QAV 724 — Our First U.S. Episode

QAV 724 US1

[00:00:00] Cameron: Uh, wel­come back to QAV, TK. Now this is, um, uh, episode, sev­en to four, but in some ways, It’s also episode one, because today we’re going to be doing our first, uh, episode about the U. S. mar­ket.

[00:00:27] Cameron: Some­thing that we’ve been talk­ing about doing for five years, one day, final­ly, final­ly got some ducks lined up and, uh, have an oppor­tu­ni­ty to start talk­ing about this stuff. Any­way, before we get into that, how are you, TK? How’s your week been? You’re back in Syd­ney, I see.

[00:00:43] Tony: yep, hol­i­day’s over. Jen was away for the week­end, so, um, she’s back now. Uh, you know, just, we’ve both been hit by the win­ter lur­gy, so we’re just try­ing to lay low for a bit and let our

[00:00:54] Tony: bod­ies recov­er. But, um, oth­er­wise, we’re well.

[00:00:57] Cameron: mmm. It’s all that golf in cold wet

[00:01:01] Cameron: weath­er not good for you.

[00:01:02] Tony: wet weath­er’s right. I mean, it was, I think I, like, what­ev­er I caught, I caught when I was inland, like in Scone and then War­wick, where it was pret­ty cold at night, and I was­n’t real­ly

[00:01:13] Tony: used to it or pre­pared for it. But any­way,

[00:01:15] Cameron: Rud­dy was­n’t cud­dling up to you enough to keep you

[00:01:18] Tony: I Rud­dy did­n’t turn up until Bris­bane.

[00:01:20] Cameron: Oh, okay, well, there

[00:01:22] Cameron: you go.

[00:01:23] Tony: And what­ev­er I got, I gave it to him as well. So yeah, I’m Typhoid Mary at

[00:01:29] Tony: the moment.

[00:01:32] Cameron: um, I had a dis­cov­ery over the week­end, just talk­ing about health and fit­ness. You know, I did a lot of Kung Fu last week, did a 90 minute class on Fri­day night, and then went to do anoth­er hour long class on Sat­ur­day morn­ing. And I was feel­ing crap like Fri­day night, Sat­ur­day morn­ing before the class, just feel­ing sore, like I haven’t felt for a long time, real­ly strug­gling to just Get my shoes on and get into it.

[00:01:59] Cameron: And then the fit­ness class that we did, which was sort of a high inten­si­ty fit­ness class on Sat­ur­day morn­ing, I strug­gled like a cou­ple of min­utes into it, I was ready to die, got to the end of it and sud­den­ly real­ized I prob­a­bly had­n’t been hydrat­ing enough that week or tak­ing elec­trolytes, came home.

[00:02:14] Cameron: Made an elec­trolyte drink and drank a liter of water with it. Felt imme­di­ate­ly bet­ter. All my pains went away, the fog lift­ed. I was like, I’m such a dum­b­ass, you know, I should have been, I got­ta hydrate more because I was sweat­ing a lot, work­ing hard. Like I prob­a­bly did 10 hours of Kung Fu last week and it was just, uh, you know, drain­ing my body.

[00:02:36] Cameron: So yeah, that was a big les­son. Hydrate. Elec­trolytes.

[00:02:40] Cameron: It’s impor­tant

[00:02:41] Tony: Yeah, well, there should be an app for that, should­n’t there? Maybe that’s a busi­ness

[00:02:44] Tony: oppor­tu­ni­ty for us.

[00:02:46] Cameron: Well, there is it’s GPT. I said, this is how I’m feel­ing. And it said, you’re prob­a­bly not drink­ing enough water doing your elec­trolytes. I was like, all right, thanks GPT.

[00:02:56] Tony: So, so I was think­ing, think­ing about your Kung Fu after we met up in Bris­bane, you were telling me about it. And, uh, You’ve got, I mean, how many hours do you have to put in to get to a black belt? Is it

[00:03:08] Tony: the nor­mal 10, 000 hours

[00:03:10] Cameron: Oh, I don’t

[00:03:11] Tony: be an

[00:03:12] Tony: expert?

[00:03:13] Cameron: Well, you’re not an expert at a black belt. No,

[00:03:15] Tony: Oh,

[00:03:16] Cameron: no, no.

[00:03:18] Tony: any­way, so you’re doing a cou­ple of hours a week. It’s going to take you a long time to get to a

[00:03:22] Cameron: I’m doing about,

[00:03:23] Tony: lev­el of Kung

[00:03:23] Tony: Fu. 10

[00:03:24] Cameron: about 10 hours a week.

[00:03:25] Cameron: So,

[00:03:26] Tony: hours a week. Wow.

[00:03:28] Cameron: so that’s a thou­sand weeks, that’s, uh, 19 years,

[00:03:33] Tony: Yeah.

[00:03:34] Cameron: I’ve, giv­en myself, uh, sev­en years to get a black belt, so I start­ed when I was, hold on, no, I start­ed when I was 51, nine years. So my goal is to have a black belt by the time I’m 60. When you’re a black belt, you just, they say, you, you, then you’re just the begin­ner of the black belts.

[00:03:49] Cameron: Then you need to, that’s when you actu­al­ly start learn­ing Kung fu is when you’re a black belt. They, okay, now, now you’ve, you’ve demon­strat­ed that you know the basics well enough to get a black belt. Now this is where the real train­ing starts.

[00:04:02] Tony: I could­n’t imag­ine doing body con­tact sport at my age, at any sort of advanced lev­el.

[00:04:08] Cameron: eh.

[00:04:09] Tony: Golf’s, golf’s good enough for me, I

[00:04:11] Cameron: Yeah. Any­way, let’s talk about the US mar­ket, Tony. So, as I said at the begin­ning, like we’ve had a cou­ple of, a hand­ful of US lis­ten­ers, uh, and some Cana­di­an lis­ten­ers since the begin­ning. We’ve had a lot of Aus­tralians over the years, not so much in recent years, but ear­ly on peo­ple would ask us a lot about invest­ing in the US mar­ket.

[00:04:32] Cameron: We’ve always said, nah, it’s not some­thing that you do, you’ve done, even though you’ve lived in, you lived in Cana­da for what, five

[00:04:40] Cameron: years?

[00:04:41] Tony: five years? yep.

[00:04:43] Cameron: Always invest­ed in Aus­tralia. Uh, but that said, you know, there’s a, we think there’s a, an audi­ence for the QAV method in the U. S. We want to be able to teach, not just in the U.

[00:04:56] Cameron: S., but in, uh, the U. K., Europe, Cana­da. I, you know, I want

[00:04:59] Cameron: to teach QAV

[00:05:00] Tony: Whoa, whoa, whoa, whoa, whoa,

[00:05:02] Tony: whoa.

[00:05:04] Cameron: ha! What I’m

[00:05:05] Cameron: say­ing is, there are peo­ple all over the world. The sys­tem should work every­where.

[00:05:09] Cameron: I mean, you learnt the sys­tem, how to invest basi­cal­ly from Amer­i­cans most­ly, right? And then added your own,

[00:05:18] Cameron: um, think­ing to it.

[00:05:19] Cameron: But so, uh, the, one of the prob­lems that we’ve had though, over the years is that the data source that you have tra­di­tion­al­ly used and that we, uh, most­ly use is Stock Doc­tor, which is Aus­tralian based and they don’t have. data. So, uh, you know, I’ve spent the last cou­ple of years try­ing to fig­ure out what data source we could use to do inter­na­tion­al mar­kets.

[00:05:46] Cameron: And, uh, coin­ci­den­tal­ly, a year or so ago, Elio from Stock Doc­tor, for­mer­ly of Stock Doc­tor, end­ed up run­ning Stock­o­pe­dia in Aus­tralia, uh, who I think are UK based, but they not only have Aus­tralian data and UK data, they also have US data. So I. We spent some time last year build­ing a ver­sion of our check­list that would use Stock­o­pe­di­a’s US data and I’ve been run­ning that for about six months and it’s been doing okay.

[00:06:17] Cameron: And so we felt like we’re sort of ready now to start look­ing at some US stocks. But there’s obvi­ous­ly a process that we’re going to have to go through to get our feet wet. under­stand­ing U. S. mar­ket, U. S. com­pa­nies, some of the dif­fer­ences about report­ing and tax­a­tion and div­i­dends and legals and all that sort of stuff in the U.

[00:06:38] Cameron: S. But over time, if this goes well, I think, um, you know, we might have like a sep­a­rate, um, Series that we do on a month­ly basis, once a month, some­thing like that, where we look at a US stock and talk to our US lis­ten­ers. Uh, and then, you know, UK, Cana­di­an, Japan­ese, Chi­nese. Tony’s giv­en me this look like, Oh, real­ly?

[00:07:01] Cameron: Oh, uh, oh, real­ly? No, yeah, yeah,

[00:07:06] Tony: I can get paid mul­ti­ples of what I’m get­ting paid now then for the new

[00:07:09] Tony: mar­kets.

[00:07:10] Cameron: absolute­ly. As many mul­ti­ples of zero as you like. So. Uh, I’m assum­ing though that most peo­ple lis­ten­ing to this are our exist­ing Aus­tralian lis­ten­ers or our exist­ing inter­na­tion­al lis­ten­ers who already know us, but I thought, just in case there are any new lis­ten­ers to this, let’s do a quick intro to you, me, QAV, oh how hap­py we will be.

[00:07:33] Cameron: Uh, and then we’ll get into talk­ing about the U. S. mar­ket. And if peo­ple want to know more about Tony and the QAV sys­tem, if they are new, please do. Go and have a lis­ten to our episode 301, find it on our web­site or in our feed. That’s sort of an hour long back­ground that we don’t need to repeat because it’s all the same stuff, but you can go and have a lis­ten to that.

[00:07:57] Cameron: So give every­one the cou­ple of minute ver­sion of your invest­ing back­ground, TK,

[00:08:05] Tony: Yeah, sure. So, uh, I’ve had, I have a cor­po­rate back­ground, so I worked for the Shell Com­pa­ny of Aus­tralia for 12 years and then for a com­pa­ny called Coles Myer, which is now West Farm­ers after it was tak­en over. So a big oil com­pa­ny and a big retail­er, um, gave me a lot of expe­ri­ence in cor­po­rate life, in how busi­ness­es work, gave me a lot of expe­ri­ence, Shell in par­tic­u­lar, and, um, Busi­ness­es around the world and what it’s like oper­at­ing in dif­fer­ent coun­tries, uh, and then towards the end of my cor­po­rate life, actu­al­ly that’s not quite true, uh, towards the end of my shell life, um, I start­ed invest­ing.

[00:08:44] Tony: So, uh, we were offered a, uh, a cor­po­rate loan as part of our salary pack­ag­ing or the option to take a cor­po­rate loan, which I, um, invest­ed, uh, and Very quick­ly lost half of because I had no idea what I was doing. And then, uh, decid­ed to back up and teach myself about invest­ing and sub­scribe to every newslet­ter I could, every, um, read every book I could on invest­ing.

[00:09:09] Tony: Um, lis­ten to tapes back in those days from, um, peo­ple who were teach­ing invest­ing and, or were, uh, famous investors them­selves, uh, pri­or to pod­casts. In fact, the ASX start­ed launch­ing pod­casts around. I think about the mid nineties and that used to be a good series. It’s a shame that it’s still doing it.

[00:09:28] Tony: Cause I, that was one of the bet­ter

[00:09:30] Tony: busi­ness pod­casts around and that intro­duced me to peo­ple like Roger Mont­gomery,

[00:09:34] Cameron: Pod­cast­ing was­n’t invent­ed until 2004,

[00:09:36] Cameron: Tony, so I doubt

[00:09:37] Tony: and I must’ve been lat­er then, sor­ry. Okay. Um, yeah, you could be right. And, uh, But I start­ed doing it about 25 years ago, so it would have been, would have been about the mid 90s when I start­ed, um, and came across a book on War­ren Buf­fett called The Mak­ing of an Amer­i­can Cap­i­tal­ist by a chap called Lowen­stein, who’s writ­ten a num­ber of books on Buf­fett since then, uh, which was an unau­tho­rized biog­ra­phy, but it sort of res­onat­ed with me.

[00:10:06] Tony: I think, uh, that was kind of like the total ecosys­tem. that appealed to me about invest­ing. Up until then, most of the stuff I read was either very dry finan­cial type analy­sis, uh, or it was, um, you know, out there kind of go with the vibe type analy­sis. And then, and of course, the dot boom, dot com boom came along where it was all about for­get about the bot­tom line and just, just get rev­enue.

[00:10:33] Tony: and Dis­rupt and Get Eye­balls, and that did­n’t real­ly appeal to me either. Even though I did work in the dot com sec­tion of Coles Myer for a while. Ran a com­pa­ny called Myer Direct, which was an online cat­a­logue retail­er and even­tu­al­ly became, um, well sor­ry, it was a cat­a­logue retail­er and even­tu­al­ly became an online sell­er as well and pio­neered e tail­ing in Aus­tralia.

[00:10:56] Tony: Uh, and um, Yeah, the val­ue invest­ing side of things, uh, struck a chord. I think, luck­i­ly enough for me, uh, IT was improv­ing, prob­a­bly because of the dot com rev­o­lu­tion, and so I had access to bet­ter tools. Uh, I had a back­ground in busi­ness analy­sis, so I knew how to use Excel. Back then it was, I think, Lotus 1 2 3, and, um, you know, pri­or to Excel.

[00:11:21] Tony: And, uh, Tools like Stock Doc­tor were launched in the late 90s and that pro­vid­ed data to use. I mean, in my ear­ly days of invest­ing, I used to write away and get sent a book once a year, or once a half of every­one’s one page sum­ma­ry of their Annu­al report. And yeah, for a long time, I had about a dozen of these on my shelf.

[00:11:44] Tony: Um, and if I had to, if I had a thought about, you know, look­ing up a com­pa­ny, I could go to that and pull out its num­bers quick­ly, but that was how you did it. But that’s all improved now over time. And par­tic­u­lar­ly with Stock Doc­tor and Excel, we had the abil­i­ty to down­load, Lumps of data and then be able to, um, to ana­lyze it your­self and look for, for impor­tant pieces of infor­ma­tion in the data.

[00:12:08] Tony: And, you know, that start­ed to be as for­ma­tive, uh, in terms of my invest­ing career, as much as val­ue invest­ing was, because it start­ed to teach me that, um, CEOs were basi­cal­ly sales­peo­ple and they could say what­ev­er they liked, but it was gen­er­al­ly to try and boost the share price, uh, and often­times did not reflect what was under­ly­ing in the com­pa­ny.

[00:12:28] Tony: So I found it was appeal­ing to be able to use the data to, um, to ana­lyze what was actu­al­ly going on in a com­pa­ny and, and, um, ignore what the CEO was say­ing to a large extent. And, um, Um, and then read a book called The Check­list Man­i­festo, which, uh, high­light­ed the virtues of being able to sys­tem­i­cal­ly, uh, oper­ate a busi­ness, I guess, uh, which, which invest­ing is, and, uh, put togeth­er All the thoughts I’d had, or all the nuggets I’d found dur­ing my expe­ri­ence as an investor, into a check­list.

[00:13:03] Tony: And that’s evolved a lit­tle bit over time and it’s become what we use in QAV now. So, in sum­ma­ry, it’s, um, it’s based on val­ue. I’ve seen enough and read enough in my expe­ri­ence to know that, um, val­ue invest­ing appeals to me, but it’s gen­er­al­ly not. been the style that’s worked the best over the years, way back, you know, from Ben Gra­ham’s days in the, in the sort of post depres­sion years in the U.

[00:13:31] Tony: S. Um, so, sure there are oth­er, oth­er ways, and espe­cial­ly growth, which would be the oth­er sort of main top­ic that peo­ple often talk about.

[00:13:40] Tony: And, and for me, both val­ue and growth go in and out of style. Um,

[00:13:45] Tony: but, Yeah, sure.

[00:13:47] Cameron: val­ue and growth?

[00:13:48] Tony: uh, say that all invest­ing is val­ue invest­ing. We’re try­ing to buy, you know, some­thing for a dol­lar now, which will be worth more than a dol­lar down the track.

[00:13:57] Tony: And, um, there’s two ways of doing that. One is to say that, you know, I’m a val­ue investor. So I’m look­ing to buy some­thing that’s, um, actu­al­ly worth 2 now, but I’ll pick it up for a dol­lar. Um, so that’s, it’s, it’s look­ing for the bar­gains, I guess, in the stock mar­ket, much the same way as you’d prob­a­bly shop for some­thing that’s impor­tant in your life, like a A car or a house or a rug or what­ev­er.

[00:14:18] Tony: Um, and then there’s growth invest­ing, which is say­ing that, uh, you know, this is a, there’s enough I can see in this busi­ness to tell me that it’s going to be much larg­er down the track than what it is now. And I can ignore the fact that it’s not mak­ing mon­ey now. Because it’s grow­ing rev­enues, for exam­ple, quick­ly, or I can see that it’s going to dis­rupt a par­tic­u­lar indus­try, or it’s, um, going to do well, for what­ev­er rea­sons, um, like it’s a new way of doing some­thing, uh, and I’m going to bet that, you know, the com­pa­ny will be well man­aged, it’ll get to a stage where it’s prof­itable, and then we’ll, um, you know, go on to be a large Large mar­ket cap com­pa­ny and actu­al­ly start to pro­duce some results down the track.

[00:14:57] Tony: Um, I think they, they tend to be two styles that go in and out­ta fash­ion. Um, but from my point of view, I found val­ue invest­ing, even though you can have down years, um, over­all it, it con­tin­ues to work. Where­as I found when I have dab­bled in growth invest­ing, it’s, um, first of all, it’s. It tends to be less rules based than the way I like to invest.

[00:15:19] Tony: So you’re pret­ty much try­ing to assess some­thing based on your expe­ri­ence that has­n’t hap­pened, um, before. So it’s, it’s, you can’t sort of go back and say, Oh, I’ve seen this before. It’s going to, you know, I can, I can apply this frame­work to it and val­ue it this way. Gen­er­al­ly, it’s some­thing that’s new. Um, and then you, you’re kind of hop­ing that it, you know, it’s going to grow, but then you’re hop­ing it’s going to turn a prof­it.

[00:15:42] Tony: Which, um, some­times these growth com­pa­nies don’t do, um, and some­times for good rea­sons if you look at Ama­zon, um, but, uh, I found growth invest­ing is, is more, it, it’s good for a while and then a growth stock when it crash­es, crash­es real­ly bad­ly, so if you think back to the dot com peri­od, you know, the Nas­daq dropped 80 per­cent in, you know, I think it was 2001 or maybe 2000, when­ev­er it was when the dot com bal­loon burst, and that tends to hap­pen with these com­pa­nies when they’re not mak­ing mon­ey and some­thing turns against them, whether it’s the econ­o­my or some kind of exis­ten­tial threat, um, they can drop like lead bal­loons, uh, so that’s the first thing that I strug­gle with, with growth invest­ing, and the sec­ond thing is, um, it’s very hard to have a growth strat­e­gy.

[00:16:32] Tony: A sell trig­ger for Azure growth invest­ment. You’re always wor­ried it’s going to go up more if you decide to sell and take some mon­ey off the table. Where­as, um, I think it’s, it’s an impor­tant part of invest­ing to have not just a buy sig­nal, but also a sell sig­nal. Um, that’s not say­ing that they aren’t out there and that some­one has­n’t mas­tered that, but I found it dif­fi­cult to do myself.

[00:16:51] Tony: So, um, that’s why I pre­fer, um, The val­ue invest­ing, data dri­ven, sort of rules based check­list for a style for invest­ing. I, I like the, you know, we put a qual­i­ty over­lay on it, so I like, um, being able to find good sol­id com­pa­nies that have good cash flows and, and then be able to, to look at them and say, okay, I can buy this at a rea­son­able price rather than, um, try­ing to assess whether this is a good buy now, pay lat­er com­pa­ny ver­sus that one, or whether, you know, um, NVIDIA chips are going to, you know, be able to keep grow­ing from where they are now or whether they’re going to be com­pet­ed out of exis­tence by the next man­u­fac­tur­er.

[00:17:33] Tony: So I just find that stuff, it requires a deep ver­ti­cal knowl­edge of a par­tic­u­lar indus­try, which I don’t have. Where­as with, um, the data dri­ven approach, I can do mar­ket scans and come up with a check­list and then

[00:17:45] Tony: work through the check­list and, and find a com­pa­ny that I like there.

[00:17:50] Cameron: essen­tial­ly, the sys­tem that you devel­op to invest, we now call QAV, Qual­i­ty At Val­ue. Basi­cal­ly, the way that we do it is that we look at all of the com­pa­nies that are list­ed, In the mar­ket, tra­di­tion­al­ly Aus­tralia, but now also the U S and we run fil­ters over them to deter­mine which com­pa­nies we believed are under­val­ued.

[00:18:14] Cameron: And it’s based on his­tor­i­cal mea­sure­ments and cur­rent, um, mea­sure­ments in terms of their sales, their prof­its, their, their rev­enues, and we buy them when we deter­mine that we think they’re cur­rent­ly avail­able to be bought at a dis­count to what their actu­al val­u­a­tion is today. Not that what their val­u­a­tion might be five years in the future, but what we think a share of it is worth today and the basic ratio­nale is that if we think it’s under­val­ued at some point, it’s under­val­ued.

[00:18:47] Cameron: The rest of the mar­ket will deter­mine that it’s under­val­ued and the price will go up to where it should be, where its val­ue is. And com­pa­nies can be under­val­ued at any giv­en point in time for a whole bunch of emo­tion­al fac­tors in the mar­ket­place that have noth­ing to do with the, how well the busi­ness is run, how prof­itable the busi­ness is, how good the man­age­ment is.

[00:19:08] Cameron: And so we’re try­ing to exploit, uh, and lever­age those, uh, fac­tors in the mar­ket­place, as opposed to try­ing to buy some­thing and pre­dict that its rev­enues five years from now will be X or ten years from now will be Y, because we don’t believe we have a crys­tal ball.

[00:19:26] Tony: Yeah, I think that’s a good sum­ma­ry. And I just want to add that it all comes down to me, to regres­sion to the mean. So we’re buy­ing some­thing which we think is under­val­ued and we’re wait­ing for it to regress back to fair val­ue. If you’re a growth investor, you’re buy­ing some­thing which you think is Kind of go up, but, you know, again, regres­sion to the mean will apply.

[00:19:45] Tony: It will even­tu­al­ly come back down to what’s fair val­ue. So, um, I’d rather be on the oth­er side, I’d rather be on the val­ue side, wait­ing for things to regress upwards than to regress

[00:19:54] Tony: down­wards.

[00:19:55] Cameron: what does regres­sion to the mean mean?

[00:19:58] Tony: if you think about a ratio­nal approach to invest­ing, then every, every com­pa­ny should trade at its fair val­ue. And that’s, that was a the­o­ry on the stock mar­ket for a long time. The effi­cient mar­ket hypoth­e­sis. There’s no new news. You can’t have an edge that every piece of news has already backed it into the price of a share.

[00:20:16] Tony: Um, but you know, we, we now know from, thanks to the work of peo­ple like Kah­ne­man and Tver­sky, that there’s a whole lot of human emo­tion in this, in

[00:20:26] Tony: mar­ket­places, not just the stock mar­ket, of course, but any mar­ket­place.

[00:20:30] Tony: Um, there are Fear who are try­ing

[00:20:31] Tony: to do, fear and greed, yeah, but also all the hard wiring in your brain, which has evolved to do some­thing else, like evade being eat­en by a tiger.

[00:20:42] Tony: Um, so, so, uh, it gets exploit­ed in the stock mar­ket and used against you by, uh, by peo­ple. Um, just like it, like, just like it’s exploit­ed every­where else in You know, the media, and in life, and etc, etc, but um, so the stock mar­ket isn’t com­plete­ly effi­cient, is what I guess I’m try­ing to say. And there can be gems hid­ing in plain sight, that once the spot­light goes on them, will be bid up in price, back to what they should be worth, and there are also com­pa­nies which have a huge spot­light on them.

[00:21:15] Tony: Where FOMO dri­ves the price up, but even­tu­al­ly most of those will fall back down to what they’re real­ly worth. And that’s, that’s what regres­sion to the mean

[00:21:22] Tony: is in my book. Yeah.

[00:21:24] Cameron: Every­thing will, um, either go up or go down to the lev­el that it should be over time. And you know, when we think about it, this is some­thing that, uh, so for, for my sto­ry, uh, for peo­ple that are new, I know noth­ing about invest­ing or at least did­n’t when we start­ed this pod­cast, but I had done a lot of pod­cast­ing and, uh, one of the things that Tony taught me ear­ly on that real­ly helped me start to under­stand invest­ing from his per­spec­tive was to think about.

[00:21:56] Cameron: a share that you buy in the stock mar­ket as lit­er­al­ly that, a share of a busi­ness. And so we’re look­ing at these com­pa­nies as going con­cerns, going busi­ness­es. And instead of, instead of think­ing about a com­pa­ny as hav­ing a mil­lion shares, imag­ine it had four and you were being offered, you know, The oppor­tu­ni­ty to buy one of those four shares.

[00:22:19] Cameron: How would you deter­mine whether or not the price you were being offered for that share was a rea­son­able price? What are the things that you would look at? You would look at how many cus­tomers does it have? You know, what’s the sales? Like this year, what’s its track record of sales? How, how capa­ble of the, do the man­age­ment seem to be based on what they’ve been doing with the busi­ness for the last four or five years?

[00:22:41] Cameron: Uh, what, how many com­peti­tors do they have? What are their prof­it mar­gins like? Are they going up? Are they going down? You’d look at all the basic stuff that. Most peo­ple lis­ten­ing to this prob­a­bly under­stand if you’re think­ing about it in terms of a, a cof­fee shop is the anal­o­gy that you’ve always used with me.

[00:22:56] Cameron: Some­thing that most of us can prob­a­bly under­stand. It’s got some costs. It’s got some cus­tomers. It’s got some prod­ucts and ser­vices that it deliv­ers for a prof­it. When you start to think about it like that, it makes a lot more sense. Then you go, okay, well, I’m being offered a share. Being offered the oppor­tu­ni­ty to buy a share of this, do I think the price that they’re offer­ing is worth it?

[00:23:18] Cameron: Is a good deal? Is it a bar­gain? Or is it, is their ask­ing price way too high? And, and how do I deter­mine what way too high is? And then we, you know, so that’s basi­cal­ly the approach to invest­ing as opposed to, you know, maybe the oth­er thing is some­body comes to you with a start­up idea and they’ve got a busi­ness plan and they say, this is going to be doing a bil­lion dol­lars a year in five years, uh, buy a share today.

[00:23:45] Cameron: Don’t miss out.

[00:23:47] Cameron: You’re like, Oh,

[00:23:48] Tony: Yeah. That’s a good idea. It’s a good sum­ma­ry, isn’t it? It’s an idea. They’re sell­ing the

[00:23:50] Tony: idea.

[00:23:51] Cameron: Yes.

[00:23:52] Tony: I’m, I’m going to use AI to run cof­fee shops more effi­cient­ly than what

[00:23:56] Tony: they run now. Okay. How much do you want for that?

[00:24:00] Cameron: So that’s, um, that’s a quick intro to, um, QAV for peo­ple that are new. And if you want to know more, as I said, go look into, lis­ten to 301 and then 303 and 305 is where we actu­al­ly go into the check­list process in a lot more detail. It’ll take a cou­ple of hours to go through it and you can have a lis­ten to those.

[00:24:19] Cameron: So, as I men­tioned in the intro, about 6 months ago, um, I start­ed build­ing our dum­my port­fo­lio of US stocks. We call it a dum­my port­fo­lio because we’re not Invest­ing real mon­ey. It’s just on paper, but we, we doing it sort of trans­par­ent­ly, pub­licly, and I’ve been report­ing on the per­for­mance of that US port­fo­lio each week on our, um, on our episodes and in our emails, uh, for the last six months and it’s been doing okay.

[00:24:49] Cameron: Um, it’s not, I would­n’t say shoot­ing the lights out in terms of being dou­ble mar­ket, which by the way is some­thing we did­n’t men­tion. So, sort of the goal that we have with our invest­ing is to do about dou­ble what the mar­ket is doing and how you deter­mine what the mar­ket is doing is a lit­tle bit sub­jec­tive.

[00:25:08] Cameron: The bench­mark that you pick, but there are index­es like the S& P 500 in the US. Or the ASX 200 or the ASX 500, 300. There’s a num­ber of dif­fer­ent index­es in Aus­tralia. So we tend to pick an index that we think is rel­e­vant and then assess our per­for­mance against that. Now, our goal is to do twice as good as the index over time, over a long peri­od of time.

[00:25:36] Cameron: Because obvi­ous­ly this is a long time. term invest­ing strat­e­gy, not a short term invest­ing strat­e­gy. And what I’ve learned in the last five years of doing this with you, just look­ing at the Aus­tralian mar­ket is there was one year in par­tic­u­lar when we knocked the lights out. We did about four times the mar­ket per­for­mance.

[00:25:52] Cameron: 2020, 2021. And then it’s come back down. Um, we’ve under­per­formed the mar­ket a lit­tle bit in the last year or two, but it’s come back down to about dou­ble mar­ket. So over the last five years, our aver­age return in Aus­tralia has been about dou­ble the Aus­tralian bench­mark that we look at. With the US port­fo­lio that we’ve been doing, and I’ve been track­ing in Stock­o­pe­dia.

[00:26:16] Cameron: Let’s see, accord­ing to this, I start­ed at Sep­tem­ber 20, 2023. So a lit­tle bit more than six months, that, isn’t it? It’s like nine months, real­ly. Um, it’s per­for­mance accord­ing to Stock­o­pe­dia has been about 21 and a half per­cent over that peri­od. Now that’s not a, CAGR per­for­mance, which is the one that we nor­mal­ly pre­fer, that’s a time weight­ed return, I think.

[00:26:46] Tony: Right,

[00:26:46] Cameron: The S& P 500 index, which is the bench­mark that they give me, is up 20. 6 per­cent over that same peri­od of time. So, we’ve done bet­ter than the index, but not quite. Nowhere near dou­ble the index, but we’ve at least matched the index. Although I do sus­pect that div­i­dends are includ­ed in our per­for­mance here and prob­a­bly not includ­ed in the S& P 500.

[00:27:10] Cameron: So if you actu­al­ly added the div­i­dends to the S& P 500 stocks, it’ll prob­a­bly be doing quite a bit bet­ter than us. In that nine month peri­od, I. Don’t think I can get Stock­o­pe­dia to give me a bench­mark that includes the div­i­dends. We should have a chat to the Stock­o­pe­dia peo­ple about maybe help­ing us out with them.

[00:27:33] Cameron: But

[00:27:34] Tony: Well, bear in mind too that div­i­dends are a small­er por­tion of the U. S. The yields are small­er in the U. S. than they are in Aus­tralia. So div­i­dends are a small­er por­tion of per­for­mance in the U. S. They don’t have our frank­ing cred­it sys­tem as far as I’m aware. And, um, it’s, it’s kind of more busi­ness phi­los­o­phy over there to rein­vest prof­its rather than to pay them out as

[00:27:54] Tony: div­i­dends.

[00:27:55] Cameron: Right. Oh, that’s good to know. Yeah. So, I will try and get fig­ures so we can do a more accu­rate com­par­i­son over time. But, bot­tom line is that the port­fo­lio, like our Aus­tralian port­fo­lio has­n’t done 21. 5 per­cent in the last 9 months. I’d be hap­py if it

[00:28:14] Cameron: had. So,

[00:28:16] Tony: No, exact­ly. Ha,

[00:28:18] Cameron: the U. S. is an inter­est­ing mar­ket

[00:28:20] Cameron: and we’ll talk a lit­tle bit about that and sort of, you know, I think I read in the Finan­cial Review, which is an Aus­tralian, um, finan­cial news­pa­per for our non Aus­tralian lis­ten­ers, say­ing today that Wall Street’s, uh, like doing record highs.

[00:28:36] Cameron: Aus­tralian mar­ket was on a record high up until the last, until today, dropped back down again. But a lot of the US mar­ket we know is being dri­ven by what they call the Mag­nif­i­cent Sev­en these days, the Mag Sev­en. And these are basi­cal­ly the tech stocks that, uh, have a lot to do with the AI boom. And they’ve just been knock­ing the lights out for the last year or so.

[00:29:00] Cameron: Well, there were tech com­pa­nies that were doing well before that, but par­tic­u­lar­ly since the Chat­G­PT start­ed the AI boom 18 months ago. Uh, these com­pa­nies who the investors in the U. S. seem to believe are going to prof­it the most out of the AI boom are doing extra­or­di­nar­i­ly well in terms of their share price.

[00:29:21] Cameron: And, uh, I think that’s account­ing for a large com­po­nent of the buoy­an­cy in the mar­ket in the U. S. is those mag sev­en. I have seen some stats say­ing what per­cent­age of the, uh, Um, growth in the U. S. is, uh, because of the Mag 7 in the past, I can’t remem­ber what it is, but it’s a, it’s a sig­nif­i­cant num­ber.

[00:29:43] Tony: that’s, that’s inter­est­ing in itself, isn’t it? So the S& P 500, which has, as you said, a large, um, would­n’t say weight­ing per­haps, but a large com­po­nent of its, its per­for­mance is through the Mag 7, uh, is doing about the same as our dum­my port­fo­lio, which is a val­ue stock port­fo­lio. So

[00:30:04] Tony: I think that’s inter­est­ing.

[00:30:05] Tony: Um, it shows that val­ue invest­ing, in my opin­ion, any­way, can, can do as well as growth, um, and it’ll be inter­est­ing to see even fur­ther if the Mag 7 come off, what hap­pens to. Our port­fo­lio com­pared to the S& P 500.

[00:30:19] Cameron: Mm. Yes. If and when that hap­pens, who knows what’s going to Yeah.

[00:30:26] Cameron: But the inter­est­ing thing for me in build­ing this U. S. port­fo­lio in the last nine months has been look­ing at the, uh, com­pa­nies that, uh, make up our port­fo­lio, which have a very dif­fer­ent, uh, Pro­file of com­pa­nies than we’d nor­mal­ly be invest­ing in, in Aus­tralia.

[00:30:45] Cameron: Uh, if I run through the stocks that we hold in our cur­rent port­fo­lio, I think there’s about 14 of them. Land’s End is, uh, the one that has done the best. If I stack rank these by their per­for­mance, Land’s End is a retail­er, cloth­ing retail­er, I think, or a dig­i­tal retail­er of most­ly cloth­ing and home prod­ucts.

[00:31:11] Cameron: Um, it’s up. Hun­dred and five per­cent. Since we bought it, cloth­ing, I don’t think there are any major dig­i­tal retail­ing or cloth­ing brands in our port­fo­lio, and I don’t think there ever have been in Aus­tralia. Can you think of any,

[00:31:29] Tony: Myer in there for a while, but it’s not a dig­i­tal retail­er. Um, super, super,

[00:31:34] Tony: yeah, super, super group. They do, I guess, aes­thet­ic cloth­ing, but, but yeah, you would­n’t expect it to. Yeah. We haven’t had much in the, in our port­fo­lio. And, and inter­est­ing­ly enough, I had a bit of a rela­tion­ship with Lanzin when I was run­ning MyerDi­rect.

[00:31:50] Tony: It was one of the, it was a cat­a­log retail­er from the US that we had a licens­ing deal with to remar­ket their appar­el in Aus­tralia. So it’s been around for a long time. And as you say, it’s not, it’s by no means some kind of AI tech, um, gross

[00:32:04] Tony: stock. It’s, you know, it’s a, a fash­ion retail­er, basi­cal­ly.

[00:32:08] Tony: Oh, buy­ing

[00:32:11] Cameron: stocks for this port­fo­lio, of course, I mean, I know noth­ing about any­thing any­way, but par­tic­u­lar­ly, I know noth­ing about these U. S. com­pa­nies. I had heard of Land’s End, but I had­n’t heard of the rest of them. But all I was doing was run­ning our fil­ter over them.

[00:32:27] Cameron: So look­ing at their finan­cials, essen­tial­ly, and their per­for­mance, giv­ing them a score based on what our Check­list told me that, uh, their val­ue and their qual­i­ty was, and then buy­ing the ones with the high­est score. And then real­ly not doing any more research or any more think­ing about it. And in some cas­es it was quite scary because I was look­ing at some of them think­ing, God, I know noth­ing about this.

[00:32:51] Cameron: And some­times their charts looked hor­ren­dous, um, their stock charts. But, you know, I’d run them through the process, and if it said they were a buy, I’d buy them, and not all of them have worked, but some of them have worked, like this one, up a hun­dred per­cent, um, since I bought it. And let me tell you, um, I’ll try and open up the trans­ac­tions for this.

[00:33:16] Cameron: So I bought it in Novem­ber, 20th of Novem­ber, so a lit­tle over sev­en months it’s, um, gone up. 100 per­cent which is astound­ing. I have no idea why. Can’t tell you why. Don’t know. It just has. The sec­ond one in terms of per­for­mance is Stealth Gas, G A S S, which is a freight and logis­tics com­pa­ny, provider of inter­na­tion­al seaborne trans­porta­tion ser­vices.

[00:33:45] Cameron: I think that just means ship­ping to liq­ue­fied petro­le­um gas pro­duc­ers and users as well as crude oil. It’s up about 64 per­cent since, um, I bought that in Octo­ber last year, so about 7 months, 8 months. Um, you famil­iar with Stealth Gas, Tony?

[00:34:07] Tony: I am not, no, even though I worked in the oil and gas indus­try, it sounds, it sounds like it’s a, it’s a ship­ping com­pa­ny for oil and gas, you know, oil and gas

[00:34:16] Tony: trans­port. Did­n’t we do it? We did an Aus­tralian com­pa­ny called Stealth Some­thing last week. Uh, the week before, we were doing a deep dive We did.

[00:34:25] Tony: Yeah. Dif­fer­ent

[00:34:25] Tony: com­pa­ny.

[00:34:26] Cameron: And they had noth­ing to do with being stealthy. I don’t know what stealth, I don’t know why

[00:34:29] Cameron: Stealth Gas is par­tic­u­lar­ly stealthy.

[00:34:32] Tony: Yeah, Stealth, the Stealth com­pa­ny list­ed in the ASX was about, um, it was a hard­ware chain, or it was sell­ing

[00:34:40] Tony: indus­tri­al equip­ment and hard­ware, basi­cal­ly in WA.

[00:34:45] Cameron: Stealth Gas is a ship­ping com­pa­ny, just is the first of a num­ber of ship­ping com­pa­nies that we’ll talk about. The next one is Grin­rod Ship­ping Hold­ings, G R I N. A Sin­ga­pore based ship­ping com­pa­ny that owns, char­ters in, and oper­ates a fleet of dry bulk car­ri­ers. It’s up 49 per­cent since I bought it.

[00:35:07] Cameron: I bought it in Octo­ber, sold it in Novem­ber, and then bought it again at the end of Jan­u­ary this year. Um, It’s done quite well since then. The fourth is Glob­al Ship Lease, GSL, a Unit­ed King­dom based con­tain­er ship own­er, leas­ing ships to con­tain­er ship­ping com­pa­nies. It’s up, uh, about 42 per­cent since I bought it in, let’s see, Jan­u­ary this year, the 12th of Jan­u­ary.

[00:35:40] Cameron: And again, ship­ping com­pa­nies is some­thing that I real­ly don’t see turn up on our buy list in Aus­tralia.

[00:35:47] Cameron: And

[00:35:48] Tony: we have any in the

[00:35:49] Tony: ASX that I can think of. Mm. Mm. Mm

[00:35:53] Cameron: this is inter­est­ing that three of the top four per­form­ers in the US port­fo­lio have been ship­ping com­pa­nies. So obvi­ous­ly when I was assess­ing them all six months ago, some­thing was going on, whether it was Ukraine or Gaza or who knows what, that had forced the prices of these stocks down or some­thing has hap­pened over the course of the last six months that has caused the prices of all these ship­ping com­pa­nies to go up some geopo­lit­i­cal glob­al con­flict or mar­ket trade issues who knows but our sys­tem iden­ti­fied six months or so ago that they were under­val­ued based on their finan­cials and the the mar­keters uh also rec­og­nized that over the course of the

[00:36:40] Cameron: last six months and their And that’s some­thing we’ve noticed in the, you know, run­ning QAV in Aus­tralia is that, uh, we can seem the­mat­ic in the port­fo­lio con­struc­tion, even though we weren’t set­ting out to do that. But the num­bers just hap­pen to focus on one par­tic­u­lar indus­try, whether it’s gold min­ing or air­lines or banks or what­ev­er.

[00:36:59] Tony: But at the moment, in the US, it tends to be ship­ping com­pa­nies. And you’re right, that could be because of, you know, if you remem­ber, the Suez Canal was blocked about a year ago. Mm hmm. And ship­ping had to go around the long, the long way, uh, which added time and cost to the, to, uh, trans­port. So I don’t know if that had a bit to do with it, whether inter­est rates are play­ing into it, who knows.

[00:37:19] Tony: We don’t real­ly care. Um, we just thought they were, you know, good qual­i­ty com­pa­nies sell­ing at a rea­son­able price. And, um, and then the indus­try re rat­ed. Regres­sion to the mean

[00:37:28] Tony: hap­pened. Yeah. Rerat­ed. That’s a good term. There’s a fifth one, uh, fourth one out of the top five here, by the way, is Euroseas, E S E A. Euroseas is engaged in the ship­ping busi­ness. The com­pa­ny is an own­er and oper­a­tor of dry bulk and con­tain­er car­ri­er ves­sels. So there you go. That one is up about 40 per­cent since I bought it, uh, Novem­ber 2023.

[00:37:54] Cameron: So four out of the top five, uh, ship­ping com­pa­nies, which is Euroseas. Quite strange. Then we get into the bank­ing and finance sec­tor. So, num­ber six on my list is Opti­mum Bank Hold­ings, OPHC, a bank hold­ing com­pa­ny, a state chart­ed bank, what­ev­er the hell that means. It’s up 35% Then we have Willis Lease Finance, WLFC, it’s a less­er and ser­vicer of com­mer­cial air­craft and air­craft engines.

[00:38:27] Cameron: But, uh, a finance com­pa­ny, I guess. Um, for some rea­son it’s share price is just Blown up in the last, uh, month and a half. We went from 48 on the 29th of April, up to 65. I got no idea why, but it’s up 32 per­cent since I added it. This one, I obvi­ous­ly had to buy because it’s TK. Lit­er­al­ly, let­ter T, let­ter K, um, which is, uh, as lis­ten­ers know, what I always refer to Tony as, Tony Kynas­ton, TK.

[00:39:05] Cameron: This TK, though, not you, it’s a provider of inter­na­tion­al crude oil and oth­er marine trans­port ser­vices. You’re just a provider of inter­na­tion­al crude jokes. Um, ah, again, anoth­er, uh, ship­ping com­pa­ny. This one’s up 31%. Then we get back to finance and bank­ing. This is, uh, next one is region­al man­age­ment. RM is the code, Diver­si­fied Con­sumer Finance Com­pa­ny.

[00:39:34] Cameron: It pro­vides install­ment loan prod­ucts pri­mar­i­ly to cus­tomers with lim­it­ed access to finance. It’s up 21%. Next, you know, the For­eign Trade Bank of Latin Amer­i­ca, BLX. Multi­na­tion­al Bank, up 18%, Mit­suho Finan­cial, MFG, a Japan based bank hold­ing com­pa­ny, up a whop­ping 2 per­cent since I bought it. And then these last two, the last three are actu­al­ly under­wa­ter.

[00:40:12] Cameron: IVR, Invesco Mort­gage Cap­i­tal. It’s down about 1 per­cent since I bought it. Inno­va Inter­na­tion­al, ENVA, a tech­nol­o­gy and ana­lyt­ics com­pa­ny is down about 1%. And Ander­sen’s, ANDE, a diver­si­fied com­pa­ny engaged in the oper­a­tions of agri­cul­tur­al sup­ply chain, down about 2. 6 per­cent since I bought it. When did I buy it?

[00:40:36] Cameron: Uh, Novem­ber 23. So hand­ful, three of them. They’re not doing great. Um, 1, 2 per­cent Mit­suo, the rest up 18 to 100%, um, which is extra­or­di­nary, um, by know­ing noth­ing about the mar­ket or noth­ing about these com­pa­nies, just ana­lyz­ing their finan­cials and buy­ing them if they score well.

[00:41:03] Tony: Yeah, I think I just want to add at this stage too is that dis­cussing those indi­vid­ual stocks are, um,

[00:41:08] Tony: it’s not a rec­om­men­da­tion for peo­ple to buy them Go and do your own research,

[00:41:12] Tony: but, um, you should have bought them

[00:41:14] Cameron: six months ago

[00:41:15] Cameron: Yeah, you should have bought them six months ago when we bought them.

[00:41:18] Tony: Yeah.

[00:41:19] Cameron: Yes. Yeah, look, and we’ll put a dis­claimer at the end of this as we always do, but obvi­ous­ly you should­n’t take any­thing you hear on this as finan­cial advice. We’re talk­ing about an invest­ing sys­tem.

[00:41:30] Cameron: We’re not telling you what to buy. But we’re hap­py to, if you stick around, Teach you the process by which we ana­lyze these stocks. So, um, run­ning through that list, Tony, does any­thing else apart from the the­mat­ics of it jump out at you?

[00:41:49] Tony: does­n’t. Um, it’s, it’s, in some ways it’s like the Aus­tralian expe­ri­ence, isn’t it? There’s, uh, you said before you had­n’t heard about any of those stocks in the US. Well, it’s often the case that some­thing will come up on our buy list and I’ve nev­er heard of it before either and go along and research it and have a look at what it does.

[00:42:05] Tony: But, um, yeah, it’s, and maybe that’s part of the process is that the mar­ket has­n’t focused on it yet and there’s no chat­ter about it yet. It’s undis­cov­ered, so to speak. Um, yeah. But no, noth­ing, noth­ing else sticks out, um, oth­er than what we’ve been say­ing, that the process is about using data to dri­ve our deci­sion mak­ing.

[00:42:25] Tony: Um, you know, build­ing on the prin­ci­ples of val­ue invest­ing, look­ing for strong cash flows in busi­ness­es, and then wait­ing for them to be dis­cov­ered and regressed back to the mean, or for what­ev­er was caus­ing them to be depressed to fade away. That’s the oth­er impor­tant thing too, is that, you know, even the very best com­pa­nies will have, you know, Times in the shade, um, for what­ev­er rea­son, you know, inter­est rates have risen or the war in Ukraine or what­ev­er.

[00:42:51] Tony: Um, but that’s the best time to buy them, right? Because they, they, you know, gen­er­al­ly, um, don’t take, they don’t take for­ev­er to get out of that posi­tion and get back to rewrit­ing or regress­ing back to where they’re, they should be. In investors eyes, back to their true val­ue. Um, and that’s the time to buy.

[00:43:10] Tony: So that’s one of the oth­er rea­sons why I like val­ue invest­ing. You’re a bit of a con­trar­i­an investor. Um, so you’re buy­ing stocks when they’re cheap for what­ev­er rea­son.

[00:43:17] Cameron: mm

[00:43:18] Tony: an arti­cle today on the AFR as I was skim­ming through it. I don’t often read the prop­er­ty sec­tion but I was skim­ming through it and there was an arti­cle there say­ing that retail shop­ping malls are now You know, um, so sought after invest­ments, top of the list for prop­er­ty investors, and it was only, you know, one or two years ago when you could­n’t give them away because of COVID shut­ting down, you know, retail and, um, com­pa­nies going out of busi­ness fol­low­ing COVID and lots of leas­es, and now they’re, you know, they’ve gone from base­ment to the pent­house, um, in prob­a­bly 18 months, so that’s just the way that things work in cycles, and that’s an impor­tant part of val­ue

[00:43:56] Tony: invest­ing.

[00:43:56] Cameron: mm And you know, there’s a lot of emo­tion tied up in those things. I mean, and you know, anoth­er thing I’ve learned doing this with you for the last five years is just look­ing at the mar­ket in gen­er­al. Talk­ing about the Aus­tralian mar­ket is how much that seems to be dri­ven. Uh, you know, at a macro lev­el, buy emo­tion.

[00:44:15] Cameron: You know, we often talk about it. Like the mar­ket will go up by a sig­nif­i­cant amount one week and then down by a sig­nif­i­cant amount the next, like what changed? Well, real­ly noth­ing, I guess. And then it’ll go back up

[00:44:27] Tony: peo­ple’s

[00:44:27] Tony: opin­ions.

[00:44:28] Cameron: Yeah. There’s a new sto­ry about this con­flict or

[00:44:31] Cameron: this inter­est rate rumor that inter­est rates will go up, or they’ll be cut, or the US jobs growth is gonna go up, and the mar­ket just fluc­tu­ates, and you go, well, real­ly, noth­ing’s, there’s no real new data or new facts that should shape where the mar­ket’s going, it’s just all over the place.

[00:44:50] Cameron: By the way, I just noticed that in the Stock­o­pe­dia port­fo­lio, it says, um, Div­i­dend Income Zero. So, it’s either, we either haven’t earned any div­i­dend income from these stocks, or it’s not track­ing div­i­dend income from these

[00:45:08] Cameron: stocks. So, uh, our per­for­mance ver­sus the S& P 500 is, uh, net net there, I guess.

[00:45:15] Cameron: It’s, uh, both of them prob­a­bly not includ­ing any div­i­dend income.

[00:45:20] Cameron: All right, well that’s a quick overview of the US port­fo­lio and how it’s doing. Uh, now what we often do or what we usu­al­ly do on the show is you will do a deep dive on a stock even though typ­i­cal­ly we don’t spend a lot of time research­ing indi­vid­ual com­pa­nies. It is good to get a sense for dif­fer­ent busi­ness­es and what they do.

[00:45:40] Cameron: We call this the pulled pork. Uh, no, No good rea­son. I think just once you said you were going to pull it apart and I called it a pulled pork and it just sort of stuck. So, what com­pa­ny are you doing a pulled pork on today, Tony, and why?

[00:45:57] Tony: Pulled Pork on RGA, which is list­ed on the New York Stock Exchange, Rein­sur­ance Group of Amer­i­ca. And the rea­son why I’m doing the Pulled Pork on that is that, uh, it’s very high up on the buy list that you pro­duce from Stock­o­pe­dia. And it’s also a large cap stock, so, uh, their ADT is some­thing like, 76 mil­lion dol­lars.

[00:46:18] Tony: So the aver­age dai­ly trans­ac­tion amount is 76 mil­lion dol­lars. And that’s some­thing we look at because when peo­ple are con­struct­ing their port­fo­lio, we don’t want them to get into very small com­pa­nies and then find it hard to get out, and that they’re buy­ing or sell­ing in or out of those com­pa­nies is forc­ing the price up or down.

[00:46:38] Tony: So, which is, you know, some­thing we try to avoid. So this is a big one. Um, I guess I should also say, this is kind of learn­ing by doing for me any­way, that you’ve done all the work and it’s been good in terms of putting togeth­er the Stock­o­pe­dia feed of US stocks, but we don’t have every item in the check­list that we use cur­rent­ly in Aus­tralia because, you know, Stock­o­pe­dia has a dif­fer­ent data feed and dif­fer­ent, you know, num­bers are in or out of what they pro­duce com­pared to what we’ve been using.

[00:47:07] Tony: So we’re kind of learn­ing as we go here about, you know, what, um, what we can, um, Do with or with­out, and also what we might need to find oth­er sources for, so that’s, I guess, an impor­tant caveat to make as well. Um, so I’ll go through the num­bers for Rein­sur­ance Group of Amer­i­ca as they appear on that check­list.

[00:47:27] Tony: Before I do that, I’ll talk a bit about what it is and its his­to­ry. So, uh, began life back in 1973. Uh, it was a busi­ness unit of a big­ger insur­ance com­pa­ny called Gen­er­al Amer­i­can Life Insur­ance Com­pa­ny and, uh, that, that com­pa­ny, GAL, decid­ed to start, uh, an insur­ance or rein­sur­ance divi­sion and, um, a bit on, um, I guess the ter­mi­nol­o­gy because the com­pa­ny adopt­ed the strat­e­gy of what they call fac­ul­ta­tive under­writ­ing.

[00:47:58] Tony: I hope I pro­nounced that right. And I guess I should also apol­o­gize in advance. I’m not an insur­ance spe­cial­ist. I have invest­ed in insur­ance com­pa­nies in the past. I do invest at the moment in QBE, which is an insur­ance com­pa­ny in Aus­tralia. So if I get some of the terms wrong or mis­pro­nounce them or my Def­i­n­i­tions aren’t right, and for­give me.

[00:48:17] Tony: I’m hap­py to be schooled, but my under­stand­ing of rein­sur­ance is that, uh, you have an insur­ance com­pa­ny, um, and then some­times insur­ance com­pa­nies will want to lay off their risk to rein­sur­ance com­pa­nies. So they pro­vide part­ners to part­ner with them. And, um, I guess, uh, that could be for a num­ber of rea­sons.

[00:48:36] Tony: The sim­plest exam­ple would be that an insur­ance com­pa­ny decides that they want to ser­vice the cus­tomer who’s come to them and ask for insur­ance, but they, uh, if every­thing goes bad and they have to pay out 100 per­cent on the pol­i­cy, then they prob­a­bly can’t afford to do that by them­selves. Or they want to, they want to pro­tect their own bal­ance sheet.

[00:48:54] Tony: And so they’ll go and seek a part­ner to come into that deal with them. And on the, when, when insur­ance has entered into that way with re insur­ers, it’s called fac­ul­ta­tive. Or case by case in rein­sur­ance. So basi­cal­ly the rein­sur­ing busi­ness will do the sort of nor­mal under­writ­ing checks that the insur­ance com­pa­ny did.

[00:49:13] Tony: So for exam­ple, you know, if it’s one of the ship­ping com­pa­nies you talked about and they’re after insur­ance for a ves­sel, uh, they go to their insur­er and say, I need, you know, a hun­dred mil­lion dol­lars if Um, to replace this ves­sel if it sinks, um, you know, give me a quote on insur­ance. Well, the insur­ance com­pa­ny might decide they’ve already got a hun­dred of these poli­cies in force and they can’t afford to pay out a bil­lion dol­lars if every boat sinks, um, or what­ev­er the sums are.

[00:49:40] Tony: Um, so they go and talk to a rein­sur­er who’ll take on some of the risk as well and charge a fee or, or split the com­mis­sion, um, with the boat com­pa­ny. Um, and the insur­er. So, uh, that’s what fac­ul­ta­tive rein­sur­ance is. It’s this kind of, um, lay­ing off by the insur­ance com­pa­ny, but the rein­sur­ance com­pa­ny will assess the risk and charge a price.

[00:50:01] Tony: I guess that’s the oth­er side of the coin is what they call treaty rein­sur­ance, which is where, um, A com­pa­ny might decide that it has too much expo­sure to one sec­tor and then will offload the whole sec­tor to a rein­sur­er. So, for exam­ple, um, you know, one of the insur­ance com­pa­nies in Aus­tralia might decide that it’s got too much expo­sure to, um, flood insur­ance.

[00:50:21] Tony: You know, there’s been lots of floods in Aus­tralia over the last, you know, And so they might decide to go to a rein­sur­er and say we’d like to offload some of our risk for all the flood insur­ance poli­cies. And then the rein­sur­er will do an assess­ment of what the risk is in gen­er­al for flood insur­ance in Aus­tralia and then offer a price to take over some of that lia­bil­i­ty.

[00:50:42] Tony: So two types of rein­sur­ance. RGA tends to play in the case by case side of things. And they start­ed back in 73. And, uh, they’ve made a good go of it. So, they, uh, quick­ly expand­ed over­seas, into Cana­da in par­tic­u­lar. Um, they, in the 80s, they kind of pio­neered using tech­nol­o­gy as it was back then, um, to quick­ly review cas­es.

[00:51:09] Tony: So, so I should say that they spe­cial­ized in life insur­ance to start off with. And, uh, Their niche was to be able to quick­ly review poli­cies and make a deci­sion about the re insur­ance cost of those poli­cies to the insur­ance com­pa­ny. And in the ear­ly 80s, they were able to do up to 60, 000 cas­es a year in this way, and that gave them a bit of an edge in the mar­ket.

[00:51:33] Tony: Uh, by 89, the divi­sion was the sec­ond largest life insur­er in the USA. So, they decid­ed soon after that, Um, to sep­a­rate that busi­ness and spin it off and list. And so in 1993, RGA list­ed on the New York Stock Exchange, even though the par­ent com­pa­ny still main­tained a con­trol­ling stake. Um, since list­ing in 1993, the com­pa­ny reports that it’s achieved greater than 17% Uh, com­pound annu­al growth in total assets and, uh, the last fig­ure I saw was in 2021, assets totaled 92 bil­lion.

[00:52:11] Tony: So it’s been a suc­cess­ful­ly oper­at­ed and run busi­ness since then. Cer­tain­ly a large busi­ness now. Uh, after list­ing in 93, RGA expand­ed over­seas and it actu­al­ly hit Aus­tralia in 1996, um, offer­ing the first rein­sur­ance treaty to an Aus­tralian com­pa­ny back then. Uh, they oper­ate all around the world. Uh, par­tic­u­lar­ly in Asia Pacif­ic, where they’ve, um, been able to expand into coun­tries like Japan, which has had, uh, uh, from, you know, some reports, uh, some curi­ous rules around insur­ance com­pa­nies, so RGA was able to nav­i­gate its way through those, and also into coun­tries like Indone­sia, which, um, RGA pio­neered, uh, Shari­ah law, uh, com­pli­ant insur­ance, uh, Busi­ness­es for them.

[00:52:57] Tony: So quite inno­v­a­tive, um, com­pa­ny and, and work­ing around the world. Uh, in 2003, uh, they, they acquired the life, the rein­sur­ance busi­ness of Allianz, uh, for 275, well, they acquired 275 bil­lions, uh, dol­lars of pack­ages, a pack­age of poli­cies worth 275 bil­lion dol­lars, um, and met life around that time. Bought the con­trol­ling stake from Gen­er­al Amer­i­can Life in the com­pa­ny, uh, in 2009.

[00:53:34] Tony: Uh, RGA acquired the rein­sur­ance busi­ness of ING in the US and Cana­da. Uh, and soon after that entered the For­tune 500 at num­ber 321, and in 2018. They entered the Forbes Best Regard­ed Com­pa­ny and World’s Best Employ­ers list. So, um, they’re now quite large in world­wide oper­a­tions, but large in the US. Along the way, they were able to, um, uh, to, uh, buy out the MetLife con­trol­ling stake.

[00:54:06] Tony: And so there is no sort of large insur­ance con­trol­ling stake with­in this com­pa­ny now. Um, in COVID, they paid out. More than two and a half bil­lion dol­lars in COVID relat­ed claims in 2020. And in 2021, they were named the Life Rein­sur­er of the Year. And last year, 2023, was their 50th anniver­sary. So, big com­pa­ny.

[00:54:30] Tony: Got it. The first ques­tion that I was sort of think­ing of when I read about this com­pa­ny was, It’s a large com­pa­ny. It’s in the For­tune 500. Why can I buy it so cheap­ly? And, um, I guess I’m going to extrap­o­late my, my knowl­edge of the insur­ance indus­try in Aus­tralia and assum­ing it’s, it’s hav­ing some kind of, uh, sim­i­lar res­onation in the US.

[00:54:51] Tony: But, um, if peo­ple think back a year or two, insur­ance com­pa­nies were a bit on the nose in Aus­tralia, life insur­ance com­pa­nies, I should say, were a bit on the nose in Aus­tralia. Um, and for a cou­ple of rea­sons, uh, and I guess some of these will also be applic­a­ble to the States, but, um, low inter­est rates was hurt­ing their busi­ness.

[00:55:11] Tony: So if you think about Berk­shire Hath­away and it’s, um, sto­ried float that they talk about that War­ren, um, uses to, to fund his, uh, his invest­ments, it’s basi­cal­ly the pre­mi­ums that are tak­en from cus­tomers, but then have, um, many years sit­ting around on the bal­ance sheet. of the insur­ance com­pa­ny before it needs to get paid out in claims.

[00:55:33] Tony: That’s par­tic­u­lar­ly the case in life insur­ance. Um, but life insur­ance, um, not sure about the US, but out­side of the US, like in Aus­tralia, it’s pret­ty heav­i­ly reg­u­lat­ed how they invest. their float because gov­ern­ments are con­cerned that some­one’s been pay­ing a life insur­ance pol­i­cy, you know, over their, the term of their life.

[00:55:53] Tony: And when they come to col­lect it, the mon­ey’s got to be there. So, uh, invest­ments for life insur­ance com­pa­nies, uh, uh, high­ly reg­u­lat­ed, at least in this juris­dic­tion. Um, and so they have to be put into, you know, AAA gov­ern­ment bonds and, um, cor­po­rate bonds. I’m not sure exact­ly what the cut­off is on, on the rat­ings, but they have to be in high­ly rat­ed, uh, Invest­ments, usu­al­ly bonds.

[00:56:16] Tony: I guess they can have some oth­er kind of equiv­a­lent invest­ments, but cer­tain­ly the insur­ance, life insur­ance com­pa­nies in Aus­tralia weren’t able to go out and buy rail­way com­pa­nies or elec­tric­i­ty com­pa­nies like War­ren does in the US with his insur­ance float. I sus­pect the same thing Per­haps it’s hap­pen­ing with, um, the insur­ance busi­ness in the US, although, you know, Berk­shire Hath­away is kind of lead­ing me to think it may not be as reg­u­lat­ed as it is in Aus­tralia.

[00:56:42] Tony: But any­way, the point I’m going to make is that, um, com­pa­nies that were invest­ed, um, over the last, say, four or five years face very low inter­est rates and there­fore their, their earn­ings from their float was­n’t very high. Inter­est rates are now return­ing back to, um, like I’ll call them nor­mal, but You know, regress­ing to the mean, going back to what they were before the last sort of 10 years of almost zero inter­est rates, which has been unusu­al in my life­time.

[00:57:08] Tony: Uh, and that means that the, the life insur­ance com­pa­nies are get­ting paid some­thing for the pre­mi­ums that they’re, they’re hold­ing, uh, long term. Um, when life insur­ance com­pa­nies weren’t mak­ing much from their float, they, they basi­cal­ly had to raise all their prof­its by putting up their pre­mi­ums. And, you know, because of com­pe­ti­tion, that’s hard to do.

[00:57:29] Tony: Um, because your com­peti­tors may not want to, you know, will be try­ing to under­cut you for mar­ket share. So you can’t just raise a pre­mi­um willy nil­ly. You’ve got to con­sid­er how it affects your mar­ket share posi­tion. And so life insur­ance com­pa­nies were doing it tough. They did­n’t have the float income they nor­mal­ly would have got­ten or had got­ten in past years.

[00:57:47] Tony: Um, and, you know, were there­fore try­ing to com­pete on pre­mi­um price and they were Rac­ing stiff com­pe­ti­tion and a lot were los­ing mon­ey. Addi­tion­al­ly, the oth­er sort of bump in the road for life insur­ance com­pa­nies, at least in the Aus­tralian con­text, was that there’s a lot more men­tal health relat­ed claims in the last sort of five to 10 years than would have been fac­tored in by their actu­ar­ies when some of the poli­cies were writ­ten, you know, way back 20, 30 years ago.

[00:58:15] Tony: Um, and so. Giv­en the fact that they were all com­pet­ing on price with their pre­mi­ums, it was hard for them to raise the price to account for that sort of spike in men­tal health claims. Um, and, and there­fore, you know, that’s, that’s been anoth­er dri­ver of neg­a­tive prof­it growth for them. Um, I think what’s prob­a­bly hap­pened on the pos­i­tive side of things and maybe a tail­wind as to why RGA is start­ing to to tick up and it’s been doing well in terms of its stock price move­ment in the last sort of 6 to 12 months, um, is because, uh, A, the float is earn­ing a rea­son­able income now, and B, Because of infla­tion, every sort of insur­ance pol­i­cy is going up in price, and it’s much eas­i­er to to raise prices when prices are going up any­way.

[00:59:04] Tony: So, you know, you don’t, you don’t stick out like a sore thumb if you’re the only per­son rais­ing prices because every­one’s rais­ing prices. Um, and you know, if your price goes up by 11 per­cent when infla­tion was­n’t run­ning quite that high, You know, it’s going to get lost in the, in the wash some­times. So it’s eas­i­er to, to start to reprice for men­tal health risk when prices are ris­ing due to infla­tion is, I guess, what I’m try­ing to say.

[00:59:29] Tony: So, um, that’s anoth­er, um, Tail­wind for this for this com­pa­ny at the moment. Um, and I think the oth­er thing which, which prob­a­bly favors this busi­ness, even though it is a life insur­er itself, it’s prob­a­bly main busi­ness is still rein­sur­ance. Uh, the, the rein­sur­ance busi­ness isn’t cus­tomer fac­ing. So the life insur­ance busi­ness­es are, they’re the ones who are going to cop.

[00:59:51] Tony: Um, any sort of, you know, gov­ern­ment inquiry into insur­ance prices going up. The rein­sur­ance busi­ness­es have a, um, less of a pub­lic spot­light on them, and there­fore have less of a damp­en­er on price increas­es. They just, you know, they still have to be com­pet­i­tive because it’s a com­pet­i­tive mar­ket, but they’re not going to face as much scruti­ny.

[01:00:12] Tony: Um, their price will be absorbed by the life insur­er, who will then try to pass on the price rise to the cus­tomer, you know. The, the end cus­tomer, the retail cus­tomer. And that’s, that’s the area that the gov­ern­ments are gonna focus on if they, if those prices rise too much. So now the rein­sur­ers do get a, um, a, a bit of a ben­e­fit from, from being in the back room, so to speak.

[01:00:31] Tony: So, um, inter­est­ing com­pa­ny to go through the num­bers now, which might shed some light on why, why we like it. Uh, and all of these num­bers are in US dol­lars. I, I has­ten to add, um. Large cap stock, 13. 7 bil­lion US dol­lars mar­ket cap, 76 mil­lion ADT. Uh, the thing I real­ly like about this com­pa­ny is it’s Prop­Caf, so price to oper­at­ing cash flow is 1.

[01:00:56] Tony: 68 times. So, it’s throw­ing off lots of cash, and you’re being paid back quick­ly for your invest­ment, is how I like to look at that, in under two years. So, to use the cof­fee shop anal­o­gy, um, your, what­ev­er you, buy into the cof­fee shop for, you’re going to get back in terms of its cash tak­ings at least, I know it’s not prof­it, but it’s the cash, in 1.

[01:01:19] Tony: 68 years. So it’s a quick, it’s a quick return for your invest­ment, um, which I like. Uh, Stock­o­pe­dia don’t have the same sort of finan­cial health rat­ings that, uh, that Stock Doc­tor do, um, but they do rank com­pa­nies accord­ing to finan­cial health. So Stock­o­pe­dia is a fac­tor based sys­tem where they rank com­pa­nies based on momen­tum, qual­i­ty and val­ue and then com­bine all those three things to stack rank scores from 100 down in terms of their scor­ing.

[01:01:53] Tony: Um, inter­est­ing­ly enough, this, this com­pa­ny in Stock­o­pe­dia ranks best for momen­tum. So as I said, the share price has been going up nice­ly. It ranks 97 due to momen­tum, but actu­al­ly on the qual­i­ty side of things, it looks like it’s about 56, which is, um, pret­ty good. Low. And on the val­ue side of things, it’s 76.

[01:02:12] Tony: So even though we’re call­ing this a QAV stock, and cer­tain­ly on the, if you ignore the, the stock Edia rank­ings, it, it rates well. Um, stock Edia, uh, aren’t rat­ing at high­ly, uh, for qual­i­ty and val­ue and not rat­ing it poor­ly, but there are oth­er com­pa­nies high­er up on their list. Um, so I’m not gonna give her the score for that.

[01:02:32] Tony: Uh, the share price I’m using, uh, when this down­load was done is. 209 per share and it’s a bit less than that today. I think it’s about 204. 50 when I had a look this morn­ing. Um, but 209 is greater than our intrin­sic val­u­a­tion num­ber one and less than intrin­sic val­u­a­tion num­ber two. So there are two, um, IVs which are based on the fore­cast earn­ings per share for the stock, um, and using dif­fer­ent hur­dle rates.

[01:02:57] Tony: One at, uh, at, um, uh, the cash rate plus risk pre­mi­um. And, which is IV2, and one at a 19. 5 per­cent hur­dle rate, which is quite a high bar indeed, but we’ve used it tra­di­tion­al­ly to seek out val­ue. We can’t buy this stock for book plus 30%, so we can’t buy it for any­where near book val­ue, so we can’t score it for that.

[01:03:23] Tony: Um, one of the things I still have to find a source for is his­tor­i­cal PE ratio. So, QAV looks for, um, the low­est PE in the last three halves, or, um, sor­ry, the last six halves, the last three years, but I could­n’t see that in Stock­o­pe­dia. I had a look through Yahoo Finance and could­n’t find it eas­i­er. It’ll be out there, but I just haven’t sourced it yet, so I haven’t been able to score it for that.

[01:03:47] Tony: Hav­ing said that, the PE is 14. 5, which is not over­ly high. And one thing we use the PE for is to look at the PEG ratio, the PE ratio com­pared to growth. Um, we do growth over PE. Which is not quite the PEG ratio, it’s the reverse of it, but any­way, um, the Stock­e­pe­dia is report­ing that the earn­ings per share is fore­cast to grow 25.

[01:04:14] Tony: 7 per­cent next year for this com­pa­ny, which is quite a lot for a For­tune 500 com­pa­ny oper­at­ing in the rein­sur­ance space, so, um, That’s quite a big increase for a big com­pa­ny. But if I put 25. 7 over the PE of 14. 5, I get 1. 77. And we look for com­pa­nies and score them if they’re above 1. 5. So that’s a, you know, quite a nice, um, uh, met­ric there.

[01:04:38] Tony: Growth over PE, 1. 7 is a good score. Uh, this com­pa­ny is only yield­ing 1. 6%. Um, and it does­n’t have any frank­ing cred­its, so we’re not going to score it for yield. Uh, we look for com­pa­nies which are above the, or yield, uh, above the, the cur­rent aver­age mort­gage rate, which is six point some­thing in Aus­tralia.

[01:04:56] Tony: Um, might be low­er in the US, but even so, 1. 6 per­cent would­n’t cut it. Uh, so, can’t score it for that. Uh, does­n’t have an own­er founder, so, Stock­o­pe­dia is, um, report­ing that Insid­ers, uh, Bye. I own a small frac­tion of this com­pa­ny. Although I did notice when I was doing the research that RGA’s first actu­ary, a guy called Greg Woodring, went on to be the pres­i­dent and CEO for three decades.

[01:05:22] Tony: So it was run by, not so much an own­er founder, but cer­tain­ly a founder for a long time, which might account for its suc­cess over those first 30 years. Haven’t been able to find, um, again, uh, the con­sis­tent equi­ty, increas­ing equi­ty, uh, score that, uh, I like to see, but, um, we will find a replace­ment for it.

[01:05:46] Tony: But, yeah, we look for whether equi­ty’s been con­sis­tent­ly increas­ing over the last two and a half years, uh, by half, and, um, I could­n’t score it on that because I can’t see it. So giv­en that we have a few gaps in in our check­list that we nor­mal­ly use, um, I’ve summed up the 10 things we could score this com­pa­ny on and uh, it gets a score of 8 for those.

[01:06:06] Tony: Uh, so 8 out of 10 is 80%. That’s the qual­i­ty score for the com­pa­ny. And if I divide that by the price to oper­at­ing cash flow, I’m get­ting a QAV score of 0. 48, which is quite high up on our On our check­list, um, I think it was num­ber three or four on the down­load you, you sent through to do this analy­sis. Um, so a big com­pa­ny scor­ing very well.

[01:06:29] Tony: Um, obvi­ous­ly one of these, you know, com­pa­nies which, uh, it’s, Uh, it’s com­ing out of per­haps what I was talk­ing about before with inter­est rates. Um, and I guess the last thing I should men­tion is that we use sen­ti­ment as a check for us, a go or no go. And, um, our tool, the Bredala­tor, does work for the New York Stock Exchange, as it does for many stock exchanges, and RGA is well above its buy price.

[01:06:56] Tony: It’s basi­cal­ly been on the improve since, um, well it’s been a buy since about, uh, Jan­u­ary 2022. Although I would add it’s a bit of a Josephine at the moment, mean­ing that it’s trad­ing for less than its pre­vi­ous mon­th’s close. So it’s had a bit of a, um, a tick down at the moment, even though the trend’s pret­ty solid­ly up.

[01:07:17] Tony: Uh, but it’s worth watch­ing because when it does, um, If it does, and I expect it would, um, tick up, giv­en its fore­cast earn­ings per share is grow­ing, uh, it might be a good time to look to pur­chase this stock, but cer­tain­ly do your own research on this one, but I found it very inter­est­ing to go through. Mm

[01:07:36] Cameron: Thank you, Tony. RGA. I was just ask­ing Chat­G­PT to explain rein­sur­ance to me

[01:07:46] Tony: hmm. how it works. Risk man­age­ment, cap­i­tal relief, sta­bi­liz­ing loss­es, capac­i­ty expan­sion, and sol­ven­cy pro­tec­tion. Appar­ent­ly, uh, sort of some of the rea­sons why insur­ance com­pa­nies do rein­sur­ance.

[01:08:01] Tony: hmm.

[01:08:02] Cameron: Not some­thing that I know much about.

[01:08:04] Cameron: Okay, so any oth­er take­aways from doing your first pulled pork on a U. S. stock,

[01:08:09] Cameron: Tony?

[01:08:10] Tony: I think it’s, uh, you know, it’s a rare thing, um, on our buy list to find a large cap stock like this so high up. We do, it does hap­pen from time to time, you know, Fortes­cue Met­als Group, the big iron ore min­er is there, occa­sion­al­ly BHP and Rio have been there, oth­er big iron ore min­ers, um, Com­mon­wealth Bank, the biggest stock on our index was there.

[01:08:31] Tony: Um, but at the moment, there, there Many big stocks at the top of our buy list, where­as per­haps because the U. S. is such a big mar­ket, we’re going to find larg­er, uh, mar­ket cap stocks there, um, which are sort of meet­ing the met­rics of val­ue stocks, um, more fre­quent­ly than we do here.

[01:08:50] Cameron: Well, if you scroll down to about num­ber 20 on the US list, you see AT& T with an aver­age dai­ly trade of 650 mil­lion. So,

[01:08:59] Cameron: and

[01:09:00] Tony: Yeah, right.

[01:09:03] Cameron: score of 0. 25 when I did this buy list, which was about a week and a half ago, two weeks ago. But, uh, yeah, that’s huge,

[01:09:15] Tony: And then of course we need to check the sen­ti­ment of AT& T. So that’d be inter­est­ing to see what its share graph is telling me.

[01:09:21] Cameron: Yeah, I was pos­i­tive then, but I haven’t looked at it today.

[01:09:26] Tony: Okay,

[01:09:28] Cameron: Okay, well, uh.

[01:09:31] Cameron: Yes, that’s pret­ty much all I’ve got to talk about in terms of US stocks for this week.

[01:09:38] Cameron: I think we

[01:09:38] Tony: Well, it’s a lot.

[01:09:39] Tony: I do.

[01:09:40] Cameron: Yeah. It’s

[01:09:41] Cameron: a lot. It’s a good lit­tle intro­duc­tion.

[01:09:43] Cameron: Um, cou­ple of things I did want to just fin­ish off with though, uh, one thing. Last week on our show and in our newslet­ter, I men­tioned that we have a finan­cial, end of finan­cial year sur­vey.

[01:09:58] Cameron: Um, I asked peo­ple to go and let us know what their per­for­mance have been for the finan­cial year because for non Aus­tralian lis­ten­ers, our finan­cial year clos­es at the end of June. And also to tell me their per­for­mance, uh, over the course of how long they’ve been invest­ing with QAV and, uh, the per­for­mances were all over the place as we kind of expect­ed. Can we talk a bit about this on the show last week? There’s a lot of vari­ables in the short term, depend­ing on, you know, what stocks you hap­pen to buy, how many stocks you hold in your port­fo­lio.

[01:10:37] Cameron: Whether you’re buy­ing big ADT or low ADT stocks, uh, how well you fol­low the rules. All sorts of things can hap­pen. Um, over the long term, we would expect that peo­ple’s per­for­mances sort of aver­age out, but in the short term, year to year, it can be quite dif­fer­ent. So I’ve only had sev­en respons­es since I post­ed this last week.

[01:10:59] Cameron: Peo­ple don’t like answer­ing my sur­veys, I’ve deter­mined, I just stopped doing them out­side of this one. But to give you an indi­ca­tion of these sev­en respons­es, uh, one per­son said their finan­cial year was 10. 43%. Next per­son said theirs was 5. 3%, next was 4. 45%. The next was 19. 57%. Um, next per­son said there was down 4 per­cent their port­fo­lio due to a lot of free PTL sales.

[01:11:37] Cameron: So their long term returns are only 15. 6 per­cent per annum, which is pret­ty good. Um, but I don’t know how they did­n’t tell me what their incep­tion date is. So I don’t know what that, how long term that long term is. Then I got a cou­ple of com­ments, uh, not quite. Part of the sur­vey, but just com­ments on my post.

[01:11:57] Cameron: One was from Michael. He said his finan­cial year return was 27. 71%, which is astound­ing. Con­grat­u­la­tions, Michael. And his incep­tion, since incep­tion, it’s 22. 41%. But again, he did­n’t tell me when his incep­tion is. So, um, and he also says that’s com­ing out of Share­Site. Uh, not sure if that’s CAGR. I think you use Share­Site a bit.

[01:12:25] Cameron: Does it, do you do CAGR? Time weight­ed? And then Ed said, um, his per­for­mance since incep­tion is 12. 08 per­cent mea­sured by share site. But he also said since incep­tion was Novem­ber 2019. And I know Ed did­n’t become a QAV mem­ber until the mid­dle of 2021. So I shot him an email today going, how does that work? Um, He said his past year is 8.

[01:12:59] Cameron: 4%. Um, he said, I’m hap­py with greater than 12%, but I’d dear­ly love to be get­ting dou­ble mar­ket. I’m think­ing it’s due to hav­ing a high­er ADT and most have cur­rent ana­lysts com­men­tary. We have talked from time to time. How about. We like stocks that don’t have any ana­lysts look­ing at them because we can often get in before the ana­lysts give them too much cov­er­age.

[01:13:25] Cameron: Any­way, thank you to every­one who filled that out. And if you haven’t filled out the sur­vey, do con­sid­er it. You can do it anony­mous­ly, uh, because it’s good for us to know what the range of results is. But I think even just with that small sam­ple, we can see that it’s, it’s all over the place. And I know my super port­fo­lio had a neg­a­tive return again for this year, um, as it did the year before.

[01:13:50] Cameron: Just a whole bunch of rule ones, uh, I think in a few 3PTL sells in my super port­fo­lio, which again has a high ADT require­ment. Um, so yeah, has­n’t been the best year for my own port­fo­lio, but then again the dum­my port­fo­lio has had a rel­a­tive­ly good year. Not quite as good as the index, but I think it’s up like, I don’t know, 12 per­cent or some­thing for the finan­cial year, so it had a, uh, rea­son­ably good year.

[01:14:16] Tony: me. I think, um, it looks like my, my super port­fo­lio fin­ished neg­a­tive this year as well. Um, I think it only holds about two or three stocks at the moment. So that could be con­tribut­ing to it. But, um, again, um, you. The price you pay for a con­cen­trat­ed port­fo­lio is volatil­i­ty. So when, if those two or three stocks turn around or

[01:14:37] Tony: when they turn around, it’ll reverse pret­ty quick­ly and pret­ty hard.

[01:14:42] Cameron: And why do you only have two or three stocks

[01:14:44] Cameron: in it?

[01:14:45] Tony: Um, well, I have a small, small­er port­fo­lio, um, And the Super­fund’s only a part of that. So I have, you know, I think it’s, I don’t have many stocks. I prob­a­bly have sev­en or eight stocks across every­thing, all the sort of struc­tures that I own stocks in. Um, but the Super­fund is the one that, uh, is eas­i­est for me to man­age because it does­n’t have cash flow­ing in and out of it for oth­er uses, like, uh, stocks in my own name do, or, um, stocks in our fam­i­ly trust do.

[01:15:14] Tony: So it’s, um, it’s the kind of pure way to, to mea­sure the

[01:15:18] Cameron: Easy to report on. Yeah, right.

[01:15:20] Tony: Yeah,

[01:15:21] Cameron: Okay. Uh, well, that’s all the main show for this week. Now, for peo­ple that are new, what we nor­mal­ly do at the end of the invest­ing chat is we just do after hours where we just talk about every­thing else that we’ve been doing and that we’ve been think­ing about. You can turn off at this point if you’re not inter­est­ed, but, uh, I’m inter­est­ed because this is my chance to chat to Tony each week about what’s going on.

[01:15:44] Cameron: What’s been going on out­side of invest­ing with you, TK?

[01:15:48] Tony: yeah, a cou­ple of things. It’s, you know, because of our AFSL license require­ments in Aus­tralia, I’ve had to fin­ish off my 20 years, 20 years, 20 hours of study, which I did in the last week or so, which, um, I had been slack and kind of back end­ed through to, um, the last month, so I’ve done a lot, a lot of read­ing and tak­ing exams in the last month

[01:16:15] Tony: to, on the Kaplan sys­tem, which is fine.

[01:16:18] Tony: That’s, that’s been inter­est­ing. Um, what did you learn from your 20 hours of study, Tony?

[01:16:24] Tony: Well, um, It’s, because I’m not doing my AFSL require­ments to meet a par­tic­u­lar license sec­tion, like if I was a cred­it provider or if, if, um, you know, I was a mort­gage bro­ker or bank or some­thing like that, um, I tend to focus on this, the, um, gen­er­al stream and the ethics stream, which, um, I guess are more per­ti­nent to what we talk about.

[01:16:50] Tony: Um, ethics has been inter­est­ing. Um, I mean, yeah, basic. Ethics that you do, you know, do the best, use the best inter­est of the cus­tomer in, um, will hold the best inter­est of the cus­tomer in your mind when you’re mak­ing deci­sions about how to ser­vice them. Um, but there’s been some oth­er inter­est­ing, um, mod­ules around that and going into the phi­los­o­phy of how you work out what your val­ues are and your ethics.

[01:17:19] Tony: So that’s, that’s been inter­est­ing and, and con­flict­ing. I think if you, you know, sort of step back and look at every­thing that they’re talk­ing about, uh, cause like there’s the util­i­tar­i­an approach to ethics when it’s applied to the finan­cial advice indus­try, which is to do the, you know, the best, have the best out­come for the most peo­ple, which may not suit the indi­vid­ual that’s right in front of you ask­ing for finan­cial advice.

[01:17:44] Tony: You might, um, you know, you might decide that it’s the best out­come for the best peo­ple is to only invest in ESG stocks. You know, as I read an arti­cle in the Finan­cial Review recent­ly, which said that some­thing like 20 bil­lion has exit­ed the ESG mar­ket. Um, Recent­ly because peo­ple aren’t mak­ing mon­ey invest­ing in the ESG mar­ket.

[01:18:05] Tony: So, yeah, it’s inter­est­ing hav­ing, inves­ti­gat­ing an ethics over­lay into finan­cial ser­vices and finan­cial advice. So that’s been fun. Um, yeah, and the oth­er, I guess, theme that’s appear­ing in finan­cial advice is in every indus­try is AI. So, I’ve read a cou­ple of mod­ules on that, um, seems like at least in terms of, um, finan­cial advi­sors, the, um, AI is going to play a part, but seems to be at this stage, um, I’ll, I’ll use the term mere automa­tion.

[01:18:42] Tony: So it’s, it’s about automat­ing, uh, the mar­ket­ing for finan­cial advi­sors, the check­ing of work before it goes out with finan­cial advi­sors and less about, um, actu­al­ly deal­ing. with an end cus­tomer and try­ing to under­stand their risk tol­er­ances and, and pro­vide ded­i­cat­ed advice. Poten­tial­ly that’s com­ing, but there were plen­ty of case stud­ies in, in exam­ples I read where, you know, it’s a fair­ly nuanced game read­ing some­one’s risk tol­er­ance and then pro­vid­ing the right advice to suit, to suit that.

[01:19:15] Tony: And, um, there are exam­ples of, Where peo­ple had tried to use AI for that, but there were hal­lu­ci­na­tions and there was wrong infor­ma­tion com­ing out and that kind of thing. So, sort of con­sen­sus from what I read was, is the indus­try is look­ing to to AI, but not yet for finan­cial advice, but cer­tain­ly for automa­tion.

[01:19:35] Tony: So that was inter­est­ing too.

[01:19:36] Cameron: Hmm. Okay.

[01:19:39] Cameron: What else?

[01:19:40] Tony: Um, and then, uh, I watched a cou­ple of things on TV. Um, Jen­ny was away, so I had a lot of time on my hands in the evening. So, uh, I watched Dumb Mon­ey, which is worth a look. That’s just come out, I think, in the last day or so. Um, the sto­ry of, uh, Wall Street Bets and, uh, what’s it? Flam­ing Kit­ty, I

[01:19:59] Tony: think, and

[01:19:59] Tony: GameStop.

[01:20:01] Tony: Roar­ing Kit­ty, that’s right, and Game­Stock, and how, uh, how the Flam­ing Kit­ty ana­lyzed the Game­Stock shorts and thought they were wrong and took on Wall Street and that took off and, um, and, you know, how then they had to decide whether they should hang on now they’ve made mil­lions of dol­lars and when they should sell and, and how the hedge fund short­ers, um, still made mon­ey in the end out of, uh, out of what went on.

[01:20:24] Tony: So it’s, yeah, it’s worth a look. It’s, um, inter­est­ing movie. Hmm. I think it will res­onate with quite a few of our lis­ten­ers. That was good. I watched Eric. Have you heard of Eric? The Net­flix series with

[01:20:38] Tony: Cum­ber­batch star­ring in

[01:20:39] Tony: it.

[01:20:40] Cameron: seen the thumb­nail for it on Net­flix, but I know

[01:20:42] Cameron: noth­ing about it.

[01:20:43] Cameron: I might’ve seen the trail­er. What’s it about?

[01:20:45] Tony: it’s, a lot of good things going for it, includ­ing the act­ing, but it’s set back in New York in the 80s and it’s about an abduc­tion of a child who goes miss­ing. Um, and, uh, Cum­ber­batch is the father, who’s a pup­peteer on a pup­pet show. And, uh, he spi­rals out of con­trol, um, prob­a­bly was spi­ral­ing out of con­trol, which is why the kid left, but, um, spi­rals out of con­trol when he dis­ap­pears, and that’s about the police inves­ti­ga­tion to find him.

[01:21:16] Tony: Real­ly, real­ly well writ­ten. It’s about six episodes, I think. Um, and at the end of every episode, you’re just think­ing, Yeah, that’s anoth­er clue. That’s, or is it the red her­ring? And you real­ly get dragged into the sto­ry because it all kind of ties togeth­er between the police and, and the vice squad and, uh, you know, the peo­ple who work in the stu­dio, TV stu­dio.

[01:21:36] Tony: And Cum­ber­batch’s father is a prop­er­ty devel­op­er with links to City Hall. So City Hal­l’s dragged into it. So it’s like one of those, you know, Um, Life On The Streets, New York, Grit­ty, Um, Back When Graf­fi­ti Was Every­where, And The San­i­ta­tion Was­n’t Being Picked Up, Every­one Was Telling Every­one Else To Fuck Off On The Streets Of New York, So, That Was Real­ly Good.

[01:22:00] Tony: Unfor­tu­nate­ly, It Has A Real­ly Bad Hol­ly­wood End­ing, Which I Just, You Know, That Was Just So Sac­cha­riney, I Just, I Just, If You Had, If I Had­n’t Watched Every­thing But The Last Episode, I Would Have Raved About This Show, But The Last Episode Real­ly Spoiled It For Me.

[01:22:13] Cameron: Yeah, right. Hmm.

[01:22:16] Cameron: Dis­ap­point­ing.

[01:22:16] Tony: But Oth­er­wise, Good. Yeah, and the last thing I want­ed to say was, um, RIP for John Black­man, the come­di­an,

[01:22:24] Tony: used to be the voiceover artist on Hey Hey It’s Sat­ur­day, amongst oth­er

[01:22:27] Tony: things. I had­n’t Don’t know John Black­man? Yeah. I had­n’t heard that he passed away until I saw it in your notes and I

[01:22:33] Cameron: went and looked it up. That’s sad.

[01:22:36] Tony: Very sad. and his whole jaw surgery and every­thing he’s been through in the last five or six years, I knew

[01:22:42] Cameron: noth­ing about that too. That’s ter­ri­ble.

[01:22:45] Tony: mmm, and I guess I just, it just res­onat­ed with me, you know, sad to see him pass. He cer­tain­ly was a part of my life, um, on var­i­ous TV shows, but, uh, when we first start­ed rac­ing race hors­es, we had a horse that Jan Rus­so, my, you know, my, a part­ner in, in the horse rac­ing busi­ness, um, called Black­man after the artist, because he just bought the Charles Black­man paint­ing to hang on his wall.

[01:23:10] Tony: Um, and after his first race, which it won, it was actu­al­ly, we were told by, uh, the pow­ers that be in the rac­ing indus­try that we could­n’t call a horse Black­man because peo­ple were com­plain­ing about, um, call­ing it Black­man, even though it was­n’t, you It was named after an artist whose name was Black­man. So we had to change its name and we called it, um, the train­er said, let’s just call it Lady Black­man because it was a mare, uh, and that got through and we’re just like, what’s, what’s the dif­fer­ence in call­ing a horse Black­man ver­sus Lady Black­man?

[01:23:39] Tony: But then, um, John Black­man, um, Uh, entered the media scrum and just said how ridicu­lous was it, you know, the peo­ple were com­plain­ing about a horse called Black­man and his name was Black­man and no one com­plained about that. And, um, and then, um, I found out, I was in the pro shop of my golf club one day and he was there as well.

[01:23:58] Tony: So we had a chat about it and a few laughs. So I got to meet him at one stage, um, and, and talked about that. And he was a real­ly nice guy. Um, so yeah, sad to see he, um, he’s

[01:24:08] Tony: gone. How long ago was that that you

[01:24:11] Cameron: ran into it?

[01:24:12] Tony: Uh, least 10 years, I’d say.

[01:24:14] Cameron: Hmm, Pre Cana­da, so

[01:24:16] Tony: prob­a­bly 12, 12 years or so ago.

[01:24:18] Tony: Hmm. Mm

[01:24:19] Cameron: Yeah, I mean, for our gen­er­a­tions grow­ing up with Hey Hey It’s Sat­ur­day, uh, with John doing all of the char­ac­ter voic­es and pro­vid­ing the humor and the com­e­dy, um, just like a huge part. Uh, of, of my child­hood, you know, absolute­ly leg­endary. His voice will always be in my head, you know, doing, doing Dicky Knee and stuff like that, Mm hmm. yeah.

[01:24:48] Cameron: And just, and just his voice intro­duc­ing

[01:24:51] Cameron: seg­ments and doing lit­tle side­lines when Mol­ly was on cam­era. Like lit­tle, uh, jokes about Mol­ly’s sex­u­al­i­ty. Um, Like, stuff that you could get away with in the 80s that, uh, would be high­ly inap­pro­pri­ate being done today. Mak­ing fun of some­body’s sex­u­al­i­ty, mak­ing, uh, you know, snide remarks about his sex­u­al­i­ty.

[01:25:20] Cameron: Yeah, um, any­way, R. I. P. John Black­man.

[01:25:24] Cameron: Well, I’ve had a, uh, a busy week. Um, Chris­sy and I tried Fall­out. Um, we watched the first episode. She, she’s not into it, so I don’t think that’ll go any fur­ther. It was a bit

[01:25:35] Cameron: sort of, Ah, okay. bit too sci fi ish for her, I think.

[01:25:39] Cameron: Um, I’ve been re watch­ing Fire­fly, just as my feel good thing.

[01:25:43] Cameron: I mean, like, one of my all time favorite shows. Don’t know if you’ve ever got­ten to that. Did you get into

[01:25:47] Cameron: Fire­fly?

[01:25:49] Tony: Yeah.

[01:25:50] Cameron: It’s a great rewatch show. The lines, the lines are great. Like, there’s so many great lines in it, and the char­ac­ters are so much fun. Like, at the end of the first episode, when, um, Mal invites Simon and Riv­er to stay on Fire­fly, and Simon says, How do I know you won’t just kill me in my sleep?

[01:26:09] Cameron: Mal says some­thing like, You don’t know me too well yet, son, so let me tell you some­thing. If I ever kill you, you’ll be awake. You’ll be look­ing at, you’ll be, you’ll be look­ing at me, and you’ll have a weapon in your hand.

[01:26:22] Tony: Mm hmm. Just real­ly, real­ly great lines like that. Um, I’ve been read­ing Riley Ace of Spies, I’ve also been read­ing Geof­frey Blaney for the first time.

[01:26:32] Tony: Ah. of his books, Short His­to­ry of the World, which I’ve been read­ing, and The Caus­es of War. Which I found out about through anoth­er thing I was read­ing. He did an analy­sis of, I think, from 1700 through to late 20th cen­tu­ry and talked about all the caus­es of war and break­ing it down, so I’m inter­est­ed to get into that.

[01:26:55] Cameron: But I think it’s the first Geof­frey Blainey book I’ve ever read. I’ve always felt like I should have read Geof­frey Blainey, see­ing as I do his­to­ry for a liv­ing,

[01:27:01] Cameron: and he’s Aus­trali­a’s try­ing to remem­ber,

[01:27:05] Tony: try­ing to remem­ber there was, um, who was his com­peti­tor? There was, uh, I know, I know as I was grow­ing up there was always two his­to­ri­ans, there was Geof­frey Blaney and there was some­one else and one was, one was Lib­er­al and one was Labor, and I can’t remem­ber which one was which.

[01:27:21] Cameron: Right. You famil­iar with the affil­i­a­tions of

[01:27:25] Tony: Blaney? No,

[01:27:27] Cameron: I’m not.

[01:27:28] Tony: Okay. Because it was like, it was, it was two schools of thought about Aus­tralian his­to­ry and one was always, um, anath­e­ma to the

[01:27:35] Tony: oth­er. I’m just try­ing to remem­ber what Blaney was. Yeah.

[01:27:39] Cameron: Hmm. Tyran­ny of Dis­tance, obvi­ous­ly, prob­a­bly being his most famous book, but I have to get my hands on that, too. Caus­es of War, 1973 was the first edi­tion of that, so it’s prob­a­bly around about where it is.

[01:27:52] Cameron: Any­who, what else? Well, Apple’s WWDC. was today, last night, uh, in the U. S., Tony, their World­wide Devel­op­er Con­fer­ence, where they final­ly announced their, the role of AI in all of their OSs mov­ing for­wards, Apple Intel­li­gence, as they’re call­ing it. And they also are inte­grat­ing Chat­G­PT into Siri, for the stuff that Apple Intel­li­gence can’t do, which is, it’s designed to be all of the on device AI, so it, Can read and inter­act with all of your apps and do stuff for you involv­ing all of the apps on your device, cal­en­dar, email, mes­sages, phone, pho­tos, et cetera, et cetera.

[01:28:38] Cameron: Any­thing else that needs, uh, to go into the greater world, it’ll have Chat­G­PT inte­grat­ed into it, they say. And it’ll say, do you want me to, you can ask Siri a ques­tion. It’ll say, do you want me to use Chat­G­PT for this? And you say, yes. And it’ll. Go out and do it, uh, love to know how much mon­ey they’re pay­ing Ope­nAI to have Chat­G­PT inte­grat­ed in it.

[01:29:01] Cameron: 1. 5 bil­lion iPhones, um, but this is going to be one of the major turn­ing points for AI, I think, is now peo­ple that don’t use Chat­G­PT all day, like I do, by the time this rolls out, which they say will be lat­er in the year, Um, and it’s, there’s still some ques­tion about how much of this AI stuff will be on lega­cy phones, and how much of it, I think for a lot of the Apple intel­li­gence on device stuff, you’re going to need to have a fair­ly cur­rent phone, a year or two old, that’s run­ning the lat­est Apple chips, because it’s all being done on the chipset, or an M1 or lat­er Mac. And my iPhone is like an iPhone 13. So it’s prob­a­bly not going to get a lot of this sort of stuff until I do an upgrade. But, um, Siri call­ing out to Chat­G­PT is prob­a­bly some­thing that it can do, but this’ll, this’ll intro­duce, uh, hun­dreds of mil­lions of peo­ple to using AI every day that they prob­a­bly don’t already.

[01:29:59] Cameron: So I think it is going to be a major turn­ing point in the roll­out of, uh, AI to the broad­er mar­ket­place. Uh, so that’s, it’s a big deal.

[01:30:10] Tony: says you.

[01:30:11] Cameron: Ha ha ha ha ha.

[01:30:13] Cameron: Yeah, it’s I’ll believe it when I see it. I could be wrong. I mean, um, I could prob­a­bly count, I think I’ve prob­a­bly sworn at Siri more times than I’ve used Siri. It’s like when she butts in and tries to ask me a ques­tion. I’ve got absolute­ly zero use for it, but I’m old school. I’d rather type my ques­tion into Google than talk to Siri.

[01:30:36] Tony: I’m not, I’m not hold­ing my breath. It’s going to improve my life at all. The only thing I think it might help with is, um, when I do. Use spread­sheets. I’m sure that Chat­G­PT or Siri or what­ev­er Apple Intel­li­gence is can say, Hey, you can do this bet­ter. So that might be a ben­e­fit to me. Um,

[01:30:53] Tony: but that’s about it, I think.

[01:30:55] Tony: I don’t need any­thing crawl­ing over my cal­en­dar telling me

[01:30:57] Tony: how to oper­ate my cal­en­dar bet­ter or, I mean,

[01:31:01] Tony: yeah. one I’m so, I’m sick and tired of going to a web­site and hav­ing Google ask me if I want to sign in using my Google account. It’s like, fuck off Google. I’ve even delved into the details of my set­tings of Google to turn that off and it still does it.

[01:31:15] Tony: So it’s

[01:31:16] Tony: like I just don’t need it.

[01:31:18] Tony: It’s just leave me alone. I know what I’m

[01:31:20] Tony: doing. like one of the demos that they did in the keynote was, uh, one of the ladies at Apple had a phone and she said, Hey, when’s, when’s my moth­er’s flight get in? And it was able to tell her by going through her emails when the flight was going to get in. And she said, what are, what are our lunch plans again?

[01:31:39] Cameron: And it was able to tell her what the lunch plans are by read­ing through her mes­sages

[01:31:43] Cameron: and, Well, was, was this per­son seri­ous­ly retard­ed? They could­n’t, they could­n’t go

[01:31:48] Tony: to the, the Qan­tas, you know, web­site and look up the ETA of

[01:31:52] Tony: the flight? She said, it would have tak­en me sev­er­al

[01:31:56] Cameron: min­utes to have recov­ered this infor­ma­tion, and it could do it for me imme­di­ate­ly,

[01:32:00] Cameron: so, And her time is

[01:32:02] Tony: gold, is it? Well, if you’re doing, if you’re doing that 50 times a day,

[01:32:06] Cameron: Tony, it?

[01:32:06] Cameron: all

[01:32:07] Cameron: adds up.

[01:32:08] Tony: You’ve got 50 moth­ers fly­ing in on 50 flights.

[01:32:10] Cameron: God, you are such a cyn­ic when it comes to this stuff, it’s astound­ing. But the big­ger,

[01:32:15] Cameron: like, you and I were I’ve just, but I’ve lived through the dot

[01:32:18] Tony: com boom and I’ve looked

[01:32:20] Tony: at prod­uct, this.

[01:32:21] Cameron: time

[01:32:21] Cameron: it’s dif­fer­ent, Tony. but I’ve decid­ed it’s dif­fer­ent.

[01:32:26] Cameron: no, here’s the thing that I think most peo­ple don’t get when they’re, when we’re talk­ing about AI, if Sam Alt­man and Bill Gates and every­one in between are right about what’s com­ing next with this, the next ver­sion of Chat­G­PT, so called Chat­G­PT 5, which is sup­posed to be, Going pub­lic lat­er on this year is going to be a mas­sive improve­ment over Chat­G­PT 4.

[01:32:58] Cameron: One of the analo­gies that I saw the CTO of Microsoft use the oth­er day, he said, is Chat­G­PT 4 has about the equiv­a­lent intel­li­gence of a high school senior in most things. Chat­G­PT 5 is basi­cal­ly a PhD. in every­thing. Sam Alt­man has said that it will solve most of the com­plaints and prob­lems that peo­ple have with GPT 4 in terms of its abil­i­ty not to make stuff up, to back up every­thing that it says with, um, sources and actu­al ver­i­fied data, etc.

[01:33:35] Cameron: But push it out anoth­er cou­ple of years. And, you know, again, Sam Alt­man, peo­ple like him are say­ing they don’t see any end in the run­way of being able to sig­nif­i­cant­ly increase the intel­li­gence. of the sys­tems in the fore­see­able future. Uh, imag­ine that we have a ver­sion of this tech­nol­o­gy in the next, let’s say, five years, where it is, uh, as smart as the smartest per­son in every sub­ject that is out there, because it’s con­sumed all of the data.

[01:34:15] Cameron: Um, you know, a lot of peo­ple, we, we sort of call that AGI, Arti­fi­cial Gen­er­al Intel­li­gence, where it’s smarter than the smartest human on every top­ic. And, you know, a lot of the peo­ple that are work­ing at Ope­nAI and places like that are say­ing, they’re sort of fore­cast­ing 2027 for AGI at this stage. So we’re three years away, maybe.

[01:34:36] Cameron: Let’s give it anoth­er cou­ple of years, let’s say it’s five years. What hap­pens when we have. When we apply that kind of intel­li­gence to sci­en­tif­ic prob­lems, the major issues that the world is fac­ing today, not just sci­en­tif­ic prob­lems, but all the think­ing about the major issues. Like it’s the explo­sion of intel­li­gence. walk­ing into that we’ve nev­er seen before. What hap­pens to can­cer when you have a mil­lion new sci­en­tists work­ing on cur­ing can­cer in the next decade?

[01:35:09] Cameron: And they’re AI sci­en­tists run­ning vir­tu­al exper­i­ments and vir­tu­al envi­ron­ments and com­ing up with the short list of things to, to do. Test in a lab. What hap­pens when you have a mil­lion new ther­a­pists, a bil­lion new ther­a­pists, where every iPhone is a ther­a­pist that knows every­thing about every­body and can help you with your men­tal health issues dur­ing the day?

[01:35:34] Cameron: What hap­pens when we have a mil­lion new sci­en­tists work­ing on cli­mate change? What hap­pens when we have a mil­lion new sci­en­tists work­ing on eco­nom­ic inequal­i­ty? What hap­pens when we have a mil­lion new sci­en­tists work­ing on geopo­lit­i­cal ten­sions or peace in the Mid­dle East or what­ev­er it is? This explo­sion of intel­li­gence that AI is going to enable, that we will be able to apply to all of the major prob­lems fac­ing soci­ety.

[01:36:05] Cameron: Uh, and enhanc­ing all of the, the way that we live togeth­er, the way that we oper­ate. Mil­lions of new sci­en­tists work­ing on busi­ness ideas, or busi­ness mod­els, or forms of, uh, socio eco­nom­ic coop­er­a­tion, gov­er­nance, what­ev­er it is. Um, then Add to that, what hap­pens when your devices are lis­ten­ing to all of your con­ver­sa­tions 24 7, upload­ing them to the cloud, index­ing them, ana­lyz­ing them?

[01:36:40] Cameron: What hap­pens when no one can lie to any­one any­more? because their devices are all record­ing every con­ver­sa­tion. What hap­pens to the legal sys­tem? What hap­pens to rela­tion­ships? What hap­pens to politi­cians and gov­ern­ments when every­thing is being record­ed and indexed? What hap­pens to soci­ety when all of this tech­nol­o­gy and mon­i­tor­ing hits us in the next few years?

[01:37:06] Cameron: I think the impli­ca­tions are absolute­ly Extra­or­di­nary. And I said to Tony off air and he laughed at me. This is the tech­no­log­i­cal sin­gu­lar­i­ty because life as we know it is going to fun­da­men­tal­ly change in the next five years and I don’t think any of us even begin to accu­rate­ly pre­dict what life is going to look like.

[01:37:28] Cameron: What hap­pens when you have mil­lions of new teach­ers for chil­dren that are avail­able on phones and iPads and com­put­ers that can have the patience to teach a three year old and the abil­i­ty to teach a PhD lev­el, uh, stu­dent doing their doc­tor­ate, that are smarter than any PhD out there on every sub­ject.

[01:37:52] Cameron: They’re smarter on every sub­ject. Yeah, you have a, you know, some­body who’s tak­ing you through your doc­tor­ate on some­thing today, they might be an expert on, you know, Endocrinol­o­gy, but they’re not, they don’t have a PhD in quan­tum mechan­ics. Your AI will have a PhD in every­thing and will be able to be your teacher.

[01:38:09] Cameron: What hap­pens when there’s just mil­lions of teach­ers avail­able at 20 a month that are experts on every sub­ject? Lan­guages, sci­ences, the human­i­ties. What does the world look like when there’s mil­lions and mil­lions of these intel­li­gences that are just pro­lif­er­at­ing on every device?

[01:38:29] Tony: I can’t pre­dict it. I don’t know. What I do know is human nature. There’s no fuck­ing way that politi­cians are going to let all of their tele­phone calls and emails, etc. be mon­i­tored. They’ll bring in pri­va­cy leg­is­la­tions way before that hap­pens. There’s still the insti­tu­tion­al imper­a­tive, as we’ve writ­ten about, in, in, you know, our Psy­chopath Epi­dem­ic book.

[01:38:54] Tony: Um, but it’s still going to apply. AI is not going to change that. AI is going to be a huge pro­duc­tiv­i­ty tool. Um, and I think some of what you said makes a lot of sense. Like, if you have lots of peo­ple scan­ning cells for can­cer and can come up with some pat­terns that sci­en­tists haven’t found before, I think that’s a great thing.

[01:39:13] Tony: Um, but they’re still going to face the bot­tle­neck of then human tri­als. You know, you still got it. You can’t, you can’t just test some­thing on an AI chip and say it’s going to work. It’s got to then be put into the same sort of human tri­al process that’s used today. So it’s going to be bot­tle­necks. So it’s, it’s going to be pro­duc­tive and we’re going to leapfrog in cer­tain areas.

[01:39:33] Tony: Um, but human. Human frailty, human char­ac­ter­is­tics are still going to be the bot­tle­neck in any­thing that’s going to change soci­ety. And like I said, I don’t want Siri telling me what to do with my cal­en­dar or my smart­phone, she can fuck off. Um, but it’s going to be very, it’s going to be a very long time before I even need any sort of automa­tion upgrade.

[01:39:59] Tony: In my life in that respect. So yeah, it’d be great if you talk to a teacher and ask them whether hav­ing a PhD knowl­edge in bio­chem­istry is going to make them a bet­ter teacher. They’ll say no, they’ll say crowd con­trol is going to make me a bet­ter teacher. So just because you’ve got a screen in front of peo­ple does­n’t mean they’re not going to, you know, Take it down the cor­ner and sell it for crack in a lot of cas­es.

[01:40:21] Tony: It’s, there’s the, I think the, I think the flights of fan­ta­sy that peo­ple get into when they’re pre­dict­ing the sin­gu­lar­i­ty, nor the human ele­ment to it all and, and self inter­est and human nature. And I think a lot of what you say is going to hap­pen, but a lot of what you say is going to be thwart­ed and won’t hap­pen

[01:40:39] Tony: as well. Like what? Which bits won’t hap­pen? Do you think?

[01:40:42] Tony: I think there’ll be, It’ll be, see AI being a great edu­ca­tor. And peo­ple like you and I, who are nat­u­ral­ly curi­ous and look things up. Yeah, well, it’ll improve our abil­i­ty to source. I can still go to Google and find most things that I’m after. Um, I’ll get some pro­duc­tiv­i­ty improve­ments. As I said, that it will help my cod­ing.

[01:41:03] Tony: It’ll help my use of Excel. Um, may, it may refine the check­list, may even do invest­ing for me. Um, I don’t think it’s going to do that. Dis­rupt the stock mar­ket. I don’t see that going away because as we just spoke about this, the stocks very rarely trade at what they should trade at because there’s human nature is involved.

[01:41:23] Cameron: I’ll tell you how it’s going to dis­rupt the stock mar­ket. So it’s going to replace jobs. Um, it’s going to replace lots of jobs. Busi­ness­es will start to replace employ­ees with AI and then robots, you know, the next 10 years. Gold­man Sachs are pre­dict­ing, uh, just the, an explo­sion of humanoid robot­ics replac­ing man­u­al labor jobs.

[01:41:47] Cameron: But at first it’ll be AI replac­ing infor­ma­tion work­er, knowl­edge work­er, cre­ative work­er, then man­age­ment, because you’ll get rid of, you’re going to get rid of swathes of, you know, Knowl­edge Work­ers, which means there’s less peo­ple to man­age, so mid­dle man­agers jobs are going to go, there’s going to be com­pe­ti­tion for psy­chol­o­gists, for teach­ers.

[01:42:08] Cameron: Then you’ve, so the prob­lem we’re going to have is large per­cent­ages of the pop­u­la­tion out of work. They don’t have work, they don’t have mon­ey, they don’t have mon­ey, they can’t use it to spend stuff. What hap­pens to

[01:42:20] Cameron: the econ­o­my when peo­ple don’t have an income?

[01:42:23] Tony: see again, I’ve been, we’ve been through this, right? It was like when I first start­ed work­ing in the IT depart­ment at Shell, we were putting clerks out of jobs, you know, because they weren’t tak­ing pieces of paper and stamp­ing them and pass­ing them on after check­ing them. But those peo­ple got

[01:42:39] Tony: jobs and there’s the same thing.

[01:42:42] Tony: The same thing will hap­pen with

[01:42:43] Tony: this.

[01:42:43] Cameron: what jobs are peo­ple going to get that won’t be tak­en

[01:42:46] Cameron: by AI? I went through this exer­cise with Chat­G­PT over the week­end. I said, it was like, oh, well, peo­ple will have to be re skilled. Like, real­ly, what are they, what jobs are they going to be re skilled to

[01:42:57] Tony: So, okay, some exam­ples. So, you’re in court, and, um, are you real­ly going to trust the iPad that they give you for free, that says here’s, you know, here’s how the case is going to go, here’s how the legal prece­dent sits, or are you going to want to

[01:43:16] Tony: pay a bar­ris­ter who thinks on their feet to get you off?

[01:43:20] Cameron: I think ini­tial­ly you’re right, you’ll prob­a­bly have human lawyers rep­re­sent­ing you in court, but a lot of the para­le­gal work that gets done to lead up to that point will be done large­ly by AI, which means all the para­le­gals are out of jobs.

[01:43:35] Tony: yeah, but if you talk

[01:43:36] Tony: to a para, a lot of para­le­gals will say my jobs is bor­ing as shit any­way, I wish I did­n’t have to

[01:43:40] Tony: do it. So

[01:43:41] Cameron: but what are they going to

[01:43:41] Tony: not nec­es­sar­i­ly

[01:43:42] Tony: a bad

[01:43:42] Tony: thing. Well, I’ll find some­thing else. I’ll find some­thing

[01:43:46] Cameron: What?

[01:43:47] Tony: Well, teach­ers,

[01:43:49] Tony: you’re not going to replace, you’re not going to replace all of these human inter­ac­tion jobs, front­line work­er jobs with AI,

[01:43:57] Cameron: Why not? It’s not

[01:43:58] Tony: like I just said, a three year old, first of all, they’re talk­ing about ban­ning access to social media for three year olds and kids under 14.

[01:44:07] Tony: It’s hap­pen­ing in some states in the U S now, it’s going to be hard to, to then say, no, you can have access to it to do your stud­ies. They’re not going to sit still

[01:44:16] Tony: for it. social media, it’s AI. It was a dif­fer­ent thing,

[01:44:19] Tony: No, I know. They are dif­fer­ent things, but it’s, it’s the same thing. I can’t see, um, well, look at the, look at the expe­ri­ence dur­ing COVID, you know, I talked to teach­ers who were teach­ing, rel­a­tives of mine who were teach­ing dur­ing COVID, and they said, we know the kids were play­ing games, they weren’t, they weren’t learn­ing, um, that, okay, it was sort of stuck togeth­er with, Sticky tape and chew­ing gum dur­ing COVID, but you could­n’t run a soci­ety on that basis.

[01:44:47] Tony: No one would learn any­thing. They’d just slack off. Who’s, who’s check­ing and mak­ing sure? Who’s, who’s dis­ci­plin­ing

[01:44:52] Tony: them? AI?

[01:44:54] Cameron: yeah, the AI is, yeah. How? How does AI dis­ci­pline

[01:44:56] Tony: a

[01:44:57] Cameron: if you think, that the approach to edu­cat­ing chil­dren is

[01:44:59] Cameron: dis­ci­plin­ing them, I think there’s a fun­da­men­tal prob­lem with the approach to edu­ca­tion.

[01:45:06] Tony: Well, no, but it’s a com­po­nent of edu­ca­tion. I mean, you know, I remem­ber when I went through school, I was inter­est­ed and curi­ous, but I looked around

[01:45:12] Tony: and the rest of the class was muck­ing up, and some­times I

[01:45:14] Tony: was

[01:45:15] Tony: muck­ing up. Yeah, that’s sort of an teach­ing takes a lot more

[01:45:18] Tony: than,

[01:45:18] Cameron: though. But then, okay, so teach­ers don’t teach them. They’re just

[01:45:22] Cameron: dis­ci­pli­nar­i­ans is what you’re say­ing. You need, you need adults forc­ing, and it’s, it’s an age thing too, right? Kids at a cer­tain age are going to have low­er con­cen­tra­tion lev­els. But, and one of the prob­lems. Oh, one of my scripts just kicked in. One of my, one of the prob­lems with, um, uh, teach­ing these days is the teacher to stu­dent ratios that are eco­nom­i­cal­ly jus­ti­fi­able for schools. So maybe instead of one teacher for every twen­ty five kids, we will have one teacher for every twen­ty five kids. Three kids, if teach­ers, uh, can be more, spend more of their time, I don’t know, mon­i­tor­ing and the AI is doing more of the teach­ing, but

[01:46:06] Cameron: if you Yeah, I think you’re right. I think it’s, I think AI is you should.

[01:46:10] Tony: okay, so where I’m com­ing from it is I think AI will get used in teach­ing, but it’ll be for things like grad­ing exams or teacher admin sup­port, um, which will free up teacher teach­ing times and will reduce the stu­dent to staff ratios, but not per­haps in the way you’re sug­gest­ing.

[01:46:25] Tony: So I think it’s, it’s going to be a huge pro­duc­tiv­i­ty improve­ment. I don’t think it’s going to be a

[01:46:30] Tony: huge dis­place­ment of jobs, um, over­all.

[01:46:34] Cameron: It’s going to be a one to

[01:46:36] Tony: into oth­er

[01:46:37] Tony: areas.

[01:46:37] Cameron: one to one teacher to stu­dent

[01:46:39] Cameron: engage­ment rela­tion­ship. Every kid will have their own AI teacher that under­stands the kid, under­stands ped­a­gogy, And under­stands how to enter­tain and edu­cate the kid at the same time. And it’s gonna,

[01:46:57] Tony: I think, I think that’s a shame if kids

[01:46:59] Tony: only talk to a screen all day. They’re not going to devel­op in the way that

[01:47:02] Tony: kids should devel­op.

[01:47:04] Cameron: they’ll have time

[01:47:05] Cameron: they’ll have time to devel­op, talk to kids, oth­er kids.

[01:47:10] Cameron: But what if, what if the, what if the avatar on their screen that they’re talk­ing to is a hyper real­is­tic avatar that looks like a human, sounds like a human.

[01:47:20] Tony: the stage where it’s a holo­gram in class, for sure. And looks like a robot in class, which could poten­tial­ly come for sure. I think there’s a lot of bridges that have to be crossed before we get there. Not say­ing it’s not the end game. I’m not drink­ing the Kool Aid yet that there’s going to be mil­lions of teach­ers out of work and

[01:47:40] Tony: who then can’t find work in oth­er indus­tries

[01:47:42] Tony: yet. well, the oth­er indus­tries

[01:47:45] Cameron: thing is the chal­leng­ing bit. Like, I’ve tried to find an indus­try that won’t be impact­ed by I was ask­ing GPT, tell me indus­tries that won’t be impact­ed in the short term by And they’re like, oh, well, like a Chief Exec­u­tive Offi­cer. Like, oh, real­ly? So Mil­lions of teach­ers are going to retrain to be chief exec­u­tive offi­cers or neu­ro­sur­geons, like every­thing is going to be impact­ed when you have a super intel­li­gence or a high­ly intel­li­gent, let’s say AI, mak­ing its way into the work­force.

[01:48:21] Cameron: And we know, again, We talked about this in the book, busi­ness­es, uh, insti­tu­tions are try­ing to com­pete, uh, with each oth­er for sur­vival. One of the ways of doing that is reduc­ing cost or increas­ing prof­it. Uh, they’re going to be look­ing for ways to lever­age AI. To do both of those things, which is going to cre­ate com­pet­i­tive forces in the mar­ket­place, which will force oth­er busi­ness­es and oth­er sorts of insti­tu­tions to do that as well.

[01:48:49] Cameron: It’s going to be a No. No doubt. effect

[01:48:51] Tony: I, I think it’s gonna be a bit like, um, when it took off. It’s gonna be a pro­duc­tiv­i­ty tool and God knows we need one in the econ­o­my. We have now, we haven’t had pro­duc­tiv­i­ty gains for a long time, which will be a ben­e­fit to, um, to soci­ety, which would be good. But like, and sure peo­ple will be de dis­placed into oth­er roles, but I don’t see, I see AI as the tool which checks things and which a, you know, improves admin.

[01:49:16] Tony: Um, maybe improves research, um, legal process­es, con­veyanc­ing, wills will become auto­mat­ed, more auto­mat­ed than they are now. But I don’t, but some­one still has to check it, right? I don’t, I don’t think peo­ple are going to trust AI at the

[01:49:31] Tony: start, not for a long

[01:49:32] Tony: time.

[01:49:33] Cameron: No, not for a long time.

[01:49:34] Cameron: with­in a cou­ple of years. Look, I

[01:49:36] Tony: And you can’t you can’t afford to.

[01:49:38] Cameron: You can’t

[01:49:39] Tony: You can’t afford to let AI fly the plane, right?

[01:49:41] Tony: It’s going to still need a pilot for a long time.

[01:49:45] Cameron: Fly­ing a plane, maybe, um, same with self dri­ving cars for a time, but, you know, for a lot of oth­er things, I think it’ll be a fair­ly quick process. It’ll be a cou­ple of years until it’s been test­ed and is deter­mined to be as trust­wor­thy, if not more trust­wor­thy, than a human in the job, and then there’ll be a pret­ty quick replace­ment peri­od.

[01:50:14] Tony: I mean, I, I hate to make pre­dic­tions like this, but I can’t see teach­ers being replaced for 20 years. It’ll be, there’ll be test­ing, there’ll be tri­als, there’ll be process­es that, you know, get checked off, but it’ll take a long time.

[01:50:28] Cameron: got­ta put mon­ey on it?

[01:50:29] Tony: sure.

[01:50:31] Cameron: If, if I had any mon­ey, I’d, I’d

[01:50:33] Cameron: put mon­ey on

[01:50:34] Tony: Yeah, well, I mean, my argu­ment is that no one can pre­dict the future. So it’s, I’m not going to back, I’m hap­py to back my pre­dic­tions with you, but my pre­dic­tions are worth­less as well. Um, actu­al­ly the only per­son I reck­on who’s been good at it is Kurzweil. So what’s he say­ing

[01:50:48] Tony: about AI? I haven’t looked into what

[01:50:50] Tony: he says. Oh yeah, he’s, he’s balls to the wall. All, all, it’s chang­ing sin­gu­lar­i­ty by 2029, man. Like it’s, Yeah. And Kurzweil is say­ing what I’m say­ing. Peo­ple don’t real­ize what the impli­ca­tions are of an explo­sion of intel­li­gence. We, we, we strug­gle to get our head around what that means, an explo­sion of intel­li­gence in our soci­ety.

[01:51:16] Cameron: We haven’t seen that ever.

[01:51:19] Cameron: Uh, Well, yeah, it’s a great,

[01:51:22] Tony: it’s a great con­cept, but again, it butts up against human nature. You said before, you know, what would a mil­lion cli­mate sci­en­tists look like? Well, I think they look like the few thou­sand we have now. They’ll be ignored large­ly by the pop­u­la­tion who are fed bull­shit by Rupert Mur­doch.

[01:51:37] Tony: So, um,

[01:51:40] Tony: there’s a lot that has to

[01:51:41] Tony: hap­pen. To bring in AI to rule the world. And the cli­mate don’t think humans would ever see that.

[01:51:47] Cameron: The cli­mate sci­en­tists will be work­ing on bet­ter ways

[01:51:50] Cameron: to extract car­bon out of the atmos­phere, bet­ter ways to cre­ate high­er effi­cien­cies for green forms of ener­gy pro­duc­tion, or for, you know, hav­ing

[01:52:00] Cameron: clean car­bon, And, and you know what

[01:52:02] Tony: will hap­pen, but it’s always the sec­ondary effects, right? So let’s, let’s, I agree with you that they, you have lots of cli­mate sci­en­tists work­ing on ways to extract car­bon, then we’ll extract car­bon. That’s just, you know, like the, the moon land­ing, let’s throw a thou­sand sci­en­tists at get­ting a man to the moon in 10 years and bring­ing him back again.

[01:52:20] Tony: Safe­ly. That’s. You know, that’s, we’ve seen that before and I hope it does hap­pen with cli­mate action, but you know what’s like­ly to hap­pen if we extract car­bon out of the atmos­phere quick­er and bet­ter than what we do now, more effi­cient than what we do now? We’ll burn more coal, right? Because that’s the busi­ness imper­a­tive.

[01:52:36] Tony: It may not actu­al­ly help the cli­mate.

[01:52:39] Cameron: well, as long as we’re extract­ing as much as we’re burn­ing, it does­n’t mat­ter.

[01:52:44] Tony: Yeah, as long as we are,

[01:52:46] Cameron: Yeah. but then, but then Rupert Mur­doch will hire a mil­lion AI

[01:52:49] Tony: cli­mate sci­en­tists to deny the fact

[01:52:51] Tony: that we are 97, man. Like,

[01:52:54] Cameron: Rupert’s not going to be around for

[01:52:55] Cameron: this. What­ev­er.

[01:52:57] Tony: he’s, he’s, he’s stack­ing up the next wife, he’s, look, he’s got, ha ha, he might mar­ry AI, right? He’s mar­ried into

[01:53:03] Tony: the Russ­ian mafia this time, he might mar­ry AI next, ha ha

[01:53:07] Tony: ha, And then, I mean, nan­otech­nol­o­gy, break­throughs in

[01:53:10] Cameron: nan­otech­nol­o­gy is the next part of it that I real­ly want to see hap­pen. So then, we take that car­bon and we reuti­lize it in our nanofab­ri­ca­tors to build new things out of the car­bon, so we don’t have to sequester it. under the ocean or in the ground, we actu­al­ly start to build stuff with the car­bon, along with every­thing else that we are dis­man­tling.

[01:53:31] Cameron: All of our waste prod­ucts get dis­man­tled into car­bon, oxy­gen, hydro­gen, nitro­gen, cop­per, gold, iron, what­ev­er it is. And

[01:53:40] Cameron: we, we

[01:53:41] Tony: yeah, and they’re, they’re great new indus­tries, and they’re not going to be com­plete­ly employ­ee less, so that’s where the teach­ers will

[01:53:47] Tony: go.

[01:53:48] Cameron: No, they will be, it’ll be, AI and

[01:53:51] Cameron: robots.

[01:53:52] Tony: I I don’t see it. There’s got to be some

[01:53:54] Tony: form of human check­ing and human

[01:53:56] Tony: inter­ven­tion in

[01:53:56] Cameron: Why? If the AI is smarter than every human, why are you going to have a human check some­thing that’s smarter than it? Does­n’t make sense. Why would you spend mon­ey get­ting a human to check some­body that’s smarter than it? Would you get a uni­ver­si­ty stu­dent to check some­body with a PhD’s work? No.

[01:54:15] Tony: um, I would­n’t.

[01:54:16] Tony: I think all of it needs to be checked. There’s peer review

[01:54:20] Tony: for a start for Well, you have one AI check the oth­er AI. I already

[01:54:24] Cameron: do but if you don’t I get Chat­G­PT, I get Chat­G­PT to write code and then I give it to

[01:54:29] Cameron: Claude or Gem­i­ni and say, check this code for me. And then I give it back to Chat­G­PT.

[01:54:35] Cameron: Have,

[01:54:36] Tony: And that’s going to be enough of con­se­quences, is there’s going to be an AI war.

[01:54:40] Tony: You know, which, which one do you believe? So that’s got to hap­pen as well.

[01:54:44] Cameron: that’ll be part of it. There’ll be

[01:54:45] Cameron: pro­pa­gan­da cre­at­ed by one set of AIs. And then oth­er peo­ple will be using their AI to, you know, fact check the pro­pa­gan­da. And they’ll say, well, you can’t believe that AI. It’s owned by lib­er­als,

[01:54:59] Cameron: you know. Yeah.

[01:55:01] Tony: Yeah. It’ll be Elon’s AI and

[01:55:03] Cameron: Elon Don­ald Trump’s AI

[01:55:07] Tony: and Rupert Mur­doch’s AI and Jack Dorsey’s AI that will be fight­ing

[01:55:09] Tony: each oth­er. tweet­ed today that if Apple inte­grate Chat­G­PT into their phones, he’s going to ban iPhones from all of his fac­to­ries and busi­ness­es because it’ll be spy­ing on him and stuff like

[01:55:22] Cameron: that.

[01:55:23] Tony: It will be. That’s part of it. Yeah. Do I real­ly want the AI to spy on me? No.

[01:55:30] Cameron: Hmm. Okay. I think one thing we’ve learned is that peo­ple are hap­py to trade pri­va­cy and secu­ri­ty for con­ve­nience and ben­e­fits.

[01:55:41] Tony: Yeah, they’re hap­py to trade. Yeah, I

[01:55:42] Tony: agree. They’re That’s why we sign,

[01:55:44] Tony: cash.

[01:55:46] Cameron: we sign user agree­ments with soft­ware com­pa­nies every day with­out read­ing them. We don’t we don’t. Yeah, exact­ly. Yeah. Oh, I agree with you. So, but AI’s got to prove itself to that lev­el of stan­dard, which I

[01:55:57] Tony: think is still, still has to hap­pen. And it won’t be as quick as

[01:56:01] Tony: peo­ple think. you know, but no, it’ll be faster than peo­ple think.

[01:56:08] Tony: Oh, look, you paint a nice pic­ture and I hope you’re right. It’d be great to cure can­cer and, and take car­bon out of the atmos­phere quick­ly and all that. But I reck­on we all got, all that’s going to hap­pen is that we’re going to get inun­dat­ed with Elon Musk’s point of view and Rupert Mur­doch’s point of view, and, and we’ll be putting car­bon into the atmos­phere

[01:56:23] Tony: because it sells more coal for the coal com­pa­nies, if we believe AI.

[01:56:28] Cameron: Well, uh, for­tu­nate­ly this is record­ed and it will be indexed and ana­lyzed by AI. And five years from now, I’ll be able to say,

[01:56:35] Cameron: Hey, pull up. When, when was it that Tony told me that he was­n’t going to be

[01:56:39] Cameron: using AI for any­thing and that teach­ers would­n’t be put out of jobs? He was going to pull that Ha ha ha ha ha. Yeah, sure. Yeah, look, you said I was a cyn­ic. I’m prob­a­bly more scep­ti­cal than a cyn­ic. But, I think there’s, No, a lot of change com­ing.

[01:56:57] Tony: No I can, I can buy into the AI argu­ment, it will improve pro­duc­tiv­i­ty. But I think there’s a lot of, a lot of water under the bridge before we see the com­plete con­trol AI, because it’s smarter than us.

[01:57:09] Tony: It won’t hap­pen.

[01:57:11] Tony: It won’t hap­pen.

[01:57:13] Tony: won’t hap­pen. In fact, I can build a case which says that AI won’t be allowed to devel­op to that lev­el because peo­ple will be scared of it being smarter than human­i­ty and

[01:57:25] Tony: tak­ing over. It’ll be kept at a cer­tain lev­el of

[01:57:28] Tony: intel­li­gence. That is an argu­ment that’s already been pushed in the last year or so by guys like Eliez­er Yudovsky, who I inter­viewed. Do you remem­ber my inter­view with him 20 years ago on G’day World? When I was doing my ear­ly Sin­gu­lar­i­ty series with Kurtzweil, et cetera, I did Eliez­er Yudovsky on. Um, he’s been an AI sort of Thinker for decades.

[01:57:51] Cameron: And he’s been one of the promi­nent voic­es about, we need to shut down AI for the last year. He’s like, this is going to kill us all. Um, but the argu­ment, the counter argu­ment against that, it’s okay. Let’s say all of the West­ern gov­ern­ments decid­ed to put a mora­to­ri­um on AI. Do you think Chi­na’s going to stop devel­op­ing AI when it offers the mas­sive com­pet­i­tive advan­tage?

[01:58:11] Cameron: So there­fore the advo­cates against this will say, well, we can’t. Put a mora­to­ri­um on AI, because we won’t stop Chi­na from devel­op­ing it. We don’t want to be, you know, have a world that’s run by Chi­na’s AI, so we have to do it. The forces of cap­i­tal­ism, uh, will push this for­wards. It’s very hard to stop it, I think, now.

[01:58:36] Cameron: I can’t see any­thing. Unless there are unfore­seen tech­no­log­i­cal hur­dles, or we run out of ser­vice space, or we run out of elec­tric­i­ty, or some fun­da­men­tal Infra­struc­ture, floor,

[01:58:52] Cameron: I Yeah, but I think there could

[01:58:54] Tony: be, there could be,

[01:58:55] Tony: just flaws in the mod­el too. We don’t know why AI

[01:58:58] Tony: hal­lu­ci­nates now.

[01:59:00] Cameron: We don’t know why AI works. yeah. This is the thing that most peo­ple don’t under­stand. I have to explain this to peo­ple all the time. Even the peo­ple who built it.

[01:59:11] Tony: Hmm.

[01:59:11] Tony: Hmm. peo­ple who built Ope­nAI and Chat­G­PT don’t know how it works or why it works. So I remem­ber an inter­view with Ilya Sutskev­er like last year before he got kicked out of the com­pa­ny.

[01:59:26] Cameron: He was like the lead tech dev of Chat­G­PT. And the inter­view­er, I think it was Jensen Huang, the CEO of NVIDIA, said, What has sur­prised you most with this? And he said, What sur­prised me most is that this works. I had no idea. That this would work, you know, they were like, uh, what hap­pens if we throw a lot of com­pute at this lan­guage mod­el?

[01:59:49] Cameron: Oh my God. It under­stands lan­guage and it devel­ops a world mod­el and it seems to under­stand things like they had­n’t, they had a hunch that if they threw a lot of com­pute at this, some­thing inter­est­ing might hap­pen, but we don’t know why it works. How does it under­stand the world? Geof­frey Hin­ton, who was Ilya’s pro­fes­sor.

[02:00:11] Cameron: and busi­ness part­ner before Ilya went to Ope­nAI. I watched an inter­view with Hin­ton just a cou­ple of weeks ago. He said the same thing. Hin­ton’s been, he’s the god­fa­ther of all of this, of, of trans­former mod­els, etc. He’s like, we don’t know how this works. This should­n’t work. That is the most jaw drop­ping, mind blow­ing thing for me, is the peo­ple who built it don’t know how it works or why it works.

[02:00:40] Tony: Well, we don’t know

[02:00:41] Tony: how our intel­li­gence works or how our con­scious­ness

[02:00:44] Tony: works.

[02:00:44] Cameron: Yeah, but we did­n’t build It

[02:00:45] Cameron: It built itself.

[02:00:48] Tony: Yeah.

[02:00:49] Cameron: They built this and they don’t know how it works. Like, you think about the impli­ca­tions of that.

[02:00:55] Cameron: We have built this thing that could become a super­in­tel­li­gence and we don’t know how it works or why. Peo­ple are like, oh, but it’s not per­fect and it has hal­lu­ci­na­tions.

[02:01:04] Cameron: Like, yeah, no, no, you’re miss­ing the point. We don’t know how it works! Like it’s, um, you know, we, I was explain­ing this to Chris­sy the oth­er day, like for the last 50 years, AI research has most­ly been around. Well, the way that humans devel­oped is we had some sort of, um, world mod­el that was pre lan­guage.

[02:01:29] Cameron: You hold up a banana. This is some­thing I can eat, but you did­n’t have words for it. And then words, Came sec­ondary to the mod­el and sym­bol­ic log­ic came sec­ondary. And then they built a new meta lay­er of under­stand­ing and con­structs and con­cepts came out of lan­guage, but we had this world mod­el first. So the think­ing was, okay, you have to build a world mod­el inside of an AI first, and then you give it lan­guage to artic­u­late the world mod­el.

[02:01:53] Cameron: But LLM does. It just gives it words,

[02:01:56] Cameron: words Well, it pre­dicts, does­n’t it? Does­n’t it pre­dict what the next word is based

[02:02:00] Tony: on the con­text of what’s had, it’s already

[02:02:03] Tony: passed? Yeah, I mean that’s a high­ly sim­plis­tic ver­sion of what it does, yeah, but that’s how it start­ed, and it kind of does that at a token lev­el, but it also has some­how, in order to do that effec­tive­ly has had to build a world mod­el. In order to pre­dict the next word it has to under­stand the world,

[02:02:28] Cameron: or else it can’t pre­dict the next word effec­tive­ly.

[02:02:31] Cameron: Like, you can go type a, you know, a seman­tic prob­lem into Chat­G­PT, which has nev­er been asked before, does­n’t exist in any of the train­ing mate­r­i­al. How does it pre­dict? How does it con­struct a coher­ent and artic­u­late response to your

[02:02:46] Tony: right.

[02:02:47] Cameron: It has to have devel­oped a way I was say­ing this about pro­gram­ming, like a year ago, when peo­ple were going, oh, it’s just a, it’s a ski­tas­tic par­rot.

[02:02:56] Cameron: Um, like, well, hold on a sec­ond. Statas­tic Par­rot. I was like, I’m ask­ing it pro­gram­ming ques­tions or, you know, write a for­mu­la for this in Excel. No one has ever, in the his­to­ry of the world, asked it this par­tic­u­lar ques­tion for a for­mu­la for a QAV spread­sheet thing, and yet it’s giv­ing me the answer. It’s not just pulling this out of its data­base or know­ing what word to place next because that’s how it’s seen done before.

[02:03:28] Cameron: It has to under­stand con­cep­tu­al­ly what the ques­tion is and it has to under­stand Excel and it has to under­stand, you know, the stock mar­ket and it has to under­stand all these bits and pieces in order to artic­u­late the for­mu­la that it then gives me. How does it do that? No one knows,

[02:03:49] Tony: Yeah.

[02:03:51] Tony: That’s crazy, isn’t it?

[02:03:54] Cameron: I’ve Yeah, which, and that may, that may be the lim­i­ta­tion on AI, but it, it works to a point, it can do like fix my for­mu­la in Excel, but maybe it can’t solve cli­mate change or it can’t cure

[02:04:06] Tony: can­cer. Maybe.

[02:04:10] Cameron: maybe, but why not, I mean, the way that humans do it is we read the lan­guage and we under­stand the lan­guage and then we solve the prob­lems based on what the lan­guage and the reports and the stud­ies and the text­books say, right? If it under­stands lan­guage it should be able to under­stand any­thing a human can under­stand.

[02:04:26] Tony: So, um, prob­a­bly not artic­u­lat­ing what I’m try­ing to say. There’s a lot of serendip­i­ty in sci­ence. You know, think about Alexan­der Flem­ing and the Petri dish of mould that was left on this, you know, left on the sill of the win­dow when he went away for the week­end. Um, if he had­n’t done that, you could throw any, any amount of, Com­put­ing grunt at the, you know, the solu­tion for

[02:04:51] Tony: bac­te­ria, and you may not solve it.

[02:04:53] Tony: So,

[02:04:55] Tony: there’s, is you can run

[02:04:57] Cameron: bil­lions and bil­lions of vir­tu­al mod­els. This is what Kurzweil was say­ing last year about COVID. You know, he said, like, we devel­oped the, you know, Mari­na devel­oped the MRNA COVID vac­cine quick­ly. Uh, Mod­e­na, not

[02:05:15] Cameron: Mari­na. Mod­e­na, yeah,

[02:05:17] Cameron: Mari­na is, uh, Mod­er­na. Mari­na’s the thing that women get in their arms to stop them get­ting preg­nant.

[02:05:24] Cameron: Um, Mod­er­na devel­oped the mRNA vac­cine

[02:05:27] Tony: used to be a great of marine oil when I was work­ing at Shell too, Mari­na,

[02:05:32] Tony: uh quick­ly, but

[02:05:36] Cameron: we still had to do human tri­als. He said what we should have done and what we will do in the future is just run a bil­lion vir­tu­al human tri­als and then say, okay, here is the, you know, here is the results of a bil­lion vir­tu­al tri­als. Tri­als that have been done and you can run those in a day.

[02:05:57] Cameron: And it spits out the results. You know,

[02:06:00] Cameron: if you’re try­ing to and that’s great if, if the FDA, you know, gets enough, um, enough evi­dence to say that that’s an

[02:06:08] Tony: accept­able replace­ment for human tri­als, and, yeah, that is progress, that, that would be great.

[02:06:13] Cameron: and, you know, they’ll, they’ll do a cou­ple of things, I’m sure we will run a bil­lion vir­tu­al tri­als and then we’ll get the short list of things to try and human tri­als and they do it. And if it works, you do that enough times and you go, okay, well, let’s skip the eight months of human tri­als. Now, like we’re con­fi­dent that the mod­el works.

[02:06:31] Cameron: Same as, Self dri­ving cars, right? We just keep run­ning it and keep run­ning it and keep run­ning it until it’s more effec­tive than human until it

[02:06:42] Cameron: Well,

[02:06:42] Cameron: human dri­vers kill Yeah, look, I am skep­ti­cal about you, about self, about dri­ver­less cars. I’ve, I’ve, again, I’ve heard

[02:06:49] Tony: that it’s com­ing in 18 months for the last 10 years. So,

[02:06:53] Cameron: Yeah, but we did­n’t have AI for the

[02:06:55] Cameron: last 10 years. It may hap­pen.

[02:06:58] Tony: but it’s still com­ing.

[02:06:59] Tony: So Yeah, but we did­n’t have AI for the

[02:07:01] Cameron: last 10 years. AI changes every­thing. This time it’s dif­fer­ent,

[02:07:05] Cameron: Tony. ha

[02:07:05] Cameron: ha ha Well, that’s, that’s the red flag for me.

[02:07:11] Cameron: ha!

[02:07:13] Cameron: I know.

[02:07:14] Tony: Because we know it prob­a­bly isn’t.

[02:07:16] Cameron: Alright, that’s the show. Thanks,

[02:07:18] Cameron: Tony. a good con­ver­sa­tion. Thank you.