QAV 732 – Water Off A Duck’s Back

QAV 732 Club

[00:00:00] Cameron: This is episode 7 3 2, QAV. Entitled, Water Off A Duck’s Back, Tony. Because I just saw that on the ABC’s coverage of what’s happening in the market. It’s just Water Off A Duck’s Back for the record. We’re recording this on the 6th. August, 2024, 2:06 PM The RBA is due to meet and prognosticate on interest rates today, but I thought it was amusing that somebody last week, uh, who was it last week, asked us to talk about how we handled the Covid

[00:00:45] Cameron: sell off.

[00:00:46] Cameron: And, uh, let me see who that question was. Uh, Rob. I want to know what Rob knew. How did Rob know what was coming this week? Rob has a crystal ball, I think. Good job, Rob.

[00:01:03] Cameron: Good job,

[00:01:03] Tony: Well, I think, I think you do too, because you’ve been saying for the last couple of weeks, ignore the market, ignore the market. And it’s come out and gone. Look at Moi. Look at Moi.

[00:01:15] Cameron: And I’m still ignoring it, largely. I look at my alerts. If I’ve got to do something, I’ve got to do something. If I don’t I was just happy in my light email this morning. I got to use the Fonzie. Badge again, just sit on it. Nothing to buy, don’t worry about it, just sit on it like Warren Buffett has been sitting on it, which we’ll get to later in the episode.

[00:01:36] Cameron: So anyway, of course the big story is The markets around the world have crashed over the last few days. The ASX is recovering a little bit today, but it’s still down a lot from where it was. What caused all of the panic in the streets? The blood, I’ve heard it referred to as the ASX apocalypse, I’ve heard it referred to as a bloodbath, I’ve heard it referred to as a brutal bear panic, which I first read as a brutal bear picnic, and I thought,

[00:02:11] Cameron: I’d like to see that.

[00:02:12] Cameron: No Brutal Bear Picnic? Uh, is that like the Berenstain Bears? Berenstain Bears, when they’ve

[00:02:19] Cameron: been on the Coke? You remember the Berenstain Bears, Tony?

[00:02:23] Tony: No, no. Who are

[00:02:25] Tony: they?

[00:02:26] Cameron: Classic kids books about a family of like, uh, brown

[00:02:30] Cameron: bears, the Berenstain

[00:02:31] Tony: Up bears,

[00:02:32] Cameron: Well, in my version, it’s like taking the kid’s

[00:02:35] Cameron: story with Cocaine Bear, that movie from a year or so ago.

[00:02:39] Cameron: And that’s a brutal, that’s how you get a brutal bear picnic. No, this, this joke has worn itself out. Uh, what’s, so tell us all what led to the, uh, the crash, Tony.

[00:02:52] Tony: I don’t think there was any one theme. that led to the crash. I think it’s a number of

[00:02:56] Tony: things. I think there’s a,

[00:03:00] Tony: as we’ve talked about nearly all year, there’s a strange

[00:03:04] Tony: or strange

[00:03:05] Tony: background to the market, particularly in the US where

[00:03:08] Tony: every time bad news comes out, the market goes up because they think that’s going to be a trigger to reduce interest rates.

[00:03:16] Tony: So it’s kind of strange now that they’ve reacted badly to The release of some unemployment numbers last Thursday in the States, which were a little bit higher than what the market thought. Uh, it did, those numbers did trigger what’s called the SAHM rule, which I’d never heard of until recently. It’s, it’s, it’s great how, People trot out all these, uh, ratios.

[00:03:42] Tony: You know, I’ve been investing for 25 years. I’d never heard of the SAHM rule until the last week or so. But the SAHM rules is apparently a good predictor of recessions. And I’ve even heard different definitions of the SAHM rule in the last couple of days. But basically it’s almost like a moving average, whether the short term, three month unemployment numbers go below the long term trend.

[00:04:05] Tony: Um, that’s it in a nutshell. I think One definition which seems to have been repeated a few times is the three month average goes below the lowest point in the in the preceding 12 months for unemployment. So it’s supposed to be a predictor of recessions as we know predictors of recessions get it right.

[00:04:22] Tony: Seven out of five times, so we’ll see if the U. S. goes into recession or not. But it did seem to have people heading towards bonds, which is always seen as being the safe haven when things happen like this. But there’s other things going on too. I mean, the market was very high in the U. S. And the last quarterly numbers came out last week for the MAG 7 stocks, and I think five of the seven.

[00:04:49] Tony: Sold off because of that. A lot of numbers didn’t meet analysts expectations, um, which is, you know, not surprising given the lofty valuations on these companies. Uh, so some, some, some A lot of people are rotating out of MAG 7 stocks now. Uh, it’s, that’s the really interesting thing, I think, out of all that’s going on.

[00:05:11] Tony: You know, I think about 2 or 3 weeks ago, I pulled apart the numbers for the world indexes and the US index. And from memory, The MAG 7 was about 10 percent of the world index. It may even have been higher than that. It may have been 20%. Uh, and in the U. S. it was, I think it was half the index or more than half the index was in those seven stocks, which are weighted by market cap.

[00:05:33] Tony: So, if they’re down, some of them are down 20%, All these, you know, who’d want to be an index fund manager at the moment? You, you are forced to sell those stocks and then forced to buy something else because you’re meant to be rebalancing and backing the index. And I think there’s a fair bit of amplification of the sell off going on because of index funds.

[00:05:53] Tony: Um, and, and it’s a bit like a plane not knowing where it needs to land because the indexes are in turmoil at the moment. So they’re selling because they have to and then they’re trying to buy in but they don’t know where because Tokyo’s down and Seoul’s down and Um, the US is down, obviously Australia’s down.

[00:06:10] Tony: So it’s a very tough thing to do to try and balance an index fund at the moment. So I think that’s part of the turmoil and I think what may have kicked things off was Japan. Japan raised interest rates recently and even though it was only 0. 25 percent that was enough because interest rates have been close to zero in Japan for a long time and it’s allowed Fund managers to to take or to borrow in Japan, so to buy bonds in Japan without much of a yield, and then invest the or sell bonds in Japan without much of a yield and then to take the proceeds from that and invest it anywhere else in the world basically and make a profit from doing nothing.

[00:06:50] Tony: The thing about that though is if you buy or if you issue bonds in Japan, you’ve got a Do that in Japanese currency, and when the interest rates went up in Japan, even though it was only like 25 basis points, the yen rose dramatically more than that, um, because people stopped issuing these bonds in yen, which means there was less demand for the yen, anyway, and probably other things at play, and the yen rose, which completely unwound all the profits for these carry trade arbitrages, and so Um, there’s been a lot of selling around the world because of that too.

[00:07:25] Tony: So there’s a lot of things going on. It’s turmoil. Um, you know, if you look at the Australian market, the PE for the Australian market was 20 times, which is above average. I’ve always thought of the, the, the average PE of Australia of about 16 to 16. 16 to 17 is about average. So it’s been higher, higher, uh, it’s trading higher than that.

[00:07:48] Tony: Um, and there’s also been a rotation out of resources in Australia, which I think may have, um, accelerated because of the, the, uh, rest of the market going down. And that’s largely based on a view in Australia that the Chinese economy has deteriorated a bit. In the last set of numbers that came out there, and I’m talking about resources excluding gold, gold miners are going up because, um, again, bonds and gold are safe havens in, uh, in this

[00:08:17] Tony: Okay.

[00:08:18] Cameron: had to sell RRL

[00:08:19] Cameron: today. Goal is turned around. Alex in her buy list yesterday flagged that it had become a Josephine. I mean, gold had been

[00:08:27] Tony: Mm hmm.

[00:08:28] Cameron: the roof for a while, but in the U. S. it became a Josephine. It was a little bit lower than it was at the end of the month. But yeah, RRL has, uh, come back a

[00:08:38] Cameron: little bit.

[00:08:38] Cameron: I

[00:08:41] Tony: declines, gold improves because people sell the market and put it into gold, which is seen as a store of value. So it’s not going to, it’s not going

[00:08:49] Tony: to, like Bitcoin, Bitcoin’s down a lot. I noticed it was down something like 15, 20, 000 US. Yeah. Yeah, well, I mean, um, it’s, it’s an interesting situation when a lot of, you know, market rules, so called market rules, break down when the, when the blowtorch goes to the belly, as Neville Rand used to say, and, uh, it’s, um, it’s, yeah, it’s interesting what holds up, what goes down, yeah, but I think, you know, a couple of interesting things, it was the first time I can remember that page two of the AFR I’ve only had two stocks advancing on their advances list, you know, on the inside front cover they have advances and declines.

[00:09:31] Tony: The highest, I think it’s five or six for the day, and there’s only two on the advances list, so a lot of across the board selling, which to me says instos are just rotating out of stocks and going into bonds. Um, holist Ballers. just, just to be safe. Um,

[00:09:50] Tony: the other thing too, is I just think the market has been overvalued.

[00:09:54] Tony: Um, I know that there are good reasons. I’ve seen graphs saying that the increase in the MAG7 stocks this year has tracked their earnings increases but. Which is fine. And the person who posted that graph was basically saying, look, it’s earnings based. It’s not PE expansion. But I thought to myself, well, the PE’s can’t really expand anymore.

[00:10:15] Tony: They’re trading on such high odds. And I kind of had a thought today about it. I mean, if you think about going to the racetrack and looking and backing an odds on horse. That’s the same, it’s actually, that’s actually better odds than putting your money into some of the Mag 7 stocks, which are, you know, some of the, even the stocks on our, on our index of trading at PE’s of 100 times.

[00:10:40] Tony: That’s a dollar one in terms of racing parlance, and the bookies don’t write tickets at a dollar one. You know, you know, you can’t. You can’t put a bet on when it’s that short. Black Caviar would often go to about 1. 05, and probably should have been lower, but people would, with 5 on, on the, with the bookie, so they had a ticket to use as a souvenir.

[00:10:59] Tony: But they were there when Black Caviar ran at 1. 05. But if it’s, if a PE is 100, you’re going to the track and putting your hard earned money into a bookie. on a racehorse that it will return you a dollar one because it will take a hundred times that that horse runs to return your money. If that horse happens to lose a race, let me tell you there’s all sorts of reasons why good racehorses lose races including bad jockeys, wet tracks or barrier draws or whatever, you don’t get your money back.

[00:11:29] Tony: And, and yet, yeah, and so people, the racing parlance, the racing saying is odds on, look on, um, because it’s just not worth the risk, and, and, you know, there’s odds on favorites that went down at Flemington on the weekend, um, and yet people are quite happy to put their superannuation, their retirement, into companies that are trading with P’s of a hundred times, which is a dollar one, in terms of, uh, your return, and then, Losing their mind when they fall 5%.

[00:11:59] Tony: It’s just,

[00:12:00] Cameron: Yeah.

[00:12:01] Tony: it’s, it’s a, it’s a great display of the foibles of human nature, I think, the last few days in the stock market.

[00:12:08] Cameron: I can tell you why you’ve never heard of the psalm rule before. It was only invented five years ago.

[00:12:16] Tony: And we haven’t had a recession. You think, you think it would have got trotted out during the COVID downturn though. Really?

[00:12:24] Cameron: Yeah,

[00:12:24] Cameron: well,

[00:12:25] Tony: But also too, if it’s only invented five years

[00:12:27] Tony: ago, I’ve seen graphs that say that predicted every recession for the last 30 or 40 years.

[00:12:33] Tony: So

[00:12:34] Cameron: Yeah,

[00:12:34] Cameron: so it’s named, it’s named after a rather young economist, Claudia Psalm. Who, according to Wikipedia, runs Sahm Consulting. She was formerly Director of Macroeconomic Policy at the Washington Center for Equitable Growth and a Section Chief at the Board of Governors of the Federal Reserve System, best known for the development of the SAHM rule.

[00:12:58] Cameron: A Federal Reserve Economic Data Indicator for Identifying Recessions in Real Time. So she went back and looked, I think it goes back to 1949. The SOM rule states when the three month moving average of the national unemployment rate is 0. 5

[00:13:14] Cameron: percentage points or more above its low over the prior 12 months, we are in the early months of recession.

[00:13:22] Cameron: She said the SOM rule is an empirical regularity. I thought that’s King Charles when he goes to the bathroom. That’s an empirical regularity too. not

[00:13:38] Tony: regularity.

[00:13:40] Cameron: It’s not a proposition, it’s not a law of nature. She further explains, I created the SAHM rule to send out stimulus checks automatically. The idea was to

[00:13:50] Cameron: act fast to make the recession less severe and help families.

[00:13:54] Cameron: The star was always the stimulus check, not the indicator that other people named after me. So it was like, as soon as they hit this number, stimulus checks go out. Cause we, we’ve hit a recession.

[00:14:08] Cameron: There you go.

[00:14:09] Tony: Okay, well, it’s, look, and she could be right and the rule could be, could hold. I think the other interesting thing, it’ll be

[00:14:15] Tony: what central banks do, because it was only a day before the markets corrected last week that. that the inflation numbers came out or two days before in the US, which were back or at least trending very close to the central bank’s range of what they wanted inflation to be.

[00:14:32] Tony: And I made a note at the time that people, economists like Paul Krugman were starting to say it’s time to cut interest rates. And in fact, the market went up 2%. When that inflation number came out, that must have been Wednesday night, I think, last week, Australian time, uh, because the, the, the Fed chief came out and said, yep, we’re very likely to, to, uh, cut interest rates in September, a month away.

[00:14:54] Tony: So, you know, who do you believe in all this? Which, which economist do you believe, Ken? Oh, Yeah. Yeah.

[00:15:06] Tony: Yeah.

[00:15:09] Cameron: over the last few years, but you know, as part of my, the education about the markets and investing, just like how things can change on a dime. Everyone’s, the markets are super, super, super crazily buoyant one day, and then manic depressive the next day. It’s all over!

[00:15:30] Cameron: Everyone jump out of a window. Um, and it’s, it’s just, it’s become amusing to me just watching it over time. I got an email from Elio D’Amato yesterday about our upcoming Stockopedia webinar we’re doing next week. And he said, uh, something about, you know, I hope you’re doing okay. Not, you know, standing on a roof or anything like that.

[00:15:53] Cameron: And I was like, I’m not even paying attention, mate. Tony’s told me not even to pay attention. Don’t even care. You know, business as usual. That’s what it is. Like, it really is. Like, it’s, it’s like ridiculous levels of optimism, particularly like for the Mag 7 or whatever. One day, and then, oh shit! The next day, gotta dump it all!

[00:16:15] Cameron: Dump it! Dump it! It’s like, it’s like one of those old Wall Street movies from the 80s, like Gordon Gekko

[00:16:22] Cameron: or Bud Fox, you know? Buy! Buy! Sell! Sell! I just imagine Guys running around in 80s haircuts, in the pit, with flip phones, well they wouldn’t have been in the 80s, just screaming buy, buy, sell, sell, it’s just like mass

[00:16:37] Tony: in funny, in funny coats, trading places,

[00:16:41] Cameron: Yes!

[00:16:42] Tony: old guys in funny coats and chalkboards, yeah, making hand signals to each other.

[00:16:48] Cameron: I mean, it is, it’s just kind of, it’s like, the other thing, I’ve watched this a number of times recently, I was showing my boys when they were over here the other day, I think we talked about on the show, the um, the last like 10 or 15 minutes of Blues Brothers, where they’re being chased by like 20 million cops, who are all just smashing into each other, there’s just pile up after pile up after pile up of cop cars, and then, then they’re storming the, the building

[00:17:17] Cameron: where the Boys have gone in to pay the 5, 000 check to stop the orphanage from being defaulted on or whatever. And there’s just like hundreds

[00:17:27] Cameron: and hundreds of military and police and they’re armed to the teeth and they’re, you know, falling all over

[00:17:32] Cameron: each other. It’s that kind of like slapstick,

[00:17:36] Cameron: um,

[00:17:37] Cameron: Benny Hill esque comedy, the way the market

[00:17:40] Cameron: reacts to things.

[00:17:42] Tony: And then the Blues Brothers turn around and they see it all for the first time standing behind them. After they make the payment, yeah.

[00:17:49] Cameron: And who accepts their payment? Do you

[00:17:51] Cameron: remember?

[00:17:52] Tony: Oh, no. No, who is it?

[00:17:55] Cameron: Steven Spielberg

[00:17:55] Cameron: is the clerk

[00:17:56] Tony: Ah,

[00:17:57] Cameron: accepts their payment.

[00:17:59] Cameron: Spielberg

[00:18:00] Tony: As if it As if he needs the money.

[00:18:04] Cameron: Exactly.

[00:18:05] Tony: Yeah, but look, you know, look, there are so many hair triggers. Uh,

[00:18:09] Tony: the stockbrokers are trying to move as quick as possible. So if someone gives them an

[00:18:14] Tony: order to execute, they execute as quickly as possible. There are fund managers trying to protect their asses and they’re acting as quickly as possible.

[00:18:22] Tony: But, you know, bear in mind, uh, what, what Warren Buffett said, he said, you don’t have to have a high IQ to be a good investor. Um, and I think these kinds of moments. It proves there are a lot of fund managers out there with average IQs, I think, who aren’t sort of self aware enough to know that they don’t need to act with a hair trigger when things happen like this.

[00:18:46] Tony: And they don’t have to act with a hair trigger on every piece of economic data that comes out of the central banks.

[00:18:54] Cameron: Just looking at the 30 days, uh, we are up 0. 31 percent per annum, whereas the STW is down 1. 73%, nearly

[00:19:10] Cameron: 2%. So we’ve fallen a bit from where we were like a week ago, but we’re still doing better. We, you know, we’ve, um, our shares have responded better. And that’s even, that’s still with me, still holding onto ASG.

[00:19:27] Cameron: It’s 3 PTL came down this week and it was only like a cent or two below it on Monday morning, but now it’s two or three cents below it again, but it’s getting close. It’s getting close. I can feel it. Um, the light portfolios in the last 30 days are down 2%, 1. 95, um, versus the 1. 73 for the STW. So they have fallen a little

[00:19:55] Cameron: bit more, but, uh, Generally speaking, everything is, uh, not that bad, really.

[00:20:04] Cameron: Well, uh, what else? I wanted to talk about the US checklist, but if you got anything else you want to talk about first?

[00:20:12] Tony: I did have some things, where are my, where are my notes?

[00:20:15] Cameron: Oh, before you get to that, I did get an email yesterday from Jordan. One of our club members, he said, Hey Cam, just wanted to say thank you to you and Tony. I lost 5 percent of my portfolio value today. Glad he didn’t stop there, but felt strangely serene about the whole thing. I watched my alerts, nothing crossed the line, so I

[00:20:35] Cameron: didn’t do anything. I think if I’d been

[00:20:38] Cameron: working without a system like QAV, I would have found it hard to avoid the panic that affected the rest of the market. Hopefully this

[00:20:44] Cameron: sale will lead to some good growth opportunities in the future, Jordan.

[00:20:50] Tony: Well done, Jordan.

[00:20:51] Cameron: Jordan. Jordan is all zen. Good

[00:20:55] Cameron: job.

[00:20:56] Tony: well done, sitting on it. Jordan’s a Fonzie.

[00:20:59] Cameron: He’s the Fonz. Yeah, he gets the Fonzie badge for this week.

[00:21:04] Tony: and and these kind of downturns are a great time to be value

[00:21:07] Tony: investors. They really are. Um, A, because value stocks tend not to fall as much as the Mag 7 type stocks.

[00:21:15] Tony: I think, I think on the Australian market yesterday, Block was the biggest decline.

[00:21:20] Tony: Um, but B, you know, brings things back, brings more things onto the buy list as their price goes down.

[00:21:27] Cameron: Although I did see, um, I saw an article somewhere today talking about some of the biggest winners and the biggest losers lately. I saw

[00:21:35] Cameron: Zip. Fell

[00:21:38] Cameron: a lot, but I also saw it was up like 300

[00:21:40] Cameron: percent this year. Yeah, Zip had a big fall, but for the year it’s gone from like 41 cents, it’s now trading at 1. 71. So, if you rode it all the way, yeah, then hopefully not too

[00:21:56] Cameron: worried.

[00:21:57] Tony: and that’s what’s probably happening Cam, if you had done that and it’s down a bit today, you’re probably going, I’ll take some profit.

[00:22:04] Cameron: Yeah, Yeah.

[00:22:07] Tony: Which is, which is causing the selling to

[00:22:08] Tony: increase. Uh, well, good way to kick off reporting season, Cam,

[00:22:13] Tony: with the market going down. Welcome to reporting season. August is reporting season. Um, the first stock off the rank that concerns us is Credit Corp (CCP) and that reported last week, last Wednesday, in fact, and on following its numbers, the stock was up 14 percent and became a buy.

[00:22:33] Tony: Um, there was a few things driving that, even though in that profit. was down a little bit, um, which would have been forecast. They were returning to growth in FY25, so they were forecasting that, which was received well by the market. However, I noticed this morning it’s crossed back below its sell line today, so, um, in line with the general downturn.

[00:22:56] Tony: Excuse me, but it might be one to watch. But it is reporting season. You’ll see lots of rapid movements. Keep your alerts up to date. You may need to download some buy lists yourself, um, during the week of stocks report. Check alerts, uh, it’s a new month, so check your three PTL alerts. And also, Watch out for dividends.

[00:23:16] Tony: Um, most stocks take about a month or so between declaring and paying, but sometimes you get sums which, which will start paying in the second half of the month. So just make sure you’re taking that into account. If you’re working out when to buying and sell. When to buy and sell.

[00:23:32] Cameron: Yeah,

[00:23:33] Tony: So that’s reporting season.

[00:23:34] Tony: Uh, stay alert

[00:23:35] Tony: people,

[00:23:36] Cameron: check your alerts. Yeah, I think everyone’s been checking their alerts the last couple of days. I don’t think, I don’t think anyone needs a reminder this week to check their alerts Yeah,

[00:23:59] Tony: what works on Wall Street.

[00:24:02] Tony: And it’s again a little bit germane to what’s going on in the market.

[00:24:06] Tony: This is a bit of a longer one today because I pulled out the whole, um, the whole couple of paragraphs. This is from what works on Wall Street by O’Shaughnessy, and it goes like this. Most statistical prediction techniques use base rates. For example, 75 percent of university students with grade point averages above 3.

[00:24:27] Tony: 5 go on to do well in graduate school. Smokers are twice as likely to get cancer. The average 70 year old in the United States can expect, based on actuarial tables, to live another 13 and a half years. Stocks with low P. E. ratios outperformed the market 99 percent of all rolling 10 year periods between 1964 and 2009.

[00:24:50] Tony: The best way to predict the future is to bet with the base rate. that is derived from a large sample. Yet, numerous studies have found that people make full use of base rate information only when there is a lack of descriptive data. In one example, people were told that out of a sample of 100 people, 70 are lawyers and 30 are engineers.

[00:25:11] Tony: When provided with no additional information and asked to guess the occupation of a randomly selected 10 people, people used the base rate information, saying that all 10 are lawyers. By doing so, they ensure themselves of getting the most right. However, when worthless yet descriptive data were added, such as Dick is a highly motivated 30 year old married man who is well liked by his colleagues, people largely ignored the base rate information in favour of their feel for the person.

[00:25:41] Tony: They’re certain that their unique insights will help them make a better forecast, even when the additional information is meaningless. We prefer descriptive data to impersonal statistics, because they better represent our individual experience. Then, when stereotypical information is added, such as Dick is 30 years old, married, shows no interest in politics or social issues, and likes to spend free time on his many hobbies, which include carpentry and mathematical puzzles, people totally ignore the base rate and say that Dick is an engineer.

[00:26:15] Tony: Despite a 70 percent chance that he is a lawyer. This bias has been proven time and again with numerous tests over a range of subjects. People always default to making predictions based upon their individual experience and intuition. It’s difficult to blame people. Base rates are boring. Experience is vivid and fun.

[00:26:37] Tony: The only way anyone will pay a hundred times a company’s earnings for a stock is if it has a tremendous story. Never mind that stocks with high PE ratios beat the market less than 1 percent of the time over all rolling 10 year periods between 64 and 2009. The story is so compelling that you’re happy to throw the base rates out the window.

[00:27:01] Cameron: it’s fascinating, isn’t it? Just, Yeah, the way human psychology Works.

[00:27:08] Tony: Yeah, yeah, we, we’re attracted to the bright shiny things, aren’t we? You know, that AI is going to revolutionize the world and

[00:27:18] Cameron: It

[00:27:18] Cameron: is.

[00:27:19] Tony: that, well, yeah, okay, but

[00:27:22] Tony: do you pay, what’s the PE of

[00:27:24] Tony: NVIDIA? Upwards of 50 times, I guess. Is it paying too much for it? And, and yet, and yet O’Shaughnessy’s analysis shows you’ve got a 1 percent chance of beating the market if you bought NVIDIA at PEU 50.

[00:27:37] Tony: If you bought it 10 years ago when the PEU was probably 10, yeah, great chance. Go for it. Hold on to it. But if you didn’t,

[00:27:45] Cameron: And even then, you had no idea

[00:27:48] Cameron: that it Was going to end up as the engine

[00:27:49] Cameron: for the AI revolution because they didn’t even know that then. Speaking of which, I mean, it’s, it’s somewhat related, but I was watching a recent interview with, uh, your, your best friend, Elon Musk, last night

[00:28:04] Cameron: on Lex Friedman’s show, talking about Neuralink,

[00:28:07] Cameron: mostly,

[00:28:08] Tony: he striking a cat? A white cat?

[00:28:12] Cameron: and he, he was talking about Neuralink and he was talking about the robots and, um, but he, he had this really interesting thing, which kind of reminded me of you in a way, he said, he has a mantra.

[00:28:24] Tony: Which one, the Neuralink or the robot?

[00:28:31] Cameron: he has a mantra, um, that he said he repeats to himself all the time when he’s talking about engineering. And it’s when it’s, this is how he solves engineering problems. When you’ve, they’ve got a sticky thing, uh, like something that they’re working on that’s causing a problem. His, his first thing is let’s get rid of it.

[00:28:52] Cameron: Or he says, delete it. Just delete that whole, delete the part, delete that process. Just get rid of it. Remove the whole thing. Um, he says, if you delete it and then you need to put it back, that’s okay. You can put it back. But, um, often he said, he was talking a lot about how we’re driven by our limbic system and we, we have all of these justifications that sort of justify our actions, limbic systems at any, he said, it’s, he said, for engineers, there’s this fear.

[00:29:31] Cameron: that they’re going to forget something or leave something out and it won’t work because they did that once. They forgot to add something into the product and then it didn’t work. And, and it’s professionally and personally embarrassing if as an engineer you leave something out. He said, so they tend to overcompensate to make sure that they won’t do that again or won’t be accused of doing that again.

[00:29:55] Cameron: But consequently, things tend to be over engineered. So his approach is, Get, can we get rid of this? If it’s causing a problem, let’s just get rid of it and not do it at all. He says, you can always put it back later, but it’s simplify. He, he was talking about most engineers make the mistake of optimizing something that doesn’t need to be there in the first place.

[00:30:13] Cameron: And he says he’s done it himself way too many times, optimizing or automating something, but his process is delete it, speed it up, optimize it, and automate it. And there was a fifth one. Can’t remember what the fifth one was. He’s, uh, oh, fifth one is automated. Yeah, uh, missing one there. Maybe it’s put it back in.

[00:30:34] Cameron: Maybe that’s the second one. But he was talking just about how, uh, it gets back to this idea that it’s, it’s our emotions

[00:30:43] Cameron: that tend to drive behaviors and we justify it with all sorts of logic. But really, I mean, it’s fear of missing out when it comes to

[00:30:52] Cameron: buying

[00:30:54] Tony: mm hmm,

[00:30:54] Cameron: or high P. E. stocks. It’s, you know, it’s that embarrassment or, you know, what if somebody says, why, why didn’t you invest in NVIDIA in 2024?

[00:31:04] Cameron: You know, you don’t want to get caught out. You don’t want to feel that embarrassment that you, you should have done something that you didn’t do. And then we justify it with all sorts of stories. But really it’s the fear of embarrassment or the fear of, I mean, he, uh, he said what I’ve been saying for decades,

[00:31:25] Cameron: 99 percent of everything humans do is just to get laid. It’s a justification for really wanting to get laid, particularly for men. I think that’s true. Everything that we do in life is pretty

[00:31:36] Cameron: much all about just getting laid, which again is our limbic system, right? We’re, we’re gene machines, as Richard Dawkins says,

[00:31:45] Tony: So, so we’re doing,

[00:31:46] Cameron: for getting

[00:31:46] Tony: so we’re, we’re podcasting as a way to get laid. I’ve got to tell you it hasn’t, hasn’t quite worked for me

[00:31:54] Cameron: Well, okay. The

[00:31:55] Cameron: rationale for me

[00:31:56] Tony: I’ll go for another five years, see how I go.

[00:32:01] Cameron: Maybe you’re doing it wrong. I could explain to you how it works for me, but I don’t want you to feel, I don’t want you to feel bad.

[00:32:08] Tony: Oh, you

[00:32:08] Tony: have to give me some lessons.

[00:32:10] Cameron: Yeah, it’s too late. Can’t teach an old dog new tricks. Anywho, back to investing. I feel like we’ve gotten off track here. Did you have any other

[00:32:21] Cameron: stories?

[00:32:22] Tony: I’ve got lots.

[00:32:24] Cameron: Okay.

[00:32:25] Tony: Well, what you’re describing about engineering is true for the markets though, isn’t it? No one wants to be the fund manager left in the Mag 7 stocks when they correct. You look like a fool. No one wants to look like a

[00:32:36] Tony: fool or

[00:32:37] Cameron: Like, if everyone else is investing in them and they do well and your boss is like why weren’t you in on that? And yeah,

[00:32:42] Tony: Yeah.

[00:32:43] Tony: Yeah, exactly. I did. I’ve got some more stuff to talk about. Speaking of, oh no, I shouldn’t say speaking of fools. Not necessarily a fool. Um, the headline was, uh, Fortescue could use some new friends.

[00:32:55] Tony: This was an article in the Fin Review

[00:32:57] Tony: last week, and Fortescue is getting very close to a sell

[00:33:02] Tony: on our buy list.

[00:33:03] Tony: Uh, it’s still on the buy list, but it’s, it’s, uh, Josephine, it’s getting close to a sell. But one of the Cornerstone investors, Uh, sold out last week. So Fortescue stock dropped like a stone yesterday, which I think was Tuesday or Wednesday, down 10%, taking the benchmark S& P ASX 200 down with it. Why? Because it lost one of its two big long term backers.

[00:33:26] Tony: The sort of shareholder that picks and sticks and helps someone like Andrew Forrest have the certainty and platform to create a 63 billion miner. The shareholder was US fund manager Capital Group, a rusted on Fortescue bull. It came as investors are still trying to work out what’s going on with Fortescue’s energy arm. So I thought that was interesting. We’re not the only ones who are a little bit bearish on Fortescue. One of its cornerstone investors sold out last week.

[00:33:54] Cameron: and they’re LA based. Capital Group, right?

[00:33:57] Tony: Okay,

[00:33:58] Cameron: Hmm.

[00:34:00] Tony: I was going to talk about a post from Paul Krugman, um, saying that the US economy had soft landed and the New York Fed’s measure of underlying inflation is now just 2. 06%, and his tweet, or X, or whatever you call it now, said the Fed should cut rates now, now, now. The Fed should cut rates now, now, now, but that’s for the other, other reasons that, uh,

[00:34:26] Cameron: that?

[00:34:28] Tony: so this was And I see a date.

[00:34:31] Tony: It was a day before the market corrected. It

[00:34:34] Cameron: Live update, Tony RBA leaves interest rates on hold at 4. 35 percent in its 6th straight meeting following market volatility.

[00:34:44] Tony: No, that’s probably a good thing.

[00:34:47] Tony: It does, it does, you know, I think, yeah, I think we’ll see central banks start to be active again over the coming month. But,

[00:34:54] Tony: um, it makes sense for the RBA not to be the first.

[00:34:58] Cameron: Okay.

[00:35:00] Cameron: What else you

[00:35:00] Tony: And it was just, it was just like a week, up to a week ago where people, a lot of economists were saying the RBA should have had interest rates higher. We had lagged interest rate rises around the world and that was a bad thing.

[00:35:13] Cameron: Hmm.

[00:35:13] Tony: It’s always fun when the market has these kind of downturns to see all the bears start crowing and the

[00:35:19] Tony: economists who got it right start to say that they’re, they’re Nostradamus with a university degree.

[00:35:26] Tony: Um, it’s a bit of fun watching all that stuff and then they all have their day in the sun, but they tend to rotate out again.

[00:35:33] Cameron: Yeah, they were right 2

[00:35:35] Cameron: times.

[00:35:36] Tony: Yeah, I was going to talk about Buffett. I think we have a question from Ally, which we can do at the same time. Uh, but it came out over the weekend that, um, Buffett halved his stake in Apple and sold 116 billion of stock.

[00:35:55] Tony: Uh, and it was also reported. This was reported, Berkshire Hathaway’s cash pile reached a record US 276.

[00:36:04] Tony: 9 billion, which is 425 billion in Australian dollars. In the second quarter, as billionaire Warren Buffett slashed its Apple stake by almost 50 percent and continued to hold off on acquisitions. That was interesting, so he got out of Apple before it. It’s crazy. Results came out and its numbers weren’t great and the share price went down.

[00:36:29] Tony: So he, he really is the, uh, Oracle of

[00:36:32] Tony: Omaha. Yeah, he really is the Oracle of Omaha.

[00:36:37] Cameron: do you think he, uh, set off the downward trend in Apple shares? When Warren pulls out,

[00:36:43] Cameron: do other people follow?

[00:36:45] Tony: Entirely possible. It’s entirely possible, but he only has to, he only has to report things once a quarter. Um,

[00:36:52] Tony: so he generally keeps his share tradings as secretive as possible to avoid either

[00:36:58] Tony: causing a run of the stock he’s selling or to make it harder for him to buy the one he’s buying.

[00:37:03] Cameron: Yeah.

[00:37:05] Tony: He speaks about that at length. I mean, you know,

[00:37:08] Tony: I

[00:37:10] Cameron: Sorry, I

[00:37:10] Cameron: was just going to Question why Warren was hoarding cash and whether or not that was at odds with the QAV philosophy.

[00:37:23] Tony: think it’s in line with the QAV philosophy, which is to be fully

[00:37:27] Tony: invested if you can. But I think if I use

[00:37:30] Tony: QAV terms, um, Warren would be looking for very large

[00:37:35] Tony: ADT stocks. and I’m guessing there’s none on his buy list at the

[00:37:39] Tony: moment. So in his words, in his terms, he wants investments that can move the needle on Berkshire Hathaway earnings.

[00:37:46] Tony: Um, not, you know, not small, smaller companies that might be buyers normally. He just, he just says it’s not, not worth buying. Um, that’s the first thing. Second thing is, I think in the last probably five years, um, he’s made, He’s put more of an emphasis on Berkshire being what he calls unquestionably strong.

[00:38:07] Tony: So he wants Berkshire to be Fort Knox, so to speak. And he’s often used terms like, I want it to be the lender of last resort. So when these kind of downturns do happen, he finds it’s useful that he can get a good return by going in and lending money to, say, banks that are having problems. And he did this during the GFC.

[00:38:27] Tony: Where he would, um, do a deal with a, a bank or a large company. I think he may have done something with GE. I could have that wrong. But, uh, some of the large companies in the US where he would offer them a lifeline in terms of a loan, it would usually be at very high interest rates, sort of 8% plus that they had to pay.

[00:38:45] Tony: And this is when they couldn’t get financing from regular sources. Uh, and then he would often backend the deal with some kind of conversion to equity. Twist in it. So if you think about what happens in Australia with bank hybrids, that kind of thing, it’s you’re investing, um, your part, it’s part loan and it could turn into equity under certain conditions.

[00:39:10] Tony: Um, so he’s well rewarded if he just gets the loan, but if he does get to convert to equity, he’s bought it at a good price. Um, and so he’s, he’s always kept a bit of money aside for that too. So yeah, they’re the two reasons, Ollie. Um, I think he, he would like to be fully invested. He certainly bought back into Berkshire Hathaway, re bought his own shares to use some of that capital if he thought the price was right.

[00:39:35] Tony: So he’s not averse to spending the money. He’s just finding it hard to find something big enough and cheap enough to, um, to suit his investment needs.

[00:39:44] Cameron: And funnily enough, a couple of days after Ali asked that question, the market crashed and things are suddenly 10 percent cheaper than they were a week

[00:39:52] Cameron: ago.

[00:39:53] Tony: But not only that, but, um, it was only in the last, I think before Charlie died, it was in the last, uh, AGM, they were talking about their big investment in Japanese stocks, uh, and how that was

[00:40:04] Tony: a a great undervalued market to invest in, and I think he bought shares in the top five or top 10 Japanese companies, I’m not sure what the number was from memory, but he bought into them, and that market’s down 20 percent from its high.

[00:40:18] Tony: So he’s not always the Oracle of Omaha, and he is constrained about this, you know, by the size of the cash he has to deploy as to what he can buy.

[00:40:26] Cameron: And I read an article in the New York Times over the weekend about him resigning as a trustee of the Bill Melinda Gates Foundation, which I think is now just the Bill Gates Foundation, because I think Melinda Gates has left as well, um, and they were sort of talking about the future of the foundation, because his donations Apparently he’s given Berkshire Stock worth 41 billion

[00:40:54] Cameron: dollars over, uh,

[00:40:58] Cameron: to five foundations, non profit foundations

[00:41:03] Cameron: that he’s donated money to.

[00:41:05] Cameron: That’s a lot of money,

[00:41:07] Tony: Yeah.

[00:41:08] Cameron: billion dollars, and I think about half of the money that’s gone into the Gates Foundation has come from Warren over the years.

[00:41:17] Tony: wonder why he’s resigned. Just getting too old to go along to board meetings, perhaps?

[00:41:23] Cameron: Well, no, I think he said recently that, um, his children are going to be managing the Buffett Philanthropy, uh, from now on. They’ve got their own foundation and that’s what they’re passionate about. And so, yeah, I think he’s had a, I don’t know if it is any reflection on his relationship with Bill. This article did say that, uh, with Bill’s newsletters that he writes, every year for years, he mentioned Warren, and he hasn’t for the last three or four years

[00:41:57] Cameron: mentioned Warren in his newsletters.

[00:41:59] Cameron: So whether or not there’s been a falling out between the two of them over, I don’t know, Jeffrey Epstein

[00:42:08] Cameron: or his affairs or

[00:42:10] Cameron: whatever led to his divorce from Melinda, I don’t know,

[00:42:14] Cameron: but, uh, anyway, it’s neither here nor

[00:42:16] Cameron: there.

[00:42:17] Tony: No, and I think Bill still sits on the board of Berkshire Hathaway as well. So there’s still a relationship.

[00:42:22] Cameron: Right. Anywho, uh,

[00:42:23] Cameron: what else you got?

[00:42:25] Tony: I saw Bill sitting in the stands for the Olympic Games. Doubles tennis final,

[00:42:30] Cameron: Oh,

[00:42:30] Cameron: yeah.

[00:42:31] Tony: Australia took gold off the US, so bad luck Bill,

[00:42:34] Cameron: Hmm.

[00:42:35] Tony: didn’t get a win then, we did. What else have I got? Uh, I think that’s it for me.

[00:42:42] Tony: Yep, just that you have some questions I think now,

[00:42:47] Cameron: No,

[00:42:47] Tony: we done those

[00:42:48] Tony: too? That was it?

[00:42:49] Tony: Alright.

[00:42:50] Tony: Well I’ve got a pulled pork.

[00:42:52] Cameron: oh, okay. Are we going to talk through my US checklist today or not?

[00:42:55] Cameron: Yeah.

[00:42:58] Tony: I’ve only given it a, like a quick eye. I wouldn’t mind spending some

[00:43:02] Cameron: that’s all. I thought we

[00:43:02] Cameron: could,

[00:43:03] Tony: it. Yep, okay. I

[00:43:04] Cameron: that on the show. Have a quick look at it. Cause I finished

[00:43:06] Cameron: my recoding of it yesterday and ran a new list. So I thought we could

[00:43:10] Cameron: take a quick look and See See if it passes

[00:43:12] Cameron: the early sniff test. Okay, you want to do your pulled pork first? You’re doing an, you’re doing an Australian pulled pork, not a US pulled pork then. Okay.

[00:43:23] Tony: MCP.

[00:43:25] Cameron: Okay. Baby, you

[00:43:26] Tony: What do you want?

[00:43:28] Cameron: That’s good, do your pulled

[00:43:29] Cameron: pork. Yeah.

[00:43:30] Tony: Bulldog? Alright.

[00:43:31] Cameron: Yeah.

[00:43:32] Tony: Yeah, so this is McPherson’s. Um, McPherson’s is a stock I’ve owned in the past,

[00:43:38] Tony: going back sort of 10 years or more. It’s too small for me now. Um, and the ADT is only 37, 000 these days, so it’s a smaller company than it was in the past as well. McPherson’s are an

[00:43:49] Tony: importer and supplier of health and beauty products.

[00:43:52] Tony: to supermarkets, chemists and other retailers. And from their own website, McPherson’s is an ASX listed supplier of essential health, beauty and wellness products. McPherson’s products touch three out of four Australian households, according to independent research, and include some of Australia’s best loved brands, including Manicare, Lady Jane, Dr.

[00:44:15] Tony: Lewin’s, Swispers and Fusion. In addition, McPherson’s has a supporting portfolio of popular brands. in attractive segments of the market including hair care, vitamins and supplements, fragrance and nutrition. It had a history of supplying other, so that’s that’s the end of its description from its website, and I know it also had a history of supplying other products outside the health and beauty aisle, but announced an end to that with the sale of the last of these legacy brands called Maltics.

[00:44:46] Tony: And, uh, they’ve just divested Maltics, and this is from an ASX announcement from McPherson’s. McPherson’s Limited today announced, this is 28th of June this year, today announces that it has completed the sale of its Maltics brand and inventory to International Consolidated Business Group. The amount was for 19 million, subject to agreed post completion contractual adjustments.

[00:45:09] Tony: McPherson’s and ICBG, International Consolidated Business Group, have also entered into a transitional services agreement, estimated for three months, under which McPherson’s will assist ICBG with the transition of Maltics to ICBG. The sale follows the completion of a strategic review of the Maltics brand, announced in November 2023, as part of McPherson’s strategic re sip.

[00:45:33] Tony: The November 2023 announcement set out that McPhersons would focus on a core portfolio of its leading consumer brands, specifically in health, wellness and beauty, as a higher growth and higher margin category. McPherson’s is currently assessing the impact of material items for FY24 resulting from its transformation.

[00:45:56] Tony: As a result of the divestment specifically, the pending finalization of the company’s FY24 audited results, McPherson’s expects to incur a one off non cash asset write down in the order of 10 to 11 million in FY24, relating to the Multics brand and associated goodwill. The pre tax costs of the Maltics divestment are expected to be approximately 1.

[00:46:20] Tony: 5 million. And I should call out, McPherson’s will announce their full year results on the 23rd of August. So, when I talk about numbers further on, uh, these are nearly six months old. A couple of interesting things about McPherson’s. One of the largest shareholders is Chemist Warehouse, which Australian listeners will be familiar with.

[00:46:43] Tony: CW Retail Holdings, a Chemist Warehouse division, hold nearly 10 percent of the company. And this was because of a deal they did a couple of years ago, back in 2022. And I’m going to quote from an article from a magazine called Inside FMCG, March 25, 2022. Chemist Warehouse will take a 10 percent stake in consumer product supplier McPherson’s as part of a broader strategic distribution partnership between the two companies.

[00:47:16] Tony: McPherson’s will become an exclusive long term distributor. of a portfolio of health and beauty brands owned or controlled by Chemist Warehouse outside of the Retailers Australia and New Zealand network. The range includes Wagner Vitamins, Wagner Body Science, Bondi Protein, Bostergrant, Inc. and Microgenics, all of which will now be available to all of McPherson’s wholesale customers.

[00:47:41] Tony: The distribution rights will be for an initial 50, 000. term of five years commencing July 1, the same date as the shares are issued to Chemist Warehouse. McPherson’s will have three five year options to extend the arrangements, subject to certain minimum performance thresholds on a brand by brand basis, which McPherson’s considers it as well placed to meet.

[00:48:01] Tony: Chemist Warehouse will also expand the range of McPherson’s brands, which the retailer ranges in Australia and New Zealand. This is a Chemist Warehouse, Moosehead, Masser, Fusion Health, Stratton, Sugar Baby, and Happy Flora will be added. So a couple years ago it’s done a deal with Chemist Warehouse just to carry more of Macpherson’s brands and Macpherson has access to Chemist Warehouse brands.

[00:48:26] Tony: And that was in exchange for Chemist Warehouse taking 10 percent of the shares in the company. It’s a kind of an interesting deal there. A bit on the history of Macpherson’s, the website, uh, proudly trumpets that it’s been around since 1860 and it was founded by a chap called Thomas Macpherson, the man who founded the business later known as Macpherson’s, emigrated from Scotland to Australia with his wife Jessie in about 1853.

[00:48:53] Tony: He set up as an iron merchant in 1860, selling pig iron to the Melbourne foundries. By 1870, he was referred to as an iron merchant with steam sawmills, and the business became known as Thomas Macpherson Sons. In 1863, Macpherson opened an office in Sydney. By 1900, uh, The mc, the mc McPherson descendants, uh, set up the Acme Bulk Company to protect local manufacturers from exploitation by overseas bulk producers.

[00:49:27] Tony: The brand Ajax was adopted and in 1924, the bulk works were transferred to a new modern building in Richmond in Melbourne. Between 29 and 32, the company Bolt works supplied 5 million rivets weighing 300 tons for the construction of the Sydney Harbor Bridge. During the First World War, the company began the manufacture of lathes, and became a leading builder of machine tools that were previously imported.

[00:49:54] Tony: Uh, There’s a lot to do with the continuation in the steel business, but I’ll skip through to 1938. A company called Australian Abrasives Pty Ltd was set up and McPherson’s acquired the Tool Equipment Company in Sydney. The Associated Machine Tools Australia Pty Ltd was also formed. To separate Macpherson’s machine tool manufacturing interests from its merchandising activities.

[00:50:22] Tony: In 1939, a foundry and pump manufacturing plant was established at Tottingham, Melbourne, and the Ajax, Bolt and Rivet Co. commenced manufacture in New Zealand. After the outbreak of the Second World War, Macpherson’s factories worked at full capacity and were crucial to Australia’s war efforts. On December 5, 1944, McPherson’s converted to a public company named McPherson’s Ltd.

[00:50:46] Tony: As time went on, manufacturing in Australia began to decline, and imports of everyday tools began arriving from Asia. So William David, who was a descendant, retired in 1984, and eventually parts of the company were divested, such as the Richmond Bolt Works, which closed in the early 1990s. Since the 1980s, McPherson’s has diversified into housewares, Printing and health and beauty care products.

[00:51:12] Tony: And that was from a website called the University of Melbourne archives, which had a very detailed list of the company. The, the last bit I want to talk about is the printing that was mentioned there. In, uh, and when I owned the company, it, uh, owned a large printing division, which was Demerge. In 20, 2012, MCP announced that they proposed to Demerge, uh, a The printing business MCP, um, uh, from McPherson’s MCP and, uh, operated as a separate company.

[00:51:45] Tony: MPG Printing and its subsidiaries, which own and operate one of Australia’s leading book printing and commercial printing businesses, um, at the time and a separation of the MPG Printing Group from the MCP Group, will place MPG, MPG Printing into position to actively pursue growth. opportunities in the printing industry.

[00:52:06] Tony: So MPG printing listed separately and after a little while changed its name to Opus Group. And the code was OPG, but in 2018, OPG was taken over by a company called TopCo, which was listed on the Hong Kong Exchange. So, I guess a case within six years of the company suggesting the printing side wasn’t receiving the kind of value it should be, they merged it, and then it was taken out.

[00:52:34] Tony: So that’s the history of McPherson’s. Um, the QAV numbers. Again, bearing in mind that, uh, they’ll, we’ll get some new numbers this month. The stock price I used was 42.5 per, uh, 42.50 cents, which is above iv one of 11 cents, but less than IV two of 47 cents. Uh, net equity per share is 76 cents, and book plus 30 is 99 cents, which are well above the share price.

[00:53:00] Tony: However. A lot of that is goodwill, um, from taking over other brands, and the NTA is only 22 cents per share, so we’ve seen this before where companies have grown by acquisition, the NTA is different to the net equity per share, and it really, if you’re going to buy a company like this on book value, you’ve got to have a good analysis of whether the goodwill is worth what it’s, uh, what it’s priced in at, and as we saw, With their announcements of the sale of the Maltics brand, they will take a write down because of goodwill impairments on that one.

[00:53:34] Tony: Uh, this company at 42 and a half cents is well below consensus price target. However, I think there are only one or two brokers providing a target. Market cap is only 63 million, so it’s a small company. Dividend yield is 7%, which is above the average mortgage rate, so we can score it for that. Stock Doctor financial health is strong and the trend is recovering, which scores an extra point.

[00:53:58] Tony: We like recovering companies. PE is 20. 3. Which is high ish, but not the highest, or lowest in the last three years, so we can’t score it for that. Uh, PropCaf is only 3. 21 times, so regardless of what’s happening with Goodwill, this company can be bought at a very cheap price, uh, based on its cash flow.

[00:54:18] Tony: Earnings per share is forecast to grow by 134%. And so EPS growth over P is 6. 6 which is high and scores well for us as well. Interestingly enough directors hold very little stock which is a concern and the founders are long gone so we can’t score it for having another founder. The stock price is not a recent uptrend and has been in general decline for a long time but is Back above its buy line, but be careful, it’s just trading above its sell line, so have a look at that if you’re interested in buying the company or taking it further.

[00:54:52] Tony: All in all, the company scores a quality score of 14 out of 16, or 88%, which is high, and the QAV score is 0. 27. Um, I guess on from the risk point of view, it’s a small company, so they can be buffeted, um, by, you know, um, kind of swings in their sales or their, their profit margins, which, uh, big companies can ride through a lot better.

[00:55:18] Tony: But, but one of the biggest risks, I think, is, is just the nature of the industry it’s in. It’s their supplying. Uh, brands to FMCG supermarkets in particular, and it’s a difficult task for a small company. Just ask farmers about that. Supermarkets could replace any of the MCP brands that they like with own brands at some stage in the future, which could hurt McPherson’s.

[00:55:41] Tony: And I guess the other risk I think is the low ownership of shares by management and directors, and that’s a particular concern. The CEO is already fairly new though, so hopefully over time he’ll build up a stake in the company. So that’s MCP.

[00:55:55] Cameron: Hmm. Thank you Tony. Didn’t know much about them before that. Seen them on the buy list over the years. I use some of their products. Nail file. They do a great nail file. Made of glass. Really good.

[00:56:08] Cameron: Chrissy recommended it to me. Kung Fu. Gotta keep your nails nice and uh, smooth. Cut so you don’t slash people.

[00:56:17] Cameron: when you’re out there. So yes, check out their glass nail files. Manicare glass nail files if you’re into doing your nails, boys and

[00:56:26] Cameron: girls. Yeah,

[00:56:32] Tony: do you? It’s just,

[00:56:35] Tony: well, don’t take a knife to a gun fight. Take a nail file.

[00:56:40] Tony: Yeah.

[00:56:41] Cameron: Don’t take a gun to a knife fight either. That’s just unfair. That’s not sportsmanlike, you know. All right, thank you for that. Let’s talk about the US. So,

[00:56:53] Tony: stocks. Yeah.

[00:56:55] Cameron: US stocks. I went through and completely rebuilt my checklist based on our last discussion. Um, and ran a new buy list on Monday, yesterday, and then filtered that with the normal things that I do, PropCaf, etc.

[00:57:20] Cameron: But then also filtered it. on stock rank equal to or greater than 96. Because, so one of the things that I did, we talked about this, uh, I think last time, is, ow, ow, ow, ah, oh, cramp in my right thigh muscle, oh, uh, I need some electrolytes. Um,

[00:57:45] Cameron: I did the whole download, all six and a half thousand stocks, and then I looked at the stock, the, I stack ranked by stock rank, and looked at what the top 200 were.

[00:57:57] Cameron: And they were about 96 and above. And then I stacked ranked by the F score

[00:58:04] Tony: hmm.

[00:58:04] Tony: Mm hmm.

[00:58:05] Cameron: and they were about eight and

[00:58:06] Cameron: above. So what I’ve built into this is after I filter it, I’m filtering the filtered list, what’s left by those companies that have a stock rank of 96 or above and an F score of eight or above.

[00:58:24] Tony: So when you say stock rank, is that the overall Stockopedia ranking or is it quality?

[00:58:29] Cameron: It’s the overall.

[00:58:31] Tony: Okay,

[00:58:32] Cameron: And that has left me, uh, with, um, and I’ve got the quality rank on here as well. So the quality rank, uh, goes down out of this list. There’s about 20 stocks I ended up with. Um, so it’s fairly cut down. I think the quality goes down as low as 68, but most of them are in their 80s and 90s in terms

[00:58:55] Cameron: of the quality rank. Um, so yeah, so, I mean, a couple of these were on my last list. Uh, buy list,

[00:59:02] Cameron: and in that original portfolio, TK, funnily, is the highest score. Uh, so there you go.

[00:59:13] Tony: Terrific value.

[00:59:16] Cameron: Uh, 98 percent quality rank, so what more can you say?

[00:59:21] Tony: Yeah, I’d like to know what the 2 percent is that I need to change.

[00:59:28] Cameron: So if um, and I think from memory they’re like a shipping company, aren’t they?

[00:59:36] Cameron: Let me

[00:59:37] Tony: so, yeah.

[00:59:38] Cameron: TK uh, International Crude Oil and Other Marine Transportation Services, based in Bermuda, that’s how you know. They’re good, because they’re based in Bermuda. Um,

[00:59:54] Cameron: so, you know, one of the things that we picked up last time when we looked at it was the bankruptcy risk for a lot of the stocks that we were picking up was high.

[01:00:05] Cameron: High risk, they’re in the distress. This one is sort of in the middle, it’s at the bottom of the green range, which is the safe range.

[01:00:13] Tony: right.

[01:00:14] Cameron: And I notice that a lot of them sort of sit there. A lot of them are in the bottom of the safe range. Some of them are a little bit higher in the safe range, but when I was looking at it last night,

[01:00:26] Cameron: that’s sort of, um, the lowest.

[01:00:29] Cameron: Um,

[01:00:30] Cameron: so, I wanted to get your thoughts

[01:00:34] Cameron: on that. Do you think if they’re in the bottom

[01:00:36] Cameron: of the safe range, that’s safe enough for us? Or do we want it to be higher? This is their Z2 score.

[01:00:44] Tony: I’d have to have a look, Cam. I don’t know.

[01:00:46] Cameron: Okay.

[01:00:48] Tony: Can I get, can you point me to where Stockopedia has its Zed score.

[01:00:53] Tony: range?

[01:00:54] Cameron: Yeah.

[01:00:54] Tony: I look at, if I look at TK,

[01:00:57] Cameron: It’s on the right hand side, halfway down the screen. Bankruptcy risk.

[01:01:01] Tony: oh yeah, um, yeah, it’s on the borderline between cautious and safe, isn’t it?

[01:01:07] Cameron: Yeah,

[01:01:09] Tony: Which I think would be good enough. I mean, you wouldn’t want it to go any lower than

[01:01:12] Tony: that.

[01:01:13] Cameron: no, we want it to be in the green,

[01:01:17] Cameron: but you

[01:01:17] Cameron: know, this is,

[01:01:19] Tony: bankruptcy risk is, is between, at the bottom of safe, but the health trend F score is nine out of nine.

[01:01:26] Cameron: yes,

[01:01:27] Tony: It’s as high as it can get. So it’s strange you can have a health trend, perfect health trend score and still be heading towards cautious on the

[01:01:37] Tony: bankruptcy risk score. That’s interesting.

[01:01:39] Cameron: and I don’t know why

[01:01:40] Cameron: that is.

[01:01:41] Tony: No, me neither.

[01:01:43] Cameron: But a couple of other things I wanted to run past you, so, in building this, so one of the things that I’ve added is I have the new three point upturn score in there now. I’ve written a script to figure that out as I do with the Australian manual data stuff. PE, lowest PE still escapes me though because I thought I might be able to get it off their home page, but even if you look, because they don’t give me a number for PE history, but even if you look on their home page and you look at PE ratio, you’ll see they’ve only got 2023 and TDM.

[01:02:27] Cameron: They don’t have

[01:02:27] Cameron: any PE history before 2023 even on their home page. So for summary, I don’t know why. LEO

[01:02:38] Cameron: couldn’t explain it to me when I asked, but that’s just not something that they do as report PE. Now, I could probably work it out though, right? If you have

[01:02:48] Cameron: the price history and the earnings history, you could, I could probably back end it.

[01:03:05] Tony: well, it’ll be the end of the financial year, which will be, because it’s US, it’ll be, you know, December 31st. So if you did get the price on that day, you’d be able to calculate the P.

[01:03:16] Tony: E. ratio yourself. So it’s surprising that Stockopedia can’t do that.

[01:03:23] Tony: I’m just looking at EK, it’s down a lot in the last few days.

[01:03:28] Cameron: Well, I’m sure everything is there. Yeah. Like I, I ran the numbers on this. I did the downloads on the 2nd of August. So obviously a lot’s changed since then. I mean, I’m not suggesting we buy any of these. It’s just the

[01:03:44] Cameron: process I wanted to, run through with you. So yeah, I want to think about how to get the PE.

[01:03:49] Cameron: Um,

[01:03:50] Cameron: one of the

[01:03:50] Cameron: other things that I did, I think you were telling me a couple of weeks ago that you thought their EPS

[01:03:56] Cameron: growth. was too far out. The figure that they were reporting was like three years.

[01:04:04] Tony: Yeah, so this gets down to, um, Forecast EPS growth, and it’s not out three years, it’s out, it’s, it’s out, um, so say we’re in 2023

[01:04:19] Tony: now, or 2024 now,

[01:04:21] Tony: it’s giving you what they’re forecasting earnings per share growth will be in 2025. Um, oh, in fact, if I look at these numbers in Stockopedia, they’re still giving us 2023 and then the growth.

[01:04:32] Tony: So, okay, my, my point is that, um, At the moment, you can, uh, there’s no hard and fast rule about what a forecast growth is for EPS, and It can relate to, um, either the growth that’s forecast for the next results, which in the case of like McPherson’s that we just talk about, we just talked about, mean that the forecast is only going to last for three weeks because we’re going to get 2024 earnings per shares out then, or as Stockopedia do it, it’s forecasting what the earnings per share will be in FY25.

[01:05:11] Tony: So it’s going out 12 months plus the three weeks left in 24. So it’s always going to be, at its worst, like in a month’s time, it’ll be nearly two years out, and at its shortest, it’ll be 12 months out, or 12 months in a day out. I’ve always found that that can be quite elastic, that number, if you go with the FY25.

[01:05:37] Tony: Earnings per share forecast and then work out growth. Um, so when I do my calculations in the checklist, I’m using the FY24 forecast number, which means at this time of year, it should be a fairly solid, reliable forecast because it’s only a few weeks away from when they report the numbers. And we’ve gone through confession season.

[01:05:57] Tony: So if the market was holding in the wrong forecast, then the company is kind of obliged to come out and say that. They don’t always, but they’re meant to. Um, yes, and I found that holding, basing decisions based on the FY25 forecast is a bit rubbery, and it changes a lot. Um, so I use FY24. I use the forecast for the next annual results, if that makes sense.

[01:06:23] Cameron: Yeah. So I’m trying to look it up here because they, they do have an EPS forecast one year.

[01:06:35] Tony: And when I dug down on that, when you gave me your buy list last time, it was the one year forecast meant, in this case, FY25, so it’s a bit over a

[01:06:44] Tony: year. Because that’s, because that made a big difference, right? So

[01:06:47] Tony: I forget now which company it was that I was looking at, but if we use the FY24 forecast, so the forecast for the end of this financial year, it was one number, but the FY25 forecast was like growth of 300 percent and it was scoring it higher and putting it onto our buy list because of that, because it scores a 2 for that.

[01:07:11] Tony: And I didn’t like that because, like I said, a forecast of a 300 percent growth in 12, 12, at least 12 months out is, is a big call. A lot can happen between now and then. And generally it’ll get, um, it’ll get moved down.

[01:07:30] Cameron: Right. And that’s sort of the case with TK. So if I look, so what I did was, yeah, take those two, I took their current EPS. And I took their EPS forecast and then calculated the difference between the two. Although now I’m looking at the numbers here. I actually look at the download, it’s got their EPS and their forecast EPS is But my formula is still giving them a score. Okay, so I need to look at my algorithm.

[01:08:06] Cameron: For that, Um, but from what you’re saying, does it mean that we can’t even use EPS growth then?

[01:08:14] Cameron: yes, I don’t think we can, cause Stockopedia uses the. FY25 number, or the number more than 12 months out. And remember we spoke a little while ago, I’ve been running some checks on Stock Doctor because it does measure earnings per share revisions during the year, and, um, I can’t check for TK in Stock Doctor, but A lot of stocks will have big movements in their earnings per share forecasts, which changes the growth number if you were looking, if you started off using the FY25 figure.

[01:08:48] Tony: During FY25, that figure can be halved or it could double. It’s that robbery.

[01:08:53] Cameron: And that means we can’t use IV 2 either, because it’s based on the future EPS.

[01:08:59] Tony: In Stockopedia, yes, we have to change it. Calculate it ourselves, I would guess.

[01:09:04] Cameron: How do we calculate it ourselves?

[01:09:07] Tony: I’m just looking at the page for, okay, I’m looking at the page for TK

[01:09:13] Tony: in stockopedia, And there’s a column in the financial summary which has 2024 E estimate and 2025 E. They’re blank for tk, but I’m assuming in other companies cases they won’t always be blank.

[01:09:30] Cameron: Right.

[01:09:32] Tony: So it’s the 2024 E number over the um, current earnings per share. The 2023 earnings per share will give us the growth.

[01:09:42] Cameron: And if they are blank, then We

[01:09:44] Cameron: just have

[01:09:45] Tony: We can’t give it an IB2. Yeah.

[01:09:48] Cameron: we just blank it out of our results.

[01:09:51] Tony: Yeah, and that happens a lot, as we know, we don’t get, um, analyst coverage of every stock, which can be to our advantage.

[01:09:58] Cameron: So if you look at GSL, Global

[01:10:01] Cameron: Ship Lease, which is

[01:10:03] Cameron: the second stock on my new buy list. It does have 2024E

[01:10:09] Cameron: for EPS.

[01:10:16] Tony: of plus 9. 05.

[01:10:20] Cameron: Yep.

[01:10:21] Tony: And then for FY25, it’s saying it’s going to go down. It’s minus 8. 18%. So that’s a big difference to our checklist, right? Cause one’s a forecast growth and one’s a forecast contraction. And we score a contraction with a minus two on the checklist. So it may swing some of these stocks off our buy list.

[01:10:41] Cameron: But I’m just looking at, so let me look at GSL in my download and see what it said.

[01:10:52] Cameron: So, Yeah,

[01:10:54] Cameron: okay. EPS forecast one year 9. 523,

[01:11:01] Cameron: which is

[01:11:03] Cameron: the same as what it has in that front page for 2024e.

[01:11:11] Tony: So that’s the correct growth. Yeah.

[01:11:14] Cameron: we’re assuming that’s the, that’s good. If, if, if it’s giving us that number, we can use it for EPS growth and for IV2.

[01:11:23] Tony: Yeah. Which is interesting because the one I looked at last time you did a download was using the FY25 forecast growth number.

[01:11:31] Tony: So I don’t know if you’ve changed something or that was a one

[01:11:34] Tony: off or there’s rules around when it rolls over to

[01:11:36] Tony: FY25, but yeah, it

[01:11:40] Tony: looks like it’s the right number.

[01:11:43] Tony: Although the front page of Stockopedia is saying 24 growth for this company is 9. 05%. And if I’m looking at the right column. In the buy list you sent me, it’s saying 9. 267. Is it column AB?

[01:11:59] Cameron: Uh, 9. 2657 is the current, um, EP, uh, EPS. AB,

[01:12:10] Tony: where’s the EPS growth?

[01:12:13] Cameron: Okay. So the EPS growth? is column AI.

[01:12:19] Tony: Oh, got it. Okay. It’s saying 3%.

[01:12:21] Cameron: Yeah.

[01:12:23] Tony: So where’s that coming from? Because it’s saying it’s either 9, plus 9, according to the front page of Stockopedia.

[01:12:31] Cameron: Yeah. I don’t know. Cause I’m, I’m, I, well, I’m, I’m, yeah, I’m calculating it myself. It’s just, uh, you know, forecast less the current. divided by the current,

[01:12:44] Cameron: right?

[01:12:45] Tony: Right. Okay.

[01:12:46] Cameron: That’s how I’m calculating it. So I don’t know why they’re giving me a different result, but I can check my calcs, check GSL. All right. I wanted to check that with you.

[01:12:59] Cameron: Um, what else? Book plus 30. Oh, just the, the

[01:13:04] Cameron: neps and the book.

[01:13:05] Cameron: price. So, um, they don’t, Elio

[01:13:09] Cameron: told me they don’t do equity. But they do have a, um,

[01:13:18] Cameron: price to book function.

[01:13:21] Cameron: It’s

[01:13:21] Tony: Yeah, they’ve got book. Okay.

[01:13:26] Cameron: So

[01:13:26] Tony: I can see book value on their front page.

[01:13:31] Cameron: yeah. So he told me they

[01:13:32] Cameron: don’t do equity, but then I figured out they do price to book and book is

[01:13:37] Cameron: basically net equity. So I’ve reversed engineered

[01:13:41] Cameron: their price to book

[01:13:43] Cameron: to work out, the equity,

[01:13:46] Cameron: and then I could do book value

[01:13:48] Cameron: growth, book plus 30, that kind of stuff based on that.

[01:13:52] Tony: Yeah, well, it looks like their book value calculation is the, Is the net equity per share calculation that we normally do.

[01:13:58] Cameron: Yes.

[01:14:00] Tony: Yeah, it’s, I just looked at the definition, it’s total assets minus total liabilities, which is what I would say is net equity per share.

[01:14:08] Cameron: Yeah. Okay. Good. Book value. Um, anyway, so, uh,

[01:14:17] Tony: Looking good.

[01:14:18] Cameron: I think these companies look stronger and, you know, we’ve, I mean, Obviously, the market’s in turmoil, so I don’t know how many of these 20 would actually be buyable, but in the normal course of events, if

[01:14:30] Cameron: I can end up with a list of 20 to

[01:14:32] Cameron: 50 stocks on that buy list, we should be able to, you know, add stuff that, that have a very high quality rank, a very high stock rank, a high F score, um, yeah, should be good.

[01:14:49] Tony: Yeah. Have you run this for the Australian stock list as well from Stockopedia?

[01:14:55] Cameron: Not this version of it. I, I, that’ll be my next step after I just check this, um, IV2, uh, this EPS forecast stuff. Yeah. So then I’ll run it and do a comparison to the Australian buy list again. But, as I said to you the other day, um, off air, the first version I built of the Stockopedia checklist I built for Australia, and it compared.

[01:15:21] Cameron: very well with the Stock Doctor buy list. And then I went and applied it to the US and the company sucked. So I’m not exactly sure why the first version of it did, you know, look like pretty much a replica. There’s a couple of

[01:15:39] Cameron: stocks that were on Stockopedia that weren’t on Stock Doctor,

[01:15:42] Cameron: like Vysan. Which has just been an absolute killer.

[01:15:50] Cameron: I wish it was in my portfolio Vysan. Um, I bought and it was up 15% today.

[01:15:59] Cameron: Um,

[01:15:59] Cameron: it’s

[01:16:00] Tony: bought it? You bought it?

[01:16:02] Cameron: I added

[01:16:03] Tony: for the

[01:16:03] Tony: Stockopedia portfolio?

[01:16:05] Cameron: The Australian Stockopedia portfolio back in July last year. It’s up 147%. since then

[01:16:13] Cameron: up 15 percent today

[01:16:16] Tony: Oh,

[01:16:17] Cameron: for some strange reason.

[01:16:20] Tony: wow.

[01:16:21] Cameron: Bought it at 17 cents. It’s currently trading at 42 cents. So, you know, you know, but anyway, again, broken clock can be right, et cetera, et

[01:16:31] Cameron: cetera.

[01:16:32] Cameron: So,

[01:16:32] Tony: yeah, yeah. yeah. And that’s right. They’re not every stock list. Not every buy list isn’t going to go up dramatically as well.

[01:16:39] Cameron: yeah. And if I look at the, the Stockopedia Australian portfolio that I built, um, hasn’t done great. I mean, that is sort of the one that’s shooting the light out. SXC is in there. It’s up 90%, but it was on the other buy list. Most of the other stocks were on the other buy list. Abacus Property Group might be the other one.

[01:17:02] Cameron: It’s down 5%. Um, but you know, you know, look, if I, the stocks that ended up on the Stockopedia Australia buy list, ASG, Boom Logistics, MacMahon Holdings, Vysan, NAB, Viva Leisure, SXE as I said, server stream SSM, JYC, FPR, ABG, Abacus Property Group, NZM, nzme, Shape Australia Corporation, SHA, which is up 38% since December.

[01:17:36] Cameron: And PRN Parenti, uh, which I only added in May actually.

[01:17:46] Cameron: I thought Parenti was sort of on the shit list because of all of their acquisitions and stuff. Maybe

[01:17:50] Cameron: not. Anyway. So generally, generally speaking like that, out of that

[01:17:53] Cameron: list

[01:17:54] Cameron: of companies outside of maybe Vysan and Abacus Property Group, which has been on and

[01:17:58] Cameron: off our buy list, none of those are a big surprise, right?

[01:18:01] Cameron: They’re just

[01:18:03] Cameron: standard

[01:18:03] Cameron: QAV stocks, more or

[01:18:04] Cameron: less.

[01:18:06] Tony: Yeah, they’re all fairly small caps. That’s probably the only other thing I’d say about them. Um,

[01:18:12] Tony: but oftentimes stocks at the top of our list are small cap stocks.

[01:18:16] Cameron: yeah, NAB being the exception there.

[01:18:19] Tony: Yep.

[01:18:20] Cameron: Maybe Fleet Partners. I can’t

[01:18:22] Tony: Mm hmm.

[01:18:22] Cameron: Partners is. But yeah, if I’m. Yeah, but you know, most of the stocks in a Stock Doctor buy list are going to be small cap stocks too,

[01:18:32] Tony: Yep.

[01:18:33] Cameron: And most of the big ones, as you say, down

[01:18:35] Cameron: the bottom, they’re scoring 0. 1, 0. 11, something like that, usually. Anyway, so yeah, I’ll run it over the Australian and

[01:18:41] Cameron: see what I come up with, but I’m feeling better about it. Um, I think I’ve plugged some of the holes. And so thank you for your, uh, guidance on

[01:18:50] Cameron: that.

[01:18:52] Tony: You’re welcome. 98 percent quality. TK.

[01:18:56] Cameron: Yeah, the 2%. That’s when you, that’s in your drinking days, was the

[01:19:00] Cameron: other 2%.

[01:19:01] Tony: Yeah.

[01:19:04] Cameron: You’re still off the booze?

[01:19:06] Tony: Yep.

[01:19:07] Cameron: After hours? I think we’re after hours?

[01:19:10] Tony: Yes, we are. Yep.

[01:19:12] Cameron: Hour and a half in, we should be in after hours by now. How’s that, how’s the uh, house sale going?

[01:19:21] Tony: I wouldn’t, I struggle to be optimistic because you

[01:19:24] Tony: never know, but we’ve had someone back twice and they’re coming back for a third time

[01:19:27] Tony: tomorrow, so hopefully there’s a bit of interest starting to appear,

[01:19:33] Tony: which is good, but we haven’t had any discussions on price or

[01:19:36] Tony: anything like that, yet, so we’ll see.

[01:19:38] Cameron: What else have you been up to this week?

[01:19:41] Tony: I watched a lot of Olympics, um, especially the golf, so that was good. But a few things happening on the horse front. So we had a horse called Wilder, which we bred, named after Gene Wilder. And like Gene, we’ve retired, we’ve retired Wilder. Yeah, so it didn’t show much promise. He was out of Heurich, our Group 2 winning Mayer, so we thought he may have done better, but he just hasn’t, uh, he was very sick as a child and he just really hasn’t recovered, so he’s retired.

[01:20:13] Tony: Uh, speaking of good horses, Karst, uh, won her trial. Yesterday? Yeah, yesterday. So, uh, big, big name horses in her trial. I know it’s only a trial, so you can’t really go on trial form, but she’ll go off to the races after running in a trial and winning yesterday against horses like Mr. Brightside, and she’ll race on August 17th.

[01:20:39] Tony: She’ll kick off her campaign for the spring, so I’m looking forward to that. She, uh, she is a good horse, but got injured last year and didn’t see much of the spring, so we’re hoping that she stays sound and can get through. Spring this year. And Quello Dorato, who ran third at the last Art War Run again this Friday at Geelong.

[01:20:59] Tony: So she’s, uh, out of Bella Orfana, who’s Furyk’s mum. So we’re kind of keeping this all in the family with our breeding. And, uh, or he is. And, um, he, he ran third on his first run, so I think he might, uh, do well. We’ll see how he goes, too, on the, on Friday.

[01:21:18] Cameron: good luck with

[01:21:18] Cameron: those.

[01:21:19] Tony: Thank you.

[01:21:21] Cameron: What else?

[01:21:22] Cameron: That’s it?

[01:21:23] Tony: I think that’s it. Yeah, still reading Billion Dollar Brain by Len Dighton, which is good. Reading, uh, What Works on Wall Street again. It’s very, very good. Highly recommend that.

[01:21:34] Cameron: After we spoke last time, I went and got a copy, I went to get a copy of the IPCROS file by Len Dayton

[01:21:40] Cameron: and realized I already started reading it I’m like three

[01:21:43] Cameron: chapters into it.

[01:21:44] Tony: Oh, okay.

[01:21:45] Cameron: I, I don’t know when, uh, I’d forgotten. I was reading where I was up

[01:21:48] Cameron: to. I was like, I don’t remember any of this, so I’ve got to go back to the beginning and read it again.

[01:21:53] Cameron: But I have been reading a book, which I wondered if you’d ever heard of, The Star’s My Destination by Alfred Bester.

[01:22:00] Tony: No, I don’t think so. The name doesn’t ring a bell. Alfred Bester does, but, and I may have read it and forgotten it, but, um, you know, going back to the golden age of Sci

[01:22:10] Cameron: yeah. Yeah, the 50s. His most famous book is called The Demolished Man, which I haven’t started yet, but somebody recommended this one to me. The Star’s My

[01:22:20] Cameron: Destination. It’s good. And he’s considered like one of the, you know, earliest, uh, science fiction guys. Apparently William Gibson cites him as a major

[01:22:32] Cameron: influence

[01:22:32] Cameron: and people like that.

[01:22:33] Cameron: So, yeah, I’d never heard of him before. All this book and it’s, it’s

[01:22:38] Cameron: fun. I’m enjoying it.

[01:22:39] Cameron: Um,

[01:22:40] Tony: good. Go back and

[01:22:42] Cameron: gotta give a shout out to your daughter, Alex, for putting me on to not only the, the

[01:22:49] Cameron: woman you mentioned last week that I listened to and I really

[01:22:51] Cameron: liked, but, and I sent her an

[01:22:54] Cameron: email and said I really liked it, and she put me on another one, Amyl and the

[01:22:57] Cameron: Sniffers.

[01:22:58] Cameron: Did she

[01:22:58] Tony: Oh, yeah. The punk

[01:22:59] Tony: band.

[01:23:00] Tony: Oh, I knew about them anyway. Yeah.

[01:23:03] Cameron: Really? Why are you holding out on me?

[01:23:05] Cameron: That’s been my soundtrack for the last week. Oh my god, I love this band.

[01:23:13] Tony: Hmm.

[01:23:14] Cameron: Melbourne, female led punk band, sound like the Stooges,

[01:23:20] Tony: Mm hmm.

[01:23:20] Cameron: MC5, like just raw, gritty, angry punk. Lovin it! Lovin it! Okay,

[01:23:31] Cameron: I

[01:23:31] Tony: No, I agree. They’re good.

[01:23:32] Cameron: stop holding out on me,

[01:23:33] Cameron: Alex,

[01:23:35] Tony: I’m surprised she likes them. That’s not usually her. She’s more Grace Cummins. Who was the other? Oh, that? she recommended. Yeah.

[01:23:42] Cameron: I liked Grace Cummins too, a really great voice, really deep, earthy sort of voice. Um, my boys took me to see Deadpool and Wolverine on Sunday

[01:23:54] Tony: Oh, yeah. How’s that?

[01:23:55] Cameron: it. Loved it.

[01:23:57] Tony: Really? Good.

[01:23:58] Cameron: Oh yeah, if you like the, if you like the Deadpool films, you know. But one of the things, Chrissy wanted to go see it, and I said to her afterwards, I don’t think you’d get 98 percent of the jokes in it because it’s, it’s very heavily built for the fan base.

[01:24:14] Cameron: So, if you haven’t been following all of the, um, issues with Marvel films and DC films and the sale of Fox to Disney and the rights issues and, um, there’s a lot of in jokes. He mentions his real life wife a couple of times and in jokes about other films that he was in. And she was in, and Hugh Jackman’s been in.

[01:24:38] Cameron: It’s just like, absolutely packed full of

[01:24:42] Cameron: in jokes of the Marvel Universe, and You know, Marvel and Disney and Fox and Kevin Feige and the Murdochs. And it’s just, it’s full of, you know, references to the greater sort

[01:25:01] Cameron: of

[01:25:02] Cameron: goings on in the industry, and You know,

[01:25:05] Cameron: all that kind of

[01:25:05] Cameron: stuff and he gets away with it.

[01:25:08] Tony: I guess they weren’t mentioning, uh, Wolverine’s wife

[01:25:12] Tony: in real life.

[01:25:13] Cameron: He does.

[01:25:14] Cameron: He,

[01:25:15] Tony: did? Really?

[01:25:16] Cameron: they, they, there was a, no, there was a crack about,

[01:25:21] Cameron: um, how he’s put on weight or got slower since the divorce or something like that, Hugh Jackman. Yeah, there’s a crack about his divorce, um, Yeah, it’s just full of inside jokes and references and all that kind of stuff. Henry Cavill turns up at it in one point in a cameo and he makes a crack about trying to get him to

[01:25:43] Cameron: leave DC and come to Marvel and, the, you know, it’s, it’s just, if you’re into that kind of thing, which I, I don’t follow it as closely as my boys do, but close enough that I got, I think 90, 98 percent of the jokes, but, uh, yeah, it was, it was very, very funny.

[01:26:01] Cameron: Very entertaining.

[01:26:03] Tony: Oh, excellent. I’ll look forward to it. Because the last few Marvel Universe films have flopped, so this was seen as a bit of a,

[01:26:11] Tony: well hopefully a watershed.

[01:26:12] Tony: Not that I really care for those movies, but um,

[01:26:16] Tony: yeah, if this one failed, they were done, I think.

[01:26:19] Cameron: And well, and he refers to that because he refers to himself as Marvel Jesus throughout the film.

[01:26:27] Tony: I would have thought Robert Downey Jr. was Marvel Jesus.

[01:26:31] Cameron: He is. Did you see his

[01:26:32] Cameron: announcement the last

[01:26:33] Tony: I did. Dr. Van Doom. Yes.

[01:26:37] Cameron: Which is kind of funny because I’ve always thought of Dr. Doom as like a ridiculous character. Oh, and there’s a, there’s a, there’s a fantastic four reference in this too, which I won’t spoil it for you, but yeah, it’s good. It’s, uh, it’s, it’s a pretty good, it’s pretty good.

[01:26:54] Cameron: I’d give it a 10, actually. The boys asked me

[01:26:56] Cameron: when we left the cinema, what would you give it out of 10? I’d say a 10. Like in terms of entertainment for two hours, absolutely entertaining for two hours. It’s just ridiculous. Like stupid. level of entertainment up there with a good Bollywood film level of stupid entertainment

[01:27:15] Tony: Yeah, right. I really liked the first two. They were good.

[01:27:19] Cameron: yeah, I thought so

[01:27:21] Cameron: too. Um, and this one again, just knocks it out the park and you got to give credit to the director, Sean Levy and, um, to Ryan Reynolds, man. He’s absolutely figured out. The, the algorithm for these films, you know,

[01:27:40] Cameron: uh, they do

[01:27:41] Tony: Well, that’s his, all his parts these days are pretty much the same. He’s a wisecracking smartass.

[01:27:47] Tony: Either he’s got superpowers or not, but he’s

[01:27:49] Tony: just cracks his way through the movies. Yeah.

[01:27:52] Cameron: Yeah. And it works. It’s entertaining, you know.

[01:27:55] Tony: Mm

[01:27:56] Cameron: And then I mentioned before Elon, yeah, been watching this long interview with Elon on Lex Friedman’s podcast, uh, talking about Neuralink and robots and his vision for Neuralink, which is really fascinating. They’ve just done their second patient. And he said they’ve got a very, uh, much higher percentage of the nodes working than they did with the first guy.

[01:28:19] Cameron: I think with the first guy, they only got 10 to 15 percent of the nodes working this time. And then they learned a lot from that because these early patients are basically alpha testers of the product, really. They’re using them as learning experiences. The new guy, he said they’ve got a much higher percentage working at this stage.

[01:28:36] Cameron: But he’s talking about the vision for it. Like he’s, he’s always said the long term vision is for us to, for humans to

[01:28:42] Cameron: integrate with AI. Because he says his big concern is that AI’s bit rate is so much higher than humans. He said, imagine somebody who’s trying to

[01:28:52] Cameron: talk to you a thousand times slower than you can think and how frustrating that would be.

[01:28:59] Cameron: That’s how

[01:29:00] Cameron: AI is going to

[01:29:01] Tony: Brisbane, Brisbane circa 1975. Yeah.

[01:29:05] Cameron: Or now, that’s the same joke I made to Chrissy. I said, I would basically just move into Brisbane. Um,

[01:29:14] Tony: improved a lot. I’ll admit that. I enjoy going back there now.

[01:29:18] Cameron: but he was talking about when. People have Neuralink, you know, 10, 15 years from now in their brain, how much faster they will be able to absorb information and how much faster they’ll be able to communicate with their computers but also with other people with the implant. Because he’s basically saying it’ll be wireless communication.

[01:29:45] Cameron: And they were talking about how communicating ideas is very low bandwidth for most people. Now, we’re talking about listening to podcasts on one and a half or two times speed, which I do a lot, um, and how you can, you know, you can up your bit rate of communication, but he was saying when people have neural, like the, you know, 10 15 year version, version 15 of Neuralink in their brains, they’ll be able to communicate with each other wirelessly in real time, it’ll be chip to chip communications and how fast you’ll be able to think faster, absorb information faster, communicate faster than people without.

[01:30:30] Cameron: The chip. And I was reminded, I was reminded of a talk I gave at the Singularity Conference in Melbourne about eight or nine years ago.

[01:30:41] Cameron: There was an AI researcher who I was on stage with and he was talking about how he believed that the next world war would be fought between the humans that have upgraded and the humans who weren’t.

[01:30:57] Cameron: And who were trying to stop humans from being upgraded.

[01:31:01] Tony: Mm hmm.

[01:31:01] Cameron: be this big division in society between those that feel it’s wrong to get upgraded. But of course, the economic opportunities will probably be there for the people that have upgraded, and the ones that haven’t upgraded will struggle to compete in the marketplace.

[01:31:19] Cameron: This is assuming AI has left any jobs for us anyway at that point. Anyway, that was a really interesting conversation. The other interesting conversation was Elon talking about robots hands. He said about 50 percent of their engineering spend on Optimus, the Tesla robot, is on hands and how inordinately difficult hands are to get right for robots.

[01:31:45] Cameron: He said it seems simple. They’re really not, and he was talking about finger length too and how you might get, he said, you might think, well, why do we have different length fingers? Can’t your fingers all be the same length? What does it really matter? He said, turns out finger length is absolutely critical.

[01:32:03] Cameron: Like your pinky, you might think it’s a waste of time, but in terms of your dexterity, the pinky is absolutely critical. Which I wouldn’t have figured. He said, if you lose your pinky, you’ll, you’ll realize how hard it is to do so many things without a pinky. And it reminded me of a conversation, Steve and I did a Futuristic on Friday and we had a farmer, Martin, who’s a farmer from Northern New South Wales, came on.

[01:32:27] Cameron: He was telling us about his, uh, experiments with AI on the farm, and we were talking about the future of AI and robotics on a farm, and what that might mean for agriculture. But he was talking about how you can buy tractors today, and ag equipment that have got the latest GPS technology in them so they can drive themselves, and they can do all sorts of advanced things.

[01:32:52] Cameron: But they cost. You know, half a million dollars for these equipments where you’ve got your old tractor, that’s fine. But a human needs to be driving. And he was saying how farms are built around the human form factor. So he’s saying if he could get a humanoid robot to work on the farm, that would just be a game changer for him if you could have, and he said, you know, ’cause we were talking about how Jensen, Huang, the CEO of Nvidia and Elon said the same things.

[01:33:23] Cameron: They reckon 10 years from now, you should be able to get a humanoid robot for about the cost of a low end car, so 20, maybe US, um, once they start building them in

[01:33:37] Cameron: mass numbers, um, so he said, hell, he said, if I could get one for

[01:33:42] Cameron: 10, 000, Couple of hundred thousand dollars to work on my farm that would be a good deal for me.

[01:33:47] Cameron: And we were just talking about the impact that could have on food production costs

[01:33:51] Cameron: and all that kind of stuff. Because he was saying the hardest

[01:33:52] Cameron: thing for him to get is staff, right?

[01:33:56] Tony: Yeah,

[01:33:57] Cameron: work on the

[01:33:57] Tony: yeah, but, yeah, but like, and it’s, I mean, my brother lives on a dairy farm and same problem, but then they don’t pay much to their staff because their price, their milk output is being screwed down by the supermarket. So they can’t afford to pay much for staff. So

[01:34:17] Tony: it’s a bit of a vicious circle on that one.

[01:34:20] Tony: Whether,

[01:34:22] Tony: yeah, if they can afford it, given they can’t afford to pay the staff, maybe they can’t afford to buy a robot I

[01:34:28] Cameron: oh yeah,

[01:34:29] Cameron: maybe.

[01:34:30] Tony: think it’ll be interesting how all this stuff plays out economically, apart from how it all plays out scientifically.

[01:34:35] Cameron: too. Anyway, Neuralink.

[01:34:41] Tony: So, getting back to the, uh, neural, what’s it called? Neural net? Neural link, thank you, I kept, oh, I said Skynet. Neural link.

[01:34:51] Tony: I wonder, you know, if things happen as Elon thinks they’ll happen, whether the brain, when it operates much quicker, will start to devolve things to autonomous, operation. So it won’t actually, it’ll think so fast it won’t consciously think about it.

[01:35:09] Tony: Much the same way as we do when we have reflex actions or, you know, we lift our hand to drink some water or whatever. We don’t think about that. It just happens.

[01:35:19] Cameron: Yeah, well, that reminds me of one of my favorite science fiction books, Accelerando. Ever

[01:35:23] Cameron: read that? Accelerando. Charles Stross came out 20 years ago, 25 years ago. Um, and one of the main characters in it, uh, at the beginning of the book, he walks around with a vest that has like 20 motherboards on it.

[01:35:48] Cameron: They’re all connected to his brain. He’s, he’s sort of engineered this thing. And he’s, he’s a, he’s an entrepreneur that comes up with business ideas, but then open sources them. He’s just giving them away. And that’s how he’s, uh, sort of, and people just give him money to keep him functioning because he keeps coming up with those ideas, but he’s outsourced a large percentage of his thinking to these off, off bordered,

[01:36:13] Cameron: uh, brains that he wears.

[01:36:15] Cameron: And then he gets mugged. And somebody steals all of his brains

[01:36:20] Cameron: and then he can’t remember who he is, where he is, what he’s supposed to be doing,

[01:36:26] Cameron: who anyone, like, who his emergency contacts are. Because over the years he’s just offloaded too much of his basic cognitive

[01:36:33] Tony: right.

[01:36:35] Cameron: through this, uh, these machines.

[01:36:37] Cameron: Yeah, that’ll be the

[01:36:38] Cameron: risk.

[01:36:39] Tony: Yeah. What was that sci fi? Book I read that was like that, um, was made into a Netflix series.

[01:36:48] Tony: Um, but basically people were uploaded into a disc in the top of their

[01:36:52] Tony: spine, would get pulled out and put into a new body

[01:36:55] Tony: when it was, um, when the body died. Yeah, similar sort of

[01:36:58] Tony: thing.

[01:36:59] Cameron: I watched the first episode of that, never really got into

[01:37:01] Cameron: it, but um, I

[01:37:02] Tony: Really good book. Mm. Mm

[01:37:06] Cameron: Anyway, it’s an interesting world. Like Elon’s, obviously, as he is, but he’s very bullish about this stuff. And

[01:37:13] Tony: hmm.

[01:37:14] Cameron: again, like, it’s interesting, when you watch these interviews on Lex, like he’s not the, uh, Guy is on Twitter just mouthing a bunch of crazy

[01:37:24] Cameron: conspiracy shit.

[01:37:25] Cameron: He’s, uh, he’s the very quiet, nerdy, autistic

[01:37:28] Cameron: engineer talking about engineering issues

[01:37:32] Cameron: and just talking about how hard it

[01:37:34] Cameron: is to do this stuff with the brain, how hard

[01:37:36] Cameron: it is to build robots, um, just engineering problems constantly that

[01:37:43] Cameron: they’re working

[01:37:44] Cameron: on. But, um, yeah, that’s, uh, Fascinating stuff where it’s all going.

[01:37:52] Tony: Interesting news in the last week about, uh, all of the, uh, Car manufacturers in the world are rethinking their re V strategies. So

[01:38:01] Tony: I think all of them, including Tesla, but

[01:38:03] Tony: including Volvo and Mercedes Benz, are down like 20 percent on sales

[01:38:09] Tony: ish. You know, for each company it’s slightly different, but, but they’re, um, The projected EV takeout are not what they thought for various reasons, which I thought was interesting.

[01:38:22] Tony: I kind of got ahead of the curve on that one. Even though in Australia, EVs are still riding a bullish wave, probably because of tax reasons, but Mercedes came out with a downgrade probably most recently.

[01:38:35] Cameron: When you mentioned earlier in the show that the Mag 7’s revenues were down, um, or no, what’d you

[01:38:44] Cameron: say that they’re,

[01:38:45] Tony: Didn’t meet expectations.

[01:38:46] Cameron: that’s right. I looked at Tesla’s. So 2018, 21 and a half million, 2019, 25 million, 2020, 31 and a half million, 2021, 54 million, 2022,

[01:39:00] Cameron: 81 million. 2023, 97 million, and TTM is 95 million. 2024 estimate 99

[01:39:12] Cameron: million. So it’s going up, just doesn’t have the same sort of

[01:39:17] Cameron: growth that,

[01:39:19] Tony: and not, not meeting Wall Street expectations. Yeah,

[01:39:23] Cameron: And then net profit is expected to come down as well. Net profit in 2023 was 15 billion. Million, um, million?

[01:39:33] Cameron: No, millions, billions. So these are all billions. 2024 profit is supposed to be eight billion, so down from 15 by quite a lot.

[01:39:41] Cameron: But anywho, certainly their, their revenue is still going up, just not as

[01:39:47] Cameron: much.

[01:39:48] Tony: yeah, and not meeting Wall Street’s targets for them as well.

[01:39:53] Tony: Let’s see if I can find the article on, uh, EVs. I thought that was interesting. Yeah,

[01:39:59] Cameron: Elon’s profit, uh, Tesla’s profits are probably down because he’s spending billions on buying, building a supercomputer to against OpenAI.

[01:40:10] Tony: no, I can’t find it. Was in the, uh, was in the, um, the FIN?

[01:40:17] Cameron: he’s got a F score of only 4 out of 9 on Stockopedia too by the way,

[01:40:23] Cameron: Tesla.

[01:40:24] Tony: What’s the, what’s the bankruptcy prediction?

[01:40:27] Cameron: Just in the green, a little bit higher than TK, but not by much.

[01:40:34] Cameron: 10.

[01:40:34] Tony: here we go. I found the article. It’s in the Fin, November 14th, last year. Oh, this must be an old one.

[01:40:43] Tony: I saw it more recently. Car makers and leading Western markets have significantly increased the range and scale of discounts they offer on electric vehicles in the bid to counter weaker than expected appetite for battery models amongst mainstream buyers.

[01:40:57] Tony: Let’s see if I can find a reason. I know China was certainly taking up the slack.

[01:41:04] Cameron: right,

[01:41:04] Cameron: with

[01:41:05] Tony: Brutal price war.

[01:41:07] Cameron: Hmm,

[01:41:08] Tony: in Germany, and VW delayed plans for the fourth battery factory, citing sluggish EV demand in Europe, while Mercedes Benz plans to produce a brutal price war in China for falling profits.

[01:41:21] Cameron: do you want to guess what Tesla’s value rating is on Stockopedia by the way?

[01:41:27] Tony: so this is rank? It’s gotta be around 50, I would have thought.

[01:41:30] Cameron: It’s value ranking.

[01:41:32] Cameron: Out of

[01:41:32] Cameron: 99?

[01:41:33] Tony: Yeah. 50?

[01:41:39] Cameron: Just one zero

[01:41:40] Cameron: off.

[01:41:43] Tony: Oh wow,

[01:41:45] Cameron: It’s stock

[01:41:46] Cameron: rank is 21. So it’s, it’s not going to be appearing on our buy list over there anytime

[01:41:51] Cameron: soon.

[01:41:52] Tony: no, we could, I could have said that without using Stockopedia.

[01:41:57] Cameron: Alright TK,

[01:41:58] Tony: Yeah. Anyway,

[01:41:59] Cameron: for this week. QAV a good week everyone. Don’t panic. Fonzie it. Be the Fonz. It’s all, all going to be okay.

[01:42:06] Tony: As O’Shaughnessy says, stick with the system.

[01:42:09] Cameron: Yeah. Thank

[01:42:10] Cameron: you Tony.

[01:42:11] Tony: All right. Thanks, mate.