QAV 738 — Pigs Get Slaughtered

QAV 738 Club

[00:00:00] TK: 3, 2, 1. Room Wag­ga Wag­ga.

[00:00:10] CR: Wel­come back to QAV from Wag­ga Wag­ga, Tony Kynas­ton. Uh, you’re on your way back from. Was it, did you leave the golf course because some­body was tak­ing shots at you, Tony? Seems to be what hap­pens on golf cours­es, uh, in cer­tain parts of the world these days.

[00:00:30] TK: No, the Secret Ser­vice did­n’t pick up any­one on the golf course. Yeah. It’s a few Amer­i­cans real­ly don’t want to see Don­ald Trump elect­ed, isn’t there?

[00:00:42] CR: Yeah, I can’t under­stand why. Um,

[00:00:47] TK: Although, he was straight out on his email ask­ing for mon­ey after it hap­pened, so,

[00:00:53] CR: well,

[00:00:54] TK: it’s um,

[00:00:54] CR: make hay while the sun shines, don’t you?

[00:00:57] TK: yeah, turn lemons into lemon­ade,

[00:01:00] CR: That’s it,

[00:01:01] TK: Cui Bono, for all the mon­ey, although I saw Elon Musk’s tweet about no one’s tried to assas­si­nate Kamala Har­ris yet, ques­tion mark, as if to say they’re behind it.

[00:01:17] CR: Hmm. Maybe she’s just not quite as annoy­ing. Um, any­way, chang­ing the top­ic. The ASX hit a record high yes­ter­day. Tony, how’s your port­fo­lio doing?

[00:01:35] TK: Good. No, it’s hav­ing a good year, which is nice.

[00:01:39] CR: As good as the index?

[00:01:41] TK: Uh, yeah, so I was beat­ing the index. I haven’t, I haven’t looked for a cou­ple of weeks, maybe a month, but, um, last time I looked I was, yeah.

[00:01:48] CR: you’re doing bet­ter than me. I checked my port­fo­lio, my super port­fo­lio this morn­ing. It’s up about 7 per­cent for the cal­en­dar year I’m talk­ing about, I think. But, um, I think the bench­mark was up like 12, 10 some­thing like that. Um, But our QAV port­fo­lios are doing well, uh, as you would hope, when the mar­ket’s up like this.

[00:02:11] CR: Um, I had a look at, I did my sort of week­ly, uh, Report this morn­ing, the Stock Doc­tor dum­my port­fo­lio, which is now, gee, how many years old? Five years old, I guess,

[00:02:25] TK: Five,

[00:02:26] CR: is up 16. 2 per­cent per annum, CAGR, over that peri­od, ver­sus the mar­ket, which is at 9. 11 per­cent per annum. Accord­ing to Navexa, so we’re doing 1.

[00:02:42] CR: 78 times bet­ter. That’s a very spe­cif­ic cal­cu­la­tion that GPT gave me.

[00:02:48] TK: Yeah.

[00:02:49] CR: Um, the last 30 days, our port­fo­lio is up 6. 6 per­cent ver­sus the STW up 3%. We’ve had declines in the last 30 days from FPR down 5 per­cent and ASG down 4. 5%, but KSC is up 16 per­cent and McMa­hon is up 19%. Did­n’t you do a pulled pork on McMa­hon recent­ly?

[00:03:13] TK: Don’t know about recent­ly, but I’ve def­i­nite­ly done one.

[00:03:19] CR: uh, port­fo­lios are doing real­ly well too. Of course, I’ve talked about the U. S. It’s just absolute­ly killing it. It’s up 50 per­cent now since incep­tion, Sep­tem­ber last year. Ver­sus the S& P, the US S& P up 26 per­cent over that time. So near­ly dou­ble the S& P. And again, it’s not mag sev­en lev­els, but for the kind of invest­ing that we do, I would say con­ser­v­a­tive, rel­a­tive­ly low risk, despite the ZED scores telling us that there’s some bank­rupt­cy risk there.

[00:03:47] CR: Um, but also the, the Aus­tralian port­fo­lio, which has been run­ning since July last year, I checked it this morn­ing. It’s had a cork­er, uh, sort of cou­ple of weeks. It’s up 16 per­cent since. Con­cep­tion, July last year, as I said, ver­sus the index up 11 in that same time­frame. Uh, MME is up 12 per­cent in the last 30 days that sits in that port­fo­lio.

[00:04:09] CR: And VYS, VYSAR, who I know you’re going to be talk­ing about a lit­tle bit lat­er on, is a dou­ble bag­ger since July last year. Um, at least, and I think, uh, even maybe a lit­tle bit more so. So, uh, it’s had a, it’s had a great run, so I’m glad that we picked that up. What are your thoughts on just the gen­er­al mar­ket froth­i­ness at the moment, Tony?

[00:04:36] TK: Yeah, I think, I think it’s tonight, or it might be, no, it might be Thurs­day Aus­tralian time, but the, uh, Fed is, every­one thinks, going to cut inter­est rates. Wednes­day, US time. Uh, and I think that’s, you know, peo­ple are get­ting ready for that. They’re get­ting excit­ed by it and low­er inter­est rates gen­er­al­ly means it’s a boon time for equi­ties.

[00:04:58] TK: Um, so hope­ful­ly the Fed won’t dis­ap­point and we reverse all the gains. But, um, yeah, I think that’s prob­a­bly what’s dri­ving things a lit­tle bit because the mar­ket’s, the mar­ket’s above aver­age in terms of its PE ratio. So it’s already a lit­tle bit expen­sive. Uh, So it won’t take much to, to see it retreat, and if the Fed does­n’t raise this month, or if the Fed rais­es less than what peo­ple expect, then that would be a neg­a­tive, but I think it’ll prob­a­bly raise 25 basis points in a cou­ple of days.

[00:05:30] TK: Yeah.

[00:05:36] CR: go hard, drop it by 50 basis points. Any­way, we’ll see what hap­pens. I did see an inter­est­ing arti­cle in, uh, where was it in? The Finan­cial Review, um, today. Investors have for­got­ten the lessons of the dot com crash. MSCI’s head of research, Ash­ley Lester, has some thoughts on what many ana­lysts have warned is the next bub­ble, the rapid rise of U.

[00:06:07] CR: S. equi­ty. Tech val­u­a­tions. Now, we’ve talked about this, um, over the last few weeks, and I think last week when we were talk­ing about it, I was say­ing that I think one of the dif­fer­ences between this and the dot com crash is that the com­pa­nies, par­tic­u­lar­ly the ones in the Mag, Mag 7, have been around a long time and, uh, are prof­itable, they’re mak­ing mon­ey, Whether or not that jus­ti­fies the val­u­a­tions is anoth­er issue.

[00:06:34] CR: But there was an inter­est­ing quote from this guy. He said, his­tor­i­cal­ly, the hit rate of bet­ting on the top 10 com­pa­nies ver­sus the mar­ket is about 25%. Recall that Microsoft was one of the even­tu­al win­ners of the inter­net age, and yet, an investor buy­ing shares in the tech behe­moth, at the height of the dot com bub­ble, had to wait near­ly 15 years to trade them for a prof­it.

[00:07:00] CR: And I know that well because I had Microsoft Stock Options at the height of the bub­ble and end­ed up sell­ing them and, uh, Yeah, I kind of regret it now. I wish I’d held on to them. They’ve gone up a lot in that peri­od, but I need­ed the cash for my killer inter­net start­up, the Pod­cast Net­work.

[00:07:20] TK: Yeah, right. How’s that

[00:07:22] CR: Oh, it’s just going great, Tony.

[00:07:24] CR: Fan­tas­tic. Actu­al­ly,

[00:07:25] TK: Bet­ter than Microsoft?

[00:07:26] CR: Uh, actu­al­ly, no, I lie, I did­n’t spend it on the start­up. I spent it buy­ing a house, which my ex wife now has. So, you know, prob­a­bly worked out well for her, I guess.

[00:07:40] TK: It was a great invest­ment for her.

[00:07:42] CR: for her, yeah. Yeah, prob­a­bly done real­ly well. Bris­bane real estate prices. But I thought that was a good point. Yeah, so even a com­pa­ny like Microsoft that was prof­itable, going gang­busters, doing great, it also, I mean, it also got hit by the DOJ case at the same time as the crash, late 90s, 2000s, etc.

[00:08:05] CR: Um, but it, you know, You know, it did­n’t stop it from mak­ing mon­ey. It did­n’t get bro­ken up or any­thing like that. Um, it’s real­ly just embar­rass­ing for them. They had to loosen up some of their con­tracts, uh, those sorts of things, but they still made mon­ey hand over fist. And yet it took 15 years for their shares to get back to where they were.

[00:08:30] CR: So they are,

[00:08:32] TK: Yeah, a lot of points to unpick there, Cam. I think the, DOG’s, DOJ is a risk that peo­ple may not seem com­ing for com­pa­nies like Google and per­haps Apple, where they con­trol so much of the mar­ket and meta that they, um, they could face some kind of antitrust reg­u­la­tion. Well they are, well yeah, sure, but it has­n’t been suc­cess­ful so far, but it’s def­i­nite­ly a risk.

[00:08:55] TK: Um, so there’s lots of echoes with the dot com boom going on at the moment. Because like, as you say, Microsoft has been prof­itable the whole way along. It’s just the fact that peo­ple were pay­ing too much for it in the bub­ble that caused the prob­lems. And the same thing’s going on now, arguably, with those Mag7 com­pa­nies.

[00:09:13] TK: They’re good com­pa­nies, but are they Can you jus­ti­fy dou­ble and some­times triple dig­it PE ratios for them? Well, no, you can’t.

[00:09:21] CR: Mm.

[00:09:22] TK: Um, and just for a start, they’re a very big com­pa­ny. So how does a very big com­pa­ny keep on grow­ing at the sort of growth rates they need to jus­ti­fy the expen­di­ture at the moment?

[00:09:34] TK: So that’s, That’s kind of my first point. The sec­ond point is that it’s inter­est­ing that these dis­cus­sions are going on about the MAG7, but they’re also going on about Comm­Bank in Aus­tralia. It’s, it’s, I think it’s now our biggest stock, might be sec­ond to BHP. Uh, and, There’s been a few arti­cles I’ve read in the last cou­ple of weeks where fund man­agers are scratch­ing their head and say­ing how can peo­ple jus­ti­fy pay­ing the kind of price that Comm­Bank is now trad­ing at, what­ev­er it is now, 1.

[00:10:03] TK: 40, 145 a share or some­thing like that. It’s the most expen­sive bank in the world on a P E ratio basis, or on a book val­ue basis, which they often use to val­ue banks. Um, and the answer to both is Pas­sive index invest­ing, that as these big cap stocks get big­ger, they attract more index invest­ing and they just become a, a bit of a self per­pet­u­at­ing cycle.

[00:10:28] TK: So, you know, that’s fine, but I think it’s, I think it’s a real risk that when the day of reck­on­ing comes, what­ev­er it’s caused by, uh, and the index­es start to unwind, they’re going to hit those top stocks even hard­er because they’re

[00:10:40] CR: Yeah. Yeah. Look it, um, as a, as a novice investor, I’m just hap­py to not be hav­ing to, not, not be play­ing in that space, not hav­ing to wor­ry about the, um, just sort of the cal­cu­la­tions that are involved in try­ing to fig­ure all this stuff out. That said. It is Straw­ber­ry Week. Have you been cel­e­brat­ing with the rest of us nerds, Tony?

[00:11:14] TK: I must’ve missed that. Sor­ry. I missed the email on Straw­ber­ry Week. I’m more of a choco­late guy any­way. I’ve nev­er liked straw­ber­ries of flavour.

[00:11:21] CR: real­ly? Hmm, okay.

[00:11:23] TK: Hmm.

[00:11:24] CR: Well, we’ll talk about that lat­er, but it has been Straw­ber­ry Week. Um, of course, as every­body, I’m sure, is well aware, Straw­ber­ry is the code name for Ope­nAI’s next mod­el, the

[00:11:40] TK: Ah.

[00:11:41] CR: mod­el, which they’re offi­cial­ly call­ing O1, and it came out a few days ago. Um, which we’ve been wait­ing for.

[00:11:48] CR: The rumours start­ed when Sam got fired from the com­pa­ny Novem­ber last year, Novem­ber, Decem­ber last year. One of the rumours was that it was because the board had seen Straw­ber­ry, AKA Q Star, and they deemed it was a huge threat to human­i­ty and he was­n’t tak­ing it seri­ous­ly enough and they fired him. Nev­er real­ly been any proof that that was what was behind it, but that’s when we start­ed hear­ing about it.

[00:12:14] CR: Straw­ber­ry. And it final­ly came out in a pre­view form a few days ago, and it’s blow­ing every­one away, um, with its capa­bil­i­ties in PhD lev­el maths, physics, quan­tum physics, chem­istry. I saw one guy I’ve been fol­low­ing on YouTube, who’s a physi­cist. Um, he. gave it the prob­lem, the paper that he, his PhD, I think his the­sis or some­thing he worked on for a year.

[00:12:46] CR: Um, it cal­cu­lat­ed the maths behind it in, uh, like an hour. Uh, it took him a year to work out. It did it in an hour. He gave it a prob­lem out of a physics text­book. Text­book, a PhD lev­el text­book that the text­book says takes a week and a half to work out to solve. It solved it in 122 sec­onds, um, cor­rect­ly. So peo­ple are very excit­ed about that.

[00:13:13] CR: Any­way. So any­way, I only talk about that because Mag­Sev­en, Inter­net, AI, blahdy blahdy blah, there’s a lot of excit­ing stuff hap­pen­ing, but as we said before, as that Microsoft exam­ple says, Microsoft was one of the win­ners of the inter­net age,

[00:13:30] TK: Yeah.

[00:13:31] CR: and still took 15 years to get back to that price. So it does­n’t mat­ter if you’re a win­ner or a los­er, if you’re over­val­ued, it can come and bite you in the arse, or bite the share­hold­ers in the arse.

[00:13:43] TK: Cor­rect.

[00:13:44] CR: about less, uh, frothy things Uh, As more Aus­tralian builders go bust, con­trac­tors and fam­i­lies are being left sub­stan­tial­ly out of pock­et, accord­ing to the ABC, I was read­ing this this morn­ing, record num­bers of builders are going bust. Um, 601 com­pa­nies in the con­struc­tion sec­tor have gone insol­vent.

[00:14:09] CR: Since July, accord­ing to this, I don’t know if that is actu­al­ly a record, but it sounds like a lot. John Win­ter from the Aus­tralian Restruc­tur­ing Insol­ven­cy and Turn­around Asso­ci­a­tion, Asso­ci­a­tion, it’s very Richie Ben­no there, Asso­ci­a­tion, Tony, Richie Ben­no, yes, shares the Mor­ri­son Gov­ern­men­t’s Home Builder Grant dur­ing the COVID 19 pan­dem­ic.

[00:14:33] CR: Lead to a mas­sive hous­ing boom and fixed price con­tracts had brought firms on tight mar­gins unstuck. So, good job Scott Mor­ri­son once again. Print­ed mon­ey, home builder grants, inter­est rate Some con­struc­tion com­pa­nies going bust. Not sure we can take all the blame for that. How they, what prices they sold con­tracts at is prob­a­bly on them to an extent.

[00:15:04] CR: Uh, but we have

[00:15:05] TK: Yeah, and doing it as a fixed price when they’re rais­ing, when, you know, infla­tion’s ram­pant. That’s,

[00:15:10] CR: but they were prob­a­bly lis­ten­ing to, uh, our friend Alan say­ing this time it’s dif­fer­ent. Inter­est rates are always going to be low, Tony. It’s a, it’s a new era of low inter­est rates for­ev­er. Like, why are you being such a stodgy old bas­tard, like, just accept the fact that this time it’s dif­fer­ent.

[00:15:28] TK: Yeah, well, it’s not, unfor­tu­nate­ly. It’s just, um, look, I feel sor­ry. I feel real­ly sor­ry for the peo­ple who are left strand­ed with­out homes and have lost deposits or what­ev­er they’ve paid. Builders have gone broke. There is a, I think the only bright spot is, I think now it’s com­pul­so­ry for builders to take out their own homes.

[00:15:49] TK: insur­ance against this kind of thing so peo­ple will get some mon­ey back although it might take some time and they’re still left with­out a house so it’s a it’s nev­er a good thing and it’s um but yeah it was like it’s basi­cal­ly been caused by fixed price con­tracts writ­ten a year ago or two years ago and then infla­tion just dri­ving up the costs of build­ing the house.

[00:16:12] TK: Um, but again too, like it’s, I’m always sur­prised that builders don’t go and try and nego­ti­ate with the cus­tomer and say, look, um, I wrote this con­tract when prices were low­er. Um, if you want your house, It’s going to cost 20 or 30 per­cent more. Can we do a, you know, can we come to some kind of agree­ment and try and nego­ti­ate their way out?

[00:16:33] TK: That’s, I always find that kind of strange that, um, if I’m a, if I’ve, if I’ve booked a con­tract with a builder to build a house and it’s going to take a year or two, and I find out he’s going to go broke. Aren’t I bet­ter off suck­ing it up and pay­ing him a lit­tle bit extra to get the thing done than to see him go broke and lose every­thing?

[00:16:54] CR: It is dif­fer­ent. Every time. It’s always dif­fer­ent, Tony. It’s nev­er the same.

[00:16:58] TK: Yeah. Well, and look, this time, um, isn’t dif­fer­ent because I remem­ber friends of mine who lost con­tracts on hous­es the last time this hap­pened, when would that have been? Back in the, maybe in the ear­ly 90s, I would think, or 2007 when the GFC hit. So it’s, um, it’s an unfor­tu­nate. It’s an unfor­tu­nate thing, and it’s, it is kind of sur­pris­ing that it keeps reap­pear­ing every time the econ­o­my slows down or infla­tion starts to rise, that the build­ing indus­try is hit, uh, and there isn’t more reg­u­la­tion to pro­tect against it.

[00:17:37] CR: Mmm. More reg­u­la­tion in the build­ing indus­try. I’m sure they’d love that.

[00:17:44] TK: Yeah, that’s the thing, isn’t it? They nev­er ask for it until they need to get bailed

[00:17:48] CR: Mmm. Well, it’s, uh, yeah, it’s kind of inter­est­ing times when there’s like this, the share mar­ket’s hit­ting its all time high. Mean­while, 600 con­struc­tion com­pa­nies have gone bel­ly up. Um, sort of a lot of mixed sig­nals out there.

[00:18:11] TK: Yes. Yes, I agree. And, um, you know, we’re still try­ing to sell our apart­ment in Syd­ney and the feed­back is it’s get­ting tougher out there. Um, and, uh, yeah, we haven’t sold it. So, yeah, it is get­ting tougher. Peo­ple are offer­ing less mon­ey for the prop­er­ty now. So, yeah, so. What’s the lead­ing indi­ca­tor and is it going to flow through to the share mar­ket?

[00:18:34] TK: It should at some stage, but again, all it takes is for the Fed and the estates or the RBA and Aus­tralia to low­er inter­est rates and the share mar­ket’s prob­a­bly going to take off again, I would have thought.

[00:18:47] CR: So what you’re say­ing is, You’ve got more neg­a­tive waves. Have a lit­tle faith, baby. Have a lit­tle faith. Have a lit­tle faith.

[00:18:57] TK: have a lit­tle faith. Yeah, neg­a­tive waves. We’re cer­tain­ly going through a neg­a­tive wave in the con­struc­tion indus­try, that’s for sure. And prob­a­bly in small busi­ness­es in gen­er­al, because the con­struc­tion indus­try employs a lot of peo­ple. A lot of elec­tri­cians and plumbers and builders, etc, you know, man­u­fac­tur­ers.

[00:19:14] TK: Some of them are on our, on our buy list, like Capral and BlueScope has been from time to time, so they may get affect­ed as well.

[00:19:22] CR: Yeah. All right. Well, mov­ing right along. I meant to talk about this last week and I for­got, um, I’ve been look­ing at the Stock­o­pe­dia screens that they have. It’s like what they call their Fil­ters, I guess. And they’ve got one called Earn­ing Sur­prise, Earn­ing Sur­prise Momen­tum. Hey, Tony’s just doing jazz hands at me on the

[00:19:48] TK: Sur­prise!

[00:19:50] CR: They say Earn­ing Sur­prise Momen­tum is a momen­tum invest­ing strat­e­gy that was iden­ti­fied in research by aca­d­e­mics Narasimhan Jagadish and Joshua Liv­nat in their paper, Rev­enue Sur­pris­es and Stock Returns. It specif­i­cal­ly looks for com­pa­nies. that man­aged to sig­nif­i­cant­ly beat earn­ings and sales fore­casts in their pre­vi­ous finan­cial results.

[00:20:15] CR: These earn­ings sur­pris­es have been found to cause medi­um term increas­es in share prices. This is believed to be caused by ana­lysts being slow to revise their fore­casts and the mar­ket fail­ing to ade­quate­ly price in the bet­ter than expect­ed results. Jagadeesh and Liv Nat found that the top 20 per­cent of stocks in terms of upside earn­ings and sale sur­pris­es out­per­formed the mar­ket by 5.

[00:20:43] CR: 3%. They wrote, although ana­lysts revise their fore­casts of future earn­ings in response to rev­enue sur­pris­es, they are slow to incor­po­rate ful­ly The infor­ma­tion in Rev­enue Sur­pris­es. The five year return on the Earn­ings Sur­prise screen in Stock Doc­tor is 94%. I was just won­der­ing if you’ve looked at that before and, uh, even if there’s a way of fil­ter­ing in Stock Doc­tor for that.

[00:21:12] TK: I’m not sure. So, um, I think you meant Stock­o­pe­dia. The five year return in Stock­o­pe­dia was 94%.

[00:21:17] CR: Oh, isn’t it? What did I say? Stock Doc­tor? The oth­er one.

[00:21:20] TK: Yeah,

[00:21:21] CR: the oth­er one.

[00:21:22] TK: the oth­er one. Yep. Um, Well, I guess this fol­lows on from some­thing I noticed too on the Stock Doc­tor front page. You can see earn­ings fore­cast changes and how they tend to cor­re­late to, uh, the share price going up. So if you go to the front page of Stock Doc­tor, if you go to the bot­tom of the graph, the sum­ma­ry graph, you can see where you can select, uh, at the bot­tom of the graph, you can select a, um, an item called EPS fore­cast 12 month.

[00:21:57] TK: And you can, there, you can, um, you can graph the fore­cast EPS changes and that pret­ty much cor­re­lates to the share price graph from what I can see,

[00:22:09] CR: Sor­ry, where are

[00:22:10] TK: that’s one way to do it man­u­al­ly.

[00:22:11] CR: are you doing this?

[00:22:13] TK: So, front page of Stock Doc­tor, if you call up a stock,

[00:22:18] CR: Down

[00:22:18] TK: so I’m going to, I’m going to do a pull poll on

[00:22:22] CR: the share price sen­ti­ment

[00:22:23] TK: Sec­tion 4.

[00:22:24] TK: Yeah, so on my screen it’s a sec­ond row, which is where you select what goes on the bot­tom of the graph.

[00:22:34] CR: Oh, okay.

[00:22:36] TK: So you can put in there per­cent­age short­ed, you can put in there the

[00:22:38] CR: Oh, EPS fore­cast 12

[00:22:40] TK: put in there Yeah,

[00:22:43] CR: Yeah. Okay. I got

[00:22:44] TK: and so it’s graph­ing the EPS fore­cast, you know, you can see how they change. Over time. Yeah, so we could do it man­u­al­ly, um, but I did see a Stock Doc­tor fil­ter in the fil­ters sec­tion too called, uh, Earn­ings Per Share Fore­cast, 12 Month and 3 Month Revi­sions, and you can select greater than zero for that, and, um, that might be a good way of fil­ter­ing for it too.

[00:23:10] CR: Um, so I’m won­der­ing if, I don’t know how we do regres­sion test­ing on this. It’d be, I don’t think Matt Walk­er’s

[00:23:20] TK: Yeah, that’s, I’ve strug­gled,

[00:23:22] CR: Hmm.

[00:23:23] TK: to do it too, unless, um, just, if we do five years, which you can get on the Stock Doc­tor front page graph. But pret­ty much every graph I’ve looked at, the earn­ings per share fore­cast changes match­es the stock price growth.

[00:23:36] CR: right. Right. Okay,

[00:23:38] TK: It’s pret­ty sim­i­lar. So it’s, it must be dri­ving price action.

[00:23:42] CR: I’m look­ing at, um, FMG here, and their earn­ings fore­cast has gone down and the share price has gone up.

[00:23:52] TK: okay. Ehhh. I’m not see­ing the fore­cast yet. Yeah. No, sure. Well, look at the fore­cast. It’s gone down.

[00:24:01] CR: That’s what I said, it’s gone down and the share price

[00:24:04] TK: And you said the share price has gone

[00:24:05] CR: it has.

[00:24:06] TK: But I’ve got the share price going down too.

[00:24:09] CR: Okay, what peri­od are you look­ing at? Five

[00:24:13] TK: Uh, 5U

[00:24:14] CR: was look­ing at one month, sor­ry. Oh yeah, okay. makes a big dif­fer­ence when I look at 5 years. Yeah, yeah, yeah, that does seem to cor­re­late, does­n’t it?

[00:24:25] TK: Yeah.

[00:24:26] CR: I’m try­ing to think of a com­pa­ny that’s had a earn­ings, pos­i­tive earn­ings sur­prise.

[00:24:32] CR: Um,

[00:24:33] TK: So look at, um, I’m doing a pull book in a minute on GPN. So that’s the one I had, sor­ry, not GPN, uh, GNP. So that’s the one I had open

[00:24:42] CR: Genus

[00:24:42] TK: when we start­ed

[00:24:43] CR: Group?

[00:24:45] TK: Yep. So if, again, if you look at the five year graph in 2024, at the end of 2023, they had a big down­grade. But from then on, it’s been upgrad­ed and the share price has tak­en off.

[00:24:59] CR: you know, maybe, um, these Jigadeesh and Jiv­nat, Right. Look­ing at a mar­ket the size of the U S but maybe, uh, ana­lysts are a lit­tle bit more on the ball, although it might also be small cap, small ADT stocks, right, that we know don’t get as much ana­lyst cov­er­age and might, might have more play in Aus­tralia with those, but maybe because we have so few com­pa­nies, large com­pa­nies, um, and maybe a lot of ana­lysts cov­er­ing them, they.

[00:25:34] CR: Quick­er to, uh, jump on rev­enue sur­pris­es here.

[00:25:42] TK: Yeah. And it’s, it’s also, the oth­er thing I strug­gle with is, so, so for exam­ple, look­ing at GMP, the graph’s going up at the minute, but are we at the top? Like, do I buy? Because the, The trend has been going up in sur­pris­es, in fore­cast earn­ings

[00:25:58] CR: hmm.

[00:25:59] TK: or is the next one gonna be a down­grade? So that’s the oth­er thing I’ve strug­gled to work out.

[00:26:04] CR: Hmm. All right. I want to do a shout out to Luke. Uh, who a while ago sent me a cash rate cal­cu­la­tor. It’s a spread­sheet that auto­mat­i­cal­ly looks up the cash rate, pulls it from the RBA’s cash rate tar­get wedge web page address, um, sug­gest­ed we might be able to build it into our check­lists.

[00:26:24] CR: And if we do so, he wants us to call it the Luk­i­na­tor, which, um, more than hap­py to oblige,

[00:26:32] TK: DeLu­cas A

[00:26:33] CR: I think that’s tak­en. And. Also, shout out to Matt Walk­er again for his, um, he sent me a Yahoo Finance ver­sion of the Bret­ta­la­tor, which I sug­gest­ed I was going to call the Mat­to­na­tor, um, so it, it has a, an option where you can switch between Google Finance and Yahoo Finance, uh, which has been quite handy.

[00:26:58] CR: This last week, because I’m still hav­ing prob­lems with the bread lat­er in Google Finance. And when­ev­er I got NAs from Google Finance, or in some cas­es it would give me a result, but there was share price of like 0. 001 cent and it could­n’t real­ly han­dle it. Yahoo Finance has, uh, the abil­i­ty to go down and process low­er order.

[00:27:19] CR: So I just switched to the, I rewrote my script. Over the week­end. So when it process­es all of my man­u­al data using the Google ver­sion, it gets, if it gets some NAs, it’ll go back and redo them using Yahoo Finance. Um, but that does­n’t help me when it uses Google Finance, which just gives me the wrong result.

[00:27:43] CR: But then when Alex sends me her results, as she did on Mon­day, and I noticed that her sen­ti­ment, Analy­sis is dif­fer­ent to mine. I go back and check and see, oh yeah, Google finance, shit the bed on that one. And I have to switch over to Yahoo and have a dif­fer­ent look at it.

[00:27:58] TK: Okay.

[00:27:58] CR: There’s still a few, there’s not many.

[00:28:00] CR: And usu­al­ly they’re like, you know, stocks with a 1, 000 ADT and don’t real­ly mat­ter any­way, you know, but they’ve got like, they’re not just pen­ny stocks. They’re sub frac­tions of a pen­ny stocks quite often.

[00:28:15] TK: Right.

[00:28:15] CR: And it just, it sort of rounds them up from 0. 001 to 0. 01 or some­thing. And then you get an invalid chart.

[00:28:24] CR: Any­way. So thank you to Luke and Matt for good think­ing and good, good Spread­sheet work. I appre­ci­ate it. And, um, there’s also, uh, Jor­dan’s sent me some inter­est­ing ideas around regres­sion test­ing sce­nar­ios that he wants me to look at, but I haven’t had a chance to get my head around his email yet, but shout out to Jor­dan for putting some thought into sce­nar­ios to test.

[00:28:54] CR: It’s always good when the brain’s trust is, uh, mak­ing our lives eas­i­er. So thank you this week to those guys. End of my notes for today, Tony. What have you got?

[00:29:04] TK: I’ll start off with mine. So while we’re on the Bret­ta­la­tor, when I opened it today, Google Chrome sug­gest­ed I clear my cache and then, uh, reload the Bret­ta­la­tor and it’s been work­ing since then. So I don’t know if that’s part of the

[00:29:17] CR: Hmm. Okay. I’ll give that a

[00:29:18] TK: Um, yeah. Yeah, so I had an arti­cle, my first arti­cle today was from Vysarn, or from the AFR about Vysarn.

[00:29:27] TK: Vysarn, which was, as you say, a dou­ble bag­ger in the Stock­o­pe­dia dum­my port­fo­lio. Uh, and it looks like they’re about to raise some mon­ey. So this was from Sep­tem­ber 11, about a week ago. Uh, Vysarn Lim­it­ed, an end to end water solu­tions provider for mines owned by the likes of Rio Tin­to. and Fortes­cue is pig­gy­back­ing on its 137.

[00:29:50] TK: 5 per­cent share price gain over the past year to ask fund man­agers to bankroll an M& A bet. Vysarn pro­vides end to end water solu­tions to min­ers and infra­struc­ture play­ers. Street Talk under­stands Vysarn cap­i­tal­ized at 200 mil­lion on the ASX was ask­ing investors to chip in 38 mil­lion on Wednes­day morn­ing to acquire CMP Con­sult­ing Group, a 16 year old water focused engi­neer­ing ser­vices busi­ness.

[00:30:21] TK: CMP ser­vices Vic­to­ri­an water author­i­ties, con­trac­tors, and gov­ern­ment bod­ies, and gives Vysarn a beach­head for the east coast. So yeah, inter­est­ing sto­ry. Vysarn grow­ing by acqui­si­tion, I would have thought, which is prob­a­bly dri­ving it. I could prob­a­bly add it to the pulled pork list and do a pulled pork in more detail.

[00:30:42] TK: Um, but it’s got a QAV score, which is below our thresh­old. I think it’s only about 0. 03, um, even though Stock­o­pe­dia rat­ed it high­ly. Uh, but I can still do a pulled pork, I guess, on it. Um, yeah, but my, I guess the oth­er point that I want­ed to raise is that, Our dum­my port­fo­lio, as I guess, as I guess the S& P or the STW, does­n’t take into account any of the cap­i­tal rais­ings that go on from time to time, so we’re not putting cash into these in the dum­my port­fo­lio, and I guess nei­ther is the STW, so, um, and I don’t know whether that’s a good or a bad thing, whether we’d actu­al­ly have a bet­ter per­for­mance if we allo­cat­ed cap­i­tal to some of these, but, um, it’s cer­tain­ly some­thing we’re not tak­ing into account in our port­fo­lio con­struc­tion.

[00:31:33] CR: By the way, we, um, bought Vysarn in the Stock­o­pe­dia port­fo­lio at, uh, 17 cents in July last year, and it’s now trad­ing at, uh, 48 and a half cents. So yeah, had a cork­er run over that peri­od.

[00:31:55] TK: Yeah, it might be inter­est­ing to see what hap­pens with the share price dur­ing the cap­i­tal rais­ing because some­times they come off a fair

[00:32:00] CR: Mm hmm.

[00:32:01] TK: um, because they’re dilut­ing, you know, the, the, the prof­its, but I guess if the, if they’re buy­ing some­thing which increas­es prof­its, then it can be a good thing.

[00:32:11] CR: See how the mar­ket reacts to it.

[00:32:13] TK: Yeah, um, just a inter­est­ing aside. Uh, when I was down at Cape Schanck, one of my neigh­bours came round for a chat and he said he’d been up in Syd­ney recent­ly buy­ing, uh, pick­ing up a new car from a car deal­er­ship up there called Dut­ton’s and, uh, some­one in the, in the deal­er­ship said, Oh, you live at Cape Schanck.

[00:32:35] TK: Do you know Tony Kynas­ton? And they say they’re big fans of QAV appar­ent­ly in Dut­ton. So shout out to the guys and girls at Dut­ton’s. Um, and, um, yeah, feel free to send us a new car at some, some, some stage

[00:32:51] CR: One once a year. Yeah. Once a year. Just shoot us a new car

[00:32:54] TK: Yeah. Okay. You can have this year’s

[00:32:57] CR: each, obvi­ous­ly not.

[00:32:59] TK: Oh, each. Okay. Yeah. Uh, and then I’ve got, um, quotes from what works on Wall Street and then I pulled pork to

[00:33:07] CR: By the way, we should have got the free car before you gave them a plug. I think like giv­ing them the plug first negates the val­ue of them giv­ing us a free car. You’ve, I’ll have to edit that out. Make a note to edit that out. There you go. I’ve, I’m sure I’ll

[00:33:22] TK: Well, it’s kind of a teas­er, like next month when they’re sit­ting around going, How come we’ve sold so many cars? Um, then we can con­tact them and say, by the way, we,

[00:33:31] CR: gave you a plug.

[00:33:31] TK: we gave you a plug. Yeah.

[00:33:33] CR: Good think­ing. Move along.

[00:33:36] TK: Yeah. So what works on Wall Street? Two quotes. Uh, one from O’Shaugh­nessy and one from some­body else, a guy called Edwin LeFavre, and he’s quot­ed by O’Shaugh­nessy. Again, along the lines of what we were talk­ing about before with bub­bles. So the first quote is, nowhere does his­to­ry indulge in rep­e­ti­tions so often or so uni­form­ly as in Wall Street.

[00:33:57] TK: When you read con­tem­po­rary accounts of booms or pan­ics. The one thing that strikes you most forcibly is how lit­tle either stock spec­u­la­tion or stock spec­u­la­tors today dif­fer from yes­ter­day. The game does not change, and nei­ther does human nature. Now, the inter­est­ing thing about that quote is it comes from Edward Lefeb­vre, and it’s from a book called Rem­i­nis­cences, Rem­i­nis­cences.

[00:34:23] TK: of a stock oper­a­tor and it’s writ­ten in 1923.

[00:34:31] CR: A hun­dred years ago, he said that.

[00:34:33] TK: Yep, yep. And has Wall Street lis­tened to the advice?

[00:34:39] CR: Well, that’s, you know, that just goes towards what we always say. Human nature does­n’t real­ly change, right? Greed, fear and greed, which was the title of last week’s episode. Uh, does­n’t real­ly change. Yeah.

[00:34:56] TK: It’s amaz­ing, isn’t it? I remem­ber read­ing a book a lit­tle while ago, which was writ­ten around the same time, called Where Are All The Cus­tomers Yachts? And that was writ­ten by a guy called Fred Schwibb. And it was writ­ten in the 1920s or 1930s. And, His obser­va­tion was, he looks out the win­dow and sees all the yachts of the stock bro­kers, but we’re all the cus­tomers yachts.

[00:35:19] TK: So it’s, you know, as valid back in the 20s and 30s as it is now, real­ly. It’s the peo­ple who are get­ting paid a fee that make all the mon­ey in these things.

[00:35:29] CR: well, speak­ing of which, I just, I just looked up the book, Rem­i­nis­cences of a Stock Oper­a­tor in Wikipedia, and Alan Greenspan appar­ent­ly was a big fan of it. And he quot­ed from the book in his own book, The Age of Tur­bu­lence in 2008. He called the book a font of invest­ing wis­dom and not­ed the quotes from the book, such as, bulls and bears make mon­ey, pigs get slaugh­tered, and now adages. You ever read that book?

[00:36:00] TK: I haven’t? No.

[00:36:02] CR: Can I try and

[00:36:02] TK: No, I should get it out and have it and read it. Yeah. Yeah.

[00:36:07] CR: Alright, what’s your oth­er

[00:36:08] TK: One more quote from O’Shaugh­nessy. Yep. Again, labour­ing the, labour­ing the point. Um, and this was in a sec­tion where he’s talk­ing about, um, his method­ol­o­gy where he likes to try and work out what will do best in the com­ing peri­od, usu­al­ly a longer term peri­od, five or ten years.

[00:36:28] TK: And he sim­ply looks at, you know, what will What works in the long term and what has­n’t done well in the pre­vi­ous term, and it’s going to regress to the mean, and how he’s had a lot of suc­cess doing that. And so he says, The point of review­ing these fore­casts is not an attempt at self aggran­dize­ment. Any investor with access to long term data who under­stands that mar­kets are ulti­mate­ly ratio­nal and have demon­strat­ed long term rever­sion to the mean will be able to make sim­i­lar fore­casts.

[00:36:58] TK: The key is to strip emo­tion from the analy­sis and under­stand that it’s not dif­fer­ent this time. Mar­kets and strate­gies will always change. ulti­mate­ly revert to their long term aver­age.

[00:37:12] CR: It is dif­fer­ent every time. It’s always dif­fer­ent, Tony. It’s nev­er the same. Oh, I nev­er get tired of that.

[00:37:20] TK: No, and actu­al­ly I think of it every time because I like lis­ten­ing to Alan Cole’s pod­cast and occa­sion­al­ly it’ll come up, you know, some­one will ask, some­one will ask what he’s worth or that they think he’s worth a lot of mon­ey and he says he always pleads he’s not. And that when I hear him plead he’s not worth a lot of mon­ey, I think of that quite this time it’s dif­fer­ent.

[00:37:42] TK: And I won­der if that’s behind yeah, his finan­cial sta­tus.

[00:37:47] CR: Well, yeah, and I remem­ber when we had him on the show years ago, and you were ask­ing him about his own invest­ing, and he told us that he’s not real­ly an investor. I kind of was shocked. And I, I, I thought you were too. Well, like you’ve been watch­ing, lis­ten­ing to him for years and assumed that he was a, an active investor and he’s not, it’s like, Oh my God, all these peo­ple are lis­ten­ing to this guy talk about stocks and the econ­o­my and that kind of stuff.

[00:38:14] CR: And you know, he’s made some mon­ey out of sell­ing a busi­ness and that kind of stuff, but, uh, not an active investor.

[00:38:22] TK: Yeah, again, once again, the per­son tak­ing the fee makes the mon­ey and not the, not the per­son fol­low­ing their own advice. Yeah.

[00:38:32] CR: Good. Well, thank you for the WWOWS quote. I like the way that you, you

[00:38:36] TK: what works on Wall Street.

[00:38:38] CR: now. What works on Wall Street? WWOWS. Wow. Hmm.

[00:38:43] TK: And now I have a pulled pork, which I fore­shad­owed. Genus Plus Group.

[00:38:47] CR: Hmm.

[00:38:48] TK: Had­n’t come across this com­pa­ny before, and I’m glad I went and did the pulled pork, because it’s very inter­est­ing. Uh, espe­cial­ly from a QAV point of view. So, the com­pa­ny’s called Genus­Plus Group, uh, code is GMP, which is not Gross Nation­al Prod­uct, it’s Genus­Plus Group. Um, accord­ing to Stock Doc­tor, Genus­Plus Group was estab­lished in 2017 and spe­cial­izes in pro­vid­ing essen­tial pow­er and com­mu­ni­ca­tions.

[00:39:18] TK: Infra­struc­ture Ser­vices. The com­pa­ny focus­es on the con­struc­tion, main­te­nance, and man­age­ment of pow­er net­works across Aus­tralia, includ­ing trans­mis­sion and dis­tri­b­u­tion pow­er lines and sub­sta­tions. Genus Plus was list­ed on the ASX on Decem­ber 14. 2020. So Stock Doc­tor has that as it’s um, as Genus Plus’s busi­ness.

[00:39:40] TK: I did go to their web­site and dug a lit­tle deep­er and it also looks like they are into design and con­struc­tion and main­te­nance of renew­able ener­gy infra­struc­ture and com­mu­ni­ca­tion sys­tems. So a cou­ple of oth­er strings to their bows there, but basi­cal­ly an engi­neer­ing com­pa­ny com­ing out of the pow­er sec­tor, WA based, uh, and has grown, um, through two meth­ods, one win­ning more and more con­tracts, and two, uh, acquir­ing oth­er com­pa­nies in the sec­tor.

[00:40:12] TK: So for exam­ple, dur­ing the year 2024, the group acquired the issued share cap­i­tal of Pras­i­nus Ener­gy Ser­vices and com­plet­ed the acqui­si­tion of the remain­ing 50 per­cent of Blue Tongue Ener­gy. So that’s again from Stock Doc­tor. Pras­i­nus is a Vic­to­ri­an com­pa­ny which gives Genus East Coast expan­sion. So it’s now nation­al, not just on the.

[00:40:36] TK: Uh, West Coast Eco­nom­ics WA based. Lat­est results, very strong. So rev­enue is up 24%, net prof­it after tax is up 43%, the div­i­dend is up 25%, and oper­at­ing cash is up 111%. So it’s grow­ing real­ly well. To go through the QAV num­bers from Stock Doc­tor, I’m using a share price of 2. 27, and that’s a slight Josephine, but it’s com­ing after a big run, a big run up in the share price, so it’s not sur­prised it’s pulled back just a cou­ple of per­cent.

[00:41:17] TK: So peo­ple might not want to buy it straight away. If they want to buy it, have a look at it your­self. It’s worth it. You know, if it keeps going, it should retrace that lit­tle bit of Josephine it has this month. Uh, 2. 27 is 83 per­cent of the con­sen­sus fore­cast, so we score it for that, but it’s way above IV1 and IV2, so I can’t score it on a val­u­a­tion basis.

[00:41:38] TK: The equi­ty per share is 68 cents, so we can’t buy this at book val­ue or book plus 30 either. Giv­en a share price of 227, uh, and in terms of net equi­ty per share, uh, there’s also a fair bit of good­will on the bal­ance sheet, and the NTA is low­er than NEPs by 34%. So the com­pa­ny’s been grow­ing by acqui­si­tion, so it’s not sur­pris­ing that it’s got good­will on the bal­ance sheet.

[00:42:02] TK: ADT, ADT for the stock is 260, 000 on aver­age, so it’s, uh, it will suit most lis­ten­ers. It’s a rea­son­able sized com­pa­ny. Small yield, it’s only 1. 1%, but you expect that giv­en it’s a growth stock and they’re grow­ing by acqui­si­tion, so they’re putting most of their prof­it to good use grow­ing the busi­ness.

[00:42:25] TK: Stock Doc­tor finan­cial health and trend is strong and steady. And the Stock­o­pe­dia qual­i­ty rank for this com­pa­ny is 98 out of 100, so it’s rat­ed good from a finan­cial health point of view. How­ev­er, the PE is 21. 6 times, which is the high­est in the last 3 years, and there­fore scores a minus 1 on the check­list.

[00:42:48] TK: So even though the PE is high, the Prop­Caf is 4. 87 times, which is good. So this is a high PE, low Prop­Caf. So, we’re in the mid­dle of a Prop­Caf com­pa­ny, which sug­gests that it may be a low mar­gin busi­ness. So, plen­ty of cash com­ing in, but it’s not always hit­ting the bot­tom line. Well, not all that’s hit­ting the bot­tom line.

[00:43:06] TK: And that’s okay. It’s still scor­ing for us on the cash side of things. Fore­cast earn­ings per share is going to grow by 40%, accord­ing to the ana­lyst, which is great. And it meets our growth over P thresh­old of 1. 5, even though the P is high at 21 times. Growth over P is 1. 85. Uh, I think one of the inter­est­ing, real­ly inter­est­ing things about this com­pa­ny is that it, um, is run by the own­er founder, a guy called David Rich­es, R I C H E S.

[00:43:37] TK: And, uh, his his­to­ry is, um, in the elec­tri­cal engi­neer­ing sec­tor. So, dur­ing their IPO, the doc­u­ment read, Genus­Plus is a unique West­ern Aus­tralian busi­ness, major­i­ty owned by its founder and cur­rent man­ag­ing direc­tor David Rich­es. Mr Rich­es, a third gen­er­a­tion elec­tri­cal con­trac­tor, estab­lished the plat­form Pow­er­line­s­Plus busi­ness in 2009, spe­cial­is­ing in con­struct­ing and main­tain­ing elec­tri­cal trans­mis­sion and dis­tri­b­u­tion pow­er lines in remote areas.

[00:44:12] TK: Aus­tralia. Over the past 11 years, Pow­er­lines Plus has grown organ­i­cal­ly and through acqui­si­tions to become one of the lead­ing providers of infra­struc­ture ser­vices to both min­ing, pub­lic util­i­ties, and pri­vate util­i­ty sec­tors across Aus­tralia, and has demon­strat­ed a his­to­ry of strong prof­itabil­i­ty and prof­itabil­i­ty.

[00:44:32] TK: And returns on cap­i­tal. So, his­to­ry of being in the indus­try and run­ning a suc­cess­ful com­pa­ny. Looks like he cap­i­tal­ized on run­ning pow­er lines to min­ing sec­tors in the remote areas of Aus­tralia. And then decid­ed to roll up that. Busi­ness into Genus Plus and IPO back in 2018. Any­way, he cur­rent­ly holds just under 53 per­cent of the stock.

[00:45:00] TK: So, um, you know, strong pres­ence by an own­er founder. And then the last point is there is a con­sis­tent­ly increas­ing equi­ty for this com­pa­ny over the last three years. So we can score it for that. So all in all, the check­list gives us a qual­i­ty score of 11 out of 15 or 73 per­cent and a QAV score of 0. 15.

[00:45:18] TK: Five. And like­wise in Stock­o­pe­dia, the com­pa­ny has scored with a rank­ing of 94, which is pret­ty good. Uh, it was marked down for val­ue, which it ranks at 65, and that’s prob­a­bly not sur­pris­ing giv­en the PE is over 20. So, um, Does score well for both QAV and Stock­o­pe­dia. The inter­est­ing thing I thought was we’re find­ing a growth stock on our buy list, which does­n’t hap­pen all that often.

[00:45:47] TK: I think we’re get­ting it fair­ly ear­ly in its lifes­pan. It’s been list­ed for five years. Um, so, uh, that’s a good thing. And I guess it’s on our list because of all the cash it’s throw­ing off, um, which is also a good thing. Uh, pos­i­tives for this com­pa­ny, um, it’s pick­ing up a lot of work from the gov­ern­ment, or being dri­ven by gov­ern­ment pol­i­cy.

[00:46:09] TK: Um, one pol­i­cy called Rewiring Aus­tralia, which is, uh, hook­ing up a lot of the, uh, renew­ables sec­tor to the trans­mis­sion pow­er lines. And then mak­ing sure those pow­er lines are fit for pur­pose. Um, but also pick­ing up all the work from the NBN, which is still rolling out fibre optic cable around, uh, par­tic­u­lar­ly region­al parts of Aus­tralia.

[00:46:33] TK: Um, and the oth­er big, um, pos­i­tive is the own­er founder. Stock Doc­tor lists some risks for this com­pa­ny, uh, which I can, um, echo. Uh, low val­ue of liq­uid­i­ty giv­en small­er mar­ket cap. Although I think the ADT at 250, 000 is pret­ty good. Um, his­to­ry of volatile earn­ings, qual­i­ty and finan­cial health, which makes sense if it’s grow­ing based on con­tract wins and acqui­si­tions, it’ll be lumpy.

[00:46:57] TK: Uh, tight mar­gins in line with a dif­fi­cult and high­ly com­pet­i­tive indus­try. Well, I think we’re see­ing that because it’s, um, throw­ing off lots of cash, but it still has a high P. E. And, uh, the growth is going to rely on ongo­ing con­tract wins. and acqui­si­tions. But we see that in a lot of these min­ing ser­vice com­pa­nies, engi­neer­ing com­pa­nies and that kind of thing.

[00:47:20] TK: So it’s not, it’s not some­thing unusu­al to this com­pa­ny. Um, and it’s cer­tain­ly a risk which we have been pre­pared to take in the past with com­pa­nies like McMa­hon that you read out before. Um, a lot of our stocks are in that cat­e­go­ry that appear on the buy list from time to time, Mitchell Ser­vices Group, et cetera, Par­en­ti in the drilling space.

[00:47:41] TK: Um, and, and I think, you know, even though it’s rely­ing on con­tract wins and acqui­si­tions, it’s got a great his­to­ry going back to 2011, I think it was, or 2009, that, um, his, uh, David Ritchie’s orig­i­nal com­pa­ny was, um, start­ed of being suc­cess­ful in this space. So, um, some­thing I’ve observed over the years is that when you get a good, uh, either engi­neer­ing com­pa­ny or ser­vices com­pa­ny, um, it builds up a good name and the con­tract wins keep com­ing because they get.

[00:48:13] TK: You know, peo­ple refer this com­pa­ny to oth­er peo­ple in the indus­try as being a good com­pa­ny to deal with, and that seems to be the case so far in its his­to­ry.

[00:48:22] CR: So it’s a, you know, a rel­a­tive­ly new list­ed com­pa­ny. What did you say? Like five years old, um, rel­a­tive­ly high PE, uh, huge share price bump in the last year or so. And yet it’s still on our buy list. That’s. That’s it. Unusu­al com­bi­na­tion of things for us. So it’s obvi­ous­ly under­val­ued accord­ing to our sys­tem.

[00:48:53] CR: Where did you say it ranks on your IVs?

[00:48:56] TK: Oh, it’s way above the IV price. Um, I did­n’t, I did­n’t list my IVs, but it was, was­n’t worth list­ing because it was about twice the IV, I think, from mem­o­ry.

[00:49:06] CR: So it’s above our IV, but it scores well still.

[00:49:09] TK: and Stock­o­pe­dia mark it down, and we can’t buy it for book val­ue. So. For many of the val­u­a­tion met­rics, except price to oper­at­ing cash flow, it looks expen­sive.

[00:49:18] TK: A PE of 21 times is pret­ty, is, you know, above mar­ket aver­age. It’s fair­ly high. Um, but it’s, it’s being, you know, you’re buy­ing it at that price, but you’re being reward­ed because it’s grow­ing. It’s fore­cast to grow up 40%, um, next year. So, you know, the, if, you know, the, The PE based on the price you pay now in a year’s time will be a lot less than 21 times.

[00:49:44] TK: As long as it keeps throw­ing off that cash and using that cash well, then it’ll keep grow­ing.

[00:49:50] CR: And it’s not like the mar­ket isn’t aware of it because the share price has. Gone up a lot in the last year, but it’s still scor­ing. Well, that’s inter­est­ing.

[00:50:01] TK: Yeah.

[00:50:01] CR: you, Tony. Well, we don’t own it. I don’t own it. I’m sure you don’t. It’s prob­a­bly too small for you, but it’s not on any of our, um, in any of our port­fo­lios either.

[00:50:09] CR: But now I want it to be.

[00:50:12] TK: Uh huh.

[00:50:13] CR: Um, well, thank you for that. I’ve got a cou­ple of late ques­tions that came in, Tony, that I haven’t prepped you on, but they’re easy answers. First one’s from Dar­rell. What’s the lat­est view on whether to sell at 10 per­cent or 20%? Have I missed that deter­mi­na­tion?

[00:50:27] TK: Yeah, Daryl, haven’t, haven’t deter­mined it. I’m, I’m using 20 per­cent myself. One of the rea­sons why it’s, I’ve been slow to lock that in is I haven’t trad­ed much this year, so, um, Yeah. I doubt, I don’t think that’s the rea­son. I don’t think because I’ve gone from 10 to 20 I haven’t trad­ed much. The mar­ket’s just been a lot more sta­ble,

[00:50:46] CR: Buoy­ant.

[00:50:47] TK: um, after all the tur­bu­lent years we had when the inter­est rates were ris­ing.

[00:50:50] TK: So, um, insuf­fi­cient data. I think you can use either, Daryl. Um, what the research showed was that if you use 10 per­cent you’ll trade more. But, that means you’ve got more chance of pick­ing up the rock­et ship that gives you an out per­for­mance. Or, if you go, if you use 20%, you trade less, which, you know, at the end of the day, works out to be a sim­i­lar sort of result, so, um, it may even just come down to what you want to do, what you feel is more com­fort­able doing, trad­ing more or trad­ing less.

[00:51:21] CR: Yeah, the regres­sion test­ing that we did real­ly did­n’t have a clear win­ner.

[00:51:26] TK: No.

[00:51:27] CR: Daryl’s sec­ond ques­tion was about try­ing to get the Bret­ta­la­tor to run in Excel and stock his­to­ry. Did that ever pan out, he asks. Um, it did­n’t. I think Gary was play­ing around with that. He was the beta tester for that and I think it had some issues and then I don’t think I heard any more from Gary on that and I haven’t pushed it.

[00:51:52] CR: So Gary, if you’re lis­ten­ing and you have an update. Uh, let us know, please. But yeah, to the best of my knowl­edge, we nev­er quite got that work­ing. And I, I seem to recall that one of the rea­sons was there was a lot of gaps in the stock his­to­ry data, which just kind of meant that it did­n’t work for a per­cent­age of the time, and it was a big enough per­cent­age that it was.

[00:52:18] CR: Just not fea­si­ble to use it. So we kind of gave up. I do recall we went to the Microsoft Prod­uct Man­ag­er for Stock His­to­ry and said What’s going on? And I don’t think she ever got back to me on that. So she’s prob­a­bly just count­ing her stock options mil­lions Because she’s part of the Mag 7. She got in at the right time unlike me.

[00:52:47] TK: Did they have, did they have Cameron Raleigh print­ed in small print on them? Recy­cled?

[00:52:52] CR: Yeah, don’t remind me. Uh, also, Ed wants to know why you’re still hold­ing GNC, Grain­Corp. He says it’s been a com­mod­i­ty sale for weeks.

[00:53:04] TK: Oh, real­ly? I had­n’t noticed that. Thanks, Ed. I had­n’t noticed it. That’s how much atten­tion I pay to my port­fo­lio. I’ll have a look at that one, but thank you for that. It’s a good heads up. I’m GMC.

[00:53:18] CR: All

[00:53:19] TK: I must admit I’ve been focus­ing on Macmil­lan, which has been, if it was­n’t, the fact is Con­nex Div­i­dend dropped a lot.

[00:53:26] TK: It’s um, flirt­ing with some of my sell lines, but it stayed above it when you added Div­i­dend back, so I haven’t focused on GMC for a while.

[00:53:32] CR: all right. Well, that’s the show, apart from After Hours. I think that’s all we’ve got on our talk­ing ponies. Um, what’s been going on? You play more golf? You’re obvi­ous­ly not in Cape Schanck any­more. How was the golf in the end, Wendy?

[00:53:49] TK: Yeah, I’m in Wag­ga Wag­ga now, and it’s a beau­ti­ful sun­ny day. We’ve had three good days of weath­er. We played golf the last two days. Um, first day was at what’s called the City­Course. There’s two cours­es in Wag­ga, the City­Course and the Coun­tryClub. And the Coun­tryClub, both cours­es are doing works to their green, so, greens, so it’s been, um, Coun­tryClub’s out of action because they’re, I guess, cor­ing their green.

[00:54:14] TK: City­Course has recent­ly cored their green, so we played on Mon­day, I think, Tues­day? Sun­day. We played Sun­day at the City­Course and it was just great. Pret­ty hor­ri­ble because you prob­a­bly would­n’t know what it means but when they call greens recent­ly they lit­er­al­ly drill big holes in them to get air into the roots of the plants and get the spring growth going and it makes it very dif­fi­cult to putt.

[00:54:37] TK: So, um, yeah, tee the green was fine. I liked the course but dif­fi­cult putting. So we decid­ed to go out to June E yes­ter­day which is about 45, 50 k’s away from Wag­ga. And we both liked the course there and that was great fun. It’s such a nice course and it’s a real coun­try course. We were play­ing about the 16th hole and guy pulls up in a ute and gets out and has a chat.

[00:55:04] TK: Here’s the He’s one of the vol­un­teers. It’s a vol­un­teer run course, telling us the his­to­ry of the place, hav­ing a chat. It’s just love­ly. We got there, the pro shop was closed, which it often is. We used the QR code to pay our green fees. There’s a few pool bug­gies around the side, and so we grabbed a cou­ple of those and went off on our own.

[00:55:22] TK: Had the course to our­selves all day. Just won­der­ful golf­ing expe­ri­ence, which I’d high­ly rec­om­mend. You know, it’s not the best kept course, um, but it’s run by vol­un­teers, uh, and it’s just, just love­ly. Have a great day.

[00:55:37] CR: You should, like, do a road trip around coun­try golf cours­es around Aus­tralia.

[00:55:41] TK: We do. Haven’t you been pay­ing atten­tion for the last

[00:55:47] CR: not like you just get off like Ed and Rachel do. Ed, when he sent me that email, said they’re in Broome at the moment. I’ve been fol­low­ing Ed on Face­book.

[00:55:55] TK: Oh, love­ly.

[00:55:56] CR: a car­a­van and take off for months. You should do that with Rud­dy. You and Rud­dy in a car­a­van?

[00:56:02] TK: Well, we do. We don’t go on a car­a­van, but we, we trav­el a lot. Um, I feel sor­ry for Jen­ny stay­ing at home doing, doing the work, but, um, yeah. But broth­er and I do trav­el around play­ing golf quite a bit.

[00:56:14] CR: a lit­tle bit. You don’t go. When was the last time you played Bund­aberg? You don’t go to Bund­aberg. Bar­gara Golf Club. No. See. Come

[00:56:21] TK: That’s, that’s above the, that’s above the North

[00:56:24] CR: Oh, Go up and stay with my mom. Play some golf Catch up.

[00:56:30] TK: Oh, okay. Is there a good course up there?

[00:56:33] CR: I don’t know. There’s cours­es. I don’t know if they’re any good. You know, there’s cours­es.

[00:56:38] TK: Well, we may do that.

[00:56:39] CR: Should do that. Um, you’ve been lis­ten­ing to Nick Cave’s new album.

[00:56:45] TK: Love it. Yeah. Thanks for the rec­om­men­da­tion. It’s real­ly good.

[00:56:49] CR: Mm-Hmm.

[00:56:49] TK: And then, um, that got me onto anoth­er one, uh, Grindr Man. So you know how Apple Music gives you rec­om­men­da­tions based on what you’re lis­ten­ing to. Uh, yeah, that was real­ly good too. So that’s two, two good, uh.

[00:57:04] CR: I think he has.

[00:57:05] TK: Oh, this I’ve been lis­ten­ing to all

[00:57:06] CR: Well, Grindr Man is Nick Cave.

[00:57:10] TK: Oh, I did­n’t know

[00:57:11] CR: you did­n’t know that, yeah.

[00:57:13] TK: No, I don’t know the sto­ry. It’s just, I just thought, wow, this is real­ly good too.

[00:57:18] CR: I think he did two Grindr Man albums. Uh, Grindr Man was, you know, just a dif­fer­ent, it’s not the Bad Seeds, uh, I don’t know if War­ren Ellis was in it, but just a dif­fer­ent, uh, group that he got with, I think. You know, 15, 20 years ago, they did a cou­ple of albums, but yeah, I love Grindr, man. Yeah. It’s one of his, one of Nick­’s tem­po­rary out­fits that he had.

[00:57:42] CR: I can’t, I just can’t get over Nick­’s pro­gres­sion. You know, every time I go back and lis­ten to The Boys Next Door or Birth­day Par­ty or what­ev­er, like, how did he go from that to this? Like, it’s real­ly quite a crazy musi­cal jour­ney he’s been on and been suc­cess­ful.

[00:58:01] TK: boys next door. I had their, had their first, um, sin­gle, had a, had an old VHS tape. I used to video­tape songs I liked on the tv. And um, yeah, the boys next door was on high rota­tion on that. Saw the birth­day par­ty back in the day. And it’s so dif­fer­ent to how he is now. I mean, so dif­fer­ent , it’s incred­i­bly dif­fer­ent.

[00:58:25] TK: Yeah. And quite an expe­ri­ence, almost like an artis­tic expe­ri­ence. It was just, yeah. So out there and very. dif­fer­ent to music at the time.

[00:58:37] CR: Uh, I’m jeal­ous. That would have been some­thing to go back and see. When we have, uh, time machines, that’s def­i­nite­ly some­thing I’d catch out ear­ly, Nick.

[00:58:47] TK: I’d rec­om­mend it.

[00:58:48] CR: And you watched, uh, True Detec­tive, Sea­son 3.

[00:58:53] TK: Yes, True Detec­tives, we’re just, Rud­dy and I have been watch­ing it in the evenings here, so we haven’t got­ten all the way through it, but we’re both quite enjoy­ing it. I had­n’t gone through, like, from Sea­son 1 to Sea­son 4 with True Detec­tives, I’ve watched bits and pieces of it, and then, but real­ly loved Sea­son 4, Night Coun­try, but I’m real­ly enjoy­ing Sea­son 3 now too.

[00:59:13] TK: Which is

[00:59:13] CR: one with, uh, Maher­sha­la Ali and Stephen Dorff and Scoot McNary.

[00:59:18] TK: Yes. Yeah.

[00:59:20] CR: good to see Stephen Dorff, cause I had­n’t seen him in any­thing for decades. I remem­ber when he was

[00:59:28] TK: of One was the last time I saw

[00:59:29] CR: oh, okay, I nev­er watched that. But I remem­ber him from Back­beat, the Bea­t­les film, in the ear­ly 90s. Did you ever see that?

[00:59:36] TK: Ah, okay. No.

[00:59:38] CR: played Stu­art Sut­cliffe. It was like the Bea­t­les in their sort of Ham­burg days. Um, and he played Stewie

[00:59:47] TK: want­ed to write, I’ve always want­ed to write a movie called The Stu Sut­cliffe Sto­ry, and just tell the Bea­t­les sto­ry from his per­spec­tive, because it’s such an inter­est­ing sto­ry.

[00:59:57] CR: that’s kind of back­beat.

[00:59:59] TK: Is it real­ly? I did­n’t know

[01:00:01] CR: Yeah, it’s his sto­ry. I mean, I don’t know if it’s from his per­spec­tive, but it’s his sto­ry. His girl­friend is Astrid, um, who was their pho­tog­ra­ph­er. It’s played by Cheryl Lee in the film from Twin Peaks.

[01:00:12] TK: and their hair­dress­er

[01:00:14] CR: Oh, real­ly? She’s the hair­dress­er too? She’s the hair­dress­er.

[01:00:16] TK: gave them the Bea­t­les hair, gave them the Bea­t­les

[01:00:18] CR: All right. Yeah. Well, that’s played by Lau­ra Palmer.

[01:00:22] CR: Um, and, uh, yeah, it’s a, it’s a, look, I

[01:00:26] TK: Oh, I’ve got to look it up.

[01:00:27] CR: I haven’t seen it since the nineties, but, um, I remem­ber enjoy­ing hear­ing more about that sto­ry or see­ing that sto­ry at the time. He was real­ly young, Stephen Daw for the time. Then he turns up in True Detec­tive and he’s old and griz­zled and, you know, it was good.

[01:00:43] CR: You know, Have you seen sea­son two of True Detec­tive? The

[01:00:47] TK: Yeah. A long time ago. Yeah.

[01:00:49] CR: Right. I liked it. It got a

[01:00:51] TK: think that’s why I

[01:00:52] CR: Oh, you did­n’t like it?

[01:00:53] TK: I think that’s why I stopped watch­ing it. Oh, I think the same with sea­son three when it came out. They can be real­ly slow to unfold and I sort of prob­a­bly lost inter­est in it after the first episode. Yeah.

[01:01:05] CR: I just real­ly, I mean, I, I loved, um, Vince Vaugh­n’s, you know, char­ac­ter, like the sort of dark­er side of Vince Vaughn, which you don’t get to see often enough. I thought he did a great job, and I love Col­in, I love see­ing Col­in Far­rell and stuff. Where he gets a chance to act, um, which he’s done more of in the last 20 years.

[01:01:25] CR: Uh, he had his sort of brief Hol­ly­wood romance peri­od where he made a lot of shit­ty Hol­ly­wood block­busters, but, uh, these days he tends to pick his projects pret­ty more, a lot

[01:01:36] TK: So you’re look­ing for­ward to the pen­guin com­ing out

[01:01:38] CR: I actu­al­ly am. I mean, I thought he was by far the high­light of that last Bat­man film. That per­for­mance was astound­ing.

[01:01:45] CR: And yeah,

[01:01:47] TK: Mmm.

[01:01:49] CR: yeah. I’m, you know, I can’t,

[01:01:50] TK: Have you seen, have you seen the Ban­shees

[01:01:54] CR: no, it’s been on my to watch list for a year. I still haven’t got around to it.

[01:02:00] TK: he’s bril­liant in it. Real­ly,

[01:02:02] CR: Well, like he was in, in Bruges, uh, Matthew, uh, Mar­tin Madon­na’s oth­er one with those two guys. Like just fan­tas­tic. I’ve seen that a few times. Yeah, he’s great.

[01:02:12] TK: Mmm.

[01:02:13] CR: Well, I’ve been watch­ing a bit of Star Trek OG, uh, which I’ve nev­er watched.

[01:02:17] CR: Um, you know, nev­er got into any of the Star Trek’s real­ly, but I’ve been going, watch­ing the orig­i­nal series.

[01:02:24] TK: Oh, that’s fan­tas­tic.

[01:02:26] CR: fan­tas­tic. And, and what got me into it is what I would, the, the, the Roger Cor­man film I was talk­ing about last week, where Shat­ner plays this racist, which I fin­ished, which was. Just fan­tas­tic.

[01:02:38] CR: Just absolute­ly, I can­not rec­om­mend it high­ly enough as a great film. Like it’s real­ly up there. Um, and Shat­ner’s fan­tas­tic in it. And so been, it’s been enjoy­ing watch­ing, um, his ear­ly years as, uh, Kirk. Um, and it’s, yeah, it’s great. Like I’m real­ly, real­ly enjoy­ing it. And we watched a cou­ple

[01:03:01] TK: Yeah,

[01:03:02] CR: of this new Jeff Gold­blum series on Net­flix, Chaos.

[01:03:05] CR: Uh,

[01:03:08] TK: Are you?

[01:03:09] CR: any­thing about that?

[01:03:11] TK: I haven’t, no. I’ve seen ads for it, but I haven’t seen them.

[01:03:14] CR: Yeah, you know what it’s about then, like, it’s the Greek gods, but set in con­tem­po­rary times, and, um, it’s, uh, it’s good! You know, it’s kind of inter­est­ing, it’s a dif­fer­ent take, uh, reminds me a lit­tle bit of Amer­i­can gods, um, in the, you know, the premise of, of the Greek gods in mod­ern times. Um,

[01:03:39] TK: Yeah,

[01:03:39] CR: uh, but Gold­blum,

[01:03:40] TK: too Per­cy Jack­son?

[01:03:42] CR: uh, no, well, so far we’re two episodes in there’s like, no, there’s no real mag­ic or stuff.

[01:03:52] CR: I mean, you see Jeff Gold­blum as Zeus, uh, con­jur­ing up storm clouds here or there for the humans, but he’s basi­cal­ly just, you know, depressed because he believes there’s a prophe­cy that his reign is com­ing to an end and he’s, uh, angry that the humans are not giv­ing him the love and respect. He just plays this nar­cis­sis­tic, para­noid god and he’s doing peak Gold­blum, um, stuff which is just delight­ful to, delight­ful to watch.

[01:04:26] CR: He’s anoth­er guy whose career has just tak­en a bizarre turn at some point. You know, you go back and watch. Him and the Fly, which I love, or Juras­sic Park, and all that kind of stuff, very dif­fer­ent, more of a main­stream, okay? The old­er and more eccen­tric he’s become, the more eccen­tric his char­ac­ters have become, and he’s turned into this, like, this Christo­pher Walken esque actor, or Nico­las Cage actor, who just brings this eccen­tric­i­ty to these char­ac­ters, and like, yeah, I’ll watch that if, you know, it’s, it’s enter­tain­ing.

[01:05:01] TK: yeah good,

[01:05:03] CR: But, uh, and I’ve been read­ing, uh, I told, I told you about Bester recent­ly, this sci fi author from the 50s, I’ve been read­ing his most pop­u­lar book, which I said, I think you might have read, The Demol­ished Man. Did you say you’d actu­al­ly read that one?

[01:05:18] TK: I don’t, I don’t think so,

[01:05:19] CR: Oh, it’s, it’s sup­pos­ed­ly his mag­num opus, I think, um, ter­rif­ic book, uh, set in a world where there are, Peo­ple with advanced ESP pow­ers called ESPers, which actu­al­ly then turned up in an orig­i­nal Star Trek episode.

[01:05:38] CR: There was this, they went through a, they went through some sort of space field that start­ed giv­ing peo­ple on the Enter­prise ESP pow­ers and they could make stuff hap­pen. I think it was actu­al­ly the first

[01:05:50] TK: It was­n’t writ­ten by Bester was it? A lot of those old sci fi guys wrote Star Trek episodes.

[01:05:54] CR: I don’t think it was, but, um, it uses that ter­mi­nol­o­gy, which I think pre­dates him too. But I think that episode was, uh, I read up on it. The Star Trek episode with ESP was the first episode they filmed. It was called Where No Man Has Gone Before, and it was the first one that they filmed after the pilot.

[01:06:17] CR: So with. Shat­ner as Kirk. Leonard Nimoy’s eye­brows are insane. They’re like, go straight up and they’re real­ly bushy. And then by the next episode, they’d been pulled back a lit­tle bit. They weren’t as off the wall. Um,

[01:06:34] TK: if you get a chance, watch the pilot. That’s

[01:06:36] CR: Oh, I’ve, I watched the pilot. Yeah, it’s good. That’s why I start­ed with that. Yeah. So on Net­flix, they start with the pilot and then they put them in The order that they were tele­vised in, but it’s not the order they were shot in, appar­ent­ly.

[01:06:50] TK: Yep. Okay.

[01:06:52] CR: any­way, but, uh, the big news for the week, as I said, at the begin­ning was.

[01:06:56] CR: Ope­nAI final­ly launched O1, which is, uh, in a lim­it­ed form, they’re call­ing it O1 Pre­view. Uh, you’ve, you’ve, there’s cer­tain things that they’ve lim­it­ed in it. You can only get like 50 ques­tions a week and you can’t, it’s not mul­ti­modal, you can’t upload doc­u­ments or any­thing like that to it. I sus­pect they’re wait­ing on the next batch of, or the first batch of NVIDI­A’s Black­well.

[01:07:27] CR: Chips to get installed in their data cen­ters so they can ramp up the capa­bil­i­ties. But this, the thing that makes this dif­fer­ent to GPT is from pre­vi­ous ver­sions of GPT is that it does think­ing and rea­son­ing before it answers your ques­tions. So it’ll take 30 sec­onds to a cou­ple of min­utes to answer your ques­tion.

[01:07:51] CR: And you can see if it has a drop down, um, arrow that you can click if you want, and you can see its thought process. So it, it breaks down its think­ing process. And one of the YouTubes I was watch­ing, a guy who was giv­ing it the PhD lev­el physics text­book ques­tions, you could see it. was start­ing to solve one of these prob­lems and it got about a minute into it and then it went, no, this is the wrong approach.

[01:08:15] CR: So it went back to the begin­ning, looped back and start­ed again to solve it. So they’ve fig­ured out how to make the LLMs rea­son, think through stuff, um, eval­u­ate their own progress in their own think­ing. Uh, it’s a, it’s a huge, step­ping stone in terms of get­ting us towards the sort of AGI that we hope we’ll get to in the next few years.

[01:08:49] CR: So, you know, despite all the crit­ics say­ing it’s just a sto­chas­tic par­rot over the last, uh, Two years, they’ve got it to a point now where it’s, um, pret­ty good. Like Sam Alt­man, clas­sic piece of mar­ket­ing. When on launch day, he tweet­ed some­thing to the effect of, it’s more impres­sive the first cou­ple of times you use it than it is over time.

[01:09:16] CR: You know, um, he sort of real­ly down­played it. Uh, out of the gate. So I’m not sure why he’s low­er­ing expec­ta­tions on it. And it’s still not per­fect by any stretch of the imag­i­na­tion, but it’s been, and they, they had a bunch of launch videos that they came out with, uh, which were Like three minute videos, one with a geneti­cist talk­ing about how he’s been using it, um, a quan­tum physi­cist, a chemist, maths, cod­ing, look­ing at all of the advanced appli­ca­tions of it.

[01:09:52] CR: But what I’ve been real­ly look­ing at and wait­ing for over the last few days is peo­ple Test­ing it in the wild, so physi­cists and chemists and, you know, peo­ple who are smarter than me putting it through its loops. And there’s this one guy who’s a physi­cist who’s been going hard with it. And it’s hard to go hard with it too, because you run out of your 50 ques­tions pret­ty quick­ly, you know, and then you don’t get any more for a week.

[01:10:19] CR: So peo­ple are being a lit­tle bit lim­it­ed, but yeah, he’s been putting it through a whole bunch of tests, so has some oth­ers. Log­ic and rea­son­ing tests that it’s acing, um, cod­ing prob­lems, a lot of peo­ple are get­ting it to build some advanced stuff pret­ty quick­ly. My cod­ing with it, uh, it solved a few hairy prob­lems for me.

[01:10:38] CR: I would­n’t say it com­plete­ly blew my mind, but I made a lot more progress with it in the last few days than I’d made in sev­er­al weeks with ear­li­er ver­sions of GPT or Anthropic’s Claude. Uh, before that, but any­way, it’s, um, it’s going to be inter­est­ing to see over the next cou­ple of weeks, uh, when peo­ple put it through its paces, what the con­sen­sus is on how good it is.

[01:11:03] CR: But, uh, in the ear­ly days, it seems to be a major mile­stone in an AI that can stop and think and rea­son its way through prob­lems at a dif­fer­ent pace. Order of mag­ni­tude than any­thing that we’ve had in the last cou­ple of years. So I’m look­ing for­ward

[01:11:24] TK: will that solve the, uh, the hal­lu­ci­na­tions, if you can see it, if you can think about its own answers?

[01:11:30] CR: um, yeah, pos­si­bly I, I haven’t seen Ope­nAI put out any state­ments relat­ed to that. So I don’t know what their test­ing has demon­strat­ed. Um, I have had, I have seen some peo­ple online and on Red­dit and Twit­ter say­ing that they’re still get­ting hal­lu­ci­na­tions. Um, I haven’t yet, but I haven’t. used it for any­thing where it could give me hal­lu­ci­na­tions.

[01:11:58] CR: You know, I’m using my, I’m using my lim­it of ques­tions to get it to code stuff for me. What I’m look­ing for­ward to being able to do with it is at some point when we can upload doc­u­ments to it as giv­ing it the check­list and giv­ing it lots of, you know, data and say­ing, look, uh, here’s how we score these things.

[01:12:20] CR: Can you make any improve­ments? What are we miss­ing? What should we tweak? Things like that.

[01:12:25] TK: Okay, great.

[01:12:26] CR: we’re not there yet. I don’t know when we’ll be there. It might be anoth­er year before we can do that with it. But at some point we should be able to dump a lot of QAV stuff into it and say, opti­mize this for us, you know?

[01:12:40] CR: Um,

[01:12:41] TK: What does it cost?

[01:12:43] CR: well at the moment it’s just part of the, Month­ly fee, which is 20 bucks US a month, you get lim­it to it. You can get a high­er tier, I think tier five is like thou­sand bucks a month or some­thing you can pay to get a high­er lim­it for the API for using. There’s a lot of spec­u­la­tion around when, when they come out of pre­view and they go full bent with it.

[01:13:08] CR: What they will charge for it. There’s some rumours that they’ll be charg­ing thou­sands of dol­lars a month for high­er lev­els of access. And cer­tain­ly if it’s PhD lev­el capa­bil­i­ty, then they’ll be able to jus­ti­fy that. Busi­ness­es, gov­ern­ments, um, uni­ver­si­ties, I’m sure will be, research insti­tu­tions will be will­ing to pay.

[01:13:29] CR: to get access to it, par­tic­u­lar­ly if dur­ing the test­ing process it’s deemed to be as good as the ear­ly sug­ges­tions are, despite Sam’s down­play­ing of it. But one of the oth­er things, there was a great inter­view, like a Q& A I watched with all of the research team from Ope­nAI, and they were say­ing the thing that they’ve dis­cov­ered is that because of this new mod­el that they’ve built, it actu­al­ly learns faster.

[01:13:59] CR: So it’s There was an arti­cle a cou­ple of days before it came out. There was an arti­cle that says they’re actu­al­ly using, Ope­nAI are using Straw­ber­ry to build Ori­on, which is the next fron­tier mod­el. So they’re using the AI to train the AI, the next AI, because it can. eval­u­ate and ques­tion itself and what it’s doing in the new mod­el.

[01:14:28] CR: So yeah, we are, uh, we, we are in the, the knee of the curve, the expo­nen­tial curve with this stuff. It would seem so any­way.

[01:14:40] TK: of the curve. I had­n’t heard of that before. The knee of the curve. Okay.

[01:14:44] CR: You know what I’m talk­ing about of the hock­ey stick? Yeah.

[01:14:49] TK: Yeah.

[01:14:49] CR: bit of the hock­ey stick where it starts to go expo­nen­tial, the capa­bil­i­ties go expo­nen­tial. So any­way, yeah, that’s tak­en up a lot of my thought in the last few days.

[01:14:59] CR: It’s try­ing to fig­ure out what to do with it. I haven’t come up with much apart from writ­ing code, but, um, it’s excit­ing times.

[01:15:07] TK: I mean, that’s the inter­est­ing thing about, from an invest­ing point of view, Wall Street’s kind of wak­ing up to that idea as well. What do you do with all this stuff? And how do you mon­e­tize it? So, there’s been a lit­tle bit of, um, a lit­tle bit of a down­turn in those, in some of those stocks because of that, so, um, but, you know, if NVIDIA comes out and says, or sor­ry, if Ope­nAI comes out and says, hey, we’ve cured can­cer, then it’ll be worth a lot.

[01:15:36] CR: Well, for the peo­ple who cure the can­cer, I’m not, yeah, I mean, I’m sure Ope­nAI will, you know, it’s the picks and shov­els mod­el for them. Right. But, um,

[01:15:48] TK: Yeah, but if like, the first per­son that comes out and wins a Nobel Prize using AI means that oth­er peo­ple are going to want to use it, and Ope­nAI can charge a lot for it in that case.

[01:15:58] CR: yeah, and you know, there’s all of the com­peti­tors that are try­ing to catch up or stay ahead, Google, Anthrop­ic, etc, etc,

[01:16:09] TK: hmm.

[01:16:10] CR: doing the same thing. So yeah, it’s gonna be an inter­est­ing cou­ple of years.

[01:16:15] TK: Yeah. Real­ly inter­est­ing fea­ture. You got my think­ing about drop­ping down the work­ing, the thought process in solv­ing a prob­lem. And like, could you take, could you take the work­ing from the cur­rent ver­sion of the AI and give it to GPT and say, hey, I just had this thought, check this out for me and get it cri­tiqued and see if it’s actu­al­ly kosher or whether it’s, you know, on the right track or the wrong track or what­ev­er.

[01:16:40] TK: Mm hmm.

[01:16:41] CR: So give GPT its own think­ing process?

[01:16:46] TK: Yeah, yeah,

[01:16:48] CR: Yeah,

[01:16:49] TK: yeah, take the thought process and say, hey, here’s my work­ing for a prob­lem, what do you think?

[01:16:55] CR: Yeah, you could do that. What I often do, um, what I have been doing for quite a while now is, I’ll have two AIs open, I’ll have GPT open, I’ll have Claude open, and I’ll ask Claude how to solve a cod­ing prob­lem, it’ll give me the solu­tion, and I’ll dump that in GPT and say, What do you think about this?

[01:17:15] CR: And it’ll give me some feed­back, which I’ll put back into Claude and go, what do you think about this? It’ll go, oh, actu­al­ly there’s some good points. And then it’ll do anoth­er iter­a­tion, which I’ll give to GPT. And you just play them off against each

[01:17:25] TK: right.

[01:17:26] CR: So you have the AI talk­ing to the AI just to refine both of their ’cause they tend to, um, not the, I dun­no about the cur­rent ver­sion oh one, but the pre­vi­ous ver­sions of GPT.

[01:17:38] CR: And the same with Claude, is you give them a, you know, 300 lines of code. And they’ll fix 10 lines, but then com­plete­ly for­get 10 lines. I’ll, I’ll, it’ll give me the new script, which I’ll copy and paste into my IDE, my, my, my code engine. And the orig­i­nal ver­sion, the one I’m replac­ing would be 300 lines long, and the new one’s 250 lines.

[01:18:03] CR: And I’ll go to Claude, that’s 50 lines short, and he goes, Oh, yeah, yeah, I, seems I left out some stuff. I’m like, well, don’t do that, what are you leav­ing out stuff for?

[01:18:15] TK: Yeah,

[01:18:15] CR: it’ll fix that, but then it’ll leave out anoth­er 20 lines of code, and you’re doing this kind of, so it, you know, they’ve been kind of flaky from that front, so.

[01:18:24] CR: Any­way, Inter­est­ing times, Tony.

[01:18:28] TK: yeah, yeah, good. Well, thank you for keep­ing me abreast, keep­ing on top of it all.

[01:18:35] CR: And I’ve recov­ered from my Kung Fu injuries from last week. I went and saw the Kung Fu physio on Wednes­day. She cracked, she said my pelvis was out, or my hip or some­thing was out like an inch and a half. She, she put me back into place and I was as good as gold.

[01:18:50] TK: Oh, oh, that had to hurt.

[01:18:52] CR: it did, uh, a lot, but not as much as my back hurt.

[01:18:57] CR: So, you know, but any­way, I’m, um, about to go and get back into it. So, uh, with that,

[01:19:04] TK: Good stuff.

[01:19:05] CR: you, Tony, for your time and insights. QAV a good week.

[01:19:10] TK: Yeah, you too. Hap­py ASX and good luck with Kung Fu and good luck with Fox and keep­ing him busy dur­ing the school hol­i­days and

[01:19:18] CR: Yeah. Can I send

[01:19:18] TK: talk to you from Syd­ney

[01:19:20] CR: him down to you for a bit? You take him for a week?

[01:19:23] TK: Send him to Wag­ga Wag­ga. We’ll take him out into the coun­try and let him run

[01:19:26] CR: great. I’ll get on that. You have a good trip back. Enjoy your golf.

[01:19:31] TK: right. Thank you. Okay.