QAV 740 — Release the Sausages!

QAV 740 Club

[00:00:00] TK: Yeah, okay.

[00:00:06] CR: Gimme a 1, 2, 3,

[00:00:08] TK: One and a two, a one, two,

[00:00:10] TK: three.

[00:00:14] CR: Wel­come to QAV, TK, episode 7 4 0. It’s the 1st of Octo­ber, 2024. How’s your week been?

[00:00:25] TK: Good. Yeah, as we were talk­ing about off air, went down to the south post, south of Syd­ney any­way, New South Wales, for a bit of a dri­ve on Fri­day with Jen. She bought a donut at Berri and we had lunch and turned around and came back. But I saw the

[00:00:40] TK: Kia­ma blow­hole again

[00:00:41] TK: for the first time in

[00:00:41] TK: 40 years.

[00:00:44] CR: How impres­sive is the Kia­ma blow hole?

[00:00:46] TK: Very impres­sive. Very impres­sive.

[00:00:48] TK: Yeah, yeah.

[00:00:50] CR: Have you been to Yel­low­stone? It’s in the blow holes at Yel­low­stone. Like old

[00:00:54] CR: faith­ful? No. No,

[00:00:55] CR: Is it, is it bit that good?

[00:00:57] TK: Yeah, I

[00:00:58] TK: haven’t been too unfaith­ful, but yeah, it’s

[00:00:59] TK: pret­ty impres­sive. Bit like that.

[00:01:01] CR: Hmm. How often does it blow?

[00:01:04] TK: every cou­ple of min­utes. It’s, it’s, it’s the waves going into the rocks and then there’s a, uh, like a chim­ney and it forces the way the water pres­sure into a spout.

[00:01:16] CR: it’s not a

[00:01:17] CR: ther­mal under­ground release of vol­canic pres­sure. Oh, okay.

[00:01:23] CR: Chris­sy and I saw Old Faith­ful last time we were at Yel­low­stone. Well, the only time we’ve been at Yel­low­stone togeth­er. Yeah, we hap­pen to be there. We’re like, I know it goes off like every six weeks or some­thing, I think, but we hap­pened to be there when it went off and it was, it was great.

[00:01:37] CR: It was spe­cial. It was

[00:01:37] CR: impres­sive.

[00:01:38] TK: Once every

[00:01:39] TK: six weeks and they

[00:01:40] TK: call it Old Faith­ful.

[00:01:42] CR: Cause it goes off every six weeks

[00:01:43] TK: call it try­ing my patience or some­thing into the head,

[00:01:45] TK: should­n’t they?

[00:01:50] CR: Oh, TK. Well, lis­ten, um, well, as of this morn­ing, I had noth­ing to talk about on the show today, so I thought we haven’t done a US show for a while and the US port­fo­lio is going bonkers, absolute­ly bonkers. So I thought today would be a good oppor­tu­ni­ty to do some Amer­i­can stuff. But before we get into that, uh, last week.

[00:02:16] CR: In your WWOWS quote from O’Shaugh­nessy, you men­tioned this book, Rem­i­nis­cences of a Stock Oper­a­tor by Edwin Lefeb­vre, and I got a copy of it, and I start­ed read­ing it.

[00:02:31] CR: And it was weird. Uh, it was­n’t what I expect­ed. And so I’m going to tell a bit of a sto­ry about it for peo­ple this week, because it’s con­sid­ered a clas­sic writ­ten in 1923.

[00:02:46] CR: Here’s a quote from it that I pulled out. Uh, anoth­er les­son I learned ear­ly is that there is noth­ing new in Wall Street. There can’t be. Because spec­u­la­tion is as old as the hills. What­ev­er hap­pens in the stock mar­ket today has hap­pened before and will hap­pen again. I’ve nev­er for­got­ten that. Good Bat­tlestar Galac­ti­ca quote.

[00:03:07] CR: All of this has hap­pened before and all of this will hap­pen again. It’s from the reboot, any­way. But, as it turns out, um, the, the book is what they call a Romana Clef. It’s a sort of a fic­tion­al account based on a real guy. So it’s not about Edwin Lefeb­vre. He did work in the stock mar­ket at some point, but it’s most­ly about a guy called Jesse Liv­er­more was the real.

[00:03:39] CR: char­ac­ter. You ever heard of Jesse Liv­er­more?

[00:03:42] TK: I haven’t, but I’ve heard of the Liv­er­more

[00:03:43] TK: Lab­o­ra­to­ries.

[00:03:44] TK: Was he involved in

[00:03:45] TK: that

[00:03:45] TK: some­how?

[00:03:46] CR: No, not, not unless it was based on the brain mat­ter that was left behind when he blew his brains out in his club

[00:03:54] TK: no. I thought he might have donat­ed a whole heap of mon­ey like that. Carnegie

[00:03:58] TK: has

[00:03:58] TK: two sci­en­tif­ic endeav­ours.

[00:04:00] CR: No, he donat­ed a whole lot of his brains to the wall of his coun­try club. Um, it’s a fas­ci­nat­ing sto­ry and there’s a whole thing here that I’d nev­er heard of before. So it’s set, um, in the ear­ly part of the 20th cen­tu­ry. And this guy Liv­er­more was like one of the cra­zi­est stock traders ever. Um, he was the guy back in the day, pulling off insane trades, mak­ing mil­lions, los­ing mil­lions.

[00:04:32] CR: Liv­ing larg­er than life. I don’t, I don’t know who a mod­ern equiv­a­lent would be, sort of a cross between Trump and, uh, who was the, uh, Michael Milken back in the eight­ies. And, uh, I don’t know, the guy from Wolf of Wall Street, you know, one of those sorts of char­ac­ters.

[00:04:53] CR: Um, it starts off, the book starts off pret­ty low key as did his life.

[00:04:57] CR: He was born Paul Liv­er­more and he, at 14, he got a job as what they called a bored boy. For Payne Web­ber in Boston, mak­ing 5 a week to post stock prices. He writ­ing them up on the boards is the top. Yeah, the tick­er tape would come out and he’d write them up.

[00:05:17] CR: With­in a year, he was work­ing at a, or gam­bling at a buck­et shop.

[00:05:22] CR: You ever heard of buck­et shops?

[00:05:24] TK: I have heard of the term. Yeah, it’s, that’s, um, So, okay. So, from mem­o­ry, it’s where they sell stocks over the counter.

[00:05:35] TK: They may not nec­es­sar­i­ly

[00:05:36] TK: be list­ed

[00:05:38] TK: in the US.

[00:05:40] CR: No, it was basi­cal­ly like, off mar­ket gam­bling of stocks. So,

[00:05:48] TK: That’s what

[00:05:48] TK: I’m, sim­i­lar sort of thing.

[00:05:49] TK: It’s not

[00:05:49] TK: list­ed, but they sell it.

[00:05:52] CR: no, no, they were list­ed, but they weren’t actu­al­ly sell­ing actu­al shares.

[00:05:57] CR: So, Peo­ple would basi­cal­ly buy and sell shares in invert­ed com­mas, and there was a tick­et tape com­ing out, but no cer­tifi­cates were trad­ing hands. It was like back alley, let’s pre­tend we’re share trad­ing, like some­thing you would do in high school when you’re learn­ing about, How to sell shares, but with real mon­ey.

[00:06:24] CR: And these were like real­ly, real­ly dodgy. And so, yeah, they were made ille­gal by the 1920s because they were so dodgy. Basi­cal­ly, it was like this just free for all gam­bling syn­di­cate in these lit­tle dives, like pret­ty well dur­ing pro­hi­bi­tion, I guess, um, uh, maybe around about the time of pro­hi­bi­tion.

[00:06:46] CR: Any­way, he was 15 and he was good with num­bers. Liv­er­more this is, and the char­ac­ter in the book. So he, and he kind of had a sense for how to fig­ure out when a share price was going to go up, just sort of based on how much it was being trad­ed, where the ten­sion was between the buy and sells, he kind of fig­ured out some sort of a mod­el when he was 15.

[00:07:11] CR: By the time he was 16, he quit his job, went all in on trad­ing. He was mak­ing about 200 a week at the buck­et shops, way more than his day job ever paid him. By the time he’s 18, he’d made 10, 000, like a thou­sand per­cent return in a few years. And he was win­ning so much that he got banned from every buck­et shop in Boston.

[00:07:36] CR: He was using fake names and dis­guis­es to try and get around the restric­tions. Even­tu­al­ly, they fig­ured him out. So, in 1923, he moved to New York, just in time for a big bull mar­ket. Turned his 10, 000 into 50, 000 in five days. Then the mar­ket cor­rect­ed and he’d gone short. On a 400 per­cent mar­gin and he lost every­thing because the tick­et tape was­n’t updat­ing fast enough to keep up with the trades.

[00:08:10] CR: So he left New York, went to St. Louis, start­ed St. Louis, start­ed trad­ing in buck­et shops again, bor­rowed 2, 000 to get back on his feet. In 1901, bet on the North­ern Pacif­ic Rail­way stock, turned 10, 000 into 5, 000. 500, 000 rel­a­tive­ly quick­ly. 1906, he was on vaca­tion in Palm Beach and for some rea­son took a mas­sive short posi­tion on the Union Pacif­ic Rail­road the day before the San Fran­cis­co earth­quake hit.

[00:08:45] CR: He made 250, 000 on that one overnight. Then in 1907, dur­ing the pan­ic of 1907, His short posi­tions made him a mil­lion dol­lars in a sin­gle day. J. P. Mor­gan, who’d become kind of a men­tor to him at that stage, asked him to stop short­ing stocks because J. P. Mor­gan appar­ent­ly per­son­al­ly sta­bi­lized the entire stock mar­ket in 1907.

[00:09:16] CR: Used his own, he was like Buf­fett bail­ing out banks dur­ing the GFC, right? He used, he used his mon­ey and his posi­tion and his, his, obvi­ous­ly his con­trol of news­pa­pers. Remem­ber that sto­ry? I think we talked about it in the psy­chopath epi­dem­ic. Um, the, uh, when Woodrow Wil­son got elect­ed, he got, Woodrow Wil­son got elect­ed on a, um, plat­form of iso­la­tion­ism.

[00:09:42] CR: The U. S. was­n’t going to get involved in World War I. But J. P. Mor­gan had so much mon­ey rid­ing on Britain pay­ing back loans that he bought like 20 news­pa­pers around the coun­try. And uses them to cre­ate this fer­vour that the U. S. had to go to war, so the U. S. went, got involved in World War

[00:10:02] CR: I. And he cre­at­ed the, the whole sink­ing of the Lusi­ta­nia, um, bull­shit excuse that they used to jus­ti­fy get­ting involved in World War I.

[00:10:12] CR: Cre­at­ed all of that to force the U. S. to get involved in World War I. Any­way. Mor­gan per­son­al­ly asked Liv­er­more to stop short­ing stocks to sta­bi­lize the mar­ket, and he did. Then he flipped his strat­e­gy, and when the mar­ket rebound­ed, he walked away with 3 mil­lion. Then he bought like a 200, 000 yacht, this is like 1907, a rail car that was all ducked out, an apart­ment on the Upper West Side, hang­ing out at exclu­sive clubs, mul­ti­ple mis­tress­es, just he was the man about town.

[00:10:47] CR: In 1908, he got tricked by a cot­ton trad­er named Ted­dy Price, who was con­vinc­ing him to buy cot­ton because it was going to be this big thing, while he was secret­ly sell­ing it. So, Ted­dy Price was secret­ly sell­ing it through fronts and then con­vinc­ing Liv­er­more to buy it. Liv­er­more lost every­thing. But, he went bank­rupt.

[00:11:08] CR: But, um, right about the time of World War I, he man­aged to cor­ner the cot­ton mar­ket. He, he flipped it, man­aged to get back, secret­ly cor­nered the cot­ton mar­ket, made an absolute for­tune,

[00:11:26] TK: As we learned from, um, what was the com­pa­ny I did the pulled pork on? Was it Elders, I think, from mem­o­ry? Made all its mon­ey dur­ing World War I because Britain came over and bought

[00:11:35] TK: every­thing.

[00:11:37] TK: No, it was wool, sor­ry. It was­n’t cot­ton. They bought every, the whole wool clip from Aus­tralia

[00:11:42] CR: yeah.

[00:11:43] TK: to build

[00:11:43] TK: uni­forms, to

[00:11:44] TK: make uni­forms

[00:11:45] TK: with.

[00:11:45] TK: Yeah.

[00:11:47] CR: This time, it was­n’t J. P. Mor­gan that per­son­al­ly inter­vened, it was Woodrow Wil­son who per­son­al­ly inter­vened and asked him to stop cor­ner­ing the cot­ton mar­ket, and he agreed, say­ing, I just want­ed to see if I could do it. In the mid, by the mid 1920s, he was mak­ing He made like 10 mil yeah, he made 10 mil­lion dol­lars trad­ing wheat and corn, putting a short squeeze on Pig­gly Wig­gly, which I think we talked about. Did you talk about Pig­gly Wig­gly once? They’re an Amer­i­can super­mar­ket chain. Some­body was talk­ing to me about Pig­gly Wig­gly.

[00:12:20] CR: Any­way, short­ed them. His biggest move came in 1929. He’d amassed Mas­sive short posi­tions using over a hun­dred bro­kers to cov­er his tracks. By spring of 1929, he was down 6 mil­lion on paper, but then when the Wall Street crash hap­pened, he made over a hun­dred mil­lion dol­lars from his short posi­tions on the crash.

[00:12:45] CR: A lot of peo­ple blamed him for the crash because of all of the short posi­tions he was tak­ing. He had to hire body­guards. He was get­ting so many death threats after the crash. Um, but then he went bank­rupt again, but his per­son­al life was also this crazy sto­ry. He was get­ting a divorce in the thir­ties and then his ex wife in 1935 shot Their son, at 1.

[00:13:17] CR: 30am, after a Thanks­giv­ing par­ty, at their place in New York, accord­ing to the, I looked it up in the New York Times, it said, The shoot­ing was the after­math of a Thanks­giv­ing Day cel­e­bra­tion, which began with a din­ner par­ty and end­ed in a quar­rel, when the youth dared his moth­er to shoot him, after she had told him she would rather see him dead than drink to excess. And then he said, go ahead and shoot me, and then she did. And he said lat­er, it was acci­den­tal.

[00:13:50] TK: Sounds like she was drink­ing to excess,

[00:13:53] CR: Yeah. Yeah. Um, any­way, then in 1934, when the Secu­ri­ties and Exchange Act came into being, his trad­ing style was made impos­si­ble. He lost his for­tune again, filed for bank­rupt­cy for the third time in 1934 with debts in the mil­lions, tried to bounce back with a finance advi­so­ry busi­ness in the late 30s, sell­ing a tech­ni­cal analy­sis sys­tem that he called QAV.

[00:14:20] CR: No, I’m kid­ding.

[00:14:25] CR: It did­n’t take off. And on Thanks­giv­ing day in 1940, he shot him­self at the Sher­ry Nether­land Hotel in Man­hat­tan, left an eight page sui­cide note to his wife that read, my dear Nina, Can’t help it. Things have been bad with me. I’m tired of fight­ing. Can’t car­ry on any longer. This is the only way out. I am unwor­thy of your love.

[00:14:45] CR: I am a fail­ure. I’m tru­ly sor­ry, but this is the only way out for me. Love, Lau­rie. So, that’s the sto­ry, basi­cal­ly, that,

[00:14:56] TK: Yeah, right.

[00:14:57] CR: Is told in this book, but the book was, came out in like the 1923. So it’s the first part of his career, not the,

[00:15:04] TK: No, okay.

[00:15:05] CR: not the trag­ic end­ing of his

[00:15:06] CR: career. But, um, one of his favourite books appar­ent­ly was Charles Mack­ay’s Extra­or­di­nary Pop­u­lar Delu­sions and the Mad­ness of Crowds.

[00:15:15] CR: And this guy was just an expert on manip­u­lat­ing, uh, stu­pid­i­ty. Um, with a big dose of his own, I

[00:15:25] CR: guess, but yeah, that, that quote I said at the begin­ning, and I think it’s the one that you, sim­i­lar to the one you used in your quote last week, noth­ing’s new because peo­ple are greedy, always have been greedy, always will be greedy.

[00:15:37] CR: That’s why there’s spec­u­la­tion. And so the mar­ket will nev­er change whilst peo­ple are greedy. That’s like, I remem­ber War­ren at the AGM last year, I think when Char­lie was still around, some­body asked him about how AI was going to change invest­ing. And he said, I don’t think it will because peo­ple will always be greedy or stu­pid, some­thing about stu­pid­i­ty.

[00:16:01] CR: The biggest, you know, advan­tage that we have is oth­er peo­ple’s stu­pid­i­ty, you know,

[00:16:07] TK: yes.

[00:16:07] CR: any­way,

[00:16:08] TK: Good mem­o­ry.

[00:16:09] TK: You did

[00:16:09] TK: say that. Yeah.

[00:16:11] CR: so that’s, but like,

[00:16:12] TK: I haven’t, I haven’t, um, I actu­al­ly skimmed over the sec­tion in O’Shaugh­nessy today while I was putting notes togeth­er for what I was going to talk about. And he goes through, like, the South Sea Island bub­ble. In detail, um, he goes through mov­ing pic­ture stu­dios in the bub­ble with radios and the 60s with the nifty fifty and then the, you know, dot com boom and just the same thing.

[00:16:37] TK: Peo­ple get greedy. But he actu­al­ly then talked about, I did­n’t pull this out because I thought it would take too long to get through, but he actu­al­ly talks about research that, uh, peo­ple have done with fMRIs. To show that, um, not only, and we know this from Kah­ne­man and Diver­si­ty that, you know, peo­ple get dopamine hits when they buy into some­thing which has been going up, like an NVIDIA or the Mag 7 or what­ev­er.

[00:17:00] TK: But, um, O’Shaugh­nessy talks about some research which I had­n’t heard of before, which talks about, When, when the mar­ket is at its high, the brain flips and it real­izes that some­thing’s wrong. There’s an uncom­fort­able feel­ing, but the way it solves the prob­lem is it, it calms you down. Some oth­er part in the brain fires up and calms you down to think that Because every­thing’s worked well in the past, it’s going to keep work­ing that way in the future.

[00:17:26] TK: Even though you can’t explain it, even though it’s not log­i­cal, you’re quite calm as the crash hap­pens.

[00:17:33] TK: And I thought That was

[00:17:34] TK: inter­est­ing.

[00:17:36] CR: That is inter­est­ing. But you know, the thing, Tony is, it is dif­fer­ent every time. It’s always dif­fer­ent, Tony. It’s nev­er the same.

[00:17:43] TK: I think that, I think the chap­ter was cool. It’s,

[00:17:45] TK: it’s not dif­fer­ent this

[00:17:47] TK: time.

[00:17:49] CR: Yeah, it’s always dif­fer­ent, but the same at the same time.

[00:17:53] TK: Yeah, it’s always the same.

[00:17:55] TK: Might have a dif­fer­ent

[00:17:56] TK: flavour.

[00:17:58] CR: yeah. What do you say? It

[00:18:00] CR: does­n’t rhyme, but it, it does­n’t, it’s

[00:18:04] TK: No, it rhymes. His­to­ry does­n’t repeat, but it rhymes.

[00:18:07] CR: does­n’t repeat, but

[00:18:08] CR: it rhymes.

[00:18:09] CR: That’s right.

[00:18:09] TK: Yeah. I think Mark,

[00:18:10] CR: I’d nev­er heard of the,

[00:18:12] TK: attrib­uted to Mark Twain

[00:18:13] TK: orig­i­nal­ly. That’s the

[00:18:14] TK: first time I heard it.

[00:18:17] CR: I like, I’d nev­er heard of Liv­er­more before. And I’d nev­er heard of, um, buck­et shops and the whole thing. So I’ve been enjoy­ing read­ing this. It’s

[00:18:25] CR: real­ly crazy, crazy sto­ry. And, you know, peo­ple bitch and moan about reg­u­la­tion, but, um, that’s an exam­ple of why we have rules and reg­u­la­tions, you know?

[00:18:38] TK: Yeah. But you know, I mean, you know, he got up, he got hit to the can­vas too many times, I guess, to get up, but some­one like that prob­a­bly would have worked out a way around reg­u­la­tions. It’s, um, it’s what those peo­ple do, like it’s, I think it’s a, that’s a basic law of the uni­verse or of human nature that smart brains are in Can­ber­ra writ­ing reg­u­la­tions, but smarter brains are mak­ing mon­ey out­side

[00:19:08] TK: get­ting around them.

[00:19:09] TK: It’s,

[00:19:10] CR: Yeah.

[00:19:11] TK: Yeah, I read a, I read an arti­cle in today’s paper, you know, that guy Nick Bolton, who you may have come across from time to time, has made lots of mon­ey from being the thorn in the side of var­i­ous trans­ac­tions and, um, you know, hold­ing out for high­er prices because he has a cor­ner­stone stake and things like that.

[00:19:29] TK: Um, and he, long sto­ry short, he was being sued, um, And his assets were frozen, but the court found out that he basi­cal­ly trans­ferred every­thing over­seas and it did­n’t have juris­dic­tion to freeze his assets. So like again, you know, this, it’s the, it’s the same exam­ple, like even the courts can’t touch him.

[00:19:50] TK: There are rules and reg­u­la­tions, but he, he’s got­ten around them again.

[00:19:55] CR: yeah. Oh, this, um, Jesse Liv­er­more, like there’s a bunch of books, not just, um, Lefevre’s book. Accord­ing to Wikipedia, there’s like sev­en or eight biogra­phies that have been writ­ten about him, or part­ly about him. Um, but no films have been made about him. It’s sur­pris­ing. Like, he sounds like the per­fect,

[00:20:22] CR: Can­di­date for an amaz­ing sort of biopic. Um, fun­ni­ly enough, uh, 1933, not long before he killed him­self, he got mar­ried again to a singer and socialite, Har­ri­et Metz Noble. Who was from a promi­nent Oma­ha fam­i­ly made its for­tune in the Met’s brew­ery com­pa­ny. Um, and two of, she was, he was her fifth hus­band, and at least two of her pre­vi­ous hus­bands had com­mit­ted sui­cide, includ­ing War­ren Noble, who hanged him­self after the Wall Street crash of 1929.

[00:21:02] CR: That, uh, Liv­er­more was accused of caus­ing. So, um, I just won­der how much, I won­der how much War­ren knows about the sto­ry of, uh, this woman and, and Liv­er­more. I’m sure he knows about the Liv­er­more sto­ry, of course.

[00:21:16] TK: So did­n’t you just say he wrote a let­ter to his wife when he died? And I thought

[00:21:21] TK: you said it was Dear Nina.

[00:21:24] CR: Yeah, he must have called her Nina.

[00:21:25] CR: for some rea­son. Her name was Har­ri­et Metz Noble, but I assume Nina. He also signed his name Lau­rie, and his name was, oh, Jesse Lau­ris­ton Liv­er­more. So, must

[00:21:36] TK: Isn’t that inter­est­ing because the Liv­er­more Labs is the Lawrence Liv­er­more Labs.

[00:21:42] TK: won­der if he

[00:21:42] TK: did some­how donate

[00:21:43] TK: some mon­ey to set up the lab.

[00:21:45] CR: Well, his mid­dle name

[00:21:46] CR: was Lau­ris­ton,

[00:21:48] TK: Lau­ris­ton, okay, maybe it’s some­one dif­fer­ent then.

[00:21:51] TK: Yeah.

[00:21:53] TK: It would make

[00:21:53] TK: a great movie though, you’re right.

[00:21:55] CR: Oh, oth­er names, Boy Plunger, The Wolf of Wall Street, The Great Bear of Wall Street. So, he was the orig­i­nal Wolf of Wall Street, appar­ent­ly. There

[00:22:05] TK: and the

[00:22:05] TK: bear.

[00:22:07] CR: Yeah.

[00:22:08] TK: In the same

[00:22:09] CR: and the bear.

[00:22:10] CR: Yeah.

[00:22:12] CR: Any­way, I’ve got a pull pork to do after­wards, but I’ll let you cov­er your notes for the week first. Mm hmm.

[00:22:18] TK: Yeah, well, I’ve got a few. Um, speak­ing of this time, it’s dif­fer­ent. I was read­ing anoth­er arti­cle today. And it was about, um, the hous­ing mar­ket and inter­est rates, so it was on the back page. Um, head­line was the strong hous­ing mar­ket is still a prob­lem for the RBA. And it made me think of our friend Alan Kohler.

[00:22:41] TK: Um, cou­ple of, cou­ple of things sort of twigged my inter­est in this. Um, it’s about, it’s about, uh, What’s hap­pen­ing with inter­est rates, what’s hap­pen­ing in the mar­ket, in the hous­ing mar­ket. I’m going to read a cou­ple of quotes. Com­mon­wealth Bank data show­ing the pro­por­tion of new mort­gages being tak­en out by those with income between 200, 000 and 500, 000 has risen from about 13 per­cent in 2018 to about 33 per­cent today.

[00:23:17] TK: So that, that cou­pled with, um, here’s anoth­er quote, The good news for the banks is these new loans are less risky. Not only are bor­row­ers being stress test­ed at a hypo­thet­i­cal rate of 9. 3%, which is the aver­age mort­gage rate plus the 3 per­cent ser­vice­abil­i­ty buffer, but loans with debt to income ratios above six times have fall­en from 24 per­cent of the mort­gage flow to just 5%.

[00:23:41] TK: In oth­er words, this is a much safer bor­row­er. So, Alan Kohler told us when he came on the show five years ago that he thought the unem­ploy­ment num­bers were a bit, a bit of a fur­phy because there was this class of peo­ple he called the under­em­ployed and that if he added them, so that was defined as peo­ple who had some work but want­ed more.

[00:24:04] TK: And if he added them to the unem­ploy­ment num­bers, the unem­ploy­ment rate should be some­thing like about 13 or 15 per­cent was his, was his guess. Now that, I think the unem­ploy­ment rate’s about four and a half, 5%. So that. Extra 9 or 10 per­cent of peo­ple, um, are prob­a­bly unable to access mort­gages. Uh, and, and there­fore are nev­er going to be able to buy a home, um, and, uh, cou­pled with the fact that, um, APRA, which is the bank­ing reg­u­la­tor, is now ask­ing banks to only write loans to peo­ple who can han­dle a mort­gage inter­est rate of 9.

[00:24:40] TK: 3%, um, as a kind of way of, you know, mak­ing sure that The mon­ey’s safe and it’s going to be repaid. There’s a lot of peo­ple who can’t get mort­gages in the mar­ket and the peo­ple who are have lots of mon­ey. So they’re push­ing the house prices up. So I guess that’s cou­pled with lack of sup­ply. But, um, again, this comes.

[00:25:03] TK: Back to this kind of con­flu­ence of a reg­u­la­tor, the RBA, which, which is, this arti­cle goes on to say, does­n’t think you’ll be able to cut inter­est rates because you’ve got these lots of qual­i­ty loans out there who are still buy­ing hous­es and there’s lack of sup­ply, um, and there­fore the RBA can’t Drop inter­est rates.

[00:25:25] TK: Um, so you’ve got the RBA not able to drop inter­est rates, you’ve got the banks who are going to become even more, um, robust, so, um, there’s going to be, and you’ve got peo­ple who are in the high­er end of the, uh, uh, income brack­ets tak­ing out mort­gages, it, not only does it speak bad­ly about, you know, um, inequal­i­ty and afford­abil­i­ty, but it, it, it, it’s also work­ing at cross pur­pos­es again.

[00:25:54] TK: I mean, sure­ly you’d want peo­ple who are find­ing it dif­fi­cult to access the hous­ing mar­ket to start access­ing the hous­ing mar­ket. In oth­er words, get mort­gages, um, to be able to sort of, um, house them­selves, I guess, and, and, um, solve some of those. Prob­lems with afford­abil­i­ty. That’s not hap­pen­ing. The mar­ket’s mov­ing the oth­er way.

[00:26:17] TK: But the oth­er inter­est­ing point about, about this arti­cle was that they were also talk­ing about pri­vate cred­it. And the arti­cle says that, uh, anoth­er fas­ci­nat­ing data point released yes­ter­day, which showed pri­vate cred­it growth hold­ing at an annu­al rate of 5. 7%, the fastest since May, 2023, and well up from the recent trough of 4.

[00:26:38] TK: 8 per­cent last Decem­ber. So, you know, I’m won­der­ing whether pri­vate cred­it is fill­ing the gap. in these kind of low ser­vice­abil­i­ty areas. And there­fore, it’s not falling with­in the purview of APRA, who’s sup­posed to be mak­ing sure that the, the line mar­ket is well reg­u­lat­ed, so we don’t have mas­sive defaults and cause anoth­er eco­nom­ic down­turn.

[00:27:00] TK: So, you know, it’s anoth­er exam­ple of, we’ve set up these struc­tures to try and reg­u­late things. Maybe they do their job too well, and it works against what we’re try­ing to solve. Um, and, and we don’t have, The mouse, I guess, in trea­sury to step up and, or the abil­i­ty, I mean, the gov­ern­ment does­n’t have the man­date to do it or does­n’t have the num­bers to do it, but some­thing’s got to give, I guess, is where I’m com­ing from.

[00:27:23] TK: And again, this is this whole one arm work­ing against the oth­er arm, the reg­u­la­tors mak­ing sure the hous­ing mar­ket is very, very, very robust and safe. Um, which is prob­a­bly keep­ing inter­est rates high because the RBA is say­ing, well, you know, infla­tion’s not going away because there’s peo­ple with access to cred­it and because the peo­ple who are access­ing cred­it can ser­vice big­ger debts, they’re get­ting more of it.

[00:27:46] TK: But then we have this hous­ing prob­lem, um, and peo­ple are then going to pri­vate cred­it avenues, per­haps, I haven’t seen data to sug­gest that, but some­body is because pri­vate cred­it is grow­ing and that’s not as reg­u­lat­ed as the banks. It could be sow­ing the seeds for the next. Eco­nom­ic down­turn. And cer­tain­ly when I’ve seen this before, when the unreg­u­lat­ed cred­it mar­ket sort of takes off, it, it becomes a prob­lem.

[00:28:10] TK: Even­tu­al­ly it becomes a bub­ble, and then it bursts.

[00:28:14] TK: Any­way, just, um, some­thing which caught my atten­tion. Um, and I hope some­one’s look­ing at it and we’ll do some­thing about it. A cou­ple of oth­er things. Um. I noticed that for the first time in a long time, Vir­gin UK is on our bio list this week, VUK has been close, if not the top of the bio list for maybe 12 months now.

[00:28:38] TK: Um,

[00:28:38] CR: Fuck off, Tony. Real­ly?

[00:28:40] TK: yeah.

[00:28:41] CR: Fuck, you’re say­ing fuck off? Fuck off.

[00:28:42] TK: No, the

[00:28:43] TK: UK is, yeah. It’s gone. You

[00:28:46] CR: is off. Fuck off. Fuck off, fuck

[00:28:48] CR: off.

[00:28:48] CR: the list. is, that what you’re say­ing?

[00:28:50] CR: Delist­ed?

[00:28:51] TK: fair bit of mon­ey out of it and then, um, it, it, it shot up because, uh. A Scot­tish bank in the UK is tak­ing it over, but it’s tak­en a long time for all that, the machi­na­tions of the takeover to wind its way through. But it was final­ly delist­ed this week.

[00:29:07] TK: So it’s valet to VUK. It’s been a great, a great, win for us val­ue investors, but it’s hung around for a long time.

[00:29:17] CR: Real­ly? I,

[00:29:18] TK: Yeah.

[00:29:20] CR: I read that arti­cle that said Qatar Air­ways was tak­ing a chunk of it. Is that

[00:29:25] TK: that’s no dif­fer­ent. That’s Vir­gin Air­lines.

[00:29:29] TK: Vir­gin, uh, VUK is a

[00:29:31] TK: bank.

[00:29:32] CR: Oh,

[00:29:34] TK: Vir­gin Mon­ey UK. Yeah.

[00:29:37] TK: It’s the old Clydes­dale Bank, which Nation­al Aus­tralia Bank

[00:29:40] CR: right,

[00:29:41] TK: demerged with when it bought many years ago and then got into trou­ble and had eco­nom­ic prob­lems and then had to demerge it. So it was list­ed with a list­ing on both the UK mar­ket and the ASX because lots of the old NAB cus­tomers still had shares in this bank.

[00:29:59] TK: Um,

[00:30:00] CR: Yep.

[00:30:01] TK: it was orig­i­nal­ly called Clydes­dale Bank, which was the bank NAB bought, but then Vir­gin took a stake in it or rebrand­ed

[00:30:08] TK: as Vir­gin UK as a, as a bank. And now anoth­er bank, I think it’s the Mid­land Bank from mem­o­ry in the UK has bought, has launched a bid and

[00:30:16] TK: looks like it’ll go

[00:30:17] TK: through And

[00:30:17] TK: final­ly take it over.

[00:30:20] CR: And so

[00:30:22] CR: any­one who was hold­ing it has had to

[00:30:29] TK: Well, they’ll now get shares in, they’ll now get shares in Mid­land Bank

[00:30:32] TK: and have to wait for that whole process to, to go through.

[00:30:35] CR: real­ly?

[00:30:36] TK: But I do remem­ber talk­ing about that, I’m going to say a year ago when the takeover start­ed and we rec­om­mend­ed to peo­ple that giv­en that the price was trad­ing at the takeover bid that they should sell.

[00:30:48] TK: So they would­n’t get trapped in the UK when it got tak­en over

[00:30:51] TK: and lost its ASX

[00:30:53] TK: list­ing. Ha ha

[00:30:54] CR: I must have not made a note of that because I, uh, added it to, I added it to, uh, one of the pos­si­ble buy lists, uh, uh, 13th of Sep­tem­ber. At 4. 24, it’s sit­ting at 4. 22 now and, uh, gone, right?

[00:31:16] TK: It’s

[00:31:16] TK: gone. Yep. I thought you had a list on your check­list, your buy­ing check­list now with a list of com­pa­nies that were on

[00:31:23] TK: the takeover.

[00:31:23] TK: Hmm.

[00:31:25] CR: I do. And that, that appar­ent­ly is either not on there or I missed it. Let’s see, VUK is, oh it is! Being acquired it says! God, must have not come to my atten­tion. I was think­ing the buy

[00:31:42] CR: list. Need to improve my alert­ing sys­tem.

[00:31:47] TK: Hmm.

[00:31:47] CR: Oh good­ness me, OK. Well Vale v UK, as you say. Buck is off.

[00:31:54] TK: Yep. The oth­er issue I want­ed to talk about today was iron ore prices. So, um, Stim­u­lus is back in the Chi­nese econ­o­my. I saw the Chi­nese stock mar­ket was up 4 or 5 per­cent this week. And that’s start­ed to cause the iron ore price to increase. I guess peo­ple, you know, think that the Chi­nese gov­ern­ment will be suc­cess­ful in re stim­u­lat­ing the econ­o­my because they’ve got a stat­ed growth tar­get they want to meet.

[00:32:21] TK: And, um, the iron ore mar­ket has sold down based on slack­ness in the Chi­nese econ­o­my, but, um, that’s been turned around recent­ly. Iron ore, last time I had a look, was­n’t a buy, but it’s get­ting pret­ty close. Um, FMG is back on the buy list. Um, it’s a buy on the bread lat­er, but, uh, iron ore still isn’t a buy yet.

[00:32:40] TK: But, um, I think that might hap­pen soon. So any­body who’s inter­est­ed in, in iron ore stocks, just keep your eye on the iron ore price and, uh, see when it becomes a buy. It’ll prob­a­bly hap­pen between now. Shows, uh, we won’t nec­es­sar­i­ly see it, um, as it hap­pens, but, um, yeah, peo­ple might want to have a look at that, because FMG is, um, you know, pret­ty close to its lows, and, uh, if it does go for a run,

[00:33:05] TK: it’s prob­a­bly got a fair bit of

[00:33:07] TK: upside.

[00:33:09] CR: But Tony, the Chi­nese econ­o­my is tank­ing. We’ve heard this over and over again. How can,

[00:33:14] TK: Until last week.

[00:33:15] CR: be

[00:33:19] TK: Yeah.

[00:33:20] CR: I love I love

[00:33:21] TK: I’m tempt­ed to do my Ben­ny Hill imper­son­ation of the Chi­nese cul­tur­al ambas­sador, but Alex, Alex told me that was, uh, not

[00:33:30] TK: allowed. So I haven’t, I won’t do it. But no, no, the Chi­nese gov­ern­ment, um, loos­ened up cred­it pol­i­cy last week as a stim­u­lus to, um, try and reach its growth tar­gets. And, uh, I think the Chi­nese stock mar­ket was up

[00:33:43] TK: like at least 5 per­cent on the day of the

[00:33:44] TK: announce­ment, maybe up more now.

[00:33:46] TK: Oh,

[00:33:51] CR: know what they’re doing. They have lead­er­ship that know what they’re doing. I like, I like these busi­ness jour­nal­ists. They must be, I’m pret­ty sure they’ve got a cal­en­dar up on their wall and it’s like, uh, which cycle are we in this week? Is it like, bash Chi­na’s econ­o­my or talk about how Chi­na’s econ­o­my is turn­ing around?

[00:34:10] CR: Where are we at? Mm.

[00:34:11] TK: yeah, yeah, we bash Chi­na’s econ­o­my and talk up the iron ore

[00:34:15] TK: price.

[00:34:17] TK: Yeah.

[00:34:18] CR: Well, there you go.

[00:34:20] TK: Yep. So, so Chi­na’s back in the good books, iron ore’s ris­ing, and I think FM, FMG’s a buy on the, on the buy list, and then the

[00:34:27] TK: Bre­da lat­er, we’re

[00:34:27] TK: just wait­ing for iron ore to become a buy as well.

[00:34:30] CR: Last time we talked about FMG, we said it was a red flag because of all of the senior

[00:34:34] TK: Oh, you’re right.

[00:34:35] CR: Zig­gy Zig­gy Twig­gy.

[00:34:37] CR: Zig­gy Zig­gy Zig­gy’s. Yeah.

[00:34:41] CR: Um, where, when do we, um, when do we give it the respite on the

[00:34:46] TK: good

[00:34:47] CR: Twig­gy’s bull­shit Red flag?

[00:34:49] TK: I don’t know.

[00:34:51] TK: Yeah, it’s a good point.

[00:34:53] CR: Mm.

[00:34:54] TK: I don’t know. I can’t advise peo­ple on that one. Suck it and see, I guess.

[00:34:57] CR: Right. Okay.

[00:35:00] TK: Well, you know, I can’t have rules for every­thing.

[00:35:04] TK: Yet.

[00:35:06] CR: a rook

[00:35:08] CR: Okay.

[00:35:09] TK: It’s a red flag until the Chi­nese

[00:35:11] TK: econ­o­my stim­u­lates and then we

[00:35:12] TK: fall lock­step

[00:35:13] TK: in with a bil­lion peo­ple in Chi­na.

[00:35:15] CR: do I add

[00:35:16] CR: suck it and C to the

[00:35:17] CR: Bible? The QAV

[00:35:18] TK: yeah, your check­list,

[00:35:19] TK: your buy­ing

[00:35:19] TK: check­list, right under it’s under takeover.

[00:35:21] TK: Check

[00:35:23] CR: all else fails, suck it and C.

[00:35:26] TK: see what they reck­on. Yeah.

[00:35:29] TK: Yeah, good ques­tion. I don’t know.

[00:35:32] CR: Mmm.

[00:35:32] TK: did have a, speak­ing of red flags, I’m going to tell you my tale of woe for the week, which is my own fault for not obey­ing my own rules. Um, peo­ple I think have, have noticed that I had a stock on our,

[00:35:46] TK: um,

[00:35:47] TK: what do we call it?

[00:35:47] TK: Our dec­la­ra­tion

[00:35:48] TK: list, the stocks that

[00:35:49] TK: we own.

[00:35:50] CR: Ed dis­clo­sures. Ed said you hold, you held GNCA cou­ple of weeks

[00:35:54] CR: ago.

[00:35:54] TK: Yeah, I sold it. Thanks, Ed. I checked the grain price and sold it. Um, I think it’s been going up since then, but I’m not look­ing at it. I may have peaked once.

[00:36:06] TK: Okay, I’ve got two tales

[00:36:07] TK: of woe this week. The first tale of woe.

[00:36:09] CR: that was­n’t it. Oh, right.

[00:36:11] TK: That was­n’t it.

[00:36:12] TK: No. The oth­er one is Fron­tier Ener­gy. So I, um, this is one of the stocks that Alex A got me into, you know, one of the, one of the backscratch­ing ones I do with him occa­sion­al­ly because he’s get­ting a com­mis­sion for float­ing a com­pa­ny. Um, and I get access to the float and it often works out well and it was for a long time.

[00:36:31] TK: It was up, it was at least dou­ble what I paid for it. Um, and, uh, The red flag is, a lit­tle while ago, in the last cou­ple of weeks, the ex pre­mier of WA became the chair­man, a guy called Mark McGowan, and it’s long been a red flag for me, when­ev­er a politi­cian, or a sports­man, or some­one like a pop star, celebri­ty chef, goes on the board of a com­pa­ny, get out, because it’s just, it’s just wrong.

[00:36:59] TK: They’re not busi­ness peo­ple, they’re politi­cians, or they’re sports peo­ple, or they’re chefs, right? Any­way, I let it slide. Um, about a week after he became chair­man, they announced the cap­i­tal rais­ing, heav­i­ly dis­count­ed cap­i­tal rais­ing, share price halved, went through the, the sell, line on the bread lat­er.

[00:37:18] TK: And I thought, well, I’m not going to put any more mon­ey into this, but if it’s a cap­i­tal rais­ing, I’ll get that away. And then I’m sure the stock will recov­er from there. How­ev­er, today it’s hard again. I’ve just announced that they lost some con­tract or gov­ern­ment fund­ing for alter­na­tive ener­gy. It’s a solar pow­ered ener­gy com­pa­ny or deal­ing in alter­na­tive ener­gies, and they just lost gov­ern­ment fund­ing or their share of some kind of gov­ern­ment fund­ing to, to build some big solar farm.

[00:37:45] TK: I haven’t got to the bot­tom of all the details, but yeah. Nev­er owned much of it. Not a big part of the port­fo­lio, but should have fol­lowed my rules. A on

[00:37:55] TK: red flags and B

[00:37:55] TK: on the

[00:37:56] TK: bread lat­er and sold out and I did­n’t. So I’ve been

[00:37:59] CR: So the red flag would’ve been the

[00:38:00] CR: politi­cian

[00:38:02] CR: tak­ing, would he join the board or he be? He became the chair­man. Became the

[00:38:05] TK: Yeah.

[00:38:06] TK: Joined the board and

[00:38:06] TK: became chair­man in one fell swoop.

[00:38:08] CR: Yeah. Right. So that should be, that would’ve been a red flag for you if you’d

[00:38:11] TK: Yeah. I remem­ber look­ing at it going, what? My first thought is he’s just being paid off by some­one for, you know, doing some­thing good by the indus­try in the past. That’s pret­ty cyn­i­cal of me, but um, and I, you know, no evi­dence for that, so don’t sue me, just a thought. Um, and, uh, but yeah, I’ve just seen it so many times.

[00:38:33] TK: And it’s just, it’s kind of, There’s almost a weak­ness, it’s a weak­ness in my nature on this occa­sion, but it’s a weak­ness in human nature. I call it, it’s almost like the silo the­o­ry. If some­one’s a good foot­baller, or if some­one’s a good politi­cian, it does­n’t make them a good any­thing else. You know, like to get to the top of the pyra­mid in one day, In one par­tic­u­lar indus­try or one par­tic­u­lar endeav­our, you’ve got to be, you know, real­ly dis­ci­plined, have the right set of attrib­ut­es to, to make that work for you.

[00:39:08] TK: Um, you know, to get to be a real­ly good foot­ball play­er or the pre­mier of a state or what­ev­er. To then think that that makes you a good, busi­ness per­son or a good, you know, role mod­el for

[00:39:19] TK: what­ev­er else

[00:39:20] TK: you want to be a

[00:39:21] TK: spokesper­son for does­n’t

[00:39:22] CR: But I. I assume when those things hap­pen,

[00:39:25] CR: celebri­ty, foot­baller, politi­cian, they’re just there as a door open­er. Hey, would you like to meet Mark McGowan? Take a meet­ing with us.

[00:39:33] TK: yeah, lots are for sure.

[00:39:35] CR: I don’t assume that they’d get that

[00:39:37] CR: job because they’re bril­liant busi­ness peo­ple. It’s just, it’s a way to get a meet­ing.

[00:39:42] CR: A bet­ter chance of get­ting a meet­ing because you’ve got a celebri­ty that you can, they can get a self­ie with a celebri­ty.

[00:39:50] TK: Yeah, no, I think you’re right. It’s, um, uh, you know, the chances are, I mean, Fron­tier Ener­gy, now that its share price is a quar­ter of what it was a week ago, um, because it lost gov­ern­ment sup­port, obvi­ous­ly does need Bet­ter entry into the polit­i­cal world. How­ev­er, this guy isn’t pro­vid­ing

[00:40:08] TK: it.

[00:40:09] TK: He’s copped the past­ing.

[00:40:11] CR: do you think they knew this was com­ing?

[00:40:12] CR: That’s why they brought him on? He’s, he’s tried to turn around?

[00:40:15] TK: Yeah, who knows. But like, if you want­ed entree into the gov­ern­ment world, you did­n’t have to make him chair­man. You could have just put him on the board, I guess, or retained him as a lob­by­ist or

[00:40:24] TK: what­ev­er. Yeah.

[00:40:26] CR: maybe that was, you know, his stip­u­la­tion. But yeah, lob­by­ist. Yeah, that’s all you need, you’re right. Hmm,

[00:40:32] TK: that was

[00:40:33] TK: my Tale of Woe,

[00:40:34] TK: and it,

[00:40:35] TK: so I think we need to add to

[00:40:35] TK: the

[00:40:36] TK: red flag list, you know,

[00:40:37] CR: I’m just glad, because, but, before you said,

[00:40:40] TK: sports

[00:40:40] TK: peo­ple on the board, sell the stock.

[00:40:43] CR: you’ll con­nect, you said, suck it and see, let me tell you my tale of woe. For the week, I thought it was going to be, uh, relat­ed to suck­ing it and see­ing, and that was your tale of woe. I was wait­ing to hear a com­plete­ly dif­fer­ent kind of sto­ry. It was just a stock sto­ry. It’s not as tit­il­lat­ing as I thought it was going to be.

[00:41:02] CR: were talk­ing about going down to New South Wales, do a blow­hole and then suck it and see in a tale of woe, my brain’s con­nect­ing the dots and

[00:41:11] TK: your brain goes where your

[00:41:12] TK: brain

[00:41:12] TK: goes.

[00:41:15] CR: yeah, too many years of doing shows with Ray. That’s where my brain goes.

[00:41:19] TK: yeah, yeah. So, um,

[00:41:23] TK: they’re my,

[00:41:24] TK: it’s my

[00:41:25] TK: sto­ries. Yeah,

[00:41:27] CR: You doing a wows?

[00:41:29] TK: I am. Yeah. So it’s a lit­tle bit lengthy. I’ll try and move through it quick­ly. Um, I’m at the stage in the book. So we’ve spent the last few weeks going through real­ly good quotes on, you know, how this time it’s not dif­fer­ent, mania of mar­kets, um, all that kind of stuff, how the human brain fools us. The rest of the book, it seems to be is, um, the out­put of his research.

[00:41:57] TK: So I want­ed to talk about the pre­am­ble to the research and then, um, just use the first bit of research as an exam­ple. And I’ll pull, going for­ward in the next few weeks, I’ll pull some, um, more results. Um, so, talks about his rules for the research. And first of all, he says, um, an impor­tant met­ric is the size of the data set.

[00:42:21] TK: And he quotes a guy called Richard Brealey. Respect your data. Ana­lyst, researcher, and British econ­o­mist, Richard Brear­ley esti­mat­ed that to make rea­son­able assump­tions about a strat­e­gy’s valid­i­ty, i. e. to assume it was 95 per­cent like­ly to be sta­tis­ti­cal­ly rel­e­vant, you would need more than 25 years of data.

[00:42:41] TK: Short peri­ods are val­ue­less. So that was inter­est­ing, I thought. Uh, so he, he goes on to talk about the two data sets for his research. One is an S& P data­base from 1963 to 2009. That seems to have, um, to be more rich in the met­rics. But he also uses anoth­er one from the Cen­ter for Research and Secu­ri­ty Price, Prices, uh, from 1926 to 2009.

[00:43:06] TK: So he’s got some pret­ty big data sets he’s lean­ing on there. He says, My goal in this book is to bring a more method­i­cal sci­en­tif­ic method to stock mar­ket deci­sions and port­fo­lio con­struc­tion. To do this, I have tried to stay true to those sci­en­tif­ic rules that dis­tin­guish a method from a less rig­or­ous mod­el.

[00:43:26] TK: Among these rules are, 1. An explic­it method. All mod­els must use explic­it­ly stat­ed rules. There must be no ambi­gu­i­ty in the state­ment of the rules to be test­ed. There is no allowance for a pri­vate, unique inter­pre­ta­tion of the rules. In oth­er words, no suck it and see. No fudg­ing. Point two, a pub­lic rule.

[00:43:47] TK: The rule must be stat­ed explic­it­ly and pub­licly so any­one with the time, mon­ey, data, equip­ment, and incli­na­tion can repro­duce results. The rule must make sense and must not be derived from the data. Num­ber three, a reli­able method. Some­one using the same rules and the same data­base must get the same results.

[00:44:08] TK: Also, the results must be con­sis­tent over time. Long term results can­not, uh, Long term results can­not show all their ben­e­fits in just a few years. Uh, yeah, so, um, I found it inter­est­ing out of those list of rules. They’re, they’re pret­ty obvi­ous, and I think it’s, in hav­ing a check­list, we’re kind of abid­ing by those rules as well.

[00:44:31] TK: They’re pub­licly telling peo­ple how we invest, what the rules are, um, and they can do it them­selves, fol­low­ing those same rules. So I, I kind of like what he’s say­ing there. I found it inter­est­ing about the um, the rule must make sense and must not be derived from the data bit. So he goes on to explain why.

[00:44:50] TK: It, and he uses an exam­ple. It takes approx­i­mate­ly 40 min­utes for an express train to go from Green­wich, Con­necti­cut to Grand Cen­tral Sta­tion in Man­hat­tan. In that time, you could look around your car and find all sorts of sta­tis­ti­cal­ly rel­e­vant char­ac­ter­is­tics about your fel­low pas­sen­gers. Per­haps there are a huge num­ber of blondes, or 75 per­cent of the peo­ple have blue eyes, or the major­i­ty were born in May.

[00:45:14] TK: These rela­tion­ships, how­ev­er, are most like­ly the result of chance occur­rences and prob­a­bly would­n’t be true for the car in front of you or behind you. When you went look­ing for these rela­tion­ships, you went data min­ing. You found sta­tis­ti­cal rela­tion­ships that fits one set of data very well, but will not trans­late to anoth­er.

[00:45:33] TK: As sta­tis­ti­cians have been known to quip, if you tor­ture the data long enough, It will con­fess to any­thing. Thus, if there is no sound the­o­ret­i­cal, eco­nom­ic, or intu­itive com­mon sense rea­son for the rela­tion­ship, it’s most like­ly a chance occur­rence. If you see strate­gies that require that you buy stocks only on a Wednes­day and hold them for 16 and a half months, you’re look­ing at the result of data min­ing.

[00:45:58] TK: So I thought that was inter­est­ing.

[00:46:00] CR: yeah,

[00:46:01] TK: Real­ly good quote. Okay. See, he talks a lot more about method­ol­o­gy. Um, what he does is, in a nut­shell, is he, um, ranks his data set, uh, first of all break­ing it up into 12 month­ly por­tions, uh, and he ranks them into deciles by what­ev­er he’s mea­sur­ing. So the first one he mea­sures is high PE ver­sus low PE stocks.

[00:46:26] TK: And deciles means that he takes the 2, 500 stocks that he had in his uni­verse and he breaks it up into groups of 250 based on a stack rank of PE ratio. Um, and then he, he, to, to make it even, um, I guess more accu­rate, he, he buys, um, port­fo­lios, uh, once every month. So he buys 12 port­fo­lios for the year based on buy­ing the top decile, based on PE ratio and the bot­tom decile based on PE ratio.

[00:47:00] TK: And then he aver­ages the returns over the 12 months to get Aver­age for, for whether you, yeah, so there’s no skew for buy­ing in Jan­u­ary ver­sus Feb­ru­ary or after results or before results, all that kind of thing. So that’s what he does. Um, but he has some rules. So he says, um, he does that buy­ing and hold­ing for 12 months.

[00:47:18] TK: How­ev­er, he has a list of six red flags that, and will remove a stock from the port­fo­lio with­in the 12 month peri­od if they, one, if they fail to ver­i­fy their num­bers. As required by the Sar­banes Oxley Act, they replace the stock in the port­fo­lio. So in oth­er words, if they, it’s kind of like ours with a qual­i­fied audit, if you can’t trust the num­bers.

[00:47:41] TK: Two, if a com­pa­ny is charged with fraud by the fed­er­al gov­ern­ment, they replace the stock in the port­fo­lio. 3. If a com­pa­ny restates num­bers such that they would not have qual­i­fied at the time of pur­chase, they replace the stock in the port­fo­lio. 4. If a com­pa­ny receives a takeover offer from a third par­ty, we replace the stock if the price of the stock moves to with­in 95 per­cent of the takeover price.

[00:48:03] TK: So I thought that was a good rule for our dum­my port­fo­lio as well. Um, any­way, inter­est­ing. Uh, five, if a com­pa­ny drops by 50 per­cent from the point of pur­chase and is in the bot­tom 10 per­cent of all stocks for the pre­vi­ous 12 months of price per­for­mance. So that’s his rule one, but it’s a 50 per­cent rule one.

[00:48:21] TK: Which I found inter­est­ing. And six, if a stock from one of our div­i­dend strate­gies cuts its div­i­dend by 50 per­cent or more, we replace the stock in the port­fo­lio. So they were his red flag, his sell trig­gers, if you like. So he rebal­ances every 12 months, but if some­thing hap­pens in between, he sells on those basis.

[00:48:40] TK: Okay, some results. So, uh, O’Shaugh­nessy, as I said, used PE/Sales analy­sis. The first one he did was, uh, PE ratio. He, he reports that from 64 to 2009, the decile of the low­est PE stocks, which he calls Decile 1, from what he calls the all stock uni­verse. And he, sor­ry to inter­rupt the quote, but he takes out small, takes out micro­cap stocks.

[00:49:06] TK: from his uni­verse of stocks because he felt that um if they had small ADTs peo­ple could­n’t real­ly buy them any­way or they could buy them and push the price around so um he calls it the all stock uni­verse which is the all the stocks on the S& P less micro­caps. Um, so, So the decile of the low­est PE from 64 to 2009 turned 10, 000 into 10, 202, 345, a com­pound rate of return of 16.

[00:49:38] TK: 25 per­cent per year. That’s 9, 000, 000 more than you would have earned with an invest­ment in the All Stocks Uni­verse as an index. Con­verse­ly, 10, 000 invest­ed in 1963 in a decile of stocks with the high­est PE ratios and rebal­anced annu­al­ly grew to just 118, 000 by the end of 2009. 1. 2 mil­lion less than if you bought the index, but the com­pound return was only 5.

[00:50:07] TK: 53%. It was behind the all stocks of 11. 22%, that’s the index, um, and it also did worse than the invest­ment in UST bills, where 10, 000 invest­ed in Decem­ber 31, 63, grew to 120, 000, an aver­age com­pound return of 5. 57%. And he goes on to say, buy­ing high PE stocks, regard­less of their mar­ket cap, is a dan­ger­ous endeav­our.

[00:50:32] TK: You should­n’t let the flash of the lat­est gram­mar stock draw you into pay­ing ridicu­lous prices for earn­ings. Yet investors do this fre­quent­ly and seem­ing­ly with greater deter­mi­na­tion as the years have gone by. Wit­ness investors push­ing Polaroids PE to 164 in 1961, Best Buy to 712 in 1997, and Yahoo to 4, 900 in 1999.

[00:50:56] CR: and today it’s the Mag 7,

[00:50:59] TK: Cor­rect. Yep.

[00:51:00] CR: mm hmm,

[00:51:01] TK: So, I mean, just think about those num­bers. What a huge, it goes into a lot of detail, like that’s the sum­ma­ry of a whole chap­ter of What works on Wall Street. Um, and he points, he points out inter­est­ing things like that, um, there were some 10 year peri­ods where IPE stocks did out­per­form, uh, low PE stocks, but in the longer term, high PE stocks, 5.

[00:51:23] TK: 5 per­cent CAGA, Ver­sus 16 point, what­ev­er it was, 16 point, uh, some­thing, uh, for 16. 25 for low PE stocks. So that’s the first thing is triple, um, low PE is triple the, the, the high PE stocks, but the time peri­od and what that means to your invest­ment is just stag­ger­ing. So it’s a long time peri­od, 64 to 2009.

[00:51:47] TK: What’s that? That’s, uh, 46 years.

[00:51:50] CR: odd years,

[00:51:51] TK: Yeah. And he takes 10, 000 at the start. And it turns into 120, 000 at 5. 57 per­cent CAGR, but it turns into 10. 2 mil­lion at 16. 25 times

[00:52:06] TK: CAGR. Huge dif­fer­ence in the end result based on that dif­fer­ence in CAGR. It’s just so impor­tant is to get that long term CAGR right. So, great, uh, great

[00:52:16] TK: analy­sis of his, I think.

[00:52:21] CR: Yeah, where my head always goes when I hear these sto­ries about, you know, the, the high PE stocks is, yeah, but what if you could build a sys­tem where you could get all of the high frothy growth and then get out at the right time and then buy the next? Peri­od of high frothy growth.

[00:52:43] TK: what if you could? what are the rules?

[00:52:45] CR: yeah.

[00:52:45] CR: yeah,

[00:52:46] TK: I’ve tried, I’ve tried, you know, I’m still try­ing, I can get in, and I can get it on the way up,

[00:52:55] TK: but the crash is always hard and fast, and you just can’t get out in time. It’s like, it’s like you said with that fMRI research, it’s the brain starts to con­vince itself that the past growth will be future growth and keeps going on for­ev­er, even though you have this uncom­fort­able feel­ing that it can’t,

[00:53:13] TK: um, you get tricked into it.

[00:53:16] CR: eat­ing a steak.

[00:53:19] TK: Eat­ing a steak?

[00:53:19] CR: and I had a long con­ver­sa­tion before we

[00:53:21] CR: went to air about diets and calo­rie track­ing and how diet­ing is like invest­ing. There’s so many strate­gies out there that every­one says works. You can’t change them every six months. You just need to pick one that seems to be backed up by sci­ence and evi­dence and then just stick to it.

[00:53:41] TK: which I haven’t been able to do, because one works in the short term for me, but nev­er works in the

[00:53:46] TK: long term.

[00:53:49] TK: And I’m always remind­ed of Pro­fes­sor Scott from Psy­chol­o­gy 100, who used to tell us about the glu­co­sta­t­ic lev­el of the human body, that every body has an equi­lib­ri­um between ener­gy in and ener­gy out.

[00:54:03] TK: You can change it for a while, but you can’t

[00:54:05] TK: change it for a long time.

[00:54:07] CR: Yeah. All right. Good stuff, Tony. Thank you for that. Well, um, I have a pulled pork today. Uh, no, uh, You did, last time I think we did a US show, you did the Willis Lease Finance Com­pa­ny, what you’re talk­ing about Willis, which has been the num­ber one per­former. Um, I haven’t talked about the port­fo­lio per­for­mance yet today, but noth­ing much has changed since last week.

[00:54:39] CR: Um, I did do my week­ly update blog post this morn­ing. Um, our Aus­tralian stock exchange. Doc­tor Dum­my Port­fo­lio is doing 16. 28 per­cent per annum ver­sus the mar­ket around about 9%, so about 1. 8 times bet­ter we’re doing. Last 30 days it’s up 3. 27 per­cent per annum ver­sus the STW up 1. 33%, so again about dou­ble.

[00:55:06] CR: The, um, Stock­o­pe­dia port­fo­lios, which are new­er, the Aus­tralian port­fo­lio there is up 18 per­cent since incep­tion, which was July 23, ver­sus the index up 13. But the US dum­my is up 70 per­cent since incep­tion, which was Sep­tem­ber 23, ver­sus the S& P up 34%, so dou­ble. And when I look at the, um, stocks, In the US port­fo­lio that have done the best, Willis Lease Finance Com­pa­ny is still the num­ber one per­former.

[00:55:43] CR: It’s up 214 per­cent since we bought it. Num­ber two is Land’s End, which is up 150%. And I thought I would do that as my pulled pork this week. Now, I has­ten to add, it’s not on the U. S. dum­my, well, I haven’t done a buy list for the U. S. dum­my port­fo­lio for a few weeks, I think, um, 12th of Sep­tem­ber was the last time I did one, but it was­n’t on that one, it had a You know, QAV score of neg­a­tive one, cause I did­n’t even look at it.

[00:56:19] CR: Most­ly because the share price is up 150 per­cent since we bought it, uh, lit­tle under a year ago. So we added Land’s End, LE is the stock port­fo­lio. We added it to the U. S. port­fo­lio on Novem­ber 20th, 2023, when the stock was trad­ing at 6. 92. Today it’s around 17. 27. Um, and I thought I’d go into the back­ground.

[00:56:45] CR: Now, most peo­ple have prob­a­bly heard of Land’s End. They’re a cloth­ing retail­er, been around since 1963, but it’s actu­al­ly got an inter­est­ing sto­ry. So, uh, found­ed in 1963 out of Dodgeville, Wis­con­sin, dodgy name for a retail­ing com­pa­ny, but out of Dodgeville, I could get, um, my old friend, uh, Doug LaFol­lette.

[00:57:14] CR: Friend of David Markham’s, Sec­re­tary of State. He was of Wis­con­sin. I don’t think he is any­more, but for many, many years, he was the Sec­re­tary of State of Wis­con­sin. He’s, I’ve done a num­ber of pod­casts with Doug over the years. Um, they spe­cial­ize in sort of, like, I, I had a look at their web­site this morn­ing and my take was it’s Coun­try Road, it’s coun­try, US Coun­try Road, basi­cal­ly.

[00:57:37] TK: Yeah. Prep­py.

[00:57:38] TK: qual­i­ty casu­al

[00:57:39] TK: wear. I used to sell it.

[00:57:41] CR: New, Oh, did you for when you were at Coles?

[00:57:45] TK: MyerDi­rect, we had a deal with Land’s End. We used to sell there because it was a cat­a­logue retail­er, now an online retail­er. I think they’ve got a small num­ber of stores now, but yeah, we used to have a deal with them where

[00:57:55] TK: we sold their

[00:57:55] TK: stuff through our cat­a­logues

[00:57:56] TK: at MyerDi­rect.

[00:57:57] CR: Right. Chris­sy said, New Eng­land Yacht Club. So that’s basi­cal­ly. Thumbs it up. Yeah.

[00:58:04] CR: Which is. You know, fit­ting because they start­ed off as a yacht­ing sup­ply com­pa­ny. That’s lit­er­al­ly the foun­da­tion of the busi­ness. So these days they also sell lug­gage and home fur­nish­ings, most of it’s online. They have 28 retail stores, main­ly in the upper Mid­west and Hawaii.

[00:58:23] CR: But yeah, it start­ed off as a mail order yacht­ing sup­ply com­pa­ny out of Chica­go. The founder, a guy called Gary Com­er, launched the busi­ness with 30, 000 in 1963. He was a big time sailor. And this was sort of a side hus­tle for him after work­ing as an adver­tis­ing copy­writer at Young Rubi­cam in Chica­go for 10 years.

[00:58:50] CR: No uni­ver­si­ty degree, just got start­ed as a young copy­writer, worked his way up. Had a cou­ple of friends that were like Olympic yacht cham­pi­ons or some­thing and he formed a busi­ness with them. And Peo­ple may know that Land’s End when writ­ten out as L A N D S apos­tro­phe, end. He actu­al­ly had a sail­boat whose name was Land apos­tro­phe S and that he was named, that he named the com­pa­ny after his sail­boat.

[00:59:25] CR: But there was a typo when he got all of the orig­i­nal cat­a­logues print­ed and he could­n’t afford to have them reprint­ed. So they just stayed with that. So ever since the last 60 odd years it’s been Lands apos­tro­phe N. It just sort of stuck. In the ear­ly days, it was all about sail­ing sup­plies and gear, but then they expand­ed into casu­al cloth­ing and home fur­nish­ings.

[00:59:49] CR: But 1978, they’d moved to Wis­con­sin. And he was a pret­ty bril­liant mar­ket­ing guy. He intro­duced a cat­a­logue that they called the Mag­a­log. It was

[01:00:02] TK: Make Amer­i­ca Great Again

[01:00:03] TK: log?

[01:00:04] CR: Yes, that was it. The MAGA log?

[01:00:08] CR: Good. Um, it was like a com­bi­na­tion mag­a­zine and cat­a­logue. Lots of very glossy pho­tos, arti­cles, sto­ries mixed in with the pro­mo­tion­al stuff and the cat­a­logue stuff.

[01:00:25] CR: Yeah, like he would have an issue where he’d have a reporter writ­ing about his train ride home at Christ­mas or they did a sto­ry on wool farm­ing in Aus­tralia or Madras Fab­ric from India. For its time, it was pret­ty unique. Appar­ent­ly it was like you could read it as a mag­a­zine as well as, uh, buy from it.

[01:00:47] CR: Very high end, very glossy. It was also one of the first com­pa­nies to have a toll free num­ber in their cat­a­logue, mak­ing it eas­i­er for peo­ple to call in orders, remove the fric­tion back when it cost mon­ey to make phone calls. Um, they also real­ly got in ear­ly on the rise of tech­nol­o­gy. Cred­it cards in the US, which led to a whole boom in shop­ping over there.

[01:01:14] CR: Com­er stayed on as pres­i­dent until 1990, when the com­pa­ny went pub­lic in 1986. He stayed on for a few years and he stepped down. They were tak­en over by Sears Roe­buck even­tu­al­ly in 2002, um, when the val­u­a­tion of the com­pa­ny was 2 bil­lion. And today it’s worth a cou­ple of hun­dred mil­lion dol­lars. So, um, it’s been a tough 20 odd years for the com­pa­ny, obvi­ous­ly explo­sion of online shop­ping and com­pa­nies that dom­i­nat­ed that one par­a­digm.

[01:01:52] CR: It’s a bit like, um, who was, uh, the. Guy who wrote the book, uh, Chris­t­ian, damn, gee, there was this, this is, there’s this clas­sic book in the late nineties, ear­ly two thou­sands that all me and my com friends were into. Can’t remem­ber the name of the guy, but he was like a, a busi­ness guru in the US, but it, um, The Inno­va­tor’s Dilem­ma.

[01:02:19] CR: That was the name of the book. Did you ever read that?

[01:02:21] TK: I do.

[01:02:22] CR: Um, Inno­va­tor’s Dilem­ma. Who was

[01:02:25] CR: that? Clay­ton

[01:02:28] TK: guys.

[01:02:28] TK: Ah,

[01:02:29] TK: Chris­t­ian, yep.

[01:02:29] CR: it. Yeah. Har­vard

[01:02:32] CR: pro­fes­sor and a busi­ness­man. And he talked about how com­pa­nies that dom­i­nate one par­a­digm rarely tend to dom­i­nate the suc­ces­sive par­a­digms because they get so stuck in a par­tic­u­lar way of doing busi­ness that they miss the, the

[01:02:49] TK: They can’t dis­rupt them­selves, you know.

[01:02:52] CR: Exact­ly. Oh yeah. Can’t dis­rupt their own cash. They have so many silos in the busi­ness that are ded­i­cat­ed to main­tain­ing their cur­rent, you know, lit­tle,

[01:03:00] CR: um,

[01:03:01] TK: and Sears Roe­buck is a good exam­ple of that. It was a cat­a­logue

[01:03:05] CR: Exact­ly.

[01:03:06] TK: Did­n’t tran­sit to online retail­ing as

[01:03:09] TK: well.

[01:03:10] CR: They’re not the Ama­zon of the online world, right? Yeah. So any­way, um, it, it, it, um, strug­gled. Uh, he though in lat­er part of his life was a big phil­an­thropist, um, gave mon­ey to lots of caus­es, chil­dren’s health­care, edu­ca­tion, cli­mate change research. He fund­ed a lot of that very ear­ly on and passed away in 2006 from prostate can­cer.

[01:03:38] CR: So any­way, the cat­a­logue busi­ness, um, Real­ly took off in the 80s and 90s, um, they jumped into e com­merce ear­ly, added live chat cus­tomer ser­vice to their web­site way ahead of their time. Had some cool part­ner­ships, they were the offi­cial jer­sey sup­pli­er for the US Nation­al Rug­by Union team. Did­n’t even know they had such a thing.

[01:04:00] TK: It’s

[01:04:00] CR: Um, They start­ed sell­ing on Ama­zon in 2016, but any­way, they had some ups and downs with Sears, Sears them­selves declared bank­rupt­cy and they pulled out all of, out of all the Sears stores in 2019. Today, they’re back to run­ning things inde­pen­dent­ly. Most of their sales are online. Um, and then they have some through their inlet stores.

[01:04:22] CR: By the way, the founder’s mot­to is still used at the com­pa­ny, which I like, take care of the cus­tomer, take care of the employ­ee and the rest will take care of itself. Did­n’t stop their val­u­a­tion going from 2 bil­lion down to 300 mil­lion, but you know, it’s, I like the mot­to any­way.

[01:04:43] TK: a great mod­el,

[01:04:44] CR: he was a good guy

[01:04:45] TK: we used to have these

[01:04:46] CR: for decades.

[01:04:48] TK: long wind­ed debates about whether, who had the, yeah, what was the most impor­tant con­stituen­cy? Cus­tomer, staff, or share­hold­er? So he said, take care of the cus­tomer, take care of the staff, and screw the share­hold­er. Would have been the

[01:05:03] TK: response to that mod­el when I was work­ing at Coles Myer.

[01:05:06] CR: And now, what would you say?

[01:05:09] TK: Oh, I was always

[01:05:10] TK: pro cus­tomer.

[01:05:11] TK: If you don’t look after your cus­tomer, you, um, for­get the rest.

[01:05:14] CR: You have no share­hold­ers, right?

[01:05:16] TK: Cor­rect. Yeah. But I used to, I used to get those robust

[01:05:19] TK: debates

[01:05:19] TK: about it,

[01:05:22] CR: I remem­ber when Google’s mot­to was, don’t do evil, or don’t be evil.

[01:05:27] TK: which they qui­et­ly got rid of.

[01:05:28] CR: gone. Yeah, yeah, they did. A long time ago.

[01:05:32] TK: Yeah.

[01:05:34] CR: Any­way, so I’ll get into their finan­cial results. Um, Again, as I said before, they’re not on the buy list today. And in ret­ro­spect, I’m not sure they should have been on it a year ago when I bought them, but that’s anoth­er sto­ry, which I’ll get to.

[01:05:50] CR: So their quar­ter­ly results, last quar­ter­ly results came out Sep­tem­ber 5th, 2024. And there’s some inter­est­ing, You know, this is a new space for us, the US mar­ket, inter­est­ing to pick through the way that they put the spin on num­bers over there. These guys like to pro­mote some­thing called GMV, Gross Mer­chan­dise Val­ue.

[01:06:15] CR: Their GMV increased in mid sin­gle dig­its. In the last quar­ter com­pared to Q2 of 2023, GMV is the total val­ue of every­thing they sold across busi­ness to con­sumer and busi­ness to busi­ness chan­nels, as

[01:06:35] TK: So it’s sales?

[01:06:37] CR: Yes. Yeah, you would think so, right?

[01:06:40] TK: Oh, always it’s sales, less things

[01:06:42] TK: like cred­it cards.

[01:06:44] CR: yeah, I don’t know, I could­n’t pick that apart, it’s

[01:06:48] TK: Yeah. Okay.

[01:06:49] CR: val­ue, gross mer­chan­dise val­ue, the val­ue of what they sold, maybe, whether or not that’s the retail val­ue, or the whole­sale val­ue, or the

[01:07:00] TK: Yeah. I’ve nev­er heard, nev­er heard the term before. And I’m skep­ti­cal of

[01:07:05] TK: com­pa­nies that pull

[01:07:06] TK: out their own

[01:07:06] TK: met­ric like I’ve got to say.

[01:07:09] CR: I don’t know how com­mon this is in retail in the US, but I just, I,

[01:07:13] TK: Nev­er heard of it, no,

[01:07:14] TK: 20 years in retail in

[01:07:15] TK: Aus­tralia.

[01:07:17] CR: I scoo­by dooed it. I was like,

[01:07:19] CR: when I read it, because I had nev­er seen it before, par­tic­u­lar­ly because as you drill down into the results, their GMV increased, but their net rev­enue decreased

[01:07:29] TK: Yeah. Right.

[01:07:30] CR: to 317. 2 mil­lion from 323.

[01:07:33] CR: 3 year on year.

[01:07:36] CR: So, I was try­ing to fig­ure out how GMV can go up while rev­enue can go down. I asked GPT. It said it could be due to dis­count­ing or pro­mo­tions or the fact that third par­ty sales, where they don’t make as much of a mar­gin, are becom­ing a big­ger part of the mix. And when you drill into their results, they actu­al­ly do say third par­ty rev­enue was up.

[01:07:59] CR: 23.

[01:07:59] CR: 4 per­cent year on year, but they said that a lot of that was through licens­ing and whole­sale arrange­ments, so Yeah, the num­bers are a lit­tle bit fun­ny, but again, it kind of reminds me of Char­lie’s thing about EBITDA, like it’s just bull­shit num­bers.

[01:08:18] TK: Yeah. Yeah.

[01:08:21] CR: Dodgy, fudgy num­bers that you can have some­thing that you can say went up.

[01:08:27] TK: Yes, exact­ly. Look, it might be impor­tant if it, if it’s, well, I think it means it’s mean the stuff that they source them­selves and then sold. So the, the prep­py polo shirts and jumpers and shoes and dock­ers and things like that, um, is my guess,

[01:08:42] TK: but it’s

[01:08:42] TK: only a guess. I got no idea what it is.

[01:08:45] CR: It reminds me of our con­ver­sa­tion before we went to air about los­ing weight. Like for the first cou­ple of years, I was telling Tony, the first cou­ple of years I was doing Kung Fu, I was­n’t los­ing weight. And I was like, what the hell? I’m like work­ing my ass off. I’m doing like 10 hours of train­ing a week.

[01:08:58] CR: How can I not be los­ing weight? And Chris­sy would be nice. She loves me. She goes, well, you’re prob­a­bly putting on mus­cle. So you’re not los­ing weight, but you might be los­ing fat, but putting on mus­cle and it’s just bal­anc­ing out. That’s, that’s like. GMV, that’s the

[01:09:14] TK: Ha,

[01:09:14] CR: loss.

[01:09:15] TK: ha, ha, ha, Ha,

[01:09:16] CR: Find a way to put a pos­i­tive

[01:09:18] CR: spin on it.

[01:09:18] CR: After a while, I real­ized

[01:09:20] CR: my waist was­n’t going down. So, you know, I was­n’t los­ing fat off my waist unless I was putting mus­cle on my butt. Um, I was­n’t real­ly los­ing weight. So yeah.

[01:09:32] CR: Even­tu­al­ly I had to start focus­ing on am I los­ing cen­time­tres off my waist? That’s the only met­ric that real­ly

[01:09:38] TK: right, yeah,

[01:09:39] CR: you know,

[01:09:41] TK: yeah,

[01:09:42] CR: and I have, I’ve lost eight cen­time­tres off my waist in 10 weeks.

[01:09:45] CR: So,

[01:09:46] TK: con­grat­u­la­tions,

[01:09:47] CR: I’m expect­ing my mid year

[01:09:48] CR: bonus from my boss at some point. Um, so, uh, gross prof­it came in at 151. 9 mil­lion up 8. 8 per­cent from 139. 6 mil­lion the pre­vi­ous same quar­ter of the pre­vi­ous year. So that is a good. Sign. Rev­enue was down, but prof­it is up. So, you know, they’re, they’re Sell­ing less, but mak­ing more mon­ey from sell­ing less, which I guess isn’t always a good thing.

[01:10:21] CR: It can be a good thing, but not always. Depends on, you know, where they’re, you know, what they’re cut­ting back, you know, you can get fire all your employ­ees and, and, uh, your prof­it will go up, but not for very long. So not always a sus­tain­able met­ric, depend­ing on where it’s com­ing from.

[01:10:41] TK: yeah, and you can also like­wise sell one piece of cloth­ing for a lot of mon­ey. and make more mon­ey this year and then it’s so damn good, so damn good, no one has to buy any­thing for the next three years. So yeah, um, yeah, it’s always a dance in retail. It’s, um, about vol­ume and mar­gin. You’ve got to have a cer­tain amount of vol­ume to make the whole engine tick, to keep the stores going, to keep all the costs cov­ered, all that kind of stuff, um, ware­hous­es online, all the rest of it.

[01:11:08] TK: So you can’t fall below a cer­tain thresh­old, you can’t fall below a cer­tain mar­ket share, because you’ll start to get Ero­sion to your com­peti­tors, all that kind of thing. But at the same token, you can’t make less mar­gin to increase your vol­ume too much,

[01:11:21] TK: oth­er­wise your prof­it

[01:11:22] TK: suf­fers. So

[01:11:23] TK: yeah, it’s a dance.

[01:11:26] CR: And I said that was a gross

[01:11:27] CR: prof­it. Um, their net prof­it was actu­al­ly a net loss. Um, but their net loss for the quar­ter was actu­al­ly low­er than the net loss was a year ear­li­er. So their net loss this quar­ter was 5. 3 mil­lion ver­sus 8 mil­lion year on year from the pre­vi­ous Q2. Still oper­at­ing at a loss, but head­ing in the right direc­tion.

[01:11:54] CR: This is sort of, you know, we did an episode a few weeks ago called Recov­er­ing, and we were look­ing at recov­er­ing stocks. This is sort of a

[01:12:00] CR: recov­er­ing sto­ry, these guys.

[01:12:03] TK: good point.

[01:12:04] CR: One area they’ve real­ly improved in seems to be inven­to­ry man­age­ment. They’ve reduced inven­to­ry by 21 per­cent year over year, and it’s actu­al­ly the sixth con­sec­u­tive quar­ter of improved inven­to­ry lev­els.

[01:12:19] CR: So, I don’t know any­thing about retail, but that sounds like, uh, a good place to be in. They’re

[01:12:25] TK: Oh, yeah, if you, yeah, so I did do a lit­tle bit of research myself. They’re bet­ter at dis­count­ing at the moment, which is why their prof­it’s improv­ing. So, there’s a, again, there’s a, par­tic­u­lar­ly in cat­a­logue retail­ing, which I can talk to a lot, which they are, if you If you order too much mer­chan­dise and then it does­n’t sell, you’ve got to dis­count it heav­i­ly to move it.

[01:12:51] TK: That affects your prof­it mar­gin and your sales because you’re sell­ing it for half the price. And if you don’t buy enough stock and some­thing’s very pop­u­lar, your cus­tomers get pissed off and they go else­where because you don’t have enough stock to back them up. The sales that would have hap­pened. So it’s a real bal­anc­ing act.

[01:13:07] TK: And the, I guess the ben­e­fit of being a cat­a­logue retail­er is you have a lot of data. Cause you know, you know, um, here’s the whole range. Here’s what sold to which peo­ple, to which cus­tomer seg­ment, you know, a bit about your cus­tomers because they, you know, they’re on your data­base. So you can decile it by fre­quen­cy and by how much you think they earn and all that kind of stuff, and then how much they buy from you and what they’re buy­ing.

[01:13:29] TK: And, um, and then you can try and opti­mize the stock­hold­ing behind the things that you think will appeal to them. So they’re get­ting, Land’s End are obvi­ous­ly get­ting bet­ter at that, which is real­ly impor­tant in retail­ing, because if you get, so basi­cal­ly retail­ers go through a cycle. So, um, Land’s End might work dif­fer­ent­ly to Myer Direct, but I doubt it.

[01:13:49] TK: They’ll prob­a­bly have four or so big sales. Cycles a year. Christ­mas will be one. East­er may be one, but in Amer­i­ca it could be spring. And then you’ll prob­a­bly have, you know, kind of a mid year or mid win­ter, and they might, they’ll prob­a­bly have a fall cat­a­logue. So four big sell­ing events. They’ll launch a new range around that, you know, so jumpers in win­ter, t shirts in sum­mer.

[01:14:15] TK: Kind of basics like that. Um, and I’ll try and sell them at full mar­gin. If they get that right, they sell out just enough stock and they make a lot of mon­ey. If they get it wrong, um, they have to go through what’s called a quit cycle, because you’ve got to get rid of the t shirts before it gets too cold, and there’s usu­al­ly a Um, some math behind that.

[01:14:35] TK: So it sells, if it does­n’t sell, uh, at the end of say four weeks and you mark it down by 10%, if it does­n’t sell at the end of two weeks you mark it down by 20%, if it does­n’t sell after two months you mark it down to 50 per­cent off. And you try and clear your stock for at least cost, so you get out of it clean.

[01:14:52] TK: If that does­n’t work and you’re hold­ing t shirts out of sea­son, um, A, your ware­house sales are Costs go up because you’ve got­ta store it and um, or b, you just write it off and, and burn it basi­cal­ly. Or give it away to St. Ben­ny’s or what­ev­er and take a bath. But that’s prob­a­bly the biggest risk of this kind of retail busi­ness is being caught with stock.

[01:15:13] TK: You can’t sell or can’t get out of for a cost and it becomes a write-down. So that’s, um, the real bal­anc­ing act in this busi­ness sounds like they’re

[01:15:22] TK: get­ting bet­ter at it

[01:15:22] TK: though, which is good.

[01:15:25] CR: Yeah, the CFO, who has the won­der­ful name of Bernie McCrack­en, um,

[01:15:31] TK: Broth­er of Phil. Cousin of Ben­dover. Scot­tish golfers.

[01:15:42] CR: said they, uh, they’re focused on prof­itabil­i­ty and bal­ance sheet effi­cien­cy. So they seem to be doing a good job at improv­ing things. Any­way, um, look­ing ahead. Their expec­ta­tions for the future sound pos­i­tive. For Q3 2024 they’re expect­ing net net re bleh bleh bleh Expect­ing net rev­enue between 300 and 340 mil­lion with the GMV con­tin­u­ing to grow.

[01:16:08] CR: They’re Fore­cast­ing their net income slash loss to fall to between neg­a­tive one and a half mil­lion loss to one and a half mil­lion dol­lar prof­it. So, they, uh, looks like they’re going to turn it around. They think they’re going to turn it around and become prof­itable again in the next quar­ter.

[01:16:25] CR: Um, and for the fis­cal 2024,

[01:16:29] CR: they’ve set net rev­enue to a range of 1.

[01:16:33] CR: 4. 3 bil­lion net income between 5 and 11 mil­lion. So they’re expect­ing to be quite prof­itable in the full fis­cal year. So that’s a good sto­ry. They’ve had lots of ups and downs, but they seem to be turn­ing it around. Stronger bal­ance sheet, bet­ter inven­to­ry man­age­ment. Now, when I did my last US analy­sis, as I said, Sep­tem­ber 12th, they weren’t on the buy list, most­ly because the share price has gone up.

[01:17:05] CR: But, um, I can run through what they looked like when I bought them in Novem­ber last year, because I still have that buy list. They had a QAV score at the time of 0. 49. But I want to point out that this was a much ear­li­er ver­sion of the US check­list than the one we have today, when there was a lot of gaps in the data.

[01:17:29] CR: And in fact, um, there was­n’t a lot of data when I go back and look at it for these guys. It was based on very lit­tle. Aver­age dai­ly trade by the way back then was about 621, 000. It’s more than dou­ble that now. Um, So it’s like the same amount of shares are trad­ing, but the share price has dou­bled, so the aver­age dai­ly trade has dou­bled.

[01:17:52] CR: But back then, the Prop­Caf was 1. 53. Today it’s 5. 40. Still low, still good, but not on our buy list for a whole bunch of oth­er rea­sons. But, um, yeah, the Prop­Caf was very low, and I think, um, I think that’s kind of what saved me when I bought this thing, because real­ly there was noth­ing else. The only oth­er thing that I had that it scored for back then was price was less than book plus 30.

[01:18:19] CR: But when I looked at the sheet, In detail, there was no book plus 30, because back then, because Stock­o­pe­dia does­n’t track equi­ty. Um, and the first ver­sion of the Stock­o­pe­dia check­list did­n’t have an equi­ty mea­sure­ment in it, but yet my scor­ing still went, well the price is above zero, so I’ll give it a score for that.

[01:18:42] CR: I’ve since fixed that, I’ve fig­ured out how to use equi­ty per share. mea­sure­ments and cre­ate my, um, own, uh, book plus 30 score. They do have a price to book thing in Stock­o­pe­dia and I fig­ured out how to sort of reverse engi­neer things. But any­way, um, today the equi­ty per share is 7. 17. The finan­cial health, the qual­i­ty rank in Stock­o­pe­dia terms.

[01:19:09] CR: was 68 back then, today it’s only 41. Just a reminder for peo­ple, the qual­i­ty rate, Stock­o­pe­dia says, aims to find the best qual­i­ty list­ed com­pa­nies. It is based on a blend of mea­sures that include an assess­ment of com­pa­ny fran­chise, prof­itabil­i­ty, cash flow mar­gins, Com­pa­ny Risk, Bank­rupt­cy, Volatil­i­ty, and the fun­da­men­tal trend, which is the F Score.

[01:19:34] CR: These inputs are com­put­ed for every com­pa­ny in the mar­ket on a dai­ly basis, ranked, blend­ed, and then re ranked as a per­centile from 0, worst, to 100, best. So it’s qual­i­ty rank has dropped. As its, um, share price has gone up, I, I assume that that’s part of the cal­cu­la­tion for

[01:19:56] TK: I don’t know, It should­n’t. Share price

[01:19:58] TK: should­n’t change qual­i­ty. I would­n’t have thought.

[01:20:01] CR: Well, it’s, I don’t know, it’s got some­thing to do with the F score, but I, we’d assume that’s improv­ing. The F score, it has an F score today of 5 and a Z score of 1. 04, which is ear­ly dis­tress. So, you know, we looked at this before, Zed score, if they’re bor­row­ing lots of mon­ey, it tends to increase their Zed score. So I don’t know, back then it had a stock rank of 79. Today it’s 81, which is the sort of weight­ed com­bi­na­tion of val­ue rank, qual­i­ty rank and momen­tum rank. So it has­n’t changed a great deal in terms of its stock rank. Um, It’s EPS and it’s fore­cast EPS were and con­tin­ue to be both neg­a­tive because it’s, um, earn­ings per share is neg­a­tive.

[01:20:52] CR: But, um, my final con­clu­sion is that it was a lucky win

[01:20:58] TK: Well, I mean, we

[01:20:59] CR: year ago,

[01:21:01] TK: I don’t know. I mean,

[01:21:02] CR: I think it was most­ly the low Prop­Caf.

[01:21:04] CR: Yeah. We know

[01:21:06] TK: seen that,

[01:21:06] TK: before, yeah,

[01:21:07] CR: yeah,

[01:21:08] CR: Prop­Caf, Prop, Prop­Caf is such a big fac­tor that I think that’s what. Made this a win. It had a real­ly like a less than two Prop­Caf. Um,

[01:21:21] TK: And we’ve seen research, we’ve cer­tain­ly seen regres­sion test­ing to sug­gest that Prop­Caf is the heavy lifter in QAV. The qual­i­ty side’s impor­tant, but, um, it kind of helps

[01:21:32] TK: us rank the low

[01:21:33] TK: Prop­Caf

[01:21:33] TK: com­pa­nies.

[01:21:35] CR: Yeah. So it was real­ly the only thing it had going

[01:21:38] CR: for it a year ago. And, um,

[01:21:42] TK: Can I just, um,

[01:21:43] CR: a good buy.

[01:21:44] TK: can I just, um, step in here, because I, I’m still try­ing to get my head around this whole idea of the Z score. Um, and it’s bank­rupt, the abil­i­ty to pre­dict the bank­rupt, um, or bank­rupt­cy, and we know that, uh, as Elio from Stock­o­pe­dia point­ed out, just because it pre­dicts the bank­rupt­cy does­n’t mean man­age­ment won’t take action to pre­vent the bank­rupt­cy, so you get recov­er­ing stocks per­haps in this cat­e­go­ry.

[01:22:12] TK: But I jumped into the bal­ance sheet. In Stock­o­pe­dia for this Land’s End, and I’m look­ing at, um, I’m look­ing at total assets, which, um, are list­ed as 811 mil­lion. I’m look­ing at total, uh, lia­bil­i­ties of 570 mil­lion, and there­fore equi­ty of 242,

[01:22:35] TK: and that does­n’t strike me as being too bad. I mean, um, lia­bil­i­ties are below assets, which means the com­pa­ny has pos­i­tive equi­ty, but, you know, debt to equi­ty is high, but it’s not, it’s not too bad.

[01:22:53] TK: It’s like there’s still plen­ty of equi­ty there. The, OK, the bor­row­ings are up, but, um, As we know from our own expe­ri­ence in Aus­tralia, cash flow pays down debt. So maybe that’s what some peo­ple are see­ing, that that’s a good thing and it will pay the debt down even fur­ther and increase prof­itabil­i­ty. But yeah, I, I, I’m strug­gling to see, my point is I’m strug­gling to see how a com­pa­ny with, um, debt lev­els that, what­ev­er I said it was, so lia­bil­i­ties of, um,

[01:23:24] TK: Where are we?

[01:23:25] TK: 570 mil­lion. And in fact, I could­n’t quite under­stand what Stock­o­pe­dia was say­ing about this, because total debt in Stock­o­pe­dia is 249 mil­lion,

[01:23:34] TK: but total lia­bil­i­ties are

[01:23:36] TK: 270. So I could­n’t

[01:23:38] TK: rec­on­cile

[01:23:40] CR: Tony. If you click, if, sor­ry, if you click the Z2 score thing, if you go to the bank­rupt­cy risk sec­tion of Lands’ End you click on Z2 scores, it’ll show you why it’s giv­ing it. This rank­ing. So there are four things that it looks at. The first is our liq­uid assets, a sig­nif­i­cant pro­por­tion of the assets.

[01:24:00] CR: And it says their work­ing cap­i­tal slash total assets is, um, point has to be greater than 0. 2375 work­ing cap­i­tal over total assets, sor­ry, has to be greater than 0. So they get a cross, a check mark against that met­ric. The sec­ond one is do rein­vest­ed earn­ings make up a sig­nif­i­cant por­tion of the assets?

[01:24:32] CR: Retained earn­ings over total assets has to be greater than neg­a­tive 0. 1355. And these guys have a neg­a­tive 0. 14, so they get a bad mark for that.

[01:24:45] TK: makes

[01:24:46] CR: The fourth is, are the assets rel­a­tive­ly pro­duc­tive in terms of earn­ings? The rule is EBIT over total assets has to be greater than neg­a­tive 0. 082. These guys have neg­a­tive 0.

[01:25:00] CR: 12, so they get a check­mark for that. The fourth is does firm val­ue com­pare favourably to its lia­bil­i­ties? The rule is mar­ket val­ue of equi­ty over book val­ue of total lia­bil­i­ties greater than 1. 439. Theirs is 0. 93. So they score a cross for each of those.

[01:25:28] TK: So basi­cal­ly the cur­rent lack of prof­it is

[01:25:32] TK: High­light­ing its bank­rupt­cy risk. And I kind of get that. That makes sense. But we know for a while, as the com­pa­ny’s cool­ing out, that they think they’ll either get back to zero or be prof­itable next, next peri­od, next

[01:25:45] TK: half. Was it next

[01:25:45] TK: half or

[01:25:46] TK: next year? Any­way, in the near future.

[01:25:48] CR: quar­ter. Yeah, next quar­ter they

[01:25:51] CR: think it might get close to being prof­itable, but cer­tain­ly in the next fis­cal year, on the whole fis­cal year pos­i­tive. And, and that’s why the F score I think is look­ing good. So the F score is a five. It’s on the high­er end of, And that’s made up of 1, 2, 3, 4, 5, 6, 7, 8, 9 met­rics.

[01:26:10] CR: They get a 5 out of 9 for that. And the fourth, the nine things, by the way, is the com­pa­ny mak­ing a prof­it? Cur­rent­ly, no. Is it gen­er­at­ing cash? Yes. Is it mak­ing more cash than it’s report­ing as prof­it? Yes. Is it more prof­itable than it was last year? No. Is the com­pa­ny’s

[01:26:29] TK: Well, yes,

[01:26:30] CR: No.

[01:26:32] TK: it’s mak­ing a small­er loss

[01:26:33] TK: this year.

[01:26:34] CR: Um, it’s look­ing at return on assets.

[01:26:40] TK: Okay.

[01:26:41] CR: So appar­ent­ly in terms of return on assets, last year it was neg­a­tive one and a half. Um, this year it’s neg­a­tive 13. So I’m not sure why it’s look­ing at that as the met­ric. They have a big expla­na­tion, but I’m not going to go through it. Next one is, is the com­pa­ny’s long term debt reduc­ing or sta­ble?

[01:27:02] CR: It gets a no for that. Is it increas­ing its abil­i­ty to pay short term debts? It gets a no for that. But then the last three, it gets a yes for is the com­pa­ny trad­ing with­out hav­ing to raise funds from share­hold­ers. Yes. Is pric­ing pow­er improv­ing and all costs reduc­ing? Yes. Is it more pro­duc­tive than last year?

[01:27:22] CR: Yes. So these are Piotrowski’s nine things and it’s get­ting a five out of nine for that. So it seems to be. You know, that’s sort of the turn­around sto­ry, I think, ver­sus the bank­rupt­cy risk is it’s cash flow sto­ry. And who was, who did you do as a pulled pork last week? I remem­ber it had a bad Z score, Qan­tas.

[01:27:45] CR: Qan­tas had a bad Z score, but a good F score too, right?

[01:27:49] TK: Yeah. Right. Yep.

[01:27:51] CR: it’s

[01:27:51] TK: Yeah. This whole, this whole, um, bank­rupt­cy risk I think is a, to me is a bit of a strange con­cept because it’s, you know, um, I under­stand it’s say­ing that there are, there’s more finan­cial stress in the com­pa­ny, but per­haps with Lands’ End it’s recov­er­ing, per­haps with Qan­tas it’s recov­er­ing.

[01:28:09] TK: So I don’t get the feel­ing that Qan­tas is about to go bank­rupt. Bel­ly up? Um, it may, but like so could any oth­er com­pa­ny. So I’m, yeah, I’m not sure about bank­rupt­cy risk. I had, I found, um, I for­get now what it’s called, but I looked at Land’s End’s bank­rupt­cy risk. I googled that and came up with anoth­er, uh, ser­vice that said, um, they rat­ed Land’s End’s chance of bank­rupt­cy at 16%,

[01:28:40] TK: which they said was low.

[01:28:41] TK: So.

[01:28:42] CR: hmm,

[01:28:43] TK: And they claim to use the F score, or Z score, sor­ry, as part of that. Um, so yeah, it’s just some­thing I don’t know much about, but it’s some­thing I’m becom­ing more and more, you know, um, more and more less like­ly, or less like­ly to, um, to use as an input into our

[01:29:00] TK: cal­cu­la­tions.

[01:29:02] CR: Well, if I look at the Qan­tas one, it’s inter­est­ing. Qan­tas, you know, I said Land’s End got four, Cross­es for the

[01:29:10] TK: Mm hmm.

[01:29:11] CR: Qan­tas gets 2, but seems to have a worse dis­tress rank­ing.

[01:29:16] TK: Right. Yeah.

[01:29:18] CR: I look at Qan­tas’s, it gets a no for are liq­uid assets a sig­nif­i­cant pro­por­tion of the assets? Yeah, this is work­ing cap­i­tal over total assets.

[01:29:28] CR: It gets a no for that. Do rein­vest­ed earn­ings make up a sig­nif­i­cant pro­por­tion of the assets? It gets a yes. Are the assets rel­a­tive­ly pro­duc­tive in terms of earn­ings? It gets a yes. But the last one does firm val­ue com­pare favourably to its lia­bil­i­ties. It gets a no for that. This is mar­ket val­ue of equi­ty over book val­ue of total lia­bil­i­ties.

[01:29:51] CR: It should be greater than 1. 439 and Qan­tas is 0. 57.

[01:29:58] TK: But again, that

[01:29:58] CR: yeah, I agree with you.

[01:30:00] TK: pecu­liar­i­ty for the air­line indus­try, though. We know, like, I know from the pulled pork that if you’re run­ning an air­line, you’ve got huge leas­es to keep, you know, for the fleet, and you bal­ance it against your cash flow. So,

[01:30:11] CR: Hmm.

[01:30:12] TK: unusu­al to see air­lines with what looks like high lev­els of indebt­ed­ness, but it’s not real­ly.

[01:30:17] TK: It’s, that’s stan­dard for the indus­try. It’s the way the indus­try works. It’s a bit like say­ing a bank has high lev­els of indebt­ed­ness. So what does CBA come up with? You know, because a bank takes on debt to lend out again as mort­gages. So I’m

[01:30:32] TK: won­der­ing if this

[01:30:32] TK: is,

[01:30:34] CR: has a bank­rupt­cy, has no,

[01:30:36] CR: uh, no bank­rupt­cy

[01:30:37] TK: Oh, okay. So They

[01:30:39] CR: don’t get a Z score,

[01:30:40] TK: yeah, right. okay.

[01:30:42] CR: but their F score is a two out of

[01:30:45] CR: nine.

[01:30:46] TK: Yeah.

[01:30:51] TK: Biggest, uh, biggest com­pa­ny on the ASX.

[01:30:55] CR: Yeah.

[01:30:58] TK: Look what they’re say­ing, it’s not gen­er­at­ing

[01:31:00] TK: Cash

[01:31:01] CR: Yeah.

[01:31:04] TK: So I guess my point is that,

[01:31:06] CR: on assets

[01:31:07] TK: I guess my point is that, you know, these are, these aver­ages are put togeth­er for indus­tri­al com­pa­nies and they might not work in all indus­tries.

[01:31:15] CR: Yeah,

[01:31:16] CR: Good insight. any­way, that’s my Land’s End sto­ry. It’s done. Um, it’s been great, but I think it was all just a low Prop­Caf sort of win there. Um, there was­n’t a lot of real oth­er data to go on a year ago. It just worked out well.

[01:31:34] TK: there’s some­thing we’ve said,

[01:31:36] TK: we’ve often said that, you know,

[01:31:37] CR: the froth­ing, the froth­i­ness of the US mar­ket prob­a­bly had a lot to do with it as well, you know.

[01:31:42] TK: there’s plen­ty of cash slosh­ing around to be invest­ed, but, um, but we’ve said it in the past too, Prop­Caf is like hav­ing a low Prop­Caf, um, is a great thing because if man­age­men­t’s good, they’ll be able to use that cash to Repair the bal­ance sheet, pay down the debt, you know, expand the busi­ness, etc, etc.

[01:32:00] TK: So, you know, out of all the, out of all the prob­lems that you can have, um, I, Prop­Caf is actu­al­ly, it’s a gold­mine, real­ly,

[01:32:10] TK: to

[01:32:10] TK: help a

[01:32:11] TK: com­pa­ny turn around.

[01:32:14] CR: Well, Tony, uh, you, you got a hard out, um, about now. I don’t think we have time for after hours. Do you want to tell me, give us one thing in after

[01:32:22] CR: hours?

[01:32:24] TK: Uh, I watch Chaos, the, um, series you rec­om­mend­ed.

[01:32:27] TK: Real­ly good. Jen­ny

[01:32:28] TK: and I sat down and watched it from end to end on the

[01:32:31] CR: Oh, Real­ly Are you away? I’ve only seen a cou­ple of

[01:32:33] CR: episodes. Yeah.

[01:32:33] CR: Are

[01:32:33] TK: Oh, no, it’s good. Gets

[01:32:34] TK: bet­ter. It’s great. Real­ly enjoyed it.

[01:32:37] CR: Gold­blum’s fun, isn’t he?

[01:32:38] CR: He’s great.

[01:32:39] TK: Oh, all of the act­ing’s real­ly good. Cliffy, I’m a big fan of Cliffy Brown. He’s real­ly good in it. Um,

[01:32:45] CR: Who’s that?

[01:32:46] TK: Posei­don? Mmm.

[01:32:47] TK: Yeah.

[01:32:49] CR: yes. The Māori New Zealan­der guy. I, I, you look famil­iar, but I looked through his, um, IMDB apart from Once Were War­riors, which I haven’t seen for 30 years. Uh, I don’t know what I knew him from, but I know the face. He’s great as Posei­don. Yeah.

[01:33:07] TK: Yeah. so

[01:33:07] CR: When he’s in the bath­tub with the king of Crete and he’s

[01:33:10] CR: stick­ing his toe in his mouth

[01:33:15] TK: Yeah.

[01:33:16] CR: that was gold. Yeah.

[01:33:18] TK: Yeah, so that was real­ly good. Um, read­ing Thir­teen On The­o­ry, the Mark Sey­mour’s book about hunters and col­lec­tors. That’s

[01:33:25] CR: Oh wow.

[01:33:26] TK: just, I mean, great, because I grew up with the sto­ry, so it’s, yeah.

[01:33:30] TK: Um, band venues in Mel­bourne from the 80s,

[01:33:33] CR: hmm. Mm hmm.

[01:33:35] TK: and, and peo­ple actu­al­ly knew Jack Howard, the trum­pet play­er. He taught Alex Trum­pet at Wes­ley

[01:33:41] CR: Oh, wow.

[01:33:42] TK: Yeah, so, um, yeah, good. And we, I’ve hired oth­ers

[01:33:45] TK: and col­lec­tors to play at

[01:33:46] TK: uni

[01:33:47] TK: cam­pus events, so yeah.

[01:33:49] CR: What does release

[01:33:50] CR: the sausages mean?

[01:33:52] TK: Oh, it just caught my eye. It was a, um, Keir Starmer, the British Prime Min­is­ter, um, mis­read from a teleprompter about the Israeli sit­u­a­tion that the hostages had to, instead of say­ing the hostages should be released, he said, and of course we should release the sausages.

[01:34:12] TK: So the guy must have been hun­gry, I guess, mak­ing lots of speech­es and mis­read the teleprompter.

[01:34:17] CR: Oh, there’s, I need a t shirt with release the sausages on it. That’s great. I thought it

[01:34:22] CR: was, I, I, I did a postal vote for our upcom­ing Queens­land elec­tion because there’s no more democ­ra­cy sausages. So I’m like, I’m not, not lin­ing up to vote if I don’t get my democ­ra­cy sausage.

[01:34:33] TK: What do you mean there’s no more

[01:34:34] TK: democ­ra­cy sausages?

[01:34:35] CR: Last cou­ple of times we’ve vot­ed. There’s no, I think since COVID, they stopped democ­ra­cy sausages and they nev­er start­ed again. So I’m

[01:34:42] TK: oh, okay.

[01:34:43] CR: I’m not vot­ing in per­son if I don’t

[01:34:45] CR: get my sausage.

[01:34:47] TK: Yeah, I mean I like vot­ing before­hand any­way because I get to choose when and where

[01:34:52] TK: I go.

[01:34:54] CR: right. plan. Quick­ly, my high­lights. I spent a lot of time over this week doing serv­er main­te­nance. I apol­o­gize to any­one who’s had serv­er or web­site prob­lems. I think I’ve got it. Nailed, but I thought that last time. But this way, this time we haven’t had any, uh, real issues for about a week, so, um, I think that’s good.

[01:35:13] CR: David Lynch has emphy­se­ma, did you hear about that?

[01:35:15] TK: No. Okay.

[01:35:17] CR: Can’t leave his house, um, won’t be doing any more direct­ing unless he said he can do it remote­ly, and that does­n’t sound like fun, so, I think we’ve seen the end of Lynch.

[01:35:26] TK: Oh, No.

[01:35:26] CR: Chris­sy and I watched a cou­ple of episodes of Boy Swal­lows Uni­verse, um, real­ly enjoy­ing that.

[01:35:33] CR: Great. The kid who plays the young kid. Oh, Hunter said he

[01:35:35] CR: audi­tioned for the role of the old­er broth­er. Um, but the, the kid who plays the younger broth­er, so good. Like real­ly great per­for­mance. Uh, we also start­ed watch­ing Will Harp­er, the Will Fer­rell thing on Net­flix, where a real­ly old friend of his, who was a writer at Sat­ur­day Night Live, tran­si­tioned

[01:35:55] TK: Right. No.

[01:35:58] CR: you know, Going out in pub­lic.

[01:35:59] CR: So Will Fer­rell does a road trip across the U. S. with him and they go on a, you know, um, red­neck bars in Ida­ho and, and uh, Will Fer­rell just sort of gets in every­one’s face about his friend tran­si­tion­ing to see how they react. It’s, it’s kind of fun. Um, new album by The Kills. Um, don’t know if you’ve ever lis­tened to The Kills, but they’re one of my favourite cur­rent bands.

[01:36:24] CR: They got a new album out, which is good.

[01:36:26] CR: GPT released advanced voice mode final­ly to every­one last week, which is, uh, super impres­sive stuff. Chris­sy and I did our pri­vate class with our Sifu last week and we got approval to do our brown belt grad­ing in a cou­ple of weeks. That was like the pre assess­ment.

[01:36:42] CR: Boris, he gave us the nod, said you’re, you’re ready, you’re ready Grasshop­per,

[01:36:47] CR: so we’re excit­ed about that. I just can’t injure myself again, before then I got­ta not hurt my back, which is already

[01:36:54] CR: dicey. And I’ve been read­ing Jim Car­rol­l’s The Bas­ket­ball Diaries, which is com­plete­ly bonkers.

[01:37:01] TK: Wow.

[01:37:02] CR: men­tioned him ear­li­er, uh, in an ear­li­er

[01:37:05] TK: Car­roll

[01:37:05] TK: banned. Yeah.

[01:37:06] CR: Yeah, Bas­ket­ball Diaries, Leonar­do DiCaprio film, 20 odd years ago, based on it. He was doing hero­in at 13. Um, also like 16 was get­ting his poet­ry pub­lished. But these are his diaries as a teenag­er, as a high school stu­dent, talk­ing about Catholic priests, feel­ing kids up. And, you know, he start­ed, you know, Giv­ing oral sex to home­less, not to home­less guys, to rich guys under a bridge to make mon­ey for his hero­in habit when he was a teenag­er.

[01:37:34] CR: And it’s, grow­ing up in New York in the 60s, it’s just a crazy sto­ry. He end­ed up with Andy Warhol at the fac­to­ry and dat­ing Pat­ti Smith and hav­ing the band and blah, blah, blah, work­ing with Lou Reed and stuff. But any­way, it’s just a crazy sto­ry about Life in the, like doing bur­glar­ies is 12, 13 and get mon­ey for drugs and um, real­ly sort of rough, rough child­hood liv­ing in the Bronx in the 60s and 13.

[01:38:07] CR: Like I can’t, I just can’t imag­ine some­body, he said he start­ed doing hero­in because he thought that was the one you did­n’t get addict­ed to.

[01:38:14] TK: No.

[01:38:15] CR: He got, he got that and weed mixed up.

[01:38:17] CR: So then he switched to

[01:38:17] CR: weed for a while, but he end­ed

[01:38:18] CR: up back on hero­in. But any­way, it’s a good book. Real­ly, real­ly grit­ty and har­row­ing sort of life for a young kid in the six­ties, but I’m enjoy­ing it. That is QAV for this week, episode 740. Thank you, TK.

[01:38:34] TK: No, you’re

[01:38:35] TK: wel­come. Thank you for doing the pulled pork

[01:38:37] TK: this week.

[01:38:38] CR: That was fun. I enjoyed it. Learned a

[01:38:40] TK: Oh, by the way, I watched the sec­ond episode of The Pen­guin. They’re releas­ing it. Week by week. So good. Oh, so good. It’s like, it’s less, it’s HBO, so it’s qual­i­ty, and it’s more a gang­ster flick than, or gang­ster series than, uh, uh, DC com­ic.

[01:38:58] TK: It’s, and Col­in Far­rell

[01:39:01] TK: just hits it

[01:39:01] TK: out of the park.

[01:39:02] TK: He is so good. It’s great.

[01:39:05] CR: Well, I looked it up, it’s on Binge, and I can­celled my Binge sub­scrip­tion, so I’m gonna wait till the whole thing’s out, then I’ll sub­scribe to it, and binge it, and then

[01:39:13] CR: unsub­scribe again. Yeah, Alright. Thank you

[01:39:17] TK: Okay. All right. See ya.