Meet the Fokkers: Value Trap or Bargain of the Year?: QAV AU #931

QAV AU 931

[00:00:00]

Cameron: All right. Wel­come to QAV. It is Tues­day, the 4th of August 2026. TK is back from vacay. How was the vacay, TK?

Tony Kynas­ton: A real­ly good one, Cameron. Yeah, not good.

Cameron: Cameron is my oth­er show. Uh, remind me again what you, what you were off to, Tony.

Tony Kynas­ton: at the Mur­ray Riv­er. Uh, the Sebel have a hotel at Lake Mul­wala, which is very nice. So we had a, um. I guess it was kin­da like an apart­ment, uh, over­look­ing the lake, which was fan­tas­tic. So Jen had a break, and we got her out of Cape Schanck for a while, which she enjoyed. And, uh, Brody came down from Wag­ga for one day, and we played golf, ’cause it’s got a golf course attached to it.

But, uh, most of it was just walk­ing around the lake and hav­ing spa days and, uh,

Cameron: So

Tony Kynas­ton: and saw the Silo Art trail. That was good fun.

Cameron: instead of play­ing golf, you, you went on hol­i­day and played [00:01:00] golf,

Tony Kynas­ton: Yeah.

Cameron: essen­tial­ly. Yeah

Tony Kynas­ton: played golf for a long time actu­al­ly.

Cameron: Real­ly?

Tony Kynas­ton: Yeah, I’ve had a strug­gling, strug­gling with a bad back and it’s been pret­ty wet down here and drea­ry too, yeah.

Cameron: Hmm.

Tony Kynas­ton: Hmm

Cameron: Well, that’s good. Well, uh, in the inter­im, uh, big, big drop in our port­fo­lios in the last 30 or so days,

Tony Kynas­ton: away for a, go away for a week.

Cameron: away

Tony Kynas­ton: Hmm

Cameron: oh well, I don’t know. Um, oil has slid today. I don’t know if you’ve heard this, Tony, but Trump has nego­ti­at­ed a peace deal with Iran

Tony Kynas­ton: I had­n’t heard that. I heard that Iran was being duplic­i­tous and say­ing one thing and doing anoth­er. That’s the last I heard

Cameron: It’s the 10th peace deal he’s nego­ti­at­ed with Iran in the last cou­ple of months. But, uh, you know, what they say, 10th time lucky. He’s, he’s absolute­ly, he’s absolute­ly sure that this one is gonna stick. Iran appar­ent­ly is say­ing, “Well, I don’t know what he’s talk­ing about. We’re not, we’re not in dis­cus­sions [00:02:00] with any­one. He’s dream­ing. Tell him he’s dream­ing.” But, uh, yeah.

Tony Kynas­ton: Yeah, I was sur­prised to see the mar­ket rebound over, in Aus­tralia today and overnight on Wall Street. It’s like, like fool me once, shame on, shame on you. Fool me 47 times, shame on me.

Cameron: Is that because he’s the 47th POTUS? Is that why you picked 47? I mean, it’s just, uh, uh, yeah, it begs belief. The

Tony Kynas­ton: Hmm.

Cameron: mar­ket reacts to these things and yeah.

Tony Kynas­ton: I mean, there’s a lot going on. I think bond yields went down last night in the US too, but, um, that’s in a bit of tur­moil and chaos as well because the, the guy run­ning the Fed­er­al Reserve over there is say­ing noth­ing when every­one expects him to put the inter­est rates up. So the mar­ket’s kin­da lead­ing him now

Cameron: Then you got the Japan sto­ry, which we’ll

Tony Kynas­ton: Hmm.

Cameron: get into in a minute, I tried to get my head around for a good [00:03:00] cou­ple of hours this morn­ing. before we get into that, report­ing sea­son is under­way, it being the 4th of August. I’ve put a hold on buy­ing in the port­fo­lios as per our rules, unless some­thing is report­ing out­side of

Tony Kynas­ton: Yeah

Cameron: sea­son or they come out with a report.

So I’m keep­ing an eye on that when I do the buy list each week. Noth­ing this week, uh, had, uh, any­thing to work with, so I did­n’t add any­thing this week. Did have to sell some­thing, though. Had to sell good old Stan­more Resources, SMR, because cok­ing coal has become a sell

Tony Kynas­ton: Mm-hmm.

Cameron: Okay, that’s it? Not much

Tony Kynas­ton: Yep.

Cameron: Okay. Yeah,

Tony Kynas­ton: Well, hap­pens.

Cameron: Yeah. Sure, fine.

Tony Kynas­ton: I got no idea why cok­ing coal is a sell, but any­way, it’s a sell

Cameron: Uh, Musk is refer­ring to him­self as for­mer tril­lion­aire Elon Musk. I mean, you got­ta

Tony Kynas­ton: Bil­lion­aire Emer­i­tus, yeah

Cameron: uh, got­ta admire his sense of humor. SpaceX shares cur­rent­ly around about 114, sor­ry. from 211, where they were just after the float.

Tony Kynas­ton: Wow

Cameron: Tes­la shares also down. Tes­la shares at one point in May were up at 445. They’re cur­rent­ly at 322.

Tony Kynas­ton: Mm-hmm.

Cameron: A lot of gnash­ing of teeth going on in the whole tech sec­tor

Tony Kynas­ton: Not around here.

Cameron: No. Uh, so

Tony Kynas­ton: let them.

Cameron: on

Tony Kynas­ton: Mm-hmm.

Cameron: Uh, Andrew Mabb, sor­ry, Steven Mabb, uh, Andrew’s broth­er. Steven Mabb sent us an email. “Hi, hey, Cam. [00:05:00] Catch­ing up on some of the pod­cast episodes and I heard the Andrew Page dis­cus­sion.” That was on an email some­body sent us, uh, Andrew Page from Straw­man. Steve says, “Just for clar­i­ty, Andrew has an excel­lent long-term record with his per­son­al dum­my port­fo­lio, even after the tough year he had with some of his com­pa­nies.

It’s a dif­fer­ent way of invest­ing to QAV, and not every­one on Straw­man will beat the mar­ket, of course, but one can judge his returns bet­ter with this info.” And he sent me his, uh, Straw­man pro­file on Straw­man, which is Straw­man. He’s ranked num­ber two. Won­der who’s ranked num­ber one.

Tony Kynas­ton: Wow

Cameron: Um, but it says his total return per annum, and it looks like it goes back, it’s a bit cut off here, but I think 2018 maybe, is 17.7% per annum. So that’s a real­ly good return. Got­ta hand it to him.

Tony Kynas­ton: Hmm.

Cameron: Um, it’s down a lot since the begin­ning of this year or the end of

Tony Kynas­ton: Yeah.

Cameron: last year by the looks of it [00:06:00]

Tony Kynas­ton: Which is why I think we com­ment­ed. He, um, I think, uh, he post­ed some­thing which one of our lis­ten­ers sent in talk­ing about what do you do when all your stocks are going down

Cameron: Yeah

Tony Kynas­ton: in, in gen­er­al. Yeah

Cameron: Yeah, it looks like they had, well, he had a real­ly bad 2026, where­as we had a real­ly good FY26. Um, so but I did say to Steve, well, A, you know, that’s good. Do you know what his method­ol­o­gy is? And I think he said he invests in a lot of small sort of stocks, but, um, we should get him back on because I think the last time we had Andrew on was years ago, and he was basi­cal­ly talk­ing about Straw­man. But I think we should get him back on and maybe talk about his method­ol­o­gy and what he does and how it works, because 17.7%, uh, I don’t know if it’s CAGR or time-weight­ed return or what­ev­er it is, but it’s, either way, it’s, it’s great.

Tony Kynas­ton: Yeah

Cameron: Prob­a­bly dou­ble mar­ket, so, um, yeah, very good. Actu­al­ly, if you look at, if you look at his lit­tle chart here, it says the mar­ket’s done about 100% return since he’s been run­ning it, and he’s [00:07:00] up around about 300% return.

So triple mar­ket maybe. Have to drill into his num­bers. The only oth­er news sto­ry I’ve got is the world’s sex­i­est hedge fund just implod­ed. Just a month ago, this is from Chan­ti­cleer in the Finan­cial Review. Just a month ago, 24-year-old Leopold Aschen­bren­ner was the hottest thing on Wall Street, but the AI trade’s sud­den rever­sal has left his firm in tat­ters. Now, you prob­a­bly don’t know who Leopold Aschen­bren­ner is, Tony

Tony Kynas­ton: I, I read the arti­cle in The Fin.

Cameron: Before that,

Tony Kynas­ton: Where, where do you.

Cameron: Leopold Aschen­bren­ner

Tony Kynas­ton: No. No, I’m not up with the sexy fund man­agers of Wall Street. Where do you think we rate on the sex­i­ness scale of fund man­age­ment?

Cameron: Well, me very high. Um, you know, do I have to show you my abs again, Tony? Do I, do I. Is this in the. Is that, is that your excuse for get­ting me to show you my [00:08:00] abs? Is that, is that your cod­ed way of say­ing, “Show me your abs.”

Cameron: I will.

Tony Kynas­ton: No.

Cameron: I will sing.

Tony Kynas­ton: I’m not,

Cameron: I will sing.

Tony Kynas­ton: I’m def­i­nite­ly not the Alan Jones of fund man­age­ment either, so no, don’t show me your abs

Cameron: Guy at Kung Fu the oth­er day. I was, I was just, I was pulling up my shirt to adjust my uni­form and my belt, and he goes, “Put your shirt down, Cameron. We don’t need to see that.” I was like, “Yeah, you do. Gaze upon the glo­ry of my abs, you mere mor­tals.” Any­way, Leopold Aschen­bren­ner and I knew, ’cause he was at Ope­nAI, um, going back, uh, six months, a year ago, and kind of I think he was part of their, um, secu­ri­ty team, then when they sort of were get­ting rid of their secu­ri­ty team, he wrote a man­i­festo on

Tony Kynas­ton: Mm-hmm.

Cameron: this kind of stuff. So I, I kind of heard about him at the time. It was a bit of a big deal when [00:09:00] he left, was talk­ing about secu­ri­ty issues and blah, blah, blah.

But I did­n’t know that he went and start­ed an AI fund.

Tony Kynas­ton: Well, he did one oth­er thing too. Do you. Sor­ry to inter­rupt. He worked for Sam Bankman-Fried for a while as well

Cameron: Well, there you go. What a track record. I, I mean, now who else would you trust your mon­ey with? Did Sam Bankman-Fried get a par­don from Trump? Has, did he get one

Tony Kynas­ton: Oh, I haven’t heard. No

Cameron: Hmm. Any­way, he went and he launched. He’s 24 years old, no invest­ing expe­ri­ence, launched a hedge fund built around AI, up 439% this year to the end of June, up more than 1000% since he start­ed the fund in June 2024. And, uh, funds under man­age­ment were a bil­lion US dol­lars. Sur­prised I had­n’t heard of this. But then it all came crash­ing down when Chi­na launched Kimi K3 and the South Kore­an stuff went bel­ly up, et cetera, [00:10:00] et cetera. So appar­ent­ly he’s, he’s in a bit of prob­lems now.

Tony Kynas­ton: I think there was a lot, there was a lot of mar­gin loans going on too, was­n’t there? That was the prob­lem

Cameron: Well, that’s, yes. A lot of peo­ple bor­row­ing mon­ey, him bor­row­ing mon­ey,

Tony Kynas­ton: Yeah

Cameron: to invest in get­ting big returns

Tony Kynas­ton: So I think, yeah, from what I read that, that yes, he was bor­row­ing. The peo­ple watch­ing his fund were wor­ried that there were gonna be mar­gin calls, so they stopped buy­ing into the shares he was invest­ing in, which took the vol­ume out of that mar­ket, so it sent the shares down, caused the mar­gin calls, et cetera, et cetera.

And I think his remain­ing stocks have been bought out by some­body else, and he’s kept some for him­self.

Cameron: Right

Tony Kynas­ton: But yeah, $20 bil­lion of Wall Street toast

Cameron: Yeah.

Tony Kynas­ton: It’s Bon­fire of the Van­i­ties.

Cameron: I’m sure it won’t be the, uh, last

Tony Kynas­ton: Oh, no.

Cameron: that we hear

Tony Kynas­ton: No

Cameron: Got an

Tony Kynas­ton: That’s incre, [00:11:00] just let me just stop there, though. How incred­i­ble is it that a 24-year-old guy who’s held one, maybe two jobs writes a man­i­festo and gets $20 bil­lion to invest?

Cameron: Yeah.

Tony Kynas­ton: Just incred­i­ble

Cameron: yeah. It’s, that’s, that’s, you know. That’s tech bub­bles, right?

Tony Kynas­ton: Yeah, and we’ve seen it all before too, haven’t we?

Cameron: “All of this has hap­pened before and all of this will hap­pen again,”

Tony Kynas­ton: Cor­rect.

Cameron: Bat­tlestar Galac­ti­ca

Tony Kynas­ton: Yeah

Cameron: Um, got a, got a, not an email, it was a Face­book mes­sage from Mark. “Morn­ing, Cam. Still con­fused about our sell rules. I thought that we just sold on the 3PTL and on a 10% drop on the ini­tial buy price. How­ev­er, after speak­ing with a cou­ple of friends of mine who I intro­duced to QAV and who are still active­ly fol­low­ing QAV, they men­tioned that we/I should be tak­ing prof­its off the table. I [00:12:00] fol­lowed this advice and thought I must have missed it in a pod­cast. I start­ed to track my port­fo­lio and reset my sell prices every month. I was either using the 3PTL or 10% low­er than the share price high point, whichev­er was high­er to take the high­er prof­it. Hope I’m explain­ing this okay. I found the major­i­ty of times I did this, the share price would come back up and I would miss out on the run. Plus, I seem to be sell­ing reg­u­lar­ly. Can you please tell me if we’re only sell­ing on the 3PTL on a 10% drop of the ini­tial pur­chase and/or on a 10% drop of the high on the share price to take prof­its? I’ve been with QAV for a fair while, but due to work and young kids, excus­es, I know, I’ve not fol­lowed it reli­gious­ly and I wan­na make a con­scious effort to change that.” Uh, I said, “Well, you need to get new friends, Mark.” Um,

Tony Kynas­ton: Well, thanks for intro­duc­ing them to QAV though, Mark. That’s great.

Cameron: Yeah, just don’t lis­ten to them.

Tony Kynas­ton: Che,

Cameron: Here’s my reply. Um, they men­tioned that we should be tak­ing prof­its off the table. No, that’s the exact oppo­site [00:13:00] of QAV. Who the hell told you that? I fol­lowed this advice and thought I must have missed it in the pod­cast. I said, “You should have checked with me first.” 10% drop on the ini­tial buy price.

I point­ed out we changed that to 20% a while ago. Our back test­ing showed it does­n’t make much dif­fer­ence in returns, but reduces the num­ber of trades slight­ly. Um, on a 10% drop of the high of the share price to take prof­its. I said, “No, nev­er. TK’s mot­to is water your flow­ers, cut your weeds. Pret­ty sure I’ve writ­ten a cou­ple of week­ly newslet­ter arti­cles about that exact prin­ci­ple in recent months.

Obvi­ous­ly, you don’t read my newslet­ters. If you ever want to get in touch, just let me know.” He did say, “Thank you, Cam. I’ll be com­ing to you for­ev­er now.” Uh, yeah. So, yeah, I’m, I’m not tak­ing the piss. Um, these things get con­fus­ing and, you know,

Tony Kynas­ton: Yeah

Cameron: life does get in the way. We, we total­ly under­stand that, Mark.

Um, but, and I apol­o­gize for read­ing this. I did keep your sur­name out. Uh, we have lots of Marks. Could be any Mark. If you’re [00:14:00] lis­ten­ing to this and you know a Mark, lots of Marks on QAV. But,

Tony Kynas­ton: could be a real name either

Cameron: yeah. Yeah. Oh, hi, Mark. it, look, yes. Um, look, you, you can sell any­thing you want when­ev­er you want. This is, this is, um, it’s your port­fo­lio.

We don’t give finan­cial advice. That said, that is not how we run things. Um, three PTL, rule one, which is now 20%, com­mod­i­ty sells, um, red flags, sud­den CEO or CFO unex­plained res­ig­na­tions, um, malfea­sance, um, evi­dence that the com­pa­ny is doing bad stuff behind the scenes, they get pinged by some­one or I think recent­ly we intro­duced a thing where they, if they don’t sub­mit their [00:15:00] finan­cial returns on time or some­thing like that, we’re like, “Hmm, not sure we’re trust­ing you with our mon­ey.” That, uh, or if you need the mon­ey. Um, we have a list of things in the Bible, a list of rea­sons that are legit­i­mate rea­sons to sell. But, um, no, tak­ing prof­its off the table not one of those unless you need the mon­ey for some­thing. But, um, you wan­na talk more about that, TK?

Tony Kynas­ton: No, you’ve summed it up real­ly well. Um, so has War­ren Buf­fett when he says you don’t bench Michael Jor­dan. That’s how he summed it up. Um, and look, it’s, the whole, the whole the­o­ry behind QAV is you’re try­ing to get the odds stacked in your favor. Will every stock that go up, goes up, keep going up? No, some will come down.

Um, and we have sells for that, and you might rue the fact that you’ve giv­en back every­thing you’ve gained. Um, if you had have sold last year, you would’ve made more mon­ey. But for every one of those, there’s a, you know, maybe [00:16:00] 1.2 or 1.5 of stocks that keep going up, um, which we’ve seen before. Like a Fortes­cue Met­als Group back in its hey­day.

Like, um, there’s one called EDU at the moment which is going asymp­tot­ic. But, you know, those kinds of stocks. Yep, Durat­e­ch, they, they don’t always go up in a straight line. They tend to retrace for a while and then get a sec­ond wind or a third wind. So if you sell out on the first down­turn, um, then you’re, uh, you’re miss­ing out on quite a lot.

And you don’t get to buy back in for those stocks either ’cause they’re off the buy list because their price is so high

Cameron: Yeah. We have back-test­ed these. I

Tony Kynas­ton: Mm-hmm.

Cameron: not, you know, like, not like, you know, the ulti­mate in back test, but we have back-test­ed this. I’ve, I’ve run analy­sis on it. I know you’ve run analy­sis on it. And we, we know. You know, I’ve, I did. I can’t remem­ber the last time I did this, but it was a year or two ago.

But went back over, like, four or five years and said, “Well, what, what would’ve hap­pened if we had have [00:17:00] sold this at this time or at that time?” what we found was, as you said, yeah, you would’ve saved mon­ey some­times. You would’ve lost mon­ey some­times. more often than not, uh, our rules And

Tony Kynas­ton: Yeah

Cameron: 55% of the time or 60% of the time our rules win, that makes a big dif­fer­ence over

Tony Kynas­ton: Yeah, and I’ve, I’ve done the same sort of test­ing. I, I mean, recent­ly, uh, most recent test I did was to look at if a stock got to twice its sell price, um, you should start tak­ing prof­its. And again, I could­n’t, I could­n’t make it work. It was always bet­ter to hold. Like, look, n‑not in every case, not in 100% of cas­es, but in most cas­es it was bet­ter off hold­ing on, ’cause you’re get­ting out of the EDUs and DURs too soon

Cameron: Yeah

I’ve got

the DUR chart in front of me just as an exam­ple. So over fi- five years ago it was trad­ing at 41 cents. it had a nice lit­tle run up to, um, [00:18:00] $1.38, dropped back down to $1.18. I don’t know what that is, like a 10% drop. Then it shot back up to $1.60, dropped down to a dol­lar. a big drop. But then to rise up, got to $1.66, $1.73, dropped back down to $1.45, then up to $2.15, dropped down to $1.78, then got up to $2.82.

It’s dropped back down. It’s now to, like, 2.16. one of the rea­sons port­fo­lios are down, is ’cause we’ve got a lot of DU- DUR. But, I mean, I, I don’t know what’s going on with DUR. I haven’t real­ly paid much atten­tion to their news sto­ries. Uh, they do turn up in my news alerts from time to time, and it’s usu­al­ly good stuff. just see it as a bit of prof­it tak­ing

Tony Kynas­ton: Yeah, I think so too.

Cameron: tak­ing prof­it off the table. There

Tony Kynas­ton: Yep

Cameron: and pro­fes­sion­al funds that have to do it for var­i­ous [00:19:00] rea­sons. We’re not one of those, so unless they break some­thing, we go, “Hey, here’s a real­ly great busi­ness that’s doing real­ly well,” and, uh, we’re gonna stick with them until they screw up. And if I, you know, open my alerts sheet. Well, I’d have to do that. Let me just get into Navexa. Oh no, maybe I do need to do that. If I look at, uh, D‑U-R, doo, doo, doo, doo, doo, DUR. You know, and even though it has come off a lot, um, one of our port­fo­lios, we’ve held it since Novem­ber 2022, it’s up 328%. Anoth­er of our port­fo­lios, we’ve held it since Feb­ru­ary ’23, it’s up 200%. Anoth­er one we’ve held it since June 2023, it’s also up 200%. And then the rest of them, we– it’s up [00:20:00] 100, 150, 150 since we’ve held it from March 2023. So yeah, like you don’t get the 300, you know, triple bag­gers if you take prof­its off the table, right?

Tony Kynas­ton: Yep. Cor­rect

But thanks for reach­ing out, Mark. Good, uh, good ques­tion

Cameron: Yeah, I’m glad you final­ly checked in with me, Mark. Um, good instinct. Bit late, but bet­ter late than nev­er. Um, oth­er email I’ve got is from Scott. Um, “Hey, mate. Real­ly enjoyed this week’s pod­cast,” which I think was the, the guest that we put out last week, the, um, Own­er­ship guy, Has­san. He says, “Made me think, the tick­er QAV sure­ly is free.

Let’s set up an ETF. Work on Tony.” Okay. Tony, QAV ETF, what do you think?

Tony Kynas­ton: Oh,

Cameron: If, if Leopold Aschen­bren­ner can raise $20 bil­lion

Tony Kynas­ton: Yeah.

Cameron: a [00:21:00] fund, I mean, you could throw in 10, and we just have to get the oth­er 10 bil­lion from some­where else. Good idea, Scott. Keep think­ing.

Tony Kynas­ton: Yeah.

Cameron: hmm

Tony Kynas­ton: Don’t know about an ETF. I don’t know how an ETF would work for QAV. They, they tend to, you know, fol­low an index or fol­low a the­mat­ic. I guess they could man­age a buy list per­haps. It’s more, it’s more like an LIC.

Cameron: don’t you? You have val­ue ETFs?

Tony Kynas­ton: Yeah, but they tend to be robot­ic, like they pick the low­est quar­tile of PE ratios, that kind of thing.

Cameron: Yeah, yeah.

Tony Kynas­ton: Hmm

Cameron: We’re more just a fun fund.

Tony Kynas­ton: Yeah.

Cameron: What do you got, uh, what do you got, Tony?

Tony Kynas­ton: I got a few things. Um, gonna do a Pulled Pork, which was a request a cou­ple of weeks ago, um, on Alliance Avi­a­tion. Uh, I saw a, I saw an arti­cle in The Wall Street Jour­nal about, um, how Wall [00:22:00] Street bots are cash­ing in on Trump’s Truth Social posts, which I thought was inter­est­ing. So, um, Trump’s social media plat­form, Truth Social, is now sell­ing stock mar­ket traders super fast access to his posts.

So for a. So the arti­cle in the Wall Street Jour­nal says many big invest­ment firms have devel­oped auto­mat­ed sys­tems to mon­i­tor Truth Social and take action, often with­in the frac­tion of a sec­ond. Uh, and a jour­nal review of trad­ing data shows how quick­ly some traders have pounced on the pres­i­den­t’s online com­ments, and, uh, some trades cause swings of more than 2% in almost two dozen ener­gy and indus­tri­al stocks.

A new prod­uct from Trump Media and Tech­nol­o­gy will let firms pay for an even faster read­out of Trump’s posts. At least five firms have signed up.

Cameron: The grift goes on. There

Tony Kynas­ton: It does­n’t it?

Cameron: to the grift

Tony Kynas­ton: Yeah, I saw on the Wall Street [00:23:00] Jour­nal too last week that Trump’s kids are all now, I think all, if not bil­lion­aires, all almost bil­lion­aires since he’s been, um, back in office. Hmm.

Cameron: Wow

Tony Kynas­ton: It’s incred­i­ble, isn’t it?

Cameron: It’s astound­ing. It’s an astound­ing time to be alive, Tony

Tony Kynas­ton: It is. I mean, that just, that’s almost bor­der­ing on inside infor­ma­tion, isn’t it? That, that Truth Social’s going to give you ear­ly access to what the pres­i­dent says. That’s almost like

Cameron: even apply to pres­i­dents?

Tony Kynas­ton: No, maybe prob­a­bly not, I sup­pose. Yeah, I don’t know. But it’s, it’s, in con­cept it’s fair­ly sim­i­lar, isn’t it?

Cameron: Mm-hmm

Tony Kynas­ton: Yeah. Any­way, back on our home shores, uh, Fleet Part­ners has­n’t been on our buy list for a while, but I know it was a core part of our buy list, um, in the past, and it’s now, uh, it’s prob­a­bly gonna be tak­en out.

Um, SG Fleet, one of the com­peti­tors, which is backed [00:24:00] by pri­vate equi­ty, has, uh, lobbed a bid yes­ter­day, which has seen the share price rise 20 or 30% today

Cameron: What’s, uh, FPR? FP

Tony Kynas­ton: FPR from mem­o­ry, yeah

Cameron: I’ll have to make a note just in case it turns up.

Tony Kynas­ton: Yeah.

Cameron: you go

Tony Kynas­ton: I don’t know if it’s any of y- in any of your port­fo­lios still

Cameron: I don’t think so. I’ll just check. I haven’t seen it for a long time

Tony Kynas­ton: Yeah, I think we did well out of it when it was back on the buy list

Cameron: Hmm. Yeah, no, it’s not on my buy list

Tony Kynas­ton: Okay. And then Shan­ta Cleary wrote an arti­cle about it today say­ing that, uh, uh, with the way the mar­kets have changed over the years, uh, with a lot of pas­sive invest­ing, et cetera, that more com­pa­nies like Fleet Part­ners are being tak­en out by pri­vate equi­ty, and it’s real­ly the only way for them to, to, uh, get some [00:25:00] kind of, um, takeover activ­i­ty hap­pen­ing in the share mar­ket at the moment.

So

Cameron: Right

Tony Kynas­ton: that was an inter­est­ing arti­cle. Um, and one oth­er thing that caught my eye in the Fin Review today, and this is why I like Cap­i­tal­ism Cam, uh, Canada’s TMX throws down the gaunt­let to ASX on trad­ing and tech. And this is about, um, uh, TMX is a Cana­di­an firm that have, um, bought a, a com­pa­ny in Aus­tralia and look like they might launch a com­peti­tor to the ASX.

And it just strikes me that, you know, there’s been, I think, two CEO res­ig­na­tions, three CEO res­ig­na­tions at the ASX. They’ve tried to replace the CHESS sys­tem. They’ve aban­doned the, the blockchain tech­nol­o­gy, I think, to replace the CHESS sys­tem. But it’s real­ly. It’s been looked at by. There’s been all sorts of inves­ti­ga­tions by ASIC into it, but it’s real­ly gonna be com­pe­ti­tion which shakes up the, the mar­ket, not, um, not reg­u­la­tion, I [00:26:00] think.

So this will be inter­est­ing to see what hap­pens. That’s what cap­i­tal­ism is.

Cameron: You can have ca- you can have com­pe­ti­tion out­side of cap­i­tal­ism. Well, look, it’s Chi­na. Plen­ty of com­pe­ti­tion in Chi­na

Tony Kynas­ton: Chi­na’s cap­i­tal­ist, mate. With a,

Cameron: Accord­ing

Tony Kynas­ton: a, a dif­fer­ent label.

Cameron: Accord­ing to whom? Oh, right. Yeah, yeah.

Tony Kynas­ton: Myer

Cameron: with Chi­nese char­ac­ter­is­tics, Tony

Tony Kynas­ton: Is that what cap­i­tal­ism is?

Cameron: No, that’s what Chi­na is

Tony Kynas­ton: It’s, it’s social­ism with, with what? Chi­nese char­ac­ter­is­tics. So are the Chi­nese char­ac­ter­is­tics cap­i­tal­ism?

Cameron: No. It’s, it’s allow­ing some forms of, uh, cor­po­ra­tions in there as long as they’re all behold­en to the state. So they’re work­ing for the good of the state, the good of the peo­ple, not for their own good.

Tony Kynas­ton: [00:27:00] Reil­ly?

Cameron: Hmm.

Tony Kynas­ton: Okay

Cameron: Jack, uh, what­ev­er his name

Tony Kynas­ton: Ma?

Cameron: Yeah, go ask Jack Ma how it works when you get to the top of the tree if you think you’re big­ger than the state.

Tony Kynas­ton: Yeah

Cameron: see the inside of a lit­tle room for a cou­ple of years until you get re-edu­cat­ed

Tony Kynas­ton: Yeah, not sure that’s a good thing. Any­way,

Cameron: Chi­na seems to be doing all right

Tony Kynas­ton: Yeah, it is. Hang on, though, you’re say­ing that Chi­nese com­pa­nies aren’t cap­i­tal­ist in nature? Why would you set up, why would you set up a com­pa­ny?

Cameron: I’m say­ing that the way the econ­o­my is run in Chi­na by the isn’t cap­i­tal­ism. It’s not lais­sez-faire cap­i­tal­ism. It’s social­ism that allows some lev­el of cor­po­ra­tions and free enter­prise, but it’s not cap­i­tal­ism.

Tony Kynas­ton: Isn’t that what, isn’t that what we have in Aus­tralia? Reg­u­lat­ed cap­i­tal­ism

Cameron: Um, [00:28:00] yes, we have reg­u­lat­ed cap­i­tal­ism, but nowhere near what they have in Chi­na.

Tony Kynas­ton: Right. So it’s just, we’re just on shades of gray here, aren’t we?

Cameron: There are, they, you could say that, sure. But

Tony Kynas­ton: Thank you. I just did.

Cameron: what they call it, is social­ism with Chi­nese char­ac­ter­is­tics. And this

Tony Kynas­ton: Right.

Cameron: Xiaop­ing.

Tony Kynas­ton: does. Does­n’t mat­ter what col­or the cat is, as long as it catch­es mice.

Cameron: Yeah, drinks

Tony Kynas­ton: As long as, as long as we call cap- we call it cap­i­tal­ism.

Cameron: Yeah All

Tony Kynas­ton: it does­n’t mat­ter what they call it, it’s c- reg­u­lat­ed cap­i­tal­ism. It does­n’t

Cameron: what, what, what, mat­ters is, you know, what the prin­ci­ples are it. Do the cap­i­tal­ists get to run amok and take over the

Tony Kynas­ton: Oh, no.

Cameron: state,

Tony Kynas­ton: Right

Cameron: are they held in check by the state?

Tony Kynas­ton: Oh, it’s reg­u­lat­ed cap­i­tal­ism, yeah. Yeah

Cameron: Well, but we, you know, you could say we have that here, but do we though?

Like, who’s, pow­er­ful here, Gina Rine­hart and Rupert Mur­doch or, [00:29:00] uh, the state

Tony Kynas­ton: Well, you don’t know that’s not the case in, in Chi­na. I don’t know their econ­o­my well. I’d love to know whether it’s actu­al­ly run by Xi Jin­ping, Xi Jin­ping or whether he’s behold­en to some­body.

Cameron: Mm-hmm.

Tony Kynas­ton: Hmm. It’s all. But it. Um, yeah, maybe.

Cameron: for sure.

Tony Kynas­ton: Might be the per­son who runs BYD.

Cameron: Could be

Tony Kynas­ton: Hmm. Any­who, I thought that was an inter­est­ing arti­cle.

Cameron: Yeah

Tony Kynas­ton: I did wan­na talk quick­ly about the, um, the joint yen res­cue, uh, which you al-allud­ed to before.

Cameron: Hmm.

Tony Kynas­ton: fair­ly arcane arti­cle, but it’s. I’m, I’m won­der­ing how much this, again, is a canary in the coal mine for the way the mar­ket’s at at the moment. So, uh, on the week­end, uh, the Amer­i­can gov­ern­ment bought a lot of Japan­ese yen, uh, to stop it from going down.[00:30:00]

Um, and that was fine. And one of the, the prob­lem is that, um. Sor­ry, so that’s. I said Chi­nese, I meant Japan­ese. Um, the, this Japan­ese gov­ern­ment owns a lot of US Trea­suries and, um, if their, if their yen to the dol­lar, uh, slips too much, then they’re forced to sell, uh, US Trea­suries, which isn’t good for US Trea­suries.

Um, sell­ing pres­sure on US bonds forces up yields, uh, which is, um, not to the US’s lik­ing because it makes it hard­er to do busi­ness when the bor­row­ing costs are increased. And so the US gov­ern­ment was, was arti­fi­cial­ly inflat­ing the Japan­ese yen recent­ly, and that’s, that’s all fine. That’s, you know, kind of inter­na­tion­al trade or inter­na­tion­al, you know, gov­ern­men­tal coop­er­a­tion.

But I guess the thing is if, if, if some­thing’s being sup­port­ed [00:31:00] arti­fi­cial­ly, how long can it go on being sup­port­ed arti­fi­cial­ly? And what hap­pens when it can’t be sup­port­ed any­more? And, um, you know, I’m, I’m think­ing back to times, uh, famous­ly when the US gov­ern­ment. Uh, sor­ry, when the UK gov­ern­ment tried to keep the pound high and, uh, George Soros bet against it, and even­tu­al­ly the pound col­lapsed because it could­n’t be sup­port­ed any­more because you can throw mon­ey at these things, and you can print mon­ey and throw it at them, but even­tu­al­ly they have a reck­on­ing, um, which is more based on log­ic than just based on the flow of mon­ey.

And, uh, so, you know, I don’t know whether it’s gonna be soon, soon­er or lat­er, but even­tu­al­ly the US will fatigue from try­ing to sup­port the yen, and if that forces a big sell-off in US bond secu­ri­ties, then bond yields will rise and that, um, will be a neg­a­tive around the world, I think, for share mar­kets. So inter­est­ing devel­op­ment

Cameron: the arti­cle that you, are [00:32:00] refer­ring to a- says that US 30-year Trea­sury yields are already sit­ting near 20-year highs. So I guess they don’t want it to go even high­er.

Tony Kynas­ton: Cor­rect

Cameron: Japan­ese econ­o­my, again, like I don’t, I don’t under­stand this stuff. I, I spent, as I said, like a long time this morn­ing try­ing to get my head around this sto­ry and the Japan­ese econ­o­my.

And what I could gath­er is, um, uh, I think the tech­ni­cal term econ­o­mists use for it is it’s screwed, um, has been for decades. And it seems like it’s a, like an impos­si­ble sce­nario. So they’ve got, um, rates near zero to try and the econ­o­my hum­ming, try­ing to keep peo­ple bor­row­ing mon­ey, invest­ing mon­ey, keep, you know, or invest­ing mon­ey into busi­ness­es, bor­row­ing mon­ey and spend­ing it on the econ­o­my because peo­ple just weren’t doing that after their econ­o­my in the ear­ly ’90s after the ’80s. [00:33:00] And at the same time, they have the high­est nation­al debt, um, in the world to over 200% GDP. And to put that in con­text, I saw like the US and some Euro­pean coun­tries are around 110, 120%, uh, GDP, so it’s way high­er. they have a, a, a pop­u­la­tion that is very old, is one of the old­est pop­u­la­tions, uh, on the plan­et. So prob­lems in the labor mar­ket and tax­a­tion and all that kind of stuff. Plus they have a pop­u­la­tion of peo­ple who save mon­ey very, very well. So their, pen­sion funds are sit­ting on tril­lions of dol­lars or tril­lions of yen. Uh, so they’ve had to invest that some­where. So they’re invest­ing it in, have been invest­ing in US bonds, which is why they’re the num­ber one hold­er of US Trea­suries. [00:34:00] they’ve got one point some­thing tril­lion in US Trea­suries. Um, but yeah, the, the, the, the yen is weak­en­ing. They have to keep buy­ing it to stop it from weak­en­ing even fur­ther.

Tony Kynas­ton: Yeah

Cameron: the US are pan­ick­ing that in order to keep being able to buy back their own cur­ren­cy, they’re gonna have to sell off tens of bil­lions of dol­lars of US Trea­suries, which will affect the US econ­o­my.

So yeah, trick­le on effects. When you say arti­fi­cial, I mean coun­tries, reserve banks, et cetera, buy their own cur­ren­cy all the time, right? This isn’t, isn’t unusu­al, but it’s just, uh, high­er lev­els than nor­mal I think in Japan right now

Tony Kynas­ton: Well, it’s, it’s, it’s unusu­al in that you would­n’t see the US gov­ern­ment buy­ing Japan­ese yen, um, very often. Count- you’re right, coun­tries do buy oth­er cur­ren­cies all the time for, usu­al­ly for trade rea­sons. [00:35:00] Like we’re doing a deal with you to buy AUKUS sub­marines, and we don’t want the cur­ren­cy to get in the way of it, so we’re gonna buy US dol­lars, for exam­ple.

That kind of thing. Yeah.

Cameron: in US dol­lars Yeah

Tony Kynas­ton: Yeah. Um, but, but the US is, is delib­er­ate­ly putting a plat­form under the Japan­ese yen to suit inter­est rates in the US

Cameron: the US has tak­en over Japan before. Maybe Trump’s think­ing Green­land, Venezuela, Japan, we’ll just add it. effec­tive­ly it’s been a US state since 1945 any­way. They’ve still got a, they’ve still got a rea­son­able sized mil­i­tary force there occu­py­ing the coun­try, so, you

Tony Kynas­ton: Well, I think it’s, um, I think the inter­est­ing thing about Japan is, is to look at what hap­pened in the ’80s and ’90s. I remem­ber, you know, being in Queens­land in the 1980s, it seemed like every day you turned around and a Japan­ese per­son or com­pa­ny was buy­ing real estate, um, or cor­po­ra­tions in Queens­land in par­tic­u­lar.

And that was, um, you know, there was all kinds of hue and cry about, um, [00:36:00] over­seas own­er­ship and encroach­ments on our nation­hood and all that kind of thing. And then it all went shh

Cameron: Paulus Peter Elyard was behind that. Did

Tony Kynas­ton: Oh, real­ly?

Cameron: sto­ry?

Tony Kynas­ton: I do, yeah. And the, uh.

Cameron: Hmm.

Tony Kynas­ton: Go on

Cameron: Well, he came up with the idea when he was, I think he was, uh, work­ing for Aquin­go in Ade­laide, and he was, he want­ed to build it in South Aus­tralia. then Hawke picked it up and thought it was a great idea, and it was gonna move to Alice Springs or some­thing like that, uh, North­ern Ter­ri­to­ry.

I don’t remem­ber where.

Tony Kynas­ton: Yeah. Yeah, there’s all kinds of resorts being moot­ed on the Rock­hamp­ton coast and things like that, Yep­poon and

Cameron: Hmm. Great

Tony Kynas­ton: point,

Cameron: Island and

Tony Kynas­ton: yeah

Cameron: I think they were buy­ing or

Tony Kynas­ton: Yeah. So Japan went through a real eco­nom­ic boom, large­ly a bit like Chi­na now. They were, they were sup­ply­ing. You know, when, when the oil crunch hap­pened in the, in ’75, they start­ed, Amer­i­cans start­ed buy­ing small four-cylin­der cars, and that [00:37:00] suit­ed Japan fine, sell­ing Dat­suns and Nis­sans and, well, they’re the same thing, but Dat­suns and Hon­das and Toy­otas, um, and, you know, became very dom­i­nant.

Um, and one of the things that hap­pened when the econ­o­my got very buoy­ant in Japan was that the house prices went up. And I, and, and, and I think that gov­ern­ments around the world, West­ern gov­ern­ments in par­tic­u­lar, would do a lot. could do a lot worse than study­ing Japan in the ’80s and ’90s. Because what hap­pened was, uh, it’s a bit like we have now, like y- y- peo­ple could­n’t afford to buy a house, and so they took out a longer and longer and longer mort­gage.

S- to have got to the stage where grand­chil­dren were behold­en to the grand­par­ents because the mort­gage was held for three gen­er­a­tions, basi­cal­ly, um, to, to be able to afford a nor­mal house in Japan. And, um, that’s kind of where things are head­ing into in Aus­tralia or in around in most West­ern coun­tries now.

You know, we talk about the bank of mom and dad. You, you know, if you’re a young [00:38:00] per­son start­ing out, you prob­a­bly need help from some­where to at least afford a deposit, so it comes from mom and dad. Well, that’s kind of one gen­er­a­tion removed from your grand­par­ents tak­ing out a mort­gage for you and you pay­ing it off when you’ve, when you’ve grown up as a grand­child.

Um, so that kind of deflat­ed the Japan­ese econ­o­my because it basi­cal­ly stopped any sort of local pur­chas­ing pow­er in Japan. Peo­ple were just work­ing to pay off the mort­gage and then hand­ing it on to their kids, and their kids were hand­ing it on to their grand­kids, um, before it was all paid off. So Japan went through a whole, uh, stage of stagfla­tion and defla­tion and, uh, did­n’t grow for a long time, and they print­ed a lot of mon­ey, and then inter­est rates came to zero, and that kind of then was man­aged in that kind of envi­ron­ment for 30 years.

Um, the s- the stock mar­ket still did okay. Um, was­n’t like every­thing ground to a halt. There’s been a lot of great Japan­ese com­pa­nies over the time, but the, the [00:39:00] local econ- the local econ­o­my became fair­ly stag­nant. Um, and that led to pop­u­la­tion decline, and we’re see­ing that a bit now in West­ern coun­tries where, um, birth rates are down.

You know, our pop­u­la­tion in Aus­tralia is only grow­ing because of immi­gra­tion, real­ly. It’s in a nat­ur­al state of decline if you look at how many peo­ple are born every year com­pared to how many peo­ple are dying. Um, so peo­ple aren’t want­i­ng to raise kids in this envi­ron­ment, um, whether that’s a con­scious deci­sion or whether it just hap­pens because, um, you can’t afford a big fam­i­ly, for exam­ple.

Cameron: Kids are annoy­ing

Tony Kynas­ton: kids are annoy­ing. Yeah. But I, but I think Jap- Japan is real­ly the, the, the les­son for West­ern coun­tries. We might just be com­ing into our Japan moments now. But very inter­est­ing.

Cameron: All right, mov­ing right along ’cause we’re run­ning out of time

Tony Kynas­ton: What will pork then?

Cameron: Yes

Tony Kynas­ton: So this was a request, and very inter­est­ing one to do a Pulled Pork on. [00:40:00] The, I can’t recall who the request came from. It might have been Scott. Cam, you can look it up per­haps while I’m talk­ing.

Cameron: I will

Tony Kynas­ton: thank you. So the Pulled Pork is on AQZ, uh, Alliance Avi­a­tion. And many years ago, I was a share­hold­er in Alliance Avi­a­tion, so, um, it has been on the buy list or pre-QAV buy list that I used to oper­ate any­way.

Uh, and I’m gonna call this, uh, episode Meet the Fokkers and maybe Toss the Fokkers because, uh, at one time in the his­to­ry of this com­pa­ny, it was the biggest, uh, buy­er and user of Fokkers, the type of, uh, air­craft that gets used on short-haul flights that peo­ple in Aus­tralia will be fair­ly f‑familiar with.

They’re tur­bo­prop planes that oper­ate in region­al areas. Um, so Alliance Avi­a­tion. Sor­ry.

Cameron: by the way. This

Tony Kynas­ton: Trent, thank you. Thanks, Trent. Um, so Alliance Avi­a­tion, uh, [00:41:00] as it says, avi­a­tion com­pa­ny. They pro­vide con­tract char­ter main­te­nance ser­vices, uh, to basi­cal­ly region­al sec­tors. They oper­ate a lot in the fly-in, fly-out mar­ket, so they con­tract with min­ing com­pa­nies in par­tic­u­lar to fly their staffing in and out on a reg­u­lar basis.

Uh, and they also got into a con­cept called wet leas­ing air­craft. Do you know what wet leas­ing is, Cam?

Cameron: I know it sounds sexy

Tony Kynas­ton: Wet leas­ing is when you con­tract to pro­vide the plane, the main­te­nance, and the crew to Qan­tas or Vir­gin or some­body else to, um, ful­fill a, a, a s- a hole in their sched­ules, like fly­ing from Mel­bourne to Wag­ga, for exam­ple.

Cameron: Wet leas­ing to fill a hole. You’re just mak­ing it worse, Tony

Tony Kynas­ton: Uh, inter­est­ing his­to­ry. So found­ed in 2002 by an own­er, cou­ple of own­er founders, Scott McMil­lan and Steve Paget. [00:42:00] Uh, they began with, uh, two Fokker F1, uh, two Fokker 100 air­crafts, and, uh, they, uh, began con­tract char­ter ser­vices for min­ing work­ers in the Aus­tralian Out­back. They grew from there, um, sys­tem­at­i­cal­ly bought up Fokker 70 and Fokker 100 planes and, uh, kind of a big leg up oc- hap­pened in 2015 when they acquired 21 air­craft from a, um, a defunct air­line called Aus­tralian Air­lines.

Um, they pur­chased most of their air­craft very cheap­ly at low cap­i­tal costs, and then, um, they built a kind of a very high­ly reli­able and high mar­gin monop­oly in the FIFO, uh, side of things in the air­craft indus­try in Aus­tralia. Uh, in 2011, they list­ed on the ASX, and in Feb­ru­ary 2019, Qan­tas bought a 19.9% [00:43:00] strate­gic stake in AQZ.

And by May 2022, Qan­tas announced that they were gonna launch a full scale takeover of the remain­ing 18.1%, um, of Alliance for a pre­mi­um. How­ev­er, the ACCC rained on that par­ty and they blocked the takeover. It took them a year to go through the inves­ti­ga­tion, but they, uh, blocked the takeover and so Qan­tas aban­doned the bid, but it kept its 19.9% share­hold­ing in the com­pa­ny.

Uh, mov­ing for­ward, uh, the com­pa­ny did very well dur­ing the pan­dem­ic. Um, even though com­mer­cial air­line avi­a­tion pret­ty much col­lapsed, uh, mi- the min­ing com­pa­nies, the pro­fes­sion­al sport­ing codes, um, in Aus­tralia that relied heav­i­ly on Alliance’s, uh, uh, char­ter oper­a­tions to go between bub­bles, um, and actu­al­ly trig­gered a bit of a boom for the com­pa­ny in Covid times.

Um, at the same time, the com­pa­ny rec­og­nized that the Fokker fleet [00:44:00] was aging, and so they launched a, uh, a cap­i­tal piv­ot, a mas­sive cap­i­tal piv­ot in August 2020, and they bought their first batch of Embraer, E‑M-B-R-A-E‑R, Embraer or Embraer E190 jets. And, uh, they did so on the back of, um, uh, one of these wet lease, uh, con­tracts to pro­vide air­craft crew main­te­nance and insur­ance for 30 Embraer E190s to Qan­tasLink, the region­al part of Qan­tas.

Uh, so that fun­da­men­tal­ly altered Alliance’s busi­ness mod­el from being a pure min­ing char­ter oper­a­tor into a, I guess a gap ful­filler for Qan­tas and Vir­gin. How­ev­er, by late 2025, infla­tion had, uh, tak­en hold pret­ty severe­ly with-with­in the com­pa­ny, and they were spend­ing a mil­lion dol­lars more than they bud­get­ed [00:45:00] to every month on main­tain­ing the, uh, aging Fokker fleet.

Um, and a‑as well as, um, at the same time hav­ing to ser­vice the wet lease oper­a­tions for Qan­tas under a fixed, uh, price con­tract, um, or large­ly a fixed price con­tract, uh, con­tract. They were slow­ly going broke, and they, um, called out in their Novem­ber 2025 announce­ment that they were tak­ing a mas­sive write-down on their Fokker fleet of $165 mil­lion, a non-cash asset impair­ment, um, which led to a $105 mil­lion statu­to­ry net loss, uh, in Feb­ru­ary 2026 when they, um, walked peo­ple through their prof­it announce­ment.

Um, in Novem­ber 2025, the own­er founder, or one of them any­way, Scott McMil­lan, and the CFO, uh, s- Andrew Evans, resigned in [00:46:00] tan­dem and left the com­pa­ny, and the c- the stock was actu­al­ly sus­pend­ed from trad­ing for sev­en days at that time. The S- Scott McMil­lan was the CEO or co-CEO at the time. So, uh, in Feb­ru­ary 2026 ear­li­er this year, they for­mal­ly acknowl­edged that the, uh, Fokker fleet was reach­ing the end of its eco­nom­i­cal life, and they raised a mate­r­i­al uncer­tain­ty relat­ed to going con­cern note in their, uh, their audit report or in their finan­cials, and it was called out in the audit report.

Uh, they pro­mot­ed Stu­art Tul­ly, who was the, who was also the co-CEO, but prob­a­bly act­ed more like the chief oper­at­ing offi­cer to, uh, to become the full CEO of Alliance. And he came out with a strat­e­gy to turn the com­pa­ny around, um, includ­ing, uh, get­ting or try­ing to sell as much as they could of the Fokker, uh, net­work, mov­ing more towards the Embraer [00:47:00] E190 jets.

Um, he, uh, he faced a prob­lem with his banks because, um, there was, uh, bank­ing covenants on, um, on all their loans. And in the past, this com­pa­ny had a, a rea­son­able, um, sort of side trade or side hus­tle in buy­ing up cheap Fokker planes as they became avail­able at dif­fer­ent oth­er air­lines around the world.

And then either using them as, for spare parts or, uh, dis­man­tling them and then sell­ing spare parts to oth­er air­lines at inflat­ed prices. So, uh, that was stopped even though it was prof­itable. It was, it was, uh, tying up cap­i­tal, and so, uh, they decid­ed to stop it. Um, they sold as much as they could of their cur­rent fleet and did a sale and lease­back pro­gram, which is still con­tin­u­ing.

And, um, they have been nego­ti­at­ing with Qan­tas since, uh, since that time to try and, uh, alter the, the wet lease con­tract that [00:48:00] they have with them. But that, that remains ongo­ing. One of the things that they have been able to do is to pass on ris­ing fuel costs, uh, which nor­mal­ly can be a prob­lem for air­lines, but in this case, their con­tracts did allow fuel increas­es to pass on to end users in the FIFO busi­ness and in the wet lease con­tracts.

So, um, I’ve got a, a note in my notes here or a head­ing in my notes here which says the Fokker busi­ness is now fokked. So they, uh, their strat­e­gy was built on buy­ing used Fokker jets, uh, for very lit­tle cap­i­tal and then putting them to work on this end­less cycle of fly­ing staff to mines and back. And in fact, they could actu­al­ly afford to s- to have some of these, um, air­planes sit idle, uh, between min­ing shifts and still, uh, make mon­ey.

But, um, a bit of back­ground on Fokker. The busi­ness, the air­line pro­duc­er, Fokker, actu­al­ly went bank­rupt in 1996, and so they haven’t been [00:49:00] man­u­fac­tur­ing the air­lines for three decades. Uh, and that’s where Alliance kind of, uh, found its niche because it was able to, to, uh, buy up the, uh, used air­craft cheap­ly, uh, conv-con­vert them into spare parts and engine com­po­nents, um, devel­op spe­cial­ized engi­neer­ing exper­tise and staff, and, um, they, uh, over­come logis­ti­cal bot­tle-bot­tle­necks in con­tin­u­ing to oper­ate the fleet.

Um, but that all came crash­ing down this month or this year, sor­ry, uh, with the bud­get, um, with the cost of main­tain­ing the fleet a mil­lion dol­lars over bud­get every month. And, uh, I guess they weren’t the only ones feel­ing that kind of pain and weren’t able to offload as much, uh, to oth­er car­ri­ers because, uh, the, the planes hav­ing not been man­u­fac­tured for 30 years are com­ing to their, uh, their nat­ur­al end of life.

Um, the cost of keep­ing those planes air­wor­thy [00:50:00] now vast­ly out­weighs the ben­e­fit of pur­chas­ing them even at a low cost and so they’re being retired. Uh, com­mer­cial part­ners no longer want­ed old­er, less fuel effi­cient air­craft on their sched­ules and Qan­tasLink and Vir­gin are both re-aggres­sive­ly retir­ing their own net­work of Fokker 100s.

Um, and they’re being replaced where they can by Boe­ing 737s. Uh, but, um, uh, there’s still a, still room for small­er jets like Embraers, which, uh, Alliance is pro­vid­ing to Qan­tasLink, but they do need to change the Qan­tasLink con­tract to make it all work out for them. So a lot going on. Um, I thought it was very inter­est­ing in their annu­al accounts how this mate­r­i­al of uncert- mate­r­i­al uncer­tain­ty over going con­cern state­ment was treat­ed and, um, just want­ed to high­light that.

So in the half year report, the direc­tors stat­ed that the audit was unqual­i­fied. [00:51:00] They, they them­selves signed off on the mate­r­i­al uncer­tain­ty re going con­cern, uh, in their finan­cial accounts and then the audi­tors referred to it in their audit. Tech­ni­cal­ly, it’s an unqual­i­fied audit, um, accord­ing to the account­ing stan­dards because all the audi­tors are required to do is to say that, um, uh, the fig­ures are, you know, true under account­ing stan­dards and can be relied upon, and then they point to the mate­r­i­al uncer­tain­ty, uh, list­ed in the finan­cial accounts and, you know, that appar­ent­ly makes an, an unqual­i­fied audit.

But I think we should treat it as a qual­i­fied audit because there is an uncer­tain­ty whether this com­pa­ny can keep, keep going. And to be fair to the direc­tors of, of the com­pa­ny when they put in their notes that, uh, they had a mate­r­i­al uncer­tain­ty of going con­cern, they then list­ed all the things they were doing to mit­i­gate that.

So, um, that’s being fair to them. [00:52:00] But, but yeah, there is a mate­r­i­al uncer­tain­ty whether this com­pa­ny can keep going and, and the biggest one I think is the game of chick­en that they have going between Qan­tas and them­selves. Uh, it’s com­pli­cat­ed by the fact that Qan­tas is a major share­hold­er in AQZ, but the ACCC won’t let Qan­tas take AQZ over.

Um, but it is pos­si­ble though, if, if, uh, this coun­try– com­pa­ny was forced into admin­is­tra­tion and it would be Qan­tas that would prob­a­bly lead to do that, although the banks could, if they breached, um, debt covenants also lead down that path. Um, but if Qan­tas does tip this com­pa­ny into admin­is­tra­tion then the ACCC might have to change its mind.

So that is one pos­si­ble way out of the cur­rent sit­u­a­tion Um, but what­ev­er hap­pens, um, the CEO Tul­ly has to fix the cap­i­tal and cost sit­u­a­tion and get Qan­tas to pay more for their Qan­tasLink wet leas­es. He can’t walk away from the [00:53:00] con­tract. Uh, AQZ would face big dam­ages claims from Qan­tas as it scram­bled to plug the hole in its sched­ules, and he would also be left with strand­ed air­craft and crew, which would be hard to, um, to, uh, get rid of quick­ly.

So I, I guess, uh, inter­est­ing ques­tion that Trent rais­es, is this a clas­sic val­ue investor, investor’s dilem­ma? Is this com­pa­ny cheap or is it a trap? Uh, put it, put, to put it anoth­er way, is it val­ue or is it crap? Um, I, I don’t like play­ing in this space because I think it’s gam­bling, even though I like to gam­ble.

How do I assess the odds of AQZ and its man­age­ment team get­ting through this, um, uh, sit­u­a­tion? I think the extreme cas­es are that, um, uh, Tul­ly, uh, gets the Qan­tasLink deal to work or he exits it grace-grace­ful­ly, and then the, the com­pa­ny goes back to being, uh, an oper­a­tor of FIFO [00:54:00] flights, so back to where it was in the past.

So I guess it shrinks its way to, to great­ness. Um, that’s one sort of end of the spec­trum. Um, or is AQZ forced into admin­is­tra­tion and Qan­tas or pos­si­bly Vir­gin picks apart the, the, the assets for scrap? Um, or is there some­thing in between? Like, does the ACCC let Qan­tas take AQZ over or do they mud­dle through?

So there’s a lot of dif­fer­ent things in play here, and it’s very hard to know, uh, as an out­sider which way things will go. I know Trent has some opin­ions on that, um, and if he has a bet­ter insight, then it’ll be less of a gam­ble for him. But for me, it’s a bit of a gam­ble. Um I think it’s also impor­tant to note that even if AQZ does just go back to being a FIFO busi­ness oper­a­tor, that does come with its prob­lems as well.

And soon after the com­pa­ny list­ed, and if you look at the share price between 2012 and [00:55:00] 2015, the price dropped from, uh, well, the price dropped down to 40 cents when the last min­ing boom end­ed. Uh, I for­get now what the– Let me see if I can see what the list­ing price was at the time. I think its high was 225 just soon after it list­ed, and it dropped all the way down to 40 cents.

So, uh, and that was on the basis that, um, the min­ing boom, uh, went through a lit­tle bit of a reces­sion in that kind of time. Com­mod­i­ty prices were down. The mines, uh, cut their costs and, uh, so there was less FIFO traf­fic. At the time, AQZ faced some strand­ed planes and crews and less rev­enue com­ing in, and in fact, I think their prof­it halved over that peri­od.

So, um, even if, uh, the CEO Tul­ly does thread the nee­dle and sur­vive, then how much will investors want to back a com­pa­ny with a his­to­ry of trou­bles and risks? Um, the, the share price ha- [00:56:00] has nev­er been strong, um, and, uh, you know, it’s, it’s, it’s been dis­ap­point­ing from time to time. Um, which is why I think, you know, I like to look at sen­ti­ment.

It’s one of our, um, one of our gates to say we either go or no go is, is the sh-share price going up or is the share price going down? And, um The, uh, you know, we have a buy price of $2.34 on the busi­ness, and it’s cur­rent­ly trad­ing at 58 cents. So it’s, uh, it’s gone down a lot this year, and you can see why from what I’ve just said.

And it reminds me again of the, the Keynes quote that, “The game of invest­ing isn’t find­ing the pret­ti­est girl, it’s find­ing who ev-every­one else thinks is the pret­ti­est.” And that’s why sen­ti­ment is so impor­tant, uh, and why even though we can be con­trar­i­an and we can look for val­ue, which this com­pa­ny does pos­sess, it, uh, unless every­body else likes it, it, it ca- it real­ly counts for naught.

[00:57:00] Uh, so that’s a sum­ma­ry of the busi­ness, what’s hap­pened, where it is, and the Q. I’ll go through the QAV num­bers. Uh, and, but I will say that, um, you know, the QAV num­bers are back­ward-look­ing to a large extent, and, uh, we’re in report­ing sea­son now, so I would­n’t be buy­ing the stock any­way, but I’ll just put that caveat out there.

It looks great on the cur­rent num­bers, even, even though the half was a, um, a mas­sive write-down, uh, but it, it does­n’t have sen­ti­ment to, to back us up. Um, so the cur­rent price, uh, was 58 and a half cents that I did the eval­u­a­tion at. ADT is $123,000. It’s down a lot, uh, this year. Uh, at 58 and a half cents is less than con­sen­sus tar­get by 30%, less than IV1 of a $1.28, less than IV2 of a $1.64, and less than two times share price.

So, um, all of those things score well for us. Uh, if you look at the yield in Stock Doc­tor, it says it’s [00:58:00] 5.3%, but, um, I need to back that out of my scor­ing because, uh, the div­i­dend’s been cut going for­ward as part of the cost, uh, sav­ing mea­sures that the com­pa­ny’s under­tak­ing, so there’ll be no yield going for­ward.

Stock Doc­tor finan­cial health and trend is strong and steady, which I find a bit hard to believe. Um, Stock­o­pe­dia is prob­a­bly more real­is­tic, and their qual­i­ty rank is 56. Over­all is 69 in Stock­o­pe­dia, so I think that’s prob­a­bly a, a bet­ter assess­ment of where the com­pa­ny’s at. F score is four out of nine, which is, um, low­er than I’d like.

Uh, look­ing at its PE ratio, it’s 2.3 times, so it’s the low­est in the last three halves, so we would score it for that. Um, again, uh, you know, you w- wan­na run these num­bers when the full year results come out, and we’ll see what they score. Pr/OpCaf is less than one. It’s 0.8 times, which is, um, very good if you’re look­ing at the past num­bers.

Net equi­ty per share $2.22, so we can, um, buy it way less than book [00:59:00] val­ue. Earn­ings per share growth is neg­a­tive 32%, so we mark it down for that. The own­er founder has left abrupt­ly, so we mark it down for that. Um, I think it has a qual­i­fied audit, even though, um, tech­ni­cal­ly the account­ing stan­dard­’s called unqual­i­fied.

If I see mate­r­i­al uncer­tain­ty of going con­cern, I think it’s a, it’s a qual­i­fied audit. Uh, it obvi­ous­ly does­n’t have a new three-point upturn. It’s a sell. Does not have con­sis­tent­ly increas­ing equi­ty. It did up until the last half, but, uh, it’s all come crash­ing down. Uh, PE is less than yield, um, but there’ll be no yield going for­ward.

Uh, so over­all, with­out adjust­ing for things that we know, uh, won’t be there in the future, it’s scor­ing eleven out of sev­en­teen or six­ty-five per­cent, and because of a very low Pr/OpCaf, it’s scor­ing 0.79 for a QAV score. Um, but like I said, we have to back out some of those items like finan­cial health, I think, and yield.

Uh, but e- but even if we back those out with a low qual­i­ty [01:00:00] score, with that low Pr/OpCaf score, it’s still gonna score prob­a­bly above our buy list cut­off of 0.10. But, you know, I want to add it faces three red, red flags. The CEO, the CFO, and the CEO as a founder all abrupt­ly exit­ed the busi­ness. There’s a mate­r­i­al uncer­tain­ty of a going con­cern in its finan­cial accounts, and it’s a three-point trend­line sell.

So, uh, even though I like tak­ing con­trar­i­an posi­tions from time to time, this one has few friends, and, um, it’s not one I’d be buy­ing into. Trent, Trent may well, um, and he– I don’t know, you know, maybe he’s just doing it for, uh, a test. But, um, yeah, I, I think this is prob­a­bly more a good exam­ple of why we use sen­ti­ment and red flags to, uh, stop us from get­ting into val­ue traps than, um, nec­es­sar­i­ly a scream­ing buy as the QAV num­bers would sug­gest.

Cameron: Trent did say it was in the gam­bling part of his port­fo­lio, d- I, I, I missed that bit in the Bible, but, uh, appar­ent­ly there’s [01:01:00] a gam­bling sec­tion of

Tony Kynas­ton: gam­ble, but, but the rule one of gam­bling is, you know, frame your mar­ket and then, and then look at what your odds are com- com­pared to what you can get in the mar­ket and

Cameron: Right

Tony Kynas­ton: gam­ble accord­ing to that. That’s my rule one of gam­bling any­way. But, um,

Cameron: Right

Tony Kynas­ton: hard to frame this mar­ket. Is, is the com­pa­ny going bank­rupt and it’s worth zero?

Or is it, um, is it gonna trade its way out and it’s worth prob­a­bly high­er than what it is now? It’s hard to say

Cameron: Did you have a look at their, um, H1 investor pre­sen­ta­tion?

Tony Kynas­ton: I did

Cameron: Page 24, inter­est­ing slide in the deck, com­mod­i­ty expo­sure. com­mod­i­ty expo­sure as a per­cent­age of the top 15 con­tract­ed FIFO clients’ rev­enue for the year end­ed Decem­ber 31st, 2025

Tony Kynas­ton: So they’re obvi­ous­ly attuned to the fact that if com­modi­ties turn down, their busi­ness turns down.

Cameron: Yeah. They’re

Tony Kynas­ton: Yeah.

Cameron: a QAV com­mod­i­ty

Tony Kynas­ton: You’re [01:02:00] right.

Cameron: sell to their busi­ness. I was pret­ty cool.”

Tony Kynas­ton: Yeah

Cameron: Do we have to start doing that for, uh, busi­ness­es now? Look at where their expo­sure is, of indi­rect expo­sure to clients and com­modi­ties

Tony Kynas­ton: Well, we did think about that when we looked at min­ing ser­vices busi­ness­es and then,

Cameron: Hmm.

Tony Kynas­ton: of them have many, many com­modi­ties,

Cameron: Hmm.

Tony Kynas­ton: ore, gold, coal, what­ev­er else, lithi­um these days too, I sup­pose. So it became pret­ty com­pli­cat­ed to work out which one

Cameron: Mm-hmm.

Tony Kynas­ton: to, uh, like, you know, if you had two sells and two holds or two buys and two holds, how do you, how do you work it out?

Cameron: Hmm.

Tony Kynas­ton: And I think a lot of this, there’ll be some min­ing con­trac­tors which are just one, you know, sin­gle indus­try focus, but most of the big­ger ones try and expose them­selves to as many as pos­si­ble to mit­i­gate that prob­lem.

Cameron: Hmm.

Tony Kynas­ton: Hmm. What, what, how’s it like?

Cameron: m‑many as pos­si­ble

Tony Kynas­ton: [01:03:00] No, that adds to the prob­lem in the Epstein case. Does­n’t help. Yeah.

Cameron: Not a good thing.

Tony Kynas­ton: Yeah

Cameron: All right. Thank you, TK. Thank you, Trent, for that sug­ges­tion. Not gonna be on our buy list for a while, if ever, but, uh, we’re look­ing at that three-point trend line graph. But good luck to you. Hope it does well for you. Well, quick, uh, after-hours, Tony, because we still got­ta get off and do an Amer­i­can show in time for me to go to kung fu

Tony Kynas­ton: Okay.

Cameron: to tell me about?

Tony Kynas­ton: Uh, not, not much good. Um, don’t both­er with “The Man­dalo­ri­an” and Grogu. Don’t both­er with “Dev­il Wears Pra­da 2.” They’re both, they’re both crap. Um, I watched the first episode on SBS of some­thing called “Empa­thy,” which was inter­est­ing, a French, French-Cana­di­an, uh, dra­ma, which is worth hav­ing a look at. I’ve only seen the first episode, but that was interesting.[01:04:00]

But we’ve been get­ting into “Clark­son’s Farm.” Have you seen that, Cam?

Cameron: No, I

Tony Kynas­ton: Yeah. Well, I was kind of, you know, prob­a­bly blasé about it like you are. Um, but we’ve real­ly enjoyed it. Alex got us into it. We watched it with Alex, and then, uh, we’re up to Sea­son 3 at the moment, and it’s a lot of fun. I reck­on, I reck­on Fox would prob­a­bly enjoy it as well.

Is he a, is he a “Top Gear” fan?

Cameron: No, he’s my son. He would­n’t know a Top Gear if he fell over. But y- I, I don’t know if you’ve ever seen any of James May’s trav­el shows,

Tony Kynas­ton: yeah

Cameron: we, enjoyed watch­ing those. I’ve,

Tony Kynas­ton: Mm-hmm.

Cameron: I’ve. I I’ve seen maybe one episode of Top Gear in my life, or half an episode or some­thing like that.

Tony Kynas­ton: Do your­self a favor.

Cameron: he was good

Tony Kynas­ton: get, um, Google Top Gear turn­ing a reliant car into a space shut­tle and show, show Fox that clip. It’s mag­nif­i­cent. Yeah. And it– But, but Clark­son’s Farm, show him a few episodes of that too, espe­cial­ly the– You’ll prob­a­bly get– You’ll [01:05:00] know whether you like it if you watch the first one.

It’s, it’s,

Cameron: Right

Tony Kynas­ton: it’s basi­cal­ly Clark­son bum­bling his way through farm­ing, but high­light­ing all the prob­lems with reg­u­la­tion and health and safe­ty and com­pli­ance and all the prob­lems that farm­ers face and how they’re not helped by the envi­ron­ments which are designed to pro­tect them. It’s, it’s a lot of fun

Cameron: Yeah, I flat out get­ting Fox to sit down and watch any­thing with me.

Tony Kynas­ton: Okay

Cameron: watch Aus- the first Austin Pow­ers film with me over the last few days, which was a strug­gle. Um, well, uh, to add to the list of don’t both­er, lat­est Spi­der-Man film, Brand New Day, or as I would call it, that’s two hours of my life I’ll nev­er get back or I could’ve been at Kung Fu. Went with Hunter to the pre­miere of that last week here and, oh my God, such a load of non­sense. So bor­ing.

Tony Kynas­ton: Right

Cameron: Mas­ters of the Uni­verse,

Tony Kynas­ton: Hmm

Cameron: uh, recent reboot or remake of [01:06:00] Uh, watched that with Chris­sy over the week­end ’cause she grew up watch­ing the orig­i­nal car­toon. That was sort of her demo­graph­ic as a kid and she real­ly want­ed to see it. They did a good job. Very fun­ny.

Tony Kynas­ton: Okay.

Cameron: Yeah, sort

Tony Kynas­ton: I’ll have a look

Cameron: in the realm of a Tai­ka Wait­i­ti Thor kind

Tony Kynas­ton: good

Cameron: you know, just mak­ing fun of how ridicu­lous it all is, uh, kind of thing. It was pret­ty good. I, uh, lis­tened to Antho­ny Hop­kins’ mem­oir as an audio­book. I fin­ished that while I was

Tony Kynas­ton: So I wan­na do that.

Cameron: over the week­end. Hmm

Tony Kynas­ton: Good. I want, I wan­na do that. It’s been on my list for a while

Cameron: Well, it’s, it, it was pret­ty good. Um, inter­est­ing is it’s nar­rat­ed by Ken­neth Branagh, who I think is also Welsh, and he sort of does a lot of accents and voic­es in it, which is inter­est­ing. And par­tic­u­lar­ly inter­est­ing at the end when Antho­ny Hop­kins is talk­ing about being in the first Thor film that was direct­ed by Ken­neth [01:07:00] Branagh, and talks about what a great direc­tor Ken­neth Branagh is. So Ken­neth Branagh nar­rat­ing this, talk­ing about what a great direc­tor he is. Um, the one, the most dis­ap­point­ing thing in the book is I did­n’t get a men­tion. Um, I was wait­ing for it, nev­er came up, so was like, “All right, I guess he could­n’t put

Tony Kynas­ton: You,

Cameron: that

Tony Kynas­ton: must be dis­ap­point­ed a lot, Cam.

Cameron: I am. I am on a dai­ly basis, Tony. But, you know, I met Antho­ny Hop­kins. I thought, uh, you

Tony Kynas­ton: Eh.

Cameron: it would’ve meant a lot to him. Uh, appar­ent­ly not so much. Um, RIP Glenn Hansard. Don’t know if you’re a

Tony Kynas­ton: Oh

Cameron: fan. Did you ever see Once, the film that won all the awards, that he

Tony Kynas­ton: No

Cameron: I can high­ly rec­om­mend that.

It’s

Tony Kynas­ton: Okay.

Cameron: film.

Tony Kynas­ton: All right

Cameron: Lis­tened to some of his music. Um, great Irish singer-song­writer. I mean, he, he, he, you know, if, I don’t know if you saw the [01:08:00] Shane Mac­Gowan but when they per­formed, uh, “Fairy­tale of New York,” it was, uh, Glenn Hansard tak­ing the

Tony Kynas­ton: Okay.

Cameron: it,

Tony Kynas­ton: Yeah, right

Cameron: and he passed away in a motor­cy­cle acci­dent on the week­end.

He did a gig at a pub, jumped on his motor­cy­cle, had an acci­dent, died, 56. Leaves behind a three-year-old son. But a lot of, lot of obits from him, from every­one from Bono to Spring­steen to many, many peo­ple who worked with him and loved him. He’s, it was a real­ly great trou­ba­dour in the style of the trou­ba­dours.

You know, he could pick up a gui­tar any­where, any­time, and bang out a song. And then I’ve been read­ing this CIA book that I wrote about in my newslet­ter last week, um, that remind­ed me of you and

Tony Kynas­ton: was it five, five KPIs for gam­bling or what­ev­er it was? Yeah.

Cameron: It’s called “The [01:09:00] Psy­chol­o­gy of Intel­li­gence Analy­sis.” And, um, I, I, I came across it because I’m writ­ing an app for myself, um, ana­lyze geopo­lit­i­cal events and, and also invest­ing sto­ries for QAV. Um, try­ing to look at. I, I’m call­ing it the cui bono frame­work, but try­ing to come up with. I’m using Bayesian, Bayesian, uh, rea­son­ing to look at a range of hypothe­ses for why X event might have occurred, and then look­ing for the evi­dence to sup­port or refute those hypothe­ses and scor­ing those, and try­ing to come up with a sys­tem­at­ic way of apply­ing, you know, some sort of a, an intel­li­gence frame­work around geopo­lit­i­cal events. Came across this guy’s book, Richards Heuer, who worked for the CIA in one capac­i­ty or anoth­er for 45 years, wrote this book in 1999, and came up with this thing [01:10:00] called the analy­sis of com­pet­ing hypothe­ses, the ACH, which was basi­cal­ly a way for them to, you know, the CIA to bring a more log­i­cal frame­work for under­stand­ing what was going on in the world, ’cause appar­ent­ly he felt the CIA was crap at that.

And hav­ing done a lot of pod­casts about the CIA, I would agree. Don’t think they learned much from it, but, uh, he wrote the book nonethe­less. But he, he talks, this is, I don’t know if. Did you read the newslet­ter? Did you see the

Tony Kynas­ton: I did. Yeah. Yeah

Cameron: for peo­ple who did­n’t, like, you know, appar­ent­ly Mark does­n’t read my newslet­ters, so for oth­er peo­ple who don’t read my newslet­ters, um, real­ly inter-

Tony Kynas­ton: Dis- are you dis­ap­point­ed again?

Cameron: dis­ap­point­ed but not sur­prised is what I. Um,

Tony Kynas­ton: Is that your epi­taph, is it?

Cameron: yeah,

Tony Kynas­ton: the head­stone. Dis­ap­point­ed but not sur­prised, yeah.

Cameron: When I

Tony Kynas­ton: I’m

Cameron: it’ll be

Tony Kynas­ton: Dis­ap­point­ed but not sur­prised.

Cameron: Not sur­prised. I’ll be dis­ap­point­ed and sur­prised if I die. [01:11:00] Yeah I’ll just read it from the newslet­ter. In one exper­i­ment that TK will love, horse race hand­i­cap­pers were shown a list of 88 vari­ables found on a typ­i­cal past per­for­mance chart. For exam­ple, the weight to be car­ried, the per­cent­age of races where the horse fin­ished first, sec­ond, or third, the jock­ey’s record, et cetera. Each hand­i­cap­per was asked to iden­ti­fy what he con­sid­ered to be the five most impor­tant items of infor­ma­tion, those that he would use to hand­i­cap a race if he were lim­it­ed to only five bits of data per horse. Each was then asked to select the 10, 20, and 40 most impor­tant vari­ables they would use. They were then giv­en true data that had been ster­il­ized, so the hors­es in actu­al races could­n’t be iden­ti­fied for 40 past races, and were then asked to rank the top five hors­es in each race in order of expect­ed fin­ish. Each hand­i­cap­per was giv­en the data in incre­ments of the five, 10, 20, and 40 vari­ables that they had judged to be the most use­ful, [01:12:00] each one pre­dict­ed each race four times, once with each of the four dif­fer­ent lev­els of infor­ma­tion. For each pre­dic­tion, each hand­i­cap­per assigned a val­ue from zero to 100% to indi­cate their degree of con­fi­dence in the accu­ra­cy of their pre­dic­tion. When their pre­dic­tions were com­pared with the actu­al out­comes of these 40 races, it turned out that the aver­age accu­ra­cy of pre­dic­tions remained the same regard­less of how much infor­ma­tion they had avail­able. Three of the hand­i­cap­pers actu­al­ly showed less accu­ra­cy as

Tony Kynas­ton: Uh-huh.

Cameron: increased. Two improved their accu­ra­cy, and three were unchanged. What’s fas­ci­nat­ing, though, is that all of them expressed increased con­fi­dence in their judg­ments as they were giv­en more infor­ma­tion to work with. When they were only work­ing with five items of infor­ma­tion, their con­fi­dence was pret­ty well cal­i­brat­ed to their accu­ra­cy.

But the more infor­ma­tion they were giv­en, the more [01:13:00] over­con­fi­dent they became. then he talks about a whole ser- this, this exper­i­ment was done with psy­chol­o­gists, with med­ical doc­tors, a range of. He goes on and on about um, vari­a­tions of this exper­i­ment. They all showed exact­ly the same thing. The, the lev­el of accu­ra­cy of pre­dic­tions does not increase with the amount of data or time spent on it, but the lev­el of con­fi­dence in the pre­dic­tions does go up.

Tony Kynas­ton: It’s comf- it’s com­fort­ing, isn’t it? More data’s com­fort­ing, yeah. It’s like, it’s, well, it’s like QAV, isn’t it? We, you know. You could prob­a­bly run QAV on price to oper­at­ing cash flow and, you know, maybe one or two oth­er things, uh, and a three-point trend line graph. Um, you know, um, but, and we could, but.

And, and QAV does­n’t use much data any­way. But my point is peo­ple still wan­na go and lis­ten to the CEO, hear what they have to say, read ana­lyst reports. Yeah, it’s, it’s just com­fort,

Cameron: Well,

Tony Kynas­ton: [01:14:00] bias

Cameron: well, yeah, the point that came to me, and, and I men­tioned this in the newslet­ter, is, you know, there are ana­lysts spend all day

Tony Kynas­ton: Mm-hmm.

Cameron: ana­lyz­ing com­pa­nies and sec­tors and the com­pe­ti­tion and their R&D depart­ments and all of that kind of stuff. And, know, I’m not ’cause Steven Mabb will send me an email if we do, but we, you know, but we beat most of them with a lim­it­ed amount of time and a lim­it­ed amount of data that we pay atten­tion to.

I know there’s a whole bunch of com­pli­cat­ed rea­sons why they don’t get the same lev­el of per­for­mance. But day, what mat­ters is, um, our lim­it­ed amount of data and the lim­it­ed amount of time that we spend still works. So I thought that was inter­est­ing.

Tony Kynas­ton: Yeah, no, I agree. Um, and, and I agree with the, the punt­ing anal­o­gy. There’s only a cou­ple of KPIs that I look at or a cou­ple of inputs I look at. Yeah.

Cameron: How’s your, how’s your punt­ing going?

Tony Kynas­ton: Good. Yeah. It’s going well. Yep. I mean, it usu­al­ly ends up breakeven for the year, but, uh, it’s a lit­tle bit ahead [01:15:00] at the moment. Yeah. Um, Rodd- you could give Rod­dy all the infor­ma­tion in the world, he’d still pick the scratch­ing.

And be very con­fi­dent about it

Cameron: uh-huh. Yeah. And still send me emails a month late telling me that I had to pay a bill that he for­got to tell me that I had to pay

Tony Kynas­ton: Yeah.

Cameron: We

Tony Kynas­ton: got

Cameron: show to do and I got a kung fu to go to. Thank you, T‑Vey. H- T- T- Vey? TK. Hap­py hunt­ing, every­body