QAVUS 002 — Markets Like Certainty

QAV US 002 Audio

Cameron: [00:00:00] Wel­come back to QAV US Edi­tion. Episode two. Tony, how are you, Tony?

TK: I am well, thank you about the same as I was five min­utes ago when we were chat­ting on the screen show.

Cameron: Oh, well, just, yeah. You know, you’re ruin­ing the illu­sion. No one wants, well, no one wants to know how the sausage is made. Tony.

TK: No. Okay.

Cameron: Um.

TK: good to, good to see you, cam. It’s been what, two weeks?

Cameron: Ah, well. Quick­ly, we’ll get into it because we don’t have a lot of time today. I just want­ed uh, on our US port­fo­lio per­for­mance. Uh, ’cause it’s been a cou­ple of weeks when since we’ve talked about it, all right, um, still, uh, all time up around about 70% return ver­sus the s and p 500, about 27% over the same peri­od of time.

So again, it’s doing not triple, but I don’t know, two [00:01:00] and a half times the s and p 500. It’s been, uh, a rocky time in the mar­kets over in the US obvi­ous­ly in the last six or eight weeks, and I had a sto­ry on that in the New York Times. Uh, the econ­o­my, the Fed, and the rates, Mr. Trump promised to end infla­tion start­ing on day one.

And declared in his inau­gur­al address that the Gold­en Age of Amer­i­ca begins right now. Instead, infla­tion has remained stub­born. And while Mr. Trump has been in office less than two months, econ­o­mists warned that his tar­iffs are like­ly to make it worse. Mea­sures of con­sumer and busi­ness con­fi­dence of plum­met­ed and stock prices have tum­bled attrib­ut­able in large part to Mr.

Trump’s poli­cies. And the uncer­tain­ty they have caused. The Fed­er­al Reserve is expect­ed to keep its key rates steady on Wednes­day after a series of cuts that low­ered rates by a full per­cent­age point last year, accord­ing to a arti­cle in the New York [00:02:00] Times. I know you are read­ing the Wall Street Jour­nal, Tony, and that’s a Mur­doch pub­li­ca­tion.

You’ve got the Fail­ing New York Times on one side, the, I don’t know what Trump’s term, I dun­no what his rela­tion­ship is with Rupert Mur­doch these days. Is they, they, they seem to be fren­e­mies. what’s the Wall Street Jour­nal say­ing about the US econ­o­my? I tried to sub­scribe to the Wall Street Jour­nal this week, by the way.

I tried on my Mac. I tried in Safari and it would­n’t, it said it had an offer $2 a month for 12 months, and then 15 9, 9 there­after per month. I tried to sub­scribe to that, hit the pur­chase but­ton, noth­ing would hap­pen. I switched to Chrome think­ing it might be a brows­er thing, exact­ly the same pric­ing deal.

Click, click, click. Would­n’t work. thought I’ll do it on my iPad. Opened up my iPad, down­loaded the app. Try to sub­scribe. In the app it said $2 for the first one month. And then $60 a month there­after. That’s the dif­fer­ence from [00:03:00] try­ing to sub­scribe in the Mac­Book to the iPad price dif­fer­ence of 15, 50,

TK: Wow.

Cameron: or $60 a month.

did­n’t

TK: I think on $3 a month I had an intro as well. Intro

Cameron: Right.

TK: Yeah. But I did that on my Mac, on my Mac, on my Mac­Book, on my Mac­Book, my lap­top. No prob­lems.

Cameron: it?

does­n’t wan­na let me do it, so I gave up. So any­way, I dun­no what the Wall Street Jour­nal say­ing, what’s the Wall Street Jour­nal say­ing about the US econ­o­my?

TK: Oh, not, not too dif­fer­ent real­ly to what The New York Times arti­cle said. Um, oh look, I think I don’t wan­na be sucked into this whole mael­strom of Trump say­ing one thing and then com­ment­ing on it, Don­ald Trump say­ing some­thing dif­fer­ent. It’s just, that’s busi­ness as usu­al. Um, the impor­tant things are that rates are being left on hold. By the Fed. Um, infla­tion might be, you know, prob­a­bly is [00:04:00]raising, but it’s not a con­cern.

Not of enough con­cern for the Fed to cut rates yet. So, um. Yeah, I, I, I think there’s, there’s what some­one says and what some­one does is, is impor­tant in this whole con­ver­sa­tion. And the, we’re talk­ing today on Tues­day, the 25th of March our time. I. Which would be 24th of March US time and the mar­ket was up 1.8% in the US because, uh, Trump, after threat­en­ing tar­iffs across the board com­ing in in April, has now walked it back a lit­tle bit say­ing that there will be some exemp­tions for some car mak­ers in the mar­ket, you know, jumped on that kind of news.

So look, I know the pol­i­cy set­tings of the US gov­ern­ment are vital­ly impor­tant. Um, I think it’s gonna take a lit­tle while for those uh, pol­i­cy set­tings to actu­al­ly reveal them­selves. A lot of it’s, um, a lot of it’s nego­ti­at­ing, uh, as we talked about before. [00:05:00] I’m gonna threat­en you with a tar­iff and I’ll see what you do and if you come and kiss the ring or if you play ball on some­thing else, if I can get some­thing else out­ta here, then those tars may not go ahead.

Cameron: Mm. it’s cre­at­ing hav­oc on the mar­kets.

TK: Well, as we said before, the mar­kets don’t like uncer­tain­ty. It’s, it’s, as we always say, you can’t pre­dict things. And this is prob­a­bly a good exam­ple of how you can’t pre­dict things because there’s so much uncer­tain­ty going on. So I think you just got­ta look at, as we always do the num­bers and, and make our deci­sions based on that. And, and look, you know, uh, I’m, I’m gonna point to an arti­cle, um, which may have an impact on our port­fo­lio because we have a num­ber of ship­ping com­pa­nies in our port­fo­lio. So, we don’t, we don’t nec­es­sar­i­ly. Look at sec­tors or be sec­tor spe­cif­ic, but it’s so unusu­al for our buy­ers to have a num­ber of, um, com­pa­nies from the one sec­tor pop up because that sec­tor’s, you know, [00:06:00] um, hav­ing it dol­drums.

But the com­pa­nies in there are pret­ty good. So their prices are beat­en down, but they will have their day in the sun when regres­sion to the mean takes. Place. there was an arti­cle in our paper, not a US paper, I’m tak­ing this from the Aus­tralian Finan­cial Review, but chances are it was reprint­ed from one of the US papers any­way, um, as they some­times are in our coun­try. Uh, it was by Lisa Bar­line, Carl Plume, and Tim­o­thy Gard­ner. So I don’t rec­og­nize them as being Aus­tralian jour­nal­ists. Some of our lis­ten­ers in the US might. Rec­og­nize them. from March 20th, but it, uh, it, the head­line reads, Trump’s mas­sive ship­ping fees threat­ened US trade. And it goes to, um, on, to out­line that, uh, and I’ll quote, Trump is draft­ing an exec­u­tive order that would rely on fund­ing from a US trade rep­re­sen­ta­tive pro­pos­al. VY finds it up to 1.5 mil­lion US Chi­na made ships or ves­sels from fleets that also include ships made in Chi­na. Those poten­tial port [00:07:00] fees have lim­it­ed the avail­abil­i­ty of ships need­ing to move agri agri­cul­ture, ener­gy min­ing, con­struc­tion, and man­u­fac­tured man­u­fac­tured goods to inter­na­tion­al buy­ers accord­ing to major US exporters and trans­porta­tion providers. and this is kind of throw­ing. Glob­al ship­ping in into a bit of a tal­is­man at the moment. Uh, and the arti­cle goes on to say ves­sel own­ers have already refused to pro­vide offers for future US coal ship­ments due to the pro­posed USTR fees, ex coal ener­gy and resources. Chief Exec­u­tive Ernie Thrash­er said in a let­ter this month to US Depart­ment of Com­merce Sec­re­tary Howard Lut­nick, that enact­ing and imple­ment­ing those fees could cease exports of US coal with­in 60 days, putting a one 30 bil­lion. dol­lar worth of ship­ments at risk. Thrash­er said, he said the fee struc­ture could add up to 35% to the, the deliv­ered cost of US coal, mak­ing it uncom­pet­i­tive on the glob­al mar­ket. And it goes on [00:08:00] to list oth­er exam­ples of that from oth­er indus­tries, like, uh, soy being exporters and, and grain dip­pers, l and g car­ri­ers, oil car­ri­ers, et cetera, et cetera. So again, a case of, um. Some­thing, whether it’s a kite fly­ing exer­cise or it’s gonna actu­al­ly hap­pen. Uh, but it’s, it’s, it’s being moot­ed as a mea­sure to, uh, to guess, move man­u­fac­tur­ing of ships back to the US. ’cause oth­er court reports some­thing like only 200 ves­sels. the cur­rent fleet of us flagged car­go ves­sels is less than 200. And not all are US built. Um. This is one of the quotes from, uh, this arti­cle. So, uh, look at the aim of hav­ing ships man­u­fac­tured in the US is a good one. Um, whether you need to crip­ple lots of, um, eco economies, uh, uh, to do it is ques­tion­able and per­haps this is gonna be watered down or, [00:09:00] um, you know, have lots of carve outs on a case by case basis.

Um, and, um, won’t come into being but anoth­er exam­ple of. Of we’re talk­ing about, that there’s a lot of and fury going on, and then the reac­tions are gauged and deals are done and it does affect, um, it may affect some, some. Com­pa­nies. I, I went through and had a look at some of the ship­ping com­pa­nies our, uh, our buy­er list, and I, I can’t remem­ber the num­bers, but it was a, I think it was only one that was down. Um, share price was down. Since that date, most of them are going up, so don’t know whether that means they’re only oper­at­ing US ships or whether it, uh, it means that the mar­ket’s still digest­ing what could hap­pen and it’s all up in the air. But this is gonna be a fea­ture of. mar­ket dynam­ics going for­ward, um, as long as this admin­is­tra­tion’s in pow­er.

Cameron: mm Well, I, if I look at, uh, Zim, who we talked about on our last [00:10:00] in the last they’re down quite a bit actu­al­ly from. $22 down to 1562 has­n’t been a good month for Zim. ESEA. Euro Sees, um, on the oth­er hand is gone from $26 76 a month ago up to 31 15. So bit of dif­fer­en­tial there between the two.

TK: And, and same with oth­er ones. DSX, TK Tankers are more ship­ping. There’s quite a few of them on our buy list and I think most of ’em are up, but, uh. course, the curse of the pulled pork to Zi. I think so. You got­ta add that back to their share Our US sis­ters won. Know about that yet. But yeah, you bet­ter watch out for stocks, which we pull apart, uh, they, they can react neg­a­tive­ly to the scruti­ny.

Cameron: Stealth gas we have in our port­fo­lio. They, they pro­vide [00:11:00] gas trans­porta­tion as you might stealth­ily. Um, of course, uh, their share price has gone down a lit­tle bit in the last month, but not, not by much. 10 cents, some­thing like that from $5, uh, 95 down to $5 80 cents. Any­way, so yeah, inter­est­ing stuff. But of course as long­time QAV lis­ten­ers know we, we read, we lis­ten, we pay atten­tion, but.

We just let the num­bers real­ly dri­ve us. We don’t get caught up in all of the froth and bub­ble of mar­ket news and analy­sis and fear­mon­ger­ing, or the hype cycles, the boom cycles, the bus cycles. One of the great things about QAV is we just let the sys­tem tell us what to buy, when to buy, what to sell, when to sell, all of the noise, oth­er peo­ple wor­ry about the noise, I

TK: Yeah. Take the emo­tion out of it.

Cameron: Hmm.

TK: And look, I, I [00:12:00] don’t wan­na sound, um, over­ly crit­i­cal of what’s going on in the us. If it results in, you know, bet­ter economies there are longer term gains, then sure, fine. I, I’d prob­a­bly side with the mar­ket com­men­ta­tors and say it’d be good to have some clar­i­ty, but, uh, you can’t have every­thing.

So, because in the old days, if there was gonna be a. Tax on Chi­nese ships arriv­ing in the us then with­in min­utes the mar­ket would’ve fac­tored that into all the pric­ing on all the stocks, on all the ship­ping com­pa­nies in the world. But that’s not hap­pen­ing at the moment. ’cause there’s, there’s just too much games­man­ship going on to be able to rely on that kind of, um, abil­i­ty to, to, to take new news into account and make your deci­sions based on that. So, fail­ing that, we can’t do it and we don’t do it.

Cameron: Well, I’ve got a ques­tion from one of our Aus­tralian lis­ten­ers, Trent, but obvi­ous­ly. He’s been pay­ing atten­tion to our US stuff. He said, cam, the buy list you ran on the [00:13:00] 20th of Jan­u­ary has only one stock that was on the pre­vi­ous buy list from the 29th of Decem­ber. Amer­i­can Air­lines. Do you know why they, why they’ve all changed over as that lev­el of turnover is not some­thing we see in the Aus­tralian QAV lists.

I first sus­pect­ed it might be quar­ter­ly results, but when I checked the only stock from either list that had released Q4 results seemed to be Delta Air­lines. The US buy list seemed to have around 20 stocks with a QAV score high­er than 0.10, which is a lot less than we get from the Aus­tralian mar­ket.

This seems a bit odd con­sid­er­ing a much larg­er uni­verse of stocks. Any the­o­ry on why there are less? So, Trent, I went back and I looked at the 29th of Decem­ber buy list, the 20th of Jan­u­ary buy list, and the most recent one I did, the 17th of Jan­u­ary buy list. The 17th of Jan­u­ary has 110 stocks on it.

The 29th of Decem­ber had a hun­dred stocks on it. The 20th of Jan­u­ary had 20 stocks on it. Let me explain [00:14:00] to you the rea­son for the dif­fer­ence. dun­no. Uh, that’s my best expla­na­tion. Um, I think I may have fil­tered out some stocks on the 20th of Jan­u­ary for some rea­son, but I can’t remem­ber why I have noth­ing in my notes.

know I was hav­ing Excel issues, I’m still hav­ing Excel issues. Uh, so it might’ve been that. the bot­tom line is, I don’t think there’s any good rea­son for it. I think I just stuffed some­thing up. I need­ed to buy one stock. 20 stocks on that buy list. That was enough for me to find one.

And I don’t know, I dun­no what I fil­tered out or why I did spend like an hour try­ing to work it out yes­ter­day. I could­n’t work it out. I gave up. So, uh, you are right though to. Ask the ques­tion about why few stocks, some­thing, some­thing hap­pened. I don’t know what it was. I’d, if it was inten­tion­al, I prob­a­bly would’ve said so when I pub­lished that one, I don’t think I did, so it prob­a­bly was­n’t inten­tion­al, so I, my apolo­gies.

But thank you for [00:15:00] atten­tion.

TK: There was a, there was a time I, I dun­no if it was the 20th of Jan­u­ary when we were look­ing at fil­ter­ing stocks fur­ther down or tight­en­ing the fil­ter on qual­i­ty. I dun­no if that was part of the process of that.

Cameron: It might have been. I did con­sid­er that we were tak­ing F scores and Z

TK: Yeah.

Cameron: and mov­ing them around.

TK: Yeah.

Cameron: I could­n’t find any evi­dence to sup­port that in my. Lit­tle analy­sis last night, so I don’t wan­na say it was that, but could have been any num­ber of fac­tors. Trent? Uh, I wish, I wish I had a bet­ter answer for you, but I don’t.

Any­way, this week’s or last week’s buy list had what, what I think is now, it is inter­est­ing though, that would­n’t be unusu­al for us to have 80, a hun­dred stocks on an Aus­tralian buy list.

And for the US buy list to pro­duce the same num­ber out of of three and a half thou­sand, [00:16:00] uh, no, six and a half thou­sand I think, is inter­est­ing.

But we do, you know, there’s a lot of fil­ter­ing that goes on um, so that’s what it gets cut down to at the end of the day, once we. Once we fil­ter prop calf and we fil­ter sen­ti­ment and uh, all the oth­er things that we look at, that’s what it comes down as down to. And as it turned out, this week, we’ve got a prob­lem with prop calf on the US data as well, which we’ll get into short­ly.

So I am gonna do a pulled pork today on the stock that I added, I had to sell. Um. CPSS Last week it was a three point trend­line sell and I replaced it with a com­pa­ny called STEM X, share Coders CX prob­a­bly should­n’t have, which we’ll get into and I might get rid of it. Um, but it was, it’s a good sto­ry Any­way.

I do that, Tony, do you have any oth­er news items you wan­na [00:17:00] talk about?

TK: No, that was the, that was the only one was the ship­ping one. Thank you.

Cameron: Okay, so cx um, I’m gonna do it, uh, with the caveat that I’ll prob­a­bly sell it today or tomor­row any­way, and I’ll explain why. But, uh, I had, I had so much fun doing the Paul Pork on it that I’m gonna do it any­way ’cause I learned a lot and it’s a great sto­ry. and it may be a buy in the future, but, uh, Cemex is a Mex­i­can.

Cement busi­ness now. I know noth­ing about cement. I, I did­n’t until I did this Paul Pork. Now I know a lot about cement it’s great. Uh, being an his­to­ri­an, I learned about the his­to­ry of cement and I was, you know, I knew a lit­tle bit about it from ancient Rome and the build­ing of the pan­theon with con­crete, et cetera, et cetera.

But learned a lot more about it in terms of the mod­ern his­to­ry of cement, and it’s the first Mex­i­can com­pa­ny I’ve ever bought shares in, so that [00:18:00] was inter­est­ing too. So I’ll do a quick, deep dive on this. Sor­ry, did you wan­na add some­thing?

TK: I was just gonna say, I went, I saw you were gonna do it, and I went to their web­site as part of my pre-show research and, um, tried to find their annu­al report. But of course it’s the Mex­i­can, it’s in Span­ish, so uh, I had to give up.

Cameron: You don’t speak Mex­i­can. Tony.

TK: No.

Cameron: can the web­site to Aus­tralian um, or to Eng­lish. Sor­ry.

TK: I could­n’t even find out where to do that. ’cause it web­site was in Span­ish. Was

Cameron: up the top that says ES. You change the to EN and it’s all in Eng­lish. Okay, well, there you go. Uh, so I love learn­ing about his­to­ry.

I’m a big fan of con­crete. I love bru­tal­ism. You a fan of Bru­tal­ism, Tony?

TK: Uh, not real­ly, but I, you know, except respect the fact that it’s part of an archi­tec­tur­al his­to­ry. So I’m not say­ing we should tear it down, but I would­n’t say I was a fan. Um, too many of the skill [00:19:00] build­ings and et cetera when I was grow­ing up were pri list. I had enough of it at the time.

Cameron: I am a big fan. Oh, look, there’s good bru­tal­ism and bad bru­tal­ism. Don’t get me wrong. There’s like no effort. Bru­tal­ism, which is just block. Then there’s. Then there’s, you know, a archi­tec­tur­al bru­tal­ism where it’s designed and well thought through. And, um, there’s, there’s some great books.

actu­al­ly been try­ing to get one eBay for years. A friend of mine who’s a. A design­er has a copy of it in her house, and when­ev­er we go over for din­ner, I just sit there like a autis­tic nerd and, uh, read her book on bru­tal­ist archi­tec­ture. I don’t wan­na buy it, but it’s like 300 bucks. I’m not pay­ing

for this book.

I, I

TK: she, she prob­a­bly trots it out. Cam’s com­ing around for din­ner tonight. Oh. I bet­ter get the Les book out. Oth­er­wise, it’s, it’s free will in the Chris­t­ian Church for two hours.

Cameron: [00:20:00] Yeah, she has lots of great design books that I love going through. Um, yeah, anyw, who, uh, big fan of Bru­tal­ism, I, all I’ve always want­ed is a house that’s just all con­crete, pol­ished, con­crete floors, con­crete walls. I. Smooth, clean lines. Cool. that’s what I love most about the con­crete is just grow­ing up in sub­trop­i­cal Queens­land, just the cool­ness putting your face up against con­crete.

Ah, so good. The cool, the, I love the cool, it’s like cheap mar­ble. It’s cheap mar­ble with its cool­ness. Now for peo­ple like me who dun­no the dif­fer­ence between cement and con­crete, ’cause I need­ed to look this up again. Cement is an ingre­di­ent of con­crete. It’s like the flour and bread. bought me a flour, uh, tin.

Dun­no if you saw this in my light update yes­ter­day, but when she was a bribe island for the school camp last week, she went to a Vin­ny’s and she got this beau­ti­ful mid 20th cen­tu­ry. Uh. [00:21:00] Swedish loaf, tin, ceram­ic loaf, tin, uh, beau­ti­ful con­di­tion, mint con­di­tion. Uh, so I made my first loaf of sour­dough in that yes­ter­day.

It was love­ly. Any­way, cement is like the flour in con­crete. you, you mix it with oth­er stuff. It’s a pow­der and you mix it with oth­er stuff, grav­el, sand, rocks, and then water to make con­crete. Uh, so the cement is basi­cal­ly the glue and the con­crete is the glue plus the rocks, plus the sand, plus the water, all of the sol­id stuff that you build with.

So we’ll be talk­ing a lot about how cement is made over the course of this, uh, deep dive because it’s fas­ci­nat­ing and I knew noth­ing about it until this morn­ing. X though is cemex, S‑A-B-D-C‑V. This is accord­ing to Wikipedia, a Mex­i­can multi­na­tion­al build­ing mate­ri­als com­pa­ny head­quar­tered in San Pedro near Mon­terey, in [00:22:00] Mex­i­co.

It man­u­fac­tures and dis­trib­utes cement ready, mix, con­crete, and aggre­gates in more than 50 coun­tries. In 2020, it was ranked as the fifth largest cement com­pa­ny by the amount of cement pro­duced annu­al­ly in the world at 87 mil­lion tons of cement. That is a lot of cement now. Sab cv, Tony, do you know what that stands for?

TK: I think it means it’s li a list­ed Mex­i­can com­pa­ny.

Cameron: Very good. Tony. Check out the big brain on Brett. Um.

Sociedad Anón­i­ma Bursátil de Cap­i­tal Vari­able.

or vari­able, but ble ble, I think is how it’s pro­nounced in Span­ish.  Sociedad Anón­i­ma uh, basi­cal­ly means it’s a Mex­i­can [00:23:00] equiv­a­lent of a pub­licly lim­it­ed com­pa­ny. Like a lim­it­ed or an Inc

TK: Mm-hmm.

Cameron:  Bursátil means it’s pub­licly trad­ed on the stock mar­ket. Um, and.  Cap­i­tal Vari­able vari­able cap­i­tal basi­cal­ly allows it flex­i­bil­i­ty to increase or decrease its cap­i­tal struc­ture with­out bureau­crat­ic has­sle or for­mal restruc­tur­ing.

In every­day terms, it means we’re a Mex­i­can cor­po­ra­tion, our shares trade pub­licly, and we can eas­i­ly adjust our cap­i­tal struc­ture with­out jump­ing through too many legal hoops. Accord­ing to stock Edia. Cemex is a Mex­i­co based oper­at­ing and hold­ing com­pa­ny, pri­mar­i­ly engaged direct­ly or indi­rect­ly through sub­sidiaries in the pro­duc­tion, dis­tri­b­u­tion, mar­ket­ing, and sale of cement ready mix, con­crete, aggre­gates, clink­er.

And oth­er glob­al­ly pro­vid­ed con­struc­tion mate­ri­als. I said before, as in 50 coun­tries. It includes Mex­i­co, the Unit­ed [00:24:00] States, Europe, south Amer­i­ca, cen­tral Amer­i­ca, Caribbean, Asia, mid­dle East, and Africa cement pro­duc­tion facil­i­ties in Mex­i­co, the Unit­ed States, Spain, Egypt, Ger­many, Colum­bia, Poland, Domini­can Repub­lic, Unit­ed King­dom, Pana­ma, Puer­to Rico, Thai­land, and Nicaragua.

Used to have some in Aus­tralia, but they sold ’em off when they need­ed some cash, which I’ll talk about. So as soon as you go to their web­site and fig­ure out how to con­vert it into Eng­lish, the first thing you’ll see is that they are rec­og­nized as one of the world’s most eth­i­cal com­pa­nies.

In March of 20 25, 2 weeks ago, they received the world’s most eth­i­cal com­pa­ny’s recog­ni­tion from Ethi­sphere, a glob­al leader in defin­ing and advanc­ing the [00:25:00] stan­dards of eth­i­cal busi­ness prac­tices. They were rec­og­nized for exem­plary busi­ness integri­ty, ethics, com­pli­ance, and gov­er­nance stan­dards. So I thought that was inter­est­ing.

Um, yes, the red­head­ed the back. You had a ques­tion.

TK: does mak­ing cement con­tribute to glob­al, uh, warm­ing.

Cameron: It turns out it does,

that until kept read­ing, accord­ing to the Glob­al

TK: but, when they hand out the eth­i­cal awards, they don’t wor­ry about warm­ing.

Cameron: When I fin­ish the sto­ry, you’ll why the cement indus­try is the source of about five to 8% of the world’s car­bon diox­ide emis­sions. I. And this is on their web­site.

This is on, um, uh, Cemex web­site. We also know that our end prod­uct ReadyMix con­crete is the most used man­made mate­r­i­al in the world and [00:26:00] plays an essen­tial role in soci­ety’s devel­op­ment and growth. sets the stage for us to con­tribute to cli­mate change mit­i­ga­tion by reduc­ing CO2 emis­sions in our pro­duc­tion process­es, as well as the entire life cycle of our prod­ucts.

they’ve done a lot of work around this to their. Press mate­ri­als, um, and I did­n’t real­ize cement was so bad. So as I said ear­li­er, I don’t know much about stuff. I know a lot about a cou­ple of things and every­thing else, um, kind of igno­rant. Um, Chris­sy said, you’re not a man who works with his hands.

I said, well, I type on a, I type on a key­board. Tech­ni­cal­ly, that is my hands of that. Yeah, I dun­no much about how the world works. His­to­ry, uh, yeah, a lit­tle bit out­side of that, not so much so. For peo­ple like me, and I’m sure most peo­ple lis­ten to this, are either man­ly men who know more than things about [00:27:00] me or women who are just as smart, who know more than about how the world works than I do.

con­crete, it turns out, is a dirty. Fiery chem­i­cal process that takes a lot of ener­gy, a lot of ener­gy. make cement, you have to heat lime­stone, cal­ci­um car­bon­ate at insane­ly high tem­per­a­tures, 14 to 1500 degrees Cel­sius. You do that, so it decom­pos­es into cal­ci­um oxide and car­bon diox­ide bad. For the atmos­phere, it’s a chem­i­cal process known as cal­ci­na­tion.

Cal­ci­na­tion is fun­da­men­tal to mak­ing cement, that process is respon­si­ble for about 60% of its total emis­sions, the all of the car­bon diox­ide that gets released dur­ing the cal­ci­na­tion process. to achieve the tem­per­a­tures in the kilns, you have to burn coal or [00:28:00] petro­le­um or nat­ur­al gas. That’s anoth­er 30 to 40% of the total emis­sions is that process.

And then on top of that, you’ve got the grind­ing and the crush­ing and the trans­porta­tion, which con­sume a lot of elec­tric­i­ty and fuel. So over­all mak­ing con­crete is a huge car­bon emis­sions trap. So Cemex has a brand called ua, V‑E-R-T-U‑A. Which is mar­ket­ed as a more sus­tain­able way of pro­duc­ing cement and con­crete.

It’s a whole life­cy­cle thing. Uh, using the ground up stuff from build­ings they pull down into rebuild­ing oth­er things, recy­cling it, et cetera, et cetera. They claim that their process­es can reduce car­bon emis­sions by over 30%. Whilst main­tain­ing the strength and dura­bil­i­ty of the prod­uct. I read a sto­ry, uh, just last month or so, it came out, um, from their [00:29:00] British oper­a­tion.

They’re part­ner­ing with High Rock, H‑I-I-R-O‑C, a British and hydro­gen com­pa­ny to use car­bon neu­tro drill hydro­gen. Using Hy Rock­’s pro­pri­etary ther­mal plas­ma elec­trol­y­sis process, which requires just one fifth of the elec­tri­cal ener­gy used in water elec­trol­y­sis and cap­tures car­bon as a sol­id byprod­uct, avoid­ing CO2 emis­sions.

So they’re doing lots of stuff like that to try and reduce, um, the car­bon foot­print of mak­ing cement.

TK: Fan­tas­tic.

Cameron: The com­pa­ny start­ed in 1906 with the found­ing of a busi­ness called Cemen­to Algo In 1931, emerged with anoth­er com­pa­ny, cemen­to Port­land, Mon­terey. Based in Mon­terey, the com­bined enti­ty became Cemen­to.

Mex­i­canos, or Cemex went pub­lic on the Mex­i­can stock exchange in 1976, [00:30:00] at which point they were the largest cement pro­duc­er in Mex­i­co. Then they start­ed acquir­ing com­pa­nies. Mex­i­can com­pa­nies in the eight­ies end­ed up as one of the 10th largest cement com­pa­nies in the world, and then they start­ed buy­ing com­pa­nies all over the globe.

Um, they’ve had a few issues along the way. In 2006, they announced that they were buy­ing a rin­ka group in the Unit­ed States for

bil­lion US dol­lars. Unit­ed States Depart­ment of Jus­tice brought an antitrust law­suit against Cemex and blocked the acqui­si­tion and force them to sell off about 40 cement and con­crete plants that were part of the deal.

In the mid 1990s, they bought Venezue­la’s largest cement com­pa­ny, vens. But then in 2008, Ugo Chavez nation­al­ized the whole cement indus­try in Venezuela, claim­ing the indus­try was its prod­ucts because they could get high­er prices [00:31:00] export­ing it, and it was sort of capped pric­ing in Vela, Venezuela was caus­ing indus­tries Venezue­lan con­struc­tion, domes­tic con­struc­tion.

So he nation­al­ized all of their busi­ness­es. He did pay them for it. Um, they got 600 mil­lion US dol­lars in com­pen­sa­tion and the can­cel­la­tion of $154 mil­lion in debt. Then the GFC hap­pened also in 2008. Um, they appar­ent­ly were high­ly lever­aged at the time. They had a lot of issues with debt. They sold off their Aus­tralian hold­ings in 2009 to a Swedish group whole­some.

Um. And you know, any­way, they’ve had some issues along the way, and this is, but talk­ing about their ethics award last year, in August, 2003, the US Nation­al Labor Rela­tions Board, the NLRB, that Cemex had engaged in over 20 unfair labor prac­tices dur­ing a 2019 union elec­tion [00:32:00] involv­ing the team­sters.

These vio­la­tions includ­ed threat­en­ing, sur­veilling and inter­ro­gat­ing employ­ees, as well as hir­ing secu­ri­ty guards to intim­i­date work­ers. The NLRB used this case to set a new pol­i­cy that an employ­er who inter­feres with a union elec­tion will be com­pelled to rec­og­nize the union with­out an elec­tion. A nation­al wide pol­i­cy that was put in place as a result of this.

So,

TK: So how much does it cost to buy one of these eth­i­cal awards? Cam?

Cameron: Tony, I would not. I would More than you. More than you and I have. Well, more than I have. Maybe you could buy it. Maybe you should buy one for QAV. World’s most My world’s most eth­i­cal val­ue invest­ing pod­cast. No,

issues[00:33:00]

TK: But they’re good mar­keters and they, they put their worst, they mar­ket their hell out­ta their worst thing. Yep.

Cameron: and props to it was in their PR team that

you know what we need? We need one of these world’s most eth­i­cal com­pa­nies awards. That’s what fix all of our

TK: of approval. Yeah.

Cameron: You know, when I think cement com­pa­nies. I don’t think

TK: Eth­i­cal.

Cameron: com maybe. I watched The Sopra­nos too many times and I lived in Mel­bourne for too long, um, when, you know, too many bod­ies of, uh, ene­mies of con­struc­tion com­pa­nies were turn­ing up and the foun­da­tions of Mel­bourne build­ings and stuff like that.

Uh, any­way, um, I. I’m, I’m not, I’m not pass­ing judg­ment. The com­pa­ny was run for many years by Loren­zo Ano, his grand­fa­ther also Loren­zo Ano, [00:34:00] um, found­ed Port­land Mon­terey Com­pa­ny in 1920, but Loren­zo. Uh, the junior died 10 or 11 years ago. Um, inter­est­ing­ly though, ’cause I’ve been doing some stuff on war prof­i­teer­ing in my oth­er pod­cast recent­ly, uh, Mon­terey had been destroyed dur­ing the Mex­i­can rev­o­lu­tion in 1910 and was being rebuilt in 1920.

And so the com­pa­ny that the grand­fa­ther found­ed played a large role in the rebuild­ing of Mon­terey prof­it­ing. I guess from the rebuild­ing of the com­pa­ny after the Mex­i­can Rev­o­lu­tion. I wan­na talk a lit­tle bit about the his­to­ry of cement though, because, uh, this is the most fas­ci­nat­ing part for me.

Cement is the most com­mon type of cement in gen­er­al use around the world. Look at you nod­ding there, like you, you’re an ex brick­ie or some­thing. Like what?

TK: I’ve heard of Port­land Cement.[00:35:00]

Cameron: It, it’s the basic ingre­di­ent

TK: You can buy it.

Cameron: mor­tar, stock, stuc­co, um, and some kinds of grout. Uh, it was devel­oped from oth­er types of hydraulic lime in Eng­land in the ear­ly 19th cen­tu­ry by a guy called Joseph Asin. obtained a patent for it in 1824, and he named it Port­land Cement, y Tony. I should point out to new lis­ten­ers that Tony won sev­er­al triv­ia con­tests in Aus­tralia back in the day.

So the way he’s nod­ding Sage­ly, there should not be a sur­prise because Tony knows lots of stuff about lots of stuff.

TK: I don’t know why its name Port­land Cement, but I’m guess­ing it hap­pened in Port­land.

Cameron: for $50,000, Tony

TK: It hap­pened in Port­land. He dis­cov­ered it in Port­land. I

Cameron: where.

TK: where he lived?

Cameron: Ore­gon.

TK: No, uk, Port­land,

Cameron: famous kind, or the [00:36:00] most, the most prized kind of stone for British archi­tec­ture for cen­turies was Port­land Stone. It was used in Paul’s Cathe­dral, the British Muse­um, hard, shiny, beau­ti­ful look­ing stone, and he believed that Port­land cement, when it. Hard­ened looked like Port­land Stone, so it was a cheap­er alter­na­tive to Port­land Stone.

You could, uh, you know, mix it up your­self rather than hav­ing it quar­ried, I guess. Um, his son William, so William Stone, sor­ry, um, was cre­ator of this, his son Joseph I men­tioned before. Uh, was the inven­tor of mod­ern Port­land cement in the 1840s. He cre­at­ed a mix with high­er loam, stone con­tent burned at a high­er tem­per­a­ture and increased wear and tear in the grind­ing process, which made it stronger, hard­er.

It was a bit like the $6 mil­lion man of cement. We can. is [00:37:00] stronger, faster. It’s for peo­ple that were around in the sev­en­ties get that ref­er­ence. Um, we have the tech­nol­o­gy to build him hard­er, stronger, faster. Now cement, uh, can be traced back to ancient times. There’re actu­al­ly. occur­ring deposits of cement are 12 mil­lion years old that were found where there was an occur­rence of oil shale right next to a bed of lime­stone had been set on fire through nat­ur­al occur­rences, and it cre­at­ed cement.

But Chem­i­cal­ly Cement is a prod­uct that includes lime as the pri­ma­ry bind­ing ingre­di­ent. in ancient times, the Baby­lo­ni­ans and the Assyr­i­ans used bitu­men or, or pitch to bind stuff togeth­er, alabaster slabs and things like that. Then the Egyp­tians used burnt gyp­sum. The, the basic, uh, foun­da­tion of chalk or plas­ter of Paris.[00:38:00]

The ancient Romans used a lot of cement and con­crete, though things like the Pan­theon I men­tioned before or the, the Tra­ian baths were built with cement and con­crete still stand­ing today. The Pan­theon, my favorite build­ing in Rome. I, I went there when we went on our trip to Rome, took my moth­er there.

She’d nev­er, it was her first trip to Rome. just some­thing. Mar­velous. Now, Pan­theon geeks will know, of course, that the orig­i­nal Pan­theon is not the one stand­ing today. It was built by a grip­per, the best friend any­one ever had, Mar­cus SIUs, SIUs Grip­per and a Claus, Augus­tus Octa­vian, or Augus­tus’s best friend, with­out whom Augus­tus prob­a­bly would­n’t have sur­vived the first cou­ple of years.

Agrip­pa was his go-to get shit done. Guy won all of his bat­tles, held his fleets, then ran Rome for him until he died. Sad­ly, [00:39:00] uh, he built the orig­i­nal Pan­theon, but it burnt down and, uh, was rebuilt by Hadi­an. Prob­a­bly ded­i­cat­ed around 126 ce. And rebuilt in con­crete, and it still stands to this very day, large­ly because the Chris­tians took it over and turned it into a church.

But, uh, any­way, it’s an, it’s an amaz­ing, impres­sive, a build­ing still has the largest re unre­in­forced con­crete dome any­where in the world. Built in 126 ce. Um, and the inter­est­ing thing about Roman con­crete, one of the inter­est­ing things is it’s more sus­tain­able than mod­ern con­crete. ’cause they obvi­ous­ly, they could­n’t burn it at those sorts of tem­per­a­tures, but it was made with about 85% vol­canic ash.

So they did­n’t need to burn their own lime­stone, they just went and dug it up out­ta vol­ca­noes and [00:40:00] that. And it used to had a lot of vol­canic ash and vol­canic rock in it too. And there’s been lots of stud­ies I’ve seen in the last decade or so says that it is, uh, able to hold up under earth­quakes a lot more because of the rock com­po­nent when they’ve done.

I don’t know, what­ev­er sound wave scans of it, some sort of sound wave X‑rays, Son­ic X‑rays, they can see all these chunky rocks in it that give it some sort of, uh, extra sta­bil­i­ty. Then, uh, the mod­ern con­crete has appar­ent­ly. Um, mod­ern devel­op­ments of con­crete cement and con­crete start­ed after the indus­tri­al rev­o­lu­tion and it was dri­ven by three main needs, hydraulic ren­der.

Hydraulic mor­tar and just stronger con­crete in gen­er­al. Now, again, being an idiot, I, I think of hydraulic as being pumps or things dri­ven by water pow­er. I did­n’t real­ize that hydraulic also [00:41:00] applied to con­crete, and when you apply it to con­crete, it’s about. appli­ca­tion of water in the process. again, some­thing else I did­n’t real­ly under­stand is that con­crete does­n’t dry.

It hard­ens big dif­fer­ence and it, it requires water. So when you mix water the cement the oth­er ingre­di­ents that you put in it actu­al­ly, uh, there’s a chem­i­cal reac­tion. The cal­ci­um. Sil­i­cates and the illu­mi­nate that are in the lime­stone after it’s been bro­ken down, react with the water and cre­ate crys­tal­lized, um, struc­tures.

Hard, sta­ble, crys­talline s instruc­tions struc­tures that require water and can even be cre­at­ed under­wa­ter. I know the Romans used it to build. facil­i­ties, they, there’s under­wa­ter con­crete, um, off the coast of Italy that [00:42:00] has sur­vived. So you can actu­al­ly build con­crete under­wa­ter and it will hard­en as it would on land because it water is a part of the process.

So fas­ci­nat­ing for me and every­one else is prob­a­bly rolling their eyes going, you’re such an idiot. We already knew this. We’ve known this since we were kids. screw you. I learned some­thing today and I’m not ashamed of that.

TK: Well done. That was inter­est­ing.

Cameron: By the way, if I told you that Chris­sy’s decid­ed I’m autis­tic.

TK: Is that why she keeps putting the bru­tal­ist archi­tec­ture book in front of you?

Cameron: Hmm? Yeah. Yeah. Appar­ent­ly I’m autis­tic. She’s decid­ed.

TK: Mm-hmm.

Cameron: CX by the num­bers. Now this is where we have to flag the fact that we think the num­bers are bad.

TK: Yeah.

Cameron: so one of the key long-term lis­ten­ers will know, new lis­ten­ers may not have picked this up yet. One of the key things that we look at is price to oper­at­ing cash flow.[00:43:00]

And when I was buy­ing this for our port­fo­lio last week and I ran the buy list, I did see that as price to oper­at­ing cash flow out­ta stock. Wikipedia was insane­ly low, 0.01, basi­cal­ly means it would take sev­er­al days. Uh, uh, for the, the. Com­pa­ny to gen­er­ate enough cash, enough cash flow per share to pay for the price per share, which did sur­prise.

I looked at it, I went, whoa, that looks weird. then I had a look at its F score and some oth­er things in stock of Peter and they looked healthy and it looked like it was doing okay. I looked at its oper­at­ing cash flow looked, it was doing one and a half bil­lion dol­lars of oper­at­ing cash flow. 1.8 I think.

I was like, eh, it’s mak­ing mon­ey. Uh, I did­n’t think any­more about, then I get an email from Tony this morn­ing going, oh, on it’s prop calf is actu­al­ly 14. what? No. And then I did the num­bers and sur­pris­ing­ly long time lis­ten­ers will be sur­prised by this. Tony was right and I was wrong. [00:44:00]Um, that’s nev­er hap­pened before.

So. Edia have got a prob­lem with their prop calf num­ber here,

TK: I think so.

Cameron: is, how many oth­er stocks in my buy list have that prob­lem? First thing I’m gonna do when I get a chance tonight is to run some analy­sis on their prop calf num­bers, because when you do the prop calf man­u­al­ly, you look at their oper­at­ing cash per share, and you look at the share price.

Yes, it comes out as 14, not 0.01. Hav­ing said that, their mar­ket caps around, uh, 26 mil­lion. Um,

TK: Bil­lion

Cameron: is it? Well, again, it says, oh yeah. Mil­lion USD No, hold on. 26.2 mil­lion USD it says here.

TK: for the mar­ket cap of a big com­pa­ny like Cemex.

Cameron: know, right? Why does it say mil­lion? It should be bil­lion. It should be 26 billion.[00:45:00]

TK: Hmm.

Cameron: Aver­age dai­ly trade is 61.7 mil­lion. So

TK: So

that the whole com­pa­ny gets trad­ed three times every day.

Cameron: three times every day. Yeah.

TK: They put it in the cement mix­er. It goes round and round.

Cameron: I don’t know. I dun­no if I can trust these num­bers. any­who, uh, in terms of our scor­ing, leav­ing out­side the prop calf for a sec­ond, uh, qual­i­ty rank on stocked is 63. Um, the F score is pret­ty good. It was, uh, let me see, what is the F score? Sev­en. Pret­ty good for an F score. Um, I score, you know, so again, leav­ing aside the, the prop calf stuff, it scored well for us on score.

The price is. High­er than TK IV num­ber one, which is a dol­lar IV one. Our [00:46:00] IV two though is $6 50. It’s low­er than our, uh, IV num­ber two, so I scored for that. Its price was less than Book plus 30 had an uptrend. Um. It had price is less than book as well of course, as well as prices less than book plus 30.

Growth over P was greater than 1.5, so we could­n’t score it for that. was greater than bank debt. Uh, sor­ry. Yield was less than bank debt, so I could­n’t score it for that. Um, I did score it for prop calf, of course, which turns out to be a prob­lem. So any­way, it end­ed up with a qual­i­ty score of 64% and a real­ly good QAV score.

But on sec­ond thoughts with the prop calf, it prob­a­bly, you know, would­n’t have got up there, so it should­n’t be on there. Also, one thing I did­n’t do last week, and I did do this morn­ing was down a com­mod­i­ty price for cement. Uh, because it’s not one of our nor­mal com­modi­ties that we look at, uh, because we don’t have a lot of big cement com­pa­nies, uh, [00:47:00] our buy list.

In Aus­tralia, I did find a com­mod­i­ty price, and in fact, cement is in a cell. So it’s, uh, again, if I’d known that last week, I would­n’t have bought it. So, w with that, I’m prob­a­bly gonna sell it, I think, and get replace it with Tony.

TK: I think it’s worth­while ask­ing, stocked to explain the oper­at­ing cash flow dis­crep­an­cy.

Cameron: Yeah.

TK: Um, but yeah, I don’t dis­agree with you. The only ques­tion I had on what you just said was, I thought the fore­cast earn­ings per share growth was rea­son­ably high. Just try and look it up now. Uh, any­way, that’s a minor thing. Uh

Cameron: got, got a no for greater than twice the price Fore­cast fore­cast. [00:48:00] Earn­ings per share for one year is 0.67.

TK: Okay.

Cameron: high.

TK: So 67% fore­cast.

Cameron: Yeah.

TK: And then if you, if you put that over the pe, which is about sev­en, it’s gonna look pret­ty good. I, any­way, check that one.

Cameron: Yeah, I will. Any who? Um, we have lost a lit­tle bit of mon­ey on it, like it’s down two or 3% since I. Added it. Uh, I bought it at $6 sev­en. It’s down to 5 91. I think I’m gonna cut my loss­es on it though. Now that I have more infor­ma­tion or I’ve actu­al­ly paid more atten­tion to the infor­ma­tion, let’s put it that way than I did last week.

TK: Actu­al­ly, you’re not gonna lose much. ’cause stocked is say­ing it last trad­ed at $6 and 6 cents.

Cameron: real­ly, that’s not what my spread­sheet says. My spread­sheets real­ly, uh. My stock his­to­ry is real­ly not want­i­ng to update today. [00:49:00] All my prices will go. All right, well, so there you go. I will dump that. I’ll get out of it neu­tral and I will fig­ure out some­thing else to replace it with and um, will dou­ble check the prop calf before I do that.

TK: Good.

Cameron: Well, that’s it. That’s all I’ve got. But I hope, I hope some­body out there some­thing about cement and, uh, con­crete and enjoyed that. Just in case you’re in a triv­ia con­test and some­body

TK: Hmm. And most impor­tant­ly about eth­i­cal awards.

Cameron: Yes. Now eth­i­cal awards work.

TK: Yep. Ter­rif­ic. Good.

Cameron: All right. Thank you, tk.

TK: Thanks,

Cameron: week.

Talk to you next time.

TK: Bye.

Cameron: All right.

TK: on. [00:50:00] [00:51:00]