QAV 744 — The Woozle Effect

QAV 744 Club

[00:00:00] CR: Wel­come back TK. It’s QAV episode 744, record­ing on the 29th of Octo­ber,

[00:00:17] CR: . you’re sit­ting in a new posi­tion today. Uh, where are you sit­u­at­ing your­self? I see a, I see a rail­ing and I see lots of green behind you and beau­ti­ful cloudy sky.

[00:00:30] TK: I’m just 180 degrees from where I was last week on the oth­er side of the table. I

[00:00:36] CR: All

[00:00:36] CR: right.

[00:00:37] TK: don’t know. I think it was just the oth­er side was untidy. So I just set up on

[00:00:40] TK: this side today.

[00:00:42] CR: At the, Schanck

[00:00:42] TK: yeah, I’ve got the, I’m at Cape Schanck, I’ve got the sun behind me, um, sun com­ing across a bit dark, but that’s okay. Sun in front of me as well,

[00:00:50] TK: but not as much.

[00:00:52] CR: How’s the week been down at Cape Schanck?

[00:00:55] TK: Good! Busy! Yeah, I’ve been up to Mel­bourne a few times, includ­ing on the week­end to see my horse win, so that was excit­ing.

[00:01:03] CR: The big dou­ble mar­ket win.

[00:01:06] TK: Ooh, got­ta love the dou­ble mar­ket, hey?

[00:01:10] CR: Con­grat­u­la­tions. The pho­tos of you, you look very chuffed hold­ing the, hold­ing the tro­phy or the cup. Or what do you, what do you call it? A cup or a tro­phy or

[00:01:17] CR: what?

[00:01:18] TK: Yeah, both. It’s, I walked, um, I walked out of Moonee Val­ley hold­ing the cup, um, past the taxi rank and they’re all going, Oh, you won the cup, mate! Oh!

[00:01:33] CR: No need for the racist accents,

[00:01:34] CR: Tony. We could’ve just

[00:01:36] TK: that’s what they said.

[00:01:37] TK: Yeah.

[00:01:39] CR: Uh, how long do you get to keep the cup for?

[00:01:43] TK: Oh, in per­pe­tu­ity until it Russ, I

[00:01:46] TK: guess.

[00:01:47] CR: Oh, real­ly? It’s not like, uh, a crick­et tro­phy where you get it for the next year until the next race hap­pens, or the next test. You get it for­ev­er.

[00:01:56] TK: Yeah, I think the Mel­bourne Cup you’re sup­posed to hand back, but they give you a repli­ca any­way. So, um, yeah. And I think they can, you can also buy repli­cas of this tro­phy if you want­ed to. Um, they always put a val­ue on it in the race book and it’s always hideous­ly over­priced. It’s a real­ly nice tro­phy, but they always say it’s worth about three or four grand, but I reck­on it’s worth about three or four hun­dred bucks, would be my guess, but any­way, I don’t, I haven’t val­ued a tro­phy

[00:02:26] TK: before, so I could be wrong.

[00:02:28] CR: well there’s, there’s the, there’s the, the val­ue of the cost of the goods and then there’s the, uh, what do we call it, the,

[00:02:36] TK: emo­tion­al val­ue.

[00:02:39] CR: the,

[00:02:39] CR: what do we call it, the, when we’re doing, uh, net

[00:02:42] TK: Intrin­sic val­ue.

[00:02:44] CR: you know, it’s, it’s the, the, the stuff that you can’t define, like brand, like, uh, Cus­tomer loy­al­ty. Intan­gi­ble, that’s the

[00:02:51] TK: That’s right. yeah,

[00:02:53] CR: it’s the intan­gi­ble val­ue

[00:02:55] TK: a high car­ry­ing val­ue, that’s

[00:02:56] TK: right.

[00:02:58] CR: What’s the ebit­da on it? It’s, uh, the bull­shit val­ue of it, as

[00:03:04] CR: Char­lie would say. Uh, so there are, you have sev­er­al own­ers of Dou­ble Mar­ket. Who, how do you decide who gets the cup? Do you time­share it?

[00:03:14] TK: The Big Dog. I own the most of the horse, so I’m tak­ing the tro­phy.

[00:03:20] TK: Gold­en Rule Cam.

[00:03:21] CR: The big dog. Just goes to the big dog. And how is, uh, how’s lit­tle dog,

[00:03:28] CR: Chair­man Mabb?

[00:03:29] TK: He’s well, he flew down for it from Bris­bane, which was a good effort from him. Uh, I was, I was actu­al­ly, I said to him when he got in, mate, you were brave because the way Qan­tas’s flights go you may have missed get­ting down and he said he had, he said he left ear­ly enough that there were two or three back­ups and it can still, it’d still get there in time, so any­way, it was good, he, uh, yeah, he turned up, uh, Wal came out with me, my broth­er in law, he was act­ing as the cam­era oper­a­tor tak­ing all the pho­tos you saw, um, It was love­ly.

[00:04:01] TK: Just a nice day at Moonee Val­ley. Beau­ti­ful day. We were ear­ly on in the pro­ceed­ings, even though it was a group two, we were race four. Um, so we were done and dust­ed. but, uh, it’s, I think that’s prob­a­bly, prob­a­bly the first time I’ve won a big race and I’ve been the major­i­ty own­er. So, um, it’s kind of sur­re­al because you go into the mount­ing yard and then Some­one comes over from the race­track, he’s like the pro­duc­tion man­ag­er, so he, uh, he grabs me, uh, Are you a Tony Kynas­ton?

[00:04:32] TK: Yeah, how do I spell your name? Uh, spell the name, he puts it on the run­ning sheet, they put a cam­era in front of him, he does the speech. Brings the, brings the spon­sor over, they do a quick speech and it’s over to me to make a speech. So I’m stand­ing at the back with Mabb going, oh shit, they’re going to ask me to do a speech, aren’t they?

[00:04:51] TK: What do I say? So, did a quick speech and then, um, pho­tographs and tro­phies and we hold the rib­bon, the sash. It goes over the horse when it wins and then it’s up, you know, uh, more pho­tographs, uh, with the train­er who gets a tro­phy, um, and off to the, the bar for a sand­wich and a free beer. Although I had a Diet Coke.

[00:05:13] TK: So yeah, it was good.

[00:05:14] TK: Um,

[00:05:15] CR: You must, in your speech, you must have plugged QAV, because A, it’s called dou­ble mar­ket, and B, we picked up a sub­scriber who said he was, uh, part own­er of the horse with you and he, so, you know, you must have giv­en QA, I mean, how much of your speech involved explain­ing intrin­sic val­ue and val­ue invest­ing?

[00:05:33] CR: I mean,

[00:05:34] TK: None.

[00:05:35] CR: let me take a few moments to explain to you why the horse is called Dou­ble Mar­ket. See, there’s a guy called War­ren

[00:05:41] CR: Buf­fett. You may have heard of him.

[00:05:44] TK: Did­n’t do that. I was think­ing on my

[00:05:46] TK: feet,

[00:05:46] CR: you Tony? No.

[00:05:47] TK: No, I was think­ing on my feet.

[00:05:49] TK: No.

[00:05:50] CR: Well, any­way, we should get on with, uh, we can talk more about your hors­es in After Hours.

[00:05:54] CR: Let’s get on with the show. I know you’ve got, uh, you’re on a time­line because you’re going to see Tom York

[00:06:00] CR: tonight.

[00:06:01] TK: cor­rect. At the Myer

[00:06:02] TK: Music Bowl.

[00:06:04] CR: Oh, very

[00:06:05] CR: nice.

[00:06:06] TK: The Syd­ney Myer Music Bowl. When I first moved to Mel­bourne, I kept won­der­ing why there was a Syd­ney Myer Music Bowl in Mel­bourne.

[00:06:13] TK: But it’s his first name. Syd­ney

[00:06:15] CR: Well, speak­ing of Sid­ney Myer, I’ll just kick off with that. I had that in my notes. Myer’s in the news today.

[00:06:20] TK: Yeah, saw that.

[00:06:21] CR: Good old Sol­ly Lew. He nev­er quits, does he? He nev­er, nev­er gives up, and judg­ing by the pho­to of him that I saw in, uh, the finan­cial review, he looks like he should have giv­en up some time ago. He’s, uh, look­ing like a Madame Tus­sauds wax­works dum­my in that pho­to.

[00:06:43] CR: I’m sor­ry, Sol­ly, I don’t know what’s going on, but, uh,

[00:06:46] CR: does not look well,

[00:06:47] TK: the guys, isn’t he, he’d be in his 80s now, I think would­n’t he,

[00:06:50] CR: Yeah, well, at least by the looks of it. Um, any­way, uh, you know, Myer has done a deal with Pre­mier Invest­ments Um, Sol­ly’s com­pa­ny, where they’re basi­cal­ly buy­ing pret­ty much, or Myer is buy­ing near­ly all of their Pre­mier Invest­ments cloth­ing divi­sion appar­el brands, includes Just Jeans, JJ’s,

[00:07:18] CR: Port­mans, Dot­tie and Jack­ie E.

[00:07:22] CR: The com­bined group will have more than 780 stores across Aus­tralia and New Zealand with around 17, 300 employ­ees. Pre­mier will retain own­er­ship of its Smiggle sta­tionery brand and sleep­wear label, Peter Alexan­der. In exchange for appar­el brands, Myer will issue new shares to Pre­mier, which it will dis­trib­ute to its investors.

[00:07:43] CR: The new shares will account for more than 51 per­cent of Myer. And as I under­stand it, once those are all dis­trib­uted, Sol­ly, who owns 40 per­cent of the group, will emerge with the, uh, largest stake. Um, his per­son­al hold­ing, um, will be 26. 8 per­cent of Myer, and he’ll take a seat on

[00:08:12] CR: Myer’s board.

[00:08:14] TK: Mm hmm.

[00:08:14] CR: So, that’s been a long time com­ing.

[00:08:17] CR: I remem­ber, gee, we’ve been talk­ing about Sol­ly, you know, try­ing to take back con­trol of Myer for years. We do own it in two light port­fo­lios. I added it in two port­fo­lios back in Jan­u­ary. Both of those stakes are up 50

[00:08:31] CR: per­cent since Jan­u­ary. So, but I remem­ber, we’ve been here before with Myer. I remem­ber a cou­ple of years ago we were up, I was up like 80%.

[00:08:42] CR: One of my port­fo­lios with Myer and then some­thing hap­pened and Sol­ly sold and it all crashed back

[00:08:48] CR: down

[00:08:48] TK: Well, Sol­ly, Sol­ly did­n’t

[00:08:50] CR: one, I

[00:08:51] CR: think.

[00:08:51] TK: It was Jeff

[00:08:52] CR: Sol­ly did­n’t sell it.

[00:08:54] CR: Oh, that’s right. Jeff

[00:08:55] CR: Wil­son. God­damn you, Jeff Wil­son. Any­way, uh, we’ll see what hap­pens this time. But yet again, Myer’s, uh, had a, had an extra­or­di­nary run

[00:09:05] CR: this year.

[00:09:06] TK: Well, it’s, I mean, it’s a, I mean, the guy plays a long game, right? He’s been a stake­hold­er Since before I worked there, which is more than 20 years ago, prob­a­bly back even 20 years before that, he orig­i­nal­ly put Myer togeth­er with Coles to form Coles Myer, and he was exec­u­tive chair­man of that com­pa­ny for a while, and then he was oust­ed because, uh, inde­pen­dent Share­hold­ers were wor­ried that he was on too many sides of trans­ac­tions where he was a major sup­pli­er to the com­pa­ny he was also run­ning.

[00:09:39] TK: And so they were wor­ried about gov­er­nance issues. Um, and, uh, you know, he set up Pre­mier Invest­ments, um, in oppo­si­tion to Myer. And now he’s merg­ing the brand side of Pre­mier Invest­ments, the fash­ion brand side of Pre­mier Invest­ments with Myer. So he’s been, um, uh, on the reg­is­ter for a long time. He’s been in and out of man­age­ment of it for a long time.

[00:10:01] TK: Um, but he’s still stand­ing. He’s still very suc­cess­ful. And, you know, we, as you said, trad­ed in and out of Myer, but I guess if we’d hold it, we’d prob­a­bly be up triple mar­ket over the, over the peri­od we’d been doing the show. Cause I think it’s, it’s up about 300 per­cent from when we first looked at it, when we first start­ed buy­ing in and out of it.

[00:10:22] TK: Um, You know, what does it mean for Myer share­hold­ers? Well, you’ve got a, uh, a very, prob­a­bly Aus­trali­a’s, one of Aus­trali­a’s best retail­ers any­way, cer­tain­ly on the fash­ion side, now a major share­hold­er and direc­tor. Um, it’s got to be a good thing, I would think. Um, you know, there can be some issues with gov­er­nance around what I spoke about before.

[00:10:44] TK: And, uh, he, he could end up being a, uh, a sup­pli­er to the com­bined com­pa­ny. So he’s on both sides of the trans­ac­tion. Um, cause Myer are buy­ing off whole­salers and he has had whole­sale busi­ness­es in the past. I don’t even know if he still does, so it may not be an issue. But, um, he’s cer­tain­ly get­ting a lot of retail expe­ri­ence.

[00:11:05] TK: Thanks for watch­ing! Um, in Myer. Myer will prob­a­bly change, uh, it’s, it’s now one of its sort of lega­cy issues is that it’s a large for­mat depart­ment store, but in merg­ing the Pre­mier Invest­ments fash­ion brands, it gets a hold of a lot of, um, small­er retail out­lets. So they prob­a­bly can ratio­nal­ize their oper­a­tions and net­work across a dif­fer­ent sort of hybrid retail for­mat, which would be good for Myer.

[00:11:31] TK: But any­way, the mar­ket seems to like it. The shares are pret­ty good. Trad­ing almost at a buck when they’ve been, you know, sort of 30 cents a cou­ple of years ago, so, uh, yeah, watch this space, it’s, it’s, it’s, looks like it’s turn­ing out well for share­hold­ers, but we’ll, you know, con­tin­ue to apply our rules to it and see how we go.

[00:11:52] CR: Well, we would­n’t have done that much bet­ter if we’d held it. Um, I don’t have dates from when I first bought it for the dum­my port­fo­lio, but it was very ear­ly on. It was, it was trade num­ber 11. We bought it. So I’m guess­ing it was like 2019, 2020. We bought it at, uh, it would have been 2019, I guess. Bought it for 99

[00:12:15] CR: cents back

[00:12:16] TK: Oh, real­ly?

[00:12:17] TK: Wow.

[00:12:18] CR: Sold it at 81 cents. It

[00:12:21] TK: Uh huh.

[00:12:21] CR: was a rule one sell.

[00:12:24] CR: And, uh, bought it again for the dum­my port­fo­lios in Sep­tem­ber 22 at 0. 59 and 0. 57. Again, it became a rule one sell, even­tu­al­ly. But I think that was the time it went all the way up and then came all the way down, maybe. Uh, and as you said, it’s now trad­ing at about 0.

[00:12:47] CR: 99. So this time when I bought back into it, it was Jan­u­ary this year at 0. And, um, it’s got, it’s like 97 today, I think. So,

[00:12:59] CR: you know,

[00:13:00] TK: I do recall it being below 0. 30 and

[00:13:02] TK: so at some stage.

[00:13:04] CR: could have been, but not when I bought

[00:13:06] TK: Okay. Right.

[00:13:08] CR: If I, I’m look­ing at a long time. Well, it was last below 30 cents. 2021. Ear­ly 2021. Com­ing out­ta Covid, crashed down to 10 cents,

[00:13:21] TK: Okay.

[00:13:22] CR: crashed down at nine and a half cents at the peak of Covid in 2020, and sort of recov­ered, pret­ty seam­less­ly seen then. Oh, it actu­al­ly got down below 30, briefly in June, 2022, and then was as high as a buck.

[00:13:38] CR: And then Col­lapse, Stan­dard 60, et cetera, et cetera. It’s had a rocky ride with the ins and the outs and the Jeff Wilsons. But, um, any­way, we’ve done well out of it. Again, I had a look at Solomon Lew’s back­sto­ry because I’ve, like, I’ve heard his name

[00:13:53] TK: Mm hmm.

[00:13:53] CR: my entire adult life, pret­ty much when it comes to invest­ing and, you know, I was in Mel­bourne and when I was at Microsoft, you know, we did a lot with Coles Myer and that kind of stuff.

[00:14:05] CR: But real­ly read­ing his sto­ry is kind of fas­ci­nat­ing. He’s actu­al­ly 79. Turned 79 in March, he was born in 45. Um, his par­ents were immi­grants, Pol­ish Jews who came over dur­ing the inter­war peri­od. His father died, his father had a tex­tiles busi­ness in Flinders Lane but died when Solomon was 12 years old. He went to school at Mount Sco­pus, uh, estab­lished his first busi­ness, Voy­ager Solo, at the age of 18, then stud­ied account­ing and com­merce at Knight School, and in 1981, his fam­i­ly office, Parfit Invest­ments, made a takeover bid for John Mar­t­in’s, an Ade­laide based depart­ment store chain, and then, uh, tried to buy, uh, OPSM, that did­n’t work, then he took a In 1983, he took a 10 per­cent stake in Myer Empo­ri­um Lim­it­ed.

[00:15:07] CR: The same year he pro­posed a 50 mil­lion takeover bid for the Aus­tralian branch of Cad­bury Schweppes, and then kind of just built from there, um, over the years. So he and Lind­say Fox tried to take over Ansett Air­lines when they went into admin­is­tra­tion.

[00:15:25] TK: Yep.

[00:15:27] CR: But he’s sort of start­ed as an 18 year old, as I said, and has just kept build­ing, um, ever since.

[00:15:33] CR: So done very well for

[00:15:34] CR: him­self.

[00:15:35] TK: And, um, was basi­cal­ly a rag trad­er in Flinders Lane and then, um, whole­saler, importer, and just kept acquir­ing and trad­ing to get to the stage where he could take a 10 per­cent stake in Myer. I mean, there’s a lot, a lot of water under the bridge before you get to that size. So he was always good at, um, busi­ness and good at, uh, You know, acqui­si­tions, I guess.

[00:15:59] TK: And that’s the thing about Myer too. He’s basi­cal­ly, has­n’t, he’s basi­cal­ly, I would­n’t say he’s tak­ing it over because he does­n’t have 100 per­cent con­trol, but he has­n’t paid a takeover pre­mi­um already. He’s bought shares

[00:16:11] TK: patient­ly. He’s used the CREEP pro­vi­sion, which is allows him to buy 3 per­cent every six months because he had, he 20%.

[00:16:20] TK: And now he’s putting togeth­er a merg­er and Myer’s issu­ing him stocks. So, you know, he’s a bit like Ker­ry Stokes in that sort of way that they. Get onto a reg­is­ter and then get to a stage where it’s inevitable that they take over the com­pa­ny with­out pay­ing

[00:16:34] TK: for pre­mi­um.

[00:16:36] CR: Was that creep pro­vi­sion men­tioned, just a real­ly clever Tom York, uh, plug there? Was it a lit­tle Radio­head plug you snuck in there, you sneaky dev­il?

[00:16:47] TK: No, it was­n’t. It’s um, it’s a two edged sword. I mean, uh, you could You could look at a com­pa­ny like Myer at least until this trans­ac­tion hap­pened and say it could be tak­en over as retail com­pa­nies, you know, have their tri­als and tribu­la­tions as you’ve just out­lined. Uh, but it looks like Sol­ly Lew is going to do it with­out pay­ing for a takeover pre­mi­um.

[00:17:07] TK: Even though the shares are up and ben­e­fit­ing share­hold­ers, they’re still well below what they float­ed for, which I think was about four bucks when it was spun out of Coles Myer. So it has­n’t been a good invest­ment. Again, one of those we’ve spo­ken about before, one of those pri­vate equi­ty. Buy­outs that were then, um, laden with debt and thrown back into the share mar­ket with a brand name like Dick Smith, like Myer, um, and they haven’t done well for retail share­hold­ers.

[00:17:36] TK: Uh, so if you’ve been a long term share­hold­er, it’s too bad, but, um, that sort of, it’s been going up since it got to its lows. It’s been, uh, going up recent­ly, and it’s prob­a­bly about, it’s, it’s, you know, true val­ue now. It’s intrin­sic val­ue rather than pay­ing four bucks for it as it did when it float­ed.

[00:17:56] CR: And you know, it’s inter­est­ing to me that busi­ness­es like that have sur­vived at all in the online world. I mean, It’s 2024. If I think about shop­ping online, Myer is not a brand that would ever come to mind, and yet they’re still around. Um, I mean, Ama­zon has­n’t killed these busi­ness­es. I do believe that Ama­zon now takes about 10 per­cent of all retail dol­lars spent online in Aus­tralia, which is Which is a big share, right?

[00:18:40] CR: I mean, par­tic­u­lar­ly in a small mar­ket like this, which is fair­ly much oli­gop­o­lies that are fight­ing for frac­tions of a per­cent­age of mar­ket share for an out­sider to come in and take 10 per­cent is huge. But you know, if you’d asked me 20 years ago, I prob­a­bly would have guessed that Myer would have been buried by online only plays, uh, by now.

[00:19:05] CR: So they’ve held on quite well some­how. I don’t know why that is, I guess peo­ple just did­n’t go online as much as we thought they were gonna 20 years

[00:19:16] CR: ago, they

[00:19:17] TK: Well, they have their own,

[00:19:20] TK: Myer has its own online pres­ence, of course. I mean, it’s get­ting larg­er and larg­er. But, um, it’s, online’s always been dif­fi­cult for appar­el, and I say that as a past online appar­el retail­er, because, uh, You know, you’ve got to han­dle the returns when peo­ple buy things that’s the wrong size and send it back.

[00:19:39] TK: Um, peo­ple will still, I’ll still want to go into a, some kind of store, whether it’s Myer or some oth­er store and try things on before I nec­es­sar­i­ly buy it. Um, I do tend to then stick with the brand once I know my size and I might buy the re, the repur­chase online, but um, you know, there’s still a place for it.

[00:19:58] TK: There’s still a place for peo­ple who. want to browse and you know they know they want to buy a gift like a hand­bag for their spouse or um the brief­case for their spouse and they don’t know what they want so they want to seal it and touch see it and touch it and feel it and all the rest of it so um yeah there’s a role for it.

[00:20:17] TK: Uh, but you know, hav­ing said all that, Myer has been close to death’s door a num­ber of times over its life. Um, and its past CEO, the guy from the UK, did a very good job of, of tak­ing costs out and shrink­ing the foot­print to try and return it to prof­itabil­i­ty. I mean, the, the dif­fi­cul­ty about these retail busi­ness­es is, They have a, you have to main­tain a cer­tain size and a cer­tain mass to be able to have lever­age in nego­ti­a­tions with sup­pli­ers.

[00:20:46] TK: So, um, you want to expand the retail foot­print all the time, even though you know every time you increase the foot­print, you’re prob­a­bly going to make a loss because, um, Aus­tralia just isn’t that big enough and you’ve had sort of peak foot­print as a retail­er for a long time. Um, but you’ve got to do it because you need to have big­ger sales, even though they’re not prof­itable, so you can have a bet­ter buy.

[00:21:08] TK: Um, buy price from, from sup­pli­ers. So it’s, it’s been a dance for com­pa­nies like Myer and David Jones and Tar­get and Kmart, um, who’ve all com­pet­ed against each oth­er. And now Ama­zon to, to sort of get that retail dom­i­nance, which gives you the best buy price and do it prof­itably. And it just, it’s always been dif­fi­cult.

[00:21:27] CR: Accord­ing to Pow­er­Re­tail. com. au, the, uh, Myer had their best, um, sales fig­ure in 20 3. bil­lion, um, down a bit. In FY24, but it’s, they say that, uh, online is 21. 6 per­cent of their total sales. Now, still not as much as I would have expect­ed again, 20 years ago. But for all the rea­sons that you said, there you go.

[00:22:06] CR: We nev­er, we nev­er real­ly fig­ured out. I mean, do you remem­ber back in the day when there was like, uh, Oh, we’re just. Take your pho­to and then we’ll over­lay what the dress will look like on you in the

[00:22:18] TK: ha ha.

[00:22:18] CR: and all that kind

[00:22:19] CR: of stuff and nev­er

[00:22:20] TK: were, some­times there were peo­ple tri­al booths in shop­ping malls to do that. It just did­n’t work, did it?

[00:22:28] CR: No.

[00:22:28] TK: I’m look­ing at, I’m look­ing at, you know, you’ve quot­ed those fig­ures, the, not sure, I’m look­ing at six month­ly here, and I’m look­ing at annu­al. So the prof­it for last year was 52 mil­lion.

[00:22:41] TK: Um, and I remem­ber work­ing at Coles, my, when May­er, I think had its record prof­it, which was just about $110 mil­lion from mem­o­ry.

[00:22:52] TK: Um,

[00:22:53] CR: So it’s got record sales but only half the

[00:22:55] CR: prof­it

[00:22:56] TK: yeah. And so, yeah, I was look­ing back through stock dock 140, $160 mil­lion seems to be, I don’t know, back in Jan­u­ary, 2010, it actu­al­ly made two, $229 mil­lion.

[00:23:11] TK: MPAT, but it nev­er got any­where near that again. Um, and that’s show­ing as the first MPAT. So I’m going to guess that’s what it float­ed with, which was prob­a­bly a padded MPAT to get the float away. And it went down from there to all the way down to 50 mil­lion. It got as low as 30 mil­lion and it went neg­a­tive.

[00:23:32] CR: Mm.

[00:23:32] TK: I guess my point is sales might be at a record high, but you Sales is one thing and prof­it is anoth­er. So you can always make unprof­itable sales and make it look good. But, uh, Myer’s always been a sort of a hun­dred mil­lion dol­lar prof­it in my mind. Um, and it’s been around that sort of 3 bil­lion in sales for a long time as well.

[00:23:54] CR: Well, speak­ing of brands that aren’t doing well, Mosa­ic Brands, a com­pa­ny that’s also been on our buy list from time to time, have announced today that they’ve been placed in vol­un­tary admin­is­tra­tion while they under­go a restruc­ture. They have the brands Rivers, Millers, Cady’s, Non­ny B, and I think you talked a lit­tle bit about them in a show.

[00:24:21] TK: Oh,

[00:24:22] CR: I don’t know, a lit­tle while ago. They were shut­ting down five of their brands, um, back in Sep­tem­ber. Rock­man’s, Auto­graph, Cross­roads, W Lane and Be Me. They said at the time they were going to focus on the Millers, Non­ny B, Rivers and Katie’s brands, but. Appar­ent­ly they left it a bit too late, so now they’re invol­un­tary admin­is­tra­tion.

[00:24:45] CR: So yeah, don’t know what’s going on with them. Tough time for them. I know that they got hit by ACCC, uh, recent­ly. They’ve had to pay penal­ties fol­low­ing, uh, fail­ing to deliv­er hun­dreds of thou­sands of prod­ucts to cus­tomers with­in its adver­tised time­frames. Um, they were sus­pend­ed from trad­ing for a while in August.

[00:25:11] CR: Um, So any­way, they’ve, they’ve, um, had some issues, Mosa­ic Brands. They were last on our buy list, I think, uh, back in Jan­u­ary, briefly. Haven’t been on it

[00:25:23] CR: since. That’s

[00:25:25] TK: Yeah, and I think they’re going to be in a sell soon after that too, look­ing at their share price graph from the Bret­ta­la­tor. Um, you said, speak­ing of oth­er brands which aren’t doing well, I just want to pick you up there. I’m not say­ing the Myer brand isn’t doing well. It’s still a very strong brand. It’s still one of the pre­mi­um brands in Aus­tralia.

[00:25:41] TK: So, and Solomon Lew thinks that too, which is why he’s merg­ing into it. So, I would­n’t say Myer’s Dis­grace brand­ed by any stretch of the imag­i­na­tion. And to flesh out Mosa­ic Brands, I think, uh, what they’re doing is, um, is a bit akin to Chap­ter 11 in the U. S. So they’re, they are going into vol­un­tary admin­is­tra­tion.

[00:26:04] TK: From what I’ve read, they’re using it as a safe har­bour. Um, one of the issues, um, in law in Aus­tralia is you can’t, you know, Trade while insol­vent, so you’ve always got to have an expec­ta­tion of being able to pay your debts if you’re trad­ing. Mosa­ic Brand’s direc­tors real­ized that they were going to skirt pret­ty close to that prob­lem and so they put them­selves into vol­un­tary admin­is­tra­tion, which gives them a bit more lee­way to be able to nego­ti­ate with sup­pli­ers.

[00:26:31] TK: to extend their cred­it and, um, try and trade out of, or restruc­ture the com­pa­ny. So my guess is that the Mosa­ic brands will get relist­ed, but we’ll focus on the prof­itable brands and get rid of the ones which haven’t worked for it. Um, as, as we said before, they’ve, they’ve owned a num­ber of brands, but some of them have worked and some of them haven’t, and I guess vol­un­tary admin­is­tra­tion is a way of try­ing to get rid of the ones and close down the ones that haven’t worked, but trade through con­tin­u­ous­ly, um, with the ones that are

[00:27:03] CR: Hmm. All right. Well, um, I just want­ed to quick­ly do the port­fo­lio reports. Noth­ing much to

[00:27:10] CR: report, actu­al­ly.

[00:27:11] TK: I just say, sor­ry to inter­rupt you again, before you do that, just because it’s on the theme. Um, I, the only news I had was that there has been a lot of activ­i­ty in retail. I just want­ed to, um, call out Super Retail, Super Group, who have, um, their shares have gone down recent­ly because in the last cou­ple of weeks they, um, said that the, uh, they weren’t, uh, look­ing like they were trav­el­ing as well as they first fore­cast.

[00:27:34] TK: Um, it looked like sales would be flat to a slight increase and, um, I’ve seen the share price come off, uh, and I own them, so I’m, I’m, you know, con­fess­ing to own­ing them. I think they’ll come good again, it’s just, uh, it’s just prob­a­bly part of the econ­o­my we’re in where peo­ple are hold­ing on to dol­lars a lot more than, um, dis­cre­tionary spend­ing, um, would nor­mal­ly dic­tate.

[00:27:58] TK: Uh, and the oth­er one that I, but it’s, it’s patchy because I know this today is stock price has been going up since we did a poor balk on it, uh, a cou­ple of weeks ago. What bet­ter month to go, I sup­pose. So they’re, they’re turn­ing around nice­ly, um, with the, they’ve, they’ve, they’ve changed over their CEO.

[00:28:15] TK: The new one starts in Jan­u­ary from Coun­try Road, so the mar­ket’s warm­ing to that. So yeah, so it’s a bit of a patchy mar­ket in retail, um, at the moment, which I guess is not unusu­al giv­en the econ­o­my, um, but it’s prob­a­bly going to throw up some more oppor­tu­ni­ties. There’s a few retail­ers on our buy list which peo­ple can pay atten­tion to if they like.

[00:28:35] CR: hmm. I’m just, if I look at, uh, the dum­my port­fo­lio, um, sort of sec­tor break­down in Navexa, uh, retail’s not show­ing up at all. Con­sumer dis­cre­tionary? That might be

[00:28:56] CR: retail?

[00:28:57] TK: Yeah, it is.

[00:28:59] CR: Yeah, it’s got SUL, VVA, and ASG in it. S. U. L. down 10. 5 per­cent per annum. But we still, I guess that’s prob­a­bly our hold­ings over time. It’s still up in all of our port­fo­lios, by vary­ing amounts, because we own it in a bunch of dif­fer­ent things.

[00:29:18] CR: Um, just look­ing at the dum­my port­fo­lio more broad­ly though, it’s been a good month. For the dum­my port­fo­lio, dum­my port­fo­lio is up about 4 per­cent in the last 30 days ver­sus the STW up 0. 7 over that peri­od. So, doing almost, well we’re doing sort of 4 times in the last 30 days. Um, In the last sev­en days, we’ve had some big wins.

[00:29:44] CR: We’re up about 2. 2 per­cent ver­sus the mar­ket up 0. 8 per­cent the last sev­en days. Big win­ners for us in the last week were MAH and McMa­hon. They’re up, uh, let’s see, um, 13. 64 per­cent MLX up 13%, CVL up 12%, um, and then SUL being the big los­er in the last week, had that big drop, as we said, 10%.

[00:30:16] CR: Any­way, been a good week in

[00:30:17] TK: that’s the one I

[00:30:18] TK: own.

[00:30:20] CR: Ah,

[00:30:22] CR: well,

[00:30:23] TK: buy a race­horse

[00:30:24] TK: instead. Yeah.

[00:30:25] CR: Yeah. What per­cent­age of your race­hors­es have had a win?

[00:30:31] TK: I haven’t nev­er done the analy­sis.

[00:30:33] CR: Okay.

[00:30:35] CR: Do that and then get back to us. Um, the, the Stock­o­pe­dia port­fo­lios are doing well too. The, um, the Aus­tralian one is up 25 per­cent since incep­tion ver­sus the S& P 200 up 20%. And the US one, um, has come back a bit. It was up get­ting close to a hun­dred per­cent a cou­ple of weeks ago. It’s back to sort of 81 per­cent up ver­sus the S& P 500 in the US up 41 per­cent since, well, over the same time­frame.

[00:31:05] CR: So still doing, you know, pret­ty much dou­ble mar­ket over there. To, um, and lat­er on in the show, so as not to upset the peo­ple who don’t care about Amer­i­can stocks, I will do a bit of a pulled pork on one of the stocks in our port­fo­lio. BLX, aka Bladex, aka the For­eign Trade Bank of Latin Amer­i­ca, aka Ban­co Lati­noamer­i­cano de Com­er­cio Exte­ri­or, which I spent some time read­ing up on.

[00:31:36] CR: Uh, we hold that in the port­fo­lio. It’s up about, I don’t know, I think 50%, I don’t know, 35 per­cent since we bought it. It’s done okay, but it’s a real­ly inter­est­ing bank in Latin Amer­i­ca. It’s sort of a, what they call a supra­na­tion­al bank. It’s owned by, and was estab­lished by, a bunch of Latin Amer­i­can Fed­er­al Reserve Banks in 1977 to sup­port, um, inter coun­try trade in Latin Amer­i­ca and, um, it’s had bonds a cou­ple of years.

[00:32:15] CR: It’s done, it’s doing very well. I’ll go through the num­bers lat­er on, but it’s killing it. So any­way, we’ll talk about that a lit­tle bit lat­er on.

[00:32:22] CR: Um,

[00:32:24] TK: BladeX was like Wes­ley Snipes in a Zim­mer frame doing the 10th instal­ment of the Blade

[00:32:29] TK: Tril­o­gy.

[00:32:30] CR: yeah. Wow. Did you see the last

[00:32:32] CR: Dead­pool film?

[00:32:33] TK: I did.

[00:32:34] TK: Yeah.

[00:32:35] CR: He had his

[00:32:36] CR: lit­tle cameo

[00:32:37] TK: Yeah. Mm hmm.

[00:32:39] TK: Yep.

[00:32:39] CR: to see Wes­ley Snopes back as Blade. He was kind of the man for a while there. I real­ly liked him. White men can’t jump and Blade and what­ev­er else he was doing back then.

[00:32:52] CR: I did­n’t see that. Um, try­ing to think there was anoth­er film that he did back then that I real­ly liked.

[00:32:59] CR: I can’t remem­ber what it was. Um, well, I’ve got some oth­er things to talk about, but I’ll shut up for a while. What do you want to talk about, Tony? We’ve talked about Sol­ly and Myer and Mosa­ic.

[00:33:10] CR: What

[00:33:10] TK: uh, yep. Uh, just, uh, pulled

[00:33:12] TK: pork. Uh,

[00:33:14] CR: Oh, okay,

[00:33:15] TK: I’ll do an Aus­tralian com­pa­ny.

[00:33:17] TK: And, uh, I got to say, like I was going through the buy list today and, um, apart from very, very small com­pa­nies, which I’m hap­py to do as a pulled pork. If any­one wants me to, um, we’re going back over com­pa­nies that we’ve done before.

[00:33:31] TK: So the buy list is, is kind of com­ing full cir­cle. I don’t know if that’s a. You know, time in the eco­nom­ic cycle that we’re at or what­ev­er. But, uh, I tossed up doing Cred­it Corp and I might do that one in com­ing weeks again, uh, but I’m going to do AMP today. And I last did it, I’d say maybe three years ago, two or three years ago, at least, uh, and.

[00:33:56] TK: I think around that time the share price I’m going to say was around a dol­lar from mem­o­ry.

[00:34:01] CR: hmm.

[00:34:02] TK: dropped back a bit from there and then, um, it’s take, it’s sort of slow­ly gone up, but it’s tak­en off in the last, uh, few months, includ­ing in the last cou­ple of weeks. So I thought it might be worth­while revis­it­ing AMP.

[00:34:15] TK: And this is, uh,

[00:34:17] TK: this is I guess, again, an exam­ple of a com­pa­ny which is shrink­ing its way to great­ness. So, it’s been through the wringer. As you know, Jen­ny used to work there as the Chief Risk Offi­cer. Um, start­ed just before the Hayne’s Roy­al Com­mis­sion. And the Hayne’s Roy­al Com­mis­sion, as it did with lots of finan­cial insti­tu­tions, real­ly threw the cat amongst the pigeons.

[00:34:40] TK: And, um, AMP suf­fered a lot, um, try­ing to find a way to change its busi­ness mod­el, to Both com­ply with the rec­om­men­da­tions, but to, I guess, prof­it from them as well. Uh, it’s been around for a long time, AMP. Um, if I go and have a look at its his­to­ry, this is from its web­site. Um, well, first of all, I’ll say what it does and then, um, talk about its his­to­ry.

[00:35:07] TK: So AMP pro­vides bank­ing, super, retire­ment and advice ser­vices in both Aus­tralia and New Zealand, sup­port­ing over 1 mil­lion cus­tomers and employ­ing approx­i­mate­ly 3, 000 peo­ple. AMP also oper­ates the award win­ning North, a tech­nol­o­gy plat­form that helps finan­cial advi­sors meet Aus­tralian super pen­sion and invest­ment needs.

[00:35:31] TK: for all of their life stages. They’ve been around for 170 years. From its hum­ble begin­nings in 1849, they offered life insur­ance to, as, sor­ry, I’m going to start that one again. This is an excerpt from their web­site that was­n’t mak­ing much sense when I tried to scan it then. But the excerpt reads, From its hum­ble begin­nings in 1849, by offer­ing life insur­ance as the Aus­tralian Mutu­al Prov­i­dence Soci­ety, AMP has evolved over the last 175 years to be a pub­licly list­ed com­pa­ny with over 1.

[00:36:05] TK: 3 mil­lion cus­tomers and 133 bil­lion in assets under man­age­ment as at finan­cial year 23. The his­to­ry of it is in 1849, The Aus­tralian Mutu­al Prov­i­dence Soci­ety opened for busi­ness in 1869. The Nation­al Mutu­al Life Asso­ci­a­tion of Aus­trala­sia opened for busi­ness, and if we fast for­ward a hun­dred years in 1962, the icon­ic A MP build­ing in Syd­ney cir­cu­lar key was opened in 1995 Nat­ur­al Mu Nation­al Mutu­al Demu­tu­al­ized, and list­ed on the Aus­tralian Stock Exchange.

[00:36:40] TK: To be fol­lowed in 1998 by a MP, which did the same and also opened a bank, fun­ni­ly enough, called a MP Bank. In 2009, a MP and Chi­na Life Group formed a strate­gic part­ner­ship in 2011 a MP and AXA Asia Pacif­ic. For­mer­ly Nation­al Mutu­al merged in 2020. Uh, the uh, a MP com­pet­ed the sale of a MP Life insur­ance.

[00:37:07] TK: To Res­o­lu­tion Life, in 2022, AMP announced the sale of a glob­al asset man­age­ment busi­ness, AMP Cap­i­tal, to focus on AMP’s core busi­ness in bank­ing and wealth man­age­ment. Uh, to where we are today, which in the last sort of, uh, six months or so has also seen some oth­er, the mutu­al­iza­tions, and to quote from the AFR, AMP rock­et­ed 17.

[00:37:32] TK: 7 per­cent to 1. 60 after the finan­cial ser­vices giant report­ed 750 mil­lion in cash flow from its wealth plat­forms in the Sep­tem­ber quar­ter, up 76 per­cent on a year ear­li­er, so that was on Octo­ber 17th, and from a newslet­ter called Investors Strat­e­gy News. Uh, which was, uh, the edi­tion was out today, AMP has been on a sim­pli­fi­ca­tion spree as it attempts to rean­i­mate its share price and reduce com­plex­i­ty in a busi­ness that over its 175 year his­to­ry has sprawled into dozens of finan­cial ser­vices sec­tors.

[00:38:11] TK: That’s seen it offload its asset man­age­ment arm, AMP Cap­i­tal, and almost com­plete­ly exit advice through the sale of its AMP Finan­cial Plan­ning, Hill Ross and Char­ter Licensees, as well as its licensee ser­vice provider, Jig­saw, to a com­pa­ny called Entire­ty, 16 advice prac­tices to AZNGA. It’s also restruc­tured its bank­ing divi­sion as it looks to build out a dig­i­tal only offer­ing tar­get­ed at small busi­ness­es and per­son­al bank­ing cus­tomers.

[00:38:47] TK: So, um, it’s been offload­ing a MP cap­i­tal, most notably the insur­ance busi­ness. Uh, and then in the, in the last lit­tle while, it’s finan­cial plan­ning busi­ness­es, although it still main­tains, uh, I think about a 30% stake in it, but it’s being oper­at­ed by entire­ty and A‑N-Z-N-G‑A. So, a lot of restruc­tur­ing going on.

[00:39:11] TK: All of that has reflect­ed in an increased per­for­mance at the MPAT lev­el. So, if I go through the seg­ments, the bank, AMP Bank MPAT was down 38%. As like a lot of oth­er small banks, it faced mort­gage chal­lenges, and A& P Bank is the coun­try’s 12th largest lender. So we’ve talked about that before in doing BOQ and some of the oth­er small, small­er offer­ings online, like PIPA, mon­ey, etc.

[00:39:42] TK: They are strug­gling with com­pe­ti­tion as the major banks come back to just basi­cal­ly being mort­gage and cred­it card providers. Super, the Super sec­tion of AMP, Super and Invest­ments was up 21 per­cent this last half. Advice lost 15 mil­lion, but that was a 40% improve­ment. The New Zealand busi­ness was sta­ble, and over­all a MP as a group lost $7 mil­lion for the half, which was 22% bet­ter than the pri­or peri­od.

[00:40:16] TK: So the mes­sage for a MP is that sim­pli­fy­ing cut­ting costs, reduc­ing debt, and invest­ing in bank­ing, and it’s going to. offer a busi­ness bank solu­tion next year and is going to focus on being an online bank. So we’re sort of see­ing that play out across all of the small providers. Bank of Queens­land was get­ting into it, get­ting more into busi­ness bank­ing amongst the oth­er ones like Judo Bank that we talked about a lit­tle while ago under the pulled pork on, which is basi­cal­ly just the busi­ness bank.

[00:40:50] TK: So it seems like the small banks are try­ing to play in that space more and more. Um, But Beta, as it may, the mar­ket sort of likes what it’s see­ing with AMP in its sim­pli­fi­ca­tion process and the fact that it is attract­ing more funds under man­age­ment, which nor­mal­ly would get lost in the mix because AMP, you know, was many oth­er things, that’s now becom­ing a a major part of, um, of its, of its prof­it mix.

[00:41:18] TK: And, uh, so, you know, it’s becom­ing a wealth man­age­ment com­pa­ny, I guess, um, and a bank­ing com­pa­ny. Um, so these plat­forms, which are a big part of its busi­ness now, if peo­ple don’t know what they are, they’re basi­cal­ly the infra­struc­ture that, uh, finan­cial advi­sors use to track their clients mon­ey and to man­age that mon­ey by putting it into.

[00:41:40] TK: Both list­ed and unlist­ed funds, and AMP runs a num­ber of those unlist­ed funds, so it gets fee income from that, but it’s also get­ting increas­ing­ly a fee income from oper­at­ing the infra­struc­ture or the plat­form that the wealth advi­sors use to track their clients, man­age and report on their clients invest­ments.

[00:42:01] TK: Um, so that’s a big part of their busi­ness as well. Uh. looks like they’re call­ing out that they’re going to make mon­ey. So they’re going to reverse the loss next year. And that’s what the mar­ket’s focus­ing on. So to go through the QAV num­bers any­way, the share price at time of analy­sis is 1. 43. That is slight­ly above con­sen­sus tar­get.

[00:42:22] TK: So we can’t score it for that. IV1 based on its most recent results is only 0. 01. And IV2 is only 0. 85. So it’s from an intrin­sic val­ue point of view, we can’t score it. Uh, that’s com­pared to the share price at 1. 43, how­ev­er it does appear that the share price is track­ing book val­ue, so net equi­ty per share for 43, so that is trad­ing at its share price, so we can um, score it for that, and obvi­ous­ly being less than book val­ue plus 30%, uh, so it scores on that basis, um, but I think the mar­ket is fore­cast­ing ahead, And look­ing at what it might look like next half, um, and that’s why the share price is also trad­ing above our intrin­sic val­ues, because we’re look­ing at what the cur­rent num­bers are.

[00:43:11] TK: Yield, the com­pa­ny’s trad­ing on a yield of 2. 8%, so it is pay­ing a div­i­dend, but it is, um, Um, below what we want to score it for based on yield. How­ev­er, it is also buy­ing back its shares. So I think that’s also sup­port­ed the share price over the last 12 months. Um, I call out that it’s get­ting close to what it said it would spend on share buy­backs.

[00:43:33] TK: So the share buy­back will come to an end dur­ing the cur­rent half. Now they may like that. To keep buy­ing back shares and announce an exten­sion, but what they’ve cur­rent­ly called out will come to an end some­time in the fore­see­able future. Stock Doc­tor finan­cial health and trend. Finan­cial health is ear­ly warn­ing, which is not good.

[00:43:53] TK: But the trend is recov­er­ing, which I like. So we’re scor­ing it a 2 for the recov­er­ing trend. So cer­tain­ly the finan­cials, the finan­cial health of this com­pa­ny is being sort­ed out. Debt’s being re, uh, being paid down and it’s being put onto a, um, a sim­pler, but a much bet­ter finan­cial foot­ing by the cur­rent man­age­ment team.

[00:44:15] TK: Uh, Stock­o­pe­dia, uh, give this com­pa­ny a score of 72, um, or a rank­ing of 72, which is not high. Uh, but I, I do note the F score is sev­en out of nine. They can’t give it a Zed score. So we’ve seen that before with the finan­cial ser­vices com­pa­nies we’ve talked about recent­ly. So 72, even though it’s low, may not be a bad score for a finan­cial ser­vices com­pa­ny giv­en they can’t use all the scor­ing met­rics, um, in Stock­o­pe­dia for it.

[00:44:43] TK: Uh, over­all Stock­o­pe­dia rank it as 91, which is, um, you know, high up on their list. So it, they, they like things that they see in it as well. Uh. Prop­Caf for the com­pa­ny is 4. 3 times, and I guess that’s what’s attract­ing me to the com­pa­ny. Earn­ings per share growth is fore­cast at 5000%, pret­ty high, but giv­en it’s a neg­a­tive earn­ings per share cur­rent­ly, it’s um, it’s um, going up but not say­ing much.

[00:45:12] TK: But growth over PE is 6 times, which gives it a score of 2 in our check­list. Com­pa­ny does­n’t have an own­er founder, it’s been around too long for that. Uh, again, the PE is, um, kind of use­less. It’s a score, it’s 950 times, um, again because earn­ings are neg­a­tive, so we can’t, um, score it for that. We give it a minus one for that.

[00:45:34] TK: Um, it’s a new three point trend buy because it’s became a buy fol­low­ing its lat­est results, so it gets a score, extra score for that. Um, it does­n’t have con­sis­tent­ly increas­ing equi­ty, may in the future, giv­en the clear­ing up the bal­ance sheet, but does­n’t at the moment. Um, so all in all, the com­pa­ny gets a score, a qual­i­ty score of 10 out of 17, or 59%.

[00:45:57] TK: So, again, for us, not over­ly high on qual­i­ty, which is sim­i­lar to Stock­o­pe­dia. But because of the high Prop­Caf, we give it a QAV score of 0. 14. So it’s a high ADT stock. And I should have said before the ADT is almost a bil­lion dol­lars for this com­pa­ny. So it’s scor­ing well on, um, uh, on that met­ric. So any­one who’s lis­ten­ing will prob­a­bly find that, uh, that they can fit it into their port­fo­lio.

[00:46:22] TK: Uh, it’s a QAV score of 0. 14 and it’s been, um, going strong­ly in terms of its share price late­ly. I guess that’s prob­a­bly the issue. That’s the hint of con­cern or the hint of cau­tion for me is it’s been on a strong run up. It went up near­ly 20 per­cent in the day after its lat­est results. I think it still makes a lot of sense from a QAV point of view to have a look at it.

[00:46:44] TK: Uh, Would­n’t sur­prise me if it pulls back from where it is now giv­en all of the peo­ple who have been pil­ing into the stock price recent­ly since its lat­est results, but cer­tain­ly it’s been, it’s turn­ing around. I like what I’m see­ing. Um, there is still a lot of com­pe­ti­tion in that. Uh, in that, uh, space, though, with, um, a lot of wealth advi­sors out there, a lot of plat­form providers out there, like Hub24, for exam­ple.

[00:47:10] TK: Um, but cer­tain­ly, A& P is turn­ing around, and it’s a recov­er­ing stock, recov­er­ing finan­cials, they’re get­ting their house in order from a bal­ance sheet point of view, and it’s worth hav­ing a look at, I

[00:47:21] TK: think.

[00:47:23] CR: And so all of the rep­u­ta­tion­al dam­age that hap­pened to them a few years ago has all been for­got­ten, for­giv­en.

[00:47:33] TK: I don’t think it has, but, um, The brand isn’t out there in the same way it was, you know, sell­ing life insur­ance and offer­ing direct advice in the way it was. It’s, it’s kind of become more of the infra­struc­ture, um, under­ly­ing the wealth man­age­ment net­work. It still does offer super, um, retail super funds.

[00:47:52] TK: It still does offer its own funds. But it’s doing more and more of that through third par­ty net­works and advi­sors. So, uh, yeah, I think there’s still some brand dam­age out there, but at some, at some stage, you know, that will dis­si­pate if it has­n’t already. Um, and that brand dam­age, don’t for­get, was also shared by its major com­peti­tors, the, the banks.

[00:48:12] TK: So, uh, a lot of those finance, finan­cial insti­tu­tions did­n’t come out of this scot-free. Um, I think the oth­er risk for the bank is, uh, is that small AMP bank­ing Busi­ness, um, small banks aren’t doing great at the moment, but it seems like they are. Putting their invest­ments where they should mat­ter, which is to turn the bank into a dig­i­tal bank to reduce its costs and to focus on busi­ness bank­ing, or to focus more on busi­ness bank­ing, um, and, uh, pro­vid­ing banks, uh, pro­vid­ing mort­gages to peo­ple who aren’t get­ting them as eas­i­ly, um, through the major banks.

[00:48:47] TK: So, um, there is a niche. in Aus­tralia for that. Um, I can’t see them being a, they might be a big play­er in that niche, but I can’t see them, you know, becom­ing a chal­lenger to the big banks by doing that. But who knows, hey, who knows what will hap­pen from, from that, uh, ongo­ing.

[00:49:04] CR: Mmm. All right. Well, thank you, Tony. We do hold them in one of the port­fo­lios. Hold AMP. Actu­al­ly, no, it was a pos­si­ble. That I rec that I made avail­able to light sub­scribers. Back in Sep­tem­ber at 1. 34, it’s up about 8 per­cent since then, but I was look­ing back at the archive. I’ve sold it. Five times, uh,

[00:49:32] CR: yeah, but it’s all since 2023.

[00:49:35] CR: I only bought them in sort of August, Sep­tem­ber, 2023 for prices around about a dol­lar 25, give or take a cou­ple of cents and had to 3PTL a cou­ple of them and rule one the rest. So if it held on, would have been above water today, but, um, you know, who knows, could have gone the oth­er way

[00:49:57] CR: too.

[00:49:58] TK: Yeah, and you would have tied up your mon­ey for no return over that peri­od as well, where­as you prob­a­bly bought

[00:50:03] TK: some­thing which went up. That’s how I view it. Yeah.

[00:50:08] CR: All right. Thank you, AMP. Um, Mor­gan Housel. I haven’t done a Mor­gan Housel for, for a lit­tle while. And because I did­n’t have any notes at eight o’clock this morn­ing, I thought I’ll throw in a Mor­gan Housel. The Woo­zle Effect is the Mor­gan Housel idea that I’m run­ning with today. Sim­i­lar to Three Men Make a Tiger, which we, uh, also sort of remem­bered last week, but a lit­tle bit dif­fer­ent.

[00:50:35] CR: So the Woo­zle Effect. He actu­al­ly quotes Daniel Kah­ne­man in his A Hun­dred Lit­tle Ideas for this, A reli­able way to make peo­ple believe in false­hoods is fre­quent rep­e­ti­tion, because famil­iar­i­ty is not eas­i­ly dis­tin­guished from truth. Um, per­ti­nent. with the, uh, final weeks of the US elec­tion going on. And it kind of reminds me of some­thing, I think it was Goebbels said that a lie told loud enough and long enough even­tu­al­ly becomes accept­ed as truth.

[00:51:06] CR: The dif­fer­ence between this, though, and Three Men Make a Tiger is the woo­zle effect. is based on some evi­dence. Where­as Three Men Make a Tiger is just peo­ple, you hear a sto­ry. The woo­zle effect, uh, usu­al­ly starts because of a mis­rep­re­sen­ta­tion of data or a study, which gets cit­ed repeat­ed­ly and then becomes accept­ed as fact.

[00:51:37] CR: Each rep­e­ti­tion sort of strength­ens the per­cep­tion that the claim is cor­rect. Sol­id when it’s not. It’s like weak or mis­rep­re­sent­ed data which sort of blows up and it gets its name from a Win­nie the Pooh sto­ry. Appar­ent­ly, Win­nie the Pooh and Piglet were fol­low­ing some foot­steps in the snow that they believed had been left by the Woo­zle.

[00:52:05] CR: And they were hunt­ing the Woo­zle and then Christo­pher Robin needs to point out that it’s their own foot­steps that they’re fol­low­ing. Um, but they saw foot­steps and they thought that was evi­dence of the Woo­zle. And, um, I have this, there’s a inter­est­ing, some exam­ples of it in Wikipedia. Um, the one that I liked was one notable exam­ple of the effect can be seen in cita­tions of addic­tion rare in patients treat­ed with nar­cotics.

[00:52:33] CR: A let­ter to the edi­tor by Jane Porter and Her­schel Jick pub­lished by the New Eng­land Jour­nal of Med­i­cine in 1980. The let­ter, which was five sen­tences long, and unlike­ly to have been peer reviewed accord­ing to any JM spokesper­son, report­ed find­ings from analy­sis of med­ical records regard­ing the use of pain med­ica­tion for hos­pi­tal patients and con­clud­ed that, despite wide­spread use of nar­cot­ic drugs in hos­pi­tals, the devel­op­ment of addic­tion is rare in med­ical patients with no his­to­ry of addic­tion.

[00:53:06] CR: Although the study only con­cerned use of nar­cotics in hos­pi­tal set­tings, over time, it was increas­ing­ly cit­ed to sup­port claims that addic­tion to painkillers was sim­i­lar­ly uncom­mon among patients pre­scribed nar­cotics to take at home. The authors of a 2017 let­ter pub­lished in the NEJM con­cern­ing the orig­i­nal 1980 let­ter, Found 608 cita­tions of Porter and Jick with a siz­able increase after the release of Oxy­con­tin in 1995.

[00:53:38] CR: Per­due Farmer, the man­u­fac­tur­ers of Oxy­con­tin, cit­ed the Porter and JIC study as well as oth­ers to argue that it car­ried a low risk of addic­tion. In 2007, Per­due and three of the com­pa­ny’s senior exec­u­tives plead­ed guilty to fed­er­al crimes that they had mis­led reg­u­la­tors, physi­cians, and patients about the addic­tion risk asso­ci­at­ed with Oxy­Con­tin.

[00:54:02] CR: The 1980 study was also mis­rep­re­sent­ed in both aca­d­e­m­ic and non aca­d­e­m­ic pub­li­ca­tions. It was described as an exten­sive study. by Sci­en­tif­ic Amer­i­can, whilst Time said that it was a land­mark study show­ing that, quote, exag­ger­at­ed fear that patients would become addict­ed, end quote, to opi­ates was basi­cal­ly unwar­rant­ed.

[00:54:24] CR: And an arti­cle in the jour­nal Sem­i­nars in Oncol­o­gy claimed that the Porter and Jick’s study exam­ined can­cer patients when the let­ter made no men­tion of what ill­ness­es the patients were study­ing from. So I thought that was an inter­est­ing exam­ple. I asked GPT for some exam­ples of how the Woo­zle effect could play out in invest­ing and it gave me some that will sound famil­iar. Buy and hold always wins. But the buy and hold strat­e­gy is pop­u­lar because some of the world’s best known investors like War­ren Buf­fett have suc­cess­ful­ly employed it. The nar­ra­tive of just buy and hold is so per­va­sive. That many investors assume it’s a uni­ver­sal­ly suc­cess­ful approach with­out con­sid­er­ing mar­ket cycles, indi­vid­ual stock qual­i­ty, or per­son­al invest­ment goals.

[00:55:20] CR: The mantra per­sists, but data show that buy and hold has seen seri­ous draw­downs, par­tic­u­lar­ly dur­ing long bear mar­kets. You would swear that GPT was trained on Tony Kynas­ton’s per­son­al anec­dotes. Num­ber two, real estate always appre­ci­ates. The idea that prop­er­ty prices only go up has become entrenched, espe­cial­ly in regions where prop­er­ty val­ues have increased for long peri­ods.

[00:55:47] CR: This belief leads to risky over lever­ag­ing as peo­ple assume prop­er­ty is a sure­fire invest­ment. Yet his­tor­i­cal exam­ples, for exam­ple, the US hous­ing crash in 2008, show that real estate mar­kets can and do cor­rect. Nonethe­less, the real estate is a safe invest­ment Woo­zle con­tin­ues. Encour­aged by indus­tries that ben­e­fit from real estate trans­ac­tions.

[00:56:09] CR: Num­ber three, stocks always recov­er in the long run. The claim that the stock mar­ket always goes up over time is wide­spread based on his­tor­i­cal trends. How­ev­er, it ignores that spe­cif­ic sec­tors, regions, or indi­vid­ual stocks may not recov­er. For instance, Japan’s stock mar­ket has strug­gled since the 1990s and indi­vid­ual stocks like Block­buster or Kodak nev­er bounced back.

[00:56:33] CR: This Woo­zle effect often encour­ages investors to over­look risk man­age­ment. Four, tech stocks are always growth stocks. Tech stocks became syn­ony­mous with growth dur­ing the 1990s and 2010s and many investors now asso­ciate any tech stock with strong growth poten­tial. But not all tech com­pa­nies are inno­v­a­tive dis­rup­tors.

[00:56:54] CR: Many face high com­pe­ti­tion and low prof­itabil­i­ty, espe­cial­ly in mar­kets sat­u­rat­ed with sim­i­lar tech­nolo­gies. Despite this, investors often dive into tech sec­tors with­out ful­ly assess­ing finan­cial health, dri­ven by the tech equals growth woo­zle effect. Num­ber five, ESG invest­ments are always more sus­tain­able.

[00:57:16] CR: The grow­ing trend of envi­ron­men­tal, social, and gov­er­nance invest­ing rests on the idea that these com­pa­nies are bet­ter for the plan­et and inher­ent­ly more sus­tain­able or eth­i­cal. How­ev­er, crit­ics argue that ESG rat­ings can be incon­sis­tent or super­fi­cial with some com­pa­nies receiv­ing favourable scores despite ques­tion­able prac­tices.

[00:57:32] CR: Yet the Woo­zle effect has made ESG pop­u­lar, push­ing many investors to assume it aligns with both Prof­itabil­i­ty and Ethics With­out Scruti­ny. And the last one is active funds beat pas­sive funds or vice ver­sa. The claim that one type of fund man­age­ment always out­per­forms the oth­er has become a main­stay in finan­cial advice.

[00:57:54] CR: Pro­po­nents on both sides cher­ry pick time peri­ods or indi­vid­ual funds to prove that active man­age­ment always out­per­forms pas­sive index­ing or vice ver­sa. In real­i­ty, which strat­e­gy wins depends heav­i­ly on mar­ket con­di­tions and spe­cif­ic fund man­age­ment, but the woo­zle effect often push­es investors into one camp, dis­miss­ing the oth­er with­out a tai­lored strat­e­gy.

[00:58:18] CR: It sum­ma­rizes this by say­ing, the woo­zle effect in invest­ing is almost inevitable, as finan­cial media and indus­try lead­ers rein­force nar­ra­tives that align with spe­cif­ic mar­ket con­di­tions or busi­ness goals. The best defense? Main­tain a healthy dose of skep­ti­cism and look at the data direct­ly before adopt­ing proven strate­gies.

[00:58:41] TK: Good advice.

[00:58:44] CR: Thank you,

[00:58:44] CR: GPT.

[00:58:45] TK: Yeah. So, I mean, it’s, it’s a great, a great anec­dote, a great sto­ry to, to talk about. I mean, um, it reminds me of the fish oil sto­ry about how it was ped­dled for years that fish oil was healthy for you. And then, uh, it turns out that was just big farmer sell­ing fish oil. If you go back and have a look at the research, it was very

[00:59:05] TK: sketchy.

[00:59:06] TK: Um,

[00:59:07] CR: Real­ly? But did fish, if fish is a big part of the Mediter­ranean diet, I thought that was because it has fish

[00:59:14] CR: oil in it.

[00:59:15] TK: No, I don’t think so. Um,

[00:59:17] CR: Hmm.

[00:59:18] TK: yeah, and then, um, like the fish stock got deplet­ed in the North­ern Hemi­sphere and so they start­ed push­ing krill oil, um, with the same sort of sup­posed health ben­e­fits. Yeah, but go and have a, go and Google it or ask Chat­G­PT and, um, you’ll find out it was pret­ty much, uh, I won’t say a scam, an alleged scam, um, but, but it hap­pens all the time where the media gets a hold of a sci­en­tif­ic arti­cle and it just gets a life of its own and it’s, it’s even dif­fer­ent from what the researchers them­selves say, you know, like cof­fee’s good for you, red wine’s good for you, um, choco­late’s good for you, the media loves to push those sto­ries because they’re kind of coun­ter­in­tu­itive, um, and the research was­n’t real­ly say­ing that at all.

[01:00:02] TK: So, uh,

[01:00:03] CR: yeah,

[01:00:04] TK: we love a sto­ry. I also like what you said about, about it’s the human trait to fall into a tribe, isn’t it? Like whether you’re a pas­sive investor or an active investor or, you know, some­one who’s in the real estate mar­ket or some­one who’s not in the real estate mar­ket. It’s always A camp that you’re either seek­ing or being pushed into.

[01:00:23] TK: That’s anoth­er inter­est­ing part of the human con­di­tion, isn’t it?

[01:00:27] CR: Yeah. Yeah. Which is anoth­er, um, one of the Housel things that I was going to get into. There’s a lot of stuff about trib­al­ism, but, um, you know, I think the tricky thing about the woo­zle effect is that there is some evi­dence or study or some­thing behind it, but you know, you’ve got to drill down into those stud­ies and you can’t just take a study at face val­ue.

[01:00:55] CR: You have to look at, well, what is the con­sen­sus of. Sci­en­tists or researchers, depend­ing on what the field is. Who are active in the field, uh, what’s the peer review say about that study? Has it been test­ed? Has it been, you know, um, repli­cat­ed? All that kind of stuff before you invest too much into it. But it gets back to Kah­ne­man’s stuff, you know?

[01:01:19] CR: It’s sys­tem A, sys­tem B. It’s far eas­i­er just to say, well, it must be true, and I don’t have to think any more about it and just go along with some­thing because it sounds good on the sur­face, than have to use the, uh, men­tal ener­gy of going, of train­ing your­self to go, Oh, hold on. Let me, let me stop and drill into that and spend some time inves­ti­gat­ing whether or not this is actu­al­ly backed up by peer review, or it’s just some­thing that peo­ple are

[01:01:48] CR: say­ing, you know,

[01:01:49] TK: And, and, you know, I think sci­ence is won­der­ful, but they do them­selves a dis­ser­vice. If you ever go and try and read the research paper that the media sto­ries hyped, it’s almost impos­si­ble if you’re not actu­al­ly Expe­ri­ence in the sec­tor. To go back and read orig­i­nal research is very, very,

[01:02:08] TK: hard to do.

[01:02:09] CR: unless you have Chat­G­PT on your

[01:02:12] TK: Oh, okay. It sum­ma­rizes for you. okay.

[01:02:15] CR: Yeah. I do this all the time with also, yeah,

[01:02:19] CR: I do this all the time with stuff that, um, I don’t under­stand. I just throw it into GPT and say, you know. Turn this into plain Eng­lish for me so I can under­stand what’s going on.

[01:02:29] TK: right.

[01:02:29] CR: It’s good at that kind of stuff, you know, it’ll, it’ll dumb it down for you or sim­pli­fy it and I had to do it with the pull pork I’m about to do on a Ban­co Lati­noameri­co de Com­er­cio Exte­ri­or because I did­n’t under­stand a lot of the jar­gon in this and I was like, what does that mean?

[01:02:46] CR: And with no fur­ther ado, uh, you’re not doing any, you got any oth­er

[01:02:50] CR: notes

[01:02:51] TK: No, that’s me. I did­n’t do a what what’s, Look, I start­ed to pre­pare for one, and I think I need a cou­ple of weeks to go through the next sec­tion, because it’s real­ly inter­est­ing and very intri­cate, and I want to Look at some research here. My own

[01:03:05] TK: research on it.

[01:03:06] TK: This

[01:03:13] CR: peo­ple who don’t care can turn off. Bye, have a nice week, uh, you’ll miss After Hours, but, you know, um, BladeX, as I said ear­li­er on, uh, found­ed in 1977 in Pana­ma. That’s it, yeah. noth­ing like it, a shin­ing machine, got the feel for the wheel, keep the mov­ing parts clean.

[01:03:42] CR: Um,

[01:03:43] TK: great. We’re doing Wes­ley Snipes, Blade Tim, and Pana­ma. Why would you want to tune out?

[01:03:50] CR: Yeah, exact­ly. I don’t know. What’s wrong with peo­ple? What else have you got to do with your time? Um, a supra­na­tion­al bank. So, it was cre­at­ed in 1977 by Latin Amer­i­can Cen­tral Banks. with the mis­sion to boost eco­nom­ic inte­gra­tion across the region pri­mar­i­ly through trade finance. They offer Pri­mar­i­ly, they’re in the busi­ness of offer­ing short and medi­um term loans to banks and cor­po­ra­tions in Latin Amer­i­ca.

[01:04:22] CR: And as I said ear­li­er, I added them to the US port­fo­lio in Novem­ber 2023 at 24. 59, cur­rent­ly trad­ing around about 33 bucks. So a gain of rough­ly 34%, not one of the biggest gains. Mas­sive out­per­form­ers in the US port­fo­lio, but it’s done well. And I knew noth­ing about them. And in fact, every time I see them in the port­fo­lio, I get a lit­tle bit wor­ried.

[01:04:44] CR: I’m like, real­ly a Latin Amer­i­can bank? Why is that in the port­fo­lio? So it was good to learn a lit­tle bit more about them. They, they float­ed on the New York Stock Exchange in 1992. The first Latin Amer­i­can bank list­ed on the New York Stock Exchange. Under the tick­er BLX, which obvi­ous­ly opened, uh, them up to a broad­er investor base, gov­ern­ments, pri­vate insti­tu­tions, et cetera, could take a slice of it.

[01:05:12] CR: And they’ve got a fair­ly unique struc­ture. Their deposits come direct­ly from Latin Amer­i­can cen­tral banks, who pret­ty much also run the board, uh, they’re on the board of Bladex. So, um, they’ve, it’s a, it’s. Pret­ty sta­ble as a, as a busi­ness, although due to the fact that they’re pri­mar­i­ly involved in Latin Amer­i­can trade, the Latin Amer­i­can econ­o­my can have a big impact on them.

[01:05:41] CR: And they had a rough cou­ple of years, 2016 to 2018, which I’ll talk about a lit­tle bit more in a sec­ond, but they also get things like pri­or­i­ty and debt col­lec­tion. So when there are loan defaults They, um, are able to get their mon­ey soon­er rather than lat­er due to the nature of their rela­tion­ship with the cen­tral banks.

[01:06:06] CR: But they have no retail or con­sumer bank­ing divi­sion, so they don’t real­ly run the risk of bank runs or mass deposit with­drawals or any of those sorts of issues that we’ve seen with U. S. banks. In the last what­ev­er years since the GFC, um, they’re more resilient to bank­ing cri­sis, but are exposed to Latin Amer­i­can eco­nom­ic issues.

[01:06:32] CR: Um, and as I said, there’s some rough years, 2016 to 2018, the share price halved dur­ing that peri­od. They had some pret­ty bad non per­form­ing loans, par­tic­u­lar­ly the Brazil­ian sug­ar indus­try got hit hard in that. I’m not exact­ly sure if it was, I did­n’t drill down into it, if it was weath­er relat­ed or some sort of oth­er eco­nom­ic issue, but that was one of the big defaults that they had in that peri­od, dam­aged their loan port­fo­lio quite a lot.

[01:07:08] CR: But! A cou­ple of years ago, they, they did a major restruc­ture. Restruc­tured their man­age­ment, restruc­tured their busi­ness focus. Uh, accord­ing to the chair­man’s report that I read, they also restruc­tured the com­pen­sa­tion for their man­age­ment. Uh, and they’ve had a great cou­ple of years, part­ly as a result of that, part­ly as a result of some oth­er things like, um, inter­est rates, et cetera.

[01:07:40] CR: Uh, I think move­ments. in that part of the world. But, um, accord­ing to the chair­man’s lat­est report, which was April of this year, Bladex had a land­mark year in 2023 dri­ven, dri­ven by growth in key mar­kets like Brazil and Mex­i­co. Appar­ent­ly those two regions make up about 45 per­cent of Latin Amer­i­ca’s GDP and they’re doing quite well.

[01:08:08] CR: Some of the oth­er mar­kets in Latin Amer­i­ca aren’t, but Brazil and Mex­i­co seem to be doing very well. Um, Brazil dri­ven by bet­ter than expect­ed results from the agri­cul­tur­al sec­tor,

[01:08:21] CR: and Mex­i­co, uh, has done par­tic­u­lar­ly well in the last cou­ple of years as well. Now, accord­ing to the IMF, the glob­al econ­o­my grew 3.

[01:08:33] CR: 1 per­cent in 2023. Latin Amer­i­ca and the Caribbean grew only two and a half per­cent. So over­all their economies aren’t doing as well, affect­ed by infla­tion, high inter­est rates, um, some adverse weath­er events, which seem to be caus­ing some increas­ing­ly com­mon in that part of the world, but cli­mate change is a myth, so I’m sure it has noth­ing to do with that.

[01:08:58] CR: I saw that in one of Rupert Mur­doch’s net­works, so it must be true. Ah, you’ve been read­ing about the Mur­doch stuff, the, the, the All of the fam­i­ly suc­ces­sion stuff that’s

[01:09:09] CR: going on

[01:09:10] TK: Oh I have you!

[01:09:12] CR: share­hold­er revolts, like it would be the great irony, I guess, of Rupert’s life. If it all gets demol­ished by angry share­hold­ers while he’s still alive, you know, to see it all stripped away.

[01:09:27] CR: I mean, I don’t think the Mur­doch fam­i­ly are going to end up des­ti­tute and poor, but, uh, they may have their A class shares removed from them, which would be inter­est­ing.

[01:09:38] TK: It would be, yeah. I mean, Steven main bangs on about the ger­ry­man­der of used corp shares, so that would be inter­est­ing, yeah.

[01:09:45] CR: Hmm. Any­way, um, the, uh, region­al growth, uh, in sort of Brazil and Latin Amer­i­ca has been ben­e­fit­ing a lot from high ener­gy prices, fos­sil fuel prices. Latin Amer­i­ca appar­ent­ly holds about 15 per­cent of the world’s oil and nat­ur­al gas resources. Brazil has become one of the top 10 oil pro­duc­ers in the world since it dis­cov­ered what’s called pre salt reserves in 2006.

[01:10:15] CR: Did­n’t drill down into that, but you’re an old shell man. Do you know what pre salt reserves are?

[01:10:20] TK: No, I can’t define it. I’ve heard of the term.

[01:10:26] TK: think, I think it

[01:10:27] TK: got to do with before they drilled.

[01:10:30] CR: okay. Uh, Colum­bia is the fifth largest coal exporter in the world. Venezuela, of course, is a major oil pro­duc­er. Um, so, as I said a cou­ple of years ago, BladeX came up with a new five year strate­gic plan. They’re two years into it, and the results seem to be, uh, ter­rif­ic. In 2023, the loan port­fo­lio grew 9 per­cent over the pre­vi­ous year, which was a record lev­el.

[01:11:03] CR: Deposits were up 38 per­cent year over year. Net inter­est income was up 58%. Year over year to 233 mil­lion. Fee income was up by 64%, which was a new bank record. Um, net income rose by 81%. Total assets hit 10.744 bil­lion, up 16% from 2022, and then their Q2. 2024 results, which is, um, April, May, June in the US, uh, real­ly good as well.

[01:11:52] CR: Net prof­it is up 35%. From the pre­vi­ous sec­ond quar­ter, 2023 sec­ond quar­ter, um, annu­al­ized return on equi­ty up 16, no, sor­ry, improved to 16. 2%. Inter­est income was up 15 per­cent year over year. Cred­it port­fo­lio was up 13 per­cent from the pre­vi­ous year. Their com­mer­cial port­fo­lio was up 13 per­cent year over year.

[01:12:21] CR: Fee income rose 93%, which is insane. Their asset qual­i­ty is con­sid­ered strong. 95 per­cent of the port­fo­lio is clas­si­fied as low risk with a 0. 1 impair­ment lev­el. Now we talked about impair­ment recent­ly, but that sounds pret­ty low. I don’t know much about. Bank­ing, but 0. 1 per­cent sounds pret­ty good.

[01:12:48] TK: Very low, yeah. Mmm.

[01:12:50] CR: And their deposits are a record high, 5.

[01:12:54] CR: 259 bil­lion, a 29 per­cent year over year, year over year increase. So, I mean, uh, boom­ing num­bers for them over the last cou­ple of years, which is one of the rea­sons why the share price has done so well. Some of the risks, um, Yeah, as I said before, high­ly depen­dent on Latin Amer­i­can eco­nom­ic sta­bil­i­ty. And with this US elec­tion, which could play out either way by the looks of it in the next cou­ple of weeks, the polls are still pret­ty much 50 50.

[01:13:33] CR: Alan Licht­man’s 13 keys are still say­ing Kamala’s got a lock on it, but uh, the more I read of the polls,

[01:13:40] TK: the

[01:13:40] TK: bet­ting mar­ket

[01:13:40] CR: I don’t know.

[01:13:42] CR: No, I know. But any­way, I mean, if, I mean, I don’t, I don’t know what would be worse for Latin Amer­i­can eco­nom­ic sta­bil­i­ty, quite hon­est­ly, like a Trump vic­to­ry or a Demo­c­rat vic­to­ry, um,

[01:13:58] TK: Yeah, espe­cial­ly giv­en the changes to the gov­ern­ment in Brazil, which must be, as you said before, Mex­i­co and Brazil are prob­a­bly the key dri­vers of Latin Amer­i­ca and the economies down there. And, you know, they’ve, they’ve lurched to the right in Brazil, which would align itself with Trump. Bol­sonaro, I

[01:14:16] TK: think, is in pow­er down there now.

[01:14:18] CR: no, he’s, he got, he got oust­ed in 2022. Lula’s

[01:14:22] CR: back.

[01:14:22] TK: Oh, Lula’s back. Okay. Well, that’s

[01:14:24] CR: yeah, Lula got, Lula got out of jail when the Supreme Court there deter­mined that the whole case against him was bull­shit and threw it, threw him out, released him, and then he, Bol­sonaro got kicked out and Lula took

[01:14:38] CR: back over.

[01:14:39] TK: Is Lula a male or a female?

[01:14:42] CR: Male.

[01:14:43] CR: Yeah,

[01:14:43] CR: he’s, and he’s the

[01:14:44] TK: it a female before Bol­sonaro

[01:14:45] TK: then? Was it?

[01:14:47] CR: Um, there was, uh, a female who was involved there, to take over or some­thing in the right, but I think she went to jail too,

[01:15:00] TK: Yeah, I thought that was

[01:15:01] CR: I vague­ly

[01:15:02] TK: Any­way. I haven’t, I haven’t focused on it. Um, yeah, so that’s, that’s, that would be inter­est­ing, the Brazil­ian

[01:15:09] TK: rela­tion­ship then. Um,

[01:15:11] CR: And, you know, Trump and John Bolton tried to over­throw Maduro in Venezuela dur­ing his last term. They had a failed attempt at a coup down there, Guaido’s coup. So yeah, but I mean, the Democ­rats have got a long way to go. track record of over­throw­ing gov­ern­ments. Haiti was over­thrown dur­ing the Oba­ma admin­is­tra­tion last time too.

[01:15:32] CR: So, I mean, it, it, you know, real­ly it’s the Latin Amer­i­cans can’t win. It does­n’t mat­ter which admin­is­tra­tion’s in the White House, you know, they’re all pro, um, uh, Mon­roe Doc­trine. They want to con­trol the Latin Amer­i­can coun­tries. So yeah,

[01:15:48] TK: So, foot­note, I looked up pre-salt using chat GPT and it says it’s, um, it’s hydro­car­bon reserves under a lay­er of salt. on the um, Brazil­ian coast,

[01:15:59] TK: and there­fore

[01:16:00] CR: under a lay­er of

[01:16:01] CR: salt. Oh, okay, right. So they have to do some spe­cial drilling or extra hard drilling to get down there.

[01:16:10] CR: Um, so the last time I ran a US buy list, which was in ear­ly Sep­tem­ber, they were still high on the buy list, BLX. I, uh, you know, I’ve held them for a year. They were still high on the buy list a month ago.

[01:16:23] CR: High qual­i­ty score of 57 per­cent and a QAV score of 0. 37 at the time. The share price at the time was just under 30 bucks. It’s now 33. 10. So it’s up 10 per­cent since then. Stock­o­pe­dia give them a qual­i­ty score of 60. Fun­ni­ly enough, almost exact­ly the same as our qual­i­ty score of 57%. They give them a val­ue score of 91 and a stock rank of 87, so pret­ty good scores there.

[01:16:55] CR: I’ll just pop over to my, uh, last US buy list. Um, so again, this is, uh, 12th of Sep­tem­ber I ran this, so six weeks ago. But, um, aver­age dai­ly trade of just under 4 mil­lion. So, big enough for any­one lis­ten­ing to this, pret­ty much. Price to oper­at­ing cash flow was 1. 54, so very low, Prop­Caf. Price was, um, above our IV1, but below our IV2.

[01:17:31] CR: Price was below book plus 30. Um, it did­n’t score on growth over PE, but it also scored on price was less than book. Um, We don’t have con­sis­tent­ly increas­ing equi­ty, but we do book val­ue growth, which is pret­ty much the same thing using Stock­o­pe­dia. It’s scored for that. PE was less than yield, but high­er than the mort­gage rate.

[01:17:55] CR: Um, so that was about all of the scor­ing I could do for it. Um, it got eight out of 14, which was the 57%. So, um, yeah, scores well for us. Um, Had an F score of 6, just by the by, no Zed score, um, so yeah, um, real­ly inter­est­ing, sol­id lit­tle, weird kind of a bank, like, no, I mean, noth­ing that we’re famil­iar with in this region, like a intra coun­try bank, I guess it’s like a World Bank or an IMF or some­thing like that, owned by lots of, prob­a­bly more like the World Bank, right, it’s got lots of poten­tial.

[01:18:37] TK: Yeah.

[01:18:38] CR: Lots of peo­ple pro­vid­ing cap­i­tal and pro­vides loans, not as, not to rebuild, but to enable

[01:18:45] CR: trade for the ben­e­fit of Latin

[01:18:47] CR: Amer­i­ca. Yeah.

[01:18:48] TK: So what was the code again?

[01:18:50] TK: Thanks?

[01:18:51] CR: BLX,

[01:18:53] TK: I’m not find­ing it in Stock­o­pe­dia,

[01:18:55] CR: um,

[01:18:56] TK: strange.

[01:18:57] CR: which, um, Exchange you’re look­ing at.

[01:19:03] TK: Well, I just, um, Stock­o­pe­dia gives

[01:19:05] TK: you the lot.

[01:19:07] CR: Okay, don’t, and by the way, don’t get con­fused with Bea­con Light­ing in Aus­tralia, which is BLX. This is on the New York Stock Exchange.

[01:19:14] TK: so, okay.

[01:19:16] CR: Do you have access to the U. S. mar­ket in your

[01:19:18] CR: Stock­o­pe­dia?

[01:19:19] TK: Yeah, I think so. Because I’ve done pulled

[01:19:21] TK: porks on it. So,

[01:19:23] CR: Yeah, that’s right, you have, yeah.

[01:19:26] TK: um, what’s the actu­al name? Is it Ban­co?

[01:19:30] CR: No, it’s For­eign Trade Bank of Latin Amer­i­ca.

[01:19:33] TK: Thank you. Fine. Oh, yeah. Okay, I got it now. It was, kept giv­ing me, um, bea­con light­ing. Yeah, the only rea­son I’m try­ing to find out what’s dri­ving its, uh, oper­at­ing rev­enue. You, have you looked into that at all?

[01:19:51] TK: Oper­at­ing cash flow per share? Just look­ing at it now, it’s, it’s gone very high.

[01:19:59] CR: What’s dri­ving

[01:20:00] CR: it?

[01:20:01] TK: Yeah, so if I look at the op cash flow per share in Stock­o­pe­dia, it’s neg­a­tive prob­a­bly half the time. So this year it’s 19. 9, which I guess is either cents or dol­lars per share, 29. 1 in 2023, but minus 21 in 2022. So just try­ing to work out what’s dri­ving it, because some­times with banks, it’s a, it’s kind of like a one off change that dri­ves it.

[01:20:33] CR: Well, scroll down to the graphs,

[01:20:36] CR: sor­ry, scroll down, scroll down to the graphs below and have a look at their rev­enue and net

[01:20:42] TK: gone up a lot, has­n’t it?

[01:20:43] CR: earn­ings per share. So they did this strate­gic Plan, cou­ple of years ago. It changed the focus of the busi­ness a lit­tle bit, appar­ent­ly. So, um, yeah, it’s gone. They’ve had a gang­buster’s cou­ple of years.

[01:20:57] CR: So I assume that’s what’s dri­ving it. All the num­bers are way up.

[01:21:03] TK: Yeah, but like it’s a bank, right? So it should be oper­at­ing cash­flow should be what, you know, the dif­fer­ence between what it’s lend­ing mon­ey at and what it’s bor­row­ing mon­ey at. So I’m just won­der­ing if there’s some­thing. In that, like, you know, we saw with some of, like, I think it was Pep­per Mon­ey that, uh, their oper­at­ing cash flow was high this half because there was a, you know, um, a tim­ing dif­fer­ence between their bor­row­ings and their lend­ings.

[01:21:30] CR: Right.

[01:21:31] TK: work out if that’s, if that’s also the case here.

[01:21:34] CR: I don’t know,

[01:21:34] CR: I just know that

[01:21:35] CR: they’re,

[01:21:35] TK: Yeah, okay. Does­n’t mat­ter.

[01:21:37] CR: they’re, they’re, they’re, they’re, Net income, their net prof­it was up 35 per­cent from where, wher­ev­er they’re get­ting it from. Their net inter­est income was up. Their com­mer­cial port­fo­lio

[01:21:49] CR: was up.

[01:21:50] TK: Yep. No,

[01:21:51] TK: good point.

[01:21:52] CR: They seem to just be mak­ing mon­ey hand over fist all of a

[01:21:56] CR: sud­den,

[01:21:58] TK: Yeah, maybe,

[01:21:59] CR: know, part­ly because

[01:21:59] TK: um, did, uh, Paci­no turn up in a four wheel dri­ve with a sack full of cash. Like in, uh,

[01:22:09] TK: what was that movie, Scar­face? Yeah. So they have a Mia­mi branch. Is that why it’s up?

[01:22:15] CR: Could be. All right. Um, Well that’s that, BLX, um, into After Hours, and I know I’ve got, I’ve got

[01:22:25] CR: a, uh, call with your wife in nine min­utes, so I’ve got a tighter heart out than you do, yeah,

[01:22:30] TK: Okay, let’s, oh, say hel­lo because I was going to call her after this, but that’s

[01:22:34] TK: fine. All

[01:22:36] CR: I’ll tell her you say hi.

[01:22:37] TK: yeah, uh,

[01:22:40] CR: so, Hors­es, Horse Wins, yeah, the Dou­ble

[01:22:43] CR: Mar­ket,

[01:22:44] TK: dou­ble mar­ket, POIFEC runs next week, prob­a­bly on Cup Day, and she’s been train­ing well. Uh, I nev­er dreamed races in half an hour, so I’m gonna watch that one. So yeah, it’s good to, good to be spring and have hors­es run­ning.

[01:23:01] CR: that’s nice,

[01:23:02] TK: And Dou­ble­Mar­ket will go to the Thou­sand Guineas in, uh, three weeks time, which is a Group 1, so hope­ful­ly she does well there too, which is the top lev­el of

[01:23:12] CR: Thou­sand Guineas,

[01:23:16] CR: is that how much mon­ey you get if you

[01:23:17] CR: win, a thou­sand guineas, is that what

[01:23:19] TK: was in the past. It’s, um, it’s a, it’s, I think it might even be a 2 mil­lion race, might be, it’s def­i­nite­ly a mil­lion dol­lar race. Um, in prize mon­ey terms. So yeah, it’s impor­tant. It’s uh, mov­ing the dial.

[01:23:32] CR: Mmm, that’s

[01:23:33] CR: fan­tas­tic, good for

[01:23:35] TK: Yeah. Yeah, it’s good. And it’s good for, good for Mabb. How about Mabb, hey? This is the fourth, the fourth time he’s owned a horse that’s run and he’s won a group

[01:23:42] TK: too. So it’s um,

[01:23:43] CR: Ha ha ha ha ha ha ha!

[01:23:45] TK: it’s, that’s a great ROI for

[01:23:46] TK: him.

[01:23:48] CR: I think that tells you a lot. You need to be just, uh, invest­ing in more hors­es with Chair­man Mabb. He obvi­ous­ly knows how to pick a win­ner.

[01:23:55] TK: Yeah. He was he was ask­ing about that. He wants me to go to the sales with him in Jan­u­ary, so we’ll see.

[01:24:02] CR: Ha, ha, Ha, ha,

[01:24:03] CR: ha, ha, ha,

[01:24:03] TK: ha, ha.

[01:24:04] TK: ha.

[01:24:05] CR: Um, what is this thing you wrote in

[01:24:08] CR: your notes? I pledge alle­giance to

[01:24:09] TK: don’t wor­ry about

[01:24:10] TK: it.

[01:24:11] CR: Hares.

[01:24:11] CR: Okay, my, not to my hair I hope, because mine’s fall­en out very

[01:24:15] CR: quick­ly.

[01:24:16] TK: Oh, we can prob­a­bly skip it. I was going to talk about Trump’s quote about Arnold Palmer in the show­ers, and I was going to talk about, um, about, uh, the lady I’ve for­got­ten the Sen­a­tor’s name now, who got up in the Great Wall of Par­lia­ment and dissed the King when he

[01:24:30] TK: was here, and then,

[01:24:32] CR: Oh yeah, Lydia,

[01:24:33] CR: what’s her face?

[01:24:35] TK: yeah, and then dou­bled down and said she nev­er pledged alle­giance to the, uh, the Queen or her

[01:24:41] TK: hares, heirs, she

[01:24:43] CR: Oh, her

[01:24:43] TK: alle­giance to the Queen and her hares, yeah, so my respect for her went up a lot with that.

[01:24:52] CR: Well, the only oth­er after hours note I had is, I fin­ished M, Fritz Lang’s M last night, and I can’t speak high­ly enough of it. Um, absolute­ly fan­tas­tic, um, ear­ly expres­sion­ist film. Peter Lorre, when he final­ly comes into it, is fan­tas­tic. Um, like some of the, uh, Cin­e­matog­ra­phy in it is astound­ing for 1931.

[01:25:19] CR: There’s a track­ing shot, which is like a Scors­ese Good­fel­las track­ing shot in it, where the cam­era goes into a place where there’s a lot of, um, beg­gars, and like get­ting, you know, like a soup kitchen, basi­cal­ly. And it goes in, and the cam­er­a’s track­ing across tables, through win­dows through like all around it’s a hand­held it’s wob­bly a bit but it’s going through like this mas­sive long track­ing shot where char­ac­ters just keep doing what they’re doing as it tracks through like way like 10 years before Orson Welles did Cit­i­zen Kane with tricky cam­era stuff.

[01:25:58] CR: Fritz Lang was doing it in Ger­many. Um, a lot of the shots are amaz­ing. A lot of the pulled focus is amaz­ing. And, and, you know, a lot of the emo­tion­al res­o­nance with the char­ac­ters, which is, you know, what Expres­sion­ist film was all try­ing to do. 20 years before Bran­do was try­ing to bring emo­tion. Sturla, They were doing it in Ger­many with this stuff, and Fritz Lang was at the fore­front of it, so it’s, yeah, I can’t rec­om­mend it enough, just a ter­rif­ic film about soci­etal break­down and, uh, and just, you know, in terms of act­ing and cin­e­matog­ra­phy, ter­rif­ic.

[01:26:35] CR: And then I watched Full Met­al Jack­et,

[01:26:37] CR: final­ly.

[01:26:39] TK: Oh, okay.

[01:26:40] CR: Nev­er seen it. Kubrick­’s last film that he was alive to fin­ish, I guess. I think he died before Eyes Wide Shut was com­plete­ly fin­ished and in the cin­e­mas, but, um You ever seen Full Met­al Jack­et?

[01:26:55] TK: it at the movies when it came out.

[01:26:57] CR: Did you?

[01:26:58] CR: Right.

[01:26:58] TK: Yeah, Pri­vate

[01:26:59] TK: Pyle. And,

[01:27:01] TK: uh,

[01:27:01] CR: Yeah,

[01:27:03] CR: I’ve always avoid­ed it, but, Matthew Modine.

[01:27:06] CR: yeah, I’ve always avoid­ed it for some rea­son. I just, I, you know, I kind of, I strug­gle with Amer­i­can, Viet­nam films, and Apoc­a­lypse Now is fine, I love it, but, just Viet, any­thing to do with Amer­i­cans at war, I just have a gag reflex against, but, and even though it’s Kubrick, and I love Kubrick, any­way, so I final­ly knuck­led down and watched it.

[01:27:31] CR: And enjoyed the first half of it. I enjoyed the Ah, Lee, Emery, Drill Sergeant, Goma Pyle, Vin­cent D’Onofrio, like,

[01:27:42] TK: hmm. Yeah.

[01:27:43] CR: Absolute­ly fan­tas­tic in that whole thing. The sec­ond half of it, when they’re actu­al­ly in, um, um, you know, it’s good to see Adam Bald­win

[01:27:55] TK: yeah, I found it quite, I found the same

[01:27:57] TK: thing. Sec­ond half was quite pedes­tri­an.

[01:28:00] CR: Yes.

[01:28:02] TK: Inter­est­ing­ly, it was an urban sort of guer­ril­la war­fare than jun­gle war­fare, but still, that was about the only inter­est I had in the sec­ond

[01:28:09] TK: half of it.

[01:28:11] CR: Yeah, and, you know, it did show a lit­tle bit about the, I don’t know, the psy­chosis involved in the Amer­i­can war effort and, um, you know, the stuff with Matthew Modine in the news­pa­per offices. where they’re spin­ning, his, his boss is telling him how they’ve got to spin all the news sto­ries. Uh, but yeah, did­n’t real­ly, did­n’t real­ly grab me the sec­ond half, unfor­tu­nate­ly, but the first half, ter­rif­ic.

[01:28:47] CR: Worth, def­i­nite­ly worth watch­ing. And Ali Emery, the drill sergeant, like absolute­ly

[01:28:52] TK: Who was the drill sergeant?

[01:28:54] TK: Train­ing the actors and then got put in front of

[01:28:57] TK: the cam­era. Yeah.

[01:28:59] CR: Had done a lit­tle bit of act­ing before appar­ent­ly, had done some oth­er sim­i­lar roles pre­vi­ous­ly, but yeah, was hired as a con­sul­tant. And then end­ed up audi­tion, like tried to get the role, tried to con­vince Kubrick to give him the role and Kubrick final­ly did. And appar­ent­ly, uh, Emery like wrote 50 per­cent of his own dia­logue, which was unheard of in a Kubrick film, but, um, yeah, real­ly great per­for­mance.

[01:29:24] CR: Well, that’s it. That’s all I have to report. And I bet­ter not keep

[01:29:27] CR: your wife wait­ing

[01:29:28] TK: Yeah. So I just want to rec­om­mend Bad Mon­key if

[01:29:31] TK: you haven’t seen it. Um,

[01:29:33] CR: No, what’s

[01:29:34] CR: that?

[01:29:34] TK: good. Uh, it’s a Carl Hyas­son book. They’ve turned into a series on Apple star­ring Vin­cent Vaughn. Um,

[01:29:43] CR: Oh,

[01:29:44] TK: pret­ty light­heart­ed, but lots of fun and real­ly well made. So I enjoyed it.

[01:29:50] CR: love Vince Vaughn. Don’t have an Apple sub­scrip­tion, but

[01:29:53] CR: I’ll keep an eye out for it

[01:29:55] TK: So you won’t have seen the fourth sea­son of Slow Hors­es, which is the oth­er thing I’ve

[01:29:58] TK: start­ed watch­ing, which is great too.

[01:30:00] CR: Haven’t seen any of it. I went to look it up after our last con­ver­sa­tion and found out it was on Apple and I was like, okay, well, I guess I have to wait until I swap out some­thing for Apple at some point. I’ll

[01:30:11] TK: Yeah. Right.

[01:30:11] CR: do an Apple binge.

[01:30:14] CR: All right, TK, well, good luck with the

[01:30:15] CR: hors­es. Uh, I nev­er dreamed

[01:30:18] CR: and I’ll, and have fun at Tom York and I’ll speak to you next

[01:30:22] CR: week.

[01:30:22] TK: Okay. Cheers, mate.

[01:30:24] CR: Take care,

[01:30:24] CR: man. Bye.