That’s also part of the financial health, isn’t it?

[00:19:41] Cameron: Current ratio.

[00:19:42] Tony: Yeah. I mean, Stock Doctor will have their own version of what that ratio threshold is, how they score it. But yeah, current assets divided by current liabilities would be, um, a metric that they would use. Um, it’s normal. It’s normal. Oftentimes called the quick ratio, and if it’s less than one, people see it as being, um, well, see it as being a negative, so you can’t really, you don’t have enough income coming in to cover the outgoings in the short term.

[00:20:09] Tony: It certainly doesn’t spell the end of the world because it could be other ways of getting income. That’s not part of the current assets, but, um, uh, and, and of course solving your current liabilities could have other solutions as well, besides paying them off, so, um, it’s not the end of the world, but generally you’d look for something that fits into this, um, he’s saying look for something that’s not just greater than one, but greater than two.

[00:20:32] Tony: Again, a really Deep value way of investing.

[00:20:37] Cameron: Number eight, total debt equal or less than twice the net quick liquidation value as defined in number five, which was two thirds stock price, two thirds of the net current asset

[00:20:50] Cameron: value. Number

[00:20:53] Tony: saying, um, okay, you’ve got current assets that you need to liquidate quickly, but that’s going to be useless if the debt you hold in the company is more than that value because you’re just going to, you know, you’re going to pay off your debt. You’re not going to pay off all your debt and therefore you won’t be able to trade.

[00:21:07] Tony: So that’s, that’s a fairly.

[00:21:10] Tony: Obvious one, I would have thought.

[00:21:13] Cameron: nine, earnings growth over the most recent 10 years of 7 percent compounded, a doubling of earnings in a 10 year period.

[00:21:24] Tony: Um, yeah, it’s like I said, if you, you try to find a, his list of stocks is going to filter out almost every stock on the market. I think if it’s, if it’s trading at its, um, less, it’s half its asset value. Um, it’s got a two to one quick ratio and it’s growing at 7 percent at least per year. Yeah. It’s investing nirvana.

[00:21:45] Tony: So, um, this is a theoretical list, at least in today’s terms, I think. One of the things I’ve seen both from him and through Buffett and other people is that technology plays a big part in the success of prior investors because he would have been very, very hard to get your hands on financial information back in the 1920s.

[00:22:07] Tony: Um, and then to do the analysis, you’re talking, you know, pads and pads of pen and paper, working it all out and then doing whatever testing you have to do to work out which is good and which is bad. I mean, the guy would have been devoting full time. Elbow grease to this probably. And that would have put him apart to most investors in the market, right?

[00:22:29] Tony: Um,

[00:22:29] Cameron: Yeah.

[00:22:30] Tony: so this is, I think that’s one of the reasons why he could do that. And number two, it’s one of the reasons why I could find companies that were trading in this kind of Nirvana spaces because it was so hard to find for anybody else.

[00:22:42] Tony: And, you know, and then you, then you sort of advance and technology advances and then there are, you know, people who put together books of finances and, um, then you hear stories about, you know, Charlie Munger being called a book with two legs and Buffett saying his kids used to say he’d walk upstairs every night with a stack of annual reports to read the data.

[00:22:59] Tony: So they were doing it as well, but probably had a bit better data sources than what, um, Graham did. And they were successful, but again, it was a very laborious mechanical operation. You know, we live in the age where we can get access to information easier, and we can run checklists to screen the whole market.

[00:23:16] Tony: So, I think

[00:23:18] Cameron: so can

[00:23:18] Cameron: everybody else.

[00:23:19] Tony: it’s like in everybody else. That’s right. So that’s, I guess that’s what I’m saying. It’s, it’s what, what are we doing differently that, um, gives us the edge. And, uh, for Ben, I think it was putting together this great, great checklist, which describes the ultimate company. But as soon as it became easier to do, like that, that benefit got traded away.

[00:23:37] Cameron: Yeah. Um, and the last one, number 10, stability of growth in earnings defined as no more than two declines of 5 percent or more in year end earnings over the most recent 10 years.

[00:23:54] Tony: Yeah, great. They are good companies.

[00:23:59] Cameron: So, the rest of this says, Together, Ben’s 10 points construct a formidable risk reward barrier. The first five point to potential reward by pinpointing a low price in relation to such key operating results as earnings. The second five measure risk by measuring financial soundness and stability of earnings.

[00:24:17] Cameron: Backtesting has shown that concentrating on stocks that meet just two or three of these criteria can produce good results. Changing market conditions and business practices make it unlikely that many stocks will get by these screens, which Graham worked out together with James Rhea, an aeronautical engineer.

[00:24:36] Cameron: Six years after Graham died, Rhea tucked the formula into a mutual fund known as the American Diversified Global Value Fund, run by Rhea’s son, James Jr. It turned out to be a clunker. And,

[00:24:53] Tony: from that.

[00:24:55] Cameron: yeah, it’s a bit of a, uh, bit of a anti climax when you go through all the 10 points and then it goes, yeah, but it didn’t work when they put it into practice.

[00:25:05] Tony: Yeah. And, um,

[00:25:08] Cameron: oh, I was gonna say, I did some more research on RIA. If that is, in fact, how he pronounces his name and, um, his work with Graham. I came across this article. It says, uh, it’s referring to an article that Ria wrote. He recounts the first time he met Ben Graham. Graham asked him to describe his stock selection theory, but without using mathematics, Ria did so using his milk cow analogy.

[00:25:30] Cameron: And I know you like a good analogy. We’ve always used the coffee shop analogy, which helped me a lot. Rheer likened his method of picking stocks to that of selecting a milk cow. When picking a milk cow, you ideally want a cow that gives lots of milk, earnings, but also will give more milk year over year, growth and earnings.

[00:25:50] Cameron: Furthermore, you would like stability in the growth. Also, Ria went on to explain cheese can be made from the milk, which is the dividend given back to the customer. So, he also would want a lot of cheese from the milk, a high dividend yield. Part of Ria’s research was to look for stocks with high reward to risk ratios.

[00:26:08] Cameron: To him, a high reward cow was one that produced a lot of milk, increased its milk output at a stable rate, and allowed for a lot of cheese to be made. The risk in Rhea’s milk cow analogy was that the cow would stop producing milk, meaning you lose your milk, earnings, and cheese, dividend yield. The degree of risk was how much you paid for the cow relative to what you could get for the meat on its bones, the liquidation value.

[00:26:33] Cameron: The higher the price paid for the cow relative to its liquidation value, the higher the risk. I I wanna I wanna know what kind of cow can keep giving out more and more

[00:26:42] Cameron: milk every year does its I don’t have to

[00:26:45] Cameron: keep increasing in size. You end up with a cow the size of a factory

[00:26:50] Cameron: or something.

[00:26:51] Tony: perhaps if you buy it when it’s very young and it starts to produce more and more as it ages, but yeah, I mean, a couple of things. That’s, that description is much more like the light. Warren Buffett approach or the Charlie Munger approach to buying quality companies at a fair value and looking for the moats and looking for them to continue to, you know, put prices up and improve earnings year on year because of their moat.

[00:27:13] Tony: So, um, that last sentence was the value bit, um, and it’s, it’s kind of a quality of value sort of. Summary as well, isn’t it? We’re finding good companies at fair, at good prices. So yeah, I mean, um, it’s a good analogy. It’s interesting. It’s a cow, like we use coffee shops and coffee beans now. So I guess back when this analogy was first made, there was a lot more understanding of the worth of a cow by the population.

[00:27:38] Tony: Rest of the day, it’s a lot more understanding of coffee. Um, but, but yeah, it’s, uh, it’s, it’s a good one. It’s, it also leads you to think, well, when’s the best time to buy a good cow? It’s probably when the price is down for, um, Cows at the slaughterhouse, which happens from time to time for various reasons, you know, droughts and floods and all that kind of stuff, so that lends itself again to Buffett’s way of thinking, which is you, you know, you’re fearful when others are greedy and greedy when others are fearful.

[00:28:09] Tony: So there are always going to be good cows around, you’ve just got to buy them at the right price, which is the value side of investing, which is the side I like.

[00:28:17] Cameron: Yeah, so, continuing looking into this and the James Rhea fund, I found an article called A Contrarian Look at Benjamin Graham, uh, says, When Benjamin Graham died at age 82, which was in 1976, by the way, he was one of the great legends of Wall Street. Brilliant, successful, ethical, the man who invented the discipline of security analysis.

[00:28:44] Cameron: Now 20 years later after his death, his memoirs are reaching the public at last, this is in 1996. A hugely successful chronicle of one of the richest and most eventful lives of the century. In a readable and in size of book practical speculation by Victor Niederhofer and Laurel Kenner, I came across a critical assessment of Benjamin Graham.

[00:29:05] Cameron: The ancient Greeks had Hercules, the mighty hero deified by Zeus for noble deeds and worshipped by men. In the 21st century, Americans have Benjamin Graham. Goes on and on and on about he’s the father of security analysis, etc, etc. Um, quoting Warren Buffett, we’re here for only one reason, to listen to the wisdom of Benjamin.

[00:29:25] Cameron: But then it says, Considering the great gap between Benjamin Graham’s theory of value investing and the chances of putting it into practice, it is not surprising that the performance of the funds he managed was not as attractive as legend would have it. The universally revered apostle of prudent investing was devastated after the crash of 1929.

[00:29:44] Cameron: After finishing 1928 with a 60 percent return, he lost 20 percent in 1929. He lost 50 percent more in 1930. In 1931, he lost 16%. In 1932, much to the relief of his investors, he lost a mere 3%. Journalist Janet Lowe in Benjamin Graham on Value Investing, lessons from the Dean of Wall Street, wrote, Though Graham was able to stumble back and regain his footing in the market rather quickly, after Black Tuesday, Ben’s high risk days were over.

[00:30:15] Cameron: Afterward, he struggled to squeeze the best possible return from his investments while at the same time seeking that wide margin of safety. The average returns on Ben’s portfolio descended from the heights of the pre depression years. Um, before I go on, like, his high risk days were over? I don’t think of Benjamin Graham’s investing strategy as high risk.

[00:30:37] Cameron: When was he, when was he high risk, do you know? Um,

[00:30:41] Tony: Uh, no, that’s a good point. He, um, one of the things I took out of his books were that he would fluctuate between bonds and stocks, depending on where he felt the risk was less. So I wouldn’t have said he was high risk either,

[00:30:53] Tony: really. Mm hmm.

[00:30:56] Cameron: she says, Graham always believed that a Dow of more than 100 was too high, and when it got there, he never again felt comfortable in the market, as the Dow never fell below 100 after 1942. Brian was always leaning toward being too defensive. In the early 1950s, when the Dow was about 300, he began to pull back from his business and advised his students against going into investing.

[00:31:16] Cameron: The market was too high. Because he believed for so long that the market was overvalued, his investment performance did not measure up to a buy and hold strategy or any other sensible alternate strategy. In 1956, the year the Dow topped 500 for the first time, he left the business for good and devoted himself to a life of pleasure.

[00:31:35] Cameron: Um Now, what I took away from that is, he was obviously predicting, I assume, that the market was going to crash. And one of the things that you’ve always taught us is, you don’t predict, you stay fully invested.

[00:31:51] Tony: Yeah, definitely. It’s surprising to me that he took a hard line number stance on what he thought was an overvalued Dow. He must have realized that it was just going to keep going up, even if it was only by inflation or, or GDP growth. Um, you’d expect that to happen. So it’s, yeah, I mean, what’s, what’s the Dow Jones now?

[00:32:13] Tony: 20, 000 something, 30, 000. Um, there’s a lot of growth he’s missed out on just by having a number. So that, that’s strange to hear that. I’m not saying it didn’t happen, but it’s strange to hear that given that. You know, look, if we just went back through his list of. Sorry?

[00:32:29] Cameron: 39,

[00:32:32] Cameron: 411 today.

[00:32:32] Tony: Okay, thank you.

[00:32:34] Tony: That’s how much I followed the Dow Jones.

[00:32:38] Tony: Um, yeah, but that’s, you know, a lot of upside people would have missed by taking his advice. So it does seem strange when he talks about linking PE ratios to bond yields that he didn’t have a relative. Number as he’s limited on when the Dow was overvalued or not.

[00:32:54] Cameron: Hmm.

[00:32:54] Tony: was interesting, but I want to hear more about his life of pleasure that you talked about at the end of that, at the end

[00:33:00] Tony: of that

[00:33:00] Tony: story.

[00:33:02] Cameron: Yeah. Well, they don’t go into that, unfortunately, but,

[00:33:04] Cameron: um.

[00:33:05] Tony: Well, they do, they talk about, they do, they talk, is it that article? Well, they talk about him making up with his son’s

[00:33:12] Tony: Girlfriend or partner?

[00:33:15] Cameron: I missed that bit. Uh, yeah, no, it’s not in this article that I’m looking at, not the PDF. He took off with his son’s girlfriend?

[00:33:26] Tony: I think so, yeah.

[00:33:29] Cameron: that is, uh,

[00:33:31] Cameron: going

[00:33:32] Tony: think he was married five times and he went to his last wife and said, uh, I’m gonna see you for six months a year and the other six months I’m gonna spend in Europe with this other girl.

[00:33:40] Tony: So, um, yeah,

[00:33:41] Cameron: Hey, well, it’s good to

[00:33:43] Tony: quite, quite the life of

[00:33:44] Tony: pleasure.

[00:33:47] Cameron: Um, and there was a quote I saw in, uh, Ben’s Wikipedia profile says, um, Graham’s investment performance was approximately 20 percent annualized return over 1936 to 1956. The overall market performance for the same, uh, time period was 12. 2 percent annually on average. Even so, both Buffett and Berkshire Hathaway Vice Chairman Charlie Munger have said they consider Graham’s methods necessary but not for sufficient, not sufficient for success in contemporary investing because Graham placed too little emphasis on the potential for future growth.

[00:34:25] Cameron: As Buffett told journalist Carol Loomis in 1988 for Fortune, Boy, if I had listened only to Ben and not also to Charlie Munger, would I ever be a lot poorer? I was wondering, like, what must Ben have been thinking in those years when he was watching Warren go from strength to strength, um, when he was telling people to stay out of the

[00:34:47] Cameron: market?

[00:34:48] Tony: Yeah. Well, I think, um, I think he, Ben owned Geico and then sold his shares in Geico to Warren, to Berkshire Hathaway. So it was kind of even worse. It was like Ben must’ve had a position on Geico, which was, it’s not a long term hold and he sold it to Warren. It’s been a cornerstone of Berkshire Hathaway ever since.

[00:35:08] Tony: So yeah, it’s, it’s like couple of base plant moments

[00:35:12] Tony: there,

[00:35:12] Tony: I think.

[00:35:15] Cameron: My last bit on Benjamin Graham was that according to Buffett, Graham used to say that he wished every day to do something foolish, something creative, and something generous. And Buffett noted Graham excelled most at the last.

[00:35:29] Tony: Yeah,

[00:35:29] Cameron: something foolish, something creative, and something generous. That’s a

[00:35:34] Cameron: nice, nice philosophy.

[00:35:35] Tony: it is, isn’t it? I

[00:35:36] Tony: like it too.

[00:35:38] Cameron: Alright, we should move on. Um, I ran a sell analysis over my super portfolio,

[00:35:45] Cameron: Tony,

[00:35:46] Tony: Mm hmm.

[00:35:46] Cameron: which I’ve talked about doing for the last couple of weeks. So, basically, my, and look, this isn’t, uh, this isn’t, like, probably the be all and end all of analysis. It was relatively rough and ready, but I took I took my super portfolio since, uh, I started self managing it, uh, via Australian Super in August of 21.

[00:36:08] Cameron: I looked at all of the sales that I’d done since that time. And then I looked at what the current price for all of those stocks is today. Then I calculated all of the dividends that they would have accrued since I sold them and added that to it. And looked at. If I had just held those stocks instead of selling them, whether or not I would be in a better off position now or a worse off position now.

[00:36:36] Cameron: And then I also, this morning, cut it down to the first 20 stocks that I sold. So just if I’d held onto those 20, where would I be now if I hadn’t continued to trade? So I’ve sold 101 stocks since August 21. 71 percent of them are worth more today than when I sold them and 30 are worth less. Um, and that includes whether or not I include dividends or not.

[00:37:07] Cameron: Um, even just with the capital gain, it’s basically the same, but if I had the dividends, obviously the appreciation is higher. According to my spreadsheet, uh, if I had held onto all of the stocks, which I’d bought, which I wouldn’t have been able to do because I wouldn’t have had

[00:37:22] Cameron: that much capital, but it would, yeah, it would be 26 percent

[00:37:27] Cameron: higher,

[00:37:28] Tony: Mm-Hmm.

[00:37:28] Cameron: um, today or 7 percent a year.

[00:37:32] Cameron: A little bit closer to, you know, 8 percent higher. I’m just opening up the spreadsheet. Um, the, uh, the sort of the big hitter in all of this is, uh, New Hope Coal. Um, it would have gone up 234%, um, since I sold it.

[00:37:55] Tony: When did you,

[00:37:56] Cameron: the, the,

[00:37:57] Tony: so, so, no. When did you buy it? Was it part of your August 21 portfolio? That’s

[00:38:02] Tony: the, that’s the test, isn’t it?

[00:38:04] Tony: Okay.

[00:38:05] Cameron: Yeah. Yeah. It was very early on. Yeah. I sold it October 21.

[00:38:10] Tony: Mm

[00:38:10] Cameron: Uh, sold October 21 at, uh, 2. 15. And it’s now trading at 4. 73. Um, but, and, and the worst though, if I kept holding it, the worst over that period would have been GRR, which is down 45%. But if I just cut it off at the first 20, uh, and take out a couple of duplicates like ECX, I bought and sold a couple of times and there was a couple of others.

[00:38:41] Cameron: Um, and it held those 20 for the last three years. I would have been 55 percent better

[00:38:48] Tony: Oh, so these were the 20 that was in place in August 21 when you started the analysis. That was your

[00:38:54] Tony: portfolio at the

[00:38:55] Tony: time?

[00:38:56] Cameron: it’s, uh, yes, the ones that I bought, like the first 20 stocks that I sold, basically, after August 21. So between August 21 and May 22 is when I sold the last of these. Um, would have been 55 percent better off. NHC, as I said, is part of that. So it’s sort of the big hitter up, 234%. The worst. I would’ve been worse off with a MI, which would be down 44%.

[00:39:22] Cameron: But, um, the average gain across that 20 is about 38%. So 55% over again, roughly three years, depending on when you cut it off, um, roughly sort of, uh, 18% a year. Uh, th outta, outta those 2017 would’ve gained. Um, since I sold them and three are negative, uh, which are ASX, AMI, and Amico, E H L. Now, uh, caveats is I haven’t really accounted for corporate actions I might have missed.

[00:39:57] Cameron: Consolidation, splits, those sorts of things. Uh, I don’t know if there were many of those in the last few years with those sort of large companies. That may, um, change it. But It was kind of depressing to run that analysis, but, but then I’ve been thinking about it overnight and I’m like, well, you know, our selling triggers are, this is a combination of rule one cells, commodity cells,

[00:40:25] Cameron: um,

[00:40:26] Tony: Three point

[00:40:26] Cameron: 3PTL cells, and maybe a

[00:40:28] Cameron: bad news seller somewhere in there too, I don’t know if there were any, but I haven’t done like a cell trigger analysis on them, but I know that our, our cell triggers are there as an insurance.

[00:40:41] Cameron: Um, policy, right?

[00:40:43] Cameron: It’s just in the last three, three years, we haven’t had

[00:40:46] Cameron: another GFC. We did have COVID, uh, before that, actually a little bit before that. So my portfolio, um, started sort of mid COVID spike or towards the end of the COVID spike, post COVID spike. But, you know, and I know we have a, we have a calamity, what, roughly every decade,

[00:41:05] Cameron: there’s a market correction.

[00:41:07] Tony: Yep. Well, we’ve had interest rate rises during that period, which I think was the reason for a lot of our selling. Um. The interest rates would rise and the market would sell off. And we get, I know I personally, I get rule one to three PTO a lot because of that. And then things would recover and settle down.

[00:41:23] Tony: So, yeah, I mean, I, I agree with you. I probably, as the day goes by, I don’t sit down and say, I wish I had gone to cash after COVID because that was when my portfolio was at the high, but. You know, I wish a lot of things too. If I could make that happen, I’d probably focus my wishes on some other things. So, um, you’ve got to be careful.

[00:41:41] Tony: We’re not sort of, you know, Monday morning quarterbacking this, but it’s a useful, is a useful analysis and it’s, um, led me to think that a 20 percent rule one is a better idea, um, but you know, the analysis we did on that suggests it’s marginally better or it’s, it’s, um, yeah, a little bit better. So I’m not sure.

[00:42:02] Tony: Um, What was your takeaway, dear? I mean, I don’t like, I have been a buy and hold investor in the past and it just didn’t work, especially when the GFC happens, so I think having sell triggers is far better than not having them, or having the ones that we have, um, but yeah, they didn’t treat us very well for the last couple of years because of all the churning that was going on due to interest

[00:42:22] Tony: rate rises primarily,

[00:42:24] Tony: um,

[00:42:25] Cameron: And Ukraine and Gaza and trade issues and China, COVID lockdowns, and, uh, All the other things that have spooked the market, but you know, it, it, it, okay. So my takeaway is number one, it confirmed my suspicion that one of the reasons my portfolio has been underperforming the index for the last few years that I’ve, I’ve been selling a lot when the market has then just been rebounding.

[00:42:52] Cameron: And the stocks that I’ve been buying, haven’t kept up with that. Cause I, you know, I lose it, it, it rule ones and I have to sell it and then it goes up and then I rule one and been in that rule one death spiral that we’ve talked about and so that, you know, that hurts, but. Again, I’m realizing that this is a long term strategy, right?

[00:43:15] Cameron: And those things are there as an insurance policy.

[00:43:20] Tony: Yeah, no, I agree 100%. I haven’t stopped using them. They’ve heard us in the last few years, but they’ll help us going forward at some stage, because there will be a market downturn. I suspect, who knows when it will be, I can’t predict it, but I suspect given where the PE is in the US stocks, that they’re going to come off at some stage for whatever reason, and that will drive the market down.

[00:43:40] Tony: Or, you know, interest rates will go up again because inflation hasn’t been tamed, and that will drive the market down. And then we’ll be thankful for it. Sell point rules that we have because we won’t be able to make sense of the market at the time. We can just apply the rules. So,

[00:43:54] Tony: um,

[00:43:55] Tony: yeah,

[00:43:56] Cameron: As you said, like Monday,

[00:43:58] Cameron: Monday, Monday morning quarterbacking, we haven’t had a correction, a major correction in the last couple of years. So, you know, in retrospect, we can go, well, we, we didn’t have to sell those things because there wasn’t a major correction, but you don’t know you’re in a major correction until, you Later,

[00:44:15] Cameron: right?

[00:44:16] Tony: Yes.

[00:44:18] Cameron: So, uh, yeah, I just, uh, yeah, it, it hurts. It’s painful, but that’s insurance.

[00:44:26] Tony: Yeah. And, and if we can think of some ways to amend the rules, um, great, but I haven’t been able to come up with anything other than to trial a 20 percent rule one, give us a bit more breathing space before we have to sell something because I was finding that was an issue. Like buy something, the interest rates would go up.

[00:44:43] Tony: Share price would go down by 11%, I’d sell it and then go back up again once the market had gotten used to interest rates being higher again. Um, so that was the killer. Uh, but then we did the backtesting, it, it, my, my thoughts are because it came out relatively the same as a rule one of 10 percent that 20 percent had less churn, it was, it was better.

[00:45:06] Tony: But I’m trialling it now going forward and I think luckily we’ve exited that kind of turbulence in the market which, May this trade a lot. So I don’t know whether the, my portfolio being so placid is now due to the rule one being 20 percent or more likely that things have just settled down. The market’s comfortable with interest rates at 4.

[00:45:28] Tony: 35 percent or thereabouts. Um, and it’s not as jumpy as it was.

[00:45:33] Cameron: Hmm. Well, I don’t think I’ve been trading as much in my super portfolio either. A little bit more than you, but I hold more stocks than you do in mine too. So there’s a little bit more volatility there that comes with that. Anyway, so that’s it. It hurts. I, I, I felt sick when I ran the spreadsheet. But, you know, I say, well, you know, it’s It’s a run it 10 years later, 10 years from now and see how you feel, you

[00:46:00] Tony: Yeah. I think buying, buying a hold, I think is attractive and that’s typically what a value investor would do. But I’ve just learned that you get burnt so badly during the downtimes.

[00:46:12] Cameron: Yeah. And you just can’t

[00:46:12] Cameron: know,

[00:46:13] Tony: Correct.

[00:46:14] Cameron: like in your 30 odd years of investing, how many major downturns, GFC is the big one, 2008,

[00:46:22] Tony: yep, uh,

[00:46:23] Cameron: the

[00:46:23] Cameron: market to recover,

[00:46:24] Tony: yep, Asian financial crisis in the late 90s, the long term capital management, um, crisis, I forget when that was, maybe early 90s, uh, dot com crash, Gulf War I, Gulf War II,

[00:46:38] Cameron: Paul Keating’s

[00:46:39] Cameron: recession we had to have.

[00:46:40] Tony: yeah, well, that was 90s as well. It was around the Gulf Wars, but yeah. Um, I’d say once a cycle, once every seven years or so, there’s a major correction.

[00:46:52] Tony: And you can recover from it. I mean, to be honest, what’s happened to my portfolio in the last three years, and it sounds like yours, is, is a bit like going through a correction, like a, a major downturn in the market. Um, even though the market’s probably gone sideways over that time. Um, we’ve underperformed because we’ve been trigger happy on our selling, but

[00:47:12] Tony: over the last three years, I could easily see that, you know, the market could have gone into a tailspin for any number of reasons, and it just hasn’t, which has been lucky.

[00:47:21] Cameron: yeah. I mean, since, if I go back to August 21, the market, the All Ords, uh, sorry, that’s the Dow Jones. Let me see there. Uh, I want to say August 21, the All Ords was about 7, 900, you know, and we’re just over 8, 000 now. So you’re right. It has sort of gone

[00:47:42] Cameron: sideways.

[00:47:44] Tony: Yeah, yeah, um, but like you said, anything that’s happening in the world could have triggered, I mean tomorrow Hezbollah could invade Israel and that could be a problem for the stock market. Um, the RBA could meet in six weeks time and put interest rates up and that could be a problem for the stock market.

[00:48:03] Tony: Um, uh, the presidential debate could go off the rails and that could be a problem for the stock market. Anything could happen, it could be out of the blue, you just don’t know. And when it happens, It spooks the market by definition because no one

[00:48:15] Tony: knows what’s going to happen

[00:48:16] Tony: next.

[00:48:18] Cameron: I, I, I’ve been telling myself today that the market rebounded today because Julian

[00:48:22] Cameron: Assange has been

[00:48:23] Tony: Yeah, I heard that.

[00:48:26] Cameron: Wow, he pled guilty

[00:48:28] Cameron: in a plea deal, but he’s free to

[00:48:31] Cameron: come home.

[00:48:32] Tony: Mmm.

[00:48:33] Cameron: honestly did not think I would see the

[00:48:35] Cameron: day that he, uh, survived that, so

[00:48:39] Cameron: All right, moving right along. Uh, what’s the time?

[00:48:41] Cameron: Oh,

[00:48:42] Cameron: uh, I’m running

[00:48:43] Tony: a pulled pork

[00:48:43] Tony: to do.

[00:48:45] Cameron: Okay. Uh, why don’t you do that and then we’ll see what time we’ve got left for other stuff.

[00:48:51] Tony: Yeah. So, I was quite pleased to see this company back on the buy list, because it’s one that I’ve owned in the past. The pulled pork is on TabCorp Holdings, TAH, which came onto the buy list this week, for the first time, I think, since we’ve been putting out a buy list. Most people would know what TabCorp is.

[00:49:12] Tony: Holdings Art Code is TAH. They run the, um, uh, they’re a big wagering company in Australia, they run, uh, they have a, uh, a monopoly on the retail, uh, bedding shops in Australia, or at least on the eastern seaboard, um, and they’ve been around, they’ve been, they listed back in the 90s, they’ve been around for a long time, they’ve had a fairly chequered history, um, Uh, they’ve been, the share price is now 70 cents, which was less than what it listed at.

[00:49:39] Tony: Uh, I don’t think there’s been consolidations along the way, but there may have been. Um, I think it’s back on the buy list though because of, uh, the recent news that, uh, they’re changing CEOs. So, uh, Gillon McLachlan was announced as the new CEO recently. If people don’t know who he is, he is the ex CEO of the AFL, who retired from that job recently.

[00:50:04] Tony: Uh, the last CEO of TabCorp, um, was asked to, to leave, um, chap by the name of Adam Reitensgild, and, uh, he was shown the door after allegations of improper language was used in front of a regulator. Um, he denies the allegations, uh, but, uh, decided to leave, um, anyway. And that depressed the stock for a while.

[00:50:28] Tony: Then there was the announcement of Gillon McLachlan, who’s, um, widely seen as being a, um, a good CEO, was appointed. Uh, and so, The stock has rebounded enough to make it a a three point trend line buy on our, on our graph. And so it’s come onto the, um, onto the buy list. Uh, I wanna run through, I guess I’ve had a long history with this stock ’cause it’s often a value stock and I’ve, I owned it during the float and uh, that was an interesting time too.

[00:50:55] Tony: I remember it was, there was a whole range of government floats. Probably the biggest one was Commonwealth Bank. They floated off part of Telstra in a couple of different installments. The government owned the betting agencies by state before TabCorp was floated and then the New South Wales TAB was floated.

[00:51:16] Tony: And I remember being told by someone I knew that the way to scam the TabCorp float was to put in lots of small, um, Small applications for shares because I’m going to scale them back a lot. And if you only put in one, you get, you get scaled down a lot. So I’ve applied in all of my relatives names and friends names and different addresses and got a reasonable allocation during the float and held those for quite a while.

[00:51:48] Tony: So I’ve been

[00:51:50] Tony: a shareholder in the past.

[00:51:51] Cameron: should you be admitting that publicly? Is

[00:51:53] Tony: Oh, I don’t know. there a statute of limitations on scamming, scamming the

[00:51:58] Tony: government? I don’t know.

[00:52:01] Cameron: Well, we’re about to find out.

[00:52:02] Tony: Yeah.

[00:52:02] Cameron: that’s,

[00:52:03] Cameron: that’s, yeah,

[00:52:04] Tony: Um, anyway, I wasn’t the only person doing it,

[00:52:07] Tony: if

[00:52:08] Tony: that’s a defence.

[00:52:10] Cameron: that’s always goes well in a court. I’m sure the judges have never heard that one before.

[00:52:16] Tony: One of the things I could say about this company, having followed it for 30 odd years, um, is that the culture has always been Fairly old fashioned, seen as being a bit of an old boys culture. And it was, I think, a classic case of disruption by technology. So, because it owned the monopoly of TAB shops, and I’m going back to the time when, you know, when I, when I used to, you know, walk down to the local TAB with a few mates, and it would be chock full of people in tracksuits and, um, guys, if it was in a pub, they’d be drinking beer.

[00:52:48] Tony: If it was, um, in a shop front, it would just be full of people who wanted to place a bet. Um, almost always 100 percent men. No, no women would want to go into an outlet like that. Uh, it would have Sky Channel on the wall, uh, because that was the only way to watch the race if you weren’t at the track. Uh, that was a monopoly television business.

[00:53:08] Tony: Uh, yeah, and so it was a, it was a I could see why the managers of the TAB at the time thought they had a license to print money, because it was, the outlets were full, it was a monopoly. Um, and yeah, they’re doing really well, but as, as more and more disruption came along and, uh, people started to be a little bit on their phones, they didn’t keep up with technology.

[00:53:31] Tony: Um, the people had found other ways to broadcast races and, um, that became eroded over time as well. Uh, so, uh, now I think during the research for doing this, uh, TabCorp have a, they claim about 33% of the, um, of the wagering market. But I did read some other analysis which said that TabCorp only had 19 percent of the downloadable betting apps in Australia, and that Sportsbet had 36%.

[00:54:01] Tony: And then there’s a lot of other small players in the market as well, Ladbrokes being probably the biggest of those. Um, so they’ve really, Really being left behind in terms of technology. And that means they’ve been left behind in terms of market share of young people, because most young people now would never dream of going to a TAB outlet to place a bet.

[00:54:20] Tony: They do it on their phones. Um, so that’s, I mean, I have another personal anecdote. I went along to a presentation that, uh, Alex Hay, my stockbroker put on with one of the people, one of the executives from TabCorp, this is going back 15 years or so. And, um, I was just struck by how. Arrogant and out of touch that person was when I was asking them questions.

[00:54:42] Tony: Cause it was around the time that Betfair had come out and that was a, a different way of betting. You’re basically a bookie or, or bidding with a bookie, um, on a, on a phone app or a laptop app and Tabcorp never had a product to match that. And I said, what are their plans? Are they going to match it? And he was just so dismissive of Betfair.

[00:55:01] Tony: It’s like, ah, Betfair, it’s, you know, We know that people who use Betfair are just nerds sitting at home on the lounge, but people who want to bet, they love going to our retail outlets. And I just tripped my head and said, mate, have you been to a tab, a TAB outlet lately? So anyway, I could tell because I was a Betfair user that, and I could see how much was being bet on each race, what the pool was for each race, and it was equivalent to what TabCorp were pulling in, so I knew it was more than just nerds sitting on laptops in their lounges betting.

[00:55:32] Tony: But anyway, um, TabCorp have been disrupted by, by newer players, um, over the years, and they’re, they’re struggling at the moment, which is probably why it’s on, you know, our checklist as a value stock. Um, recently, in the last year or so, they spun out, uh, well, going back to nine, uh, 2017, I think it is, I’ll get to it when I go through the history, Tabcorp bought, um, or merged with Tats Lotto, uh, or the Tattersall’s company which runs the Lotto business in Australia, and then, uh, last year they de merged, or 2022 they de merged the, the Lotteries business again out of Tabcorp, so they’ve, they’ve had this history of Struggling for growth.

[00:56:15] Tony: And if you think about the betting market, unless there’s new sports to bet on, um, or they expand overseas or whatever, it doesn’t really grow. It’s, it’s a fairly stable sort of market, which is good and bad, but there’s been a struggle for growth and they’ve oftentimes done it through M& A work. So like this, um, merger with Tatts Lotto.

[00:56:34] Tony: Um, one of the things though, that a lot of fund managers don’t like is when, is when the company which is struggling for growth buys another company. Um, because then the company that is growing, in this case the lotto business, was masking the problems in the gambling business and therefore the sum of both of those wasn’t trading at the right premium for the lotto business and so there was a lot of pressure on TabCorp almost from the time they bought the lotto company to get rid of it and because it was it would trade at a high multiple as a separate company and they did and that’s what happened so um You know, I’ll go through the history in a minute, but there is this kind of history of trying to get growth by using the cash flow that comes in from gaming to buy or merge with other companies, and it generally doesn’t work out, or they have to divest it.

[00:57:22] Tony: Um, they don’t just have a wagering business, they also have the Sky Racing business, which broadcasts now on Foxtel. Um, uh, and I, uh, threw a deal with Channel 7 also on, um, Channel 7’s subsidiary channels. Uh, although I’m not sure if TabCorp owns that or Racing Victoria owns that. But anyway, there is competition for, for, uh, broadcasting racing in, on Australian TVs now, which there wasn’t before.

[00:57:50] Tony: Um, and I also have a division which monitors, uh, the poker machines, um, for integrity. So making sure, Making sure that poker machines are paying out what they should and that they’re, they’re working properly and not, um, not breaking the law. Um, so there’s a couple of other strings to their bow, but, but by and large, it’s a wagering business.

[00:58:10] Tony: Um, one of the things that they’ve, they’ve had issues with over time as well is the changing nature of bookmaking, uh, and the way it’s taxed. So, originally, Um, the racing prize money was mostly funded through the government taking a, a mandated tax on the, the tote pools that TabCorp ran, and that would go back into, the government would agree to put that back into racing as prize money.

[00:58:36] Tony: Um, what’s happened over the years though, with the rise of the online bookmakers, is a lot of money has left the tote pool, and so, uh, governments have, have, uh, Um, increasingly tax bookmakers more, um, but that tax is less than what is coming out of the tote pool for TabCorp. So TabCorp’s always had, um, an unleveled playing field with how it’s being taxed compared to how bookmakers are being taxed.

[00:59:01] Tony: So there’s been a fair amount of government lobbying going on to try and level the playing field. And, uh, TabCorp signed a new agreement last year with the Victorian government, which came into force at the end of last year, um, which will be more profitable for TabCorp going forward. So that’s something to, on the positive side of things, they did something similar in Queensland, uh, and New South Wales are reviewing the taxation of the racing industry.

[00:59:26] Tony: So, uh, Um, I think that’s gonna be a, um, if it’s gonna be a benefit having someone like Gil McLaughlin as the CEO because they have always had good, he’s always had good government contacts and good government, um, uh, relationships, um, as at CEO of the A FL and that, that will, um, help I think in terms of making sure that the playing field is leveled between taxes between different types of wagering companies.

[00:59:53] Tony: Um, yeah, Gil aside, Gil McLaughlin has been called the most, um. The person with the most contacts in Australia. So he’s, he’s a very heavily networked CEO, which, which will help in this business. Um, what else can I say? Uh, and just back on Gil McLaughlin, he was, he was a successful CEO of, um, the AFL, doubled AFL revenues during his tenure, introduced at AFLW, the Women’s League, um, bought Marble Stadium and successfully renegotiated media contracts along the way.

[01:00:25] Tony: So, um, Um, he, he has done very well. One of his ex lieutenants, a lady called Kylie Rogers, is about to run Racing Victoria, so he’s going to be well networked for his role with TabCorp going forward. The only interesting part of that is that, uh, His New South Wales, um, well, the head of New South Wales Racing is also the head of the NRL.

[01:00:48] Tony: So Peter Volandes is chairman of both New South Wales Racing and the NRL. And, uh, you know, the head of the AFL would have had an interesting relationship with the head of the NRL, which are competing football codes. So it’ll be interesting to see what happens with, um, with his relationship with Peter Volandes going forward, because, um, racing New South Wales will be a big part of, um, what happens to TabCorp going forward.

[01:01:12] Tony: Um, Tabcorp itself posted a large loss in the December half, um, the loss was 637 million. A lot of that was a one off hit because they, they um, had to devalue what they thought their, their licenses were worth for gambling in I think South Australia and one of the other states as well. Uh, so that won’t happen again, but um, but it was a big hit.

[01:01:36] Tony: However, it’s worth looking at the underlying earnings, which fell by 14%. Um, And our revenue fell by 5%. So there’s a fair few headwinds, um, facing Gill McLaughlin, uh, in coming into this, this company, I’ve got to admit some of the reasons why revenue and earnings are down is because COVID was an all time high for wagering companies as people were locked at home, sitting on their couches, um, watching.

[01:02:04] Tony: So, um, it’s not surprising in some ways that the revenue is down post COVID, uh, because people can go out and do other things besides, besides bet on their phones. Um, the other thing that as a headwind that they’re facing in the industry is that the government is looking at, uh, The way that the industry advertises and is thinking about bringing in bans about advertising on TV around sporting matches and possibly before 8pm to, um, to try and reduce, uh, the influence on children.

[01:02:36] Tony: So, um, quite a few headwinds there. Um, question is whether Gillon McLachlan is, is up to that, um, based on his AFL career, probably yes. Well, I am always reminded of Warren Buffett’s. When he says that if a manager with a good reputation meets a business with a bad reputation, it’s usually the business that has the reputation that stays intact.

[01:02:58] Tony: So, um, we’ll, we’ll see, um, what happens on that. A bit of history on, um, on the TAB. Uh, TAB stands for Totalizator Agency Board. Um, and a lot of people won’t know the total, or the Totalizator is an Australian invention. Um, going back to 1913 by, uh, it was invented by a fellow called George Julius, who was later knighted for it.

[01:03:23] Tony: Um, the first Totalization machine, um, was installed in Auckland, New Zealand at a race course called Lesley and the Second in Perth in 1916 and the third at Eagle Farm in Brisbane in 1916. And, um, if anyone’s interested, have a Google it and have a look at the, what the machine looked like. But if. It was like a huge room full of pulleys and weights, um, and cables, um, mechanically working out, uh, what was being bet where and what the, how the odds were changing on the horses.

[01:03:53] Tony: Um, so a tote pool is, is what’s called parimutuel betting. Um, and that means that the, the way that the winnings are dispersed is that all of the funds that have been put in to bet on that race, um, or sporting event, but generally a race, uh, are then paid out to the winner. So it’s divided by the number of tickets that were bet on that winning horse, um, less whatever the government takes out in taxes and the operator takes out, um, as their, their margin.

[01:04:22] Tony: Um, so what it basically means is you don’t know the odds that you’re getting until the, uh, race has started and the, Tote Pool is closed, and then it’s calculated, and that’s different to what’s called Fixed Odds Betting, which is, um, what a bookie does, and you know your odds at the time of placing the bet, what the horse, um, is gonna, uh, pay if it wins.

[01:04:41] Tony: Uh, what else can I say about this? Um, so yeah, so, uh, the tote was an Australian invention. Uh, or the automation, the TOAT was Australian invention. Uh, the companies were then, um, government agencies were set up to run the TOATs, um, largely because they saw it as a way of, uh, taking their, their share of the cut from the pool and using that to fund racing, to fund the, The, um, the prize money in racing.

[01:05:15] Tony: And then it wasn’t until 19, 19, well, 1994, I think. I’m just looking at my notes here. Um, yeah, 1994 when TabCorp was listed on the ASX. And then a few years later, the New South Wales TAB was listed, um, under the code TAB as well. In 1999, TabCorp acquired the Star City Casinos, which was three Queensland based casinos in, um.

[01:05:44] Tony: Sorry, that’s not right, uh, Star City Casinos was in New South Wales in 03, uh, they merged with Jupiter’s to own the three Queensland casinos, um, and in 04, uh, TabCorp acquired the TAB, which was listed separately, the New South Wales TAB, which also gave them, um, the Sky Channel broadcast assets. So they, they expanded, they did quite a good job through, um, until that period of just acquiring and acquiring and acquiring.

[01:06:12] Tony: Um, then in 2011, they decided the casino business wasn’t a good one for them, and they dismerged the casino businesses into a company called Echo Entertainment Group. And again, it’s this idea of, um, fund managers wanting to invest in either a wagering company or a casino company, and they should trade on separate multiples, um, on the, on the ASX, which is what eventually happened.

[01:06:37] Tony: Um, and I said before, 2017 TabCorp combined with the Tax Group, which operates lotteries, but in 2022 they demerged again with, um, the lotteries business. So it’s just, uh, basically a wagering business now. So that’s, that’s the history of it. Um, interesting history. I mean, uh, the governments took over the tight businesses.

[01:07:00] Tony: Um, and then also I got into, um, The fixed price businesses, uh, and largely as a way of controlling gambling. There was a lot of SP bookmarking, bookmaking going on in Australia, um, right up until, uh, the ability to go into a betting shop and, um, and place a bet through them rather than just going into a pub and finding the person who was the SP bookmaker.

[01:07:24] Tony: So there was some appeal, um, to the government to clean up the regulation of the industry by operating the totes themselves. And then, um, Yeah, things evolved and they decided to demerge them that they weren’t shouldn’t be in the wagering business. I should highlight that there’s a ESL, I guess, issue or concern with a company like Tabcorp and that’s always going to be a part of someone’s decision to invest in this company.

[01:07:52] Tony: Research suggests that maybe up to a third of bettors Um, with the, with any sort of wagering company are problem gamblers. So, um, it’s, it’s how the companies, uh, can, can, Monitor for that and exclude people, which is, um, I think good corporate governance. Um, they haven’t always had a history of doing that.

[01:08:14] Tony: And there’s certainly been cases of, um, one wagering company that I think of that has marketed to these people and, and kept them going when they haven’t been able to afford, um, to, to, to. Feed their gambling habit and it’s often led to fraud. So it has led to fraud in some cases. So, um, there is an ESL concern with this.

[01:08:34] Tony: And I think it’s, it’s also fair to call out the government’s conflicted nature in this industry, but also. You know, most of the syntax industries, they get an income from taxing these industries and they’re meant to regulate them. Um, so they have an incentive to see them grow, but they also have a duty to see them well regulated and that can often come and do a bit of conflict, I think, um, not necessarily overtly, but potentially covertly that it can hurt their, their budgets if they decide to clamp down on companies like casinos or wagering companies or anything else that they get a tax take from which can be detrimental to people.

[01:09:14] Tony: Alcohol, speeding, whatever. So yeah, there is an ESL issue here that people need to work their way through. Going to the numbers, uh, The reason why I’m happy to talk about this, um, is that it has a high 2M, so it’s going to be able to be invested by, um, pretty much anyone who’s listening to this, uh, podcast.

[01:09:37] Tony: Uh, I did the numbers with a price, a stock price of 0. 70, and that’s less than the consensus target of 0. 82, but above our IV1. Calculations and IB2 calculations, which are 17 respectively. The yield on this company is 2. 86%, so it’s good to have a yield, but it doesn’t reach our threshold, so we’re not going to score it for that.

[01:10:01] Tony: Uh, and I think there is a risk with this yield because the payout ratio I saw in the latest presentation is 111%. So, um, They’re paying out more than they earn currently, which is either a bet on the future earnings going up, or it means it’s going to be a cut to the dividend at some stage when they can’t afford to keep doing that.

[01:10:21] Tony: So it’s, it’s, I don’t think it’s a good sign, bit of a, wouldn’t say it’s a red flag not to buy the stock, but it is an issue to watch going forward when the payout ratio is so high. Um, stocks do, high payout stocks do have this situation from time to time where they target paying out. A lot or most or all of their earnings and then they come a cropper when they try and maintain a year when they’ve had a slight downturn.

[01:10:46] Tony: Uh, it can be a short term thing or it can be a problem, but I guess one of the things to watch out for is if a company is borrowing to pay a dividend, that’s a bad sign for me. Stock Doctor financial health and trend is strong and steady, so Stock Doctor are marking it as a good company. We score it well for that.

[01:11:04] Tony: PE is 11 times, which is the lowest in six halves, so we score it for that. PropCaf is only 4. 3 times, so it’s um, it’s a good PropCaf score for us, price to operating cash flow. Net equity per share is 87 cents, uh, so we can buy it for less than net equity, and therefore less than net equity plus 30%, which is 1.

[01:11:25] Tony: 14. Um, then we get down to the earnings per share forecast, which is negative 72%. So, someone out there doesn’t Like the future of this company. Um, I’m not sure if that’s going to change and be upgraded, but currently we can’t score it for growth over PE because it’s negative. We give it actually a negative score for that.

[01:11:45] Tony: Um, but I found that interesting that it’s forecast to go backwards by so much when, uh, there’s a new CEO coming in, they’ve tidied up at least two of their three, betting licenses with the state governments, uh, and, um, are lucky to have, well, the third’s under review, so lucky to have some kind of reasonable outcome there.

[01:12:06] Tony: Um, to say that their forecast earnings is going down by so much, um, surprised me. I wonder what was driving that, and I wonder if that’ll be upgraded. Um, when Gillian McLaughlin gets his feet under the desk. Uh, no owner, owner founder for this company because it’s a government spin off. Um, it does have a new three point upturn, um, largely because of the appointment of Gillian McLaughlin.

[01:12:28] Tony: Doesn’t have, does not have consistently increasing equity, so we can’t score it for that. So all in all we have 11 out of 17 or 65 percent and a QAV score of 0. 15. So in terms of positives and negatives, I’ve covered a few of those as we go through. Uh, the new CEO appointments definitely a positive, uh, and given their contacts, um, particularly with government, it’s got to be a good thing.

[01:12:53] Tony: Um, negatives of the dividend payout ratio, uh, potentially tighter advertising controls. And that might be a good thing or a bad thing. I think it might affect sports bet more than it affects TAB or TabCorp. I think sports bet are the one which is driving the controls because they’re always saturating the market during sporting events with television advertising.

[01:13:13] Tony: Um, Opportunities and risks, opportunities. I think everyone in wagering around the world has been interested in getting into the US market as state by state. They deregulate, uh, sports betting, uh, sports betting. So up until recently, uh, you could only go to Vegas and bet with a bookie. Um, and sp bookmaking was rife throughout the rest of the US and it’s a bit like the, the history of marijuana.

[01:13:39] Tony: decriminalization in the U. S., uh, people are starting to realize, Oh, it’s not such a bad thing to allow legalized, uh, purchase of cannabis. We can regulate it, we can tax it. And the same thing starting to dawn on states as far as gambling in the U. S. And so there’s a bit of a shake up in state by state, uh, betting laws.

[01:13:59] Tony: Um, Tabcorp have dipped a very small toe into that market, but it, given that they’re, uh, You know, uh, a well credentialed, um, long term operator of, of, uh, betting shops. I would have thought they may have looked at that more aggressively, but it’s possibly an opportunity for them. They own a small stake in a company called Dabble, um, which operates in the, uh, Australia and in the U.

[01:14:23] Tony: S., but it’s much smaller in the U. S. than it is here. Um, the risks to this company. Well, the. Age old risks of growth, um, given the wagering market doesn’t grow by a whole heap. Uh, traditionally they’ve solved that by corporate activity, but I think the market’s sort of getting wary of that as being a growth driver for this company, and I’ve got to find other ways of doing it.

[01:14:45] Tony: Um, which leads me again back to Buffett’s quote of, uh, a good, good manager in a bad, uh, in a bad company meeting, and the reputation of the company remains intact. So it’ll be interesting to see what happens with Um, the new CEO for this one. So, uh, yeah, have a look. It’s a, it’s a interesting company with interesting history.

[01:15:04] Tony: On the checklist for the first time that, uh, in a long time that I can recall, and with a new top grade CEO, it might be worth having a look at.

[01:15:12] Cameron: Thank you, Tony. Not knowing what SP stood for in SP bookie, I looked it up and ended up

[01:15:21] Cameron: Ended up with the Criminal Justice Commission of Queensland’s Issues Paper from November 1990. SP Bookmaking and other aspects of criminal activity in the racing industry. Big explanation at the beginning of, uh,

[01:15:37] Cameron: this, but I

[01:15:38] Tony: SP stands for starting price, and it was the easiest way for, um, an illegal bookmaker to, um, pay out customers was to take bets and then pay out whatever the horse started at on the tote. Um, but they didn’t have to run a tote themselves, they could just do it via an SP book.

[01:15:56] Cameron: the summary and the introduction to this. It’s talking about Commissioner Fitzgerald at his inquiry. It says, Of all illegal industries, SP bookmaking has been the one most consistently involved with police corruption in this state. This historical association with corruption extends to include telecom employees and other government officials.

[01:16:17] Cameron: Despite the SP industry lying low during the course of the Fitzgerald Inquiry, it is now largely business as usual for the SP industry. Ha ha ha ha. Good old police corruption in Queensland. Well, um, we, we kind of need to wrap this up, Tony. Um, cause I’ve got a hard out, I got to go to Kung Fu. Uh, we did have Dave from Newey send his survey results, which I’ll go through in detail next time, I guess, but he does say, um, Since he’s been fully invested with the QAV approach from June 2021 to May 2024, his portfolio has done 21.

[01:16:59] Cameron: 69 percent versus the benchmark of 5. 68%. I am very happy as a customer of QAV. I’m grateful I found the podcast. I’d like to thank you and Tony again for the excellent work you do and the energy you bring week in, week out. The growing number of tools are very helpful, shout out to the Hive Mind. And he goes on, but I’ll read that next week.

[01:17:19] Cameron: Sorry, we don’t have time to go into that in more detail, Dave. Uh, also Toby,

[01:17:25] Cameron: Toby asked some questions about the impact of the new tax rates, but we might have to talk about that next week as well.

[01:17:32] Cameron: Um,

[01:17:33] Tony: I had a few articles to read, but I can push those off and we can talk after hours, if you like,

[01:17:37] Tony: for the last

[01:17:38] Tony: little bit.

[01:17:40] Cameron: Oh, very quickly. What have you got for after hours apart from, uh, Donald Sutherland?

[01:17:46] Tony: Yeah, I would just recommend listening to the Acquired podcast. They’ve got an episode out currently on Starbucks and its history, and they’re interviewing Howard Schultz, and it’s, um, it’s a long podcast, but it’s, um, quite a good interview. It’s worth, worth listening to. Yeah. And, you know, there’s the, I think the, my key takeaways are that, um, Starbucks, what I didn’t know about Starbucks was that Howard always saw it as the third place, so you had home, you had work, and then you had a coffee shop, and, and his sort of, um, sort of, the human Part of the business was always the call for it, and he kept, he ran it that way for a long time, he left, it was run by typical corporate managers who cut costs, and, um, the company started to go downhill, and he came back in and fixed it up, and, you know, just a whole sort of thread of the human approach to business through it.

[01:18:38] Tony: was, um, was I think really nice to see, um, from Howard Schultz. Uh, I had a couple of, I had three horses running over the weekend, um, two of them aren’t worth mentioning, but, uh, ChaChaChanges came very close to winning at Pakenham yesterday, ran second by a nose. Um, he’s got a bright future, I think, so watch out for that one.

[01:18:57] Tony: Uh, and I,

[01:18:58] Cameron: It’s a David Bowie reference.

[01:18:59] Tony: it is, yeah. I went through a period of naming my horses after musical references.

[01:19:06] Cameron: Very

[01:19:07] Cameron: good.

[01:19:08] Tony: And I watched the movie called Nocturnal Animals. I don’t know if you’ve seen that. It’s about 10 years old now.

[01:19:13] Cameron: No.

[01:19:14] Tony: Jake Gyllenhaal, Michael Shannon, and Amy Adams. Really quite liked it. It’s not, it’s not by any means a perfect movie, patchy in places, has a very confronting start, um, with a naked fat lady dancing on screen and then you realize it’s actually part of a, an art installation at a, at a LA gallery that Amy Adams works at, but, um, but it stayed with me.

[01:19:41] Tony: It’s actually really good. Um, so not, not a perfect movie, probably a 7 but I’d worth, um, I’d recommend it if anyone hasn’t seen it.

[01:19:51] Tony: So that’s my

[01:19:51] Cameron: Well, thank you. I’ll keep an eye out for that. We watched half of the Gene Wilder documentary that’s on Netflix last night, which is great. I don’t know if you’re a Gene Wilder fan,

[01:20:01] Tony: yeah, yeah,

[01:20:02] Cameron: I’ve always loved Gene Wilder since my mum and I used to sit there and watch Mel Brooks films in the 70s and early 80s.

[01:20:09] Cameron: Um, and I’ve been reading Nikita Khrushchev’s memoirs this week, uh, which is fascinating. You know, it’s just fascinating to get his perspective on Stalin. Um, I’m sort of reading the second volume. I don’t have the first volume, the second volume, which is like post World War II. And when he goes back to Moscow after running Ukraine and dealing with Stalin and purges and all sorts of stuff going on, um, the insanity that was going on with the paranoia in the upper echelons from Nikita Khrushchev’s perspective.

[01:20:46] Cameron: Oh, obviously famously when Stalin died, threw Stalin under the bus, um, not without his own sins either, uh, and then ran the USSR for 13 years before they threw him under the bus as well, mostly over what they perceived to be his failure of his handling of the Cuban Missile Crisis. Um, Which was, kept a big secret from the West.

[01:21:11] Cameron: Anyway, interesting. And Julian Assange released from prison as we said, but, um, I could talk more about that, but congratulations to Julian and his family and, uh, can’t wait to see whether or not there’s a gag order, what he’s allowed to say, what he’s not allowed to say, what he’s allowed to do, not allowed to do.

[01:21:29] Cameron: In the coming years, but, um, yeah, so anyway,

[01:21:33] Cameron: that’s it. I

[01:21:34] Tony: yeah, I was very happy to hear that news too today.

[01:21:37] Cameron: yeah. Wow. Big news. Thank you, TK. Thank you for, uh, uh, spending time with us. And, uh, I will talk to you. I might be in Bundy next week, but I can probably still do a show from my mum’s spare bedroom. So I’ll, uh, I’ll talk to you between now and

[01:21:56] Cameron: then anyway.

[01:21:57] Tony: All right. Well, enjoy your trip.

[01:21:58] Tony: Enjoy Kung Fu.

[01:22:00] Tony: Okay.

[01:22:00] Cameron: Thanks. Well, cheers, mate. Bye. Well, have a good week, everyone.

 

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